EXHIBIT 10.36

                                  CONFIDENTIAL
                    SETTLEMENT AGREEMENT AND GENERAL RELEASE

     WHEREAS,  the  parties  hereto,  DePuy  AcroMed,   Inc.,  and  DePuy,  Inc.
(collectively "DePuy") and Osteotech,  Inc. ("Osteotech"),  desire to resolve by
settlement  the  litigation  styled  Osteotech  Inc.,  Defendant,   Counterclaim
Plaintiff  and  Third-Party  Plaintiff v. DePuy  Motech,  Inc. and DePuy,  Inc.,
pending as third-party claims in civil action No. CV99-10111-MRP(CTX)  (formerly
CV9868 AHS(EEX)) in the United States District Court for the Central District of
California (the "Litigation"); and

     WHEREAS,  the parties desire to resolve by settlement of the Litigation all
disputes known or posited currently to exist between them, and those that may be
reasonably  contemplated,  relating to DePuy's  sale of the  Dynagraft  products
which are  alleged in the  Litigation  to  infringe  United  States  Patent Nos.
5,290,558  and  5,284,655,  Dynagraft  Gel and  Dynagraft  Putty  (the  "accused
products" or the "accused  Dynagraft  products").  The "accused products" do not
include Dynagraft DBM Granules, Dynagraft Matrix 45 or Dynagraft Matrix 30.

     NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants and agreements set
forth  herein and other good and  valuable  consideration,  DePuy and  Osteotech
MUTUALLY SPECIFY AND AGREE THAT:

     1. Osteotech agrees to execute and file in the form of attached Exhibit A a
stipulated  dismissal  with  prejudice  of all claims and related  requests  for
compensatory and exemplary damages, attorneys' fees, costs and interest expenses
Osteotech  has asserted,  could have asserted or sought leave to assert  against
DePuy in the Litigation arising from or related to DePuy's


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alleged infringement of United States Patent Nos. 5,290,558 and 5,284,655 caused
by or related to  DePuy's  sale of the  accused  Dynagraft  products.  Upon such
dismissal DePuy will no longer participate in the Litigation, except as required
by law. That  dismissal  shall not be filed with the Court until the time of any
public  disclosure  by Osteotech  pursuant to paragraph 13 below or 4:00 p.m. in
New York on November 11, 1999, whichever is earlier.

     2. Osteotech hereby releases,  acquits, discharges and covenants not to sue
DePuy AcroMed,  Inc., DePuy, Inc., DePuy  Orthopaedics,  Inc., Johnson & Johnson
and their affiliates, parents, subsidiaries,  officers, directors, shareholders,
employees,  agents and  attorneys  (collectively  the "DePuy  Parties")  and any
physicians  and  hospitals  from any and all claims,  causes of action,  rights,
allegations,  liabilities  or  damages  whatsoever  arising  out of the  alleged
infringement  by DePuy or any such  physicians or hospitals of the United States
Patent Nos.  5,290,558 and  5,284,655  patents and any other  applicable  United
States  patents  owned by  Osteotech  caused by or related  to  DePuy's  sale or
promotion of the accused Dynagraft products for the time period through February
4, 2000.

     3. Osteotech hereby releases,  acquits, discharges and covenants not to sue
the DePuy  Parties and any  physicians  and  hospitals  from any and all claims,
causes  of  action,  rights,  allegations,  liabilities  or  damages  whatsoever
relating to or arising from  DePuy's sale or promotion of the accused  Dynagraft
products  for the time period  through  February  4, 2001 based upon  heretofore
undisclosed  existing Osteotech  inventions for which patent protection has been
or may be obtained  ("current patent  applications").  The release  contained in
this  paragraph  3 and in the  previous  paragraph  2 shall  not  apply to or be
effective  with  respect  to any  sale or  promotion  of the  accused  Dynagraft
products  by any of the  DePuy  Parties  after  February  4, 2001 or the sale or
promotion of any other products by any of the DePuy Parties at any time.



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     4. The DePuy Parties hereby release,  acquit, discharge and covenant not to
sue Osteotech, its affiliates,  subsidiaries, officers, directors, shareholders,
employees, agents and attorneys (collectively, the "Osteotech Parties") from any
and all claims, causes of action,  rights,  allegations,  liabilities or damages
whatsoever  which any of the DePuy Parties has asserted,  could have asserted or
sought leave to assert  against any of the Osteotech  Parties in the  Litigation
arising  out of or related to any sale or  promotion  of the  accused  Dynagraft
products by any of the DePuy Parties.

     5. This  Agreement  is entered  into solely for the purpose of avoiding the
burden and expense of further  litigation  and neither it, nor any statements or
recitations in it, nor any negotiations  leading up to it, is intended to be, or
should be  construed  as, an  admission  of fact or liability on the part of any
party.

     6. In connection with any legal or administrative proceeding related to the
accused  Dynagraft  products,  the DePuy  Parties  will not contest  Osteotech's
claims that United  States  Patent Nos.  5,290,558  and  5,284,655 are valid and
infringed by the accused Dynagraft products.

     7. Except as specifically  provided herein, the parties expressly agree and
understand that this Settlement Agreement does not extend to any other person or
entity  (whether a party to the present  litigation  or not, or that person's or
entity's  agents,  servants,  or  attorneys),   and  that  it  does  not  affect
Osteotech's  rights  against any other person or entity  (whether a party to the
present  litigation or not, or that person's or entity's  agents,  servants,  or
attorneys),  that Osteotech may charge with infringement of United States Patent
Nos.  5,290,558 and/or 5,284,655.  Specifically,  by releasing the DePuy Parties
and  physicians  and  hospitals in this  agreement,  Osteotech is not  releasing
GenSci  Regeneration  Laboratories,   Inc.  or  its  parents,   subsidiaries  or

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<PAGE>

affiliated  companies ("GenSci") or waiving any of its claims against GenSci, or
any other person or entity.

     8. The terms of this Confidential  Settlement  Agreement shall be governed,
construed and enforced in  accordance  with the laws of the State of New Jersey,
without regard to contrary New Jersey conflict of laws provisions.

     9. This Confidential  Settlement Agreement shall be binding upon, and inure
to  the  benefit  of,  the  parties  hereto  and  their  respective  successors,
administrators and assigns.

     10.  Within  ten (10) days of  execution  of this  Confidential  Settlement
Agreement  by both  parties,  DePuy shall pay  Osteotech  the sum of Two Million
Dollars  ($2,000,000.00)  by delivery to  Osteotech  of a certified or cashier's
check or the wire transfer of such funds to an account designated by Osteotech.

     11. In  addition,  DePuy  shall pay  Osteotech a further sum of One Million
Dollars ($1,000,000.00) as follows:

                           $250,000.00 on March 31, 2000;
                           $250,000.00 on June 30, 2000;
                           $250,000.00 on September 30, 2000; and
                           $250,000.00 on December 31, 2000.

However,  with respect to the payments  outlined in this paragraph,  each of the
quarterly  payments  shall be payable only if DePuy sells some  accused  product
during the  quarter  ending on the date on which the  payment  is due.  If DePuy
sells no accused product during a quarter, that quarterly payment is forgiven.



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<PAGE>

     12. The DePuy  Parties  agree to stop selling the accused  products and any
other flowable product that contains  demineralized  osteogenic bone powder in a
polyhydroxy (e.g., Pluronic F127) carrier on the earlier of (a) February 4, 2001
or (b) the end of any quarter in which DePuy owes no  payments  under  Paragraph
11. However,  if Osteotech settles with GenSci and permits GenSci to continue to
manufacture and sell the accused products, then DePuy shall not be bound to stop
selling the accused  products  after February 4, 2001, but shall be free to sell
said products without further payment to Osteotech.

     13. The parties  understand and agree that the terms and conditions of this
Confidential   Settlement   Agreement   and  Release   shall  be  kept  strictly
confidential and shall not be disclosed, or caused to be disclosed, by Osteotech
or DePuy or by any of their officers,  directors,  employees, agents, attorneys,
or by any affiliates, or officers,  directors,  employees,  agents, attorneys of
affiliates,  except as set forth in this  paragraph 13 and except as required by
court  order or law or  regulation.  Osteotech  shall make no  disclosure  until
either  (a) 4:00 p.m.  in New York on the day that DePuy has  advised  Osteotech
that DePuy will disclose the existence of this agreement to GenSci (DePuy agrees
to give Osteotech 24 hours advance notice of its intent to so disclose to GenSci
and  Osteotech  agrees  DePuy may so  disclose  any terms of this  agreement  to
GenSci),  (b) 4:00 p.m. in New York on November 11 or (c) the public  disclosure
of the existence or terms of this  agreement  without the fault of the Osteotech
Parties,  whichever is the earliest.  At that time,  Osteotech may make a public
disclosure  consistent  with  the  terms  of  this  agreement.  After  a  public
disclosure by Osteotech,  DePuy may make public disclosures about this agreement
consistent with the terms of this agreement.

     14. The persons executing this Settlement  Agreement on behalf of Osteotech
and DePuy each represent and warrant that they have full and complete  authority
to do so.



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<PAGE>

     15. DePuy agrees that the breach of this Settlement Agreement by any of the
Depuy  parties  resulting  or  arising  from any such party  continuing  to sell
accused  products or any other  flowable  product  that  contains  demineralized
osteogenic  bone powder in a  polyhydroxy  (e.g.,  Pluronic  F127) carrier after
February  4,  2001,  will  result  in  irreparable  harm to  Osteotech  and that
Osteotech shall have the right to seek immediate  injunctive relief in the event
of such actual or  threatened  breach,  in addition to any other legal  remedies
that  may be  available  to  Osteotech,  and  without  the  need to post a bond.
Notwithstanding  the foregoing,  in any action for  injunctive  relief the DePuy
Parties do not waive or Limit their  rights to assert  defenses  concerning  the
unenforceability  of  paragraph  12 in the event the United  States  Patent Nos.
5,290,558  and  5,284,655 are declared  non-infringed  by the accused  Dynagraft
products,  invalid or  unenforceable  by a court of competent  jurisdiction in a
final, non-appealable judgment.

     16. The parties  declare  and  represent:  (1) No promise,  representation,
inducement or agreement not expressed in this Confidential  Settlement Agreement
has been  made to  either  of them;  (2) They are not  relying  on any  promise,
representation,  inducement  or  agreement  in entering  into this  Confidential
Settlement Agreement except as expressly set forth in this Settlement Agreement;
(3) This Confidential  Settlement Agreement (and its attached Exhibit A) contain
the entire agreement between the parties relating to its subject matter; (4) The
parties have consulted with counsel of their own choosing prior to entering into
this Confidential  Settlement Agreement;  and (5) The terms of this Confidential
Settlement Agreement are contractual and not mere recitals.

     17.  The  parties  agree to  jurisdiction  and venue in the  United  States
District  Court for the District of New Jersey for all  disputes  arising out of
this Agreement.


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<PAGE>

         IN  WITNESS  HEREOF,  this  Settlement  Agreement  is  executed  by the
parties:

DATED: November 2, 1999                     Dated: November 2, 1999

OSTEOTECH, INC.                             DEPUY ACROMED, INC.

By:  /s/Richard W. Bauer                    By: /s/Earl R. Fender, Jr.
     ------------------------------             --------------------------------
       Its: Chief Executive Officer              Its: President


                                            Dated: November 2, 1999

                                            DEPUY, INC.

                                            By: /s/Donald E. Knebel
                                                --------------------------------
                                                  Its: Attorney

APPROVED AS TO SUBSTANCE AND FORM:

DORSEY & WHITNEY, LLP                       BARNES & THORNBURG

By: /s/Kevin T. Collins                     By: /s/Donald E. Knebel
    -------------------------------             --------------------------------
       One of the Attorneys on              One of the Attorneys on
       behalf of Osteotech, Inc.              behalf of DePuy AcroMed, Inc.
                                              and DePuy, Inc.


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<PAGE>


EXHIBIT A
ALAN H. BOON
BERGER, KAHN, SHAFTON, MOSS,
FIGLER SIMON & GLADSTONE
2 Park Place, Suite 650
Irvine, California 92614-8516
Telephone: (949) 474-1880
Facsimile:  (949) 474-7265

Daniel P. Albers
Melissa A. Vallone
BARNES & THORNBURG
200 West Madison - Suite 2610
Chicago, IL 60606
Telephone: (312) 357-1313
Facsimile:  (312) 214-8831
Attorneys for Third Party Defendants
DEPUY, INC. and DEPUY ACROMED, INC.

                          UNITED STATES DISTRICT COURT
                         CENTRAL DISTRICT OF CALIFORNIA

------------------------------------------
OSTEOTECH, INC.,                          )
                                          )
                  Defendant, Counterclaim )
                  Plaintiff and Third     )
                  Party Plaintiff         )
                                          )
       v.                                 )   Case No.: CV-99-10111-MRP(CTX)
                                          )
GENSCI REGENERATION SCIENCES, INC.,       )
                                          )
DePuy MOTECH, INC. and DEPUY, INC.,       )
                                          )
                  Third Party Defendants. )
------------------------------------------)

                         AGREED FINAL ORDER OF DISMISSAL

     Defendant,  Counterplaintiff  and Third Party  Plaintiff,  Osteotech,  Inc.
("Osteotech") and Third Party Defendants DePuy AcroMed,  Inc.,  incorrectly sued
as  DePuy  Motech,  Inc.  and  DePuy,  Inc.  (collectively,   "DePuy"),  through
settlement negotiations, having compromised and


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resolved their disputes, and the Court having been advised that a Settlement has
been reached by said parties;

     IT IS HEREBY ORDERED THAT:

     1. Osteotech's Third-Party Complaint against DePuy AcroMed, Inc. and DePuy,
Inc. is dismissed with prejudice;

     2. In approving  this Agreed  Order,  neither  party admits any  liability,
culpability  nor fault with respect to the  allegations in any pleading filed or
sought to be filed in this Action;

     3. Each party shall bear its own costs,  attorneys' fees and other expenses
relative to this Action; and

     4. The Court finds pursuant to Federal Rule of Civil  Procedure  54(b) that
there is no just  reason to delay  enforcement  of or appeal from this Order and
the Court directs the clerk to enter judgment on this Order.


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     IT IS SO ORDERED:
Dated:____________,1999        Entered: /s/ Mariana P. Pfaelzer
                                        -----------------------------------
                                        The Honorable Mariana P. Pfaelzer
                                        United States District Court Judge
AGREED AS TO FORM:

/s/Mark Sullivan               /s/Donald E. Knebel and /s/Daniel P. Albers
Attorneys for Defendant        Attorneys for Third-Party Defendants
Third-Party Plaintiff          DEPUY ACROMED, INC. (incorrectly sued as
OSTEOTECH, INC.                DEPUY MOTECH, INC.) and DEPUY, INC.

Mark Sullivan                  Donald E. Knebel
Dorsey & Whitney LLP           Daniel P. Albers
650 Town Center Drive          Barnes & Thornburg
Suite 1850                     2600 Chase Plaza
Costa Mesa, CA 92626           10 South LaSalle Street
(714) 662-7300                 Chicago, Illinois 60603
                               (312) 357-1313


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