exv10w1



 


Exhibit 10.1




EXECUTION VERSION






AGREEMENT AND PLAN OF MERGER


by and among


ReGen Biologics, Inc.

(a Delaware corporation),


Aros Corporation

(a Delaware corporation)


and


Aros Acquisition Corp.

(a Delaware corporation)






Dated as of June 7th, 2002

















 






 


TABLE OF CONTENTS



	 	 	 	 	 	 	 	 	 	 
	ARTICLE I THE MERGER
	 	 	2	 	 	 	 	 
	 
	 	Section 1.01. The Merger
	 	 	2	 	 	 	 	 
	 	Section 1.02. Conversion
	 	 	2	 	 	 	 	 
	 	Section 1.03. Exchange of Certificates
	 	 	3	 	 	 	 	 
	 	Section 1.04. Dissenting Shares
	 	 	5	 	 	 	 	 
	 	Section 1.05. Stock Transfer Books
	 	 	6	 	 	 	 	 
	 	Section 1.06. Stock Option Plans
	 	 	6	 	 	 	 	 
	 	Section 1.07. Certificate of Incorporation and Bylaws
	 	 	6	 	 	 	 	 
	 	Section 1.08. Directors
	 	 	6	 	 	 	 	 
	 	Section 1.09. Tax Consequences
	 	 	6	 	 	 	 	 
	 
	ARTICLE II REPRESENTATIONS AND WARRANTIES OF REGEN
	 	 	7	 	 	 	 	 
	 
	 	Section 2.01. Corporate Existence and Power
	 	 	7	 	 	 	 	 
	 	Section 2.02. Corporate Authorization
	 	 	7	 	 	 	 	 
	 	Section 2.03. Governmental Authorization
	 	 	7	 	 	 	 	 
	 	Section 2.04. Non-contravention
	 	 	8	 	 	 	 	 
	 	Section 2.05. Capitalization
	 	 	8	 	 	 	 	 
	 	Section 2.06. Subsidiaries
	 	 	9	 	 	 	 	 
	 	Section 2.07. FDA and other Regulations
	 	 	9	 	 	 	 	 
	 	Section 2.08. Financial Statements
	 	 	9	 	 	 	 	 
	 	Section 2.09. Absence of Certain Changes or Events
	 	 	10	 	 	 	 	 
	 	Section 2.10. Real Property
	 	 	10	 	 	 	 	 
	 	Section 2.11. Personal Property
	 	 	10	 	 	 	 	 
	 	Section 2.12. Labor Matters
	 	 	11	 	 	 	 	 
	 	Section 2.13. Environmental Matters
	 	 	11	 	 	 	 	 
	 	Section 2.14. Non-ERISA Plans
	 	 	12	 	 	 	 	 
	 	Section 2.15. ERISA Plans
	 	 	12	 	 	 	 	 
	 	Section 2.16. Compliance with Law
	 	 	13	 	 	 	 	 
	 	Section 2.17. Litigation
	 	 	13	 	 	 	 	 
	 	Section 2.18. Material Contracts
	 	 	13	 	 	 	 	 
	 	Section 2.19. Conduct of Business
	 	 	14	 	 	 	 	 
	 	Section 2.20. Tax Matters
	 	 	15	 	 	 	 	 
	 	Section 2.21. Absence of Undisclosed Liabilities
	 	 	16	 	 	 	 	 
	 	Section 2.22. Insurance
	 	 	16	 	 	 	 	 
	 	Section 2.23. Transactions with Related Parties
	 	 	16	 	 	 	 	 
	 	Section 2.24. Permits
	 	 	17	 	 	 	 	 
	 	Section 2.25. Bank Accounts
	 	 	17	 	 	 	 	 
	 	Section 2.26. Intellectual Property Matters
	 	 	17	 	 	 	 	 
	 	Section 2.27. Brokers
	 	 	20	 	 	 	 	 



 






 




	 	 	 	 	 	 	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF AROS AND ACQUISITION SUB
	 	 	20	 	 	 	 	 
	 
	 	Section 3.01. Real Property
	 	 	20	 	 	 	 	 
	 	Section 3.02. Personal Property
	 	 	20	 	 	 	 	 
	 	Section 3.03. Labor Matters
	 	 	20	 	 	 	 	 
	 	Section 3.04. Environmental Matters
	 	 	20	 	 	 	 	 
	 	Section 3.05. Non-ERISA Plans
	 	 	21	 	 	 	 	 
	 	Section 3.06. ERISA Plans
	 	 	21	 	 	 	 	 
	 	Section 3.07. Conduct of Business
	 	 	22	 	 	 	 	 
	 	Section 3.08. Corporate Existence and Power
	 	 	23	 	 	 	 	 
	 	Section 3.09. Corporate Authorization
	 	 	24	 	 	 	 	 
	 	Section 3.10. Governmental Authorization
	 	 	24	 	 	 	 	 
	 	Section 3.11. Non-contravention
	 	 	25	 	 	 	 	 
	 	Section 3.12. Capitalization
	 	 	25	 	 	 	 	 
	 	Section 3.13. Reports
	 	 	26	 	 	 	 	 
	 	Section 3.14. Absence of Certain Changes; Conduct of Business
	 	 	26	 	 	 	 	 
	 	Section 3.15. No Undisclosed Liabilities
	 	 	26	 	 	 	 	 
	 	Section 3.16. Litigation
	 	 	27	 	 	 	 	 
	 	Section 3.17. Permits; Compliance with Law
	 	 	27	 	 	 	 	 
	 	Section 3.18. Intellectual Property
	 	 	27	 	 	 	 	 
	 	Section 3.19. Ownership of Acquisition Sub; No Prior Activities
	 	 	27	 	 	 	 	 
	 	Section 3.20. Brokers
	 	 	28	 	 	 	 	 
	 
	ARTICLE IV COVENANTS OF AROS AND REGEN
	 	 	28	 	 	 	 	 
	 
	 	Section 4.01. Reasonable Efforts
	 	 	28	 	 	 	 	 
	 	Section 4.02. ReGen Shareholder Meeting
	 	 	28	 	 	 	 	 
	 	Section 4.03. Consents
	 	 	29	 	 	 	 	 
	 	Section 4.04. Public Announcements
	 	 	29	 	 	 	 	 
	 	Section 4.05. Notification of Certain Matters
	 	 	29	 	 	 	 	 
	 	Section 4.06. Access to Information
	 	 	29	 	 	 	 	 
	 	Section 4.07. Conduct of Business
	 	 	29	 	 	 	 	 
	 	Section 4.08. Tax-free Reorganization
	 	 	31	 	 	 	 	 
	 	Section 4.09. No Solicitation
	 	 	32	 	 	 	 	 
	 	Section 4.10. Aros Shareholder Meeting
	 	 	32	 	 	 	 	 
	 	Section 4.11. Aros Registration Statements
	 	 	33	 	 	 	 	 
	 	Section 4.12. Restrictions on Transfer; Legends
	 	 	33	 	 	 	 	 
	 	Section 4.13. Exemption from Federal Registration; Blue Sky Compliance
	 	 	33	 	 	 	 	 
	 	Section 4.14. Information Statement; Company Stockholder Approval
	 	 	34	 	 	 	 	 
	 	Section 4.15. Option Assumption and Conversion
	 	 	35	 	 	 	 	 
	 	Section 4.16 Aros Stock Options Available for Issuance
	 	 	34	 	 	 	 	 
	 
	ARTICLE V CONDITIONS TO THE MERGER
	 	 	36	 	 	 	 	 
	 
	 	Section 5.01. Conditions to the Obligations of Each Party
	 	 	36	 	 	 	 	 
	 	Section 5.02. Conditions Precedent to the Obligations of Aros and Acquisition Sub
	 	 	37	 	 	 	 	 



 






 




	 	 	 	 	 	 	 	 	 	 
	 	Section 5.03. Conditions Precedent to the Obligations of ReGen
	 	 	39	 	 	 	 	 
	 
	ARTICLE VI TERMINATION
	 	 	41	 	 	 	 	 
	 
	 	Section 6.01. Termination
	 	 	41	 	 	 	 	 
	 	Section 6.02. Effect of Termination
	 	 	41	 	 	 	 	 
	 	Section 6.03. Fees and Expenses
	 	 	41	 	 	 	 	 
	 
	ARTICLE VII MISCELLANEOUS
	 	 	42	 	 	 	 	 
	 
	 	Section 7.01. Notices
	 	 	42	 	 	 	 	 
	 	Section 7.02. Survival of Representations, Warranties and Agreements
	 	 	43	 	 	 	 	 
	 	Section 7.03. Amendment
	 	 	43	 	 	 	 	 
	 	Section 7.04. Extension; Waiver
	 	 	43	 	 	 	 	 
	 	Section 7.05. Successors and Assigns
	 	 	43	 	 	 	 	 
	 	Section 7.06. Governing Law
	 	 	43	 	 	 	 	 
	 	Section 7.07. Jurisdiction
	 	 	43	 	 	 	 	 
	 	Section 7.08. Counterparts; Effectiveness
	 	 	44	 	 	 	 	 
	 	Section 7.09. Entire Agreement
	 	 	44	 	 	 	 	 
	 	Section 7.10. Headings
	 	 	44	 	 	 	 	 
	 	Section 7.11. Severability
	 	 	44	 	 	 	 	 



 






 



AGREEMENT AND PLAN OF MERGER



     This Agreement and Plan of Merger is made as of the 7th day of June, 2002
by and among (i) ReGen Biologics, Inc., a Delaware corporation (“ReGen”), (ii)
Aros Corporation, a Delaware corporation (“Aros”), and (iii) Aros Acquisition
Corp., a Delaware corporation which is a wholly-owned subsidiary of Aros
(“Acquisition Sub”).


     WHEREAS, the Boards of Directors of ReGen and Aros have determined that it
is fair and advisable to, and in the best interests of, ReGen and Aros and
their respective shareholders that ReGen fold its business and operations into
Aros in a transaction pursuant to which Aros will acquire ReGen by the merger
of Acquisition Sub with and into ReGen upon the terms, and subject to the
conditions, set forth herein; and


     WHEREAS, the issued and outstanding share capital of Aros currently
consists of 8,966,966 shares of common stock, $0.01 par value (the “Aros Common
Stock”); and


     WHEREAS, the issued and outstanding capital stock of ReGen consists of
2,529,973 shares of common stock, par value $0.0001 per share (the “ReGen
Common Stock”), 725,000 shares of Series A Convertible Preferred Stock, par
value $0.0001 per share (the “ReGen Series A Stock”), 1,226,338 shares of
Series B Convertible Preferred Stock, par value $0.0001 per share (the “ReGen
Series B Stock”), 550,552 shares of Series C Convertible Preferred Stock, par
value $0.0001 per share (the “ReGen Series C Stock”), 1,191,321 shares of
Series D Convertible Preferred Stock, par value $0.0001 per share (the “ReGen
Series D Stock”), 335,314 shares of Series E Convertible Preferred Stock, par
value $0.0001 per share (the “ReGen Series E Stock”) and 453,310 shares of
Series F Convertible Preferred Stock, par value $0.0001 per share (the “ReGen
Series F Stock” and, together with the ReGen Series A Stock, the ReGen Series B
Stock, the ReGen Series C Stock, the ReGen Series D Stock and the ReGen Series
E Stock, the “ReGen Existing Preferred Stock”); and


     WHEREAS, it is anticipated that immediately prior to the consummation of
the transactions contemplated hereby, in addition to the outstanding ReGen
Common Stock and ReGen Existing Preferred Stock described above, ReGen will
also have outstanding from 5,568,220 up to 5,974,032 shares of Series G
Convertible Preferred Stock, par value $0.0001 per share (the “ReGen Series G
Stock” and, together with the ReGen Existing Preferred Stock, the “ReGen
Preferred Stock”).


     NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree
as follows.


 






 


ARTICLE I



THE MERGER



     Section 1.01. The Merger.


           (a)     Upon the terms and subject to the conditions contained in this
Agreement, at the Effective Time (as defined in Section 1.01(c)), Acquisition
Sub shall be merged (the “Merger”) with and into ReGen in accordance with the
Delaware General Corporation Law, as amended (the “DGCL”), whereupon the
separate existence of Acquisition Sub will cease, and ReGen shall be the
surviving corporation (the “Surviving Corporation”).


           (b)     Subject to the satisfaction or waiver of all of the conditions set
forth in Article V herein, the closing of the Merger (the “Closing”) will take
place at 10:00 a.m. (New York City time) on a date to be specified by the
parties (the “Closing Date”), which shall be no later than the second Business
Day after satisfaction of the conditions set forth in Article V, at the offices
of Dreier & Baritz LLP, 499 Park Avenue, New York, New York 10022, unless the
parties agree in writing to another time, date or place.


           (c)     Upon the Closing, ReGen and Acquisition Sub will file a certificate of
merger with the Secretary of State of the State of the Delaware on the Closing
Date and make all other filings or recordings required by Delaware law,
including the DGCL, in connection with the Merger. The Merger will become
effective at such time as the certificate of merger is filed with the Secretary
of State of the State of Delaware (the “Effective Time”).


           (d)     From and after the Effective Time, the Surviving Corporation will
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, and restrictions of ReGen and Acquisition Sub,
all as provided under the DGCL.


     Section 1.02. Conversion. At the Effective Time, by virtue of the Merger and
without any action on the part of Aros, Acquisition Sub, ReGen or the holder of
any of the following securities:


           (a)     Each share of ReGen Common Stock issued and outstanding immediately
prior to the Effective Time other than Dissenting Shares (as defined in Section
1.04, which shares will not constitute “ReGen Common Stock” hereunder) shall be
converted into the right to receive 2.7495 shares of fully paid, nonassessable
shares of Aros Common Stock.


           (b)     Each share of ReGen Existing Preferred Stock issued and outstanding
immediately prior to the Effective Time other than Dissenting Shares (which
shares will not constitute “ReGen Existing Preferred Stock” hereunder) shall be
converted into (i) the right to receive 0.0663 shares of fully paid,
nonassessable shares of Aros Common Stock, plus (ii)

-2-






 




2.6832 shares of Aros Series B Convertible Preferred Stock, par value
$0.01 per share, bearing the terms set forth on Exhibit A hereto (the “Aros
Series B Stock”).


           (c)     Each share of ReGen Series G Stock issued and outstanding immediately
prior to the Effective Time other than Dissenting Shares (which shares will not
constitute “ReGen Series G Stock” hereunder) shall be converted into the right
to receive 2.7495 shares of fully paid, nonassessable shares of Aros Series A
Convertible Preferred Stock, par value $0.01 per share, bearing the terms set
forth on Exhibit B hereto (the “Aros Series A Stock”).


           (d)     Each option to purchase ReGen Common Stock under the ReGen Option
Plans (as defined in Section 1.06 below) outstanding immediately prior to the
Effective Time (the “ReGen Options”) and each warrant to purchase ReGen Common
Stock outstanding immediately prior to the Effective Time (the “ReGen Common
Warrants”) shall be assumed by Aros and converted, in accordance with Section
4.15 herein, into options and warrants, respectively, to acquire Aros Common
Stock.


           (e)     Each warrant to purchase ReGen Series C Stock outstanding immediately
prior to the Effective Time (the “ReGen Series C Warrants”) shall be assumed by
Aros and converted, in accordance with Section 4.15, into warrants to purchase
shares of Aros Common Stock and Aros Series B Stock (such warrants to purchase
ReGen Series C Stock and the options and warrants referred to in Section
1.02(d) above are collectively referred to herein as the “ReGen Options and
Warrants”).


           (f)     All shares of ReGen Common Stock and ReGen Preferred Stock outstanding
immediately prior to the Effective Time shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist except as
otherwise provided herein or by law.


           (g)     Each share of ReGen Common Stock and ReGen Preferred Stock which is
held in the treasury of ReGen immediately prior to the Effective Time shall be
cancelled and retired and cease to exist without any conversion thereof and
without any payment of consideration with respect thereto.


           (h)     Each issued and outstanding share of the capital stock of Acquisition
Sub shall be converted into and become one fully paid and nonassessable share
of common stock of the Surviving Corporation.


     Section 1.03. Exchange of Certificates.


           (a)     At the Effective Time, Aros shall deposit with Aros’ current transfer
agent or such other agent as Aros and ReGen shall agree (the “Exchange Agent”),
in trust for the benefit of the holders of ReGen Common Stock and ReGen
Preferred Stock (together, the

-3-






 




“ReGen Exchangeable Stock”) for exchange in accordance with this Article I, certificates
representing the aggregate number of shares of Aros Common Stock, Aros
Series A Stock and Aros Series B Stock issuable pursuant to Section 1.02 as
rounded to the nearest whole share in accordance with Section 1.03(e) below
(collectively, the “Aros Issuable Stock”) in exchange for the ReGen
Exchangeable Stock.


           (b)     Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates that, immediately prior
to the Effective Time, represented ReGen Exchangeable Stock (the
“Certificates”) (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Aros and ReGen may reasonably
specify), and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the applicable Aros
Issuable Stock. Upon surrender of a Certificate to the Exchange Agent,
together with such letter of transmittal, duly executed and completed in
accordance with its terms, the holder of such Certificate shall be entitled to
receive in exchange therefor the certificates representing whole shares of the
applicable Aros Issuable Stock, as determined in accordance with Section
1.03(e) below, which such holder has the right to receive pursuant to the
provisions of this Agreement, and the Certificate so surrendered shall
forthwith be cancelled.


           If a certificate representing Aros Issuable Stock is to be issued in a
name other than that in which the Certificate surrendered in exchange therefore
is registered, it shall be a condition to the issuance that such Certificate be
properly endorsed (or accompanied by an appropriate instrument of transfer) and
accompanied by evidence that any applicable stock transfer taxes have been paid
or provided for.


           Until surrendered as contemplated by this Section 1.03, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive the consideration specified herein; provided, that in the
event any holder exercises such holder’s appraisal rights, if any, under
Section 262 of the DGCL and becomes entitled to receive the appraised value of
such holder’s ReGen Exchangeable Stock instead of the Aros Issuable Stock into
which such ReGen Exchangeable Stock shall have been converted, the Surviving
Corporation shall pay such holder the appraised “fair value” of such shares of
ReGen Exchangeable Stock, together with any other sums which it may owe such
holder as a result of the appraisal proceeding, upon the holder’s surrender to
the Exchange Agent of the Certificates that immediately prior to the Effective
Time represented the shares of ReGen Exchangeable Stock so appraised, and the
Exchange Agent shall not thereafter be required to deliver to such holder any
Aros Issuable Stock.


           With respect to any Certificate alleged to be lost, stolen or destroyed,
the holder of such Certificates shall be entitled to the consideration set
forth in Section 1.02 above upon delivery to Aros (with a copy to the Exchange
Agent) of an affidavit of such holder setting forth such allegation and an
indemnity agreement to indemnify Aros and the Surviving Corporation, on terms
reasonably satisfactory to Aros, against any claim that may be made against any
of


-4-






 


them on account of the alleged loss, theft or destruction of any such
Certificate or the delivery of the Aros Issuable Stock contemplated by this
Section 1.03.


           Any certificates of Aros Issuable Stock which remain unclaimed by the
holders of Certificates for twelve months after the Effective Time shall be
returned by the Exchange Agent to Aros, and any holders of Certificates who
have not theretofore complied with this Section 1.03 shall thereafter receive
delivery (subject to abandoned property, escheat or other similar laws) of the
Aros Issuable Stock issuable upon the conversion of their Certificates and any
dividends payable on such shares, without any interest thereon, only after
delivering their Certificates and letters of transmittal to Aros, and otherwise
complying with Section 1.01 herein.


           (c)     No dividends or other distributions declared or made after the
Effective Time with respect to Aros Issuable Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the Aros Issuable Stock represented thereby until the holder of
record of such Certificate shall surrender such Certificate. Following
surrender of any such Certificate, there shall be paid to the record holder of
the certificates representing whole shares of Aros Issuable Stock, as rounded
to the nearest whole share in accordance with Section 1.03(e) below, issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofor paid with respect to such shares of Aros Issuable
Stock and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such shares of Aros Issuable Stock.


           (d)     Following the Effective Time, there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation or Aros
of the ReGen Exchangeable Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or Aros for any reason, they shall be cancelled and
exchanged as provided in this Article I.


           (e)     No certificate or scrip representing fractional Aros Issuable Stock
shall be issued upon the surrender for exchange of Certificates. In lieu of
any such fractional share, Aros shall round the number of shares of Aros Common
Stock, Aros Series A Stock and Aros Series B Stock, as the case may be, up to
the nearest whole share (with amounts of 0.5 and greater being rounded up),
except as otherwise set forth in Section 4.15 herein.


     Section 1.04. Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of ReGen Common Stock and ReGen Preferred Stock that
are held by stockholders who have dissented from the Merger and perfected their
appraisal rights, if permitted by, and in accordance with, the provisions of
Section 262 of the DGCL (the “Dissenting Shares”), shall not be converted into
or be exchangeable for the right to receive any Aros Issuable Stock, but the
holders thereof shall be entitled to payment from the Surviving Corporation of
the appraised “fair value” of such shares as provided in Section 1.03(b)
herein;


-5-






 


provided, however, that if any such holder shall have failed to perfect
such appraisal rights or shall have effectively withdrawn or lost such rights
pursuant to Section 262 of the DGCL, then such holder shall be entitled to have
such holder’s shares of ReGen Exchangeable Stock
converted into, at the Effective Time, shares of Aros Issuable Stock in
accordance herewith. If any holder of shares of ReGen Exchangeable Stock shall
be entitled to be paid such appraised “fair value” of such Dissenting Shares as
provided in Section 262 of the DGCL, ReGen shall give Aros notice thereof and
Aros shall have the right to participate in all negotiations and proceedings
with respect to any such demands. ReGen shall not, except with the prior
written consent of Aros, voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for payment.


     Section 1.05. Stock Transfer Books. At the Effective Time, the stock
transfer books of ReGen will be closed and there will be no further
registration of transfers of shares of ReGen Exchangeable Stock on the records
of ReGen. Certificates formerly representing shares of ReGen Exchangeable
Stock that are presented to Aros or the Surviving Corporation after the
Effective Time will be cancelled and exchanged as provided in this Article I.


     Section 1.06. Conversion and Assumption of Stock Option Plans; Warrants. As
of the Effective Time, (a) the ReGen Options and Warrants shall be assumed by
Aros as set forth in Sections 1.02(d), 1.02(e) and 4.15, and (b) all existing
stock option plans and other incentive compensation plans of ReGen as set forth
on Schedule 1.06 (the “ReGen Option Plans”) shall be assumed by Aros in
accordance with Section 4.15 herein.


     Section 1.07. Certificate of Incorporation and Bylaws. The certificate of
incorporation of Acquisition Sub as in effect at the Effective Time,
substantially in the form of Exhibit C attached hereto, shall be the
certificate of incorporation of the Surviving Corporation until duly amended in
accordance with applicable law. The bylaws of Acquisition Sub as in effect at
the Effective Time, substantially in the form of Exhibit D attached hereto,
shall be the bylaws of the Surviving Corporation until thereafter amended in
accordance with applicable law.


     Section 1.08. Directors. The Board of Directors of Aros and the Surviving
Corporation from and after the Effective Time shall initially consist of seven
(7) members. From the Effective Time, until their successors have been duly
elected and qualified in accordance with the terms of the Stockholders
Agreement (as defined in Section 5.01(d)) by and among Aros and certain ReGen
stockholders, the directors shall consist of the designees set forth in the
Stockholders Agreement, each to hold office in accordance therewith and in
accordance with the certificate of incorporation and bylaws of each of Aros and
the Surviving Corporation.


     Section 1.09. Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the “Code”) and that this Agreement
shall constitute a “plan of reorganization” for purposes of Section 368 of the
Code.


-6-






 


ARTICLE II



REPRESENTATIONS AND WARRANTIES OF REGEN



     ReGen represents and warrants to Aros and Acquisition Sub as follows:


     Section 2.01. Corporate Existence and Power. ReGen is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all corporate power required to carry on its business as
now conducted. ReGen is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the
property owned or leased by it or the nature of its activities makes such
qualification necessary, except where the failure to so qualify or be in good
standing would not have a ReGen Material Adverse Effect. For purposes of this
Agreement, “ReGen Material Adverse Effect” means any change or event that
individually or when taken together with all other changes and events, is or is
reasonably likely to be materially adverse to the business, assets,
liabilities, operations, condition (financial or otherwise) or prospects of
ReGen, other than any such effect arising out of or resulting from the
transactions contemplated by this Agreement or general economic, financial, or
market conditions. A ReGen Material Adverse Effect shall be deemed to exist if
there occurs any event which causes or may reasonably be expected to cause or
result in a monetary loss which, individually or when aggregated with all other
events, exceeds $100,000.


     Section 2.02. Corporate Authorization. The execution, delivery and
performance by ReGen of this Agreement and the consummation by ReGen of the
transactions contemplated hereby are within ReGen’s corporate powers and have
been duly authorized by all necessary corporate action on the part of ReGen
(other than approval by the holders of the requisite number of shares of
capital stock of ReGen). This Agreement has been duly and validly executed and
delivered by ReGen and, assuming the due and valid authorization, execution and
delivery of this Agreement by Aros and Acquisition Sub, constitutes a valid and
binding agreement of ReGen, enforceable in accordance with its terms except as
may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors’ rights
generally and by equitable principles of general applicability. The Board of
Directors of ReGen has approved the Merger, this Agreement and the transactions
contemplated hereby.


     Section 2.03. Governmental Authorization. The execution, delivery and
performance by ReGen of this Agreement and the consummation by ReGen of the
Merger and the other transactions contemplated hereby require no consent,
waiver, approval, authorization or permit by or from, or action by or in
respect of, or filing with, any government or subdivision thereof, or any
administrative, governmental or regulatory authority, agency, commission,
tribunal or body, domestic, foreign or supranational (any of the foregoing, a
“Governmental Entity”) other than: (a) the filing of the certificate of merger
as contemplated by Section 1.01(c); (b) compliance with any applicable
requirements of the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the “Exchange Act”); and (c)
where the failure


-7-






 


to obtain such consents, waivers, approvals, authorizations
or permits, or to take such action by
or in respect of, or to make such filings with, such Governmental Entit
would not (i) prevent or materially delay consummation of the Merger, (ii)
otherwise prevent or be reasonably likely to prevent ReGen from performing its
material obligations under this Agreement or (iii) individually or in the
aggregate, have a ReGen Material Adverse Effect. ReGen has taken all action
necessary to render the restrictions in Section 203 of the DGCL inapplicable to
this Agreement and the Merger.


     Section 2.04. Non-contravention. Except as set forth on Schedule 2.04, the
execution, delivery and performance by ReGen of this Agreement and the
consummation by ReGen of the transactions contemplated hereby do not and will
not: (a) contravene or conflict with the certificate of incorporation or bylaws
of ReGen; (b) contravene or conflict with or constitute a violation of any
provision of any state or federal law, regulation, judgment, injunction, order
or decree binding upon or applicable to ReGen; (c) result in a breach or
violation of or constitute a default (or an event that with the giving of
notice or the lapse of time or both would constitute a default) under or give
rise to a right of termination, amendment, cancellation or acceleration of any
right or obligation of ReGen or to a loss of any material benefit to which
ReGen is entitled or require any consent, approval or authorization under any
provision of any material agreement, contract or other instrument binding upon
ReGen or any of its assets; or (d) result in the creation or imposition of any
lien on any material asset of ReGen.


     Section 2.05. Capitalization.


           (a)     As of the date hereof, the authorized capital stock of ReGen consists
solely of 13,000,000 shares of ReGen Common Stock, 725,000 shares of ReGen
Series A Stock, 1,226,338 shares of ReGen Series B Stock, 1,635,000 shares of
ReGen Series C Stock, 1,191,321 shares of ReGen Series D Stock, 335,314 shares
of ReGen Series E Stock, and 1,000,000 shares of ReGen Series F Stock and, as
of the Effective Time, there shall also be authorized 6,400,000 shares of ReGen
Series G Stock. As of the date hereof, there are issued and outstanding
2,529,973 shares of ReGen Common Stock, 725,000 shares of ReGen Series A Stock,
1,226,338 shares of ReGen Series B Stock, 550,552 shares of ReGen Series C
Stock, 1,191,321 shares of ReGen Series D Stock, 335,314 shares of ReGen Series
E Stock, and 453,310 shares of ReGen Series F Stock. Immediately prior to the
Effective Time there shall be issued and outstanding only the capital stock of
ReGen specified in the preceding sentence plus a minimum of 5,568,220 and a
maximum of 5,974,032 shares of ReGen Series G Stock. All of the shares of
capital stock of ReGen issued and outstanding as of the date hereof are, and
immediately prior to the Effective Date will be, validly issued, fully paid and
non-assessable.


           (b)     As of the date hereof, (i) 3,269,979 shares of ReGen Common Stock are
issuable upon exercise of the ReGen Options, at an average exercise price of
$1.09 (exercise prices ranging from $0.10 to $1.45 per share), pursuant to the
ReGen Option Plans, (ii) 240,704 shares of ReGen Common Stock are issuable upon
exercise of the ReGen Common Warrants, at an average exercise price of $3.35
(exercise prices ranging from $1.45 to $4.50 per share) and (iii) 449,888
shares of ReGen Series C Stock are issuable upon exercise of the ReGen Series C
Warrants, at an exercise price of $4.50 per share, to purchase such preferred
stock. Immediately


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prior to the Effective Time the only issued and outstanding
options and warrants relating to the
capital stock of ReGen shall be those specified in the preceding sentence
plus warrants to purchase up to 784,829 shares of ReGen Common Stock at an
exercise price of $1.2321, which will have been issued in respect of the
conversion of certain bridge loans of ReGen.


           (c)     Except as set forth on Schedule 2.05 and in this Section 2.05, there
are outstanding (i) no shares of capital stock or other voting securities of
ReGen, (ii) no securities of ReGen convertible into or exchangeable for shares
of capital stock or voting securities of ReGen, and (iii) no options or other
rights to acquire from ReGen, and no obligation of ReGen to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of ReGen.


           (d)     There are no outstanding contractual obligations of ReGen to provide
funds to, or make any investment (in the form of a loan, capital contribution
or otherwise) in, any other Person.


     Section 2.06. Subsidiaries. ReGen has no subsidiaries and does not own
(directly or indirectly) any equity interest in any corporation, partnership,
limited liability company, joint venture or other entity.


     Section 2.07. FDA and other Regulations. Except as set forth in Schedule
2.07, ReGen, and the products sold and intended to be sold by ReGen, are in
compliance in all material respects with all current and otherwise applicable
statutes, rules, regulations, standards, guides or orders administered or
issued by the Federal Drug and Food Administration or other applicable
regulatory bodies. Except as set forth in Schedule 2.07, ReGen does not know
of any facts which are reasonably likely to cause: (a) the denial, withdrawal,
recall or suspension of any product sold or intended to be sold by ReGen, (b) a
change in the marketing classification or labeling of any such products, or (c)
a termination or suspension of the marketing of any such products.


     Section 2.08. Financial Statements. ReGen has provided Aros with its
audited financial statements for the fiscal years ended December 31, 2000 and
1999, its unaudited financial statements for the fiscal year ended December 31,
2001, and its unaudited interim financial statements for the fiscal quarter
ending March 31, 2002 and prior to the Effective Time will have provided Aros
with its audited financial statements for the fiscal year ended December 31,
2001 (collectively, the “Financial Statements”). Each of the balance sheets
included in the Financial Statements (including the related notes and
schedules) fairly presents, or will fairly present, as the case may be, in all
material respects the financial position of ReGen as of the date thereof, and
each of its statements of operations, shareholders’ equity and cash flows
included in the Financial Statements fairly presents, or will fairly present,
as the case may be, in all material respects the financial position of ReGen
for the periods then ended (subject to normal year-end adjustments in the case
of any unaudited interim financial statements), in each case in accordance with
generally accepted accounting principles consistently applied in effect in the
United States of America as of the date of the applicable determination
(“GAAP”) (except as may be noted


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therein, except for the absence of notes in
the case of unaudited interim financial statements, and in each case subject to
necessary year-end adjustments). The Financial Statements have been, or
will be, as the case may be, prepared in all material respects from the
books and records of ReGen maintained in the ordinary course of business and
reflect and provide, or will reflect and provide, as the case may be, adequate
reserves in respect of all known liabilities of ReGen, including all known
contingent liabilities, as of their respective dates.


     Section 2.09. Absence of Certain Changes or Events. Except as reflected in
Schedule 2.09, since March 31, 2002, there has not been: (a) any change in the
business, operations or financial condition of ReGen that has had or would
reasonably be expected to have, individually or in the aggregate, a ReGen
Material Adverse Effect; (b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
ReGen, or any repurchase, redemption or other acquisition by ReGen of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, ReGen; (c) any incurrence, assumption or guarantee by ReGen of
any indebtedness for borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past practices; or (d) as
of the date hereof, any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of ReGen that has
had or would reasonably be expected to have, individually or in the aggregate,
a ReGen Material Adverse Effect.


     Section 2.10. Real Property.


           (a)     ReGen does not own any real property. Set forth on Schedule 2.10(a)
is a description of each parcel of real property under which ReGen is a lessee,
lessor, sublessee or sublessor (the “Leased Property”). True and complete
copies of all leases to which ReGen is a party respecting the Leased Property
and all other instruments granting such leasehold interests, rights, options or
other interests (the “Property Leases”), have been made available to Aros.


           (b)     With respect to the Property Leases, no breach or event of default on
the part of ReGen to any of the Property Leases and no event that, with the
giving of notice or lapse of time or both, would constitute such breach or
event of default, have occurred and are continuing unremedied. All the
Property Leases are in full force and effect and, to the knowledge of ReGen,
are valid and enforceable against the parties thereto in accordance with their
terms. All rental and other payments due under each of the Property Leases
have been duly paid in accordance with the terms of such Property Lease.


     Section 2.11. Personal Property. ReGen has good and marketable title to all
personal property reflected on the most recent balance sheet included in the
Financial Statements and all personal property acquired by ReGen since the date
of the most recent balance sheet (except such personal property as has been
disposed of in the ordinary course of business), free and clear of any liens,
except for: (a) the liens identified on Schedule 2.11; (b) liens for current
taxes not yet due and payable or delinquent, or being contested in good faith;
and (c) mechanics’, carriers’, workmen’s, and similar liens arising in the
ordinary course of business.


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     Section 2.12. Labor Matters. Except as reflected on Schedule 2.12, ReGen is
not party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization. To
ReGen’s knowledge, there are no organizational efforts with respect to the
formation of any collective bargaining unit presently being made or threatened
involving employees of ReGen.


     Section 2.13. Environmental Matters.


           (a)     ReGen is and, to the knowledge of ReGen has been at all times, in
compliance in all material respects with all Environmental Laws. ReGen has now
and at all times has had all the necessary permits required under Environmental
Laws for the operation of its business, and is not and has not been in
violation of any of the terms and conditions of any of its permits. ReGen has
not received any written notice or other communication that alleges that ReGen
is not in compliance in any material respect with any Environmental Law.
Except as set forth on Schedule 2.13, ReGen has not generated, manufactured,
produced, transported, imported, used, treated, refined, processed, handled,
stored, discharged, released, or disposed of any Hazardous Materials (whether
lawfully or unlawfully) at any of the Leased Property occupied or controlled by
ReGen on or at any time prior to the Closing Date. To the knowledge of ReGen:
(i) there are not and have not been any releases or threatened releases of any
Hazardous Materials in any quantity at, on, or from the Leased Property; (ii)
there are no circumstances that may prevent or interfere in any material
respect with ReGen’s compliance with any Environmental Law; and (iii) all real
property and all current and past activities thereon, during ReGen’s ownership
and operation, including without limitation the use, maintenance and operation
of all real property and all activities and conduct of business related
thereto, currently comply and at all times in the past during ReGen’s ownership
and operation have complied in all material respects with all Environmental
Laws.


           (b)     For the purposes of this Agreement:



		
	 	     (i)     “Environmental Laws” means all applicable statutes, regulations,
rules, ordinances, codes, actions, licenses, permits, orders, approvals,
plans, authorizations, concessions, franchises and similar items of all
federal state, and local Governmental Entities, domestic and foreign,
having jurisdiction, and all applicable judicial and administrative and
regulatory decrees, judgments and orders, and all covenants running with
the land that relate to the protection of health or the environment,
including without limitation those that relate to the existence,
handling, manufacture, treatment, storage, use, generation, release,
discharge, refining, recycling, reclaiming or disposal of Hazardous
Substances.




		
	 	     (ii)      “Hazardous Substances” means any substance: (A) the presence
of which requires reporting, investigation, removal or remediation under
any Environmental Law; (B) that is defined as a “hazardous waste,”
“hazardous substance,” “pollutant” or “contaminate” under any
Environmental Law; (C) that is toxic, explosive, corrosive, flammable,
ignitable, infectious, radioactive, reactive, carcinogenic, mutagenic or



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	 	otherwise hazardous and is regulated under any Environmental Law; (D)
the presence of which on any real property poses a hazard to the health or safety of
persons on or about any real property; (E) the presence of which on
adjacent properties constitutes a trespass by ReGen; (F) that contains
gasoline, diesel fuel or other petroleum hydrocarbons; or (G) that
contains PCBs, asbestos or urea formaldehyde foam insulation.



           (c)     ReGen has made available to Aros true and complete copies of all
claims, complaints, reports, assessments, audits, investigations and other
documents in the possession of or obtainable by ReGen made by, on behalf of or
against ReGen during the past five (5) years pertaining to Environmental Laws
or Hazardous Substances.


           (d)     Notwithstanding anything to the contrary in this Section 2.13, all
representations made by ReGen in this Section 2.13 with respect to the actions
or omissions of any current or prior owner or occupant of any real property,
other than ReGen, are made to the actual knowledge of ReGen.


     Section 2.14. Non-ERISA Plans. Set forth on Schedule 2.14 is a complete list
of each current employment contract and consulting agreement entered into by
ReGen, or by which ReGen is bound, and each deferred compensation, bonus,
incentive compensation, restricted stock, stock option, employee stock
purchase, savings, severance or termination pay agreement or plan and any other
employee benefit plan, agreement, arrangement or commitment, whether formal or
informal, not required to be listed on Schedule 2.15, maintained, entered into
or contributed to, or which is required to be maintained, entered into or
contributed to, by ReGen for the benefit of any current or former director,
officer or employee of ReGen (the “Non-ERISA Plans”).


     Section 2.15. ERISA Plans.


           (a)     Except as set forth on Schedule 2.15(a), there is no employee pension
benefit plan (the “Pension Plans”) as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974 (“ERISA”) or employee welfare benefit
plan as defined in Section 3(1) of ERISA (the “Welfare Plans” and, together
with the Pension Plans, collectively referred to as the “ERISA Plans”)
established, maintained or contributed to by ReGen or any ReGen ERISA Affiliate
or to which ReGen or any ReGen ERISA Affiliate had an obligation to contribute
during the five (5) years preceding the date hereof. As used herein, the term
“ReGen ERISA Affiliate” means a corporation which is a member of a controlled
group of corporations with ReGen within the meaning of Section 414(b) of the
Code, a trade or business (including a sole proprietorship, partnership, trust,
estate or corporation) which is under common control with ReGen within the
meaning of Section 414(c) of the Code, or a member of an affiliated service
group with ReGen within the meaning of Section 414(m) or Section 414(o) of the
Code.


          (b)     Except as set forth on Schedule 2.15(b), no contract, agreement, plan
or other arrangement, whether or not an ERISA Plan (other than this Agreement),
exists pursuant to


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which the execution of this Agreement would trigger an
obligation by ReGen to pay any amount or provide any property to any employee,
officer or director of ReGen.


     Section 2.16. Compliance with Law. Except as set forth on Schedule 2.16,
ReGen has complied with all applicable statutes, regulations, orders and
restrictions of the United States of America, all states and other subdivisions
thereof, all agencies and instrumentalities of the foregoing and all national
self-regulatory bodies and authorities in respect of the conduct of ReGen’s
business and ownership of its properties, except where such failure to comply
would not have a ReGen Material Adverse Effect.


     Section 2.17. Litigation. Except as set forth on Schedule 2.17, there is no
action, suit, claim, proceeding, inquiry or investigation pending or, to
ReGen’s knowledge, threatened, against or affecting ReGen, or the assets,
properties, or business of ReGen, or relating to or involving the transactions
contemplated by this Agreement at law or in equity, or before or by any federal
or state Governmental Entity that are likely to have, individually or in the
aggregate, a ReGen Material Adverse Effect. ReGen is not in default with
respect to any order, writ, injunction or decree known to or served upon ReGen.
Except as set forth on Schedule 2.17, there is no pending action or suit
brought by ReGen against others.


     Section 2.18. Material Contracts.


           (a)    Except as set forth on Schedule 2.18(a), ReGen is not a party to any
written or to ReGen’s knowledge, oral:



		
	 	        (i)    contract involving payments or receipts in excess of $20,000
(on an annualized basis) or contract not made in the ordinary course of
business;
	 
	 	        (ii)    consulting agreement or contract for the employment of any
officer, employee or other person on a full-time, part-time or consulting
basis;
	 
	 	        (iii)    agreement, mortgage, indenture, loan or credit agreement,
security agreement, guaranty or indemnity or other agreement or
instrument relating to the borrowing or lending of money or extension of
credit or providing for the mortgaging or pledging of, or otherwise
placing a lien or security interest on, any assets or properties of
ReGen;
	 
	 	        (iv)    option, warrant or other contract for the purchase of any debt
or equity security of any corporation, or for the issuance of any debt or
equity security, or the conversion of any obligation, instrument or
security into debt or equity securities, of ReGen;
	 
	 	        (v)    settlement agreement of any administrative or judicial
proceedings within the past five (5) years; or



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	 	        (vi)    intellectual property (including trademark) licensing
agreement.



           (b)    Except as set forth on Schedule 2.18(b), ReGen is not in breach of or
in default in any material respect under any provisions of the contracts,
obligations or commitments set forth on Schedule 2.18(a) (collectively, the
“Contracts”), and no event has occurred that, with the giving of notice or
lapse of time or both, would constitute such a breach or default. ReGen has
made available to Aros a true and complete copy of all written Contracts set
forth on Schedule 2.18(a), and accurate descriptions of all oral Contracts set
forth on Schedule 2.18(a).


     Section 2.19. Conduct of Business. Since March 31, 2002, ReGen has in all
material respects preserved the business organization of ReGen intact, kept
available to ReGen the services of all current officers and employees and
preserved the goodwill of the suppliers, customers, employees and others having
business relations with ReGen. Except as set forth on Schedule 2.19, since
March 31, 2002, ReGen has conducted its business in the ordinary course, has
maintained its assets and properties in at least as good order and condition as
existed on March 31, 2002 (other than wear as may be accounted for by
reasonable use), and as is necessary to continue to conduct its business and,
except as contemplated by this Agreement, has not and will have not through the
Closing Date:


           (a)    incurred any material obligation or liability (absolute, accrued,
contingent or other), except in the ordinary course of business;


           (b)    discharged or satisfied any material lien or encumbrance, or paid or
satisfied any material obligation or liability (absolute, accrued, contingent
or other), other than liabilities reflected on the most recent balance sheet
included in the Financial Statement or incurred since March 31, 2002 in the
ordinary course of business consistent with past practice;


           (c)    increased or established any reserve for taxes or other liabilities on
its books or otherwise provided therefor, except for current taxes due in the
ordinary course of business;


           (d)    mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the assets or properties of ReGen, except for leases and
financing of equipment in the ordinary course of business;


           (e)    sold, assigned or transferred any asset, property or business or
canceled any debt or claim or waived any right, except sales of inventory and
immaterial amounts of other assets in the ordinary course of business;


           (f)    granted any increase in the compensation (including bonuses and
deferred compensation) payable to any executive officer, director, or key
employee of ReGen, or granted any increase in compensation to any other
employee of ReGen in excess of five percent (5%);


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           (g)    made or authorized any capital expenditures in excess of $100,000 in
the aggregate, except as may have been necessary for ordinary repair,
maintenance and replacement of equipment;


           (h)    made or forgiven any loan to any shareholder or any relative or
affiliate of any shareholder, or declared, set aside or paid to any shareholder
any dividend or other distribution in respect of its capital stock, or redeemed
or purchased any of its capital stock, or agreed to take any such action;


           (i)    transferred any asset or paid any commission, salary or bonus to any
shareholder or any relative or affiliate of any shareholder other than the
payment of wages or salaries to shareholder employees in the ordinary course of
business, or paid any rent, commission or fee to any shareholder or any
relative or affiliate of any shareholder other than pursuant to the Property
Leases disclosed on Schedule 2.10(a) in the amounts shown thereon;


           (j)    entered into or agreed to enter into any transaction with or for the
benefit of any shareholder or any relative or affiliate of any shareholder
other than the transactions contemplated by this Agreement;


           (k)    issued, sold or transferred, or agreed to issue, sell or transfer, any
stock, bond, debenture or other security of ReGen; or


           (l)    paid, incurred or made any commitments to pay or incur any default
rate of interest, fees, costs or expenses of any nature whatsoever in
connection with any credit or loan facilities extended to ReGen.


     Section 2.20. Tax Matters.


           (a)    Except as set forth on Schedule 2.20(a), ReGen in a timely manner
(including extensions) has filed all tax returns and other tax information
reports required to have been filed with any governmental agency by it under
all federal, state, local and foreign tax laws to which it is subject, except
to the extent that any failure to file would not have, individually or in the
aggregate a ReGen Material Adverse Effect. All such returns and reports are
true, correct and complete in all material respects and accurately set forth
all items to the extent required to be reflected or included in such returns by
applicable federal, state, local or foreign tax laws, regulations or rules.
ReGen has paid in full all taxes, including any interest and penalty in
connection therewith, required to have been paid with respect to the periods
covered by such returns. ReGen does not have any tax liability, whether or not
disputed, including any interest and penalty in connection therewith, for all
periods ending on or prior to the date of the most recent balance sheet
included in the Financial Statements for which an adequate tax reserve has not
been established on such balance sheet. From and after the date of the most
recent balance sheet included in the Financial Statements, ReGen has not
incurred any tax liability other than as a result of business transactions in
the ordinary course.


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           (b)    Set forth on Schedule 2.20(b) is a complete list of income and other
tax returns filed by ReGen pursuant to the laws or regulations of any federal,
state, local or foreign tax authority that have been examined or audited by the
IRS or other appropriate authority during
the preceding three (3) years. Also set forth on Schedule 2.20(b) is a
complete list of all adjustments resulting from each such examination or audit.
No tax examination or audit is in progress. All material deficiencies
proposed as a result of examinations or audits by taxing authorities have been
paid or finally settled and no issue has been raised in any such examination or
audit that, by application of similar principles, reasonably can be expected to
result in the assertion of a deficiency for any other year not so examined or
audited. As of the date hereof, ReGen has not granted any requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment of any taxes with respect to any tax returns of
ReGen that have continuing effect.


     Section 2.21. Absence of Undisclosed Liabilities. Except as specifically
identified on Schedule 2.21, ReGen has no indebtedness or liability, whether
accrued, fixed or contingent, other than (a) liabilities reflected in the most
recent balance sheet included in the Financial Statements, and (b) liabilities
incurred in the ordinary course of business of ReGen (consistent with past
practice in terms of both frequency and amount) subsequent to the date of such
balance sheet.


     Section 2.22. Insurance. ReGen has made available to Aros copies of all
liability insurance policies, primary and excess casualty insurance policies
providing coverage for bodily injury and property damage to third parties,
including products liability and completed operations coverage, and worker’s
compensation insurance policies maintained by ReGen. ReGen maintains insurance
coverage reasonably adequate for the operation of its business (taking into
account the cost and availability of such insurance).


     Section 2.23. Transactions with Related Parties.


           (a)    Except as set forth on Schedule 2.23, there are no outstanding notes
payable to, accounts receivable from or advances by ReGen to, and ReGen is not
otherwise a creditor of, any shareholder or former shareholder of ReGen or any
relative or affiliate of any shareholder or former shareholder of ReGen. Since
the date of the most recent balance sheet included in the Financial Statements,
ReGen has not incurred any obligation or liability to, or become a creditor of,
any shareholder or former shareholder of ReGen or any relative or affiliate of
any shareholder or former shareholder of ReGen.


           (b)    ReGen has not purchased or leased real property from any shareholder
or former shareholder of ReGen or any relative or affiliate of such shareholder
or former shareholder, including any other instruments granting such leasehold
interests, or involving rights, options or other interests.


-16-






 


     Section 2.24. Permits. ReGen has all franchises, licenses, permits,
certificates and other authorizations from federal, state and local
Governmental Entities, departments or bodies that are necessary for the conduct
of its business and which, if not obtained, would, individually or in the
aggregate, have a ReGen Material Adverse Effect (each a “Permit”). Schedule
2.24
contains a list of all Permits. ReGen has no knowledge of any fact, error or
omission relevant to any Permit that would permit the revocation or withdrawal
thereof.


     Section 2.25. Bank Accounts. Schedule 2.25 contains an accurate and complete
list of:


           (a)    the names and addresses of each bank in which ReGen has an account;


           (b)    the account numbers of such accounts; and


           (c)    the authorized signatories and amounts for such accounts.


     Section 2.26. Intellectual Property Matters.


           (a)    As used herein, the term “Intellectual Property Assets” includes:



		
	 	        (i)    all material fictional business names, trading names, registered
and unregistered trademarks, service marks, and applications
(collectively, “Marks”);
	 
	 	        (ii)    all material patents, patent applications, and inventions and
discoveries that may be patentable owned by ReGen (collectively,
“Patents”);
	 
	 	        (iii)    all material registered copyrights in both published works and
unpublished works, and all rights in mask works owned by ReGen
(collectively, “Copyrights”); and
	 
	 	        (iv)    all material know-how, trade secrets, confidential information,
customer lists, customer histories, product formulations, product
information and specifications, software, technical information, data,
process technology, plans, drawings, and blueprints (collectively, “Trade
Secrets”) owned, used, or licensed by ReGen as licensee or licensor.



           (b)    ReGen represents as follows:



		
	 	        (i)    Schedule 2.26(b) contains a complete and accurate list and
summary description, including any royalties paid or received by ReGen,
of all material contracts relating to the Intellectual Property Assets to
which ReGen is a party or by which ReGen is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less than $1,500



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	 	        under which ReGen is the licensee. There are no outstanding, and to
ReGen’s knowledge no threatened, disputes or disagreements with respect
to any such agreement.
	 
	 	        (ii)    The Intellectual Property Assets owned or used by ReGen are all
those necessary for the operation of ReGen’s business as currently
conducted. Except as set forth on Schedule 2.26(b), ReGen is the owner
of all right, title, and interest in and to each of the Intellectual
Property Assets, free and clear of all liens and, to ReGen’s knowledge,
other adverse claims, and to ReGen’s knowledge, ReGen has the right to
use without payment to a third party all of the Intellectual Property
Assets.
	 
	 	        (iii)    Except as set forth in Schedule 2.26(b), all ReGen research
employees who are currently employed or were employed during the past two
(2) years have executed written contracts with ReGen that assign to ReGen
all rights to any inventions, improvements, discoveries, or information
relating to the business of ReGen. Except as set forth in Schedule
2.26(b) and to ReGen’s knowledge, no employee has entered into any
contract that restricts or limits in any way the scope or type of work in
which the employee may be engaged or requires the employee to transfer,
assign, or disclose information concerning his or her work to anyone
other than ReGen.



           (c)    Patents.



		
	 	        (i)    Schedule 2.26(c) contains a complete and accurate list and
summary description of all Patents.
	 
	 	        (ii)    All of the issued Patents are currently in material compliance
with formal legal requirements (including payment of filing, examination,
and maintenance fees and proofs of working or use), and, to ReGen’s
knowledge, are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90) days
after the Closing Date.
	 
	 	        (iii)    To the best of ReGen’s knowledge, no Patent has been or is now
involved in any interference, reissue, reexamination, or opposition
proceeding. To ReGen’s knowledge, there is no potentially interfering
patent or patent application of any third party.
	 
	 	        (iv)    Except as set forth on Schedule 2.26(c), and to ReGen’s actual
knowledge, no Patent is infringed or, has been challenged or threatened
in any way. To the best of ReGen’s knowledge, none of the products
manufactured and sold, nor any process or know-how used, by ReGen
infringes or is alleged to infringe any patent or other proprietary right
of any other Person. ReGen has not received notice of any Person’s
intent to challenge the validity of any of the Patents.



           (d)    Trademarks.


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	 	        (i)    Schedule 2.26(d) contains a complete and accurate list and
summary description of all Marks.
	 
	 	        (ii)    All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal
legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are
valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the Closing
Date.
	 
	 	        (iii)    No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to ReGen’s knowledge, no such action
is threatened with respect to any of the Marks.
	 
	 	        (iv)    To ReGen’s knowledge, there is no potentially interfering
trademark or trademark application of any third party.
	 
	 	        (v)    To ReGen’s knowledge, no Mark is infringed or has been
challenged or threatened in any way and none of the Marks used by ReGen
infringes or is alleged to infringe any trade name, trademark, or service
mark of any third party.
	 
	 	        (vi)    All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.



           (e)    Copyrights.



		
	 	        (i)    Schedule 2.26(e) contains a complete and accurate list and
summary description of all Copyrights.
	 
	 	        (ii)    All Copyrights have been registered and are currently in
compliance with all formal legal requirements, are valid and enforceable,
and are not subject to any maintenance fees or taxes or actions falling
due within ninety (90) days after the Closing Date.
	 
	 	        (iii)    To the best of ReGen’s knowledge, no Copyright is infringed or
has been challenged or threatened in any way. To the best of ReGen’s
knowledge, none of the subject matter of any of the Copyrights infringes
or is alleged to infringe any copyright of any third party or is a
derivative work based on the work of a third party.
	 
	 	        (iv)    All works encompassed by the Copyrights have been marked with
the proper copyright notice.



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           (f)    Trade Secrets.



		
	 	        (i)    With respect to each Trade Secret, the documentation if any,
defining such Trade Secret is current, accurate, and sufficient in detail
and content to identify and
explain it and to allow its full and proper use without reliance on
the knowledge or memory of any individual.
	 
	 	        (ii)    ReGen has taken all reasonable precautions to protect the
secrecy, confidentiality, and value of the Trade Secrets.
	 
	 	        (iii)    ReGen has an absolute (but not necessarily exclusive) right to
use the Trade Secrets. Except as set forth on Schedule 2.26(f), the
Trade Secrets are not part of the public knowledge or literature, and, to
ReGen’s knowledge, have not been used, divulged, or appropriated either
for the benefit of any Person or to the detriment of ReGen.



     Section 2.27. Brokers. No broker, investment banker, financial advisor or
other Person is entitled to any broker’s, finder’s, financial advisor’s or
other similar fee or commission in connection with the transactions
contemplated by this Agreement.


ARTICLE III



REPRESENTATIONS AND WARRANTIES OF AROS AND ACQUISITION SUB



     Aros and Acquisition Sub represent and warrant to ReGen as follows:


     Section 3.01. Real Property. Neither Aros nor Acquisition Sub owns or leases
any real property.


     Section 3.02. Personal Property. Neither Aros nor Acquisition Sub owns or
leases any personal property other than some miscellaneous furniture and
equipment items owned by Aros that have been fully depreciated and are not
subject to any liens, and which are neither material to Aros’ business nor
possess a material value.


     Section 3.03. Labor Matters. Neither Aros nor Acquisition Sub is party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. To Aros or Acquisition
Sub’s knowledge, there are no organizational efforts with respect to the
formation of any collective bargaining unit presently being made or threatened
involving either the employees of Aros or Acquisition Sub.


     Section 3.04. Environmental Matters.


           (a)    Each of Aros and Acquisition Sub is and, to the knowledge of Aros and
Acquisition Sub has been at all times, in compliance in all material respects
with all


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Environmental Laws. Each of Aros and Acquisition Sub has now and at
all times has had all the necessary permits required under Environmental Laws
for the operation of their respective businesses, and neither Aros nor
Acquisition Sub is and has not been in violation of any of the
terms and conditions of any of their respective permits. Neither Aros nor
Acquisition Sub has received any written notice or other communication that
alleges that such entity is not in compliance in any material respect with any
Environmental Law. Neither Aros nor Acquisition Sub has generated,
manufactured, produced, transported, imported, used, treated, refined,
processed, handled, stored, discharged, released, or disposed of any Hazardous
Materials (whether lawfully or unlawfully) at any of the properties occupied or
controlled by either Aros and Acquisition Sub or at any time prior to the
Closing Date (the “Aros Properties”). To the knowledge of Aros and Acquisition
Sub: (i) there are not and have not been any releases or threatened releases of
any Hazardous Materials in any quantity at, on, or from the Aros Properties;
(ii) there are no circumstances that may prevent or interfere in any material
respect with either Aros or Acquisition Sub’s compliance with any Environmental
Law; and (iii) all real property and all current and past activities thereon,
during Aros and Acquisition Sub’s ownership and operation, including without
limitation the use, maintenance and operation of all real property and all
activities and conduct of business related thereto, currently comply and at all
times in the past during Aros and Acquisition Sub’ ownership and operation have
complied in all material respects with all Environmental Laws.


           (b)    Each of Aros and Acquisition Sub has made available to ReGen true and
complete copies of all claims, complaints, reports, assessments, audits,
investigations and other documents in the possession of or obtainable by Aros
or Acquisition Sub made by, on behalf of or against Aros or Acquisition Sub
during the past five (5) years pertaining to Environmental Laws or Hazardous
Substances.


           (c)    Notwithstanding anything to the contrary in this Section 3.04, all
representations made by Aros and Acquisition Sub in this Section 3.04 with
respect to the actions or omissions of any current or prior owner or occupant
of any Aros Properties, other than Aros and Acquisition Sub, are made to the
actual knowledge of Aros and Acquisition Sub.


     Section 3.05. Non-ERISA Plans. Set forth on Schedule 3.05 is a complete list
of each current employment contract and consulting agreement entered into by
either Aros or Acquisition Sub, or by which either Aros or Acquisition Sub is
bound, and each Non-ERISA Plan maintained, entered into or contributed to, or
which is required to be maintained, entered into or contributed to, by either
Aros or Acquisition Sub for the benefit of any current or former director,
officer or employee of either Aros or Acquisition Sub.


     Section 3.06. ERISA Plans.


           (a)    There are no ERISA Plans as defined in Section 3(1) of ERISA
established, maintained or contributed to by either Aros or Acquisition Sub or
any Aros or Acquisition Sub ERISA Affiliate or to which Aros or Acquisition Sub
or any Aros or Acquisition Sub ERISA Affiliate had an obligation to contribute
during the five (5) years preceding the date hereof. As


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 used herein, “Aros or
Acquisition Sub ERISA Affiliate” means a corporation which is a member of a
controlled group of corporations with Aros or Acquisition Sub within the
meaning of Section 414(b) of the Code, a trade or business (including a sole
proprietorship, partnership, trust, estate or corporation) which is under common control with Aros or
Acquisition Sub within the meaning of Section 414(c) of the Code, or a member
of an affiliated service group with Aros or Acquisition Sub within the meaning
of Section 414(m) or Section 414(o) of the Code.


           (b)    Except as set forth on Schedule 3.06(b), no contract, agreement, plan
or other arrangement, whether or not an ERISA Plan (other than this Agreement),
exists pursuant to which the execution of this Agreement would trigger an
obligation by Aros or Acquisition Sub to pay any amount or provide any property
to any employee, officer or director of Aros or Acquisition Sub.


     Section 3.07. Conduct of Business. Since March 31, 2002, each of Aros and
Acquisition Sub has in all material respects preserved its business
organization intact, kept available to it the services of all of its current
officers and employees and preserved the goodwill of those having business
relations with it. Except as contemplated by this Agreement and as set forth
on Schedule 3.07, since March 31, 2002, each of Aros and Acquisition Sub (a)
has conducted its business (i) in the ordinary course, and in the case of Aros
as described and in accordance with the disclosure in the Company SEC Reports
(as defined in Section 3.13 herein), and (ii) as is necessary to continue to
conduct its business in such manner; and (b) has not and will have not through
to the Closing Date:



		
	 	        (i)    incurred any material obligation or liability (absolute,
accrued, contingent or other), except in the ordinary course of business;
	 
	 	        (ii)    discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute,
accrued, contingent or other), other than liabilities reflected on Aros’
most recent balance sheet included in the Company SEC Reports or incurred
since March 31, 2002 in the ordinary course of business consistent with
past practice;
	 
	 	        (iii)    increased or established any reserve for taxes or other
liabilities on its books or otherwise provided therefor, except for
current taxes due in the ordinary course of business;
	 
	 	        (iv)    mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of its assets or properties, except for leases and
financing of equipment in the ordinary course of business;
	 
	 	        (v)    sold, assigned or transferred any asset, property or business or
canceled any debt or claim or waived any right, except sales of inventory
and immaterial amounts of other assets in the ordinary course of
business;



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	 	        (vi)    granted any increase in the compensation (including bonuses and
deferred compensation) payable to any executive officer, director, or key
employee, or
granted any increase in compensation to any other employee in excess
of five percent (5%);
	 
	 	        (vii)    made or authorized any capital expenditures in excess of
$100,000 in the aggregate, except as may have been necessary for ordinary
repair, maintenance and replacement of equipment;
	 
	 	        (viii)    made or forgiven any loan to any shareholder or any relative
or affiliate of any shareholder, or declared, set aside or paid to any
shareholder any dividend or other distribution in respect of its capital
stock, or redeemed or purchased any of its capital stock, or agreed to
take any such action;
	 
	 	        (ix)    transferred any asset or paid any commission, salary or bonus
to any shareholder or any relative or affiliate of any shareholder other
than the payment of wages or salaries to shareholder employees in the
ordinary course of business, or paid any rent, commission or fee to any
shareholder or any relative or affiliate of any shareholder;
	 
	 	        (x)    entered into or agreed to enter into any transaction with or for
the benefit of any shareholder or any relative or affiliate of any
shareholder other than the transactions contemplated by this Agreement;
	 
	 	        (xi)    issued, sold or transferred, or agreed to issue, sell or
transfer, any stock, bond, debenture or other security of Aros or
Acquisition Sub other than the issuance of 1,000 shares of Acquisition
Sub common stock, par value $0.01 per share, to Aros in connection with
the formation of Acquisition Sub; or
	 
	 	        (xii)    paid, incurred or made any commitments to pay or incur any
default rate of interest, fees, costs or expenses of any nature
whatsoever in connection with any credit or loan facilities extended to
Aros or Acquisition Sub.



     Section 3.08. Corporate Existence and Power.


           (a)    Aros is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has and will have on the
Closing Date all corporate power required to carry on its business as now
conducted. Aros is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except where the failure to so qualify or be in good standing would
not have an Aros Material Adverse Effect. Aros has delivered to ReGen copies
of Aros’ certificate of incorporation and bylaws as currently in effect. For
purposes of this Agreement, “Aros Material Adverse Effect” means any change or
event that individually or when taken together with all


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other changes and events, is or is reasonably likely to be materially adverse
to the business, assets, liabilities, operations, condition (financial or otherwise)
or prospects of Aros and its
subsidiaries, taken as a whole, other than any such effect arising out of
or resulting from the transactions contemplated by this Agreement or general
economic, financial, or market conditions. An Aros Material Adverse Effect
shall be deemed to exist if there occurs any event which causes or may
reasonably be expected to cause or result in estimable monetary loss which,
individually or when aggregated with all other events, exceeds $50,000.


           (b)    Acquisition Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has all
corporate power required to carry on its business as now conducted.
Acquisition Sub is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except where the failure to so qualify or be in good standing would
not have a material adverse effect on the business of Acquisition Sub.
Acquisition Sub has delivered to ReGen true and complete copies of Acquisition
Sub’s certificate of incorporation and bylaws as currently in effect.


     Section 3.09. Corporate Authorization. The execution, delivery and
performance by each of Aros and Acquisition Sub of this Agreement and the
consummation by each of Aros and Acquisition Sub of the transactions
contemplated hereby are within the corporate powers of each of Aros and
Acquisition Sub and have been duly authorized by all necessary corporate action
on the part of Aros and Acquisition Sub. This Agreement has been duly and
validly executed and delivered by each of Aros and Acquisition Sub and,
assuming the due and valid authorization, execution and delivery of this
Agreement by ReGen, constitutes a valid and binding agreement of each of Aros
and Acquisition Sub, enforceable in accordance with its terms except as may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors’ rights generally and by
equitable principles of general applicability. The Board of Directors of each
of Aros and Acquisition Sub have, and Aros as the sole shareholder of
Acquisition Sub has, approved the Merger, this Agreement and the transactions
contemplated hereby. No other corporate proceedings or shareholder approvals
on the part of Aros or Acquisition Sub are necessary to authorize or approve
this Agreement or to consummate the transactions contemplated hereby.


     Section 3.10. Governmental Authorization. The execution, delivery and
performance by each of Aros and Acquisition Sub of this Agreement and the
consummation by each of Aros and Acquisition Sub of the Merger and the other
transactions contemplated hereby require no consent, waiver, approval,
authorization or permit by or from, or action by or in respect of, or filing
with, any Governmental Entity, other than: (a) the filing of the certificate
of merger as contemplated by Section 1.01(c); (b) compliance with any
applicable requirements of the Exchange Act; and (c) compliance with any
applicable requirements under any contracts with a Governmental Entity to which
Aros is a party. Aros has taken all action necessary to render the
restrictions set forth in Section 203 of the DGCL inapplicable to this
Agreement and the Merger.


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     Section 3.11. Non-contravention. The execution, delivery and performance by
each of Aros and Acquisition Sub of this Agreement and the consummation by each
of Aros and Acquisition Sub of the transactions contemplated hereby do not and
will not: (a) contravene or
conflict with the certificate of incorporation or bylaws of each of Aros and
Acquisition Sub; (b) contravene or conflict with or constitute a violation of
any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to Aros, Acquisition Sub or any other subsidiary of
Aros; (c) result in a breach or violation of or constitute a default (or an
event that with the giving of notice or the lapse of time or both would
constitute a default) under or give rise to a right of termination, amendment,
cancellation or acceleration of any right or obligation of Aros, Acquisition
Sub or any other subsidiary of Aros or to a loss of any material benefit to
which Aros, Acquisition Sub or any other subsidiary of Aros is entitled or
require any consent, approval or authorization under any provision of any
material agreement, contract or other instrument binding upon Aros, Acquisition
Sub or any other subsidiary of Aros or any of their respective assets
(including any material license, franchise, permit or other similar
authorization held by Aros, Acquisition Sub or any other subsidiary of Aros);
or (d) result in the creation or imposition of any lien on any material asset
of Aros, Acquisition Sub or any other subsidiary of Aros.


     Section 3.12. Capitalization.


           (a)    The authorized capital stock of Aros consists solely of 30,000,000
shares of Aros Common Stock and 30,000,000 shares of preferred stock, $0.01 par
value (the “Aros Preferred Stock”), of which 30,000 shares of Aros Preferred
Stock are designated as Series A Junior Participating Preferred Stock, par
value $.01 per share, and 29,970,000 shares are not designated. As of the date
hereof, 8,966,966 shares of Aros Common Stock are issued and outstanding and
there are no shares of Aros Preferred Stock issued or outstanding.


           (b)    As of the date hereof, 939,390 shares of Aros Common Stock are
issuable upon exercise of options, at an average exercise price of $4.64
(exercise prices ranging from $0.08 to $13.00 per share), pursuant to Aros’
incentive stock option plan and nonqualified employee stock option plan (such
plans are referred to herein collectively as the “Aros Option Plans”). As
of the date hereof, 1,000,000 shares of Aros Common Stock are issuable upon
exercise of warrants, at an exercise price of $0.50 per share.


           (c)    All outstanding shares of Aros Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable. Except as set forth
in this Section 3.12, there are outstanding (i) no shares of capital stock or
other voting securities of Aros, (ii) no securities of Aros convertible into or
exchangeable for shares of capital stock or voting securities of Aros, and
(iii) no options or other rights to acquire from Aros, and no obligation of
Aros to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of Aros.


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           (d)    There are no outstanding contractual obligations of Aros to provide
funds to, or make any investment (in the form of a loan, capital contribution
or otherwise) in, any other Person.


           (e)    The shares of Aros Issuable Stock issued to the holders of ReGen
Exchangeable Stock in the Merger, when issued, will be validly issued, fully
paid, and non-assessable, and will be issued in compliance with all applicable
laws, including but not limited to the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the
“Securities Act”) and the Exchange Act, and any applicable state securities or
blue sky laws.


     Section 3.13. Reports. Aros has timely filed all required forms, reports and
documents with the Securities and Exchange Commission (the “SEC”) since
December 31, 1999 (collectively, the “Company SEC Reports”), all of which have
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act. None of the Company SEC Reports,
including without limitation any financial statements or schedules included
therein, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and all such Company SEC Reports were
prepared in accordance with, and complied as to form in all material respects
with, the requirements of all applicable federal securities laws and the rules
and regulations thereunder. Each of the balance sheets (including the related
notes) included in the Company SEC Reports fairly presents the consolidated
financial position of Aros and its subsidiaries as of the respective dates
thereof, and the other related statements (including the related notes)
included therein fairly present the results of operations and the changes in
financial position of Aros and its subsidiaries for the respective fiscal
years, except, in the case of interim financial statements, for year-end audit
adjustments, consisting only of normal year end adjustments as permitted by
Form 10-Q. Each of the financial statements (including the related notes)
included in the Company SEC Reports has been prepared in accordance with GAAP
consistently applied during the periods involved, except as otherwise noted
therein.


     Section 3.14. Absence of Certain Changes; Conduct of Business. Except as set
forth in the Company SEC Reports, since March 31, 2002, neither Aros nor any of
its subsidiaries has suffered any adverse changes in its business, operations
or financial condition which are material to Aros and its subsidiaries taken as
a whole (other than changes generally affecting the industries in which Aros
operates, including changes due to actual or proposed changes in law or
regulation, or changes relating to the transactions contemplated by this
Agreement, including the change in control contemplated hereby) or entered into
any transaction, or conducted its business or operations, other than in the
ordinary and usual course of business and consistent with past practice and
other than in connection with the Aros’ exploration of alternatives leading to
the execution of this Agreement.


     Section 3.15. No Undisclosed Liabilities. Except as and to the extent set
forth in the Company SEC Reports, neither Aros nor any of its subsidiaries
(including Acquisition Sub) had at March 31, 2002 any liabilities not reflected
on a consolidated balance sheet of Aros and its


-26-






 




subsidiaries. Except as and to
the extent set forth in such Company SEC Reports, since March 31, 2002, neither
Aros nor any of its subsidiaries (including Acquisition Sub) has incurred any
liabilities material to their respective business, operations or financial
condition, except liabilities incurred in the ordinary and usual course of
business and consistent with past practice and liabilities incurred in
connection with this Agreement.


     Section 3.16. Litigation. Except as disclosed in the Company SEC Reports or
in Schedule 3.16, there is no action, suit, proceeding, review or investigation
pending or, to the knowledge of Aros, threatened involving Aros or any of its
subsidiaries, at law or in equity, or before any Governmental Entity, which in
the aggregate are reasonably likely to have an Aros Material Adverse Effect.
Neither Aros nor Acquisition Sub is in material default with respect to any
order, writ, injunction or decree known to or served upon them. Except as set
forth on Schedule 3.16, there is no pending action or suit brought by either
Aros or Acquisition Sub against others.


     Section 3.17. Permits; Compliance with Law. Aros and its subsidiaries hold
all permits, licenses, certificates, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective business (the “Aros Permits”), except for failures to hold
such Aros Permits which would not, individually or in the aggregate, have an
Aros Material Averse Effect. Aros and its subsidiaries are in compliance with
the terms of the Aros Permits, except where the failure so to comply would not
have an Aros Material Adverse Effect. The businesses of Aros and its
subsidiaries have complied with, and are not being conducted in violation of
any, applicable law, ordinance, rule, regulation, decree or order of any
Governmental Entity, except for violations which individually or in the
aggregate are not likely to have an Aros Material Adverse Effect.


     Section 3.18. Intellectual Property. No claim is pending or, to the knowledge
of Aros, threatened, to the effect that the present or past operations of Aros
or any subsidiary of Aros infringe upon or conflict with the rights of others
with respect to any intellectual property (including, without limitation,
patents, patent rights, patent applications, trademarks, trademark
applications, trade names, copyrights, drawings, trade secrets, know-how and
computer software) necessary to permit Aros and its subsidiaries to conduct
their businesses as now operated (the “Intellectual Property”) and no claim is
pending or threatened to the effect that any of the Intellectual Property is
invalid or unenforceable. No contract, agreement or understanding with any
party exists which would impede or prevent the continued use by Aros and its
subsidiaries of the entire right, title and interest of Aros and its
subsidiaries in and to the Intellectual Property.


     Section 3.19. Ownership of Acquisition Sub; No Prior Activities.


           (a)    Acquisition Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, and Acquisition Sub has not taken
any actions or transacted any business other than in connection with its
corporate organization.


           (b)    As of the Effective Time, all of the outstanding capital stock of
Acquisition Sub will be owned directly by Aros. As of the Effective Time,
there will be no options, warrants


-27-






 




or other rights (including registration
rights), agreements, arrangements or commitments to which Acquisition Sub is a
party of any character relating to the issued or unissued capital stock of, or
other equity interests in, Acquisition Sub, or obligating Acquisition Sub to
grant, issue or sell any shares of the capital stock of, or other equity
interests in, Acquisition Sub, by sale, lease, license or otherwise. There are
no obligations, contingent or otherwise, of Acquisition Sub to repurchase,
redeem or otherwise acquire any shares of the capital stock of Acquisition Sub.


           (c)    As of the date hereof and the Effective Time, except for obligations
or liabilities incurred in connection with its incorporation or organization
and the transactions contemplated by this Agreement, Acquisition Sub has not
and will not have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any Person.


     Section 3.20. Rights Agreement. The Board of Directors of Aros has amended
its Rights Agreement dated May 6, 1997 with First Chicago Trust Company of New
York, as Rights Agent (the “Aros Rights Agreement”) to exclude its
applicability in any respect to the transactions contemplated hereby.


     Section 3.21. Brokers. No broker, investment banker, financial advisor or
other Person is entitled to any broker’s, finder’s, financial advisor’s or
other similar fee or commission in connection with the transactions
contemplated by this Agreement.


ARTICLE IV



COVENANTS OF AROS AND REGEN



     Section 4.01. Reasonable Efforts. Subject to the terms and conditions herein
provided, each of the parties will use its commercially reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, as promptly as
practicable, all things necessary or advisable under applicable laws and
regulations to ensure that the conditions set forth in Article V are satisfied,
to obtain any waivers, consents and approvals required and to consummate and
make effective the transactions contemplated by this Agreement. If at any time
after the Effective Time any further action is reasonably necessary or
desirable to carry out the purposes of this Agreement, including the execution
of additional instruments, the proper officers and directors of each party will
take all such action.


     Section 4.02. ReGen Shareholder Meeting.


           (a)    Promptly following the date hereof, ReGen will take all action
necessary in accordance with the DGCL and its certificate of incorporation and
bylaws to call, give notice of and hold a meeting of its shareholders, or cause
its shareholders to adopt by written consent, in



-28-










 



accordance with the DGCL, to
consider and vote upon the approval and adoption of this Agreement and the
Merger and for such other purposes as may be necessary or desirable in
connection therewith.


     
     (b)  The Board of Directors of ReGen will recommend that the shareholders
of ReGen vote to approve the Merger and adopt this Agreement and approve any
other matters to be submitted to shareholders in connection therewith.


     Section 4.03. Consents. Each of the parties will use its reasonable best
efforts to obtain as promptly as practicable all consents, waivers, approvals,
authorizations or permits of any Governmental Entity or any other
Person required in connection with the consummation of the transactions
contemplated by this Agreement.


     Section 4.04. Public Announcements. Neither Aros nor ReGen will issue any
press release or make any other public announcement concerning this Agreement,
the Merger or the transactions contemplated hereby without the prior consent of
the other, except that either party may make such public disclosure that it
believes in good faith to be required by law (in which event such party will
notify the other party prior to making such disclosure).


     Section 4.05. Notification of Certain Matters. Aros and ReGen promptly will
notify the other of: (a) the occurrence or non-occurrence of any fact or event
that would be reasonably likely to cause any (i) representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time or (ii) material
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied in all material respects; and (b) any failure of ReGen, Aros
or Acquisition Sub to comply with or satisfy in any material respect any
covenant, condition or agreement contained in this Agreement.


     Section 4.06. Access to Information. From the date hereof until the Effective
Time, Aros and ReGen will, and Aros will cause Acquisition Sub to: (a) give
the other party and its counsel, financial advisors, auditors and other
authorized representatives reasonable access upon advance notice during normal
business hours to the offices, properties, books and records of such party and
its subsidiaries as the other party reasonably may request, and furnish the
other party with such financial and operating data and other information as the
other party reasonably may request; and (b) instruct such parties’ employees,
counsel and financial advisors to cooperate with the other party in their
investigation of the business of such party.


     Section 4.07. Conduct of Business. From the date hereof until the Effective
Time, except for the actions in connection with this Agreement and the
transactions contemplated hereby or otherwise disclosed in the schedules
attached hereto, or required in connection with the Bridge Loan Conversion (as
defined in Section 5.02(d) herein) or in the Preferred Stock Financing (as
defined in Section 5.02(e) herein):

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     (a)  ReGen shall carry on its business in the usual, regular and ordinary
course, consistent with past practice, and use its commercially reasonable
efforts to preserve intact its present business organizations, keep available
the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with them.



     
     (b)  ReGen will endeavor to (i) maintain its corporate existence and good
standing in its state of incorporation; (ii) keep and maintain in good
condition, repair and
working order all buildings, offices, stores and other structures and all
machinery, tools, equipment, fixtures and other property and observe and
conform to all material terms and conditions upon or under which any of its
properties is held; and (iii) continue and maintain in full force and effect
all insurance now maintained and promptly proceed with the repair, restoration
or replacement of any asset or property damaged or destroyed by fire or other
casualty after the date hereof, whether insured or uninsured, subject to the
rights, if any, of the lessors or mortgagees thereof.



     
     (c)  Neither ReGen nor Aros shall, nor shall either propose to, (i)
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of any of its capital
stock; (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock; or (iii)
repurchase, redeem or otherwise acquire any of its securities.



     
     (d)  Neither Aros nor ReGen shall authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights
to purchase or otherwise) any stock of any class or any other securities
(including indebtedness having the right to vote) or equity equivalents
(including, without limitation, stock appreciation rights), except as required
pursuant to the agreements and instruments outstanding on the date hereof and
disclosed in the schedules attached hereto, or amend in any material respect
any of the terms of any such securities or agreements outstanding on the date
hereof, other than the issuance of shares of Aros and ReGen, as the case may
be, upon the exercise of stock options pursuant to stock option plans and set
forth on a schedule hereto and upon the exercise or conversion of other
options, warrants or rights, in each case outstanding on the date of this
Agreement and in accordance with their present terms, or except as required to
permit the assumption of the ReGen Options and Warrants and ReGen Option Plans
as contemplated by this Agreement.



     
     (e)  ReGen shall not amend or propose to amend its certificate of
incorporation or bylaws.



     
     (f)  Neither ReGen nor Aros shall acquire, sell, lease, encumber, transfer
or dispose of any assets outside the ordinary course of business, consistent
with past practice, or any assets which are material to ReGen or Aros, as
applicable, or enter into any commitment or

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transaction outside the ordinary
course of business, consistent with past practice, except in all cases (i)
pursuant to obligations in effect on the date hereof; and (ii) with respect to
Aros, as such actions are required by the fiduciary duty of the Aros directors.



     
     (g)  Neither ReGen nor Aros shall incur (which shall not be deemed to
include entering into credit agreements, lines of credit or similar
arrangements until borrowings are made under such arrangements) any
indebtedness for borrowed money or guarantee any such indebtedness, or issue or
sell any debt securities or warrants or rights to acquire any debt securities,
or guarantee (or become liable for) any debt of others or make any loans,
advances or
capital contributions or mortgage, pledge or otherwise encumber any
material assets or create or suffer any material lien thereupon other than in
each case in the ordinary course of business consistent with prior practice.



     
     (h)  Neither ReGen nor Aros shall pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business consistent with past practice or in accordance
with their terms of liabilities incurred prior to the date hereof, or incurred
after the date hereof in the ordinary course of business consistent with past
practice.



     
     (i)  Neither ReGen nor Aros shall change any of the accounting principles
or practices used by it (except as required by GAAP).



     
     (j)  Neither ReGen nor Aros shall agree to take any of the foregoing
actions from which it is prohibited or take or agree to take any action that
would or is reasonably likely to result in any of its representations and
warranties set forth in this Agreement being untrue or in any of the conditions
to the Merger set forth in Article V not being satisfied except pursuant to
obligations in effect on the date hereof.


     Section 4.08. Tax-free Reorganization.



     
     (a)  Prior to the Effective Time, each party will use its best efforts to
cause the Merger to qualify as a reorganization within the meaning of Section
368 of the Code, and will not take any action reasonably likely to cause the
Merger not to qualify as such reorganization.



     
     (b)  Pursuant to the foregoing, each party agrees to make such commercially
reasonable additions or modifications to the terms of this Agreement as may be
reasonably necessary to permit the Merger to so qualify.



     
     (c) No party hereto knows of any reason that the transaction may not
qualify as a reorganization within the meaning of Section 368(a) of the Code.
Neither Aros nor Acquisition Subsidiary has any present plan or intention to
take any action after the Merger that would cause the Merger to fail to so
qualify.


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     (d)  Aros intends to, or intends to cause one or more members of Aros’s
“qualified group” (within the meaning of Treas. Reg. § 1.368-1(d)(4)(ii)), to
continue a significant line of the “historic business” of ReGen or to use a
significant portion of ReGen’s “historic business assets” in a business (as
such terms are defined in Treas. Reg. § 1.368-1(d)) following the Merger.



     
     (e)  Aros has no plan or intention to cause the ReGen to issue additional
shares of stock after the Merger or take any other action that would result in
Aros losing “control” (as defined in Section 368(c) of the Code) of ReGen.



     
     (f)  Except for transfers to controlled corporations described in Treas.
Reg. § 1.368-2(k)(2), Aros has no plan or intention to: (i) liquidate ReGen or
distribute all or substantially all of its assets to Aros; (ii) merge ReGen
with or into another corporation including Aros or its affiliates; (iii) sell,
distribute or otherwise dispose of any of the stock of ReGen; or (iv) cause
ReGen to sell or otherwise dispose of any of its assets or of any assets
acquired from Acquisition Sub, except for dispositions made in the ordinary
course of business or for payment of expenses incurred by ReGen pursuant to the
Merger.



     
     (g)  The parties hereto agree that, unless otherwise required by law, they
(i) will report in their respective federal income tax returns for the taxable
period including the Closing Date that the Merger qualified as a reorganization
under Section 368(a) of the Code, (ii) will not take any tax reporting position
inconsistent with the characterization of the Merger as a reorganization within
the meaning of Section 368(a) of the Code; and (iii) will properly file with
their federal income tax returns all information required by Treas. Reg.
§1.368-3.


     Section 4.09. No Solicitation. For a period of thirty (30) days commencing on
the date hereof, neither ReGen nor Aros nor any of their respective
subsidiaries, affiliates, officers, directors, representatives or agents shall,
directly or indirectly, (i) solicit, initiate or encourage (including by way of
furnishing information) any Person concerning any merger, sale of substantial
assets outside the ordinary course of business, sale of shares of capital stock
or similar transaction involving such company or any of its subsidiaries or
divisions (other than the transactions contemplated by this Agreement), or (ii)
enter into any agreement or understanding or conduct any discussions,
negotiations or other activity incident to, or with a view toward, any of the
foregoing; provided, that either party may participate in negotiations with or
furnish information to a third party if the Board of Directors of such company
believes, after consultation with its outside counsel, that the failure to do
so would be a breach of its fiduciary duty under applicable law. In such event
ReGen or Aros, as the case may be, shall promptly advise the other party of the
existence of any such inquiries or proposals and the terms thereof.


     Section 4.10. Aros Shareholder Meeting.




          (a) Promptly following the Effective Time, Aros will take all action
necessary in accordance with the DGCL, the Exchange Act, and its certificate of
incorporation and bylaws to call, give notice of and hold a meeting of its
shareholders in accordance with the DGCL to consider and vote upon those
certain matters set forth in the Stockholders Agreement.


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     (b)  Following the Effective Time, the Board of Directors of Aros will (i)
recommend that the stockholders of Aros vote to approve the actions
contemplated by the Stockholders Agreement referred to above and any other
matters to be submitted to stockholders
in connection therewith, and (ii) appoint to the Board of Directors of the
Surviving Corporation those individuals set forth in, and in accordance with,
the Stockholders Agreement.



     
     (c)  Promptly following the amendment to the Aros certificate of
incorporation contemplated by the Stockholders Agreement, the Board of
Directors of Aros will effect the conversion of the Aros Series B Stock into
Aros Common Stock in accordance with the terms of such Aros Series B Stock and
reserve for issuance the appropriate number of shares of Aros Common Stock
issuable upon exercise of the ReGen Options and Warrants assumed by Aros and
upon conversion of the Aros Series A Stock.


     Section 4.11. Aros Registration Statements. Aros will take all action
necessary pursuant to the terms and conditions set forth in the Registration
Rights Agreement to register certain shares of Aros capital stock as set forth
in such Registration Rights Agreement.


     Section 4.12. Restrictions on Transfer; Legends.



     
     (a)  At the Effective Time, none of the shares of Aros Issuable Stock, the
ReGen Options and Warrants nor the Aros Common Stock issuable upon conversion
of any of the Aros Issuable Stock or exercise of the ReGen Options and Warrants
(collectively, the “Restricted Securities”), nor the offer and sale thereof,
will have been registered under the Securities Act or the securities laws of
any state. None of the Restricted Securities may be sold, offered for sale or
transferred in any manner for an indefinite period of time unless and until (i)
a registration statement with respect thereto is in effect under the Securities
Act and applicable state laws, or (ii) it has been established to the
reasonable satisfaction of Aros and its counsel that the proposed transaction
is exempt from registration under the Securities Act and applicable state laws
or that registration under the Securities Act and applicable state laws is not
required.



     
     (b)  It is understood that each certificate representing the Restricted
Securities shall bear the following legends:



		
	 	“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR SAID LAWS,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.”



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	 	“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS AGREEMENT AND PROXY WHICH PLACES CERTAIN
RESTRICTIONS ON THE VOTING OF THE SHARES
REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES
SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS
OF SUCH STOCKHOLDERS AGREEMENT AND PROXY. A COPY OF SUCH STOCKHOLDERS
AGREEMENT AND PROXY WILL BE FURNISHED TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS.”



     Section 4.13. Exemption from Federal Registration; Blue Sky Compliance. Aros
and ReGen will use commercially reasonable efforts to cause the Aros Issuable
Stock to be issued in a transaction exempt from registration under the
Securities Act, pursuant to a private placement transaction exempt from
registration under the Securities Act by reason of the safe harbor provided by
Rule 506 of Regulation D promulgated under the Securities Act (the “Private
Placement Exemption”); provided, that ReGen shall take all commercially
reasonable actions within its legal power to ensure compliance with the Private
Placement Exemption, including without limitation, the delivery of executed
stockholder investment certificates substantially in the form attached as
Exhibit G attached hereto. Aros and ReGen will use commercially reasonable
efforts to cause the issuance of Aros Issuable Stock and assumption of the
ReGen Option and Warrants under this Agreement to be made in compliance with
any applicable blue sky laws.


     Section 4.14. Information Statement; ReGen Stockholder Approval. As soon as
practicable after the execution of this Agreement, ReGen shall prepare, with
the cooperation of Aros, an information statement for ReGen stockholders to
approve this Agreement, the certificate of merger contemplated hereby and the
transactions contemplated hereby and thereby (the “Information Statement”).
The Information Statement shall include a disclosure document for the offer and
issuance of the shares of Aros Issuable Stock to be received by the holders of
ReGen Exchangeable Stock in the Merger. Aros and ReGen shall each use
commercially reasonable efforts to cause the Information Statement to comply
with applicable federal and state securities laws requirements. Each of Aros
and ReGen agrees to provide promptly to the other such information concerning
its business and financial statements and affairs as, in the reasonable
judgment of the providing party or its counsel, may be required or appropriate
for inclusion in the Information Statement, or in any amendments or supplements
thereto, and to cause its counsel and auditors to cooperate with the other’s
counsel and auditors in the preparation of the Information Statement. ReGen
will promptly advise Aros, and Aros will promptly advise ReGen, in writing if
at any time prior to the Effective Time either ReGen or Aros shall obtain
knowledge of any facts that might make it necessary or appropriate to amend or
supplement the Information Statement in order to make the statements contained
or incorporated by reference therein not misleading or to comply with
applicable law. The Information Statement shall contain the recommendation of
the Board of Directors of ReGen that ReGen stockholders approve the Merger and
this Agreement and the conclusion of the Board of

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Directors that the terms and
conditions of the Merger are fair and advisable to and in the best interests of
the ReGen stockholders. Anything to the contrary contained in this Agreement
notwithstanding, ReGen shall not include in the Information Statement any
information with
respect to Aros or its affiliates or associates, the form and content of which
information shall not have been approved by Aros prior to such inclusion, which
approval shall not be unreasonably withheld.



     
Section 4.15. Option Assumption and Conversion




     
     (a)  Each ReGen Option assumed by Aros under this Agreement shall
continue to have, and be subject to, the same terms and conditions set forth in
the ReGen Option Plans and option agreements thereunder immediately prior to
the Effective Time, except that each such ReGen Option to acquire ReGen Common
Stock shall be exercisable for that number of shares of Aros Common Stock equal
to the product of the number of shares of ReGen Common Stock that were
purchasable under such ReGen Option immediately prior to the Effective Time,
multiplied by 2.7495, and rounded down to the nearest whole number of shares of
Aros Common Stock. The per share exercise price for shares of Aros Common
Stock issuable upon exercise of such assumed ReGen Options shall be equal to
the quotient determined by dividing the exercise price per share of ReGen
Common Stock at which such ReGen Option was exercisable immediately prior to
the Effective Time by 2.7495, and rounding the resulting exercise price up to
the nearest whole cent.



     
     (b)  The ReGen Common Warrants assumed by Aros pursuant to this Agreement
shall continue to be subject to the certificates, agreements or other
instruments pursuant to which such ReGen Common Warrants were granted, as in
effect immediately prior to the Effective Time (as amended as contemplated by
this Agreement), and no new certificates, agreements or other instruments in
respect of such ReGen warrants shall be issued by Aros except as otherwise
expressly specified in this Agreement; provided, however that after assumption,
the ReGen Common Warrants shall give the holder thereof the right to purchase
the number of shares of Aros Common Stock that is equal to the product of the
number of shares of ReGen Common Stock that were purchasable under such ReGen
Common Warrants immediately prior to the Effective Time, multiplied by 2.7495.
The per share exercise price for shares of Aros Common Stock issuable upon
exercise of assumed ReGen Common Warrants shall be equal to the quotient
determined by dividing the exercise price per share of ReGen Common Stock at
which each such ReGen Common Warrant was exercisable immediately prior to the
Effective Time by 2.7495, and rounding the resulting exercise price to the
nearest whole cent.



     
     (c)  The ReGen Series C Warrants assumed by Aros pursuant to this
Agreement shall continue to be subject to the certificates, agreements or other
instruments pursuant to which such ReGen Series C Warrants were granted, as in
effect immediately prior to the Effective Time (as amended as contemplated by
this Agreement), and no new certificates, agreements or other instruments in
respect of such ReGen warrants shall be issued by Aros except as otherwise
expressly specified in this Agreement; provided, however that after assumption,
each right to


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purchase a single share of ReGen Series C Stock held by the
holder of a ReGen Series C Warrant immediately prior to the Effective Time
shall be converted into the right to purchase 0.0663 shares of Aros Common
Stock and 2.6832 shares of Aros Series B Stock, with an exercise price equal to
the quotient determined by dividing the exercise price per share of ReGen
Series C
Stock at which such ReGen Series C Warrant was exercisable immediately
prior to the Effective Time by 2.7495, and rounding the resulting exercise
price to the nearest whole cent.



     
     Section 4.16. Aros Stock Options Available for Issuance. Aros and ReGen
agree that following the Effective Time, Aros shall take all action necessary
or desirable to increase the authorized number of shares of Aros Common Stock
issuable upon exercise of stock options issued under the Aros Option Plans by
3,000,000 shares (as so increased, the “Available Amount”). Aros and ReGen
further agree that neither party will grant options to purchase shares of Aros
Common Stock in excess of the Available Amount until the earlier of one year
from the Effective Time or the date on which Aros consummates an equity
financing in which it raises at least $5,000,000; provided, however, that if
the Aros Board of Directors unanimously approves and consents to grant
option(s) in excess of such amount, the prohibition against grant contained in
this Section 4.16 shall not apply.


ARTICLE V



CONDITIONS TO THE MERGER





     Section 5.01. Conditions to the Obligations of Each Party. The respective
obligations of the parties to consummate the Merger are subject to the
satisfaction (or waiver in accordance with Section 7.04 hereof), at or prior to
the Effective Time, of each of the following conditions:



     
     (a)  The shareholders of ReGen shall have approved and adopted this
Agreement and the Merger pursuant to the requirements of ReGen’s certificate of
incorporation and by-laws and the DGCL;



     
     (b)  The consummation of the Merger shall not be restrained, enjoined or
prohibited by any order, judgment, decree, injunction or ruling of a court of
competent jurisdiction or any Governmental Entity entered after the parties
have used their reasonable best efforts to prevent such entry. There shall not
have been any statute, rule or regulation enacted, promulgated or deemed
applicable to the Merger by any Governmental Entity that prevents the
consummation of the Merger;



     
     (c)  Aros and the stockholders of ReGen shall have executed a registration
rights agreement relating to the registration of the Aros Common Stock included
in the Aros Issuable Stock, the Aros Common Stock issuable upon conversion of
the Aros Issuable Stock and the Aros Common Stock issuable upon exercise of the
ReGen Options and Warrants substantially in the form attached hereto as Exhibit
E (the “Registration Rights Agreement”);

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     (d)  Stockholders of ReGen holding at least a majority of shares of ReGen
capital stock shall have executed a stockholders agreement and proxy relating
to the election of directors
to the boards of Aros and Acquisition Sub and certain other matters,
substantially in the form attached hereto as Exhibit F (the “Stockholders
Agreement”); and



     
     (e)  Aros and ReGen shall have received evidence, in form and substance
reasonably satisfactory to them, that fewer than ten percent (10%) of the
shares of ReGen Exchangeable Stock are Dissenting Shares of ReGen.


     Section 5.02. Conditions Precedent to the Obligations of Aros and
Acquisition Sub. The obligations of Aros and Acquisition Sub to consummate the
Merger are subject to the satisfaction (or waiver in accordance with Section
7.04 hereof), at or prior to the Effective Time, of each of the following
further conditions:


     (a)  Each of the representations and warranties of ReGen contained in this
Agreement shall have been true and correct in all material respects when made
and on and as of the Closing Date as if made on and as of such date. Aros
shall have received a certificate to such effect executed by an executive
officer of ReGen;


     (b)  ReGen shall have performed and complied in all material respects with
all agreements and covenants required to be performed and complied with by it
under this Agreement on or prior to the Closing Date. Aros shall have received
a certificate to such effect executed by an executive officer of ReGen;


     (c)  All consents, waivers, approvals and authorizations required to be
obtained from any Governmental Entity prior to the consummation of the
transactions contemplated hereby shall have been obtained;


     (d)  The outstanding bridge loans of ReGen in the aggregate principal
amount of $2,664,722 plus accrued and unpaid interest thereon of up to
approximately $195,883 shall have converted into up to 2,321,731 shares of
ReGen Series G Stock based on a price of $1.2321 per share and warrants to
purchase up to 784,829 shares of ReGen Common Stock at a price of $1.2321 per
share (the “Bridge Loan Conversion”);


     (e)  After the date hereof ReGen shall have consummated a private placement
of ReGen Series G Stock in which it raised a minimum of $4 million and a
maximum of $4.5 million (the “Preferred Stock Financing”);


     (f)  At the Closing, ReGen shall have furnished Aros with copies of (i)
resolutions duly adopted by the Board of Directors of ReGen approving the
execution and delivery of this Agreement and all other necessary or proper
corporate action to enable ReGen to comply with the terms of this Agreement,
and (ii) the resolution duly adopted by the holders of ReGen

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Exchangeable Stock
approving and adopting this Agreement and the Merger, such resolutions to be
certified by the Secretary or Assistant Secretary of ReGen;


     (g)  At the Closing, ReGen shall have furnished Aros with an opinion, dated
the Closing Date, of counsel to ReGen, in form and substance reasonably
satisfactory to Aros and its counsel, to the effect that:



		
	 	     (i) ReGen is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware;




		
	 	     (ii) ReGen has the corporate power to carry on its businesses as
they are being conducted on the Closing Date;




		
	 	     (iii) Based solely upon a review of the minute books of ReGen and a
certificate of an authorized officer of the company, immediately prior to
the Effective Time, the authorized capital stock of ReGen will consist of
19,200,000 shares of ReGen Common Stock, of which 2,529,973 are issued
and outstanding, 725,000 shares of ReGen Series A Stock, all of which are
issued and outstanding, 1,226,338 shares of ReGen Series B Stock, all of
which are issued and outstanding, 1,635,000 shares of ReGen Series C
Stock, 550,552 shares of which are issued and outstanding, 1,191,321
shares of ReGen Series D Stock, all of which are issued and outstanding,
335,314 shares of ReGen Series E Stock, all of which are issued and
outstanding, 1,000,000 shares of ReGen Series F Stock, of which 453,310
shares are issued and outstanding, and 6,400,000 of ReGen Series G Stock,
of which there will be issued and outstanding a minimum of 5,568,220 and
a maximum of 5,974,032 shares, of on the date hereof;




		
	 	     (iv) ReGen has taken all required corporate action to approve and
adopt this Agreement and this Agreement is a valid and binding obligation
of ReGen enforceable against ReGen in accordance with its terms, subject
as to enforcement to bankruptcy, reorganization, moratorium, insolvency
and other laws of general applicability relating to or affecting
creditors’ rights and to general equity principles;




		
	 	     (v) The execution and delivery of this Agreement by ReGen do not,
and the consummation of the transactions contemplated by this Agreement
by ReGen will not, constitute a breach or violation of, or a default
under, the certificate of incorporation or bylaws of ReGen; and




		
	 	     (vi) All filings required to be made by ReGen prior to the Effective
Time with, and all consents, approvals, permits or authorizations
required to be obtained by ReGen prior to the Effective Time from,
governmental and regulatory authorities of the United States and the
State of Delaware in connection with the execution and delivery of this
Agreement by ReGen and the consummation of the transactions contemplated
by this Agreement by ReGen, have been so made or obtained, as the case
may be.



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     (h)  From the date of this Agreement through the Closing Date, ReGen shall
not have suffered any adverse changes in its business, operations or financial
condition which causes, or is
likely to cause, a monetary loss to ReGen individually or in the aggregate
of more than $500,000 (other than changes generally affecting the industries in
which ReGen operates, including changes due to actual or proposed changes in
law or regulation).


     Section 5.03. Conditions Precedent to the Obligations of ReGen. The
obligation of ReGen to consummate the Merger is subject to the satisfaction (or
waiver in accordance with Section 7.04 hereof), at or prior to the Effective
Time, of each of the following further conditions:


     (a)  Each of the representations and warranties of Aros and Acquisition Sub
contained in this Agreement shall have been true and correct in all material
respects when made and on and as of the Closing Date as if made on and as of
such date. ReGen shall have received a certificate to such effect executed by
an authorized individual;


     (b)  Each of Aros and Acquisition Sub shall have performed and complied in
all material respects with all agreements and covenants required to be
performed and complied with by it under this Agreement on or prior to the
Closing Date. ReGen shall have received a certificate to such effect executed
by an authorized individual;


     (c)  All consents, waivers, approvals and authorizations required to be
obtained from any Governmental Entity prior to the consummation of the
transactions contemplated hereby shall have been obtained;


     (d)  At the Closing, Aros shall have furnished ReGen with copies of (i)
resolutions duly adopted by the Board of Directors of Aros approving the
execution and delivery of this Agreement and all other necessary or proper
corporate action to enable Aros to comply with the terms of this Agreement, and
(ii) resolutions duly adopted by Aros, as the sole stockholder of Acquisition
Sub, approving and adopting this Agreement and the Merger, such resolutions to
be certified by the Secretary or Assistant Secretary of Aros;


     (e)  Aros shall have designated the Aros Series A Stock in accordance with
the certificate of designations substantially in the form of Exhibit B attached
hereto and the Aros Series B Stock in accordance with the certificate of
designations substantially in the form of Exhibit A attached hereto;


     (f)  At the Closing, Aros shall have furnished ReGen with an opinion, dated
the Closing Date, of counsel to Aros, in form and substance satisfactory to
ReGen and its counsel, to the effect that:

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	 	     (i) Each of Aros and Acquisition Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware;
	 
	 	     (ii) Based solely upon the SEC Reports, and a review of the minute
book of Acquisition Sub and a certificate of an authorized officer of
each company, (a) (1) the authorized capital stock of Aros consists of
30,000,000 shares of Aros Common Stock, of which 8,966,966 shares are
issued and outstanding, and 30,000,000 shares of Aros Preferred Stock, of
which 30,000 shares of Aros Preferred Stock are designated as Series A
Junior Participating Preferred Stock, par value $.01 per share, and
29,970,000 shares are not designated, and no shares of Aros Preferred
Stock are issued and outstanding on the date hereof, and (2) the
authorized capital stock of Acquisition Sub consists of 3,000 shares of
common stock, $0.01 par value, of which 1,000 shares are issued and
outstanding on the date hereof, validly issued and outstanding, and fully
paid and nonassessable, and (b) the Aros Issuable Stock to be issued in
connection with the Merger has been duly authorized for issuance by Aros
and, when a certificate or certificates therefore are issued and
delivered in accordance with the terms of the this Agreement and the
certificate of incorporation and bylaws of Aros, will be validly issued,
fully paid and nonassessable. To such counsel’s knowledge, between the
date hereof and the Closing Date, no additional shares of capital stock
have been issued and none of such issued and outstanding shares were
issued in violation of any preemptive rights of shareholders of
Acquisition Sub;




		
	 	     (iii) Each of Aros and Acquisition Sub has taken all required
corporate action to approve and adopt this Agreement and this Agreement
is a valid and binding obligation of each of Aros and Acquisition Sub
enforceable against each of them in accordance with its terms, subject as
to enforcement to bankruptcy, reorganization, moratorium, insolvency and
other laws of general applicability relating to or affecting creditors’
rights and to general equity principles; and




		
	 	     (iv) The execution and delivery of this Agreement by each of Aros
and Acquisition Sub does not, and the consummation of the transactions
contemplated by this Agreement by each of Aros and Acquisition Sub will
not, constitute a breach or violation of, or a default under, the
certificate of incorporation or bylaws of either Aros or Acquisition Sub.



     (g)  All necessary action shall have been taken such that, at the Effective
Time, the Board of Directors of Aros and the Surviving Corporation shall
consist of the individuals listed in Section 1.08 herein; and


     (h) At the Closing, the sum of Aros’ cash, cash equivalents and accounts
and notes receivable less liabilities (excluding legal fees and expenses
incurred in connection with the transactions contemplated hereby) shall be
equal to or greater than $2,850,000.


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ARTICLE VI



TERMINATION



     Section 6.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding
approval thereof by the shareholders of ReGen:


     (a)  by mutual written agreement of ReGen and Aros;


     (b)  by either ReGen or Aros, if the Merger has not been consummated by
June 30, 2002; provided, that the right to terminate this Agreement pursuant to
this Section 6.01(b) will not be available to any party whose breach of any
provision of this Agreement results in the failure of the Merger to be
consummated by such time;


     (c)  by either ReGen or Aros, if there shall be any law or regulation that
makes consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining the parties from consummating
the Merger is entered and such judgment, injunction, order or decree shall
become final and nonappealable;


     (d)  by Aros, upon a material breach of any representation, warranty,
covenant or agreement of ReGen, or if any representation or warranty of ReGen
shall become untrue in any material respect; and


     (e)  by ReGen, upon a material breach of any representation, warranty,
covenant or agreement of Aros or Acquisition Sub, or if any representation or
warranty of Aros or Acquisition Sub shall become untrue in any material
respect.



     The party desiring to terminate this Agreement pursuant to this Section
6.01 shall give notice of such termination to the other party.


     Section 6.02. Effect of Termination. If this Agreement is terminated pursuant
to Section 6.01, this Agreement will become void and of no effect with no
liability on the part of any party hereto or its respective directors, officers
or shareholders, except that the agreements contained in Section 6.03 will
survive the termination hereof. Nothing herein shall relieve any party from
liability for any breach of this Agreement.


     Section 6.03. Fees and Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with the Merger, this Agreement
and the transactions contemplated by this Agreement will be paid by the party
incurring such expenses.


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ARTICLE VII



MISCELLANEOUS



     Section 7.01. Notices. All notices, requests and other communications to any
party hereunder shall be in writing and shall be deemed to have been duly given
when delivered in person, by registered or certified mail (postage prepaid,
return receipt requested), by overnight courier, or by facsimile or electronic
transmission to the respective parties as follows:




	 	If to Aros or Acquisition Sub, to:




	 	Aros Corporation

1290 Bay Dale Drive, PMB 351

Arnold, Maryland 21012

Attention: Chief Executive Officer

Facsimile: (410) 349- 2453




	 	with a copy to:




	 	Dreier & Baritz LLP

499 Park Avenue

New York, New York 10022

Attention: Valerie A. Price, Esq.

Facsimile: (212) 652-3701




	 	If to ReGen, to:




	 	ReGen Biologics, Inc.

509 Commerce Street

East Wing

Franklin Lakes, NJ 07417

Attention: Chief Executive Officer

Facsimile: (201) 651-5141




	 	with a copy to:




	 	Shaw Pittman LLP

1650 Tysons Boulevard

McLean, VA 22102

Attn: Greg Giammittorio, Esq.

Facsimile: (703) 770-7901





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or such other address or facsimile number as such party may specify for the
purpose by written notice to the other parties hereto. Each such notice,
request or other communication will be effective: (a) if delivered in person,
when such delivery is made at the address specified in this Section 7.01; (b)
if delivered by mail, three (3) Business Days after mailing; (c) if delivered
by overnight courier, the next Business Day after such delivery is sent to the
address specified in
this Section 7.01; or (d) if delivered by facsimile or electronic transmission,
when such facsimile or electronic transmission is transmitted to the facsimile
number or e-mail address, as applicable, specified in this Section 7.01 or
otherwise by the parties, and the appropriate confirmation is received;
provided, that in the event a notice or other communication is sent pursuant to
subsection (d), delivery via facsimile or electronic transmission shall be
followed by delivery of the original, if applicable.



     
Section 7.02. Survival of Representations, Warranties and Agreements. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto will survive for the
period from the Effective Time until ten (10) days following the date on which
the Form 10-K for Aros for the fiscal year ended December 31, 2002 shall have
been filed with the SEC. This Section 7.02 will not limit any covenant or
agreement of the parties which by its terms contemplates performance or
application after the Effective Time, including, but not limited to, the
representations, warranties and covenants contained in Section 6.03.



     
Section 7.03. Amendment. This Agreement may be amended by ReGen and Aros at
any time before or after any approval of this Agreement by the shareholders of
ReGen. This Agreement may not be amended except by an instrument in writing
signed on behalf of all the parties.



     
Section 7.04. Extension; Waiver. At any time prior to the Effective Time, the
parties may: (a) extend the time for the performance of any of the obligations
or other acts of any other party; (b) waive any inaccuracies in the
representations and warranties contained herein by any other party or in any
document, certificate or writing delivered pursuant hereto by any other party;
or (c) waive compliance with any of the agreements of any other party or with
any conditions to its own obligations. Any agreement on the part of any party
to any such extension or waiver will be valid only if set forth in an
instrument in writing signed on behalf of such party.



     
Section 7.05. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. No party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement
without the prior written consent of the other parties.



     
Section 7.06. Governing Law. This Agreement will be construed in accordance
with and governed by the law of the State of Delaware applicable to agreements
entered into and to be performed wholly within such State.



     
Section 7.07. Jurisdiction. Each of the parties: (a) consents to submit
itself to the personal jurisdiction of any federal or state court located in
the State of New York in the event any dispute arises out of this Agreement or
the Merger; (b) agrees that it will not attempt to deny

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or defeat such personal
jurisdiction by
motion or other request for leave from any such court; and (c) agrees that it
will not bring any action relating to this Agreement or the Merger in any court
other than a federal or state court sitting in the State of New York.



     
     Section 7.08. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement will become effective when each party shall have received
counterparts hereof signed by all of the other parties.



     
     Section 7.09. Entire Agreement. This Agreement and the other agreements
(together with all exhibits, schedules and other documents delivered pursuant
thereto) referred to herein or executed contemporaneously herewith constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
of this Agreement. No representation, inducement, promise, understanding,
condition or warranty not set forth herein has been made or relied upon by any
party.



     
     Section 7.10. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.



     
     Section 7.11. Severability. In the event that any one or more of the
provisions contained in this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement.



     
     Section 7.12. Certain Definitions. For purposes of this Agreement, the
term: (a) “Business Day” shall mean any day other than a day on which banks in
the State of New York are authorized or obligated to be closed; and (b)
“Person” means an individual, corporation, limited liability company, joint
stock company, partnership (general, limited or otherwise), association, trust,
unincorporated organization or other legal entity or group.



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     IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed by its respective authorized officer as of the day and year first
above written.



	 
	AROS CORPORATION
	 
	By:
	      /s/   WILLIAM R. LEWIS
	 



Name:  William R. Lewis

Title:  Special Committee Member
	 
	By:
	      /s/   ALAN W. BALDWIN
	 



Name:  Alan W. Baldwin

Title:  Special Committee Member
	 
	AROS ACQUISITION CORP.
	 
	By:
	      /s/   ALAN W. BALDWIN
	 



Name:  Alan W. Baldwin

Title:  President
	 
	REGEN BIOLOGICS, INC.
	 
	By:
	      /s/   GERALD E. BISBEE, JR.
	 



Name:  Gerald E. Bisbee, Jr., Ph.D.

Title:  President, Chief Executive Officer and Chairman