Document:

EXHIBIT 10.56

Execution Version
D&W June 5, 2002

                        SETTLEMENT AGREEMENT AND RELEASE

      This Settlement Agreement and Release (the "Agreement"), dated as of June
1, 2002, is entered into by and among Osteotech, Inc., a Delaware Corporation
with its principal offices at 51 James Way, Eatontown, NJ 07724 ("OTI"), and
Osteotech Investment Corporation, a New Jersey Corporation with its principal
offices at 51 James Way, Eatontown, NJ 07724 (collectively "Osteotech"), the
Musculoskeletal Transplant Foundation, a not-for-profit District of Columbia
corporation with its principal place of business at 125 May Street, Edison, NJ
08837 ("MTF"), and Synthes Spine Company, L.P., a Delaware limited partnership
with its principal place of business at 1690 Russell Road, Paoli, PA 19301
("Synthes") (collectively, the "Parties").

      WHEREAS, Osteotech, MTF and Synthes are parties to a certain action
captioned Musculoskeletal Transplant Foundation and Synthes Spine Co. L.P. v.
Osteotech, Inc and Osteotech Investment Corp; and Osteotech, Inc. and Osteotech
Investment Corp. v. Musculoskeletal Transplant Foundation and Synthes Spine Co.
L.P., Civ. No. 00-4869 (JWB), pending in the United States District Court for
the District of New Jersey (the "Action"); and

      WHEREAS, the Parties desire to settle and resolve all disputes that led to
the Action, and all claims, counterclaims, allegations and defenses asserted
therein.

      NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:

      1. The Parties have contemporaneously executed a License Agreement of even
date (the "License Agreement"), and OTI and MTF have entered into a processing
agreement entitled "Second Amended and Restated Processing Agreement Between
Osteotech, Inc. and

                                                                             E-2
<PAGE>

Musculoskeletal Transplant Foundation and Biocon, Inc." (the "Processing
Agreement"). This Agreement shall take effect only upon the effectiveness of the
License Agreement and the Processing Agreement. The effective date of this
Agreement shall be the same as the effective dates of the License Agreement and
the Processing Agreement.

      2. MTF and Synthes and their respective successors, assigns, affiliates,
parents and subsidiaries covenant and agree not to challenge or cause to be
challenged, directly or indirectly, the validity or enforceability of any claims
of Osteotech's U.S. Patent No. 5,284,655 (the "'655 patent") and U.S. Patent No.
5,290,558 (the "'558 patent"), and/or the foreign counterparts of such patents
in any domestic or foreign court or tribunal, including the United States Patent
Office and any foreign patent offices in which the foreign counterparts of such
patents have been filed and/or registered. As to the `655 and `558 patents, MTF
and Synthes and their respective successors, assigns, affiliates, parents and
subsidiaries waive any and all invalidity and unenforceability defenses in any
future litigation, arbitration, dispute, or other proceeding. This waiver
applies to any product made, used, sold, offered for sale, or imported by MTF
and Synthes, or any of their respective assignees, successors, licensees,
sublicensees, or for those who act for or in concert with any of them at any
time during the life of either the `655 or `558 patents. MTF and Synthes and
their respective successors, assigns, affiliates, parents and subsidiaries shall
not counsel or assist others to take or in taking any action that MTF and
Synthes and their respective successors, assigns, affiliates, parents and
subsidiaries are not permitted to take under this paragraph of the Agreement.

      3. The Parties shall cause the Action to be resolved by directing their
respective counsel to execute and file in the Action a stipulated dismissal with
prejudice, with the parties to the Action bearing their own costs, in the form
annexed hereto as Exhibit A.

                                                                             E-3
<PAGE>

      4. Except as set forth in this paragraph, Osteotech hereby releases,
acquits, discharges and covenants not to sue each of MTF and Synthes, and its
successors, assigns, affiliates, parents, subsidiaries, officers, directors,
shareholders, employees, agents, distributors, marketers, promoters, customers
and attorneys from any and all claims, causes of action, rights, allegations,
liabilities or damages whatsoever that Osteotech has asserted, could have
asserted or sought leave to assert against MTF and Synthes in the Action. Any
release provided by Osteotech to MTF and Synthes with respect to claims arising
out of the alleged infringement of the `558 and/or `655 patents is based solely
on and is limited to the rights granted by Osteotech to MTF and Synthes as
defined and described in the License Agreement, and with regard to said
infringement claims, such parties are released by this Agreement only to the
extent their activities are permitted under and are within the scope of the
License Agreement.

      5. MTF and Synthes hereby release, acquit, discharge and covenant not to
sue Osteotech and its successors, assigns, affiliates, parents, subsidiaries,
officers, directors, shareholders, employees, agents, distributors, marketers,
promoters, customers and attorneys from any and all claims, causes of action,
rights, allegations, liabilities or damages whatsoever that MTF and/or Synthes
have asserted, could have asserted or sought leave to assert against Osteotech
in the Action.

      6. Except as expressly stated herein, the releases granted above shall not
be deemed to grant any license, covenant not to sue, or other rights, whether
express or implied, in any patents or other intellectual property rights of any
of the Parties. To the extent that any such rights are being granted by one
party to another, they are granted in the License Agreement.

      7. Except as specifically provided in this Agreement or the License
Agreement, the Parties expressly agree and understand that this Agreement does
not extend to any other person

                                                                             E-4
<PAGE>

or entity, and that it does not affect Osteotech's rights against any other
person or entity that Osteotech may charge with infringement of its patents,
including the `558 and `655 patents.

      8. The Parties declare and represent that: (a) no promise, representation,
inducement or agreement not expressed in this Agreement has been made to any of
them; (b) they are not relying on any promise, representation, inducement or
agreement in entering into this Agreement except as expressly set forth in this
Agreement; (c) this Agreement (including all attached exhibits) contains the
entire agreement between the parties relating to its subject matter; (d) the
parties have consulted with counsel of their own choosing prior to entering into
this Agreement; and (e) the terms of this Agreement are contractual and not mere
recitals.

      9. This Agreement shall be binding on and inure to the benefit of the
successors or assigns of any of the Parties (including any assignee of the `655
or `558 patents). In all other respects, this Agreement shall not create
third-party beneficiary rights in any nonparty hereto or be relied on by any
nonparty hereto as an admission, waiver or in any other way for any purpose.

      10. The persons executing this Agreement on behalf of the Parties each
represent and warrant that they have full and complete authority to do so, and
to make and give the promises, releases, and covenants set forth in this
Agreement.

      11. The terms of this Agreement shall be governed, construed and enforced
in accordance with the laws of the State of New Jersey, without regard to
contrary New Jersey conflict of laws provisions.

      12. This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, and all of
such counterparts together shall constitute one and the same instrument.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Agreement.

                                                                             E-5
<PAGE>

      IN WITNESS HEREOF, the undersigned certify their assent to the terms of
this Agreement.

OSTEOTECH, INC

By: /s/ Richard W. Bauer
   --------------------------------------
    Richard Bauer
    President and Chief Executive Officer

OSTEOTECH INVESTMENT CORPORATION

By: /s/ Richard W. Bauer
   --------------------------------------
    Name: Richard W. Bauer
    Title: President and CEO

MUSCULOSKELETAL TRANSPLANT FOUNDATION

By: /s/ Bruce Stroever
   --------------------------------------
    Bruce Stroever
    President and Chief Executive Officer

SYNTHES SPINE COMPANY, L.P.

By: /s/ Thomas B. Higgins
   --------------------------------------
    Name: Thomas B. Higgins
    Title: President

                                                                             E-6
<PAGE>

                                                                       EXHIBIT A
                                                         to Settlement Agreement

Charles M. Lizza (CL 5036)
LeBOEUF, LAMB, GREENE & MacRAE L.L.P.
One Riverfront Plaza
Newark, New Jersey  07102
(973) 643-8000
Attorneys for Plaintiffs/Counterclaim Defendants
Musculoskeletal Transplant Foundation and
Synthes Spine Company, L.P.

Frederick A. Nicoll (FN 9351)
DORSEY & WHITNEY LLP
East 80 Route 4
Paramus, New Jersey  07652
(201) 291-8904
Attorneys for Defendants/Counterclaim Plaintiffs
Osteotech, Inc. and Osteotech Investment Corporation

                       IN THE UNITED STATES DISTRICT COURT
                         FOR THE DISTRICT OF NEW JERSEY

MUSCULOSKELETAL TRANSPLANT
FOUNDATION and SYNTHES                     )
SPINE COMPANY, L.P.,                       )
                                           )    Civ. No. 00-4869 (JWB)
                  Plaintiffs,              )
                                           )
                           v.              )
                                           )
OSTEOTECH, INC. and OSTEOTECH,             )
INVESTMENT CORPORATION,                    )
                                           )
                  Defendants.              )
-----------------------------------------------

OSTEOTECH, INC. and OSTEOTECH,
INVESTMENT CORPORATION,                    )    STIPULATION OF DISMISSAL
                                           )
                  Counterclaim-Plaintiffs, )
                                           )
                           v.              )
                                           )
MUSCULOSKELETAL TRANSPLANT                 )
FOUNDATION and SYNTHES                     )
SPINE COMPANY,  L.P.,                      )
                                           )
                  Counterclaim-Defendants. )

                                                                             E-7
<PAGE>

      IT IS HEREBY STIPULATED by and between the parties hereto, through their
undersigned attorneys, that the above-captioned actions be dismissed with
prejudice, with all parties bearing their own costs.

LeBOEUF, LAMB, GREENE & MacRAE L.L.P.           DORSEY & WHITNEY LLP

By:___________________________________          By:_______________________
   Charles M. Lizza (CL 5036)                      Frederick A. Nicoll (FN-9351)
   One Riverfront Plaza                            East 80 Route 4
   Newark, New Jersey  07102                       Paramus, New Jersey 07652
   (973) 643-8000                                  (201) 291-8904

   Attorneys for Plaintiffs/Counterclaim-          Attorneys for
   Defendants Musculoskeletal Transplant           Defendants/Counterclaim-
   Foundation and Synthes Spine Company, L.P.      Plaintiffs Osteotech, Inc.
                                                   and Osteotech Investment
                                                   Corporation

Dated:_____________________ , 2002              Dated:___________________ , 2002

                                                                             E-8EXHIBIT 10.57

                                     SECOND

                              AMENDED AND RESTATED

                          PROCESSING AGREEMENT BETWEEN

                                 OSTEOTECH, INC.

                                       AND

                      MUSCULOSKELETAL TRANSPLANT FOUNDATION

                                       AND

                                  BIOCON, INC.

                                   dated as of

                                  June 1, 2002

***Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                             E-9
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

1.  DEFINITIONS; COMPLIANCE WITH LAWS.........................................2

    1.1   Definitions.........................................................2
    1.2   Compliance with Laws................................................9

2.  DELIVERY AND PROCESSING OF TISSUE.........................................9

    2.1   MTF Commitment to Deliver Tissue for Processing.....................9
          2.1.1   Engagement of Osteotech.....................................9
          2.1.2   Forecasts...................................................9
          2.1.3   Tissue Products Returned to MTF............................11
          2.1.4   Inventory Requirements.....................................12
          2.1.5   Tissue Delivered in Respect of Consideration for License...13
          2.1.6   Processing Fees............................................15
          2.1.7   Procurement Fee............................................15
          2.1.8   Compliance With Applicable Standards.......................15
          2.1.9   Donor Records..............................................18
    2.2   Processing Responsibilities of Osteotech in Respect of MTF Tissue..19
          2.2.1   General Undertaking........................................19
          2.2.2   Interpretation; Change in Regulations......................19
          2.2.3   Processing Considerations..................................19
    2.3   Undertakings Regarding Osteotech Tissue............................20
          2.3.1   General Undertaking........................................20
          2.3.2   Furtherance of MTF Mission.................................21
          2.3.3   MTF Responsibilities.......................................21
          2.3.4   Fitness for End Use........................................21
          2.3.5   Labeling...................................................21
          2.3.6   Storage....................................................21
          2.3.7   Record Retention and Access................................22
          2.3.8   Indemnity..................................................22

3.  STORAGE, SHIPPING, REGULATORY COMPLIANCE AND LABELING....................22

    3.1   Possession and Storage of Tissue...................................22
    3.2   Shipping...........................................................23
    3.3   Certain Joint Compliance Responsibilities..........................24
    3.4   Records and Reports................................................26
    3.5   New Tissue Form Development........................................27
    3.6   New Proprietary Products...........................................28
    3.7   Other Services.....................................................28
    3.8   Publication and Public Disclosure of Scientific Information........29

4.  INDEMNIFICATION; SETTLEMENT..............................................30

    4.1   Indemnification....................................................30
    4.2   Confirmation of Previous Releases..................................32
    4.3   Settlement of Current Disputes.....................................32

                                                                            E-10
<PAGE>

5.  FINANCIAL TERMS..........................................................32

    5.1   Fees...............................................................32
    5.2   Invoicing and Payment..............................................33

6.  CONFIDENTIALITY AND CERTAIN OTHER COVENANTS..............................33

    6.1   Non-Disclosure of Confidential Information.........................33
    6.2   Non-Solicitation of Sales Agents...................................34
    6.3   Osteotech Sales Agents.............................................35
    6.4   Osteotech Marketing of Grafton(R)..................................35
    6.5   Dedicated Supply...................................................35
    6.6   Notices of Pricing and/or Processing Fee Increases.................35
    6.7   Bone Dowel Sales...................................................36
    6.8   Surviving Provisions...............................................36

7.  EFFECTIVENESS AND TERM OF AGREEMENT......................................36

8.  TERMINATION..............................................................36

9.  INSURANCE................................................................38

10. FORCE MAJEURE............................................................38

11. BINDING AGREEMENT; ASSIGNMENT............................................38

12. NAME, EMBLEM, PACKAGING, TECHNOLOGY AND TRADEMARK........................40

13. NOTICES..................................................................41

14. ENTIRE AGREEMENT.........................................................41

15. MODIFICATION.............................................................42

16. APPLICABLE LAW...........................................................42

17. WAIVER...................................................................42

18. INDEPENDENT CONTRACTOR...................................................42

19. SEVERABILITY.............................................................42

20. SUCCESSORS...............................................................42

21. COUNTERPART SIGNATURES; DELIVERY BY FACSIMILE............................42

22. EXHIBIT 1

23. EXHIBIT 2

24. EXHIBIT 3

25. SCHEDULE 2.1.6

                                                                            E-11
<PAGE>

                SECOND AMENDED AND RESTATED PROCESSING AGREEMENT

      This Second Amended and Restated Processing Agreement (this "Agreement"),
dated as of June 1, 2002, by and among Musculoskeletal Transplant Foundation,
("MTF"), a nonprofit District of Columbia corporation, Biocon, Inc., a nonprofit
District of Columbia corporation and the controlling parent corporation of MTF
("Biocon"; for purposes of this Agreement the term "MTF" shall include Biocon
and all existing and future affiliates of MTF and/or Biocon), and Osteotech,
Inc. ("Osteotech"; for purposes of this Agreement the term "Osteotech" shall
include all existing and future affiliates of Osteotech which engage in Tissue
Processing), a Delaware corporation. Capitalized terms used in this Agreement
shall have the meanings assigned to them in Section 1 hereof unless otherwise
defined elsewhere in this Agreement.

      WHEREAS, Osteotech provides high-quality tissue processing services and
other related services to entities engaged in procuring and distributing human
bone and related connective soft tissue for transplantation; and

      WHEREAS, MTF, directly, or by or through Biocon and/or other affiliates of
MTF, procures Tissue from various sources, and has contracted with Osteotech to
process such Tissue; and

      WHEREAS, MTF wishes to obtain Tissue Processing services from Osteotech
with respect to certain Tissue procured by MTF, and Osteotech desires to perform
such Tissue Processing services for MTF with respect to such Tissue and to
return the products of such Processing to MTF for distribution, under the
following agreed terms and conditions; and

      WHEREAS, Osteotech wishes to contract with MTF for MTF to procure certain
Tissue for Osteotech for use by Osteotech in a manner which is consistent with
MTF's mission as described in Section 2.3.2 hereof and in furtherance of the
interest of MTF's member organizations in finding productive uses for such
Tissue and MTF desires to perform such procurement services for such Tissue
under the following agreed terms and conditions; and

      WHEREAS, Osteotech and MTF are parties to a Processing Agreement dated as
of April 1, 1997 (the "Original Processing Agreement" and, as amended and
restated pursuant to that certain Amended and Restated Processing Agreement
among MTF, Biocon and Osteotech made as of September 1, 2000, the "Prior
Processing Agreement"), and desire that this Agreement supersede and replace the
Prior Processing Agreement in its entirety except as otherwise provided herein;
and

      WHEREAS, MTF and Synthes are parties to certain agreements listed on
Exhibit 1 hereto (the "MTF/Synthes Agreements") pursuant to which MTF processes
and distributes certain spine-related products developed by Synthes and/or MTF;
and

      WHEREAS, Osteotech owns certain patents with respect to which MTF and
Synthes desire to obtain a non-exclusive license in exchange for certain
consideration to Osteotech as hereinafter described.

                                                                            E-12
<PAGE>

      NOW, THEREFORE, the parties agree as follows:

      1.    DEFINITIONS; COMPLIANCE WITH LAWS

            1.1   Definitions.

            "Affiliate" shall have the meaning assigned to such term in Section
11(a) hereof.

            "Agreement" shall have the meaning assigned to such term in the
preamble hereof.

            "Annual Processing Fee Increase" shall have the meaning assigned to
such term in Schedule 2.1.6 hereto.

            "AATB" shall mean the American Association of Tissue Banks.

            "Average Gross Production Yield" shall have the meaning assigned to
such term in Section 2.1.2(a) hereof.

            "Best Efforts" shall mean, as to a party hereto, an undertaking by
such party to perform or satisfy an obligation or duty or otherwise act in a
manner reasonably calculated to obtain the intended result by action or
expenditure not disproportionate or unduly burdensome in the circumstances and
in any case without resorting to litigation or other legal proceedings.

            "Biocon" shall have the meaning assigned to such term in the
preamble hereof.

            "Bioimplants" shall mean engineered tissue graft forms processed
from cortical, cortical/cancellous, cancellous bone or variations thereof,
including without limitation ramps, dowels, wedges, blocks, and/or other forms
variations thereof.

            "Confidential Information" means all general and specific knowledge,
experience and information that is confidential and of value to MTF or to
Osteotech, including without limitation, formulations, designs, products,
processes, supplies, methods of manufacture or processing, SOPs, cost data,
master files, the nature of research and/or development projects, as well as
data relating thereto, marketing or business plans, Donor data and financial
data. It shall also mean any information disclosed to either party by any third
party which either MTF or Osteotech is obligated to treat as confidential or
proprietary. Information shall not be considered to be Confidential Information
of a party if it can be established that (i) such information was in the
possession of the other party prior to disclosure to such other party by the
party claiming that it is Confidential Information and such information is not
otherwise subject to a confidentiality agreement; (ii) such information is then
part of the public domain and became so without the breach of this or any other
confidentiality agreement by such other party or any of its affiliates; or (iii)
such information is developed independently by such other party or becomes known
to or acquired by such other party by means other than as a result of a breach
of a confidentiality agreement or any fiduciary obligation.

                                                                            E-13
<PAGE>

      "Donor Commitment" shall mean Tissue from Donors in accordance with the
following table:

<TABLE>
<CAPTION>
-------------------------------    -----------------------    ---------------------------------    --------------------------------
                                                                      Donors per Month                    Donors per Month
            Month                                                       Processed by                        Procured for
    (including first and                Total Donors                 Osteotech for MTF                    Osteotech by MTF
       last indicated)                   per Month                    ("MTF Donors")+                  ("Osteotech Donors")++
-------------------------------    -----------------------    ---------------------------------    --------------------------------
<S>                                        <C>                             <C>                                  <C>
June 2002
through and including
December 2002                              ***                             ***                                  ***
-------------------------------    -----------------------    ---------------------------------    --------------------------------
January 2003
through and including
December 2003                              ***                             ***                                  ***
-------------------------------    -----------------------    ---------------------------------    --------------------------------
January 2004
through and including
December 2004                              ***                             ***                                  ***
-------------------------------    -----------------------    ---------------------------------    --------------------------------
January 2005
through and including
December 2005                              ***                             ***                                  ***
-------------------------------    -----------------------    ---------------------------------    --------------------------------
January 2006
through and including
December 2006                              ***                             ***                                  ***
-------------------------------    -----------------------    ---------------------------------    --------------------------------
January 2007
through and including
December 2007                              ***                             ***                                  ***
-------------------------------    -----------------------    ---------------------------------    --------------------------------
January 2008
through and including
December 2008                              ***                             ***                                  ***
-------------------------------    -----------------------    ---------------------------------    --------------------------------
</TABLE>

----------

+     Except as otherwise provided in this Agreement, in each month, MTF Donors
shall meet the following requirements:

      (i) The average age of such MTF Donors shall be within *** years of the
average age of donors retained by MTF and shall have a substantially equivalent
male to female ratio as donors retained by MTF.

      (ii) At least *** of such MTF Donors shall be Standard Donors and
equivalent to donors retained by MTF for processing into Bioimplants for each
year of the Term of this Agreement. The intent is that such MTF Donors shall be
substantially the same as donors retained by MTF for processing into Bioimplants
which are promoted and/or distributed by Synthes. Furthermore,

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-14
<PAGE>

the intent is to meet Osteotech's specifications for Donors suitable for
Processing into Bioimplants as such specifications are provided from time to
time by Osteotech to MTF.

      (iii) The remaining *** of such MTF Donors shall be composed so as to
cause all of the MTF Donors to meet the following requirements:

           (A) At least *** of all MTF Donors will be Standard Donors;

           (B) Not more than *** of all MTF Donors will be ages *** through ***;

           (C) Not more than *** of all MTF Donors will be female ages ***
through *** ; and

           (D) Not more than *** of all MTF Donors will be male ages ***
through *** .

      The percentages set forth in clauses (A) through (D) above reflect the mix
of donors retained by MTF during the year preceding the Effective Date and shall
be set for the first year of the Term of this Agreement. If the mix of donors
retained by MTF during any subsequent year of the Term of this Agreement changes
from the percentages set forth in clauses (A) through (D) above, the mix of
Donors to be delivered by MTF to Osteotech for Processing during the immediately
succeeding year shall be changed to reflect the new mix of donors retained by
MTF. It is agreed that the percentages set forth in clauses (B), (C) and (D)
above are monthly averages which will be measured at the end of each calendar
quarter during the Term. In the event the monthly average of the delivered
percentages of Donors in clauses (B), (C) and (D) exceed the allowable
percentages set forth in clauses (B), (C) and (D), in any such calendar quarter
MTF shall deliver Donors in the first month of the next succeeding calendar
quarter which would cause the monthly average of the delivered percentages of
Donors during the preceding calendar quarter to comply with the maximum
allowable percentages set forth in clauses (B), (C) and (D). The maximum
allowable percentages set forth in clauses (B), (C) and (D) shall not affect the
percentage of MTF Donors which are required to be Standard Donors as set forth
in clauses (ii) and (iii)(A) above.

      (iv) Osteotech shall have the right on reasonable prior notice to MTF to
have an independent third party reasonably acceptable to MTF audit MTF's
compliance with the foregoing provisions regarding the mix of MTF Donors. MTF
shall cooperate with such audit and shall provide such third party with such
information as it shall request in order to conduct such audit. Osteotech shall
be entitled to exercise such audit right no more than once per year.

++    Except as otherwise provided in this Agreement, the Osteotech Donors shall
      be Non-Standard Donors. MTF shall take no action which MTF could have
      reasonably foreseen would influence procurement of Osteotech Donors so as
      to cause a greater percentage of such Donors to be female. If MTF begins
      to retain Non-Standard Donors, MTF agrees

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-15
<PAGE>

      that the ages of, and the ratio of male to female, of Osteotech Donors
      shall be substantially equivalent to the ages of, and the ratio of male to
      female, of Non-Standard Donors retained by MTF. Osteotech shall have the
      right on reasonable prior notice to MTF to have an independent third party
      reasonably acceptable to MTF audit MTF's compliance with the foregoing
      provisions regarding the mix of Osteotech Donors. MTF shall cooperate with
      such audit and shall provide such third party with such information as it
      shall request in order to conduct such audit. Osteotech shall be entitled
      to exercise such audit right no more than once per year.

**    Except as otherwise provided above and in Section 2.1.5 hereof the number
      of Donors to be provided per month must be delivered in each month during
      the relevant year.

            "Donor" shall mean a Standard Donor or Non-Standard Donor from whom
Tissue is to be (or has been) procured and delivered by MTF in accordance with
the provision of this Agreement.

            "Effective Date" shall mean the date set forth in the first
paragraph of this Agreement, provided that this Agreement shall not take effect
until it has been duly executed and delivered by all parties hereto.

            "Existing Proprietary Products" shall have the meaning assigned to
such term in the definition of "Proprietary Products" in Section 1.1 hereof.

            "FDA" shall mean the United States Food and Drug Administration.

            "License" shall mean the license granted by Osteotech to MTF and
Synthes pursuant to the License Agreement.

            "License Agreement" shall mean that certain License Agreement dated
as of the same date as this Agreement, by and among Osteotech, MTF and Synthes
in the form attached hereto as Exhibit 2.

            "Licensee" shall have the meaning assigned to such term in the
License Agreement.

            "Licensor" shall have the meaning assigned to such term in the
License Agreement.

            "MTF" shall have the meaning assigned to such term in the preamble
hereof.

            "MTF Donor" shall mean a Donor delivered pursuant to the Donor
Commitment by MTF to Osteotech for Processing into products that will be
returned to MTF for distribution. The Donor Commitment with respect to MTF
Donors is set forth in the third column of the chart in the definition of "Donor
Commitment" above.

            "MTF/Synthes Agreements" shall have the meaning assigned to such
term in the recitals hereof.

                                                                            E-16
<PAGE>

            "MTF Tissue" shall mean Tissue obtained from MTF Donors.

            "New Proprietary Products" shall have the meaning assigned to such
term in the definition of "Proprietary Products" in Section 1.1 hereof.

            "Non-Standard Donor" shall have the meaning assigned to such term in
the definition of "Standard Donor" in Section 1.1 hereof.

            "Original Processing Agreement" shall have the meaning assigned to
such term in the recitals hereof.

            "Osteotech" shall have the meaning assigned to such term in the
preamble hereof.

            "Osteotech Donor" shall mean a Donor delivered pursuant to the Donor
Commitment by MTF to Osteotech and retained by Osteotech for processing, use
and/or distribution by or on behalf of Osteotech in accordance with the terms of
this Agreement. The Donor Commitment with respect to Osteotech Donors is set
forth in the fourth column of the chart in the definition of "Donor Commitment"
above.

            "Osteotech Tissue" shall mean Tissue obtained from Osteotech Donors.

            "Prior Processing Agreement" shall have the meaning assigned to such
term in the recitals hereof.

            "Processing" shall mean the processing of Tissue by Osteotech in
accordance with its proprietary techniques and in accordance with the Processing
Standards.

            "Processing Fee" shall have the meaning assigned to such term in
Schedule 2.1.6 hereto.

            "Processing Standards" shall mean all standards, guidelines, rules,
regulations and laws applicable to the Processing, storage, packaging, labeling,
and shipping of Tissue by Osteotech. The Processing Standards shall include (i)
applicable laws, regulations, and guidelines of the FDA; (ii) applicable
standards and guidelines promulgated by the AATB; (iii) applicable laws and
regulations of other U.S. federal, state and local government agencies with
jurisdiction over the processing and distribution of human musculoskeletal
tissue; (iv) applicable laws and regulations of non-U.S. jurisdictions where
Tissue processed by Osteotech is procured or distributed by or on behalf of MTF;
(v) MTF's SOPs, as may be amended from time to time by MTF and as provided to
Osteotech in advance of their effectiveness; and (vi) Osteotech's SOPs, as may
be amended from time to time.

            "Procurement Fees" shall mean the fees to be paid by Osteotech to
MTF pursuant to Section 2.1.7 hereof with respect to Osteotech Tissue.

            "Proprietary Products" shall mean Existing Proprietary Products and
New Proprietary Products. "Existing Proprietary Products" shall mean those
Proprietary Products listed in clause (b) of Schedule 2.1.6 hereto as in effect
on the Effective Date and as the same shall be amended from time-to-time
pursuant to this Agreement; Existing Proprietary Products

                                                                            E-17
<PAGE>

shall be deemed to be Proprietary Products for all purposes of this Agreement.
"New Proprietary Products" shall mean Proprietary Products not listed in
Schedule 2.1.6 hereto and designated as New Proprietary Products pursuant to
Section 3.6 hereof.

            "Recovery Standards" shall mean all standards, guidelines, rules,
regulations and laws applicable to the donation, recovery, and suitability of
Tissue. The Recovery Standards shall include applicable standards and
requirements relating to Donor referral, informed consent, tissue recovery,
pre-processing storage, packaging and shipping of pre-processed Tissue and all
records, activities and standards related to obtaining, testing, documenting and
evaluating serological test results; obtaining, documenting and evaluating
medical history and lifestyle data; and related organizational, management and
quality assurance activities as may be contained in (i) applicable laws,
regulations, and guidelines of the FDA; (ii) applicable standards and guidelines
promulgated by the AATB; (iii) applicable laws and regulations of other U.S.
federal, state and local government agencies with jurisdiction over the
procurement and distribution of human musculoskeletal tissue; (iv) applicable
laws and regulations of non-U.S. jurisdictions where such Tissue Processed by
Osteotech is procured pursuant to this Agreement or distributed by or on behalf
of MTF or Osteotech; (v) MTF's SOPs, as may be amended from time to time by MTF;
and (vi) Osteotech's standards for recovered Tissue, to the extent applicable to
MTF-supplied Tissue, as specified in Osteotech's SOPs, as may be amended from
time to time by Osteotech and as provided to MTF in advance of their
effectiveness.

            "Required Average Gross Production Yield" shall have the meaning
assigned to such term in Section 2.1.2(d) hereof.

            "RTI" shall have the meaning assigned to such term in Section 8.5
hereof.

            "Settlement Agreement" shall mean that certain Settlement Agreement
and Release by and among Osteotech, Osteotech Investment Corp., MTF and Synthes,
dated as of the same date of this Agreement, attached hereto as Exhibit 3.

            "SOP" shall mean standard operating procedures of the entity to whom
such term is applied.

            "Standard Donor" shall mean; (i) a human male not less than ***
years of age and not greater than *** years of age at date of death; or (ii) a
human female not less than *** years of age and not greater than *** years of
age at date of death. "Non-Standard Donor" shall mean: (i) a human male not less
than *** years of age and not greater than *** years of age at date of death; or
(ii) a human female not less than *** years of age and not greater than ***
years of age at date of death.

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-18
<PAGE>

            "Suggested End User Price" shall mean, in respect of any Proprietary
Product, the price determined from time-to-time by Osteotech in its sole
discretion. The current Suggested End User Prices are set out in Schedule 2.1.6
hereto.

            "Synthes" shall mean Synthes Spine Company, L.P., a Delaware limited
partnership.

            "Term" shall mean the period of time during which this Agreement is
in effect pursuant to Section 7 hereof.

            "Termination Fee" shall have the meaning assigned to such term in
Section 8.5 hereof.

            "Tissue" shall mean human bone and related connective soft tissue.

            "Tissue Products" shall mean Tissue prepared from MTF Tissue and
used as follows:

                  (a)   By Application: The Tissue may be prepared into forms
                        which can bear mechanical load, such as shaped implants,
                        composite implants made of bone elements bonded, adhered
                        or otherwise formed into monolithic structures and which
                        may include other materials; cut or otherwise shaped
                        implants; or it may be formed into implants which bear
                        minimal load, including demineralized bone, void filling
                        grafts; or soft tissue grafts; or hybrids of any of the
                        aforementioned forms.

                  (b)   By Field of Use: The Tissue prepared may be used in any
                        clinical field, including, without limitation, the
                        orthopaedic fields of Spine, Trauma, Joint Replacement,
                        Sports Medicine and Oncology; as well as Reconstructive
                        Surgery, Dental, Maxillofacial, Plastic Surgery and
                        Podiatry.

                  (c)   By Function: Hard and soft tissue may be prepared into
                        graft forms which perform any function or functions,
                        including, without limitation, one or more of the
                        following functions, when used: Remodeling;
                        incorporation; fusion between skeletal bones, bone
                        portions and/or grafts; mechanical support; fixation;
                        fastening of skeletal elements, soft tissue, or implants
                        to each other; stabilization of skeletal elements or
                        implants; providing shape; including bone formation;
                        anchoring implants or grafts or anatomical structures;
                        filling voids; bridging gaps; forming cartilage;
                        adhering, binding or grouting skeletal elements, soft
                        tissue or grafts; resurfacing; separating bony elements;
                        delivering drugs, cells, bioactive molecules, DNA and/or
                        biomaterials.

            In this Agreement the singular includes the plural and the plural
the singular; references to statutes or regulations are to be construed as
including all statutory or regulatory

                                                                            E-19
<PAGE>

provisions consolidating, amending or replacing the statute or regulation
referred to; references to "writing" including printing, typing, lithography and
other means of reproducing words in a tangible visible form; references to
articles, section (or subdivisions of sections), exhibits, annexes or schedules
are to this Agreement unless otherwise indicated; references to agreements and
other contractual instruments shall be deemed to include all schedules and
exhibits to such agreement and all subsequent amendments and other modifications
to such agreements and contractual instruments, but only to the extent such
amendments and other modifications are not prohibited by the terms of this
Agreement, unless otherwise indicated; and references to persons or entities
include their respective permitted successors and assigns and, in the case of
any governmental entity, governmental entities succeeding to their respective
functions and capacities. The headings used in this Agreement and the table of
contents are for convenience only and shall not be deemed to constitute a part
hereof.

            1.2 Compliance with Laws.

            In accordance with the National Organ Transplant Act and the Uniform
Anatomical Gift Act (i) neither MTF nor Osteotech shall buy, sell, or trade
banked human tissue; and (ii) MTF and Osteotech may market recovery, testing,
processing, storage, distribution and other services in compliance with state
and federal law and in accordance with the terms of this Agreement.

      2. DELIVERY AND PROCESSING OF TISSUE.

            2.1 MTF Commitment to Deliver Tissue for Processing.

                  2.1.1 Engagement of Osteotech. MTF hereby engages Osteotech as
a provider of Processing services in respect of MTF Tissue.

                  2.1.2 Forecasts.

                  (a)   Osteotech shall be responsible for planning the
                        Processing of all MTF Donors in order to produce
                        Proprietary Products. Osteotech shall make: (i)
                        quarterly, its good faith estimate of the demand for the
                        then ensuing twelve (12) month period for each of its
                        Proprietary Products (by product code) Processed from
                        MTF Donors which MTF inventories and distributes to MTF
                        customers; and (ii) good faith efforts to plan the
                        Processing of MTF Donors to meet the forecasted demand
                        for such Proprietary Products in order to reduce the
                        risk of backordering end users by maintaining the
                        inventory levels described in Section 2.1.4 hereof. Such
                        planning shall be based upon market needs for
                        Proprietary Products first, with base Tissue products or
                        non-Proprietary Products a secondary consideration.
                        After each MTF Donor is planned by Osteotech to meet the
                        forecasted demand for Proprietary Products, Osteotech
                        shall use its Best Efforts to follow the master plan
                        provided by MTF with respect to such Donor in order to
                        plan the remainder of such Donor for non-Proprietary
                        Products. Osteotech

                                                                            E-20
<PAGE>

                        acknowledges that MTF has certain commitments to its
                        member organ procurement organizations to give priority
                        in certain circumstances to member demands for base
                        (non-Proprietary) Tissue Products currently Processed by
                        Osteotech and Osteotech agrees to follow MTF's
                        direction, as reflected in Donor master plans, to
                        respond to such member priority demands as long as
                        Processing of Proprietary Products is not disrupted.
                        During the first year after the Effective Date,
                        Osteotech shall use its Best Efforts to plan MTF Donors
                        such that the average gross dollar yield of Tissue
                        Products produced from such Donors (the "Average Gross
                        Production Yield") shall be at least *** per Donor based
                        on the Suggested End User Prices for the Proprietary
                        Products Processed by Osteotech from such Donors. The
                        calculation of such gross dollar yield of Tissue
                        Products produced from a Donor shall be made when all of
                        the usable Tissue from such Donor has been Processed.

                  (b)   In addition, Osteotech shall deliver to MTF its good
                        faith estimated twelve (12) month sales projection for
                        each New Proprietary Product it develops and produces
                        which becomes subject to this Agreement pursuant to
                        Section 3.6 hereof, together with Osteotech's reasonable
                        projection of required inventory levels to be maintained
                        by MTF to adequately support the launch of such New
                        Proprietary Product. Commencing twelve (12) months after
                        such New Proprietary Product has been on the market, but
                        subject to the provisions of Section 3.6 hereto, such
                        New Proprietary Product shall be subject to all the
                        other terms of this Agreement relating to the forecasts
                        and inventory requirements and no longer subject to the
                        foregoing provisions of this clause.

                  (c)   Should MTF be meeting the delivery requirements for
                        Tissue referred to in Section 2.1.5 in a timely manner,
                        subject to MTF's compliance with its obligations under
                        Section 2.1.4(a), and should MTF document to Osteotech
                        that a sufficient quantity of an Existing Proprietary
                        Product was not available to MTF creating a backorder to
                        MTF customers which caused cancellation by end users of
                        one or more purchase orders issued to MTF in respect of
                        such Existing Proprietary Product, then Osteotech will
                        reimburse MTF*** of the Suggested End User Price for the
                        amount of such
----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-21
<PAGE>

                        Existing Proprietary Product in respect of which
                        purchase orders were so cancelled.

                  (d)   In the event Osteotech shall fail to plan MTF Donors so
                        as to yield the Required Average Gross Production Yield
                        during the first year following the Effective Date the
                        number of MTF Donors to be delivered each month pursuant
                        to the Donor Commitment during the ensuing quarter shall
                        be reduced by a percentage equal to the percentage by
                        which the actual Average Gross Production Yield falls
                        below the Required Average Gross Production Yield. At
                        the end of such quarter the Average Gross Production
                        Yield for such quarter shall be calculated and, if the
                        Average Gross Production Yield is at least equal to the
                        Required Average Gross Production Yield then the monthly
                        Donor Commitment for the ensuing quarter shall be
                        restored to the levels set forth for the year in which
                        such quarter shall fall in the definition of "Donor
                        Commitment" above. If the Average Gross Production Yield
                        for such quarter is below the Required Average Gross
                        Production Yield, then the monthly Donor Commitment for
                        the ensuing quarter shall be reduced by a percentage
                        equal to the percentage by which the actual Average
                        Gross Production Yield falls below the Required Average
                        Gross Production Yield. Such calculations of Average
                        Gross Production Yield shall be done and such
                        adjustments to the monthly Donor Commitment shall be
                        made for each quarter (after the first year following
                        the Effective Date) during the Term of this Agreement.
                        For purposes hereof, the "Required Average Gross
                        Production Yield" shall be *** . No downward adjustment
                        of the monthly Donor Commitment shall be made if the
                        Average Gross Production Yield shall be below the
                        Required Average Gross Production Yield during a quarter
                        in which there shall have occurred a shortfall in the
                        number or types of Donors delivered by MTF to Osteotech
                        pursuant to the Donor Commitment.

                  2.1.3 Tissue Products Returned to MTF.

                  (a)   Osteotech shall, subject to the other provisions of this
                        Agreement, return to MTF for distribution and invoicing
                        by MTF to its customers all Tissue Products, including
                        Proprietary Products, processed and prepared by
                        Osteotech from MTF Tissue.

                  (b)   Osteotech shall use its Best Efforts to return
                        cancellous chips to MTF Processed by Osteotech from MTF
                        Tissue at a rate such that

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-22
<PAGE>

                        in each rolling three (3) month period during the Term
                        of this Agreement MTF shall receive, on average *** of
                        cancellous chips. This amount is the equivalent of ***
                        of the volume of cancellous chips Processed by Osteotech
                        from a Standard Donor during the year preceding the
                        Effective Date of this Agreement.

                  2.1.4 Inventory Requirements.

                  (a)   Since Osteotech will plan the Processing of MTF Donors
                        for Proprietary Products, the inventory of Proprietary
                        Products Processed from such Donors to be maintained by
                        MTF will be reasonably determined by Osteotech based on
                        its good faith sales estimates for Proprietary Products.
                        MTF will use its Best Efforts to maintain such inventory
                        of Proprietary Products in cooperation with Osteotech.
                        Notwithstanding anything to the contrary contained
                        herein, (i) Osteotech shall not plan for and MTF will
                        not be required to maintain inventory at MTF of
                        Propriety Products to cover more than two (2) months of
                        sales of Proprietary Products forecast in good faith by
                        Osteotech and (ii) MTF will not be required to deliver
                        more MTF Donors to Osteotech than the number of MTF
                        Donors MTF is required to deliver pursuant to the Donor
                        Commitment.

                  (b)   MTF shall report monthly to Osteotech its then current
                        inventory of each such Proprietary Product (by product
                        code). Osteotech shall maintain an inventory of such
                        Proprietary Products prepared from MTF Tissue sufficient
                        to cover sales for the next ensuing month and to turn
                        this inventory not less than four times in each calendar
                        year. In the event that such turn rate is not achieved,
                        Osteotech shall adjust its sales estimates to reasonably
                        conform to its current and reasonably expected market
                        conditions. MTF shall have the right on reasonable prior
                        notice to Osteotech to have an independent third party
                        reasonably acceptable to Osteotech audit Osteotech's
                        compliance with its obligations regarding inventory set
                        forth in this Section 2.1.4(b). Such right may be
                        exercised by MTF no more than once per calendar year
                        during the Term. Osteotech shall cooperate with such
                        audit and shall provide such third party with such
                        information as such third party shall reasonably request
                        in order to conduct such audit.

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-23
<PAGE>

                  (c)   Notwithstanding anything to the contrary contained
                        herein, it is the intent of the parties to act in good
                        faith and use their Best Efforts to not allow
                        back-orders or inventory shortfalls to occur and to
                        eliminate back-orders and inventory shortfalls when they
                        do occur as soon as possible.

                  2.1.5 Tissue Delivered in Respect of Consideration for
                        License.

                  (a)   In consideration of the entering into of the License
                        Agreement by Osteotech and in consideration of the
                        License granted thereunder, MTF hereby agrees, in
                        addition to, and without limiting any of its other
                        obligations set forth in this Agreement, to deliver to
                        Osteotech the Tissue from Donors constituting the Donor
                        Commitment. For purposes of this Agreement a Donor shall
                        be deemed to be delivered to Osteotech by MTF when
                        Osteotech determines in good faith that the Donor has
                        been recovered in accordance with the Recovery Standards
                        and is able to be released for Processing. Without
                        limiting the foregoing, except as otherwise provided in
                        Section 2.1.5, any shortfall in delivery of Non-Standard
                        Donors shall be fully compensated by delivery (at the
                        time such Non-Standard Donor is due hereunder) of
                        Standard Donors in substitution for such undelivered
                        Non-Standard Donors.

                  (b)   Notwithstanding anything to the contrary contained in
                        this Agreement it is expected that Tissue from the
                        typical Donor delivered to Osteotech by MTF shall
                        consist of *** and such number of *** as shall equal the
                        average number of *** as are recovered from donors
                        retained by MTF during the preceding twelve (12) month
                        period, and, in addition, in each month *** from not
                        less than *** of such Donors.

                  (c)   Osteotech shall have the right to reject all Tissue from
                        any particular Donor delivered to it pursuant to this
                        Agreement if Osteotech reasonably believes that: (i)
                        such Tissue fails to comply with the Recovery Standards;
                        or (ii) such Tissue was not obtained or handled in
                        accordance with the Processing Standards or (iii) if the
                        terms of the applicable consent with respect to the
                        donor of such Tissue restrict the Processing and use of
                        Tissue as contemplated in this Agreement. In the event
                        of any such rejection, Osteotech shall notify MTF as
                        promptly as practicable

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-24
<PAGE>

                        thereof and provide a written explanation of the
                        reasons. MTF shall use its Best Efforts to cure such
                        rejection by either: (i) correcting the cause for such
                        rejection so that such Tissue is no longer rejected by
                        Osteotech; or (ii) delivering other Tissue which is not
                        rejected. If such rejection is so cured within thirty
                        (30) days after receipt by MTF of such written
                        explanation, such Tissue shall not be considered in
                        computing any "shortfall" referred to below in this
                        Section 2.1.5; and, if such rejection is not so cured
                        within such 30-day period, such Tissue shall be
                        considered in computing such "shortfall" until such
                        rejection shall have been cured as described in this
                        clause 2.1.5(c) or such shortfall eliminated as
                        described below.

                        (d) In the event that MTF is unable, due to events
                        beyond MTF's control which could not have been avoided
                        by the use of due diligence, to deliver Tissue in any
                        month in the amounts or from the required Donor type set
                        forth above in Section 2.1.5 (a) hereof (the amount not
                        so delivered being referred to herein as the
                        "shortfall"), MTF shall, except to the extent it is
                        unable due to events beyond MTF's control which could
                        not have been avoided by the use of due diligence,
                        deliver in the next succeeding month Tissue from a
                        number of Donors equal to the sum of (i) the number
                        required by subsection (a) above to be delivered in such
                        succeeding month, plus (ii) the shortfall. The shortfall
                        in any given month shall be computed on the basis of the
                        sum of (i) the number of Donors required to be delivered
                        in such month less the number of Donors actually
                        delivered in such month plus (ii) the aggregate amount
                        of the shortfalls from all prior months which have not
                        been delivered. The foregoing delivery requirement shall
                        carry forward from month to month; however, if a carried
                        forward shortfall exists in two consecutive months,
                        notwithstanding anything to the contrary in this
                        Agreement, all such shortfall shall be made up by MTF in
                        the next succeeding month, provided that if MTF is
                        unable to make up such shortfall in such month due to
                        events beyond MTF's control which could not be avoided
                        by the use of due diligence, such shortfall shall be
                        made up by MTF in the next succeeding three months
                        through the delivery of Tissue from Standard Donors
                        only.

                  (e)   Subject to the foregoing, in the event that in any month
                        MTF is unable to satisfy its requirement to deliver to
                        Osteotech the Osteotech Donors required for such month
                        from Non-Standard Donors as described in the Donor
                        Commitment and such event is not due to events beyond
                        MTF's control which could not have been avoided by the
                        use of due diligence, MTF shall deliver Tissue from
                        Standard Donors for Tissue it is so unable to deliver
                        from Non-Standard Donors so that, in such month, MTF
                        shall deliver to

                                                                            E-25
<PAGE>

                        Osteotech, as Osteotech Tissue, Tissue from a total
                        number of Donors equal to the number required for
                        Osteotech Tissue for such month. The Standard Donors
                        delivered by MTF to Osteotech pursuant to this Section
                        2.1.5(e) shall have the same average age and male to
                        female ratio as that of the Standard Donors retained by
                        MTF.

                  2.1.6 Processing Fees. MTF shall pay, in accordance with the
provisions of Section 5 hereof, to Osteotech in respect of MTF Tissue, the
Processing Fees set forth in Schedule 2.1.6 hereto. MTF shall be responsible for
all costs and expenses of procuring, screening, testing, storing, and delivering
MTF Tissue to Osteotech for Processing.

                  2.1.7 Procurement Fee. Osteotech shall reimburse MTF in the
amount of *** per Donor for services performed by MTF in respect of Osteotech
Tissue which is actually delivered to Osteotech pursuant to the provisions of
this Agreement (such amount being the "Procurement Fee"); provided that, on an
annual basis, the Procurement Fee shall be increased by a percentage equal to
the increase in the then most recently published Medical Cost Component of the
Consumer Price Index over the immediately preceding twelve (12) month period;
and provided, further, that if MTF shall have demonstrated to Osteotech through
reasonable documentation that MTF's actual average system-wide amount paid to
recovery agencies, hospitals and recovery teams for recovery of Tissue in the
preceding calendar year exceeded *** per Non-Standard Donor and such average
amount for such year had increased by a percentage greater than the percentage
increase in the Medical Cost Component of the Consumer Price Index in the then
immediately preceding twelve (12) month period, then the Procurement Fee shall
be increased at such time by such documented greater percentage increase.

                  2.1.8 Compliance With Applicable Standards.

                  (a)   Recovery Standards. All Tissue delivered to Osteotech
                        for Processing pursuant to this Agreement shall conform
                        to the Recovery Standards. If interpretation of the
                        Recovery Standards is required or if there is a
                        disagreement about the interpretation of the Recovery
                        Standards, MTF and Osteotech will attempt to negotiate a
                        resolution in good faith. If such interpretations or
                        disagreements are not resolved by the parties, the
                        parties will mutually agree upon a third party who will
                        assist the parties in arriving at a resolution.

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-26
<PAGE>

                  (b)   Processing Standards. MTF shall comply with the
                        Processing Standards to the extent applicable to MTF's
                        activities as contemplated hereunder.

                  (c)   Standard Operating Procedures. Each of MTF and Osteotech
                        shall make available to the other a copy of its SOPs and
                        copies of any material amendments to its SOPs promptly
                        after such material amendments are adopted; provided,
                        however, that doing so will not require such party to
                        disclose any trade secrets, technical know how or
                        unpublished scientific data or technical art to the
                        other party.

                  (d)   Reciprocal Audit Rights.

                        (i)   Upon reasonable notice and at its own expense,
                              each of Osteotech, on the one hand, and MTF, on
                              the other hand, shall have the right to conduct an
                              annual audit of the other party's facilities and
                              records related to regulatory compliance and, in
                              the event there are repeated significant defects
                              in such other party's compliance with its SOPs or
                              any applicable Recovery Standards or Processing
                              Standards, as the case may be, each of Osteotech,
                              on the one hand, and MTF, on the other hand, may
                              conduct such additional audits of the other
                              party's facilities and records related to
                              regulatory compliance as are reasonably necessary
                              to ensure that such defects have been rectified.
                              Notwithstanding the foregoing, in any such audit;
                              (x) MTF will be entitled to review Osteotech's
                              records only to the extent such records relate to
                              MTF Tissue; and (y) Osteotech will be entitled to
                              review MTF's records only to the extent such
                              records relate to Osteotech Tissue and/or MTF
                              Tissue.

                        (ii)  Osteotech will grant designated MTF personnel
                              access to its facilities to observe all steps of
                              Processing for the purpose of conducting a
                              standard MTF inspection (pursuant to this Section
                              2.1.8(d)) of Osteotech's compliance with the
                              Processing Standards applied to MTF Tissue. As
                              part of this inspection, all such Processing
                              Standards will be made available to the
                              inspectors; provided, that such access will not
                              require Osteotech to reveal any proprietary
                              know-how or trade secrets unless it is necessary
                              to MTF's understanding of whether Osteotech is in
                              compliance with such Processing Standards and to
                              the extent applicable to Osteotech, the Recovery
                              Standards, and then, in such case, such
                              proprietary know-how and trade secrets shall be
                              revealed only to a mutually agreeable third party.
                              Such

                                                                            E-27
<PAGE>

                              third party will have access to such proprietary
                              know-how and trade secrets only if it signs a
                              confidentiality agreement satisfactory to
                              Osteotech. If such personnel require access to
                              Osteotech's clean rooms, the personnel must have
                              on file with Osteotech appropriate blood serum
                              test results and such other appropriate test
                              results as Osteotech may require prior to such
                              personnel being granted access to Osteotech's
                              clean rooms. Osteotech may, at its sole
                              discretion, refuse any individual access to
                              Osteotech's clean rooms for cause. Such denial of
                              access will not be a violation of this Agreement.

                        (iii) MTF will grant designated Osteotech personnel
                              access to its facilities to observe MTF's Tissue
                              recovery activities for the purpose of conducting
                              a standard Osteotech inspection of MTF's
                              compliance with the Recovery Standards and to the
                              extent applicable to MTF, the Processing Standards
                              pursuant to this Section 2.1.8(d). As part of this
                              inspection, all Recovery Standards will be made
                              available to the inspectors; provided, that such
                              access will not require MTF to reveal any
                              proprietary know-how or trade secrets unless it is
                              necessary to Osteotech's understanding of whether
                              MTF is in compliance with the Recovery Standards
                              and to the extent applicable to MTF, the
                              Processing Standards, and then, in such case, such
                              proprietary know-how and trade secrets shall be
                              revealed only to a mutually agreeable third party.
                              Such third party will have access to such
                              proprietary know-how and trade secrets only if it
                              signs a confidentiality agreement satisfactory to
                              MTF.

                  (e)   Meetings. Osteotech will arrange with MTF to hold
                        regular meetings to discuss Processing of MTF Tissue and
                        other related issues. At these meetings the following
                        information with respect to MTF Tissue will be
                        discussed, along with any other relevant information
                        related to the Processing Standards and Recovery
                        Standards, the approval of MTF Tissue for Processing and
                        the release of MTF Tissue for Processing: MTF Tissue
                        released month to date, Grafton(R) DBM product releases,
                        Bioimplant releases, releases of other Proprietary
                        Products rework list, unprocessed MTF Tissue list at
                        Osteotech, Grafton(R) DBM products, Bioimplants and
                        other Proprietary Products, WIP lists, and list of raw
                        MTF Tissue at Osteotech for Grafton(R) DBM products,
                        Bioimplants and other demineralized Tissue or
                        Proprietary Products.

                  (f)   Serology Testing. MTF shall be responsible for the
                        performance of all serology testing on Tissue from each
                        Donor procured by

                                                                            E-28
<PAGE>

                        MTF and delivered to Osteotech pursuant to this
                        Agreement which shall be performed by a laboratory
                        certified by the Centers for Medicare and Medicaid
                        Services under the Clinical Laboratory Improvement
                        Amendments of 1988. The results of such tests will be
                        forwarded to Osteotech promptly in accordance with the
                        Recovery Standards and the Processing Standards. In
                        addition, if MTF becomes aware of adverse test results
                        from tests performed by another party (e.g. eye bank,
                        etc.) on tissue or organs obtained from a Donor procured
                        by MTF and delivered to Osteotech pursuant to this
                        Agreement, MTF shall notify Osteotech of such test
                        results promptly after MTF becomes aware of such test
                        results.

                  2.1.9 Donor Records.

                  (a)   MTF will obtain and maintain complete and accurate
                        records as required of MTF by the Recovery Standards
                        (including without limitation Donor medical history,
                        Donor life style information, serology and blood culture
                        testing), as well as records with respect to (i)
                        inventory of Tissue delivered to Osteotech pursuant to
                        this Agreement (including records classifying each Donor
                        as a Standard Donor or a Non-Standard Donor); (ii)
                        inventory of MTF Tissue Processed pursuant to this
                        Agreement and received by MTF from Osteotech for
                        distribution to end users by MTF; and (iii) the receipt
                        and processing of all end user orders received from
                        MTF's customers who utilize the MTF Tissue processed by
                        Osteotech pursuant to this Agreement.

                  (b)   MTF shall also obtain and forward to Osteotech, in
                        English, such records, within the requisite time period,
                        as may be reasonably necessary to satisfy all of the
                        Processing Standards, including, but not limited to,
                        Donor medical history, Donor life style information,
                        Donor classification (Standard or Non-Standard) and all
                        Donor testing information.

                  (c)   In the event any regulatory agency audits or otherwise
                        inspects MTF's facilities or records and requires
                        information maintained by Osteotech relating to the
                        Processing of MTF Tissue by Osteotech, Osteotech will
                        provide MTF with such information as is necessary to
                        satisfy any such request by any such regulatory agency.

                  (d)   In the event any regulatory agency audits or otherwise
                        inspects Osteotech's facilities or records and requires
                        information maintained by MTF relating to MTF's
                        recovery, screening and testing of Tissue procured by
                        MTF and delivered to Osteotech pursuant to this
                        Agreement, MTF will provide Osteotech with such
                        information as is necessary to satisfy any such request
                        by any such regulatory agency.

                                                                            E-29
<PAGE>

            2.2   Processing Responsibilities of Osteotech in Respect of MTF
                  Tissue.

                  2.2.1 General Undertaking.

      Processing and packaging of MTF Tissue received by Osteotech from MTF for
Processing pursuant to this Agreement into then currently available finished
units of MTF Tissue shall be conducted by Osteotech in compliance with the
Processing Standards.

                  2.2.2 Interpretation; Change in Regulations.

                  (a)   If interpretation of the Processing Standards is
                        required or if there is a disagreement about the
                        interpretation of the Processing Standards, MTF and
                        Osteotech will attempt to negotiate a resolution in good
                        faith. If such interpretations or disagreements are not
                        resolved by the parties, the parties will mutually agree
                        upon a third party who will assist the parties in
                        arriving at a resolution.

                  (b)   In the event the FDA, any other applicable regulatory
                        agency or the AATB, implements new or additional
                        regulations applicable to Tissue, MTF shall implement
                        such changes to its SOPs as are necessary to comply with
                        such regulations in respect of all Tissue procured by
                        MTF and delivered to Osteotech pursuant to this
                        Agreement, and Osteotech shall implement such changes to
                        its SOPs as are necessary to comply with such
                        regulations in respect of MTF Tissue and Osteotech
                        Tissue. In the event FDA has determined (after any good
                        faith appeal of such determination by Osteotech) that
                        Osteotech has failed to implement such changes in
                        respect of MTF Tissue or Osteotech Tissue by the
                        effective date of such changes, MTF shall have the
                        remedy set forth in Section 8.4 and in the event FDA has
                        determined (after any good faith appeal of such
                        determination by MTF) that MTF has failed to implement
                        such changes in respect to MTF Tissue or Osteotech
                        Tissue by the effective date of such changes, Osteotech
                        shall have the remedy set forth in Section 8.4.

                  2.2.3 Processing Considerations.

                  (a)   MTF shall undertake reasonable efforts to present a
                        consistent flow of Donors to Osteotech with the goal of
                        minimizing second-half-of-month bunching of Donors, and
                        Osteotech shall undertake similar reasonable efforts in
                        respect of Processing of MTF Tissue. Subject to the
                        foregoing sentence, to Osteotech's right to refuse to
                        accept Tissue pursuant to Section 2.1.5(c) and to the
                        provisions of clauses (b) and (c) below, MTF Tissue
                        received at Osteotech for Processing pursuant to this
                        Agreement will be processed within a reasonable period
                        of time (which shall be reviewed at the meetings
                        provided for in Section 2.1.8(e)) from the time all
                        required,

                                                                            E-30
<PAGE>

                        complete and accurate Donor documentation as specified
                        by the Processing Standards is received at Osteotech.
                        Subject to the foregoing, Osteotech will use
                        commercially reasonable efforts to complete the
                        Processing of MTF Tissue delivered to it pursuant to
                        this Agreement and deliver such processed Tissue to MTF
                        within a reasonable period of time.. Osteotech will
                        advise MTF no later than the following business day if
                        there will be a material delay in the commencement of
                        Processing of MTF Tissue which has been released from
                        Osteotech's Quality Assurance Department. Once
                        Processing of the Donor is complete, subject to the
                        provisions of Section 3.1, all MTF Tissue will be
                        shipped to MTF upon final inspection and release thereof
                        by Osteotech's Quality Assurance Department.

                  (b)   If the release of processed MTF Tissue back to MTF is
                        delayed due to (i) Tissue histology of unknown etiology;
                        or (ii) microbial contamination of final product,
                        Osteotech will notify MTF of the reason for the hold and
                        the approximate time period expected for the hold (in
                        weeks).

                  (c)   Osteotech will maintain a quality assurance program in
                        respect of Processing of MTF Tissue, the goal of which
                        is to achieve zero defect Processing. To the extent
                        there are rejects of MTF Tissue, it is Osteotech's goal
                        that such rejects of MTF Tissue be no more than an
                        average of *** of MTF Tissue initially processed per
                        Donor of MTF Tissue (not taking into account any
                        reworks). All rejected MTF Tissue that can be reworked
                        with commercially reasonable efforts will be reworked
                        and returned to MTF within *** from the time of
                        rejection.

            2.3 Undertakings Regarding Osteotech Tissue.

                  2.3.1 General Undertaking. As an accommodation to, and in
response to interest from, MTF's member organ procurement organizations, MTF has
determined to recover certain Non-Standard Donors that it would not otherwise
procure and make them available to Osteotech as part of the Donor Commitment.
Such Donors shall be Osteotech Donors as provided herein and shall be Processed
and distributed by Osteotech pursuant to the terms of this Agreement. In the
event MTF decides to also retain Non-Standard Donors it shall not affect MTF's
obligations to deliver Donors to Osteotech pursuant to the Donor Commitment
herein. Notwithstanding any other provision in this Agreement or in any other
agreement between

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-31
<PAGE>

Osteotech and MTF, the following provisions of this Section 2.3 shall govern the
Processing, distribution, and use of by Osteotech (or any third party to whom
Osteotech distributes such tissue for redistribution) of Osteotech Tissue
delivered by or on behalf of MTF to Osteotech.

                  2.3.2 Furtherance of MTF Mission. Osteotech agrees that it
will Process, distribute and/or use, and use its Best Efforts to cause others to
whom it distributes for redistribution to process, distribute and/or use,
Osteotech Tissue products in a manner that is consistent with (a) MTF's mission
of providing high quality human allograft tissue for transplantation and
research (it being understood and agreed that such obligation of Osteotech shall
be deemed to have been fully satisfied for all purposes by Osteotech meeting its
obligations to provide Processing in accordance with the Processing Standards
and by preparation of products therefrom for transplant only into humans) and
(b) subject to Osteotech's rights under Section 2.1.5(c), respecting the wishes
of tissue donors and their families and the terms of the applicable consents of
the donors and/or their families or other responsible parties with respect to
such Tissue. MTF will provide Osteotech with the required information concerning
such consents at the time it delivers the applicable Osteotech Tissue to
Osteotech. Osteotech will not Process, distribute, or use, or allow others to
Process or distribute, Osteotech Tissue products in a manner or for a purpose
inconsistent with MTF's mission or such consents or applicable laws,
regulations, SOPs or Processing Standards.

                  2.3.3 MTF Responsibilities. Except as otherwise expressly set
forth in this Agreement, MTF shall have no responsibility with respect to the
processing, storage, distribution, use, or disposal of Osteotech Tissue after
such tissue is released to Osteotech. MTF shall have no responsibility to
conduct any additional testing with respect to Osteotech Tissue once such tissue
is delivered to Osteotech, except to the extent such testing is required by the
Recovery Standards.

                  2.3.4 Fitness for End Use. Osteotech will use its Best Efforts
to ensure that all Osteotech Tissue products shall be fit for the end use for
which such products are distributed (it being understood and agreed that such
obligation shall be deemed to have been fully satisfied for all purposes if such
products meet or exceed applicable Osteotech Tissue product specifications and
were prepared in accordance with the Processing Standards). In the event
Osteotech learns of any noncompliance of Osteotech Tissue products with
applicable Osteotech Tissue Product specifications, Osteotech shall forthwith
cease distribution of any such products until such noncompliance can be
investigated and resolved.

                  2.3.5 Labeling. MTF shall not be identified in any labeling of
or other documentation relating to Osteotech Tissue products, except to the
extent expressly required by applicable law or as expressly agreed to in writing
by MTF.

                  2.3.6 Storage. Osteotech shall bear all responsibility and
cost for storage of Osteotech Tissue after it has been delivered to Osteotech.
For purposes of the preceding sentence, Osteotech Tissue shall be deemed to be
delivered to Osteotech when it is physically delivered to Osteotech, not when it
is released by Osteotech's Quality Assurance Department. MTF will immediately
deliver to Osteotech all Osteotech Donors, provided that if any such Donor is
deemed by Osteotech to be unsuitable or is rejected by Osteotech pursuant to
Section 2.1.5(c), MTF will be fully responsible at its cost to promptly remove
all Tissue from such

                                                                            E-32
<PAGE>

Donor from Osteotech's facility and such Osteotech Tissue will not be deemed to
have been delivered and released under the terms and conditions of this
Agreement.

                  2.3.7 Record Retention and Access. Osteotech shall maintain
complete and accurate records regarding the Processing and distribution of
Osteotech Tissue products in a manner consistent with applicable law, industry
guidelines, and customary industry practices. If MTF is requested by donor
families, recovery organizations, or regulatory authorities to provide access to
any such records, MTF will request such records from Osteotech in writing with
information regarding the source and nature of the request. Osteotech will use
its Best Efforts to provide MTF with copies of or access to such records on a
timely basis, to the extent reasonably available to Osteotech; provided that in
no event shall Osteotech be required to disclose any proprietary information
pursuant to any such request.

                  2.3.8 Indemnity. In addition to and not in limitation of the
indemnity provisions of Section 4 hereof, Osteotech agrees to defend, hold
harmless, and indemnify MTF and its member organizations against any damages,
litigation costs, losses, obligations, liabilities, claims, actions or causes of
action sustained or suffered by MTF or any of its member organizations arising
from Osteotech's Processing, distribution, or use of Osteotech Tissue or the
Processing, distribution or use of Osteotech Tissue by any other party that has
received Osteotech Tissue from Osteotech, except to the extent that such
damages, litigation costs, losses, liabilities, claims, actions or causes of
action result from or arise out of any of the matters set forth in clauses (i)
through (iv) of Section 4.1(b) hereof. Osteotech's indemnity of MTF hereunder
shall be governed by the procedures set forth in Section 4.1 hereof.

      3.    STORAGE, SHIPPING, REGULATORY COMPLIANCE AND LABELING.

            3.1   Possession and Storage of Tissue.

                  (a)   MTF Tissue delivered to Osteotech for Processing
                        pursuant to this Agreement and any finished units or
                        other byproducts derived from such MTF Tissue shall be
                        held by Osteotech on behalf of MTF at all times until
                        delivery thereof to MTF or pursuant to MTF's
                        instructions, except that MTF may grant Osteotech
                        written permission to use excess MTF Tissue for research
                        purposes.

                  (b)   To the extent Osteotech stores any MTF Tissue delivered
                        to it pursuant to this Agreement, such storage shall be
                        in compliance with all applicable portions of the
                        Processing Standards. Except as provided in Section
                        3.1(c) and Section 3.2(e) hereof, MTF shall bear the
                        risk of loss for all MTF Tissue delivered to Osteotech
                        pursuant to this Agreement.

                  (c)   In the event that MTF Tissue which is being Processed by
                        Osteotech or held by Osteotech in "quarantine storage",
                        "pre-processing storage", or "post-processing storage"
                        (as such terms are defined or described in the
                        applicable portions of the Processing Standards)
                        pursuant to this Agreement is destroyed or

                                                                            E-33
<PAGE>

                        rendered unusable while in the possession of Osteotech
                        due to the negligence of Osteotech, Osteotech shall pay
                        to MTF the following amounts: (i) in the case of MTF
                        Tissue which has already been Processed at the time of
                        such destruction or damage, the market value of such MTF
                        Tissue, less the cost of Processing such MTF Tissue; and
                        (ii) in the case of MTF Tissue which has not yet been
                        Processed at the time of such destruction or damage, the
                        market value of the average per Donor yield for Donors
                        processed in the prior calendar quarter, less the
                        average per Donor cost of Processing in such prior
                        calendar quarter.

            3.2   Shipping.

                  (a)   Except as otherwise provided in a written document
                        signed by both Osteotech and MTF (other than (x)
                        demineralized bone, (y) MTF Tissue used for Grafton(R)
                        DBM products, Bioimplants and other Proprietary
                        Products, and (z) items being reworked), Osteotech shall
                        ship all finished units derived from MTF Tissue from a
                        single Donor received for Processing pursuant to this
                        Agreement to MTF in one shipment by a carrier designated
                        by MTF. Osteotech shall ship finished units of
                        Grafton(R) DBM products, Bioimplants and other
                        Proprietary Products processed by Osteotech from MTF
                        Tissue pursuant to this Agreement to MTF upon release
                        from Osteotech's Quality Assurance Department, except
                        that in the case of inventory held by Osteotech for MTF
                        of finished units of Grafton(R) DBM products,
                        Bioimplants and other Proprietary Products which have
                        been released by Osteotech's Quality Assurance
                        Department, Osteotech will ship such units to MTF upon
                        and in accordance with MTF's order. Any item being
                        reworked will be shipped back to MTF as soon as it is
                        completed and released by Osteotech's Quality Assurance
                        Department. MTF shall be responsible for payment of all
                        shipping costs.

                  (b)   Osteotech shall ship all finished units of MTF Tissue to
                        be distributed by MTF in shipping containers which meet
                        the requirements specified in the Processing Standards.
                        All such packaging and shipping containers must be
                        validated and the validation studies shall be available
                        for review by MTF's Quality Assurance and Regulatory
                        Affairs Departments.

                  (c)   Osteotech shall clearly label each such shipping
                        container as containing transplantable tissue and with
                        the addresses of both the shipping and receiving
                        facility. Such labeling shall meet the specifications
                        included in the Processing Standards.

                  (d)   Each such shipment from Osteotech shall include a
                        packaging slip listing the contents and corresponding
                        Donor lot and batch

                                                                            E-34
<PAGE>

                        numbers, if applicable. All tissue containers in each
                        such shipment shall be packed with sufficient materials
                        between containers so that breakage will be minimized.

                  (e)   MTF will promptly notify Osteotech of any damage to such
                        finished units of MTF Tissue which it reasonably
                        believes occurred during shipment thereof. Osteotech
                        will file a claim against the shipping carrier for the
                        amount of damage up to the amount insured. Osteotech
                        will insure finished units of MTF Tissue with the
                        shipping carrier in an amount not less than the portion
                        of the Suggested End User Price which would have been
                        received by MTF had such finished units of Proprietary
                        Products been received by MTF without damage and not
                        less than the end user price for all other MTF Tissue
                        which would have been actually received by MTF had such
                        finished units been received by MTF without damage. The
                        relevant portion of the amount recovered from the
                        shipping carrier for any such claims will be passed on
                        to MTF within ten (10) days of receipt by Osteotech.
                        Osteotech shall have no liability for any damage to such
                        finished units of MTF Tissue incurred during shipping,
                        except to the extent Osteotech fails to require that the
                        shipping carrier has the aforementioned insurance or
                        except where such damage is caused by the negligence or
                        misconduct of Osteotech or its agents (other than the
                        carrier) or employees.

                  (f)   Osteotech shall pay for shipping, and related costs
                        arising from the return of any such finished units of
                        MTF Tissue to Osteotech due to complaints which are
                        shown to have been caused by defects in Osteotech's
                        workmanship or Osteotech's failure to comply with the
                        Processing Standards, except for MTF Tissue damaged
                        during shipment, as specified in (e) above.

            3.3   Certain Joint Compliance Responsibilities.

                  (a)   MTF shall comply with applicable laws, regulations and
                        guidelines as required under Section 2.1.8. Osteotech
                        shall comply with applicable laws, regulations and
                        guidelines as required under Section 2.2.1. In instances
                        where the party's compliance responsibilities overlap,
                        or where otherwise necessary and appropriate, each party
                        shall use its Best Efforts to cooperate with and assist
                        the other party in such other party's regulatory
                        compliance activities. If a difference arises as to
                        which party is responsible for meeting a particular
                        regulatory compliance responsibility, MTF and Osteotech
                        will attempt to negotiate a resolution in good faith. If
                        the difference is not resolved by the parties, MTF and
                        Osteotech will agree upon a third party who will assist
                        the parties in arriving at a resolution. Notwithstanding
                        the

                                                                            E-35
<PAGE>

                        foregoing, it is agreed that both MTF and Osteotech
                        shall have regulatory compliance responsibility with
                        respect to labeling MTF Tissue and to the extent
                        expressly required by applicable law, Osteotech Tissue,
                        including without limitation, product inserts, label
                        content, sales sheets, advertising and product brochure
                        wording and marketing clearance. If a difference arises
                        with regard to such joint compliance responsibilities,
                        MTF and Osteotech will attempt to negotiate a resolution
                        in good faith. If the difference is not resolved, MTF
                        and Osteotech will agree upon a third party who will
                        assist the parties in arriving at a resolution.

                  (b)   Containers of finished units of MTF Tissue processed by
                        Osteotech for MTF must bear a standard MTF bone product
                        label, approved by Osteotech and MTF, that contains the
                        product name and identity code, Donor number and
                        expiration date.

                  (c)   Osteotech shall, in respect of MTF Tissue, bear the
                        costs of producing labels in conformance with the
                        Processing Standards. If the labels and/or package
                        inserts are changed by request of MTF, MTF will bear the
                        costs of these changes, including label inventory
                        replacements.

                  (d)   All labeling of MTF Tissue will be in accordance with
                        Sections 3.2(c), 3.2(d) and the Processing Standards.

                  (e)   Specifications for all products which are not
                        Proprietary Products but are to be processed from MTF
                        Tissue will be developed and approved according to MTF
                        and Osteotech SOPs. Requests to Osteotech about its
                        ability to accomplish special specifications and for
                        labeling changes, including package inserts, will be
                        made in writing by MTF and will receive a written
                        response from Osteotech within a reasonable period of
                        time.

                  (f)   In the event of any recall (either voluntary or mandated
                        by FDA) of Tissue Products Processed from MTF Tissue,
                        MTF shall be responsible for carrying out such recall,
                        provided that Osteotech shall reimburse MTF for the
                        costs of such recall if such recall is made necessary by
                        Osteotech's failure to comply with the Processing
                        Standards with respect to such Tissue or Osteotech's
                        negligence in Processing such Tissue.

                  (g)   In the event of any recall (either voluntary or mandated
                        by FDA) of Tissue Products Processed from Osteotech
                        Tissue, Osteotech shall be responsible for carrying out
                        such recall, provided that MTF shall reimburse Osteotech
                        for the costs of such recall if such recall is made
                        necessary by MTF's failure to comply with the

                                                                            E-36
<PAGE>

                        Recovery Standards with respect to such Tissue or MTF's
                        negligence in recovering such Tissue.

            3.4   Records and Reports.

                  (a)   Osteotech shall maintain complete and accurate records
                        concerning MTF Tissue received by Osteotech pursuant to
                        this Agreement, MTF Tissue Processed pursuant to this
                        Agreement and in storage at Osteotech, and finished
                        units of MTF Tissue stored and shipped by Osteotech
                        pursuant to this Agreement. Such records shall be
                        available, at MTF's expense, to MTF during normal
                        business hours upon reasonable advance notice. Osteotech
                        shall not be required to produce any data other than
                        data which it is required to obtain and maintain by the
                        Processing Standards.

                  (b)   In addition to the information provided in subsection
                        (a), Osteotech shall provide the following reports on
                        MTF Tissue in a timely manner showing MTF Tissue
                        processed and shipped by Osteotech:

                                          Daily Reports

                        List of Donors of MTF Tissue Released to MTF.

                                          Weekly Reports

                        Pending list of Donors of MTF Tissue.

                        Listing of Donors of MTF Tissue processed during prior
                        week with detailed processing notes.

                                          Monthly Reports

                        Proprietary Product Releases by serial number in
                        inventory at Osteotech.

                  (c)   Osteotech shall ensure that all information pertaining
                        to MTF will be disclosed only to those Osteotech
                        personnel with a need-to-know who have signed
                        Osteotech's standard confidentiality agreement.

                  (d)   Osteotech shall notify MTF prior to the release of any
                        identifying information, such as the Donor identifying
                        number, related to any MTF Tissue delivered to Osteotech
                        pursuant to this Agreement where such release is legally
                        required by a regulatory or governmental agency or court
                        or administrative order or subpoena. The provisions of
                        this Section 3.4 (d) shall survive termination of this
                        Agreement.

                                                                            E-37
<PAGE>

                  (e)   In connection with the marketing and distribution of
                        Grafton(R) DBM products, Bioimplants and other
                        Proprietary Products processed by Osteotech from MTF
                        Tissue, during the course of each month and in the case
                        of monthly reports, no later than the tenth (10th)
                        business day following the end of the month, MTF shall
                        provide to Osteotech such reports and data as Osteotech
                        may reasonably request, including hospital/end user
                        sales of such products detailed by account.

                  (f)   Osteotech will periodically (no less than once every six
                        (6) months) provide MTF with a list of the agents who
                        are marketing Grafton(R) DBM products, Bioimplants and
                        other Proprietary Products processed by Osteotech that
                        bear MTF's label which, in each case, were prepared from
                        MTF Tissue, and the territories they are covering;
                        provided such information shall be treated as
                        Osteotech's Confidential Information pursuant to Section
                        6.1 hereof.

            3.5   New Tissue Form Development.

                  It is the understanding of MTF and Osteotech that each of them
may independently develop new Tissue forms and/or processes or improve upon
existing products and/or processes.

                  (a)   Subject to subsection (c) and the provisions of the
                        License Agreement, Osteotech shall own all rights, title
                        and interest in and to all information, technology,
                        data, inventions, products, and processes, conceived,
                        made or developed solely by employees of Osteotech as
                        well as the intellectual property rights based thereon,
                        including but not limited to copyrights and patent
                        rights.

                  (b)   Subject to subsection (c) and the provisions of the
                        License Agreement, MTF shall own all rights, title and
                        interest in and to all information, technology, data,
                        inventions, products, and processes, conceived, made or
                        developed solely by employees of MTF as well as the
                        intellectual property rights based thereon, including
                        but not limited to copyrights and patent rights.

                  (c)   Any joint development of information, technology, data,
                        inventions, products, and processes, shall be conducted
                        pursuant to a formal written development agreement
                        signed by Osteotech and MTF and a development budget for
                        the project agreed to in writing by Osteotech and MTF.

                  (d)   The provisions of this Section 3.5 shall survive
                        termination of this Agreement.

                                                                            E-38
<PAGE>

      3.6   New Proprietary Products.

            It is understood and agreed that Osteotech may develop New
Proprietary Products on its own or jointly with its other Tissue processing
clients. Subject to the other provisions of this Section 3.6, MTF agrees that:
(i) Osteotech may, by written notice to MTF identifying the New Proprietary
Product and its Suggested End User Price, elect (in its sole discretion) to have
any such New Proprietary Product be treated under this Agreement as an Existing
Proprietary Product for all purposes (in which event, clause (b) of Schedule
2.1.6 hereto shall be deemed amended to include such additional Existing
Proprietary Product effective as of the date of such notice) and to Process MTF
Tissue into such New Proprietary Product under this Agreement; and (ii) unless
and/or until Osteotech shall have made such election and delivered such written
notice, MTF shall not have access to, or the right to utilize, any such New
Proprietary Product and shall not be able to cause Osteotech to Process or
produce any such New Proprietary Product for MTF or on MTF's behalf unless and
until MTF and Osteotech shall have executed a written agreement or a written
amendment to this Agreement which provides for such access or utilization by or
on behalf of MTF. Notwithstanding the foregoing, Osteotech shall not have the
unilateral right to have a New Proprietary Product treated as an Existing
Proprietary Product and to Process MTF Tissue into such New Proprietary Product
under this Agreement if Osteotech's Processing of such New Proprietary Product
would, based on Osteotech's good faith forecast of projected unit sales of such
New Proprietary Product and Donor planning for the twelve (12) month period
after its market introduction, cause the aggregate weighted average Suggested
End User Price for Proprietary Products derived from MTF Donors to be less than
*** of the aggregate weighted average Suggested End User Price for Proprietary
Products derived from MTF Donors (based on actual unit sales) Processed by
Osteotech during the calendar year preceding the proposed introduction date for
such New Proprietary Product, unless otherwise agreed to by the parties. MTF
shall have the right on written thirty (30) days' notice to Osteotech to cause
such New Proprietary Product not to be deemed to be an Existing Proprietary
Product if actual unit sales of such New Proprietary Product for the twelve (12)
month period after its market introduction caused the aggregate weighted average
Suggested End User Price for Proprietary Products derived from MTF Donors during
such twelve (12) month period (based on actual unit sales) to be less than ***
of the aggregate weighted average Suggested End User Price for Tissue Products
derived from MTF Donors (based on actual unit sales) Processed by Osteotech
during the calendar year preceding the market introduction of such New
Proprietary Products.

      3.7   Other Services.

            Osteotech may provide such services other than the Processing
services contemplated in this Agreement as are requested by MTF in accordance
with one or more separate agreements entered into between MTF and Osteotech.
Reasonable fees for such

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-39
<PAGE>

services will be established at the time such agreements are entered into and
will be separate from the fees listed in Schedule 2.1.6. MTF shall be free to
obtain any such services from third parties.

      3.8   Publication and Public Disclosure of Scientific Information.

            (a)   Either party shall have the right to publish or otherwise
                  publicly disclose at its own expense scientific information or
                  data developed by such party which utilizes or relates to the
                  other party's technology or other proprietary or confidential
                  processes or information; provided, however, that
                  notwithstanding any other provision in this Agreement to the
                  contrary, no such publication or disclosure shall be made by
                  the publishing party if such publication or disclosure would
                  result in the disclosure of information defined as
                  Confidential Information in Section 6.1 or would otherwise
                  violate or jeopardize any proprietary rights the other party
                  may have with respect to such technology. Publication of
                  jointly developed information will be covered in a separate
                  agreement.

            (b)   Within a reasonable period of time (not less than thirty (30)
                  days) prior to publication or other public disclosure of the
                  information or data described in Section 3.8(a), the
                  publishing party shall submit to the other party for review a
                  draft of the publication or, if oral disclosure, a written
                  copy of the remarks. The other party shall then use Best
                  Efforts to notify the publishing party as soon as practicable
                  (not to exceed thirty (30) days from its receipt of such draft
                  or written copy) of (i) any reasonable changes to the
                  publication or disclosure it deems appropriate, which changes
                  the publishing party will make so long as they do not change
                  materially the meaning of the information or data being
                  disclosed or published; (ii) any error in the information or
                  data being disclosed, which the publishing party shall correct
                  upon verification of the error; or (iii) the necessity to
                  delay publication or disclosure to enable the filing of any
                  patent application or regulatory filing if applicable, in
                  which event the publishing party will delay such publication
                  or disclosure as reasonably requested by the other party.
                  Management of both parties shall attempt in good faith to
                  resolve any disputes regarding such publications.

            (c)   If there has been no mutual agreement to publish or disclose
                  within thirty (30) days after the other party has received the
                  notice and draft of the publication or oral disclosure from
                  the publishing party, the publishing party shall again notify
                  the other party in writing of its intention to publish or
                  disclose and may proceed to do so fifteen (15) days after
                  delivery of such second notice, subject to the provisions of
                  Section 3.8(a).

                                                                            E-40
<PAGE>

            (d)   Authorship of any publication shall be determined in
                  accordance with normal scientific practice.

            (e)   The provisions of this Section 3.8 shall survive termination
                  of this Agreement.

      4.    INDEMNIFICATION; SETTLEMENT

            4.1   Indemnification.

                  (a)   Indemnification by Osteotech. Osteotech agrees to
                        defend, hold harmless, and indemnify MTF and its member
                        organizations against any damages, litigation costs,
                        losses, obligations, liabilities, claims, actions or
                        causes of action sustained or suffered by MTF or any of
                        its member organizations arising from (i) a breach or
                        default by Osteotech of any of its representations,
                        warranties or covenants contained in this Agreement;
                        (ii) a defect in any finished unit of MTF Tissue
                        Processed by Osteotech under this Agreement to the
                        extent such defect results from an error or omission by
                        Osteotech (including any employee or agent of Osteotech
                        or other person to whom Osteotech has delegated any
                        Processing activities or any Processing related
                        activities hereunder), or from a failure of workmanship,
                        by Osteotech; (iii) any medical claim made by any
                        employee or authorized agent of Osteotech regarding any
                        MTF Tissue processed by Osteotech pursuant to this
                        Agreement (A) which is required by applicable laws or
                        regulations to be approved by a relevant regulatory
                        agency and has not been so approved and/or (B) which is
                        not supported by credible objective scientific evidence;
                        or (iv) a false and misleading representation made by
                        any employee or authorized agent of Osteotech regarding
                        any MTF Tissue Processed by Osteotech pursuant to this
                        Agreement.

                  (b)   Indemnification by MTF. MTF agrees to defend, hold
                        harmless, and indemnify Osteotech against any damages,
                        litigation costs, losses, obligations, liabilities,
                        claims, actions or causes of action sustained or
                        suffered by Osteotech arising from (i) a breach or
                        default by MTF of any of its representations, warranties
                        or covenants contained in this Agreement; (ii) a defect
                        in any finished unit of Tissue Processed by Osteotech
                        under this Agreement to the extent such defect results
                        from an error or omission by MTF (including any employee
                        or agent of MTF or other person to whom MTF has
                        delegated any Tissue recovery or distribution activities
                        or any Tissue recovery or distribution related
                        activities hereunder), in connection with its Tissue
                        recovery or distribution activities, including without
                        limitation any testing performed by or at the direction
                        of MTF; (iii) any medical claim made by any employee or
                        authorized agent of MTF regarding any Tissue procured by

                                                                            E-41
<PAGE>

                        MTF and processed by Osteotech pursuant to this
                        Agreement (A) which is required by applicable laws or
                        regulations to be approved by a relevant regulatory
                        agency and has not been so approved and/or (B) which is
                        not supported by credible objective scientific evidence;
                        or (iv) a false and misleading representation made by
                        any employee or authorized agent of MTF regarding any
                        Tissue procured by MTF and processed by Osteotech
                        pursuant to this Agreement.

                  (c)   Indemnification Procedures. For purposes of subsection
                        (a) above, Osteotech shall be the "indemnifying party"
                        and MTF shall be the "indemnified party" and for the
                        purposes of subsection (b) above, MTF shall be the
                        "indemnifying party" and Osteotech shall be the
                        "indemnified party." The obligations and liabilities of
                        the indemnifying party hereunder with respect to claims
                        resulting from the assertion of liability by third
                        parties shall be subject to the following terms and
                        conditions:

                        (i)   The indemnified party shall give written notice to
                              the indemnifying party of any assertion of
                              liability by a third party which might give rise
                              to a claim by the indemnified party against the
                              indemnifying party based on the indemnity
                              contained in Section 4.1(a) hereof, or Section
                              4.1(b) hereof, as the case may be, stating the
                              nature and basis of said assertion and the amount
                              thereof, to the extent known, within five (5)
                              business days after an officer of the indemnified
                              party learns of the claim or receives notice
                              thereof. Failure to give such notice within five
                              (5) business days may, at the indemnifying party's
                              option, result in a reduction in any subsequent
                              indemnification payment by an amount equivalent to
                              the expenses and/or losses demonstrated to have
                              been caused by such delay in notification.

                        (ii)  In the event any action, suit or proceeding is
                              brought against the indemnified party, with
                              respect to which the indemnifying party may have
                              liability under the indemnity agreement contained
                              in Section 4.1(a) or Section 4.1(b) hereof, as the
                              case may be, the action, suit or proceeding shall,
                              upon the written agreement of the indemnifying
                              party that it is obligated to indemnify under the
                              indemnity agreement contained in subsection (a) or
                              (b) hereof, as the case may be, be defended
                              (including all proceedings on appeal or for review
                              which counsel for the defendant shall deem
                              appropriate) by the indemnifying party. The
                              indemnified party shall have the right to be
                              represented by advisory counsel and accountants,
                              at its own expense, and

                                                                            E-42
<PAGE>

                              shall be kept fully informed of such action, suit
                              or proceeding at all stages thereof, whether or
                              not it is so represented. The indemnifying party
                              shall make available to the indemnified party and
                              its attorneys and accountants all books and
                              records of the indemnifying party relating to such
                              proceedings or litigation. The parties will render
                              to each other such assistance as they may
                              reasonably require in order to ensure the proper
                              and adequate defense of any such action, suit or
                              proceeding.

                        (iii) The indemnifying party shall not make any
                              settlement of any claims without the written
                              consent of the indemnified party, which consent
                              shall not be unreasonably withheld or delayed.

                        (iv)  The indemnified party shall not make any
                              settlement of any claims without the written
                              consent of the indemnifying party.

                  (d)   The provisions of this Section 4.1 shall survive
                        termination of this Agreement.

            4.2   Confirmation of Previous Releases.

      Without limiting any other provision of this Agreement, each of the
parties to this Agreement hereby confirms, ratifies and agrees to be bound by
the provisions of Section 2.4(d) and 2.4(e) of the Prior Processing Agreement,
and, as they relate to such Sections 2.4(d) and 2.4(e), Sections 2.4(f), 2.4(g)
and 2.4(h) of the Prior Processing Agreement, in each case, as if such
provisions had been expressly incorporated in this Agreement with such changes
as are necessary to make those provisions have the identical substantive effect
they would have had under such Prior Processing Agreement if this Agreement had
not been entered into.

            4.3   Settlement of Current Disputes.

      Osteotech, MTF and Synthes have settled certain current disputes between
them pursuant to the Settlement Agreement.

      5.    FINANCIAL TERMS.

            5.1   Fees.

                  (a)   MTF will pay to Osteotech the Processing Fees.

                                                                            E-43
<PAGE>

                  (b)   ***

                  (c)   Osteotech will pay to MTF the Procurement Fees.

                  (d)   ***

            5.2   Invoicing and Payment.

                  (a)   Osteotech shall submit invoices in U.S. dollars to MTF
                        for all Processing Fees due in respect of MTF Tissue
                        delivered to Osteotech hereunder. The invoice date shall
                        be the date that Osteotech's Quality Assurance
                        Department releases the finished units of MTF Tissue for
                        shipment to MTF or the date of shipment of Grafton(R)
                        DBM products, Bioimplants or other Proprietary Products
                        Processed from MTF Tissue, as the case may be.

                  (b)   MTF shall submit invoices in U.S. dollars to Osteotech
                        for all Procurement Fees due in respect of Osteotech
                        Tissue delivered hereunder when such Osteotech Tissue is
                        delivered to Osteotech.

                  (c)   Each party will pay each invoice received by it within
                        forty-five (45) days of the invoice date. In the event
                        there is an error in an invoice submitted to it, the
                        receiving party shall notify the other party of such
                        error within three (3) business days of the date such
                        invoice is received and the invoice date will then be
                        the date of the corrected invoice submitted by such
                        other party. All such payments shall be in U.S. dollars.

                  (d)   Any balance of any invoice which is not paid within the
                        time specified above, at the option of the party to whom
                        payment is due, shall accrue interest at the rate of one
                        percent (1%) per month.

      6.    CONFIDENTIALITY AND CERTAIN OTHER COVENANTS.

            6.1   Non-Disclosure of Confidential Information.

                  (a)   Neither party will, at any time, without the express
                        agreement of the other party, or except as expressly
                        permitted by this Agreement, disclose to any other
                        person or use any Confidential Information of the other
                        party, except for the purposes of

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-44
<PAGE>

                        performing this Agreement or any successor Agreement or
                        as may be required by law, governmental regulation or
                        court order.

                  (b)   Each Party agrees to require its employees, consultants
                        or others granted access to Confidential Information to
                        execute appropriate confidentiality agreements; provided
                        that each organization's agreements are approved by such
                        organization's counsel.

                  (c)   MTF and Osteotech recognize that violation in any
                        material respect of any provision of Section 6.1(a) may
                        cause irreparable injuries to Osteotech or MTF and agree
                        that MTF or Osteotech shall be entitled to preliminary
                        and final injunctive relief against such violation. Such
                        injunctive relief shall be in addition to, and in no way
                        in limitation of, any and all remedies or rights which
                        MTF or Osteotech shall have at law or in equity for the
                        enforcement of the provisions of this Section 6.1. In
                        addition, MTF and Osteotech agree that the party
                        responsible for the breach of confidentiality shall be
                        responsible for all legal fees and other costs and
                        expenses incurred in the successful enforcement of the
                        non-breaching party's rights and remedies under this
                        Section 6.1.

      6.2   Non-Solicitation of Sales Agents.

            (a)   MTF shall not engage any (i) sales agent retained by Osteotech
                  or (ii) any employee, independent contractor or other sales
                  personnel affiliated with such sales agent ("affiliated
                  personnel"), while any such sales agent or affiliated
                  personnel is under contract directly or indirectly to
                  Osteotech and for a period of one (1) year after any such
                  contract is terminated, to promote or represent any form of
                  Tissue developed, processed or distributed by or on behalf of
                  MTF or any of MTF's licensees, licensors, distributors,
                  partners or agents which competes with any of Osteotech's
                  Proprietary Products, including without limitation
                  Grafton(R) DBM products or Bioimplants.

            (b)   Osteotech shall not engage any (i) sales agent retained by MTF
                  or (ii) any employee, independent contractor or other sales
                  personnel affiliated with such sales agent ("affiliated
                  personnel"), while any such sales agent or affiliated
                  personnel is under contract directly or indirectly to MTF and
                  for a period of one (1) year after any such contract is
                  terminated, to promote or represent any form of Tissue
                  developed, processed or distributed by or on behalf of
                  Osteotech or any of Osteotech's licensees, licensors,
                  distributors, partners or agents which competes with any of
                  MTF's proprietary Tissue products.

                                                                            E-45
<PAGE>

            6.3   Osteotech Sales Agents.

                  MTF acknowledges the existence and importance of the
independent sales agent network established and maintained by Osteotech. MTF
shall not be entitled to engage independent agents or any other person or entity
to promote Osteotech's Grafton(R) DBM products or other Proprietary Products
distributed by MTF unless Osteotech shall have first consented in writing to MTF
engaging such agent, person or entity. Osteotech shall have full discretion to
determine whether to withhold or grant such consent.

            6.4   Osteotech Marketing of Grafton(R).

                  Osteotech represents that it currently intends to continue to
market Grafton(R) DBM in the United States through its direct and independent
sales agent network regardless of whether it enters, in the future, into
agreements with parties other than MTF.

            6.5   Dedicated Supply.

                  MTF shall use its Best Efforts to ensure that: (a) when a
customer requests a Proprietary Product processed by Osteotech for MTF pursuant
to this Agreement, such request will not be diverted to or fulfilled by,
directly or indirectly, any product processed by MTF or any entity (other than
Osteotech) with which MTF has any contractual or other business arrangement; and
(b) that Proprietary Products processed by Osteotech which are the subject of
any such request will in fact be shipped to such customers.

      In furtherance of the foregoing undertaking, if Osteotech shall determine
that, notwithstanding the foregoing, any such Proprietary Product processed by
Osteotech shall not have been delivered to such customer, upon presentation of
evidence reasonably documenting such fact (provided that no hearsay evidence
will be used to make such determination), MTF shall pay Osteotech an amount
equal to *** of the Suggested End User Price for each and every Proprietary
Product processed by Osteotech which would have been distributed to such
customer.

            6.6   Notices of Pricing and/or Processing Fee Increases.

      Osteotech shall deliver to MTF written notice no less than ninety (90)
days prior to the effectiveness of any change in Suggested End User Price or in
the Annual Processing Fee Increase (referred to in Schedule 2.1.6 hereto). Each
such notice shall state the new Suggested End User Price or Annual Processing
Fee Increases as relevant and the effective date thereof. All such changes and
information related thereto shall be treated as Confidential Information until
publicly disclosed by Osteotech.

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-46
<PAGE>

            6.7   Bone Dowel Sales.

      Osteotech agrees to plan its products from MTF Tissue so that the growth
rate of end user unit sales of its bio-d(R) Threaded Cortical Bone Dowel product
does not exceed the following amounts: in 2002, *** times the number of such
sales in 2001; in January 2003, *** times the number of such sales in January
2002.

            6.8   Surviving Provisions.

                  The provision of Sections 6.1 and 6.2 shall survive the
termination of this Agreement in accordance with their terms.

            7.    EFFECTIVENESS AND TERM OF AGREEMENT.

                  This Agreement shall, when it has been executed by all the
Parties hereto, become effective as of the Effective Date and shall terminate on
December 31, 2008, unless terminated earlier in accordance with the provisions
hereof.

            8.    TERMINATION.

            8.1   Either party may terminate this Agreement at any time upon:

                  (a)   The material breach by the other party of any of its
                        obligations under this Agreement, if such breach shall
                        not be cured within ninety (90) days after written
                        notice thereof is given by the non-breaching party to
                        the breaching party; or

                  (b)   An adjudication of the other party as bankrupt or
                        insolvent; or the admission in writing by such other
                        party of its inability to pay its debts as they mature;
                        or an assignment by such other party for the benefit of
                        its creditors; or such other party applying for or
                        consenting to the appointment of a receiver, trustee or
                        similar officer for its assets; or the appointment of a
                        receiver, trustee or similar officer for such other
                        party's assets without the application or consent of
                        such other party, if such appointment shall continue
                        undischarged for a period of ninety (90) days; or such
                        other party instituting (by petition, application,
                        answer, consent or otherwise) any bankruptcy, insolvency
                        arrangement or similar proceeding relating to it under
                        the laws of any jurisdiction; or the institution of any
                        bankruptcy, insolvency arrangement or similar proceeding
                        relating to such other party, if such proceeding shall
                        remain

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-47
<PAGE>

                        undismissed for a period of ninety (90) days; or the
                        issuance or levy of any judgment, writ, warrant of
                        attachment or execution or similar process against a
                        substantial part of the property or assets of such other
                        party, if such judgment, writ, warrant of attachment or
                        execution or similar process shall not be released,
                        vacated or fully bonded within ninety (90) days after
                        its issue or levy.

            8.2 MTF may terminate this Agreement at any time upon ninety (90)
days' prior written notice to Osteotech if MTF makes a determination to end its
program of procuring and distributing Tissue; provided that if MTF resumes such
program at any time during the original term of this Agreement it shall provide
prompt written notice of such resumption to Osteotech and this Agreement shall
become effective again in accordance with its terms as soon as is practicable,
but in no event later than ninety (90) days after such notice is received by
Osteotech.

            8.3 In the event MTF enters into an agreement or arrangement with a
third party whereby finished units of MTF Tissue processed by Osteotech for MTF
are used as part of such third party's technology or product, MTF shall promptly
inform Osteotech of its intent to enter into such agreement or arrangement and
Osteotech shall have the right to terminate this Agreement solely as it relates
to MTF Tissue at any time upon ninety (90) days' prior written notice to MTF
without any further obligation to MTF, other than (A) Osteotech's obligations
hereunder with respect to MTF Tissue which Osteotech has begun to Process and
MTF Tissue which Osteotech has finished Processing but not yet delivered to MTF,
which obligations shall continue until all such MTF Tissue is delivered to MTF
and (B) those obligations which otherwise survive termination of this Agreement
in accordance with their terms.

            8.4 MTF may terminate this Agreement at any time upon thirty (30)
days' prior written notice to Osteotech if FDA has made the determination (after
any good faith appeal of such determination by Osteotech) described in Section
2.2.2(b) to the extent such provisions are applicable to Osteotech. Osteotech
may terminate this Agreement at any time upon thirty (30) days' prior written
notice to MTF if FDA has made the determination (after any good faith appeal of
such determination by MTF) described in Section 2.2.2(b) to the extent such
provisions are applicable to MTF.

            8.5 In the event that Regeneration Technologies Inc. ("RTI") shall
have acquired beneficial ownership of more than 50% of the voting shares of
Osteotech or shall have caused the election of persons nominated by it to
membership on the board of directors of Osteotech so that such persons
constitute a majority of the membership of such board, then MTF shall have the
right, exercisable solely by delivery of written notice to Osteotech within
thirty (30) days of the occurrence of such event, to terminate this Agreement
upon payment to Osteotech of the Termination Fee (as defined below); provided
that such right may only be exercised if the License is simultaneously
terminated pursuant to the provisions of Section 6.5 thereof. The Termination
Fee shall be the net present value to Osteotech, determined at the time of
exercise of the rights referred to in this Section 8.5, of the remaining
obligations of MTF under this Agreement for the remainder of its term. Osteotech
and MTF will negotiate in good faith to agree on the Termination Fee. If such
agreement is not reached within thirty (30) days after the occurrence of the
change in control event involving RTI, the Termination Fee shall be

                                                                            E-48
<PAGE>

determined by an appraiser jointly selected by Osteotech and MTF, which
appraiser shall submit to the parties a report within thirty (30) days of its
appointment setting forth such determination. If the parties are unable to agree
on an appraiser within forty-five (45) days after failing to reach agreement on
the Termination Fee, within seven (7) days thereafter, each party shall submit
the names of two nationally recognized firms that are engaged in the business of
valuing non-publicly traded securities, and each party shall be entitled to
strike one name from the other party's list of firms, and the appraiser shall be
selected by lot from the remaining two firms. The expenses of such appraiser
shall be borne equally by Licensor and Licensee. The determination of any such
appraiser as to the Termination Fee shall be final and binding upon all parties.

            9.    INSURANCE.

                  (a)   Osteotech shall secure and maintain in force reasonable
                        and adequate insurance coverage for Osteotech's Tissue
                        Processing activities, provided such coverage is
                        available at reasonable prices and terms. Osteotech has
                        previously delivered to MTF certificates of insurance.

                  (b)   MTF shall secure and maintain in force reasonable and
                        adequate insurance coverage of its Tissue recovery and
                        distribution activities pursuant to this Agreement,
                        provided such coverage is available at reasonable prices
                        and terms. MTF has previously delivered to Osteotech
                        certificates of insurance.

                  (c)   Osteotech shall require each subcontractor or assignee
                        who Processes MTF Tissue on behalf of Osteotech (if any
                        are permitted by MTF) to procure and maintain insurance
                        of the types and amounts required of Osteotech. In
                        addition, once approved by MTF, the subcontractor or
                        assignees shall sign the indemnity agreement as it
                        appears in Section 4.1(a) in favor of MTF. If there is
                        any assignment to a majority owned subsidiary of
                        Osteotech as provided in Section 11 of this Agreement,
                        that subsidiary shall meet each requirement of this
                        Section 9.

            10. FORCE MAJEURE.

            Neither party shall be responsible to the other for nonperformance
or delayed performance of the terms and conditions hereof due to acts of God,
acts of government, wars, riots, accidents and transportation, fuel or material
shortages, or other causes (except strikes), in the nature of force majeure
which is beyond its control. To the extent Osteotech is unable to perform
Processing of MTF Tissue due to such events, Osteotech shall arrange to have
such MTF Tissue processed under Osteotech's oversight within thirty (30) days of
the occurrence of such event.

            11. BINDING AGREEMENT; ASSIGNMENT.

                  (a)   Each of Biocon and MTF represents, warrants and
                        covenants (i) that this Agreement does not violate any
                        law, rule or regulation

                                                                            E-49
<PAGE>

                        applicable to it, nor does it conflict with or cause a
                        breach of or default under any other agreement to which
                        either of them or any other organization, entity or
                        person which they control, are controlled by, or are
                        under common control with, either through ownership,
                        common management, contract or otherwise (any such
                        organization, entity or person being an "Affiliate" for
                        purposes of this Agreement) is a party or is bound; and
                        (ii) that neither of them or any of their Affiliates
                        will enter into any agreement which would conflict with
                        or interfere with MTF's ability to comply with its
                        obligations under this Agreement; and (iii) that this
                        Agreement has been duly authorized by all necessary
                        actions and constitutes its legal, valid and binding
                        obligation enforceable against it in accordance with its
                        terms. Each of Biocon and MTF agrees that all of MTF's
                        obligations under this Agreement are and will be binding
                        upon Biocon and MTF and all existing and future
                        Affiliates of either of them and that each party whose
                        signature to this Agreement is required to make such
                        obligation binding on all such Affiliates has in fact
                        executed this Agreement Each of Biocon and MTF, on the
                        one hand, and Osteotech, on the other hand, represents,
                        warrants and covenants that it is not a party to any
                        agreement, or subject to any obligation or other duty,
                        that would materially conflict with or interfere with
                        MTF's or Osteotech's respective ability to comply with
                        its obligations under this Agreement.

                  (b)   Osteotech represents, warrants and covenants (i) that
                        this Agreement does not violate any law, rule or
                        regulation applicable to it, nor does it conflict with
                        or cause a breach of or default under any other
                        agreement to which it or any of its affiliates is a
                        party or is bound; and (ii) that neither it or any of
                        its affiliates will enter into any agreement which would
                        conflict with or interfere with Osteotech's ability to
                        comply with its obligations under this Agreement; and
                        (iii) that this Agreement has been duly authorized by
                        all necessary actions and constitute its legal, valid
                        and binding obligation enforceable against it in
                        accordance with its terms. Osteotech agrees that all of
                        Osteotech's obligations under this Agreement are and
                        will be binding upon all existing and future Affiliates
                        of Osteotech and that each party whose signature to this
                        Agreement is required to make such obligation binding on
                        all such Affiliates has in fact executed this Agreement.

                  (c)   Except as otherwise expressly herein provided, this
                        Agreement may not be assigned in whole or in part
                        without the prior written consent of the other party,
                        provided that either party may assign its rights under
                        this Agreement to any majority-owned subsidiary of such
                        party without the consent of the other party, provided
                        that such subsidiary agrees in writing to be bound by
                        the terms and

                                                                            E-50
<PAGE>

                        conditions of this Agreement. In the event of any such
                        assignment, the party making such assignment shall not
                        be relieved of its obligations under this Agreement
                        unless otherwise agreed to in a writing executed by the
                        other party.

      12. NAME, EMBLEM, PACKAGING, TECHNOLOGY AND TRADEMARK.

                  (a)   Except to the extent Osteotech indicates in any
                        literature, including without limitation promotional
                        materials, that MTF is one of Osteotech's Tissue
                        Processing clients, and except as required under this
                        Agreement, Osteotech shall have no right to use the
                        trademark or emblem of MTF in connection with its
                        Processing activities or to use the name of MTF for
                        commercial purposes without the prior written consent of
                        MTF; provided, however, Osteotech may disclose MTF's
                        name as may be required by law, government regulation or
                        court order.

                  (b)   Except to the extent MTF indicates in literature,
                        including without limitation promotional materials, that
                        Osteotech processes MTF Tissue distributed by MTF, and
                        except as required under this Agreement, MTF shall not
                        have the right to use any trademark or emblem of
                        Osteotech, including the name Osteotech, without the
                        prior written consent of Osteotech; provided, however,
                        MTF may disclose Osteotech's name as may be required by
                        law, government regulation or court order.

                  (c)   (i) Nothing in this Agreement shall be interpreted to
                            convey to MTF any trademark, patent or proprietary
                            technology owned by Osteotech; and

                        (ii)Nothing in this Agreement shall be interpreted to
                            convey to Osteotech any trademark, patent, or
                            proprietary technology owned by MTF.

                  (d)   MTF recognizes that Osteotech currently performs, and
                        intends in the future to perform, Processing services
                        for others in addition to MTF, and therefore, agrees
                        that unless specifically developed or customized for MTF
                        or as otherwise provided herein, all packaging and
                        technology used by Osteotech to perform Processing
                        services for MTF may also be used by Osteotech to
                        perform such services for others.

                  (e)   MTF recognizes that Osteotech processes Proprietary
                        Products and agrees that if it were to distribute these
                        products it will do so only under the trademark,
                        packaging, labels and emblems developed and provided by
                        Osteotech.

                                                                            E-51
<PAGE>

      13.   NOTICES.

      All notices and other communications provided for hereunder shall be in
writing and shall be mailed by certified mail, return receipt requested,
telecopied, with a copy sent promptly thereafter by U.S. mail, or delivered by
hand or overnight delivery, as follows.

                 If to MTF:             Chief Executive Officer
                                        Musculoskeletal Transplant Foundation
                                        125 May Street
                                        Edison, New Jersey 08837
                                        Telephone No. (732) 661-0202
                                        Telecopy No. (732) 661-2297

                 If to Osteotech:       Chief Executive Officer
                                        Osteotech, Inc.
                                        51 James Way
                                        Eatontown, New Jersey 07724
                                        Telephone No. (732) 542-2800
                                        Telecopy No. (732) 935-0626

                 If to Biocon:          Chief Executive Officer
                                        Biocon, Inc.
                                        125 May Street
                                        Edison, New Jersey 08837
                                        Telephone No. (732) 661-0202
                                        Telecopy No. (732) 661-2297

or such other person or address as either party may designate by written notice
to the other party complying as to delivery with the terms of this Section 13.
All such notices and other communications shall be effective (i) if mailed by
certified or registered mail, when received as indicated by the return receipt;
(ii) if telecopied, when transmitted, as indicated by the facsimile transmission
report, provided same is on a business day in the U.S. (excludes weekends and
federal holidays) and, if not, on the next business day; or (iii) if delivered,
upon delivery, provided same is on a business day and, if not, on the next
business day.

      14.   ENTIRE AGREEMENT.

      This Agreement sets forth the entire agreement between the parties. Any
prior agreements, promises, negotiations, or representations, either oral or
written, relating to the subject matter of this Agreement not expressly set
forth in this Agreement, are of no force or effect. Without limiting the
foregoing, except as expressly provided in Section 4 hereof, it is agreed that
the Prior Processing Agreement is superseded in its entirety by this Agreement
and is of no force and effect as of the Effective Date.

                                                                            E-52
<PAGE>

      15.   MODIFICATION.

      This Agreement, or any part or section of it, may not be amended or
modified except by the written consent of both parties to such Agreement.

      16.   APPLICABLE LAW.

      This Agreement shall be construed in accordance with the laws of the State
of New Jersey, without giving effect to any conflict of laws principles.

      17.   WAIVER.

      Waiver or breach of any provision of this Agreement shall not be deemed a
waiver of any other breach of the same or a different provision of this
Agreement.

      18.   INDEPENDENT CONTRACTOR.

      Each of Osteotech and MTF is providing its services hereunder as an
independent contractor. Nothing herein shall create any affiliation, partnership
or joint venture between the parties hereto, or any employer/employee
relationship.

      19.   SEVERABILITY.

      The provisions of this Agreement shall be severable, and if a court of
competent jurisdiction holds any provisions of this Agreement to be in violation
of any applicable law, the remaining provisions shall nevertheless remain in
full force and effect.

      20.   SUCCESSORS.

      This Agreement shall be binding upon and inure to the benefit of the
parties and their respective parents, subsidiaries, affiliates, successors and
assigns.

      21.   COUNTERPART SIGNATURES; DELIVERY BY FACSIMILE.

      This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, and all of
such counterparts together shall constitute one and the same instrument.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Agreement.

                                                                            E-53
<PAGE>

      IN WITNESS WHEREOF, the parties have caused this Second Amended and
Restated Processing Agreement to be executed by their duly authorized officers
as of the date first written above.

                                          MUSCULOSKELETAL TRANSPLANT FOUNDATION

                                          By:   /s/ Bruce Stroever
                                              ----------------------------------
                                                Bruce Stroever, President
                                                and Chief Executive Officer

                                          BIOCON, INC.

                                          By:    /s/ Bruce Stroever
                                              ----------------------------------
                                                Bruce Stroever, President

                                          OSTEOTECH, INC.

                                          By:   /s/ Richard W. Bauer
                                               ---------------------------------
                                                Richard W. Bauer, President
                                                and Chief Executive Officer

                                                                            E-54
<PAGE>

                                               Exhibit 1 to Processing Agreement

                             MTF/Synthes Agreements

         ***

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-55
<PAGE>

                                               Exhibit 2 to Processing Agreement

                            FORM OF LICENSE AGREEMENT

                             MTF/Synthes Agreements

      [See Exhibit 10.58 to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002]

                                                                            E-56
<PAGE>

                                               Exhibit 3 to Processing Agreement

                          FORM OF SETTLEMENT AGREEMENT

      [See Exhibit 10.56 to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002]

                                                                            E-57
<PAGE>

                     SCHEDULE 2.1.6 TO PROCESSING AGREEMENT
                                 PROCESSING FEES

      MTF shall pay to Osteotech the Processing Fees described in the following
subsections of this Schedule 2.1.6.

(a)   Processing Fees in respect of Base Allograft Tissue.

      BASE ALLOGRAFT PROCESSING FEE ***

      1. MTF shall pay to Osteotech the amount of *** (as it shall be modified
pursuant to the following clause 2, the "Processing Fee") for Processing the MTF
Tissue of each Donor from which MTF Tissue is delivered pursuant to this
Agreement on or prior to December 31, 2003;

      2. After December 31, 2003, the Processing Fee for Processing of MTF
Tissue delivered in a calendar year, will be the Processing Fee for the
immediately preceding calendar year multiplied by an amount equal to the sum of
(x) 1.0 plus (y) the Annual Processing Fee Increase in respect of such year (For
the purpose of this Schedule 2.1.6, "Annual Processing Fee Increase" shall mean,
in respect of Processing Fees for any calendar year, a percentage determined by
Osteotech in its sole discretion, provided that such percentage shall not exceed
the increase in the Medical Cost Component of the Consumer Price Index for the
calendar year immediately preceding the calendar year to which such Annual
Processing Fee Increase will be applied.)

(b)      Processing Fees in respect of Proprietary Products.

      In addition to the Processing Fees referred to in the foregoing clause
(a), MTF shall pay to Osteotech the following fees (each a "Processing Fee") for
Processing MTF Tissue into the listed Proprietary Products.

<TABLE>
<CAPTION>
PROPRIETARY PRODUCT PROCESSING FEES
---------------------------------------------------------------------------------------------------------------
                                                                               Suggested          Processing
                                                                             End User Price           Fee
                                                                            -----------------    --------------
<S>                                                                <C>            <C>                  <C>
GRAFTON(R)
DEMINERALIZED BONE
MATRIX (DBM)
GEL                                                                .5cc           ***                  *
                                                                    1cc           ***                  *
                                                                    5cc           ***                  *
                                                                   10cc           ***                  *
</TABLE>

----------

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-58
<PAGE>

<TABLE>
<CAPTION>
PROPRIETARY PRODUCT PROCESSING FEES
---------------------------------------------------------------------------------------------------------------
                                                                               Suggested          Processing
                                                                             End User Price           Fee
                                                                            -----------------    --------------
<S>                                                                <C>            <C>                  <C>
                                                                   25cc           ***                  *

FLEX                                                       1.5 x 1.5 cm           ***                  *
                                                             5 x 2.5 cm           ***                  *
                                                            10 x 2.5 cm           ***                  *
                                                               5 x 5 cm           ***                  *

PUTTY                                                             .5 cc           ***                  *
                                                                    1cc           ***                  *
                                                                  2.5cc           ***                  *
                                                                    5cc           ***                  *
                                                                   10cc           ***                  *
                                                 1/4 cc syringe (1 ea.)           ***                  *
                                                1/4 cc syringe (10 ea.)           ***                  *
                                                 1/2 cc syringe (1 ea.)           ***                  *
                                                1/2 cc syringe (10 ea.)           ***                  *

CRUNCH                                                              5cc           ***                  *
                                                                   15cc           ***                  *

MATRIX                                                      2.5cm x 5cm           ***                  *
                                                           2.5cm x 10cm           ***                  *
                                               8mm x 10 mm plug (1 ea.)           ***                  *
                                               8mm x 10 mm plug (5 ea.)           ***                  *
                                              10mm x 10 mm plug (2 ea.)           ***                  *
                                              12mm x 10 mm plug (2 ea.)           ***                  *
                                              14mm x 10 mm plug (2 ea.)           ***                  *
                                              16mm x 10 mm plug (2 ea.)           ***                  *
                                              18mm x 10 mm plug (2 ea.)           ***                  *
                                              20mm x 10 mm plug (2 ea.)           ***                  *
                                              25mm x 10 mm plug (2 ea.)           ***                  *
</TABLE>

----------

* The Processing Fee in respect of the listed Existing Propriety Product shall
be *** of the Suggested End User Price unless modified by the mutual written
agreement of the parties.

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-59
<PAGE>

<TABLE>
<CAPTION>
PROPRIETARY PRODUCT PROCESSING FEES
---------------------------------------------------------------------------------------------------------------
                                                                               Suggested          Processing
                                                                             End User Price           Fee
                                                                            -----------------    --------------
<S>                                                                <C>            <C>                  <C>

GRAFTON PLUS (TM) DEMINERALIZED BONE                                1cc           ***                  *
MATRIX (DBM) PASTE
                                                                    5cc           ***                  *
                                                                   10cc           ***                  *

BIOIMPLANTS

bio-d(R) Threaded Cortical Bone Dowel                                             ***                  *
Graftech(TM) Posterior Ramp                                                       ***                  *
Graftech(TM) Anterior Ramp                                                        ***                  *

                                                                                  ***

Graftech(TM) Cervical Spacer                                 5mm to 9mm           ***                  *
                                                           10mm to 13mm           ***
Graftech(TM) Cervical Dowel                                                       ***                  *
Graftech(TM) Cortical Spacer                                                      ***                  *
------------------------------------ -- -------------------------------- -- ----------------- -- --------------
</TABLE>

----------

1. Osteotech shall deliver to MTF written notice no less than 90 days prior to
the effectiveness of any change in Suggested End User Price or in the Annual
Processing Fee Increase. Each such notice shall state the new Suggested End User
Price or Annual Processing Fee Increases as relevant and the effective date
thereof.

2. The fees referred to in this clause (b) are inclusive of all marketing and
sales programs to be provided by Osteotech and all technical support, clinical
studies, medical education and other services required to market and sell
products.

3. Without limiting the foregoing, Processing Fees and all other matters in
respect of any New Proprietary Product shall, except to the extent such New
Proprietary Product is designated to be an Existing Proprietary Product pursuant
to the provisions of Section 3.6 of the Processing Agreement to which this
Schedule is attached, be negotiated among the parties at the time of
introduction thereof, and no party shall have, under the Processing Agreement,
any obligation to any other party in respect of any New Proprietary Product
unless and until Processing Fees and all such other matters shall have been
documented by a written agreement among the parties.

--------

* The Processing Fee in respect of the listed Existing Propriety Product shall
be *** of the Suggested End User Price unless modified by the mutual written
agreement of the parties.

*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.

                                                                            E-60

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