Exhibit 10.60

                              SETTLEMENT AGREEMENT

      This Agreement, having an effective date of May 15, 2002, is between (a)
Medtronic, Inc., a Minnesota Corporation having its principal place of business
at 710 Medtronic Parkway, N.E., Minneapolis, Minnesota 55432, on behalf of
itself and as owner, directly or indirectly, of Medtronic Sofamor Danek, Inc.
(formerly known as Sofamor Danek Group, Inc.), Sofamor Danek Holdings, Inc.,
Medtronic Sofamor Danek USA, Inc., SDGI Holdings, Inc., and Sofamor Danek L.P.
(hereinafter referred to collectively as "Medtronic"); and (b) Osteotech, Inc.,
a Delaware corporation having its principal place of business at 51 James Way,
Eatontown, New Jersey 07724 (hereinafter referred to as "Osteotech").

      WHEREAS United States Patent No. 5,741,253 ("the '253 patent") issued to
Dr. Gary Karlin Michelson with claims covering certain methods for performing
spinal surgery; United States Patent No. 5,484,437 ("the '437 patent") issued to
Dr. Michelson with claims covering certain methods for performing spinal
surgery; and United States Patent No. 6,096,038 ("the '038 patent") issued to
Dr. Michelson with claims covering certain instruments for performing spinal
surgery;

      WHEREAS the '253, '437, and '038 patents are assigned to Medtronic;

      WHEREAS the '253, '437, and '038 patents are the subject of an action
entitled Medtronic Sofamor Danek, Inc., Sofamor Danek Holdings, Inc., Medtronic
Sofamor Danek USA, Inc., SDGI Holdings, Inc., and Sofamor Danek L.P. v.
Osteotech, Inc., Civ. No. 99-2656 GV (W.D. Tennessee), in which Medtronic has
asserted that Osteotech infringes certain claims of the '253, '437, and '038
patents and Osteotech has counterclaimed for a declaration that the '253, '437,
and '038 patents are invalid, unenforceable and not infringed (hereinafter
referred to as "the Tennessee Action");

      WHEREAS United States Patent Nos. 5,814,084, 4,950,296, and 6,096,081
("the '084, '296, and '081 patents," collectively) are the subject of an action
entitled University of Florida Tissue Bank, Inc., Regeneration Technologies,
Inc., Sofamor Danek Group, Inc., and Sofamor Danek L.P. v. Osteotech, Inc.,
Civil Action No. 99CV33 MMP, pending in the United States District Court for the
Northern District of Florida, in which Medtronic has asserted that Osteotech
infringes certain claims of the '084, '296, and '081 patents (hereinafter
referred to as "the Florida Action"); and

      WHEREAS the parties hereto, to avoid further expenditure of financial,
managerial and other resources, wish to resolve their disputes with finality;
and

      NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and undertakings set forth herein, the parties to this Settlement Agreement
agree as follows:

I.    DEFINITIONS


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      A.    "Patents-in-Suit in Tennessee" means the '253, '437, and '038
            patents, which are at issue in the Tennessee Action, and all United
            States and foreign counterpart patents (including divisions,
            continuations, continuations-in-part, reissues, reexaminations and
            all other variations) and all other patents issuing anywhere in the
            world that claim the benefit of priority to either of the '253,
            '437, and '038 patents.

      B.    "Patents-in-Suit in Florida" means the '084, '296, and '081 patents,
            which are at issue in the Florida Action, and all United States and
            foreign counterpart patents (including divisions, continuations,
            continuations-in-part, reissues, reexaminations and all other
            variations) and all other patents issuing anywhere in the world that
            claim the benefit of priority to either of the '084, '296, and '081
            patents.

      C.    "Off the Market" means that Osteotech is not, after the designated
            date, taking or filling orders, selling or otherwise receiving
            revenue for (other than revenue for product delivered prior to
            February 1, 2003 on standard payment terms per account as of the
            date of this agreement, with all new accounts established after
            April 24, 2002, not to exceed thirty (30) days net terms, provided
            that nothing herein shall affect Osteotech's right to later collect
            on any account), loaning, consigning, promoting, advertising,
            marketing, distributing or processing the product or the related
            instruments and methods.

      D.    "The Litigation" means the Tennessee and Florida Actions
            collectively.

II.   JUDGMENT

      A.    Simultaneously with the execution of this Settlement Agreement, the
            parties to this Settlement Agreement shall enter into a Consent
            Judgment with respect to the Tennessee Action, in the form of
            Exhibit A annexed hereto (which may be modified only if necessary to
            accord with local practice or requirements of the Court), by which
            Osteotech stipulates to an injunction against infringement,
            including direct infringement, active inducement of infringement and
            contributory infringement of any of the claims of the '253, '437, or
            '038 patents for the duration of the term of each such patent, with
            each party to the Settlement Agreement to pay its own costs and
            attorney fees.

      B.    Simultaneously with the execution of this Settlement Agreement, the
            parties to this Settlement Agreement shall enter into a Consent
            Judgment with respect to the Florida Action, in the form of Exhibit
            B annexed hereto (which may be modified only if necessary to accord
            with local practice or requirements of the Court), with each party
            to this Settlement Agreement to pay its own costs and attorney fees.


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III.  PAYMENT

      A.    Osteotech will pay Medtronic $1,900,000 in 24 equal monthly payments
            of $79,166.67 each, commencing May 15, 2002, and payable on the 15th
            day of each month, or if not a business day then on the next
            business day thereafter, without interest except as hereinafter
            provided (each a "Monthly Payment"). Osteotech shall have the right
            to prepay the amounts owing hereunder to Medtronic in whole or in
            part from time to time without premium or penalty.

      B.    In the event Osteotech fails to make a Monthly Payment when due and
            such failure continues for 10 days after Medtronic has given
            Osteotech written notice of such failure, interest shall be due on
            the then outstanding balance, accruing from May 15, 2002, including
            each overdue payment, calculated at a rate equal to 5% per annum,
            based on the number of days elapsed in a 365-day year.

      C.    In the event Osteotech fails to make a Monthly Payment when due and
            such failure continues for 10 days after Medtronic has given
            Osteotech written notice of such failure, Medtronic shall have the
            right, without further notice, to declare the entire aggregate
            amount of all remaining Monthly Payments, and all interest due
            thereon, immediately due and payable, and to present a drawing on
            the Letter of Credit described below in paragraph D in the aggregate
            accelerated amount.

      D.    Osteotech's obligation to make the Monthly Payments (whether on the
            stated due date or if the maturity has been declared due and
            accelerated), and any interest due thereon, will be backed by an
            irrevocable letter of credit issued by Fleet National Bank ("the
            Issuer") for the account of Osteotech and for the benefit of
            Medtronic Inc. in the form of Exhibit C annexed hereto (the "Letter
            of Credit").

      E.    If Medtronic presents an affidavit to Osteotech and Fleet National
            Bank testifying that the Letter of Credit has been lost, stolen, or
            destroyed and that Medtronic has exercised due diligence searching
            for the Letter of Credit, and Medtronic indemnifies or provides
            objectively satisfactory security to Osteotech and the Issuer,
            Osteotech will request that the Issuer issue a replacement Letter of
            Credit (marked as a Replacement Letter of Credit) to Medtronic. If
            Medtronic presents an affidavit to Osteotech and Fleet National Bank
            testifying that the Letter of Credit has been mutilated, accompanied
            by the mutilated Letter of Credit, Osteotech will request that the
            Issuer issue a replacement Letter of Credit (marked as a Replacement
            Letter of Credit) to Medtronic.


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      F.    If, for any reason, the Letter of Credit or Replacement Letter of
            Credit is found void by any court, or fails to fully compensate
            Medtronic as intended by this settlement, Osteotech may, within 10
            days of written notice of such event, pay in full any remaining
            unpaid amounts under this Agreement. If Osteotech fails to pay in
            full any remaining unpaid amounts under this Agreement within 10
            days of written notice of such event, Medtronic may, at its sole
            option, void this settlement and any covenant not to sue, release or
            other obligation on its part under this settlement.

      G.    In the event Osteotech prepays the amount due Medtronic under this
            Section III, Medtronic shall cause the original Letter of Credit,
            together with any amendments, to be delivered promptly to Osteotech,
            together with a written statement that Osteotech has fully satisfied
            the payment terms of the Settlement Agreement and that the Letter of
            Credit may be terminated.

IV.   RELEASES, COVENANTS, AND OBLIGATIONS

      In consideration for the Consent Judgments and payments set forth above,
the parties to this Agreement agree to the following releases, covenants, and
obligations:

      A.    Medtronic does hereby release, acquit and discharge Osteotech, its
            affiliates, predecessors, successors, assigns, directors, officers,
            employees, and agents from any claims, demands, actions or causes of
            action that Medtronic made or may have made under the
            Patents-in-Suit in Tennessee and Florida relating to any Osteotech
            product, instrument, or method accused of infringement in the
            Litigation through April 24, 2002.

      B.    Medtronic hereby grants Osteotech a conditional covenant not to sue
            Osteotech for infringement under any patent relating to spinal
            interbody implants until January 31, 2003, provided that Osteotech
            complies with all other terms and conditions of this Settlement
            Agreement. If Osteotech fails to comply with all terms and
            conditions herein, the covenant is null and void from the outset.

      C.    If Osteotech complies with all the terms and conditions of this
            Settlement Agreement that Osteotech is obliged to comply with or
            fulfill on or before February 15, 2003, Medtronic will deliver to
            Osteotech by February 28, 2003, a release through January 31, 2003
            for all claims of patent infringement by the products, instruments
            and methods accused of infringement in the Tennessee and/or Florida
            Actions under any patent owned by or licensed to Medtronic. The
            release to be delivered by Medtronic shall be in the form of Exhibit
            D annexed hereto.


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      D.    Medtronic will not voluntarily join with any other person or entity
            pursuing an action against Osteotech that is covenanted against or
            released by the terms of this Settlement Agreement. An action is
            covenanted against hereunder if the covenant is in full force and
            effect and has not become void as provided herein. An action is
            released hereunder if such release has been delivered to Osteotech
            and has not become void as provided herein.

      E.    Osteotech acknowledges that Medtronic cannot control the action of
            any other person or entity (except those persons and entities
            controlled or directly or indirectly owned by Medtronic) nor can it
            preclude the possibility that it may be involuntarily joined into
            such action, which would not be contrary to the terms of this
            Settlement Agreement. Enforcement of this Settlement Agreement,
            whether undertaken by Medtronic alone or in conjunction with any
            other person or entity, would not be contrary to this Settlement
            Agreement.

      F.    Medtronic agrees: (a) to discontinue its participation in the
            Florida Action; (b) neither to fund nor to voluntarily assist
            Regeneration Technologies Inc. ("RTI") or any other party to
            continue to pursue the Florida Action against Osteotech (provided
            that any purchase or sale by Medtronic of securities of RTI or other
            commercial transactions between Medtronic and RTI shall not
            constitute funding or assistance); and (c) to contact RTI, inform it
            of the terms of this settlement and give it Medtronic's
            recommendation to accept these terms in complete resolution of the
            Florida Action. Osteotech acknowledges that Medtronic has already
            completed Step (c).

      G.    Osteotech acknowledges that Medtronic has no control over what
            actions RTI or any other person (except those persons and entities
            controlled or directly or indirectly owned by Medtronic) may take,
            nor can Medtronic preclude the possibility that it may be required
            to provide involuntary assistance to RTI or another person by court
            order or subpoena.

      H.    Osteotech further acknowledges that the continuance by Medtronic's
            counsel of any representation of RTI or any other party in pursuing
            the Florida Action, without funding or voluntary assistance by
            Medtronic, would not be contrary to the terms of this Settlement
            Agreement.

      I.    Osteotech does hereby release, acquit and discharge Medtronic, its
            affiliates, predecessors, successors, assigns, directors, officers,
            employees and agents from any claims, demands, actions, or causes of
            action that Osteotech made or may have made related to the
            Patents-in-suit in the Tennessee or Florida Actions or relating to
            the products, instruments and methods accused of infringement in the
            Tennessee or Florida Actions through April 24, 2002.


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      J.    Osteotech reserves all claims and defenses it may have in the
            Florida Action against any person or entity other than Medtronic.

      K.    Osteotech shall take the bio-d(R)Threaded Cortical Bone Dowel
            ("bio-d(R)") product line Off the Market no later than January 31,
            2003. After January 31, 2003, any products and related instruments
            and method-directed material related to the bio-d(R)product line
            which have previously been delivered to an end-user customer
            (physician or hospital) such that the end-user customer has taken
            legal title, on standard payment terms as described above, may
            remain in place; any other products and related instruments and
            method-directed material shall be recalled and withdrawn from the
            market completely, including without limitation any such items in
            the possession, custody or control of Osteotech or its employees,
            sales representatives, distributors, or stocking facilities, and
            including any such items which such persons or entities have loaned
            or consigned to another.

      L.    Osteotech agrees that it will not replace the bio-d(R) product line
            or its related surgical instruments with any products which infringe
            any of the `253, `437, `038, `081, `084, and `296 Patents, nor will
            it promote the practice of any methods covered by any of those
            patents after the withdrawal of the bio-d(R) product line from the
            market by January 31, 2003 or such earlier date as it completes such
            withdrawal.

      M.    Osteotech, Inc. and each of its officers, agents, employees,
            successors and assigns, as well as any person who, acting in concert
            or participating with the defendant, has actual notice of the
            Consent Judgment, consent to being permanently enjoined from
            infringement, active inducement of infringement, or contributory
            infringement of any claim of United States Patent Nos. 5,471,253,
            5,484,437, and 6,096,038 (collectively "the '253, '437, and '038
            patents.") for the remainders of their prospective terms, except
            that Osteotech shall be permitted to continue sales of products in
            the existing bio-d(R)product line as it existed on April 24, 2002
            (including related instruments and methods) only until such products
            are fully withdrawn from the market not later than January 31, 2003,
            as provided herein.

V.    TRANSFER OF THIS AGREEMENT

      A.    This Agreement and the rights and obligations set forth herein shall
            be transferable only to a purchaser who acquires substantially all
            of the rights and assets of a party, or of the business unit of a
            party that includes the spinal interbody implant business. The
            rights and obligations of the transferee shall be the same as the
            transferor's rights and obligations immediately preceding the
            transfer, and the transferee shall not acquire any rights or incur
            any obligations apart from or severable from the transferred
            business. Nothing in this


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            provision shall prevent any party from transferring this Agreement
            or the rights or obligations set forth herein to an affiliate,
            provided that doing so does not relieve that party of its
            obligations hereunder.

VI.   MISCELLANEOUS

      A.    This Agreement may not be modified except in writing signed by
            authorized representatives of the parties.

      B.    The parties to this Agreement represent and warrant that they have
            the authority to enter into this Agreement, including the releases
            and covenants contained herein, and that they and their counsel have
            the authority to execute and file the Consent Judgment. Medtronic,
            Inc. represents and warrants that it has the right to bind the
            entities included within the definition of "Medtronic" in this
            Settlement Agreement to the terms and conditions of this Settlement
            Agreement and to cause such entities to comply with their
            obligations under this Settlement Agreement.

      C.    Any party to this Agreement who believes that another party has
            breached this Agreement shall give written notice to the other
            party. If the party asserted to have breached determines that it has
            breached this Agreement, it may cure the breach within 10 days of
            receiving notification of the breach without incurring any penalty,
            except as provided in Paragraphs III B and C supra.

      D.    This Agreement shall be governed by, and construed and enforced in
            accordance with, the substantive and procedural laws of the State of
            Tennessee.

      E.    The United States District Court for the Western District of
            Tennessee shall retain jurisdiction over the implementation of or
            disputes arising out of the settlement of this litigation. The
            parties retain their rights to petition the United States District
            Court for the Western District of Tennessee regarding any breach or
            violation of this Agreement, to seek enforcement of this Agreement
            and seek equitable relief and damages.

      F.    All disputes, controversies or differences that may arise between
            the parties out of, or in relation to, or in connection with this
            Agreement, or for the breach thereof, shall be submitted to the
            United States District Court for the Western District of Tennessee
            for resolution, or if, and only if, such court shall not have
            jurisdiction over such dispute, then in State Court in Shelby
            County, Tennessee.


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      G.    Enforcement of the terms of this settlement, whether undertaken by
            Medtronic alone or in conjunction with any other person or entity,
            is not contrary to the terms of this settlement.

      H.    This settlement between Medtronic and Osteotech is complete and
            final as to both the Tennessee and Florida actions, and is not
            contingent on any action RTI, the University of Florida Tissue Bank
            ("UFTB"), or any other person may take.

      I.    No right or license is granted herein by implication or otherwise
            under any patent, patent application or patent claim.

      J.    All notices to, demands, consents or other communications which any
            party to this Agreement may desire or may be required to give to any
            other party must be in writing, shall be sent by overnight courier
            or registered United States Mail, or by facsimile transmission with
            electronically confirmed transmission, and shall be effective as of
            the date of confirmed receipt at the address of the party set forth
            below:

      for Medtronic:                         for Osteotech:

      General Counsel                        Chief Executive Officer
      Medtronic, Inc.                        Osteotech, Inc.
      710 Medtronic Parkway, N.E.            51 James Way
      Minneapolis, Minnesota 55432           Eatontown, New Jersey 07724
      Facsimile: (763) 572-5459              Facsimile: (732) 935-0626

      With a copy to:                        With a copy to:

      Chief Counsel                          Craig D. Diviney, Esq.
      Medtronic Sofamor Danek, Inc.          Dorsey & Whitney L.L.P.
      1800 Pyramid Place                     50 South Sixth Street
      Memphis, Tennessee 38132               Minneapolis, MN  55432
      Facsimile: (901) 344-1583              Facsimile: (612) 340-8856


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      In witness whereof, the parties have caused this Agreement to be executed
by their respective duly authorized representatives on the dates and places
indicated below.


                                          MEDTRONIC, INC.,

                                          By: /s/ David J. Scott
                                             -----------------------------------
ATTEST:
                                          Title:  Senior Vice President General
                                                  Counsel and Secretary
                                                  ------------------------------
By: /s/ Jonathan L. Eisenberg             Dated:  June 21, 2002
   --------------------------                     ------------------------------

ATTEST:                                   OSTEOTECH, INC.,

By: /s/ Mark H. Burroughs                 By:  /s/ Michael J. Jeffries
   --------------------------                  ---------------------------------
                                          Title:  Executive Vice President, CFO
                                                  ------------------------------
                                          Dated:  June 28, 2002
                                                  ------------------------------


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