JOINT VENTURE AGREEMENT


        THIS JOINT VENTURE AGREEMENT (the "Agreement") is entered into as of the
12th day of July,  1996,  by and between  WRIGHT  MEDICAL  TECHNOLOGY,  INC.,  a
Delaware corporation,  having offices at 5677 Airline Road, Arlington, Tennessee
38002 ("Wright") and TISSUE ENGINEERING,  INC., a Delaware  corporation,  having
offices at The Fargo Building,  451 D Street,  Boston,  Massachusetts 02210 (the
"Company").

        WHEREAS,  the  Company  has  developed  and owns  technology  to produce
collagen-based scaffolds which can be used, among other things, for ligament and
tendon  reconstruction,  for  cartilage  regeneration,  and for use with calcium
phosphate/sulfate as a bone graft substitute  (collectively,  the "Technology");
and

        WHEREAS,  Wright and the Company desire to form a jointly owned Delaware
limited liability company (the "LLC") for the purpose of broadly commercializing
products  for use in the  treatment  of  musculoskeletal  problems  based on the
Technology (the "Products"), upon the terms and subject the conditions set forth
in this Agreement.

        NOW,  THEREFORE,  in  consideration of the premises and actual covenants
set forth herein and for other good and valuable consideration,  the receipt and
sufficiency  of  which is  hereby  acknowledged,  the  parties  hereby  agree as
follows:

        SECTION 1.       DEFINITIONS.  The following definitions shall apply to
this Agreement:

        "Additional Note" shall have the meaning given to it in Section
3(C) hereof.

        "Approved Marketing Expenses" for any period shall mean the total amount
of marketing  expenses  mutually  agreed upon by Wright and the Company for such
period when Products  become  available for  marketing.  Within thirty (30) days
following  the end of each  Contract  Year,  Wright shall provide the LLC with a
written  reconciliation of actual marketing  expenses and the Approved Marketing
Expenses for such year. In the event the actual marketing expenses do not exceed
the Approved  Marketing Expenses that had been returned to Wright that year, the
difference  shall  be  added  to Gross  Billings  for the  month  in  which  the
reconciliation is presented.  Wright shall be solely  responsible for any actual
marketing expenses that exceed the Approved Marketing Expenses for any year.

        "Approved Per Unit Marketing Expenses" shall be calculated each Contract
Year and shall mean the  Approved  Marketing  Expenses  divided by the  Expected
Minimum Unit Sales.

        "Approved  R&D  Expenses"  for any period shall mean the total amount of
research and development expenses mutually agreed upon by Wright and the Company
for such period.  Within  thirty (30) days  following  the end of each  Contract
Year, the Company shall provide the LLC with a written

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reconciliation of actual research and development  expenses and the Approved R&D
Expenses for such year.  In the event that the actual  research and  development
expenses do not exceed the Approved R&D Expenses  that had been  returned to the
Company  that year,  such  difference  shall be added to Gross  Billings for the
month in which the  reconciliation  is  presented.  The Company  shall be solely
responsible  for any actual  research and  development  expenses that exceed the
Approved R&D Expenses for any year, unless provision is made by the LLC for such
research and  development  Expenses and for other mutually  agreed upon research
and development expenses to be paid by funds raised by the LLC.

        "Budget"  shall mean the annual budget of the LLC approved by Wright and
the  Company,  which  shall  include,  among  other  things,  budgets  for sales
forecasts,  Approved  Marketing  Expenses,  Approved R&D Expenses,  intellectual
property development,  patent prosecution and maintenance expenses, pre-clinical
and  clinical  costs  and  expenses,  administrative  and  accounting  expenses;
provided that the initial budget for the LLC is attached hereto as Exhibit D.

        "CGS" shall mean the Company's fully absorbed costs to manufacture  each
Product sold.

        "Commissions"  shall mean the  actual  sales  commissions  to be paid by
Wright on the sale of the Products.

        "Contract  Year"  shall mean each  twelve  month  period  commencing  on
January 1 and ending on December 31; provided that the first Contract Year shall
commence upon execution of this Agreement and end on December 1, 1996.

        "Expected  Minimum  Unit Sales"  shall mean the Minimum  Gross  Billings
divided by the average selling price of the Product in the prior year.

        "Expenses" shall mean (1) Commissions;  provided,  however,  that in any
one month period those  Commissions  may not exceed twenty  percent (20%) of the
Gross Billings; (2) the CGS; (3) Approved Per Unit Marketing Expenses; provided,
however,  that such  marketing  expenses  shall  cease to be  deducted  when the
aggregate  Approved  Marketing  Expenses  for a given  year have been  repaid to
Wright;  (4) Wright's shipping costs for Products sold if such costs are able to
be billed by Wright to the  customer and if not  otherwise  included in CGS; (5)
Approved  R&D  Expenses,   manufacturing  scale-up  and  manufacturing  expenses
incurred by the Company;  (6) all costs and expenses of Wright  associated  with
pre-clinical  animal  studies and clinical  studies;  and (7) any other expenses
that Wright and the Company agree to deduct.

        "Formation Date" shall have the meaning given to it in Section 3(A)
hereof.

        "Gross Billings" shall mean the sum of (1) the gross sales price charged
by Wright,  (2) excess Approved  Marketing  Expenses and (3) excess Approved R&D
Expenses.

        "Initial Note" shall have the meaning given to it in Section

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3(B)(1) hereof.

        "License" shall mean the royalty free,  exclusive and perpetual  license
granted by the Company for the Technology for use in the musculoskeletal  field,
excluding  dental  applications,  to the LLC  pursuant  to a  license  agreement
substantially in the form of Exhibit A attached hereto.

        "Minimum Gross  Billings"  shall have the meaning given to it in Section
7(B)(2) hereof.

        "Net  Profit" for any period  shall mean the  aggregate  Gross  Billings
minus Expenses.

        "Proprietary  Information" shall mean any information of either party or
the LLC that might reasonably be considered  proprietary,  secret,  sensitive or
private,  including  but not limited to: (a)  technical  information,  know-how,
data,   techniques,   discoveries,   inventions,   ideas,   unpublished   patent
applications,  trade secrets,  formulae,  analyses,  laboratory  reports,  other
reports, financial information, studies, findings, or other information relating
to the LLC or the Technology or methods or techniques  used by the LLC,  whether
or not contained in samples, documents, sketches,  photographs,  drawings, lists
and the like;  (b) data and other  information  employed in connection  with the
marketing of the Products,  including cost  information,  business  policies and
procedures,  revenues and markets, distributors and customers, and similar items
of  information  whether  or  not  contained  in  documents  or  other  tangible
materials;  or (C) any  other  information  obtained  by the any  party  to this
Agreement  during  the term  hereof,  that is not  generally  known to,  and not
readily ascertainable by proper means by, third parties.

        SECTION  2.  PURPOSE  OF THE LLC.  The LLC will be  established  for the
purposes of  commercializing  products based on the  Technology.  It is expected
that the LLC initially will focus a large share of its efforts  toward  products
that can be  manufactured  using the Technology and  commercialized  in the near
future.  It is also expected that an appropriate  balance of longer term product
opportunities will be maintained,  working to develop commercializable products.
The parties  hereto  agree to  negotiate in good faith to enter into one or more
additional  LLC  agreements  in the  event  transactions  contemplated  by  this
Agreement result in additional product ideas.

        SECTION 3.         FORMATION OF LLC; FURTHER CAPITAL CONTRIBUTIONS;
                           ADDITIONAL AGREEMENTS OF THE PARTIES.

        A. As soon as practicable following the execution of this Agreement, the
parties hereto shall cause the LLC to be formed as a limited  liability  company
pursuant  to the laws of the  State of  Delaware  by  filing  a  certificate  of
incorporation (the "Charter").  The date of such filing is hereinafter  referred
to as the "Formation Date".

        B.  On the Formation Date:

            1.  Wright shall contribute to the LLC (a) initial

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administrative,  accounting and legal support in order to create the LLC and (b)
a  promissory  note in the amount of  $1,500,000  (the  "Initial  Note"),  which
Initial  Note  shall be drawn down on demand by the LLC in  accordance  with the
Budget,  in exchange for issuance by the LLC on the Formation Date of 49% of the
validly issued,  fully paid and nonassessable shares of capital stock of the LLC
issued and outstanding on the Formation Date.

            2.  The  Company  shall  contribute  to the LLC the  License  to the
Technology in exchange for issuance by the LLC on the  Formation  Date of 51% of
the validly issued,  fully paid and nonassessable shares of capital stock of the
LLC issued and outstanding on the Formation Date.

            3.  Wright and the Company shall execute a shareholders
agreement substantially in the form of Exhibit B attached hereto.

        C. Wright hereby agrees to make additional funding  contributions to the
LLC, in furtherance of the LLC, in the amount of $1,500,000 on each of the first
and second annual  anniversary  of the Formation  Date;  provided that each such
obligation  shall be satisfied by delivering to the LLC a promissory note in the
amount of $1,500,000 (the "Additional Note"). To the extent that the LLC is able
to raise its own capital, or arrange for its own financing, Wright shall be able
to  charge  the LLC  reasonable  fees  reflecting  its fully  absorbed  cost for
providing  administrative,  accounting,  legal,  regulatory and clinical support
provided to the LLC and, in addition to the  research and  development  provided
pursuant to the Budget for the first  three  years,  beginning  on the four year
anniversary  of the  execution of this  Agreement,  the Company shall be able to
charge the LLC for  research  and  development  support  and  support of product
manufacturing at normal commercial rates for such services.

        D. The Company  hereby agrees to grant to Wright an  irrevocable  voting
proxy for that  number of shares of capital  stock of the LLC equal to 1% of the
issued and  outstanding  stock of the LLC on the  Formation  Date,  it being the
intent of the  parties  hereto  that the Company and Wright each have a right to
vote 50% of the issued and outstanding stock of the LLC at all times;  provided,
however,  that in the  event  that  Wright  is a  party  to any  agreement  that
prohibits it from exercising  such voting proxy,  such proxy shall be granted to
an independent  third party mutually  acceptable to both Wright and the Company;
and  provided,  further,  that Wright shall have the option to purchase  such 1%
interest for $1.00 at anytime  following the Formation  Date.  Furthermore,  the
Company hereby agrees to take all action necessary to ensure that any such proxy
continues in perpetuity,  including  without  limitation,  executing  subsequent
voting proxy upon the expiration of any existing proxy under applicable Delaware
law or, at the request of Wright, entering into a voting trust to effectuate the
purposes set forth in this Section 3(D).

        SECTION 4.         CORPORATE GOVERNANCE; MANAGEMENT.

        A.  Except as otherwise required by law or as provided in the
Charter, responsibility for the management, direction and control of the
LLC shall be vested in the Board of Directors of the LLC.  The Charter

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shall provide for the election of four directors.

        B. The directors of the LLC shall be elected annually at annual meetings
of the  stockholders  of the LLC.  It is  understood  and agreed by the  parties
hereto that two of the  directors of the LLC shall be  individuals  nominated by
Wright and two of the directors of the LLC shall be individuals nominated by the
Company.  Each of the parties hereto  covenants and agrees to vote its shares of
stock of the LLC to cause the election of the directors  nominated in accordance
with the  foregoing.  In the  event of the  death,  incapacity,  resignation  or
removal of a director  prior to the end of his or her term,  each of the parties
hereto  agrees  to vote  its  shares  of stock  so as to  appoint  as his or her
replacement a director  nominated by the party hereto who nominated the director
whose death, incapacity, resignation or removal was the cause of such vacancy.

        C.  Wright and the Company shall take all actions necessary or
appropriate to ensure that the Charter accurately reflects the
arrangements set forth in this Section 4.

        D. The  management of the LLC shall be comprised of officers  designated
by the  Board  of  Directors  of the  LLC.  Each of the  parties  hereto  hereby
covenants  and agrees to cause the  directors of the LLC nominated by it to cast
their  votes so as to appoint as  officers  of the LLC  individuals  who qualify
under the  foregoing  provisions  of this Section  4(D).  In the event of death,
incapacity,  resignation  or other removal of an officer prior to the end of his
or her term, each of the parties hereto agrees to cause the directors of the LLC
to cast  their  votes so as to  appoint  his or her  replacement  a nominee  who
qualifies under said foregoing provisions of this Section 4(D).

        E.  Notwithstanding  anything  to the  contrary  contained  herein,  the
parties hereto hereby agree to use their best efforts to avoid the occurrence of
any deadlock and further agree to use their best efforts to resolve any deadlock
as expeditiously as possible.

        F. The parties hereto agree that the Board of Directors of the LLC shall
meet at least once each  calendar  quarter at such time and place  acceptable to
all directors,  and at each annual meeting of the Board of Directors,  an annual
operating Budget of the LLC shall be adopted.

        G. If the parties are unable to agree at any Board of Directors' meeting
to act upon a resolution  approving the LLC's annual  operating plan and Budget,
the  parties  hereto  agree that a  top-level  meeting be  convened  between the
parties,  attended  by  corporate  officers  of each party with  decision-making
authority  regarding  the dispute,  in order to attempt in good faith to resolve
the matter. At such meeting each of the parties hereto will use its best efforts
to resolve the deadlock and such meeting  shall  continue  until a resolution is
achieved.

        SECTION 5.         RESEARCH AND DEVELOPMENT ACTIVITIES.

        A.  Wright will use its best efforts to obtain regulatory approval
to sell and distribute the Products.  In connection therewith, Wright

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and the  Company  will meet,  discuss  and  formulate  a plan for Wright to fund
pre-clinical animal studies and clinical trials. Wright and the Company agree to
establish a clinical trials committee (the "CTC"),  comprised equally of members
from Wright and the  Company.  The CTC will design and  supervise  the  clinical
trials and shall have the full  authority to direct the conduct of such clinical
trials. The CTC will operate by consensus,  however, in the event the members of
the CTC cannot  unanimously  agree upon any given  matter  (other  than  matters
related to the funding of the clinical trials), such matter shall be referred to
and  resolved  by an  oversight  committee  comprised  of  an  equal  number  of
independent members from the respective scientific advisory boards of Wright and
the Company.

        B. Wright agrees that it shall use  commercially  reasonable  efforts to
assist and  consult  with the Company  with  respect to  financial,  accounting,
regulatory, engineering and manufacturing matters relating to the Products.

        C.  The  LLC  shall  use  the  Company   exclusively  for  research  and
development  services;  provided that in the event the Company ceases to provide
such  research  and  development  services,  the LLC shall be  permitted to find
alternatives sources of research and development services.

        D. (1) On the fourth  anniversary of this  Agreement,  the Company shall
provide research and development  services to the LLC and (2) upon  commencement
of production of any Products, the Company shall provide manufacturing services,
each on financial terms to be mutually  agreed upon by the Company,  the LLC and
Wright.

        SECTION 6.         DISTRIBUTION RIGHTS; INTELLECTUAL PROPERTY RIGHTS.


        A. In furtherance of the LLC, the Company hereby agrees to cause the LLC
to grant and convey to Wright the world-wide  exclusive rights to sell,  market,
distribute  and conduct all  incidental  and necessary  activities  thereto with
respect to the Products  pursuant to a distribution  agreement  substantially in
the form of Exhibit C attached hereto.

        B. The Company  shall own all patents  associated  with the  Technology;
provided that the Company  hereby grants the LLC a  royalty-free  license to the
Company's  intellectual  property to the extent  necessary to make, use and sell
any Product,  including without  limitation,  any and all patents and registered
trademarks,  which  license  shall be exclusive  for  musculoskeletal  use. Such
license shall  automatically  transfer to any successors in interest of the LLC.
Wright shall have the right to develop and own trademarks and tradenames for the
sale of the Product;  provided that Wright shall undertake to acknowledge in any
Product  literature  that the  Company  participated  in the  invention  of such
Product.  Any intellectual  property  developed by either party, or by any third
party,  pursuant to work  commissioned as an Approved R&D Expense shall be owned
by the LLC.  Patent  prosecution  and  maintenance  costs  associated  with such
intellectual  property  shall  be  paid by the  LLC.  Research  and  development
conducted by either party,

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independent of this Agreement,  or not  commissioned as an Approved R&D Expense,
and the intellectual property associated therewith,  shall be owned by the party
conducting such research and development.

        SECTION 7.         PROFIT SHARING; SALES; FORECASTS, ETC.

        A.  Profit  Sharing.  The LLC shall pay each of Wright  and the  Company
fifty  percent  (50%) of all Net  Profits,  if any, on the sale of any  Products
during  each  month;  provided  that,  if in any  month  Expenses  exceed  Gross
Billings,  such excess  Expenses  shall be carried  forward and  deducted in the
following  month on a pro rata basis  consistent with the percentage of Expenses
incurred  and paid that month to Wright and the  Company  respectively.  The Net
Profit  calculation  shall be conducted by Wright,  and the LLC shall tender any
payment to the Company and Wright, within 90 days of the end of each month.

        B.  Sales.  Wright hereby agrees to use commercially reasonable
efforts to promote the Products in accordance with the Budgets.

        C.  Forecasts.  Wright shall provide quarterly sales forecasts
that will include its best  forecast for sales in the succeeding three
(3) months as well as projected sales for the succeeding twelve (12)
months.

        D.  Orders  and  Receivables.  Wright  shall  take  all  orders  for the
Products.  Upon notification  from Wright,  the Company shall be responsible for
promptly  delivering  such  Products  directly  to the  customer  or Wright,  as
directed by Wright  from time to time.  The  Company  shall  provide the Product
packaged and sterile according to Wright's packaging instructions.  Wright shall
be responsible for all billing and collections.  Freight shall be shipped F.O.B.
the  Company  and shall be added by  Wright to all  billings  to  customers,  if
acceptable to the marketplace.

        SECTION 8.         ACCOUNTING AND GENERAL REPORTING.

        A. The accounting  period of the LLC shall commence on January 1 of each
year end on December 31 of the  following;  provided  that the first  accounting
period of the LLC shall  commence as of the date this  Agreement is executed and
end on the next following December 31.

        B. Wright shall be responsible  for keeping all books and records of the
LLC in  accordance  with  sound and  generally  accepted  accounting  principles
applicable the LLC and corporate practices  consistently  applied.  Wright shall
make and keep books,  records and accounts that in reasonable  detail accurately
and fairly reflect the transactions of the LLC.

        C.  Wright  shall  prepare  monthly,   quarterly  and  annual  financial
statements of the LLC. Such financial statements shall be prepared in accordance
with  generally  accepted  accounting  principles.   Wright  shall  submit  such
statements to the Company as soon as practicable  (but not later than 30 days in
the case of monthly and quarterly  financial  statements and 60 days in the case
of annual financial statements) after the end of each period.

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        D. Each party shall have the right,  upon 10 days notice, to inspect the
financial  records  of the other  party  and the LLC only as they  relate to the
calculation of Expenses  (including without  limitation,  commissions,  Approved
Marketing  Expenses),  Gross  Billings and the  calculation  of Net Profit.  All
materials  reviewed and all materials prepared by the other party based upon the
audit  shall  remain  confidential  and not be used for any  purpose  other  the
operation or enforcement of this Agreement.

        SECTION 9.         PROPRIETARY INFORMATION.

        A. All  business,  technical,  research and  development  and  financial
information and materials  containing such business  information provided by the
parties  to each  other,  including  without  limitation,  lists of  present  or
prospective  customers  or vendors  or of persons  that have or shall have dealt
with the respective  parties  hereto,  customer  requirements,  preferences  and
methods  of  operation,   management  information  reports  and  other  computer
generated  reports,   pricing  policies  and  details,   details  of  contracts,
operational  methods,  plans or  strategies,  business  acquisition  plans,  new
personnel  acquisition  plans,  product  information  and  samples,  technology,
know-how, patent applications,  designs and other business,  technical, research
and development and financial affairs learned  heretofore or hereafter,  are and
shall be treated as confidential.  Each party agrees for itself and on behalf of
its  directors,  officers,  employees  and agents to whom such  information  and
materials  are  disclosed,  that it and they  shall  keep such  information  and
materials  confidential and retain them in strictest  confidence both during and
after the term of this  Agreement.  Such  information and materials shall not be
disclosed  by either party to any person  except to its  officers and  employees
requiring  such  information or materials to perform  services  pursuant to this
Agreement  and except to other persons under a  confidentiality  agreement  with
either  party  protecting  such   information   from   disclosure.   Each  party
acknowledges  and agrees that it shall be liable to the other for damages caused
by any breach of this provision or by any unauthorized disclosure or use of such
confidential  information  and  materials by its officers and employees or third
parties to whom  unauthorized  disclosure  was made.  In  addition  to any other
rights or remedies  that may be  available  to each  party,  each party shall be
entitled to appropriate  injunctive relief or specific  performance  against the
other or its officers and employees to prevent  unauthorized  disclosure of such
confidential  information and materials or other breach of this provision.  Each
party acknowledges and agrees that such unauthorized  disclosure or other breach
of this  provision  will cause  irreparable  injury to the other  party and that
money damages will not provide an adequate remedy.  Each party shall be entitled
to recover from the other its costs,  expenses and  attorneys'  fees incurred in
enforcing  its rights under this Section 9. Each party shall return to the other
all such  information  and  materials  covered under this Section 9 and received
pursuant  to  this  Agreement  and  all  copies  thereof  immediately  upon  the
termination of this Agreement.

        B. This obligation of confidentiality shall not apply to any information
that (1) was known to the receiving party at the time of receipt as evidenced by
tangible  records;  (2) was in the  public  domain at the time of  receipt;  (3)
becomes publicly available through no fault

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of the party  obligated  to keep it  confidential;  (4) such party  legitimately
learns from third parties who are under no obligation  of  confidentiality  with
respect to the information;  or (5) is required by applicable law or court order
or other mandatory legal process to be disclosed.

        C.  The provisions of this Section 9 shall survive the termination
or expiration of this Agreement.

        SECTION 10.        OPERATION OF THE LLC.

        A.  The  Company  shall  provide  the  LLC  with  product  research  and
development  services,   engineering  support,   patent  services,  as  well  as
manufacture  the  Products  for sale by the LLC,  all  pursuant to the Budget of
Approved R&D Expenses.  As set forth in the Budget, the Company hereby agrees to
provide continuing  research and development  support necessary to meet customer
demand, technological advances and as may reasonably be requested by Wright, and
employees of the Company  shall be regularly  available to consult and work with
the LLC and Wright on such research and  development.  In addition,  the Company
shall manufacture and supply all Products necessary for the conduct of the LLC's
business;  provided that the LLC may use an alternative manufacturer or supplier
that it determines is more cost effective than the Company.  In order to receive
the necessary funding for the conduct of all Approved R&D Expenses and all other
Expenses set forth in the Budget, the Company shall be allowed to draw down upon
the Initial Note on the first of each month an advance of  $100,000,  and within
seven days thereafter  provide a reconciliation of previous months  expenditures
and the balance of the account to date.  This advance  shall be  transferred  by
wire directly to a segregated  non-commingle operating account of the Company by
the 1st of the month. If during any month the  reconciliation  reflects a credit
balance in excess of $10,000,  or if a large purchase is  anticipated  exceeding
$10,000,  this  monthly  advance  amount may be adjusted  accordingly  by mutual
agreement between Wright and the Company.

        B. Wright shall provide the LLC with administrative services, accounting
services and marketing service, all pursuant to the Budget of Approved Marketing
Expenses.  In  addition,  Wright  shall  be  fully  responsible  for any and all
regulatory  approvals necessary for the public sale and marketing of the Product
and all labeling and warnings associated with the Product.  The Company promptly
shall provide  Wright notice of any and all claims from third parties  regarding
any of the  Products,  including  events that may be  reportable as an under any
current or future Food and Drug  Administration  MDR (medical device  reporting)
regulations.  Upon  request,  Wright shall  consult with the Company  regarding,
and/or provide the Company with proof of any regulatory approvals.  In order for
Wright and the Company to be  reimbursed  for expenses  detailed in Section 3(C)
hereof,  and for those  Approved  Marketing  Expenses and all other Expenses set
forth in the Budget,  Wright and the Company  shall provide the LLC with monthly
invoices,  which  invoices  shall set forth in  reasonable  detail the  services
provided and which shall be paid within 15 days of receipt by the LLC.

        C.   Wright shall be the exclusive distributor of all Products,

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and shall be entitled to distribute the Products in a manner consistent
with the distribution of its own products.

        D. The LLC shall be managed in  accordance  with its Budget and detailed
business  plans.  In  accordance  with  the  initial  Budget,  the LLC  shall be
permitted  to draw  down the  Initial  Note  upon  demand  in  amounts  equal to
approximately  $800,000  for direct  expenses  and  approximately  $700,000  for
indirect  expenses.  In  addition,  the LLC shall be permitted to draw down upon
each Additional Note in amounts necessary to fund operations.

        SECTION 11.        COVENANTS OF THE PARTIES.

        A. Except as otherwise expressly provided herein, all costs and expenses
incurred in connection  with the preparation and execution of this Agreement and
the transactions  contemplated hereby, including without limitation,  attorneys'
fees and advisors'  fees, if any, will be paid by the party incurring such costs
and expenses

        B. Each of the parties  hereby  agree to use all  reasonable  efforts to
take,  or cause to be taken,  all  actions  and to do, or cause to be done,  all
things  necessary,   proper  or  advisable  under  applicable  laws,  rules  and
regulations to consummate and make effective the  transactions  contemplated  by
this Agreement,  including without  limitation,  any state or federal regulatory
filings.  In the event that at any time after the  execution of this  Agreement,
further  action is  necessary  or  desirable  to carry out the  purposes of this
Agreement,  the proper  officers or directors of each of the parties  shall take
such necessary action.

        C. Upon execution of this Agreement, and continuing during its term, the
Company  shall provide the LLC access to, or copies of, all documents and things
in the Company's  control which relate to the Products and are necessary for the
LLC to conduct its business, including without limitation,  obtaining regulatory
approval for any Product.

        D. The Company  hereby agrees to use its  reasonable  efforts during the
term of this  Agreement  to actively  seek to develop the  Products  and to make
prudent and  efficient use of the Initial Note and  Additional  Note, as well as
its own research and development  expenditures.  As used in this Agreement,  the
term  "best  efforts"  shall mean the  commercially  reasonable  efforts  that a
prudent  person  desiring to achieve a  particular  result would use in order to
ensure that such result is achieved as expeditiously as possible.

        E. Each of the parties  hereto hereby agrees to at all times conduct its
efforts  hereunder in strict compliance with all applicable  federal,  state and
local laws and regulations and with the highest government standards.

        F. Each of the parties  hereto  hereby agrees to use its best efforts to
arrange for independent financing for the LLC; provided,  that in the event that
the LLC obtains such independent  financing,  the parties hereto hereby agree to
cause the LLC to distribute the first  $1,000,000 of any such proceeds to Wright
as a return of its Initial

                                                  Page 95 of 105

<PAGE>



Capital Contribution to the LLC.

        SECTION 12.        LIABILITY.

        A. The  Company  shall  indemnify  and  hold  harmless  Wright  from all
liability,  damages,  costs and expenses (including  reasonable attorneys' fees)
incurred as a result of any claims, actions,  judgments and demands for injuries
to persons or property arising from any and all design or manufacturing  defects
in the Products  (collectively,  a "Claim"), and for any conduct of the Company,
but not for claims,  actions,  judgments,  and  demands  arising  from  Wright's
negligence, gross negligence, or willful misconduct with respect to the sale and
distribution of Products.

        B. Wright shall  indemnify  and hold harmless the Company from any Claim
arising from Wright's negligence,  gross negligence,  or willful misconduct with
respect to the sale and distribution of Products.

        C.  The provisions of paragraphs 12(A) and 12(B) hereof shall
survive the expiration and any termination of this Agreement.

        D. Upon  commercialization  of Products,  the LLC shall carry  liability
insurance regarding the Products in an amount consistent with industry practice,
and each of the Company and Wright shall carry  commercially  reasonable amounts
of insurance commensurate with their respective obligations under this Agreement
(including without limitation,  its indemnification  obligations) and support of
the LLC's operations.

        E.  With  respect  to  any  actual  or  potential  Claim  or  demand  or
commencement  of any action,  or the occurrence of any other event,  relating to
any Claim against which a party hereto is indemnified (the "Indemnified  Party")
by the other party (the "Indemnifying Party") under this Section 9:

            1.  Promptly  after the  Indemnified  Party first  receives  written
documents  pertaining  to the Claim,  or if such Claim does not  involve a third
party Claim (a "Third Party Claim"),  promptly after the Indemnified Party first
has actual knowledge of such Claim,  the Indemnified  Party shall give notice to
the Indemnifying  Party of such Claim in reasonable  detail,  stating the amount
involved, if known, together with copies of any such written documentation.

            2. The Indemnifying  Party shall have no obligation to indemnify the
Indemnified  Party with respect to any Claim if the  Indemnified  Party fails to
give the notice with respect thereto in accordance with this Section 9.

            3. If the Claim involves a Third Party Claim,  then the Indemnifying
Party shall have the right,  at its sole cost,  expense and  ultimate  liability
regardless  of the outcome,  and through  counsel of its choice  (which  counsel
shall be reasonably satisfactory to the Indemnified Party), to litigate, defend,
settle or  otherwise  attempt  to  resolve  such Third  Party  Claim;  provided,
however,  that if in the Indemnified  Party's reasonable  judgment a conflict of
interest may exist between the Indemnified Party and the Indemnifying Party with
respect to

                                                  Page 96 of 105

<PAGE>



such Third Party Claim,  then the Indemnified  Party shall be entitled to select
counsel of its own choosing,  reasonably satisfactory to the Indemnifying Party,
in which event the  Indemnifying  Party shall be obligated to pay the reasonable
fees and expenses of such counsel.  Notwithstanding the preceding sentence,  the
Indemnified  Party may elect,  at any time and at the  Indemnified  Party's sole
cost,  expense and ultimate  liability,  regardless of the outcome,  and through
counsel of its choice,  to  litigate,  defend,  settle or  otherwise  attempt to
resolve such Third Party Claim. If the Indemnified  Party so elects (for reasons
other than the  Indemnifying  Party's failure or refusal to provide a defense to
such Third Party Claim), then the Indemnifying Party shall have no obligation to
indemnify the Indemnified Party with respect to such Third Party Claim, but such
disposition will be without  prejudice to any other right the Indemnified  Party
may have to  indemnification  under this Section 9, regardless of the outcome of
such Third Party Claim. If the Indemnifying  Party fails or refuses to provide a
defense to any Third  Party  Claim,  then the  Indemnified  Party shall have the
right to undertake  the defense,  compromise  or  settlement of such Third Party
Claim,  through  counsel of its choice,  on behalf of and for the account and at
the  risk  of the  Indemnifying  Party,  and the  Indemnifying  Party  shall  be
obligated to pay the costs,  expenses and reasonable attorneys' fees incurred by
the  Indemnified  Party in connection with such Third Party Claim. In any event,
Wright  and the  Company  shall  fully  cooperate  with  each  other  and  their
respective counsel in connection with any such litigation,  defense,  settlement
or other attempted resolution.

        SECTION 13.        TERM AND TERMINATION.

        A. The term of the Agreement  shall commence as of the date of execution
of this  Agreement and unless this agreement is terminated  earlier  pursuant to
the provisions  hereof or otherwise,  shall expire upon  dissolution of the LLC.
During the term that this  Agreement  remains in effect,  the Company and Wright
agree not to sell or  distribute  any other product line similar to the Products
for use in the  musculoskeletal  area  without the  consent of the other  party;
provided,  however,  that this  restriction  shall not apply to any product line
incidentally  acquired by either company  through the purchase of another entity
and  subsequently  contributed  to  the  LLC,  Wright's  ownership  interest  in
OsteoBiologics, Inc. or the sale or distribution by Wright of products developed
by OsteoBiologics, Inc.

        B.  In addition to other events of Termination set forth in this
Agreement, this Agreement shall terminate in the following events:

            1. If either  party  breaches a material  term or  provision of this
agreement and the breaching party fails to cure the breach within 180 days after
notice thereof, the non-breaching party may terminate this Agreement,  with such
termination effective upon expiration of the 180 day period.

            2. If any  governmental  authority limits the ability of the Company
to  manufacture or Wright to sell the Products in any material  respect,  either
party may terminate this  agreement by giving written notice of termination  for
such reason to the other party, such

                                                  Page 97 of 105

<PAGE>



termination to be effective upon the giving of such notice.

        C. Upon the expiration or termination  of this  Agreement,  Wright shall
have no right to order or purchase Products from the Company or the LLC, but may
dispose of its  inventory  of the Products  through  normal  channels.  Upon the
termination of this Agreement,  all intellectual property owned by either party,
but licensed to the LLC, shall,  subject to the terms of any applicable  license
agreement, remain property of the respective party.

        SECTION 14.        MISCELLANEOUS.

        A. Should any  provision  of this  agreement  be  determined  by a court
having  jurisdiction  over the parties  and the subject  matter to be illegal or
unenforceable in such  jurisdiction,  the parties agree that such  determination
shall not affect or impair the validity or  enforceability  of such provision in
any other jurisdiction or the validity or enforceability of any other provision.
The  determination  by a court  having  jurisdiction  over the  parties  and the
subject matter that any provision of this agreement is illegal or  unenforceable
in such jurisdiction shall also not affect the validity or enforceability of the
other provisions of the agreement in that jurisdiction.

        B. If a claim for  indemnification  arises  under  this  agreement,  the
indemnified party shall give the indemnifying party prompt written notice of any
event  which  might  give rise to a claim for  indemnification,  specifying  the
nature of the  possible  claim and the amount  believed to be  involved.  If the
claim for indemnification  arises from a claim or dispute with any third person,
the  indemnifying  party  shall have the right,  at its own  expense,  to defend
and/or settle such claim or dispute,  and the indemnified  party shall generally
cooperate  fully  in any  such  defense,  but at no  out-of-pocket  cost  to the
indemnified party.

        C. In the event that either party is unable to carry out its obligations
under this agreement due to force majeure (including,  without limitation,  acts
of God; war;  riot;  fire;  flood;  explosion;  labor  disputes;  embargoes;  or
unavailability or shortages of raw materials, bulk, equipment or transport), the
failure so to perform  shall be excused and not  constitute a default  hereunder
during the  continuation of the  intervention  of such force majeure.  The party
affected  by  such  force  majeure  shall  resume  performance  as  promptly  as
practicable  after such force majeure has been eliminated.  Notwithstanding  the
foregoing,  in the event  either  party is  unable to carry out its  obligations
hereunder by reason of such force majeure for a period of 180 days or more, than
either party may at any time  thereafter  during the  continuation of such force
majeure  terminate  this  agreement upon notice to the other party setting forth
the circumstances of such force majeure.

        D.  This agreement is binding upon and inures to the benefit of
the parties hereto and their respective permitted successors and
assigns.

        E.  This agreement, including the Exhibits annexed hereto,

                                                  Page 98 of 105

<PAGE>



constitutes  the entire  agreement  between the parties  with  reference  to the
subject matter hereof and supersedes all previous  agreements,  representations,
memoranda  and  undertakings  whether oral or written,  between the parties with
respect to the subject matter hereof and may not be changed  without the written
consent of the parties.

        F. Except as provided for in Section 4(F),  any disputes  regarding this
contract between the parties shall be settled by binding  arbitration  under the
rules of the American  Arbitration  Association.  Each party shall pick a single
temporary   arbitrator  which  two  arbitrators  will  then  choose  the  single
arbitrator  before whom the dispute  shall be heard.  The dispute shall be heard
before that single arbitrator in Memphis, Tennessee, if initiated by the Company
and in Boston, Massachusetts, if initiated by Wright.

        G. All notices and reports  required or permitted to be given under this
agreement  shall be deemed  validly  given and made if in writing and  delivered
personally  (as of such  delivery)  or sent by  registered  or  certified  mail,
postage prepaid,  return receipt requested (as of ten (10) days after deposit in
the mail) or sent by facsimile or overnight courier service, charges prepaid (as
of the date of  confirmed  receipt)  to the party to be  notified in care of its
General Counsel at its address (or facsimile  number if sent by facsimile) first
set forth above.  Either  party may, by notice to the other,  change its address
and facsimile number for receiving such notices or reports.

        H.  This agreement shall be construed in accordance with and
governed by the laws of Tennessee without regard to its principles of
conflicts of laws.

        I. Nothing  contained in this  Agreement  shall be deemed to  constitute
either  party  as  the  agent  for  the  other,  or  to  establish  a  fiduciary
relationship of any kind between the parties.

                                                  Page 99 of 105

<PAGE>



        IN WITNESS WHEREOF,  the parties hereto have executed and delivered this
Agreement as of the day and year first above written.


                                  WRIGHT MEDICAL TECHNOLOGY, INC.


                                  By: /s/Jon A. Brilliant
                                         Jon A. Brilliant
                                         Assistant General Counsel



                                  TISSUE ENGINEERING, INC.


                                  By: /s/Eugene Bell
                                         Eugene Bell
                                         CEO & President

                                                  Page 100 of 105