Preferred Stock Exchange Agreement between Ortec International, Inc. and North Sound Entities
Ortec International, Inc. and the holders of its Series D Convertible Preferred Stock, North Sound Legacy Institutional Fund, LLC and North Sound Legacy International, Ltd., agree to exchange their Series D Preferred Stock for new Series D-1 Convertible Preferred Stock. The new shares have different liquidation preferences, a lower conversion price, and a higher authorized share count. The investors confirm they are accredited and are acquiring the new shares for investment purposes only. The agreement is effective as of January 30, 2006.
January 30, 2006
Ortec International, Inc.
3960 Broadway
New York, NY 10032
Gentlepersons:
1. The undersigned, being the holders of 5000.1027 outstanding shares of Ortec International, Inc.’s (the “Company”) Series D Convertible Preferred Stock (the “Series D Preferred Stock”), hereby agree to exchange each share of Series D Preferred Stock owned by the undersigned for one share of the Company’s new Series D-1 Convertible Preferred Stock (the “Series D-1 Preferred Stock”). The undersigned understands that the only differences between the Series D Preferred Stock and the Series D-1 Preferred Stock are:
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| (a) | The liquidation preference for the Series D-1 Preferred Stock will, instead of the Ten Thousand ($10,000) Dollars per share for the Series D Preferred Stock, be the greater of |
| (i) | Ten ($10) Dollars per share of Series D-1 Preferred Stock, or |
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| (ii) | an amount per share of Series D-1 Preferred Stock calculated by taking the total amount available for distribution to holders of all of the Company’s outstanding Common Stock before deduction of any preference payments for the Series D-1 Preferred Stock, divided by the Total of (x) all of the then outstanding shares of the Company’s Common stock, plus (y) all of the shares of the Company’s Series D-1 Preferred Stock on an as converted basis, and multiplied by 4,000. |
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| (b) | The Conversion Price for the Series D-1 Preferred Stock shall be $0.0025 per share of Series D-1 Preferred Stock instead of Two Dollars and Fifty Cents ($2.50) per share Series D Preferred Stock. |
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| (c) | The number of shares of Series D-1 Preferred Stock that the Company will be authorized to issue shall be Fifty Thousand (50,000) shares instead of Ten Thousand (10,000) shares of Series D Preferred Stock that the Company is authorized to issue. |
| 2. | The undersigned each represent that: |
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| (a) | it is an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act) and |
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| (b) | the undersigned is acquiring such shares of Series D-1 Preferred Stock for investment and not with a view to distribution thereof. |
| Yours very truly, |
| North Sound Legacy Institutional Fund, LLC | |
| By: North Sound Capital, LLC |
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By: /s/ Tom McAuleyPrint name: Tom McAuley
| Title: 1/30/06 |
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| Number of Shares: 1,739.55105 | |
North Sound Legacy International, Ltd.
| By: North Sound Capital, LLC |
By: /s/ Tom McAuley
| Print name: Tom McAuley |
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| Title: Chief Investment Officer |
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| Date: 1/30/06 |
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| Number of Shares: 3,260.55165 | |||
The foregoing is agreed to and accepted.
| Ortec International, Inc. |
By: /s/ Ron LipsteinPrint name: Ron Lipstein
| Title: Chief Executive Officer | |
| Date: 1/30/06 |
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