EXHIBIT 10.31


                                   SUMMIT BANK
                               301 Carnegie Center
                                  P.O. Box 2066
                        Princeton, New Jersey 08543-2066

                                 THIRD RESTATED
                            EQUIPMENT PROMISSORY NOTE

$4,000,000                                                Middletown, New Jersey
                                                            Date:  July 28, 1997

      FOR VALUE RECEIVED,  the undersigned  ("Borrower")  promises to pay to the
order  of  Summit  Bank,   f/k/a  United   Jersey  Bank,   f/k/a  United  Jersey
Bank/Central,  N.A.  ("Bank"),  at its executive offices at 301 Carnegie Center,
Princeton, New Jersey 08543, or at such other place as the Bank may from time to
time  designate by notice to the  Borrower,  the  principal  sum of FOUR MILLION
DOLLARS  ($4,000,000.00),  or so much  thereof as may be advanced  as  Equipment
Advances  pursuant to the Loan and Security  Agreement  between the Bank and the
Borrower  dated May 27, 1993, as amended (the  "Agreement"),  in lawful money of
the United States of America with interest, calculated on the basis of a 360 day
year, on the unpaid  balance from the date of this  Promissory  Note ("Note") at
the rates set forth below until paid.  Any  capitalized  terms used herein shall
have the meanings ascribed to them in the Agreement.

      All  amounts due to the Bank in  connection  with each  Equipment  Advance
shall bear  interest  during each  calendar  month  pursuant  to the  Borrower's
Equipment Advance Application at a fluctuating  interest rate per annum equal at
all times to the Bank's  Base Rate in effect  from time to time,  or two hundred
(200) basis points greater than the Eurodollar  Rate in effect from time to time
until the Loan Termination Date. Each change in such fluctuating rate shall take
effect  simultaneously  with  the  corresponding  change  in such  Base  Rate or
Eurodollar  Rate,  when  applicable,  without  notice to the  undersigned or any
endorser,  surety or guarantor. Any such change shall not affect or alter any of
the other terms and conditions of this Note. All  computations of interest shall
be  calculated  on  a  daily  basis  upon  the  unpaid  balance  with  each  day
representing  1/360th of a year. The undersigned  shall make monthly payments of
interest,  which  payments  shall be due no later  than  the  first  day of each
calendar month.

      The Borrower  shall make  monthly  payments of principal of amounts due in
connection  with  Equipment  Advances until the earlier of the date on which all
amounts due in connection with the Equipment  Advances have been paid in full or
the Loan  Termination  Date on which date all  amounts  due  hereunder  shall be
immediately due and payable. Such payments shall be equal to 1/48th of the total
amount of principal due in connection  with Equipment  Advances and shall be due
on the first day of each month.

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      The terms,  covenants  and  conditions  of the Agreement are hereby made a
part of this Note,  to the extent and with the same  effect as if more fully set
forth  herein and the  Borrower  hereby  covenants  and promises to abide by and
comply with each and every term,  covenant and  condition set forth in this Note
and in the Agreement.

      Notwithstanding  the  foregoing,  and  in  addition  to the  terms  of the
Agreement, the unpaid balance of the principal amount owing hereunder,  together
with interest thereon, shall immediately become due and payable, at the election
of the holder hereof, in the event of:

     (a)  Failure to make any payment of principal or interest when due;

     (b)  Failure to observe or perform any term,  covenant or condition of this
          Note or the Agreement with respect to the payment of money; and

     (c)  Any Event of Default as defined in the Agreement.

      For each amount  payable by the  Borrower to the Bank under this Note that
is not paid by the tenth (10th) day  following the date on which such payment is
due (whether at the Loan Termination  Date, by acceleration or otherwise) and to
the extent  permitted by applicable  law, the Bank  reserves the right,  without
notice to the Borrower,  to charge interest,  from the date on which such amount
shall have first  become due and  payable by the  Borrower  to the date on which
such amount shall be paid by the Borrower (whether before or after judgment), at
an annual rate of interest  that shall at all times be five  percent  (5%) above
the annual rate of interest if such amount were not overdue. The unpaid interest
accrued on any overdue  amount in accordance  with Section 2.08 of the Agreement
shall  become and be  absolutely  due and payable by the Borrower to the Bank on
written  demand by the Bank at any time.  Interest on each  overdue  amount will
continue to accrue  monthly until the  obligations of the Borrower in respect of
the payment of such  overdue  amounts are  discharged  (whether  before or after
judgment).

      In the event that any  payment  shall not be  received  by the Bank by the
tenth  (10th)  day  following  the date on which such  payment is due,  the Bank
shall,  in addition to and not to the  exclusion  of its other rights under this
Note, be entitled to charge,  and the Borrower  shall pay the Bank a late charge
equal to the lesser of five percent (5%) of the overdue  payment or One Thousand
Dollars  ($1,000.00)  for the  purpose of  defraying  the  expense  incident  to
handling  the  delinquent  payment.  Late  charges  assessed  by  the  Bank  are
immediately  due and  payable.  Payments  are deemed  made on the  Business  Day
payment is  received by the Bank.  Payments  received  after 11:00 a.m.  will be
deemed received the next Business Day.

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      The Borrower  agrees to pay all costs of enforcement or collection of this
Note and the Agreement, including reasonable attorney's fees and court costs, in
the event that the Borrower  defaults in its obligations  hereunder or under the
Agreement, whether suit be brought against the Borrower or not.

      This Note shall be the  obligation  of the maker and shall be binding upon
it and upon its successors, representatives and assigns.

      If  any  provision  contained  in  this  Note  is  in  conflict  with,  or
inconsistent  with, any provision in the Agreement,  the provision  contained in
the Agreement shall govern and control.

      This Note is referred to in the  Agreement and is entitled to the benefits
thereof  and may be  prepaid  in whole or in part as  provided  therein  without
premium  or  penalty.  Upon the  occurrence  of any one or more of the Events of
Default  specified in the Agreement,  all amounts then remaining  unpaid on this
Note may be declared to be immediately due and payable as provided therein.

      If this Note or any installment of principal or interest  hereunder is not
paid when due, the Bank may hold and apply any amounts which the Bank, from time
to time, may owe to the Borrower,  including any balance or share of any deposit
or other account, and any other property, tangible or intangible, owned by or in
which the Borrower has an interest  which may be in the possession or control of
the Bank. This right is in addition to the Bank's right of set-off.

      The  Borrower,  and any  endorsers,  guarantors,  sureties  and all  other
parties  liable  for  payment  of any sum or sums due or to become due under the
terms of this Note, jointly and severally waive presentment, demand for payment,
protest and notice of dishonor of this Note,  and authorize  the holder  hereof,
without notice,  to grant  extensions in the time of payment of any reduction or
increase in the rate of interest on any money owing on this Note.

      All  notices  and  other  communications   hereunder  shall  be  given  in
accordance with the terms and conditions of the Agreement.

      This Note has been  executed and  delivered in the State of New Jersey and
is to be governed  in all  respects by the laws of the State of New Jersey as an
agreement to be wholly performed in the State of New Jersey.


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      This Note shall replace and supersede the Equipment  Promissory Note dated
May 27,  1993 issued in  connection  with the  Agreement,  as amended by a First
Restated  Equipment  Promissory Note dated July 14, 1994, and as further amended
by a Second  Restated  Equipment  Promissory  Note  dated as of May 31,  1996 to
evidence the indebtedness of the Borrower to the Bank represented  thereby which
indebtedness  hereafter  shall be  represented  by this  Note,  but shall not be
discharged,  released or reduced by this Note nor shall this Note  constitute  a
novation with respect to any such indebtedness.

      IN WITNESS  WHEREOF,  the  undersigned  have set their  hands and seals or
caused this $4,000,000 Third Restated  Equipment  Promissory Note to be executed
by their proper  corporate  officers and sealed with their seal  effective as of
May 31, 1997.

ATTEST                                            OSTEOTECH, INC.


/s/ STEVEN SOBIESKI                      BY: /s/MICHAEL J. JEFFRIES
-------------------                      --------------------------
Name: Steven Sobieski                      Michael J. Jeffries,
Vice President Finance                     Executive Vice President,
                                           COO & CFO



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<PAGE>


                                    EXHIBIT A


                                 OSTEOTECH, INC.

                            EQUIPMENT ADVANCE REQUEST



Date of Request:

Date of Advance:

A)    Equipment Credit Balance (before advance):            $____________

B)    Amount of Requested Advance:                          $____________

New Equipment Credit Balance (A + B):                       $____________
      (cannot exceed $4,000,000.00)

Interest Rate (circle one):

               1. Base Rate
               2. Eurodollar Rate

Complete Description of Equipment,  including serial #'s if applicable:  (attach
copy of invoice)



                                                       -------------------------
                                                            Authorized Signature


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