ex10_1.htm


    
      

    

    Exhibit 10.1

    


     

    SUBSCRIPTION
AGREEMENT

     

    This
Subscription Agreement (this “Agreement”) is entered into as
of February 13, 2009, by and among ReGen Biologics, Inc., a Delaware corporation
(together with its successors and permitted assigns, the “Issuer”), and the undersigned
investors (together with their successors and permitted assigns, the “Investors” and each an “Investor”).  Capitalized
terms used but not otherwise defined herein shall have the meanings set forth in
Section
11.1.

     

    RECITALS

     

    Subject
to the terms and conditions of this Agreement, the Issuer desires to issue and
sell to the Investors up to $_______________ of the Issuer’s common stock, par
value $0.01 per share (the “Common Stock”) at the Share
Price and warrants to purchase the Issuer’s Common Stock pursuant to the terms
of the warrant substantially in the form attached hereto as Exhibit A (the “Warrant”), and each Investor,
severally and not jointly, desires to subscribe for and purchase at the Share
Price the principal amount of Common Stock set forth on such Investor’s
signature page hereto.

     

    TERMS
OF AGREEMENT

     

    In
consideration of the mutual representations and warranties, covenants and
agreements contained herein, the parties hereto agree as follows:

     

    
      	
              1.

            	
              SUBSCRIPTION AND ISSUANCE OF
      COMMON STOCK AND WARRANTS.

            


    

     

    1.1           Subscription and Issuance of
Common Stock and Warrants.  At Closing, upon the terms and
subject to the conditions set forth herein: (a) the Issuer agrees that it will
issue and sell to the Investors up to $______________ (the “Aggregate Purchase Price”) of
the Issuer’s Common Stock at $3.50 per share, the Share Price (the “Offering”), and each Investor,
severally and not jointly, agrees that it will acquire from the Issuer shares of
Common Stock at the Share Price in the amount set forth on its signature page
hereto (for each Investor, the “Shares”); (b) the Issuer
agrees that it will issue and sell to each Investor, and each Investor severally
and not jointly agrees that it will acquire from the Issuer, Common Stock at the
Share Price, in each case, up to the aggregate amount set forth on the signature
page for each Investor hereof (the “Investment Amount”); (c) the
Issuer agrees that it will issue to each Investor, and each Investor, severally
and not jointly, agrees that it will acquire from the Issuer, a Warrant or
Warrants exercisable at the Warrant Price to purchase a number of shares of
Common Stock equal to 15% of the amount of such Investor’s Investment Amount
divided by
$3.50; and (d) each Investor agrees to remit payment for its Investment Amount
in accordance with the provisions of Section 1.2.

     

    1.2          
Payment for the Shares
and Warrants.  At Closing, upon the terms and subject to the
conditions set forth herein, each Investor shall pay its respective Investment
Amount.  All payments by Investors shall be paid in cash, by wire
transfer of immediately available funds at Closing to an account designated in a
written notice delivered by the Issuer to each Investor not later than two (2)
days prior to the Closing.

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

     

    1.3           Legend.  Any
certificate or certificates representing the Shares or any shares of Common
Stock issuable upon exercise of any Warrant shall bear the following legend, in
addition to any legend that may be required by any Requirements of
Law:

     

    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH
RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
IN COMPLIANCE WITH ANY APPLICABLE RULES OF THE SECURITIES AND EXCHANGE
COMMISSION.

     

    
      	
              2.

            	
              CLOSING.

            


    

     

    2.1           Closing.  The
closing of the transactions contemplated herein (the “Closing”) shall take place on
a date designated by the Issuer, which date shall be February 13,
2009.  The Closing shall take place at the offices of Pillsbury
Winthrop Shaw Pittman LLP, counsel for the Issuer, 1650 Tysons Boulevard,
McLean, VA 22102 or such other location as determined by the
Issuer.  At the Closing (i) each Investor shall remit payment in
accordance with and in the manner specified
in Section 1.2, (ii) the
Issuer shall issue to the Investors the Shares, and shall deliver or cause to be
delivered promptly after the Closing to the Investor a certificate or
certificates representing the Shares duly registered in the name of the
Investor, as specified on the signature pages hereto; (iii) the Issuer shall
issue to each Investor a Warrant or Warrants exercisable at the Warrant Price to
purchase a number of shares of Common Stock equal to 15% of the amount of such
Investor’s Investment Amount divided by $3.50; and
(iv) all other actions referred to in this Agreement which are required to be
taken for the Closing shall be taken and all other agreements and other
documents referred to in this Agreement which are required for the Closing shall
be executed and delivered.

     

    2.2           Termination.  This
Agreement may be terminated at any time prior to the Closing:

     

    (a)           by
mutual written consent of the Issuer and the Investors;

     

    (b)           with
respect to any Investor’s obligations hereunder, by such Investor, upon a
materially inaccurate representation or breach of any material warranty,
covenant or agreement on the part of the Issuer set forth in this Agreement, in
either case such that the conditions in Section 10.1 would be
reasonably incapable of being satisfied on or prior to the date of the Closing;
or

     

    (c)           by
the Issuer, upon a materially inaccurate representation or breach of any
material warranty, covenant or agreement on the part of the Investors set forth
in this Agreement, in either case such that the conditions in Section 10.2 would be
reasonably incapable of being satisfied on or prior to the date of the
Closing.

    


    
      
        
           


        

        
          2

          
            

          

        

        
           


        

      

    

     

    2.3           Effect of
Termination.  In the event of termination of this Agreement
pursuant to Section 2.2,
this Agreement shall forthwith become void, there shall be no liability on the
part of the Issuer or the Investors to each other and all rights and obligations
of any party hereto shall cease; provided, however, that nothing
herein shall relieve any party from liability for the willful breach of any of
its representations and warranties, covenants or agreements set forth in this
Agreement.

     

    
      	
              3.

            	
              NEGATIVE CLAW
      BACK.

            


    

     

    3.1           Subsequent
Financings.  If at any time after the Closing, the Company
consummates a financing transaction (a “Subsequent Financing”) in
which the Company issues Common Stock or Convertible Securities or Options
(collectively, such Common Stock, Convertible Securities, or Options are
hereinafter defined as “Additional Securities”) at a
price per share of such Additional Securities (after giving effect to the
conversion of any Convertible Securities and the exercise of any Options to be
issued in the Subsequent Financing) less than $3.20, subject to adjustment as
set forth in Section 3.3
(the “Trigger Price”),
the Company shall be obligated to issue to each Investor, for no additional
consideration, that number of shares of Common Stock as is equal to the quotient
of (a) the product of (i) the difference between the Trigger Price and the
Subsequent Financing Price, multiplied by (ii)
the number of the Shares issued to such Investor pursuant to this Agreement
divided by (b)
the Subsequent Financing Price (“Additional Shares”), which in
order to avoid fractional shares shall be rounded up to the next whole
number.  Notwithstanding the foregoing, the provisions of this Section 3.1 shall not apply to
and no Additional Shares shall be issued in the case of the following issuances
of Additional Securities by the Company: (A) Additional Securities issued or
issuable to employees, consultants, contractors or directors of the Company
directly or pursuant to a stock option plan, restricted stock plan or other
arrangement; (B) Additional Securities issued or issuable upon the exercise of
any Convertible Securities or Options outstanding as of the date hereof; (C)
Additional Securities issued or issuable in a joint venture, strategic
partnership or licensing agreement, the primary purpose of which is not the
raising of capital; (D) Additional Securities issued or issuable pursuant to any
rights plan, poison pill or any similar plan or agreement; (E) Additional
Securities issued or issuable pursuant to the Warrants issued in connection with
this Agreement, or (F) in an adjustment pursuant to Section 3.3.

     

    3.2           Notice; Additional
Shares.  If the Subsequent Financing Price is less than the
Trigger Price, then at least five (5) days prior to closing of the Subsequent
Financing, the Company shall give to each Investor a notice (the “Subsequent Financing Notice”)
setting forth the Subsequent Financing Price, a statement as to the adjustment
to be made pursuant to this Section 3 and the number of
shares of Common Stock to be delivered to each Investor.  The Company
shall promptly deliver or cause to be delivered to each Investor a certificate
evidencing the appropriate number of shares of Common Stock deliverable to each
Investor as a result of this Section 3 following the
closing of the Subsequent Financing.

    


    
      
        
           


        

        
          3

          
            

          

        

        
           


        

      

    

     

    3.3           Adjustments.  If
the Company splits, subdivides or combines its Common Stock into a different
number of shares, then (a) the number of additional shares issuable to each
Investor as the result of the operation of Section 3.1 shall be
proportionately increased in the case of a split or subdivision or
proportionately decreased in the case of a combination and (b) the Trigger Price
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.

     

    
      	
               
      

            	
              3.4

            	
              Termination; Maximum
      Amount of Additional Shares.

            


    

     

    (a)           The
rights of the Investors under this Section 3 shall automatically
terminate upon the earlier of (a) the Company’s net income or loss plus depreciation,
amortization, income tax and noncash stock-based compensation being equal to or
greater than zero (0) at the end of the fiscal quarter as reported in the
Company’s securities filings, (b) the closing of a Qualified Offering and (c)
January 16, 2012.

     

    (b)           Notwithstanding
Section 3.4(a), upon the
issuance of 6,000,000 Additional Shares of Common Stock (the “Maximum Amount of Additional
Shares”) as a result of the operation of Section 3.1, not including any
adjustments pursuant to Section
3.3, the rights of the Investors under this Section 3 shall terminate, and
pursuant to the Subsequent Financing that triggers the rights of the Investors
under Section 3.1 and
causes the issuance of shares up to the Maximum Amount of Additional Shares, the
Investors shall receive their pro rata amount of Additional Shares up to the
Maximum Amount of Additional Shares.

     

    
      	
              4.

            	
              REPRESENTATIONS AND WARRANTIES
      OF THE ISSUER.

            


    

     

    As a
material inducement to the Investors entering into this Agreement, subscribing
for the Shares and Warrants, except as set forth in the Disclosure Schedules
delivered to the Investors concurrently herewith, the Issuer represents and
warrants to the Investors as follows:

     

    4.1           Corporate
Status.  The Issuer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
the Issuer and its Subsidiaries has full corporate power and authority to own
and hold its properties and to conduct its business as described in the Issuer’s
SEC Reports. Each of the Issuer and its Subsidiaries is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business requires qualification or good standing, except for any failure to be
so qualified or be in good standing that would not have a Material Adverse
Effect.

     

    4.2           Corporate Power and
Authority.  The Issuer has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
to consummate the transactions contemplated hereby.  At or prior to
the Closing, the Issuer will have taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.  No further
approval or authorization of any stockholder or the board of directors of the
Issuer is required for the issuance and sale of the Shares and Warrants or,
except as provided in Section
7.2, the filing of the Registration Statement.

    


    
      
        
           


        

        
          4

          
            

          

        

        
           


        

      

    

     

    4.3           Enforceability.  This
Agreement has been duly executed and delivered by the Issuer and (assuming it
has been duly authorized, executed and delivered by the Investors) constitutes a
legal, valid and binding obligation of the Issuer, enforceable against the
Issuer in accordance with its terms, except (a) as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally, and (b) the indemnity
provisions of Section 9
of this Agreement, to the extent such provisions may not be enforceable
based upon public policy considerations, and general equitable principles,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.

     

    4.4           No
Violation.  The execution and delivery by the Issuer of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Issuer with the terms and provisions hereof (including,
without limitation, the Issuer’s issuance to the Investors of the Shares and
Warrants as contemplated by and in accordance with this Agreement), will not
result in a default under (or give any other party the right, with the giving of
notice or the passage of time (or both), to declare a default or accelerate any
obligation under) or violate the Certificate of Incorporation or Bylaws of the
Issuer or any material Contract to which the Issuer is a party (except to the
extent such a default, acceleration, or violation would not, in the case of a
Contract, have a Material Adverse Effect on the Issuer), or materially violate
any Requirement of Law applicable to the Issuer, or result in the creation or
imposition of any material Lien upon any of the capital stock, properties or
assets of the Issuer or any of its Subsidiaries (except where such violations of
any Requirement of Law or creations or impositions of any Liens would not have a
Material Adverse Effect on the Issuer).  Neither the Issuer nor any of
its Subsidiaries is (a) in default under or in violation of any material
Contract to which it is a party or by which it or any of its properties is bound
or (b) to its knowledge, in violation of any order of any Governmental
Authority, which, in the case of clauses (a) and (b), could reasonably be
expected to have a Material Adverse Effect.

     

    4.5           Consents/Approvals.  Except
for the filing of a registration statement in accordance with Article 7 hereof and filings
with the SEC and the securities commissions of the states in which the Shares
and Warrants are to be issued, no consents, filings, authorizations or other
actions of any Governmental Authority are required to be obtained or made by the
Issuer for the Issuer’s execution, delivery and performance of this Agreement
which have not already been obtained or made.  No consent, approval,
waiver or other action by any Person under any Contract to which the Issuer is a
party or by which the Issuer or any of its properties or assets are bound is
required or necessary for the execution, delivery or performance by the Issuer
of this Agreement and the consummation of the transactions contemplated hereby,
except where the failure to obtain such consents would not have a Material
Adverse Effect on the Issuer.

     

    4.6           Valid
Issuance.  Upon payment of the Aggregate Purchase Price by the
Investors and delivery of the certificates for the Shares and the Warrants, such
Shares and Warrants will be validly issued, fully paid and nonassessable and
will be free and clear of all Liens imposed by the Issuer.  The shares
of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”) when issued
will be validly issued, fully paid and nonassessable and will be free and clear
of all Liens imposed by the Issuer and will not be subject to any preemptive
rights or other similar rights of stockholders of the Issuer imposed by
law.

    


    
      
        
           


        

        
          5

          
            

          

        

        
           


        

      

    

     

    4.7           SEC Filings and Other
Filings.  Except as set forth on Schedule 4.7, the
Issuer has timely made all filings required to be made by it under the Exchange
Act since December 31, 2006.  The Issuer has delivered or made
accessible to the Investors true, accurate and complete copies of (a) the
Issuer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007;
(b) the Issuer’s definitive proxy statement dated April 21, 2008 relating to its
2008 Annual Meeting of Stockholders; and (c) the Issuer’s Period Reports on Form
10-Q filed May 8, 2008 for the quarter ended March 31, 2008, August 8, 2008 for
the quarter ended June 30, 2008 and November 10, 2008 for the quarter ended
September 30, 2008 (as such documents have,
since the time of their filing, been amended or supplemented, and together with
all reports, documents and information filed or after the date first written
above through the date of Closing with the SEC, collectively the “SEC Reports”).  The
SEC Reports, when filed (unless amended and superseded by a later Issuer filing
prior to the date hereof, then on the date of such later filing), complied in
all material respects with all applicable requirements of the Exchange Act and
the Securities Act, if and to the extent applicable, and the rules and
regulations of the SEC thereunder applicable to the SEC Reports.  None
of the SEC Reports when filed (unless amended and superseded by a later Issuer
filing prior to the date hereof, then on the date of such later filing)
contained any misstatement of a material fact or omitted to state a material
fact necessary to prevent the statements made therein from being
misleading.

     

    4.8           Commissions.  Except
for those fees set forth on Schedule 4.8, the
Issuer has not incurred any other obligation for any finder’s or broker’s or
agent’s fees or commissions in connection with the transactions contemplated
hereby.

     

    4.9           Capitalization.  As
of the date hereof, the authorized capital stock of the Issuer consists of
165,000,000 shares of Common Stock and 60,000,000 shares of Preferred
Stock.  Except as set forth on Schedule 4.9, all
issued and outstanding shares of capital stock of the Issuer have been, and as
of Closing will be, duly authorized and validly issued and are fully paid and
non-assessable, have been issued in compliance with all applicable state and
federal securities laws in all material respects and were not issued in
violation of, or subject to, any preemptive, subscription or other similar
rights of any stockholder of the Issuer imposed by law.  As of the
date hereof, the Issuer has issued and outstanding 9,021,603 shares of Common
Stock, not accounting for any fractional shares resulting from the Reverse
Split, and 8,015,820 shares of Preferred Stock, of which 1,990,360 shares have
been designated as Series A Convertible Preferred Stock and of which 6,025,460
shares have been designated as Series C Convertible Preferred Stock, which in
the aggregate are convertible into 400,791 shares of Common Stock, not
accounting for any fractional shares resulting from the Reverse
Split.  Except for outstanding options to purchase 4,137,223 shares of
Common Stock, outstanding warrants to purchase 1,348,352 shares of Common Stock
and the outstanding Bridge Notes convertible into 61,555 shares of Common Stock,
not accounting for the Financing Options to be cancelled pursuant to this
Agreement, as of the date hereof there were no outstanding options, warrants,
notes or rights (including conversion or preemptive rights and rights of first
refusal and similar rights or agreements, orally or in writing, for the purchase
or acquisition from the Issuer of any shares of capital stock, and, except as
set forth on Schedule
4.9, the Issuer is not a party to or subject to any agreement or
understanding and, to the Issuer’s knowledge, there is no agreement or
understanding between any Persons, which affects or relates to the voting or
giving of written consents with respect to any security or by a director of the
Issuer. The Issuer owns, directly or indirectly, all of the capital stock of its
Subsidiaries, free and clear of any Liens or equitable interests other than as
reflected in the SEC Reports.  Except as set forth in the SEC Reports,
the Issuer has no obligation, contingent or otherwise, to redeem or repurchase
any equity security or any security that is a combination of debt and
equity.

    


    
      
        
           


        

        
          6

          
            

          

        

        
           


        

      

    

     

    4.10         Material
Changes.  Except as set forth in the SEC Reports (excluding any
“risk factors” or “forward-looking statements” sections thereof) or as otherwise
contemplated herein, since December 31, 2007, there has been no Material Adverse
Effect in respect of the Issuer and its Subsidiaries taken as a
whole.  Except as set forth in the SEC Reports (excluding any “risk
factors” or “forward-looking statements” sections thereof), since December 31,
2007, there has not been: (i) any direct or indirect redemption, purchase or
other acquisition by the Issuer of any shares of the Common Stock; (ii) any
declaration, setting aside or payment of any dividend or other distribution by
the Issuer with respect to the Common Stock; (iii) any borrowings incurred or
any material liabilities (absolute, accrued or contingent) assumed, other than
current liabilities incurred in the ordinary course of business, liabilities
under Contracts entered into in the ordinary course of business, or liabilities
not required to be reflected on the Issuer’s financial statements pursuant to
GAAP or required to disclosed in the SEC Reports; (iv) any Lien or adverse claim
on any of the Issuer’s material properties or assets, except for Liens for taxes
not yet due and payable or otherwise in the ordinary course of business; (v) any
sale, assignment or transfer of any of the Issuer’s material assets, tangible or
intangible, except in the ordinary course of business; (vi) any extraordinary
losses or waiver of any rights of material value; (vii) any material capital
expenditures or commitments therefor other than in the ordinary course of
business; (viii) any other material transaction other than in the ordinary
course of business; (ix) any material change in the nature or operations of the
business of the Issuer and its Subsidiaries; (x) any default in the payment of
principal or interest in any material amount, or violation of any material
covenant, with respect to any outstanding debt obligations that are material to
the Issuer and its Subsidiaries as a whole; (xi) any material changes to the
Issuer’s critical accounting policies or material deviations from historical
accounting and other practices in connection with the maintenance of the
Issuer’s books and records; or (xii) any agreement or commitment to do any of
the foregoing.

     

    4.11         Litigation.  Except
as set forth in the SEC Reports, there is no action, suit, proceeding or
investigation pending or, to the Issuer’s knowledge, currently threatened
against the Issuer or any of its Subsidiaries that questions the validity of
this Agreement or the right of the Issuer to enter into it, or to consummate the
transactions contemplated hereby, or that could reasonably be expected to
result, either individually or in the aggregate, in a Material Adverse Effect on
the Issuer or any material change in the current equity ownership of the Issuer.
The foregoing includes, without limitation, actions pending or, to the Issuer’s
knowledge, threatened involving the prior employment of any of the Issuer’s
employees or their use in connection with the Issuer’s business of any
information or techniques allegedly proprietary to any of their former
employers.  Neither the Issuer nor any of its Subsidiaries is a party
to or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or Governmental Authority.  There is no action,
suit, proceeding or investigation by the Issuer or any of its Subsidiaries
currently pending or which the Issuer or any of its Subsidiaries currently
intends to initiate, which could reasonably be expected to have a Material
Adverse Effect.

    


    
      
        
           


        

        
          7

          
            

          

        

        
           


        

      

    

     

    4.12         Rights of Registration,
Voting Rights, and Anti-Dilution.  Except as contemplated in
this Agreement and as set forth on Schedule 4.12, the
Issuer has not granted or agreed to grant any registration rights, including
piggyback rights, to any Person and, to the Issuer’s knowledge, no stockholder
of the Issuer has entered into any agreements with respect to the voting of
capital shares of the Issuer.  Except as set forth in Schedule 4.12, the
issuance of the Shares and Warrants does not constitute an anti-dilution event
for any existing security holders of the Issuer, pursuant to which such security
holders would be entitled to additional securities or a reduction in the
applicable conversion price or exercise price of any securities.

     

    4.13         Offerings.  Subject
in part to the truth and accuracy of the Investors’ representations and
warranties set forth in this Agreement, the offer, sale and issuance of the
Shares, Warrants and Warrant Shares (together, the “Securities”) as contemplated
by this Agreement are exempt from the registration requirements of the
Securities Act and any applicable state securities laws, and neither the Issuer
nor any authorized agent acting on its behalf will take any action hereafter
that would cause the loss of such exemption.

     

    4.14         Licenses and
Permits.  Except as disclosed in the SEC Reports or on Schedule 4.14, each
of the Issuer and its Subsidiaries has all Permits under applicable Requirements
of Law from all applicable Governmental Authorities that are necessary to
operate its businesses as presently conducted and all such Permits are in full
force and effect, except where the failure to have any such Permits in full
force and effect would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.  Neither the Issuer nor
any of its Subsidiaries is in default under, or in violation of or noncompliance
with, any of such Permits, except for any such default, violation, or
noncompliance which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. To the Issuer’s knowledge, other
than as disclosed in the SEC Reports, there is no proposed change in any
Requirements of Law which would require the Issuer and its Subsidiaries to
obtain any Permits in order to conduct its business as presently conducted that
the Issuer and its Subsidiaries do not currently possess and the lack of which
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

     

    4.15         Patents and
Trademarks.  The Issuer and each of its Subsidiaries has, or
has rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and know-how
(including trade secrets or other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) (collectively, the “Intellectual Property Rights”)
that are necessary for use in connection with its business as presently
conducted, except where the failure to have such Intellectual Property Rights
would not reasonably be expected to have a Material Adverse
Effect.  To the Issuer’s knowledge, there is no existing infringement
by another person or entity of any of the Intellectual Property Rights that are
necessary for use in connection with the Issuer’s business as presently
conducted.  The Issuer is not infringing on any intellectual property
rights of any other person, nor is there any claim of infringement made or, to
the Issuer’s knowledge, threatened by a third party against or involving the
Issuer.

    


    
      
        
           


        

        
          8

          
            

          

        

        
           


        

      

    

     

    4.16         Insurance. The Issuer maintains and
will continue to maintain insurance with such insurers, and insuring against
such losses, in such amounts, and subject to such deductibles and exclusions as
are customary in the Issuer’s industry and otherwise reasonably prudent, all of
which insurance is in full force and effect.

     

    4.17         Material Contracts.
All material Contracts to which the Issuer or any Subsidiary is a party and
which are required to have been filed by the Issuer on Exhibit 10 to the SEC
Reports have been filed by the Issuer with the SEC pursuant to the requirements
of the Exchange Act.  Except as disclosed in the SEC Reports, each
such material Contract is in full force and effect, except as otherwise required
pursuant to its respective terms, and is binding on the Issuer or its
Subsidiaries, as the case may be, in each case, in accordance with its
respective terms, and neither the Issuer or any of its Subsidiaries nor, to the
Issuer’s knowledge, any other party thereto is in breach of, or in default
under, any such material Contract, which breach or default would reasonably be
expected to have a Material Adverse Effect.  Except as set forth in
the SEC Reports, there exists no actual or, to the knowledge of the Issuer,
threatened termination, cancellation or limitation of, or any material adverse
modification or change in, the business relationship of the Issuer or any of its
Subsidiaries, or the business of the Issuer or any of its Subsidiaries, with any
customer or supplier or any group of customers or suppliers whose purchases or
inventories provided to the business of the Issuer or any of its Subsidiaries
would, individually or in the aggregate, have a Material Adverse
Effect.

     

    4.18         Taxes.  The
Issuer has filed all material federal, state and foreign income and franchise
tax returns which are due and has paid or accrued all taxes shown as due
thereon, and the Issuer has no knowledge of a tax deficiency which has been or
might be asserted or threatened against it which is reasonably likely to have a
Material Adverse Effect.

     

    4.19         Private
Placement.  Neither the Issuer nor any of its Subsidiaries or
Affiliates, nor any Person acting on its or their behalf, (i) has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities, (ii) has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under any
circumstances that would require registration of the Securities under the
Securities Act or (iii) has issued any shares of Common Stock or shares of any
series of preferred stock or other securities or instruments convertible into,
exchangeable for or otherwise entitling the holder thereof to acquire shares of
Common Stock which would be integrated with the sale of the Securities hereunder
for purposes of the Securities Act or of any applicable stockholder approval
provisions, nor will the Issuer or any of its Subsidiaries or Affiliates take
any action or steps that would require registration of any of the Securities
under the Securities Act or cause the offering of the Securities to be
integrated with other offerings.  Assuming the accuracy of the
representations and warranties of the Investors, the offer and sale of the
Securities by the Issuer to the Investors pursuant to this Agreement will be
exempt from the registration requirements of the Securities Act.

    


    
      
        
           


        

        
          9

          
            

          

        

        
           


        

      

    

     

    4.20         Application of Takeover
Protections. There is no control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Issuer's charter documents or the laws
of its state of incorporation that is or could become applicable to the
Investors as a result of the Investors and the Issuer fulfilling their
obligations or exercising their rights hereunder, including, without limitation,
as a result of the Issuer's issuance of the Securities or the Investors’
ownership of the Securities.

     

    
      	
              5.

            	
              REPRESENTATIONS AND WARRANTIES
      OF EACH INVESTOR.

            


    

     

    As a
material inducement to the Issuer entering into this Agreement and issuing the
Shares and Warrants, and in reliance upon the representations and warranties of
the Issuer in Section 4
hereof, each of the Investors severally and not jointly represents, warrants,
and covenants to the Issuer as follows:

     

    5.1           Power and
Authority.  The Investor, if other than a natural person, is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation.  The Investor has
the corporate, partnership or other power (or capacity) and authority under
applicable law to execute and deliver this Agreement and consummate the
transactions contemplated hereby, and has all necessary authority to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.  The Investor has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.

     

    5.2           No
Violation.  The execution and delivery by the Investor of this
Agreement, the consummation of the transactions contemplated hereby, and the
compliance by the Investor with the terms and provisions hereof, will not result
in a default under (or give any other party the right, with the giving of notice
or the passage of time (or both), to declare a default or accelerate any
obligation under) or violate any charter or similar documents of the Investor,
if other than a natural person, or any Contract to which the Investor is a party
or by which it or its properties or assets are bound, or violate any Requirement
of Law applicable to the Investor, other than such violations or defaults which,
individually and in the aggregate, do not and will not have a Material Adverse
Effect on the Investor.  The Investor will comply with any Requirement
of Law applicable to it in connection with the Offering and any resale by the
Investor of any of the Securities.

     

    5.3           Consents/Approvals.  No
consents, filings, authorizations or actions of any Governmental Authority are
required for the Investor’s execution, delivery and performance of this
Agreement.  No consent, approval, waiver or other actions by any
Person under any Contract to which the Investor is a party or by which the
Investor or any of its properties or assets are bound is required or necessary
for the execution, delivery and performance by the Investor of this Agreement
and the consummation of the transactions contemplated hereby.

    


    
      
        
           


        

        
          10

          
            

          

        

        
           


        

      

    

     

    5.4           Enforceability.  This
Agreement has been duly executed and delivered by the Investor and (assuming it
has been duly authorized, executed and delivered by the Issuer) constitutes a
legal, valid and binding obligation of the Investor, enforceable against the
Investor in accordance with its terms, except (a) as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditor’s rights generally, and (b)
the indemnity provisions of Section 9 of this Agreement,
to the extent they may not be enforceable based upon public policy
considerations, and general equitable principles, regardless of whether
enforceability is considered in a proceeding at law or in equity.

     

    5.5           Investment
Intent.  The Investor is acquiring the Shares and Warrants
hereunder for its own account and with no present intention of distributing or
selling any of the Securities and further agrees not to transfer such Securities
in violation of the Securities Act or any applicable state securities law, and
no one other than the Investor has any beneficial interest in the Shares (except
to the extent that the Investor may have delegated voting authority to its
investment advisor), the Warrants or the Warrant Shares.  The Investor
agrees that it will not sell or otherwise dispose of any of the Securities
unless such sale or other disposition has been registered under the Securities
Act or, in the opinion of counsel acceptable to the Issuer, is exempt from
registration under the Securities Act and has been registered or qualified or,
in the opinion of such counsel acceptable to the Issuer, is exempt from
registration or qualification under applicable state securities
laws.  The Investor understands that the offer and sale by the Issuer
of the Shares and Warrants being acquired by the Investor hereunder has not been
registered under the Securities Act by reason of their contemplated issuance in
transactions exempt from the registration and prospectus delivery requirements
of the Securities Act pursuant to Section 4(2) thereof, and that the reliance of
the Issuer on such exemption from registration is predicated in part on these
representations and warranties of the Investor.  The Investor
acknowledges that pursuant to Section 1.3 of this Agreement
a restrictive legend consistent with the foregoing has been or will be placed on
the certificates for the Securities.

     

    5.6           Accredited
Investor.  The Investor is an “accredited investor” as such
term is defined in Rule 501(a) of Regulation D under the Securities Act, and has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment to be made by it
hereunder.

     

    5.7           Adequate
Information.  The Investor has received from the Issuer, and
has had the opportunity to review, such information which the Investor considers
necessary or appropriate to evaluate the risks and merits of an investment in
the Shares and Warrants.  The Investor also acknowledges that the risk
factors set forth on Exhibit C and
contained in the SEC Reports have been delivered to the Investor and the
Investor has had the opportunity to review such risk factors.

     

    5.8           Opportunity to
Question.  The Investor has had the opportunity to question,
and has questioned, to the extent deemed necessary or appropriate,
representatives of the Issuer so as to receive answers and verify information
obtained in the Investor’s examination of the Issuer, including the information
that the Investor has received and reviewed as referenced in Section 5.7 hereof in relation
to its investment in the Shares and Warrants.

    


    
      
        
           


        

        
          11

          
            

          

        

        
           


        

      

    

     

    5.9           No Other
Representations.  No oral or written material representations
have been made to the Investor in connection with the Investor’s acquisition of
the Shares and Warrants which were in any way inconsistent with the information
reviewed by the Investor.  The Investor acknowledges that in deciding
whether to enter into this Agreement and to purchase the Shares and Warrants
hereunder, it has not relied on any representations or warranties of any type or
description made by the Issuer or any of its representatives with regard to the
Issuer, any of its Subsidiaries, any of their respective businesses or
properties, or the prospects of the investment contemplated herein, other than
the representations and warranties set forth in Section 4 hereof.

     

    5.10         Knowledge and
Experience.  The Investor has such knowledge and experience in
financial, tax and business matters, including substantial experience in
evaluating and investing in common stock and other securities (including the
common stock and other securities of speculative companies), so as to enable the
Investor to utilize the information referred to in Section 5.7 hereof and any
other information made available by the Issuer to the Investor in order to
evaluate the merits and risks of an investment in the Shares and Warrants and to
make an informed investment decision with respect thereto.

     

    5.11         Independent
Decision.  The Investor is not relying on the Issuer or on any
legal or other opinion in the materials reviewed by the Investor with respect to
the financial or tax considerations of the Investor relating to its investment
in the Shares and Warrants.  The Investor has relied solely on the
representations and warranties, covenants and agreements of the Issuer in this
Agreement (including the exhibits and schedules hereto) and on its examination
and independent investigation in making its decision to acquire the Shares and
Warrants.

     

    5.12         Commissions.  The
Investor has not incurred any obligation for any finder’s or broker’s or agent’s
fees or commissions in connection with the transactions contemplated
hereby.

     

    
      	
              6.

            	
              COVENANTS.

            


    

     

    6.1           Public
Announcements.  The Issuer shall file within four (4) business
days after the Closing a Current Report on Form 8-K with the SEC in respect of
the transactions contemplated by this Agreement.  Prior to the earlier
of the filing of such Current Report on Form 8-K or the fifth business day after
the Closing, each Investor agrees not to make any public announcement or issue
any press release or otherwise publicly disseminate any information about the
subject matter of this Agreement.  Except as provided herein, the
Issuer shall have the right to make such public announcements and shall control,
in its sole and absolute discretion, the timing, form and content of all press
releases or other public communications of any sort relating to the subject
matter of this Agreement, and the method of their release, or publication
thereof.  The Issuer may issue press releases relating to the
transactions contemplated by this Agreement, but shall not identify any Investor
in any such press release without the consent of such Investor, except as may be
required by any Requirement of Law or rule of any exchange on which the Issuer’s
securities are listed.  Notwithstanding the foregoing, each Investor
may make such filings with and public disclosures to any Governmental Authority
as are required, including but not limited to filings on Form 4 and Schedule
13D/G with the SEC.

    


    
      
        
           


        

        
          12

          
            

          

        

        
           


        

      

    

     

    6.2           Further
Assurances.  Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be reasonably necessary or appropriate to effectuate, carry out and
comply with all of the terms of this Agreement and the transactions contemplated
hereby.  Each of the Investors and the Issuer shall make on a prompt
and timely basis all governmental or regulatory notifications and filings
required to be made by it with or to any Governmental Authority in connection
with the consummation of the transactions contemplated hereby.  The
Issuer and the Investors each agree to cooperate with the other in the
preparation and filing of all forms, notifications, reports and information, if
any, required or reasonably deemed advisable pursuant to any Requirement of Law
in connection with the transactions contemplated by this Agreement and to use
their respective commercially reasonable efforts to agree jointly on a method to
overcome any objections by any Governmental Authority to any such
transactions.  Except as may be specifically required hereunder,
neither of the parties hereto nor their respective Affiliates shall be required
to agree to take any action that in the reasonable opinion of such party would
result in or produce a Material Adverse Effect on such party.

     

    6.3           Notification of Certain
Matters.  Prior to the Closing, each party hereto shall give
prompt notice to the other party of the occurrence, or non-occurrence, of any
event which would be likely to cause any representation and warranty herein to
be untrue or inaccurate, or any covenant, condition or agreement herein not to
be complied with or satisfied.

     

    
      	
               
      

            	
              6.4

            	
              Confidential
      Information; Standstill.

            


    

     

    (a)           Except
as contemplated by Sections
6.1 and 6.2
above, each of the Investors agrees that no portion of the Confidential
Information (as defined below) shall be disclosed to third parties, except as
may be required by law, without the prior express written consent of the Issuer;
provided, that
an Investor may share such information with such of its officers and
professional advisors as may need to know such information to assist such
Investor in its evaluation thereof on the condition that such parties agree to
be bound by the terms hereof.  “Confidential Information”
means the existence and terms of this Agreement, the transactions contemplated
hereby, and the disclosures and other information contained herein, excluding
any disclosures or other information that is publicly available.  Each
of the Investors further agrees that it will not trade the Common Stock acquired
through this Offering until the Issuer has publicly announced the completion of
the Offering.

     

    (b)           For
a period of two (2) years from Closing, no Investor will, without the prior
written consent of the Issuer (i) propose to enter into any acquisition of all
or substantially all of the assets or stock of the Issuer or a merger or other
business combination transaction involving the Issuer, (ii) seek to control the
management, Board of Directors or policies of the Issuer, or (iii) except as set
forth on Schedule
6.4(b), form, join or in any way participate in a “group” (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any securities
of the Issuer in connection with any of the foregoing.

     

    6.5           Financing Option
Cancellation.  The parties hereto agree that upon Closing any
and all Financing Options held by the Investors shall be deemed cancelled and
non-exercisable without any further action by any of the parties to this
Agreement.

    


    
      
        
           


        

        
          13

          
            

          

        

        
           


        

      

    

     

    
      	
              7.

            	
              REGISTRATION
      RIGHTS.

            


    

     

    The
Investors shall have the following registration rights with respect to the
Registrable Securities owned by it:

     

    7.1           Transfer of Registration
Rights.  An Investor may assign the registration rights with
respect to the Securities to any party or parties to which it may from time to
time transfer all of the Shares and Warrants in accordance with Section 5.5 hereof; provided, that the
transferee agrees in writing with the Issuer to be bound by the applicable
provisions of this Agreement regarding such registration rights and
indemnification relating thereto.  Upon assignment of any registration
rights pursuant to this Section
7.1, the Investor shall deliver to the Issuer a notice of such assignment
which includes the identity and address of any assignee and such other
information reasonably requested by the Issuer in connection with effecting any
such registration (collectively, the Investor and each such subsequent holder is
referred to as a “Holder”).  The
Issuer shall maintain at one of its offices a register for the recordation of
the names and addresses of the Holders and the Shares and Warrants held by each
Holder (for the purposes of this Section 7.1 only, the
“Register”).  The Issuer and Holders may treat each person whose name
is recorded in the Register pursuant to the terms hereof as a Holder hereunder
for all purposes of this Agreement.

     

    7.2           Required
Registration.  The Issuer agrees to register the resale of all
of the Registrable Securities by filing a registration statement on Form S-1 (or
S-3 if conditions change to allow the Issuer to use S-3) (the “Registration Statement”),
including the Shares and Warrant Shares purchased pursuant to this Agreement.
The Issuer agrees to use commercially reasonable efforts to file a Registration
Statement as soon as possible after the Closing; provided, however, that if the
Issuer is not eligible to use Form S-3, the Issuer shall not be required to make
such filing until the date that is sixty (60) days following the date the Issuer
files its next regularly scheduled Annual Report on Form 10-K.  The
Issuer shall subsequently use commercially reasonable efforts to cause the SEC
to declare the Registration Statement effective as soon as
possible.  The Issuer shall thereafter maintain the effectiveness of
the Registration Statement until the earlier of (a) the date on which all the
Registrable Securities have been sold pursuant to the Registration Statement or
Rule 144 promulgated under the Securities Act (“Rule 144”), (b) such time as
the Issuer reasonably determines, based on an opinion of counsel, that all of
the Holders will be eligible to sell under Rule 144 all of the Securities then
owned by the Holders within the volume limitations imposed by paragraph (e) of
Rule 144 in the three month period immediately following the termination of the
effectiveness of the Registration Statement, and (c) the first anniversary of
the date the Registration Statement was declared effective by the
SEC.  The Registration Statement filed pursuant to this Section 7.2 may include other
securities of the Issuer that are held by Persons who, by virtue of agreements
with the Issuer, are entitled to similar registration rights.

     

    
      	
               
      

            	
              7.3

            	
              Registration
      Procedures.

            


    

     

    (a)           In
case of the Registration Statement effected by the Issuer subject to this Section 7, the Issuer shall
keep the Investors, on behalf of Holder, advised in writing as to the initiation
of such registration, and as to the completion thereof.  In addition,
subject to Section 7.2
above, the Issuer shall, to the extent applicable to the Registration
Statement:

    


    
      
        
           


        

        
          14

          
            

          

        

        
           


        

      

    

     

    (i)           
prepare and file with the SEC such amendments and supplements to the
Registration Statement as may be necessary to keep such registration
continuously effective and free from any material misstatement or omission
necessary to make the statements therein, in light of the circumstances, not
misleading, and comply with provisions of the Securities Act with respect to the
disposition of all securities covered thereby during the period referred to in
Section
7.2;

     

    (ii)           update,
correct, amend and supplement the Registration Statement as
necessary;

     

    (iii)          notify
the Holders promptly when the Registration Statement is declared effective by
the SEC, and furnish such number of prospectuses, including preliminary
prospectuses, and other documents incident thereto as any Holder may reasonably
request from time to time;

     

    (iv)          use
its commercially reasonable efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions of
the United States where an exemption is not available and as any Holder may
reasonably request to enable it to consummate the disposition in such
jurisdiction of the Registrable Securities (provided that the Issuer will not be
required to (A) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this provision, or (B)
consent to general service of process in any such jurisdiction, or (C) subject
itself to taxation in any jurisdiction where it is not already subject to
taxation);

     

    (v)           notify
each Holder at any time when a prospectus relating to the Registrable Securities
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in the Registration Statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading and, subject to Section 7.6, the Issuer will
prepare a supplement or amendment to such prospectus, so that, as thereafter
delivered to purchasers of such shares, such prospectus will not contain any
untrue statements of a material fact or omit to state any fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;

     

    (vi)          cause
all such Registrable Securities to be listed on each securities exchange on
which similar securities issued by the Issuer are then listed and obtain all
necessary approvals for trading thereon;

     

    (vii)         provide
a transfer agent and registrar for all such Registrable Securities not later
than the effective date of the Registration Statement;

    


    
      
        
           


        

        
          15

          
            

          

        

        
           


        

      

    

     

    (viii)        upon
the sale of any Registrable Securities pursuant to the Registration Statement,
direct the transfer agent to remove all restrictive legends from all
certificates or other instruments evidencing the Registrable
Securities;

     

    (ix)           with
a view to making available to the Holders the benefits of certain rules and
regulations of the SEC that at any time permit the sale of the Registrable
Securities to the public without registration, so long as any Registrable
Securities are outstanding, the Issuer shall use its commercially reasonable
efforts for a period of two years following the date of Closing:

     

    (1)           to
make and keep public information available, as those terms are understood and
defined in Rule 144(c) under the Securities Act;

     

    (2)           to
file with the SEC in a timely manner all reports and other documents required of
the Issuer under the Exchange Act; and

     

    (3)           to
furnish to the Holders upon any reasonable request a written statement by the
Issuer as to its compliance with the public information requirements of Rule
144(c) under the Securities Act; and

     

    (x)           to
advise the Holder promptly after it has received notice or obtained knowledge of
the existence of any stop order by the SEC delaying or suspending the
effectiveness of the Registration Statement or of the initiation or threat of
any proceeding for that purpose, and to make every commercially reasonable
effort to obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible time.

     

    (b)           Notwithstanding
anything stated or implied to the contrary in Section 7.3(a) above, the
Issuer shall not be required to consent to any underwritten offering of the
Registrable Securities or to any specific underwriter participating in any
underwritten public offering of the Registrable Securities.

     

    (c)           Each
Holder agrees that upon receipt of any notice from the Issuer of the happening
of any event of the kind described in Section 7.3(a)(v), and subject
to Section 7.5, such
Holder will forthwith discontinue such Holder’s disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such Holder’s receipt of the copies of the supplemented or
amended prospectus contemplated by Section 7.3(a)(v) and, if so
directed by the Issuer, will deliver to the Issuer at the Issuer’s expense all
copies, other than permanent file copies, then in such Holder’s possession, of
the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.

     

    (d)           Except
as required by law, all expenses incurred by the Issuer in complying with this
Section 7, including but
not limited to, all registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel and accountants for the Issuer, blue
sky fees and expenses (including fees and disbursements of counsel related to
all blue sky matters) incurred in connection with any registration,
qualification or compliance pursuant to this Section 7 shall be borne by
the Issuer.  All underwriting discounts and selling commissions
applicable to a sale incurred in connection with any registration of Registrable
Securities and the legal fees and other expenses of a Holder shall be borne by
such Holder.

    


    
      
        
           


        

        
          16

          
            

          

        

        
           


        

      

    

     

    7.4           Further
Information.  If Registrable Securities owned by a Holder are
to be included in any registration, such Holder shall furnish the Issuer such
information regarding itself as the Issuer may reasonably request and as shall
be required in connection with any registration (or amendment or supplement
thereto), referred to in this Agreement, and Holder shall indemnify the Issuer
with respect thereto in accordance with Section 9
hereof.  Each Holder shall furnish the information requested in Exhibit E of this
Agreement in writing to the Issuer no later than sixty (60) days after the
Closing otherwise the Issuer shall have no obligation to register such Holder’s
Registrable Securities under the Registration Statement.  The Issuer
may reasonably request that each Holder provide additional information in
connection with filing the Registration Statement, and such Holder shall provide
such additional information requested promptly following such
request.  Each Holder hereby represents and warrants to the Issuer
that it will accurately and completely provide any requested information,
including the questions listed in Exhibit E of this
Agreement, in accordance with this Section 7.4, and each Holder
agrees and acknowledges that the Issuer may rely on such information as being
true and correct for purposes of preparing and filing the Registration Statement
at the time of filing thereof and at the time it is declared effective, unless
such Holder has notified the Issuer in writing to the contrary prior to such
time.

     

    
      	
               
      

            	
              7.5

            	
              Right of
      Suspension.

            


    

     

    (a)           Notwithstanding
any other provision of this Agreement or any related agreement to the contrary,
the Issuer shall have the right, at any time, to suspend the effectiveness of
the Registration Statement and offers and sales of the Registrable Securities
pursuant thereto whenever, in the good faith judgment of the Issuer, (i) there
exists a material development or a potential material development with respect
to or involving the Issuer that the Issuer would be obligated to disclose in the
prospectus used in connection with the Registration Statement, which disclosure,
in the good faith judgment of the Issuer, after considering the advice of
counsel, would be premature or otherwise inadvisable at such time or (ii) the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances, not
misleading, including without limitation that period annually during which any
Registration Statement would require suspension pending the Issuer’s new fiscal
year financial statements (each, a “Suspension
Event”).  In the event that the Issuer shall determine to so
suspend the effectiveness of the Registration Statement and offers and sales of
the Registrable Securities pursuant thereto, the Issuer shall, in addition to
performing those acts required to be performed under the Securities Act and/or
the Exchange Act or deemed advisable by the Issuer, deliver to each Holder
written notice thereof, signed by the Chief Financial Officer or Chief Executive
Officer of the Issuer.  Upon receipt of such notice, the Holders shall
discontinue disposition of the Registrable Securities pursuant to the
Registration Statement and prospectus until such Holders (x) are advised in
writing by the Issuer that the use of the Registration Statement and prospectus
(and offers and sales thereunder) may be resumed, (y) have received copies of a
supplemental or amended prospectus, if applicable, and (z) have received copies
of any additional or supplemental filings which are incorporated or deemed to be
incorporated by reference into such prospectus.  The Issuer will
exercise commercially reasonable efforts to ensure that the use of the
Registration Statement and prospectus may be resumed as quickly as
practicable.

    


    
      
        
           


        

        
          17

          
            

          

        

        
           


        

      

    

     

    (b)           The
Issuer’s right to suspend the effectiveness of the Registration Statement and
the offers and sales of the Registrable Securities pursuant thereto, as
described above in this Section
7.5(a), shall be for a period of time (the “Suspension Period”) beginning
on the date of the occurrence of the Suspension Event and expiring on the
earlier to occur of (i) the date on which the Suspension Event ceases, or (ii)
ninety (90) days after the occurrence of the Suspension Event; provided, however, that there
shall not be more than two Suspension Periods in any 12-month
period.  Notwithstanding the foregoing, the Issuer shall be able to
suspend the effectiveness of the Registration Statement and offers and sales of
the Registrable Securities for any time period as may reasonably be required in
order to update the Registration Statement to replace financial information
which is no longer current, as required by applicable securities
law.

     

    (c)           In
addition, in connection with any underwritten public offering of securities of
the Issuer, if requested by the Issuer or its managing underwriter, each Holder
will enter into a lock-up agreement pursuant to which such Holder will not,
during the seven (7) days prior to, and for a period no longer than one hundred
eighty (180) days following, the date of the prospectus (or if the offering is
pursuant to a shelf registration statement, the date of the pricing prospectus
supplement) relating to the offering, offer, sell or otherwise dispose of any
securities of the Issuer without the prior consent of the Issuer and the
managing underwriter, provided that the executive officers and directors of the
Issuer enter into lock-up agreements for a period at least as long and on the
same terms.

     

    7.6           Transfer of
Securities.  An Investor may
transfer all or any part of its Securities to any Person under common management
with the Investor and may distribute all or any part of the Shares to its equity
holders or partners; provided, that any
such transfer shall be effected in full compliance with all applicable federal
and state securities laws, including, but not limited to, the Securities Act and
the rules of the SEC promulgated thereunder.  The Issuer will effect
such transfer of restricted certificates and will promptly amend or supplement
the Prospectus forming a part of the Registration Statement to add the
transferee to the selling stockholders in the Registration Statement; provided that the
transferor and transferee shall be required to provide the Issuer with the
information requested of the Investor in this Agreement, information reasonably
necessary for the Issuer to determine that the transfer was effected in
accordance with all applicable federal and state securities laws, including, but
not limited to, the Securities Act and the rules of the SEC promulgated
thereunder, and all other information reasonably requested by the Issuer from
time to time in connection with any transfer, registration, qualification or
compliance referred to in Section 7.4.

    


    
      
        
           


        

        
          18

          
            

          

        

        
           


        

      

    

     

    
      	
              8.

            	
              [Reserved.]

            


    

     

    
      	
              9.

            	
              INDEMNIFICATION.

            


    

     

    9.1           Indemnification by the
Issuer.  The Issuer will indemnify and hold harmless each
Holder of Registrable Securities which are included in a registration statement
pursuant to the provisions of Section 7 hereof and any
underwriter (as defined in the Securities Act) for such Holder, and any person
who controls such Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act or such underwriter within the
meaning of the Securities Act, and any officer, director, investment adviser,
employee, agent, partner, member or affiliate of such Holder (each, a “Holder Indemnified Party”),
from and against, and will reimburse each such Holder Indemnified Party with
respect to, any and all claims, actions, demands, losses, damages, liabilities,
costs and reasonably incurred expenses to which such Holder or any such Holder
Indemnified Party may become subject under the Securities Act or otherwise,
insofar as such claims, actions, demands, losses, damages, liabilities, costs or
reasonably incurred expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any materially
inaccurate representation or breach of any material warranty, agreement or
covenant of the Issuer contained herein; provided, however, that the
Issuer will not be liable in any such case to the extent that any such claim,
action, demand, loss, damage, liability, cost or expense is caused by an untrue
statement or alleged untrue statement or omission or alleged omission (1) made
in conformity with information furnished by such Holder in writing specifically
for use in the preparation thereof, or (2) which was cured in an amendment or
supplement to the prospectus (or any amendment or supplement thereto) delivered
to the Holder on a timely basis to permit proper delivery thereof prior to the
date on which any Registrable Securities were transferred or sold.

     

    9.2           Indemnification by the
Holder.  Each Holder of Registrable Securities which are
included in a registration statement pursuant to the provisions of Section 7 hereof will
indemnify and hold harmless the Issuer, and any Person who controls the Issuer
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, and any officer, director, employee, agent, partner, member or
affiliate of the Issuer (each, an “Issuer Indemnified Party”)
from and against, and will reimburse the Issuer Indemnified Parties with respect
to, any and all losses, damages, liabilities, costs or reasonably incurred
expenses to which such Issuer Indemnified Parties may become subject under the
Securities Act or otherwise, insofar as such losses, damages, liabilities, costs
or reasonably incurred expenses are caused by any untrue or alleged untrue
statement of any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or are
caused by the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made solely in reliance
upon and in conformity with written information furnished by such Holder
specifically for use in the preparation thereof; provided, however, that the
liability of any Holder pursuant to this Section 9.2 shall be limited
to an amount not to exceed the net proceeds received by such Holder from the
sale of Registrable Securities pursuant to the registration statement which
gives rise to such obligation to indemnify.

    


    
      
        
           


        

        
          19

          
            

          

        

        
           


        

      

    

     

    9.3           Procedures.  Promptly
after receipt by a party indemnified pursuant to the provisions of Section 9.1 or Section 9.2 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of Section 9.1 or Section 9.2, notify the
indemnifying party of the commencement thereof; but the omission to so notify
the indemnifying party will not relieve it from any liability which it may have
to an indemnified party otherwise than under this Section 9 and shall not
relieve the indemnifying party from liability under this Section 9, except to the
extent that such indemnifying party is materially prejudiced by such
omission.  In case such action is brought against any indemnified
party and such indemnified party notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party pursuant to
the provisions of Section
9.1 or Section
9.2 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof.  No
indemnifying party shall be liable to an indemnified party for any settlement of
any action or claim without the consent of the indemnifying party.  No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.

     

    
      	
              10.

            	
              CONDITIONS TO
      CLOSING.

            


    

     

    10.1         Conditions to the
Obligations of the Investors.  The obligation of an Investor to
proceed with the Closing is subject to the following conditions, any and all of
which may be waived by such Investor, in whole or in part, to the extent
permitted by applicable law:

     

    (a)           Representations and
Warranties.  Each of the representations and warranties of the
Issuer contained in this Agreement shall be true and correct in all material
respects as of the Closing as though made on and as of the Closing, except (i)
for changes specifically permitted by this Agreement, (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date, and (iii) such failures to
be true and correct which would not, individually or in the aggregate, have a
Material Adverse Effect on the Issuer.  Unless the Investor receives
written notice to the contrary at the Closing, such Investor shall be entitled
to assume that the preceding is accurate in all respects at the
Closing.

     

    (b)           Agreement and
Covenants.  The Issuer shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the
Closing.  Unless the Investor receives written notice to the contrary
at the Closing, such Investor shall be entitled to assume that the preceding is
accurate in all respects at the Closing.

    


    
      
        
           


        

        
          20

          
            

          

        

        
           


        

      

    

     

    (c)           No
Order.  No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction, or other order (whether temporary, preliminary or permanent)
which is in effect and which materially restricts, prevents or prohibits
consummation of the Closing or any transaction contemplated by this
Agreement.

     

    (d)           Opinion of Issuer’s
Counsel.  The Investor shall have received an opinion of
Issuer’s counsel, dated the date of Closing, in the form attached hereto as
Exhibit
B.

     

    (e)           Closing Certificate.
The Investor shall have received a certificate executed by the Chief Executive
Officer or Chief Financial Officer of the Issuer, dated as of the Closing, to
the effect that the conditions set forth in Sections 10.1(a) and (b) have been
fulfilled.

     

    10.2         Conditions to the
Obligations of the Issuer.  The obligation of the Issuer to
proceed with the Closing is subject to the following conditions, any and all of
which may be waived by the Issuer, in whole or in part and with respect to any
or all Investors, to the extent permitted by applicable law:

     

    (a)           Representations and
Warranties.  Each of the representations and warranties of the
Investors contained in this Agreement shall be true and correct as of the
Closing as though made on and as of the Closing, except (i) for changes
specifically permitted by this Agreement, and (ii) that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date.  Unless the Issuer receives written
notification to the contrary at the Closing, the Issuer shall be entitled to
assume that the preceding is accurate in all respects at the
Closing.

     

    (b)           Agreement and
Covenants.  The Investors shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Closing.  Unless the Issuer receives written notification to the
contrary at the Closing, the Issuer shall be entitled to assume that the
preceding is accurate in all respects at the Closing.

     

    (c)           No
Order.  No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction, or other order (whether temporary, preliminary or permanent)
which is in effect and which materially restricts, prevents or prohibits
consummation of the Closing or any transaction contemplated by this
Agreement.

     

    
      	
              11.

            	
              MISCELLANEOUS.

            


    

     

    11.1         Defined
Terms.  As used herein the following terms shall have the
following meanings:

    


    
      
        
           


        

        
          21

          
            

          

        

        
           


        

      

    

     

    (a)           “Additional Securities” has the
meaning specified in Section
3.1 of this Agreement.

     

    (b)           “Additional Shares” has the
meaning specified in Section
3.1 of this Agreement.

     

    (c)           “Affiliate” has the meaning
ascribed to it in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the date hereof.

     

    (d)           “Aggregate Purchase Price” has
the meaning specified in Section 1.1 of this
Agreement.

     

    (e)           “Agreement” has the meaning
specified in the Preamble to this Agreement.

     

    (f)           “Bridge Financings” means the
bridge financings transacted pursuant to those certain Subscription Agreements,
dated as of July 24, 2008 and as of December 4, 2008, pursuant to which the
Company issued Bridge Notes and Bridge Warrants to the Investors party to each
such agreement.

     

    (g)           “Bridge Notes” means the
Issuer’s unsecured convertible notes, including any accrued and unpaid interest,
which are convertible into the Company’s Common Stock pursuant to the terms of
such notes, purchased by the Investors as part of the Bridge
Financings.

     

    (h)           “Bridge Warrants” means the
warrants, which are exercisable for the purchase of the Company’s Common Stock
pursuant to the terms of such warrants, purchased by the Investors as part of
the Bridge Financings.

     

    (i)           
“Bylaws” means the
Bylaws of the Issuer, as the same may be supplemented, amended, or restated from
time to time.

     

    (j)           
“Certificate of
Incorporation” means the Issuer’s Certificate of Incorporation, as the
same may be supplemented, amended or restated from time to time.

     

    (k)           “Closing” has the meaning
specified in Section 2.1
of this Agreement.

     

    (l)           
“Common Stock” has the
meaning specified in the Recitals of this Agreement.

     

    (m)          “Confidential Information” has
the meaning specified in Section 6.4 of this
Agreement.

     

    (n)           “Contract” means any indenture,
lease, sublease, loan agreement, mortgage, note, restriction, commitment,
obligation or other contract, agreement or instrument.

    


    
      
        
           


        

        
          22

          
            

          

        

        
           


        

      

    

     

    (o)           “Convertible Securities” means
any evidences of indebtedness, shares (other than Common Stock) or other
securities convertible into or exchangeable for Common Stock.

     

    (p)           “Exchange Act” means the
Securities Exchange Act of 1934, as amended.

     

    (q)           “Financing Options” mean
options, as amended and restated, to purchase shares of the Company’s Common
Stock issued to any Investor pursuant to those certain Subscription Agreements,
dated as of November 30, 2006, December 1, 2006, March 2, 2007, March 30, 2007
and April 5, 2007.

     

    (r)           “GAAP” means generally accepted
accounting principles in effect in the United States of America.

     

    (s)           “Governmental Authority” means
any nation or government, any state or other political subdivision thereof, and
any entity or official exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.

     

    (t)           “Holder” has the meaning
specified in Section 7.1
of this Agreement.

     

    (u)           “Holder Indemnified Party” has
the meaning specified in Section 9.1 of this
Agreement.

     

    (v)           “Intellectual Property Rights”
has the meaning specified in Section 4.15 of this
Agreement.

     

    (w)          “Investment Amount” has the
meaning specified in Section
1.1 of this Agreement.

     

    (x)           “Investors” has the meaning
specified in the Preamble to this Agreement.

     

    (y)           “Issuer” has the meaning
specified in the Preamble to this Agreement.

     

    (z)           “Issuer Indemnified Party” has
the meaning specified in Section 9.2 of this
Agreement.

     

    (aa)         “Lien” means any mortgage,
pledge, security interest, encumbrance, lien or charge of any kind (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in connection
with such mortgage, pledge, security interest, encumbrance, lien or
charge).

     

    (bb)         “Material Adverse Effect” means
a material and adverse change in, or effect on, the financial condition,
properties, assets, liabilities, rights, obligations, operations or business, of
a Person and its Subsidiaries taken as a whole.

    


    
      
        
           


        

        
          23

          
            

          

        

        
           


        

      

    

     

    (cc)         “Maximum Amount of Additional
Shares” has the meaning specified in Section 3.4 of this
Agreement.

     

    (dd)         “Offering” has the meaning
specified in Section 1.1
of this Agreement.

     

    (ee)         “Options” means any rights,
options or warrants to subscribe for, purchase or otherwise acquire Common Stock
or Convertible Securities.

     

    (ff)           “Permit” means any permit,
certificate, consent, approval, authorization, order, license, variance,
franchise or other similar indicia of authority issued or granted by any
Governmental Authority.

     

    (gg)         “Person” means an individual,
partnership, corporation, business trust, joint stock company, estate, trust,
unincorporated association, joint venture, Governmental Authority or other
entity, of whatever nature.

     

    (hh)         “Preferred Stock” means the
Series A Convertible Preferred Stock, the Series C Convertible Preferred Stock,
the Series D Convertible Preferred Stock, the Series E Convertible Preferred
Stock and the Series F Convertible Preferred Stock.

     

    (ii)           “Qualified Offering” means a
firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock by the Company to the public that results in
gross cash proceeds to the Company of at least $10,000,000 and assumes a minimum
valuation of the Company of at least $50,000,000.

     

    (jj)           “Register”, “registered” and “registration” refer to a
registration of the offering and sale or resale of Common Stock effected by
preparing and filing a registration statement in compliance with the Securities
Act and the declaration or ordering of the effectiveness of such registration
statement.

     

    (kk)         “Registrable Securities” means
(i) the Shares acquired by each Investor pursuant to this Agreement, (ii) the
Warrant Shares, and (iii) any other shares of Common Stock or other securities
issued in respect of such shares by way of a stock dividend or stock split or in
connection with a combination or subdivision of the Common Stock or by way of a
recapitalization, merger or consolidation or reorganization of the Issuer; provided, however, that as to
any particular securities, such securities will cease to be Registrable
Securities upon the earlier of (i) the sale of such securities pursuant to
registration or in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof, (ii) the
date that such securities are permitted to be disposed pursuant to Rule 144
under the Securities Act, or (iii) the date on which all such securities cease
to be outstanding; and, as a result of the event or circumstance described in
either of the foregoing clauses (i) or (ii), all transfer restrictions and
restrictive legends with respect thereto are removed or removable in accordance
with this Agreement or such legends, as the case may be.

    


    
      
        
           


        

        
          24

          
            

          

        

        
           


        

      

    

     

    (ll)           “Registration Statement” has
the meaning specified in Section 7.2 of this
Agreement.

     

    (mm)       “Requirements of Law” means as
to any Person, the certificate of incorporation, bylaws or other organizational
or governing documents of such Person, and any domestic or foreign and federal,
state or local law, rule, regulation, statute or ordinance or determination of
any arbitrator or a court or other Governmental Authority, in each case
applicable to, or binding upon, such Person or any of its properties or to which
such Person or any of its property is subject.

     

    (nn)        “Reverse Split” means the one
for twenty reverse stock split of the Company’s Common Stock, effected as of
11:59 p.m. Eastern Standard Time on November 29, 2008.

     

    (oo)        “Rule 144” has the meaning
specified in Section 7.2
of this Agreement.

     

    (pp)        “SEC” means the Securities and
Exchange Commission.

     

    (qq)        “SEC Reports” has the meaning
specified in Section 4.7
of this Agreement.

     

    (rr)          “Securities” means the Shares,
the Warrants and the Warrant Shares.

     

    (ss)         “Securities Act” means the
Securities Act of 1933, as amended.

     

    (tt)          “Share Price” means $3.50 per
share of Common Stock.

     

    (uu)        “Shares” has the meaning
specified in Section 1.1
of this Agreement.

     

    (vv)        “Subsequent Financing” has the
meaning specified in Section
3.1 of this Agreement.

     

    (ww)       “Subsequent Financing Notice”
has the meaning specified in Section 3.2 of this
Agreement.

     

    (xx)          “Subsequent Financing Price”
means the per share price of the Additional Securities to be paid by prospective
purchasers of the Additional Securities in the Subsequent
Financing.

     

    (yy)        “Subsidiary” means as to any
Person, a corporation or limited partnership of which more than 50% of the
outstanding capital stock or partnership interests having full voting power is
at the time directly or indirectly owned or controlled by such
Person.

     

    (zz)          “Suspension Event” has the
meaning specified in Section
7.5(a) of this Agreement.

    


    
      
        
           


        

        
          25

          
            

          

        

        
           


        

      

    

     

    (aaa)       “Suspension Period” has the
meaning specified in Section
7.5(b) of this Agreement.

     

    (bbb)      “Trigger Price” has the meaning
specified in Section 3.1
of this Agreement.

     

    (ccc)       “Warrant” has the meaning
specified in the Recitals to this Agreement

     

    (ddd)      “Warrant Price” means $1.20 per
share of Common Stock.

     

    (eee)        “Warrant Shares” has the
meaning specified in Section
4.6 of this Agreement.

     

    
      	
               
      

            	
              11.2

            	
              Other Definitional
      Provisions.

            


    

     

    (a)           All
terms defined in this Agreement shall have the defined meanings when used in any
certificates, reports or other documents made or delivered pursuant hereto or
thereto, unless the context otherwise requires.

     

    (b)           Terms
defined in the singular shall have a comparable meaning when used in the plural,
and vice versa.

     

    (c)           All
accounting terms shall have a meaning determined in accordance with
GAAP.

     

    (d)           The
words “hereof,” “herein” and “hereunder,” and words of similar import, when used
in this Agreement shall refer to this Agreement as a whole (including any
exhibits and schedules hereto) and not to any particular provision of this
Agreement.

     

    11.3         Notices.  All
notices, requests, demands, claims, and other communications hereunder shall be
in writing and shall be delivered by certified or registered mail (first class
postage pre-paid), guaranteed overnight delivery, or facsimile transmission if
such transmission is confirmed by delivery by certified or registered mail
(first class postage pre-paid) or guaranteed overnight delivery, to the
following addresses and telecopy numbers (or to such other addresses or telecopy
numbers which such party shall subsequently designate in writing to the other
party):

     

    
      	
               
      

            	
              (a)

            	
              if
      to the Issuer to:

            


    

     

    ReGen
Biologics, Inc.

    411
Hackensack Avenue

    Hackensack,
NJ  07601

    Attention:
Brion D. Umidi

    Telecopy:
201.651.5141

    


    
      
        
           


        

        
          26

          
            

          

        

        
           


        

      

    

     

    with a
copy to:

     

    Pillsbury
Winthrop Shaw Pittman LLP

    1650
Tysons Boulevard

    McLean,
VA 22102

    Attention:
David C. Main, Esq.

    Telecopy:
703.770.7901

     

    (b)           if
to an Investor, to the address or telecopy number set forth next to its name on
the signature page hereto.

     

    Each such
notice or other communication shall for all purposes of this Agreement be
treated as effective or having been given when delivered if delivered by hand,
by messenger or by courier, or if sent by facsimile, upon confirmation of
receipt.

     

    11.4         Entire
Agreement.  This Agreement (including the exhibits and
schedules attached hereto) and other documents delivered at the Closing pursuant
hereto, contain the entire understanding of the parties in respect of its
subject matter and supersede all prior agreements and understandings between the
parties with respect to such subject matter.

     

    11.5         Expenses;
Taxes.  Except as otherwise provided in this Agreement, the
parties shall pay their own fees and expenses, including their own counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby.  Any sales tax, stamp duty, deed transfer or other tax (except
taxes based on the income of an Investor) arising out of the issuance of the
Securities (but not with respect to subsequent transfers) by the Issuer to an
Investor and consummation of the transactions contemplated by this Agreement
shall be paid by the Issuer.

     

    11.6         Amendment;
Waiver.  Unless provided otherwise in this Agreement, this
Agreement may not be modified, amended, supplemented, canceled or discharged,
except by written instrument executed by all parties.  Unless provided
otherwise in this Agreement, no failure to exercise, and no delay in exercising,
any right, power or privilege under this Agreement shall operate as a waiver,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude the exercise of any other right, power or
privilege.  No waiver of any breach of any provision shall be deemed
to be a waiver of any preceding or succeeding breach of the same or any other
provision, nor shall any waiver be implied from any course of dealing between
the parties.  No extension of time for performance of any obligations
or other acts hereunder or under any other agreement shall be deemed to be an
extension of the time for performance of any other obligations or any other
acts.  The rights and remedies of the parties under this Agreement are
in addition to all other rights and remedies, at law or equity, that they may
have against each other.

     

    11.7         Binding Effect;
Assignment.  The rights and obligations of this Agreement shall
bind and inure to the benefit of the parties and their respective successors and
legal assigns.  The rights and obligations of this Agreement may not
be assigned by any party without the prior written consent of the other
party.

    


    
      
        
           


        

        
          27

          
            

          

        

        
           


        

      

    

     

    11.8         Counterparts; Facsimile
Signature.  This Agreement may be executed by facsimile
signature and in any number of counterparts, each of which shall be an original
but all of which together shall constitute one and the same
instrument.

     

    11.9         Headings.  The
headings contained in this Agreement are for convenience of reference only and
are not to be given any legal effect and shall not affect the meaning or
interpretation of this Agreement.

     

    11.10       Governing Law;
Interpretation.  This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of New
York applicable to contracts executed and to be wholly performed within such
State.

     

    11.11       Severability.  The
parties stipulate that the terms and provisions of this Agreement are fair and
reasonable as of the date of this Agreement.  However, if any
provision of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated.  If, moreover, any of those provisions shall for any
reason be determined by a court of competent jurisdiction to be unenforceable
because excessively broad or vague as to duration, activity or subject, it shall
be construed by limiting, reducing or defining it, so as to be
enforceable.

     

    


     

    [Signature
Pages Follow]

    


    
      
        
           


        

        
          28

          
            

          

        

        
           


        

      

    

    


    IN WITNESS WHEREOF, the
parties hereto have caused this Subscription Agreement to be duly executed and
delivered as of the date set forth below.

     

    


    
      
        
          	
                  NAME OF
      INVESTOR:

                	 	
                  ADDRESS FOR NOTICES
      (Please Print):

                


        

      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                                                SIGNATURE:

                                              	 
      	 
      	 
      
	 
      	 
      	 
      	
                                                Attention:

                                              	 
      
	
                                                By:

                                              	 
      	 
      	
                                                Telecopy:

                                              	 
      
	 
      	
                                                Name:

                                              	 
      	
                                                Phone:

                                              	 
      
	 
      	
                                                Title:

                                              	 
      	
                                                Email
      Address:

                                              	 
      
	 
      	 
      	 
      	
                                                Tax
      Identification #:

                                              	 
      


                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    


    
      
        
          	
                  Exact
      Name to appear on Stock Certificate and Warrant:

                	 
      


        

      

    

    


    
      
        
          	
                  Investment
      Amount (in dollars):

                	 
      	 
      


        

      

    

    


    
      
        
          
            	
                    Number
      of Shares to be issued to Investor:

                  	 
      	
                      
      (Company to
confirm)

                  


          

        

      

    

    


    


    


    Signature
Page – Subscription Agreement


    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

     

    ACKNOWLEDGED
AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN BY:

     

    


     

    REGEN
BIOLOGICS, INC.

     

    


     

    
      
        
          
            
              
                	
                        By:

                      	 
      	 
      	 
	 
      	
                        Name:

                      	
                        Brion
      D. Umidi

                      	 
	 
      	
                        Title:

                      	
                        Senior
      Vice President and Chief Financial
Officer

                      


              

            

          

        

      

    

     

    Signature Page
– Subscription Agreement

     

    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    EXHIBIT
A

     

    FORM
OF WARRANT

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    EXHIBIT
B

     

    FORM
OF OPINION

    


    [Not
filed with this current report.]

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    EXHIBIT
C

     

    RISK
FACTORS RELATED TO THIS OFFERING

     

    WE ARE
UNABLE TO DETERMINE WITH CERTAINTY WHEN THE REGISTRATION STATEMENT TO BE FILED
WITH THE SEC WILL BE DECLARED EFFECTIVE.  CONSEQUENTLY, YOU MAY NOT BE
ABLE TO SELL YOUR SHARES OF COMMON STOCK FOR A SUBSTANTIAL PERIOD OF
TIME.

     

    Although
we have undertaken to register the Shares and Warrant Shares for resale by you,
you should be aware that we are unable to determine with certainty when the
registration statement to be filed with the SEC will become
effective.  The SEC may seek to review our registration statement, in
which case, the period necessary to achieve effectiveness of the registration
statement with the SEC will be affected by our ability to provide the SEC with
sufficient disclosures satisfactory to the SEC.  The length of the SEC
review process is uncertain and may extend to a number of months.  As
you are aware, the Shares and Warrant Shares being sold in this Offering are
restricted in nature and may not be publicly resold absent the effectiveness of
the registration statement or pursuant to an applicable exemption from
registration. Consequently, you may not be able to sell your Shares for a
substantial period of time.

     

    WE MAY
ALLOCATE THE NET PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT
AGREE.

     

    We will
have broad discretion in how we apply the net proceeds from this
Offering.  Because the net proceeds of this Offering are not required
to be allocated to any specific investment or transaction, you cannot determine
at this time the value or appropriateness of our application of the net
proceeds, and you and other shareholders may not agree with our
decisions.  For example, we may attempt to acquire other businesses or
assets using a portion of the net proceeds of this Offering which otherwise
could have been used for working capital.  There can be no assurance
that we will be able to acquire any desirable businesses or assets or that, if
acquired, that we will be able to successfully develop or integrate such
businesses or assets.

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    EXHIBIT
D

     

    EXPLANATION
OF “BENEFICIAL OWNERSHIP”

     

     

    Securities
that are subject to a power to vote or dispose are deemed beneficially owned by
the person who holds such power, directly or indirectly.  This means
that the same securities may be deemed beneficially owned by more than one
person, if such power is shared.  In addition, the beneficial
ownership rules provide that shares which may be acquired upon exercise of an
option or warrant, or which may be acquired upon the termination of a trust,
discretionary account or similar arrangement, which can be effected within a
period of sixty (60) days from the date of determination, are deemed to be
“beneficially” owned.  Furthermore, shares that are subject to rights
or powers even though such rights or powers to acquire are not exercisable
within the 60-day period may also be deemed to be beneficially owned if the
rights or powers were acquired “with the purpose or effect of changing or
influencing the control of the issuer or in connection with or as a participant
in any transaction having such purpose or effect.”

     

    In
determining whether securities are “beneficially owned,” benefits which are
substantially equivalent to those of ownership by virtue of any contract,
understanding, relationship, agreement or other arrangement should cause the
securities to be listed as “beneficially owned.”

     

    Thus, for
example, securities held for a person’s benefit in the name of others or in the
name of any estate or trust in which such person may be interested should also
be listed.  Securities held by a person’s spouse, children or other
members of such person’s family who are such person’s dependents or who live in
such person’s household should be listed as “beneficially owned” unless such
person does not enjoy benefits equivalent to those of ownership with respect to
such securities.

     

    If a
person has a proprietary or beneficial interest in a controlled corporation,
partnership, personal holding company, trust or estate which owns of record or
beneficially any securities, such person should state the amount of such
securities owned by such controlled corporation, partnership, personal holding
company, trust or estate in lieu of allocating such person’s proprietary
interest, and by note or otherwise, please indicate that.  In any
case, the name of the controlled corporation, partnership, personal holding
company, or estate must be stated.

     

    In all
cases the nature of the beneficial ownership should be stated.

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

     

    EXHIBIT
E

     

    ADDITIONAL
INFORMATION

     

    The
Investor hereby provides the following additional information:

    


    (a)           Set
forth below is the number of shares of preferred stock of the Issuer (“Preferred Stock”) or Common
Stock and options, rights or warrants of the Issuer (“Options” and together with the
Preferred Stock and Common Stock, “Owned Securities”) which the
Investor beneficially
owns or of which the Investor is the record owner on the date
hereof.  Please refer to the definition of beneficial ownership
on Exhibit D
attached hereto.  If none, please so state.

    


    Number of
shares of Preferred Stock and Common Stock:
____________________________________

    


    Number of
Options: ________________________________

    


    Please
indicate by an asterisk (*) above if the Investor disclaims “beneficial ownership”
of any of the above listed Owned Securities, and indicate in response to
question (b) below who has beneficial ownership.

    


    (b)           If
the Investor disclaims “beneficial ownership”
in question (a),  please furnish the following information with
respect to the person(s) other than the Investor who is the beneficial owner(s)
of the Owned Securities in question.  If not applicable, please check
box:   ̈

    


    Name of
Beneficial Owner:____________________________________

    Relationship
to the Investor:____________________________________

    Number of
Owned Securities Beneficially Owned:

    ________________________

    


    I           As
to the Owned Securities indicated as being “beneficially owned”
in answers to question (a) and (b) does any person other than the person
identified as the “beneficial owner”
have:

    


    


    (i)           the
sole or shared power to vote or to direct the vote of any such Owned
Securities?

    


    Yes  o     
No o

    


    or                           
(ii)           the sole
or shared power to dispose or to direct the disposition of any such Owned
Securities (referred to as “dispositive power”)?

    


    Yes  o     
No o

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

     

    If the
answer is “Yes” to either of the forgoing questions, the Investor should set
forth below the name and address of each person who has either such power or
with whom the indicated “beneficial owner”
shares such power, together with such number of shares to which such rights
relates.

    


    
      

    

     

    
      

    

     

    
      

    

     

    


    IF
THE INVESTOR IS AN ENTITY OR A TRUST:

    


    The
Investor must list the name of each natural person associated with the Investor
entity or trust who has or shares voting or dispositive power with respect to
the shares indicated as being “beneficially owned”
in answers to questions (a) or (c).  For an investment or holding
company, the investment manager(s) would normally be the person(s) who hold(s)
or share(s) voting and dispositive power.  For a trust, the natural
person(s) holding or sharing voting or dispositive power would normally be the
trustee(s).  For other types of entities, the natural person(s)
holding or sharing voting or dispositive power would normally be the officer(s)
empowered by the board of directors to make such decisions, or if there is no
such officer, each of the directors.  Disclosure is required for each
natural person who in practice has voting or dispositive power, regardless of
that person’s formal title or position within the organization.

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    NAME OF
INVESTOR:______________________

    


    


    
      
        
          
            	
                    Name
      of Natural Person

                  	
                    Type
      of Power: Voting/Dispositive/

                    Both

                  	
                    Address

                  	
                    Position
      or Title

                  
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      


          

        

      

    

    


    (d)           In
any pending legal proceeding, is the Investor or any of its affiliates a party, or does
the Investor or any such affiliate have an interest,
adverse to the Issuer or any affiliate of the
Issuer?

    


    Yes  o     
No o   

    


    If the
answer is “Yes,” please describe, and state the nature and amount of, such
interest.

     

    
      
        

      

      
        

      

      
        

      

    

     

    (e)           Is
there any family relationship (including relationships by blood, marriage, and
adoption, except those more remote than first cousin) between the Investor or
any of its affiliates
and any director or officer of the Issuer, any affiliate of the Issuer or
any person who has been chosen to become a director or officer of the
Issuer?

    


    Yes  o     
No o   

    


    If the
answer is “Yes,” please describe the relationship.

     

    
      
        

      

      
        

      

      
        

      

       

    

    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

     

    (f)           Are
any of the Owned Securities listed in response to question (a) the subject of a
voting agreement, contract or other arrangement whereby others have voting
control over, or any other interest in, any of the Investor’s Owned
Securities?

    
      
        	 
      	
                 ̈  Yes

              	
                 ̈  No

              


      

    

    


    If the
answer is “Yes”, please give
details:____________________________________________.

    


    (g)           Please
describe each position, office or other material relationship which the Investor
has had with the Issuer or any of its affiliates, including any Subsidiary of
the Issuer, within the past three years.  Please include a description
of any loans or other indebtedness, and any contracts or other arrangements or
transactions involving a material amount, payable by the Investor to the Issuer
or any of its affiliates, including its Subsidiaries, or by the Issuer or any of
its affiliates, including its Subsidiaries, to the Investor.  “Affiliates” of the Issuer
include its directors and executive officers, and any other person controlling
or controlled by the Issuer.  If none, please so
state.

    


    Answer:

     

    (h)           Please
provide the name and address of other person(s), if any, to whom any proxy
statements, registration statements (including notice of effectiveness thereof),
prospectuses or similar documents and information should be delivered by the
Issuer on behalf of the Investor in the future, with respect to the Investor’s
shares:

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                     

                                  	
                                     

                                  	
                                     

                                  
	
                                     

                                  	
                                     

                                  	
                                     

                                  
	
                                     

                                  	
                                     

                                  	
                                     

                                  
	
                                     

                                  	
                                     

                                  	
                                     

                                  


                          

                        

                      

                       

                    

                  

                

              

            

          

        

      

    

    (i)           Please
advise if a Financial Industry Regulatory Authority (FINRA) member has placed
with you the Shares and Warrants being purchased hereunder:  (Name of
Member): ________________________________