SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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

                                    FORM 8-A

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



                FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
                     PURSUANT TO SECTION 12(b) OR (g) OF THE
                         SECURITIES EXCHANGE ACT OF 1934




                                  EXOGEN, INC.
             (Exact name of Registrant as specified in its charter)


       Delaware                                            77-223208468
(State of incorporation                        (IRS Employer Identification No.)
or organization) 


                             10 Constitution Avenue
                                  P.O. Box 6860
                          Piscataway, New Jersey 08855
               (Address of principal executive offices) (Zip Code)

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

        Securities to be registered pursuant to Section 12(b) of the Act: 


                    Title of each class to be so registered
                                      None

                  Name of each exchange on which each class is
                                to be registered
                                      None

       Securities to be registered pursuant to Section 12(g) of the Act:
                                                    
                         Preferred Share Purchase Rights
                                (Title of Class)

<PAGE>
Item     1. Description of Securities to be Registered.

         Effective as of December 6, 1996, pursuant to a Preferred Shares Rights
Agreement (the "Rights  Agreement")  between  Exogen,  Inc. (the  "Company") and
Registrar and Transfer  Company,  as Rights  Agent  (the  "Rights  Agent"),  the
Company's  Board of  Directors  declared a dividend  of one right (a "Right") to
purchase  one  one-hundredth  share  of the  Company's  Series  A  Participating
Preferred  Stock  ("Series A Preferred")  for each  outstanding  share of Common
Stock,  par value  $0.0001 per share  ("Common  Shares"),  of the  Company.  The
dividend is payable on December 19, 1996 (the "Record Date") to  stockholders of
record as of the  close of  business  on that  date.  Each  Right  entitles  the
registered  holder to purchase from the Company one  one-hundredth of a share of
Series A  Preferred  at an  exercise  price of $30.00  (the  "Purchase  Price"),
subject to adjustment in the event the Company declares a dividend on the Common
Stock payable in Common Stock,  subdivides the number of  outstanding  shares of
Common  Stock  into a larger  number of such  shares or  combines  the number of
outstanding  shares of Common Stock into a smaller number of such shares,  among
other circumstances.  In addition,  under certain  circumstances  described more
fully herein, the Rights may become exercisable for a number of shares of Common
Stock having a value equal to two times the Purchase  Price and/or  Common Stock
of certain  acquiring  companies  having a value equal to two times the Purchase
Price.

         The following summary of the principal terms of the Rights Agreement is
a general  description  only and is subject to the detailed terms and conditions
of the Rights  Agreement.  A copy of the Rights Agreement is attached as Exhibit
99.1 to this  Registration  Statement and is  incorporated  herein by reference;
capitalized  terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Rights Agreement.

Certain Anti-takeover Effects

         The Rights  approved by the Board are  designed to protect and maximize
the value of the outstanding  equity interests in the Company in the event of an
unsolicited  attempt by an acquiror to take over the Company,  in a manner or on
terms not  approved  by the Board of  Directors.  Takeover  attempts  frequently
include  coercive  tactics to deprive the  Company's  Board of Directors and its
stockholders of any real opportunity to determine the destiny of the Company.

         The  Rights  have been  declared  by the  Board in order to deter  such
tactics, including a gradual accumulation in the open market of a 15% or greater
position to be followed by a merger or a partial or two-tier  tender  offer that
does not treat all stockholders  equally.  These tactics can operate to unfairly
pressure  stockholders,  force them out of their  investment and deprive them of
the full value of their shares.

         The Rights are not  intended  to prevent a takeover  of the Company and
will not do so.  The  Rights may be  redeemed  by the  Company at $.01 per Right
within ten days (or on such later date as may be determined by a majority of the
Board of Directors,  excluding  directors  affiliated with an Acquiring  Person)
after  the  accumulation  of 15% or more of the  Company's  shares  by a  single
acquiror or group. Accordingly,  the Rights should not interfere with any merger
or business combination approved by the Board of Directors.
<PAGE>
         However,  the Rights may have the effect of rendering more difficult or
discouraging  an acquisition  of the Company deemed  undesirable by the Board of
Directors.  The Rights may cause substantial  dilution to a person or group that
attempts  to acquire  the  Company on terms or in a manner not  approved  by the
Company's Board of Directors,  except pursuant to an offer  conditioned upon the
negation,  purchase or redemption of the Rights.  As a result,  while the Rights
may  provide the Board with  leverage to obtain a higher  price from a potential
acquiror,  they may also prevent or deter offers not approved by the Board,  and
therefore deprive  stockholders,  without providing them with the opportunity to
vote thereon,  of the benefits of offers which may be at a higher price than the
current  market price of the Company's  Common Stock.  In addition,  assuming an
active trading market in the Rights  themselves  does not develop,  stockholders
with lesser financial means might not be able to take full economic advantage of
the  Rights.  Further,  the  implementation  of a rights plan may  heighten  the
susceptibility  of the Company to  greenmail  by  stockholders  who  threaten to
acquire a sufficient equity position to pass the Rights'  triggering  threshold,
although  the Board can  respond to any such action by  redeeming  the Rights at
$.01 per Right.

         Issuance  of the  Rights  does  not in any  way  weaken  the  financial
strength of the Company or interfere  with its business  plans.  The issuance of
the Rights themselves has no dilutive effect,  will not affect reported earnings
per share, should not be taxable to the Company or to its stockholders, and will
not  change the way in which the  Company's  shares are  presently  traded.  The
Company's  Board of  Directors  believes  that the Rights  represent a sound and
reasonable means of addressing the complex issues of corporate policy created by
the current takeover environment.

Rights Evidenced by Common Share Certificates

         The Rights will not be exercisable until the Distribution Date (defined
below).  Prior to the  Distribution  Date,  certificates for the Rights ("Rights
Certificates")  will not be sent to  stockholders  and the Rights will attach to
and trade  only  together  with the Common  Shares.  Accordingly,  Common  Share
certificates  outstanding  on the Record Date will  evidence the Rights  related
thereto, and Common Share certificates issued after the Record Date but prior to
the Distribution Date will contain a notation incorporating the Rights Agreement
by reference.  Until the Distribution Date (or earlier  redemption or expiration
of the Rights), the surrender or transfer of any certificates for Common Shares,
even without  notation or a copy of the Summary of Rights being attached thereto
(but as to certificates representing Common Shares issued after the Record Date,
only if they  bear the  legend  required  by the  Rights  Agreement),  will also
constitute  the  transfer  of the  Rights  associated  with  the  Common  Shares
represented by such certificate.
<PAGE>
Distribution Date

         The Rights will separate from the Common  Shares,  Rights  Certificates
will be issued and the Rights will become  exercisable  upon the earlier of: (i)
10 days (or such later date as may be  determined  by a majority of the Board of
Directors,  excluding directors affiliated with the Acquiring Person, as defined
below (the  "Continuing  Directors"))  following  a public  announcement  that a
person or group of affiliated or associated persons (an "Acquiring  Person") has
acquired, or obtained the right to acquire,  beneficial ownership of 15% or more
of the outstanding  Common Shares, or (ii) 10 days (or such later date as may be
determined by a majority of the Continuing Directors) following the commencement
of, or  announcement  of an intention to make, a tender offer or exchange  offer
the  consummation of which would result in the beneficial  ownership by a person
or group of 15% or more of the  outstanding  Common Shares.  The earlier of such
dates is referred to as the "Distribution Date."

Issuance of Rights Certificates; Expiration of Rights

         As soon as practicable following the Distribution Date, separate Rights
Certificates  will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will evidence the Rights from and after the Distribution  Date. All Common
Shares issued prior to the Distribution Date will be issued with Rights.  Common
Shares  issued  after the  Distribution  Date may be issued  with Rights if such
shares are issued (i) upon the conversion of outstanding  convertible debentures
or any  other  convertible  securities  issued  after  adoption  of  the  Rights
Agreement or (ii)  pursuant to the exercise of stock  options or under  employee
benefit plans or arrangements  unless such issuance would result in (or create a
risk that) such options,  plans or arrangements  would not qualify for otherwise
available special tax treatment.  Except as otherwise determined by the Board of
Directors,  no other Common  Shares issued after the  Distribution  Date will be
issued with  Rights.  The Rights will expire on the earliest of (i) December 19,
2006 (the "Final Expiration Date"), (ii) redemption or exchange of the Rights as
described  below,  or  (iii)  consummation  of an  acquisition  of  the  Company
satisfying  certain  conditions  by a person who acquired  shares  pursuant to a
Permitted Offer as described below.

Initial Exercise of the Rights

         Following the  Distribution  Date,  and until one of the further events
described  below,  holders of the  Rights  will be  entitled  to  receive,  upon
exercise  and the payment of $30.00 per Right,  one  one-hundredth  share of the
Series A Preferred,  subject to adjustment  in the event the Company  declares a
dividend on the Common Shares payable in Common Shares, subdivides the number of
outstanding  Common  Shares into a larger  number of such shares or combines the
number of outstanding Common Shares into a smaller number of such shares,  among
other circumstances.  In addition,  under certain  circumstances  described more
fully herein, the Rights may become exercisable for Common Shares having a value
equal to two times the Purchase  Price and/or Common Stock of certain  acquiring
companies having a value equal to two times the Purchase Price.
<PAGE>
Right to Buy Company Common Shares

         Unless the Rights are earlier redeemed,  in the event that an Acquiring
Person  becomes  the  beneficial  owner of 15% or more of the  Company's  Common
Shares then outstanding (other than pursuant to a Permitted Offer),  then proper
provision will be made so that each holder of a Right which has not  theretofore
been exercised (other than Rights  beneficially  owned by the Acquiring  Person,
which will thereafter be void) will  thereafter have the right to receive,  upon
exercise and payment of the Purchase  Price,  Common Shares having a value equal
to two times the  Purchase  Price.  For  example,  if the market price of Common
Shares on the Shares  Acquisition  Date (as defined below) was $15.00,  a person
holding one Right could  purchase  four (4) Common  Shares upon exercise of such
Right  ($30.00/$7.50),  whereas he/she could only purchase two (2) Common Shares
($30.00/$15.00)  in the absence  of such  Rights.  Rights  are  not  exercisable
following the  occurrence of an event as described  above until such time as the
Rights are no longer redeemable by the Company as set forth below.

         In the event that the Company does not have  sufficient  Common  Shares
available  for all  Rights  to be  exercised,  or the Board  decides  that it is
necessary  and not  contrary to the  interests  of Rights  holders to do so, the
Company may instead  substitute cash,  assets or other securities for the Common
Shares for which the Rights would have been exercisable under this provision.

Right to Buy Acquiring Company Stock

         Similarly,  unless the Rights are earlier redeemed,  in the event that,
after the Shares  Acquisition  Date,  (i) the Company is acquired in a merger or
other  business  combination  transaction,  or (ii) 50% or more of the Company's
consolidated assets or earning power are sold (other than in transactions in the
ordinary course of business)  (either of which event is referred to herein as an
"Acquisition"),  proper  provision  must be made so that each  holder of a Right
which has not theretofore been exercised (other than Rights  beneficially  owned
by the Acquiring Person, which will thereafter be void) will thereafter have the
right to receive, upon exercise, shares of Common Stock of the acquiring company
having a value equal to two times the  Purchase  Price  (unless the  transaction
satisfies  certain  conditions  and is  consummated  with a person who  acquired
shares pursuant to a Permitted Offer, in which case the Rights will expire).  So
(assuming no satisfaction of such conditions) if for example the market price of
the acquiror's stock on the date of the Acquisition were $7.50, a person holding
one Right could purchase  eight (8) shares of the  acquiror's  Common Stock upon
exercise of such Right  ($30.00/$3.75),  whereas he could only purchase four (4)
shares of acquiror's Common Stock ($30.00/$7.50) in the absence of such Rights.

Permitted Offer

         A  Permitted  Offer  means a tender  offer for all  outstanding  Common
Shares that has been determined by a majority of the Continuing  Directors to be
adequate  and   otherwise  in  the  best   interests  of  the  Company  and  its
stockholders.  Where the Board of Directors has  determined  that a tender offer
constitutes  a  Permitted  Offer,  the  Rights  will not become  exercisable  to
purchase  Common Shares or shares of the acquiring  company (as the case may be)
at the discounted price described above.
<PAGE>
Exchange Provision

         At any time after the acquisition by an Acquiring Person of 15% or more
of the Company's  outstanding Common Shares and prior to the acquisition by such
Acquiring Person of 50% or more of the Company's  outstanding Common Shares, the
Board of Directors of the Company,  following  the approval of a majority of the
Board of Directors and a majority of the Continuing Directors,  may exchange the
Rights (other than Rights owned by the Acquiring  Person),  in whole or in part,
at an exchange ratio of one Common Share per Right.

Redemption

         At any time on or prior to the close of  business on the earlier of (i)
the 10th day  following  the  acquisition  by an  Acquiring  Person (the "Shares
Acquisition  Date") or such later date as may be determined by a majority of the
Continuing  Directors and publicly  announced by the Company,  or (ii) the Final
Expiration Date of the Rights,  the Company may redeem the Rights in whole,  but
not in part, at a price of $.01 per Right.

Adjustments to Prevent Dilution

         The  Purchase  Price  payable,  the  number of Rights and the number of
Series A Preferred or Common  Shares or other  securities  or property  issuable
upon  exercise  of the Rights are  subject  to  adjustment  from time to time in
connection with the dilutive issuances by the Company as set forth in the Rights
Agreement.  With certain exceptions, no adjustment in the Purchase Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
such Purchase Price.

Cash Paid Instead of Issuing Fractional Shares

         No fractional portion less than integral multiples of one one-hundredth
of a  Preferred  Share  will be  issued  upon  exercise  of a Right  and in lieu
thereof,  an  adjustment  in cash will be made based on the market  price of the
Common Shares on the last trading date prior to the date of exercise.

No Stockholders' Rights Prior to Exercise

         Until a Right is exercised,  the holder thereof,  as such, will have no
rights as a stockholder  of the Company  (other than any rights  resulting  from
such holder's ownership of Common Shares),  including,  without limitation,  the
right to vote or to receive dividends.

Amendment of Rights Agreement

         The provisions of the Rights  Agreement may be  supplemented or amended
by the Board of  Directors  in any manner  prior to the close of business on the
Distribution Date without the approval of Rights holders. After the Distribution
Date,  the  provisions  of the Rights  Agreement  may be amended by the Board in
order to cure any ambiguity,  defect or inconsistency,  to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any  Acquiring  Person),  or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not redeemable
or there are not  Continuing  Directors,  the  majority  of which  agree to such
adjustment.
<PAGE>
Rights and Preferences of the Series A Preferred

         Series A Preferred  purchasable upon exercise of the Rights will not be
redeemable.  Each share of Series A Preferred  will be entitled to an  aggregate
dividend of 100 times the dividend  declared per Common  Share.  In the event of
liquidation, the holders of the Series A Preferred will be entitled to a minimum
preferential liquidation payment equal to $100 per share. Each share of Series A
Preferred will have 100 votes,  voting  together with the Common Shares.  In the
event of any  merger,  consolidation  or other  transaction  in which the Common
Shares  are  changed or  exchanged,  each  share of Series A  Preferred  will be
entitled to receive 100 times the amount received per Common Share. These rights
are protected by customary anti-dilution provisions.

         Because of the nature of the dividend, liquidation and voting rights of
the shares of Series A Preferred, the value of the one one-hundredth interest in
a share of Series A Preferred  purchasable  upon  exercise of each Right  should
approximate the value of one Common Share.
<PAGE>
Item 2. Exhibits.

        Exhibit

             99.1                Preferred Share Rights  Agreement,  dated as of
                                 December 6,   1996,  between  Exogen,  Inc. and
                                 Registrar and Transfer  Company, including  the
                                 Certificate  of  Determination,   the  form  of
                                 Rights  Certificate  and the  Summary of Rights
                                 attached  thereto  as  Exhibits  A,  B  and  C,
                                 respectively.


<PAGE>



                                    SIGNATURE

         Pursuant to the  requirements of Section 12 of the Securities  Exchange
Act of 1934, the Registrant  has duly caused this  Registration  Statement to be
signed on its behalf by the undersigned, thereto duly authorized.

                                                     EXOGEN, INC.


Date:  December 10, 1996
                                           By: /s/ PATRICK A. MCBRAYER          
                                               -----------------------
                                                   Patrick A. McBrayer
                                                   President and Chief Executive
                                                   Officer

<PAGE>
                                  EXHIBIT INDEX




                                                                                
       Exhibit                                                                  
         No.           Exhibit                                                  
         ---           -------                                                  

        99.1           Preferred Share Rights Agreement, dated as of            
                       December 6, 1996, between Exogen, Inc. and
                       Registrar and Transfer Company, including the
                       Certificate   of   Determination,   the  form  of  Rights
                       Certificate and the Summary of Rights attached thereto as
                       Exhibits A, B and C, respectively.




<PAGE>
                                                                    EXHIBIT 99.1











                                  EXOGEN, INC.


                                       and

                         REGISTRAR AND TRANSFER COMPANY 

                                 (Rights Agent)











                                RIGHTS AGREEMENT


                          DATED AS OF DECEMBER 6, 1996


 


<PAGE>
                                TABLE OF CONTENTS 

                                                                                

Section 1.        Certain Definitions

Section 2.        Appointment of Rights Agent

Section 3.        Issuance of Rights Certificates

Section 4.        Form of Rights Certificates

Section 5.        Countersignature and Registration

Section 6.        Transfer, Split  Up, Combination and Exchange of Rights
                  Certificates; Mutilated, Destroyed, Lost or Stolen Rights
                  Certificates

Section 7.        Exercise of Rights; Purchase Price; Expiration Date of Rights

Section 8.        Cancellation and Destruction of Rights Certificates

Section 9.        Reservation and Availability of Preferred Shares

Section 10.       Preferred Shares Record Date
 
Section 11.       Adjustment of Purchase Price, Number of Shares or Number of
                  Rights

Section 12.       Certificate of Adjusted Purchase Price or Number of Shares

Section 13.       Consolidation, Merger or Sale or Transfer of Assets or Earning
                  Power

Section 14.       Fractional Rights and Fractional Shares                       

Section 15.       Rights of Action

Section 16.       Agreement of Rights Holders

Section 17.       Rights Certificate Holder Not Deemed a Stockholder

Section 18.       Concerning the Rights Agent

Section 19.       Merger or Consolidation or Change of Name of Rights Agent

Section 20.       Duties of Rights Agent

Section 21.       Change of Rights Agent

Section 22.       Issuance of New Rights Certificates

Section 23.       Redemption

Section 24.       Exchange

Section 25.       Notice of Certain Events
<PAGE>

Section 26.       Notices

Section 27.       Supplements and Amendments

Section 28.       Successors

Section 29.       Determinations and Actions by the Board of Directors, etc.

Section 30.       Benefits of this Agreement

Section 31.       Severability

Section 32.       Governing Law

Section 33.       Counterparts

Section 34.       Descriptive Headings


EXHIBITS

Exhibit A         Form of Certificate of Designation

Exhibit B         Form of Rights Certificate

Exhibit C         Summary of Rights
<PAGE>
                                RIGHTS AGREEMENT 


         Rights  Agreement,  dated as of  December  6, 1996  (the  "Agreement"),
between Exogen, Inc., a Delaware corporation (the "Company"),  and Registrar and
Transfer Company  (the "Rights Agent").

         On December 6, 1996 (the "Rights Dividend Declaration Date"), the Board
of Directors of the Company  authorized and declared a dividend of one Preferred
Share purchase right (a "Right") for each Common Share (as hereinafter  defined)
of the Company outstanding as of the Close of Business (as hereinafter  defined)
on December 19, 1996 (the "Record Date"),  each Right  representing the right to
purchase one one-hundredth of a share of Series A Participating  Preferred Stock
(as such number may be adjusted  pursuant to the provisions of this  Agreement),
having  the  rights,  preferences  and  privileges  set  forth  in the  form  of
Certificate  of Designation  of Rights,  Preferences  and Privileges of Series A
Participating  Preferred  Stock attached hereto as Exhibit A, upon the terms and
subject to the conditions herein set forth, and further  authorized and directed
the  issuance  of one Right (as such  number  may be  adjusted  pursuant  to the
provisions  of this  Agreement)  with  respect to each  Common  Share that shall
become  outstanding  between the Record Date and the earlier of the Distribution
Date and the Expiration  Date (as such terms are  hereinafter  defined),  and in
certain circumstances after the Distribution Date.

         NOW,  THEREFORE,  in  consideration  of the  promises  and  the  mutual
agreements herein set forth, the parties hereby agree as follows:

         Section 1. Certain  Definitions.  For purposes of this  Agreement,  the
following terms have the meanings indicated:

         (a)  "Acquiring  Person"  shall mean any Person who,  together with all
         Affiliates and Associates of such Person, shall be the Beneficial Owner
         of 15% or more of the Common  Shares  then  outstanding,  but shall not
         include:

               (i) the Company;

               (ii) any Subsidiary of the Company;

               (iii)  any  employee  benefit  plan  of  the  Company  or of  any
               Subsidiary  of the  Company,  or any Person or entity  organized,
               appointed  or  established  by the Company for or pursuant to the
               terms of any such plan;

               (iv) any  Person  who  becomes an  Acquiring  Person  solely as a
               result of a reduction in the number of Common Shares  outstanding
               due to the repurchase of Common Shares by the Company, unless and
               until such Person shall  thereafter  purchase or otherwise become
               the Beneficial Owner of additional Common Shares  constituting 1%
               or more of the Common  Shares  outstanding  at the time that such
               Person  becomes the  Beneficial  Owner of 15% or more of the then
               outstanding Common Shares.
<PAGE>
         Notwithstanding the foregoing, "Acquiring Person" shall not include any
Person  whose  ownership  of 15% or more of the Common  Shares then  outstanding
results  from any  action,  transaction  or series of  transactions  approved in
advance by a majority  of the  Continuing  Directors  of the Company who are not
Affiliates or Associates of such Person or  representatives of such Person or of
any such  Affiliate  or  Associate  (provided  that such Person  shall become an
Acquiring  Person if such Person shall  thereafter  purchase or otherwise become
the Beneficial Owner of additional Common Shares  constituting 1% or more of the
then  outstanding  Common  Shares  unless  otherwise  approved  in  advance by a
majority of the  Continuing  Directors  who are not  Affiliates or Associates of
such  Person  or  representatives  of such  Person or of any such  Affiliate  or
Associate); provided, however, that any transfer of Common Shares by such Person
to a third party (other than the Company,  any  subsidiary  of the Company,  any
employee benefit plan of the Company or any trustee in respect thereof acting in
such  capacity)  who after such  transfer  owns 15% or more of the Common Shares
then outstanding will cause the Rights to become  exercisable at the time and in
the manner  provided for herein,  unless such  transferee's  ownership of 15% or
more of the Common Shares is approved in advance by a majority of the Continuing
Directors  who  are  not   Affiliates  or  Associates  of  such   transferee  or
representatives of such transferee or of any such Affiliate or Associate. If the
Continuing  Directors  of the Company  determine in good faith that a Person who
would  otherwise be an "Acquiring  Person" as defined  pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient  number of Common Shares so that
such Person would no longer be an "Acquiring  Person" as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purpose of this Agreement.

         (b)  "Adjustment  Shares"  shall have the  meaning set forth in Section
         11(a)(ii) hereof.

         (c)  "Affiliate"  and  "Associate"  shall have the respective  meanings
         ascribed  to  such  terms  in  Rule  12b-2  of the  General  Rules  and
         Regulations under the Exchange Act.

         (d) A Person  shall be deemed the  "Beneficial  Owner" of, and shall be
         deemed to "beneficially own" any securities:

               (i) which  such  Person  or any of such  Person's  Affiliates  or
               Associates   beneficially  owns,  directly  or  indirectly,   for
               purposes  of  Section  13(d) of the  Exchange  Act and Rule 13d-3
               thereunder (or any comparable or successor law or regulation);

               (ii)  which such  Person or any of such  Person's  Affiliates  or
               Associates,  directly or indirectly, has (A) the right to acquire
               (whether such right is exercisable  immediately or only after the
               passage  of  time)  pursuant  to any  agreement,  arrangement  or
               understanding  (other than customary  agreements with and between
               underwriters  and selling  group  members  with respect to a bona
               fide public  offering  of  securities),  or upon the  exercise of
               conversion  rights,  exchange  rights,  rights  (other  than  the
               Rights),  warrants or options, or otherwise;  provided,  however,
               that a  Person  shall  not be  deemed  pursuant  to this  Section
               1(c)(ii)(A) the Beneficial Owner of, or to beneficially  own, (1)
               securities  tendered  pursuant to a tender or exchange offer made
               by or on behalf of such Person or any of such Person's Affiliates
<PAGE>
               or  Associates  until such tendered  securities  are accepted for
               purchase or exchange,  or (2) securities which a Person or any of
               such Person's  Affiliates or Associates may be deemed to have the
               right to  acquire  pursuant  to any  merger or other  acquisition
               agreement  between the Company and such Person (or one or more of
               its Affiliates or Associates) if such agreement has been approved
               by the Board of Directors of the Company  prior to there being an
               Acquiring  Person;  or (B) the right to vote or dispose of or has
               "beneficial  ownership" of (as determined  pursuant to Rule 13d-3
               of the General  Rules and  Regulations  under the Exchange  Act),
               including    pursuant   to   any   agreement,    arrangement   or
               understanding, whether or not in writing; provided, however, that
               a Person  shall not be deemed  the  "Beneficial  Owner" of, or to
               "Beneficially Own," any security under this subparagraph  (ii)(B)
               of this paragraph (c) as a result of an agreement, arrangement or
               understanding   to  vote  such   security   if  such   agreement,
               arrangement or understanding:  (1) arises solely from a revocable
               proxy given in response to a public proxy or consent solicitation
               made  pursuant  to,  and  in  accordance   with,  the  applicable
               provisions of the General Rules and Regulation under the Exchange
               Act,  and (2) is not  also  then  reportable  by such  Person  on
               Schedule  13D  under  the  Exchange  Act  (or any  comparable  or
               successor report); or

               (iii) which are beneficially  owned,  directly or indirectly,  by
               any other Person (or any  Affiliate or  Associate  thereof)  with
               which  such  Person  (or  any  of  such  Person's  Affiliates  or
               Associates)  has any  agreement,  arrangement  or  understanding,
               whether or not in writing (other than customary  agreements  with
               and between  underwriters  and selling group members with respect
               to a bona fide public offering of securities), for the purpose of
               acquiring,  holding, voting (except to the extent contemplated by
               the proviso to  subparagraph  (ii)(B) of this  paragraph  (c)) or
               disposing of any  securities of the Company;  provided,  however,
               that in no case shall an officer or  director  of the  Company be
               deemed (x) the Beneficial  Owner of any  securities  beneficially
               owned by another  officer or director  of the  Company  solely by
               reason of actions undertaken by such persons in their capacity as
               officers or directors of the Company or (y) the Beneficial  Owner
               of  securities  held of record  by the  trustee  of any  employee
               benefit plan of the Company or any  Subsidiary of the Company for
               the benefit of any employee of the Company or any  Subsidiary  of
               the Company, other than the officer or director, by reason of any
               influence  that such officer or director may have over the voting
               of the securities held in the plan.

         (e) "Business Day" shall mean any day other than a Saturday,  Sunday or
         a day on  which  banking  institutions  in the  State  of  Delaware  or
         California  are  authorized  or obligated by law or executive  order to
         close.

         (f)  "Close  of  Business"  on any given  date  shall  mean 5:00  p.m.,
         California time, on such date; provided,  however, that if such date is
         not a Business  Day it shall mean 5:00 p.m.,  California  time,  on the
         next succeeding Business Day.
<PAGE>
         (g) "Common  Shares" shall mean the shares of Common  Stock,  par value
         $0.0001,  of the Company,  except that  "Common  Shares" when used with
         reference to any Person  other than the Company  shall mean the capital
         stock of such  Person with the  greatest  voting  power,  or the equity
         securities or other equity  interest  having power to control or direct
         the management, of such Person.

         (h)  "common  stock  equivalents"  shall have the  meaning set forth in
         Section 11(a)(iv) hereof.

         (i)  "Continuing  Director"  shall  mean (i) any member of the Board of
         Directors of the Company, while a member of the Board of Directors, who
         is  not  an  Acquiring  Person,  or an  Affiliate  or  Associate  of an
         Acquiring  Person, or a representative of an Acquiring Person or of any
         such  Affiliate  or  Associate,  and who was a member  of the  Board of
         Directors  on the date that the Board of Directors  initially  approved
         this Agreement, or (ii) any Person who subsequently becomes a member of
         the Board of Directors,  while a member of the Board of Directors,  who
         is  not  an  Acquiring  Person,  or an  Affiliate  or  Associate  of an
         Acquiring  Person, or a representative of an Acquiring Person or of any
         such Affiliate or Associate,  if such Person's  nomination for election
         or election to the Board of Directors is  recommended  or approved by a
         majority of the Continuing Directors.

         (j) "current  per share market  price" shall have the meaning set forth
         in Section 11(d) hereof.

         (k)  "Current  Value"  shall  have the  meaning  set  forth in  Section
         11(a)(iv) hereof.

         (l)  "Distribution  Date"  shall  mean the  earlier of (i) the Close of
         Business on the tenth day (or such later date as may be  determined  by
         action of a majority of Continuing  Directors then in office) after the
         Shares  Acquisition  Date  (or,  if the  tenth  day  after  the  Shares
         Acquisition  Date occurs before the Record Date,  the Close of Business
         on the Record  Date) or (ii) the Close of Business on the tenth day (or
         such  later  date as may be  determined  by  action  of a  majority  of
         Continuing  Directors  then in office)  after the date that a tender or
         exchange offer by any Person (other than the Company, any Subsidiary of
         the  Company,  any  employee  benefit  plan  of the  Company  or of any
         Subsidiary of the Company, or any Person or entity organized, appointed
         or  established by the Company for or pursuant to the terms of any such
         plan) is first  published  or sent or given  within the meaning of Rule
         14d-2(a) of the General Rules and  Regulations  under the Exchange Act,
         if, assuming the successful  consummation thereof, such Person would be
         the Beneficial  Owner of 15% or more of the shares of Common Stock then
         outstanding.

         (m) "Equivalent Shares" shall mean Preferred Shares and any other class
         or  series  of  capital  stock  of the  Company  which is  entitled  to
         participate   in   dividends   and   other   distributions,   including
         distributions  upon the  liquidation,  dissolution or winding up of the
         Company, on a proportional basis with the Common Shares. In calculating
         the number of any class or series of Equivalent  Shares for purposes of
         Section 11 of this Rights Agreement, the number of shares, or fractions
         of a share,  of such class or series of capital  stock that is entitled
         to the same dividend or  distribution  as a whole Common Share shall be
         deemed to be one share.
<PAGE>
         (n) "Exchange Act" shall mean the  Securities  Exchange Act of 1934, as
         amended.

         (o)  "Exchange  Fraction"  shall have the  meaning set forth in Section
         11(p) hereof.

         (p) "Exchange  Ratio" shall have the meaning set forth in Section 11(a)
         hereof.

         (q)  "Expiration  Date"  shall  mean the  earlier  of (i) the  Close of
         Business on the Final  Expiration Date, (ii) the Redemption Date, (iii)
         the time at which the Board of  Directors  orders the  exchange  of the
         Rights as provided in Section 24 hereof,  or (iv) the consummation of a
         transaction contemplated by Section 13(d) hereof.

         (r) "Final Expiration Date" shall mean December 19, 2006.

         (s) "Nasdaq" shall mean the National Association of Securities Dealers,
         Inc. Automated Quotation System.

         (t)  "Permitted  Offer" shall mean a tender  offer for all  outstanding
         Common  Shares made in the manner  prescribed  by Section  14(d) of the
         Exchange  Act and the rules  and  regulations  promulgated  thereunder;
         provided,  however,  that  such  tender  offer  occurs  at a time  when
         Continuing  Directors  are in office and a majority  of the  Continuing
         Directors then in office has determined that the offer is both adequate
         and otherwise in the best interests of the Company and its stockholders
         (taking into account all factors that such  Continuing  Directors  deem
         relevant).

         (u) "Person"  shall mean any  individual,  firm,  corporation  or other
         entity,  and shall  include any  successor  (by merger or otherwise) of
         such entity.

         (v) "Post  Transferee" shall have the meaning set forth in Section 7(e)
         hereof.

         (w)  "Preferred  Shares"  shall mean  shares of Series A  Participating
         Preferred Stock of the Company.

         (x) "Principal Party" shall have the meaning set forth in Section 13(b)
         hereof.

         (y) "Prior Transferee" shall have the meaning set forth in Section 7(e)
         hereof.

         (z)  "Purchase  Price" shall have the meaning set forth in Section 4(a)
         hereof.

         (aa)  "Ratio of  Exchange"  shall have the meaning set forth in Section
         24(a) hereof.

         (ab) "Record  Date" shall have the meaning set forth in the recitals at
         the beginning of this Agreement.

         (ac)  "Redemption  Date"  shall  mean the time at  which  the  Board of
         Directors of the Company orders redemption of the Rights as provided in
         Section 23 hereof.
<PAGE>
         (ad)  "Redemption  Price"  shall have the  meaning set forth in Section
         23(a) hereof.

         (ae)  "Rights  Dividend  Declaration  Date"  shall have the meaning set
         forth in the recitals at the beginning of this Agreement.

         (af) "Section  11(a)(ii) Trigger Date" shall have the meaning set forth
         in Section 11(a)(iv) hereof.

         (ag)  "Section 13 Event" shall mean any event  described in clause (i),
         (ii) or (iii) of Section 13(a) hereof.

         (ah)  "Securities  Act"  shall  mean the  Securities  Act of  1933,  as
         amended.

         (ai)  "Spread"  shall have the meaning  set forth in Section  11(a)(iv)
         hereof.

         (aj)  "Shares  Acquisition  Date"  shall  mean the first date of public
         announcement  (which,  for purposes of this definition,  shall include,
         without limitation,  a report filed pursuant to Section 13(d) under the
         Exchange  Act) by the Company or an Acquiring  Person that an Acquiring
         Person has become such; provided that, if such person is determined not
         to have become an  Acquiring  Person  pursuant to Section  1(a) hereof,
         then no Shares Acquisition Date shall be deemed to have occurred.

         (ak)  "Subsidiary"  of any Person shall mean any  corporation  or other
         entity of which an amount of voting  securities  sufficient  to elect a
         majority of the directors or Persons having  similar  authority of such
         corporation  or  other  entity  is  Beneficially  Owned,   directly  or
         indirectly, by such Person.

         (al) "Substitution Period" shall have the meaning set forth in Section

         (am) "Total Exercise Price" shall have the meaning set forth in Section
         4(a) hereof.

         (an)  "Trading  Day" shall have the meaning set forth in Section  11(d)
         hereof.

         (ao) A  "Triggering  Event" shall be deemed to have  occurred  upon any
         Person  (other than the Company,  any  Subsidiary  of the Company,  any
         employee  benefit plan of the Company or any Subsidiary of the Company,
         or any entity holding Common Shares for or pursuant to the terms of any
         such plan), together with all Affiliates and Associates of such Person,
         becoming an Acquiring Person.

         Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof,  shall prior to the Distribution  Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof,  and the Rights Agent hereby accepts such  appointment.  The Company may
from time to time  appoint  such  co-Rights  Agents as it may deem  necessary or
desirable. Contemporaneously with any such appointment, the Company shall notify
the Rights Agent thereof.
<PAGE>
         Section 3. Issuance of Rights Certificates.

         (a) Until the  Distribution  Date,  (i) the  Rights  will be  evidenced
         (subject to the  provisions  of Sections  3(b) and 3(c)  hereof) by the
         certificates  for Common Shares  registered in the names of the holders
         thereof  (which   certificates  shall  also  be  deemed  to  be  Rights
         Certificates)  and not by separate  Rights  Certificates,  and (ii) the
         right to  receive  Rights  Certificates  will be  transferable  only in
         connection with the transfer of Common Shares. Until the earlier of the
         Distribution Date or the Expiration Date, the surrender for transfer of
         such certificates for Common Shares shall also constitute the surrender
         for  transfer  of  the  Rights   associated   with  the  Common  Shares
         represented  thereby.  As soon as  practicable  after the  Distribution
         Date,  the Company  will  prepare and  execute,  the Rights  Agent will
         countersign,  and the  Company  will  send or cause to be sent (and the
         Rights Agent will, if requested, send) by first-class,  postage-prepaid
         mail,  to each  record  holder  of  Common  Shares  as of the  close of
         business on the Distribution  Date, at the address of such holder shown
         on the records of the Company, a Rights  Certificate,  in substantially
         the form of Exhibit B hereto (a "Rights  Certificate"),  evidencing one
         Right for each Common Share so held,  subject to adjustment as provided
         herein.  In the event  that an  adjustment  in the number of Rights per
         Common Share has been made pursuant to Section 11(a)(i),  Section 11(i)
         or Section 11(p) hereof, then at the time of distribution of the Rights
         Certificates,  the Company  shall make the  necessary  and  appropriate
         rounding  adjustments (in accordance with Section 14(a) hereof) so that
         Rights  Certificates  representing  only  whole  numbers  of Rights are
         distributed  and cash is paid in lieu of any fractional  Rights.  As of
         the  Distribution  Date,  the Rights will be  evidenced  solely by such
         Rights  Certificates  and may be  transferred  by the  transfer  of the
         Rights Certificates as permitted hereby,  separately and apart from any
         transfer of one or more Common  Shares,  and the holders of such Rights
         Certificates  as listed in the records of the  Company or any  transfer
         agent or registrar for the Rights shall be the record holders thereof.

         (b) On the  Record  Date  or as  soon as  practicable  thereafter,  the
         Company  will send a copy of a Summary of Rights in  substantially  the
         form of Exhibit C hereto (the  "Summary of  Rights"),  by  first-class,
         postage-prepaid  mail, to each record holder of Common Shares as of the
         close of  business  on the Record  Date,  at the address of such holder
         shown on the records of the Company.

         (c) Unless the Board of  Directors by  resolution  adopted at or before
         the time of the issuance  (including pursuant to the exercise of rights
         under the Company's  benefit  plans) of any Common Shares  specifies to
         the  contrary,  Rights shall be issued in respect of all Common  Shares
         that are issued  after the Record  Date but prior to the earlier of the
         Distribution  Date or the Expiration Date or, in certain  circumstances
         provided   in  Section  22  hereof,   after  the   Distribution   Date.
         Certificates representing such Common Shares shall also be deemed to be
         certificates for Rights, and shall bear the following legend:
<PAGE>
                  This certificate also evidences and entitles the holder hereof
                  to certain Rights as set forth in a Rights  Agreement  between
                  Exogen, Inc. and  Registrar  and Transfer  Company,  as Rights
                  Agent, dated as of December 6, 1996  (the "Rights Agreement"),
                  the terms of which are hereby incorporated herein by reference
                  and a copy of  which  is on file  at the  principal  executive
                  offices of Exogen,  Inc. Under certain  circumstances,  as set
                  forth in the Rights  Agreement,  such Rights will be evidenced
                  by separate  certificates  and will no longer be  evidenced by
                  this certificate. Exogen, Inc. will mail to the holder of this
                  certificate  a copy of the Rights  Agreement,  as in effect on
                  the date of mailing,  without charge promptly after receipt of
                  a written request  therefor.  Under certain  circumstances set
                  forth in the Rights  Agreement,  Rights issued to, or held by,
                  any Person who is, was or becomes an  Acquiring  Person or any
                  Affiliate or  Associate  thereof (as such terms are defined in
                  the Rights Agreement),  whether currently held by or on behalf
                  of such Person or by any  subsequent  holder,  may become null
                  and void.  

         With respect to such  certificates  containing  the  foregoing  legend,
         until the earlier of (i) the  Distribution  Date or (ii) the Expiration
         Date, the Rights associated with the Common Shares  represented by such
         certificates   shall  be  evidenced  by  such  certificates  alone  and
         registered  holders  of  Common  Shares  shall  also be the  registered
         holders of the associated Rights, and the surrender for transfer of any
         such  certificate  shall also  constitute  the  transfer  of the Rights
         associated  with the Common Shares  represented  thereby.  In the event
         that the Company  purchases  or acquires  any Common  Shares  after the
         Record Date but prior to the Distribution  Date, any Rights  associated
         with such Common  Shares  shall be deemed  canceled and retired so that
         the Company  shall not be entitled  to exercise  any Rights  associated
         with the Common Shares which are no longer outstanding.

         Section 4. Form of Rights Certificates.

         (a) The Rights  Certificates  (and the forms of  election  to  purchase
         Common Shares and of  assignment to be printed on the reverse  thereof)
         shall be  substantially  in the form of  Exhibit B hereto  and may have
         such marks of identification or designation and such legends, summaries
         or endorsements printed thereon as the Company may deem appropriate and
         as are not  inconsistent  with the provisions of this Agreement,  or as
         may be required to comply with any  applicable  law or with any rule or
         regulation made pursuant  thereto or with any rule or regulation of any
         stock exchange on which the Rights may from time to time be listed,  or
         to  conform  to usage.  Subject  to the  provisions  of  Section 11 and
         Section 22 hereof, the Rights Certificates, whenever distributed, shall
         be dated as of the Record  Date (or in the case of Rights  issued  with
         respect to Common  Shares  issued by the Company after the Record Date,
         as of the date of  issuance  of such  Common  Shares) and on their face
         shall  entitle  the  holders  thereof to  purchase  such  number of one
         one-hundredths  of a Preferred  Share as shall be set forth  therein at
<PAGE>
         the price set forth therein (such exercise price per one  one-hundredth
         of a Preferred  Share being  hereinafter  referred to as the  "Purchase
         Price"  and  the  aggregate  exercise  price  of all  Preferred  Shares
         issuable  upon exercise of one Right being  hereinafter  referred to as
         the "Total  Exercise  Price"),  but the  number and type of  securities
         purchasable  upon the  exercise  of each Right and the  Purchase  Price
         shall be subject to adjustment as provided herein.

         (b) Any Rights  Certificate  issued pursuant to Section 3(a) or Section
         22  hereof  that  represents  Rights  beneficially  owned  by:  (i)  an
         Acquiring Person or any Associate or Affiliate of an Acquiring  Person,
         (ii) a transferee of an Acquiring  Person (or of any such  Associate or
         Affiliate) who becomes a transferee  after the Acquiring Person becomes
         such or  (iii) a  transferee  of an  Acquiring  Person  (or of any such
         Associate  or  Affiliate)   who  becomes  a  transferee   prior  to  or
         concurrently  with the Acquiring Person becoming such and receives such
         Rights  pursuant  to  either  (A)  a  transfer   (whether  or  not  for
         consideration) from the Acquiring Person to holders of equity interests
         in such  Acquiring  Person or to any  Person  with whom such  Acquiring
         Person  has any  continuing  agreement,  arrangement  or  understanding
         regarding the  transferred  Rights or (B) a transfer which the Board of
         Directors of the Company has determined is part of a plan,  arrangement
         or understanding  which has as a primary purpose or effect avoidance of
         Section  7(e) hereof,  and any Rights  Certificate  issued  pursuant to
         Section 6 or Section 11 hereof upon transfer, exchange,  replacement or
         adjustment  of  any  other  Rights  Certificate  referred  to  in  this
         sentence, shall contain (to the extent feasible) the following legend:

                  The Rights  represented by this Rights Certificate are or were
                  beneficially  owned by a Person who was or became an Acquiring
                  Person or an Affiliate or Associate of an Acquiring Person (as
                  such terms are defined in the Rights Agreement between Exogen,
                  Inc. and  Registrar  and Transfer  Company,  as Rights  Agent,
                  dated  as of  December  6,  1996  (the  "Rights  Agreement")).
                  Accordingly,   this   Rights   Certificate   and  the   Rights
                  represented   hereby   may   become   null  and  void  in  the
                  circumstances   specified   in  Section  7(e)  of  the  Rights
                  Agreement.

         Section 5. Countersignature and Registration.

         (a) The Rights  Certificates shall be executed on behalf of the Company
         by  its  Chairman  of the  Board,  its  Chief  Executive  Officer,  its
         President  or any  Vice  President,  either  manually  or by  facsimile
         signature,  and shall have affixed  thereto the Company's seal (if any)
         or a facsimile  thereof  which shall be attested by the Secretary or an
         Assistant  Secretary  of the Company,  either  manually or by facsimile
         signature. The Rights Certificates shall be countersigned by the Rights
         Agent,  either  manually or by  facsimile  signature,  and shall not be
         valid for any purpose unless so  countersigned.  In case any officer of
         the Company who shall have signed any of the Rights  Certificates shall
         cease to be such officer of the Company before  countersignature by the
         Rights Agent and  issuance  and  delivery by the  Company,  such Rights
         Certificates,  nevertheless,  may be  countersigned by the Rights Agent
<PAGE>
         and issued and  delivered by the Company with the same force and effect
         as though the person who signed such Rights Certificates had not ceased
         to be such officer of the Company. Any Rights Certificate may be signed
         on behalf of the  Company by any person  who, at the actual date of the
         signing of such Rights  Certificate,  shall be a proper  officer of the
         Company to sign such  Rights  Certificate,  although at the date of the
         signing of this Agreement such person was not such an officer.

         (b)  Following  the  Distribution  Date,  the Rights Agent will keep or
         cause to be kept, at its office designated for such purposes, books for
         registration and transfer of the Rights  Certificates issued hereunder.
         Such books shall show the names and addresses of the respective holders
         of the Rights Certificates,  the number of Rights evidenced on its face
         by each of the Rights  Certificates  and the date of each of the Rights
         Certificates.

         Section 6.  Transfer,  Split Up,  Combination  and  Exchange  of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

         (a) Subject to the  provisions of Sections  7(e), 14 and 24 hereof,  at
         any time after the Close of Business on the  Distribution  Date, and at
         or prior to the Close of Business on the  Expiration  Date,  any Rights
         Certificate  or  Rights  Certificates  may be  transferred,  split  up,
         combined  or  exchanged  for  another  Rights   Certificate  or  Rights
         Certificates, entitling the registered holder to purchase a like number
         of one  one-hundredths of a Preferred Share (or, following a Triggering
         Event,  other securities,  cash or other assets, as the case may be) as
         the Rights Certificate or Rights Certificates surrendered then entitled
         such holder to purchase.  Any registered  holder  desiring to transfer,
         split  up,  combine  or  exchange  any  Rights  Certificate  or  Rights
         Certificates shall make such request in writing delivered to the Rights
         Agent,   and  shall   surrender  the  Rights   Certificate   or  Rights
         Certificates to be transferred,  split up, combined or exchanged at the
         office of the Rights Agent  designated  for such  purpose.  Neither the
         Rights  Agent nor the  Company  shall be  obligated  to take any action
         whatsoever with respect to the transfer of any such surrendered  Rights
         Certificate until the registered holder shall have completed and signed
         the certificate contained in the form of assignment on the reverse side
         of such Rights  Certificate  and shall have  provided  such  additional
         evidence of the identity of the Beneficial Owner (or former  Beneficial
         Owner)  or  Affiliates  or  Associates  thereof  as the  Company  shall
         reasonably  request.  Thereupon  the  Rights  Agent  shall,  subject to
         Sections 7(e), 14 and 24 hereof,  countersign and deliver to the person
         entitled thereto a Rights  Certificate or Rights  Certificates,  as the
         case may be, as so requested.  The Company may require payment of a sum
         sufficient to cover any tax or governmental  charge that may be imposed
         in connection with any transfer,  split up,  combination or exchange of
         Rights Certificates.

         (b) Upon  receipt  by the  Company  and the  Rights  Agent of  evidence
         reasonably  satisfactory  to them of the loss,  theft,  destruction  or
         mutilation  of a Rights  Certificate,  and,  in case of loss,  theft or
         destruction,  of indemnity or security reasonably satisfactory to them,
         and, at the  Company's  request,  reimbursement  to the Company and the
         Rights Agent of all reasonable expenses  incidental  thereto,  and upon
         surrender  to  the  Rights  Agent  and   cancellation   of  the  Rights
         Certificate  if  mutilated,  the  Company  will make and  deliver a new
         Rights  Certificate  of like tenor to the Rights  Agent for delivery to
         the  registered  holder  in lieu of the  Rights  Certificate  so  lost,
         stolen, destroyed or mutilated.
<PAGE>
         Section 7.  Exercise  of Rights;  Purchase  Price;  Expiration  Date of
Rights.

         (a) Subject to Sections  7(e),  23(b) and 24(b) hereof,  the registered
         holder of any Rights  Certificate  may  exercise  the Rights  evidenced
         thereby  (except as otherwise  provided  herein) in whole or in part at
         any time  after the  Distribution  Date upon  surrender  of the  Rights
         Certificate,  with the form of election to purchase on the reverse side
         thereof duly executed,  to the Rights Agent at the office of the Rights
         Agent  designated  for  such  purpose,  together  with  payment  of the
         Purchase Price for each  one-hundredth of a Preferred Share as to which
         the Rights are exercised, at or prior to the Expiration Date.

         (b) The Purchase Price for each one  one-hundredth of a Preferred Share
         issuable  pursuant to the exercise of a Right shall initially be Thirty
         Dollars  ($30.00),  shall be subject to adjustment from time to time as
         provided  in  Sections  11 and 13 hereof and shall be payable in lawful
         money of the United States of America in accordance  with paragraph (c)
         below.

         (c) Upon  receipt  of a  Rights  Certificate  representing  exercisable
         Rights,   with  the  form  of  election  to  purchase  duly   executed,
         accompanied  by  payment  of the  Purchase  Price for the number of one
         one-hundredths  of a Preferred Share (or other  securities or property,
         as  the  case  may  be) to be  purchased  and an  amount  equal  to any
         applicable  transfer  tax  required  to be paid by the  holder  of such
         Rights  Certificate in accordance  with Section 9 hereof in cash, or by
         certified check or cashier's check payable to the order of the Company,
         the Rights  Agent shall,  subject to Section  20(k)  hereof,  thereupon
         promptly (i) (A)  requisition  from any transfer agent of the Preferred
         Shares (or make  available,  if the Rights Agent is the transfer  agent
         for the Preferred  Shares) a certificate or certificates for the number
         of one  one-hundredths  of a Preferred  Share to be  purchased  and the
         Company hereby irrevocably authorizes its transfer agent to comply with
         all such  requests or (B) if the Company  shall have elected to deposit
         the total number of one  one-hundredths  of a Preferred  Share issuable
         upon  exercise  of  the  Rights  hereunder  with  a  depositary  agent,
         requisition   from  the   depositary   agent  of  depositary   receipts
         representing such number of one  one-hundredths of a Preferred Share as
         are to be  purchased  (in which  case  certificates  for the  Preferred
         Shares  represented by such receipts shall be deposited by the transfer
         agent with the  depositary  agent) and the Company  hereby  directs the
         depositary  agent to comply with such request,  (ii) when  appropriate,
         requisition  from the  Company the amount of cash to be paid in lieu of
         issuance of  fractional  shares in  accordance  with Section 14 hereof,
         (iii) after receipt of such certificates or depositary receipts,  cause
         the same to be delivered to or upon the order of the registered  holder
         of such Rights Certificate,  registered in such name or names as may be
         designated  by such  holder and (iv) when  appropriate,  after  receipt
         thereof,  deliver  such  cash to or upon the  order  of the  registered
         holder of such Rights  Certificate.  The payment of the Purchase  Price
         (as such amount may be reduced  (including to zero) pursuant to Section
         11(a)(iv)  hereof)  may be made in cash or by  certified  bank check or
<PAGE>
         bank draft  payable to the order of the Company.  In the event that the
         Company is obligated to issue other securities of the Company, pay cash
         and/or distribute other property pursuant to Section 11(a) hereof,  the
         Company  will  make  all  arrangements  necessary  so that  such  other
         securities,  cash and/or other property are available for  distribution
         by the Rights Agent, if and when appropriate.
 
         (d) In case the  registered  holder  of any  Rights  Certificate  shall
         exercise  less than all the  Rights  evidenced  thereby,  a new  Rights
         Certificate  evidencing  Rights  equivalent  to  the  Rights  remaining
         unexercised  shall be  issued  by the  Rights  Agent to the  registered
         holder  of such  Rights  Certificate  or to his or her duly  authorized
         assigns, subject to the provisions of Section 14 hereof.

         (e)  Notwithstanding  anything in this Agreement to the contrary,  from
         and after the first  occurrence  of a Triggering  Event or a Section 13
         Event, any Rights  beneficially  owned by (i) an Acquiring Person or an
         Associate or Affiliate of an Acquiring Person,  (ii) a transferee of an
         Acquiring  Person (or of any such Associate or Affiliate) who becomes a
         transferee   after  the   Acquiring   Person   becomes  such  (a  "Post
         Transferee"), (iii) a transferee of an Acquiring Person (or of any such
         Associate  or  Affiliate)   who  becomes  a  transferee   prior  to  or
         concurrently  with the Acquiring Person becoming such and receives such
         Rights  pursuant  to  either  (A)  a  transfer   (whether  or  not  for
         consideration) from the Acquiring Person to holders of equity interests
         in such  Acquiring  Person or to any  Person  with  whom the  Acquiring
         Person  has any  continuing  agreement,  arrangement  or  understanding
         regarding the  transferred  Rights or (B) a transfer which the Board of
         Directors of the Company has determined is part of a plan,  arrangement
         or understanding which has as a primary purpose or effect the avoidance
         of this  Section  7(e) (a "Prior  Transferee")  or (iv) any  subsequent
         transferee  receiving  transferred  Rights from a Post  Transferee or a
         Prior  Transferee,  either directly or through one or more intermediate
         transferees,  shall become null and void without any further action and
         no holder of such Rights shall have any rights  whatsoever with respect
         to such  Rights,  whether  under any  provision  of this  Agreement  or
         otherwise.  The Company shall use all reasonable efforts to insure that
         the  provisions  of this  Section  7(e) and  Section  4(b)  hereof  are
         complied  with,  but shall  have no  liability  to any holder of Rights
         Certificates  or to any other Person as a result of its failure to make
         any  determinations  with respect to an Acquiring Person or any of such
         Acquiring Person's Affiliates, Associates or transferees hereunder.

         (f) Notwithstanding anything in this Agreement to the contrary, neither
         the Rights Agent nor the Company  shall be  obligated to undertake  any
         action with respect to a registered  holder upon the  occurrence of any
         purported  exercise  as  set  forth  in  this  Section  7  unless  such
         registered  holder shall have (i) completed and signed the  certificate
         contained  in the form of election to purchase set forth on the reverse
         side of the Rights  Certificate  surrendered for such exercise and (ii)
         provided  such  additional  evidence of the identity of the  Beneficial
         Owner (or former Beneficial Owner) or Affiliates or Associates  thereof
         as the Company shall reasonably request.
<PAGE>
         Section 8.  Cancellation  and Destruction of Rights  Certificates.  All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination  or exchange  shall,  if surrendered to the Company or to any of its
agents,  be delivered to the Rights Agent for  cancellation or in canceled form,
or, if surrendered  to the Rights Agent,  shall be canceled by it, and no Rights
Certificates  shall be issued in lieu thereof  except as expressly  permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement,  and the Rights Agent shall so cancel and
retire,  any other  Rights  Certificate  purchased  or  acquired  by the Company
otherwise  than upon the exercise  thereof.  The Rights Agent shall  deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company,  destroy such canceled Rights Certificates,  and in such case shall
deliver a certificate of destruction thereof to the Company.

         Section 9. Reservation and Availability of Preferred Shares.

         (a) The Company  covenants and agrees that it will use its best efforts
         to cause to be reserved and kept  available out of and to the extent of
         its authorized and unissued  shares of Preferred Stock not reserved for
         another purpose (and,  following the occurrence of a Triggering  Event,
         out of its authorized and unissued  shares of Common Stock and/or other
         securities),  the  number  of  Preferred  Shares  (and,  following  the
         occurrence  of  the  Triggering   Event,   Common  Stock  and/or  other
         securities)  that will be  sufficient to permit the exercise in full of
         all outstanding Rights.

         (b) If the Company shall hereafter list any of its Preferred  Shares on
         a national  securities  exchange,  then so long as the Preferred Shares
         (and,  following the  occurrence of a Triggering  Event,  Common Shares
         and/or other securities)  issuable and deliverable upon exercise of the
         Rights may be listed on such  exchange,  the Company shall use its best
         efforts  to  cause,  from and  after  such  time as the  Rights  become
         exercisable  (but only to the extent that it is reasonably  likely that
         the Rights will be exercised), all shares reserved for such issuance to
         be listed on such exchange  upon official  notice of issuance upon such
         exercise.

         (c) The  Company  shall use its best  efforts  to (i) file,  as soon as
         practicable following the earliest date after the first occurrence of a
         Triggering  Event in which the  consideration  to be  delivered  by the
         Company upon  exercise of the Rights has been  determined in accordance
         with  Section  11(a)(iv)  hereof,  or as  soon  as is  required  by law
         following the  Distribution  Date,  as the case may be, a  registration
         statement  under the  Securities  Act,  with respect to the  securities
         purchasable  upon exercise of the Rights on an appropriate  form,  (ii)
         cause  such  registration  statement  to  become  effective  as soon as
         practicable  after  such  filing  and  (iii)  cause  such  registration
         statement to remain  effective  (with a prospectus at all times meeting
         the  requirements of the Securities Act) until the date as of which the
         Rights are no longer exercisable for such securities. A majority of the
         Continuing  Directors may cause the Company temporarily to suspend, for
         a period  not to exceed  ninety  (90) days  after the date set forth in
         clause  (i)  of  the  first   sentence  of  this  Section   9(c),   the
         exercisability  of the Rights in order to enable the Company to prepare
         and file such registration statement and permit it to become effective.
<PAGE>
         Upon any such suspension, the Company shall issue a public announcement
         stating,  and notify the Rights Agent,  that the  exercisability of the
         Rights has been temporarily suspended, as well as a public announcement
         and  notification to the Rights Agent at such time as the suspension is
         no longer in effect.  The Company  will also take such action as may be
         appropriate  under,  or to ensure  compliance  with,  the securities or
         "blue  sky"  laws  of  the  various  states  in  connection   with  the
         exercisability  of the Rights.  Notwithstanding  any  provision of this
         Agreement to the contrary,  the Rights shall not be  exercisable in any
         jurisdiction,  unless the requisite  qualification in such jurisdiction
         shall have been obtained, or an exemption therefrom shall be available,
         and until a registration statement has been declared effective.

         (d) The Company  covenants and agrees that it will take all such action
         as may be necessary to ensure that all Preferred  Shares delivered upon
         exercise of Rights shall,  at the time of delivery of the  certificates
         for such Preferred  Shares (subject to payment of the Purchase  Price),
         be  duly  and  validly   authorized  and  issued  and  fully  paid  and
         nonassessable.

         (e) The Company further  covenants and agrees that it will pay when due
         and payable any and all  federal and state  transfer  taxes and charges
         which may be payable in respect of the original issuance or delivery of
         the Rights  Certificates or of certificates  for Preferred  Shares upon
         the exercise of Rights. The Company shall not, however,  be required to
         pay any transfer tax which may be payable in respect of any transfer or
         delivery of Rights Certificates to a person other than, or the issuance
         or delivery of certificates or depositary receipts for Preferred Shares
         in a name  other  than that of,  the  registered  holder of the  Rights
         Certificate  evidencing Rights  surrendered for exercise or to issue or
         to deliver any certificates or depositary receipts for Preferred Shares
         upon the exercise of any Rights until any such tax shall have been paid
         (any such tax being payable by the holder of such Rights Certificate at
         the  time  of  surrender)  or  until  it has  been  established  to the
         Company's satisfaction that no such tax is due.

         Section 10. Preferred Shares Record Date. Each person in whose name any
certificate  for a number of one  one-hundredths  of a Preferred Share is issued
upon the  exercise of Rights shall for all purposes be deemed to have become the
holder of record of such  Preferred  Shares  represented  thereby  on,  and such
certificate  shall  be  dated,  the  date  upon  which  the  Rights  Certificate
evidencing  such Rights was duly  surrendered  and payment of the Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share with respect
to which the Rights have been exercised (and any applicable  transfer taxes) was
made;  provided,  however,  that if the date of such  surrender and payment is a
date upon which the Preferred  Shares  transfer books of the Company are closed,
such person shall be deemed to have become the record  holder of such shares on,
and such certificate  shall be dated, the next succeeding  Business Day on which
the  Preferred  Shares  transfer  books of the  Company  are open.  Prior to the
exercise of the Rights  evidenced  thereby,  the holder of a Rights  Certificate
shall not be  entitled to any rights of a holder of  Preferred  Shares for which
the Rights shall be exercisable,  including,  without  limitation,  the right to
vote, to receive dividends or other  distributions or to exercise any preemptive
rights,  and shall not be entitled to receive any notice of any  proceedings  of
the Company, except as provided herein.
<PAGE>
         Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights.  The  Purchase  Price,  the number and kind of shares or other  property
covered  by each  Right and the  number of Rights  outstanding  are  subject  to
adjustment from time to time as provided in this Section 11.

         (a) (i) In the event the  Company  shall at any time  after the date of
         this  Agreement (A) declare a dividend on the Common Shares  payable in
         Common Shares, (B) subdivide the outstanding Common Shares, (C) combine
         the  outstanding  Common  Shares (by reverse  stock split or otherwise)
         into a smaller number of Common Shares,  or (D) issue any shares of its
         capital stock in a reclassification of the Common Shares (including any
         such  reclassification  in connection with a consolidation or merger in
         which the Company is the continuing or surviving corporation), then, in
         each such event, except as otherwise provided in this Section 11(a) and
         Section 7(e) hereof:  (1) each of the Rights outstanding at the time of
         the  record  date  for  such  dividend  or the  effective  date of such
         subdivision,  combination or reclassification  shall be proportionately
         adjusted  to that  number  of Rights  (calculated  to the  nearest  one
         ten-thousandth of a Right) equal to a fraction (the "Exchange  Ratio"),
         the  numerator of which shall be the total  number of Common  Shares or
         shares of capital stock issued in such  reclassification  of the Common
         Shares outstanding  immediately following such time and the denominator
         of  which  shall be the  total  number  of  Common  Shares  outstanding
         immediately  prior to such time,  and the  number of Rights  that shall
         thereafter be issued with respect to each Common Share or share of such
         other capital stock that shall become  outstanding  thereafter prior to
         the Distribution Date shall be equal to the total number of outstanding
         Rights  immediately  after such  event (as  adjusted  pursuant  to this
         clause (1)) divided by the total number of outstanding Common Shares or
         shares  of such  other  capital  stock  immediately  after  such  event
         (subject  to further  adjustment  pursuant  to the  provisions  of this
         Agreement);  (2) the Purchase Price in effect at the time of the record
         date for such  dividend or of the effective  date of such  subdivision,
         combination or reclassification  shall be adjusted so that the Purchase
         Price  thereafter  shall  equal the result  obtained  by  dividing  the
         Purchase Price in effect immediately prior to such time by the Exchange
         Ratio;  provided,  however, that in no event shall the consideration to
         be paid upon the exercise of one Right be less than the  aggregate  par
         value of the  shares of  capital  stock of the  Company  issuable  upon
         exercise  of such  Right;  and (3) the  number of  Preferred  Shares or
         shares of such other capital  stock  issuable upon the exercise of each
         Right shall remain unchanged  immediately after such event, but, in the
         event of a  reclassification,  the  kind of  shares  issuable  upon the
         exercise of each Right immediately after such reclassification shall be
         appropriately  adjusted.  If an event  occurs  which  would  require an
         adjustment  under both this  Section  11(a)(i)  and  Section  11(a)(ii)
         hereof,  the adjustment  provided for in this Section 11(a)(i) shall be
         in  addition  to, and shall be made prior to, any  adjustment  required
         pursuant to Section 11(a)(ii) hereof.
<PAGE>
         (ii) Subject to Section 24 of this Agreement, in the event a Triggering
         Event shall have  occurred,  then promptly  following  such  Triggering
         Event,  proper  provision shall be made so that each holder of a Right,
         except as provided in Section 7(e) hereof,  shall  thereafter  have the
         right to receive for each Right,  upon  exercise  thereof in accordance
         with the terms of this Agreement and payment of the then-current  Total
         Exercise  Price,  in  lieu  of a  number  of  one  one-hundredths  of a
         Preferred  Share,  such number of Common Shares of the Company as shall
         equal the result  obtained by  multiplying  the  then-current  Purchase
         Price by the then number of one one-hundredths of a Preferred Share for
         which a Right was  exercisable  (or would have been  exercisable if the
         Distribution  Date  had  occurred)   immediately  prior  to  the  first
         occurrence of a Triggering  Event,  and dividing that product by 50% of
         the  current per share  market  price  (determined  pursuant to Section
         11(d)  hereof)  for  Common  Shares  on the date of  occurrence  of the
         Triggering Event (such number of shares being  hereinafter  referred to
         as the "Adjustment Shares").

         (iii) The right to buy Common Shares of the Company pursuant to Section
         11(a)(ii)  hereof shall not arise as a result of any Person becoming an
         Acquiring  Person through an acquisition of Common Shares pursuant to a
         Permitted Offer.

         (iv) In lieu of  issuing  Common  Shares  in  accordance  with  Section
         11(a)(ii) hereof, the Company may, if the Board of Directors determines
         that such action is  necessary or  appropriate  and not contrary to the
         interest  of  holders of Rights  (and,  in the event that the number of
         Common  Shares which are  authorized by the  Company's  Certificate  of
         Incorporation but not outstanding or reserved for issuance for purposes
         other than upon exercise of the Rights are not sufficient to permit the
         exercise in full of the Rights, or if any necessary regulatory approval
         for such  issuance has not been  obtained by the  Company,  the Company
         shall):  (A) determine the excess of (1) the value of the Common Shares
         issuable  upon the exercise of a Right (the  "Current  Value") over (2)
         the Purchase Price (such excess,  the "Spread") and (B) with respect to
         each Right,  make  adequate  provision  to  substitute  for such Common
         Shares,  upon exercise of the Rights,  (1) cash, (2) a reduction in the
         Purchase Price, (3) other equity securities of the Company  (including,
         without  limitation,  shares  or  units  of  shares  of any  series  of
         preferred  stock which the Board of Directors of the Company has deemed
         to have the same value as Common Shares (such shares or units of shares
         of preferred  stock are herein  called  "common  stock  equivalents")),
         except to the extent that the Company has not  obtained  any  necessary
         stockholder  or  regulatory  approval  for  such  issuance,   (4)  debt
         securities  of the  Company,  except to the extent that the Company has
         not obtained any necessary  stockholder or regulatory approval for such
         issuance,  (5) other assets,  or (6) any  combination of the foregoing,
         having an  aggregate  value  equal to the  Current  Value,  where  such
         aggregate  value has been  determined  by the Board of Directors of the
         Company  based upon the advice of a  nationally  recognized  investment
         banking  firm  selected  by the  Board  of  Directors  of the  Company;
         provided,  however,  if  the  Company  shall  not  have  made  adequate
         provision to deliver  value  pursuant to clause (B) above within thirty
<PAGE>
         (30)  days  following  the  later  of (x)  the  first  occurrence  of a
         Triggering  Event  and (y) the date on  which  the  Company's  right of
         redemption  pursuant to Section 23(a) expires (the later of (x) and (y)
         being referred to herein as the "Section 11(a)(ii) Trigger Date"), then
         the Company  shall be  obligated  to deliver,  upon the  surrender  for
         exercise  of a Right and  without  requiring  payment  of the  Purchase
         Price,  Common Shares (to the extent  available),  except to the extent
         that  the  Company  has  not  obtained  any  necessary  stockholder  or
         regulatory  approval for such issuance,  and then, if necessary,  cash,
         which shares  and/or cash have an aggregate  value equal to the Spread.
         If the Board of Directors of the Company shall  determine in good faith
         that it is likely that  sufficient  additional  Common  Shares could be
         authorized for issuance upon exercise in full of the Rights or that any
         necessary  regulatory approval for such issuance will be obtained,  the
         thirty  (30) day period set forth  above may be  extended to the extent
         necessary,  but not more  than  ninety  (90)  days  after  the  Section
         11(a)(ii)  Trigger Date, in order that the Company may seek stockholder
         approval for the authorization of such additional shares or take action
         to obtain such regulatory approval (such period, as it may be extended,
         the "Substitution  Period").  To the extent that the Company determines
         that some action  need be taken  pursuant  to the first  and/or  second
         sentences of this  Section  11(a)(iv),  the Company (x) shall  provide,
         subject to Section 7(e) hereof,  that such action shall apply uniformly
         to all outstanding Rights and (y) may suspend the exercisability of the
         Rights until the expiration of the Substitution Period in order to seek
         any  authorization of additional  shares,  to take any action to obtain
         any required  regulatory approval and/or to decide the appropriate form
         of  distribution  to be made  pursuant  to such first  sentence  and to
         determine the value thereof.  In the event of any such suspension,  the
         Company   shall   issue  a  public   announcement   stating   that  the
         exercisability of the Rights has been temporarily suspended, as well as
         a public  announcement  at such time as the  suspension is no longer in
         effect. For purposes of this Section 11(a)(iv), the value of the Common
         Shares  shall be the  current  per share  market  price (as  determined
         pursuant to Section  11(d)  hereof) of the Common Shares on the Section
         11(a)(ii)  Trigger Date and the value of any "common stock  equivalent"
         shall be deemed  to have the same  value as the  Common  Shares on such
         date.

         (b) In case  the  Company  shall,  at any time  after  the date of this
         Agreement,  fix a record date for the  issuance  of rights,  options or
         warrants to all  holders of Common  Shares or of any class or series of
         Equivalent  Shares entitling such holders (for a period expiring within
         forty-five  (45) calendar days after such record date) to subscribe for
         or  purchase   Common  Shares  or   Equivalent   Shares  or  securities
         convertible  into  Common  Shares or  Equivalent  Shares at a price per
         share  (or  having  a  conversion   price  per  share,  if  a  security
         convertible into Common Shares or Equivalent Shares) less than the then
         current  per share  market  price of the  Common  Shares or  Equivalent
         Shares (as defined in Section 11(d)) on such record date, then, in each
         such case,  the  Purchase  Price to be in effect after such record date
         shall be  determined  by  multiplying  the  Purchase  Price  in  effect
         immediately  prior to such record date by a fraction,  the numerator of
         which shall be the number of Common  Shares and  Equivalent  Shares (if
         any)  outstanding on such record date, plus the number of Common Shares
<PAGE>
         or Equivalent  Shares, as the case may be, which the aggregate offering
         price of the total number of Common Shares or Equivalent Shares, as the
         case may be, so to be offered (and/or the aggregate initial  conversion
         price of the convertible securities so to be offered) would purchase at
         such current  market price,  and the  denominator of which shall be the
         number of Common Shares and Equivalent  Shares (if any)  outstanding on
         such  record  date,  plus the  number of  additional  Common  Shares or
         Equivalent  Shares,  as the case may be, to be offered for subscription
         or purchase (or into which the convertible  securities so to be offered
         are initially convertible). In case such subscription price may be paid
         in a  consideration  part or all of which shall be in a form other than
         cash,  the value of such  consideration  shall be as determined in good
         faith by the Board of  Directors of the  Company,  whose  determination
         shall be described in a statement filed with the Rights Agent and shall
         be binding on the Rights  Agent and the holders of the  Rights.  Common
         Shares and  Equivalent  Shares  owned by or held for the account of the
         Company  shall not be deemed  outstanding  for the  purpose of any such
         computation. Such adjustment shall be made successively whenever such a
         record  date is fixed,  and in the event that such  rights,  options or
         warrants are not so issued,  the Purchase Price shall be adjusted to be
         the  Purchase  Price  which would then be in effect if such record date
         had not been fixed.

         (c) In case  the  Company  shall,  at any time  after  the date of this
         Agreement,  fix a record date for the making of a  distribution  to all
         holders  of the Common  Shares or of any class or series of  Equivalent
         Shares  (including  any such  distribution  made in  connection  with a
         consolidation  or merger  in which the  Company  is the  continuing  or
         surviving  corporation)  of evidences of  indebtedness or assets (other
         than a regular  quarterly cash dividend,  if any, or a dividend payable
         in  Common  Shares)  or  subscription   rights,   options  or  warrants
         (excluding  those  referred to in Section  11(b)),  then,  in each such
         case,  the Purchase  Price to be in effect after such record date shall
         be determined by multiplying  the Purchase Price in effect  immediately
         prior to such record date by a fraction,  the  numerator of which shall
         be the current  market price (as  determined  pursuant to Section 11(d)
         hereof) of a Common Share or an Equivalent  Shares on such record date,
         less the fair market value (as determined in good faith by the Board of
         Directors of the Company,  whose  determination shall be described in a
         statement  filed  with the  Rights  Agent) of the  portion of the cash,
         assets or evidences of  indebtedness  so to be  distributed  or of such
         subscription  rights  or  warrants  applicable  to a  Common  Share  or
         Equivalent  Shares,  as the case may be, and the  denominator  of which
         shall be such current market price (as  determined  pursuant to Section
         11(d)  hereof) of a Common  Share or  Equivalent  Shares on such record
         date.  Such  adjustments  shall be made  successively  whenever  such a
         record date is fixed, and in the event that such distribution is not so
         made,  the Purchase  Price shall be adjusted to be the  Purchase  Price
         which would have been in effect if such record date had not been fixed.
<PAGE>
         (d)  For  the  purpose  of  any  computation   hereunder,   other  than
         computations made pursuant to Section  11(a)(iv)  hereof,  the "current
         per share market price" of any security (a  "Security"  for the purpose
         of this Section 11(d)) on any date shall be deemed to be the average of
         the daily closing prices per share of such Security for the thirty (30)
         consecutive  Trading  Days  (as  such  term  is  hereinafter   defined)
         immediately  prior to such date, and for purposes of computations  made
         pursuant to Section  11(a)(iv)  hereof,  the  "current per share market
         price" of any Security on any date shall be deemed to be the average of
         the daily  closing  prices per share of such  Security for the ten (10)
         consecutive  Trading  Days  immediately  prior to such date;  provided,
         however,  that in the event that the current per share  market price of
         the Security is determined  during a period  following the announcement
         by the issuer of such  Security  of (i) a dividend or  distribution  on
         such  Security  payable  in  shares  of  such  Security  or  securities
         convertible  into such shares or (ii) any  subdivision,  combination or
         reclassification  of such Security,  and prior to the expiration of the
         requisite thirty (30) Trading Day or ten (10) Trading Day period, after
         the ex-dividend date for such dividend or  distribution,  or the record
         date for such subdivision,  combination or reclassification,  then, and
         in each  such  case,  the  current  per  share  market  price  shall be
         appropriately  adjusted to reflect the current  market  price per share
         equivalent  of such  Security.  The closing price for each day shall be
         the last sale price,  regular way, or, in case no such sale takes place
         on such day, the average of the closing bid and asked  prices,  regular
         way,  in  either  case  as  reported  in  the  principal   consolidated
         transaction  reporting  system  with  respect to  securities  listed or
         admitted to trading on the New York Stock  Exchange or, if the Security
         is not listed or admitted to trading on the New York Stock Exchange, as
         reported in the principal  consolidated  transaction  reporting  system
         with respect to securities listed on the principal national  securities
         exchange on which the  Security is listed or admitted to trading or, if
         the  Security  is not listed or  admitted  to  trading on any  national
         securities exchange, the last sale price or, if such last sale price is
         not  reported,  the average of the high bid and low asked prices in the
         over-the-counter  market,  as reported  by Nasdaq or such other  system
         then in use,  or, if on any such date the Security is not quoted by any
         such  organization,  the average of the closing bid and asked prices as
         furnished  by a  professional  market  maker  making  a  market  in the
         Security  selected by the Board of Directors of the Company.  If on any
         such date no market maker is making a market in the Common Shares,  the
         fair value of such shares on such date as  determined  in good faith by
         the Board of Directors of the Company shall be used.  The term "Trading
         Day"  shall  mean a day on  which  the  principal  national  securities
         exchange on which the Security is listed or admitted to trading is open
         for the  transaction  of business  or, if the Security is not listed or
         admitted to trading on any  national  securities  exchange,  a Business
         Day. If the Common Shares are not publicly held or so listed or traded,
         "current per share market price" shall mean the fair value per share as
         determined  in good  faith by the Board of  Directors  of the  Company,
         whose  determination  shall be described in a statement  filed with the
         Rights Agent and shall be conclusive for all purposes.
<PAGE>
         (e) Anything herein to the contrary  notwithstanding,  no adjustment in
         the  Purchase  Price shall be required  unless  such  adjustment  would
         require an increase or decrease of at least 1% in the  Purchase  Price;
         provided, however, that any adjustments which by reason of this Section
         11(e) are not  required  to be made shall be carried  forward and taken
         into account in any subsequent adjustment.  All calculations under this
         Section  11 shall  be made to the  nearest  ten-thousandth  of a Common
         Share or other share or  ten-thousandth  of a Preferred  Share,  as the
         case may be.  Notwithstanding the first sentence of this Section 11(e),
         any adjustment  required by this Section 11 shall be made no later than
         the  earlier  of (i) three (3) years  from the date of the  transaction
         which requires such adjustment or (ii) the Expiration Date.

         (f) If as a result of an  adjustment  made pursuant to Section 11(a) or
         13(a) hereof, the holder of any Right thereafter exercised shall become
         entitled  to receive any shares of capital  stock other than  Preferred
         Shares,  thereafter the number of such other shares so receivable  upon
         exercise of any Right and if  required,  the  Purchase  Price  thereof,
         shall be  subject  to  adjustment  from time to time in a manner and on
         terms as  nearly  equivalent  as  practicable  to the  provisions  with
         respect to the Common  Shares  contained in Sections  11(a),  (b), (c),
         (e), (h), (i), (j), (k), (l) and (m), and the provisions of Sections 7,
         9, 10, 13 and 14 with  respect to the  Preferred  Shares shall apply on
         like terms to any such other shares.

         (g) All  Rights  originally  issued by the  Company  subsequent  to any
         adjustment  made to the Purchase  Price  hereunder  shall  evidence the
         right to purchase,  at the adjusted  Purchase Price,  the number of one
         one-hundredths  of a  Preferred  Share  purchasable  from  time to time
         hereunder  upon  exercise  of  the  Rights,   all  subject  to  further
         adjustment as provided herein.

         (h) Unless the Company shall have exercised its election as provided in
         Section 11(i),  upon each  adjustment of the Purchase Price as a result
         of the  calculations  made in Section  11(b),  each  Right  outstanding
         immediately  prior to the making of such  adjustment  shall  thereafter
         evidence the right to purchase,  at the adjusted  Purchase Price,  that
         number  of   Preferred   Shares   (calculated   to  the   nearest   one
         ten-thousandth  of a share)  obtained by (i) multiplying (x) the number
         of  Preferred  Shares  covered  by a Right  immediately  prior  to this
         adjustment,  by (y) the Purchase Price in effect  immediately  prior to
         such adjustment of the Purchase Price, and (ii) dividing the product so
         obtained  by the  Purchase  Price  in  effect  immediately  after  such
         adjustment of the Purchase Price.

         (i) The Company may elect on or after the date of any adjustment of the
         Purchase Price as a result of the calculations made in Section 11(b) to
         adjust the number of Rights,  in substitution for any adjustment in the
         number of Preferred  Shares  purchasable  upon the exercise of a Right.
         Each of the Rights  outstanding  after such adjustment of the number of
         Rights shall be exercisable for the number of one  one-hundredths  of a
         Preferred Share for which a Right was exercisable  immediately prior to
         such adjustment.  Each Right held of record prior to such adjustment of
         the number of Rights shall become that number of Rights  (calculated to
<PAGE>
         the nearest one  ten-thousandth  of a Right)  obtained by dividing  the
         Purchase  Price  in  effect  immediately  prior  to  adjustment  of the
         Purchase  Price by the  Purchase  Price  in  effect  immediately  after
         adjustment  of the  Purchase  Price.  The  Company  shall make a public
         announcement of its election to adjust the number of Rights, indicating
         the record  date for the  adjustment,  and,  if known at the time,  the
         amount of the  adjustment to be made.  This record date may be the date
         on which the Purchase Price is adjusted or any day thereafter,  but, if
         the Rights  Certificates  have been issued,  shall be at least ten (10)
         days  later  than  the  date  of the  public  announcement.  If  Rights
         Certificates  have been issued,  upon each  adjustment of the number of
         Rights  pursuant to this Section 11(i),  the Company shall, as promptly
         as practicable,  cause to be distributed to holders of record of Rights
         Certificates  on  such  record  date  Rights  Certificates  evidencing,
         subject  to  Section 14  hereof,  the  additional  Rights to which such
         holders  shall be entitled as a result of such  adjustment,  or, at the
         option of the Company, shall cause to be distributed to such holders of
         record in substitution and replacement for the Rights Certificates held
         by such holders  prior to the date of  adjustment,  and upon  surrender
         thereof, if required by the Company, new Rights Certificates evidencing
         all the  Rights to which  such  holders  shall be  entitled  after such
         adjustment.  Rights  Certificates so to be distributed shall be issued,
         executed and  countersigned  in the manner provided for herein (and may
         bear, at the option of the Company,  the adjusted  Purchase  Price) and
         shall be  registered  in the names of the  holders  of record of Rights
         Certificates on the record date specified in the public announcement.

         (j)  Irrespective  of any adjustment or change in the Purchase Price or
         the  number of  Preferred  Shares  issuable  upon the  exercise  of the
         Rights, the Rights  Certificates  theretofore and thereafter issued may
         continue  to express  the  Purchase  Price per one  one-hundredth  of a
         Preferred  Share and the number of one  one-hundredths  of a  Preferred
         Share which were  expressed in the initial Rights  Certificates  issued
         hereunder.

         (k) Before  taking any action that would cause an  adjustment  reducing
         the Purchase Price below the par or stated value, if any, of the number
         of one  one-hundredths  of a Preferred  Share issuable upon exercise of
         the Rights,  the Company shall take any corporate  action which may, in
         the opinion of its counsel,  be necessary in order that the Company may
         validly and legally issue as fully paid and  nonassessable  shares such
         number of one  one-hundredths  of a  Preferred  Share at such  adjusted
         Purchase Price.

         (l) In any  case  in  which  this  Section  11  shall  require  that an
         adjustment in the Purchase  Price be made effective as of a record date
         for a  specified  event,  the  Company  may  elect to defer  until  the
         occurrence  of such  event  the  issuing  to the  holder  of any  Right
         exercised after such record date of the number of one one-hundredths of
         a Preferred Share and other capital stock or securities of the Company,
         if any,  issuable  upon such  exercise over and above the number of one
         one-hundredths  of  a  Preferred  Share  and  other  capital  stock  or
         securities of the Company,  if any,  issuable upon such exercise on the
         basis  of the  Purchase  Price  in  effect  prior  to such  adjustment;
         provided,  however, that the Company shall deliver to such holder a due
         bill or other appropriate  instrument evidencing such holder's right to
         receive such  additional  shares  (fractional  or  otherwise)  upon the
         occurrence of the event requiring such adjustment.
<PAGE>
         (m) Anything in this Section 11 to the contrary notwithstanding,  prior
         to the  Distribution  Date,  the Company shall be entitled to make such
         reductions  in the  Purchase  Price,  in addition to those  adjustments
         expressly  required by this Section 11, as and to the extent that it in
         its sole  discretion  shall determine to be advisable in order that any
         (i)  consolidation  or  subdivision  of the Preferred or Common Shares,
         (ii) issuance wholly for cash of any Preferred or Common Shares at less
         than the  current  market  price,  (iii)  issuance  wholly  for cash of
         Preferred  or Common  Shares  or  securities  which by their  terms are
         convertible into or exchangeable  for Preferred or Common Shares,  (iv)
         stock  dividends,  or (v)  issuance  of  rights,  options  or  warrants
         referred  to in this  Section  11,  hereafter  made by the  Company  to
         holders of its  Preferred or Common Shares shall not be taxable to such
         stockholders.

         (n) The  Company  covenants  and agrees  that it shall not, at any time
         after the Distribution  Date,  effect or permit to occur any Triggering
         Event or Section 13 Event, if (i) at the time or immediately after such
         Triggering Event or Section 13 Event there are any rights,  warrants or
         other  instruments  or securities  outstanding  or agreements in effect
         which would substantially  diminish or otherwise eliminate the benefits
         intended to be afforded by the Rights or (ii) prior to,  simultaneously
         with or immediately  after such Section 13 Event,  the  stockholders of
         the Person who constitutes,  or would constitute, the "Principal Party"
         for purposes of Section 13(b) hereof shall have received a distribution
         of Rights  previously owned by such Person or any of its Affiliates and
         Associates.

         (o) The Company covenants and agrees that, after the Distribution Date,
         it will not, except as permitted by Sections 23, 24 or 27 hereof,  take
         (or permit to be taken) any action if at the time such  action is taken
         it  is   reasonably   foreseeable   that  such  action  will   diminish
         substantially  or  otherwise  eliminate  the  benefits  intended  to be
         afforded by the Rights.

         (p) Anything in this Agreement to the contrary notwithstanding,  in the
         event the  Company  shall at any time after the date of this  Agreement
         (A) declare a dividend on the  Preferred  Shares  payable in  Preferred
         Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the
         outstanding Preferred Shares (by reverse stock split or otherwise) into
         a smaller  number of Preferred  Shares,  or (D) issue any shares of its
         capital stock in a reclassification  of the Preferred Shares (including
         any such  reclassification in connection with a consolidation or merger
         in which the Company is the continuing or surviving corporation), then,
         in each such event, except as otherwise provided in this Section 11 and
         Section 7(e) hereof:  (1) each of the Rights outstanding at the time of
         the  record  date  for  such  dividend  or the  effective  date of such
         subdivision,  combination or reclassification  shall be proportionately
         adjusted  to that  number  of Rights  (calculated  to the  nearest  one
         ten-thousandth   of  a  Right)  equal  to  a  fraction  (the  "Exchange
         Fraction"),  the  numerator  of which  shall  be the  total  number  of
<PAGE>
         Preferred   Shares  or  shares  of   capital   stock   issued  in  such
         reclassification  of  the  Preferred  Shares  outstanding   immediately
         following  such time and the  denominator  of which  shall be the total
         number of Preferred Shares outstanding  immediately prior to such time,
         and the number of Rights that shall  thereafter  be issued with respect
         to each  Common  Share or share of other  capital  stock  that shall be
         issued  in a  reclassification  of  the  Common  Shares  prior  to  the
         Distribution  Date  shall be equal to the total  number of  outstanding
         Rights  immediately  after such  event (as  adjusted  pursuant  to this
         clause (1)) divided by the total number of outstanding Common Shares or
         shares  of such  other  capital  stock  immediately  after  such  event
         (subject  to further  adjustment  pursuant  to the  provisions  of this
         Agreement);  (2) the Purchase Price in effect at the time of the record
         date for such  dividend or of the effective  date of such  subdivision,
         combination or reclassification  shall be adjusted so that the Purchase
         Price  thereafter  shall  equal the result  obtained  by  dividing  the
         Purchase Price in effect immediately prior to such time by the Exchange
         Fraction;  provided,  however, that in no event shall the consideration
         to be paid upon the  exercise  of one Right be less than the  aggregate
         par value of the shares of capital  stock of the Company  issuable upon
         exercise of such Right; and (3) the number of one  one-hundredths  of a
         Preferred  Share or share of such other capital stock issuable upon the
         exercise of each Right shall remain  unchanged  immediately  after such
         event,  but,  in the  event of a  reclassification,  the kind of shares
         issuable  upon  the  exercise  of each  Right  immediately  after  such
         reclassification  shall be  adjusted  to be the kind of  shares of such
         other  capital  stock  issued  in such  reclassification,  rather  than
         Preferred Shares.

         Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an  adjustment  is made as  provided in Sections 11 and 13 hereof,  the
Company shall promptly (a) prepare a certificate  setting forth such  adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 26 hereof.  Notwithstanding the foregoing
sentence,  the  failure of the Company to make such  certification  or give such
notice shall not affect the validity of such  adjustment  or the force or effect
of the  requirement  for  such  adjustment.  The  Rights  Agent  shall  be fully
protected in relying on any such  certificate  and on any  adjustment  contained
therein and shall not be deemed to have knowledge of such adjustment  unless and
until it shall have received such certificate.

         Section  13.  Consolidation,  Merger or Sale or  Transfer  of Assets or
Earning Power.

         (a) In the event that,  following the Shares Acquisition Date, directly
         or indirectly:

               (i) the Company shall  consolidate  with, or merge with and into,
               any other  Person  (other than a  Subsidiary  of the Company in a
               transaction the principal purpose of which is to change the state
               of  incorporation  of the Company or which  complies with Section
               11(o) hereof);
<PAGE>
               (ii) any Person  (other  than a  Subsidiary  of the  Company in a
               transaction  that  complies  with  Section  11(o)  hereof)  shall
               consolidate with the Company,  or merge with and into the Company
               and the Company shall be the continuing or surviving  corporation
               of such consolidation or merger; or

               (iii) the Company  shall sell or  otherwise  transfer  (or one or
               more of its Subsidiaries  shall sell or otherwise  transfer),  in
               one or more transactions, assets or earning power aggregating 50%
               or more of the assets or  earning  power of the  Company  and its
               Subsidiaries  (taken as a whole) to any other  Person or  Persons
               (other  than  the  Company  or one or  more of its  wholly  owned
               Subsidiaries in one or more transactions,  each of which complies
               with Section 11(o) hereof),  then, and in each such case,  proper
               provision shall be made so that:

                  (A) each  holder  of a Right  (except  as  otherwise  provided
                  herein) shall  thereafter have the right to receive,  upon the
                  exercise   thereof  in  accordance  with  the  terms  of  this
                  Agreement, such number of validly authorized and issued, fully
                  paid and  nonassessable  and freely tradeable Common Shares of
                  the  Principal  Party (as  hereinafter  defined),  free of any
                  liens, encumbrances,  rights of first refusal or other adverse
                  claims,  as  shall  be equal  to the  result  obtained  by (1)
                  multiplying  the then current  Purchase Price by the number of
                  one  one-hundredths of a Preferred Share for which a Right was
                  exercisable  immediately  prior to the first  occurrence  of a
                  Section 13 Event (or, if a Triggering Event has occurred prior
                  to the first occurrence of a Section 13 Event, multiplying the
                  number of such one  one-hundredths  of a  Preferred  Share for
                  which a Right was exercisable  immediately  prior to the first
                  occurrence  of a  Triggering  Event by the  Purchase  Price in
                  effect  immediately prior to such first  occurrence),  and (2)
                  dividing that product (which,  following the first  occurrence
                  of a Section  13 Event,  shall be  referred  to as the  "Total
                  Exercise  Price" for each Right and for all  purposes  of this
                  Agreement)  by 50% of  the  current  per  share  market  price
                  (determined  pursuant to Section  11(d)  hereof) of the Common
                  Shares of such Principal  Party on the date of consummation of
                  such Section 13 Event;

                  (B) such Principal  Party shall  thereafter be liable for, and
                  shall  assume,  by virtue of such  Section  13 Event,  all the
                  obligations  and  duties  of  the  Company  pursuant  to  this
                  Agreement;

                  (C) the term "Company" shall  thereafter be deemed to refer to
                  such Principal Party, it being specifically  intended that the
                  provisions  of  Section  11 hereof  shall  apply  only to such
                  Principal Party following the first occurrence of a Section 13
                  Event; and

                  (D) such Principal Party shall take such steps (including, but
                  not limited to, the reservation of a sufficient  number of its
                  Common Shares) in connection with the consummation of any such
                  transaction  as may be necessary to assure that the provisions
                  hereof shall thereafter be applicable, as nearly as reasonably
                  may  be,  in   relation  to  its  Common   Shares   thereafter
                  deliverable upon the exercise of the Rights.
<PAGE>
         (b)  "Principal  Party"  shall  mean,  in the  case of any  transaction
         described in clause (i), (ii) or (iii) of Section 13(a),  the Person or
         Acquiring  Person  referred to therein (or such  Person's or  Acquiring
         Person's successor, including, if applicable, the Company, if it is the
         surviving corporation),  provided,  however, that in any such case: (i)
         if the  Common  Shares  of such  Person is not at such time and has not
         been continuously  over the preceding  12-month period registered under
         Section 12 of the Exchange Act, and such Person is a direct or indirect
         Subsidiary of another Person the Common Shares of which is and has been
         so registered,  "Principal Party" shall refer to such other Person; and
         (ii) if such Person is a Subsidiary,  directly or  indirectly,  of more
         than one  Person,  "the  Common  Shares of two or more of which are and
         have been so registered,  Principal  Party" shall refer to whichever of
         such  Persons is the issuer of the Common  Shares  having the  greatest
         aggregate  market value,  and provided,  further,  that for purposes of
         transactions described in clause (iii) hereof,  "Principal Party" shall
         refer to that Person  receiving  the greatest  portion of the assets or
         earning power transferred pursuant to such transaction or transactions.

         (c) If, for any  reason,  the  Rights  cannot be  exercised  for Common
         Shares of such Principal Party as provided in Section 13(a),  then each
         holder of Rights  shall have the right to exchange  its Rights for cash
         from such  Principal  Party in an amount  equal to the number of Common
         Shares that it would otherwise be entitled to purchase times 50% of the
         current per share market price, as determined pursuant to Section 11(d)
         hereof,  of such Common  Shares of such  Principal  Party.  If, for any
         reason,  the foregoing  formulation  cannot be applied to determine the
         cash amount into which the Rights are  exchangeable,  then the Board of
         Directors,  based upon the advice of one or more nationally  recognized
         investment  banking  firms,  and  based  upon  the  total  value of the
         Company,  shall determine such amount reasonably and with good faith to
         the  holders  of  Rights.  Any such  determination  shall be final  and
         binding on the Rights Agent.

         (d) Notwithstanding anything in this Agreement to the contrary, Section
         13 shall not be applicable  to a  transaction  described in clauses (i)
         and (ii) of Section 13(a) if: (i) such  transaction is consummated with
         a Person or Persons who acquired  Common Shares pursuant to a Permitted
         Offer (or a  wholly-owned  Subsidiary  of any such Person or  Persons);
         (ii) the price per share of Common Shares  offered in such  transaction
         is not less  than the price  per  share of  Common  Shares  paid to all
         holders of Common Shares whose shares were  purchased  pursuant to such
         Permitted Offer;  and (iii) the form of consideration  being offered to
         the remaining  holders of Common Shares pursuant to such transaction is
         the  same  form as the  form of  consideration  paid  pursuant  to such
         Permitted Offer. Upon consummation of any such transaction contemplated
         by this Section 13(d), all Rights hereunder shall expire.

         (e) The Company  shall not  consummate  any Section 13 Event unless the
         Principal  Party shall have a sufficient  number of  authorized  Common
         Shares that have not been issued or reserved for issuance to permit the
         exercise in full of the Rights in  accordance  with this Section 13 and
         unless prior  thereto the Company and such issuer  shall have  executed
         and delivered to the Rights Agent a supplemental  agreement  confirming
         that such Principal Party shall,  upon  consummation of such Section 13
         Event,  assume this Agreement in accordance with Sections 13(a) and (b)
<PAGE>
         hereof,  that all  rights  of first  refusal  or  preemptive  rights in
         respect of the issuance of Common Shares of such  Principal  Party upon
         exercise  of  outstanding  Rights have been  waived,  that there are no
         rights,   warrants,   instruments  or  securities  outstanding  or  any
         agreements or arrangements  which,  as a result of the  consummation of
         such  transaction,   would  eliminate  or  substantially  diminish  the
         benefits   intended  to  be  afforded  by  the  Rights  and  that  such
         transaction shall not result in a default by such Principal Party under
         this  Agreement,  and further  providing  that, as soon as  practicable
         after the date of such Section 13 Event, such Principal Party will:

               (i)  prepare  and  file  a  registration   statement   under  the
               Securities  Act with  respect to the  Rights  and the  securities
               purchasable  upon exercise of the Rights on an appropriate  form,
               use its best  efforts to cause  such  registration  statement  to
               become effective as soon as practicable after such filing and use
               its best efforts to cause such  registration  statement to remain
               effective   (with  a   prospectus   at  all  times   meeting  the
               requirements  of the Securities  Act) until the Expiration  Date,
               and similarly comply with applicable state securities laws;

               (ii) use its best  efforts to list (or  continue  the listing of)
               the Rights and the  securities  purchasable  upon exercise of the
               Rights  on  a  national   securities  exchange  or  to  meet  the
               eligibility requirements for quotation on Nasdaq; and

               (iii)  deliver  to holders  of the  Rights  historical  financial
               statements for such Principal  Party which comply in all respects
               with  the  requirements  for  registration  on  Form  10 (or  any
               successor form) under the Exchange Act.

         In the event  that at any time  after the  occurrence  of a  Triggering
         Event some or all of the Rights  shall not have been  exercised  at the
         time of a  transaction  described  in this Section 13, the Rights which
         have not theretofore  been exercised shall thereafter be exercisable in
         the manner  described in Section 13(a) (without taking into account any
         prior adjustment required by Section 11(a)(ii)).

         (f)  The  provisions  of this  Section  13  shall  similarly  apply  to
         successive mergers or consolidations or sales or other transfers.

         Section 14. Fractional Rights and Fractional Shares.

         (a) The Company  shall not be required to issue  fractions of Rights or
         to distribute Rights  Certificates which evidence fractional Rights. In
         lieu of such fractional  Rights,  there shall be paid to the registered
         holders of the Rights Certificates with regard to which such fractional
         Rights would otherwise be issuable, an amount in cash equal to the same
         fraction of the current market value of a whole Right. For the purposes
         of this Section 14(a),  the current market value of a whole Right shall
         be the  closing  price of the Rights for the  Trading  Day  immediately
         prior to the date on which  such  fractional  Rights  would  have  been
         otherwise  issuable,  as determined  pursuant to the second sentence of
         Section 11(d) hereof.
<PAGE>
         (b) The Company  shall not be required to issue  fractions of Preferred
         Shares  (other  than  fractions  that  are  integral  multiples  of one
         one-hundredth  of a Preferred  Share) upon exercise of the Rights or to
         distribute  certificates  which evidence  fractional  Preferred  Shares
         (other than fractions that are integral  multiples of one one-hundredth
         of a Preferred Share). In lieu of fractional  Preferred Shares that are
         not integral  multiples of one  one-hundredth of a Preferred Share, the
         Company shall pay to the registered  holders of Rights  Certificates at
         the time such Rights are exercised as herein provided an amount in cash
         equal to the same  fraction  of the  current  market  value of a Common
         Share.  For purposes of this Section 14(b), the current market value of
         a Common  Share  shall be the  closing  price  of a  Common  Share  (as
         determined pursuant to the second sentence of Section 11(d) hereof) for
         the Trading Day immediately prior to the date of such exercise.

         (c) The  holder of a Right by the  acceptance  of the  Right  expressly
         waives  his or her  right  to  receive  any  fractional  Rights  or any
         fractional shares upon exercise of a Right.

         Section 15.  Rights of Action.  All rights of action in respect of this
Agreement,  excepting  the  rights of action  given to the  Rights  Agent  under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares);  and any registered holder of any Rights  Certificate (or, prior
to the  Distribution  Date,  of the Common  Shares),  without the consent of the
Rights Agent or of the holder of any other Rights  Certificate (or, prior to the
Distribution Date, of the Common Shares),  may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or  proceeding  against the Company to enforce,  or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights  Certificate in
the manner provided in such Rights  Certificate  and in this Agreement.  Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically  acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this  Agreement and will be entitled to specific
performance of the obligations  under,  and injunctive  relief against actual or
threatened  violations  of,  the  obligations  of any  Person  subject  to  this
Agreement.

         Section 16.  Agreement of Rights  Holders.  Every holder of a Right, by
accepting  the same,  consents  and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

         (a) prior to the  Distribution  Date,  the Rights will be  transferable
         only in connection with the transfer of the Common Shares;

         (b)  after  the   Distribution   Date,  the  Rights   Certificates  are
         transferable  only  on the  registry  books  of  the  Rights  Agent  if
         surrendered  at the  principal  office or offices  of the Rights  Agent
         designated for such purposes,  duly endorsed or accompanied by a proper
         instrument of transfer and with the appropriate  forms and certificates
         fully executed; and
<PAGE>
         (c)  subject to  Sections  6(a) and 7(f)  hereof,  the  Company and the
         Rights  Agent may deem and treat the  person in whose  name the  Rights
         Certificate (or, prior to the Distribution  Date, the associated Common
         Shares  certificate) is registered as the absolute owner thereof and of
         the  Rights  evidenced  thereby   (notwithstanding   any  notations  of
         ownership  or  writing  on the Rights  Certificates  or the  associated
         Common Shares  certificate made by anyone other than the Company or the
         Rights Agent) for all purposes whatsoever,  and neither the Company nor
         the Rights Agent shall be affected by any notice to the contrary.

         Section 17.  Rights  Certificate  Holder Not Deemed a  Stockholder.  No
holder, as such, of any Rights  Certificate  shall be entitled to vote,  receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other  securities  of the  Company  which  may at any  time be  issuable  on the
exercise of the Rights represented  thereby, nor shall anything contained herein
or in any  Rights  Certificate  be  construed  to confer  upon the holder of any
Rights  Certificate,  as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter  submitted
to stockholders at any meeting  thereof,  or to give or withhold  consent to any
corporate  action,  or to receive notice of meetings or other actions  affecting
stockholders  (except as provided in Section 25 hereof), or to receive dividends
or subscription  rights,  or otherwise,  until the Right or Rights  evidenced by
such  Rights  Certificate  shall  have been  exercised  in  accordance  with the
provisions hereof.

         Section 18. Concerning the Rights Agent.

         (a)  The  Company  agrees  to  pay  to  the  Rights  Agent   reasonable
         compensation  for all services  rendered by it hereunder and, from time
         to time, on demand of the Rights  Agent,  its  reasonable  expenses and
         counsel fees and other disbursements incurred in the administration and
         execution of this  Agreement  and the exercise and  performance  of its
         duties hereunder. The Company also agrees to indemnify the Rights Agent
         for, and to hold it harmless against,  any loss,  liability or expense,
         incurred  without  negligence,  bad faith or willful  misconduct on the
         part of the Rights  Agent,  for anything  done or omitted by the Rights
         Agent in connection  with the  acceptance  and  administration  of this
         Agreement,  including  the  reasonable  costs and expenses of defending
         against any claim of liability in the premises.

         (b) The Rights  Agent shall be  protected  and shall incur no liability
         for,  or in respect of any action  taken,  suffered or omitted by it in
         connection with, its  administration of this Agreement in reliance upon
         any Rights  Certificate  or  certificate  for the  Preferred  Shares or
         Common  Shares or for other  securities  of the Company,  instrument of
         assignment  or  transfer,  power of attorney,  endorsement,  affidavit,
         letter, notice, direction,  consent,  certificate,  statement, or other
         paper  or  document  believed  by it to be  genuine  and to be  signed,
         executed and, where necessary,  verified or acknowledged, by the proper
         Person or Persons, or otherwise upon the advice of counsel as set forth
         in Section 20 hereof.
<PAGE>
         Section 19. Merger or Consolidation or Change of Name of Rights Agent.

         (a) Any corporation into which the Rights Agent or any successor Rights
         Agent  may be  merged  or with  which  it may be  consolidated,  or any
         corporation  resulting  from any merger or  consolidation  to which the
         Rights Agent or any  successor  Rights  Agent shall be a party,  or any
         corporation  succeeding to the corporate  trust  business of the Rights
         Agent or any  successor  Rights  Agent,  shall be the  successor to the
         Rights Agent under this  Agreement  without the  execution or filing of
         any paper or any further act on the part of any of the parties  hereto;
         provided,   however,  that  such  corporation  would  be  eligible  for
         appointment as a successor Rights Agent under the provisions of Section
         21  hereof.  In case at the time  such  successor  Rights  Agent  shall
         succeed to the  agency  created  by this  Agreement,  any of the Rights
         Certificates shall have been countersigned but not delivered,  any such
         successor   Rights  Agent  may  adopt  the   countersignature   of  the
         predecessor  Rights  Agent and  deliver  such  Rights  Certificates  so
         countersigned;  and in case at that time any of the Rights Certificates
         shall not have  been  countersigned,  any  successor  Rights  Agent may
         countersign  such  Rights  Certificates  either  in  the  name  of  the
         predecessor  Rights Agent or in the name of the successor Rights Agent;
         and in all such  cases  such  Rights  Certificates  shall have the full
         force provided in the Rights Certificates and in this Agreement.

         (b) In case at any time the name of the Rights  Agent  shall be changed
         and at  such  time  any of the  Rights  Certificates  shall  have  been
         countersigned  but not  delivered,  the  Rights  Agent  may  adopt  the
         countersignature  under its prior name and deliver Rights  Certificates
         so  countersigned;  and  in  case  at  that  time  any  of  the  Rights
         Certificates  shall not have been  countersigned,  the Rights Agent may
         countersign such Rights Certificates either in its prior name or in its
         changed name; and in all such cases such Rights Certificates shall have
         the  full  force  provided  in the  Rights  Certificates  and  in  this
         Agreement.

         Section 20. Duties of Rights  Agent.  The Rights Agent  undertakes  the
duties and  obligations  imposed by this Agreement upon the following  terms and
conditions,  by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

         (a) The Rights Agent may consult  with legal  counsel (who may be legal
         counsel for the Company), and the opinion of such counsel shall be full
         and complete authorization and protection to the Rights Agent as to any
         action taken or omitted by it in good faith and in accordance with such
         opinion.

         (b) Whenever in the  performance of its duties under this Agreement the
         Rights  Agent shall deem it  necessary  or  desirable  that any fact or
         matter (including,  without  limitation,  the identity of any Acquiring
         Person and the  determination  of "current per share market  price") be
         proved or  established  by the Company prior to taking or suffering any
         action hereunder, such fact or matter (unless other evidence in respect
         thereof  be  herein  specifically  prescribed)  may  be  deemed  to  be
         conclusively  proved and established by a certificate signed by any one
<PAGE>
         of  the  Chairman  of the  Board,  the  Chief  Executive  Officer,  the
         President,  any  Vice  President,  the  Chief  Financial  Officer,  the
         Secretary or any  Assistant  Secretary of the Company and  delivered to
         the Rights Agent; and such certificate  shall be full  authorization to
         the Rights  Agent for any action  taken or suffered in good faith by it
         under  the   provisions  of  this   Agreement  in  reliance  upon  such
         certificate.

         (c) The Rights  Agent shall be liable  hereunder to the Company and any
         other  Person  only  for its  own  negligence,  bad  faith  or  willful
         misconduct.

         (d) The Rights Agent shall not be liable for or by reason of any of the
         statements  of fact or recitals  contained in this  Agreement or in the
         Rights  Certificates  (except  its  countersignature   thereof)  or  be
         required to verify the same,  but all such  statements and recitals are
         and shall be deemed to have been made by the Company only.

         (e) The Rights Agent shall not be under any  responsibility  in respect
         of the validity of this Agreement or the execution and delivery  hereof
         (except the due execution  hereof by the Rights Agent) or in respect of
         the  validity  or  execution  of any  Rights  Certificate  (except  its
         countersignature  thereof);  nor shall it be responsible for any breach
         by the Company of any covenant or condition contained in this Agreement
         or in any  Rights  Certificate;  nor  shall it be  responsible  for any
         change in the  exercisability  of the Rights or any  adjustment  in the
         terms of the Rights  (including the manner,  method or amount  thereof)
         provided  for in Sections 3, 11, 13, 23 or 24, or the  ascertaining  of
         the existence of facts that would require any such change or adjustment
         (except  with  respect to the  exercise of Rights  evidenced  by Rights
         Certificates  after  receipt  by  the  Rights  Agent  of a  certificate
         furnished pursuant to Section 12 describing such change or adjustment);
         nor shall it by any act hereunder be deemed to make any  representation
         or warranty as to the  authorization  or  reservation  of any Preferred
         Shares  to  be  issued   pursuant  to  this  Agreement  or  any  Rights
         Certificate or as to whether any Preferred Shares will, when issued, be
         validly authorized and issued, fully paid and nonassessable.

         (f) The Company agrees that it will perform,  execute,  acknowledge and
         deliver or cause to be performed, executed,  acknowledged and delivered
         all such  further and other acts,  instruments  and  assurances  as may
         reasonably  be required  by the Rights  Agent for the  carrying  out or
         performing by the Rights Agent of the provisions of this Agreement.

         (g) The  Rights  Agent is  hereby  authorized  and  directed  to accept
         instructions  with respect to the  performance of its duties  hereunder
         from any one of the Chairman of the Board, the Chief Executive Officer,
         the President,  any Vice President,  the Chief Financial  Officer,  the
         Secretary or any  Assistant  Secretary of the Company,  and to apply to
         such officers for advice or instructions in connection with its duties,
         and it shall not be liable for any action  taken or  suffered  by it in
         good faith in accordance  with  instructions of any such officer or for
         any  delay  in  acting  while  waiting  for  those  instructions.   Any
<PAGE>
         application  by the  Rights  Agent for  written  instructions  from the
         Company  may, at the option of the Rights  Agent,  set forth in writing
         any action  proposed  to be taken or omitted by the Rights  Agent under
         this Rights  Agreement  and the date on and/or  after which such action
         shall be taken or such omission  shall be  effective.  The Rights Agent
         shall not be liable for any action taken by, or omission of, the Rights
         Agent in accordance with a proposal included in any such application on
         or after the date specified in such  application  (which date shall not
         be less than five (5)  Business  Days after the date any officer of the
         Company  actually  receives such  application,  unless any such officer
         shall have  consented in writing to an earlier date)  unless,  prior to
         taking  any  such  action  (or the  effective  date  in the  case of an
         omission), the Rights Agent shall have received written instructions in
         response  to such  application  specifying  the  action  to be taken or
         omitted.

         (h) The Rights Agent and any stockholder, director, officer or employee
         of the Rights Agent may buy, sell or deal in any of the Rights or other
         securities  of the  Company  or become  pecuniarily  interested  in any
         transaction in which the Company may be interested, or contract with or
         lend  money to the  Company  or  otherwise  act as fully and  freely as
         though it were not Rights Agent under this  Agreement.  Nothing  herein
         shall  preclude the Rights Agent from acting in any other  capacity for
         the Company or for any other legal entity.

         (i) The Rights  Agent may  execute  and  exercise  any of the rights or
         powers hereby vested in it or perform any duty hereunder  either itself
         or by or through its  attorneys  or agents,  and the Rights Agent shall
         not be  answerable  or  accountable  for any act,  default,  neglect or
         misconduct  of any  such  attorneys  or  agents  or for any loss to the
         Company  resulting from any such act,  default,  neglect or misconduct,
         provided  reasonable  care was exercised in the selection and continued
         employment thereof.

         (j) No provision of this  Agreement  shall  require the Rights Agent to
         expend or risk its own funds or otherwise incur any financial liability
         in the performance of any of its duties hereunder or in the exercise of
         its rights if there  shall be  reasonable  grounds for  believing  that
         repayment of such funds or adequate  indemnification  against such risk
         or liability is not reasonably assured to it.

         (k) If,  with  respect to any  Rights  Certificate  surrendered  to the
         Rights Agent for exercise or transfer,  the certificate attached to the
         form of assignment or form of election to purchase, as the case may be,
         has either not been completed or indicates an  affirmative  response to
         clause 1 and/or 2 thereof,  the Rights Agent shall not take any further
         action with  respect to such  requested  exercise  or transfer  without
         first consulting with the Company.

         (l) At any time and from time to time after the Distribution Date, upon
         the request of the Company,  the Rights Agent shall promptly deliver to
         the Company a list,  as of the most recent  practicable  date (or as of
         such earlier date as may be specified by the  Company),  of the holders
         of record of Rights.
<PAGE>
         Section 21. Change of Rights  Agent.  The Rights Agent or any successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon  thirty  (30) days'  notice in writing  mailed to the  Company  and to each
transfer  agent of the  Preferred  Shares and the Common Shares by registered or
certified  mail,  and to the holders of the Rights  Certificates  by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days'  notice in writing,  mailed to the Rights  Agent or  successor
Rights Agent,  as the case may be, and to each  transfer  agent of the Preferred
Shares and the Common Shares by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. If the Rights Agent shall resign
or be removed or shall otherwise become  incapable of acting,  the Company shall
appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment  within a period of thirty  (30) days  after  giving  notice of such
removal  or  after  it has been  notified  in  writing  of such  resignation  or
incapacity by the resigning or incapacitated  Rights Agent or by the holder of a
Rights  Certificate  (who  shall,  with such  notice,  submit  his or her Rights
Certificate  for inspection by the Company),  then the registered  holder of any
Rights  Certificate  may apply to any court of  competent  jurisdiction  for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court,  shall be a  corporation  organized and doing
business  under the laws of the  United  States  or of any  state of the  United
States,  in good  standing,  which is  authorized  under  such laws to  exercise
corporate trust or stockholder  services powers and is subject to supervision or
examination  by  federal  or state  authority  and  which has at the time of its
appointment  as Rights  Agent a  combined  capital  and  surplus of at least $50
million. After appointment,  the successor Rights Agent shall be vested with the
same powers,  rights,  duties and  responsibilities as if it had been originally
named as Rights Agent without  further act or deed; but the  predecessor  Rights
Agent shall deliver and transfer to the  successor  Rights Agent any property at
the time held by it  hereunder,  and execute and deliver any further  assurance,
conveyance,  act or deed necessary for the purpose. Not later than the effective
date of any such  appointment,  the Company shall file notice thereof in writing
with the  predecessor  Rights  Agent and each  transfer  agent of the  Preferred
Shares  and the  Common  Shares,  and mail a notice  thereof  in  writing to the
registered  holders  of the  Rights  Certificates.  Failure  to give any  notice
provided  for in this  Section 21,  however,  or any defect  therein,  shall not
affect the  legality  or validity  of the  resignation  or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

         Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this  Agreement or of the Rights to the contrary,  the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the  Purchase  Price  and the  number  or kind or  class of  shares  or other
securities  or  property  purchasable  under  the  Rights  Certificates  made in
accordance  with the provisions of this  Agreement.  In addition,  in connection
with the issuance or sale of Common Shares following the  Distribution  Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common  Shares so issued or sold  pursuant  to the  exercise of stock
options or  warrants  or under any  employee  plan or  arrangement,  or upon the
exercise,  conversion  or  exchange  of  securities  hereinafter  issued  by the
Company,  and (b) may, in any other case, if deemed  necessary or appropriate by
the Board of Directors of the Company,  issue Rights  Certificates  representing
the  appropriate  number of Rights in  connection  with such  issuance  or sale;
provided,  however, that (i) no such Rights Certificate shall be issued and this
sentence  shall be null and void ab initio  if,  and to the  extent  that,  such
<PAGE>
issuance  or this  sentence  would  create a  significant  risk of or  result in
material  adverse  tax  consequences  to the  Company or the Person to whom such
Rights  Certificate  would be issued or would  create a  significant  risk of or
result in such options' or employee plans' or  arrangements'  failing to qualify
for  otherwise   available  special  tax  treatment  and  (ii)  no  such  Rights
Certificate shall be issued if, and to the extent that,  appropriate  adjustment
shall otherwise have been made in lieu of the issuance thereof.

         Section 23. Redemption.

         (a) The Company  may, at its option and with the  approval of the Board
         of Directors, at any time prior to the Close of Business on the earlier
         of (i) the tenth day  following  the  Shares  Acquisition  Date or such
         later date as may be  determined  by action of a majority of Continuing
         Directors then in office and publicly  announced by the Company or (ii)
         the Final  Expiration  Date,  redeem all but not less than all the then
         outstanding   Rights  at  a   redemption   price  of  $.01  per  Right,
         appropriately  adjusted to reflect any stock split,  stock  dividend or
         similar  transaction  occurring after the date hereof (such  redemption
         price  being  herein  referred  to as the  "Redemption  Price") and the
         Company may, at its option,  pay the Redemption  Price either in Common
         Shares  (based  on the  current  per share  market  price  thereof  (as
         determined pursuant to Section 11(d) hereof) at the time of redemption)
         or cash.  Such  redemption  of the  Rights by the  Company  may be made
         effective at such time,  on such basis and with such  conditions as the
         Board of  Directors in its sole  discretion  may  establish;  provided,
         however, if the Board of Directors of the Company authorizes redemption
         of the  Rights  on or  after  the time a Person  becomes  an  Acquiring
         Person, then there must be Continuing Directors then in office and such
         authorization  shall  require  the  concurrence  of a majority  of such
         Continuing Directors.

         (b)  Immediately  upon the  action  of the  Board of  Directors  of the
         Company ordering the redemption of the Rights,  evidence of which shall
         have been filed with the Rights Agent,  and without any further  action
         and without any notice, the right to exercise the Rights will terminate
         and the only right  thereafter  of the  holders  of Rights  shall be to
         receive the  Redemption  Price.  The Company shall promptly give public
         notice of any such redemption;  provided,  however, that the failure to
         give or any defect in, any such notice shall not effect the validity of
         such redemption.  Within ten (10) days after the action of the Board of
         Directors ordering the redemption of the Rights, the Company shall give
         notice of such  redemption  to the Rights  Agent and the holders of the
         then  outstanding  Rights by mailing such notice to all such holders at
         their last  addresses  as they  appear upon the  registry  books of the
         Rights Agent or, prior to the Distribution  Date, on the registry books
         of the transfer agent for the Common Shares. Any notice which is mailed
         in the manner herein provided shall be deemed given, whether or not the
         holder  receives the notice.  Each such notice of redemption will state
         the method by which the payment of the  Redemption  Price will be made.
         Neither the Company nor any of its Affiliates or Associates may redeem,
         acquire  or  purchase  for value any  Rights at any time in any  manner
         other than that specifically set forth in this Section 23 or in Section
         24 hereof,  and other than in  connection  with the  purchase of Common
         Shares prior to the Distribution Date.
<PAGE>
         Section 24. Exchange.

         (a) Subject to applicable laws,  rules and regulations,  and subject to
         subsection (c) below, the Company may, at its option,  by majority vote
         of the  Board  of  Directors  and a  majority  vote  of the  Continuing
         Directors,  at any time after the  occurrence  of a  Triggering  Event,
         exchange all or part of the then  outstanding  and  exercisable  Rights
         (which shall not include  Rights that have become void  pursuant to the
         provisions  of Section  7(e)  hereof) for Common  Shares at an exchange
         ratio of one Common Share per Right,  appropriately adjusted to reflect
         any stock split, stock dividend or similar transaction  occurring after
         the date hereof (such exchange ratio being  hereinafter  referred to as
         the "Ratio of Exchange").  Notwithstanding the foregoing,  the Board of
         Directors  shall not be empowered  to effect such  exchange at any time
         after  any  Person  (other  than the  Company,  any  Subsidiary  of the
         Company,  any  employee  benefit  plan  of  the  Company  or  any  such
         Subsidiary,  or any entity holding Common Shares for or pursuant to the
         terms of any such plan), together with all Affiliates and Associates of
         such Person,  becomes the Beneficial Owner of 50% or more of the Common
         Shares then outstanding.

         (b) Immediately upon the action of the Board of Directors  ordering the
         exchange of any Rights  pursuant to  subsection  (a) of this Section 24
         and  without any  further  action and without any notice,  the right to
         exercise such Rights shall terminate and the only right thereafter of a
         holder of such Rights shall be to receive that number of Common  Shares
         equal to the number of such Rights held by such  holder  multiplied  by
         the Ratio of Exchange. The Company shall give public notice of any such
         exchange;  provided,  however,  that the failure to give, or any defect
         in, such notice  shall not affect the  validity of such  exchange.  The
         Company  shall mail a notice of any such exchange to all of the holders
         of such Rights at their last addresses as they appear upon the registry
         books of the Rights  Agent.  Any  notice  which is mailed in the manner
         herein  provided  shall be  deemed  given,  whether  or not the  holder
         receives the notice. Each such notice of exchange will state the method
         by which the exchange of the Common  Shares for Rights will be effected
         and, in the event of any partial  exchange,  the number of Rights which
         will be  exchanged.  Any partial  exchange  shall be effected  pro rata
         based on the number of Rights (other than Rights which have become void
         pursuant to the  provisions of Section 7(e) hereof) held by each holder
         of Rights.

         (c) In the event  that  there  shall not be  sufficient  Common  Shares
         issued but not  outstanding  or  authorized  but unissued to permit any
         exchange of Rights as  contemplated  in accordance  with Section 24(a),
         the  Company  shall  either  take such  action as may be  necessary  to
         authorize  additional  Common  Shares for issuance upon exchange of the
         Rights or  alternatively,  at the option of a majority  of the Board of
         Directors,  with  respect to each Right (i) pay cash in an amount equal
         to the  Current  Value (as  hereinafter  defined),  in lieu of  issuing
         Common  Shares  in  exchange  therefor,  or (ii)  issue  debt or equity
         securities  or a  combination  thereof,  having  a value  equal  to the
         Current  Value,  in lieu of issuing  Common Shares in exchange for each
         such Right, where the value of such securities shall be determined by a
         nationally  recognized investment banking firm selected by the Board of
         Directors by majority vote of the Board of Directors,  or (iii) deliver
<PAGE>
         any  combination  of  cash,   property,   Common  Shares  and/or  other
         securities  having a value equal to the Current  Value in exchange  for
         each Right.  For purposes of this Section 24(c) only, the Current Value
         shall mean the product of the current per share  market price of Common
         Shares  (determined  pursuant  to  Section  11(d)  on the  date  of the
         occurrence of the event described above in subparagraph (a)) multiplied
         by the number of Common Shares for which the Right  otherwise  would be
         exchangeable if there were sufficient shares  available.  To the extent
         that the Company  determines that some action need be taken pursuant to
         clauses  (i),  (ii) or  (iii)  of this  Section  24(c),  the  Board  of
         Directors may temporarily  suspend the exercisability of the Rights for
         a period of up to sixty (60) days following the date on which the event
         described in Section  24(a) shall have  occurred,  in order to seek any
         authorization  of  additional   Common  Shares  and/or  to  decide  the
         appropriate  form of  distribution  to be made  pursuant  to the  above
         provision and to determine the value thereof.  In the event of any such
         suspension,  the Company shall issue a public announcement stating that
         the exercisability of the Rights has been temporarily suspended.

         (d) The  Company  shall not be required  to issue  fractions  of Common
         Shares or to distribute  certificates which evidence  fractional Common
         Shares. In lieu of such fractional  Common Shares,  there shall be paid
         to the  registered  holders of the Rights  Certificates  with regard to
         which such  fractional  Common Shares would  otherwise be issuable,  an
         amount in cash  equal to the same  fraction  of the  current  per share
         market  value of a whole Common  Share (as  determined  pursuant to the
         second sentence of Section 11(d) hereof).

         (e) The Company  may, at its option,  by majority  vote of the Board of
         Directors,  at any time  before  any  Person  has  become an  Acquiring
         Person,  exchange all or part of the then outstanding Rights for rights
         of substantially  equivalent  value, as determined  reasonably and with
         good faith by the Board of  Directors,  based upon the advice of one or
         more nationally recognized investment banking firms.

         (f) Immediately upon the action of the Board of Directors  ordering the
         exchange of any Rights  pursuant to  subsection  (e) of this Section 24
         and  without any  further  action and without any notice,  the right to
         exercise such Rights shall terminate and the only right thereafter of a
         holder of such  Rights  shall be to  receive  that  number of rights in
         exchange  therefor as has been  determined by the Board of Directors in
         accordance  with  subsection  (e) above.  The Company shall give public
         notice of any such  exchange;  provided,  however,  that the failure to
         give,  or any defect in, such notice  shall not affect the  validity of
         such exchange.  The Company shall mail a notice of any such exchange to
         all of the  holders  of such  Rights at their  last  addresses  as they
         appear upon the  registry  books of the  transfer  agent for the Common
         Shares of the Company.  Any notice which is mailed in the manner herein
         provided shall be deemed given,  whether or not the holder receives the
         notice. Each such notice of exchange will state the method by which the
         exchange of the Rights will be effected.
<PAGE>
         Section 25. Notice of Certain Events.

         (a) In case the Company  shall propose to effect or permit to occur any
         Triggering Event described in Section 11(a)(ii)(A) or 11(a)(ii)(B) or a
         Section 13 Event,  the Company shall give notice thereof to each holder
         of Rights in  accordance  with  Section 26 hereof at least  twenty (20)
         days prior to  occurrence of such  Triggering  Event or such Section 13
         Event.

         (b) In case any Triggering Event or Section 13 Event shall occur, then,
         in any such case, the Company shall as soon as  practicable  thereafter
         give to each holder of a Rights Certificate, in accordance with Section
         26  hereof,  a notice of the  occurrence  of such  event,  which  shall
         specify  the event and the  consequences  of the  event to  holders  of
         Rights under Sections 11(a)(ii) and 13 hereof.

         Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights  Certificate
to or on the Company shall be sufficiently  given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                            EXOGEN, INC.
                            10 Constitution Avenue
                            P.O. Box 6860
                            Piscataway, New Jersey 08855
                            Attn:  President

         Subject to the  provisions  of Section 21 hereof,  any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights  Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail,  postage prepaid,  addressed (until another
address is filed in writing with the Company) as follows:

                            Registrar and Transfer Company
                            10 Commerce Drive
                            Cranford, New Jersey 07016
                            Attention:  Stock Transfer Administration


Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company or the Rights  Agent to the  holder of any Rights  Certificate  shall be
sufficiently  given  or  made  if sent by  first-class  mail,  postage  prepaid,
addressed  to such holder at the address of such holder as shown on the registry
books of the Company.

         Section 27. Supplements and Amendments. Prior to the Distribution Date,
the Company may  supplement or amend this  Agreement in any respect  without the
approval of any holders of Rights and the Rights Agent shall,  if the Company so
directs,  execute such supplement or amendment.  From and after the Distribution
Date, the Company and the Rights Agent may from time to time supplement or amend
this  Agreement  without  the  approval of any holders of Rights in order to (i)
cure any ambiguity,  (ii) correct or supplement any provision  contained  herein
which may be defective or inconsistent with any other provisions  herein,  (iii)
shorten or lengthen any time period hereunder (which  lengthening or shortening,
<PAGE>
following  the first  occurrence of an event set forth in the proviso to Section
23(a)  hereof,  shall be effective  only if there are  Continuing  Directors and
shall require the  concurrence  of a majority of such  Continuing  Directors) or
(iv) to change or  supplement  the  provisions  hereunder in any manner that the
Company may deem necessary or desirable and that shall not adversely  affect the
interests  of the  holders  of  Rights  (other  than an  Acquiring  Person or an
Affiliate or Associate of an Acquiring Person); provided, this Agreement may not
be  supplemented  or  amended  to  lengthen,  pursuant  to clause  (iii) of this
sentence,  (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then  redeemable  or (B) any other time period unless
such  lengthening is for the purpose of protecting,  enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate  from an  appropriate  officer of the  Company  that states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such  supplement  or amendment.  Prior to the
Distribution  Date,  the  interests  of the  holders  of Rights  shall be deemed
coincident with the interests of the holders of Common Shares.

         Section  28.  Successors.  All the  covenants  and  provisions  of this
Agreement  by or for the benefit of the  Company or the Rights  Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

         Section 29. Determinations and Actions by the Board of Directors,  etc.
For all  purposes of this  Agreement,  any  calculation  of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular  percentage of such outstanding Common Shares of which any Person
is the Beneficial  Owner,  shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board of  Directors of the Company  (and,  where  specifically  provided for
herein,  the Continuing  Directors) shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers  specifically
granted to the Board,  or the  Company  (or,  where  specifically  provided  for
herein,  the Continuing  Directors),  or as may be necessary or advisable in the
administration of this Agreement,  including,  without limitation, the right and
power to (i)  interpret  the  provisions  of this  Agreement  and (ii)  make all
determinations  deemed  necessary or advisable  for the  administration  of this
Agreement  (including a  determination  to redeem or not redeem the Rights or to
amend  the  Agreement).  All such  actions,  calculations,  interpretations  and
determinations  (including, for purposes of clause (y) below, all omissions with
respect  to the  foregoing)  which  are  done or made by the  Board  (or,  where
specifically  provided for herein,  by the Continuing  Directors) in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights Certificates and all other parties and (y) not subject the
Board or the Continuing Directors to any liability to the holders of the Rights.

         Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company,  the Rights Agent and
the  registered   holders  of  the  Rights   Certificates  (and,  prior  to  the
Distribution  Date, the Common Shares) any legal or equitable  right,  remedy or
claim  under  this  Agreement;  but  this  Agreement  shall  be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the  Rights  Certificates  (and,  prior to the  Distribution  Date,  the  Common
Shares).
<PAGE>
         Section  31.  Severability.   If  any  term,  provision,   covenant  or
restriction  of this Agreement is held by a court of competent  jurisdiction  or
other  authority  to be invalid,  void or  unenforceable,  the  remainder of the
terms, provisions,  covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected,  impaired or invalidated;
provided,  however,  that  notwithstanding  anything  in this  Agreement  to the
contrary, if any such term,  provision,  covenant or restriction is held by such
court  or  authority  to be  invalid,  void or  unenforceable  and the  Board of
Directors of the Company determines in its good faith judgment that severing the
invalid  language  from this  Agreement  would  adversely  affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be  reinstated  and shall not expire  until the close of  business  on the
tenth day following the date of such determination by the Board of Directors.

         Section  32.  Governing  Law.  This  Agreement  and each Right and each
Rights  Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes  shall be governed by and
construed in accordance  with the laws of such State  applicable to contracts to
be made and performed entirely within such State.

         Section 33. Counterparts.  This Agreement may be executed in any number
of counterparts and each of such  counterparts  shall for all purposes be deemed
to be an original,  and all such counterparts shall together  constitute but one
and the same instrument.

         Section 34. Descriptive  Headings.  Descriptive headings of the several
Sections of this  Agreement  are  inserted  for  convenience  only and shall not
control or affect the meaning or construction of any of the provisions hereof.
<PAGE>

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


"COMPANY"                           EXOGEN, INC.


                                    By:/s/ Patrick A. McBrayer
                                           ------------------- 
                                    Name:  Patrick A. McBrayer
                                    Title: Chief Executive Officer and President

"RIGHTS AGENT"                      REGISTRAR AND TRANSFER COMPANY


                                    By:/s/ William P. Tatler
                                           -----------------
                                    Name:  William P. Tatler
                                    Title: Vice President


<PAGE>

                                                                       EXHIBIT A



                CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
                                AND PRIVILEGES OF

                     SERIES A PARTICIPATING PREFERRED STOCK
                                 OF EXOGEN, INC.


         Pursuant to Section 151 of the Delaware General Corporation Law


         The undersigned,  Patrick A. McBrayer and Richard H. Reisner, do hereby
certify:

         1. That they are the duly  elected and acting Chief  Executive  Officer
and  President,  and Vice  President,  Chief  Financial  Officer and  Secretary,
respectively, of Exogen, Inc., a Delaware corporation (the "Corporation").

         2. That pursuant to the authority conferred upon the Board of Directors
by  the  Amended  and  Restated   Certificate  of   Incorporation  of  the  said
Corporation,  the said  Board of  Directors  adopted  the  following  resolution
creating a series of 140,000  shares of Preferred  Stock  designated as Series A
Participating Preferred Stock:

         "RESOLVED,  that  pursuant  to the  authority  vested  in the  Board of
         Directors of the corporation by the Amended and Restated Certificate of
         Incorporation, the Board of Directors does hereby provide for the issue
         of a series of  Preferred  Stock,  par value  $.0001 per share,  of the
         Corporation, to be designated "Series A Participating Preferred Stock,"
         initially  consisting  of 140,000  shares  and to the  extent  that the
         designations, powers, preferences and relative and other special rights
         and the  qualifications,  limitations and  restrictions of the Series A
         Participating  Preferred  Stock are not  stated  and  expressed  in the
         Amended and Restated Certificate of Incorporation,  does hereby fix and
         herein state and express such  designations,  powers,  preferences  and
         relative and other special rights and the  qualifications,  limitations
         and restrictions  thereof,  as follows (all terms used herein which are
         defined in the Amended and Restated  Certificate of Incorporation shall
         be deemed to have the meanings provided therein):

         Section 1.  Designation and Amount.  The shares of such series shall be
designated  as "Series A  Participating  Preferred  Stock," par value $.0001 per
share, and the number of shares constituting such series shall be 140,000.

         Section 2.        Dividends and Distributions.

                  (A) Subject to the prior and superior  right of the holders of
any shares of any series of Preferred  Stock  ranking  prior and superior to the
shares of Series A Participating Preferred Stock with respect to dividends,  the
holders of shares of Series A Participating Preferred Stock shall be entitled to
receive  when, as and if declared by the Board of Directors out of funds legally
<PAGE>
available for the purpose,  quarterly  dividends payable in cash on the last day
of  December,  March,  June and  September  in each year  (each  such date being
referred to herein as a "Quarterly  Dividend  Payment Date"),  commencing on the
first  Quarterly  Dividend  Payment Date after the first  issuance of a share or
fraction of a share of Series A Participating  Preferred Stock, in an amount per
share  (rounded to the  nearest  cent) equal to,  subject to the  provision  for
adjustment  hereinafter  set forth,  100 times the aggregate per share amount of
all cash  dividends,  and 100 times the aggregate  per share amount  (payable in
kind) of all  non-cash  dividends or other  distributions  other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding  shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock of
the Corporation (the "Common Stock") since the immediately  preceding  Quarterly
Dividend Payment Date, or, with respect to the first Quarterly  Dividend Payment
Date,  since the first  issuance of any share or fraction of a share of Series A
Participating  Preferred  Stock. In the event the Corporation  shall at any time
after December 6, 1996 (the "Rights Declaration Date") (i) declare  any dividend
on  Common  Stock  payable  in  shares  of  Common  Stock,  (ii)  subdivide  the
outstanding  Common Stock, or (iii) combine the outstanding  Common Stock into a
smaller number of shares,  then in each such case the amount to which holders of
shares of Series A Participating Preferred Stock were entitled immediately prior
to such event under the preceding sentence shall be adjusted by multiplying such
amount by a fraction,  the  numerator of which is the number of shares of Common
Stock  outstanding  immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding  immediately prior to
such event.

                  (B) The  Corporation  shall declare a dividend or distribution
on the Series A Participating Preferred Stock as provided in paragraph (A) above
immediately  after it declares a dividend or  distribution  on the Common  Stock
(other than a dividend payable in shares of Common Stock).

                  (C)  Dividends  shall  begin to accrue  and be  cumulative  on
outstanding shares of Series A Participating  Preferred Stock from the Quarterly
Dividend  Payment Date next preceding the date of issue of such shares of Series
A  Participating  Preferred  Stock,  unless the date of issue of such  shares is
prior to the record date for the first Quarterly Dividend Payment Date, in which
case  dividends  on such shares  shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record  date for the  determination  of holders of shares of
Series A Participating  Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly  Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative  from such Quarterly  Dividend
Payment Date.  Accrued but unpaid  dividends shall not bear interest.  Dividends
paid on the shares of Series A  Participating  Preferred Stock in an amount less
than the total amount of such  dividends at the time accrued and payable on such
shares  shall be  allocated  pro rata on a  share-by-share  basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Participating Preferred Stock
entitled to receive  payment of a dividend  or  distribution  declared  thereon,
which  record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
<PAGE>
         Section  3.  Voting   Rights.   The  holders  of  shares  of  Series  A
Participating Preferred Stock shall have the following voting rights:

                  (A) Subject to the provision for  adjustment  hereinafter  set
forth,  each share of Series A  Participating  Preferred Stock shall entitle the
holder  thereof  to  100  votes  on  all  matters  submitted  to a  vote  of the
stockholders of the Corporation.  In the event the Corporation shall at any time
after the Rights  Declaration  Date (i)  declare any  dividend  on Common  Stock
payable in shares of Common Stock, (ii) subdivide the outstanding  Common Stock,
or (iii) combine the  outstanding  Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which  holders of shares
of Series A  Participating  Preferred Stock were entitled  immediately  prior to
such event  shall be  adjusted by  multiplying  such  number by a fraction,  the
numerator  of  which  is the  number  of  shares  of  Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

                  (B) Except as otherwise provided herein or by law, the holders
of shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.

                  (C)  Except  as   required   by  law,   holders  of  Series  A
Participating  Preferred  Stock  shall have no special  voting  rights and their
consent  shall not be required  (except to the extent they are  entitled to vote
with  holders of Common  Stock as set forth  herein)  for  taking any  corporate
action.

         Section 4.   Certain Restrictions.

                  (A) The  Corporation  shall not declare any  dividend on, make
any   distribution   on,  or  redeem  or  purchase  or  otherwise   acquire  for
consideration  any shares of Common Stock after the first issuance of a share or
fraction  of  a  share  of  Series  A   Participating   Preferred  Stock  unless
concurrently therewith it shall declare a dividend on the Series A Participating
Preferred Stock as required by Section 2 hereof.

                  (B)  Whenever  quarterly   dividends  or  other  dividends  or
distributions payable on the Series A Participating  Preferred Stock as provided
in  Section  2 are in  arrears,  thereafter  and until all  accrued  and  unpaid
dividends  and  distributions,  whether or not  declared,  on shares of Series A
Participating  Preferred  Stock  outstanding  shall have been paid in full,  the
Corporation shall not:

                      (i)   declare  or  pay   dividends   on,  make  any  other
distributions  on, or redeem or purchase or otherwise  acquire for consideration
any shares of stock ranking junior (either as to dividends or upon  liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock;
 
                      (ii)  declare  or  pay   dividends   on,  make  any  other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon  liquidation,  dissolution  or winding up) with  Series A  Participating
Preferred  Stock,  except  dividends paid ratably on the Series A  Participating
Preferred  Stock and all such parity stock on which  dividends are payable or in
arrears in  proportion  to the total  amounts  to which the  holders of all such
shares are then entitled;
<PAGE>
                      (iii)  redeem  or  purchase  or   otherwise   acquire  for
consideration shares of any stock ranking on a parity (either as to dividends or
upon  liquidation,  dissolution  or winding up) with the Series A  Participating
Preferred Stock, provided that the Corporation may at any time redeem,  purchase
or otherwise  acquire  shares of any such parity stock in exchange for shares of
any stock of the  Corporation  ranking  junior  (either as to  dividends or upon
dissolution,  liquidation or winding up) to the Series A Participating Preferred
Stock; or

                      (iv) purchase or otherwise  acquire for  consideration any
shares of Series A Participating Preferred Stock, or any shares of stock ranking
on a  parity  with  the  Series  A  Participating  Preferred  Stock,  except  in
accordance  with  a  purchase  offer  made  in  writing  or by  publication  (as
determined  by the Board of  Directors)  to all holders of such shares upon such
terms as the Board of Directors,  after  consideration of the respective  annual
dividend  rates and other  relative  rights and  preferences  of the  respective
series and  classes,  shall  determine  in good  faith  will  result in fair and
equitable treatment among the respective series or classes.

                  (C) The  Corporation  shall not permit any  subsidiary  of the
Corporation  to purchase or otherwise  acquire for  consideration  any shares of
stock of the Corporation  unless the Corporation  could,  under paragraph (A) of
this Section 4,  purchase or  otherwise  acquire such shares at such time and in
such manner.

         Section 5.  Reacquired  Shares.  Any  shares of Series A  Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their  cancellation  become  authorized  but unissued
Preferred  Stock and may be reissued as part of a new series of Preferred  Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.

         Section 6.   Liquidation, Dissolution or Winding Up.

                  (A) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Corporation,  no distribution  shall be made to the holders
of shares of stock ranking junior  (either as to dividends or upon  liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock unless,
prior thereto,  the holders of shares of Series A Participating  Preferred Stock
shall have received  $100 per share,  plus an amount equal to accrued and unpaid
dividends and  distributions  thereon,  whether or not declared,  to the date of
such payment (the "Series A Liquidation  Preference").  Following the payment of
the  full  amount  of  the  Series  A  Liquidation  Preference,   no  additional
distributions  shall be made to the holders of shares of Series A  Participating
Preferred  Stock unless,  prior  thereto,  the holders of shares of Common Stock
shall have received an amount per share (the "Common  Adjustment")  equal to the
quotient  obtained by dividing (i) the Series A  Liquidation  Preference by (ii)
100 (as appropriately adjusted as set forth in subparagraph (C) below to reflect
such events as stock splits, stock dividends and  recapitalization  with respect
to the Common  Stock)  (such number in clause (ii),  the  "Adjustment  Number").
Following the payment of the full amount of the Series A Liquidation  Preference
and the  Common  Adjustment  in respect  of all  outstanding  shares of Series A
Participating Preferred Stock and Common Stock, respectively,  holders of Series
A  Participating  Preferred  Stock and  holders of shares of Common  Stock shall
receive their  ratable and  proportionate  share of the  remaining  assets to be
distributed  in the ratio of the  Adjustment  Number to 1 with  respect  to such
Preferred Stock and Common Stock, on a per share basis, respectively.
<PAGE>
                  (B) In the  event,  however,  that  there  are not  sufficient
assets  available  to  permit  payment  in  full  to the  Series  A  Liquidation
Preference  and the  liquidation  preferences  of all other  series of Preferred
Stock, if any, which rank on a parity with the Series A Participating  Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation preferences. In
the event,  however,  that there are not sufficient  assets  available to permit
payment in full of the Common  Adjustment,  then such remaining  assets shall be
distributed ratably to the holders of Common Stock.

                  (C) In the event the  Corporation  shall at any time after the
Rights  Declaration  Date (i) declare any  dividend on Common  Stock  payable in
shares of Common Stock,  (ii) subdivide the  outstanding  Common Stock, or (iii)
combine the  outstanding  Common Stock into a smaller number of shares,  then in
each such case the Adjustment  Number in effect  immediately prior to such event
shall be  adjusted  by  multiplying  such  Adjustment  Number by a fraction  the
numerator  of  which  is the  number  of  shares  of  Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

         Section 7.  Consolidation,  Merger,  etc. In case the Corporation shall
enter into any consolidation,  merger, combination or other transaction in which
the shares of Common  Stock are  exchanged  for or changed  into other  stock or
securities,  cash and/or any other property, then in any such case the shares of
Series A  Participating  Preferred  Stock  shall at the same  time be  similarly
exchanged  or changed  in an amount  per share  (subject  to the  provision  for
adjustment  hereinafter  set forth) equal to 100 times the  aggregate  amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be,  into  which or for which  each  share of  Common  Stock is  changed  or
exchanged.  In the  event the  Corporation  shall at any time  after the  Rights
Declaration  Date (i) declare any dividend on Common Stock  payable in shares of
Common Stock, (ii) subdivide the outstanding  Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the  preceding  sentence with respect to the exchange or
change of shares of Series A Participating  Preferred Stock shall be adjusted by
multiplying  such amount by a fraction  the  numerator of which is the number of
shares  of  Common  Stock  outstanding  immediately  after  such  event  and the
denominator  of  which is the  number  of  shares  of  Common  Stock  that  were
outstanding immediately prior to such event.

         Section  8.  No  Redemption.  The  shares  of  Series  A  Participating
Preferred Stock shall not be redeemable.

         Section 9. Ranking.  The Series A  Participating  Preferred Stock shall
rank junior to all other series of the  Corporation's  Preferred Stock as to the
payment of dividends  and the  distribution  of assets,  unless the terms of any
such series shall provide otherwise.

         Section  10.  Amendment.   The  Amended  and  Restated  Certificate  of
Incorporation  of the  Corporation  shall not be  further  amended in any manner
which would materially alter or change the powers,  preference or special rights
of the Series A  Participating  Preferred  Stock so as to affect them  adversely
without  the  affirmative  vote  of the  holders  of a  majority  or more of the
outstanding shares of Series A Participating  Preferred Stock, voting separately
as a class.
<PAGE>
         Section 11. Fractional Shares.  Series A Participating  Preferred Stock
may be issued in  fractions  of a share  which  shall  entitle  the  holder,  in
proportion  to such  holder's  fractional  shares,  to exercise  voting  rights,
receive  dividends,  participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.

         RESOLVED  FURTHER,  that the  President or any Vice  President  and the
Secretary or any  Assistant  Secretary of this  corporation  be, and they hereby
are, authorized and directed to prepare and file a Certificate of Designation of
Rights,  Preferences and Privileges in accordance with the foregoing  resolution
and the  provisions  of Delaware  law and to take such  actions as they may deem
necessary or appropriate to carry out the intent of the foregoing resolution."

         3. That the authorized  number of Preferred Stock of the Corporation is
3,000,000 and that no such Preferred Stock has been issued.
<PAGE>



         We further  declare under penalty of perjury that the matters set forth
in the  foregoing  Certificate  of  Designation  are true and correct of our own
knowledge.

         Executed at Piscataway, New Jersey on December 6, 1996.




                                       
                                         -------------------
                                         Patrick A. McBrayer
                                         Chief Executive Officer and President




                                      
                                         ---------------------
                                         Richard H. Reisner
                                         Vice President, Chief Financial Officer
                                         and Secretary


<PAGE>
                                                                       EXHIBIT B



                           FORM OF RIGHTS CERTIFICATE 


Certificate No. R-                                                  _____ Rights


         NOT EXERCISABLE AFTER DECEMBER 19, 2006 OR EARLIER IF TERMINATED BY THE
         COMPANY OR IF THE COMPANY  EXCHANGES THE RIGHTS  PURSUANT TO THE RIGHTS
         AGREEMENT.  THE RIGHTS ARE SUBJECT TO REDEMPTION,  AT THE OPTION OF THE
         COMPANY,  AT $30.00  PER  RIGHT ON THE  TERMS  SET FORTH IN THE  RIGHTS
         AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
         ACQUIRING  PERSON OR AN AFFILIATE  OR ASSOCIATE OF AN ACQUIRING  PERSON
         (AS SUCH TERMS ARE DEFINED IN THE RIGHTS  AGREEMENT) AND ANY SUBSEQUENT
         HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED
         BY THIS RIGHTS  CERTIFICATE ARE OR WERE BENEFICIALLY  OWNED BY A PERSON
         WHO WAS OR BECAME AN  ACQUIRING  PERSON OR AN AFFILIATE OR ASSOCIATE OF
         AN  ACQUIRING   PERSON  (AS  SUCH  TERMS  ARE  DEFINED  IN  THE  RIGHTS
         AGREEMENT).   ACCORDINGLY,  THIS  RIGHTS  CERTIFICATE  AND  THE  RIGHTS
         REPRESENTED  HEREBY  MAY  BECOME  NULL  AND  VOID IN THE  CIRCUMSTANCES
         SPECIFIED IN SECTION 7(E) OF SUCH RIGHTS AGREEMENT.]*

* The portion of the legend in bracket shall be inserted only if applicable  and
shall replace the preceding sentence.


                               RIGHTS CERTIFICATE

                                  EXOGEN, INC.


         This certifies that  ______________________,  or registered assigns, is
the  registered  owner of the  number of Rights set forth  above,  each of which
entitles the owner thereof,  subject to the terms,  provisions and conditions of
the Rights  Agreement  dated as of  December 6, 1996 (the  "Rights  Agreement"),
between Exogen, Inc., a Delaware corporation (the "Company"),  and Registrar and
Transfer Company (the "Rights Agent"),  to purchase from the Company at any time
after the  Distribution  Date (as such term is defined in the Rights  Agreement)
and prior to 5:00 p.m.,  California  time, on December 19, 2006 at the office of
the Rights Agent designated for such purpose,  or at the office of its successor
as Rights  Agent,  one  one-hundredth  of a fully paid  non-assessable  share of
Series A  Participating  Preferred  Stock,  par value  $.0001  per  share,  (the
"Preferred  Shares"),  of the  Company,  at a  purchase  price of $30.00 per one
one-hundredth of a Preferred Share (the "Purchase Price"), upon presentation and
surrender of this Rights  Certificate  with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of one one-hundredths of a Preferred Share which may
be purchased  upon exercise  hereof) set forth above are the number and Purchase
Price as of December 6, 1996,  based on the Preferred  Shares as  constituted at
such date.  As  provided in the Rights  Agreement,  the  Purchase  Price and the
number and kind of Common Shares or other securities which may be purchased upon
the exercise of the Rights  evidenced by this Rights  Certificate are subject to
modification and adjustment upon the happening of certain events.
<PAGE>
         This Rights Certificate is subject to all of the terms,  provisions and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights  Agent,  the Company and the  holders of the Rights  Certificates,  which
limitations of rights include the temporary  suspension of the exercisability of
such Rights under the specific  circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office of the Rights Agent.

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Rights Certificate (i) may be redeemed by the Company, at its option, at
a redemption  price of $.01 per Right or (ii) may be exchanged by the Company in
whole or in part for Common  Shares,  substantially  equivalent  rights or other
consideration as determined by the Company.

         This Rights  Certificate,  with or without  other Rights  Certificates,
upon  surrender at the office of the Rights Agent  designated  for such purpose,
may be exchanged for another Rights  Certificate or Rights  Certificates of like
tenor  and date  evidencing  Rights  entitling  the  holder to  purchase  a like
aggregate amount of securities as the Rights evidenced by the Rights Certificate
or Rights Certificates  surrendered shall have entitled such holder to purchase.
If this Rights  Certificate  shall be  exercised  in part,  the holder  shall be
entitled to receive upon surrender  hereof another Rights  Certificate or Rights
Certificates for the number of whole Rights not exercised.

         No  fractional  portion of less than one  one-hundredth  of a Preferred
Share will be issued upon the exercise of any Right or Rights  evidenced  hereby
but in lieu  thereof a cash  payment  will be made,  as  provided  in the Rights
Agreement.

         No holder of this  Rights  Certificate,  as such,  shall be entitled to
vote or  receive  dividends  or be  deemed  for any  purpose  the  holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof,  nor shall anything  contained in the Rights
Agreement or herein be construed to confer upon the holder hereof,  as such, any
of the  rights  of a  stockholder  of the  Company  or any right to vote for the
election  of  directors  or upon any matter  submitted  to  stockholders  at any
meeting thereof,  or to give or withhold consent to any corporate  action, or to
receive notice of meetings or other actions  affecting  stockholders  (except as
provided  in the Rights  Agreement),  or to receive  dividends  or  subscription
rights,  or  otherwise,  until  the  Right or Rights  evidenced  by this  Rights
Certificate shall have been exercised as provided in the Rights Agreement.
<PAGE>
         This  Rights  Certificate  shall  not be  valid or  obligatory  for any
purpose until it shall have been countersigned by the Rights Agent.

         WITNESS the facsimile  signature of the proper  officers of the Company
and its corporate seal. Dated as of ___________, 19__.


ATTEST:                                     EXOGEN, INC.



                                               By:
---------------------                             ----------------------
Richard H. Reisner                                   Patrick A. McBrayer 
Vice President, Chief Financial Officer              Chief Executive Officer and
and Secretary                                        President





Countersigned:


REGISTRAR AND TRANSFER COMPANY,
as Rights Agent


By:   -------------------
Name:
Title:

<PAGE>
                   FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Rights Certificate)


       FOR VALUE RECEIVED____________________hereby sells, assigns and transfers

unto _______________________________________________________________
                 (Please print name and address of transferee)

----------------------------------------------------------------------------
this Rights  Certificate,  together with all right,  title and interest therein,
and does hereby  irrevocably  constitute and appoint  __________________________
Attorney,  to  transfer  the  within  Rights  Certificate  on the  books  of the
within-named Company, with full power of substitution.


Dated: _______________, 1996


                                                     __________________________
                                                     Signature


Signature Guaranteed:

         Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>

                                   CERTIFICATE


         The  undersigned  hereby  certifies by checking the  appropriate  boxes
that:

                  (i) this  Rights  Certificate  [ ] is [ ] is not  being  sold,
assigned and  transferred by or on behalf of a Person who is or was an Acquiring
Person,  or an  Affiliate  or  Associate  of any such  Person (as such terms are
defined in the Rights Agreement);

                  (ii)  after  due  inquiry  and to the  best  knowledge  of the
undersigned,  it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate  from any  Person who is, was or  subsequently  became an  Acquiring
Person or an Affiliate or Associate of any such Person.

Dated: _______________, 1996



                                                     __________________________
                                                     Signature


Signature Guaranteed:

         Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
             FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED

                          FORM OF ELECTION TO PURCHASE

                      (To be executed if holder desires to
                        exercise the Rights Certificate)

To:

         The    undersigned    hereby    irrevocably    elects    to    exercise
_______________________   Rights  represented  by  this  Rights  Certificate  to
purchase the number of one one-hundredths of a Preferred Share issuable upon the
exercise of such Rights and requests  that  certificates  for such number of one
one-hundredths of a Preferred Share issued in the name of:

Please insert social security or other identifying number

_______________________________________________________________________________
                         (Please print name and address)

_______________________________________________________________________________



If such number of Rights  shall not be all the Rights  evidenced  by this Rights
Certificate,  a new Rights  Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security or other identifying number


_______________________________________________________________________________

                         (Please print name and address)

_______________________________________________________________________________


Dated:                     , 1996



                                                     __________________________
                                                     Signature
Signature Guaranteed:

         Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
                                   CERTIFICATE


         The  undersigned  hereby  certifies by checking the  appropriate  boxes
that:

         (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an  Affiliate  or Associate of any such Person (as such terms are defined in the
Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned,  it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any  Person  who is,  was or  subsequently  became  an  Acquiring  Person  or an
Affiliate or Associate of any such Person.

Dated:____________,1996



                                                     _________________________
                                                     Signature


Signature Guaranteed:

         Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
             FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED


                                     NOTICE


         The  signature in the foregoing  Forms of Assignment  and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE>
                                                                       EXHIBIT C


                                  EXOGEN, INC.

                             STOCKHOLDER RIGHTS PLAN

                                Summary of Rights



Distribution Transfer of Rights;       The Board of  Directors  has  declared a 
Rights Certificate:                    dividend of one Right (the  "Right") for 
                                       each outstanding  share of Common Stock, 
                                       par value $.0001,  of Exogen,  Inc. (the 
                                       "Company").  Prior  to the  Distribution 
                                       Date referred to below,  the Rights will 
                                       be  evidenced  by, and trade  with,  the 
                                       certificates for the Common Stock. After 
                                       the Distribution  Date, the Company will 
                                       mail   Rights    certificates   to   the 
                                       Company's  stockholders  and the  Rights 
                                       will become  transferable apart from the 
                                       Common Stock.                            
                                                                                
Distribution Date:                     Rights  will  separate  from the  Common 
                                       Stock  and  become  exercisable  on  the 
                                       tenth day (or such  later date as may be 
                                       determined   by  a   majority   of   the 
                                       Directors   not   affiliated   with  the 
                                       acquiring    person   or   group    (the 
                                       "Continuing  Directors")) after a person 
                                       or   group   (a)   acquires   beneficial 
                                       ownership   of  15%  or   more   of  the 
                                       Company's  Common Stock or (b) announces 
                                       a  tender   or   exchange   offer,   the 
                                       consummation  of which  would  result in 
                                       ownership by a person or group of 15% or 
                                       more of the Company's Common Stock.      
                                                                                
                                        
Preferred Stock Purchasable            After the Distribution  Date, each Right 
Upon Exercise of Rights:               will entitle the holder to purchase, for 
                                       $30.00,  a  fraction of  a  share of the 
                                       Company's  Preferred Stock with economic 
                                       terms  similar  to that of one  share of 
                                       the Company's Common Stock.       
<PAGE>
Flip-In:                               If an acquiror (an  "Acquiring  Person") 
                                       obtains  15% or  more  of the  Company's 
                                       Common Stock  (other than  pursuant to a 
                                       tender offer deemed  adequate and in the 
                                       best  interests  of the  Company and its 
                                       stockholders  by the Board of  Directors 
                                       (a "Permitted Offer")),  then each Right 
                                       (other than Rights owned by an Acquiring 
                                       Person or its  affiliates)  will entitle 
                                       the holder thereof to purchase,  for the 
                                       exercise  price,  a number  of shares of 
                                       the Company's Common Stock having a then 
                                       current   market   value  of  twice  the 
                                       exercise price.                          
                                                                                
Flip-Over:                             If,  after the Shares  Acquisition  Date 
                                       (defined below),  (a) the Company merges 
                                       into  another  entity,  (b) an acquiring 
                                       entity  merges  into the  Company or (c) 
                                       the  Company  sells more than 50% of the 
                                       Company's assets or earning power,  then 
                                       each Right  (other than Rights  owned by 
                                       an Acquiring  Person or its  affiliates) 
                                       will  entitle  the  holder   thereof  to 
                                       purchase,  for  the  exercise  price,  a 
                                       number of shares of Common  Stock of the 
                                       person   engaging  in  the   transaction 
                                       having a then  current  market  value of 
                                       twice the  exercise  price  (unless  the 
                                       transaction satisfies certain conditions 
                                       and is  consummated  with a  person  who 
                                       acquired  shares pursuant to a Permitted 
                                       Offer,  in which  case the  Rights  will 
                                       expire).                                 
                         
Exchange Provision:                    At any time  after  an event  triggering 
                                       the  flip-in  or  flip-over  rights  and 
                                       prior   to   the   acquisition   by  the 
                                       Acquiring  Person  of 50% or more of the 
                                       outstanding  Common Stock,  the Board of 
                                       Directors  of the Company  may  exchange 
                                       the Rights  (other than Rights  owned by 
                                       the Acquiring Person or its affiliates), 
                                       in  whole  or in  part,  at an  exchange 
                                       ratio of one share of  Common  Stock per 
                                       Right (subject to adjustment).           
                                        
Redemption of the Rights:              Rights   will  be   redeemable   at  the 
                                       Company's  option  for $.01 per Right at 
                                       any time on or prior  to the  tenth  day 
                                       (or such later date as may be determined 
                                       by  a   majority   of   the   Continuing 
                                       Directors)  after  public   announcement 
                                       that a person  has  acquired  beneficial 
                                       ownership   of  15%  or   more   of  the 
                                       Company's   Common  Stock  (the  "Shares 
                                       Acquisition Date").                      
<PAGE>
Expiration of  the  Rights:            The Rights expire on the earliest of (a) 
                                       December  19,  2006,   (b)  exchange  or 
                                       redemption  of the  Rights as  described 
                                       above,  or (c)  consummation of a merger 
                                       or consolidation resulting in expiration 
                                       of the Rights as described above.        
                                        
Amendment of Terms of Rights:          The terms of the  Rights  and the Rights 
                                       Agreement  may be amended in any respect 
                                       without   the   consent  of  the  Rights 
                                       holders on or prior to the  Distribution 
                                       Date;  thereafter,   the  terms  of  the 
                                       Rights and the Rights  Agreement  may be 
                                       amended   without  the  consent  of  the 
                                       Rights  holders  in  order  to cure  any 
                                       ambiguities  or to make changes which do 
                                       not  adversely  affect the  interests of 
                                       Rights holders (other than the Acquiring 
                                       Person).                                 

Voting Rights:                         Rights will not have any voting rights.

Anti-Dilution Provisions:              Rights  will have the benefit of certain
                                       customary anti-dilution provisions.     
                                       
Taxes:                                 The  Rights  distribution  should not be 
                                       taxable for federal income tax purposes. 
                                       However,   following   an  event   which 
                                       renders the Rights  exercisable  or upon 
                                       redemption  of the Rights,  stockholders 
                                       may recognize taxable income.            
                                        
The foregoing is a summary of certain principal terms of the Stockholder  Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of December 6, 1996,  between the Company and the
Rights Agent.  Further details of the Rights are contained in a letter that will
be mailed to all the Company's stockholders.