EXHIBIT 10.29


                          PROCESSING AGREEMENT BETWEEN

                                 OSTEOTECH, INC.

                                       AND

                      MUSCULOSKELETAL TRANSPLANT FOUNDATION
























XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.


<PAGE>



<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                               Page

<C>                                                                                             <C>
1.  DELIVERY AND PROCESSING OF TISSUE                                                           1

    1.1      MTF Commitment to Deliver Tissue for Processing                                    1
             1.1.1    Exclusive Engagement of Osteotech                                         1
             1.1.2    Commitment to Deliver Tissue for Processing                               2
             1.1.3    Delivery of Tissue for Processing of Grafton(R)DBM Products               2
             1.1.4    Costs of Procurement and Delivery                                         2
             1.1.5    Compliance With Applicable Standards                                      3
             1.1.6    Osteoarticular Tissue                                                     5
             1.1.7    Volume                                                                    5
             1.1.8    Donor Records                                                             6

    1.2      MTF Research and Development; Retention of Development Donors                      7
             1.2.1    MTF Research and Development Activities                                   7
             1.2.2    XXXXX                                                                     7
             1.2.3    XXXXX                                                                     8
             1.2.4    Processing Changes for Development Donors
                        and Equivalent Donors                                                   9
             1.2.5    XXXXX                                                                    10
             1.2.6    Use of Retained Tissue                                                   11
             1.2.7    New Tissue Forms                                                         11
             1.2.8    MTF Processing Facility                                                  12

    1.3      Processing Responsibilities of Osteotech                                          12
             1.3.1    General Undertaking                                                      12
             1.3.2    Processes and Methods                                                    12
             1.3.3    Processing Considerations                                                15

2.1 STORAGE, SHIPPING, REGULATORY COMPLIANCE AND LABELING                                      16
             2.1.1    Possession and Storage of Tissue                                         16
             2.1.2    Shipping                                                                 17
             2.1.3    Certain Joint Compliance Responsibilities                                19

    2.2      Liability                                                                         20

    2.3      Records and Reports                                                               23

    2.4      New Tissue Form Development                                                       25

    2.5      Non-Proprietary New Products                                                      26


XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.


<PAGE>



         2.6      Other Services                                                           27

         2.7      Publication and Public Disclosure                                        27

3.1      FINANCIAL TERMS                                                                   28

         3.2      Invoicing and Payment                                                    29

4.       CONFIDENTIALITY AND CERTAIN OTHER COVENANTS                                       30

         4.1      Non-Disclosure of Confidential Information                               30

         4.2      Non-Solicitation of Osteotech Employees                                  32

         4.3      Non-Solicitation of MTF Employees                                        32

         4.4      XXXXX                                                                    32

         4.5      XXXXX                                                                    33

         4.6      Non-Solicitation of Sales Agents                                         34

         4.7      MTF Sales Agents                                                         35

         4.8      Surviving Provisions                                                     36

5.       TERM OF AGREEMENT                                                                 36

6.       TERMINATION                                                                       36

7.       INSURANCE                                                                         41

8.       FORCE MAJEURE                                                                     42

9.       ASSIGNMENT                                                                        42

10.      NAME, EMBLEM, PACKAGING, TECHNOLOGY AND TRADEMARK                                 42

11.      NOTICES                                                                           44

12.      ENTIRE AGREEMENT                                                                  44

13.      MODIFICATION                                                                      45

14.      APPLICABLE LAW                                                                    45

XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.


<PAGE>




15.      WAIVER                                                                            45

16.      INDEPENDENT CONTRACTOR                                                            45

17.      SEVERABILITY                                                                      45

18.      SUCCESSORS                                                                        46

</TABLE>



<PAGE>




                                    AGREEMENT

                  This Agreement is made as of April 1, 1997 by Musculoskeletal 
Transplant Foundation, ("MTF"), a non-profitDistrict of Columbia corporation,
and Osteotech, Inc. ("Osteo- tech"), a Delaware corporation as follows:

                  WHEREAS,  Osteotech  provides  high-quality  tissue processing
services  ("Processing")  and other  related  services  to  entities  engaged in
procuring and  distributing  human bone and related  connective  soft tissue for
transplantation (collectively, "Tissue"); and

                  WHEREAS,  MTF  procures  and  distributes  Tissue from various
sources, and wishes to contract with Osteotech to process such Tissue; and

                  WHEREAS, MTF wishes to ensure its ability to obtain processing
services  and certain  other  services  and  Osteotech  desires to perform  such
services and to Process Tissue for MTF,  provided that MTF agrees to exclusively
provide  Tissue to  Osteotech  for  Processing  (except  as  otherwise  provided
herein),  regardless of where it is recovered,  under the following agreed terms
and conditions;

                  NOW, THEREFORE, the parties agree as follows:

1. DELIVERY AND  PROCESSING OF TISSUE 1.1 MTF  Commitment to Deliver  Tissue for
Processing 1.1.1 Exclusive Engagement of Osteotech. MTF hereby engages Osteotech
as its worldwide exclusive provider of Tissue Processing services and agrees not
to engage  any other  party to  provide  such  services  during the term of this
Agreement, except as otherwise provided herein.

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1.1.2  Commitment  to  Deliver  Tissue  for  Processing.  MTF shall  deliver  to
Osteotech for Processing in accordance  with this Agreement all Tissue  procured
by or on behalf of MTF, other than Retained Tissue (as hereinafter  defined). In
the event that MTF procures donors outside the United States,  Canada and Mexico
("North America"), South America and Europe and such donors cannot be shipped to
an Osteotech  facility  within the time specified in the Recovery  Standards (as
hereinafter defined) and the Processing Standards (as hereinafter defined),  MTF
may have such donors  processed in a facility other than an Osteotech  facility,
provided that such  non-Osteotech  facility is located  outside  North  America,
South America and Europe.

1.1.3  Delivery  of  Tissue  for  Processing  of  Grafton(R)  DBM  Products.  At
Osteotech's  request, MTF shall use its Best Efforts to provide to Osteotech for
Processing  cortical bone Tissue  suitable for  Processing  into  Grafton(R) DBM
products sufficient to meet Osteotech's good faith forecast of hospital/end user
demand for such products.  For purposes of this Agreement,  "Best Efforts" shall
mean, as to a party hereto,  an  undertaking by such party to perform or satisfy
an  obligation  or duty or otherwise  act in a manner  reasonably  calculated to
obtain the intended  result by action or  expenditure  not  disproportionate  or
unduly burdensome in the circumstances,  which means,  among other things,  that
such party shall not be required to institute  litigation or arbitration as part
of its Best Efforts.

1.1.4 Costs of  Procurement  and Delivery.  As between the parties  hereto,  MTF
shall be responsible for the costs of procuring,  screening,  testing,  storing,
and delivery of Tissue to Osteotech for Processing.


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1.1.5             Compliance With Applicable Standards.
         (a)      Compliance with Recovery Standards.  With the exception
                  of Retained  Tissue,  all Tissue procured by MTF and delivered
                  to Osteotech for  Processing  shall conform to all  standards,
                  guidelines,  rules,  regulations  and laws  applicable  to the
                  donation,  recovery,  and suitability of Tissue (the "Recovery
                  Standards").  The Recovery  Standards shall include applicable
                  standards  and   requirements   relating  to  donor  referral,
                  informed  consent,  tissue recovery,  pre-processing  storage,
                  packaging  and  shipping  of  pre-processed   Tissue  and  all
                  records,   activities  and  standards  related  to  obtaining,
                  testing,  documenting and evaluating serological test results;
                  obtaining,  documenting  and  evaluating  medical  history and
                  lifestyle  data;  and related  organizational,  management and
                  quality  assurance  activities  as may be  contained  in:  (i)
                  applicable  laws,  regulations,  and  guidelines of the United
                  States Food and Drug Administration  ("FDA");  (ii) applicable
                  standards   and   guidelines   promulgated   by  the  American
                  Association of Tissue Banks  ("AATB");  (iii)  applicable laws
                  and  regulations  of  other  U.S.  federal,  state  and  local
                  government agencies with jurisdiction over the procurement and
                  distribution of human musculoskeletal  tissue; (iv) applicable
                  laws and  regulations  of  non-U.S.  jurisdictions  where such
                  Tissue Processed by Osteotech is procured or distributed by or
                  on behalf  of MTF;  (v) MTF's  standard  operating  procedures
                  ("SOPs"), as may be amended from time to time by MTF; and (vi)
                  Osteotech's  standards  for  recovered  Tissue,  to the extent
                  applicable to MTF supplied Tissue, as specified in Osteotech's
                  SOPs,  as may be amended from time to time by Osteotech and as
                  provided  to  MTF  in  advance  of  their  effectiveness.   If
                  interpretation  of the  Recovery  Standards  is required or if
                  there  is a  disagreement  about  the  interpretation  of  the
                  Recovery Standards, MTF and

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                  Osteotech  will  attempt to  negotiate  a  resolution  in good
                  faith.  If  such  interpretations  or  disagreements  are  not
                  resolved by the parties,  the parties will mutually agree to a
                  third  party who will  assist  the  parties in  arriving  at a
                  resolution.
         (b)      Compliance with Applicable Processing Standards.  With
                  the exception of Retained Tissue, MTF shall comply with
                  the Processing Standards (as hereinafter defined) to the
                  extent applicable to MTF's activities as contemplated
                  hereunder.
         (c)      Standard  Operating  Procedures.  MTF and Osteotech shall each
                  provide  the  other  a copy  of its  SOPs  and  copies  of any
                  amendments  to its SOPs  promptly  after such  amendments  are
                  adopted;  provided,  however,  that doing so will not  require
                  such party to disclose any trade  secrets,  technical know how
                  or unpublished  scientific  data or technical art to the other
                  party.
         (d)      Reciprocal Audit Rights.  Upon reasonable notice and at
                  its own expense, each of Osteotech and MTF shall have the
                  right to conduct an annual audit of the other party's
                  facilities and records related to regulatory compliance
                  and, in the event there are repeated significant defects
                  in such other party's compliance with its SOPs or any
                  applicable Recovery Standards or Processing Standards, as
                  the case may be, each of Osteotech and MTF may conduct
                  such additional audits of the other party's facilities
                  and records related to regulatory compliance as are
                  reasonably necessary to ensure that such defects have
                  been rectified.  Notwithstanding the foregoing, in any
                  such audit MTF will be entitled to review Osteotech's
                  records only to the extent such records relate to donors
                  delivered by MTF to Osteotech for Processing and
                  Osteotech will be entitled to review MTF's records only
                  to the extent such records relate to donors delivered by
                  MTF to Osteotech for Processing.

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1.1.6 Osteoarticular Tissue. It is the goal of the parties for MTF to process in
its research and  development  facility during the term of this Agreement all of
the osteoarticular ("OA") Tissue procured by MTF. Notwithstanding the foregoing,
commencing  no later  than July 1,  1997 and  until  such time as MTF is able to
process  all of the OA Tissue,  MTF will  process the OA Tissue  recovered  from
donors on Sundays  through  Tuesdays  and  Osteotech  will process the OA Tissue
recovered from donors on Wednesdays through  Saturdays.  MTF will take no action
or fail to take any action which would influence OA Tissue donations in a manner
that would cause Osteotech to process a disproportionate  share of the OA Tissue
recovered for processing.

1.1.7             Volume
         (a)      MTF may increase the volume of donors delivered to
                  Osteotech above the volume set forth in the applicable
                  forecast prepared and agreed to in accordance with
                  subsection (b), provided that it gives Osteotech ninety
                  (90) days prior written notice for every planned incre-
                  mental increase of fifty (50) donors in any month, unless
                  Osteotech agrees in writing to a shorter notice period
                  for any of these increases.
         (b)      Subject to subsection (a), MTF and Osteotech shall
                  jointly agree upon written forecasts for the Processing
                  of Tissue for the succeeding twelve (12) months, broken
                  out by month.  The first such forecast shall be provided
                  thirty (30) days after the effective date of this
                  Agreement; each such forecast shall be a rolling twelve
                  (12) month forecast provided each January 1, April 1,
                  July 1, and October 1.  If the parties cannot agree upon
                  a forecast for any month, the forecast for such month
                  shall be the average of the forecasts of the parties for
                  the immediately preceding three months.
         (c)      Osteotech  will  arrange  with MTF to hold  weekly  production
                  meetings to discuss Processing and other related issues.

                                      - 5 -

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         (d)      MTF shall be responsible for the performance of all
                  serology testing on each donor procured by MTF which
                  shall be performed by a laboratory certified by the
                  Department of Health and Human Services under the
                  Clinical Laboratory Improvement Amendments of 1988.  The
                  results of such tests will be forwarded to Osteotech in
                  accordance with the Recovery Standards and the Processing
                  Standards.  MTF shall also make arrangements to acquire
                  blood and tissue culture kits and Procurement Packs.
                  Until such time as MTF is able to perform these responsi-
                  bilities, Osteotech will continue supplying these
                  services at prices as stipulated in Exhibit 3.1.  Upon
                  the commencement of its performance of these responsibil-
                  ities, MTF will acquire, at prices stipulated in Exhibit
                  3.1, all of Osteotech's then existing inventory of DDI
                  Kits and Procurement Packs; provided that MTF shall not
                  be required to purchase more than three (3) months' worth
                  of such inventory.

1.1.8             Donor Records
         (a)      MTF will obtain and maintain complete and accurate
                  records as required of MTF by the Recovery Standards
                  (including without limitation donor medical history,
                  donor life style information, serology and blood culture
                  testing), as well as records with respect to (i) inventory
                  of MTF procured Tissue shipped to Osteotech, (ii)
                  inventory of processed MTF Tissue received from Osteo-
                  tech, and (iii) the receipt and processing of all end
                  user orders received from MTF's customers who utilize the
                  Tissue.  MTF shall provide to Osteotech, within fifteen
                  (15) days of the end of each calendar quarter, data on
                  the donor procurement activity of MTF occurring during
                  that quarter, including without limitation information
                  regarding Retained Tissue.  Osteotech shall have the
                  right to audit MTF donor procurement activity data,

                                      - 6 -

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                  including without  limitation  information  regarding Retained
                  Tissue, upon reasonable prior written notice to MTF.
         (b)      MTF shall also  obtain and forward to  Osteotech,  in English,
                  such  records,  within the  requisite  time period,  as may be
                  reasonably   necessary  to  satisfy  all  of  the   Processing
                  Standards,  including,  but  not  limited  to,  donor  medical
                  history,  donor life style  information  and all donor testing
                  information.
         (c)      In  the  event  any  regulatory  agency  audits  or  otherwise
                  inspects MTF's facilities or records and requires  information
                  maintained  by  Osteotech  relating to the  Processing  of MTF
                  Tissue by  Osteotech,  Osteotech  will  provide  MTF with such
                  information as is necessary to satisfy any such request by any
                  such regulatory agency.
         (d)      In  the  event  any  regulatory  agency  audits  or  otherwise
                  inspects  Osteotech's   facilities  or  records  and  requires
                  information  maintained  by MTF  relating  to MTF's  recovery,
                  screening   and  testing  of  Tissue   Processed  for  MTF  by
                  Osteotech, MTF will provide Osteotech with such information as
                  is   necessary  to  satisfy  any  such  request  by  any  such
                  regulatory agency.

1.2 MTF Research and  Development;  Retention  of  Development  Donors 1.2.1 MTF
Research  and  Development  Activities.  MTF  intends  to conduct  research  and
development activities with respect to the recovery,  processing, and transplant
of Tissue and activities related thereto. One of the objectives of such research
and  development  activities  is  to  develop  new  Tissue  based  products  and
applications for Tissue.

                                      - 7 -

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1.2.2             XXXXX
1.2.3             XXXXX
1.2.4 Processing  Charges for Development  Donors and Equivalent  Donors . On an
ongoing  basis,  MTF  shall  declare  donors  from  which it  retains  Tissue as
Development Donors, provisional Development Donors, or Equivalent Donors, as the
case may be.  MTF shall pay  Osteotech  the  following  processing  charges  for
Development Donors and Equivalent Donors from which Tissue is retained by MTF:
         (a)      XXXXX
         (b)      XXXXX
         (c)      XXXXX
         (d)      XXXXX

1.2.5             XXXXX

1.2.6             Use of Retained Tissue.  MTF may use Retained Tissue for
any of the following applications:
         (a)      research and development activities;
         (b)      processing and distribution of Retained Tissue from up to
                  XXXXX Development Donors annually, provided that MTF
                  shall use its Best Efforts to limit the effect of
                  distributing existing Tissue forms on distribution of
                  Tissue forms processed by Osteotech (e.g., by using its
                  Best Efforts to ship such Tissue first outside the United
                  States and then to the extent such Tissue cannot be
                  distributed outside the United States, to areas where
                  there are no existing customers for Osteotech-processed
                  Tissue);

XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.


                                      - 8 -

<PAGE>



         (c)      processing and distribution of New Tissue Forms where
                  Osteotech has declined or failed to process such New
                  Tissue Forms;
         (d)      processing  and  distribution  of tissue  forms to fill a back
                  order  (provided  such  back  order is not a direct  result of
                  MTF's failure to adequately procure or plan Donors); and
         (e)      processing and distribution of a form of Tissue that is
                  proprietary to MTF.

1.2.7 New Tissue  Forms.  The term "New  Tissue  Forms"  shall mean any forms of
Tissue that are not  included in MTF's  catalogue  as of April 1, 1997 and which
are  developed by or on behalf of MTF or in which MTF has secured  processing or
distribution  rights.  New Tissue  Forms shall not  include  Tissue  forms,  the
design,  development,  or processing of which is proprietary to Osteotech or any
of its other Tissue Processing  clients. A New Tissue Form shall be considered a
New Tissue Form until such time as Osteotech commences authorized  Processing of
such Tissue form for MTF or any other  client.  At such time,  MTF shall  engage
Osteotech to Process such Tissue form  provided  that (a)  Osteotech  reasonably
demonstrates  that such  Tissue form as  processed  by it is of equal or greater
quality to the New Tissue Form  processed by MTF and (b) Osteotech and MTF agree
to a processing charge for such Tissue form. If the foregoing conditions are not
met, MTF may continue to process such Tissue form as a New Tissue Form.

                                      - 9 -

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1.2.8  MTF  Processing  Facility.  MTF  will not  process  Tissue  as  permitted
hereunder in any facility other than its own research and development processing
facility  and will not  process  Tissue  in its  facility  except  as  permitted
hereunder.  Such  facility  shall not exceed the size and  operational  capacity
(taking  into account the amount of  Processing  and related  equipment  and the
number of rooms and personnel)  considered  reasonably necessary in the industry
to conduct  research and  development  activities  with respect to, and process,
XXXXX Development Donors and XXXXX Donor Equivalents as permitted hereunder.

1.3      Processing Responsibilities of Osteotech
1.3.1             General Undertaking
         (a)      Processing  and  packaging  of Tissue  received  by  Osteotech
                  pursuant  to  Section  1.1.2  into  then  currently  available
                  finished  units of  Tissue  shall be  conducted  by  Osteotech
                  pursuant  to  the  Processing  Standards  in  accordance  with
                  Section 1.3.2. For purposes  hereof,  Processing shall include
                  all  operations  necessary  to  prepare  procured  Tissue  for
                  transplantation.
         (b)      Osteotech  shall,  upon  reasonable  prior written notice from
                  MTF,  permit  MTF to change  the  production  plan for a donor
                  determined pursuant to Section 1.3.3(a).

XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.

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<PAGE>





1.3.2             Processes and Methods
         (a)      Processing of Tissue will be performed by Osteotech under
                  applicable Processing Standards.  "Processing Standards"
                  shall mean all standards, guidelines, rules, regulations
                  and laws applicable to the Processing, storage, packag-
                  ing, labeling, and shipping of Tissue by Osteotech.  The
                  Processing Standards shall include (i) applicable laws,
                  regulations, and guidelines of the FDA; (ii) applicable
                  standards and guidelines promulgated by the AATB;
                  (iii) applicable laws and regulations of other U.S.
                  federal, state and local government agencies with
                  jurisdiction over the processing and distribution of
                  human musculoskeletal tissue; (iv) applicable laws and
                  regulations of non-U.S. jurisdiction where Tissue
                  processed by Osteotech is procured or distributed by or
                  on behalf of MTF; (v) MTF's SOPs, as may be amended from
                  time to time by MTF and as provided to Osteotech in
                  advance of their effectiveness; and (vi) Osteotech's
                  SOPs.  If interpretation of the Processing Standards is
                  required or if there is a disagreement about the inter-
                  pretation of the Processing Standards, MTF and Osteotech
                  will attempt to negotiate a resolution in good faith.  If
                  such interpretations or disagreements are not resolved by
                  the parties, the parties will mutually agree to a third

                                     - 11 -

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                  party who will assist the parties in arriving at a
                  resolution.
         (b)      In the event the FDA, any other applicable regulatory
                  agency or the AATB, implements new or additional regula-
                  tions applicable to Tissue, Osteotech and MTF shall each
                  implement such changes to its SOPs as are necessary to
                  comply with such regulations.  In the event Osteotech is
                  unable or unwilling to implement such changes, MTF shall
                  have the remedy set forth in Section 6.5 and in the event
                  MTF is unable or unwilling to implement such changes,
                  Osteotech shall have the remedy set forth in Section 6.5.
         (c)      Osteotech will grant designated MTF personnel access to
                  its facilities to observe all steps of Processing for the
                  purpose of conducting a standard MTF inspection of
                  Osteotech's compliance with the Processing Standards.  As
                  part of this inspection, all Processing Standards will be
                  made available to the inspectors; provided, that such
                  access will not require Osteotech to reveal any
                  proprietary know-how or trade secrets unless it is
                  necessary to MTF's understanding of whether Osteotech is
                  in compliance with the Processing Standards and to the
                  extent applicable to Osteotech, the Recovery Standards
                  and then only to a mutually agreeable third party.  Such
                  third party will have access to such proprietary know-how
                  and trade secrets only if it signs a confidentiality
                  agreement satisfactory to Osteotech.  If such personnel

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                  require access to Osteotech's  cleanrooms,  the personnel must
                  have on file  with  Osteotech  appropriate  blood  serum  test
                  results and such other  appropriate  test results as Osteotech
                  may require prior to such  personnel  being granted  access to
                  Osteotech's cleanrooms. Osteotech may, at its sole discretion,
                  refuse any  individual  access to  Osteotech's  cleanrooms for
                  cause.  Such denial of access will not be a violation  of this
                  Agreement.
         (d)      MTF will grant designated Osteotech personnel access to
                  its facilities to observe MTF's Tissue recovery
                  activities for the purpose of conducting a standard
                  Osteotech inspection of MTF's compliance with the
                  Recovery Standards and to the extent applicable to MTF,
                  the Processing Standards.  As part of this inspection,
                  all Recovery Standards will be made available to the
                  inspectors; provided, that such access will not require
                  MTF to reveal any proprietary know-how or trade secrets
                  unless it is necessary to Osteotech's understanding of
                  whether MTF is in compliance with the Recovery Standards
                  and to the extent applicable to MTF, the Processing
                  Standards and then only to a mutually agreeable third
                  party.  Such third party will have access to such
                  proprietary know-how and trade secrets only if it signs
                  a confidentiality agreement satisfactory to MTF.


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1.3.3             Processing Considerations:
         (a)      MTF will pre-plan, including a written primary and
                  secondary donor plan, the expected production from each
                  donor prior to the scheduled day of Processing.  If
                  Tissue cannot be processed according to either the
                  primary or secondary donor plan, verbal approval will
                  first be obtained by Osteotech from MTF for changes to
                  the primary or secondary donor plan prior to Processing
                  by Osteotech which MTF will confirm by faxed written
                  approval.  Osteotech will use its Best Efforts to
                  maximize the planned yield from each donor.
         (b)      Osteotech may present valid evidence to MTF if Osteotech
                  determines that FDA, AATB or other applicable government
                  agency mandated changes in processing techniques or the
                  quality and condition of MTF Tissue prevents the
                  achievement of the planned yield provided for in subsec-
                  tion (a).  The parties agree to discuss the implications
                  of such parameters and to determine a reasonable yield
                  based on such new requirements.
         (c)      MTF and Osteotech shall each undertake  reasonable  efforts to
                  present a  consistent  flow of donors  and Tissue to the other
                  with the goal of minimizing  second-half-of-month  bunching of
                  donors and Tissue.  Subject to the foregoing sentence,  donors
                  received at Osteotech for Processing will be processed  within
                  a  reasonable  period of time (which  shall be reviewed at the
                  weekly production

                                     - 14 -

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                  meetings  provided for in Section  1.1.7(c)) from the time all
                  required,   complete  and  accurate  donor   documentation  as
                  specified   by  the   Processing   Standards  is  received  at
                  Osteotech.  Subject  to  the  foregoing,  Osteotech  will  use
                  reasonable  efforts to complete the  Processing  of MTF Tissue
                  and deliver such  processed  Tissue to MTF within a reasonable
                  period of time.  Once  Processing  of the  donor is  complete,
                  subject to the provisions of Sections 2.1.1 and 2.1.2(a),  all
                  Tissue  will be  shipped  to MTF  upon  final  inspection  and
                  release thereof by Osteotech's  Quality Assurance  Department.
                  Osteotech will advise MTF no later than the following business
                  day if there will be a material delay in the  commencement  of
                  Processing of donors which have been released from Osteotech's
                  Quality Assurance Department.
         (d)      If the release of processed  Tissue back to MTF is delayed due
                  to: (i) Tissue histology of unknown etiology or (ii) microbial
                  contamination  of final product,  Osteotech  will  immediately
                  notify MTF of the reason for the hold and the approximate time
                  period expected for the hold (in weeks).


                                     - 15 -

<PAGE>



         (e)      XXXXX

2.1      STORAGE, SHIPPING, REGULATORY COMPLIANCE AND LABELING
2.1.1             Possession and Storage of Tissue
         (a)      Tissue delivered by MTF to Osteotech for Processing and
                  any finished units or other by-products derived from such
                  Tissue shall be held by Osteotech on behalf of MTF at all
                  times until delivery thereof to MTF or pursuant to MTF's
                  instructions, except that MTF may grant Osteotech written
                  permission to use excess Tissue for research purposes.
                  Neither MTF nor OTI shall have any ownership or other
                  property right in any such Tissue, finished units or
                  other by-products and shall not allow any third party to
                  obtain any such right (whether in the nature of a lien,
                  security interest, encumbrance, or otherwise).  Neither
                  MTF nor Osteotech shall sell, trade, or otherwise dispose
                  of or imply that it is selling, trading or otherwise
                  disposing of, banked human tissue, provided, that this
                  shall not prohibit either party from promoting or
                  marketing its processing techniques and other services in
                  compliance with applicable law.

XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.


                                     - 16 -

<PAGE>




         (b)      To the extent Osteotech  stores any MTF Tissue,  including but
                  not limited to MTF Grafton inventory, such storage shall be in
                  compliance  with all  applicable  portions  of the  Processing
                  Standards.  Except as provided in Section 2.1.1(c) and Section
                  2.1.2(e)  hereof,  MTF  shall  bear  the  risk of loss for all
                  Tissue delivered to Osteotech by MTF.
         (c)      In the event that Tissue which is being processed by
                  Osteotech or held by Osteotech in "quarantine storage",
                  "pre-processing storage", or "post-processing storage"
                  (as such terms are defined or described in the applicable
                  portions of the Processing Standards) is destroyed or
                  rendered unusable while in the possession of Osteotech
                  due to the negligence of Osteotech, Osteotech shall pay
                  to MTF the market value of such Tissue less the cost of
                  Processing such Tissue.

2.1.2             Shipping
         (a)      Except as otherwise provided in a written document signed
                  by both Osteotech and MTF, Osteotech shall ship all
                  finished units of Tissue, other than demineralized bone
                  and items being reworked, derived from a donor received
                  for Processing from MTF back to MTF in one shipment by a
                  carrier designated by MTF.  Osteotech shall ship finished
                  units of demineralized bone to MTF upon release from
                  Osteotech's Quality Assurance Department, except that in

                                     - 17 -

<PAGE>



                  the case of finished units of MTF Grafton inventory which have
                  been released by  Osteotech's  Quality  Assurance  Department,
                  Osteotech  will ship such units to MTF upon and in  accordance
                  with MTF's order. Any item being reworked will be shipped back
                  to MTF as soon as it is completed and released by  Osteotech's
                  Quality  Assurance  Department.  MTF shall be responsible  for
                  payment of all shipping costs.
         (b)      Osteotech  shall ship all finished units of Tissue in shipping
                  containers  which  meet  the  requirements  specified  in  the
                  Processing  Standards.  All packaging and shipping  containers
                  must  be  validated  and  the  validation   studies  shall  be
                  available for review by MTF's Quality Assurance and Regulatory
                  Affairs Departments.
         (c)      Osteotech  shall  clearly  label each  shipping  container  as
                  containing  transplantable  tissue and with the  addresses  of
                  both the shipping and receiving facility.  Such labeling shall
                  meet the specifications included in the Processing Standards.
         (d)      Each shipment from  Osteotech  shall include a packaging  slip
                  listing the  contents  and  corresponding  donor lot and batch
                  numbers, if applicable. All tissue containers in each shipment
                  shall be packed with sufficient  materials between  containers
                  so that breakage will be minimized.
         (e)      MTF will promptly notify Osteotech of any damage to the
                  finished units of Tissue during shipment thereof.

                                     - 18 -

<PAGE>



                  Osteotech  will file a claim against the shipping  carrier for
                  the  amount of damage up to the  amount  insured.  The  amount
                  recovered from the shipping  carrier for claims will be passed
                  on to MTF  within  ten  (10)  days of  receipt  by  Osteotech.
                  Osteotech  shall have no liability  for any damage to finished
                  Tissue  incurred  during   shipping,   except  to  the  extent
                  Osteotech  fails to ensure that the  shipping  carrier has the
                  aforementioned insurance or except where such damage is caused
                  by the  negligence  or  misconduct  of Osteotech or its agents
                  (other than the carrier) or employees.
         (f)      Osteotech  shall pay for  shipping,  and related costs arising
                  from the return of finished  units of Tissue to Osteotech  due
                  to  complaints  which are shown to have been caused by defects
                  in Osteotech's  workmanship  or Osteotech's  failure to comply
                  with the  Processing  Standards,  except  for  Tissue  damaged
                  during shipment as specified in (e) above.

2.1.3             Certain Joint Compliance Responsibilities
         (a)      MTF shall comply with applicable laws, regulations and
                  guidelines as required  under Section 1.1.5.  Osteotech  shall
                  comply with  applicable  laws,  regulations  and guidelines as
                  required under Section 1.3.2.  In instances  where the party's
                  compliance   responsibilities   overlap,  or  where  otherwise
                  necessary and appropriate, each party

                                     - 19 -

<PAGE>



                  shall use its Best  Efforts to  cooperate  with and assist the
                  other  party  in  such  other  party's  regulatory  compliance
                  activities.  If a  difference  arises  as to  which  party  is
                  responsible  for meeting a  particular  regulatory  compliance
                  responsibility,  MTF and Osteotech will attempt to negotiate a
                  resolution in good faith. If the difference is not resolved by
                  the parties, MTF and Osteotech will agree on a third party who
                  will  assist  the   parties  in  arriving  at  a   resolution.
                  Notwithstanding the foregoing,  it is agreed that both MTF and
                  Osteotech shall have regulatory compliance responsibility with
                  respect to labeling,  including  without  limitation,  product
                  inserts, label content, sales sheets,  advertising and product
                  brochure  wording and  marketing  clearance.  If a  difference
                  arises with regard to such joint compliance  responsibilities,
                  MTF and  Osteotech  will attempt to negotiate a resolution  in
                  good  faith.  If the  difference  is  not  resolved,  MTF  and
                  Osteotech  will  agree on a third  party who will  assist  the
                  parties in arriving at a resolution.
         (b)      Containers of finished units of Tissue  processed by Osteotech
                  for MTF must bear a standard MTF bone product label,  approved
                  by  Osteotech  and MTF,  that  contains  the product  name and
                  identity code, donor number and expiration date.

                                     - 20 -

<PAGE>



         (c)      Osteotech  shall  bear  the  costs  of  producing   labels  in
                  conformance  with  the  Processing  Standards.  If the  labels
                  and/or package inserts are changed by request of MTF, MTF will
                  bear the costs of these  changes,  including  label  inventory
                  replacements. Osteotech shall not be required to maintain more
                  than six (6) months of label and package  insert  inventory by
                  tissue type.
         (d)      All labeling will be in accordance with Sections
                  2.1.2(b), 2.1.2(c) and the Processing Standards.
         (e)      Specifications  for all Tissue  products to be processed  from
                  MTF donors will be developed and approved according to MTF and
                  Osteotech  SOPs.  Requests to  Osteotech  about its ability to
                  accomplish  special  specifications  and for labeling changes,
                  including package inserts,  will be made in writing by MTF and
                  will  receive  a  written  response  from  Osteotech  within a
                  reasonable period of time.

2.2               Liability
         (a)      Osteotech agrees to defend, hold harmless, and indemnify
                  MTF and its member organizations against any damages,
                  litigation costs, losses, obligations, liabilities,
                  claims, actions or causes of action sustained or suffered
                  by MTF or any of its member organizations arising from:
                  (i) a breach of Osteotech's obligations hereunder; (ii)
                  a defect in any finished unit of Tissue processed by
                  Osteotech under this Agreement to the extent such defect

                                     - 21 -

<PAGE>



                  results from an error or omission by Osteotech  (including any
                  employee  or  agent  of  Osteotech  or  other  person  to whom
                  Osteotech has delegated any  Processing or Processing  related
                  activities  hereunder),  or from a failure of workmanship,  by
                  Osteotech;  (iii) any  medical  claim made by any  employee or
                  authorized  agent  of  Osteotech   regarding  any  MTF  Tissue
                  processed  by  Osteotech  (A) which is required by  applicable
                  laws or  regulations  to be approved by a relevant  regulatory
                  agency  and has not been so  approved  and/or (B) which is not
                  supported by credible objective scientific evidence; or (iv) a
                  false and  misleading  representation  made by any employee or
                  authorized  agent  of  Osteotech   regarding  any  MTF  Tissue
                  processed by Osteotech.
         (b)      MTF agrees to defend, hold harmless, and indemnify
                  Osteotech against any damages, litigation costs, losses,
                  obligations, liabilities, claims, actions or causes of
                  action sustained or suffered by Osteotech arising from
                  (i) a breach of MTF's obligations hereunder; (ii) a
                  defect in any finished unit of Tissue processed by
                  Osteotech under this Agreement to the extent such defect
                  results from an error or omission by MTF (including any
                  employee or agent of MTF or other person to whom MTF has
                  delegated any Tissue recovery or distribution or Tissue
                  recovery or distribution related activities hereunder),
                  in connection with its Tissue recovery and distribution

                                     - 22 -

<PAGE>



                  activities, including without limitation any testing performed
                  by or at the direction of MTF; (iii) any medical claim made by
                  any  employee or  authorized  agent of MTF  regarding  any MTF
                  Tissue  processed  by  Osteotech  (A)  which  is  required  by
                  applicable  laws or  regulations  to be approved by a relevant
                  regulatory  agency  and has not been so  approved  and/or  (B)
                  which  is  not  supported  by  credible  objective  scientific
                  evidence;  or (iv) a false and misleading  representation made
                  by any employee or  authorized  agent of MTF regarding any MTF
                  Tissue processed by Osteotech.
         (c)      For purposes of subsection (a) above, Osteotech shall be
                  the "indemnifying party" and MTF shall be the "indemni-
                  fied party" and for the purposes of subsection (b) above,
                  MTF shall be the "indemnifying party" and Osteotech shall
                  be the "indemnified party."  The obligations and liabili-
                  ties of the indemnifying party hereunder with respect to
                  claims resulting from the assertion of liability by third
                  parties shall be subject to the following terms and
                  conditions:
                  (i)      The indemnified party shall give written notice to
                           the indemnifying  party of any assertion of liability
                           by a third  party which might give rise to a claim by
                           the indemnified party against the indemnifying  party
                           based on the  indemnity  contained in Section  2.2(a)
                           hereof, or Section 2.2(b) hereof, as

                                     - 23 -

<PAGE>



                           the case may be, stating the nature and basis of said
                           assertion  and  the  amount  thereof,  to the  extent
                           known, within five (5) business days after an officer
                           of the  indemnified  party  learns  of the  claim  or
                           receives notice thereof.  Failure to give such notice
                           within   five  (5)   business   days   may,   at  the
                           indemnifying party's option, result in a reduction in
                           any subsequent  indemnification  payment by an amount
                           equivalent to the expenses and/or losses demonstrated
                           to have been caused by such delay in notification.
                  (ii)     In the event any action, suit or proceeding is
                           brought against the indemnified party, with respect
                           to which the indemnifying party may have liability
                           under the indemnity agreement contained in subsec-
                           tion (a) or (b) hereof, as the case may be, the
                           action, suit or proceeding shall, upon the written
                           agreement of the indemnifying party that it is
                           obligated to indemnify under the indemnity agree-
                           ment contained in subsection (a) or (b) hereof, as
                           the case may be, be defended (including all pro-
                           ceedings on appeal or for review which counsel for
                           the defendant shall deem appropriate) by the indem-
                           nifying party.  The indemnified party shall have
                           the right to be represented by advisory counsel and
                           accountants, at its own expense, and shall be kept

                                     - 24 -

<PAGE>



                           fully informed of such action,  suit or proceeding at
                           all  stages   thereof,   whether  or  not  it  is  so
                           represented.   The  indemnifying   party  shall  make
                           available to the indemnified  party and its attorneys
                           and   accountants   all  books  and  records  of  the
                           indemnifying  party  relating to such  proceedings or
                           litigation.  The  parties  will  render to each other
                           such  assistance  as they may  reasonably  require in
                           order to ensure the proper  and  adequate  defense of
                           any such action, suit or proceeding.
                  (iii)             The  indemnifying  party  shall not make any
                                    settlement of any claims without the written
                                    consent  of  the  indemnified  party,  which
                                    consent shall not be  unreasonably  withheld
                                    or delayed.
                  (iv)     The indemnified party shall not make any settlement
                           of any claims without the written consent of the
                           indemnifying party.
         (d)      The provisions of this Section 2.2 shall survive termina-
                  tion of this Agreement.

2.3      Records and Reports
         (a)      Osteotech  shall  maintain   complete  and  accurate   records
                  concerning  MTF  Tissue  received  by  Osteotech,  MTF  Tissue
                  processed  and in storage at Osteotech  and finished  units of
                  MTF Tissue stored and shipped by Osteotech. Such records shall
                  be available to MTF during normal business

                                     - 25 -

<PAGE>



                  hours  upon  reasonable   advance  notice  at  MTF's  expense.
                  Osteotech shall not be required to produce any data other than
                  data  which it is  required  to  obtain  and  maintain  by the
                  Processing Standards.
         (b)      In addition to the  information  provided in  subsection  (a),
                  Osteotech  shall  provide  the  following  reports on each MTF
                  donor in a timely manner showing Tissue  processed and shipped
                  by Osteotech:

                                                   Daily Reports
                           WIP List of Donor Releases to MTF

                                                  Weekly Reports
                           Pending Donor List
                           PCR/Re Swab List
                           Listing of Donors  processed  during  prior week with
                           detail  processing  notes  and  Osteoarticular   Logs
                           Donors Released Month to Date Grafton Releases

                                                  Monthly Reports
                           Rework List
                           Unprocessed Donors List at Osteotech
                           Grafton WIP List
                           Grafton Releases by Serial Number in inventory at
                           OTI
                           Alpha Tissue List
                           List of raw Cortical Tissue at Osteotech for Graf-
                           ton and other Demineralized Tissues


                                     - 26 -

<PAGE>



         (c)      Osteotech shall ensure that all information  pertaining to MTF
                  will be disclosed  only to those  Osteotech  personnel  with a
                  need-to-know    who   have   signed    Osteotech's    standard
                  confidentiality agreement.
         (d)      Osteotech  shall  notify  MTF prior to the  release of any MTF
                  donor identifying  information,  such as the donor identifying
                  number, where such release is legally required by a regulatory
                  or  governmental  agency or court or  administrative  order or
                  subpoena.  The provisions of this Section 2.3(d) shall survive
                  termination of this Agreement.
         (e)      In connection with the marketing and distribution of
                  proprietary Tissue forms which are processed utilizing
                  Osteotech's proprietary Processing techniques ("Osteo-
                  tech's Proprietary Tissue Forms"), including without
                  limitation Grafton(R)DBM, during the course of each month
                  and in the case of monthly reports, no later than the
                  tenth (10th) business day following the end of the month,
                  MTF shall provide to Osteotech such reports and data as
                  Osteotech may reasonably request, including hospital/end
                  user sales of Osteotech's Proprietary Tissue Forms as
                  identified by the parties (such as Grafton(R)DBM) detailed
                  by account.
         (f)      Osteotech will  periodically  (no less than once every six (6)
                  months)  provide  MTF  with  a  list  of the  agents  who  are
                  marketing Osteotech's Proprietary Tissue Forms and the
                  territories they are covering.

2.4      New Tissue Form Development
         It is the  understanding  of MTF and  Osteotech  that  each of them may
         independently develop new Tissue forms and/or processes or improve upon
         existing  products  and/or  processes.  

          (a)     Subject to subsection (c), Osteotech shall own all
                  rights, title and interest in and to all information,
                  technology, data, inventions, products, and processes,

                                     - 27 -

<PAGE>



                  conceived,  made or developed solely by employees of Osteotech
                  as well as the  intellectual  property  rights based  thereon,
                  including  but not  limited to  copyrights  and patent  rights
                  except to the extent such rights  infringe  upon the rights of
                  other parties (including MTF).
         (b)      Subject to subsection (c), MTF shall own all rights,
                  title and interest in and to all information, technology,
                  data, inventions, products, and processes, conceived,
                  made or developed solely by employees of MTF as well as
                  the intellectual property rights based thereon, including
                  but not limited to copyrights and patent rights except to
                  the extent such rights infringe upon the rights of other
                  parties (including Osteotech).
         (c)      Any  joint  development  of  information,   technology,  data,
                  inventions,   products,  and  processes,  shall  be  conducted
                  pursuant to a formal written  development  agreement signed by
                  Osteotech  and MTF and a  development  budget for the  project
                  agreed to in writing by Osteotech and MTF.
         (d)      The provisions of this Section 2.4 shall survive termina-
                  tion of this Agreement.

2.5      Non-Proprietary New Products
         It is understood and agreed that Osteotech may develop new information,
         technology,  data, inventions,  products, and processes  (collectively,
         "new products")  jointly with its other Tissue  processing  clients and
         that  certain  of such new  products  may not be  subject  to patent or
         copyright protection  ("non-proprietary new products"). MTF agrees that
         it shall not have  access  to, or  utilize,  such  non-proprietary  new
         products  and  shall not be able to cause  Osteotech  to  utilize  such
         non-proprietary new products on MTF's behalf unless and until MTF shall
         reimburse  Osteotech and/or such other Tissue processing  client(s) for
         MTF's  proportionate  share (based upon the number of Tissue processing
         clients which were involved in

                                     - 28 -

<PAGE>



         the  development of such products  and/or are involved in the marketing
         and distribution of such products) of the development  costs (including
         without  limitation  internal  direct  costs,  but  excluding  internal
         overhead  costs) for such  non-proprietary  new  product as  reasonably
         determined  by Osteotech  and such  processing  client or clients.  The
         methods and bases for determining such Tissue  development  costs shall
         be disclosed to MTF on a confidential basis.  Osteotech shall include a
         provision   substantially  the  same  in  substance  to  the  foregoing
         provision  in  its  agreements  with  its  other   significant   Tissue
         processing clients to cover any  non-proprietary new products which may
         be developed jointly hereunder by Osteotech and MTF.

2.6      Other Services
         Osteotech may provide such services other than the Processing  services
         contemplated  in this  Agreement as are  requested by MTF in accordance
         with one or more  separate  agreements  entered  into  between  MTF and
         Osteotech. Reasonable fees for such services will be established at the
         time such  agreements  are entered  into and will be separate  from the
         fees  listed in Exhibits  3.1 and 3.2.  MTF shall be free to obtain any
         such services from third parties.

2.7      Publication and Public Disclosure
         (a)      Either party shall have the right to publish or otherwise
                  publicly disclose scientific information or data
                  developed by such party at its own expense which utilizes
                  or relates to the other party's technology or other
                  proprietary or confidential processes or information,
                  provided, however, that notwithstanding any other
                  provision in this Agreement to the contrary, no such
                  publication or disclosure shall be made by the publishing
                  party if such publication or disclosure would result in
                  the disclosure of information defined as Confidential

                                     - 29 -

<PAGE>



                  Information  in  Section  4  or  would  otherwise  violate  or
                  jeopardize  any  proprietary  rights the other  party may have
                  with  respect  to  such  technology.  Publication  of  jointly
                  developed information will be covered in a separate agreement.
         (b)      Within a reasonable period of time (not less than thirty
                  (30) days) prior to publication or other public
                  disclosure of the information or data described in
                  Section 2.7(a), the publishing party shall submit to the
                  other party for review a draft of the publication or, if
                  oral disclosure, a written copy of the remarks.  The
                  other party shall then use Best Efforts to notify the
                  publishing party as soon as practicable (not to exceed
                  thirty (30) days from its receipt of such draft or
                  written copy) of (i) any reasonable changes to the
                  publication or disclosure it deems appropriate, which
                  changes the publishing party will make so long as they do
                  not change materially the meaning of the information or
                  data being disclosed or published; (ii) any error in the
                  information or data being disclosed, which the publishing
                  party shall correct upon verification of the error; or
                  (iii) the necessity to delay publication or disclosure to
                  enable the filing of any patent application or regulatory
                  filing if applicable, in which event the publishing party
                  will delay such publication or disclosure as reasonably
                  requested by the other party.  Management of both parties
                  shall attempt in good faith to resolve any disputes
                  regarding such publications.
         (c)      If there has been no mutual  agreement  to publish or disclose
                  within thirty (30) days after the other party has received the
                  notice and draft of the  publication or oral  disclosure  from
                  the publishing  party, the publishing party shall again notify
                  the other  party in  writing  of its  intention  to publish or
                  disclose and may proceed to

                                     - 30 -

<PAGE>



                  do so fifteen (15) days after  delivery of such second notice,
                  subject to the provisions of Section 2.7(a).
         (d)      Authorship of any publication shall be determined in
                  accordance with normal scientific practice.
         (e)      The provisions of this Section 2.7 shall survive termina-
                  tion of this Agreement.

3.       FINANCIAL TERMS
3.1      (a)      MTF will pay Osteotech Processing fees as set forth in
                  Section 1.2.4 and Exhibits 3.1 and 3.2.  Subject to the
                  terms set forth in Section 1.2.4 and Exhibits 3.1 and
                  3.2, such fees may be adjusted from time to time, but no
                  more frequently than annually, as set forth in Exhibits
                  3.1 and 3.2.  Each November 1 during the term of this
                  Agreement, Osteotech will establish a suggested list
                  price to be effective the following January 1 for each of
                  Osteotech's Proprietary Tissue Forms (the "Suggested List
                  Prices").  The Suggested List Prices as of the date of
                  this Agreement are set forth in Exhibit 3.2 hereto.
         (b)      XXXXX
         (c)      In the event a change in federal, state or local govern-
                  ment rules, regulations, guidelines or laws, changes in
                  industry standards published by AATB or the requirements
                  of MTF causes Osteotech to be unable to complete the
                  Processing of Tissue received by Osteotech for Processing
                  from MTF or deliver to MTF Tissue which has been
                  processed by Osteotech on behalf of MTF and held in
                  inventory by Osteotech, MTF shall nevertheless pay a fee
                  to Osteotech with respect to such Tissue which is equal

XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.

                                     - 31 -

<PAGE>



                  to fifty  percent  (50%) of the fee which would  otherwise  be
                  payable to Osteotech hereunder with respect to such Tissue.

3.2      Invoicing and Payment
         (a)      Osteotech shall submit invoices in U.S. dollars to MTF
                  for all Processing services rendered in accordance with
                  the then existing fee schedule.  The invoice date shall
                  be the date that Osteotech's Quality Assurance Department
                  releases the finished units of Tissue for shipment to MTF
                  or the date of shipment of Grafton or other of Osteo-
                  tech's Proprietary Tissue Forms maintained in inventory
                  by Osteotech for MTF, as the case may be.
         (b)      MTF will pay all invoices within forty-five (45) days of
                  the invoice date.  In the event there is an error in an
                  invoice submitted to it by Osteotech, MTF shall notify
                  Osteotech of such error within three (3) business days of
                  the date such invoice is received by MTF and the invoice
                  date will then be the date of the corrected invoice
                  submitted by Osteotech.  All such payments shall be in
                  U.S. dollars.
         (c)      Any balance of any  invoice  which is not paid within the time
                  specified  above,  at the option of  Osteotech,  shall  accrue
                  interest at the rate of one percent (1%) per month.


                                     - 32 -

<PAGE>



4.       CONFIDENTIALITY AND CERTAIN OTHER COVENANTS
4.1      Non-Disclosure of Confidential Information
         (a)      For purposes of this Agreement, "Confidential Informa-
                  tion" means all general and specific knowledge, experi-
                  ence and information that is confidential and of value to
                  MTF or to Osteotech, including without limitation,
                  formulations, designs, products, processes, supplies,
                  methods of manufacture or processing, SOPs, cost data,
                  master files, the nature of research and/or development
                  projects, as well as data relating thereto, marketing or
                  business plans, donor data and financial data.  It shall
                  also mean any information disclosed to either party by
                  any third party which either MTF or Osteotech is obligat-
                  ed to treat as confidential or proprietary.
         (b)      Both parties agree that neither party will, at any time,
                  without the express agreement of the other party, or
                  except as expressly permitted by this Agreement, disclose
                  to any other person or use any Confidential Information
                  of the other party, except for the purposes of performing
                  this Agreement or any successor Agreement or as may be
                  required by law, governmental regulation or court order.
                  Information shall not be considered to be Confidential
                  Information of a party if it can be established that (i)
                  such information was in the possession of the other party
                  prior to disclosure to such other party by the party
                  claiming that it is Confidential Information and such

                                     - 33 -

<PAGE>



                  information  is not  otherwise  subject  to a  confidentiality
                  agreement,  (ii) such  information  is then part of the public
                  domain and  became so without  the breach of this or any other
                  confidentiality  agreement  by such other  party or any of its
                  affiliates,   or   (iii)   such   information   is   developed
                  independently  by such  other  party  or  becomes  known to or
                  acquired  by such other  party by means other than as a result
                  of a breach of a  confidentiality  agreement or any  fiduciary
                  obligation.
         (c)      MTF and Osteotech each agree to require employees, consultants
                  or others granted access to such  Confidential  Information to
                  execute appropriate Confidentiality Agreements;  provided that
                  each   organization's   agreements   are   approved   by  such
                  organization's counsel.
         (d)      MTF and Osteotech recognize that violation in any
                  material respect of any provision of Section 4.1(b) may
                  cause irreparable injuries to Osteotech or MTF and agree
                  that MTF or Osteotech shall be entitled to preliminary
                  and final injunctive relief against such violation.  Such
                  injunctive relief shall be in addition to, and in no way
                  in limitation of, any and all remedies or rights which
                  MTF or Osteotech shall have at law or in equity for the
                  enforcement of the provisions of this Section.  In
                  addition, MTF and Osteotech agree that the party respon-
                  sible for the breach of confidentiality shall be respon-
                  sible for all legal fees and other costs and expenses

                                     - 34 -

<PAGE>



                  incurred in the  successful  enforcement of the non- breaching
                  party's rights and remedies under this Section 2.7.

4.2      Non-Solicitation of Osteotech Employees
         During the term of this Agreement and for a two (2) year
         period after termination of this Agreement (collectively, the
         "Restricted Period"), MTF will not recruit or hire personnel
         who are then employed by Osteotech, or who had been employed
         by Osteotech at any time during the prior two (2) years, or
         entice Osteotech personnel to leave Osteotech.  In the event
         Osteotech personnel should leave the employ of Osteotech
         during the Restricted Period, MTF will not hire such personnel
         for two (2) years from the date such personnel leaves the
         employ of Osteotech.

4.3      Non-Solicitation of MTF Employees
         During  the  Restricted  Period,  Osteotech  will not  recruit  or hire
         personnel  who are then employed by MTF or who had been employed by MTF
         at any time during the prior two (2) years,  or entice MTF personnel to
         leave MTF. In the event MTF  personnel  should  leave the employ of MTF
         during the  Restricted  Period,  Osteotech will not hire such personnel
         for two (2) years  from the date such  personnel  leaves  the employ of
         MTF.


                                     - 35 -

<PAGE>



4.4      XXXXX
4.5      XXXXX
4.6      Non-Solicitation of Sales Agents
         Neither  party shall  engage any (i) sales agent  retained by the other
         party or (ii)  any  employee,  independent  contractor  or other  sales
         personnel  affiliated  with such sales agent  ("affiliated  personnel")
         while such person is under contract directly or indirectly to the other
         party  and for a period  of one (1) year  after  any such  contract  is
         terminated. Notwithstanding the foregoing, (i) if MTF's engagement of a
         sales agent who had  marketed  Tissue  other than Grafton or another of
         Osteotech's Proprietary Tissue Forms is terminated,  Osteotech shall be
         entitled to retain such sales agent and/or its affiliated  personnel to
         market Grafton or any other of its Proprietary  Tissue Forms or (ii) if
         Osteotech's  engagement  of a sales agent who had  marketed  Grafton or
         another of  Osteotech's  Proprietary  Tissue Forms is  terminated,  MTF
         shall be  entitled to retain  such sales  agent  and/or its  affiliated
         personnel  to  market  Tissue  other  than  Grafton  or  any  other  of
         Osteotech's Proprietary Tissue Forms, in each of the cases set forth in
         (i) and  (ii),  without  regard  to the  restriction  set  forth in the
         immediately preceding sentence.

XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.

                                     - 36 -

<PAGE>




4.7      MTF Sales Agents
         MTF acknowledges the existence and importance of the independent  sales
         agent network  established  and maintained by Osteo- tech. MTF shall be
         entitled   to  engage   independent   agents  to  promote   Osteotech's
         Proprietary  Tissue Forms  distributed  by MTF,  subject to Osteotech's
         right to approve  such agents if they would  service an area covered by
         an agent retained by Osteotech and disclosed to MTF pursuant to Section
         2.3(f). Osteotech shall be entitled to disapprove of any agent proposed
         by MTF if such potential agent does not meet the standards  established
         by Osteotech to represent its proprietary  technology or if Osteotech's
         agent shall object  thereto,  provided that Osteotech shall make a good
         faith  determination  of whether  the agent  proposed by MTF would meet
         such  standards.  In the event any Osteotech  sales agent who covers an
         area  serviced by an MTF agent is terminated  and Osteotech  desires to
         replace  such  sales  agent,  Osteotech  shall  use  its  Best  Efforts
         consistent  with its past practices to replace such agent with an agent
         who does not object to MTF's agent. If Osteotech  cannot retain such an
         agent,  it shall so notify MTF and MTF shall  terminate  its agent in a
         manner  consistent  with the  termination  provisions of its agreements
         with its agents (such  agreements to provide for  termination by MTF on
         no more than  thirty  (30) days  prior  notice)  and if it so  desires,
         replace  such  agent  with  an  agent  which  is not  objectionable  to
         Osteotech's new agent or its agent.

                                     - 37 -

<PAGE>




4.8      Surviving Provisions
         The  provision of Section  4.1,  4.2,  4.3,  and 4.6 shall  survive the
         termination of this Agreement in accordance with their terms.

5.       TERM OF AGREEMENT
         This  Agreement  shall  become  effective  on April 1,  1997 and  shall
terminate  March 31, 2002;  unless  terminated  earlier in  accordance  with the
provisions hereof.  This Agreement shall  automatically  renew for an additional
five year period,  unless MTF or Osteotech  shall, at least six (6) months prior
to the termination  date of this Agreement,  communicate in writing to the other
party, as the case may be, its intention not to renew the Agreement.

6.       TERMINATION
6.1      Either party may terminate this Agreement at any time upon:
         (a)      The material breach by the other party of any of its
                  obligations  under this  Agreement if such breach shall not be
                  cured within ninety (90) days after written  notice thereof is
                  given by the non-breaching party to the breaching party; or
         (b)      An  adjudication  of the other party as bankrupt or insolvent;
                  or the  admission  in  writing  by  such  other  party  of its
                  inability to pay its debts as they mature; or an assignment by
                  such other party for the benefit of

                                     - 38 -

<PAGE>



                  its creditors;  or such other party applying for or consenting
                  to the  appointment of a receiver,  trustee or similar officer
                  for its assets;  or the appointment of a receiver,  trustee or
                  similar  officer  for such other  party's  assets  without the
                  application   or  consent  of  such  other   party,   if  such
                  appointment shall continue undischarged for a period of ninety
                  (90)  days;  or such other  party  instituting  (by  petition,
                  application,  answer,  consent or otherwise)  any  bankruptcy,
                  insolvency  arrangement or similar  proceeding  relating to it
                  under the laws of any jurisdiction;  or the institution of any
                  bankruptcy,   insolvency  arrangement  or  similar  proceeding
                  relating to such other party, if such proceeding  shall remain
                  undismissed  for a period of ninety (90) days; or the issuance
                  or  levy of any  judgment,  writ,  warrant  of  attachment  or
                  execution or similar process against a substantial part of the
                  property  or assets of such  other  party,  if such  judgment,
                  writ,  warrant of attachment  or execution or similar  process
                  shall not be released,  vacated or fully bonded  within ninety
                  (90) days after its issue or levy.

6.2      MTF may  terminate  this  Agreement  at any time upon  ninety (90) days
         prior written notice to Osteotech if MTF makes a  determination  to end
         its program of procuring and distributing Tissue;  provided that if MTF
         resumes such program at any time

                                     - 39 -

<PAGE>



         during  the term of this  Agreement  it shall  provide  prompt  written
         notice of such  resumption to Osteotech and this Agreement shall become
         effective again in accordance with its terms as soon as is practicable,
         but in no event  later  than  ninety  (90) days  after  such  notice is
         received by Osteotech.

6.3      (a)      If, as determined by a panel of experts under Section
                  6.3(b) a commercially feasible processing technology not
                  available as of the date of this Agreement ("New
                  Technology") developed by a third party results in a form
                  of tissue that (A) represents a significant scientific
                  advance in transplantation (including a significantly
                  greater acceptability by patients or physicians) when
                  compared to forms of tissue processed using Osteotech's
                  processing technology or (B) is comparable to forms of
                  tissue processed by Osteotech and represents at least a
                  ten (10%) percent reduction in costs (a "significant
                  reduction in costs"); and
                  (ii)     Osteotech refuses, or is unable, to achieve compara-
                  ble scientific or economic results within six (6) months
                  of such determination, then MTF may terminate this
                  Agreement.
         (b)      (i) A determination under Section 6.3(a) shall be initiated by
                  MTF if the threshold is met through  notice to  Osteotech,  in
                  writing,  which notice shall  describe the New  Technology and
                  describe in reasonable detail the

                                     - 40 -

<PAGE>



                  scientific  advance or economic benefit resulting from the New
                  Technology.  The threshold  will be met if MTF can  reasonably
                  demonstrate  that it has lost or is reasonably  likely to lose
                  two (2%) percent of its  projected  gross  revenues  (based on
                  MTF's gross  revenues  for the  preceding  twelve (12) months,
                  adjusted  for new  product  lines and  projected  growth,  but
                  including  revenues from Grafton and any other of  Osteotech's
                  Proprietary  Tissue  Forms  only  if  and to  the  extent  New
                  Technology  competes with Grafton or such other of Osteotech's
                  Proprietary  Tissue  Forms,  as the case may be.  (ii)  Within
                  thirty (30) days after Osteotech's receipt of such notice, MTF
                  and  Osteotech  shall  each  appoint  to a  panel  one  expert
                  qualified to make a  determination  under Section  6.3(a) with
                  respect to the matter  described  in the notice  under  clause
                  (i). The expert  appointed by a party shall be  acceptable  to
                  the  other  party.   The  two  experts   shall,   as  soon  as
                  practicable,  appoint a third expert to the panel.  (iii) MTF,
                  Osteotech, and the party that has developed the New Technology
                  may submit  relevant  written  information to the panel.  (iv)
                  Within ninety (90) days of final  composition  of the panel or
                  such other  period as the panel shall  determine  by unanimous
                  vote is necessary to make its determination,  the panel shall,
                  by a vote of at least two of its

                                     - 41 -

<PAGE>



                  members,  determine  whether the New  Technology  represents a
                  scientific  advance  or  a  significant   reduction  in  costs
                  described  in  Section  6.3(a),  provided  that  if the  panel
                  determines   that  the  New  Technology  is  not  as  safe  as
                  Osteotech's  technology the New Technology shall not be deemed
                  to represent a scientific  advance or a significant  reduction
                  in costs.
         (c)      The  parties  shall  agree to the budget for the panel and MTF
                  shall advance all budgeted  expenses incurred by the panel. If
                  the panel  determines  that the New  Technology  represents  a
                  scientific  advance  or  a  significant  reduction  in  costs,
                  Osteotech shall reimburse MTF for such expenses.

6.4      In the event MTF enters into an agreement or arrangement with
         a third party whereby finished units of Tissue processed by
         Osteotech for MTF are used as part of such third party's
         technology or product, MTF shall promptly inform Osteotech of
         its intent to enter into such agreement or arrangement and
         Osteotech shall have the right to (i) terminate this Agreement
         at any time upon ninety (90) days prior written notice to MTF
         without any further obligation to MTF, other than (A) Osteo-
         tech's obligations hereunder with respect to MTF Tissue which
         Osteotech has begun to Process and MTF Tissue which Osteotech
         has finished Processing but not yet delivered to MTF, which
         obligations shall continue until all such Tissue is delivered

                                     - 42 -

<PAGE>



         to MTF and (B) those obligations which otherwise survive termination of
         this Agreement in accordance with their terms, or (ii)  renegotiate the
         terms of this Agreement.

6.5      MTF may terminate this Agreement at any time upon thirty (30)
         days prior written notice to Osteotech if Osteotech is
         unwilling or unable to comply with the provisions of Section
         1.3.2(b) to the extent such provisions are applicable to
         Osteotech.  Osteotech may terminate this Agreement at any time
         upon thirty (30) days prior written notice to MTF if MTF is
         unwilling or unable to comply with the provisions of Section
         1.3.2(b) to the extent such provisions are applicable to MTF.

6.6      In the event MTF (i) develops a non-proprietary Tissue form,
         modification of an existing form, or a change in presentation
         of a Tissue form, (ii) requests that Osteotech process such
         Tissue form and (iii) agrees to reimburse Osteotech for the
         additional expenses for additional equipment, personnel or
         facility which would be reasonably incurred by Osteotech in
         order to process such Tissue form and Osteotech fails to
         notify MTF of its decision to process such Tissue form within
         three (3) months after its receipt of such request and
         agreement in writing from MTF, provided that such Tissue form
         does not violate any patent or other proprietary right, or any
         law or regulation or the Processing Standards, MTF may
         terminate this Agreement only as it would apply to such new

                                     - 43 -

<PAGE>



         non-proprietary  Tissue  form.  Such  three (3) month  period  shall be
         extended to six (6) months if Osteotech presents reasonable evidence of
         its  need  for  such  extension  in  order  to make  its  determination
         hereunder.

6.7      In the event Osteotech develops or acquires a substitute for
         Tissue based products or Tissue based technology ("Tissue
         Substitute") which materially competes in the United States
         with the Tissue distributed by MTF, MTF shall have the right
         to terminate this Agreement at any time upon ninety (90) days
         written notice to Osteotech without further obligation to
         Osteotech (other than those obligations which otherwise
         survive termination of this Agreement in accordance with their
         terms) if Osteotech fails to cease such competitive activity
         within sixty (60) days of written notice from MTF requesting
         the cessation of such competitive activity.  Any such product
         or technology shall not be deemed to be competitive with MTF's
         Tissue distribution activities until such time as such product
         or technology receives the necessary regulatory approvals and
         is marketed commercially in the United States.  In any event
         the restrictions on Osteotech's activities set forth in this
         Section 6.7 shall not apply to any Tissue Substitute acquired
         or developed by Osteotech which Osteotech offers to MTF on
         terms which are consistent with the terms of this Agreement.


                                     - 44 -

<PAGE>



6.9      MTF shall have the right to terminate this Agreement in accordance with
         Section 4.4 and Section 4.5, as provided therein.

7.       INSURANCE
         (a)      Osteotech  shall secure and maintain in force  reasonable  and
                  adequate  insurance coverage for Osteotech's Tissue Processing
                  activities,  provided such coverage is available at reasonable
                  prices and terms.  Osteotech shall deliver to MTF certificates
                  of insurance  within fifteen (15) days after execution of this
                  Agreement.
         (b)      MTF shall secure and maintain in force reasonable and adequate
                  insurance  coverage  of  MTF  bone  and  tissue  recovery  and
                  distribution  activities,  provided such coverage is available
                  at reasonable prices and terms. MTF shall deliver to Osteotech
                  certificates  of  insurance  within  fifteen  (15) days  after
                  execution of this Agreement.
         (c)      Osteotech shall require each subcontractor or assignee (if any
                  are permitted by MTF) to procure and maintain insurance of the
                  types and amounts  required of  Osteotech.  In addition,  once
                  approved by MTF, the subcontractor or assignees shall sign the
                  indemnity  agreement as it appears in Section  2.2(a) in favor
                  of  MTF.  If  there  is  any  assignment  to a  majority-owned
                  subsidiary of Osteo-

                                     - 45 -

<PAGE>



                  tech  as  provided  in  Section  9  of  this  Agreement,  that
                  subsidiary shall meet each requirement of this Section 7.

8.       FORCE MAJEURE
         Neither party shall be responsible to the other for  nonperformance  or
delayed  performance of the terms and conditions hereof due to acts of God, acts
of  government,  wars,  riots,  accidents and  transportation,  fuel or material
shortages,  or other causes  (except  strikes),  in the nature of force  majeure
which is beyond  its  control.  To the  extent  Osteotech  is unable to  perform
Processing of MTF's Tissue due to such events,  Osteotech  shall arrange to have
MTF's Tissue  processed under  Osteotech's  oversight within thirty (30) days of
the occurrence of such event.  Notwithstanding  the above, in the event of total
or partial  destruction of any processing  facility of Osteotech utilized in the
Processing  of MTF Tissue,  Osteotech  shall agree to rebuild such plant or part
thereof  within a  reasonable  period  of time and  agrees  to  arrange  for the
Processing,  under Osteotech oversight and in compliance with the Agreement,  of
MTF Tissue during such period.

9.       ASSIGNMENT
         Except as otherwise  expressly herein provided,  this Agreement may not
be assigned in whole or in part without the prior  written  consent of the other
party,  provided  that either party may assign its rights under the Agreement to
any  majority-owned  subsidiary  of such party  without the consent of the other
party, provided that

                                     - 46 -

<PAGE>



such  subsidiary  agrees in writing to be bound by the terms and  conditions  of
this Agreement. In any event Osteotech and MTF and their respective subsidiaries
shall be subject to and bound by the terms and  conditions of this  Agreement to
the  extent  any of  them  are  engaged  in the  recovery  and  distribution  or
Processing of Tissue, as the case may be.

10.      NAME, EMBLEM, PACKAGING, TECHNOLOGY AND TRADEMARK
         (a)      Except to the extent Osteotech indicates in any litera-
                  ture, including without limitation promotional materials, that
                  MTF is one of Osteotech's Tissue Processing  clients,  without
                  the prior  written  consent  of MTF,  Osteotech  shall have no
                  right to use the trademark or emblem of MTF in connection with
                  its  Processing  activities  or to use  the  name  of MTF  for
                  commercial purposes; provided, however, Osteotech may disclose
                  MTF's name as may be required by law, government regulation or
                  court order.
         (b)      Except to the extent MTF indicates in literature,
                  including without limitation promotional materials, that
                  Osteotech processes Tissue distributed by MTF, MTF shall
                  not have the right to use any trademark or emblem of
                  Osteotech, including the name Osteotech, without the
                  prior written consent of Osteotech; provided, however,
                  MTF may disclose Osteotech's name as may be required by
                  law, government regulation or court order.

                                     - 47 -

<PAGE>



         (c)      (i) Nothing in this  Agreement  shall be interpreted to convey
                  to MTF any trademark,  patent or proprietary  technology owned
                  by  Osteotech;   (ii)  Nothing  in  this  Agreement  shall  be
                  interpreted to convey to Osteotech any trademark,  patent,  or
                  proprietary technology owned by MTF.
         (d)      MTF recognizes that Osteotech currently performs, and
                  intends in the future to perform, Processing services for
                  others in addition to MTF, and therefore, agrees that
                  unless specifically developed or customized for MTF or as
                  otherwise provided herein, all packaging and technology
                  used by Osteotech to perform Processing services for MTF
                  may also be used by Osteotech to perform such services
                  for others.
         (e)      MTF recognizes that Osteotech  processes  proprietary forms of
                  tissue and agrees that if it were to distribute  these tissues
                  it will do so only under the trademark,  packaging, labels and
                  emblems developed and provided by Osteotech.

11.      NOTICES
         All notices and other communications provided for hereunder shall be in
writing  and  shall be mailed  by  certified  mail,  return  receipt  requested,
telecopied,  with a copy sent promptly  thereafter by U.S. mail, or delivered by
hand or overnight delivery, as follows.

                                     - 48 -

<PAGE>



      If to MTF:                         Chief Executive Officer
                                         Musculoskeletal Transplant Foundation
                                         125 May Street
                                         Edison, New Jersey  08837
                                         Telephone No. (908) 661-0202
                                         Telecopy No. (908) 661-2297

      If to Osteotech:                   Chief Executive Officer
                                         Osteotech, Inc.
                                         51 James Way
                                         Eatontown, New Jersey 07724
                                         Telephone No. (908) 542-2800
                                         Telecopy No.  (908) 935-0626

or such other person or address as either party may designate by written  notice
to the other party  complying as to delivery  with the terms of this Section 11.
All such notices and other  communications  shall be effective  (i) if mailed by
certified or registered  mail, when received as indicated by the return receipt,
(ii) if telecopied, when transmitted, as indicated by the facsimile transmission
report,  provided same is on a business day in the U.S.  (excludes  weekends and
federal  holidays) and, if not, on the next business day, or (iii) if delivered,
upon  delivery,  provided  same is on a business  day and,  if not,  on the next
business day.

12.      ENTIRE AGREEMENT
         This Agreement sets forth the entire Agreement between the parties. Any
prior agreements,  promises,  negotiations,  or representations,  either oral or
written,  relating to the subject  matter of this  Agreement  not  expressly set
forth in this Agreement are of no force or effect.

13.      MODIFICATION
         This  Agreement,  or any part of  section  of it, may not be amended or
modified except by the written consent of both parties of the Agreement.


                                     - 49 -

<PAGE>



14.      APPLICABLE LAW
         This  Agreement  shall be construed in accordance  with the laws of the
State of New Jersey, without giving effect to any conflict of laws principles.

15.      WAIVER
         Waiver or breach of any provision of this Agreement shall not be deemed
a waiver  of any  other  breach  of the same or a  different  provision  of this
Agreement.

16.      INDEPENDENT CONTRACTOR
         Osteotech  is  providing  its  services  hereunder  as  an  independent
contractor.  Nothing herein shall create any  affiliation,  partnership or joint
venture between the parties hereto, or any employer/employee relationship.

17.      SEVERABILITY
         The provisions of this Agreement shall be severable,  and if a court of
competent jurisdiction holds any provisions of this Agreement to be in violation
of any applicable law, the remaining  provisions  shall  nevertheless  remain in
full force and effect.

18.      SUCCESSORS
         This  Agreement  shall be binding  upon and inure to the benefit of the
parties and their successors and assigns.


                                     - 50 -

<PAGE>



                  IN WITNESS WHEREOF,  the parties have caused this Agreement to
be  executed  by their duly  authorized  officers  as of the date first  written
above.

                                           MUSCULOSKELETAL TRANSPLANT FOUNDATION


                                               BY:/S/BRUCE STROEVER
                                               --------------------
                                                   Bruce Stroever, President and
                                                   Chief Executive Officer


                                                     OSTEOTECH, INC.


                                               BY:/s/RICHARD W. BAUER
                                               ----------------------
                                                   Richard W. Bauer, President
                                                   and Chief Executive Officer

                                     - 51 -

<PAGE>



                                             MTF                   Exhibit 3.1

                           Schedule of Processing Fees




                                      XXXXX

























XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.



<PAGE>


                                       MTF                          Exhibit 3.2

                           Schedule of Processing Fees


                                      XXXXX















XXXXX             Indicates the omission of confidential  material pursuant to a
                  request for  confidential  treatment  made in accordance  with
                  Rule  24b-2  under the  Securities  Exchange  Act of 1934,  as
                  amended.  The confidential  material is being filed separately
                  with the Secretary to the Securities Exchange Commission.