Document:

EXHIBIT 10.3

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE

AGREEMENT

Dated as of June 18, 2007

among

ORTEC INTERNATIONAL, INC.

and

THE PURCHASERS LISTED ON EXHIBIT A

TABLE OF CONTENTS

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
PAGE

	
 

	
 

	
 

	
 

	
 

	

	
ARTICLE I

	
 

	
Purchase and Sale of Preferred Stock

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
Section 1.1

	
 

	
Purchase and Sale of Stock

	
 

	
1

	
 

	
Section 1.2

	
 

	
The Conversion Shares

	
 

	
1

	
 

	
Section 1.3

	
 

	
Purchase Price and Closing

	
 

	
2

	
 

	
Section 1.4

	
 

	
Warrants

	
 

	
2

	
 

	
Section 1.5

	
 

	
Exchange of Revenue Interest

	
 

	
3

	
 

	
 

	
 

	
 

	
 

	
ARTICLE II

	
 

	
Representations and Warranties

	
 

	
3

	
 

	
 

	
 

	
 

	
 

	
 

	
Section 2.1

	
 

	
Representations and Warranties of the
  Company

	
 

	
3

	
 

	
Section 2.2

	
 

	
Representations and Warranties of the
  Purchasers

	
 

	
14

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE III

	
 

	
Covenants

	
 

	
17

	
 

	
 

	
 

	
 

	
 

	
 

	
Section 3.1

	
 

	
Securities Compliance

	
 

	
17

	
 

	
Section 3.2

	
 

	
Registration and Listing

	
 

	
17

	
 

	
Section 3.3

	
 

	
Inspection Rights

	
 

	
17

	
 

	
Section 3.4

	
 

	
Compliance with Laws

	
 

	
18

	
 

	
Section 3.5

	
 

	
Keeping of Records and Books of
Account

	
 

	
18

	
 

	
Section 3.6

	
 

	
Reporting Requirements

	
 

	
18

	
 

	
Section 3.7

	
 

	
Amendments

	
 

	
18

	
 

	
Section 3.8

	
 

	
Other Agreements

	
 

	
18

	
 

	
Section 3.9

	
 

	
Distributions; Subsidiaries

	
 

	
19

	
 

	
Section 3.10

	
 

	
Status of Dividends

	
 

	
19

	
 

	
Section 3.11

	
 

	
Disclosure of Transaction

	
 

	
20

	
 

	
Section 3.12

	
 

	
Conversions; Opinions

	
 

	
20

	
 

	
Section 3.13

	
 

	
Reservation of Shares

	
 

	
20

	
 

	
Section 3.14

	
 

	
Transfer Agent Instructions

	
 

	
20

	
 

	
Section 3.15

	
 

	
Disposition of Assets

	
 

	
21

	
 

	
Section 3.16

	
 

	
No Issuance of Senior Securities

	
 

	
21

	
 

	
Section 3.17

	
 

	
Most Favored Nations Exchange Right;
  Subsequent Financing

	
 

	
22

	
 

	
Section 3.18

	
 

	
Form 10-KSB

	
 

	
23

	
 

	
Section 3.19

	
 

	
Executive Management

	
 

	
23

	
 

	
Section 3.20

	
 

	
Board of Directors

	
 

	
24

	
 

	
Section 3.21

	
 

	
Restrictions on Use of Proceeds

	
 

	
24

	
 

	
Section 3.22

	
 

	
Affiliate Transaction

	
 

	
24

	
 

	
Section 3.23

	
 

	
Re-listing on the OTC Bulletin Board

	
 

	
24

	
 

	
Section 3.24

	
 

	
Disclosure of FDA Approval

	
 

	
24

-i- 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE IV

	
 

	
Conditions

	
 

	
25

	
 

	
 

	
 

	
 

	
 

	
 

	
Section 4.1

	
 

	
Conditions Precedent to the Obligation of the Company to Sell the
  Shares

	
 

	
25

	
 

	
Section 4.2

	
 

	
Conditions Precedent to the Obligation of the Purchasers to Purchase
  the Shares

	
 

	
25

	
 

	
 

	
 

	
 

	
 

	
ARTICLE V

	
 

	
Intentionally Omitted

	
 

	
28

	
 

	
 

	
 

	
 

	
 

	
ARTICLE VI

	
 

	
Stock Certificate Legend

	
 

	
28

	
 

	
 

	
 

	
 

	
 

	
 

	
Section 6.1

	
 

	
Legend

	
 

	
28

	
 

	
 

	
 

	
 

	
 

	
ARTICLE VII

	
 

	
Intentionally Omitted

	
 

	
28

	
 

	
 

	
 

	
 

	
 

	
ARTICLE VIII

	
 

	
Indemnification

	
 

	
29

	
 

	
 

	
 

	
 

	
 

	
 

	
Section 8.1

	
 

	
General Indemnity

	
 

	
29

	
 

	
Section 8.2

	
 

	
Indemnification Procedure

	
 

	
29

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE IX

	
 

	
Miscellaneous

	
 

	
30

	
 

	
 

	
 

	
 

	
 

	
 

	
Section 9.1

	
 

	
Fees and Expenses

	
 

	
30

	
 

	
Section 9.2

	
 

	
Specific Enforcement, Consent to Jurisdiction

	
 

	
30

	
 

	
Section 9.3

	
 

	
Entire Agreement; Amendment

	
 

	
31

	
 

	
Section 9.4

	
 

	
Notices

	
 

	
31

	
 

	
Section 9.5

	
 

	
Waivers by Party

	
 

	
32

	
 

	
Section 9.6

	
 

	
Waivers by Majority Holders

	
 

	
32

	
 

	
Section 9.7

	
 

	
Headings

	
 

	
33

	
 

	
Section 9.8

	
 

	
Successors and Assigns

	
 

	
33

	
 

	
Section 9.9

	
 

	
No Third Party Beneficiaries

	
 

	
33

	
 

	
Section 9.10

	
 

	
Governing Law

	
 

	
33

	
 

	
Section 9.11

	
 

	
Survival

	
 

	
33

	
 

	
Section 9.12

	
 

	
Counterparts

	
 

	
33

	
 

	
Section 9.13

	
 

	
Publicity

	
 

	
33

	
 

	
Section 9.14

	
 

	
Severability

	
 

	
33

	
 

	
Section 9.15

	
 

	
Further Assurances

	
 

	
34

-ii-

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT

          This
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”) is
dated as of June 18, 2007 by and among Ortec International, Inc., a Delaware
corporation (the “Company”), and each of the Purchasers of shares of Series A
Convertible Preferred Stock of the Company whose names are set forth on Exhibit
A hereto (individually, a “Purchaser” and collectively, the “Purchasers”).

          The
parties hereto agree as follows:

ARTICLE I

Purchase and Sale of Preferred Stock

               Section
1.1  Purchase
and Sale of Stock. Upon the following terms and conditions, the Company
shall issue and sell to the Purchasers and each of the Purchasers shall,
severally but not jointly, purchase from the Company, the number of shares of
the Company’s Series A Convertible Preferred Stock, par value $.001 per share
(the “Preferred Shares”), at a purchase price of $10,000 per share, set forth
with respect to such Purchaser on Exhibit A hereto. The minimum aggregate
purchase price for the Preferred Shares shall be $8,000,000 (inclusive of the
principal amount of Bridge Notes (as defined below) applied to purchase the
Preferred Shares and Warrants) and the maximum aggregate purchase price for the
Preferred Shares and the Warrants shall be $12,000,000 (inclusive of the principal
amount plus interest outstanding on the Bridge Notes applied to purchase the
Preferred Shares and Warrants). The Company acknowledges that a portion of the
Purchase Price (as defined in Section 1.2 hereof) shall be paid by certain
Purchasers surrendering for cancellation certain bridge notes (the “Bridge
Notes”) issued by the Company to such Purchasers. Each Purchaser who applies
the principal amount and interest outstanding on the Bridge Notes to purchase
the Preferred Shares shall receive Preferred Shares in an amount equal to 125%
of the principal amount plus accrued and unpaid interest of such Bridge Note.
The designation, rights, preferences and other terms and provisions of the
Preferred Shares are set forth in the Certificate of Designation of the
Relative Rights and Preferences of the Series A Convertible Preferred Stock
attached hereto as Exhibit C-1 (the “Certificate of Designation”). The Company
and the Purchasers are executing and delivering this Agreement in accordance
with and in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “Commission”) under the
Securities Act of 1933, as amended (the “Securities Act”) or Section 4(2) of
the Securities Act.

               Section
1.2  The
Conversion Shares. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, such number of shares of Preferred Shares
and Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares and exercise of the Warrants then
outstanding; provided that the number of shares of Common Stock so
reserved shall at no time be less than 120% of the number of shares of Common
Stock required to be issued upon the conversion of the Preferred Shares and
exercise of the Warrants. Any shares of Common Stock issuable upon conversion
of the Preferred Shares and exercise of

the Warrants
(and such shares when issued) are herein referred to as the “Conversion Shares”
and the “Warrant Shares”, respectively. The Preferred Shares, the Conversion
Shares and the Warrant Shares are sometimes collectively referred to as the
“Shares”.

               Section
1.3  Purchase
Price and Closing. The Company agrees to issue and sell to the Purchasers
and, in consideration of and in express reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchasers,
severally but not jointly, agree to purchase that number of the Preferred
Shares and Warrants set forth opposite their respective names on Exhibit A. The
aggregate purchase price of the Preferred Shares and Warrants being acquired by
each Purchaser is set forth opposite such Purchaser’s name on Exhibit A (for
each such purchaser, the “Purchase Price”. The Preferred Shares and Warrants
shall be sold and funded in one or more closings (each, a “Closing”). The
initial Closing under this Agreement (the “Initial Closing”) shall take
place on or about June 18, 2007 (the “Initial Closing Date”). Each
subsequent closing under this Agreement (each, a “Subsequent Closing”)
shall occur on such date as the Purchasers and the Company may agree
upon (each, a “Subsequent Closing Date”) but no later than July 31,
2007.The Initial Closing Date and each Subsequent Closing Date are
sometimes referred to in this Agreement as the “Closing Date”. Each closing of
the purchase and sale of the Preferred Shares and Warrants to be acquired by
the Purchasers from the Company under this Agreement shall take place at the
offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the
Americas, New York, NY 10036 or at such other place as the Purchasers and the
Company may agree upon at 10:00 a.m., New York time on the date on which the
last to be fulfilled or waived of the conditions set forth in Article IV hereof
and applicable to such Closing shall be fulfilled or waived in accordance
herewith. At each Closing, the Company shall deliver or cause to be delivered
to each Purchaser a certificate registered in the name of the Purchaser
representing the number of Preferred Shares that such Purchaser is purchasing
pursuant to the terms hereof and the Warrants to purchase such number of shares
of Common Stock as is set forth opposite the name of such Purchaser on Exhibit
A. At each Closing, each Purchaser shall deliver its Purchase Price by wire
transfer Kramer Levin Naftalis & Frankel LLP, as escrow agent. 

               Section
1.4  Warrants.
The Company agrees to issue to each of the Purchasers: (i) a Series A Warrant,
in substantially the form attached hereto as Exhibit B-1 (the “Series A
Warrants”), to purchase the number of shares of Common Stock equal to fifty
percent (50%) of the number of Conversion Shares issuable upon such Purchasers
Preferred Shares purchased hereunder, as set forth opposite such Purchaser’s
name on Exhibit A hereto, (ii) a Series M Warrant, in substantially the form
attached hereto as Exhibit B-2 (the “Series M Warrants”), to purchase the
number of shares of Common Stock (or, as set forth therein, Series D-2
Preferred Stock of the Company) equal to (x) fifty percent (50%) of the number
of Conversion Shares issuable upon such Purchaser’s Preferred Shares purchased
hereunder, as set forth opposite such Purchaser’s name on Exhibit A hereto, or
(y) if any Purchaser purchases at least $3,500,000 of Preferred Shares pursuant
to this Agreement, one hundred percent (100%) of the number of Conversion
Shares issuable upon such Purchaser’s Preferred Shares purchased hereunder, as
set forth opposite such Purchaser’s name on Exhibit A hereto, and (iii) a
Series M-1 Warrant, in substantially the form attached hereto as Exhibit B-3
(the “Series M-1 Warrants” and together with the Series A Warrants and the
Series M Warrants, the “Warrants”), to purchase the number of shares of Common
Stock equal to fifty percent (50%) of the Warrant Shares issuable upon exercise
of the Series M Warrant, as set forth opposite such Purchaser’s name on Exhibit
A 

hereto. The
Warrants shall expire five (5) years following the applicable Closing Date,
except for the Series M Warrants, which shall expire thirty (30) days following
the date the Company files a Form 8-K with the Commission disclosing the
Company’s receipt of the written notice from the U.S. Food and Drug
Administration regarding granting the Company the right to commercialize and
market (i.e., formal approval of the Issuer’s Pre-Market Application for) its
OrCel product for the treatment of venous leg ulcers. Each of the Warrants
shall have an exercise price per share equal to the Warrant Price (as defined
in the applicable Warrant). 

               Section
1.5 Exchange of Revenue Interest. The parties
acknowledge that simultaneously with the consummation of the transactions
contemplated by this Agreement, Paul Royalty Fund, L.P., f/k/a Paul Capital
Royalty Acquisition Fund, L.P. (“PRF”) and the Company shall enter into an
Exchange Agreement (“PRF Exchange Agreement”) pursuant to which PRF shall
exchange its revenue interest for $5,000,000 of Series A-1 Convertible
Preferred Stock (the “Series A-1 Preferred Shares”) with a conversion price of
$0.50 per share and $5,000,000 of Series A-2 Convertible Preferred Stock (the
“Series A-1 Preferred Shares”) with a conversion price of $5.00 per share. The
Series A-1 Preferred Shares and the Series A-2 Preferred Shares shall rank pari
passu with the Preferred Shares with respect to liquidation and dividend
rights. The forms of the Certificate of Designations for the Series A-1
Preferred Shares and the Series A-2 Preferred Shares are attached hereto as
Exhibit C-2 and C-3, respectively. Upon consummation of the Exchange Agreement,
PRF shall have no claims against the Company or any of its Subsidiaries other
than as a holder of the Company’s Series A-1 Preferred Shares and Series A-2
Preferred Shares.

ARTICLE II

Representations and Warranties

               Section
2.1  Representations
and Warranties of the Company. The Company hereby represents and warrants
to the Purchasers, except as set forth in the Company’s disclosure schedule
delivered with this Agreement (with each numbered schedule corresponding to the
section number herein) as follows:

               (a)
Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company does not have any Subsidiaries (as defined in Section 2.1(g))
except OrCel, LLC, Hapto Biotech, Inc. and Hapto Biotech (Israel), Ltd., or own
securities of any kind in any other entity. The Company and each such
Subsidiary is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, “Material Adverse Effect” means (i) any adverse effect on the
business, operations, properties, prospects or financial condition of the
Company or its Subsidiaries and which is material to such entity or other
entities controlling or controlled by such entity and/or (ii) any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with

the ability of
the Company to perform any of its obligations under this Agreement or any of
the Transaction Documents (as defined below) in any material respect.

               (b)
Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement, the Certificate
of Designation, the Registration Rights Agreement attached hereto as Exhibit D
(the “Registration Rights Agreement”), the Escrow Agreement attached hereto as
Exhibit G (the “Escrow Agreement”) the Irrevocable Transfer Agent Instructions
(as defined in Section 3.14) and the Warrants (collectively, the “Transaction
Documents”), and to issue and sell the Preferred Shares in accordance with
the terms hereof and the Warrants, as applicable. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company.
The other Transaction Documents will have been duly executed and delivered by
the Company at the Initial Closing. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the
enforcement of, creditor’s rights and remedies or by other equitable principles
of general application.

               (c)
Capitalization. The authorized capital stock of the Company and the
shares thereof currently issued and outstanding as of June 18, 2007 is set
forth on Schedule 2.1(c)(1) hereto. All of the outstanding shares of the
Company’s Common Stock and any other security of the Company have been duly and
validly authorized. Except as set forth in Schedule 2.1(c)(1), no shares of
Common Stock or any other security of the Company are entitled to preemptive
rights or to registration rights which have not already been complied with, and
except as set forth in Schedule 2.1(c)(1), there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. Furthermore, except as set forth in this
Agreement and as set forth in Schedule 2.1(c)(1), there are no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company or
options, securities or rights convertible into shares of capital stock of the
Company. Except for customary transfer restrictions contained in agreements
entered into by the Company in order to sell restricted securities the Company
is not a party to or bound by any agreement or understanding granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. Except as set forth on Schedule 2.1(c)(2), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company. The offer and sale of all capital stock, convertible
securities, rights, warrants, or options of the Company issued prior to each
Closing complied with all applicable federal and state securities laws, and no
holder of such securities has a right of rescission or claim for damages with
respect thereto which could have a Material Adverse Effect. The Company has
furnished or made available to the Purchasers true and correct copies of the 

Company’s
Certificate of Incorporation as in effect on the date hereof (the “Certificate”),
and the Company’s Bylaws as in effect on the date hereof (the “Bylaws”).

               (d)
Issuance of Securities. The Preferred Shares and the Warrants to be
issued at each Closing have been duly authorized by all necessary corporate
action and, when paid for or issued in accordance with the terms hereof, the
Preferred Shares and the Warrants shall be validly issued and outstanding,
fully paid and nonassessable and free and clear of all liens, encumbrances and
rights of refusal of any kind and the holders of the Preferred Shares shall be
entitled to all rights accorded to them in the Certificate of Designation. When
the Warrant Shares are issued and paid for in accordance with the terms of this
Agreement and as set forth in the Warrants, and when the Conversion Shares are
issued upon conversion of the Preferred Shares, such shares will be duly
authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind and the holders shall be entitled
to all rights accorded to a holder of Common Stock.

               (e)
No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Preferred Shares and the Warrants) do not and will not (i)
violate or conflict with any provision of the Company’s Certificate or Bylaws
or its Subsidiaries’ comparable charter documents, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries’ respective properties or assets
are bound, (iii) create or impose a lien, mortgage, security interest, charge
or encumbrance of any nature on any property or asset of the Company or its
Subsidiaries under any agreement or any commitment to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound or by which any of their respective properties or assets are bound, or
(iv) result in a violation of any federal, state, local or foreign statute,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries are bound or affected, except, in all cases other than violations
pursuant to clauses (i) or (iv) (with respect to federal and state securities
laws) above, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is required under
federal, state, foreign or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of
its obligations under the Transaction Documents or issue and sell the Preferred
Shares, the Warrants, the Conversion Shares and the Warrant Shares in
accordance with the terms hereof or thereof (other than any filings which may
be required to be made by the Company with the Commission, prior to or
subsequent to the

Closing, or
state securities administrators subsequent to the Closing, or any registration
statement which may be filed pursuant hereto or the Registration Rights
Agreement).

               (f)
Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and except as set
forth on Schedule 2.1(f), the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the “Commission Documents”). The Company has
delivered or made available to the Purchasers true and complete copies of the
latest Commission Documents filed with the Commission. The Company has not
provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. At
the time of its filing, the Form 10-QSB for the fiscal quarter ended September
30, 2006, as amended on April 17, 2007 (the “Form 10-QSB”) complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such documents, and
the Form 10-Q did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. As of their respective dates, the financial
statements of the Company included in the Commission Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).

               (g)
Subsidiaries. The Company’s only Subsidiaries are OrCel, LLC, a limited
liability company organized under the laws of the State of Delaware, Hapto
Biotech, Inc., a corporation organized under the laws of the State of Delaware,
and Hapto Biotech (Israel) Ltd., a corporation organized under the laws of
Israel. Such Subsidiaries are each wholly-owned by the Company. All of the
outstanding membership interests and other securities of such Subsidiaries have
been duly authorized and validly issued, and are fully paid and nonassessable.
There are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon any such Subsidiary
for the purchase or acquisition of any membership interests or other securities
of such Subsidiary or any other securities convertible into, exchangeable for
or evidencing the rights to subscribe for any membership interests or other
securities of such Subsidiary except for agreements between the Company, OrCel,
LLC and PRF 

which will
terminate and be of no force and effect on Initial Closing. Neither the Company
nor any such Subsidiary is subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any membership interests or other
securities of such Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the Company
nor any such Subsidiary is party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any membership interests of such
Subsidiary except for agreements between the Company, OrCel, LLC and PRF.

               (h)
No Material Adverse Change. Since September 30, 2006, the Company has
not experienced or suffered any Material Adverse Effect, except for use of its
cash in the regular course of its development stage activities, without
offsetting income, as set forth on Schedule 2.1(h) hereto.

               (i)
No Undisclosed Liabilities. Except as included in the financial statements
in the Commission Documents or as set forth on Schedule 2.1 hereto, neither the
Company nor any of its Subsidiaries has any liabilities, obligations, claims or
losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) other than those incurred in the ordinary
course of the Company’s or its Subsidiaries’ respective businesses since
September 30, 2006 and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company or its Subsidiaries.

               (j)
No Undisclosed Events or Circumstances. Since September 30, 2006, no
event or circumstance has occurred or exists with respect to the Company or any
of its Subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed. 

               (k)
Indebtedness. The Company’s financial statements and other information
in the Commission Documents set forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or its Subsidiaries, or for
which the Company or its Subsidiaries have commitments, except for additional
indebtedness incurred by the Company and its Subsidiaries in the regular course
of their development stage activities, without offsetting income, as set forth
on Schedule 2.1(k).

               (l)
Title to Assets. Each of the Company and its Subsidiaries has good and
marketable title to all of its real and personal property, free and clear of
any mortgages, pledges, charges, liens, security interests or other
encumbrances of any nature whatsoever, except for those indicated in the
Commission Documents or such that, individually or in the aggregate, do not
have a Material Adverse Effect. All leases of the Company and its Subsidiaries
are valid and subsisting and in full force and effect except that the Company
is in violation of its lease with Columbia University for its office and
laboratory facilities because the Company is in arrears in its rental payments.

                (m)
Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding
pending or, to the knowledge of the Company, threatened against the Company or
its Subsidiaries which questions the validity of this 

Agreement or
any of the other Transaction Documents or any of the transactions contemplated
hereby or thereby or any action taken or to be taken pursuant hereto or
thereto. Except as set forth on Schedule 2.1(m) hereto, there is no action,
suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or other proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any of its Subsidiaries or any of
their respective properties or assets, which individually or in the aggregate,
would have a Material Adverse Effect. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any of its Subsidiaries
or any officers or directors of the Company or its Subsidiaries in their
capacities as such, which individually or in the aggregate, would have a
Material Adverse Effect. 

               (n)
Compliance with Law. The business of the Company and its Subsidiaries
has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except or such that, individually or in the aggregate, the noncompliance
therewith would have a Material Adverse Effect. The Company and its
Subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of their business as now being conducted by them unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.

               (o)
Taxes. The Company and its Subsidiaries have accurately prepared and
filed all federal, state, foreign and other tax returns required by law to be
filed by them, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate provisions have been and
are reflected in the financial statements of the Company and its Subsidiaries
for all current taxes and other charges to which the Company or its
Subsidiaries are subject and which are not currently due and payable. None of
the federal income tax returns of the Company or its Subsidiaries have been
audited by the Internal Revenue Service. The Company has no knowledge of any
additional assessments, adjustments or contingent tax liability (whether
federal, state or foreign) of any nature whatsoever, whether pending or
threatened against the Company or any of its Subsidiaries for any period, nor
of any basis for any such assessment, adjustment or contingency.

               (p)
Certain Fees. Except as set forth in this Section 2.1 (p) and on Schedule
2.1(p) hereto, no brokers, finders or financial advisory fees or
commissions will be payable by the Company or any subsidiary or any Purchaser
with respect to the transactions contemplated by this Agreement. Brokers,
finders and/or financial advisory fees and commissions shall include, but not
be limited to, warrants substantially identical to the Warrants and the
exchange of certain Series E PA Warrants, Series E Warrants, Series F PA
Warrants and Series F Warrants held by such brokers and/or finders in exchange
for shares of Common Stock of the Company.

               (q)
Disclosure. The Company confirms that neither it nor anyone working on
its behalf has provided any of the Purchasers or their agents or counsel with
any information that constitutes or might constitute material, nonpublic
information. To the best of the Company’s knowledge, neither this Agreement or
the Schedules hereto nor any other documents, certificates

or instruments
furnished to the Purchasers by or on behalf of the Company or its Subsidiaries
in connection with the transactions contemplated by this Agreement contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.

               (r)
Operation of Business. The Company and its Subsidiaries own or possess
all patents, trademarks, domain names (whether or not registered) and any
patentable improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations, and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted
without any conflict with the rights of others. However, PRF has been assigned
the Company’s United States patents and trademarks as security for payment of
the Company’s obligations to PRF, which assignment will be released on Initial
Closing or promptly thereafter.

               (s)
Environmental Compliance. The Company and its Subsidiaries have obtained
all material approvals, authorization, certificates, consents, licenses, orders
and permits or other similar authorizations of all governmental authorities, or
from any other person, that are required under any Environmental Laws. “Environmental
Laws” shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface
water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature. The
Company has all necessary governmental approvals required under all
Environmental Laws and used in its business or in the business of its
Subsidiaries, except for such instances as would not individually or in the
aggregate have a Material Adverse Effect. The Company and its Subsidiaries are
also in compliance with all other limitations, restrictions, conditions,
standards, requirements, schedules and timetables required or imposed under all
Environmental Laws. Except for such instances as would not individually or in
the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company or its Subsidiaries that violate or may
violate any Environmental Law after the Closing or that may give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including, without limitation,
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance. “Environmental
Liabilities” means all liabilities of a person (whether such liabilities
are owed by such person to governmental authorities, third parties or
otherwise) whether currently in existence or arising hereafter which arise
under or relate to any Environmental Law.

               (t)
Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all
material respects the

information
relating to the business of the Company and its Subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or its Subsidiaries. The
Company and its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company’s board of directors, to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate actions are taken with respect to any differences.

               (u)
Material Agreements. Except for those described or referred to in the
Commission Documents, neither the Company nor any of its Subsidiaries is a
party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission (collectively, “Material Agreements”) if the Company
or any of its Subsidiaries were registering securities under the Securities
Act. Except as set forth on Schedule 2.1(u) hereto, , the Company and its
Subsidiaries have in all material respects performed all the obligations
required to be performed by them to date under the foregoing agreements, have
received no notice of default and, to the best of the Company’s knowledge are
not in default under any other Material Agreement now in effect, the result of
which could cause a Material Adverse Effect. Except as set forth in Section
2.1(u) hereto, no written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement of the Company or of any of its Subsidiaries
limits the payment of dividends on its Common Stock.

               (v)
Transactions with Affiliates. Except as disclosed in the Commission
Documents and except for the employment of Raphael Hofstein, a director of the
Company, by Hadasit, a supplier to a Subsidiary of the Company, there are no
loans, leases, agreements, contracts, royalty agreements, management contracts
or arrangements or other continuing transactions between (a) the Company, its
Subsidiaries or any of their respective customers or suppliers on the one hand,
and (b) on the other hand, any executive officer, or to the knowledge of the
Company, any employee, consultant or director of the Company, or its
Subsidiaries, or any member of the immediate family of such executive officer,
employee, consultant or director or any corporation or other entity controlled
by such executive officer, employee, consultant or director.

               (w)
Securities Act of 1933. The Company has complied and will comply with
all applicable federal and state securities laws in connection with the offer,
issuance and sale of the Preferred Shares, the Warrants, the Conversion Shares
and the Warrant Shares hereunder. Neither the Company nor anyone acting on its
behalf, directly or indirectly, has or will sell, offer to sell or solicit
offers to buy any of the Securities, or similar securities to, or solicit
offers with respect thereto from, or enter into any preliminary conversations
or negotiations relating thereto with, any person, or has taken or will take
any action so as to bring the issuance and sale of any of the Securities under
the registration provisions of the Securities Act and applicable state
securities laws. Neither the Company nor any of its affiliates, nor any person
acting on its or

 their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) in connection with the offer or sale of any of the
Securities.

               (x)
Governmental Approvals. Except for the filing of any notice prior or
subsequent to the Closing that may be required under applicable state and/or
federal securities laws (which if required, shall be filed on a timely basis),
no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Preferred Shares
and the Warrants, or for the performance by the Company of its obligations
under the Transaction Documents.

               (y)
Employees. Neither the Company nor its Subsidiaries have any
collective bargaining arrangements or agreements covering any of their
employees. Neither the Company nor its Subsidiaries have any employment
contract, agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
Subsidiary. Since September 30, 2006, no officer, consultant or key employee of
the Company or its Subsidiary whose termination, either individually or in the
aggregate, could have a Material Adverse Effect, has terminated or, to the
knowledge of the Company, has any present intention of terminating his or her
employment or engagement with the Company or any Subsidiary, except for the
possible terminations of the employment of Ron Lipstein and Steven Katz as
provided in Section 12(a)(xiii) of the Exchange Agreement dated
January 29, 2007 between the Company and PRF, the terms of which shall be
acceptable to the Purchasers.

               (z)
Absence of Certain Developments. Except as set forth in the Commission
Documents and on Schedule 2.1(z), since September 30, 2006, neither the
Company nor any of its Subsidiaries has:

                    (i)
issued any stock, bonds or other corporate securities or any rights, options or
warrants with respect thereto, except for additional options granted under the
Company’s Employee Stock Option Plan;

                    (ii)
borrowed any amount or incurred or become subject to any liabilities (absolute
or contingent) except trade payables incurred in the ordinary course of
business;

                    (iii)
discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business;

                    (iv)
declared or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock;

                    (v)
sold, assigned or transferred any other tangible assets, or canceled any debts
or claims, except in the ordinary course of business;

                    (vi)
sold, assigned or transferred any patent rights, trademarks, trade names,
copyrights, trade secrets or other intangible assets or intellectual property
rights, or disclosed any proprietary confidential information to any person
except in the ordinary course of business or to the Purchasers or its
representatives;

                    (vii)
suffered any substantial losses (except for losses incurred in connection with
its development stage operations in the ordinary course without offsetting
income as set forth on Schedule 2.1(z)(vii)) or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;

                    (viii)
made any changes in employee compensation except in the ordinary course of
business and consistent with past practices;

                    (ix)
made capital expenditures or commitments in excess of $100,000 therefor except
in the ordinary course of its development stage operations as set forth on
Schedule 2.1(z)(ix);

                    (x)
entered into any other transaction other than in the ordinary course of
business, or entered into any other material transaction, whether or not in the
ordinary course of business;

                    (xi)
made charitable contributions or pledges in excess of $25,000;

                    (xii)
suffered any material damage, destruction or casualty loss, whether or not
covered by insurance;

                    (xiii)
experienced any material problems with labor or management in connection with the
terms and conditions of their employment;

                    (xiv)
effected any two or more events of the foregoing kind which in the aggregate
would cause a Material Adverse Effect; or

                    (xv)
entered into an agreement, written or otherwise, to take any of the foregoing
actions.

               (aa)
Use of Proceeds. The proceeds from the sale of the Preferred Shares will
be used by the Company for working capital and general corporate purposes.

               (bb)
Public Utility Holding Company Act and Investment Company Act Status.
The Company is not a “holding company” or a “public utility company” as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon the
Closing will not be, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.

               (cc)
ERISA. No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan by the Company or any of its subsidiaries
which is or would be materially adverse to the Company and its subsidiaries.
The execution and delivery of this Agreement and the issue and sale of the Preferred
Shares will not involve any transaction which is subject to the prohibitions of
Section 406 of ERISA or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended,
provided that, if any of the Purchasers, or any person or entity that owns a
beneficial interest in any of the Purchasers, is an “employee pension benefit
plan” (within the meaning of Section 3(2) of ERISA) with respect to which the
Company is a “party in interest” (within the meaning of Section 3(14) of
ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(ac), the term “Plan” shall
mean an “employee pension benefit plan” (as defined in Section 3 of ERISA)
which is or has been established or maintained, or to which contributions are
or have been made, by the Company or any of its Subsidiaries or by any trade or
business, whether or not incorporated, which, together with the Company or any
of its Subsidiaries, is under common control, as described in Section 414(b) or
(c) of the Code.

               (dd)
Dilutive Effect. The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Preferred Shares
and the Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Preferred Shares in accordance
with this Agreement and the Certificate of Designation and its obligations to
issue the Warrant Shares upon the exercise of the Warrants in accordance with
this Agreement and the Warrants, is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.

               (ee)
No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offering of the Preferred Shares and
Warrants pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Preferred Shares and Warrants pursuant to Rule 506 under the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Preferred Shares and
Warrants to be integrated with other offerings. The Company does not have any
registration statement pending before the Commission or currently under the
Commission’s review and since October 1, 2006, the Company has not
offered or sold any of its equity securities or debt securities convertible
into shares of Common Stock.

               (ff)
Independent Nature of Purchasers. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under the Transaction Documents. The Company acknowledges that the
decision of each Purchaser to purchase securities pursuant to this Agreement
has been made by such Purchaser independently of any other purchase and 

independently
of any information, materials, statements or opinions as to the business,
affairs, operations, assets, properties, liabilities, results of operations,
condition (financial or otherwise) or prospects of the Company or of its
Subsidiaries which may have been made or given by any other Purchaser or by any
agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges that each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. The
Company acknowledges that for reasons of administrative convenience only, the
Transaction Documents have been prepared by counsel for one of the Purchasers
and such counsel does not represent all of the Purchasers but only such
Purchaser and the other Purchasers have retained their own individual counsel
with respect to the transactions contemplated hereby. The Company acknowledges
that it has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers. The Company acknowledges that
such procedure with respect to the Transaction Documents in no way creates a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions contemplated
hereby or thereby.

               (gg)
Sarbanes Oxley; Transfer Agent. The Company has complied with its
obligations under the Sarbanes Oxley Act of 2002 and the rules and regulations
promulgated thereunder. The Company’s transfer agent is a participant in and
the Common Stock is eligible for transfer pursuant to the Depository Trust
Company Automated Securities Transfer Program. The name, address, contact
person and telephone number of the Company’s transfer agent is set forth on
Schedule 2.1(gg) hereto.

               Section
2.2 Representations and Warranties of the Purchasers.
Each of the Purchasers severally and not jointly hereby makes the following
representations and warranties to the Company with respect solely to itself and
not with respect to any other Purchaser:

               (a)
Organization and Standing of the Purchasers. If the Purchaser is an
entity, such Purchaser is a corporation or partnership duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.

               (b)
Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the
Preferred Shares being sold to it hereunder. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement by such
Purchaser and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate or partnership
action (if the Purchaser is an entity), and no further consent or authorization
of such 

Purchaser or
its Board of Directors, stockholders, or partners, as the case may be, is
required. Each of this Agreement and the Registration Rights Agreement has been
duly authorized, executed and delivered by such Purchaser.

               (c)
No Conflicts. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement and the consummation by such Purchaser of
the transactions contemplated hereby and thereby or relating hereto do not and
will not (i) result in a violation of such Purchaser’s charter documents or
bylaws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of
any agreement, indenture or instrument to which such Purchaser is a party, or
result in a violation of any law, rule, or regulation, or any order, judgment
or decree of any court or governmental agency applicable to such Purchaser or
its properties (except for such conflicts, defaults and violations as would
not, individually or in the aggregate, have a material adverse effect on such
Purchaser). Such Purchaser is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or the Registration Rights Agreement or to purchase the
Preferred Shares or acquire the Warrants in accordance with the terms hereof,
provided that for purposes of the representation made in this sentence, such
Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.

               (d)
Acquisition for Investment. Such Purchaser is acquiring the Preferred
Shares and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
Such Purchaser does not have a present intention to sell the Preferred Shares
or the Warrants, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Preferred Shares or the Warrants to
or through any person or entity, provided that by making the
representations herein and subject to Section 2.2(h) below, such Purchaser does
not agree to hold the Preferred Shares or the Warrants for any minimum or other
specific term and reserves the right to dispose of the Preferred Shares or the
Warrants at any time in accordance with Federal and state securities laws applicable
to such disposition. Such Purchaser acknowledges that it is able to bear the
financial risks associated with an investment in the Preferred Shares and the
Warrants and that it has been given full access to such records of the Company
and the subsidiaries and to the officers of the Company and the subsidiaries
and received such information as it has deemed necessary or appropriate to
conduct its due diligence investigation.

               (e)
Accredited Purchasers. Such Purchaser is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act and has such
knowledge and experience in financial and business matters that such Purchaser
is capable of evaluating the merits and risks of the prospective investment in
the Preferred Shares.

               (f)
Opportunities for Additional Information. Each Purchaser acknowledges
that such Purchaser has had the opportunity to ask questions of and receive
answers from, or obtain additional information from, the executive officers of
the Company concerning the financial and other affairs of the Company, and to
the extent deemed necessary in light of such 

Purchaser’s
personal knowledge of the Company’s affairs, such Purchaser has asked such
questions and received answers to the full satisfaction of such Purchaser, and
such Purchaser desires to invest in the Company.

               (g)
No General Solicitation. Each Purchaser acknowledges that the Securities
were not offered to such Purchaser by means of any form of general or public
solicitation or general advertising, or publicly disseminated advertisements or
sales literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which
such Purchaser was invited by any of the foregoing means of communications.

               (h)
Rule 144. Such Purchaser understands that the Shares must be held
indefinitely unless such Shares are registered under the Securities Act or an
exemption from registration is available. Such Purchaser acknowledges that such
Purchaser is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act (“Rule 144”),
and that such person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.

               (i)
No Shorting. No Purchaser has engaged in any short sales of the Common
Stock or instructed any third parties to engage in any short sales of the
Common Stock on its behalf prior to the Closing Date. Each Purchaser covenants
and agrees that it will not be in a net short position with respect to the
shares of Common Stock. For purposes of this Section 2.2(i), a “net short
position” means a sale of Common Stock by a Purchaser that is marked as a short
sale and that is made at a time when there is no equivalent offsetting long
position in Common Stock held by such Purchaser.

               (j)
General. Such Purchaser understands that the Shares are being offered
and sold in reliance on a transactional exemption from the registration
requirement of Federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Shares.

               (k)
Certain Exchanges Excepted. For purposes of Section 5(e)(x) of the
Series A Certificate of Designation and Series A-1 Certificate of Designation
and the definition of “Permitted Issuances” as defined in Section 9 of the
Warrants, each Purchaser acknowledges that the exchange of certain warrants
outstanding on the date hereof for shares of the Company’s Common Stock shall
not require the Company to make an adjustment of the Conversion Price under
Section 5(e)(vi) of the Series A Certificate of Designation and Series A-1
Certificate of Designation or an adjustment of the Warrant Price under Section
4(d) of the Warrants

ARTICLE III

Covenants

          The
Company covenants with each of the Purchasers as follows, which covenants are
for the benefit of the Purchasers and their permitted assignees (as defined
herein).

               
Section 3.1 Securities Compliance.

               (a)
The Company shall notify the Commission in accordance with their rules and
regulations, of the transactions contemplated by any of the Transaction
Documents, including filing a report on Form 8-K and filing a Form D with
respect to the Preferred Shares, Warrants, Conversion Shares and Warrant
Shares, if required by the Commission’s rules, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Preferred
Shares, the Warrants, the Conversion Shares and the Warrant Shares to the
Purchasers or subsequent holders.

               (b)
The Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Purchasers
set forth herein in order to determine the applicability of Federal and state
securities laws exemptions and the suitability of such Purchasers to acquire
the Preferred Shares.

               Section
3.2 Registration and Listing. The Company will
cause its Common Stock to continue to be registered under Sections 12(b) or
12(g) of the Exchange Act, will comply in all respects with its reporting and
filing obligations under the Exchange Act, will comply with all requirements
related to any registration statement filed pursuant to this Agreement or the
Registration Rights Agreement, and will not take any action or file any
document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will take all
action necessary to continue the listing or trading of its Common Stock on the
over-the-counter electronic bulletin board and on such other exchange or market
on which the Common Stock is trading. If required, the Company will apply any
listing application for the Shares and Warrant Shares. The Company further
covenants and agrees that it will take such further action as the Purchasers
may reasonably request, all to the extent required from time to time to enable
the Purchasers to sell the Securities without registration under the Securities
Act within the limitation of the exemptions provided in Rule 144 promulgated
under the Securities Act. Upon the request of the Purchasers, the Company shall
deliver to the Purchasers a written certification of a duly authorized officer
as to whether it has complied with such requirement.

               Section
3.3 Inspection Rights. The Company shall permit,
during normal business hours and upon reasonable request and reasonable notice,
each Purchaser or any employees, agents or representatives thereof, so long as
such Purchaser shall be obligated hereunder to purchase the Preferred Shares or
shall beneficially own any Preferred Shares, or shall own Conversion Shares
which, in the aggregate, represent more than 2% of the total combined voting
power of all voting securities then outstanding, for purposes reasonably
related 

to such
Purchaser’s interests as a stockholder to examine and make reasonable copies of
and extracts from the records and books of account of, and visit and inspect
the properties, assets, operations and business of the Company and any
subsidiary, and to discuss the affairs, finances and accounts of the Company
and any subsidiary with any of its officers, consultants, directors, and key
employees.

               Section
3.4 Compliance with Laws. The Company shall
comply, and cause each subsidiary to comply, with all applicable laws, rules,
regulations and orders, noncompliance with which could have a Material Adverse
Effect.

               Section
3.5 Keeping of Records and Books of Account. The
Company shall keep and cause each of its Subsidiaries to keep adequate records
and books of account, in which complete entries will be made in accordance with
GAAP consistently applied, reflecting all financial transactions of the Company
and its Subsidiaries, and in which, for each fiscal year, all proper reserves
for depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business shall be made.

               Section
3.6 Reporting Requirements. If the Company ceases
to file its periodic reports with the Commission, or if the Commission ceases
making these periodic reports available via the Internet without charge, then
at a Purchaser’s request the Company shall furnish the following to such
Purchaser so long as such Purchaser shall be obligated hereunder to purchase
the Preferred Shares or shall beneficially own any Preferred Shares, or shall
own Conversion Shares which, in the aggregate, represent more than 2% of the
total combined voting power of all voting securities then outstanding:

               (a)
Quarterly Reports filed with the Commission on Form 10-Q or Form 10-QSB as soon
as available, and in any event within forty-five (45) days after the end of
each of the first three fiscal quarters of the Company;

               (b)
Annual Reports filed with the Commission on Form 10-K or Form 10-KSB as soon as
available, and in any event within ninety (90) days after the end of each
fiscal year of the Company; and

               (c)
Copies of all notices and information, including without limitation notices and
proxy statements in connection with any meetings, that are provided to holders
of shares of Common Stock, contemporaneously with the delivery of such notices
or information to such holders of Common Stock.

               Section
3.7 Amendments. The Company shall not amend or
waive any provision of the Certificate, Bylaws or the Registration Rights
Agreement in any way that would adversely affect the liquidation preferences,
conversion rights, voting rights or redemption rights of the holders of the
Preferred Shares, unless in compliance with the terms of such instruments or
agreements.

               Section
3.8 Other Agreements. The Company shall not enter
into any agreement in which the terms of such agreement would restrict or
impair the right or ability to 

perform of the
Company or any subsidiary under any Transaction Document or the Certificate of
Designation.

               Section
3.9 Distributions; Subsidiaries. So long as any
Preferred Shares or Warrants remain outstanding, the Company agrees that it
shall not (i) declare or pay any dividends or make any distributions to any
holder(s) of Common Stock or (ii) purchase or otherwise acquire for value,
directly or indirectly, any Common Stock or other equity security of the
Company. So long as any Preferred Shares or Warrants remain outstanding, the
Company agrees that it shall not transfer, assign, pledge, issue or otherwise
permit any equity or other ownership interests in the Subsidiaries to be
beneficially owned or held by any person other than the Company.

               Section
3.10 Status of Dividends. The Company covenants
and agrees that (i) no Federal income tax return or claim for refund of Federal
income tax or other submission to the Internal Revenue Service will adversely
affect the Preferred Shares, any other series of its Preferred Stock, or the
Common Stock, and any deduction shall not operate to jeopardize the
availability to Purchasers of the dividends received deduction provided by
Section 243(a)(1) of the Code or any successor provision, (ii) in no report to
shareholders or to any governmental body having jurisdiction over the Company
or otherwise will it treat the Preferred Shares other than as equity capital
unless required to do so by a governmental body having jurisdiction over the
accounts of the Company or by a change in generally accepted accounting
principles required as a result of action by an authoritative accounting standards
setting body, and (iii) other than pursuant to this Agreement or the
Certificate of Designation, it will take no action which would result in the
dividends paid by the Company on the Preferred Shares out of the Company’s
current or accumulated earnings and profits being ineligible for the dividends
received deduction provided by Section 243(a)(1) of the Code. The preceding
sentence shall not be deemed to prevent the Company from designating the
Preferred Stock as “Convertible Preferred Stock” in its annual and quarterly
financial statements in accordance with its prior practice concerning other
series of preferred stock of the Company. Notwithstanding the foregoing, the
Company shall not be required to restate or modify its tax returns for periods
prior to the Closing Date. In the event that the Purchasers have reasonable
cause to believe that dividends paid by the Company on the Preferred Shares out
of the Company’s current or accumulated earnings and profits will not be
treated as eligible for the dividends received deduction provided by Section
243(a)(1) of the Code, or any successor provision, the Company will, at the
reasonable request of the Purchasers of 51% of the outstanding Preferred
Shares, join with the Purchasers in the submission to the Service of a request
for a ruling that dividends paid on the Shares will be so eligible for Federal
income tax purposes, at the Purchasers expense. In addition, the Company will
reasonably cooperate with the Purchasers (at Purchasers’ expense) in any
litigation, appeal or other proceeding challenging or contesting any ruling,
technical advice, finding or determination that earnings and profits are not
eligible for the dividends received deduction provided by Section 243(a)(1) of
the Code, or any successor provision to the extent that the position to be
taken in any such litigation, appeal, or other proceeding is not contrary to
any provision of the Code or incurred in connection with any such submission,
litigation, appeal or other proceeding. Notwithstanding the foregoing, nothing
herein contained shall be deemed to preclude the Company from claiming a
deduction with respect to such dividends if (i) the Code shall hereafter be
amended, or final Treasury regulations thereunder are issued or modified, to

provide that
dividends on the Preferred Shares or Conversion Shares should not be treated as
dividends for Federal income tax purposes or that a deduction with respect to
all or a portion of the dividends on the Shares is allowable for Federal income
tax purposes, or (ii) in the absence of such an amendment, issuance or
modification and after a submission of a request for ruling or technical
advice, the service shall rule or advise that dividends on the shares should
not be treated as dividends for Federal income tax purposes. If the Service
determines that the Preferred Shares or Conversion Shares constitute debt, the
Company may file protective claims for refund.

               Section 3.11 Disclosure of Transaction. The Company shall
issue a press release describing the material terms of the transactions
contemplated hereby (the “Press Release”) on each Closing Date; provided,
however, that if such Closing occurs after 4:00 P.M. Eastern Time on any
Trading Day, the Company shall issue the Press Release no later than 9:00 A.M.
Eastern Time on the first Trading Day following such Closing Date. The Company
shall also file with the Commission a Current Report on Form 8-K (the “Form
8-K”) describing the material terms of the transactions contemplated hereby
(and attaching as exhibits thereto this Agreement, the Certificate of
Designation, the Registration Rights Agreement, the form of Warrant and the
Press Release) as soon as practicable following each Closing Date but in no
event more than four (4) Trading Days following each Closing Date, which Press
Release and Form 8-K shall be subject to prior review and reasonable comment by
the Purchasers. “Trading Day” means any day during which the principal
exchange on which the Common Stock is traded shall be open for trading. 

               Section 3.12 Conversions; Opinions. The Company will
provide, at the Company’s expense, such legal opinions in the future as are
reasonably necessary but only in conformance with federal and state securities
regulations for the issuance and resale of the Common Stock issuable upon
conversion of the Preferred Shares and exercise of the Warrants pursuant to an
effective registration statement, Rule 144 under the 1933 Act or an exemption
from registration. In the event that Common Stock is sold in a manner that
complies with an exemption from registration, the Company will promptly
instruct its counsel (at its expense) to issue to the transfer agent an opinion
permitting removal of the legend (indefinitely, if pursuant to Rule 144(k) of the
1933 Act, or to permit sale of the shares if pursuant to the other provisions
of Rule 144 of the 1933 Act).

               Section 3.13 Reservation of Shares. So long as any of the
Preferred Shares or Warrants remain outstanding, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than 120% of the aggregate number of shares of Common
Stock needed to provide for the issuance of the Conversion Shares and the
Warrant Shares.

               Section 3.14 Transfer Agent Instructions. The Company
shall issue irrevocable instructions to its transfer agent, and any subsequent
transfer agent, to issue certificates, registered in the name of each Purchaser
or its respective nominee(s), for the Conversion Shares and the Warrant Shares
in such amounts as specified from time to time by each Purchaser to the Company
upon conversion of the Preferred Shares or exercise of the Warrants in the form
of Exhibit E attached hereto (the “Irrevocable Transfer Agent Instructions”).
Prior to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall

 bear the restrictive legend specified in
Section 6.1 of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
3.14 will be given by the Company to its transfer agent and that the Shares
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section 3.14 shall affect in any way each
Purchaser’s obligations and agreements set forth in Section 6.1 to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Shares. If a Purchaser provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of the Shares may be made without registration under the Securities
Act or the Purchaser provides the Company with reasonable assurances that the
Shares can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of
the Conversion Shares and the Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates in such name and in such denominations
as specified by such Purchaser and, without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this Section 3.14
will cause irreparable harm to the Purchasers by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this
Section 3.14 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 3.14, that
the Purchasers shall be entitled, in addition to all other available remedies,
to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.

               Section 3.15 Disposition of Assets. So long as the
Preferred Shares remain outstanding, neither the Company nor any of its
Subsidiaries shall sell, transfer or otherwise dispose of any of its
properties, assets and rights including, without limitation, its software and
intellectual property, to any person except for sales to customers in the
ordinary course of business or with the prior written consent of the holders of
a majority of the Preferred Shares then outstanding.

               Section 3.16 No Issuance of Senior Securities. So long as
Preferred Shares and Series A-1 Convertible Preferred Shares with an aggregate
of $2,000,000 of stated value (as stated in the Certificate of Designation for
the Preferred Shares and Series A-1 Preferred Shares) remains outstanding, the
Company shall not, and shall not permit any Subsidiary to, whether by operation
of law or otherwise, offer, sell or issue or allow to exist, any securities or
financial instruments that would rank senior to or pari passu with the
Preferred Shares, Series A-1 Convertible Preferred Stock or Series A-2
Convertible Preferred Stock (or securities or financial instruments convertible
or exchangeable into any such securities or financial instruments) with respect
to dividends or liquidation, including, without limitation, any Indebtedness,
or any ownership or other interest in any Subsidiary, without the prior written
approval of at least fifty percent (50%) of the Preferred Shares and Series A-1
Convertible Preferred Stock outstanding (together as one class); provided,
however, that no such senior or pari passu securities or financial
instruments shall contain (a) a liquidation preference in excess of one (1)
times the purchase price paid to the Company therefor, or (b) an annual dividend
or interest rate in excess of LIBOR, plus 6 basis points without, in the case
of either (a) or (b), the prior written approval of thirty percent (30%) of the
Preferred Shares and the Series A-1 Convertible Preferred Stock

 outstanding, each voting separately as a
class. The provisions of this Section 3.16 shall not apply to (a) the issuance
prior to December 31, 2007 of up to $3,000,000 of securities used to settle
trade payables ranking pari passu with the Preferred Shares and the Series A-1
Convertible Preferred Shares, provided, that a Release Event has
not occurred as of the date of the issuance of such securities and (b) a
working capital line of credit, containing typical and customary terms and
conditions of up to $2,000,000 issued by a bank, credit, union, governmental
agency or similar unaffiliated corporate or institutional lender. For purposes
of this Section 3.16, “Indebtedness” means (a) all obligations for borrowed
money, (b) all obligations evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations in respect of
letters of credit, bankers acceptance, current swap agreements, Interest Rate
Agreements, interest rate swaps, or other financial products, (c) all capital
lease obligations that exceed $100,000 in any fiscal year to the extent
incurred in the Company’s ordinary course of business, (d) all obligations or
liabilities secured by a lien or encumbrance on any asset of the Company or its
Subsidiaries, irrespective of whether such obligation or liability is assumed,
(e) all obligations for the deferred purchase price of assets, together with
trade debt and other accounts payable that exceed $100,000 in any fiscal year
to the extent incurred in the Company’s ordinary course of business, (f) all
synthetic leases, and (g) any obligation guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted or
sold with recourse) any of the foregoing obligations of any other person;
provided, however, Indebtedness shall not include (a) usual and customary trade
debt incurred in the ordinary course of business and (b) endorsements for
collection or deposit in the ordinary course of business.

               Section 3.17 Most Favored Nations Exchange Right; Subsequent
Financing. So long as the Preferred Shares and Series A-1 Convertible
Preferred Stock remain outstanding, if the Company enters into any equity or
equity linked financing (“Subsequent Financing”) on terms more favorable
than the terms governing the Preferred Shares and Series A-1 Convertible
Preferred Shares, then the Purchasers and PRF in their sole discretion may
exchange their Preferred Shares and Series A-1 Convertible Preferred Shares, as
the case may be, valued at their stated value, for the securities issued or to
be issued in the Subsequent Financing to the extent a Release Event has not
occurred with respect to such shares. The term “Release Event” means, with
respect to a holder’s shares of Series A Preferred Stock and Series A-1 Preferred
Stock, the date on which the Company files a Form 8-K with the Commission
disclosing the Company’s receipt of written notice from the U.S. Food and Drug
Administration regarding the granting the Issuer the right to commercialize and
market (i.e., formal approval of the Issuer’s Pre-Market Application for) its
OrCel product for the treatment of venous leg ulcers.

               (a)
For a period of two (2) years following the Initial Closing Date so long as the
Preferred Shares remain outstanding, the Company covenants and agrees to
promptly notify (in no event later than five (5) business days after making or
receiving an applicable offer) in writing (a “Rights Notice”) the
Purchasers who have purchased at least $3,500,000 of Preferred Shares (each, a
“Preferred Stockholder” and collectively the “Preferred Stockholders”)
of the terms and conditions of any proposed offer or sale to, or exchange with
(or other type of distribution to) any third party (a “Subsequent Financing”),
of Common Stock or any debt or equity securities convertible, exercisable or
exchangeable into Common Stock. The Rights Notice shall describe, in reasonable
detail, the proposed Subsequent Financing, the names and investment amounts of
all investors participating in the Subsequent Financing (if known), the
proposed closing date of the Subsequent Financing, which shall be within twenty
(20) calendar 

days from the date of the Rights Notice, and all of the terms and
conditions thereof and proposed definitive documentation to be entered into in
connection therewith. The Rights Notice shall provide each Preferred
Stockholder an option (the “Rights Option”) during the ten (10) Trading
Days following delivery of the Rights Notice (the “Option Period”) to
inform the Company whether such Preferred Stockholder will purchase up to forty
percent (40%) of the securities being offered in such Subsequent Financing on
the same, absolute terms and conditions as contemplated by such Subsequent
Financing. Delivery of any Rights Notice constitutes a representation and
warranty by the Company that there are no other material terms and conditions,
arrangements, agreements or otherwise except for those disclosed in the Rights
Notice, to provide additional compensation to any party participating in any
proposed Subsequent Financing, including, but not limited to, additional
compensation based on changes in the Purchase Price or any type of reset or
adjustment of a purchase or conversion price or to issue additional securities
at any time after the closing date of a Subsequent Financing. If the Company
does not receive notice of exercise of the Rights Option from the Preferred
Stockholder within the Option Period, the Company shall have the right to close
the Subsequent Financing on the scheduled closing date with a third party; provided
that all of the material terms and conditions of the closing are the same as
those provided to the Preferred Stockholder in the Rights Notice. If the
closing of the proposed Subsequent Financing does not occur on that date, any
closing of the contemplated Subsequent Financing or any other Subsequent
Financing shall be subject to all of the provisions of this Section 3.17(a),
including, without limitation, the delivery of a new Rights Notice. The
provisions of this Section 3.17(a) shall not apply to issuances of securities
in a Permitted Financing.

               (b)
For purposes of this Agreement, a Permitted Financing (as defined hereinafter)
shall not be considered a Subsequent Financing. A “Permitted Financing”
shall mean (i) securities issued (other than for cash) in connection with a
merger, acquisition, or consolidation, (ii) securities issued pursuant to the
conversion or exercise of convertible or exercisable securities issued or
outstanding on or prior to the date of this Agreement or issued pursuant to
this Agreement (so long as the conversion or exercise price in such securities
are not amended to lower such price and/or adversely affect the Purchasers),
(iii) securities issued in connection with bona fide strategic license agreements
or other partnering arrangements so long as such issuances are not for the
purpose of raising capital, (iv) Common Stock issued or the issuance or grants
of options to purchase Common Stock pursuant to the Company’s stock option
plans and employee stock purchase plans or stock incentive plans as they exist
on the date of this Agreement or are 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, and (v)
any warrants issued to the placement agent and its designees for the
transactions contemplated by the Purchase Agreement.

               Section 3.18 Form 10-KSB. The Company shall use its best
efforts to file its Form 10-KSB for the period ending December 31, 2006 (“Form
10-K”) promptly after the Initial Closing.

               Section 3.19 Executive Management. Following the filing of
the Form 10-K, Costa Papastephanou, Ph.D., President and COO, shall be named
Chief Executive Officer of the Company, and Ron Lipstein and Steven Katz shall
resign from the Company’s Board of 

Directors and
enter into agreements terminating their employment with the Company pursuant to
the terms set forth on Schedule 3.19 hereto upon terms acceptable to PRF, the
Board of Directors and Montaur Capital Partners.

               Section 3.20 Board of Directors. Promptly after the filing
of the Form 10-K, the Board of Directors shall be reconstituted to consist of
no fewer than five (5) members, of which no more than two (2) directors shall
be from the current Board of Directors and one (1) member shall be designated
by PRF. PRF shall have a continuing right to designate one other person to
attend meetings of the Board of Directors as an observer.

               Section 3.21 Restrictions on Use of Proceeds. The Company
agrees that it shall not use more than $300,000 from the proceeds of the sale
of the Preferred Shares and Warrants until the Form 10-KSB for the period
ending December 31, 2006 has been filed. 

               Section 3.22 Affiliate Transaction. Without the prior
written consent of holders of at least 50% of the Preferred Shares, the Company
and its Subsidiaries shall not engage in any transactions with any officer,
director, employee or any Affiliate of the Company or any Subsidiary, including
any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of an aggregate of
$150,000 each fiscal year, other than (i) for payment of salary, bonus or
consulting fees for services rendered, (ii) reimbursement for expenses incurred
on behalf of the Company, (iii) for other employee benefits, including stock
option agreements under any stock option plan, or stock grants under any plan,
of the Company, (iv) stock or option grants authorized by the Board of
Directors or by a committee of the Board of Directors the majority of the
members of which are independent directors, and (v) all payments to Ron
Lipstein and Steven Katz pursuant to agreements currently entered or being
entered into by them with the Company and referred to in Section 3.19 of
this Agreement, the terms of which are outlined in Schedule 3.19 of this
Agreement.

               Section 3.23 Re-listing on the OTC Bulletin Board.
Promptly following the filing of the Form 10-K, the Company will take all
action necessary to re-list its Common Stock on the OTC Bulletin Board.

               Section 3.24 Disclosure of FDA Approval. Promptly
following the receipt thereof, the Company shall file a Form 8-K with the
Commission disclosing the receipt of written notice from the U.S. Food and Drug
Administration regarding granting the Company the right to commercialize and
market (i.e., formal approval of the Issuer’s Pre-Market Application for) its
OrCel product for the treatment of venous leg ulcers.

ARTICLE IV

Conditions

               Section
4.1 Conditions Precedent to the Obligation of the
Company to Sell the Shares. The obligation hereunder of the Company to
issue and sell the Preferred Shares and the Warrants to the Purchasers is
subject to the satisfaction or waiver, at or before each Closing, each of the
conditions set forth below. These conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion.

               (a)
Accuracy of Each Purchaser’s Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of each Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.

               (b)
Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by such Purchaser at or prior to each Closing.

               (c)
No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement. 

               (d)
Delivery of Purchase Price. The Purchase Price for the Preferred Shares
and Warrants has been delivered to the Company at each Closing Date.

               (e)
Delivery of Transaction Documents. The Transaction Documents have been
duly executed and delivered by the Purchasers to the Company.

               Section
4.2 Conditions Precedent to the Obligation of the
Purchasers to Purchase the Shares. The obligation hereunder of each
Purchaser to acquire and pay for the Preferred Shares and the Warrants is
subject to the satisfaction or waiver, at or before the each Closing, of each
of the conditions set forth below. These conditions are for each Purchaser’s
sole benefit and may be waived by such Purchaser at any time in its sole
discretion.

               (a)
Accuracy of the Company’s Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement or the other
agreements contemplated hereby shall be true and correct in all material
respects as of the date when made and as of each Closing Date as though made at
that time (except for representations and warranties that speak as of a
particular date), which shall be true and correct in all material respects as
of such date.

               (b)
Performance by the Company. The Company shall have performed, satisfied
and complied in all respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to each Closing.

               (c)
No Suspension, Etc. From the date hereof to the Closing Date, trading in
the Company’s Common Stock shall not have been suspended by the Commission
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at
any time prior to the Closing, trading in securities generally as reported by
Bloomberg Financial Markets (“Bloomberg”) shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by Bloomberg, or on the New York Stock Exchange, nor shall
a banking moratorium have been declared either by the United States or New York
State authorities, nor shall there have occurred any material outbreak or escalation
of hostilities or other national or international calamity or crisis of such
magnitude in its effect on, or any material adverse change in any financial
market which, in each case, in the judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Preferred Shares.

               (d)
No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

               (e)
No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any of its Subsidiaries, or any of the officers, directors or
affiliates of the Company or any of its Subsidiaries seeking to restrain, prevent
or change the transactions contemplated by this Agreement, or seeking damages
in connection with such transactions.

               (f)
Certificate of Designation of Rights and Preferences. Prior to the
Initial Closing, the Certificate of Designation in the form of Exhibit C-1
attached hereto shall have been filed with and accepted by the Secretary of
State of Delaware. The Certificate of Designations for the Series A-1 Preferred
Shares and the Series A-2 Preferred Shares, in the forms attached hereto, shall
have been filed with and accepted by the Secretary of State of Delaware. The
Certificate of Designation for the Series D-2 Preferred Stock of the Company
shall have been filed with and accepted by the Secretary of State of the State
of Delaware, in the form attached hereto as Exhibit C-4.

               (g)
Opinion of Counsel, Etc. At each Closing, the Purchasers shall have
received an opinion of counsel to the Company, dated the date of such Closing,
in the form of Exhibit F hereto, and such other certificates and documents as
the Purchasers or its counsel shall reasonably require incident to each
Closing.

               (h)
Registration Rights Agreement. At the Initial Closing, the Company shall
have executed and delivered the Registration Rights Agreement to each
Purchaser.

               (i)
Certificates. The Company shall have executed and delivered to the
Purchasers the certificates (in such denominations as such Purchaser shall
request) for the Preferred Shares and Warrants being acquired by such Purchaser
at each Closing.

               (j)
Resolutions. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 2.1(b) above in a form reasonably
acceptable to such Purchaser (the “Resolutions”).

               (k)
Reservation of Shares. As of each Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares and the exercise of
the Warrants, a number of shares of Common Stock equal to at least 120% of the
aggregate number of Conversion Shares issuable upon conversion of the Preferred
Shares outstanding on the Closing Date and the number of Warrant Shares
issuable upon exercise of the number of Warrants assuming such Warrants were
granted on the Closing Date (after giving effect to the Preferred Shares and
the Warrants to be issued on the Closing Date and assuming all such Preferred
Shares and Warrants were fully convertible or exercisable on such date regardless
of any limitation on the timing or amount of such conversions or exercises).
The Company shall have reserved, solely for the purposes of exercise of the
Series M Warrants, at least 120% of the shares of the Series D-2 Preferred
Stock issuable upon exercise the Series M Warrants.

               (l)
Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit E attached hereto, shall have been
delivered to and acknowledged in writing by the Company’s transfer agent.

               (m)
Secretary’s Certificate. The Company shall have delivered to such
Purchaser a secretary’s certificate, dated as of each Closing Date, as to (i)
the Resolutions, (ii) the Certificate, (iii) the Bylaws, (iv) the Certificate
of Designation, each as in effect at the Closing, and (iv) the authority and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.

               (n)
Officer’s Certificate. The Company shall have delivered to the
Purchasers a certificate of an executive officer of the Company, dated as of
each Closing Date, confirming the accuracy of the Company’s representations,
warranties and covenants as of the Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section 4.2 as
of the Closing Date.

               (o)
Material Adverse Effect. No Material Adverse Effect shall have occurred
at or before each Closing Date.

               (p)
Escrow Agreement. The Company and the parties thereto shall have
executed and delivered the Escrow Agreement.

               (q)
Amended and Restated PRF Exchange Agreement. The Company and PRF shall
have executed and delivered the Amended and Restated PRF Exchange Agreement, in

form and
substance reasonably satisfactory to the Purchasers, and the transactions
contemplated therein shall have been consummated. PRF shall have released any
and all security interests in any assets of the Company held by it (including
patents and trademarks).

ARTICLE V

Intentionally Omitted.

ARTICLE VI

Stock Certificate Legend

               Section
6.1 Legend. Each certificate representing the
Preferred Shares and the Warrants, and, if appropriate, securities issued upon
conversion or exercise thereof, shall be stamped or otherwise imprinted with a
legend substantially in the following form (in addition to any legend required
by applicable state securities or “blue sky” laws):

	
 

	
 

	
 

	
 

	
THESE
  SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) 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.

	
 

               The
Company agrees to reissue certificates representing the Shares without the
legend set forth above if at such time, prior to making any transfer of any
Shares or Shares, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company may
reasonably request, and (x) the Shares have been registered for sale under the
Securities Act and the holder is selling such shares and is complying with its
prospectus delivery requirement under the Securities Act, (y) the holder is
selling such Shares in compliance with the provisions of Rule 144 or (z) the
provisions of paragraph (k) of Rule 144 apply to such Shares.

ARTICLE VII

Intentionally Omitted.

ARTICLE VIII

Indemnification

               Section
8.1 General Indemnity. The Company agrees to
indemnify and hold harmless the Purchasers and any finder (and their respective
directors, officers, affiliates, agents, successors and assigns) from and
against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys’ fees, charges
and disbursements) incurred by the Purchasers as a result of any inaccuracy in
or breach of the representations, warranties or covenants made by the Company
herein. Each Purchaser severally but not jointly agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents,
successors and assigns from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by the Company
as result of any inaccuracy in or breach of the representations, warranties or
covenants made by such Purchaser herein. The maximum aggregate liability of
each Purchaser pursuant to its indemnification obligations under this Article 8
shall not exceed the portion of the Purchase Price paid by such Purchaser
hereunder.

               Section
8.2 Indemnification Procedure. Any party entitled
to indemnification under this Article VIII (an “indemnified party”) will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to indemnification
hereunder to give notice as provided herein shall not relieve the indemnifying
party of its obligations under this Article VIII except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any action, proceeding or claim is brought against an indemnified party in
respect of which indemnification is sought hereunder, the indemnifying party
shall be entitled to participate in and, unless in the reasonable judgment of
the indemnified party a conflict of interest between it and the indemnifying
party may exist with respect of such action, proceeding or claim, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party.
In the event that the indemnifying party advises an indemnified party that it
will contest such a claim for indemnification hereunder, or fails, within
thirty (30) days of receipt of any indemnification notice to notify, in
writing, such person of its election to defend, settle or compromise, at its
sole cost and expense, any action, proceeding or claim (or discontinues its
defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim. In any event, unless and until the indemnifying party elects
in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party’s costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably
available to the indemnified party which relates to such action or claim. The
indemnifying party shall keep the indemnified party fully apprised at all times
as to the status of the defense or any settlement negotiations with respect
thereto. If the indemnifying party elects to defend any such action or claim,
then the indemnified party shall be entitled to participate in such defense
with counsel of its choice at its sole cost and expense. The indemnifying party
shall not be liable for 

any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VIII to the contrary, the indemnifying
party shall not, without the indemnified party’s prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect
of such claim. The indemnification required by this Article VIII shall be made
by periodic payments of the amount thereof during the course of investigation
or defense, as and when bills are received or expense, loss, damage or
liability is incurred, so long as the indemnified party irrevocably agrees to
refund such moneys if it is ultimately determined by a court of competent
jurisdiction that such party was not entitled to indemnification. The indemnity
agreements contained herein shall be in addition to (a) any cause of action or
similar rights of the indemnified party against the indemnifying party or
others, and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.

ARTICLE IX

Miscellaneous

               Section
9.1 Fees and Expenses. Except as otherwise set
forth in this Agreement or the Certificate of Designation, each party shall pay
the fees and expenses of its advisors, counsel, accountants and other experts,
if any, and all other expenses, incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement, provided that the Company shall pay, at the Initial Closing
(i) all actual attorneys’ fees and expenses (exclusive of disbursements and
out-of-pocket expenses) incurred by Platinum Partners, Montaur Capital Partners
and Burnham Hill Partners in connection with the preparation, negotiation,
execution and delivery of this Agreement and the transactions contemplated
hereunder and (ii) in connection with the filing and declaration of
effectiveness by the Commission of the Registration Statement and any
amendments, modifications or waivers of this Agreement or any of the other Transaction
Documents. In addition, the Company shall pay all reasonable fees and expenses
incurred by the Purchasers in connection with the enforcement of this Agreement
or any of the other Transaction Documents, including, without limitation, all
reasonable attorneys’ fees and expenses. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the
Preferred Shares pursuant hereto.

               Section
9.2 Specific Enforcement, Consent to Jurisdiction.

               (a)
The Company and the Purchasers acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement, the
Certificate of Designation or the Registration Rights Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement or
the Registration Rights Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.

               (b)
Each of the Company and the Purchasers (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New
York County for the purposes of any suit, action or proceeding arising out of
or relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Purchasers
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 9.2
shall affect or limit any right to serve process in any other manner permitted
by law. The parties hereto agree that the prevailing party in any suit, action
or proceeding arising out of or relating to the Preferred Shares, the Warrants,
this Agreement or the other agreements between the Purchasers and the Company
contemplated hereby shall be entitled to reimbursement for reasonable legal
fees from the non-prevailing party.

               Section
9.3 Entire Agreement; Amendment. This Agreement
contains the entire understanding of the parties with respect to the matters
covered hereby and, except as specifically set forth herein or in the
Transaction Documents or the Certificate of Designation, neither the Company
nor any of the Purchasers makes any representations, warranty, covenant or
undertaking with respect to such matters and they supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein. Except as set forth elsewhere herein and except for Section
3.16 hereof which shall require the consent of fifty percent (50%) of the
Preferred Shares and Series A-1 Preferred Stock (voting together as one class),
no provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the holders of at least two-thirds (2/3)
of the Preferred Shares then outstanding and no provision hereof may be waived
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought. No such amendment shall be effective
to the extent that it applies to less than all of the holders of the Preferred
Shares then outstanding. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of any of
the Transaction Documents or the Certificate of Designation unless the same
consideration is also offered to all of the parties to the Transaction
Documents or holders of Preferred Shares, as the case may be. Copies of any
requests for waivers or amendments from the Purchasers shall also be delivered
to the Paul Royalty Fund, L.P., c/o Paul Capital Advisors, L.L.C., Two Grand
Central Tower, 140 East 45th Street, 44th Floor, New
York, New York 10017, Attention: Lionel Leventhal, Tel No.: (646) 264-1106, Fax
No.: (646) 264-1101 and to Morton E. Grosz, Esq., 30 Rockefeller Plaza, New
York, New York 10112, Tel No.: (212) 408-5592, Fax No.: (212) 541-5369.

               Section
9.4 Notices. Any notice, demand, request, waiver
or other communication required or permitted to be given hereunder shall be in
writing and shall be effective (a) upon hand delivery by telex (with correct
answer back received), telecopy or facsimile at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business
hours where such

notice is to
be received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

	
 

	
 

	
 

	
 

	
If to the
  Company:

	
Ortec International, Inc.

	
 

	
 

	
3960
  Broadway

	
 

	
 

	
New York, NY
  10032

	
 

	
 

	
Attention:
  Chief Financial Officer

	
 

	
 

	
Tel. No.:
  (646) 218-1885

	
 

	
 

	
Fax No.:
  (212) 740-2570

	
 

	
 

	
 

	
 

	
with copies
  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

	
 

	
 

	
 

	
 

	
If to any
  Purchaser:

	
At the
  address of such Purchaser set forth on Exhibit A to this
  Agreement, with copies to Purchaser’s counsel as set forth on
  Exhibit A or as specified in writing by such Purchaser
  with copies to:

	
 

	
 

	
 

	
 

	
 

	
Christopher
  S. Auguste, Esq.

	
 

	
 

	
Kramer Levin
  Naftalis & Frankel LLP

	
 

	
 

	
1177 Avenue
  of the Americas

	
 

	
 

	
New York,
  New York 10036

	
 

	
 

	
Tel No.:
  (212) 715-9100

	
 

	
 

	
Fax No.:
  (212) 715-8000

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.

               Section
9.5 Waivers by Party. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.

               Section
9.6 Waivers by Majority Holders. The affirmative vote at a meeting duly
called for such purpose or the written consent without a meeting of the holders
of not less than two-thirds (2/3) of the then outstanding Preferred Shares may
waive any of the obligations of the Company or the then rights of the Purchasers
set forth in this Agreement (except with respect to Section 3.16 hereof which
shall require the consent of fifty percent (50%) of the Preferred Shares and
Series A-1 Preferred Stock (voting together as one class)).

               Section
9.7 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

               Section
9.8 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. After the
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.

               Section
9.9 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

               Section
9.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to the choice of law provisions. This Agreement shall not interpreted or
construed with any presumption against the party causing this Agreement to be
drafted.

               Section
9.11 Survival. The representations and warranties of the Company and the
Purchasers contained in Sections 2.1(o) and (s) should survive indefinitely and
those contained in Article II, with the exception of Sections 2.1(o) and (s),
shall survive the execution and delivery hereof and the Closing until the date
three (3) years from the Closing Date, and the agreements and covenants set
forth in Articles I, III, VIII and IX of this Agreement shall survive the
execution and delivery hereof and the Closing hereunder until the Purchasers in
the aggregate beneficially own (determined in accordance with Rule 13d-3 under
the Exchange Act) less than 2% of the total combined voting power of all voting
securities then outstanding, provided, that Sections 3.1, 3.2, 3.4, 3.5, 3.6,
3.7, 3.8, 3.9, 3.10, 3.13, 3.14, 3.16, 3.17 and 3.22 shall in no event expire
until the Registration Statement required by Section 2 of the Registration
Rights Agreement is no longer required to be effective under the terms and
conditions of the Registration Rights Agreement.

               Section
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Any signature may be delivered by
facsimile transmission.

               Section
9.13 Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of the Purchasers without the
consent of the Purchasers unless and until such disclosure is required by law
or applicable regulation, and then only to the extent of such requirement.

               Section
9.14 Severability. The provisions of this Agreement, the Certificate of
Designation and the Registration Rights Agreement are severable and, in the
event that any court of competent jurisdiction shall determine that any one or
more of the provisions or part of the provisions contained in this Agreement,
the Certificate of Designation or the Registration Rights Agreement shall, for
any reason, be held to be invalid, illegal or unenforceable in any respect,

such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement, the Certificate of Designation or the
Registration Rights Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.

               Section
9.15 Further Assurances. From and after the date of this Agreement, upon
the request of any Purchaser or the Company, each of the Company and the
Purchasers shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement, the
Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares, the
Certificate of Designation and the Registration Rights Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

               IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.

	
 

	
 

	
 

	
 

	
ORTEC
  INTERNATIONAL, INC. 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Alan W.
  Schoenbart

	
 

	
 

	

	
 

	
 

	
   Name:

	
 

	
 

	
   Title:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
PURCHASER

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	

	
 

	
 

	
   Name:

	
 

	
 

	
   Title:

EXHIBIT
A to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENTFOR ORTEC

INTERNATIONAL, INC.

	
 

	
 

	
 

	
Names and Addresses

	
Number of
  Preferred Shares

	
Dollar Amount

	
of
  Purchasers

	
& Warrants Purchased

	
of
  Investment

	

	

	

EXHIBIT B-1 to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

FORM OF SERIES A WARRANT

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.

SERIES A WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

ORTEC INTERNATIONAL, INC.

Expires June 18, 2012

	
 

	
 

	
No.: W-A
  -___

  Date of Issuance: June 18, 2007

	
Number of Shares: ______

          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
______________________ or its registered assigns is entitled to subscribe for
and purchase, during the period specified in this Warrant, up to
_______________ (________) 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 18, 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
commencing on June 18, 2007.

          (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, 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
and commencing one (1) year following the Original Issue Date, 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 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

-2-

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 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

-3-

	
 

	
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 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.

-4-

          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 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

-5-

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 $1.00 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 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 

-6-

	
 

	
 

	
 

	
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 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

-7-

	
 

	
 

	
 

	
          (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).

          (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

-8-

	
 

	
 

	
 

	
          (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 files a
  Form 8-K with the Commission disclosing the Company’s receipt of written
  notice from the U.S. Food and Drug Administration regarding the granting the
  Issuer the right to commercialize and market (i.e., formal approval of the
  Issuer’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 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

-9-

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 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 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

-10-

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, 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,

-11-

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
          (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 

-12-

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
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.

-13-

          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, 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 

-14-

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          “Majority
  Holders” means at any time the Holders of Warrants exercisable for a
  majority of the shares of Warrant Stock issuable under the Warrants at the
  time outstanding.

	
 

	
 

	
 

	
          “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
  issuances and/or 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 under this subsection (iii), which would
  cause the provisions of Section 4 hereof to be applied, 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 as adjusted
  by the anti-dilution provisions thereof in effect on 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 

-15-

	
 

	
 

	
 

	
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-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, as adjusted by the
  anti-dilution provisions thereof in effect on the Original Issue 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.

	
 

	
 

	
 

	
          “Purchase
  Agreement” means the Series A Convertible Preferred Stock Purchase
  Agreement dated as of June 18, 2007 among the Issuer and the investors a
  party thereto.

	
 

	
 

	
 

	
          “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 

-16-

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
          “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.

	
 

	
 

	
 

	
          “Warrants”
  means the Warrants issued and sold pursuant to the Purchase Agreement,
  including, without limitation, this Warrant, and any other warrants of like
  tenor issued in substitution or exchange for any thereof pursuant to the
  provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
  Warrants.

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          “Warrant
  Price” initially means U.S. $1.00, as such price may be adjusted from
  time to time as shall result from the adjustments specified in this Warrant,
  including Section 4 hereto.

	
 

	
 

	
 

	
          “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.

-17-

	
 

	
 

	
 

	
          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 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

-18-

particular
instance and either retroactively or prospectively), by a written instrument or
written instruments executed by the Issuer and the Majority Holders; provided,
however, that no such amendment or waiver shall reduce the Warrant Share
Number, increase the Warrant Price, shorten the period during which this
Warrant may be exercised or modify any provision of this Section 11 without the
consent of the Holder of this Warrant. 

          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 

Copies of
notices to the Holder shall be sent to Kramer Levin Naftalis & Frankel LLP,
1177 Avenue of the Americas, New York, New York 10036, Attention: Christopher
S. Auguste, Tel No.: (212) 715-9100, Fax No.: (212) 715-8000. 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. 

-19-

          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 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 Series A 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:

	
 

	
 

	
 

	

	
 

	
 

	
Name:

	
 

	
 

	
Title:

-20-

SERIES A 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”). 

-21-

ASSIGNMENT

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
_______________. 

-22-

EXHIBIT B-2 to the 

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

FORM OF SERIES M WARRANT

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. 

SERIES M WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

ORTEC INTERNATIONAL, INC.

No.: W-M -
____           Number of
Shares: ______

Date of Issuance: June 18, 2007 

          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 ______________________ or its registered assigns is entitled to subscribe for
and purchase, during the period specified in this Warrant, up to
_______________ (________) 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 the thirtieth (30th) day following the date
the Issuer files a Form 8-K with the Commission disclosing the Issuer’s receipt
of written notice from the U.S. Food and Drug Administration regarding the
granting the Issuer the right to commercialize and market (i.e., formal
approval of the Issuer’s Pre-Market Application for) its OrCel product for the
treatment of venous leg ulcers (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
commencing on June 18, 2007. 

          (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 by certified or official bank
check or by wire transfer to an account designated by the Issuer. In the event
the Holder is unable to exercise this Warrant due to the restrictions set forth
in Section 8 hereof, the Holder may elect to receive Series D-2 Convertible
Preferred Stock of the Company in lieu of shares of Common Stock convertible
into the number of shares of Common Stock that would have been delivered to the
Holder but for the limitations set forth in Section 8 hereof. The Company shall
delivery stock certificates representing such Series D-2 Convertible Preferred
Stock no later than five (5) Trading Days after such exercise. 

          (c)
Intentionally Omitted. 

          (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 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 

-2-

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 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. 

-3-

          (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 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
pursuant 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 

-4-

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 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. 

          (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 

-5-

	
 

	
 

	
 

	
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 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, Common Stock, 

-6-

	
 

	
 

	
 

	
 

	
 

	
(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 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), 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),

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

-7-

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).

	
 

	
 

	
 

	
 

	
(d)

	
Intentionally
  Omitted.

	
 

	
 

	
 

	
 

	
(e)

	
Intentionally
  Omitted.

	
 

	
 

	
 

	
 

	
(f)

	
Intentionally
  Omitted.

	
 

	
 

	
 

	
 

	
(g)

	
Intentionally
  Omitted.

	
 

	
 

	
 

	
 

	
(h)

	
Intentionally
  Omitted.

	
 

	
 

	
 

	
           (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)
   Intentionally Omitted.

	
 

	
 

	
 

	
          (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

-8-

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 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. Fractional shares of Series D-2 Preferred Stock may be issued
by the Company in connection with the exercise of this Warrant for Series D-2
Preferred Stock in lieu of Warrant Stock.

          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 7(b) with regard to any or all shares of Common
Stock issuable upon exercise of this Warrant, this Section 7(b) will be of
no force or effect with regard to all or a portion of the Warrant referenced in
the Waiver Notice.

          If
the Holder elects to exercise this Warrant and such exercise would result in
such Holder beneficially owning (in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules thereunder) more
than 9.999% of all of the Common Stock

-9-

issued and
outstanding at such time, such Holder may elect to exercise this Warrant for
the Company’s Series D-2 Convertible Preferred Stock. Notwithstanding the
foregoing, the Holder may waive at any time its rights to limit its ownership
to 9.999% of all of the Common Stock issued and outstanding at such time in
accordance with Section 8 hereof.

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

	
 

	
 

	
 

	
          “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, 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.

	
 

	
 

	
 

	
          “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.

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          “Majority
  Holders” means at any time the Holders of Warrants exercisable for a
  majority of the shares of Warrant Stock issuable under the Warrants at the
  time outstanding.

	
 

	
 

	
 

	
          “Original
  Issue Date” means June 18, 2007.

-10-

	
 

	
 

	
 

	
          “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.

	
 

	
 

	
 

	
          “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.

	
 

	
 

	
 

	
          “Purchase
  Agreement” means the Series A Convertible Preferred Stock Purchase
  Agreement dated as of June 18, 2007 among the Issuer and the investors a
  party thereto.

	
 

	
 

	
 

	
          “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 

-11-

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
          “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.

	
 

	
 

	
 

	
          “Warrants”
  means the Warrants issued and sold pursuant to the Purchase Agreement,
  including, without limitation, this Warrant, and any other warrants of like
  tenor issued in substitution or exchange for any thereof pursuant to the
  provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
  Warrants.

                    “Warrant
Price” initially means U.S. $0.50, as such price may be adjusted from time
to time as shall result from the adjustments specified in this Warrant,
including Section 4 hereto.

	
 

	
 

	
 

	
          “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:

-12-

	
 

	
 

	
 

	
 

	
(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 shares of Capital Stock of any class 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), by a
written instrument or written instruments executed by the Issuer and the
Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,

-13-

shorten the
period during which this Warrant may be exercised or modify any provision of
this Section 11 without the consent of the Holder of this Warrant.

          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

Copies of
notices to the Holder shall be sent to Kramer Levin Naftalis & Frankel LLP,
1177 Avenue of the Americas, New York, New York 10036, Attention: Christopher
S. Auguste, Tel No.: (212) 715-9100, Fax No.: (212) 715-8000. 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

-14-

pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such 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.

-15-

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

	
 

	
 

	
 

	
 

	
ORTEC INTERNATIONAL, INC.

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	

	
 

	
 

	
Name:

	
 

	
 

	
Title:

-16-

SERIES M 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 determined in accordance with Section 16 of the
Securities Exchange Act of 1934, as
amended: _________________________

ASSIGNMENT

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 _______________.

-17-

EXHIBIT
B-3 to the 

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR 

ORTEC INTERNATIONAL, INC.

FORM
OF SERIES M-1 WARRANT

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.

SERIES M-1 WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

ORTEC
INTERNATIONAL, INC.

	
 

	
 

	
No.: W-M-1 - _____

	
Number of Shares: ____

	
Date of
  Issuance: June 18, 2007

	
 

          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
______________________ or its registered assigns is entitled to subscribe for
and purchase, during the period specified in this Warrant, up to
_______________ (________) 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 the date that is five (5) years from the initial
exercise of the Series M Warrant (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
for such number of shares of Common Stock (including any Common Stock issuable
under Series D-2 Preferred 

Stock
delivered pursuant to the Series M Warrant, without giving effect to any
ownership limitations contained therein for purposes of this calculation) equal
to fifty percent (50%) of the number of shares of Common Stock that have been
exercised by the Holder pursuant to the Series M Warrant issued to the Holder
pursuant to the Purchase Agreement.

          (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, 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
and commencing one (1) year following the Original Issue Date, 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 

-2-

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 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:

-3-

	
 

	
 

	
 

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
 

	
 

	
          (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

-4-

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 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 

-5-

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 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 $1.00 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 

-6-

	
 

	
 

	
 

	
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 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,

-7-

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 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 

-8-

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).

          (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 files a
  Form 8-K with the Commission disclosing the Company’s receipt of written
  notice from the U.S. Food and Drug Administration regarding the granting the
  Issuer the right to commercialize and market (i.e., formal approval of the
  Issuer’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 

-9-

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 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

-10-

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 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 

-11-

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, 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 

-12-

	
 

	
 

	
 

	
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.

	
 

	
 

	
 

	
          (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

-13-

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 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.

-14-

	
 

	
 

	
 

	
          “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, 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.

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          “Majority
  Holders” means at any time the Holders of Warrants exercisable for a
  majority of the shares of Warrant Stock issuable under the Warrants at the
  time outstanding.

	
 

	
 

	
 

	
          “Original
  Issue Date” means June 18, 2007.

	
 

	
 

	
 

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

-15-

	
 

	
 

	
 

	
          “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 issuances
  and/or grant of stock options or warrants to purchase shares of Common Stock
  whether the issuance and/or 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 under this subsection (iii), which would cause the
  provisions of Section 4 hereof to be applied, 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-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.

-16-

	
 

	
 

	
 

	
          “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.

	
 

	
 

	
 

	
          “Purchase
  Agreement” means the Series A Convertible Preferred Stock Purchase
  Agreement dated as of June 18, 2007 among the Issuer and the investors a
  party thereto.

	
 

	
 

	
 

	
          “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.

	
 

	
 

	
 

	
          “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.

-17-

	
 

	
 

	
 

	
          “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.

	
 

	
 

	
 

	
          “Warrants”
  means the Warrants issued and sold pursuant to the Purchase Agreement,
  including, without limitation, this Warrant, and any other warrants of like
  tenor issued in substitution or exchange for any thereof pursuant to the
  provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
  Warrants.

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          “Warrant
  Price” initially means U.S. $1.00, as such price may be adjusted from
  time to time as shall result from the adjustments specified in this Warrant,
  including Section 4 hereto.

	
 

	
 

	
 

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

-18-

	
 

	
 

	
 

	
 

	
(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), by a
written instrument or written instruments executed by the Issuer and the
Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 11 without the consent of the Holder of this Warrant.

-19-

          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

Copies of
notices to the Holder shall be sent to Kramer Levin Naftalis & Frankel LLP,
1177 Avenue of the Americas, New York, New York 10036, Attention: Christopher
S. Auguste, Tel No.: (212) 715-9100, Fax No.: (212) 715-8000. 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 Series M-1 Warrant as of the day and year
first above written.

	
 

	
 

	
 

	
 

	
ORTEC INTERNATIONAL, INC.

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	

	
 

	
 

	
Name:

	
 

	
 

	
Title:

-21-

SERIES M-1 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”).

-22-

ASSIGNMENT

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-

EXHIBIT C-1 to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

FORM OF CERTIFICATE OF DESIGNATION FOR SERIES
A PREFERRED SHARES

-FILED SEPARATELY-

EXHIBIT C-2 to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

FORM OF CERTIFICATE OF DESIGNATION FOR SERIES
A-1 PREFERRED SHARES

-FILED SEPARATELY-

-2-

EXHIBIT C-3 to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

FORM OF CERTIFICATE OF DESIGNATION FOR SERIES
A-2 PREFERRED SHARES

-FILED SEPARATELY-

EXHIBIT C-4 to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

FORM OF CERTIFICATE OF DESIGNATION FOR SERIES
D-2 PREFERRED SHARES

-FILED SEPARATELY-

EXHIBIT D to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

FORM OF REGISTRATION RIGHTS AGREEMENT

               This
Registration Rights Agreement (this “Agreement”) is made and entered
into as of June 18, 2007, by and among Ortec International, Inc., a Delaware
corporation (the “Company”), Paul Royalty Fund, L.P., a Delaware limited
partnership (“PRF”), and the purchasers listed on Schedule I
hereto (the “Purchasers”).

               This
Agreement is being entered into pursuant to the Series A Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the “Purchase Agreement”) and the Amended and Restated
Exchange Agreement dated as of the date hereof, between the Company and PRF
(the “Exchange Agreement”).

               The Company,
PRF, and the Purchasers hereby agree as follows:

          1.
Definitions.

               Capitalized
terms used and not otherwise defined herein shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:

               “Affiliate”
means, with respect to any Person, any other Person that directly or indirectly
controls or is controlled by or under common control with such Person. For the
purposes of this definition, “control,” when used with respect to any
Person, means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms of “affiliated,” “controlling” and “controlled” have
meanings correlative to the foregoing.

               “Board”
shall have meaning set forth in Section 3(n).

               “Business
Day” means 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
generally are authorized or required by law or other government actions to
close.

               “Closing
Date” means the date of the closing of the purchase and sale of the
Series A Convertible Preferred Stock and Warrants pursuant to the Purchase
Agreement and the sale and exchange of the Series A-1 Convertible Preferred
Stock and the Series A-2 Convertible Preferred Stock pursuant to the Exchange
Agreement.

               “Commission”
means the Securities and Exchange Commission.

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

               “Effectiveness
Date” means with respect to a Registration Statement the earlier of the one
hundred fifty (150) days following the Filing Date or the date which is within
five (5) Business Days of the date on which the Commission informs the
Company that the Commission (i) will not review the Registration Statement or
(ii) that the Company may request the acceleration of the effectiveness of the
Registration Statement.

               “Effectiveness
Period” shall have the meaning set forth in Section 2.

               “Event”
shall have the meaning set forth in Section 7(e).

               “Event
Date” shall have the meaning set forth in Section 7(e).

               “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

               “Filing
Date” means the ninetieth (90th) day following the Initial
Closing Date.

               “Holder”
or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities or of securities giving such holder or
holders the right to acquire Registrable Securities.

               “Indemnified
Party” shall have the meaning set forth in Section 5(c).

               “Indemnifying
Party” shall have the meaning set forth in Section 5(c).

               “Losses”
shall have the meaning set forth in Section 5(a).

               “Majority
Holders” means the Holder or Holders of a majority of (i) the
Registrable Securities then outstanding plus (ii) the Registrable
Securities that can be acquired.

               “Periodic
Amount” shall have the meaning set forth in Section 7(d).

               “Person”
means an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.

               “PRF
Counsel” means Chadbourne & Parke LLP, for which PRF will be reimbursed
by the Company pursuant to Section 4 for fees in an amount not to exceed
$2,000.

               “Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

               “Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A

-2-

 promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.

               “Registrable
Securities” means the shares of Common Stock issued or issuable to the
Purchasers (i) upon the conversion of the Series A Convertible
Preferred Stock purchased pursuant to the Purchase Agreement (ii) upon exercise
of the Warrants issued pursuant to the Purchase Agreement, (iii) upon the
conversion of the Series A-1 Convertible Preferred Stock purchased pursuant to
the Exchange Agreement, (iv) upon conversion of the Series A-2 Convertible
Preferred Stock purchased pursuant to the Exchange Agreement, and (v) upon
conversion of the Series D-2 Convertible Preferred Stock if issued and
outstanding at the time of filing of a Registration Statement.

               “Registration
Statement” means the registration statements and any additional
registration statements contemplated by Section 2, including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference in such registration statement.

               “Rule
144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

               “Rule
158” means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

               “Rule
415” means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

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

               “Series
A Convertible Preferred Stock” means the Company’s Series A
Convertible Preferred Stock, par value $0.001 per share.

               “Series
A-1 Convertible Preferred Stock” means the Company’s Series A-1 Convertible
Preferred Stock, par value $0.001 per share.

               “Series
A-2 Convertible Preferred Stock” means the Company’s Series A-2 Convertible
Preferred Stock, par value $0.001 per share.

               “Series
D-2 Convertible Preferred Stock” means the Company’s Series D-2 Convertible
Preferred Stock.

-3-

               “Special
Counsel” means Kramer Levin Naftalis & Frankel LLP, for which the
Holders will be reimbursed by the Company pursuant to Section 4.

          2.
Shelf Registration.

               (a)
On or prior to the Filing Date, the Company shall prepare and file with the
Commission a “shelf” Registration Statement covering all Registrable Securities
for an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form SB-2 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form SB-2, in
which case such registration shall be on another appropriate form in accordance
with the Securities Act and the rules promulgated thereunder). The Company
shall (i) not permit any securities other than the Registrable Securities and
the securities listed on Schedule II hereto (the “Other Securities”)
to be included in the Registration Statement and (ii) use its best efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as possible after the filing thereof, but in any event prior to
the Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until such date as is the earliest of
(x) the date when all Registrable Securities covered by such Registration
Statement have been sold, (y) the date on which all the Registrable
Securities may be sold without any restriction pursuant to Rule 144(k), as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company’s transfer agent to such effect, or (z) two (2)
years following the Effectiveness Date (the “Effectiveness Period”). The
Company shall request that the effective time of the Registration Statement is
4:00 p.m. Eastern Time on the effective date. If at any time and for any
reason, an additional Registration Statement is required to be filed because at
such time the actual number of shares of Common Stock into which the Warrants
are exercisable plus the number of shares of Common Stock exceeds the number of
shares of Registrable Securities remaining under the Registration Statement,
the Company shall have thirty-five (35) Business Days to file such additional
Registration Statement, and the Company shall use its best efforts to cause
such additional Registration Statement to be declared effective by the
Commission as soon as possible, but in no event later than seventy-five (75)
days after filing.

               (b)
Notwithstanding anything to the contrary set forth in this Section 2, in the
event the Commission does not permit the Company to register all of the
Registrable Securities in the Registration Statement because of the
Commission’s application of Rule 415, the Company shall register in the
Registration Statement such number of Registrable Securities as is permitted by
the Commission, provided, however, that the number of Registrable
Securities and the Other Securities, to be included in such Registration
Statement or any subsequent registration statement shall be determined in the
following order: (i) first, the shares of Common Stock issuable upon conversion
of the Series A Convertible Preferred Stock registered and the Other Securities
on a pro rata basis among the holders thereof; (ii) second, the shares of
Common Stock issuable upon conversion of the Series A-1 Convertible Preferred
Stock registered on behalf of PRF and the shares of Common Stock issuable upon
exercise of the Series M Warrants registered on a pro rata basis among the
holders thereof; (iii) third, the shares of Common Stock issuable upon exercise
of the Series A Warrants registered on a pro rata basis among the holders
thereof; (iv) fourth, the shares of Common Stock issuable upon conversion of
the Series A-2 Convertible Preferred Stock registered on behalf of PRF; and (v)
fifth, the shares of Common 

-4-

Stock issuable
upon exercise of the Series M-1 Warrants and upon conversion of the Series D-2
Preferred Stock if issued and outstanding at the time of filing of the
Registration Statement registered on a pro rata basis among the holders
thereof. In the event the Commission does not permit the Company to register
all of the Registrable Securities in the initial Registration Statement, the
Company shall use its best efforts to file subsequent Registration Statements
to register the Registrable Securities that were not registered in the initial
Registration Statement as promptly as possible and in a manner permitted by the
Commission. For purposes of this Section 2(b), “Filing Date” means with
respect to each subsequent Registration Statement filed pursuant hereto, the
later of (i) sixty (60) days following the sale of substantially all of the
Registrable Securities, determined, to the extent permitted by the Commission,
on a per holder (and its affiliates) basis, included in the initial
Registration Statement or any subsequent Registration Statement and (ii) six
(6) months following the effective date of the initial Registration Statement
or any subsequent Registration Statement, as applicable, or such earlier date
as permitted by the Commission. For purposes of this Section 2(b), “Effectiveness
Date” means with respect to each subsequent Registration Statement filed
pursuant hereto, the earlier of (A) the ninetieth (90th) day
following the filing date of such Registration Statement (or in the event such
Registration Statement receives a “full review” by the Commission, the one
hundred twentieth (120th) day following such filing date) or (B) the
date which is within three (3) Business Days after the date on which the
Commission informs the Company (i) that the Commission will not review such
Registration Statement or (ii) that
the Company may request the acceleration of the effectiveness of such
Registration Statement and the Company makes such request; provided that,
if the Effectiveness Date falls on a Saturday, Sunday or any other day which
shall be a legal holiday or a day on which the Commission is authorized or
required by law or other government actions to close, the Effectiveness Date
shall be the following Business Day.

          3.
Registration Procedures.

               In
connection with the Company’s registration obligations hereunder, the Company
shall:

               (a)
Prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form SB-2 (or if the Company is not then eligible to
register for resale the Registrable Securities on Form SB-2 such registration
shall be on another appropriate form in accordance with the Securities Act and
the rules promulgated thereunder) in accordance with the method or methods of
distribution thereof as specified by the Holders (except if otherwise directed
by the Holders), and cause the Registration Statement to become effective and
remain effective as provided herein; provided, however, that not
less than five (5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated therein by reference), the
Company shall (i) furnish to the Holders (as requested) and the Special
Counsel, copies of all such documents proposed to be filed, which documents
(other than those incorporated by reference) will be subject to the review of
such Holders (as requested) and such Special Counsel, and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
such Special Counsel, to conduct a reasonable investigation within the meaning
of the Securities Act. The

-5-

Company shall
not file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Special Counsel shall reasonably object in
writing within three (3) Business Days of their receipt thereof. If the Special
Counsel shall so reasonably object in writing, the Filing Date and
Effectiveness Date shall be extended by the time that the Company and the Special
Counsel shall reasonably need to respond to and/or comply with such objections.

               (b)
(i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as possible to any comments received from the
Commission with respect to the Registration Statement or any amendment thereto
and as promptly as possible provide the Special Counsel and Holders (as
requested) true and complete copies of all correspondence from and to the
Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by
the Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.

               (c)
Notify the Holders (as requested) and the Special Counsel as promptly as
possible (and, in the case of (i)(A) below, not less than five (5) days prior
to such filing) and (if requested by any such Person) confirm such notice in
writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is filed; (B) when the Commission notifies the Company
whether there will be a “review” of such Registration Statement and whenever
the Commission comments in writing on such Registration Statement and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement covering any or all of the Registrable Securities
or the initiation of any Proceedings for that purpose; (iv) if at any time any
of the representations and warranties of the Company contained in any agreement
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (vi) of the occurrence of
any event that makes any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make

-6-

the statements
therein, in the light of the circumstances under which they were made, not
misleading.

               (d)
Use its best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of, (i) any order suspending the effectiveness of the Registration
Statement or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.

               (e)
If requested by the Special Counsel or by the Majority Holders
(i) promptly incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as the Company
reasonably agrees should be included therein and (ii) make all required filings
of such Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.

               (f)
Furnish to the Special Counsel and upon request to each Holder, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all
exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.

               (g)
Promptly deliver to the Special Counsel and each Holder, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

               (h)
Prior to any public offering of Registrable Securities, use its best efforts to
register or qualify or cooperate with the selling Holders and the Special
Counsel in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.

               (i)
Cooperate with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates shall be free of all restrictive
legends (provided that the issuance of such unlegended certificates is in
compliance with applicable securities laws), and to enable such 

-7-

Registrable
Securities to be in such denominations and registered in such names as any
Holder may request at least three (3) Business Days prior to any sale of
Registrable Securities.

               (j)
Upon the occurrence of any event contemplated by Section 3(c)(vi), as promptly
as possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

               (k)
Use its best efforts to cause all Registrable Securities relating to such
Registration Statement to be listed or traded on the OTC Bulletin Board, The
Nasdaq SmallCap Market, or any other securities exchange, quotation system or
market, if any, on which similar securities issued by the Company are then
listed as and when required pursuant to the Purchase Agreement and the Exchange
Agreement.

               (l)
Comply in all material respects with all applicable rules and regulations of
the Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 3-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year)
commencing on the first day of the first fiscal quarter of the Company after
the effective date of the Registration Statement, which statement shall conform
to the requirements of Rule 158.

               (m)
The Company may require each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities
of any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.

               If
the Registration Statement refers to any Holder by name or otherwise as the
holder of any securities of the Company, then such Holder shall have the right
to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force)
the deletion of the reference to such Holder in any amendment or supplement to
the Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.

               Each
Holder covenants and agrees that (i) it will not sell any Registrable
Securities under the Registration Statement until it has received copies of the
Prospectus as then amended or supplemented as contemplated in Section 3(g) and
notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section 3(c) and
(ii) it and its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.

-8-

               Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(v), 3(c)(vi) or 3(n), such
Holder will forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement contemplated
by Section 3(j), or until it is advised in writing by the Company that the use
of the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or Registration
Statement.

               (n)
If (i) there is material non-public information regarding the Company which the
Company’s Board of Directors (the “Board”) reasonably determines not to
be in the Company’s best interest to disclose and which the Company is not
otherwise required to disclose, or (ii) there is a significant business
opportunity (including, but not limited to, the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Board reasonably determines not to be in the Company’s best
interest to disclose, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed twenty
(20) consecutive days, provided that the Company may not postpone or suspend
its obligation under this Section 3(n) for more than forty-five (45) days in
the aggregate during any twelve (12) month period; provided, however,
that no such postponement or suspension shall be permitted for consecutive
twenty (20) day periods, arising out of the same set of facts, circumstances or
transactions.

          4.
Registration Expenses.

               All
fees and expenses incident to the performance of or compliance with this
Agreement by the Company, except as and to the extent specified in Section 4,
shall be borne by the Company whether or not the Registration Statement is
filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings, if any, required to be made with The Nasdaq
SmallCap Market and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filings required to be made with the National Association of Securities
Dealers, Inc. and the NASD Regulation, Inc. and (C) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Majority Holders may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of photocopying prospectuses if the photocopying of
prospectuses is requested by any Holder), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement, including, without limitation, the Company’s independent

-9-

public
accountants (including the expenses of any comfort letters, if needed, or costs
associated with the delivery by independent public accountants of such needed
comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.

          5.
Indemnification.

               (a)
Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and attorneys’ fees) and expenses (collectively, “Losses”),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that such untrue statements or omissions are based solely upon
information regarding such Holder or such other Indemnified Party furnished in
writing to the Company by such Holder expressly for use therein, which
information was reasonably relied on by the Company for use therein or to the
extent that such information relates to such Holder or such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto. The Company shall notify the Holders promptly of the
institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.

               (b)
Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review), as incurred, arising solely out of or based solely upon
any untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or arising solely out of
or based solely upon any omission of a material fact required to be stated

-10-

therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, to the extent, but only to the extent,
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus. Notwithstanding anything to the contrary
contained herein, the Holders shall be liable under this Section 5(b) for only
that amount as does not exceed the lesser of (i) the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation and (ii) the aggregate purchase
price paid by the Holder (other than PRF) for the Shares pursuant to the
Purchase Agreement or, in the case of PRF, the stated value of the Series A-1
Preferred Stock and Series A-2 Preferred stock purchased by PRF pursuant to the
Exchange Agreement.

               (c)
Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party promptly shall notify the Person from whom
indemnity is sought (the “Indemnifying Party) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.

               An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (3) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel (which shall be reasonably acceptable to the Indemnifying
Party) that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel, reasonably acceptable to the Indemnifying
Party, at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and such counsel shall be at
the expense of the Indemnifying Party). The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect
any settlement of any

-11-

pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.

               All
fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent with this Section) shall
be paid to the Indemnified Party, as incurred, within ten (10) Business Days of
written notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).

               (d)
Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission of a material fact, has been taken or made
by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party in accordance with its terms. In no
event shall any selling Holder be required to contribute an amount under this
Section 5(d) in excess of the net proceeds received by such Holder upon sale of
such Holder’s Registrable Securities pursuant to the Registration Statement
giving rise to such contribution obligation.

               The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

               The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.

-12-

          6.
Rule 144.

               As
long as any Holder owns any Registrable Securities or securities entitling the
Holder to acquire Registrable Securities, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act and, at the
Holder’s request, to promptly furnish the Holders with true and complete copies
of all such filings. As long as any Holder owns Registrable Securities or
securities entitling the Holder to acquire Registrable Securities, if the
Company is not required to file reports pursuant to Section 13(a) or 15(d)
of the Exchange Act, it will prepare and furnish to the Holder, at the Holder’s
request, and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Person to sell its Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including providing any legal opinions
relating to such sale pursuant to Rule 144. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.

          7.
Miscellaneous.

               (a)
Remedies. In the event of a breach by the Company or by a Holder, of any
of their obligations under this Agreement, each Holder or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

               (b)
No Inconsistent Agreements. Neither the Company nor any of its subsidiaries
has, as of the date hereof entered into and currently in effect, nor shall the
Company or any of its subsidiaries, on or after the date of this Agreement,
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as disclosed in Section 2.1(c) of the
Purchase Agreement or Section 2.1(c) of the Exchange Agreement, neither the
Company nor any of its subsidiaries has previously entered into any agreement
currently in effect granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then
outstanding Registrable Securities, the Company shall not grant to any Person
the 

-13-

right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Holders set forth herein, and are not otherwise in
conflict with the provisions of this Agreement.

               (c)
No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto or as
disclosed in Section 2.1(c) of the Purchase Agreement, Section 2.1(c) of the
Exchange Agreement or Schedule II hereto) may include securities of the
Company in the Registration Statement and the Company shall not after the date
hereof enter into any agreement providing such right to any of its
securityholders, unless the rights so granted are subject in all respects to
the prior rights in full of the Holders set forth herein, and are not otherwise
in conflict with the provisions of this Agreement.

               (d)
Piggy-Back Registrations. If at any time when there is not an effective
Registration Statement covering the Registrable Securities, the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Holder written notice of such determination and, if within thirty
(30) days after receipt of such notice, any such Holder shall so request in
writing, (which request shall specify the Registrable Securities intended to be
disposed of by such Holder), the Company will cause the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Holder, to the extent requisite to permit the
disposition of the Registrable Securities so to be registered, provided that if
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to such holder
and, thereupon, (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay expenses in
accordance with Section 4 hereof), and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities being registered pursuant to this Section 7(d) for the same period
as the delay in registering such other securities. The Company shall include in
such registration statement all or any part of such Registrable Securities such
Holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant
to this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of
the Securities Act. In the case of an underwritten public offering, if the
managing underwriter(s) or underwriter(s) should reasonably object to the
inclusion of the Registrable Securities in such registration statement, then if
the Company after consultation with the managing underwriter should reasonably
determine that the inclusion of such Registrable Securities, would materially
adversely affect the offering contemplated in such registration statement, and
based on such determination recommends inclusion in such registration statement
of fewer or none of the Registrable Securities of the Holders, then the number
of Registrable Securities of the Holders included in

-14-

such
registration statement shall be reduced pro-rata among such Holders (based upon
the number of Registrable Securities requested to be included in the
registration statement), if the Company after consultation with the
underwriter(s) recommends the inclusion of fewer Registrable Securities; provided,
however, that such reduction shall not represent a greater fraction of
the number of Registrable Securities intended to be offered by the Holders than
the fraction of similar reductions imposed on such other persons or entities
(including the Company).

               (e)
Failure to File Registration Statement and Other Events. The Company and
the Holders agree that the Holders will suffer damages if the Registration
Statement is not filed on or prior to the Filing Date and not declared
effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Period or
if certain other events occur. The Company and the Holders further agree that
it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, if (A) (i) the Registration Statement is not filed on
or prior to the Filing Date or (ii) is not declared effective by the Commission
on or prior to the thirtieth (30th) day following the Effectiveness
Date, or (B) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act
within three (3) Business Days of the date that the Company is notified (orally
or in writing, whichever is earlier) by the Commission that a Registration
Statement will not be “reviewed,” or not subject to further review, or (C) the
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities included
therein at any time prior to the expiration of the Effectiveness Period, without
being succeeded immediately by a subsequent Registration Statement filed with
and declared effective by the Commission, or (D) trading in the Common
Stock shall hereafter be suspended or if the Common Stock is hereafter delisted
from the OTC Bulletin Board (or other principal exchange on which the Common
Stock is traded) for any reason for more than three (3) Business Days in the
aggregate, or (E) the Company breaches in a material respect any covenant or
other material term or condition to this Agreement, the Purchase Agreement
(other than a representation or warranty contained therein), the Exchange
Agreement (other than a representation or warranty contained therein) or any
other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby, and such
breach continues for a period of thirty (30) days after written notice thereof
to the Company, or (F) the Company has breached Section 3(n) (any such
failure or breach being referred to as an “Event,” and for purposes of
clauses (A) and (D) the date on which such Event occurs, or for purposes of
clause (B) the date on which such three (3) Business Day period is exceeded, or
for purposes of clause (C) after more than fifteen (15) Business Days, or for
purposes of clause (D) the date on which such three (3) Business Day period is
exceeded, or for clause (E) the date on which such thirty (30) day period is
exceeded, or for clause (F) the date the Company has breached Section 3(n)
hereof, being referred to as “Event Date”), the Company shall pay in
cash as liquidated damages to each Holder only with respect to the Series A Convertible
Preferred Stock and Series A-1 Convertible Preferred Stock held by such Holder
in an amount equal to (x) solely in the case of clause (A)(i) two percent (2%)
of the Holders’ initial investment in the Series A Convertible Preferred Stock
and the stated value of the Series A-1 Convertible Preferred Stock (provided,
however, that in the case of clause (A)(i), the Event shall be deemed to
commence on the sixtieth (60) day prior to the Event Date), and (y) in all
other cases, one percent (1.0%) for each thirty (30) day period thereafter or
portion thereof of the Holder’s initial investment in the Series A

-15-

Convertible
Preferred Stock and the stated value of the Series A-1 Convertible Preferred
Stock from the Event Date until the earlier of (x) the date when the applicable
Event has been cured, or (y) when the Effectiveness Period ends, which shall be
pro rated for such periods less than thirty (30) days (the “Periodic Amount”);
provided, however, that in no event shall the amount of
liquidated damages payable at any time and from time to time to any Holder
pursuant to this Section 7(e) exceed an aggregate of twenty-four percent (24%)
of the amount of the Holder’s initial investment in the Series A Convertible
Preferred Stock and the stated value of the Series A-1 Convertible Preferred
Stock; and provided, further, that in the event the Commission
does not permit all of the Registrable Securities to be included in the
Registration Statement because of its application of Rule 415, liquidated
damages payable pursuant to clause (A)(ii) above shall be payable by the
Company based on one percent (1%) of the portion of the Holder’s initial
investment in the Series A Convertible Preferred Shares and the stated value of
the Series A-1 Convertible Preferred Stock that corresponds to the number of
such Holder’s Registrable Securities permitted to be registered by the
Commission pursuant to Rule 415. Notwithstanding anything to the contrary in
this paragraph (e), if (a) any of the Events described in clauses (A), (B),
(C), (D) or (F) shall have occurred, (b) on or prior to the applicable Event
Date, the Company shall have exercised its rights under Section 3(n) hereof and
(c) the postponement or suspension permitted pursuant to such Section 3(n)
shall remain effective as of such applicable Event Date, then the applicable
Event Date shall be deemed instead to occur on the second Business Day
following the termination of such postponement or suspension. Liquidated
damages payable by the Company pursuant to this Section 7(e) shall be payable
on the first (1st) Business Day of each thirty (30) day period
following the Event Date. Notwithstanding anything to the contrary contained
herein, in no event shall any liquidated damages be payable with respect to the
Warrants or the Warrant Shares. The parties agree that the Periodic Amount
represents a reasonable estimate on the part of the parties, as of the date of
this Agreement, of the amount of damages that may be incurred by the Holders if
the Registration Statement is not filed on or prior to the Filing Date or has
not been declared effective by the Commission on or prior to the Effectiveness
Date and maintained in the manner contemplated herein during the Effectiveness
Period or if any other Event as described herein has occurred.

               (f)
Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Majority
Holders. Notwithstanding anything herein to the contrary, (i) no amendment,
modification, supplement, or waiver of or consent to a departure from the first
sentence of Section 2(b) hereof shall adversely effect PRF’s rights without the
written consent of PRF, (ii) liquidated damages payable by the Company pursuant
to Section 7(e) hereof shall not be waived or modified unless the same waiver
or modification is applied to all holders of the Series A Preferred Stock and
Series A-1 Preferred Stock and (iii) no other amendment, modification,
supplement, waiver or consent shall apply to the holders of the Series A-1
Preferred Stock or Series A-2 Preferred Stock unless it also applies to all
holders of the Series A Preferred Stock. No consideration shall be offered or
paid to any person to amend, modify, supplement, waive or consent to a
departure from any provision hereof unless the same consideration is also
offered to all Holders. All Holders shall be notified by the Company of any
request for an amendment, modification, supplement, waiver or consent concurrently.

-16-

               (g)
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., New York City time,
on a Business Day, (ii) the Business 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., New York City time,
on any date and earlier than 11:59 p.m., New York City time, on such date,
(iii) the Business 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 each Holder at its address set forth under its name on
Schedule 1 attached hereto, or with respect to the Company, 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

or to such
other address or addresses or facsimile number or numbers as any such party may
most recently have designated in writing to the other parties hereto by such
notice. Copies of notices to the Company shall be sent to Feder Kaszovitz
Isaacson Weber Skala Bass & Rhine, LLP, 750 Lexington Ave., New York,
New York 10022, Attention: Gabriel Kaszovitz, Esq., Tel. No.: (212) 888-8200,
Fax No.: (212) 888-7776.

               (g)
Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns and
shall inure to the benefit of each Holder and its successors and assigns. The
Company may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of each Holder, except that the
assumption of the Company’s obligations by the surviving company in a merger of
the Company with and into such surviving company, shall not constitute an
assignment of the Company’s obligations or rights hereunder. Each Purchaser may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement and PRF may assign its rights hereunder in the manner
and to the persons permitted under the Exchange Agreement.

               (h)
Assignment of Registration Rights. The rights of each Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder or any other
Holder or Affiliate of any other Holder of the Registrable Securities if: (i)
the Holder agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of
(a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned, (iii)

-17-

following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, (v) such transfer by a Purchaser shall have been
made in accordance with the applicable requirements of the Purchase Agreement
and (vi) such transfer by PRF shall be in accordance with the Exchange
Agreement. In addition, each Holder shall have the right to assign its rights
hereunder to any other Person with the prior written consent of the Company,
which consent shall not be unreasonably withheld. The rights to assignment
shall apply to the Holders (and to subsequent) successors and assigns.

               (i)
Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.

               (j)
Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York,
without giving effect to any of the conflicts of law principles which would
result in the application of the substantive law of another jurisdiction. This
Agreement shall not be interpreted or construed with any presumption against
the party causing this Agreement to be drafted. The Company and the Holders
agree that venue for any dispute arising under this Agreement will lie
exclusively in the state or federal courts located in New York County, New
York, and the parties irrevocably waive any right to raise forum non conveniens or any
other argument that New York is not the proper venue. The Company and the
Holders irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Company and the Holders consent to process
being served in any such suit, action or proceeding by delivering a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7(j) shall
affect or limit any right to serve process in any other manner permitted by
law. The Company and the Holders hereby agree that the prevailing party in any
suit, action or proceeding arising out of or relating to this Agreement, the
Purchase Agreement or the Exchange Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party. The
parties hereby waive all rights to a trial by jury.

               (k)
Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

               (l)
Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, illegal, void or unenforceable in any respect,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or

-18-

restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.

               (m)
Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

               (n)
Shares Held by the Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its
Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.

               (o)
Termination. This Agreement shall terminate on the date when all
remaining Registrable Securities may be sold without restriction pursuant to
paragraph (k) of Rule 144.

               (o)
Independent Nature of Purchasers and PRF. The Company acknowledges that
the obligations of each Purchaser under the Transaction Documents and of PRF
under the Exchange Agreement, this Agreement, and the Certificates of
Designation of the Series A-1 Convertible Preferred Stock and the Series A-2
Convertible Preferred Stock (collectively, the “PRF Transaction Documents”) are
several and not joint with the obligations of any other Purchaser or PRF, as
the case may be, and no Purchaser nor PRF shall be responsible in any way for
the performance of the obligations of any other Purchaser under the Transaction
Documents or of PRF under the PRF Transaction Documents. The Company
acknowledges that the decision of each Purchaser to purchase securities
pursuant to the Purchase Agreement has been made by such Purchaser, and by PRF
to exchange revenue interests for securities pursuant to the Exchange Agreement
has been made by PRF, independently of any other purchase or exchange and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or
of its Subsidiaries which may have been made or given by any other Purchaser or
PRF or by any agent or employee of any other Purchaser or PRF, and no Purchaser
nor PRF nor any of their respective agents or employees shall have any
liability to any other Purchaser or PRF (or any other person) relating to or
arising from any such information, materials, statements or opinions. The
Company acknowledges that nothing contained herein, or in any Transaction
Document or PRF Transaction Document, and no action taken by any Purchaser or
PRF pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Purchaser or PRF in the Registration Statement and (ii) review
by, and consent to, such Registration Statement by a Purchaser or PRF) shall be
deemed to constitute the Purchasers or PRF as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers and PRF are in any way acting in concert or as a group with respect
to such obligations or the transactions contemplated by the Transaction
Documents and the PRF Transaction Documents. The Company acknowledges that each
Purchaser and PRF shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of this Agreement
or out of the other Transaction Documents and PRF 

-19-

Transaction
Documents, and it shall not be necessary for any other Purchaser or PRF to be
joined as an additional party in any proceeding for such purpose. The Company
acknowledges that for reasons of administrative convenience only, the
Transaction Documents and the PRF Transaction Documents have been prepared or reviewed
by counsel for one of the Purchasers and separate counsel for PRF and neither
of such counsel represents all of the Purchasers but only such Purchaser (in
the case of Special Counsel) or PRF (in the case of PRF Counsel) and the other
Purchasers have had the opportunity to retain their own individual counsel with
respect to the transactions contemplated hereby. The Company acknowledges that
it has elected to provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or
requested to do so by the Purchasers. The Company acknowledges that such
procedure with respect to the Transaction Documents and the PRF Transaction
Documents in no way creates a presumption that the Purchasers and PRF are in
any way acting in concert or as a group with respect to the Transaction
Documents or PRF Transaction Documents or the transactions contemplated hereby
or thereby.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-20-

          IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ORTEC
  INTERNATIONAL, INC.

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ Alan W.
  Schoenbart

	
 

	
 

	
 

	

	
 

	
 

	
 

	
Name: Alan
  W. Schoenbart

	
 

	
 

	
 

	
Title: CFO

	
 

	
 

	
 

	
 

	
 

	
 

	
PURCHASER 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
Name:

	
 

	
 

	
 

	
Title:

	
 

	
 

	
 

	
 

	
 

	
 

	
PAUL ROYALTY
  FUND, L.P.

	
 

	
 

	
 

	
 

	
 

	
By:

	
Paul Capital
  Management, LLC,

	
 

	
 

	
 

	
Its General
  Partner

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
Paul Capital
  Advisors, L.L.C.

	
 

	
 

	
 

	
 

	
Its Manager

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
Lionel
  Leventhal

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
Name: Lionel
  Leventhal

	
 

	
 

	
 

	
 

	
 

	
Title:
  Manager

-21-

Schedule I

Purchasers

-22-

Schedule II

Other Securities Permitted to be Included in the Registration Statement 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Common

	
 

	
Warrants

	
 

	
Totals

	
 

	
 

	
 

	
 

	
 

	

	
 

	

	
 

	

	
 

	
Series B-1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
11,747

	
 

	
 

	
 

	
 

	
Series B-2

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
7,520

	
 

	
 

	
 

	
 

	
Series C

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
6,800

	
 

	
 

	
 

	
 

	
Quality Resolve

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
19,000

	
 

	
 

	
 

	
 

	
Elite Financial

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
5,000

	
 

	
 

	
 

	
 

	
Bristol Bridge Loan

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3,334

	
 

	
 

	
 

	
 

	
Rodman & Renshaw – Hapto

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
266,667

	
 

	
 

	
 

	
 

	
Cambrex BioScience

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
73,674

	
 

	
 

	
 

	
 

	
Special Warrant Offer

	
 

	
Series E

	
 

	
 

	
 

	
 

	
 

	
27,646

	
 

	
 

	
 

	
 

	
January 2005 PIPE

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
141,840

	
 

	
 

	
 

	
 

	
January 2005 PIPE

	
 

	
Series E PA

	
 

	
 

	
 

	
 

	
 

	
183,092

	
 

	
 

	
 

	
 

	
January 2005 PIPE – Ser C Exchange

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
225,319

	
 

	
 

	
 

	
 

	
January 2005 PIPE – P/N Conversion

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
715,858

	
 

	
 

	
 

	
 

	
Fields Placement

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
4,000

	
 

	
 

	
 

	
 

	
Additional Right Offer Feb 2005

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,359

	
 

	
 

	
 

	
 

	
October 2005 Placement

	
 

	
Series F

	
 

	
 

	
1,395,846

	
 

	
 

	
1,162,927

	
 

	
 

	
 

	
 

	
October 2005 Placement

	
 

	
Series F PA

	
 

	
 

	
 

	
 

	
 

	
211,975

	
 

	
 

	
 

	
 

	
Rodman & Renshaw

	
 

	
April

	
 

	
 

	
 

	
 

	
 

	
153,017

	
 

	
 

	
 

	
 

	
MRC Investments

	
 

	
April

	
 

	
 

	
 

	
 

	
 

	
39,517

	
 

	
 

	
 

	
 

	
Subtotal Above

	
 

	
 

	
 

	
 

	
1,395,846

	
 

	
 

	
3,260,292

	
 

	
 

	
4,656,138

	
 

	
 

	
Additionally we need to register the following:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
April 2006 Placement Shares

	
 

	
 

	
 

	
 

	
5,130,396

	
 

	
 

	
 

	
 

	
 

	
5,130,396

	
 

	
25% Warrant Kicker on H Warrant Exchange

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
492,278

	
 

	
 

	
492,278

	
 

	
Hapto

	
 

	
 

	
 

	
 

	
2,031,119

	
 

	
 

	
200,000

	
 

	
 

	
2,231,119

	
 

	
Cambrex

	
 

	
 

	
 

	
 

	
68,667

	
 

	
 

	
 

	
 

	
 

	
68,667

	
 

	
Placement Agency and
  Designees issued 2006 from 2006 Financing

	
 

	
 

	
113,147

	
 

	
 

	
 

	
 

	
 

	
113,147

	
 

	
Bridge Note Warrants

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3,009,000

	
 

	
 

	
3,009,000

	
 

	
Warrants that don’t convert from April 2006 Placement

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
200,000

	
 

	
 

	
200,000

	
 

	
Approximate Total

	
 

	
 

	
 

	
 

	
8,739,175

	
 

	
 

	
7,161,570

	
 

	
 

	
15,900,745

	
 

-23-

EXHIBIT
E to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

FORM
OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

ORTEC
INTERNATIONAL, INC.

              
                 
              
              
              
              
              
              
              
              
as of June 18, 2007

[Name and
address of Transfer Agent]

Attn: _____________

Ladies and Gentlemen:

          Reference
is made to that certain Series A Convertible Preferred Stock Purchase Agreement,
dated as of June 18, 2007, by and among Ortec International, Inc., a Delaware
corporation (the “Company”), and the purchasers named therein
(collectively, the “Purchasers”) pursuant to which the Company
is issuing to the Purchasers shares of its Series A Convertible Preferred
Stock, par value $.001 per share, (the “Preferred Shares”) and warrants (the “Warrants”)
to purchase shares of the Company’s common stock, par value $.001 per share
(the “Common
Stock”) in connection with the sale and issuance of Preferred Shares
and Warrants to the Purchasers. This letter shall serve as our irrevocable
authorization and direction to you (provided that you are the transfer agent of
the Company at such time) to issue shares of Common Stock upon conversion of the
Preferred Shares (the “Conversion Shares”) and exercise of the
Warrants (the “Warrant Shares”) to or upon the order of a Purchaser from time
to time upon (i) surrender to you of a properly completed and duly executed
Conversion Notice or Exercise Notice, as the case may be, in the form attached
hereto as Exhibit I and Exhibit II, respectively, (ii) in the case of the
conversion of Preferred Shares, a copy of the certificates (with the original
certificates delivered to the Company) representing Preferred Shares being
converted or, in the case of Warrants being exercised, a copy of the Warrants
(with the original Warrants delivered to the Company) being exercised (or, in
each case, an indemnification undertaking with respect to such share
certificates or the warrants in the case of their loss, theft or destruction),
and (iii) delivery of a treasury order or other appropriate order duly executed
by a duly authorized officer of the Company. So long as you have previously
received (x) written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares or Warrant
Shares, as applicable, has been declared effective by the Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as
amended (the “1933 Act”), and no subsequent notice by the Company or its
counsel of the suspension or termination of its effectiveness and (y) a copy of
such registration statement, and if the Purchaser represents in writing that
the Conversion Shares or the Warrant Shares, as the case may be, were sold
pursuant to the Registration Statement, then certificates representing the
Conversion Shares and the Warrant Shares, as the case may be, shall not bear
any legend restricting transfer of the Conversion Shares and the Warrant
Shares, as the case may be, thereby and should not be subject to any
stop-transfer restriction. Provided, however, that if you have not previously
received (i) written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares or Warrant
Shares, as applicable, has been declared effective by the SEC under the 1933
Act, and (ii) a copy of such registration statement, then the certificates for
the Conversion Shares and the Warrant Shares shall bear the following legend:

	
 

	
 

	
 

	
          “THE
  SECURITIES REPRESENTED BY THIS CERTIFICATE 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 OR 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.”

and, provided
further, that the Company may from time to time notify you to place
stop-transfer restrictions on the certificates for the Conversion Shares and
the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events
then current or the prospectus which is part of such registration statement may
no longer be used for sales of Conversion Shares or Warrant Shares.

          A
form of written confirmation from counsel to the Company that a registration
statement covering resales of the Conversion Shares and the Warrant Shares has
been declared effective by the SEC under the 1933 Act is attached hereto as Exhibit
III.

          Please
be advised that the Purchasers are relying upon this letter as an inducement to
enter into the Securities Purchase Agreement and, accordingly, each Purchaser
is a third party beneficiary to these instructions.

          Please
execute this letter in the space indicated to acknowledge your agreement to act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at ___________.

	
 

	
 

	
 

	
 

	
 

	
 

	
Very truly
  yours,

	
 

	
 

	
 

	
ORTEC INTERNATIONAL, INC.

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
Name:

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
Title:

	
 

	
 

	
 

	
 

	
 

	

ACKNOWLEDGED
AND AGREED:

[TRANSFER AGENT]

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	

	
 

	
Name:

	
 

	
 

	
 

	

	
 

	
Title:

	
 

	
 

	
 

	

	
 

	
Date:

	
 

	
 

	
 

	

	
 

	
	

-2-

EXHIBIT I

ORTEC INTERNATIONAL, INC.

CONVERSION NOTICE

Reference is
made to the Certificate of Designation of the Relative Rights and Preferences
of the Series A Preferred Stock of Ortec International, Inc. (the “Certificate
of Designation”). In accordance with and pursuant to the Certificate of
Designation, the undersigned hereby elects to convert the number of shares of
Series A Preferred Stock, par value $.001 per share (the “Preferred Shares”),
of Ortec International, Inc., a Delaware corporation (the “Company”), indicated
below into shares of Common Stock, par value $.001 per share (the “Common
Stock”), of the Company, by tendering the stock certificate(s) representing the
share(s) of Preferred Shares specified below as of the date specified below. 

	
 

	
 

	
 

	
 

	
Date of
  Conversion: 

	

	
 

	
 

	
 

	
 

	
Number of
  Preferred Shares to be converted: _______

	
 

	
 

	
 

	
 

	
 

	
Stock
  certificate no(s). of Preferred Shares to be converted: ______

	
 

	
 

	
 

	
 

	
 

	
The Common
  Stock have been sold pursuant to the registration statement:

	
 

	
YES ____ 

	
NO____

	
 

	
 

	
 

	
Please
  confirm the following information: 

	
 

	
 

	
 

	
 

	
 

	
Conversion
  Price:

	

	
 

	
 

	
 

	
 

	
Number of
  shares of Common Stock to be issued:

	

	
 

	
 

	
 

	
Please issue
  the Common Stock into which the Preferred Shares are being converted and, if
  applicable, any check drawn on an account of the Company in the following
  name and to the following address:

	
 

	
 

	
 

	
 

	
 

	
 

	
Issue to:

	

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
Facsimile
  Number:

	

	
 

	
 

	
 

	
 

	
 

	
 

	
Authorization:

	

	
 

	
 

	
By: 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
Dated:

	
 

	
 

	
 

PRICES ATTACHED

-3-

EXHIBIT I-A

ASSIGNMENT

FOR VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
________________. _________ of the Preferred Shares evidenced by the within
stock certificate together with all rights therein, and does irrevocably
constitute and appoint ___________________, attorney, to transfer that part of
the said Preferred Shares on the books of the within named corporation. 

	
 

	
 

	
 

	
 

	
Dated: 

	
 

	
Signature

	
 

	
 

	

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
Address

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	

-4-

EXHIBIT II

FORM OF EXERCISE NOTICE

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

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	

ASSIGNMENT

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 _______________. 

-5-

EXHIBIT III

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

[Name and
address of Transfer Agent]

Attn: _____________ 

                    Re:     
Ortec International, Inc.

Ladies and
Gentlemen: 

          We
are counsel to Ortec International, Inc., a Delaware corporation (the “Company”), and have represented the Company
in connection with that certain Series A Convertible Preferred Stock Purchase
Agreement (the “Purchase Agreement”),
dated as of June 18, 2007, by and among the Company and the purchasers named
therein (collectively, the “Purchasers”) pursuant to which the Company issued
to the Purchasers shares of its Series A Convertible Preferred Stock, par value
$.001 per share, (the “Preferred Shares”)
and warrants (the “Warrants”) to
purchase shares of the Company’s common stock, par value $.001 per share (the “Common Stock”). Pursuant to the
Purchase
Agreement, the Company agreed, among other things, to register the shares of
Common Stock issuable upon conversion of the Preferred Shares and exercise of
the Warrants (together the “Registrable Shares”), under the Securities Act of
1933, as amended (the “1933 Act”).
In connection with the Company’s obligations under the Purchase Agreement, on
________________, 2007, the Company filed a Registration Statement on Form SB-2
(File No. 333-________) (the “Registration
Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the resale of the
Registrable Shares which names each of the present Purchasers as a selling
stockholder thereunder.  

          In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS]
and we have no
knowledge, after telephonic inquiry of a member of the SEC’s staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and accordingly,
the Registrable Shares are available for resale under the 1933 Act pursuant to
the Registration Statement. 

	
 

	
 

	
 

	
 

	
Very truly
  yours, 

	
 

	
 

	
 

	
 

	
[COMPANY COUNSEL] 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	

	
 

	
 

	
 

	
cc:     [LIST NAMES OF PURCHASERS]

	
 

	
 

-6-

EXHIBIT F to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

FORM OF OPINION OF COUNSEL

          1.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of Delaware and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The company is duly qualified as
a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary. 

          2.
The Company has the requisite corporate power and authority to enter into and
perform its obligations under the Transaction Documents and to issue the
Preferred Stock, the Warrants and the Common Stock issuable upon conversion of
the Preferred Stock and exercise of the Warrants. The execution, delivery and
performance of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. Each of the Transaction Documents have been duly executed and
delivered, and the Preferred Stock and the Warrants have been duly executed,
issued and delivered by the Company and each of the Transaction Documents
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms. The Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants
are not subject to any preemptive rights under the Certificate of Incorporation
or the Bylaws. 

          3.
The Preferred Stock and the Warrants have been duly authorized and, when
delivered against payment in full as provided in the Purchase Agreement, will
be validly issued, fully paid and nonassessable. The shares of Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants,
have been duly authorized and reserved for issuance, and, when delivered upon
conversion or against payment in full as provided in the Certificate of
Designation and the Warrants, as applicable, will be validly issued, fully paid
and nonassessable. 

          4.
The execution, delivery and performance of and compliance with the terms of the
Transaction Documents and the issuance of the Preferred Stock, the Warrants and
the Common Stock issuable upon conversion of the Preferred Stock and exercise
of the Warrants do not (i) violate any provision of the Certificate of
Incorporation or Bylaws, (ii) to our knowledge conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) to our knowledge create or
impose a lien, charge or encumbrance on any property of the Company under any
agreement or any commitment to which the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are
bound, or (iv) (a) result in a violation of any federal, state or local
statute, rule or regulation, or to our knowledge, any order, judgment,
injunction or decree (including Federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected, except, in all cases other than violations
pursuant to clause (i) above, for such conflicts, default, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. 

-7-

          5.
No consent, approval or authorization of or designation, declaration or filing
with any governmental authority on the part of the Company is required under
Federal, state or local law, rule or regulation in connection with the valid
execution, delivery and performance of the Transaction Documents, or the offer,
sale or issuance of the Preferred Stock, the Warrants or the Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants
other than the Certificate of Designation, the Registration Statement, report
on Form 8-K and Form D, both to be filed with the Securities and Exchange
Commission. 

          6.
To our knowledge, there is no action, suit, claim, investigation or proceeding
pending or threatened against the Company which questions the validity of this
Agreement or the transactions contemplated hereby or any action taken or to be
taken pursuant hereto or thereto. To our knowledge, there is no action, suit,
claim, investigation or proceeding pending, or to our knowledge, threatened,
against or involving the Company or any of its properties or assets and which,
if adversely determined, is reasonably likely to result in a Material Adverse
Effect. To our knowledge, there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any officers or directors of the Company
in their capacities as such. 

          7.
The offer, issuance and sale of the Preferred Stock and the Warrants and the
offer, issuance and sale of the shares of Common Stock issuable upon conversion
of the Preferred Stock and exercise of the Warrants pursuant to the Purchase
Agreement, the Certificate of Designation and the Warrants, as applicable, are
based on the Purchasers’ representations in the Agreement, exempt from the
registration requirements of the Securities Act. 

          8.
The Company is not, and as a result of and immediately upon Closing will not
be, an “investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as amended. 

	
 

	
 

	
 

	
Very truly
  yours, 

-8-

EXHIBIT G to the

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

ORTEC INTERNATIONAL, INC.

ESCROW AGREEMENT

          THIS
ESCROW AGREEMENT (this “Agreement”) is made as of June 18, 2007, by and
among Ortec International, Inc., a Delaware corporation (the “Company”),
the purchasers signatory hereto (each a “Purchaser” and together the “Purchasers”),
Burnham Hill Partners, a division of Pali Capital, Inc. (the “Placement
Agent”), and Kramer Levin Naftalis & Frankel LLP, with an address at
1177 Avenue of the Americas, New York, New York 10036 (the “Escrow Agent”).
Capitalized terms used but not defined herein shall have the meanings set forth
in the Purchase Agreement (as defined below). 

WITNESSETH: 

          WHEREAS,
the Purchasers will be purchasing from the Company shares of Series A
Convertible Preferred Stock (the “Preferred Shares”) convertible into
shares of the Company’s common stock, par value $0.001 per share, pursuant to a
Series A Convertible Preferred Stock Purchase Agreement dated as of the date
hereof by and among the Company and the Purchasers (the “Purchase Agreement”);

          WHEREAS,
the Company and the Purchasers have requested that the Escrow Agent hold the
subscription amounts with respect to the purchase of the Preferred Shares in
escrow until the Escrow Agent has received all closing documents and deliveries
required under Article IV of the Purchase Agreement; and 

          NOW,
THEREFORE, in consideration of the covenants and mutual promises contained
herein and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the parties agree as follows: 

ARTICLE 1

TERMS OF THE ESCROW

          1.1.
The parties hereby agree to establish an escrow account with the Escrow Agent
whereby the Escrow Agent shall hold the funds for the purchase of the Preferred
Shares as contemplated by the Purchase Agreement. 

          1.2.
Upon the Escrow Agent’s receipt of the aggregate subscription amounts into its
master escrow account, together with copies of counterpart signature pages of
the Transaction Documents from each Purchaser and the Company and all other
closing documents and deliveries required under Article IV of the Purchase
Agreement with respect to the Closing, it shall advise the Company and the
Placement Agent, or their designated attorney or agent, of 

-9-

 the amount of funds it has received into its
master escrow account. 

          1.3.
Wire transfers to the Escrow Agent shall be made as follows: 

	
 

	
 

	
 

	
 

	
Bank:

	
Citibank,
  N.A.

  666 Fifth Avenue

  New York, NY 10103

	
 

	
ABA No.:

	
021000089 

	
 

	
Account
  Name:

	
Kramer Levin
  Naftalis & Frankel LLP IOLA Account

	
 

	
Account No.:

	
37317968

	
 

	
Reference:

	
Ortec
  International, Inc. / Burnham Hill Partners 

          1.4.
The Company and the Placement Agent, promptly after being advised by the Escrow
Agent that it has received the subscription amounts for the Closing, copies of
counterpart signature pages of the Transaction Documents from each Purchaser
and the Company and all other closing documents and deliveries required under
Article IV of the Purchase Agreement, shall deliver to the Escrow Agent a Release
Notice, in the form attached hereto as Exhibit A (the “Release Notice”).

          1.5.
Once the Escrow Agent receives the Release Notice executed by the Company and
the Placement Agent, the Escrow Agent shall wire the subscription proceeds per
the written instructions of the Company and the Placement Agent, net of fees,
expenses and any other disbursements as set forth in the Release Notice. 

          1.6.
Wire transfers to the Company shall be made pursuant to written instructions
from the Company provided to the Escrow Agent. 

          1.7.
In the event that the Closing does not occur within five (5) business days of
the date of this Agreement, upon the written request from a Purchaser to the
Escrow Agent, the Escrow Agent shall promptly return the subscription proceeds
to each Purchaser pursuant to written wire instructions to be delivered by such
Purchaser to the Escrow Agent. 

ARTICLE 2

MISCELLANEOUS

          2.1.
No waiver or any breach of any covenant or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof, or of any other
covenant or provision herein contained. No extension of time for performance of
any obligation or act shall be deemed an extension of the time for performance
of any other obligation or act. 

          2.2.
All notices or other communications required or permitted hereunder shall be in
writing, and shall be sent as set forth in the Purchase Agreement. 

          2.3.
This Escrow Agreement shall be binding upon and shall inure to the benefit of
the permitted successors and permitted assigns of the parties hereto. 

-10-

          2.4.
This Escrow Agreement is the final expression of, and contains the entire
agreement between, the parties with respect to the subject matter hereof and
supersedes all prior understandings with respect thereto. This Escrow Agreement
may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as
otherwise expressly permitted herein. 

          2.5.
Whenever required by the context of this Escrow Agreement, the singular shall
include the plural and masculine shall include the feminine. This Escrow Agreement
shall not be construed as if it had been prepared by one of the parties, but
rather as if both parties had prepared the same. Unless otherwise indicated,
all references to Articles are to this Escrow Agreement. 

          2.6.
The parties hereto expressly agree that this Escrow Agreement shall be governed
by, interpreted under and construed and enforced in accordance with the laws of
the State of New York, without regard to conflicts of law principles that would
result in the application of the substantive laws of another jurisdiction. Any
action to enforce, arising out of, or relating in any way to, any provisions of
this Escrow Agreement shall only be brought in a state or Federal court sitting
in New York City, Borough of Manhattan. 

          2.7.
The Escrow Agent’s duties hereunder may be altered, amended, modified or
revoked only by a writing signed by the Company, each Purchaser and the Escrow
Agent. 

          2.8.
The Escrow Agent shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by the
Escrow Agent to be genuine and to have been signed or presented by the proper
party or parties. The Escrow Agent shall not be personally liable for any act
the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith and in the absence of gross negligence, fraud and willful
misconduct, and any act done or omitted by the Escrow Agent pursuant to the
advice of the Escrow Agent’s attorneys-at-law shall be conclusive evidence of
such good faith, in the absence of gross negligence, fraud and willful
misconduct. 

          2.9.
The Escrow Agent is hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree, the Escrow Agent shall not be liable to any of the parties
hereto or to any other person, firm or corporation by reason of such decree
being subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction. 

          2.10.
The Escrow Agent shall not be liable in any respect on account of the identity,
authorization or rights of the parties executing or delivering or purporting to
execute or deliver the Purchase Agreement or any documents or papers deposited
or called for thereunder in the absence of gross negligence, fraud and willful
misconduct. 

          2.11.
The Escrow Agent shall be entitled to employ such legal counsel and other 

-11-

experts as the
Escrow Agent may deem necessary properly to advise the Escrow Agent in
connection with the Escrow Agent’s duties hereunder, may rely upon the advice
of such counsel, and may pay such counsel reasonable compensation therefor
which shall be paid by the Escrow Agreement unless otherwise provided for in
Section 2.14. The Escrow Agent has acted as
legal counsel for the Placement Agent and may continue to act as legal counsel
for the Placement Agent from time to time, notwithstanding its duties as the
Escrow Agent hereunder. The Company and the Placement Agent consent to the
Escrow Agent in such capacity as legal counsel for the Placement Agent and
waives any claim that such representation represents a conflict of interest on
the part of the Escrow Agent. The Company and the Placement Agent understand
that the Escrow Agent is relying explicitly on the foregoing provision in
entering into this Escrow Agreement.

          2.12.
The Escrow Agent’s responsibilities as escrow agent hereunder shall terminate
if the Escrow Agent shall resign by giving written notice to the Company and
the Purchasers. In the event of any such resignation, the Purchasers and the
Company shall appoint a successor Escrow Agent and the Escrow Agent shall
deliver to such successor Escrow Agent any escrow funds and other documents
held by the Escrow Agent. 

          2.13.
If the Escrow Agent reasonably requires other or further instruments in
connection with this Escrow Agreement or obligations in respect hereto, the necessary
parties hereto shall join in furnishing such instruments. 

          2.14.
It is understood and agreed that should any dispute arise with respect to the
delivery and/or ownership or right of possession of the documents or the escrow
funds held by the Escrow Agent hereunder, the Escrow Agent is authorized and
directed in the Escrow Agent’s sole discretion (1) to retain in the Escrow
Agent’s possession without liability to anyone all or any part of said
documents or the escrow funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned by a final order,
decree or judgment or a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings or (2)
to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or Federal court having competent subject
matter jurisdiction and located in the City of New York, Borough of Manhattan,
in accordance with the applicable procedure therefor. 

          2.15.
The Company and each Purchaser agree severally but not jointly to indemnify and
hold harmless the Escrow Agent and its partners, employees, agents and
representatives from any and all claims, liabilities, costs or expenses in any
way arising from or relating to the duties or performance of the Escrow Agent
hereunder or the transactions contemplated hereby or by the Purchase Agreement
other than any such claim, liability, cost or expense to the extent the same
shall have been determined by final, unappealable judgment of a court of
competent jurisdiction to have resulted from the gross negligence, fraud or
willful misconduct of the Escrow Agent. 

[SIGNATURE PAGE FOLLOWS]

-12-

[SIGNATURE PAGE TO ESCROW AGREEMENT]

          IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
18th day of June, 2007. 

	
 

	
 

	
 

	
ORTEC INTERNATIONAL, INC.

	
 

	
 

	
By:

	
/s/

	
Alan W.
  Schoenbart

	
 

	
 

	

	
 

	
Name: Alan
  W. Schoenbart

	
 

	
Title: CFO

	
 

	
 

	
ESCROW AGENT:

	
 

	
 

	
Kramer Levin Naftalis & Frankel LLP

	
 

	
 

	
By

	
/s/

	
Chris
  Auguste

	
 

	
 

	

	
 

	
Name: Chris
  Auguste

	
 

	
Title:
  Partner

	
 

	
 

	
Burnham Hill Partners,

	
a division of Pali Capital, Inc.

	
 

	
 

	
By:

	
/s/

	
Jason Adelman

	
 

	
 

	

	
 

	
Name: Jason
  Adelman

	
 

	
Title:
  President

[PURCHASERS’ SIGNATURE PAGE FOLLOWS]

-13-

	
 

	
[PURCHASER’S SIGNATURE PAGE TO ESCROW AGREEMENT]

	
 

	
Name of
  Investing Entity: __________________________________

	
Signature of Authorized Signatory of Investing Entity:
  __________________________________

	
Name of
  Authorized Signatory: _____________________________________

	
Title of
  Authorized Signatory: ______________________________________

	
 

-14-

Exhibit A to

Escrow Agreement

RELEASE NOTICE

               The
UNDERSIGNED, pursuant to the Escrow Agreement dated as of June __, 2007 among
the Company, the Purchasers signatory thereto and Kramer Levin Naftalis &
Frankel LLP, as Escrow Agent (the “Escrow Agreement”), hereby notify the
Escrow Agent that each of the conditions precedent to the purchase and sale of
the Preferred Shares have been satisfied or waived in accordance with Article
IV of the Purchase Agreement. The Company hereby confirms that all of its
respective representations and warranties contained in the Purchase Agreement
remain true and correct and authorize the release by the Escrow Agent of the
funds to be released as described in the Escrow Agreement and as set forth
below. This Release Notice shall not be effective until executed by the Company
and the Placement Agent. 

               Capitalized
terms used herein and not defined shall have the meaning ascribed to such terms
in the Escrow Agreement.

               This
Release Notice may be signed in one or more counterparts, each of which shall
be deemed an original.

               Please
release the $____________ that has been deposited in the escrow account
pursuant to the Escrow Agreement according to the following instructions:

[to be completed]

-15-

               IN
WITNESS WHEREOF, the undersigned have caused this Release Notice to be duly
executed and delivered as of this 18th day of June, 2007.

	
 

	
 

	
ORTEC INTERNATIONAL, INC.

	
 

	
 

	
By: /s/ Alan
  W. Schoenbart

	
 

	
Name: Alan
  W. Schoenbart

	
 

	
Title: CFO

	
 

	
 

	
PLACEMENT AGENT:

	
 

	
 

	
Burnham Hill Partners, 

  a division of Pali Capital, Inc.

	
 

	
 

	
By: /s/ Jason
  Adelman

	
 

	
Name:

	
 

	
Title:

-16-

DISCLOSURE SCHEDULES

Schedule 2.1

Preferred
stock, $.001 par value, authorized, 1,000,000 shares Convertible Series D-1,
stated value $10 per share; authorized 20,000 shares; Common Stock, $.001 par
value; authorized 200,000,000 shares; 9,073,890 issued and outstanding

-17-

Schedule 2.1(c)(1)

Commitment to
exchange Series H warrants for common and 25% warrant coverage

Commitment to issued 500,000 shares to management on 1/1/08

-18-

Schedule 2.1(c)(2)

	
 

	
 

	
1.

	
Section 4.4
  of the agreement dated as of April 14, 2006, among the Company, ORTN
  Acquisition Corp. (whose name after the merger referred to in such
  April 14, 2006 agreement was changed to Hapto Biotech, Inc.), Hapto
  Biotech, Inc. and certain shareholders and option holders of Hapto Biotech,
  Inc. for the merger of Hapto Biotech, Inc. with and into ORTN Acquisition
  Corp., provides that until April 14, 2007, none of the approximately
  2,057,360 shares of Common Stock acquired by the former shareholders and
  option holders of Hapto Biotech, Inc. could be sold, pledged, encumbered or
  otherwise disposed of by them. 

-19-

Schedule 2.1(f)

12/31/2006
10-KSB
 3/31/2007 10-QSB

-20-

Schedule 2.1(h)

None

-21-

Schedule 2.1 (i)(k)

	
 

	
 

	
 

	
 

	
 

	
 

	
Loss
  Incurred in the 4th Qtr of 2006

	
 

	
$

	
3,916,960

	
 

	
Audit not
  completed

	
Loss
  Incurred in the 1st Qtr of 2007

	
 

	
 

	
4,312,867

	
 

	
Unaudited

	
Aggregate
  Six month Loss

	
 

	
$

	
8229,827

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3/31/2007

	
 

	
 

	
 

	
 

	
 

	
Unaudited 

	
 

	
 

	
Accounts payable
  and accrued expenses

	
 

	
$

	
5,037,018

	
 

	
 

	
Convertible
  bridge financing payable

	
 

	
 

	
2,434,000

	
 

	
 

	
Insurance
  Premium Financing

	
 

	
 

	
107,981

	
 

	
 

	
Loan
  payable-current

	
 

	
 

	
39,411

	
 

	
 

	
Capital
  lease obligation

	
 

	
 

	
6,094

	
 

	
 

	
Obligation
  under revenue interest assignment

	
 

	
 

	
41,006,000

	
 

	
 

	
Total
  Liabilities

	
 

	
$

	
48,630,503

	
 

	
 

-22-

Cap Table

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Common Eq.

	
 

	
Warrants

	
 

	
Options

	
 

	
 

	
 

	
 

	
 

	

	
 

	

	
 

	

	
 

	
Outstanding
  Shares

	
 

	
Note 2

	
 

	
9,073,890

	
 

	
 

	
 

	
 

	
 

	
Penny
  warrants considered shares

	
 

	
 

	
 

	
811,333

	
 

	
811,333

	
 

	
 

	
 

	
 

	
Series D-1
  Preferred

	
 

	
5948,6148
  shs

	
 

	
1,586,297

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
11,471,520

	
 

	
 

	
 

	
 

	
 

	
 

	
Full Ratchel
  H Warrants

	
 

	
Note 3

	
 

	
2,169,111

	
 

	
2,169,111

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
13,640,631

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other Warrant Series

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
B-1

	
 

	
 

	
 

	
$

	
60.00

	
 

	
11,747

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
B-2

	
 

	
 

	
 

	
$

	
75.00

	
 

	
7,520

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
C

	
 

	
 

	
 

	
$

	
54.00

	
 

	
6,800

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
E

	
 

	
 

	
 

	
$

	
11.34

	
 

	
47,840

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
E

	
 

	
 

	
 

	
$

	
13.06

	
 

	
254,279

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
E PA

	
 

	
 

	
 

	
$

	
5.02

	
 

	
183,092

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
F

	
 

	
 

	
 

	
$

	
8.45

	
 

	
1,162,926

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
F PA

	
 

	
 

	
 

	
$

	
4.50

	
 

	
211,975

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
G

	
 

	
 

	
 

	
$

	
4.50

	
 

	
200,000

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other
  various expirations

	
 

	
 

	
 

	
$

	
3.75

	
 

	
19,000

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other various
  expirations

	
 

	
 

	
 

	
$

	
4.50

	
 

	
266,667

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other
  various expirations

	
 

	
 

	
 

	
$

	
6.00

	
 

	
192,534

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other
  various expirations

	
 

	
 

	
 

	
$

	
7.50

	
 

	
3,334

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other
  various expirations

	
 

	
 

	
 

	
$

	
7.50

	
 

	
1,667

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other
  various expirations

	
 

	
 

	
 

	
$

	
8.50

	
 

	
1,688

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other various
  expirations

	
 

	
 

	
 

	
$

	
11.25

	
 

	
73,674

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other
  various expirations

	
 

	
 

	
 

	
$

	
15.00

	
 

	
1,667

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Other
  various expirations

	
 

	
 

	
 

	
$

	
27.00

	
 

	
103,000

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
2,749,390

	
 

	
 

	
 

	
 

	
 

	
Total
  outstanding warrants

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
5,729,834

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
Outstanding
  stock opinions

	
 

	
W/A exerc price

	
 

	
 

	
19.50

	
 

	
 

	
 

	
 

	
 

	
538,473

	
 

	
Note 1

	
 

Note 1 –
508,909 options will go away when RL and SK above

Note 2 – Does
not include 500,000 to be issued to management on 1/1/08

Note 3 – We
expect all of these to exchange their shares. Still trying to contact Avitan
Ami – 3,333 Series H

-23-

Schedule 2.1(m)

The Company is
in default of its leases with Columbia University and such lease has terminated
as of 4/30/07. We have extended the cure period to 5/30/07 to pay all rent in
arrears which is in excess of $250,000

-24-

Schedule 2.1(p)

Burnham Hill
Partners

ViewTrade

-25-

Schedule 2.1(u)

Columbia Lease
Agreement disclosed above

-26-

Schedule 2.1(z)(ix)

None

-27-

Schedule 2.1(ee)

Ortec has
issued bridge notes in the amount of $2,899,000 which the holders may use to
purchase the Series A Preferred Stock and the Warrants being sold as described
in Section 1.

-28-

Schedule 2.1(gg)

Registrar and
Transfer Company

10 Commerce Drive

Cranford, NJ 07016-3572

(800) 866-1340, Fausto Rodriguez (Ext. 2509)EXHIBIT 10.4  

BURNHAM HILL PARTNERS  

A DIVISION OF PALI CAPITAL INC.  

	
 

	
 

	
590 MADISON AVENUE 

	
TEL 212-980-2200 

	
NEW YORK, NEW YORK 10022 

	
FAX 212-980-9466 

	
 

	
 

	
 

	
June 15, 2007

	
 

	
 

	
 

	
Mr. Alan Schoenbart

	
 

	
Chief Financial Officer

	
 

	
Ortec International, Inc.

	
 

	
3960 Broadway

	
 

	
New York, NY 10032

	
 

	
 

	
 

	
Dear Mr. Schoenbart:

	
 

	
 

	
 

	
This letter Agreement (the
  “Agreement”) confirms the engagement of Burnham Hill Partners (“BHP”),
  a division of Pali Capital, Inc., by Ortec International, Inc. (the “Company”) to act as its
  exclusive placement agent in connection with the issuance and sale of
  up to $12 million of Series A Convertible Preferred Stock (the “Series A
  Preferred”) and common stock purchase warrants through a transaction or transactions exempt from registration under
  the Securities Act of 1933, as amended, and in compliance with the applicable
  securities laws and regulations (a “Financing”). This Agreement and
  the separate Advisory Agreement entered into this day supersede all previous
  agreements with the Company either written or verbal.

	
 

	
 

	
 

	
In connection with BHP’s
  engagement hereunder, the Company shall pay BHP a cash fee equal to ten
  percent (10%) of the gross proceeds received by the Company in the Financing,
  which shall include cash amounts received by the Company in connection with
  bridge notes issued by the Company in relation to this Financing. BHP shall
  be paid five percent (5%) of any proceeds received by the Company upon the
  cash exercise of the investor warrants issued in connection with the Series A
  Financing and related activity. In addition, the Company shall issue 5-year
  warrants equal to ten percent (10%) of the number of as converted Series A
  Preferred shares and five percent (5%) of the Series M Warrants issued with
  an initial exercise price per share equal to 110% of the Series A Preferred
  conversion price and 110% of the Series M exercise price respectively (the “Placement
  Warrants”). The shares underlying the Placement Warrants shall have
  standard piggyback registration rights, be exercisable pursuant to a cashless
  exercise provision, be non-redeemable and be included in any registration
  statement covering the shares issued pursuant to any financing activity under
  this Agreement.

	
 

	
 

	
 

	
In addition to the above,
  the Company shall promptly reimburse BHP for reasonable out-of-pocket
  expenses (which amount shall not exceed $10,000 without the prior written
  approval of the Company) incurred in connection with this Agreement. All fees
  and expenses hereunder are payable in cash, unless otherwise noted by wire
  transfer upon the Closing of the Financing.

	
 

	
 

	
 

	
In connection with this
  Agreement, the Company will furnish BHP with all information concerning the
  Company which BHP reasonably deems appropriate and will provide BHP with
  access to its officers, directors, employees, accountants, counsel and other
  representatives (collectively, the “Representatives”), it being
  understood that BHP will rely solely upon such information supplied by the
  Company and its Representatives without assuming any responsibility for the
  independent investigation or verification thereof. All non-public information
  concerning the Company that is given to BHP will be used solely in the course
  of the performance of our services hereunder and will be treated confidentially
  by us for so long as it remains non-public. Except as otherwise required by
  law, BHP will not disclose any information to any third party without the
  consent of the Company.

	
 

	
 

	
 

	
Notice given pursuant to
  any of the provisions of this Agreement shall be given in writing and shall
  be sent by overnight courier or personally delivered (a) if to the Company,
  to the Company’s Chief Executive Officer at the address listed above; and (b)
  if to BHP, to its offices at 590 Madison Avenue, 5th floor, New
  York, NY 10022, Attention: Jason Adelman, Managing Director.

	
 

	
 

	
 

	
No advice or opinion
  rendered by BHP, whether formal or informal, may be disclosed, in whole or in
  part, or summarized, excerpted from or otherwise referred to without our
  prior written consent. In addition, BHP may not be otherwise referred to
  without its prior written consent. Since BHP will be acting on behalf of the
  Company in

1

	
 

	
 

	
 

	
connection with its
  engagement hereunder, the Company has entered into a separate letter
  Agreement, dated the date hereof, providing for the indemnification by the
  Company of BHP and certain related persons and entities.

	
 

	
 

	
 

	
For a period of twelve
  (12) months following the initial closing of the Financing (the “Authorization
  Period”), BHP shall have the right, but not the obligation, to act as
  exclusive placement agent in connection with any financing activity by the
  Company. The fees for such subsequent financing activity shall be mutually
  agreed to in good faith by the Company and BHP. Provided however, that upon the
  expiration of the Authorization Period, BHP will continue to be entitled to
  its full fees provided for herein in the event that at any time prior to the
  expiration of twelve (12) months after such expiration, a Financing involving
  the Company occurs that involves a party contacted by BHP on behalf of the
  Company.

	
 

	
 

	
 

	
BHP is a
  division of Pali Capital, Inc. The letter agreement shall remain in full
  force and effect as to BHP and the Company, and shall be deemed fully
  assigned, in the event that BHP becomes an independent entity. Our engagement
  is for the limited purposes set forth under this Agreement, and the rights
  and obligations of each of BHP and the Company are herein defined. Each of
  BHP and the Company agrees that the other party has no fiduciary duty to it
  or its stockholders, officers and directors as a result of the engagement
  described in this Agreement. This Agreement shall be governed by and
  construed in accordance with the laws of the State of New York without regard
  to conflicts of law principles thereof. This Agreement may not be amended or
  modified except in writing signed by each of the parties hereto.

	
 

	
 

	
 

	
The invalidity or
  unenforceability of any provision of this letter Agreement shall not affect
  the validity or enforceability of any other provisions of this Agreement or
  the Indemnification Agreement, which shall remain in full force and effect.

	
 

	
 

	
 

	
We are delighted to accept
  this engagement and look forward to working with you on this assignment.
  Please confirm that the foregoing is in accordance with your understanding by
  signing and returning to us the enclosed duplicate of this Agreement.

	
 

	
 

	
 

	
 

	
Very truly yours,

	
 

	
 

	
 

	
Burnham Hill Partners

	
 

	
 

	
 

	
By /s/ Jason Adelman

	
 

	
 

	

	
 

	
Name: Jason Adelman

	
 

	
Title: Managing Director

	
 

	
 

	
Accepted and agreed to as
  of the date first written above:

	
 

	
Ortec International, Inc.

	
 

	
By: /s/ Alan Schoenbart

	
 

	

	
Name: Alan Schoenbart

	
Title: Chief Financial
  Officer

2

	
 

	
 

	
 

	
TO:

	
Burnham Hill Partners

	
Date:
  June 15, 2007

	
 

	
A division of Pali Capital
  Inc. 

	
 

	
 

	
590 Madison Avenue

	
 

	
 

	
New York, NY 10022

	
 

          In
connection with your engagement pursuant to our letter Agreement of even date
herewith (the “Engagement”), we agree to indemnify and hold harmless Burnham
Hill Partners, a division of Pali Capital Inc. (“BHP”) and its affiliates, the
respective directors, officers, partners, agents and employees of BHP and its
affiliates, and each other person, if any, controlling BHP or any of its
affiliates or successor in interest (collectively, “Indemnified Persons”), from
and against, and we agree that no Indemnified Person shall have any liability
to us or our owners, parents, affiliates, security holders or creditors for,
any losses, claims, damages or liabilities (including actions or proceedings in
respect thereof) (collectively “Losses”) (A) related to or arising out of (i)
our actions or failures to act (including statements or omissions made, or
information provided, by us or our agents) or (ii) actions or failures to act
by an Indemnified Person with our consent or in reliance on our actions or
failures to act, or (B) otherwise related to or arising out of the Engagement
or your performance thereof, except that this clause (B) shall not apply to any
Losses that are finally judicially determined to have resulted primarily from
your bad faith or gross negligence or breach of the letter Agreement. If such
indemnification is for any reason not available or insufficient to hold you
harmless, we agree to contribute to the Losses involved in such proportion as
is appropriate to reflect the relative benefits received (or anticipated to be
received) by us and by you with respect to the Engagement or, if such
allocation is judicially determined unavailable, in such proportion as is
appropriate to reflect other equitable considerations such as the relative
fault of us on the one hand and of you on the other hand; provided, however,
that, to the extent permitted by applicable law, the Indemnified Persons shall
not be responsible for amounts which in the aggregate are in excess of the
amount of all fees actually received by you from us in connection with the
Engagement. Relative benefits to us, on the one hand, and you, on the other
hand, with respect to the Engagement shall be deemed to be in the same
proportion as (i) the total value paid or proposed to be paid or received or
proposed to be received by us or our security holders, as the case may be,
pursuant to the transaction(s), whether or not consummated, contemplated by the
Engagement bears to (ii) all fees paid or proposed to be paid to you by us in
connection with the Engagement.

          We
will reimburse each Indemnified Person for all expenses (including reasonable
fees and disbursements of counsel) as they are incurred by such Indemnified
Person in connection with investigating, preparing for or defending any action,
claim, investigation, inquiry, arbitration or other proceeding (“Action”)
referred to above (or enforcing this Agreement or any related engagement
Agreement), whether or not in connection with pending or threatened litigation
in which any Indemnified Person is a party, and whether or not such Action is
initiated or brought by you. We further agree that we will not settle or
compromise or consent to the entry of any judgment in any pending or threatened
Action in respect of which indemnification may be sought hereunder (whether or
not an Indemnified Person is a party therein) unless we have given you
reasonable prior written notice thereof and used all reasonable efforts, after
consultation with you, to obtain an unconditional release of each Indemnified
Person from all liability arising therefrom. In the event we are considering
entering into one or a series of transactions involving a merger or other
business combination or a dissolution or liquidation of all or a significant
portion of our assets, we shall promptly notify you in writing. If requested by
BHP, we shall then establish alternative means of providing for our obligations
set forth herein on terms and conditions reasonably satisfactory to BHP.

          If
multiple claims are brought against you in any Action with respect to at least
one of which indemnification is permitted under applicable law and provided for
under this Agreement, we agree that any judgment, arbitration award or other
monetary award shall be conclusively deemed to be based on claims as to which
indemnification is permitted and provided for. In the event that you are called
or subpoenaed to give testimony in a court of law, we agree to pay your
expenses related thereto and for every day or part thereof that we are required
to be there or in preparation thereof. Our obligations hereunder shall be in
addition to any rights that any Indemnified Person may have at common law or
otherwise. Solely for the purpose of enforcing this Agreement, we hereby
consent to personal jurisdiction and to service and venue in any court in which
any claim which is subject to this Agreement is brought by or against any
Indemnified Person. We acknowledge that in connection with the Engagement you
are acting as an independent contractor with duties owing solely to us. YOU HEREBY AGREE, AND WE HEREBY AGREE ON OUR
OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF OUR
SECURITY HOLDERS, TO WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
CLAIM, COUNTER-CLAIM OR ACTION ARISING OUT OF THE ENGAGEMENT, YOUR PERFORMANCE
THEREOF OR THIS AGREEMENT.

          The
provisions of this Agreement shall apply to the Engagement (including related
activities prior to the date hereof) and any modification thereof and shall
remain in full force and effect regardless of the completion or termination of
the Engagement. This Agreement and any other Agreements relating to the
Engagement shall be governed by and construed in accordance with the laws of the
state of New York, without regard to conflicts of law principles thereof.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Very truly yours,

	
 

	
 

	
 

	
Accepted and Agreed:

	
 

	
 

	
 

	
 

	
 

	
Burnham Hill Partners

	
 

	
Ortec International, Inc.

	
 

	
 

	
 

	
By:

	/s/ Jason Adelman	
By:

	
 /s/ Alan Schoenbart 

	
 

	

	
 

	

	
Name: Jason Adelman

	
 

	
Name: Alan Schoenbart

	
Title: Managing Director

	
 

	
Title: Chief Financial
  Officer

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