CHANGE IN CONTROL AGREEMENT


     AGREEMENT  by and between  Osteotech,  Inc.,  a Delaware  corporation  (the
"Company"),  and Richard W. Bauer (the "Executive"),  dated as of the 8th day of
September, 1997.

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

          NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

     1.   Certain Definitions.

          For purposes of this Agreement:

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

          (b) The  Executive's  "Base  Period  Compensation"  is (i) the average
     annual  "compensation" (as defined below) which was includible in his gross
     income for his base period  (i.e.,  his most recent five  taxable  years or
     such lesser  number of taxable years or portions  thereof  during which the
     Executive  performed services for the Company ending before the date of the
     Change in Control);  and (ii) if Executive's  base period  includes a short
     taxable  year or less than all of a  taxable  year,  compensation  for such
     short or incomplete  taxable year shall be annualized  for the base period.
     (In  annualizing  compensation,  the  frequency  with  which  payments  are
     expected  to be made over an annual  period  shall be taken  into  account.
     Thus,  any amount of  compensation  for such a short or incomplete  taxable
     year that  represents  a payment  that would not be made more than once per
     year shall not be annualized). For


<PAGE>


     purposes of this definition, Executive's "compensation" is the compensation
     which was payable to him by the Company or an Affiliate, determined without
     regard to the  following  Sections  of the  Code:  125  (cafeteria  plans),
     402(a)(8)   (cash  or  deferred   arrangements),   402(h)(1)(B)   (elective
     contributions  to  simplified  employee  pensions),  and,  in the  case  of
     employer  contributions  made  pursuant  to a salary  reduction  agreement,
     403(b) (tax sheltered annuities).

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

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

          (e) "Change in Control" shall mean:

               (i) a "Board Change" which, for purposes of this Agreement, shall
          have occurred if a majority of the seats (not  counting  vacant seats)
          on the  Company's  Board were to be occupied by  individuals  who were
          neither (A) nominated by a majority of the Incumbent Directors nor (B)
          appointed by  directors so  nominated.  An  "Incumbent  Director" is a
          member of the Board who has been either (A) nominated by a majority of
          the  directors  of the  Company  then in  office or (B)  appointed  by
          directors so nominated,  but  excluding,  for this  purpose,  any such
          individual  whose  initial  assumption of office occurs as a result of
          either an actual or threatened  election contest (as such term is used
          in Rule 14a-11 of  Regulation  14A  promulgated  under the  Securities
          Exchange Act of 1934, as amended (the "Exchange Act")) or other actual
          or threatened solicitation of proxies or consents by or on behalf of a
          Person other than the Board; or

               (ii) the acquisition by any  individual,  entity or group (within
          the meaning of Section  13(d)(3) or 14(d)(2) of the  Exchange  Act) (a
          "Person") of  beneficial  ownership  (within the meaning of Rule 13d-3
          promulgated  under  the  Exchange  Act)  of a  majority  of  the  then
          outstanding voting securities of the Company (the



                                       2
<PAGE>



          "Outstanding Company Voting Securities");  provided, however, that the
          following  acquisitions shall not constitute a Change in Control:  (A)
          any acquisition by the Company, or (B) any acquisition by any employee
          benefit plan (or related trust) sponsored or maintained by the Company
          or any  corporation  controlled  by the  Company,  or (C)  any  public
          offering,  private  placement or other  issuance by the Company of its
          voting securities; or

               (iii) a merger  or  consolidation  of the  Company  with  another
          entity in which neither the Company nor a corporation  that,  prior to
          the merger or consolidation, was a subsidiary of the Company, shall be
          the surviving entity; or

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

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

               (vi) a sale or  disposition by the Company of at least 80% of its
          assets in a single transaction or a series of transactions (other than
          a sale or  disposition  of assets to a subsidiary  of the Company in a
          transaction  not  involving a Change in Control or a change in control
          of such subsidiary).

     2.   Employment Period.

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



                                       3
<PAGE>



          (b) Position and Duties.

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

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

          (c) Compensation.

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

               (ii) Incentive, Savings Retirement and Stock Option Plans. During
          the Employment  Period, the Executive shall be entitled to participate
          in  all  incentive,   savings,  retirement  and  stock  option  plans,
          practices,  policies and programs  applicable  generally to other peer
          executives  of  the  Company,  but  in  no  event  shall  such  plans,
          practices,   policies  and  programs   provide  the   Executive   with
          opportunities  and benefits  less  favorable  than those in effect and
          applicable  to the  Executive  immediately  preceding  the  Change  in
          Control.



                                       4
<PAGE>



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

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

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

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

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



                                       5
<PAGE>



          Executive  exercised  such  Options  prior to such  Change in Control,
          notwithstanding  anything  to  the  contrary  contained  in  any  Plan
          covering  such Options.  Upon a Change in Control  pursuant to Section
          1(e)(iii) or 1(e)(v),  all Options held by  Executive,  whether or not
          vested,  shall  terminate as of the  effective  date of such Change in
          Control  to  the  extent  not  previously  exercised,   provided  that
          Executive  shall have been provided with a reasonable  opportunity  to
          exercise such options prior to such  effective  date,  notwithstanding
          anything to the contrary  contained in the Plan covering such Options.
          Notwithstanding  the foregoing,  the terms of the Option Agreement for
          the option to purchase  176,833  shares of Common Stock granted to the
          Executive on July 31, 1997 and not the terms of this  Agreement  shall
          govern  with  respect  to such  options  in the  event of a Change  in
          Control.

     3.   Termination of Employment.

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

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

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

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



                                       6
<PAGE>



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

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

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

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

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

               (iv) the  failure by the  Company to comply  with  Section  7(a),
          provided  that the  successor  has received at least twenty (20) days'
          prior  written  notice  from  the  Company  or  the  Executive  of the
          requirements of Section 7(a); or,

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

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

          (d) Notice of  Termination.  Any  termination  by the Company for Just
     Cause or by the Executive for Good Reason shall be  communicated  by Notice
     of Termination  to the other party hereby given in accordance  with Section
     8. For  purposes  of this  Agreement,  a "Notice  of  Termination"  means a
     written notice



                                       7
<PAGE>



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

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

     4.   Obligations of Company upon Termination.

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

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



                                       8
<PAGE>



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

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

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

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

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

          The  foregoing  payments  and  benefits  shall be deemed  compensation
     payable  for duties to be  performed  by  Executive  pursuant to Section 2.
     Except  for the  payments  and  benefits  described  in  Sections  4(b)(i),
     4(b)(ii),  and 4(b)(v) the sums due  pursuant to this Section 4(b) shall be
     paid in one  lump-sum  payable no later than sixty (60) days after the Date
     of  Termination.  All sums of money  due  hereunder  shall  be  subject  to
     appropriate withholding and statutory requirements.  Executive shall not be
     required to mitigate the amount of any payment provided for in this Section
     4(b) by seeking other employment or



                                       9
<PAGE>



     otherwise.  Notwithstanding  anything  stated in this  Section  4(b) to the
     contrary,  Company shall not be required to provide medical,  health and/or
     disability  benefits to the extent such benefits would  duplicate  benefits
     received  by  Executive  in  connection  with his  employment  with any new
     employer.

          The determination of the amounts and benefits payable to the Executive
     pursuant  to  Sections  4(b)(i),  4(b)(iii)  and  4(b)(iv)  (the  "Combined
     Amount") shall first be made by the Company in good faith,  and the Company
     shall notify the Executive of the Combined Amount as soon as possible after
     the Date of  Termination,  but in no event later than  forty-five (45) days
     prior to the  payment  date of the sums due  under  Section  4(b)(iii)  and
     4(b)(iv).  If the Executive  disagrees with the Company's  determination of
     the  Combined  Amount,  then  within  ten (10) days  after the date of such
     notification  to the Executive,  the Executive  shall notify the Company of
     such disagreement,  the extent of such disagreement (the "Disputed Amount")
     and the amount that is undisputed (the "Undisputed Amount"). The Undisputed
     Amount shall be paid in one lump-sum payable sixty (60) days after the Date
     of   Termination,   subject  to  appropriate   withholding   and  statutory
     requirements.  If the Company disagrees with the Executive's  determination
     of the  Combined  Amount,  then within ten (10) days after the date of such
     notification  to the Company,  it shall  furnish  Executive  with a written
     appraisal of the Combined  Amounts (the "First  Appraisal")  prepared by an
     independent  certified public accountant  regularly employed by the Company
     (the "First Appraiser"). If Executive disagrees with the amounts determined
     pursuant to the First Appraisal,  then within ten (10) days after notice of
     the First Appraisal,  he shall furnish the Company with a written appraisal
     of the Combined Amount (the "Second Appraisal")  prepared by an independent
     certified public accountant (the "Second Appraiser").  Within ten (10) days
     after notice of the Second  Appraisal,  the First  Appraiser and the Second
     Appraiser  shall  meet and  shall  endeavor,  within  ten (10) days of such
     meeting,  to agree upon the Combined  Amount and notify the Company and the
     Executive thereof; provided, however, that if they are unable to agree upon
     the Combined  Amount,  then,  within (10) days of such meeting,  they shall
     engage an independent  certified public accountant (the "Third  Appraiser")
     and notify the Company and the  Executive of their  engagement of the Third
     Appraiser,  whose  determination of the Combined  Amount,  if any, shall be
     final and conclusive  and binding on the Company and the Executive.  Within
     ten (10) days after notice of such  engagement,  the Third  Appraiser shall
     determine  the Combined  Amount and notify the Company and the Executive of
     his determination  (the "Final Amount").  Except for the benefits described
     in Sections  4(b)(ii) and  4(b)(v),  the Final  Amount,  as adjusted by any
     prior  payment of the  Undisputed  Amount or any payment  made  pursuant to
     Section 4(b)(i),  shall be paid in one lump-sum payable on the later of (i)
     sixty (60) days after the Date of  Termination,  or (ii)  twenty  (20) days
     after  notification  of  the  Final  Amount,  in  either  case



                                       10
<PAGE>



     subject to appropriate  withholding and statutory  requirements;  provided,
     however,  that notwithstanding the foregoing,  the Executive shall have the
     option to decline the benefits  described in Section 4(b)(ii) no later than
     ten (10) days prior to such payment date.

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

     5.   Additional Payment.

     Upon a Change in Control,  Executive  shall be  entitled to a payment  (the
"Additional  Payment") equal to the product of (A) 228,167 multiplied by (B) the
amount by which (i)(x) the value of the  consideration  per share received or to
be received by the shareholders of the Company in connection with such Change in
Control  event or (y) in the event the Change in Control  does not result in any
payment to the  shareholders  of the Company,  the average of the last  reported
sale  price  of the  Company's  Common  Stock  for the  five  (5)  trading  days
immediately preceding the effective date of such Change in Control, exceeds (ii)
$12.75.  Such  Additional  Payment  shall be paid to  Executive  within five (5)
business days after the effectiveness of such Change in Control,  subject to all
withholdings required by law.

     6.   Nonexclusivity of Rights.

     Nothing in this Agreement shall prevent or limit the Executive's continuing
or future participation in any plan, program, policy or practice provided by the
Company and for which the Executive may qualify, nor shall anything herein limit
or otherwise  affect such rights as the Executive may have under any contract or
agreement  with the  Company.  Amounts  which are vested  benefits  or which the
Executive is otherwise entitled to receive under any plan,  policy,  practice or
program of or any contract or agreement with the Company at or subsequent to the
Date of  Termination  shall be payable  in  accordance  with such plan,  policy,
practice or program or contract or agreement,  except as explicitly  modified by
this Agreement.



                                       11
<PAGE>



     7.   Successors; Binding Agreement.

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

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

     8.  Notices.  All  notices,  requests,  demands  and  other  communications
provided for by this  Agreement  shall be in writing and shall be deemed to have
been given when delivered by hand and  acknowledged by receipt or when mailed at
any general or branch  United  States Post Office  enclosed in a  registered  or
certified postpaid envelope and addressed to the address of the respective party
stated below or to such changed address as the party may have fixed by notice.

                           If to the Company:

                           Osteotech, Inc.
                           51 James Way
                           Eatontown, New Jersey 07724
                           Attention: Corporate Secretary
                           With a copy to:

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


If to the Executive:

                           -----------------------------

                           -----------------------------

                           -----------------------------


     9.  Miscellaneous.  This Agreement may not be modified or discharged unless
such  waiver,  modification  or  discharge is agreed to in writing and signed by
Executive and such officers of the Company as may be specifically  designated by
its Board. The failure of either party to this Agreement to object to any breach
by the other party or the non-breaching  party's conduct or conduct  forbearance
shall not constitute a waiver of that party's rights



                                       12
<PAGE>



to enforce this  Agreement.  No waiver by either party hereto at any time of any
breach by the other  party  hereto of, or  compliance  with,  any  condition  or
provision of this  Agreement to be performed by such other party shall be deemed
a  waiver  of any  subsequent  breach  by such  other  party or any  similar  or
dissimilar provisions or conditions at the same or any prior or subsequent time.
Except for that certain  employment  agreement  dated as of December 5, 1996 and
entered  into by and  between the Company  and the  Executive  (the  "Employment
Agreement") and that certain  non-qualified  stock option  agreement dated as of
July  31,  1997  by and  among  the  Company  and  the  Executive  (the  "Option
Agreement"),  no agreements or  representations,  oral or otherwise,  express or
implied,  with  respect to the  subject  matter  hereof have been made by either
party  which are not  expressly  set forth in this  Agreement.  The  Company and
Executive agree that to the extent any of the terms of the Employment  Agreement
and this Agreement  conflict,  it is their intention that Executive in each case
receive  the  benefits  under that  agreement  which are most  favorable  to the
Executive.  In this  regard,  it is  expressly  agreed  that  the  terms of this
Agreement  that  relate to a Change in Control  (as  defined in this  Agreement)
shall be controlling over the terms of the Employment Agreement that relate to a
Change in Control. It is expressly agreed that the terms of the Option Agreement
relating to the vesting and  exercise of the option  represented  by such Option
Agreement  shall be controlling  over the terms of this Agreement that relate to
the vesting and exercise of options. The validity, interpretation,  construction
and  performance of this Agreement shall be governed by the internal laws of the
State of New Jersey, without giving any effect to any conflict of laws.

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

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



                                       13
<PAGE>



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


                                 OSTEOTECH, INC.

                                 By:/S/MICHAEL J. JEFFRIES
                                    -----------------------------------
                                 Name:   Michael J. Jeffries
                                 Title:  Executive Vice President,
                                           Chief Operating Officer
                                           and Chief Financial Officer

                                 EXECUTIVE

                                 /S/RICHARD W. BAUER
                                 -----------------------
                                 Richard W. Bauer




                                       14