OSTEOTECH, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT

                1.              A STOCK OPTION (the “Option”) for the purchase of a total of 176,833 shares of the common stock, par value $0.01 (the “Common Stock”), of Osteotech, Inc. (the “Company”) has been granted to Richard W. Bauer (“Optionee”), pursuant to and subject in all respects, except as otherwise expressly provided herein, to the terms
and provisions of the Osteotech, Inc. 1991 Stock Option Plan, as amended (the “Plan”), which has been adopted by the Board of Directors and Stockholders of the Company and which is incorporated
herein by reference. The Option shall be governed by the Plan and except as otherwise specifically
set forth herein the provisions of the Plan shall govern the Option. To the extent the terms of this
Option Agreement are inconsistent or conflict with the terms of the Plan, the terms of this Option
Agreement shall control and the inconsistent or conflicting provision of the Plan shall be deemed
waived or modified by the Board of Directors of the Company. Executive has reviewed the Plan prior
to executing this certificate.

                2.              The exercise price of this Option is $12.75 per share of Common Stock. Such exercise price is equal
to the last reported sale price of a share of the Common Stock as reported on the NASDAQ National
Market on the date of grant, July 31, 1997.

                3.              The Option may not be exercised if the issuance of shares of Common Stock of the Company upon such
exercise would constitute a violation of any applicable Federal or state securities or other law
or regulation. The Optionee, as a condition to his exercise of this Option, shall (i) represent to
the Company that the shares of Common Stock of the Company that he acquires upon exercise of this
Option are being acquired by him for investment and not with a view to distribution or resale, unless
such shares are then registered under a currently effective registration statement under the Securities
Act of 1933, as amended (the “Act”), or counsel for 



	

 








	
the Company is then of the opinion that such registration is not required under the Act or any other
applicable law, regulation, or rule of any governmental agency and (ii) if the shares of Common Stock
underlying this Option are not registered under the Act, acknowledge that the certificate evidencing
such shares may be stamped with a restrictive legend and such shares will be “restricted securities”
as defined in Rule 144 promulgated under the Act.

                4.              The Option may not be transferred in any manner otherwise than by will or the laws of descent and
distribution, and may be exercised during the lifetime of the Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators, heirs, successors, and
assigns of the Optionee.

                5.              The Option shall vest and become exercisable in its entirety on July 30, 1999, provided that Optionee
is employed by the Company on such date. Except as otherwise provided in paragraph 6(b) hereof and
subject to the terms of the Plan governing the exercisability of the Option subsequent to the termination
of Optionee’s employment with the Company, once this Option shall become exercisable as to any
tranche of shares either in accordance with this paragraph 5 or paragraphs 6(a) or 6(b) it shall
remain exercisable as to such tranche of shares until 5:00 p.m., New York City time on July 30, 2007.

                6.              Notwithstanding the provisions of paragraph 6 hereof, this Option will vest and become exercisable
prior to July 30, 1999 upon the earlier occurrence of the events described in subparagraphs (a) and
(b) below provided Optionee is employed by the Company at the time of the occurrence of such events.

                (a)             The Option shall vest and become exercisable in three tranches as follows: (i) as to 53,050 shares
of Common Stock when the last reported sale price of a share of the Common Stock on the Nasdaq National
Market is at least eighteen dollars ($18.00) for at least five (5) 



	

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consecutive trading days; (ii) as to an additional 70,733 shares of Common Stock when the last
reported sale price of a share of the Common Stock on the Nasdaq National Market is at least twenty
dollars ($20.00) for at least five (5) consecutive trading days; and (iii) as to an additional 53,050
shares of Common Stock when the last reported sale price of a share of the Common Stock on the NASDAQ
National Market is at least twenty-two dollars ($22.00) for at least five (5) consecutive trading
days. The accelerated vesting provisions in the immediately preceding sentence shall be referred
to herein as the “Accelerated Vesting Schedule.”  The last reported sales prices in the first sentence of this subparagraph (a) shall be referred
to herein as the “Threshold Prices”. With respect to each tranche of shares of Common Stock subject to the Option, upon vesting, such
tranche shall be referred to herein as the “Vested Shares.”  With respect to each tranche of shares subject to the Option which have not vested, such tranche
shall be referred to herein as the “Non-Vested Shares.”  The Threshold Prices and number of shares set forth above shall be proportionately adjusted
for stock splits, stock dividends, and other similar recapitalization events.

                 (b)            If any of the Change in Control events specified below occur, the Option shall vest as to all Non-Vested
Shares immediately prior to the effective date of such Change in Control event (and Optionee will
be provided a reasonable opportunity to exercise the Option prior to such effective date) in accordance
with the Accelerated Vesting Schedule to the extent the shareholders of the Company receive a payment
for their shares of Common Stock in connection with such Change in Control event which is equal to
or exceeds the respective Threshold Prices set forth in paragraph 6(a) hereof or the shares of Common
Stock trade at the respective Threshold Prices on any trading day during the twenty (20) trading
days immediately preceding the effective date of the Change in Control. In the event of any of the Change in 



	

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 Control events specified in paragraph 6(c)(i) or (iii) occur, the Option shall terminate as to all
Vested Shares and Non-Vested Shares as of the effective date of such Change in Control event to the
extent not previously exercised, provided Optionee is provided a reasonable opportunity to exercise
the Option prior to such effective date. In the event that a Change in Control of the Company occurs,
the Option shall pertain and apply to the securities or property to which Optionee would have been
entitled based on the number of shares of Common Stock subject to the Option if the Option had been
exercised prior to the effective date of such Change in Control. Notwithstanding any provisions contained
in the Plan, if any of the Change in Control events specified in paragraph 6(c) occur, the provisions
contained herein shall apply with respect to the Option covered by this Option Agreement.

                (c)            For purposes hereof, “Change of Control” shall mean: (i) 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; (ii) a merger or consolidation of the Company following which
either the Company or a corporation that, prior to the merger or consolidation, was a subsidiary
of the Company, shall be the surviving entity and a majority of the Outstanding Company Voting Securities
(as hereinafter defined) are owned by a Person (as hereinafter defined) or Persons who were not “beneficial owners” (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) of a majority of such Outstanding Company Voting Securities immediately prior to such merger or consolidation;
(iii) a voluntary or involuntary liquidation of the Company; (iv) 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 of 



	

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the Company or a change in control of such subsidiary); (v) a “Board Change” which, for purposes of this Option, 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 (as hereinafter defined) nor (B) appointed by directors
so nominated; or (vi) 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 “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition
by the Company, (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. 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 Exchange
Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board.

                7.             All notices, requests, demands and other communications provided for by this Option 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 



	

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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 10022-3219
Attention: Kevin Collins, Esq.
		 


	 	If to the Optionee:
		 


	 	______________________________
	 	______________________________
	 	______________________________


	

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ACCEPTED AND AGREED TO:

	 


	 	OSTEOTECH, INC.
	 	 	 
	 	By:	/s/ Michael J. Jeffries 
	 	 	Michael J. Jeffries
	 	 	Executive Vice President,
	 	 	Chief Operating Officer and
	 	 	Chief Financial Office
	 	 	 
	 	OPTIONEE
	 	 	/s/ Richard W. Bauer 
	 	 	Richard W. Bauer
	 	 	 


	
Dated: As of July 31, 1997



	

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PURCHASE FORM

	 


	 	Date:____________


	 	TO:	Controller
		 	 
	 	The undersigned hereby irrevocably elects to exercise the attached Non-Qualified Stock Option Certificate
  to the extent of options to purchase _____ shares and hereby makes payment of $________ in payment
  of the purchase price thereof.

	 	 
	INSTRUCTIONS FOR REGISTRATION OF SECURITIES
	 	 
	 	 	Name:____________________________________
	 	 	 	 
	 	 	Address:	____________________________________
	 	 	 	____________________________________
	 	 	 	____________________________________
	 	 	 	 
	____________________________________


	

 








	No. of Options: 176,833 Date Granted: July 31, 1997 Price: $12.75

  The Optionee acknowledges receipt of a copy of the Osteotech, Inc. 1991 Stock Option Plan, as amended
  (the “Plan”), and represents that he is familiar with the terms and provisions thereof. The Optionee hereby agrees
  that, except as otherwise provided in the Option Agreement, this Option is subject to all the terms
  and provisions of the Plan. The Optionee hereby agrees to accept as binding, conclusive, and final
  all decisions and interpretations of the Compensation Committee upon any questions arising under
  the Plan. As a condition to the issuance of shares of Common Stock of the Company under this option,
  the Optionee authorizes the Company to withhold in accordance with applicable law from any regular
  cash compensation payable to him any taxes required to be withheld by the Company under Federal,
  state or local law as a result of the exercise of this Option.

  Dated:  As of July 31, 1997

	 


 	 	OPTIONEE
	 	 	_________________________________
   
	 	 	Richard W. Bauer


	

 








	
Agreement #1099 A-1

FIRST AMENDMENT TO NON-QUALIFIED STOCK OPTION AGREEMENT

This Amendment, dated as of June 9, 2005, is made by and between OSTEOTECH, INC., a Delaware corporation
(the “Company”), and Richard W. Bauer (the “Optionee”), pursuant to the Company’s 1991 Stock Option Plan. 

Recitals

WHEREAS, the Company and the Optionee entered into that certain Non-Qualified Stock Option Agreement
(the “Original Option Agreement”), dated as of July 31, 1997, 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 5 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 5 of the Original Option Agreement is hereby amended and restated with the following:
	 	 
	 	“5.  The Option vested and became exercisable in its entirety on July 30, 1999. Except as
provided in Sectoin 6(b) hereof, this Option shall remain exercisable as to all of the shares issuable
hereunder until 5:00 p.m., New York City time on July 30, 2007 in all cases including, without limitation,
in the event Optionee’s employment with the Company is terminated for any reason.” 
	 	 


	
2.            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 1991 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.	/s/ Michael J. Jeffries 	By.	/s/ Richard W. Bauer 
	 	Name: Michael J. Jeffries	 	Name: Richard W. Bauer
	 	Title:   Executive Vice President and 	 	 
	 	            Chief Financial Officer