Exhibit 10.3

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY
STATE SECURITIES LAWS. THIS WARRANT AND SUCH SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

REGEN BIOLOGICS, INC.

Warrant to Purchase
Common Stock

Date of Issue: September 23, 2003

     REGEN BIOLOGICS, INC., a Delaware corporation (the “Company”), and [     ]
(the “Holder”), hereby agree that, for value received, the Holder is entitled to
purchase from the Company, subject to the terms and conditions set forth below,
at any time after the date of a Trigger Event (as defined in Section 2.2 hereof
) and on or before the Expiration Date (as defined in Section 2.5 hereof), such
number of shares of fully paid and non-assessable Common Stock, par value $0.01
per share (the “Common Stock”) of the Company as specified in Section 2.2 (the
“Shares”), at a purchase price per Share specified in Section 1.2 hereof (the
“Warrant Price”). The number of Shares subject to this Warrant and the Warrant
Price shall be subject to adjustment from time to time after the date hereof
pursuant to the terms and conditions in Section 4 hereof.

     1.     Number of Shares and Warrant Price.

          1.1.      Number of Shares. The number of Shares shall be      .

          1.2.      Warrant Price. The Warrant Price shall be initially equal to
$0.4481 per share, which price has been determined by the Board of Directors of
the Company in good faith. The Warrant Price shall be adjusted from time to time
in accordance with Section 4.

     2.     Exercise of Warrant.

          2.1.      Mechanics of Exercise. The Holder may exercise this Warrant
in whole or in part by surrendering this Warrant and a duly executed Notice of
Exercise in substantially the form attached hereto as Exhibit A at the principal
executive offices of the Company. The Holder shall also deliver to the Company
simultaneously with the Holder’s Notice of Exercise payment of the aggregate
Warrant Price for the Shares being purchased. The consideration for the exercise
of this Warrant may be in the form of a bank cashier’s or certified check
payable to the order of the Company, or by wire transfer to an account
designated in writing by the Company. In the event that the Holder elects to
exercise less than the full number of Shares recorded above, the Company will
execute and deliver to the Holder a Warrant of like tenor in the number of
Shares granted by the Company less the number of Shares exercised.

 

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          2.2.      Number of Shares Exercisable Upon Trigger Event. (a) This
Warrant shall become exercisable, in whole or in part, if prior to March 22,
2005 (18 months from the Date of Issue of this Warrant) the Company completes an
equity financing (a “Subsequent Financing”) at a price per share lower than the
Warrant Price (a “Trigger Event”).

          (b) The Holder shall be entitled to purchase (i)      Shares in the
event that the price per share of the Subsequent Financing is greater than
$0.25, but less than $0.40; or (ii)      Shares in the event that the price per
share of the Subsequent Financing is greater or equal to $0.40, but less than
the Warrant Price. The amounts set forth in this Section 2.2(b) shall be
adjusted in the same manner as the Warrant Price in accordance with Section 4.

          2.3.      When Exercise Effective. The exercise of this Warrant shall
be deemed to have been effective for the Holder immediately prior to the close
of business on the business day on which this Warrant is surrendered to the
Company as provided in Section 2.1, and at such time the person or persons in
whose name or names any certificate or certificates for Shares shall be issuable
upon such exercise as provided in Section 2.4 shall be deemed to have become the
holder or holders of record thereof.

          2.4.      Delivery of Stock Certificates, Etc. As soon as practicable
after the surrender of this Warrant, the Company will cause to be issued in the
name of, and delivered to, the Holder a certificate or certificates for the
number of fully paid and non-assessable Shares which the Holder has purchased.

          2.5.      Expiration Date. This Warrant shall expire on the earlier of
(i) March 22, 2005 in the event a Trigger Event has not occurred, (ii) the fifth
anniversary of the date of issuance, and (iii) the date of the closing of the
first underwritten public offering of the Company’s Common Stock after the date
hereof (the earlier of such dates is referred to herein as the “Expiration
Date”).

     3.     Net Issue Exercise.

          3.1.      In lieu of exercising this Warrant pursuant to Section 2,
this Warrant may be exercised by the Holder by the surrender of this Warrant to
the Company, with a duly executed Notice of Exercise marked to reflect Net Issue
Exercise and specifying the number of shares of Common Stock to be purchased,
during normal business hours at any time after the date hereof, but on or before
the Expiration Date. The Company agrees that such shares of Common Stock shall
be deemed to be issued to the Holder as the record holder of such shares of
Common Stock as of the close of business on the date on which this Warrant shall
have been surrendered as aforesaid. Upon such exercise, the Holder shall be
entitled to receive shares equal to the value of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant to the Company together
with notice of such election in which event the Company shall issue to Holder a
number of shares of Common Stock computed as of the date of surrender of this
Warrant to the Company using the following formula:

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Where   X

X

Y

A

B   =

=

=

=

=   Y(A-B)
    A
the number of shares of Common Stock to be issued to Holder under this
Section 3.1

the number of shares of Common Stock otherwise purchasable under this Warrant
(as adjusted to the date of such calculation);

the fair market value of one share of the Common Stock at the date of such
calculation;

the Exercise Price (as adjusted to the date of such calculation).

          3.2.      Fair Market Value. For purposes of the above calculation,
fair market value of one share of Common Stock shall be determined by the
Company’s Board of Directors in good faith; provided, however, that where there
exists a public market for the Company’s Common Stock at the time of such
exercise, the fair market value per share shall be the average of the closing
bid and asked prices of the Common Stock quoted in the Over-The-Counter Market
Summary or the last reported sale price of the Common Stock or the closing price
quoted on the Nasdaq National Market or any exchange on which the Common Stock
is listed, whichever is applicable, as published in the Western Edition of The
Wall Street Journal for the five (5) trading days prior to the date of
determination of fair market value.

     This Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Common Stock issuable
upon such exercise shall be treated for all purposes as the holder of record of
such shares as of the close of business on such date. As promptly as practicable
on or after such date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or persons entitled
to receive the same a certificate or certificates for the number of shares
issuable upon such exercise. In the event that this Warrant is exercised in
part, the Company at its expense will execute and deliver a new Warrant of like
tenor exercisable for the number of shares for which this Warrant may then be
exercised.

     4.     Adjustments.

          4.1.      Adjustment for Certain Dividends and Distributions. If the
Company at any time or from time to time after the date hereof makes, or fixes a
record date for the determination of holders of shares of Common Stock entitled
to receive, a dividend or other distribution payable in additional shares of the
Company’s equity securities, then, and in each such event, the number of Shares
theretofore receivable upon the exercise of this Warrant shall be
proportionately increased as of the time of such issuance or, in the event such
record date is fixed, as of the close of business on such record date; provided,
however, that if such record date is fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor, the number
of Shares theretofore receivable upon exercise of this Warrant shall be
recomputed accordingly as of the close of business on such record date, and
thereafter the

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number of Shares theretofore receivable upon exercise of this Warrant shall be
adjusted pursuant to this Section 4.1 as of the time of actual payment of such
dividends or distributions.

          4.2.      Stock Split and Reverse Stock Split. If the Company at any
time or from time to time after the date hereof effects a stock split or
subdivision of the outstanding Common Stock, the number of Shares theretofore
receivable upon the exercise of this Warrant shall be proportionately increased.
If the Company at any time or from time to time after the date hereof effects a
reverse stock split or combines the outstanding shares of Common Stock into a
smaller number of shares, the number of Shares theretofore receivable upon the
exercise of this Warrant shall be proportionately decreased. Each adjustment
under this Section 4.2 shall become effective at the close of business on the
date the stock split, subdivision, reverse stock split or combination becomes
effective.

          4.3.      Merger, Sale of Assets, Etc. If at any time while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be
(i) a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company’s capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property (whether in the form of securities, cash or
otherwise), or (iii) a sale or transfer of the Company’s properties and assets
as, or substantially as, an entirety to any other person, this Warrant shall
thereafter represent the right to acquire for the Aggregate Warrant Price (as
defined below) the number of shares of stock or other securities which the
Holder of this Warrant would have owned immediately after the consummation of
such reorganization, merger, consolidation, sale or transfer, if the Holder of
this Warrant had exercised this Warrant immediately before the effective date of
the reorganization, merger, consolidation, sale or transfer. In each such case,
the terms of this Warrant shall be applicable to the shares of stock or other
securities receivable upon exercise of this Warrant after such consummation. For
purposes of this Section 4.3, the “Aggregate Warrant Price” shall mean the
aggregate consideration obtained by multiplying (x) the Warrant Price by (y) the
maximum number of Shares of Common Stock for which this Warrant is or may become
exercisable immediately prior to such conversion or redemption.

     5.     Transferability of Warrant.

          5.1.      Transferability Generally. This Warrant and the Shares may
not be transferred or assigned in whole or in part without compliance with
applicable federal and state securities laws by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonable satisfactory to the
Company).

          5.2.      Ownership. Until this Warrant is transferred on the books of
the Company (with the Company’s consent), the Company may treat the person in
whose name this Warrant is issued as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.

     6.     Exchange of Warrant. Upon the surrender by the Holder of this
Warrant, properly endorsed, to the Company, the Company, subject to the
provisions of Section 5 hereof,

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will issue and deliver to or upon the order of the Holder a new Warrant or
Warrants of like tenor, in the name of the Holder or as the Holder (upon payment
by the Holder of any applicable transfer taxes) may direct, calling in the
aggregate on the face or faces thereof for the number of Shares called for on
the face or faces of the Warrant or Warrants so surrendered.

     7.     Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity bond (or, in the case of any institutional holder, an
indemnity agreement) reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor.

     8.     Legends. The certificate(s) representing the Shares shall be
imprinted with a legend in substantially the following form:

  THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS.
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS AND UNTIL (1) REGISTERED UNDER THE ACT AND SUCH
STATE SECURITIES LAWS OR (2) THE CORPORATION RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.

     9.     Representations and Covenants.

          9.1.      Representation and Warranty of the Company. The Company
hereby represents and warrants to the Holder that the Shares which may be issued
upon exercise of this Warrant shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities law.

          9.2.      Representation and Warranty of Holder. The Holder hereby
represents and warrants to the Company that the Holder is an “accredited
investor” within the meaning of Regulation D promulgated under the Act, and
acknowledges that the Company is relying upon this representation and warranty
in the issuance of this Warrant to the Holder.

     10.     Notices. All notices, consents and other communications under this
Warrant shall be in writing and shall be deemed given when delivered personally
or when mailed by registered mail, return receipt requested, or reputable
overnight delivery service, to a party at its principal executive offices (or
such other address as a party may designate by notice given to the other parties
pursuant to this Section 10).

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     11.     Miscellaneous.

          11.1.      Termination. Neither this Warrant nor any term hereof may
be amended, modified, waived, discharged or terminated orally.

          11.2.      Applicable Law. This Warrant shall be construed and
enforced in accordance with and governed by the laws of the State of Delaware
without regarding to provisions thereof relating to choice of law or conflicts
of law.

          11.3.      Headings. The headings in this Warrant are for convenience
of reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.

          11.4.      No Fractional Shares. No fractional shares of Common Stock
shall be issued in connection with the exercise of this Warrant. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
Share as determined in accordance with Section 3.2.

          11.5.      No Rights as Stockholder. Until the exercise of this
Warrant, the Holder shall not have or exercise any rights as a stockholder of
the Company by virtue of this Warrant.

     12.     Expiration. The right to exercise this Warrant shall expire at 5:00
p.m., Eastern time, on the Expiration Date.

      REGEN BIOLOGICS, INC., a Delaware corporation   By:  

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    Name: Gerald E. Bisbee, Jr.     Title: President and Chief Executive Officer

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EXHIBIT A

NOTICE OF EXERCISE

[To be signed only upon exercise of Warrant]

TO: REGEN BIOLOGICS, INC.

     The undersigned, the holder of the within Warrant, hereby surrenders
Warrants to purchase      shares of Common Stock of REGEN BIOLOGICS, INC. and
herewith makes payment of $[DOLLAR AMOUNT] therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to, [NAME],
whose address is [ADDRESS].

      Dated:  

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(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)  

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Address

  Signed in the presence of:  

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A-1

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     EXHIBIT B

FORM OF ASSIGNMENT

[To be signed only upon transfer of Warrant after approval by the Company]

     For value received, the undersigned hereby sells, assigns and transfers
unto [NAME] the right represented by the within Warrant to purchase [NUMBER OF
SHARES] shares of Common Stock of REGEN BIOLOGICS, INC. (the “Company”) to which
the within Warrant relates, and appoints the Secretary of the Company as
attorney to transfer such right on the books of the Company, with full power of
substitution in the premises.

Dated:

 

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(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)  

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Address

Signed in the presence of:

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B-1