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Exhibit 10.1

_________________________________________________________

DIP LOAN AND SECURITY AGREEMENT

Among

REGEN BIOLOGICS, INC. and RBIO, INC.,
as Borrowers

and

SPORTS MEDICINE HOLDING COMPANY LLC,
as Lender

Dated as of April 21, 2011

US$ 1.4 million

_______________________________________________________

 
 

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TABLE OF CONTENTS

  Page     ARTICLE I     DEFINITIONS
1
 
Section 1.1
Defined Terms
1
 
Section 1.2
Collateral Definitions
4
 
Section 1.3
Plural Usage
5
ARTICLE II    AMOUNT AND TERMS OF LOAN
5
 
Section 2.1
Loan Commitment
5
 
Section 2.2
Initial Budget Report and Interim Budget Reports
6
 
Section 2.3
Disbursement of Funds
6
 
Section 2.4
Repayment of Loan; Evidence of Debt
6
 
Section 2.5
Interest
6
 
Section 2.6
Funding Losses
7
 
Section 2.7
Taxes
7
ARTICLE III   PAYMENTS
8
 
Section 3.1
Mandatory Prepayments
8
 
Section 3.2
Voluntary Prepayments
8
 
Section 3.3
Method and Place of Payment
8
 
Section 3.4
Waiver of Demand, etc
9
ARTICLE IV    CONDITIONS PRECEDENT
9
 
Section 4.1
Conditions Precedent to Effectiveness
9
 
Section 4.2
Further Conditions Precedent
10
 
Section 4.3
Further Conditions Precedent to Second Borrowing
10
ARTICLE V     REPRESENTATIONS AND WARRANTIES
11
 
Section 5.1
Organization
11
 
Section 5.2
Corporate Power and Authority
11
 
Section 5.3
Due Execution
11
 
Section 5.4
Consent
11
 
Section 5.5
Enforceability
11
 
Section 5.6
No Defaults
11
 
Section 5.7
Priority
12
 
Section 5.8
No Tax Lien
12
 
Section 5.9
Priority of Security Interest
12

 
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TABLE OF CONTENTS
(continued)

      Page          
Section 5.10
Title to Property
12
 
Section 5.11
Intellectual Property
12
ARTICLE VI   AFFIRMATIVE COVENANTS
12
 
Section 6.1
Continuation of Business
12
 
Section 6.2
Books, Records and Financial Information
13
 
Section 6.3
Use of Proceeds
13
 
Section 6.4
Obligation Cannot Be Modified
13
 
Section 6.5
Notification of Default
13
ARTICLE VII  NEGATIVE COVENANTS
13
 
Section 7.1
Fundamental Changes
13
 
Section 7.2
Asset Dispositions
13
 
Section 7.3
Liens
13
ARTICLE VIII EVENTS OF DEFAULT
14
 
Section 8.1
Events of Default
14
ARTICLE IX  GRANT OF SECURITY INTEREST
15
 
Section 9.1
Grant of Security Interest
15
 
Section 9.2
Remedies; Obtaining the Collateral Upon Default
16
 
Section 9.3
Remedies; Disposition of the Collateral
18
 
Section 9.4
Waiver of Claims
18
 
Section 9.5
Application of Proceeds
19
 
Section 9.6
Duty of Care
19
 
Section 9.7
License
19
 
Section 9.8
Further Acts
19
 
Section 9.9
Representations Regarding Collateral
20
 
Section 9.10
Changes
20
 
Section 9.11
Storage and Use
20
 
Section 9.12
Inspections and Reports
20
 
Section 9.13
Inventory
20
 
Section 9.14
Equipment
20
 
Section 9.15
Right to Cure
20
 
Section 9.16
Filings
21

 
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TABLE OF CONTENTS
(continued)

      Page          
Section 9.17
Borrower Remains Liable
21
 
Section 9.18
Power of Attorney
21
ARTICLE X    MISCELLANEOUS
22
 
Section 10.1
Payment of Expenses, Indemnification
22
 
Section 10.2
Notices
22
 
Section 10.3
Successors and Assigns
23
 
Section 10.4
Governing Law
24
 
Section 10.5
Submission to Jurisdiction
24
 
Section 10.6
Waiver of Jury Trial
24
 
Section 10.7
Severability
24
 
Section 10.8
Amendment or Waiver
25
 
Section 10.9
Remedies Cumulative
25
 
Section 10.10
Entire Agreement
25
 
Section 10.11
Survival
25
 
Section 10.12
Counterparts
25
 
Section 10.13
Headings Descriptive
25

 
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DIP LOAN AND SECURITY AGREEMENT, dated as of April 21, 2011 by and among REGEN
BIOLOGICS, INC., a Delaware corporation (“ReGen”), and RBIO, Inc., a Delaware
corporation (“RBIO”, and, together with ReGen, the “Borrower”), each a debtor
and debtor-in-possession in the Chapter 11 case described below, as borrower,
and SPORTS MEDICINE HOLDING COMPANY, LLC, a Delaware limited liability company
(the “Lender”), as lender.

WHEREAS, the Borrower is a debtor and debtor-in-possession in the Case (as
defined below);

WHEREAS, in support of the operating needs of the Borrower's business, the
Borrower has requested to borrow, and the Lender is willing to lend, Loans in
the aggregate principal amount of up to $1.4 million on the terms and conditions
of this Agreement.

WHEREAS, the willingness of the Lender to make the aforesaid Loans available to
the Borrower is conditioned on the Borrower’s agreement to pledge its assets as
security for all present and future obligations of the Borrower under this
Agreement, and the Borrower is willing to do so on the terms and conditions of
this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
 
ARTICLE I
DEFINITIONS

Section 1.1           Defined Terms. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires:

“Agreement” shall mean this DIP Loan and Security Agreement as the same may
hereafter be amended, restated, supplemented or otherwise modified from time to
time in accordance with its terms.

“Asset Sale” means a sale, assignment, conveyance, transfer or other disposition
to, or any exchange of property with, any Person, of any of the Borrower’s
businesses, assets or properties of any kind, whether real, personal, or mixed
and whether tangible or intangible, whether now owned or hereafter acquired in
each case pursuant to Section 363 of the Bankruptcy Code or a Reorganization
Plan, which Asset Sale was approved pursuant to an order of the Bankruptcy Court
in form and substance satisfactory to the Lender other than  inventory (or other
assets) sold or leased in the ordinary course of the Borrower’s business.

“Bankruptcy Code” shall mean Title 11 of the United States Bankruptcy Code, as
heretofore and hereafter amended, and codified as 11 U.S.C. Sec.Sec. 101 et seq.

“Bankruptcy Court” shall mean the United States Bankruptcy Court for the
District of Delaware or any other court having jurisdiction over the Case from
time to time.

“Borrower” shall have the meaning provided in the heading of this Agreement.

 
 

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“Business Day” shall mean a day, other than a Saturday or Sunday, on which banks
in New York City are not authorized or required to close.

“Case” shall mean the case pending under Chapter 11 of the Bankruptcy Code in
the Bankruptcy Court for the Borrower.

“Commitment” shall mean up to $1.4 million.

“Commitment Termination Date” shall mean June 15, 2011.

“Default” shall mean an Event of Default or any other event that, with the
giving of notice or the lapse of time or both, would become an Event of Default.

“Dollars” “United States Dollars” and “$” mean lawful money of the United States
of America.

“Event of Default” is defined in Section 8.10.

“Final Order” has the meaning assigned to that term in Section 4.3(b).

“Governmental Authority” shall mean any nation or government, or any state or
other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of government.

“Indebtedness” of any Person at any date, shall mean, without duplication, (a)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (b) any other indebtedness of such Person which
is evidenced by a note, bond, debenture or similar instrument, (c) all
liabilities of such Person in respect of capital leases, (d) all obligations of
such Person in respect of letters of credit and acceptances (or instruments
serving a similar function) issued or created for the account of such Person,
(e) all liabilities secured by any Lien on any property owned by such Person
whether or not such Person has assumed or otherwise become liable for the
payment thereof, (f) all accounts receivable sold or assigned by that Person
with full or partial recourse, and (g) any Guarantee of such Person with respect
to liabilities of a type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under generally accepted accounting principles.

“Indemnified Liabilities” has the meaning assigned to that term in Section 10.1.

“Initial Budget Report” is defined in Section 2.2(a).

“Interim Budget Report” is defined in Section 2.2(a).

“Lender” shall have the meaning provided in the heading of this Agreement.

 
 

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“Lien” shall mean, with respect to any Person, any mortgage, pledge,
encumbrance, lien (statutory or other), charge, security interest, attachment,
set-off, or any interest or title of any vendor, lessor, lender or other secured
party to or of such Person under any conditional sale or other title retention
agreement or capital lease, or any arrangement to provide priority or preference
to a third party and, in the case of securities, a third party's right to
purchase with respect to or upon any property or asset of such Person.

“Loan” shall mean each of the loans made to the Borrower under Section 2.1.

“Loan Documents” shall mean this Agreement, the Note and each other agreement or
document entered into or relating to this Agreement.

“Material Adverse Effect” shall mean (i) a material adverse effect on the
business, condition (financial or otherwise), operations, assets, performance or
properties of the Borrower that, in the reasonable judgment of the Lender, could
adversely affect the Borrower's ability to perform its payment or other
obligations hereunder, or (ii) a material adverse effect on the validity or
enforceability of this Agreement or any other Loan Document, or (iii) a material
adverse effect on the rights and remedies of the Lender under this Agreement or
any other Loan Document.

“Maturity Date” shall mean the earlier of (i) June 30, 2011, or (ii) the day
that an Asset Sale closes.

“Net Asset Sale Proceeds” means, with respect to any Asset Sale, an amount equal
to: (i) cash payments (including any cash received by way of deferred payment)
or any proceeds received by the Borrower from such Asset Sale, minus (ii) any
bona fide direct costs incurred in connection with such Asset Sale, that have
been approved by the Bankruptcy Court.

“Net Insurance/Condemnation Proceeds” means an amount equal to: (i) cash
payments or any proceeds received by the Borrower or its agent (a) under any
casualty insurance policy in respect of a covered loss thereunder or (b) as a
result of the taking of any assets of the Borrower by any Person pursuant to the
power of eminent domain, condemnation or otherwise, or pursuant to a sale of any
such assets to a purchaser with such power under threat of such a taking, minus
(ii) (a) any actual and reasonable costs incurred in connection with the repair
or replacement of damaged property or the adjustment or settlement of any claims
in respect thereof, and (b) any bona fide direct costs incurred in connection
with any sale of such assets as referred to in clause (i)(b) of this definition,
including income taxes payable as a result of any gain recognized in connection
therewith.

“Note” is defined in Section 2.4(b).

“Obligations” shall mean all present and future obligations of the Borrower
under this Agreement, the Note and the other Loan Documents, whether for
principal, interest, fees, indemnities, costs, expenses or any other amount, and
in any event shall include all interest and other amounts that would accrue but
for the commencement of bankruptcy proceedings.

 
 

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

“Requirement of Law” shall mean, as to any Person, any law, treaty, rule, order
or regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

“Reorganization Plan” shall mean a plan of reorganization in the Case.

“Senior Note” means that certain Note or Notes of the Borrower issued pursuant
to the Subscription and Security Agreement dated as of March 11, 2011, as
amended April 7, 2011, to Sports Medicine Holding Company, LLC or its assigns.

“Superpriority Claim” shall mean a claim against the Borrower in the Case which,
pursuant to Section 364(c)(1) of the Bankruptcy Code, is an administrative
expense claim having priority over any or all administrative expenses of the
kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the State of New York.

Section 1.2          Collateral Definitions. The terms “Accounts”, “Chattel
Paper”, “Commercial Tort Claims”, “Contracts”, “Deposit Accounts”, “Documents”,
“Equipment”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”,
“Investment Property”, “Letter-of-Credit Rights”, “Proceeds”, “Securities
Accounts” and “Supporting Obligations” shall have the meanings assigned to those
terms in the UCC.  In addition:
 
“Copyright Licenses” shall mean written agreements, now or hereafter in effect,
granting any right under a Copyright and all rights under any such agreement.

“Copyrights” shall mean (i) copyrights arising under the laws of the United
States, any other country or political subdivision thereof, whether registered
or unregistered and whether published or unpublished, all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, (ii) the right to obtain all renewals thereof and (iii)
all goodwill associated therewith.

“Domain Names” shall mean Internet domain names and associated URL addresses.

“Intellectual Property” shall mean intellectual and similar property of every
kind and nature, including, without limitation, inventions, designs, Patents,
Copyrights, rights under any Licenses, Trademarks (including Domain Names),
Trade Secrets, Trade Secret Rights, confidential or proprietary technical and
business information, know-how, show-how and other confidential or proprietary
data or information, Software and databases and all goodwill associated with any
of the foregoing.

 
 

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“License” shall mean any Patent License, Trademark License, Copyright License or
other license or sublicense of Intellectual Property.

“Patent License” shall mean a written agreement, now or hereafter in effect,
granting any right to make, use or sell any invention under a Patent and all
rights under any such agreement.

“Patents” shall mean (a) letters of patent of the United States, any other
country or political subdivision thereof, all reissues and extensions thereof
and all goodwill associated therewith, (b) all applications for letters patent
of the United States or any other country and all divisions, continuations and
continuations-in-part thereof, (c) all rights to obtain any reissues or
extensions of the foregoing, and (d) all goodwill associated with any of the
foregoing.

“Permits” shall mean, to the extent permitted to be assigned by the terms
thereof or by applicable law, all licenses, permits, rights, orders, variances,
franchises or authorizations of or from any governmental authority or agency.

“Real Property” shall mean all now owned and hereafter acquired real property of
the Borrower, including leasehold interests, together with all buildings,
structures, and other improvements located thereon and all licenses, easements
and appurtenances relating thereto, wherever located.

“Software” shall mean “software” as such term is defined in Section 9-102(a)(75)
of the UCC.

“Trademark License” shall mean a written agreement, now or hereafter in effect,
granting to any third party any right to use any Trademark and all rights of
that third party under any such agreement.

“Trademarks” shall mean: (a) trademarks, service marks, trade names, corporate
names, company names, business names, fictitious business names. Domain Names,
trade styles, trade dress, logos, other source or business identifiers, designs
and general intangibles of like nature, all registrations and recordings
thereof, and all registration and recording applications filed in connection
therewith, including registrations and registration applications in the United
States Patent and Trademark Office, any State of the United States or any
similar offices in any other country or any political subdivision thereof, and
all extensions or renewals thereof, and (b) all goodwill associated therewith or
symbolized thereby.

“Trade Secret Rights” shall mean the rights of the Borrower in a Trade Secret.

“Trade Secrets” shall mean secretly held existing engineering information or
other data, information, production procedures and other know-how relating to
the design, manufacture, assembly, installation, use, operation, marketing, sale
and/or servicing of a product or business whether written or not.

Section 1.3           Plural Usage. Defined terms in this Agreement shall
include in the singular number the plural and in the plural number the singular.

 
 

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ARTICLE II
AMOUNT AND TERMS OF LOAN.

Section 2.1           Loan Commitment. Subject to and upon the terms and
conditions and in reliance upon the representations and warranties of the
Borrower herein set forth, the Lender agrees, during the period from the date of
this Agreement to and including the Commitment Termination Date, to make certain
Loans to the Borrower, which Loans from the Lender shall be in an aggregate
principal amount up to but not exceeding the Commitment, as more fully provided
in Section 2.2.

Section 2.2           Initial Budget Report and Interim Budget Reports

(a)         So long as the Note is outstanding, the Borrower shall provide the
Lender with (i) an initial 30 day operating budget provided at the date of this
Agreement (the “Initial Budget Report”) and (ii) twice-monthly operating budgets
of the Borrower (each, an “Interim Budget Report”) for subsequent periods not
less than one week before such period begins.  The Initial Budget Report has
been approved by the Lender.  Each Interim Budget Report shall be subject to the
Lender’s approval, and may be amended once by the Borrower within one (1)
business day following rejection by the Lender.  In the event that the Lender
does not approve an Interim Budget Report, the Lender shall have no obligation
to provide another Loan unless and until the Borrower submits an Interim Budget
Report that is approved by the Lender.  The Initial Budget Report is attached
hereto as Schedule 2.2.

(b)         The Lender shall make loans based on the Initial Budget Report
commencing no later than May 16, 2011 and twice-monthly thereafter through the
period covered by the Initial Budget Report.  Within two (2) business days of
the Lender’s receipt of an Interim Budget Report, the Lender (unless it rejects
such Interim Budget Report) shall make such Loan, in an amount equal to the
lesser of (i) the remaining portion of its unfunded Commitment or (ii) an amount
equal to the amount requested by the Issuer in such Interim Budget Report.  All
payments by the Lender shall be paid in cash, by wire transfer of immediately
available funds, or in some other form deemed acceptable by the Issuer, to an
account designated in a written notice delivered by the Issuer to the Lender not
later than two (2) business days prior to the Closing.

(c)         The Borrower covenants that all proceeds resulting from the Loans
shall be used solely to fund the activities identified in the corresponding
Initial Budget Report or Interim Budget Report and not for any other purpose
without the consent of the Lender.

Section 2.3           Disbursement of Funds. On the date specified for borrowing
in the Initial Budget Report or the applicable Interim Budget Report, the Lender
will, subject to the terms and conditions of this Agreement, make its Loan
available to the Borrower.

Section 2.4           Repayment of Loan; Evidence of Debt.

(a)         Each of ReGen and RBIO, jointly and not severally, hereby
unconditionally promises to pay to the Lender the then unpaid principal amount
of the Loans. All payments and prepayments under this Agreement and the Note,
whether of principal, interest or other amounts, shall be made in accordance
with Section 3.3.

 
 

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(b)         The Borrower's obligation to pay the principal of and interest on
the Loans shall be evidenced by a promissory note (a “Note”), duly executed and
delivered by the Borrower substantially in the form of Exhibit A hereto, with
blanks appropriately completed in conformity herewith.  The Note shall (i) be
payable to the order of the Lender, and shall be dated the date of the borrowing
of the related Loans from time to time, (ii) be in a stated principal amount
equal to the Loans evidenced thereby, (iii) mature on the Maturity Date, (iv) be
subject to mandatory prepayment as provided herein, (v) bear interest as
provided in Section 2.5 and (vi) be entitled to all of the benefits of this
Agreement.

(c)         The Lender shall mark the Note on its internal records the amount of
each Loan and each payment with respect thereto; provided that the failure to
make, or any error in making, a notation with respect to a Loan shall not limit
or otherwise affect the obligation of the Borrower hereunder or under the Note.
Such notations shall constitute conclusive evidence (absent manifest error) of
the accuracy of the information contained therein.

Section 2.5           Interest.

(a)         The Borrower agrees to pay interest on each Loan and Note, from the
period from the date on which such Loan or Note is made to and including the
date on which it is repaid in full, at a rate per annum equal to 12%.

(b)         Accrued interest shall be payable on the Maturity Date, and also on
any date on which any principal of the Loans or Note is repaid, and on the date
on which any Loan or Note shall be paid in full.

(c)         Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed in the period for which such interest is payable.
Each determination of an interest rate or fee by the lender will be conclusive
evidence of such rate or fee and shall be binding on the Borrower, absent
manifest error.

(d)         Notwithstanding the foregoing, any principal, interest, or other
amount owing hereunder or under the Note which is unpaid when due (whether by
acceleration or otherwise) shall bear interest, which shall be payable on demand
from time to time by the Lender to which such amount is owed, from the date of
default to the actual date of payment (before as well as after judgment), at a
rate per annum equal to 18%.

(e)         Anything in this Agreement or the Note to the contrary
notwithstanding, the rate of interest payable under this Agreement and the Note
shall not exceed the maximum rate permitted by applicable law. If the making of
any payment by the Borrower would result in a payment being made that is in
excess of such rate, the applicable Lender will apply that excess to the
reduction of principal, or will determine the payment or payments that are to be
reduced or refunded, as the case may be, so that such result does not occur.

Section 2.6           Funding Losses. If the Borrower shall make any payment in
respect of a Loan or Note on a day other than a scheduled payment date (whether
by reason of the occurrence of an Event of Default or otherwise), or if any
borrowing of Loans shall fail to take place on the date scheduled therefor, the
Borrower shall indemnify and hold the Lender harmless for all funding, breakage
and other reasonable losses, costs and expenses incurred or to be incurred by
that Lender as a result of such payment or prepayment, as calculated in writing
by the Lender, such calculations to be conclusive and binding absent manifest
error, and subject in all respects to reasonableness; provided, however, that
the Lender shall not be entitled to claim loss of expected interest resulting
from any prepayment.

 
 

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Section 2.7           Taxes.

(a)         All amounts payable under or in respect of this Agreement or the
Note shall be paid free and clear of any set-off, counterclaim or other
deduction or withholding of any nature and free and clear of all taxes, duties
and imposts (including withholding or retention taxes) which may be levied by
any jurisdiction.

(b)         Should any deduction or withholding under Section 2.7(a) be required
by applicable law, the Borrower shall increase the amount thereof to the extent
necessary to permit the Lender to receive the same amount, after such deduction
or withholding (including deductions or withholding applicable to additional
sums payable under this Section 2.7(b)) as the Lender would have received had no
such deduction or withholding been made. For avoidance of doubt, additional
amounts payable under this Section 2.7(b) shall not include any taxes imposed on
the Lender's overall net income or profits by the jurisdiction in which the
Lender is organized or in which the Lender's principal office or applicable
lending office is located.

(c)         The Borrower shall promptly deliver to the Lender original tax
receipts and such other evidence as the Lender may reasonably request to
demonstrate that all amounts deducted or withheld have been paid to the
appropriate taxation authority.

(d)         If the Lender is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement, it shall deliver
to the Borrower at the time prescribed by applicable law, any properly completed
and executed documentation prescribed by applicable law or reasonably requested
by the Borrower as will permit such payments to be made without withholding or
at a reduced rate. The Borrower shall not be required to pay any additional
amounts to the Lender in respect of United States federal withholding tax
pursuant to subsection (b) above if the obligation to pay such additional
amounts would not have arisen but for a failure by the Lender to comply with the
provisions of this subsection (d). For avoidance of doubt, the Lender shall not
be obliged to disclose to the Borrower or any other Person any information
regarding its tax affairs or tax computations, and nothing in this Agreement or
any other Loan Document shall interfere with the Lender's right to arrange or
manage its tax affairs in whatever manner it believes is appropriate.

(e)         Without limiting the survival of any other provisions of this
Agreement or the Note, the agreements of the Borrower in this Section 2.7 shall
survive the repayment in full of the Loans and the cancellation of the Note.

ARTICLE III
PAYMENTS.

Section 3.1           Mandatory Prepayments.

 
 

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(a)         Asset Sales. No later than the first Business Day following the date
of receipt by the Borrower of any Net Asset Sale Proceeds, the Borrower shall
prepay the Loans in an aggregate amount equal to the lesser of (i) such Net
Asset Sale Proceeds or (ii) the aggregate amount of principal and interest
outstanding under the Loans.

(b)         Insurance/Condemnation Proceeds. No later than the first Business
Day following the date of receipt by the Borrower or its agents of any Net
Insurance/Condemnation Proceeds, the Borrower shall prepay the Loans in an
aggregate amount equal to lesser of (i) such Net Insurance/Condemnation Proceeds
or (ii) the aggregate amount of principal and interest outstanding under the
Loans.

Section 3.2          Voluntary Prepayments. The Borrower may prepay the Loans,
in whole or in part, without premium or penalty but subject to Section 2.6,
without simultaneous notice to the Lender.

Section 3.3           Method and Place of Payment.

(a)         All payments under this Agreement and the Note shall be made without
defense, set-off, recoupment or counterclaim of any kind, to the respective
Lender not later than Noon (New York City time) on the date when due. All
payments of principal of and interest on the Loans and the Note and all other
amounts payable hereunder and thereunder shall be made in United States Dollars
and in immediately available and freely transferable funds, by wire transfer to
such account at such financial institution as the Lender may from time to time
notify the Borrower.

(b)         Except as otherwise specifically provided herein, any payments under
this Agreement or the Note to be made by the Borrower which are made later than
Noon (New York City time) shall for all purposes hereof (including the following
sentence) be deemed to have been made on the next succeeding Business Day.

(c)         Any payment required to be made hereunder or under the Note on a day
that is not a Business Day shall instead be made on the next succeeding Business
Day and interest shall accrue for the period of such extension.

Section 3.4          Waiver of Demand, etc. Each of ReGen and RBIO hereby waives
presentment, demand, protest, notice of dishonor, and any other notice of any
kind with respect to this Agreement and each Note.

ARTICLE IV
CONDITIONS PRECEDENT.

Section 4.1           Conditions Precedent to Effectiveness. The Commitment of
the Lender and the borrowing of the Loans under this Agreement are subject to
the satisfaction of the following conditions precedent:

(a)          Agreement. This Agreement shall have been executed and delivered by
the Borrower and the Lender.

 
 

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(b)         Authority. The Borrower shall have delivered to the Lender in form
and substance satisfactory to the Lender, each of the following documents (each
of which shall be dated on or about the date of the Loan), with an original copy
for the Lender:

(i)           A copy of the by-laws of the Company, certified by an authorized
officer of the Company as being true, correct, complete and up-to-date.

(ii)          A copy of the resolutions of the board of directors the Company
authorizing the execution, delivery and performance of this Agreement and the
other Loan Documents, the granting of security hereunder and the consummation of
all of the transactions contemplated hereby. Such resolutions shall be certified
by an authorized officer of the Borrower as being true, correct, complete and
up-to-date.

(iii)          A certificate of the certified by an authorized officer of the
Company as to the incumbency in office and true signature of each officer of the
Borrower who signs or will sign this Agreement and each of the other Loan
Documents.

(iv)          Such other certificates, opinions and other documents as the
Lender may reasonably request.

Section 4.2           Further Conditions Precedent. The obligation of the Lender
to make the Loans on the occasion of each borrowing is subject to the
satisfaction of the following additional conditions precedent:

(a)         Representations and Warranties True, No Default.

(i)            all representations and warranties contained in Article V are
true and correct on and as of the date of such Loan, with the same effect as
though made on and as of the date of such Loan; and

(ii)           no event has occurred and is continuing or condition exists, or
would result from such Loan or the application of the proceeds thereof, which
constitutes an Event of Default or a Default.

(b)           Note. The Lender shall have received a Note evidencing the Loan,
duly completed, executed and delivered by the Borrower as provided in Section
2.4(b) of this Agreement.

Section 4.3           Further Conditions Precedent to Second Borrowing. The
obligation of the Lender to make the Loans on the occasion of the second
borrowing is subject to the satisfaction of the following additional conditions
precedent:

(a)         Bidding Procedures. The entry by the Bankruptcy Court of an order on
or before May 3, 2011, approving bidding and sale procedures in connection with
the Asset Sale, which order shall (i) include, among other things, that the
Bankruptcy Court shall schedule a hearing to be held on or before May 31, 2011,
to consider entry of an order approving the Asset Sale and (ii) be in form and
substance satisfactory to the Lender in its sole discretion.

 
 

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(b)         Final Order. The Lender shall have received satisfactory evidence of
the entry of an order of the Bankruptcy Court approving, on a final basis, this
Agreement, the Note and the other Loan Documents and granting the Superpriority
Claim status and senior Liens described in Section 5.9 (the “Final Order'),
which Final Order (i) shall authorize extensions of credit in the amount of the
Commitment, (ii) shall be in form and substance satisfactory to the Lender in
its sole discretion, (iii) shall have authorized the use by the Borrower of any
cash collateral consistent with the provisions of this Agreement and on terms
and conditions satisfactory to the Lender and (iv) shall not have been vacated,
stayed, reversed, modified or amended in any respect.

ARTICLE V
REPRESENTATIONS AND WARRANTIES.

In order to induce the Lender to enter into this Agreement and to make available
the term loan facility contemplated hereby, each of ReGen and RBio jointly and
not severally makes the following representations, warranties and agreements,
each of which shall survive the execution and delivery of this Agreement and the
Note and the making of the Loans:

Section 5.1          Organization. The Borrower (i) is a corporation, duly
organized and validly existing under the laws of the State of Delaware, (ii) has
the corporate power and authority, and the legal right, to own and operate its
property and to conduct the business in which it is currently engaged, (iii) is
duly qualified under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except where the failure to be so duly qualified could not
reasonably be expected to have a Material Adverse Effect, and (iv) is in
compliance with all Requirements of Law (including, without limitation, all
environmental laws), except (other than in the case of laws relating to
corruption, money laundering, terrorism and bribery) any non-compliance which
could not reasonably be expected to have a Material Adverse Effect. The Borrower
and the Lender acknowledge that the Borrower is not in good standing in the
State of Delaware.

Section 5.2          Corporate Power and Authority. The Borrower has the
corporate power and authority, and the legal right and authority, to make,
deliver and perform this Agreement and each of the other Loan Documents, to
borrow and grant security hereunder and to consummate all of the other
transactions contemplated hereby and thereby.

Section 5.3          Due Execution. The Borrower has taken all necessary
corporate and legal and regulatory actions to authorize (i) the borrowing of the
Loans on the terms and conditions of this Agreement and the other Loan
Documents, (ii) the execution, delivery and performance of this Agreement and
the other Loan Documents, and (iii) the granting of security and consummation of
all of the other transactions contemplated hereby and thereby.

Section 5.4          Consent. Except for the Final Order, no consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement
or the other Loan Documents, the borrowing of the Loans hereunder, the granting
of security hereunder or the consummation of any of the other transactions
contemplated hereby or thereby.

 
 

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Section 5.5          Enforceability. This Agreement has been duly executed and
delivered on behalf of the Borrower and constitutes, and each other Loan
Document, when signed by a duly authorized signatory of the Borrower, will
constitute, the legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its respective terms.

Section 5.6           No Defaults. The execution, delivery and performance of
this Agreement and the other Loan Documents, the borrowing of the Loans
hereunder, the use of the proceeds thereof and the consummation of each of the
other transactions contemplated hereby and thereby will not violate any of the
Borrower's organizational or governing documents or any Requirement of Law or
any agreement, instrument or other undertaking to which the Borrower is a party
or by which either of them is bound and will not result in, or require, the
creation or imposition of any Lien on any of its properties or revenues pursuant
to any such Requirement of Law or agreement, instrument or undertaking.

Section 5.7           Priority. The Loans and the Note rank senior in priority
to all other Indebtedness and obligations of the Borrower.

Section 5.8           No Tax Lien. No tax Lien has been filed against assets of
the Borrower, and, to the knowledge of the Borrower, no written claim is being
asserted, with respect to any such tax, fee or other charge. However, Borrower
is overdue in the filing of certain tax returns or in the payment of
certain  amounts in respect of taxes.

 
Section 5.9           Priority of Security Interest. This Agreement, subject to
the entry and provisions of the Final Order, creates a valid, perfected security
interest in substantially all of the property of the Borrower pursuant to
Sections 364(d)(1), 364(c)(2) and 364(c)(3). In addition, subject to the entry
and provisions of the Final Order, the DIP Lender shall be granted Superpriority
Claim status pursuant to Section 364(c)(1) of the Bankruptcy Code.

Section 5.10         Title to Property. Other than with respect to certain
Intellectual Property assigned to Off Madison Avenue, Inc. (which assignment the
Borrowers dispute) as disclosed to the Lender, the Borrower has (i) good,
sufficient and legal title to (in the case of fee interests in real property),
(ii) valid leasehold interests in (in the case of leasehold interests in real or
personal property), and (iii) good title to (in the case of all other personal
property, including, but not limited to, Intellectual Property) all of their
respective properties and assets reflected in their most recent financial
statements, in each case except for assets disposed of since the date of such
financial statements in the ordinary course of business.

Section 5.11         Intellectual Property. The Borrower owns or possesses, or
could obtain ownership or possession of, on terms not materially adverse to it,
all Intellectual Property (other than certain Intellectual Property transferred
to Off Madison Avenue, Inc., which transfers the Borrowers dispute, pursuant to
a court order as disclosed to the Lender) necessary for the present conduct of
its business, without any known conflict with the rights of others, and free
from any burdensome restrictions, except where such conflicts and restrictions
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 
 

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ARTICLE VI
AFFIRMATIVE COVENANTS.

As long as this Agreement is in effect or any Loan or any other Loan Document
remains outstanding, the Borrower shall perform each of the following covenants:

Section 6.1           Continuation of Business. The Borrower will: (i) except in
connection with the Asset Sale, maintain its existence (and will not materially
change the nature of its business, dispose of all or a substantial portion of
its assets or merge or consolidate with another party), (ii) comply with all
applicable Requirements of Law, including all applicable environmental laws and
all anti-corruption, anti-bribery, anti-money laundering and anti-terrorism
laws; and (iii) remain qualified to do business in all applicable jurisdictions.

Section 6.2           Books, Records and Financial Information. The Borrower
will (a) keep proper books and records in which full, true and correct entries
shall be made in all dealings and transactions in relation to its business and
activities, and (b) promptly provide the Lender with such financial statements
and other information relating to the business, properties, operations,
condition (financial or otherwise) or prospects of the Borrower as the Lender
may from time to time request in writing.

Section 6.3           Use of Proceeds. All proceeds of the Loans shall be used
solely for working capital purposes of the Borrower or in a manner which is
otherwise consistent with the Initial Budget Report and Interim Budget Report
(as defined in the Final Order) and Final Order.

Section 6.4            Obligation Cannot Be Modified. The Borrower agrees that
(i) its obligations hereunder shall not be discharged by the entry of an order
confirming a Reorganization Plan (and each of ReGen and RBIO, pursuant to
Section 1141(d)(4) of the Bankruptcy Code, hereby waives any such discharge) and
(ii) the Superpriority Claim granted to the Lender pursuant to the Final Order
and described in Section 5.9 and the Liens granted to the Lender pursuant to the
Final Order shall not be affected in any manner by the entry of an order
confirming a Reorganization Plan.

Section 6.5           Notification of Default. The Borrower will notify the
Lender promptly of any Event of Default of which the Borrower has knowledge,
setting forth the details of such Event of Default.

ARTICLE VII
NEGATIVE COVENANTS.

As long as this Agreement is in effect or any Loan or any other Loan Document
remains outstanding, the Borrower shall perform each of the following covenants:

Section 7.1           Fundamental Changes. The Borrower will not merge or
consolidate with or into any other Person.

Section 7.2           Asset Dispositions. Except in connection with an Asset
Sale, the Borrower will not sell, assign or dispose of any of its assets,
revenues or other properties other than (i) sales of inventory in the ordinary
course of business, and (ii) sales of obsolete or worn out property to the
extent promptly replaced with other property of at least equal usefulness.
Proceeds of any Asset Sale shall be distributed to the Lender in accordance with
the provisions of this Agreement, and Final Order.

 
 

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Section 7.3           Liens. The Borrower will not create, incur or suffer to
exist any Liens on its respective property other than (i) pursuant to this
Agreement, and (ii) other Liens already existing on the date hereof.

ARTICLE VIII
EVENTS OF DEFAULT.

Section 8.1           Events of Default. Upon the occurrence of any of the
following events (each, an “Event of Default”):

(a)         the Borrower shall fail to pay any principal, interest or other
amount when due hereunder or under the Note; or

(b)         any representation or warranty made or deemed made, or information
supplied or deemed supplied, by the Borrower in connection with or related to
this Agreement or any other Loan Document shall turn out to be incorrect or
misleading in any material respect when made or supplied or deemed to have been
made or supplied; or

(c)         the Borrower shall fail to perform or observe any term of this
Agreement or any other Loan Document; or

(d)         the Borrower shall have failed to obtain on or prior to May 13,
2011, entry by the Bankruptcy Court of the Final Order, which shall not have
been vacated, stayed, reversed, modified or amended in any respect such that the
Lender has reasonably determined the same to be adverse to the interests of the
Lender, without the prior written consent of the Lender; or

(e)         the Final Order (after having been entered by the Bankruptcy Court)
(i) shall fail to be in full force and effect or (ii) shall have been stayed,
reversed, modified or amended in any respect such that the Lender has reasonably
determined the same to be adverse to the interests of the Lender, without the
prior written consent of the Lender; or

(f)          there shall have occurred or be continuing any event or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect;

(g)         the Bankruptcy Court shall not have entered an order on or before
May 3, 2011, approving bidding and sale procedures in connection with the Asset
Sale, which order shall (i) include, among other things, that the Bankruptcy
Court shall schedule a hearing to be held on or before May 31, 2011, to consider
entry of an order approving the Asset Sale and (ii) be satisfactory to the
Lender in its sole discretion; or

(h)         the Bankruptcy Court shall not have entered an order on or before
May 31, 2011, approving the Asset Sale, which order shall  be satisfactory to
the Lender in its sole discretion;

 
 

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then the Lender may, by written notice to the Borrower, declare all Loans and
Note, all interest hereon and thereon and all other amounts payable hereunder or
thereunder to be forthwith due and payable, whereupon the same shall become and
be forthwith due and payable, without demand, presentment, diligence, protest or
notice of any kind, all of which the each of ReGen and RBIO hereby expressly
waives.

ARTICLE IX
GRANT OF SECURITY INTEREST.

Section 9.1           Grant of Security Interest. Subject to the entry and
provisions of the Final Order, each of ReGen and RBIO hereby pledges to the
Lender, and hereby grants to the Lender; a security interest in, general lien
and mortgage on and right of set-off against, all right, title and interest of
the Borrower in all of the following property now owned or at any time hereafter
acquired by the Borrower in which the Borrower now has or at any time in the
future may acquire any right, title or interest, in each case whether now
existing or hereafter arising and whether now owned or hereafter acquired
(collectively, the “Collateral”), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations:

(1)                      all Accounts;

(2)                      all Chattel Paper;

(3)                      all Commercial Tort Claims;

(4)                      all computer programs and all Intellectual Property
rights therein and all other proprietary information, including but not limited
to Domain Names and Trade Secret Rights;

(5)                      all Contracts, together with all Contract Rights
arising thereunder;

(6)                      all Deposit Accounts;

(7)                      all Documents;

(8)                      all Equipment;

(9)                      all General Intangibles;

(10)                    all Goods;

(11)                    all Instruments;

(12)                    all Intellectual Property;

(13)                    all Inventory;

(14)                    all Investment Property;

 
 

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(15)                    all Letter-of-Credit Rights;

(16)                    all money;

(17)                    all Permits and Licenses;

(18)                    all promissory notes;

(19)                    all Real Property and fixtures;
 
(20)                    all Securities Accounts, together with all cash or other
sums, securities and other property at any time thereafter on deposit or situate
therein, credited thereto or payable thereon and all instruments, documents and
other writings evidencing such accounts;

(21)                    all software and all software licensing rights, all
writings, plans, specifications and schematics, all engineering drawings,
customer lists, goodwill and licenses, and all recorded data of any kind or
nature, regardless of the medium of recording;

(22)                    all Supporting Obligations;

(23)                    all books and records (including, without limitation,
all customer data, credit files, computer programs, printouts and other computer
materials and records) pertaining to the Collateral;

(24)                    to the extent not included in the foregoing list, all
other personal property;
 
(25)                    all collateral security and guarantees given by any
Person with respect to any of the foregoing; and

(26)                    all accessions to, substitutions for and all
replacements, products and Proceeds of any and all of the foregoing.

Section 9.2           Remedies; Obtaining the Collateral Upon Default.

The Borrower agrees that, during the occurrence and continuance of a Default,
then and in every such case, the Lender, in addition to any rights now or
hereafter existing under applicable law and under the other provisions of this
Agreement, shall have all rights as a secured party under the Uniform Commercial
Code in effect at such time in all relevant jurisdictions, and such additional
rights and remedies to which a secured creditor is entitled under the laws in
effect in all relevant jurisdictions, and, without limiting the foregoing, in
any event may:

(a)         personally, or by agents or attorneys, immediately take possession
of the Collateral or any part thereof, from the Borrower or any other Person who
then has possession of any part thereof with or without notice or process of
law, and for that purpose may enter upon such Borrower's premises where any of
the Collateral is located and remove the same and use in connection with such
removal any and all services, supplies, aids and other facilities of the
Borrower;

 
 

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(b)         instruct the account debtor(s) and any other obligor or obligors on
any agreement, instrument or other obligation (including, without limitation,
the Accounts and the Contracts) constituting the Collateral to make any payment
required by the terms of such agreement, instrument or other obligation directly
to the Lender and may exercise any and all remedies of the Borrower in respect
of such Collateral;

(c)         instruct all banks which have entered into a control agreement with
the Lender to transfer all monies, securities and instruments held by such bank
to such account as the Lender shall instruct such banks in writing; and instruct
all securities intermediaries which have entered into a control agreement with
the Lender to liquidate all Investment Property and/or to transfer all monies
and Investment Property held by such securities intermediary to the Lender or as
the Lender may direct;

(d)         sell, assign or otherwise liquidate any or all of the Collateral or
any part thereof in accordance with Section 9.3 hereof, or direct the Borrower
to sell, assign or otherwise liquidate any or all of the Collateral or any part
thereof, and, in each case, take possession of the proceeds of any such sale or
liquidation for application in accordance with Section 9.5 below;

(e)         take possession of the Collateral or any part thereof, by directing
the Borrower in writing to assemble and make available or, to the extent
practicable, to deliver the same to the Lender at any reasonable place or places
designated by the Lender, in which event the Borrower shall at its own expense:

(i)            forthwith cause the same to be moved to, or provide access to the
Collateral at, the place or places so designated by the Lender and there
delivered to the Lender;

(ii)           store and keep any Collateral so delivered to the Lender at such
place or places pending further action by the Lender as provided in Section 9.3
hereof; and

(iii)          while the Collateral shall be so stored and kept, provide such
security and maintenance services as shall be reasonably necessary to protect
the same and to preserve and maintain it in good condition;

(f)          license or sublicense, whether on an exclusive or nonexclusive
basis, any Trademarks, Domain Names, Patents, Copyrights or Licenses included in
the Collateral for such term and on such conditions and in such manner as the
Lender shall in its sole judgment determine;

(g)         apply any monies constituting Collateral or proceeds thereof in
accordance with the provisions of Section 9.5 hereof; and

(h)         take any other action as specified in clauses (1) through (5),
inclusive, of Section 9-607(a) of the UCC;

 
 

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it being understood that the Borrower's obligation to deliver the Collateral as
described above is of the essence of this Agreement and that, accordingly, upon
application to a court of equity having jurisdiction, the Lender shall be
entitled to a decree requiring specific performance by the Borrower of said
obligation.

Section 9.3           Remedies; Disposition of the Collateral.

If a Default shall have occurred and is continuing, then any Collateral
repossessed by the Lender under or pursuant to Section 9.2 hereof and any other
Collateral whether or not so repossessed by the Lender, may be sold, assigned,
leased or otherwise disposed of under one or more contracts or as an entirety,
and without the necessity of gathering at the place of sale the property to be
sold, and in general in such manner, at such time or times, at such place or
places and on such terms as the Lender may, in compliance with any mandatory
requirements of applicable law, determine to be commercially reasonable. Any of
the Collateral may be sold, leased or otherwise disposed of in the condition in
which the same existed when taken by the Lender or after any overhaul or repair
(which shall be at the expense of the Borrower) which the Lender shall determine
to be commercially reasonable. Any such sale, lease or other disposition may be
effected by means of a public disposition or private disposition, effected in
accordance with the applicable requirements (in each case if and to the extent
applicable) of Sections 9-610 through 9-613 of the UCC and/or such other
mandatory requirements of applicable law as may apply to the respective
disposition. The Lender may, without notice or publication, adjourn any public
or private disposition or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the disposition, and such
disposition may be made at any time or place to which the disposition may be so
adjourned. To the extent permitted by any such requirement of law, the Lender
may bid for and become the purchaser (and may pay all or any portion of the
purchase price by crediting Obligations against the purchase price) of the
Collateral or any item thereof, offered for disposition in accordance with this
Section 9.3 without accountability to the Borrower. If, under applicable law,
the Lender shall be permitted to make disposition of the Collateral within a
period of time which does not permit the giving of notice to the Borrower as
hereinabove specified, the Lender need give the Borrower only such notice of
disposition as shall be required by such applicable law. The Borrower agrees to
do or cause to be done all such other acts and things as may be reasonably
necessary to make such disposition or dispositions of all or any portion of the
Collateral valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at the Borrower’s expense.

Section 9.4           Waiver of Claims.

Except as otherwise provided in this Agreement, each of ReGen and RBIO hereby
waives, to the fullest extent permitted by applicable law, notice and judicial
hearing in connection with the Lender taking possession or the Lender’s
disposition of any of the Collateral, including, without limitation, any and all
prior notice and hearing for any prejudgment remedy or remedies, and each of
ReGen and RBIO hereby further waives, to the extent permitted by law:

 
 

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(a)         all damages occasioned by such taking of possession or any such
disposition except any damages which are the direct result of the Lender's gross
negligence or willful misconduct;

(b)         all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the Lender's rights
hereunder; and

(c)         all rights of redemption, appraisement, valuation, stay, extension
or moratorium now or hereafter in force under any applicable law in order to
prevent or delay the enforcement of this Agreement or the absolute sale of the
Collateral or any portion thereof, and each of ReGen and RBIO, for itself and
all who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.

Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Borrower therein and thereto, and
shall be a perpetual bar both at law and in equity against the Borrower and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
the Borrower.

Section 9.5           Application of Proceeds. The Lender shall apply the
proceeds of any collection or sale of Collateral, as well as any Collateral
consisting of cash, to the Obligations in accordance with the terms of this
Agreement. It is understood that the Borrower shall remain liable to the extent
of any deficiency between the amount of the proceeds of the Collateral and the
aggregate amount of the Obligations.

Section 9.6           Duty of Care. The Lender shall exercise ordinary care in
the storage or use of any Collateral in its possession. The Lender shall not
have any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of the Lender, or as to the
preservation of rights against prior parties or any other rights pertaining
thereto.

Section 9.7           License. For the sole purpose of enabling the Lender to
exercise rights and remedies under this Agreement (including, without
limitation, in order to take possession of, hold, preserve, process, assemble,
prepare for sale, market for sale, sell or otherwise dispose of Collateral) at
such time as the Lender shall be lawfully entitled to exercise such rights and
remedies, to the extent of the Borrower's legal and contractual rights to make
such grant, each of ReGen and RBIO hereby grants to the Lender, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to the Borrower) to use, license or sublicense any Intellectual
Property now owned or hereafter acquired by the Borrower, and wherever the same
may be located, and including in such license access to all media in which any
of the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.

Section 9.8           Further Acts. The Borrower will, at its own expense and
upon the reasonable request of the Lender, make, execute, endorse, acknowledge,
file and/or deliver to the Lender from time to time such lists, descriptions and
designations of its Collateral, warehouse receipts, receipts in the nature of
warehouse receipts, bills of lading, documents of title, vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, certificates, reports and other assurances or instruments, execute
and cause to be executed such control agreements, make intellectual property
filings, and take such further steps relating to the Collateral and other
property or rights covered by the security interest hereby granted, which the
Lender deems reasonably necessary or desirable to perfect, preserve or protect
its security interest in the Collateral or the priority thereof.

 
 

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Section 9.9           Representations Regarding Collateral. The Borrower
represents and warrants to the Lender that: set forth on Schedule 9.9 is (a) the
location of its chief executive office and the location of its books and
records; (b) the location of the majority of the Collateral as of the date of
this Agreement, and (c) the location of the remaining Collateral.  The Borrower
further represents and warrants that: (x) with respect to the Borrower’s
Accounts, that each existing Account represents, and each future Account will
represent, a bona fide sale or lease and shipment of goods by the Borrower, or
rendition of services by the Borrower, in the ordinary course of the Borrower’s
business; and (y) all Documents, Instruments, and Chattel Paper describing,
evidencing, or constituting Collateral, and all signatures and endorsements
thereon, are and will be valid and genuine in all material respects.

Section 9.10         Changes. Neither ReGen nor RBIO will change its name, type
of organization or jurisdiction of organization without giving at least 30 days'
prior written notice to the Lender and, prior to any such change, making such
filings and taking such other steps as the Lender may reasonably request to
continue the perfection and priority of the Liens granted hereunder.

Section 9.11         Storage and Use. The Borrower agrees that it will use,
store, and maintain the Collateral with all reasonable care and will use such
Collateral for lawful purposes only.

Section 9.12         Inspections and Reports. The Borrower shall permit
representatives and independent contractors of the Lender access to its
properties and records from time to time upon the reasonable request of the
Lender, and shall provide the Lender with such reports as to the Collateral as
the Lender shall in its commercial judgment request from time to time; together,
in each case, with a certificate of the Borrower executed by an officer thereof
certifying as to the accuracy and completeness of the foregoing.

Section 9.13         Inventory. The Borrower represents and warrants that all of
the Inventory owned by the Borrower is and will be held for sale or lease, or to
be furnished in connection with the rendition of services, in the ordinary
course of the Borrower's business, and is and will be fit for such purposes. The
Borrower will keep its Inventory in good and marketable condition, except for
damaged or defective goods arising in the ordinary course of the Borrower's
business. The Borrower agrees that all Inventory produced by the Borrower in the
United States of America will be produced in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. The Borrower will conduct a physical count of the Inventory up to
once each calendar quarter at such times as the Lender requests.

Section 9.14         Equipment. The Borrower represents and warrants to the
Lender and agrees with the Lender that all of the Equipment owned by the
Borrower is and will be used or held for use in the Borrower's business (other
than obsolete Equipment), and is and will be fit for such purposes. The Borrower
shall keep and maintain its Equipment in good operating condition and repair
(ordinary wear and tear excepted) and shall make all necessary replacements
thereof. The Borrower will not, without the Lender's prior written consent,
alter or remove any identifying symbol or number on any of the Borrower's
Equipment constituting Collateral.

 
 

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Section 9.15         Right to Cure. The Lender may, in its discretion, pay any
amount or do any act required of the Borrower hereunder in order to preserve,
protect, maintain or enforce the Obligations, the Collateral or the Lender's
Liens therein, and which the Borrower fails to pay or do, including payment of
any judgment against the Borrower, any insurance premium, any warehouse charge,
any finishing or processing charge, any landlord's or bailee's claim, and any
other Lien upon or with respect to the Collateral; provided, however, that the
Lender shall not be under any obligation to take any such action. Any payment
made or other action taken by the Lender under this Section shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
thereafter as herein provided.

Section 9.16         Filings. The Lender is hereby authorized to file such
financing statements with respect to this Agreement, with or without the
Borrower’s signature, or to file a photocopy of this Agreement in substitution
for a financing statement, as the Lender may deem appropriate and to execute in
the Borrower's name such financing statements and amendments thereto and
continuation statements which may require the Borrower's signature.

Section 9.17         Borrower Remains Liable. It is expressly agreed by the
Borrower that, anything herein to the contrary notwithstanding, the Borrower
shall remain liable under each of its contracts and each of its licenses to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder. The Lender shall not have any obligation or
liability under any contract or license by reason of or arising out of this
Agreement or the granting herein of a Lien thereon or the receipt by the Lender
of any payment relating to any contract or license pursuant hereto. The Lender
shall not be required or obligated in any manner to perform or fulfill any of
the obligations of the Borrower under or pursuant to any contract or license, or
to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it or the sufficiency of any performance by any party
under any contract or license, or to present or file any claims, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.

Section 9.18         Power of Attorney. Each of ReGen and RBIO hereby
constitutes and appoints the Lender its true and lawful attorney, with full
power (in the name of the Borrower or otherwise), to act, require, demand,
receive, compound and give acquittance for any and all monies and claims for
monies due or to become due to the Borrower under or arising out of the
Collateral, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which the Lender may deem to be necessary or advisable to protect the interests
of the Lender, which appointment as attorney is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, at any time after
the occurrence of an Event of Default, the Lender is hereby authorized and
empowered to:

 
 

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(a)         endorse the Borrower's name on any checks, notes, acceptances, money
orders, or other forms of payment or security that come into the Lender's
possession;

(b)         sign the Borrower’s name on any invoice, bill of lading, warehouse
receipt or other negotiable or non-negotiable Document constituting Collateral,
on drafts against customers, on assignments of Accounts, on notices of
assignment, financing statements and other public records and to file any such
financing statements by electronic means with or without a signature as
authorized or required by applicable law or filing procedure;

(c)         notify the post office authorities to change the address for
delivery of the Borrower's mail to an address designated by the Lender and to
receive, open and dispose of all mail addressed to the Borrower;

(d)         send requests for verification of Accounts to customers;
 
(e)         complete in the Borrower’s name or the Lender's name, any order,
sale or transaction, obtain the necessary Documents in connection therewith, and
collect the proceeds thereof;

(f)          clear Inventory through customs in the Borrower's name, the
Lender's name or the name of the Lender's designee, and to sign and deliver to
customs officials limited powers of attorney in the Borrower's name for such
purpose; and
 
(g)         do all things necessary to carry out this Agreement. The Borrower
ratifies and approves all acts of such attorney done in accordance with the
power set forth herein. The Lender nor its attorneys or agents will be liable
for any acts or omissions or for any error of judgment or mistake of fact or law
except for their own willful misconduct. This power, being coupled with an
interest, is irrevocable until the Obligations have been fully satisfied.

ARTICLE X
MISCELLANEOUS.

Section 10.1         Payment of Expenses, Indemnification. Whether or not any
Loan is made to the Borrower, the Borrower agrees to pay, and to reimburse the
Lender for all of the Lender's costs and expenses (including any stamp duty,
registration, documentary, excise and any other similar taxes payable) in
connection with the preparation, negotiation, execution and delivery of this
Agreement and each other Loan Document, any amendment or waiver to this
Agreement or any other Loan Document, the collection or other enforcement of
this Agreement or any other Loan Document, the perfection and priority of any
Collateral, and the preservation of any and all rights of the Lender hereunder
and under the other Loan Documents, including, without limitation, all fees and
expenses of all counsels to the Lender in connection with any of the
foregoing.  Payment of such expenses shall be made on or after the earlier of
(i) the acceleration of the Borrower’s obligations hereunder due to the
occurrence of an Event of Default or (ii) the Maturity Date.  In addition, each
of ReGen and and RBIO hereby releases and agrees to indemnify the Lender from
and against all liabilities, losses, damages, penalties, judgments, suits or
costs of any kind whatsoever with respect to this Agreement or any other Loan
Document or any Loan or other advance or any matter related hereto or thereto
(all of the foregoing, collectively, the “Indemnified Liabilities”), except for
Indemnified Liabilities caused directly by the Lender's gross negligence or
willful misconduct. Without limiting the survival of any other provisions of
this Agreement or the other Loan Documents, the terms of this Section shall
survive payment of the Loans and termination of this Agreement and the other
Loan Documents.

 
 

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Section 10.2         Notices. Any notice, demand, waiver, consent, or any other
communication under this Agreement or any other Loan Document must be in writing
to be effective and will be hand-delivered or sent by registered mail or by fax
to the following addresses:

(a)         for the Borrower,

 
  ReGen Biologics, Inc.
  411 Hackensack Avenue
  Hackensack, NJ  07601
  Attention: Gerald E. Bisbee, Jr., Ph.D.
  Telecopy: 201.651.5141

  With a copy to:

  Pillsbury Winthrop Shaw Pittman LLP
  1650 Tysons Boulevard
  McLean, VA 22102
  Attention: David C. Main, Esq.
  Telecopy: 703.770.7901

(b)         for the Lender,

  Sports Medicine Holding Company, LLC
  c/o Ivy Capital Partners, LLC
  One Paragon Drive, Suite 125
  Montvale, NJ 07645
  Attention: Robert W. Pangia
  Telecopy:  201.573.8403

  With a copy to:

  DLA Piper LLP (US)
  1251 Avenue of the Americas, 27th Floor
  New York, NY 10020
  Attention: Jamie Knox, Esq.
  Telecopy: 212.884.8692

or such other address, or fax number or to the attention of such other
individual which either party may from time to time notify the other in writing.
Any notice delivered by hand or by registered mail will be deemed to have been
given when received, and if transmitted by fax, on the day of transmission with
answerback received, unless such day is not a Business Day, in which case the
following Business Day.

 
 

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Section 10.3         Successors and Assigns. This Agreement and each other Loan
Document shall be binding upon and inure to the benefit of the Borrower and the
Lender and their respective successors and assigns. The Borrower shall not
assign or transfer its rights or obligations under this Agreement or any other
Loan Document without the prior written consent of the Lender, and any purported
assignment or transfer by the Borrower without such consent shall be void. The
Lender may assign or transfer its obligations (if any) and rights under the Loan
Documents to any other Person with prompt subsequent notice to the Borrower.

Section 10.4         Governing Law. This Agreement and each Note shall be
governed by and construed in accordance with the laws of the State of New York
(including Section 5-1401 of the General Obligations Law of the State of New
York, which is expressly made applicable hereto).

Section 10.5         Submission to Jurisdiction.

(a)         The Borrower irrevocably agrees that any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document, shall
be brought and adjudicated in the Bankruptcy Court, and each of RBIO and ReGen
hereby submits, on behalf of itself and its properties, to the exclusive
jurisdiction of the Bankruptcy Court for the purposes of any such suit, action
or proceeding. Each of RBIO and ReGen hereby irrevocably waives any objection it
may have to the laying of venue of any such suit, action or proceeding in the
Bankruptcy Court, and any claim that such suit, action or proceeding has been
brought in an inconvenient forum,

(b)         The Borrower irrevocably agrees that any writ, summons or other
process or notice of motion or any other application to the Bankruptcy Court may
be served within or without such court's jurisdiction by registered mail at the
address of the Borrower as set forth in this Agreement or at such other address
as the Borrower may designate in writing in accordance with this Agreement, or
by personal service; provided that a reasonable time for appearance is allowed
in accordance with applicable New York or US federal law. In addition, the
Borrower agrees to service of process by mail at its address indicated in the
records of the Lender. Nothing in this Agreement shall limit the ability of the
Lender to commence or adjudicate any suit, action or proceeding arising out of
or relating to this Agreement or any other Loan Document in any other
jurisdiction, or to serve any writ, summons, process or notice of motion or
application by any other means permitted by applicable law.

(c)         Each of RBIO and ReGen hereby irrevocably agrees that the Lender
shall not be liable for any special, indirect or consequential damages arising
out of any claim related to this Agreement or any other Loan Document or
Collateral any related transaction or document (including, but not limited to,
loss of profit) irrespective of whether the Lender has been advised of the
likelihood of such loss or damage and regardless of the form of action.

Section 10.6        WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING THAT MAY RELATE TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY RELATED DOCUMENT OR TRANSACTION.

 
 

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Section 10.7         Severability. If any provision of this Agreement or any
other Loan Document is invalid, unenforceable or illegal for any reason, such
provision shall be deemed to be excised from this Agreement or such other Loan
Document, as the case may be, and shall not affect the validity, enforceability
or legality of any other provision of this Agreement or such other Loan
Document.

Section 10.8         Amendment or Waiver. No provision of this Agreement or any
other Loan Document may be amended, modified or waived other than by a written
document signed by the Borrower and the Lender.

Section 10.9         Remedies Cumulative. No failure of the Lender to exercise,
and no delay in exercising, any rights or remedies under this Agreement or under
any other Loan Document shall constitute a waiver thereof, nor shall any single
or partial exercise preclude any additional or further exercise of any rights or
remedies. The rights of the Lender under this Agreement and the other Loan
Documents are cumulative and in addition to any other rights provided by
contract or by applicable law,

Section 10.10       Entire Agreement. This Agreement and the other Loan
Documents constitute the entire agreement between the parties hereto with
respect to the subject matter hereof, and supersedes any and all prior
agreements or understandings, written or oral, with respect thereto.

Section 10.11       Survival. All indemnities set forth in this Agreement shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder and under the
Note.

Section 10.12       Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed and delivered (including by facsimile or other
electronic transmission) shall be an original, but all of which shall together
constitute one and the same instrument.

Section 10.13       Headings Descriptive. The headings of the articles and
sections of this Agreement and the table of contents, if any, are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.

 
 

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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
 
 

 
REGEN BIOLOGICS, INC., as the Borrower
             
By:
/s/ Gerald E. Bisbee, Jr., Ph.D
 
Name:  Gerald E. Bisbee, Jr., Ph.D
 
Title:  President and CEO
                         
RBIO, INC., as the Borrower
             
By:
/s/ Gerald E. Bisbee, Jr.
 
Name: Gerald E. Bisbee, Jr., Ph.D
 
Title:  President and CEO
                         
SPORTS MEDICINE HOLDING COMPANY LLC., as the Lender
             
By:
/s/ Robert Pangia
 
Name:  Robert Pangia
 
Title:  Manager

 
 

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EXHIBIT A

FORM OF NOTE

$________________
New York, New York

 
__________________, 2011

FOR VALUE RECEIVED, the undersigned, REGEN BIOLOGICS, INC., a Delaware
corporation (“Borrower”), hereby promises to pay to the order of SPORTS MEDICINE
HOLDING COMPANY LLC, a Delaware limited liability company (“Lender”) in lawful
money of the United States of America and in immediately available funds, the
principal amount of ONE MILLION FOUR HUNDRED THOUSAND AND 00/100 DOLLARS
($1,400,000.00) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans referred to below) payable on the Maturity Date or
such other dates and in the principal amounts provided in the DIP Loan Agreement
(as hereinafter defined).

The undersigned further agrees that interest shall accrue and be payable on the
unpaid principal amount hereof from time to time outstanding from the date
hereof until paid in full at the rate per annum set forth in Section 2.5(a) of
the DIP Loan Agreement, as such rate may be increased to the default rate in
accordance with Section 2.5(d) during the continuance of any default.  Interest
shall be payable on the Maturity Date.  The holder of this Promissory Note (the
“Note”) is authorized to endorse the date and amount of the Loans evidenced
hereby and the date and amount of each payment or prepayment of principal with
respect thereto on Schedule 1 annexed hereto and made a part hereof, or on a
continuation thereof which shall be attached hereto and made a part hereof,
which endorsements shall constitute conclusive evidence of the accuracy of the
information endorsed in the absence of manifest error, provided that failure by
the Lender to make any such endorsement on this Note or any error with respect
to such endorsement shall not affect the obligations of Borrower under this
Note, the DIP Loan Agreement or any other Loan Document.

This Note (i) is the Note referred to in the DIP Loan Agreement dated April __,
2011 by and between Borrower and Lender (as amended, supplemented or otherwise
modified from time to time, the “DIP Loan Agreement”), (ii) is entitled to the
benefits thereof, (iii) is secured as provided therein, and (iv) is subject to
optional and mandatory prepayment in whole or in part as provided
therein.  Capitalized terms used herein but not otherwise defined shall have the
meanings ascribed to such terms in the DIP Loan Agreement.

After the occurrence of any one or more of the Events of Default specified in
the DIP Loan Agreement, all amounts then remaining unpaid on this Note may be
declared to be immediately due and payable, all as provided therein.

Maker hereby waives presentment, demand, protest or notice of any kind in
connection with this Note.
 
 
 

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THE PLACE OF NEGOTIATION, EXECUTION AND DELIVERY OF THIS NOTE IS THE STATE OF
NEW YORK. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  IT IS THE INTENT OF MAKER
THAT THE PROVISIONS OF SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE
STATE OF NEW YORK SHALL APPLY TO THIS NOTE.

 
REGEN BIOLOGICS, INC.
                   
By:
 
      Name:       Title:  

 
 

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SCHEDULE 1 TO NOTE

Dates and Amount of Loan or Payment/Prepayment

       
Amount of
 
Balance
 
Notation
Date
 
Amount of Loan
 
Payment/Prepayment
 
Outstanding
 
Made by

 

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