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Ortec International Inc. (ORTN.OB) And Paul Capital Healthcare To Restructure Existing Financing Agreement


11/30/2006 10:53:07 AM

NEW YORK, Nov. 29 /PRNewswire-FirstCall/ -- Ortec International, Inc. , a company focused on advancing regenerative medicine through the development of cellular technology and advanced biomaterial products, announced today that it has signed a term sheet to amend the terms and conditions of its 2001 agreement with an affiliate of Paul Capital Healthcare (formerly Paul Royalty Fund). Under the new agreement which is expected to be signed in the coming weeks, Paul Capital Healthcare (PCH) will exchange all of its interest in future OrCel(R) related revenue for Ortec Convertible Preferred stock.

The terms, detailed in an 8K filed with the Securities and Exchange Commission, will provide for PCH to convert all of its interest in future OrCel(R) related revenue into Preferred Convertible stock with a face value of $10 million (the original amount invested by PCH) upon Ortec securing cumulative cash funding of at least $8 million and meeting certain other conditions. This Convertible Preferred stock will be the same stock Ortec expects to issue to investors involved in the $8 million capital financing with certain additional liquidation preferences.

Commenting on the agreement with Paul Capital Healthcare, Ron Lipstein, Ortec's Vice Chairman and CEO, stated, "We have created a pathway to convert PCH's $36 million debt into an equity position. This agreement will dramatically improve our shareholder equity and should enable us to attract new capital as well as open market purchasers. We believe that executing this agreement with PCH, filing of our PMA application in 2007, and subsequently obtaining FDA approval should allow Ortec's stock to reach a more realistic market value reflective of the large markets we are pursuing and Ortec's advanced technology portfolio."

About Ortec International, Inc.

Ortec International, Inc. (OTCI) is a company focused on advancing regenerative medicine and stem cell therapy through the development and commercialization of innovative products by combining advanced cell technology and advanced biomaterials. Ortec's lead product is OrCel(R) (Bilayered Cellular Matrix). Ortec's current focus is the application of OrCel(R) to heal chronic and acute wounds. OrCel(R) is composed of a collagen sponge seeded with allogeneic epidermal and dermal cells. These cells secrete growth factors and cytokines normally found in acute human wounds and are believed to have a beneficial role in promoting tissue repair.

A pivotal clinical trial evaluating a cryopreserved version of OrCel(R) in the treatment of venous leg ulcers has been completed and a Pre Market Approval (PMA) application has been filed. Ortec has completed a confirmatory trial requested by the FDA, and the data from this trial are expected to be integrated with the results of the pivotal clinical trial and submitted as a clinical supplement to its PMA filing. Ortec has already obtained FDA approvals for use of a non-frozen version of OrCel(R) in the treatment of Epidermolysis Bullosa and donor sites in burn patients. In addition, the FDA has granted Ortec approval to initiate a pivotal (Phase III) trial evaluating OrCel(R) for the treatment of diabetic foot ulcers.

Ortec recently acquired two fibrin derived advanced biomaterial technologies, Fibrin MB and Haptides(TM). Fibrin MB has the potential to play a significant role in advancing stem cell therapy having demonstrated the ability to efficiently recover adult stem cells and allow for their growth, differentiation, and potential reimplantation into the patient. Haptides(TM) utilize proprietary synthetic peptides that mimic the mechanism of cell attachment to fibrin. These peptides have demonstrated the ability to significantly enhance cell attraction and attachment providing the potential to use Haptides(TM) in the development of product opportunities applicable to the cosmetic tissue augmentation, wound healing, orthopedics, and drug delivery markets.

About Paul Capital Partners and Paul Capital Healthcare

Paul Capital Partners manages nearly $5 billion in equity capital commitments for its three investment platforms that include Healthcare Direct Investments (including royalty and revenue interests), Private Equity Secondaries and Top Tier Fund-of-Funds. The firm has offices in New York, San Francisco, Paris, London and Toronto. Paul Capital Healthcare is one of the largest dedicated healthcare funds globally, with $1.4 billion in equity capital commitments and debt facilities under management. Paul Capital Healthcare has made investments in the pharmaceutical, biotechnology, and medical device sectors valued at more than $850 million. These investments are focused on commercial stage companies and products, and consist of investments in the form of royalties, revenue interests, debt and equity. For more information, visit www.paulcapital.com.

This news release may contain "forward-looking statements" for the purposes of the United States Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3B-6 under The Exchange Act. Without limitation, statements regarding expected FDA approvals, clinical trial results, product performance, expectations with respect to sales, gross margins, research and development expenditures, earnings per share, capital expenditures, collaborations, or other expansion opportunities would be "forward-looking statements." These statements may be identified by words such as "expects," "anticipates," "intends," "estimates," "believes" or similar expressions in connection with any discussion of future financial and operating performance. The forward- looking statements contained herein involve risks and uncertainties that may cause results to differ materially from the Company's expectations including but not limited to, global economic trends, competitive pricing or product developments, government legislation and/or regulations, technology, manufacturing, legal and patent issues, suppliers, capital availability, personnel changes, cancellation or delays in renewal of contracts, and lack of suitable raw materials or packaging materials. Investors are cautioned to review risk factors in the Company's filings with the United States Securities and Exchange Commission.

Ortec International, Inc.

CONTACT: Ron Lipstein, Vice Chairman, CEO of Ortec International, Inc.,+1-212-740-6999, rlipstein@ortecinternational.com


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