OSTEOTECH INC
EX-10.69: THE MANAGEMENT PERFORMANCE BONUS PLAN, JUNE 2006
<DOCUMENT>
<TYPE>EX-10.69
<SEQUENCE>5
<FILENAME>y23889exv10w69.txt
<DESCRIPTION>EX-10.69: THE MANAGEMENT PERFORMANCE BONUS PLAN, JUNE 2006
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.69

OSTEOTECH INC.
INNOVATORS IN MUSCULOSKELETAL SCIENCE

THE MANAGEMENT PERFORMANCE BONUS PLAN

OSTEOTECH, INC.

OVERVIEW OF THE MANAGEMENT PERFORMANCE PLAN                            JUNE 2006

     Osteotech's Management Performance Bonus Plan is designed to focus
     attention on and motivate the achievement of annual Company performance
     objectives.

     This document explains how the Management Performance Bonus Plan works. It
     will answer many of your questions about the mechanics of the Plan and
     provide the information you need to understand how performance affects your
     earnings.

ELIGIBILITY

     Position responsibilities and the ability to directly influence Company
     performance are the key criteria used to determine participation in the
     Management Performance Bonus Plan.

     Eligibility to participate in the Management Performance Bonus Plan is
     extended to Officers, Sr. Directors/Directors and named senior managers.
     Eligibility for an award is based 100% upon the accomplishment of the OTI
     performance measures, as established on an annual basis.

PLAN EFFECTIVE DATE

     The Plan is effective January 1, 2006. This Plan supersedes all prior
     programs and previously agreed to terms for incentive compensation, with
     the exception of certain sales management.

<PAGE>

PLAN OBJECTIVES

     The Management Performance Bonus Plan rewards the achievement of
     pre-established annual OTI performance objectives.

     Osteotech's Management Performance Bonus Plan is designed to:

     1.   Focus attention on the achievement of pre-established annual OTI
          performance objectives.

     2.   Support the objective-setting processes - awards are tied to the
          accomplishment of OTI performance objectives.

     3.   Attract and retain high-performing Officers, Sr. Directors/Directors,
          and Senior Managers.

OTI PERFORMANCE DETERMINES ACTUAL AWARDS

     Each year corporate executive management, with approval of the Compensation
     Committee of the Board of Directors, will establish annual OTI performance
     objectives and weightings for the coming year, in support of the annual
     business plan.

EACH PARTICIPANT HAS A TARGET INCENTIVE OPPORTUNITY

     As a participant in the Plan, you have a target incentive opportunity equal
     to a percentage of your annual base salary.

     The target incentive opportunity is the amount that would be paid if OTI
     performance results meet pre-established annual OTI performance objectives.

     The target incentive opportunity may differ from the actual payout:

     -    The target incentive opportunity is the amount available for meeting
          all performance objectives.

     -    The actual payout is the amount paid based upon the level of
          performance achieved. The payout may be higher, lower, or equal to the
          target incentive opportunity.

<PAGE>

THE TARGET INCENTIVE OPPORTUNITY IS A PERCENT OF BASE SALARY

     The target incentive opportunity is calculated as a percentage of base
     salary. Each year, as part of the planning process, corporate executive
     management, with approval of the Compensation Committee of the Board of
     Directors, will determine what the target incentive opportunities will be
     for Plan participants.

THE OTI PERFORMANCE MEASURES ARE ESTABLISHED EACH YEAR

     Each year performance measures will be reviewed to determine which specific
     performance measures best support the Company's business plan. An
     appropriate weighting will be determined for each performance measure
     selected. EBIT (or EBITDA) and Revenue Growth are performance measures that
     will be used each year.

RANGE OF EXPECTED PERFORMANCE

     At the beginning of each year, a range of performance will be established
     for the annual OTI performance objectives. This range will be based upon
     three levels of performance:

-    Performance Gate, or minimum level of performance. Some performance
     measures may have a Performance Gate set, at which performance below the
     Performance Gate will result in no payout for that performance measure.

-    Target, or planned level of performance. This represents 100% achievement
     of the OTI annual performance objectives.

-    Maximum level of performance. Some performance measures may have a maximum
     performance level, at which a maximum payout will be made based upon annual
     OTI performance exceeding expectations.

<PAGE>

PERFORMANCE GATE

     Each year corporate executive management, with the approval of the
     Compensation Committee of the Board of Directors, may set minimum
     performance levels for one or more performance measures, below which there
     are no payouts.

PAYOUT BEYOND TARGET INCENTIVE OPPORTUNITY FOR OTI PERFORMANCE THAT EXCEEDS
EXPECTATIONS

     Each year, based upon the Company performance objectives, corporate
     executive management, with the approval of the Compensation Committee of
     the Board of Directors, may decide that an additional payout will be made
     for performance that exceeds expectations. The actual payout is calculated
     by multiplying the level of achievement, times the weighting, times the
     target incentive opportunity.

PAYOUT BELOW TARGET INCENTIVE OPPORTUNITY FOR OTI PERFORMANCE THAT DOES NOT MEET
EXPECTATIONS

     On a year-by-year basis, there may be a minimum level of achievement of
     pre-established OTI performance objectives, below which there will be no
     payout. In addition, if your individual performance is rated
     "Unsatisfactory" there will be no payout.

     Your actual payout will be less than the target incentive opportunity if
     OTI performance falls below expectations.

APPROVAL OF PAYOUTS

     The Human Resources and Finance Department will calculate actual payouts.
     The final approval comes from the CEO of OTI.

<PAGE>

ELIGIBILITY FOR PAYOUT

     Eligibility to participate in the Performance Bonus Plan is extended to
     Officers; Sr. Directors/Directors and named senior managers, who have been
     functioning in one of the stated positions. Payouts will be prorated, based
     upon months of eligibility.

     Eligible participants must be actively employed on the day of the payout to
     receive their Management Performance Bonus. However, if a participant
     retires, dies, or becomes permanently disabled during the plan year, a
     prorated payout will be paid based upon the time worked during the year.
     This payout may be granted at 100%, at the discretion of the Compensation
     Committee.

     Employees who are demoted during the Plan year will be eligible for a
     prorated payout based upon the number of months that they were in an
     eligible position. If they were in two different eligible positions, they
     will receive a prorated amount for the number of months in each eligible
     position.

PLAN CHANGES

     Each year, management reserves the right to reassess the terms and
     conditions of the plan and revise the plan design and components.

PAYOUT DETERMINATION

     Final payouts will be determined and paid out, as early as possible,
     following the year-end close and audit.
</TEXT>
</DOCUMENT>
