NONTRANSFERABLE INCENTIVE
                             STOCK OPTION AGREEMENT


     THIS AGREEMENT (the "Agreement"), is dated as of [___________,  ______], by
and  between  OSTEOTECH,  INC.,  a Delaware  corporation  (the  "Company"),  and
[____________] (the "Optionee"),  pursuant to the Company's 2000 Stock Plan (the
"Plan").

     For good and valuable consideration,  the receipt and adequacy of which are
hereby acknowledged, the Company and Optionee hereby agree as follows:

     1. Grant of Option.

     The Company  hereby grants to Optionee,  effective as of the date set forth
above (the "Grant Date"), the right and option (hereinafter called the "Option")
to purchase up to an aggregate of [________]  shares of common stock,  par value
$0.01 per share (the "Common Stock"),  of the Company at a price of $[_____] per
share,  upon the terms and  conditions  set forth in this  Agreement  and in the
Plan. This Option is intended to be an incentive stock option within the meaning
of Section 422 of the Internal  Revenue Code of 1986,  as amended (the  "Code").
The Option  shall  terminate  at the close of  business  ten (10) years from the
Grant Date, or such shorter period as is prescribed  herein.  Optionee shall not
have any of the rights of a  stockholder  with respect to the shares  subject to
the  Option  until  such  shares  shall be issued to  Optionee  upon the  proper
exercise of the Option.

     2. Duration and Exercisability.

     (a) Subject to the terms and conditions set forth herein, this Option shall
become  exercisable by the Optionee for the following  installments of shares of
Common Stock in  accordance  with the following  schedule.  The Optionee must be
employed  by the  Company on the  relevant  anniversary  date set forth below in
order for the  corresponding  installment to become  exercisable.  As the Option
becomes  exercisable for such installment,  those  installments shall accumulate
and the Option shall remain  exercisable for the accumulated  installments until
the Option expires pursuant to Section 1 or terminates  pursuant to Section 3 or
Section 4.

                                      Shares for Which Option is Exercisable
                          Date          Percentage                 Number
[1st anniversary of grant date]            25%                     [____]
[2nd anniversary of grant date]            25%                     [____]
[3rd anniversary of grant date]            25%                     [____]
[4th anniversary of grant date]            25%                     [____]

     (b) During the lifetime of Optionee,  the Option shall be exercisable  only
by Optionee and shall not be assignable or transferable by Optionee,  other than
as  provided  for in  accordance  with the  provisions  of Section  4(c) of this
Agreement.
<PAGE>

     3. Adjustment of Shares.

     (a) The exercise price and the number of shares  purchasable  upon exercise
of the Options may be adjusted by the Compensation  Committee (the "Compensation
Committee") of the Board of Directors of the Company (the "Board") in accordance
with Section 4(c) of the Plan upon the occurrence of certain  corporate  actions
that may affect the Common Stock.

     (b) In the event of a dissolution  or liquidation of the Company the Option
shall  terminate,  provided,  if a period  of one (1) year  from the date of the
grant of the Option shall have elapsed,  that the Optionee  shall have the right
immediately prior to such dissolution or liquidation to exercise such portion of
the Option,  in whole or in part, as  determined  in the sole  discretion of the
Board,  whether or not the Optionee's right to exercise the Option has otherwise
vested  pursuant  to the terms of Section 2 of this  Agreement.  The Board shall
also have the right to waive such one (1) year period.

     (c) In the event that the Company is a party to a merger or  consolidation,
the Option shall be subject to the  agreement of merger or  consolidation.  Such
agreement, without the Optionee's consent, may provide for:

     (i) The  continuation  of the Option by the  Company (if the Company is the
surviving corporation);

     (ii) The assumption of the Plan and the Option by the surviving corporation
or its parent;

     (iii)  The  substitution  by the  surviving  corporation  or its  parent of
options with substantially the same terms for the Option; or

     (iv) The  cancellation  of the Option provided that the Optionee shall have
the right  immediately  prior to such merger or  consolidation  to exercise  the
Option in whole or in part,  whether or not the Optionee's right to exercise the
Option has otherwise accrued pursuant to Section 2 of this Agreement.

4.       Effect of Termination of Employment.

     (a) In the event that Optionee shall cease to be employed by the Company or
its  subsidiaries,  if any, for any reason other than  termination for cause (as
defined in Section 4(b) hereof) or Optionee's  death or disability (as such term
is defined in Section 4(c)  hereof),  Optionee  shall have the right to exercise
the  Option at any time  within  three (3)  months  after  such  termination  of
employment  to the extent of the full number of shares  Optionee was entitled to
purchase under the Option on the date of termination;  provided,  however,  that
this Option shall not be  exercisable  after the  expiration  of the term of the
Option if earlier.

     (b) In the event that Optionee shall cease to be employed by the Company or
its  subsidiaries,  if any,  upon  termination  for cause,  the Option  shall be
terminated  as of  the  date  of  the  act  giving  rise  to  such  termination.
Termination for cause shall mean  termination of the Optionee's  employment with
the Company for the following acts: dishonesty,  fraud, conviction or confession
of a felony or of a crime involving moral turpitude, destruction or theft of the
Company's property, physical attack on a fellow employee, willful malfeasance or
gross  negligence,  refusal or failure to perform job duties (other than failure
resulting  from  disability),  misconduct  materially  injurious to the Company,
participation in fraud against the Company,  entering into  competition  against
the  Company,  and/or a material  breach or  threatened  material  breach of any
agreements with the Company.

                                       2
<PAGE>

     (c) If Optionee shall die while this Option is still exercisable  according
to its terms, or if Optionee's employment with the Company is terminated because
Optionee has become disabled (within the meaning of Code Section 22(e)(3)) while
in the employ of the Company or a  subsidiary,  if any, and  Optionee  shall not
have fully exercised the Option, such Option may be exercised at any time within
twelve (12) months after  Optionee's  death or date of termination of employment
for  disability by Optionee,  personal  representatives  or  administrators,  or
guardians of Optionee,  as  applicable,  or by any person or persons to whom the
Option  is  transferred   by  will  or  the  applicable   laws  of  descent  and
distribution,  to the extent of the full number of shares  Optionee was entitled
to  purchase  under the  Option  on the date of  Optionee's  death,  the date of
termination of Optionee's  employment with the Company,  if earlier, or the date
of termination of Optionee's  employment  with the Company for such  disability,
and subject in all cases to the  condition  that no Option shall be  exercisable
after the expiration of the term of the Option.

     5. Manner of Exercise.

     (a) The Option may be exercised only by Optionee or other proper party,  as
provided  herein,  by  delivering  within the period  during which the Option is
exercisable hereunder written notice to the Company at its principal office. The
notice  shall  state  the  number  of  shares  as to which  the  Option is being
exercised  and be  accompanied  by payment  in full of the Option  price for all
shares designated in the notice.

     (b)  Optionee  may pay the  Option  price in cash,  by check  (bank  check,
certified check or personal check),  by money order, or with the approval of the
Compensation  Committee (i) by delivering to the Company for cancellation shares
of  Common  Stock  of the  Company  with a fair  market  value as of the date of
exercise equal to the exercise price of the Option or the portion  thereof being
paid by tendering such shares or (ii) by delivering to the Company a combination
of cash and Common  Stock of the Company  with an  aggregate  fair market  value
equal to the exercise price of the Option.  For these purposes,  the fair market
value of the  Company's  shares of Common  Stock of the  Company  as of any date
shall be as reasonably determined by the Compensation  Committee pursuant to the
Plan.

6.       Notices.

     All  notices  or other  communications  which  are  required  or  permitted
hereunder shall be deemed to be sufficient if contained in a written  instrument
given by personal delivery, air courier or registered or certified mail, postage
prepaid,  return receipt  requested,  addressed to such party at the address set
forth below or such other  address as may  thereafter be designated in a written
notice from such party to the other party:

                                       3
<PAGE>

                  if to the Company, to:

                           Attention: Chief Financial Officer
                           Osteotech, Inc.
                           51 James Way
                           Eatontown, New Jersey 07724

                  if to the Optionee, to:

                           [Optionee's Name]
                           [Optionee's Address]

     All such notices, advances, and communications shall be deemed to have been
delivered and received (a) in the case of personal delivery, on the date of such
delivery,  (b) in the case of air  courier,  on the  business day after the date
when sent and (c) in the case of mailing,  on the third  business day  following
such mailing.

     7. Miscellaneous.

     (a) This Option is issued  pursuant to the Company's 2000 Stock Plan and is
subject to its terms. The terms of the Plan are available for inspection  during
business hours at the principal offices of the Company.

     (b) This  Agreement  shall not confer on Optionee any right with respect to
continuance of employment by the Company or any of its subsidiaries, nor will it
interfere in any way with the right of the Company to terminate such  employment
at any time.  Optionee  shall  have none of the  rights  of a  stockholder  with
respect to shares  subject to this  Option  until  such  shares  shall have been
issued to Optionee upon exercise of this Option.

     (c) The exercise of all or any parts of this Option shall only be effective
at such time as the sale of Common  Stock  pursuant  to such  exercise  will not
violate any state or federal securities or other laws.

     (d) The Company  shall at all times  during the term of the Option  reserve
and keep  available  such number of shares as will be  sufficient to satisfy the
requirements of this Agreement.

     (e) No waiver of any breach or condition of this Agreement  shall be deemed
to be a waiver of any other or subsequent  breach or condition,  whether of like
or different nature.

     (f) The  Optionee  shall  take  whatever  additional  actions  and  execute
whatever additional  documents the Company may in its judgment deem necessary or
advisable  in order to carry out or  effect  one or more of the  obligations  or
restrictions  imposed on the Optionee pursuant to the express provisions of this
Agreement.

     (g) This Agreement  shall be governed by and construed in accordance  with,
the laws of the State of Delaware.

                                       4
<PAGE>

     (h) This Agreement may be executed in counterparts,  each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.

     (i) This Agreement  constitutes  the entire  agreement  between the parties
with respect to the subject matter hereof and thereof, merging any and all prior
agreements.

     (j) In order to  provide  the  Company  with the  opportunity  to claim the
benefit  of any  income  tax  deduction  which may be  available  to it upon the
exercise  of the Option and in order to comply  with all  applicable  federal or
state  income tax laws or  regulations,  the  Company may take such action as it
deems appropriate to insure that, if necessary,  all applicable federal or state
payroll,  withholding,  income or other  taxes are  withheld or  collected  from
Optionee.  With the Company's concurrence,  Optionee may elect to satisfy his or
her federal and state income tax withholding  obligations  upon exercise of this
Option by (i)  having  the  Company  withhold  a portion of the shares of Common
Stock  otherwise  to be  delivered  upon  exercise of such Option  having a fair
market  value equal to the amount of federal and state income tax required to be
withheld upon such  exercise,  in accordance  with such rules as the Company may
from time to time  establish,  or (ii)  delivering to the Company  shares of its
Common Stock other than the shares  issuable upon exercise of such Option with a
fair market value equal to such taxes, in accordance with such rules.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement as of the
date set forth above.

OSTEOTECH, INC.



By:_______________________________
           Name:
           Title:






By:_____________________________
           [Optionee]


                                       5
<PAGE>


       FIRST AMENDMENT TO NONTRANSFERABLE INCENTIVE STOCK OPTION AGREEMENT

This  Amendment,  dated  as of  [___________,  ______],  is made by and  between
OSTEOTECH,  INC., a Delaware corporation (the "Company"), and [___________] (the
"Optionee"), pursuant to the Company's 2000 Stock Plan.

                                    Recitals

WHEREAS, the Company and the Optionee entered into that certain  Nontransferable
Incentive Stock Option Agreement (the "Original Option Agreement"),  dated as of
[______,_____],  pursuant to which the Company  granted  Optionee  the right and
option to purchase the Company's shares of common stock;

WHEREAS,  the  Company  and the  Optionee  desire  to amend  Section 4 and other
relevant Sections of the Original Option Agreement to extend the exercise period
of the Option in the event of the Optionee's termination of employment.

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

     1.  Section  2(b) of the Original  Option  Agreement is hereby  amended and
restated with the following:

          "(b) During the lifetime of Optionee,  the Option shall be exercisable
     only by Optionee and shall not be assignable or  transferable  by Optionee,
     other than as provided for in accordance  with provision of Section 4(b) of
     this Agreement."

     2.  Section  4 of the  Original  Option  Agreement  is hereby  amended  and
restated with the following:

     "4. Effect of Termination of Employment

          (a) In the event  that  Optionee  shall  cease to be  employed  by the
     Company or its  subsidiaries,  if any, for any reason,  the Optionee  shall
     have the right to exercise the Option  through the expiration of the Option
     Term.

          (b) If the Optionee shall die or if Optionee has become disabled, such
     Option may be exercised at any time through the  expiration  of the term of
     the Option, by Optionee,  personal  representatives or  administrators,  or
     guardians of Optionee,  as applicable,  or by any person or persons to whom
     the Option is  transferred  by will or the  applicable  laws of descent and
     distribution."

                                       6
<PAGE>

     3. Optionee  acknowledges  that all Options issued pursuant to the Original
Option  Agreement,  as amended,  that are exercised  more than 90 days after the
Optionee's  termination of employment  with the Company will no longer be deemed
to be  incentive  stock  options  and will  automatically  become  non-qualified
options.

     4.  Except as set forth  herein,  the  Original  Option  Agreement  remains
unchanged  and in full force and  effect.  In case of any  conflict  between the
Original  Option  Agreement,  as amended,  and the 2000 Stock Option  Plan,  the
Original Option Agreement, as amended, shall control.

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

OSTEOTECH, INC.
By. _____________________                   By. _____________________
      Name:                                                          [Optionee]
      Title:




                                       7
<PAGE>