Document:

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                                                                   Exhibit 10.31

                                 LOAN AGREEMENT
                                 --------------

     THIS AGREEMENT is made as of the l7th day of April, 2001, by and between
REGENERATION TECHNOLOGIES, INC. (the "Borrower"), a Delaware corporation, and
BANK OF AMERICA, N.A. (the "Bank").

                                    Recitals
                                    --------

     The Borrower wishes to obtain credit from the Bank on the terms and
conditions set forth herein.

     NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:

                                    ARTICLE I
                              BORROWING AND PAYMENT
                              ---------------------

     1.01 Revolving Line of Credit.
          ------------------------

          (a) The Bank hereby establishes in favor of the Borrower a revolving
     line of credit (the "Line of Credit"). The Borrower shall be entitled to
     borrow, repay and reborrow funds from the Bank in accordance with the terms
     hereof so long as the total principal amount owed to the Bank under the
     revolving line of credit does not exceed $10,000,000 (or such lesser amount
     as is set forth herein) during the Revolving Period (as defined herein).
     The Bank's obligation to make advances hereunder shall terminate at the
     expiration of the Revolving Period or such earlier date as is set forth
     herein.

          (b) The Borrower's indebtedness under the Line of Credit shall be
     evidenced by a Renewal Promissory Note (as amended, extended or renewed
     from time to time, the "Note") of even date herewith executed by the
     Borrower in favor of the Bank in the principal amount of $10,000,000.00.
     The Note shall bear interest at the rate set forth therein and shall be
     payable as set forth therein.

          (c) The Bank shall make each advance under the Line of Credit upon
     written or telephonic notice from the Borrower to the Bank requesting an
     advance. The notice shall specify the date for which the advance is
     requested (which must be a Business Day) and the amount of the advance. The
     Bank must receive the notice prior to 12:00 noon (Eastern time) on the
     Business Day of the advance. Alternatively, the Borrower may request
     advances by drawing checks on a deposit account that is linked to the
     credit facility hereunder in accordance with disbursement arrangements that
     are mutually satisfactory to the parties. The Bank will make each requested
     advance available to the Borrower not later than the close of business on
     the Business Day of the request by crediting the Borrower's account
     maintained with the Bank in the amount of the advance if as of such time:
     (i) the Bank's obligation to make advances hereunder has not terminated or
     expired; (ii) a Default or Event of Default has not occurred; and (iii) all
     conditions to the advance set forth herein or in any other Loan Documents
     have been
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     satisfied. The Bank may rely upon any written or telephonic notice given
     by any Person that the Bank in good faith believes is an authorized
     representative of the Borrower without the necessity of any independent
     investigation. If any telephonic notice conflicts with a written
     confirmation, the telephonic notice shall govern if the Bank has acted in
     reliance thereon.

            (d)  For purposes hereof, the "Revolving Period" shall mean a
     period commencing on the date hereof and ending on April 24, 2002.
     Notwithstanding the foregoing, the Revolving Period shall be automatically
     extended on April 24, 2002, and on each April 24 thereafter through April
     24, 2003 (each such date, including April 24, 2002, an "Extension Date")
     for a one-year period commencing on each such Extension Date and continuing
     until the next April 24 thereafter unless the Bank in its sole discretion
     elects not to extend the Revolving Period in accordance with the terms
     hereof. If the Bank elects not to extend the Revolving Period, it shall
     provide written notice of such election to the Borrower at least 15 days
     prior to the next scheduled Extension Date. If the Bank provides such
     notice, then: (i) the Revolving Period shall terminate on the next
     scheduled Extension Date; and (ii) the Revolving Period shall not be
     further extended beyond such Extension Date. The Bank's election shall be
     final and binding, and the Bank may elect not to extend the Revolving
     Period whether or not a Default or Event of Default (as defined herein) has
     occurred. The Bank may condition any extension of the Revolving Period on
     such terms as it may deem appropriate (including, without limitation,
     payment of such fee as the Bank may require). Notwithstanding any contrary
     provision set forth herein, the Revolving Period shall not in any event
     extend beyond April 24, 2004.

     1.02   Borrowing Base.
            --------------

            (a)  Notwithstanding any contrary provision set forth herein or
     in any other Loan Document, the Borrower agrees that the outstanding
     principal balance under the Note shall not at any time exceed the lesser
     of: (i) $10,000,000; or (ii) the Borrowing Base (as defined herein) then in
     effect.

            (b)  For purposes hereof, the "Borrowing Base" shall mean 80% of
     the face amount of Eligible Receivables. For purposes hereof, "Eligible
     Receivables" shall mean all accounts receivable then outstanding for
     services and for goods, merchandise and other items of tangible Property
     (collectively, "Products") sold in the ordinary course of business by the
     Borrower. However, Eligible Receivables shall not include any account
     receivable with respect to which: (i) a final invoice has not been issued;
     (ii) delivery of the Products or performance of the services has not been
     completed; (iii) the invoice is conditional, permits returns or restricts
     collection rights or assignments in any respect (except, however, that the
     invoice may permit returns in the ordinary course of business); (iv) the
     invoice permits payment: (aa) more than 30 days after the invoice date;
     (bb) in any currency other than United States Dollars; or (cc) at any
     location outside the United States; (v) the obligation to pay is evidenced
     by chattel paper or any note or other instrument (unless duly endorsed and
     delivered to the Bank); (vi) the Products or services

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          have been rejected, returned or disputed in any way, whether in whole
     or in part, in which event the receivable shall be ineligible to the extent
     of such rejection, return or dispute; (vii) the customer has attempted to
     renegotiate the invoiced price or asserted any right of reduction, set-off,
     recoupment, counterclaim or defense; (viii) the account is outstanding 90
     days or more after the invoice date; (ix) the account is 60 days or more
     past due from the due date; (x) the obliger under the receivable is also a
     creditor or supplier of the Borrower (in which case the amount of the
     receivable shall be reduced, for eligibility purposes, by the amount owed
     by the Borrower to such obligor); (xi) the collection of the receivable is
     doubtful or will be delayed by reason of the customer's financial
     condition; (xii) the Bank does not have a perfected first priority security
     interest in the receivable; (xiii) the invoice or corresponding account
     receivable is the subject of any financing statement, Lien or other
     encumbrance other than in favor of the Bank and other than Permitted Liens
     that are subordinate to the Bank's Lien; (xiv) the customer and its
     Affiliates account for more than 20% of all of the Borrower's accounts
     receivable then outstanding (in which case the amount in excess of 20%
     shall be deemed ineligible); (xv) the customer is an officer, director,
     employee or other Affiliate of the Borrower; (xvi) the customer is any
     United States governmental authority (except to the extent that the
     Borrower has complied with the federal Assignment of Claims Act); (xvii)
     the customer is located outside the continental United States unless the
     sale is on letter of credit, guaranty or other terms reasonably
     satisfactory in each case to the Bank; (xviii) the account receivable is
     owed by a customer who is 90 days or more past due on 50% or more of its
     obligations owed to the Borrower (in which event all receivables owed by
     the customer to the Borrower shall be deemed ineligible); or (xix) the Bank
     otherwise determines in its discretion that the receivable is ineligible
     hereunder.

          (c) The Bank has the right to deem any receivable as ineligible for
     lending purposes if it is not in the Bank's judgment adequately documented
     by the Borrower's books and records or if the Bank otherwise deems such
     receivable as ineligible for any reason. If at any time the outstanding
     principal balance under the Note exceeds the Borrowing Base then in effect,
     the Borrower shall immediately pay to the Bank the amount of such excess.
     The Borrower authorizes the Bank to charge any deposit account of the
     Borrower with the Bank for the amount of any such excess. The Borrower
     shall not be entitled to obtain any advance under the Note if the advance
     would result in a violation of the lending limits set forth herein. The
     Borrower shall deliver a borrowing base certificate to the Bank
     demonstrating compliance with the lending limits set forth herein: (i) not
     later than 30 days after the end of each calendar month (based upon the
     then outstanding balance of the Note as a percentage of Eligible
     Receivables as of the end of the immediately preceding calendar month); and
     (ii) at such other times as the Bank may request.

          (d) The Borrower acknowledges that the Borrowing Base may be monitored
     by the Bank's asset based lending group (the "ABL Group"). The Borrower
     shall: (i) fully cooperate with the Bank and the ABL Group in connection
     with any audit or review of the Borrower's receivables; (ii) permit the
     Bank and the ABL Group to have such access to the Borrower's books, records
     and premises as the Bank or the ABL Group may require

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     in connection with any such audit or review; and (iii) instruct and permit
     its customers and vendors to provide such information to the Bank and the
     ABL Group as the Bank or the ABL Group may require in connection with any
     such audit or review (and the Borrower hereby consents to any inquiries
     that the Bank or the ABL Group may make of such customers and vendors in
     connection with any such audit or inquiry). The Borrower shall pay all such
     fees as the Bank or the ABL Group may from time to time assess, in addition
     to any other fees set forth herein or in any other Loan Documents, in
     connection with any such review or audit.

     1.03   Loan Documents. The Obligations (the "Obligations") now or hereafter
            --------------
evidenced by the Note shall be secured by a first priority lien pursuant to the
Security Agreement (as amended or restated from time to time, the "Security
Agreement") of even date herewith executed by the Borrower in favor of the Bank
covering the Borrowers inventory, accounts receivable, general intangibles and
other assets described therein. The Borrower shall execute and deliver such
financing statements and other documents as the Bank may reasonably request to
perfect and continue perfection of the Bank's liens.

     1.04   Facility Fees.
            -------------

            (a)  The Borrower shall pay the Bank a non-refundable closing fee of
     $35,000 on the date hereof.

            (b)  The Borrower shall also pay the Bank a fee equal to 0.25% per
     annum (calculated on the basis of a 360 day year) of the daily average
     unused amount of the Line of Credit. The unused amount of the Line of
     Credit shall be calculated without giving effect to any borrowing base
     limitations, The Borrower shall pay the fee: (i) quarterly in arrears
     within 15days after each fiscal quarter end (commencing on July 15, 2001);
     and (ii) on the termination or expiration of the Line of Credit.

     1.05   Interpretation.
            --------------

            (a)  Certain terms used herein shall have the meanings ascribed
     thereto in Appendix I attached hereto.

            (b)  The definitions set forth in Appendix I attached hereto are
     equally applicable to both the singular and plural forms of the terms
     defined. The words "hereof', "herein" and "hereunder" when used in this
     Agreement shall refer to this Agreement as a whole and not to any
     particular provision of this Agreement. Where the character or amount of
     any asset or liability or item of income or expense is required to be
     determined or any consolidation or other accounting computation is required
     to be made for the purposes of this Agreement, it shall be done in
     accordance with GAAP except where such principles are inconsistent with the
     specific provisions of this Agreement.

            (c)  The Borrower shall cause its Subsidiaries to comply with all
     covenants and agreements imposed upon the Subsidiaries herein. Each
     provision set forth herein

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     obligating (or purportedly obligating) any Subsidiary to take, or refrain
     from taking, any action shall obligate the Borrower to cause such
     Subsidiary to take, or refrain from taking, such action.

                                   ARTICLE II
                                   CONDITIONS
                                   ----------

     2.01 Conditions to Initial Advance. The Bank shall have no obligation to
          -----------------------------
make the initial advance under the Line of Credit unless the Bank shall have
received on or before the date hereof and the date of such advance in form
reasonably satisfactory to it: (a) the duly executed Loan Documents; (b) such
evidence of corporate authorization from the Borrower and each Subsidiary as the
Bank may reasonably require; (c) good standing certificates indicating that the
Borrower and each Subsidiary are in good standing in their respective states of
incorporation and in any other states where they are required to qualify to do
business (except where the failure to be so qualified would not have a Material
Adverse Effect); and (d) certified articles of incorporation, bylaws or other
applicable organizational documents of the Borrower and each Subsidiary.

     2.02. Conditions to Advances. The obligation, if any, of the Bank to make
           ----------------------
any advances hereunder or under the Note is subject, without limitation, to
satisfaction of the following additional conditions precedent:

          (a) The representations and warranties of the Borrower and each
     Subsidiary set forth in this Agreement and in the Loan Documents shall be
     true and correct in all material respects on and as of the date of each
     such advance.

          (b) On the date of each such advance, the Borrower shall be in
     compliance with all the material terms and provisions set forth in this
     Agreement on its part to be observed or performed, and no Default or Event
     of Default shall be continuing hereunder.

     2.03 Other Documents. The Bank shall have received on or before the date
          ---------------
hereof or the date of any advance or credit extension hereunder such other
documents or items as the Bank may reasonably request.

                                   ARTICLE III
                              AFFIRMATIVE COVENANTS
                              ---------------------

     3.01 Financial Statements. The Borrower will deliver to the Bank the
          --------------------
following:

          (a) Within forty five days after the end of each quarter of the
     Borrower's fiscal year, the Borrower's financial statements as of the end
     of and for such period in reasonable detail, setting forth in consolidated
     and comparative form the corresponding figures for that date and period and
     for the corresponding date and accounting period in the preceding fiscal
     year, certified by the Borrower's chief financial officer.

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            (b)  Within one hundred twenty days after the end of each fiscal
     year of the Borrower, the Borrower's financial statements as of the end of
     and for such year of the Borrower in reasonable detail, setting forth in
     consolidated and comparative form the corresponding figures for that date
     and period and for the corresponding date and period in the preceding
     fiscal year, audited and certified by independent certified public
     accountants of recognized standing selected by the Borrower and acceptable
     to the Bank, whose certificate shall be satisfactory to the Bank in scope
     and substance.

            (c)  Not later than 15 days after the end of each calendar month, an
     accounts receivable aging report certified to the Bank by the Borrower's
     chief financial officer.

            (d)  Promptly upon receipt thereof, copies of all other detailed
     reports (if any) (including, without limitation, any management letters)
     submitted to the Borrower by independent certified public accountants in
     connection with each annual or interim audit or review of the books of the
     Borrower by such accountants.

            (e)  With each delivery required under subparagraphs (a) and (b)
     above, a compliance certificate in form approved by the Bank executed by an
     executive officer of the Borrower demonstrating compliance with the Loan
     Documents.

            (f)  Promptly upon the occurrence of any Default, a notice thereof,
     specifying the nature thereof; and promptly upon the occurrence of any
     event or discovery of any fact which might affect or indicate a material
     adverse change in the Borrower's financial condition, notice thereof
     specifying the nature thereof.

            (g)  Promptly upon becoming available, upon request of the Bank, a
     copy of all: (i) reports, registration statements and other materials filed
     by the Borrower with the Securities and Exchange Commission; (ii.) offering
     circulars made in connection with any distribution or sale of the Borrowers
     securities; and (iii) notices, proxy statements and other materials mailed
     or distributed to the Borrower's shareholders.

            (h)  Such other material information as the Bank may from time to
     time reasonably request.

     3.02   Financial Information. All financial information submitted by the
            ---------------------
Borrower hereunder shall be prepared in accordance with GAAP as in effect on the
date of this Agreement on a basis consistently applied. The Borrower and its
Subsidiaries will maintain books of account in accordance with GAAP. The books
of account shall disclose the information necessary for determining whether the
Borrower has satisfied any provisions or requirements of this Agreement.

     3.03   Taxes and Other Charges. The Borrower and its Subsidiaries will pay
            -----------------------
and discharge or cause to be paid and discharged all taxes, charges, liabilities
or claims of any type at any time assessed against or incurred by the Borrower
or any of its Subsidiaries, or which could become a lien against the Borrower
and its Subsidiaries or any of their respective properties.

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Nothing in this subsection shall require the payment of any such sum if the
Borrower promptly notifies the Bank and by appropriate proceedings contests the
same in good faith and so long as the Borrower, if so requested by the Bank,
creates a funded reserve equal to the amount so claimed or assessed.

     3.04 Maintenance of Existence. Each of the Borrower and its Subsidiaries
          ------------------------
will do or cause to be done all things necessary to preserve and keep in full
force and effect its existence, franchises, rights and privileges as a
corporation under the laws of its state of organization and any other
jurisdiction where, in the opinion of the Borrower's counsel, the Borrower or
any such Subsidiary should be qualified to do business. Each of the Borrower and
its Subsidiaries will do or cause to be done all things necessary to preserve
and keep in full force and effect its right to own Property and to operate all
aspects of its business in a manner not less favorable to it than those now in
existence.

     3.05 Officers. The Borrower will use its reasonable efforts to cause its
          --------
current chief executive officer and chief operating officer to remain engaged in
the active management of the Borrower and to perform duties substantially
similar to those presently performed by such officers. In the event the
retirement, termination or death of any of such Person, such Person shall be
replaced by a Person having similar business experience and expertise.

     3.06 Notice of Litigation. Promptly after the commencement thereof, the
          --------------------
Borrower shall furnish the Bank notice of all material actions, suits and
proceedings before any court or govenmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting the Borrower
or any of its Subsidiaries

     3.07 Notice of ERISA Requirements. As soon as possible and in any event
          ----------------------------
within thirty (30) days after the Borrower knows or has reason to know that any
reportable event, accumulated funding deficiency, prohibited transaction,
disqualification or termination (as such terms are defined in the ERISA) with
respect to any Plan has occurred, the Borrower shall furnish the Bank with the
statement of the chief financial officer of the Borrower setting forth details
as to such event and the action which the Borrower proposes to take with respect
thereto, together with a copy of the notice of such event to the PBGC. For
purposes of this Agreement, "Plan" shall mean any employee benefit plan
maintained in whole or in part for employees of the Borrower or any of its
Subsidiaries which is subject to the provisions of Title IV of the ERISA, or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code of 1986, as amended from time to time.

     3.08 Other Events. The Borrower shall promptly notify the Bank of any
          ------------
default under or violation of any agreement, law or regulation to which the
Borrower or any of its Subsidiaries is a party or by which it is bound. Each of
the Borrower and its Subsidiaries shall promptly perform all of its obligations
under any agreements to which it is a party and shall use its best efforts to
ensure compliance by other parties with such agreements.

     3.09 Compliance with Laws. Each of the Borrower and its Subsidiaries shall
          --------------------
comply at all times with all statutes, regulations, orders and judgments to
which it is subject.

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     3.10   Access. The Bank (by any of its officers. employees or agents) shall
            ------
have the right, exercisable as frequently as the Bank reasonably determines to
be appropriate, to inspect, audit and make extracts from all of the records.
files and books of account of the Borrower and each of its Subsidiaries. All
costs, fees and expenses incurred by the Bank, or for which the Bank has become
obligated, in connection with any such inspection, audit and verification shall
be payable by the Bank. Each of the Borrower and its Subsidiaries shall instruct
its banking and other financial institutions to make available to the Bank such
information and records as the Bank may reasonably request.

     3.11   Deposits. Each of the Borrower and its Subsidiaries shall maintain
            --------
its primary deposit accounts with the Bank.

     3.12   Further Assurances. If at any time counsel for the Bank is of the
            ------------------
reasonable opinion that any portion of the Obligations is not secured or will or
may not be secured by a first priority lien on the Property described in the
Security Agreement, or as contemplated herein, subject only to exceptions
described in the Security Agreement, as the case may be, then the Borrower
shall, after written notice of such opinion from the Bank, do all things and
matters necessary to assure to the reasonable satisfaction of counsel for the
Bank that any part of the Obligations then existing or thereafter to be created
is secured or will be secured as contemplated by this Agreement.

                                   ARTICLE 4
                              NEGATIVE COVENANTS
                              ------------------

     4.01   Liens. Neither the Borrower nor any Subsidiary will create, incur,
            -----
assume or suffer to exist any mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of the assets of the Borrower or any
Subsidiary now or hereafter owned, or enter into or suffer to exist any
conditional sales contracts dr other title retention agreements except for
Permitted Liens. For purposes hereof, Permitted Liens shall mean:

            (a)  liens in favor of the Bank;

            (b)  the lien of ad valorem and other taxes and assessments not yet
     due and payable;

            (c)  Liens on equipment and other assets to secure indebtedness
     permitted hereunder to finance the acquisition thereof;

            (d)  liens arising out of pledges, deposits, or other amounts owed
     under worker's compensation laws, unemployment insurance, old age pensions
     or other social security or retirement benefits, or similar legislation,
     or to secure payment of premiums for insurance purchased in the usual
     course of operations or in Connection with self-insurance or to secure the
     performance of bids, tenders or trade contracts incurred in the ordinary
     course of operations and not in connection with the borrowing of money;

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          (e) deposits for indemnity bonds and other bonds required in the
     ordinary course of the Borrower's or any Subsidiary's business, and not in
     connection with borrowed money;

          (f) inchoate materialmen's, suppliers', operators', mechanics',
     workmen's, repairmen's, employees', carriers', warehousemen's or attorneys'
     liens or other like statutory liens arising in the ordinary course of
     business and securing obligations (i) which are not delinquent or (ii) the
     amounts or validity of which are being contested in good faith as to which
     the Borrower or any Subsidiary has established appropriate funded reserves
     to the extent required by GAAP;

          (g) deposits made by the Borrower or any Subsidiary in the ordinary
     course of business;

          (h) liens of financial institutions arising in the ordinary process of
     collection of instruments; and

          (i) statutory landlord's liens so long as amounts secured thereby
     are not past due bv more than 30 days.

     4.02 Obligations.
          -----------

          (a) Neither the Borrower nor any Subsidiary is or will become directly
     or indirectly obligated in any way for any obligation for borrowed money or
     Capital Leases except for Permitted Obligations, For purposes hereof,
     Permitted Obligations shall mean:

               (i) any and all obligations now or hereafter owed by the Borrower
          or any Subsidiary to the Bank;

               (ii) customer deposits in the ordinary course of business;

               (iii) obligations subordinated to the Obligations pursuant to
          subordination agreements acceptable to the Bank; and

               (iv) other obligations in an aggregate principal amount, on a
          combined basis as to all such other obligations, not exceeding
          $250,000.

          (b) Notwithstanding any contrary provision herein, the Borrower and
     such Subsidiaries shall be entitled to incur and maintain Capital Leases
     and purchase money indebtedness, in addition to existing amounts permitted
     under the foregoing subparagraph (a), to finance the Borrower's or any
     Subsidiary's acquisition or lease of equipment or other assets so long as
     the aggregate principal amount of such purchase money obligations and
     Capital Lease obligations, on a combined basis, incurred during each
     fiscal year will not exceed $250,000.

                                       9
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            (c)  Neither the Borrower nor any Subsidiary shall: (i) guarantee or
     purchase any obligations of any other Person; (ii) enter into any credit
     support, financial maintenance, credit enhancement or similar arrangement
     in favor of any Person; or (iii) enter into any other transaction which is
     intended to assure performance of the obligations of any other Person.

     4.03   Merger: Consolidation; Sale of Substantial Assets. Neither the
            -------------------------------------------------
Borrower nor any Subsidiary will merge into or with, consolidate with, or sell
all or a substantial part of its assets to, any other Person.

     4.04   Loans and Investments.
            ---------------------

            (a)  Neither the Borrower nor any Subsidiary shall purchase any
     stock, securities or evidence of indebtedness, or make or permit to exist
     any loans or advances to, or make any investment or acquire any interest
     in, any other Person (except, however, that the Borrower and its
     Subsidiaries shall be entitled to make acquisitions in accordance with the
     terms of subparagraph (b) below). Neither the Borrower nor any Subsidiary
     shall, without the Bank's prior written consent, enter into partnership or
     joint venture agreements with any other Person (except, however, that the
     Borrower and its Subsidiaries shall be entitled to enter into such
     agreements so long as the aggregate investment of the Borrower and its
     Subsidiaries in such partnerships and joint ventures, on a combined basis,
     does not exceed S250,000). Notwithstanding the foregoing: (i) the Borrower
     and its Subsidiaries may sell inventory on credit in the ordinary course of
     business; (ii) the Borrower and its Subsidiaries may extend credit and make
     advances (including, without limitation, advances to officers) in the
     ordinary course of business so long as the total outstanding amount of such
     credit and advances, on a combined basis under this subparagraph (ii), does
     not exceed $10,000 at any time; and (iii) the Borrower and its
     Subsidiaries may invest in Eligible Securities. For purposes hereof,
     Eligible Securities" shall mean: (i) direct obligations of the United
     States of America or any agency or instrumentality thereof whose
     obligations constitute the full faith and credit of the United States of
     America so long as all such obligations mature within one year of the date
     of issuance thereof; (ii) commercial paper rated P-1 or better by Moody's
     and maturing within one year of the date of issuance thereof; (iii)
     certificates of deposit issued by any United States commercial bank having
     capital and surplus of not less than $100,000,000; (iv) repurchase
     obligations with a term of not more than seven days for underlying
     securities of the types described in the foregoing clause (i) entered into
     with a United States commercial bank having capital and surplus of not less
     than $100,000,000; and (v) other investments contemplated in the Borrower's
     investment policy approved from time to time by the Borrower's board of
     directors.

            (b)  The Borrower and its Subsidiaries shall be entitled to acquire
    businesses through stock acquisitions, asset purchases or mergers upon
    satisfaction of the following conditions:

                                       10
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               (i)   Each such acquisition shall be made on arms' length terms.
          The Borrower and its Subsidiaries shall, after consummation of the
          acquisition, own and control not less than 100% of the outstanding
          equity and voting rigts in any Person acquired by the Borrower
          or any such Subsidiary in connection with the acquisition.

               (ii)  The Person acquired, or the business acquired, must be in
          the same or a related line of business as the Borrower.

               (iii) The aggregate acquisition consideration payable by the
          Borrower and its Subsidiaries for any acquisition shall not exceed 40%
          of the Borrower's consolidated Tangible Net Worth (as defined below)
          (before giving effect to the acquisition) (except, however, that the
          Borrower and its Subsidiaries shall be entitled to make acquisitions
          for acquisition consideration in excess of such amount with the Bank's
          prior written consent). The acquisition consideration payable in
          connection with any such acquisition shall mean the sum of the
          following items (without duplication): (aa) all cash paid by the
          Borrower and its Subsidiaries in connection with the acquisition; (bb)
          the fair market value transferred (including, without limitation, the
          fair market value of all securities issued) by the Borrower and its
          Subsidiaries in connection with the acquisition; (cc) the principal
          amount of all indebtedness and other amounts payable by the Borrower
          and its Subsidiaries to the sellers or other Persons in connection
          with the acquisition; (dd) the principal amount of all obligations
          assumed by the Borrower and its Subsidiaries in connection with any
          asset acquisition; (ee) all amounts paid or payable under or with
          respect to covenants not to compete or deferred compensation
          agreements in connection with the acquisition; and (ff) all amounts
          paid or payable under or with respect to master brokerage agreements
          and similar agreements in connection with the acquisition.

               (iv) The Borrower shall have given the Bank not less than
          fourteen days prior notice of each acquisition. The notice shall
          include: (aa) the name of the Person or business to be acquired (or,
          as applicable, the name of any Person selling assets to the Borrower
          or any Subsidiary); (bb) financial statements for such company or
          business as of and for the end of its two most recent fiscal years
          and, if available, as of and for the end of its most recent fiscal
          quarter; and (cc) any projections provided to the Borrower or used by
          the Borrower for the Person or business to be acquired in connection
          with the acquisition. The Borrower shall thereafter provide the Bank
          such additional information concerning the acquisition as the Bank may
          reasonably request.

               (V) The Borrower shall have prior to the consummation of the
          acquisition provided the Bank with a certificate executed by the
          Borrower's chief financial officer or other senior financial officer
          demonstrating that the acquisition will not result in a default under
          the financial and other covenants hereunder: (aa) at *the time such
          acquisition is consummated after giving effect to such

                                       11
<PAGE>

            acquisition; and (bb) on a projected basis based upon reasonable
            projections after giving effect to such acquisition.

               (vi)   The acquisition will not result in a Default under Section
            4.08 hereof. In addition, the acquisition will not result in a
            default under the financial and other covenants hereunder: (aa) at
            the time such acquisition is consummated after giving effect to such
            acquisition; and (bb) on a projected basis based upon reasonable
            projections after giving effect to such acquisition.

               (vii)  The Borrower shall have taken, simultaneously with the
            consummation of the acquisition, all such action as may be required
            to cause each Subsidiary directly or indirectly acquired in
            connection therewith, or resulting therefrom, to guaranty all
            obligations of the Borrower under the Loan Documents pursuant to a
            guaranty acceptable to the Bank.

               (viii) For purposes hereof, "Tangible Net Worth" shall mean, at
            any time the same is to be determined, the total shareholders'
            equity (including capital stock,additional paid-in capital and
            retained earnings after deducting treasury stock) that would appear
            on the balance sheet of the Borrower determined on a consolidated
            basis in accordance with GAAP less (aa) the aggregate book value of
            all assets that would be classified as intangible assets under GAAP,
            including, without limitation, goodwill, patents, trademarks, trade
            names, copyrights, franchises and deferred charges (including,
            without limitation, unamortized debt discount arid expense,
            organization costs and deferred research and development expense)
            and similar assets; (bb) the write-up of assets above cost; (cc) any
            amounts owed to the Borrower or any Subsidiary by officers,
            directors, employees, stockholders, or other Affiliates of such
            entity (except as otherwise approved from time to time by the Bank);
            and (dd) the book value of all assets of the Borrower or any
            Subsidiary located outside of the United States of America.

            (c) The Borrower shall not form or create any new Subsidiary on or
     after the date hereof except for the sole purpose of consummating
     acquisitions in accordance with the terms of subparagraph (b) above.
     Notwithstanding the foregoing, for so long as no Default has occurred
     hereunder, the Borrower shall be entitled to form or create new
     Subsidiaries so long as each such Subsidiary guarantees all of the
     Borrowers obligations under the Loan Documents pursuant to a guaranty
     satisfactory to the Bank.

     4.05   Sale or Pledge of Property. Neither the Borrower nor any Subsidiary
            --------------------------
will sell, lease or otherwise dispose of or transfer any of its interests in any
of its assets except in the ordinary course of business.

     4.06   Sale and Leaseback. Neither the Borrower nor any Subsidiary will
            ------------------
enter into any arrangement with any Person (other than an Affiliate of the
Borrower) providing for the leasing by the Borrower or any Subsidiary of
Property which has been sold or is to be sold or transferred by the Borrower or
any Subsidiary to such Person.

                                       12
<PAGE>

     4.07 Pension Plan Funding Deficiency. Neither the Borrower nor any
          -------------------------------
Subsidiary shall incur or suffer to exist any material accumulated funding
deficiency within the meaning of the ERISA or incur any material liability to
the PBGC (or any successor) established thereunder in connection with any Plan.

     4.08 Financial Covenants. The Borrower shall comply at all times with the
          -------------------
following financial covenants. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP as in effect on the date of
this Agreement on a basis consistently applied.

          (a) The Borrower shall not permit its Debt Service Coverage Ratio to
     be less than 1.35 to 1.0 for any consecutive four quarter period
     (calculated on a rolling four quarter basis). The Debt Service Coverage
     Ratio shall be the Borrower's consolidated net income, less Distributions
     (as defined herein), plus (to the extent deducted in calculating net such
     income) depreciation, amortization and interest expense, for the four
     fiscal quarters ending as of the end of each fiscal quarter, divided by
     interest expense, current maturities of long term debt and current
     maturities of Capital Leases payable on a consolidated basis during such
     fiscal quarters. For purposes hereof, "Distributions" shall mean all
     dividends and other distributions to shareholders during any applicable
     period

          (b) The Borrower shall not permit its Debt Ratio to exceed 3.0 to 1 as
     of the end of any fiscal quarter. For purposes hereof, the Debt Ratio shall
     the ratio of: (i) the Borrower's Funded Debt as of the end of each fiscal
     quarter to (ii) the Borrower's consolidated net income before income taxes
     plus, to the extent deducted in calculating such net income, interest,
     depreciation and amortization, for the four fiscal quarters ending on such
     date.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

     The Borrower represents and warrants, and so long as this Agreement is in
effect or any part of the Obligations remains unpaid, shall continue to
represent and warrant at all times, that:

     5.01 The Borrower. Each of the Borrower and its Subsidiaries is a
          ------------
corporation duly incorporated and validly existing under and by virtue of its
state of incorporation. Each of the Borrower and its Subsidiaries is duly
licensed and qualified in all other states and jurisdictions wherein the nature
of the business transacted by it or the ownership of its properties makes such
licensing or qualification as a foreign corporation necessary, if any, except
where the failure to be so qualified would not have a Material Adverse Effect.
Each of the Borrower and its Subsidiaries: (a) holds in full force and effect
all permits, licenses and franchises necessary for it to carry out its
operations in conformity with all material applicable laws and regulations; and
(b) has full and adequate power to own its Property and conduct its business as
now conducted.

     5.02 Authorization, Conflicts and Validity. The execution and delivery of
          -------------------------------------
this Agreement and each of the other Loan Documents to which the Borrower is or
will be a party

                                       13
<PAGE>

and the performance by the Borrower of all of its obligations thereunder: (a)
have been duly authorized by all requisite corporate action; (b) will not
violate or be in conflict with (i) any material provision of applicable law
(including, without limitation, any applicable usury or similar law); (ii) any
material order, rule or regulation of any court or other governmental authority
to which the Borrower is subject; (iii) any material provision of its
certificate of incorporation or bylaws, including any amendments thereto, or any
resolution with continuing effect adopted by its Board of Directors or
shareholders; or (iv) any material provision of any shareholders agreement or
trust respecting securities of its issue or related rights; (c) will not
violate, be in conflict with, result in a breach of or constitute a default
(with or without the giving of notice or the passage of time or both) under any
material instrument, indenture, agreement or other obligation to which it is a
party or by which it or any of its assets and properties is or may be bound or
subject; and (d) except as specifically contemplated or permitted by this
Agreement or any other Loan Documents, will not result in the creation or
imposition of any lien, charge or encumbrance of any nature upon any of its
assets and properties. The Loan Documents to which the Borrower is or will be a
party when executed and delivered will be legal, valid and binding obligations
of the Borrower, enforceable in accordance with their respective terms and
provisions.

     5.03   Consents. No consent, approval or authorization of, or registration,
            --------
declaration or filing with, any governmental authority or other Person
(including, without limitation, the shareholders of the Borrower) (other than
the filing of any required financing statements to perfect the Bank's security
interest in collateral) is required as a condition precedent, concurrent or
subsequent to or in connection with the due and valid execution, delivery and
performance by the Borrower of this Agreement or any other Loan Document to
which it is or will be a party, or the legality, validity, binding effect or
enforceability of any of the respective representations, warranties, covenants
and other terms and provisions thereof. Each franchise, license, certificate,
authorization, approval or consent from any governmental authority material to
the present conduct of the business and operations of the Borrower, or required
for the acquisition, ownership, improvement, operation or maintenance by it of
any material portion of the assets and properties it now owns, operates or
maintains, has been obtained and validly granted, is in full force and effect
and constitutes valid and sufficient authorization therefor.

     5.04   Financial Statements. The Borrower made available to the Bank
            --------------------
financial statements as of and for the fiscal year ending December 31, 1999, and
the period ending September 30, 2000. Those financial statements fairly present
the financial condition of the Borrower and the results of its operations as of
the dates thereof, Those financial statements have been prepared in accordance
with GAAP consistently applied throughout the periods involved, except for
changes, if any, stated in any related accountants reports. The Borrower does
not have any contingent liabilities that are material to it other than as
indicated on such financial statements.

     5.05   Changes in Financial Condition. Since September 30, 2000, there has
            ------------------------------
been no material adverse change in the assets, the financial condition or
business prospects of the Borrower from that set forth or reflected in the
financial statements as of that date. The Borrower is current in the payment of
all of its debts and performance of all of its material obligations.

                                       14
<PAGE>

     5.06 Legal or Administrative Proceedings. There are no material actions,
          -----------------------------------
suits, investigations or proceedings by any Person pending or, to the best
knowledge of the Borrower, threatened against the Borrower or any Subsidiary or
to which any of them is a party involving the possibility of any material
adverse judgment or liability not fully covered by insurance or by adequate
reserves set up on the books of the Borrower or any Subsidiary.

     5.07 Assets. The Borrower and its Subsidiaries have good and marketable
          ------
title to (or valid leasehold interests in) all of their assets reflected in the
financial statements dated September 30, 2000, and such assets are free and
clear of all Liens and charges except for Permitted Liens.

     5.08 Trademarks, Franchises and Licenses. Each of the Borrower and its
          -----------------------------------
Subsidiaries owns, possesses or has the right to use all necessary patents,
licenses, software, franchises, trademarks, trade names, trade styles,
copyrights, trade secrets, know how and confidential commercial and proprietary
information to conduct its businesses as now conducted, without known conflict
with any patent, license, franchise, trademark, trade name, trade style,
copyright or other proprietary right of any other Person.

     5.09 Losses. Since September 30, 2000, no material loss, damage,
          ------
destruction or talking of any of the physical properties of the Borrower or any
Subsidiary has occurred that has not been fully restored or replaced, or that is
not fully covered by insurance, and neither the Property nor business of the
Borrower or any Subsidiary has been adversely affected in any substantial way
as the result of any accident, strike, lockout, combination of workmen, embargo,
riot, war, act of God or public enemy. Neither the Borrower nor any of its
officers is aware of any material adverse fact concerning the conditions or
future prospects of the Borrower or any Subsidiary that has not been fully
disclosed in writing to the Bank.

     5.10 Corporate Restrictions. The Borrower is not a party to any contract or
          ----------------------
subject to any charter or other corporate restriction that would materially and
adversely affect its Property or business, or its ability to perform its
obligations under the Loan Documents.

     5.11 Taxes. The Borrower has filed all federal and state tax returns that
          -----
are required to be filed, and has paid all taxes as shown on the returns and on
all assessments received by it to the extent that the taxes have become due.
Proper and, in the Borrower's judgment, accurate amounts have been withheld by
the Borrower from its employees for all periods in full and complete compliance
with the tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law and such withholdings have been
timely paid to the respective governmental agencies.

     5.12 Default. There exists as of the date hereof no Default.
          -------

     5.13 Other Representations. All warranties and representations of the
          ---------------------
Borrower contained in any of the Loan Documents are true and accurate in all
material respects.

                                      15
<PAGE>

     5.14   ERISA. The Borrower has fulfilled its obligations under the minimum
            -----
funding standards of and is in compliance in all material respects with ERISA
and the Code to the extent applicable to it. The Borrower has not incurred any
liability to the PBGC or a Plan under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA. The Borrower does not have
any contingent liabilities with respect to any post-retirement benefits under
any Plan or Welfare Plan, other than liability for continuation coverage
described in Article 6 of Title I of ERISA.

     5.15   Compliance with Laws. Each of the Borrower and its Subsidiaries is
            --------------------
in compliance with the requirements of all federal, state and local laws, rules
and regulations applicable to or pertaining to its Property or business
operations (including, without limitation, the Occupational Safety and Health
Act of 1970, the Americans with Disabilities Act of 1990, and laws and
regulations establishing quality criteria and standards for air, water, land and
toxic or hazardous wastes and substances), non-compliance with which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. The Borrower and its Subsidiaries have not received any
notice to the effect that their operations are not in compliance with any of the
requirements of applicable federal, state or local environmental, health
and safety statutes and regulations or are the subject of any governmental
investigation evaluating whether any remedial actions needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

     5.16   Purpose of the Borrower. The Borrower does not own any "margin
            -----------------------
security" within the meaning of Regulation U (12 CFR Part 221) of the Board of
Governors of the Federal Reserve System. None of the proceeds of the loan by the
Bank to the Borrower will be used for the purpose of purchasing or carrying any
margin security or for the purpose of reducing or retiring any indebtedness
that was originally incurred to purchase or carry a margin security or for any
other purpose that might constitute this transaction a "purpose credit" within
the meaning of Regulation U, as now in effect or as it may hereafter be amended.
Neither the Borrower nor any agent acting on its behalf has taken or will take
any action that might cause this Agreement or any Loan Document to violate
Regulation U or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Securities Exchange Act of 1934, in each case
as in effect now or as the same may hereafter be amended.

     5.17   Payment of Loan Proceeds. The Bank is authorized to disburse all
            ------------------------
proceeds of any loan to the Borrower hereunder directly to or upon the order of
any officer of the Borrower without looking into the use of those proceeds.

     5.18   Solvency. After giving effect to the full funding of the loans
            --------
contemplated herein, the Borrower will be solvent. "Solvent" shall mean, when
used with respect to any Person, that: (a) such Person does not intend to incur,
and does not believe and has no reason to believe that it will incur, debts
beyond its ability to pay as they become due; (b) the sum of such Person's
assets is greater than all of such Person's liabilities at a fair valuation; (c)
such Person has sufficient cash flow to enable it to pay its debts as they
become due; and (d) such Person does not have unreasonably small capital to
carry on such Person's business as theretofore operated

                                       16
<PAGE>

and all businesses in which such Person is about to engage. "Fair valuation" is
intended to mean that value that can be obtained if the assets are sold within a
reasonable time in arms-length transactions in an existing and not theoretical
market.

     5.19 Federal Acts. The Borrower is not an "investment company" or a company
          ------------
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act.

     5.20 Affiliate Transactions. The Borrower is not a party to any contracts
          ----------------------
or agreements with any of its Affiliates on terms and conditions that are less
favorable to the Borrower than would be usual and customary in similar contracts
or agreements between Persons not affiliated with one another.

     5.21 Full Disclosure. The statements and information furnished to the Bank
          ---------------
in connection with the negotiation of this Agreement and the other Loan
Documents and the commitment by the Bank to provide all or part of the financing
contemplated hereby do not contain any untrue statements of a material fact or
omit a material fact necessary to make material statements contained herein or
therein not misleading. The Bank acknowledges that as to any projections
furnished to the Bank, the Borrower only represents that the same were prepared
on the basis of information and estimates that the Borrower believed to be
reasonable.

     5.22 Subsidiaries. As of the date hereof, the Borrower owns no Subsidiaries
          ------------
other than: (a) Alabama Tissue Center, Inc.; (b) Georgia Tissue Bank, Inc.; and
(c) any other subsidiary listed on Exhibit 21 to the Borrower's Registration
Statement on Form S-l filed prior to the date hereof with the Securities and
Exchange Commission under file number 333-35756.

                                   ARTICLE VI
                               EVENTS OF DEFAULT
                               -----------------

     6.01 Events of Default. Each of the following events shall constitute an
          -----------------
"Event of Default" hereunder:

          (a) if the Borrower defaults in the payment of any principal, interest
     or other amount under the Note, either by the terms thereof or otherwise as
     provided herein and such default continues for a period of five days
     thereafter; or

          (b) if the Borrower or any Subsidiary defaults: (i) in any payment of
     principal of or interest on any other obligation in an amount exceeding
     $25,000 beyond any period of grace provided with respect thereto or (ii) in
     the performance or observance of any other agreement, term, or condition
     contained in any agreement under which any such obligation is created if
     the effect of such default is to cause, or permit the holder or holders of
     such obligation (or trustee on behalf of such holder or holders) to cause,
     such obligation to become due prior to its stated maturity; or

                                       17
<PAGE>

     (c)   if any statement, representation or warranty made by the Borrower or
any Subsidiary herein or in any writing now or hereafter furnished in connection
with or pursuant to the Loan Documents or in connection with any audit shall be
false in any material respect; or if the Borrower or any Subsidiary omits or
fails to disclose within 10 days any substantial contingent or liquidated
liabilities, or any material adverse change in facts previously disclosed by any
statement, representation, certificate or warranty to the Bank; or

     (d)   if the Borrower or any Subsidiary defaults in the performance or
observance of any covenants contained in Sections 4.08 hereof; or

     (e)   (i) if any Event of Default occurs under any Loan Document; or (ii)
if the Borrower or any Subsidiary defaults in the performance or observance of
any other agreement, covenant, term or condition contained herein or in any
other Loan-Document and such default shall not have been remedied within 30 days
after written notice thereof is sent by the Bank to the Borrower except,
however, that an Event of Default shall not be deemed to have occurred if the
Borrower or the Subsidiary, as the case may be, commences, to cure such default
within such 30-day period and the Borrower, or such Subsidiary, as the case may
be, completes such cure within 60 days after such notice; or

     (f)  if the Borrower or any Subsidiary makes an assignment for the benefit
of creditors or is generally not paying its debts as they become due; or

     (g)  if any order, judgment or decree is entered under the bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction adjudicating the
Borrower or any Subsidiary, bankrupt or insolvent; or

     (h)  if the Borrower or any Subsidiary petitions or applies to any tribunal
for, or consents to, the appointment of a trustee, receiver, custodian,
liquidator, or similar official, of the Borrower or any Subsidiary or of any
substantial part of the assets of the Borrower or any Subsidiary, or commences a
voluntary case under the Bankruptcy Code of the United States or any proceedings
relating to the Borrower or any Subsidiary, under the bankruptcy, insolvency, or
moratorium law of any other jurisdiction, whether now or hereafter in effect; or

     (i)  if any such petition or application is filed, or any such proceedings
are commenced, against the Borrower or any Subsidiary and if the Borrower or the
Subsidiary by any act indicates its approval thereof, consent thereto, or
acquiescence therein, or an order is entered in an involuntary case under the
Bankruptcy Code of the United States, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator, or similar
official, or approving the petition in any proceedings, and such order remains
unstayed and in effect for more than 60 days; or

                                       18
<PAGE>

          (j) if any order is entered in any proceedings against the Borrower or
     any Subsidiary decreeing the dissolution or split-up of the Borrower or any
     Subsidiary or if the Borrower or any Subsidiary dissolves (or is dissolved
     or its existence is terminated; or

          (k) if any judgment or judgments are entered against the Borrower or
     any Subsidiary, or against the Property of any such Person, in an aggregate
     amount in excess of $50,000 that remains unvacated, unbonded, unstayed or
     unsatisfied for a period of 45 days; or

          (1) if any Default or Event of Default occurs under that certain
     Construction Loan Agreement (as amended or restated from time to time, the
     "Construction Loan Agreement") dated April 2, 2001, as amended or restated
     from time to time, by and between the Bank and the Borrower.

     6.02 Default. A "Default" shall be deemed to have occurred hereunder if any
          -------
event or condition occurs that would constitute an Event of Default hereunder
upon the satisfaction of any requirement for notice or passage of time in
connection with such event or condition

     6.03 Remedies. If any Default shall occur, any obligation of the Bank to
          --------
make advances hereunder or under any Loan Document shall be terminated without
notice to the Borrower. In addition, if any Event of Default shall occur, the
Bank may by notice to the Borrower, effective upon dispatch, declare the entire
unpaid principal amount then outstanding under the Loan Documents, all interest
accrued and unpaid under the Loan Documents and all other Indebtedness of the
Borrower to the Bank under this Agreement or any of the other Loan Documents to
be forthwith due and payable. Thereupon, the then outstanding principal amount
under the Loan Documents, all such accrued interest and all such other
Obligations shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower, and the Bank may immediately enforce payment of all such
amounts and exercise any or all of the rights and remedies of the Bank under
this Agreement and other Loan Documents, including without limitation the right
to resort to any or all collateral securing any obligations under the Loan
Documents and exercise any or all of the rights of a secured party pursuant to
the Uniform Commercial Code of Florida and other applicable similar statutes in
other jurisdictions.

     6.04 Termination of Rights to Advances; Automatic Acceleration.
          ---------------------------------------------------------
Notwithstanding anything herein to the contrary, (a) the Borrower's right, if
any, to obtain any additional advances or credit under the Loan Documents shall
automatically terminate upon the initiation against the Borrower or any
Subsidiary of any proceeding under the Federal Bankruptcy Code, or upon the
occurrence of any Event of Default described in subparagraphs (f), (g), (h), (i)
or (j) of Section 6.01, and (b) all Obligations shall automatically be and
become immediately due and payable upon the occurrence of any Event of Default
described in subparagraphs (g), (h) or (i) of Section 6.01,

                                      19

<PAGE>

     6.05   Additional Rights of Bank.
            -------------------------

            (a) The Borrower acknowledges that its timely and complete
     compliance with all of the terms and conditions contained in the Loan
     Documents is a material consideration for the Bank's extension of the
     credit facilities evidenced by the Note. In addition To all other rights
     and remedies that the Bank has upon the occurrence of an Event of Default,
     the Bank, in its sole discretion, may: (i) waive its rights resulting from
     such Event of Default; and (ii) charge the Borrower a fee for such waiver.

            (b) The Borrower acknowledges that the Bank's ability to monitor the
     loans evidenced by the Note is dependent upon the Borrower's providing all
     financial statements and other information required in Section 3.01 hereof
     within the time periods set forth in such section. In addition to all other
     rights and remedies that the Bank has upon the occurrence of an Event of
     Default, the Bank may by notice to the Borrower assess the Borrower a late
     fee upon each failure by the Borrower to deliver financial statements or
     information within the time periods set forth in Section 3.01 hereof
     (whether or not such failure constitutes a Default or an Event of Default
     hereunder). The amount of such late fee shall equal the greater of: (i)
     $500.00; or (ii) 0.10% of the face amount of the Note. The Borrower shall
     pay such fee no later than ten days after the Bank has notified the
     Borrower of such assessment. The Bank may assess the late fee on successive
     occasions based upon any successive failures to deliver financial
     statements or financial information within the periods required herein. The
     Bank's assessment of any such fee, and the Borrower's payment of the same,
     shall not be deemed to be a waiver of the Borrower's continuing obligation
     to provide financial statements and other information required hereunder.

     6.06   Cross Default. The Borrower agrees than any Event of Default
            -------------
hereunder shall also constitute a Default under the Construction Loan Agreement.

                                  ARTICLE VII
                                 MISCELLANEOUS
                                 -------------

     7.01   Expenses. The Borrower agrees to pay, and save the Bank harmless
            --------
against liability for the payment of, all reasonable out-of-pocket expenses
arising in connection with this transaction (including any renewals or
modifications relating hereto), including any state documentary stamp taxes or
other taxes (including interest and penalties, if any) that may be determined to
be payable in connection with the execution and delivery of any Loan Document or
any renewal or modification of any Loan Document, and the reasonable fees and
expenses of the Bank's counsel. The Borrower acknowledges that it has
participated with the Bank in establishing the structure of this transaction and
that it has independently determined the amount of documentary stamp and other
taxes due in connection herewith. The Borrower has not relied upon
representations of the Bank or its counsel in calculating the amount of such
taxes, and the Borrower shall be liable for any additional taxes (including
interest and penalties) that may be due in connection with this transaction or
any renewals hereof. If an Event of Default shall occur, the Borrower shall also
pay all of the Banks costs of collection including reasonable Bank

                                       20
<PAGE>

employee travel expenses, court costs and reasonable fees of attorneys and
legal assistants (whether incurred in connection with trial or appellate
proceedings). The Borrower authorizes the Bank to make advances under the Notes
and to debit its deposit accounts to pay all expenses and all other amounts now
or hereafter due under any Loan Document.

     7.02 Survival of Representations and Warranties. All representations and
          ------------------------------------------
warranties contained herein or made in writing by the Borrower in connection
herewith shall survive the execution and delivery of the Loan Documents.

     7.03 Successors and Assigns. All covenants and agreements in this Agreement
          ----------------------
contained by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. The Borrower shall not be entitled to assign its
rights hereunder. The Bank may, without the Borrower's consent, assign all or
part of its rights hereunder or grant participations herein. The Bank may
disclose to any such assignee or participant (or any prospective assignee or
participant) such information concerning the Borrower and its Affiliates as the
Bank deems appropriate. The Borrower acknowledges that the Bank currently
intends to sell or assign a 40% interest in the Loan Documents to one, or more
participating financial institutions. If the Bank is unable to sell or assign a
40% interest in the Loan Documents, then the Borrower shall upon request of the
Bank, after consultation with the Bank, agree to such modifications in the
pricing, structure and other terms governing the Line of Credit as the Bank may
require to facilitate a sale or assignment of such interest.

     7.04 No Third Party Beneficiaries. There are no third party beneficiaries
          ----------------------------
to this Loan Agreement.

     7.05 Notices. All communications, notices or demands provided for hereunder
          -------
or under any other Loan Document to which the Borrower is a party shall be sent
by first class mail, by courier, by hand or by certified mail as follows or to
such other address with respect to any party as such party shall notify the
others in writing:

     To the Bank:        Bank of America, N.A.
                         9000 Southside Blvd., Bldg. 100
                         Jacksonville, Florida 32256
                         Attn: Commercial Loan Administration

     To the Borrower:    Regeneration Technologies, Inc.
                         One Innovation Drive
                         Alachua, Florida 32615
                         Attn: President

Except as otherwise specifically set forth herein, each such communication,
notice or demand shall be deemed given: (i) when deposited in the mail with
proper postage affixed if sent by mail; or (ii) when actually delivered to the
appropriate address if sent by courier or by hand.

                                       21
<PAGE>

     7.06   Applicable Law. This Agreement shall be construed and enforced in
            --------------
accordance with the laws of the State of Florida.

     7.07   Headings. The descriptive section headings herein have been inserted
            --------
for convenience only and shall not be deemed to limit or otherwise affect the
construction of any provisions hereof.

     7.08   Counterparts. This Agreement may be executed simultaneously in
            ------------
several counterparts. Each counterpart shall be deemed an original.

     7.09   Remedies Cumulative. All rights and remedies of the Bank hereunder
            -------------------
are cumulative and in addition to any rights and remedies that the Bank may have
under the laws of Florida. The Bank's exercise of any one right or remedy
against one party hereto will not deprive the Bank of any right or remedy
against that party or any other parties hereto. No right, power or remedy
conferred upon or reserved to the Bank under this Agreement or any other of the
Loan Documents is exclusive of any other tight, power or remedy in any of the
Loan Documents, but each and every such right, power and remedy shall be
cumulative and concurrent and shall be in addition to any other right, power and
remedy given hereunder or under any other Loan Documents; or now hereafter
existing at law, in equity or by statute.

     7.10   Delay or Omission. No delay or omission of the Bank to exercise any
            -----------------
right, power or remedy under any of the Loan Documents or accruing upon any
Event of Default shall exhaust or impair any such right, power or remedy or
shall be construed to waive any such Event of Default or to constitute
acquiescence therein, Every right, power and remedy given to the Bank under any
of the Loan Documents may be exercised from time to time and as often as may be
deemed expedient by the Bank.

     7.11   No Waiver of One Default to Affect Another. No waiver of any Default
            ------------------------------------------
or Event of Default hereunder shall extend to or affect any subsequent Default
or Event of Default or any other Default or Event of Default then existing, or
impair any rights, powers or remedies consequent thereon.

     7.12   Changes. No term of any Loan Document may be changed, waived,
            -------
discharged or terminated orally, or by any action or inaction, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.

     7.13   Severability. If any portion of any Loan Document is declared void
            ------------
by any court as illegal or against public policy, the remainder of the Loan
Documents in question shall continue in full effect.

     7.14   Lost or Damaged Note. Upon receipt by the Borrower of evidence
            --------------------
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
the Note (the "Lost Note") and of an indemnity agreement reasonably satisfactory
to the Borrower, the Borrower will make and deliver to the Bank a new Note of
like tenor, date and principal amount in lieu of the Lost Note.

                                       22
<PAGE>

     7.15 Merger. This Agreement supersedes and replaces any commitment letter
          ------
relating to the Obligations. Except as "otherwise expressly provided for in the
Loan Documents no termination or cancellation (regardless of cause or procedure)
of the financing under this Agreement shall in any way affect or impair the
obligations, duties, and liabilities of the Borrower or the rights of the Bank
relating to any transaction or event occurring prior to such termination. All
undertakings, agreements, indemnifications, covenants, warranties and
representations contained in the Loan Documents shall survive such termination
or cancellation.

     7.16 Arbitration. The parties agree to the following arbitration
          -----------
provisions:

          (a) This Section 7.16 governs the resolution of any controversies or
     claims between the Borrower and the Bank, whether arising in contract, tort
     or by statute, including but not limited to controversies or claims
     (collectively, a "Claim") that arise out of or relate to: (i) this Loan
     Agreement (including any renewals, restatements, extensions or
     modifications hereof); or (ii) any document related to this Loan Agreement.

          (b) At the request of the Borrower or the Bank, any Claim shall be
     resolved by binding arbitration in accordance with the Federal Arbitration
     Act (Title 9, U.S. Code) (the "Act").The Act will apply even though this
     Loan Agreement provides that it is governed by the law of a specified
     state. Arbitration proceedings will be determined in & accordance with the
     Act, the rules and procedures for the arbitration of financial services
     disputes of JAMS/Endispute or any successor thereof ("JAMS"), and the terms
     of this Section. In the event of any inconsistency, the terms of this
     Section shall control. The arbitration shall be administered by JAMS and
     conducted in any United States state where real or tangible personal
     Property collateral for this credit is located or if there is no such
     collateral, in Florida. All Claims shall be determined by one arbitrator.
     However, if Claims exceed $5,000,000, upon the request of any party, the
     Claims shall be decided by three arbitrators. All arbitration hearings
     shall commence within 90 days of the demand for arbitration and close
     within 90 days of commencement and the award of the arbitrator or
     arbitrators, as the case may be, shall be issued within 30 days of the
     close of the hearing. However, the arbitrator or arbitrators, as the case
     may be, upon a showing of good cause, may extend the commencement of the
     hearing for up to an additional 60 days. The arbitrator or arbitrators, as
     the case may be, shall provide a concise written statement of reasons for
     the award. The arbitration award may be submitted to any court having
     jurisdiction to be confirmed and enforced.

          (c) The arbitrator(s) will have the authority to decide whether any
     Claim is barred by the statute of limitations and, if so, to dismiss the
     arbitration on that basis. For purposes of the application of the statute
     of limitations, the service on JAMS under applicable JAMS rules of a notice
     of Claim is the equivalent of the filing of a lawsuit. Any dispute
     concerning this arbitration provision or whether a Claim is arbitrable
     shall be determined by the arbitrator(s). The arbitrator(s) shall have the
     power to award legal fees pursuant to the termsof this Loan Agreement.

                                       23
<PAGE>

            (d)  This Section 7.16 does not limit the right of the Borrower or
     the Bank to: (i) exercise self-help remedies, such as but not limited to,
     setoff; (ii) initiate judicial or nonjudicial foreclosure against any real
     or personal Property collateral; (iii) exercise any judicial or power of
     sale rights, or (iv) act in a court of law to obtain an interim remedy,
     such as but not limited to, injunctive relief, writ of possession or
     appointment of a receiver, or additional or supplementary remedies.

            (e)  By agreeing to binding arbitration, the Borrower and the Bank
     irrevocably and voluntarily waive any right they may have to a trial by
     jury in respect of any Claim. Furthermore, without intending in any way to
     limit this Loan Agreement to arbitrate, to the extent any Claim is not
     arbitrated, the parties irrevocably and voluntarily waive any right they
     may have to a trial by jury in respect of such Claim. This provision is a
     material inducement for the Borrower's executing, and the Bank's accepting,
     this Loan Agreement. No provision in this Loan Agreement or in any document
     related hereto regarding submission to jurisdiction or venue in any court
     is intended or shall be construed to be in derogation of the provisions of
     this Loan Agreement or in any such other document for arbitration of any
     controversy or claim.

     7.17   Amended and Restated Agreement. This Agreement amends and restates
            ------------------------------
that certain Loan Agreement dated September 24, 1999, by and between the Bank
and the Borrower.

     7.18.  NOTICE OF FINAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT REPRESENTS
            -------------------------
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.

                                 REGENERATION TECHNOLOGIES,INC.

                                 By: /s/ Richard R. Allen
                                    -----------------------------
                                    Its: CFO/Sec/Treas
                                    -----------------------------

                                 BANK OF AMERICA, N.A.

                                 By: /s/ Cynthia M. Stringfield
                                    -----------------------------
                                    Its: Asst. Vice President
                                    -----------------------------

                                       24
<PAGE>

STATE OF GEORGIA

COUNTY OF CAMDEN

     The foregoing instrument was executed, acknowledged and delivered before me
this 17th day of April, 2001, by Richard R Allen the CFO/SEC/TREAS of
Regeneration Technologies, Inc., on behalf of the corporation, in Camden County,
Georgia.

                             /s/ SUZANNE A. GUAY
                             ---------------------------------------------------
                             Notary Public, State and County
                              Aforesaid
                             Print Name: SUZANNE A. GUAY
                                        ----------------------------------------
                             My commission expires: Notary Public, Camden
                                                   -----------------------------
                                                    County, Georgia
                                                   -----------------------------
                             My commission number: My Commission Expires
                                                  ------------------------------
                                                   Aug. 21, 2004
                                                  ------------------------------

                             (NOTARIAL SEAL)

                                       25
<PAGE>

                                  APPENDIX I

     The following terms when used in the Loan Agreement shall have the
following meanings;

     "Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for the purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by conduct or otherwise.

     "Bank" is defined in the introductory paragraph of the Loan Agreement.

     "Borrower" is defined in the introductory paragraph of the Loan Agreement.

     "Borrowing Base" is defined in Section 1.02(b) of the Loan Agreement.

     "Business Day" means each day other than a Saturday, a Sunday or any
holiday on which commercial banks in Jacksonville, Florida are closed for
business.

     "Capital Lease" means any lease of Property which in accordance with GAAP
is required to be capitalized on the balance sheet of the lessee.

     "Capital Lease Obligation" means the amount of the liability shown on the
balance sheet of any Person in respect of a Capital Lease determined in
accordance with GAAP.

     "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.

     "Collateral" means all properties, rights, interests and privileges from
time to time subject, or intended to be subject, to the Liens granted to the
Bank by the Collateral Documents.

     "Collateral Documents" means the Security Agreement and all other
mortgages, deeds of trust, security agreements, assignments, financing
statements and other documents as shall from time to time secure the Obligations
or any guaranty thereof.

     "Construction Loan Agreement" is defined in Section 6.01(a) of the Loan
Agreement.

     "Debt" means for any Person (without duplication): (a) all indebtedness of
such Person for borrowed money, whether current or funded, or secured or
unsecured, (b) all indebtedness for the deferred purchase price of Property or
services, (c) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to Property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the

<PAGE>

event of a default are limited to repossession or sale of such Property), (d)
all indebtedness secured by a purchase money mortgage or other Lien to secure
all or part of the purchase price of Property subject to such mortgage or Lien,
(e) all obligations under leases that shall have been or must be, in accordance
with GAAP, recorded as Capital Leases with respect to which such Person is
liable as lessee, (f) any liability in respect of banker's acceptances or
letters of credit, (g) any indebtedness, whether or not assumed, secured by
Liens on Property acquired by such Person at the time of acquisition thereof,
(h) all indebtedness, whether or not for borrowed money, represented by notes,
drafts, bonds, debentures and similar instruments, and (i) all indebtedness
referred to in clause (a), (b), (c), (d), (e), (f), (g) or (h) above which is
directly or indirectly guaranteed by such Person or which such Person has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which any of them have otherwise assured a creditor against loss. Debt shall
not, however, include trade payables arising in the ordinary course of business
that are not more than 90 days past due.

     "Debt Ratio " is defined in Section 4.08(b) of the Loan Agreement.

     "Debt Service Coverage Ratio " is defined in Section 4.08(a) of the Loan
Agreement.

     "Default" is defined in Section 6.02 of the Loan Agreement.

     "Distributions" is defined in Section 4.08(a) of the Loan Agreement.

     "Eligible Receivables " is defined in Section 1.02(b) of the Loan
Agreement.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.

     "Event of Default" means any event or condition identified as such in
Section 6.01 of the Loan Agreement.

     "Extension Date " is defined in Section 1.01(d) of the Loan Agreement.

     "Funded Debt" means, at any time, the aggregate principal amount of all
Debt of a Person that is outstanding at such time.

     "GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.

     "Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of and Property, including the interests of a
vendor or lessor under any conditional sale, Cap&l Lease 0; other title
retention arrangement.

                                       2
<PAGE>

     "Line of Credit" is defined in Section 1.01(a) of the Loan Agreement.

     "Loan Agreement" or "this Agreement" shall mean the Loan Agreement to which
this Appendix is attached as such agreement may be amended or restated from time
to time.

     "Loan Documents" shall mean and include this Agreement (as amended from
time to time), the Note, the Security Agreement, all other Collateral Documents
and all documents related to the foregoing documents. Loan Documents shall also
include all documents executed by any Subsidiary on or after the date hereof.

     "Lost Note" is defined in Section 7.14 of the Loan Agreement.

     "Material Adverse Effect" means (a) a material adverse change in, or
material adverse effect upon, the operations, business, Property, condition
(financial or otherwise) or prospects of the Borrower or of the Borrower and the
Subsidiaries taken as a whole, (b) a material impairment of the ability of the
Borrower or any Subsidiary to perform its obligations under any Loan Document,
or (c) a material adverse effect upon (i) the legality, validity, binding
effect or enforceability against the Borrower or any Subsidiary of any Loan
Document or the rights and remedies of the Bank thereunder or (ii) the
perfection or priority of any Lien granted under any Collateral Document.

     "Moody's" means Moody's Investors Service, Inc.

     "Note" is defined in Section 1.01(b) of the Loan Agreement.

     "Obligations" is defined in Section 1.03 of the Loan Agreement.

     "PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.

     "Permitted Liens" is defined in Section 4.01 of the Loan Agreement.

     "Permitted Obligations" is defined in Section 4.02(a) of the Loan
Agreement.

     "Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof.

     "Plan" means any employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
either (a) is maintained by the Borrower or any Subsidiary for employees of any
such Person or (b) is maintained pursuant to a collective bargaining agreement
or any other arrangement under which more than one employer makes contributions
and to which the Borrower or any Subsidiary is

                                       3
<PAGE>

then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.

     "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

     "Revolving Period" is defined in Section 1.01(d) of the Loan Agreement.

     "Security Agreement" is defined in Section 1.03 of the Loan Agreement.

     "Solvent" is defined in Section 5.18 of the Loan Agreement.

     "Subsidiary" means any corporation or other Person more than 50% of the
outstanding ordinary voting shares or other equity interests of which is at the
time directly or indirectly owned by the Borrower, by one or more of its
Subsidiaries, or by the Borrower and one or more of its Subsidiaries.

     "Tangible Net Worth" is defined in Section 4.04(b)(viii) of
the Loan Agreement

     "Welfare Plan" means a "welfare plan" as defined in Section 3(l) of ERISA.

                                       4<PAGE>

                                                                   Exhibit 10.32

                               SECURITY AGREEMENT
                               ------------------

     THIS AGREEMENT is made as of the 17th day of April, 2001, by REGENERATION
TECHNOLOGIES, INC. (the "Borrower"), a Delaware corporation, whose address is
One Innovation Drive, Alachua, Florida 32615, and BANK OF AMERICA, N.A. (the
"Bank"), whose address is 9000 Southside Blvd., Bldg. 100, Jacksonville, Florida
32256.

                                    Recitals
                                    --------

     The Borrower and the Bank have executed a Loan Agreement (as amended or
restated from time to time, the "Loan Agreement") of even date herewith. The
Borrower, pursuant to the Loan Agreement, has executed and delivered a Renewal
Promissory Note (as amended, extended or renewed from time to time, the "Note")
of even date herewith in the principal amount of $10,000,000 in favor of the
Bank. The Borrower has agreed to secure certain obligations in accordance with
the terms hereof.

     Now therefore, for good and valuable consideration, the Borrower agrees as
follows:

     1.   Security Interest.
          -----------------

          (a)  The Borrower hereby gives the Bank a continuing and unconditional
     security interest (the "Security Interest") in, and assigns to the Bank,
     the assets described below and all parts, accessories, attachments,
     additions, replacements, accessions, substitutions, increases, profits,
     income, distributions, proceeds and products thereof and thereto in any
     form (including, without limitation, insurance proceeds) together with all
     records (including, without limitation, computer tapes, disks and records)
     relating thereto (the "Collateral"):

               (i)    All of the Borrower's inventory (whether now existing or
          hereafter acquired), including without limitation all goods now or
          hereafter held for sale or lease or to be furnished under contracts of
          service, raw materials, work in process and materials to be used or
          consumed in the Borrower's business.

               (ii)   All of the Borrower's right to receive payments from any
          source and for any reason (whether characterized as accounts,
          commissions, chattel paper, choses-in-action, contract rights, general
          intangibles, instruments, notes or otherwise), whether now existing or
          hereafter arising, including, without limitation, the Borrower's right
          to receive payments for goods and other products sold or leased or for
          services rendered, whether or not earned by performance or recognized
          or billed by the Borrower.

               (iii)  All of the Borrower's receivables, commissions, chattel
          paper, notes, securities, and instruments (whether now existing or
          hereafter arising), including the right to receive payments
          thereunder.

<PAGE>

               (iv)    All of the Borrower's general intangibles and goodwill,
          whether now existing or hereafter arising or acquired, " copyrights,"
          trademarks, trade names and service marks.

               (v)     All of the Borrower's rights under any and all documents
          of title, bills of lading, warehouse receipts and other documents
          (whether now existing or hereafter arising).

               (vi)    All of the Borrower's contract rights (whether now
          existing or hereafter arising) including, without limitation: the
          Borrower's rights under distribution contracts, franchise agreements,
          license agreements, sales contracts, unfilled customer orders, and
          lease agreements.

               (vii)   All of the Borrower's revenues, income, receipts and
          money, whether now existing or hereafter arising, received as a
          result of or in connection with the Borrower's: (aa) operation,
          ownership or sale of property; (bb) performance of services; or (cc')
          sale of assets or otherwise.

               (viii)  All of the Borrower's deposit accounts, certificates of
          deposit, investment accounts, money market funds, mutual funds, cash
          and cash equivalents (whether now owned or hereafter acquired).

          (b) The Collateral also includes other assets of the same or similar
     class or classes as the assets described in subparagraph (a) above
     hereafter owned or acquired by the Borrower and the Bank shall have a
     security interest in all such after acquired assets and all parts,
     accessories, attachments, additions, replacements, accessions,
     substitutions, increases, profits, income, distributions, proceeds and
     products thereof in any form.

     2. Indebtedness Secured. The Security Interest secures payment when due of
        --------------------
all Indebtedness (as defined herein) to the Bank. As used in this Agreement, the
term "Indebtedness" means: (a) all principal, interest, costs, expenses and
other amounts now or hereafter due under the Note (including, without
limitation, all principal amounts advanced thereunder before, on or after the
date hereof); and (b) all other amounts now or hereafter payable by the
Borrower under any of the Loan Documents (as such term is defined in the Loan
Agreement).

     3. Warranties of Borrower. The Borrower warrants and so long as this
        ----------------------
Agreement continues in force shall be deemed continuously to warrant that:

          (a) The Borrower is the owner of the Collateral free of all security
     interests or other encumbrances, except for the Security Interest and
     except for Permitted Liens (as defined in the Loan Agreement).

          (b) The Borrower is authorized to enter into the Security Agreement.

                                       2
<PAGE>

          (c) The Collateral is used or bought for use primarily in business or
     professional operations.

          (d) The Collateral is or will be located at the Borrower's addresses
     specified on Exhibit "A" attached hereto.

          (e) The chief executive office of the Borrower is at the address set
     forth above. The Borrower does not operate under any trade names.

     4. Covenants of Borrower. So long as this Agreement has not been terminated
        ---------------------
as provided hereafter, the Borrower: (a) will defend the Collateral against the
claims of all other persons; (b) will keep the Collateral free from all security
interests or other encumbrances, except for the Security Interest and except for
Permitted Liens (as defined in the Loan Agreement); (c) will not assign,
deliver, sell, transfer, lease or otherwise dispose of any of the Collateral or
any interest therein without the prior written consent of the Bank, except that
prior to an Event of Default, the Borrower may sell or lease inventory in the
ordinary course of the Borrower's business and dispose worn out or obsolete
equipment in the ordinary course of the Borrower's business; (d) will keep
accordance with generally accepted accounting principles applied, accurate and
complete records concerning the Collateral and upon the Bank's request will mark
any of such records and all or any other Collateral to give notice of the
Security Interest and will permit the Bank or its agents to inspect the
Collateral and to audit and make abstracts of such records or any of the
Borrower's books, ledgers, reports, correspondence and other records; (e) upon
demand, will deliver to the Bank any documents of title and any chattel paper
representing or relating to the Collateral or any part thereof, schedules,
invoices, shipping or delivery receipts, purchase orders, contracts or other
documents representing or relating to purchases or other acquisitions or sales
or leases or other dispositions of the Collateral and proceeds thereof and any
and all other schedules, documents and statements which the Bank may from time
to time reasonably request; (f) will keep the Collateral at the addresses
specified in Exhibit "A" until the Bank is notified in writing of any change in
its location, and the Borrower will not change the location of the Borrower's
chief executive office without the written consent of the Bank (which consent
shall not be unreasonably withheld or delayed); (g) will notify the Bank
promptly in writing of any change in the Borrower's address, name, trade names
or identity from that specified above or of any change in the location of the
Collateral; (h) will permit the Bank or its agents to inspect the Collateral;
(i) will keep the Collateral in good condition and repair and will not use the
Collateral in violation of any provisions of this Agreement, any applicable
statute, regulation or ordinance or any policy of insurance insuring the
Collateral; (j) will execute and deliver to the Bank such financing statements,
landlord waivers and other documents reasonably requested by the Bank, and take
such other action and provide such further assurances as the Bank may reasonably
deem advisable to evidence, perfect or enforce the Security Interest created by
this Agreement; (k) will pay all taxes, assessments and other charges of every
nature which may be levied or assessed against the Collateral (unless the same
are being contested in good faith); (l) will insure the Collateral against risks
by obtaining policies (none of which shall be cancellable without at least 30
days prior written notice to the Bank) in coverage, form and amount and with
companies reasonably satisfactory to the Bank, containing a loss

                                       3
<PAGE>

payee provision in favor of the Bank, and at the Bank's request will deliver
each policy or certificate of insurance therefor to the Bank; (m) will prevent
any part of the Collateral from becoming an accession to other goods not covered
by this Agreement; and (n) will prevent the Collateral or any part of the
Collateral from becoming a fixture.

     5.   Verification. The Bank may verify any Collateral in any manner and
          ------------
through any medium which the Bank may deem appropriate, and the Borrower shall
furnish such assistance as the Bank may reasonably require in connection
therewith.

     6.   Default.
          -------

          (a)   Each of the following shall constitute an "Event of Default"
     hereunder: (i) the occurrence of an Event of Default under the Loan
     Agreement; (ii) failure by the Borrower to perform any material obligations
     under this Agreement or under any other agreement between the Borrower and
     the Bank or by the Borrower in favor of the Bank, time being of the essence
     (subject, however, to any applicable notice and cure periods); (iii)
     material falsity in any certificate, statement, representation, warranty or
     audit at any time furnished by or on behalf of the Borrower or any endorser
     or guarantor or any other party liable for payment of all or part of the
     Indebtedness, pursuant to or in connection with this Agreement or otherwise
     to the Bank, including warranties in this Agreement and including any
     omission to disclose any substantial contingent or liquidated liabilities
     or any material adverse change in facts disclosed by any certificate,
     statement, representation, warranty or audit furnished to the Bank; or (iv)
     any attachment or levy against the Collateral or any other occurrence which
     inhibits the Bank's free access to the Collateral.

          (b)   Upon the occurrence of an Event of Default, the Bank may
     exercise such remedies and rights as are available hereunder, under the
     Loan Agreement or otherwise (including without limitation, acceleration of
     the Indebtedness or any part thereof).

          (c)   Upon the occurrence of any Event of Default, the Bank's rights
     with respect to the Collateral shall be those of a secured party under the
     Uniform Commercial Code and any other applicable law in effect from time to
     time. The Bank shall also have any additional rights granted herein and in
     any other agreement now or hereafter in effect between the Borrower and the
     Bank. If requested by the Bank after the occurrence of an Event of Default,
     the Borrower will assemble the Collateral and make it available to the Bank
     at a place to be designated by the Bank.

          (d)   The Borrower agrees that any notice by the Bank of the sale or
     disposition of the Collateral or any other intended action hereunder,
     whether required by the Uniform Commercial Code or otherwise, shall
     constitute reasonable notice to the Borrower if the notice is mailed by
     regular or certified mail, postage prepaid, at least ten days before the
     action to the Borrower's address as specified in this Agreement or to any
     other address which the Borrower has specified in writing to the Bank as
     the address to which notices shall be given to the Borrower.

                                       4
<PAGE>

          (e) The Borrower shall pay all costs and expenses incurred by the Bank
     in enforcing this Agreement, realizing upon any Collateral and collecting
     any Indebtedness (including a reasonable attorney's fee) whether suit is
     brought or not and whether incurred in connection with collection, trial,
     appeal or otherwise and, to the extent of the Borrower's liability for
     repayment of any of the Indebtedness, shall be liable for any deficiencies
     in the event the proceeds of disposition of the Collateral do not satisfy
     the Indebtedness in full. Nothing contained herein shall be deemed to
     require the Bank to proceed against the Collateral or any part thereof
     before or as a condition to the pursuit of any of its other rights and
     remedies with respect to the Indebtedness.

     7. Miscellaneous.
        -------------

          (a) The Borrower authorizes the Bank at the Borrower's expense to file
     any financing statements relating to the Collateral (without the Borrower's
     singature thereon) which the Bank deems appropriate and the Borrower
     appoints the Bank as the Borrower's attorney-in-fact to execute any such
     financing statements in the Borrower's name and to perform all other acts
     which the Bank deems appropriate to perfect and to continue perfection of
     the Security Interest.

          (b) The Borrower hereby irrevocably consents to any act by the Bank or
     its agents in entering upon any premises for the purposes of either (i)
     inspecting the Collateral or (ii) taking possession of the Collateral after
     any Event of Default in any commercially reasonable manner. The Borrower
     hereby waives its right to assert against the Bank or its agents any claim
     based upon trespass or any similar cause of action for entering upon any
     premises where the Collateral may be located.

          (c) The Borrower authorizes the Bank to collect and apply against the
     Indebtedness any refund of insurance premiums or any insurance proceeds
     payable on account of the loss or damage to any of the Collateral and
     appoints the Bank as the Borrower's attorney-in-fact to endorse any check
     or draft representing such proceeds or refund.

          (d) Upon the Borrower's failure to perform any of its duties
     hereunder, the Bank may, but it shall not be obligated to, perform any of
     the duties and the Borrower shall forthwith upon demand reimburse the Bank
     for any expenses incurred by the Bank in so doing.

          (e) No delay or omission by the Bank in exercising any right hereunder
     or with respect to any Indebtedness shall operate as a waiver of that or
     any other right, and no single or partial exercise of any right shall
     preclude the Bank from any other or further exercise of the right or the
     exercise of any other right or remedy. The Bank may cure any Event of
     Default by the Borrower in any reasonable manner without waiving the Event
     of Default so cured and without waiving any other prior or subsequent Event
     of Default by

                                       5
<PAGE>

     the Borrower. All rights and remedies of the Bank under this Agreement and
     under the Uniform Commercial Code shall be deemed cumulative.

          (f) The Bank shall exercise reasonable care in the custody and
     preservation of the Collateral to the extent required by law and it shall
     be deemed to have exercised reasonable care if it takes such action for
     that purpose as the Borrower shall reasonably request in writing; however,
     no omission to do any act not requested by the Borrower shall be deemed a
     failure to exercise reasonable care and no omission to comply with any
     requests by the Borrower shall of itself be deemed a failure to exercise
     reasonable care. The Bank shall have no obligation to take and the Borrower
     shall have the sole responsibility for taking any steps to preserve rights
     against all prior parties to any instrument or chattel paper in the Bank's
     possession as Collateral or as proceeds of the Collateral. The Borrower
     waives notice of dishonor and protest of any instrument constituting
     Collateral at any time held by the Bank on which the Borrower is in any way
     liable and waives notice of any other action taken by the Bank.

          (g) The Borrower shall, upon request of the Bank, direct each of its
     Account Debtors (as defined herein) to remit payment of all accounts to
     such lockbox, post office box or as the Bank may designate from time to
     time. From and after the occurrence of any Event of Default, the Bank may
     notify each Account Debtor of the Security Interest and may also direct
     such Account Debtor to make all payments on the Collateral to the Bank. All
     payments on and other proceeds from the Collateral received by the Bank
     directly or from the Borrower shall be applied to the Indebtedness in such
     order and manner and at such time as the Bank shall in its sole discretion
     determine. Unless the Bank notifies the Borrower in writing that it
     dispenses with one or more of the following requirements, any payments on
     or other proceeds of the Collateral received by the Borrower before or
     after notification to any Account Debtor shall be held by the Borrower in
     trust for the Bank in the same medium in which received, shall not be
     commingled with any assets of the Borrower and shall be turned over to the
     Bank not later than the next business day following the day of their
     receipt. From and after the occurrence of an Event of Default, the Borrower
     shall also promptly notify the Bank of the return to or repossession by the
     Borrower of goods underlying any Collateral. For purposes hereof, an
     "Account Debtor" shall mean any person or entity who is obligated to pay
     the Borrower any amounts under any receivables, accounts, notes,
     instruments, chattel paper or general intangibles.

          (h) The Borrower authorizes the Bank without affecting the Borrower's
     obligations hereunder from time to time: (i) to take from any party and
     hold collateral (other than the Collateral) for the payment of the
     Indebtedness or any part thereof, and to exchange, enforce or release such
     collateral or any part thereof; (ii) to accept and hold the endorsement or
     guaranty of payment of the Indebtedness or any part thereof and to release
     or substitute any such endorser or guarantor or any party who has given any
     security interest in any collateral as security for the payment of the
     Indebtedness or any part thereof or any party in any way obligated to pay
     the Indebtedness or any part thereof; and (iii) upon the occurrence of any
     Event of Default to direct the manner of the disposition

                                       6
<PAGE>

     of the Collateral and any other collateral and the enforcement of any
     endorsements or guaranties relating to the Indebtedness or any part thereof
     as the Bank in its sole discretion may determine.

          (i) The Bank may demand, collect and sue for all proceeds (either in
     the Borrower's name or the Bank's name at the Bank's option), with the
     right to enforce, compromise, settle or discharge any proceeds. The
     Borrower irrevocably appoints the Bank as the Borrower's attorney-in-fact
     to endorse the Borrower's name on all checks, commercial paper and other
     instruments pertaining to the proceeds before or after the occurrence of an
     Event of Default.

          (j) The rights and benefits of the Bank under this Agreement shall, if
     the Bank agrees, inure to any party acquiring an interest in the
     Indebtedness or any part thereof.

          (k) The terms "Bank" and "Borrower" as used in this Agreement include
     the heirs, personal representatives and successors or assigns of those
     parties.

          (l) This agreement may not be modified or amended nor shall any
     provision of it be waived except in writing signed by the Borrower and by
     an authorized officer of the Bank.

          (m) This Agreement shall be construed under the Florida Uniform
     Commercial Code and any other applicable laws in effect from time to time.

          (n) This Agreement is a continuing agreement which shall remain in
     force until the last to occur of: (i) the payment in full of all
     Indebtedness if such payment of the Indebtedness has become final and is
     not subject to being refunded as a preference or fraudulent transfer under
     the Bankruptcy Code or other applicable law; (ii) the termination of all
     agreements or obligations (whether or not conditional) of the Bank to
     extend credit to the Borrower; and (iii) the termination of the Loan
     Agreement.

     8. Waiver. IF AN EVENT OF DEFAULT SHOULD OCCUR, THE BORROWER WAIVES ANY
        ------
RIGHT THE BORROWER MAY HAVE TO NOTICE AND A HEARING BEFORE THE BANK TAKES
POSSESSION OF THE COLLATERAL BY SELF-HELP, REPLEVIN, ATTACHMENT, SETOFF OR
OTHERWISE.

     9. Amended and Restated Agreement. This Agreement amends and restates that
        ------------------------------
certain Commercial Security Agreement dated September 24, 1999, executed by the
Borrower in favor of the Bank.

                                       7
<PAGE>

EXECUTED and delivered as of the day and year first above written.

                                      REGENERATION TECHNOLOGIES, INC.

                                      By: /s/ Richard R. Allen
                                         ---------------------------------------
                                        Its: CFO, Sec., Treas.
                                            ------------------------------------

                                      BANK OF AMERICA, N.A.

                                      By: /s/ Cynthia M. Stringfield
                                         ---------------------------------------
                                        Its: Asst. Vice President
                                            ------------------------------------

                                       8
<PAGE>

                                                                       EXHIBIT A

                              ADDRESS OF BORROWER

Regeneration Technologies, Inc.
One Innovation Drive
Alachua, Florida 32615

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