EXHIBIT 10.35

                           CHANGE IN CONTROL AGREEMENT

     AGREEMENT  by and between  Osteotech,  Inc.,  a Delaware  corporation  (the
"Company"), and Arthur A. Alfaro (the "Executive"),  dated as of the 13th day of
September, 1999.

     The Board of Directors of the Company (the "Board") has determined  that it
is in the best interests of the Company and its  stockholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility,  threat or occurrence of a Change in Control (as defined in Section
1(e)) of the  Company.  The Board  believes it is  imperative  to  diminish  the
distraction of the Executive by virtue of the personal  uncertainties  and risks
created  by a pending  or  threatened  Change in Control  and to  encourage  the
Executive's  full attention and  dedication to the Company  currently and in the
event of any  threatened  or  pending  Change in  Control,  and to  provide  the
Executive with  compensation and benefits  arrangements upon a Change in Control
which ensure that the  compensation  and benefits  expectations of the Executive
will be satisfied and that such  compensation  and benefits are competitive with
those of other corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this Agreement.

     NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

     1. Certain Definitions.

     For purposes of this Agreement:

     (a) An "Affiliate"  means any member of the same  affiliated  group (within
the meaning of Section  1504 of the Internal  Revenue  Code of 1986,  as amended
(the "Code"),  determined  without regard to Section 1504(b) of the Code),  that
includes the Company.

     (b) The Executive's  "Base Period  Compensation"  is (i) the average annual
"compensation"  (as defined  below) which was includible in his gross income for
his base period (i.e.,  his most recent five taxable years or such lesser number
of taxable  years or  portions  thereof  during  which the  Executive  performed
services for the Company  ending before the date of the Change in Control);  and
(ii) if Executive's  base period  includes a short taxable year or less than all
of a taxable year,  compensation for such short or incomplete taxable year shall
be annualized for the base period. (In annualizing  compensation,  the frequency
with which payments are expected to be made over an annual period shall be taken
into account.  Thus, any amount of  compensation  for such a short or incomplete
taxable year that represents a payment that would not be made more than once per
year shall not be  annualized).  For  purposes of this  definition,  Executive's
"compensation" is the compensation which was payable to him by the Company or an
Affiliate,  determined without regard to the following Sections of the Code: 125
(cafeteria  plans),  402(a)(8)  (cash or  deferred  arrangements),  402(h)(1)(B)
(elective  contributions to simplified employee  pensions),  and, in the case of
employer  contributions  made pursuant to a salary reduction  agreement,  403(b)
(tax sheltered annuities).



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     (c) The "Commencement  Date" shall mean the first date during the Change in
Control Period (as defined in Section 1(d)) that a Change in Control (as defined
in Section 1(e)) occurs.

     (d) The "Change in Control Period" shall mean the period  commencing on the
date hereof and ending on the third  anniversary  of the date hereof;  provided,
however,  that  commencing on the first  anniversary of the date hereof,  and on
each successive annual anniversary of the date hereof (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"), the
Change in Control  Period  shall be  automatically  extended so as to  terminate
three years from such Renewal Date, unless at least sixty (60) days prior to the
Renewal Date the Company shall give notice to the  Executive  that the Change in
Control Period shall not be so extended.

     (e) "Change in Control" shall mean:

          (i) A "Board Change" which, for purposes of this Agreement, 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  nor (B)  appointed by
     directors so nominated.  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 Securities Exchange Act of 1934, as amended (the "Exchange Act"))
     or other actual or threatened  solicitation of proxies or consents by or on
     behalf of a Person other than the Board; or

          (ii) 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, or (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; or

          (iii) 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; or

          (iv) A merger or consolidation of the Company  following which (A) the
     Company or a corporation that, prior to the merger or consolidation,  was a
     subsidiary of the Company shall be the surviving  entity and (B) a majority
     of the  Outstanding  Company  Voting  Securities  is owned  by a Person  or
     Persons  who were not  beneficial  owners  (within  the  meaning of Section
     13(d)(3) or 14(d)(2) of the Exchange Act) of a majority of the  Outstanding
     Company   Voting   Securities   immediately   prior  to  such   merger   or
     consolidation; or



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          (v) A voluntary or involuntary liquidation of the Company; or

          (vi) 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 or a change in control of
     such subsidiary).

     2. Employment Period.

     (a) Term of Employment.  Commencing on the Commencement  Date and ending on
the first  anniversary  of such date (the  "Employment  Period"),  the Executive
hereby  agrees to remain in the employ of the  Company,  and the Company  hereby
agrees to continue the Executive in its employ,  in accordance with, and subject
to, the terms and provisions of this Agreement, in the capacity of President and
Chief  Operating  Officer   responsible  for,  among  other  things,   directing
Operations,  Sales, Marketing, Research and Development functions of the Company
and, subject to the general supervision of the Chief Executive Officer, and such
other duties and responsibilities as are not inconsistent with the express terms
of this Agreement.

     (b) Position and Duties.

          (i)  During  the  Employment  Period,  (A)  the  Executive's  position
     (including status, offices, titles and reporting requirements),  authority,
     duties and responsibilities shall be in accordance with Section 2(a) hereof
     and (B) the  Executive's  services shall be performed at the location where
     the Executive was employed  immediately  preceding the Commencement Date or
     any  office  which is the  headquarters  of the  Company  and is less  than
     fifteen (15) miles from such location.

          (ii)  During the  Employment  Period,  and  excluding  any  periods of
     vacation and sick leave to which the  Executive is entitled,  the Executive
     agrees to devote reasonable attention and time during normal business hours
     to the business and affairs of the Company and, to the extent  necessary to
     discharge the responsibilities  assigned to the Executive hereunder, to use
     the  Executive's   reasonable  best  efforts  to  perform   faithfully  and
     efficiently such  responsibilities.  During the Employment  Period it shall
     not be a violation  of this  Agreement  for the  Executive  to (A) serve on
     corporate,  civic or charitable boards or committees, (B) deliver lectures,
     fulfill speaking engagements or teach at educational institutions,  and (C)
     manage  personal  investments,  so long as such activities do not interfere
     with the performance of the Executive's  responsibilities as an employee of
     the Company in accordance with this Agreement.

     (c) Compensation.

          (i) Base Salary.  During the Employment  Period,  the Executive  shall
     receive an annual base salary  ("Annual Base Salary") in an amount at least
     equal to that  which he was  receiving  immediately  prior to the Change in
     Control.

          (ii) Incentive,  Savings Retirement and Stock Option Plans. During the
     Employment  Period,  the Executive  shall be entitled to participate in all
     incentive,  savings, retirement and stock option plans, practices, policies
     and programs applicable  generally to other peer executives of the


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     Company, but in no event shall such plans, practices, policies and programs
     provide the Executive with  opportunities  and benefits less favorable than
     those in effect and applicable to the Executive  immediately  preceding the
     Change in Control.

          (iii)  Benefit  Plans.  During the  Employment  Period,  the Executive
     and/or the  Executive's  family,  as the case may be, shall be eligible for
     participation  in and shall  receive all  benefits  under  welfare  benefit
     plans, practices, policies and programs provided by the Company (including,
     without  limitation,  medical,  prescription,  dental,  disability,  salary
     continuance,  employee  life,  group  life,  accidental  death  and  travel
     accident  insurance plans and programs) to the extent applicable  generally
     to other peer executives of the Company,  but in no event shall such plans,
     practices,  policies and programs provide the Executive with benefits which
     are less  favorable  than such plans,  practices,  policies and programs in
     effect and applicable to the Executive  immediately preceding the Change in
     Control.

          (iv) Expenses.  During the Employment  Period,  the Executive shall be
     entitled to receive  prompt  reimbursement  for all  reasonable  employment
     related expenses incurred by the Executive in accordance with the policies,
     practices and  procedures of the Company which shall not be less  favorable
     than those in effect immediately preceding the Change in Control.

          (v) Office  and  Support  Staff.  During the  Employment  Period,  the
     Executive  shall be  entitled  to an office or  offices  of a size and with
     furnishings,  and to exclusive  personal  secretarial and other assistance,
     which shall be at least  equal to that  provided  to the  Executive  by the
     Company immediately preceding the Change in Control.

          (vi)  Vacation.  During  the  Employment  Period  Executive  shall  be
     entitled to paid  vacations  at least equal to that to which the  Executive
     was entitled immediately preceding the Change in Control.

          (vii) Options. Upon a Change in Control all options to purchase shares
     of the Company's Common Stock held by Executive (the "Options"), whether or
     not vested,  shall vest and become  exercisable  in  accordance  with their
     terms  immediately  prior to the  effective  date of such Change in Control
     (and Executive  will be provided a reasonable  opportunity to exercise such
     Options  prior to such  effective  date),  notwithstanding  anything to the
     contrary  contained  in the option  certificates  or any plan  covering the
     Options  collectively,  the ("Plan").  Upon a Change in Control all Options
     held by Executive  shall be exercisable in accordance  with their terms for
     such securities or property to which Executive would have been entitled had
     Executive   exercised  such  Options  prior  to  such  Change  in  Control,
     notwithstanding  anything to the contrary  contained  in any Plan  covering
     such  Options.  Upon a Change in Control  pursuant to Section  1(e)(iii) or
     1(e)(v),  all  Options  held by  Executive,  whether or not  vested,  shall
     terminate as of the effective  date of such Change in Control to the extent
     not previously exercised,  provided that Executive shall have been provided
     with a  reasonable  opportunity  to  exercise  such  options  prior to such
     effective date,  notwithstanding  anything to the contrary contained in the
     Plan covering such Options.


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<PAGE>

     3. Termination of Employment.

     (a)  Death  or  Disability.  The  Executive's  employment  shall  terminate
automatically  upon the Executive's  death during the Employment  Period. If the
Company  determines  in good  faith that the  Disability  of the  Executive  has
occurred during the Employment  Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 3(d) of its intention to terminate the Executive's  employment.  In such
event, the Executive's  employment with the Company shall terminate effective on
the 30th day after  receipt of such  notice by the  Executive  (the  "Disability
Effective Date"), provided that, within the thirty (30) days after such receipt,
the  Executive  shall  not  have  returned  to  full-time   performance  of  the
Executive's  duties.  For purposes of this Agreement,  "Disability" shall mean a
physical or mental  condition  which  prohibits  Executive  from  performing his
duties hereunder for a continuous six (6) month period or for a total of six (6)
months during any eighteen (18) month period.

     (b) Just Cause. Executive's employment may be terminated by the Company for
Just Cause. For purposes hereof, "Just Cause" shall mean:

          (i) The  commission by Executive of a willful act of material fraud in
     the performance of his duties on behalf of the Company; or

          (ii) The  conviction  of  Executive  for  commission  of a  felony  in
     connection with the performance of his duties on behalf of the Company.

     Prior to  termination  for Just Cause,  the Board shall by a majority  vote
have  declared  that  Executive's  termination  is for Just  Cause  specifically
stating the basis for such determination.

     (c) Good Reason. Executive's employment during the Employment Period may be
terminated by Executive  with Good Reason.  For purposes  hereof,  "Good Reason"
shall mean:

          (i) The  assignment  to  Executive  of any  duties of  lesser  status,
     dignity and character  than his duties  immediately  prior to the Change in
     Control  or a  substantial  reduction  in  the  nature  or  status  of  his
     responsibilities  from those in effect  immediately  prior to the Change in
     Control;

          (ii) Any  failure by the  Company  to comply  with the  provisions  of
     Section 2(c);

          (iii)  Relocation of  Executive's  office to a location  which is more
     than fifteen (15) miles from the  location in which  Executive  principally
     worked for the Company  immediately prior to the Change in Control;  or his
     being required by the Company in order to perform  duties of  substantially
     equal   status,   dignity  and  character  to  those  duties  he  performed
     immediately  prior to the  Change in  Control  to  travel on the  Company's
     business to a  substantially  greater  extent than is  consistent  with his
     business travel obligations immediately prior to a Change in Control;

          (iv) The failure by the Company to comply with Section 6(a),  provided
     that the  successor  has received at least twenty (20) days' prior  written
     notice from the Company or the  Executive  of the  requirements  of Section
     6(a); or,



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          (v) The voluntary  termination  by the Executive for any reason at any
     time after the 180th day immediately following a Change in Control.

     For purposes of this  Sections 3(c) any good faith  determination  of "Good
Reason"  made by the  Executive  shall  in all  cases be  conclusive;  provided,
however, that for purposes of Sections 3(c)(i),  (ii), (iii) and (iv), Executive
shall have given the  Company  prior  written  notice  thereof and not less than
twenty (20) days to cure such "Good Reason".

     (d) Notice of Termination. Any termination by the Company for Just Cause or
by the Executive for Good Reason shall be  communicated by Notice of Termination
to the other party  hereby given in  accordance  with Section 7. For purposes of
this  Agreement,  a "Notice of  Termination"  means a written  notice  which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the  extent  applicable,  sets  forth in  reasonable  detail  the  facts  and
circumstances  claimed to  provide a basis for  termination  of the  Executive's
employment  under the  provision so indicated  and (iii)  specifies  the Date of
Termination  (as defined  below)  (which date shall be not more than thirty (30)
days after the giving of such  notice).  The  failure  by the  Executive  or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes  to a showing of Good Reason or Just Cause shall not waive any right
of the  Executive  or the Company  hereunder  or preclude  the  Executive or the
Company from asserting such fact or circumstance in enforcing the Executive's or
the Company's rights hereunder.

     (e) Date of Termination.  "Date of Termination"  means the date the Company
or the  Executive  specifies  as the  date  of  termination  in  the  Notice  of
Termination or if the Executive's employment is terminated by reason of death or
Disability,  the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.

     4. Obligations of Company upon Termination.

     (a)  Termination  by Company for Just Cause.  If at any time on or prior to
the 180th day following the Commencement Date, the Executive's  employment shall
be terminated by the Company for Just Cause,  then,  Executive shall receive all
then  accrued  pay,  benefits,   executive  compensation  and  fringe  benefits,
including  (but not limited  to),  pro rata bonus and  incentive  plan  earnings
through the Date of Termination,  plus the amount of any compensation previously
deferred by the Executive,  in each case to the extent  theretofore  unpaid. The
foregoing  payments and benefits  shall be deemed  compensation  payable for the
duties to be performed by Executive  pursuant to Section 2. If at any time after
the 180th day following the Commencement Date, the Executive's  employment shall
be  terminated  by the  Company  for Just  Cause,  then the  Executive  shall be
entitled to the payment and benefits described in Section 4(b), below.

     (b) Termination by Executive for Good Reason; Termination by the Company at
Any Time Other Than For Just  Cause;  Termination  by the Company For Just Cause
After the 180th Day Following the Commencement Date; Termination Upon Expiration
of the Employment  Period.  If (i) the Company shall  terminate the  Executive's
employment  at any time other than for Just Cause;  or,  (ii) the Company  shall
terminate  Executive's  employment  for Just Cause after the 180th day following
the Commencement Date; or, (iii) the Executive shall terminate his employment at
any time for Good Reason;  or (iv) the  Executive's  employment


                                      E-17
<PAGE>

with the Company shall  terminate upon the expiration of the Employment  Period,
in addition to any other sums, benefits or compensation otherwise payable to him
by the Company:

          (i)  Executive  shall  receive,  no later  than  the  next pay  period
     following  the  Date  of  Termination,  all  then  accrued  pay,  benefits,
     executive compensation and fringe benefits, including (but not limited to),
     his pro rata bonus and incentive plan earnings  accrued through the Date of
     Termination, plus the amount of any compensation previously deferred by the
     Executive, in each case to the extent theretofore unpaid;

          (ii)  Executive  shall  receive,  at the Company's  expense,  medical,
     health  and  disability  benefits  which are  substantially  similar to the
     benefits the Company is providing him  immediately  preceding the Change in
     Control for a period of thirty-six  (36) months  immediately  following the
     Date of Termination;

          (iii)  Executive shall receive an amount equal to one dollar less than
     the sum of (A)  300% of his Base  Period  Compensation,  plus (B)  interest
     thereon for the period beginning on the Commencement  Date through the date
     or dates of  payment,  at a rate  equal to 120% of the  applicable  Federal
     rate,   determined   under   Section   1274(d)  of  the  Code,   compounded
     semiannually.

          (iv) Except in the case of a termination by the Company for Just Cause
     or a voluntary  termination  by the  Executive in  accordance  with Section
     3(c)(v),  Executive  shall  receive  the  balance  of  all  pay,  benefits,
     compensation and fringe benefits,  including (but not limited to), pro rata
     salary,  bonus and incentive plan earnings payable through the remainder of
     the Employment Period; and,

          (v) Except in the case of a termination  by the Company for Just Cause
     or a voluntary  termination  by the  Executive in  accordance  with Section
     3(c)(v),  Executive shall be entitled to a private office with  furnishings
     and secretarial and other reasonable services for the period beginning with
     the Date of Termination and ending on the first anniversary thereof.

     The foregoing  payments and benefits shall be deemed  compensation  payable
for duties to be performed  by  Executive  pursuant to Section 2. Except for the
payments and benefits described in Sections 4(b)(i),  4(b)(ii),  and 4(b)(v) the
sums due pursuant to this Section 4(b) shall be paid in one lump-sum  payable no
later than sixty (60) days after the Date of Termination.  All sums of money due
hereunder   shall  be  subject  to   appropriate   withholding   and   statutory
requirements.  Executive  shall not be required  to  mitigate  the amount of any
payment  provided  for in this  Section  4(b) by  seeking  other  employment  or
otherwise. Notwithstanding anything stated in this Section 4(b) to the contrary,
Company  shall not be  required to provide  medical,  health  and/or  disability
benefits  to the extent  such  benefits  would  duplicate  benefits  received by
Executive in connection with his employment with any new employer.

     The  determination  of the amounts and  benefits  payable to the  Executive
pursuant to Sections  4(b)(i),  4(b)(iii) and 4(b)(iv) (the  "Combined  Amount")
shall first be made by the Company in good faith,  and the Company  shall notify
the  Executive  of the  Combined  Amount as soon as  possible  after the Date of
Termination,  but in no event  later  than  forty-five  (45)  days  prior to the
payment  date of the sums due  under  Section  4(b)(iii)  and  4(b)(iv).  If


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the Executive disagrees with the Company's determination of the Combined Amount,
then within ten (10) days after the date of such  notification to the Executive,
the Executive shall notify the Company of such disagreement,  the extent of such
disagreement  (the  "Disputed  Amount") and the amount that is  undisputed  (the
"Undisputed  Amount").  The  Undisputed  Amount  shall  be paid in one  lump-sum
payable sixty (60) days after the Date of  Termination,  subject to  appropriate
withholding  and  statutory  requirements.  If the  Company  disagrees  with the
Executive's  determination  of the  Combined  Amount,  then within ten (10) days
after the date of such  notification to the Company,  it shall furnish Executive
with a  written  appraisal  of the  Combined  Amounts  (the  "First  Appraisal")
prepared by an independent certified public accountant regularly employed by the
Company  (the  "First  Appraiser").  If  Executive  disagrees  with the  amounts
determined  pursuant  to the First  Appraisal,  then  within ten (10) days after
notice of the First  Appraisal,  he shall  furnish  the  Company  with a written
appraisal  of the  Combined  Amount  (the  "Second  Appraisal")  prepared  by an
independent  certified public  accountant (the "Second  Appraiser").  Within ten
(10) days after  notice of the Second  Appraisal,  the First  Appraiser  and the
Second  Appraiser  shall meet and shall  endeavor,  within ten (10) days of such
meeting,  to agree upon the  Combined  Amount and  notify  the  Company  and the
Executive thereof; provided,  however, that if they are unable to agree upon the
Combined Amount,  then,  within (10) days of such meeting,  they shall engage an
independent  certified public accountant (the "Third  Appraiser") and notify the
Company and the  Executive of their  engagement  of the Third  Appraiser,  whose
determination of the Combined Amount,  if any, shall be final and conclusive and
binding on the Company and the  Executive.  Within ten (10) days after notice of
such  engagement,  the Third  Appraiser  shall determine the Combined Amount and
notify the Company and the Executive of his determination  (the "Final Amount").
Except for the benefits  described in Sections  4(b)(ii) and 4(b)(v),  the Final
Amount, as adjusted by any prior payment of the Undisputed Amount or any payment
made pursuant to Section  4(b)(i),  shall be paid in one lump-sum payable on the
later of (i) sixty (60) days after the Date of Termination,  or (ii) twenty (20)
days  after  notification  of the  Final  Amount,  in  either  case  subject  to
appropriate  withholding and statutory  requirements;  provided,  however,  that
notwithstanding  the foregoing,  the Executive  shall have the option to decline
the benefits  described in Section 4(b)(ii) no later than ten (10) days prior to
such payment date.

     (c)  Disability  or  Death.  If  the  Executive's   employment  during  the
Employment  Period  is  terminated  at any  time by  reason  of the  Executive's
Disability or death, this Agreement shall terminate without further  obligations
to the Executive, his estate or legal representative, as the case may be, except
that the Company  shall (i) pay to  Executive  within  sixty (60) days after the
Date of  Termination  (A)  amounts  due and owing  under  Sections  4(b)(i)  and
4(b)(iii) and (B)  Executive's  Annual Base Salary for the lesser of the six (6)
month period  following the Date of Termination or the remaining  portion of the
Employment  Period,  reduced in the case of  Disability  by amounts  received by
Executive under any employee disability policy maintained by the Company for the
benefit  of  Executive  and  (ii)  provide   Executive,   his  estate  or  legal
representative,  as the  case may be,  with the  benefits  provided  by  Section
4(b)(ii).

     5. Nonexclusivity of Rights.

     Nothing in this Agreement shall prevent or limit the Executive's continuing
or future participation in any plan, program, policy or practice provided by the
Company and for which the Executive may qualify, nor shall anything herein limit
or otherwise  affect such rights as the Executive may


                                      E-19
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have under any contract or agreement with the Company.  Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy,  practice or program of or any contract or agreement with the Company at
or subsequent  to the Date of  Termination  shall be payable in accordance  with
such plan,  policy,  practice  or program or contract  or  agreement,  except as
explicitly modified by this Agreement.

     6. Successors; Binding Agreement.

     (a) The Company will require any successor  (whether  direct or indirect by
purchase, merger, consolidation or otherwise, to all or substantially all of the
business and/or assets of the Company) to expressly  assume and agree to perform
this  Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.

     (b) This  Agreement  shall  inure to the benefit of and be  enforceable  by
Executive's  personal  or  legal  representatives,   executors,  administrators,
successors, heirs, distributees, devisees and legatees.

     7.  Notices.  All  notices,  requests,  demands  and  other  communications
provided for by this  Agreement  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  provided to the
other party by notice in accordance herewith.

                                  If to the Company:

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

                                  With a copy to:

                                  Dorsey & Whitney LLP
                                  250 Park Avenue
                                  New York, NY  10177
                                  Attn:  Kevin T. Collins, Esq.

If to the Executive:

                                  Arthur A. Alfaro
                                  10201 Shrewsbury Run West
                                  Collierville, TN 38017


     8. Miscellaneous.  This Agreement may not be waived, modified or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by Executive and such officers of the Company as may be specifically  designated
by its Board.  The failure of either  party to this  Agreement  to object to any
breach  by the other  party or the  non-breaching  party's  conduct  or  conduct
forbearance shall not constitute a waiver of that party's rights to enforce this
Agreement.  No waiver by either  party  hereto at any time of any  breach by the
other party hereto of, or  compliance  with,  any


                                      E-20
<PAGE>

condition  or  provision  of this  Agreement to be performed by such other party
shall be deemed a waiver of any  subsequent  breach by such  other  party or any
similar  or  dissimilar  provisions  or  conditions  at the same or any prior or
subsequent time.  Except for that certain  employment  agreement dated as of the
13th day of September,  1999 and entered into by and between the Company and the
Executive (the "Employment Agreement"),  no agreements or representations,  oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly  set forth in this  Agreement.
The  Company  and  Executive  agree  that to the  extent any of the terms of the
Employment  Agreement and this Agreement  conflict,  it is their  intention that
Executive in each case receive the benefits under that  agreement  which is most
favorable  to the  Executive.  In this regard,  it is expressly  agreed that the
terms of this  Agreement  that relate to a Change in Control (as defined in this
Agreement) shall be controlling over the terms of the Employment  Agreement that
relate to a Change in Control.  The validity,  interpretation,  construction and
performance  of this  Agreement  shall be governed by the  internal  laws of the
State of New Jersey, without giving any effect to any conflict of laws.

     9.  Severability.  The invalidity or  unenforceability  of any provision of
this  Agreement  shall not affect the  validity or  enforceability  of any other
provision of this Agreement.

     10.  Survival.  The  obligations of the parties under this Agreement  shall
survive the term of this Agreement.

     11.  EMPLOYMENT  PRIOR TO CHANGE IN CONTROL.  THE EXECUTIVE AND THE COMPANY
ACKNOWLEDGE THAT, EXCEPT AS OTHERWISE PROVIDED IN THE EMPLOYMENT  AGREEMENT,  OR
ANY RENEWAL,  EXTENSION OR REPLACEMENT  THEREOF, THE EMPLOYMENT OF THE EXECUTIVE
BY THE COMPANY IS, AND PRIOR TO THE  COMMENCEMENT  DATE WILL CONTINUE TO BE, "AT
WILL" AND,  PRIOR TO THE  COMMENCEMENT  DATE,  MAY BE  TERMINATED  BY EITHER THE
EXECUTIVE  OR THE  COMPANY AT ANY TIME UPON  SIXTY  (60) DAYS'  PRIOR TO WRITTEN
NOTICE.  MOREOVER, IF PRIOR TO THE COMMENCEMENT DATE, THE EXECUTIVE'S EMPLOYMENT
WITH THE COMPANY  TERMINATES,  THEN THE EXECUTIVE  SHALL HAVE NO FURTHER  RIGHTS
UNDER THIS AGREEMENT.


                                       OSTEOTECH, INC.

                                       By: /s/ Richard W. Bauer
                                           ---------------------------
                                       Name:  Richard W. Bauer
                                       Title: Chief Executive Officer

                                                         and

                                       By: /s/Arthur A. Alfaro
                                           ---------------------------
                                       Name:  Arthur A. Alfaro
                                       Title: President and Chief
                                              Operating Officer

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