OSTEOTECH, INC.
                      NON-QUALIFIED STOCK OPTION AGREEMENT


     1. A STOCK OPTION (the  "Option") for the purchase of a total of [________]
shares of the common stock, par value $0.01 (the "Common Stock"),  of Osteotech,
Inc. (the "Company") has been granted to [_____________] ("Optionee"),  pursuant
to and subject in all respects,  except as otherwise  expressly provided herein,
to the terms and  provisions of the  Osteotech,  Inc. 1991 Stock Option Plan, as
amended  (the  "Plan"),  which has been  adopted by the Board of  Directors  and
Stockholders of the Company and which is incorporated  herein by reference.  The
Option  shall be governed by the Plan and except as otherwise  specifically  set
forth herein the  provisions of the Plan shall govern the Option.  To the extent
the terms of this Option  Agreement are  inconsistent or conflict with the terms
of the  Plan,  the  terms  of  this  Option  Agreement  shall  control  and  the
inconsistent  or  conflicting  provision  of the Plan shall be deemed  waived or
modified by the Board of Directors of the  Company.  Executive  has reviewed the
Plan prior to executing this certificate.

     2. The exercise  price of this Option is $[____] per share of Common Stock.
Such  exercise  price is equal to the last reported sale price of a share of the
Common  Stock as  reported on the NASDAQ  National  Market on the date of grant,
[__________,____].

     3. The  Option may not be  exercised  if the  issuance  of shares of Common
Stock of the Company  upon such  exercise  would  constitute  a violation of any
applicable Federal or state securities or other law or regulation. The Optionee,
as a  condition  to his  exercise of this  Option,  shall (i)  represent  to the
Company  that the shares of Common  Stock of the Company  that he acquires  upon
exercise of this Option are being  acquired by him for investment and not with a
view to distribution or resale,  unless such shares are then registered  under a
currently effective  registration statement under the Securities Act of 1933, as
amended (the "Act"), or counsel for the Company is then of the opinion that such
registration  is  not  required  under  the  Act or any  other  applicable  law,
regulation,  or rule of any governmental agency and (ii) if the shares of Common
Stock underlying this Option are not registered under the Act,  acknowledge that
the certificate  evidencing such shares may be stamped with a restrictive legend
and  such  shares  will be  "restricted  securities"  as  defined  in  Rule  144
promulgated under the Act.

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<PAGE>

     4. The Option may not be transferred  in any manner  otherwise than by will
or the  laws of  descent  and  distribution,  and may be  exercised  during  the
lifetime of the Optionee only by the Optionee. The terms of this Option shall be
binding upon the executors,  administrators,  heirs, successors,  and assigns of
the Optionee.

     5. The  Option  shall  vest  and  become  exercisable  in its  entirety  on
[________,____], provided that Optionee is employed by the Company on such date.
Except as otherwise  provided in paragraph  6(b) hereof and subject to the terms
of the  Plan  governing  the  exercisability  of the  Option  subsequent  to the
termination of Optionee's  employment  with the Company,  once this Option shall
become  exercisable  as to any tranche of shares either in accordance  with this
paragraph 5 or paragraphs  6(a) or 6(b) it shall remain  exercisable  as to such
tranche of shares until 5:00 p.m., New York City time on [________,____].

     6.  Notwithstanding  the provisions of paragraph 6 hereof, this Option will
vest and become exercisable prior to [________,____] upon the earlier occurrence
of the events described in subparagraphs  (a) and (b) below provided Optionee is
employed by the Company at the time of the occurrence of such events.

               (a) The  Option  shall  vest  and  become  exercisable  in  three
          tranches as follows:  (i) as to [________] shares of Common Stock when
          the last  reported  sale price of a share of the  Common  Stock on the
          Nasdaq  National Market is at least eighteen  dollars  ($18.00) for at
          least five (5)  consecutive  trading  days;  (ii) as to an  additional
          [________] shares of Common Stock when the last reported sale price of
          a share of the Common Stock on the Nasdaq  National Market is at least
          twenty  dollars  ($20.00)  for at least five (5)  consecutive  trading
          days; and (iii) as to an additional  [________] shares of Common Stock
          when the last  reported  sale price of a share of the Common  Stock on
          the NASDAQ National Market is at least twenty-two dollars ($22.00) for
          at least five (5) consecutive  trading days. The  accelerated  vesting
          provisions in the immediately  preceding sentence shall be referred to
          herein as the "Accelerated  Vesting Schedule." The last reported sales
          prices  in the  first  sentence  of this  subparagraph  (a)  shall  be
          referred to herein as the  "Threshold  Prices".  With  respect to each
          tranche of shares of Common Stock subject to the Option, upon vesting,
          such tranche shall be referred to herein as the "Vested  Shares." With
          respect to each tranche of shares subject to the Option which have not
          vested,  such tranche  shall be referred to herein as the  "Non-Vested
          Shares."  The  Threshold  Prices and number of shares set forth  above
          shall be proportionately  adjusted for stock splits,  stock dividends,
          and other similar recapitalization events.

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<PAGE>

               (b) If any of the Change in Control events specified below occur,
          the Option shall vest as to all Non-Vested Shares immediately prior to
          the effective  date of such Change in Control event (and Optionee will
          be provided a reasonable  opportunity  to exercise the Option prior to
          such  effective  date)  in  accordance  with the  Accelerated  Vesting
          Schedule  to the  extent the  shareholders  of the  Company  receive a
          payment  for  their  shares of Common  Stock in  connection  with such
          Change in Control  event which is equal to or exceeds  the  respective
          Threshold  Prices set forth in paragraph  6(a) hereof or the shares of
          Common Stock trade at the respective  Threshold  Prices on any trading
          day during the twenty (20)  trading  days  immediately  preceding  the
          effective  date of the Change in  Control.  In the event of any of the
          Change in  Control  events  specified  in  paragraph  6(c)(i) or (iii)
          occur,  the  Option  shall  terminate  as to  all  Vested  Shares  and
          Non-Vested  Shares as of the effective  date of such Change in Control
          event to the extent not  previously  exercised,  provided  Optionee is
          provided a reasonable opportunity to exercise the Option prior to such
          effective  date.  In the event that a Change in Control of the Company
          occurs,  the  Option  shall  pertain  and apply to the  securities  or
          property  to which  Optionee  would  have been  entitled  based on the
          number of shares of Common  Stock  subject to the Option if the Option
          had been  exercised  prior to the  effective  date of such  Change  in
          Control.  Notwithstanding any provisions contained in the Plan, if any
          of the Change in Control events specified in paragraph 6(c) occur, the
          provisions  contained  herein  shall apply with  respect to the Option
          covered by this Option Agreement.

                                       3
<PAGE>

               (c) For purposes  hereof,  "Change of Control"  shall mean: (i) a
          merger or  consolidation  of the Company with another  entity in which
          neither  the Company nor a  corporation  that,  prior to the merger or
          consolidation, was a subsidiary of the Company, shall be the surviving
          entity;  (ii) a merger or consolidation of the Company following which
          either  the  Company  or a  corporation  that,  prior to the merger or
          consolidation, was a subsidiary of the Company, shall be the surviving
          entity and a majority of the Outstanding Company Voting Securities (as
          hereinafter defined) are owned by a Person (as hereinafter defined) or
          Persons who were not  "beneficial  owners" (within the meaning of Rule
          13d-3  promulgated  under  the  Securities  Exchange  Act of 1934 (the
          "Exchange  Act") of a  majority  of such  Outstanding  Company  Voting
          Securities immediately prior to such merger or consolidation;  (iii) a
          voluntary or involuntary  liquidation  of the Company;  (iv) a sale or
          disposition  by the  Company of at least 80% of its assets in a single
          transaction  or a  series  of  transactions  (other  than  a  sale  or
          disposition  of assets to a subsidiary of the Company in a transaction
          not  involving  a Change  in  Control  of the  Company  or a change in
          control of such subsidiary);  (v) a "Board Change" which, for purposes
          of this  Option,  shall have  occurred if a majority of the seats (not
          counting  vacant seats) on the Company's  Board were to be occupied by
          individuals  who were  neither  (A)  nominated  by a  majority  of the
          Incumbent  Directors  (as  hereinafter  defined) nor (B)  appointed by
          directors so nominated;  or (vi) the  acquisition  by any  individual,
          entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
          the Exchange  Act) (a "Person") of  beneficial  ownership  (within the
          meaning  of  Rule  13d-3  promulgated  under  the  Exchange  Act) of a
          majority of the then outstanding voting securities of the Company (the
          "Outstanding Company Voting Securities");  provided, however, that the
          following  acquisitions shall not constitute a Change in Control:  (A)
          any  acquisition by the Company,  (B) any  acquisition by any employee
          benefit plan (or related trust) sponsored or maintained by the Company
          or any  corporation  controlled  by the  Company,  or (C)  any  public
          offering,  private  placement or other  issuance by the Company of its
          voting  securities.  An "Incumbent  Director" is a member of the Board
          who has been either (A)  nominated  by a majority of the  directors of
          the Company then in office or (B) appointed by directors so nominated,
          but excluding,  for this purpose,  any such  individual  whose initial
          assumption  of  office  occurs  as a result  of  either  an  actual or
          threatened  election  contest  (as such term is used in Rule 14a-11 of
          Regulation 14A promulgated  under the Exchange Act) or other actual or
          threatened  solicitation  of proxies or  consents by or on behalf of a
          Person other than the Board.

                                       4
<PAGE>

     7. All notices,  requests, demands and other communications provided for by
this  Option  shall be in  writing  and shall be deemed to have been  given when
delivered by hand and  acknowledged  by receipt or when mailed at any general or
branch United States Post Office enclosed in a registered or certified  postpaid
envelope and addressed to the address of the respective party stated below or to
such changed address as the party may have fixed by notice. If to the Company:

                           Osteotech, Inc.
                           51 James Way
                           Eatontown, New Jersey  07724
                           Attention:  Corporate Secretary

                           With a copy to:

                             Heller Ehrman LLP
                             7 Times Square
                             New York, NY  10036
                             Attention:  Kevin Collins, Esq.

                           If to the Optionee:

                          ________________________________
                          ________________________________
                          ________________________________
<PAGE>

ACCEPTED AND AGREED TO:
                                       OSTEOTECH, INC.



                                       By:_________________________
                                        Name:
                                        Title:


                                       OPTIONEE

                                        _____________________________
                                               [Optionee]

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<PAGE>


                                  PURCHASE FORM


                                                     Date:____________
         TO:      Controller

     The  undersigned   hereby  irrevocably  elects  to  exercise  the  attached
     Non-Qualified Stock Option Certificate to the extent of options to purchase
     _____  shares  and hereby  makes  payment  of  $________  in payment of the
     purchase price thereof.

                   INSTRUCTIONS FOR REGISTRATION OF SECURITIES

                  Name:______________________

                  Address:_____________________




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<PAGE>



No. of Options:  [________]  Date Granted:  [________,____]  Price:  $[____] The
Optionee acknowledges receipt of a copy of the Osteotech, Inc. 1991 Stock Option
Plan, as amended (the "Plan"), and represents that he is familiar with the terms
and provisions  thereof.  The Optionee  hereby agrees that,  except as otherwise
provided  in the Option  Agreement,  this Option is subject to all the terms and
provisions  of the Plan.  The  Optionee  hereby  agrees  to  accept as  binding,
conclusive,  and final all decisions  and  interpretations  of the  Compensation
Committee  upon any  questions  arising  under the Plan.  As a condition  to the
issuance  of  shares of Common  Stock of the  Company  under  this  option,  the
Optionee  authorizes the Company to withhold in accordance  with  applicable law
from any  regular  cash  compensation  payable to him any taxes  required  to be
withheld by the  Company  under  Federal,  state or local law as a result of the
exercise of this Option. Dated:

As of [________,____]


                                       OPTIONEE


                                        _______________________
                                        [Optionee]

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<PAGE>

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             FIRST AMENDMENT TO NON-QUALIFIED STOCK OPTION AGREEMENT

This Amendment,  dated as of [________,____],  is made by and between OSTEOTECH,
INC.,  a  Delaware   corporation  (the  "Company"),   and  [_____________]  (the
"Optionee"), pursuant to the Company's 1991 Stock Option Plan.

                                    Recitals

WHEREAS,  the Company and the Optionee  entered into that certain  Non-Qualified
Stock  Option  Agreement  (the  "Original  Option   Agreement"),   dated  as  of
[________,____],  pursuant to which the Company  granted  Optionee the right and
option to purchase the Company's shares of common stock;

WHEREAS,  the Company and the Optionee desire to amend Section 5 of the Original
Option Agreement to extend the exercise period of the Option in the event of the
Optionee's termination of employment; and

WHEREAS, the Company's Board of Directors authorized a three-for-two stock split
on February 11, 1999, and the exercise price and the number of shares underlying
the  unexercised  portion of the Option as of March 19, 1999,  were  adjusted to
reflect the three-for-two stock split.

NOW,  THEREFORE,  in consideration of the foregoing and the mutual covenants set
forth herein, the Company and the Optionee hereby agree to the following:

1.   Section 5 of the Original  Option  Agreement is hereby amended and restated
     with the following:

          "5.  The  Option  vested and became  exercisable  in its  entirety  on
          [________,____].  Except as  provided  in Sectoin  6(b)  hereof,  this
          Option  shall  remain  exercisable  as to all of the  shares  issuable
          hereunder  until 5:00 p.m., New York City time on  [________,____]  in
          all cases  including,  without  limitation,  in the  event  Optionee's
          employment with the Company is terminated for any reason."

     2.   Except as set forth  herein,  the Original  Option  Agreement  remains
          unchanged  and in full  force  and  effect.  In  case of any  conflict
          between the Original Option Agreement,  as amended, and the 1991 Stock
          Option Plan, the Original Option Agreement, as amended, shall control.

     IN WITNESS  WHEREOF,  the Company and the Optionee  hereto have caused this
Amendment to be duly executed as of the date first written above.


OSTEOTECH, INC.
By. _____________________                   By. _____________________
      Name:                                 Name:
      Title:

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