WAIVER AND FIRST AMENDMENT TO SENIOR SECURED, SUPER PRIORITY DEBTOR-IN- POSSESSION CREDIT AGREEMENT

Class Description

Allowed Administrative Expenses:

(Inclusive of UST fees payable per 28 U.S.C. § 1930; and fee claims of estate professionals, the Unsecured Creditors’ Committee and the Ad Hoc Committee, net of retainers; provided, however, that all requested professional fees and expenses incurred from the Petition Date through and including the Effective Date must be approved by the Court prior to disbursement on account of any such Claim.)

Generally: Allowed Administrative Expense Claims: Except to the extent the holder agrees to other, lesser treatment, each holder of an Allowed Administrative Claim shall be paid cash in respect of such Claim equal to the unpaid portion of such Allowed Administrative Expense Claim. The Allowed Administrative Expense Claim shall be payable within the later of: (i) ten (10) days after the Effective Date, or (ii) ten (10) days after the date on which such Claim becomes an Allowed Administrative Expense.

Statutory Fees: All fees payable pursuant to 28 U.S.C. § 1930 shall be paid in cash equal to the amount of such fees when due or no later than the Effective Date. Postpetition U.S. Trustee fees and post-confirmation reports shall be paid and filed as required by 28 U.S.C. § 1930 until the Bankruptcy Case is closed, converted or dismissed, and failure to do either timely is a material default pursuant to Section 1112 of the Code.

Professionals: Except to the extent the holder agrees to other, lesser treatment, all professionals or other entities requesting compensation or reimbursement of expenses pursuant to Sections 327, 328, 330, 331, 503(b) and 1102 of the Code (including any professional or entity requesting compensation for making a substantial contribution in the Bankruptcy Case), shall be paid cash, in respect of such Claim, equal to the unpaid portion of such Allowed Professional Fee and Expense Claim approved by the Court, limited to a cash amount as set forth in the Budget attached to the Final Order approving the DIP Loan Agreement; provided, however, that a Professional may seek payment above its budgeted amount if there are other non-Lender designated professional fee amounts available in the Budget

not used by such non-Lender professionals or not otherwise allowed by the Court.

In the event of a Successful Capital Raise (as defined below), the Allowed Professional Fee and Expense Claim of Gordian Group (exclusive of the monthly fee payable to Gordian in the Budget) in the amount of $400,000 (with Lender responsible for funding $100,000 of this amount) shall be paid in full in cash within ten (10) days after the Effective Date. In the event of an Unsuccessful Capital Raise (as defined below), the Allowed Professional Fee and Expense Claim of Gordian Group (exclusive of the monthly fee payable to Gordian in the Budget) shall be limited to $200,000 and funded by Lender within ten (10) days after the Effective Date to enable the Reorganized Debtor to make such payment.

In the event of a Successful Capital Raise, Debtor Professionals may seek payment of unpaid professional fees in excess of the amounts set forth in the Budget from the proceeds of such Successful Capital Raise, in the amount no greater than $150,000 in the aggregate for all such Debtor Professionals.

Ad Hoc Committee: Fees and expenses of the Ad Hoc Committee and its professionals shall be deemed Allowed Administrative Expenses under Code sections 503(b)(3)(D) and 503(b)(4), subject to Court approval, and their method and amount of payment shall depend on whether the Capital Raise is successful:

(a) In the event of a Successful Capital Raise, the fees and expenses of the Ad Hoc Committee and its professionals shall be paid in full following approval by the Court as follows: (i) out-of-pocket expenses of the Ad Hoc Committee members and its professionals shall be paid in cash; (ii) approved hourly fees of the Ad Hoc Committee’s professionals shall be paid through a combination of cash and the issuance of common stock of the Reorganized Debtor at the same per share price paid in the Capital Raise (plus a gross-up cash allowance for taxes payable on account of any equity issued), with the cash portion of such approved fee award paid at a maximum rate of $425 per hour and the remaining portion of such fee award paid in common stock of the Reorganized Debtor.

(b) In the event of an Unsuccessful Capital Raise, the allowed fees and expenses of the Ad Hoc Committee and its professionals shall be paid following approval by the Court, but limited to a cash amount as set forth in the Budget attached to the Final Order approving the DIP Loan Agreement.

The payment of an allowed Administrative Expense Claim

shall be in full satisfaction, settlement release and discharge of, and in exchange for such Allowed Administrative Expense Claim.

Estimated Percentage Recovery: 100%

Allowed Priority Tax Claims:

(Approximately $30,000.)

Except to the extent the holder agrees to other, lesser treatment, each holder of an Allowed Priority Tax Claim shall be paid in cash, in respect of such Claim, equal to the unpaid portion of such Allowed Priority Tax Claim by the later of ten (10) days after (i) the Effective Date, (ii) the date on which such Claim becomes an Allowed Priority Tax Claim; or (iii) as otherwise provided under the Code. To the extent the holder of an Allowed Priority Tax Claim holds a lien to secure its claim under applicable state law, the holder of such Claim shall retain its lien until its Allowed Priority Tax Claim has been paid in full.

The payment of an Allowed Priority Tax Claim shall be in full satisfaction, settlement, release and discharge of, and in exchange for such Claim.

Estimated Percentage Recovery: 100%

Allowed Class 1 Unsecured Priority Claims:

(Approximately $150,000 - $250,000.)

Except to the extent the holder agrees to other, lesser treatment, each holder of an Allowed Unsecured Priority Claim shall be paid in cash, in respect of such Claim, equal to the unpaid portion of such Allowed Unsecured Priority Claim within ten (10) days after (i) the Effective Date, or (ii) the date on which such Claim becomes an Allowed Unsecured Priority Claim.

Class 1 Claims will be unimpaired and will not be entitled to vote on the Plan. The payment of an Allowed Unsecured Priority Claim shall be in full satisfaction, settlement, release and discharge of, and in exchange for such Claim.

Estimated Percentage Recovery: 100%

Allowed Class 2 General Unsecured Claims:

(Approximately $2,000,000.)

Within ten (10) days after (i) the Effective Date, or (ii) the date on which such Claim becomes an Allowed General Unsecured Claim, each holder of an Allowed General Unsecured Claim shall be paid as follows:

(a) In the event of an Unsuccessful Capital Raise, the lesser of (i) an amount necessary to pay such Allowed Claim in full without post-petition interest or (ii) a pro rata share of a cash fund in an amount not to exceed $2,000,000;

(b) In the event of a Successful Capital Raise:

(i) if total Allowed Unsecured Claims are less than $2,000,000, an amount necessary to pay such Allowed Claim in full without post-petition interest;

(ii) if total Allowed Unsecured Claims are between $2,000,000 and $3,000,000, a pro rata share of a cash fund in an amount not to exceed $2,250,000;

(iii) if total Allowed Unsecured Claims are between $3,000,001 and $4,000,000, a pro rata share of a cash fund in an amount not to exceed $2,500,000;

(iv) if total Allowed Unsecured Claims are greater than $4,000,001, a pro rata share of a cash fund in an amount not to exceed $2,750,000.

Unsecured Creditor Oversight Committee: Promptly upon approval of the Final DIP financing order, the Debtor shall seek approval of a Motion Establishing A General Bar Date, Administrative Bar Date and Governmental Bar Date. To the extent the amount of the General Unsecured Claims filed against the Debtor’s estate exceeds $2.25 million, the Debtor shall fund and pay for the costs and expenses of an Unsecured Creditor Oversight Committee, not to exceed $125,000, which Committee shall have the right to: (i) review and reconcile all General Unsecured Claims filed against the Debtor’s estate; and (ii) object to the allowance of any General Unsecured Claim asserted against the Debtor’s estate. The Unsecured Creditor Oversight Committee shall consist of one representative from the Reorganized Debtor and two (2) representatives appointed by the UCC. In the event that total allowed General Unsecured Claims are reduced below $2.25 million, due to successful objections or otherwise, then the Unsecured Creditor Oversight Committee shall immediately be disbanded, and only reasonable costs and expenses incurred to that point shall be permitted.

The payment of an Allowed General Unsecured Claim as set forth above shall be in full satisfaction, settlement, release and discharge of, and in exchange for such Claim

Estimated Percentage Recovery: ~100%

Scenario A:   Prior to the Effective Date, Debtor shall seek to raise not less than $10,500,000 in funding, which amount shall be available, along with proceeds of the DIP Loan Agreement (consistent with the Budget), to pay all amounts owing by the Debtor under the Plan (with up to $3,000,000 of such $10,500,000 allowable in the form of backstop irrevocable capital call commitments from creditworthy obligors in the reasonable judgment of the Lenders), through a private placement of common stock of the Reorganized Debtor (the “Successful Capital Raise”).  Existing holders of common stock of the Debtor that are accredited investors shall have the opportunity, at the sole and absolute discretion of the Debtor, to participate in the

private placement. Binding commitments for a Successful Capital Raise must be received on or before the date that is five (5) days before the confirmation hearing and such commitments shall be fully funded (or secured in the case of a backstop commitment) no later than the Effective Date. If the Successful Capital Raise has been completed, existing holders of common stock in the Debtor will receive a percentage of the Reorganized Debtor’s common stock under the Plan on account of their existing common stock equity interests which percentage shall be set forth in the Disclosure Statement.

Scenario B: If the Successful Capital Raise is not timely committed to and fully funded (i.e., the entire $10,500,000 funding including up to $3 million of backstop irrevocable capital call commitments) (an “Unsuccessful Capital Raise”), Lenders will receive 95% of the common equity of the Reorganized Debtor on the Effective Date in exchange for a portion of their Allowed Secured Claims and existing equity holders will own 5% of the common equity interests in the Reorganized Debtor on the Effective Date.

Equity Interests are impaired. The distribution or retention of the common equity interests in the Reorganized Debtor to or by holders of Allowed Equity Interests shall be in full satisfaction, settlement, release and discharge of, and in exchange for such Equity Interests.

Allowed Secured Class 4 Claims of Lenders:

(Approximately $38.3 million.)

Lenders shall have an allowed secured claim in the full amount of their pre-petition indebtedness. In full satisfaction of the Lenders secured claims under their prepetition facility and their secured administrative expenses under the DIP Loan Agreement (“Lenders’ Secured Claims”), Lenders will receive the following:

In all events, whether under Scenario A or Scenario B below, on the Effective Date, and in exchange for $15 million of Lenders’ Secured Claims, Lenders will receive an assignment of all of Debtor’s rights, title and interest in the existing license agreement with Arthrex, Inc., all associated intellectual property owned by Debtor and licensed thereunder and all royalty and payment rights thereunder. The Debtor will enter into a transition services agreement with the Lenders as they may reasonably require in respect thereof.

Scenario A (Successful Capital Raise): On the Effective Date, in exchange for the balance of Lenders’ Secured Claim, which shall include the amount funded by Lenders for the payment of Gordian, Lenders will receive non-convertible, no dividend, preferred equity interests in the Reorganized Debtor in the amount of such balance (estimated to be approximately $29.3 million), which shall

have a liquidation preference senior to all other equity interests and such other customary terms acceptable to the Debtor and Lenders (the “Preferred Equity”), and Lenders shall receive no common stock or other equity interest.

Scenario B (Unsuccessful Capital Raise): On the Effective Date, in exchange for such balance, the Lenders will receive an amount of common stock of the Reorganized Debtor such that Lenders will own 95% of the total common equity of the Reorganized Debtor and existing equity holders will receive or retain 5% of the common equity of the Reorganized Debtor.

The distributions to the holders of the Allowed Lenders’ Secured Claims shall be in full satisfaction, settlement release and discharge of, and in exchange for such Allowed Lenders’ Secured Claims.

Class 5 - Other Allowed Secured Claims:

(Approximately $_______)

Claims of creditors holding perfected and unavoidable first priority liens on specific items of collateral by virtue of a purchase money security interest or financing lease will, in full and final satisfaction of such allowed Other Secured Claim be treated in a manner to leave them unimpaired under section 1124 of the Code.

Class 6 – Other Equity Interests:

Class 6 consists of all ownership interests in the Debtor, except for Allowed Class 3 Common Stock Equity Interests, evidenced by any share certificate or other instrument, whether or not transferable or denominated "stock" (including, without limitation, interests denominated as common stock or preferred stock), or similar security, and any warrant or right (including a right to convert) to purchase or subscribe to any such ownership interest. Class 6 includes all Allowed Claims arising under section 510(b) of the Code, all Allowed Claims arising from the rejection of agreements granting such Class 6 Other Equity Interests (to the extent, if any, that they constitute executory contracts), and any Allowed Claims based on indemnification rights.

Holders of Allowed Class 6 Other Equity Interests shall receive or retain no property or distributions on account of such Allowed Claims or Allowed Equity Interests. The Debtor is not soliciting the votes of Class 6 and shall seek confirmation of the Plan with respect to Class 6 under Code section 1129(b).

Conditions Precedent to

Plan Effective Date

The Plan shall contain conditions to the effectiveness of the Plan customary for chapter 11 plans of reorganization of this type, including:

(a) the disclosure statement (“Disclosure Statement”) with respect to the Plan shall be in form and substance reasonably satisfactory to the Debtor, Lenders, UCC and Ad Hoc Committee (collectively, the “Parties”), to the extent permitted by the Court; and

(b) an order confirming the Plan (“Plan Confirmation Order”), in form and substance reasonably satisfactory to the Parties, shall have been entered by the Court and shall not be subject to a stay.

Obligations

of Reorganized Debtor

Scenario A (Successful Capital Raise): The Reorganized Debtor shall have three or five board members. The Debtor will select (i) executive officers for the Reorganized Debtor and (ii) depending on whether the Reorganized Debtor has three or five board members, two or four board members of such board. Lenders will have sole discretion to select one of the board members, regardless of whether the Reorganized Debtor has three or five board members. ▇▇▇▇▇ ▇▇▇▇▇▇ shall be designated by the Debtor as Chief Executive Officer of the Reorganized Debtor.

Scenario B (Unsuccessful Capital Raise): The Lender will have sole discretion to select all board members and executive officers of the Reorganized Debtor.

The identities of the proposed members of the Reorganized Debtor’s board and the proposed executive officers of the Reorganized Debtor under Scenario A and Scenario B shall be disclosed in sufficient time to satisfy the disclosure obligations in section 1129(a)(5). All existing members of the Debtor’s board of directors shall resign as of the Effective Date and be replaced by the newly selected members. The Debtor shall disclose the identity of any insider that will be employed or retained by

the Reorganized Debtor, and the nature of any compensation for such insider in sufficient time to satisfy the disclosure obligations in section 1129(a)(5).

In Scenario A, the Reorganized Debtor will not be entitled to make any dividends or distributions to common equity holders while the Preferred Equity to be issued to the Lenders is outstanding or incur any debt, other than ordinary course indebtedness attendant to its business purpose and other debt solely for working capital in an aggregate amount not to exceed $3,000,000.

In either Scenario A or B, the Reorganized Debtor, among other things, may (a) sell, lease, license, and/or dispose of any of the assets in the ordinary course of business (other than the Causes of Action); (b) institute, prosecute, settle, compromise, abandon or release all Causes of Action (except that Avoidance Actions will be released); (c) prosecute objections to claims filed against the Debtors; (d) make distributions to the holders of allowed Claims in accordance with the Plan; (e) perform administrative services related to the implementation of the Plan; and (f) employ attorneys and other professionals, to assist in fulfilling the Reorganized Debtor’s obligations under the Plan and Code.

The Reorganized Debtor shall have a President and any such other officers as the board of directors may determine. The President may be a board member. The President’s compensation shall be negotiated by the President and the board, but the Debtor shall make such timely disclosure as is required by section 1129(a)(5).

The Reorganized Debtor and the Unsecured Creditor Oversight Committee (to the extent created) shall examine all Claims and will have the right, authority, power and discretion to: (i) file objections to the allowance, priority and classification of all Claims; (ii) litigate to judgment, settle or withdraw objections to Claims without any notice or approval of any other party or the Court; and (iii) request that the Court estimate any claim pursuant to 11 U.S.C. § 502(c). The deadline to file objections to Claims shall be sixty (60) days after the Effective Date, which date may be extended by the Reorganized Debtor with order of the Court.

subsidiaries and affiliates; (ii) the DIP Agent, Lenders and their directors, officers, employees, agents, professionals, representatives, predecessors, successors, subsidiaries and affiliates; (iii) the members of the UCC, including their directors, officers, employees, agents, professionals, successors subsidiaries and affiliates, in their capacity as members; (iv) the members of the Ad Hoc Committee, including their directors, officers, employees, agents , professionals, subsidiaries and affiliates, in their capacity as members; (v) the professionals retained in the Bankruptcy Case by the Parties; and (vi) persons subject to potential Avoidance Actions.

The releases granted in (i) and (vi) above shall not extend to any person whose claim against or equity interest in the Debtor is disputed by any of the Parties.