EXHIBIT 10.22

                                        CONFIDENTIAL  TREATMENT  HAS BEEN SOUGHT
                     FOR  PORTIONS OF THIS  EXHIBIT PURSUANT TO RULE 24B-2 UNDER
                             THE  SECURITIES  EXCHANGE  ACT OF 1934, AS AMENDED.






                                  EXOGEN, INC.


                                       AND


                              SMITH & NEPHEW, INC.


                                MASTER AGREEMENT


                                 August 10, 1998









<PAGE>
                                TABLE OF CONTENTS


                                                                         PAGE
                                                                         ----

SECTION 1.          Purchase of Exogen Common Stock by S&N..................1

SECTION 2.          United States Sales Representative Agreement............1

SECTION 3.          Payment on Initial Payment Date.........................2

SECTION 4.          License Agreement.......................................2

SECTION 5.          United States Stocking Distribution Agreement...........2

SECTION 6.          Global Stocking Distribution Agreement; 
                    Option to Purchase Additional Shares of
                    Exogen Common Stock.....................................3

SECTION 7.          Certain Rights of First Negotiation.....................6

SECTION 8.          Certain Covenants of Exogen.............................7

SECTION 9.          Certain Covenants of S&N...............................10

SECTION 10.         Representations and Warranties of Exogen...............12

                    10.1     Power and Authority...........................12
                                                                            
                    10.2     Valid Issuance of Exogen Common Stock.........12
                                                                           
                    10.3     Consents......................................13
                                                                           
                    10.4     Compliance with Other Instruments.............13
                                                                            
                    10.5     ISO 9000 and CE Mark of Approval..............13
                                                                            
                    10.6     Millenium Compliance..........................13
                                                                            
SECTION 11.         Representations and Warranties of S&N..................14

                    11.1     Power and Authority...........................14
                                                                           
                    11.2     Consents......................................14
                                                                            
                    11.3     Compliance with Other Instruments.............14
                                                                           
SECTION 12.         Miscellaneous..........................................14

                    12.1     Survival of Warranties........................14
<PAGE>                                                                        
                    12.2     Deductible....................................14
                                                                            
                    12.3     Claim Notice..................................15
                                                                            
                    12.4     Remedies......................................15
                                                                            
                    12.5     Successors and Assigns........................15
                                                                            
                    12.6     Governing Law.................................16
                                                                           
                    12.7     Counterparts..................................16
                                                                            
                    12.8     Titles and Subtitles..........................16
                                                                            
                    12.9     Notices.......................................16
                                                                            
                    12.10    Attorneys' Fees...............................16
                                                                            

                    12.11    Amendments and Waivers........................16

                    12.12    Severability..................................16
                                                                           
                    12.13    Entire Agreement..............................16
                                                                            
                    12.14    Press Releases and Announcements..............17
                                                                            
                    12.15    Arbitration...................................17 
                                                                            
<PAGE>
                                    SCHEDULES


SCHEDULE 5     Terms and Conditions of U.S. Stocking Distribution Agreement

SCHEDULE 6A    Terms and Conditions of Global Stocking Distribution Agreement

SCHEDULE 6B    Terms and Conditions of Individual Country Stocking Distribution 
               Agreement (Prior to Exercise of Global Distribution Option)

SCHEDULE 7     Terms and Conditions to Serve as the Basis for Good Faith 
               Negotiations

SCHEDULE 8     U.S. and Foreign Patents, Trademarks and Applications

SCHEDULE 9     Current International Arrangements

SCHEDULE 10    Required Consents


<PAGE>
                                    EXHIBITS


EXHIBIT A                  Common Stock Purchase Agreement

EXHIBIT B                  U.S. Sales Representative Agreement

EXHIBIT C                  License Agreement



<PAGE>
                                MASTER AGREEMENT


                  Master  Agreement  ("Agreement")  dated as of August 10,  1998
between Exogen,  Inc., a Delaware  corporation  ("Exogen"),  and Smith & Nephew,
Inc., a Delaware corporation ("S&N").

                                    RECITALS

                  WHEREAS,  Exogen  manufactures  and  sells  Sonic  Accelerated
Fracture Health Systems ("SAFHS"); and

                  WHEREAS,  S&N  desires  to  acquire  certain  rights  from and
interests in Exogen.

                  NOW,  THEREFORE,  in  consideration  of the mutual  agreements
contained  herein and intending to be legally bound hereby,  the parties  hereto
agree as follows:

                  SECTION 1. Purchase of Exogen Common Stock by S&N. On the date
hereof  (the  "Initial  Closing  Date"),  Exogen  will issue and sell to Smith &
Nephew Holdings,  Inc., an affiliate of S&N, and Smith & Nephew  Holdings,  Inc.
will purchase from Exogen,  820,000 shares of Common Stock, par value $.0001 per
share, of Exogen ("Exogen Common Stock"). The price to be paid for each share of
Exogen  Common Stock to be so  purchased by S&N shall be $5.00,  or an aggregate
purchase  price of  $4,100,000.  In  connection  with  such  issuance,  sale and
purchase,  on the Initial  Closing Date (i) Exogen and Smith & Nephew  Holdings,
Inc. shall execute and deliver the Common Stock  Purchase  Agreement in the form
of Exhibit A to this Agreement (the "Purchase Agreement"),  and the Registration
Rights Agreement in the form of Annex A to the Purchase  Agreement (the "Initial
Registration  Rights  Agreement"),  (ii)  Exogen  shall  deliver  or cause to be
delivered  to Smith & Nephew  Holdings,  Inc. all  certificates  (other than the
Exogen  Common Stock  certificate  (as required in the Purchase  Agreement)  and
other documents  contemplated  by the Purchase  Agreement to be delivered by it,
(iii) to the extent possible,  the Exogen Common Stock  certificate  required in
the Purchase Agreement;  and (iv) Smith & Nephew Holdings, Inc. shall deliver to
Exogen the Purchase  Price (as defined in the Purchase  Agreement) in the manner
contemplated  by the  Purchase  Agreement.  If Exogen is not able to deliver the
Exogen Common Stock  certificate on the Initial  Closing Date, then Exogen shall
deliver such certificate to Smith & Nephew Holdings, Inc. no later than five (5)
business days following the Initial Closing Date.

                  SECTION 2. United States Sales  Representative  Agreement.  On
the Initial  Closing  Date,  Exogen and S&N shall execute and deliver the United
States Sales Representative Agreement in the form of Exhibit B to this Agreement
(the "U.S. Sales Representative Agreement").
<PAGE>
                  SECTION 3.  Payment on Initial  Payment  Date.  On the Initial
Closing  Date,  S&N shall  deliver  to Exogen  $1,000,000  by wire  transfer  to
Exogen's bank account (designated at least one business day prior to the Initial
Closing Date).

                  SECTION 4. License  Agreement.  On the Initial  Closing  Date,
Exogen and S&N shall  execute  and  deliver a License  Agreement  in the form of
Exhibit C to this Agreement (the "License Agreement").

                  SECTION 5. United States Stocking Distribution Agreement.

                  (a) Exogen and S&N will  enter into a United  States  Stocking
Distribution  Agreement  having the terms and conditions set forth in Schedule 5
to this Agreement  (the "U.S.  Stocking  Distribution  Agreement") in accordance
with the following:

                      (i) If the Requisite  Approval Date (as defined in Section
         4(b) of the U.S. Sales Representative  Agreement) occurs prior to or on
         July 31, 2002,  Exogen and S&N will enter into such agreement within 30
         days following the Requisite  Approval Date,  provided that in no event
         will the U.S. Stocking Distribution Agreement become effective prior to
         August 1, 2000.

                      (ii) If S&N  desires  to enter  into such  agreement  even
         though the  Requisite  Approval  Date has not  occurred or has occurred
         after July 31, 2002 and so notifies  Exogen of such desire prior to the
         termination or expiration of the U.S. Sales  Representative  Agreement,
         Exogen and S&N will enter into such agreement  within 30 days following
         such  notification,  provided  that in no event will the U.S.  Stocking
         Distribution  Agreement  become effective prior to August 1, 2000. Each
         of Exogen and S&N shall  negotiate  in good faith the terms of the U.S.
         Stocking Distribution Agreement and shall use diligent efforts to enter
         into such agreement within the foregoing timetable.

                  (b) In  consideration  for the  execution  and delivery of the
U.S. Stocking  Distribution  Agreement,  S&N shall pay to Exogen an aggregate of
[****],  which  shall  be  payable  as  follows:  [****]  concurrently  with the
execution and delivery of the U.S. Stocking Distribution Agreement and [****] on
the first  anniversary  of such  execution and delivery.  Such payments shall be
made by wire  transfer to an account  designated by Exogen no later than two (2)
business  days  prior  to  the  execution  and  delivery  of the  U.S.  Stocking
Distribution Agreement.

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

     [****]  REPRESENTS  MATERIAL WHICH HAS BEEN REDACTED  PURSUANT TO A REQUEST
FOR CONFIDENTIAL  TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.

                                       2
<PAGE>
                  SECTION 6. Global Stocking Distribution  Agreement;  Option to
Purchase Additional Shares of Exogen Common Stock.

                      (a) S&N shall have the option  (the  "Global  Distribution
         Option"),  exercisable  by S&N by written notice given to Exogen at any
         time  during the period  commencing  on the  Initial  Closing  Date and
         ending on the third  anniversary  of the Initial  Closing Date ("Global
         Option Period"),  to cause Exogen to enter into with S&N or one or more
         of its Affiliates a Global Stocking  Distribution  Agreement having the
         terms and  conditions  set forth in Schedule 6A to this  Agreement (the
         "Global Stocking Distribution Agreement"). Each of Exogen and S&N shall
         negotiate in good faith the terms of the Global  Stocking  Distribution
         Agreement  and shall use  diligent  efforts  to enter  into the  Global
         Stocking  Distribution  Agreement as promptly as practicable  after the
         exercise of such option.

                     (i) Exogen  represents  and warrants that Schedule 9 sets
         forth  a  complete  and  accurate  list  of all  sales  representative,
         distribution  and similar  arrangements to which Exogen is a party with
         respect to  territories  outside of the United States as of the date of
         this Agreement ("Current International Arrangements"),  together with a
         description  of: the  territory  covered by each current  International
         Arrangement;  Exogen's  rights to terminate each Current  International
         Arrangement;   the  expiration  date  of  each  Current   International
         Arrangement;  and any  extension  or  renewal  rights.  S&N's  right to
         commence distribution in any country outside the United States shall be
         subject  to and  limited  by the  terms  and  conditions  disclosed  on
         Schedule  9, and any  extension,  renewal or  amendment  to any Current
         International  Arrangement as is permitted  pursuant to Section 6(e) of
         this  Agreement.  Notwithstanding  anything  contained  herein  to  the
         contrary,  Exogen shall use diligent  efforts to terminate  the Current
         International Arrangements as soon as possible following S&N's exercise
         of  its  Global  Distribution   Option.  

                      (ii) For purposes of this Agreement:

                            "Affiliate"    means   (A)   any   entity   directly
controlling,  controlled by, or under common control with another entity, or (B)
any  person or entity  owning or  controlling  more than 50% of the  outstanding
voting  securities  of an entity.  "Control"  means  possession  of the power to
direct or cause the  direction  of the  management  and  policies  of an entity,
whether through the ownership of a majority of the outstanding voting securities
or by contract or otherwise.

                            "Global  Option  Exercise  Date" means the date,  if
any, on which S&N provides the written notice referred to in Section 6(a).
--------------


                                       3
<PAGE>
                  (b) Exogen  hereby  grants to S&N an option (the  "Option") to
purchase from the Company  additional  shares of Exogen Common Stock for its own
account or its designee, subject to the following terms and conditions:

                      (i) The Option shall be  exercisable by S&N beginning only
         when and if S&N  exercises  the Global  Distribution  Option within the
         time period  specified in Section 6(a), and any time  thereafter  until
         the second anniversary of the Global Option Exercise Date.

                      (ii) The Option may be exercised in whole or in part,  but
         may only be exercised  one time.  In order to exercise the Option,  S&N
         shall give to Exogen a written notice of S&N's election to exercise the
         Option (the date of such notice being referred to herein as the "Option
         Exercise Date") and S&N's designation of the date on which the purchase
         by S&N of the  shares  of Exogen  Common  Stock  shall be  closed  (the
         "Option  Closing  Date"),  which date  shall be no  earlier  than three
         business days following the Option  Exercise Date and no later than (A)
         the 45th day after the Option  Exercise Date or (B) the third  business
         day after the  expiration of any  applicable  waiting  period under the
         Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976,  whichever  is
         later.  On the  Option  Closing  Date,  S&N  shall  pay to  Exogen  the
         aggregate  purchase  price  for  the  shares  of  Exogen  Common  Stock
         purchased  pursuant to exercise of the Option in immediately  available
         funds by wire  transfer to a bank  account  designated  by Exogen,  and
         Exogen shall  deliver to S&N a certificate  representing  the number of
         shares of Exogen  Common Stock so purchased by S&N,  registered  in the
         name of S&N or its nominee.

                      (iii) The maximum  number of shares of Exogen Common Stock
         which can be  purchased  upon  exercise  of the  Option is equal to the
         difference  between  (A) the  number of shares of Exogen  Common  Stock
         equal to  nineteen  percent  (19%) of the  number  of  shares of Exogen
         Common  Stock issued and  outstanding  as of the Option  Exercise  Date
         (after  giving  effect to the  shares  issuable  upon  exercise  of the
         Option),  minus  (B) the  number  of  shares  of  Exogen  Common  Stock
         purchased by S&N on the Initial  Closing Date  (adjusted to reflect any
         stock dividends, stock splits or similar events).

                      (iv) The price to be paid for each share of Exogen  Common
         Stock to be  purchased  by S&N pursuant to exercise of the Option shall
         be equal to the  average of the last  reported  sale price per share of
         Exogen Common Stock as reported on the Nasdaq  National  Market or such
         other national  securities  exchange or securities  quotation system on
         which such  shares are then traded or quoted,  using the last  reported
         sale price for each of the 20  consecutive  trading  days ending on the
         third trading day immediately preceding the Option Exercise Date.

                      (v) On the Option Closing Date or as soon thereafter as is
         practicable,  Exogen  and S&N shall  enter into a  Registration  Rights
         Agreement  having terms and 


                                       4
<PAGE>
         conditions  substantially  similar to those  contained  in the  Initial
         Registration  Rights  Agreement and covering the shares of Common Stock
         purchased upon exercise of the Option.

                  (c) If S&N exercises the Global Distribution Option, S&N shall
pay to Exogen by wire transfer an aggregate of [****], which shall be payable as
follows:  [****]  concurrently  with the  execution  and  delivery of the Global
Stocking  Distribution  Agreement  and [****] on the first  anniversary  of such
execution  and  delivery.  Exogen  shall  designate  to S&N in writing  the bank
account to which funds  should be  transferred  no later two (2)  business  days
prior to the execution and delivery of the Global Distribution Agreement.

                  (d) If,  during the period ending on the earlier of the Global
Option  Exercise Date and the  expiration of the Global  Option  Period,  Exogen
desires to commence or continue the distribution or sale of Products (as defined
in the U.S.  Sales  Representative  Agreement) in a country in which Exogen does
not then have a sales representative, distribution or other similar agreement in
effect (including by reason of the termination, expiration, renewal or extension
of a prior  agreement  in such  country) or in which  Exogen is not then selling
Products  directly,  Exogen shall so notify S&N. If S&N so elects within 10 days
following  receipt  of such  notice,  S&N shall have the  exclusive  right for a
period of 60 days after  receipt of such  notice to  negotiate  with Exogen with
respect to a stocking  distribution  agreement  in such  country with S&N (or an
Affiliate  of S&N) having the terms and  conditions  set forth in Schedule 6B to
this Agreement  (the  "Individual  Country  Stocking  Distribution  Agreement").
Exogen and S&N shall  negotiate  in good faith the terms and  conditions  of any
such  agreement,  including  the  payment  of an up  front  fee  if  Exogen  has
previously  engaged  in  distribution  activities  or  expended  funds to obtain
regulatory  approval to distribute in that country.  If the terms and conditions
of any such agreement require the payment by S&N of any fee, the fee paid by S&N
shall be credited  against any amount that may become due  pursuant to the first
sentence of Section 6(c). If Exogen and S&N do not reach  agreement on the terms
of an agreement within the 60 day period referenced above,  Exogen shall be free
to negotiate such an agreement with any other third party, provided that such an
agreement  can be  terminated by Exogen on no more than ninety (90) days' notice
(or such longer period as is required by applicable law).

                  (e) In the event that S&N elects  under  Section 6(d) to enter
into Individual Country Stocking Distribution Agreements and S&N has paid Exogen
at least [****] in up front fees (pursuant to Section 6(d)) for such agreements,
then S&N shall have the right at any time following the last payment to exercise
the Global Stocking  Distribution Option without payment of the amounts required
under  Section 6(c),  and the  provisions of Section 6(c) shall be of no further
force or effect.

-------------
     [****]  REPRESENTS  MATERIAL WHICH HAS BEEN REDACTED  PURSUANT TO A REQUEST
FOR CONFIDENTIAL  TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.

                                       5
<PAGE>
                  SECTION 7. Certain Rights of First Negotiation.

                  (a) If, at any time prior to August 1, 2008, Exogen desires to
enter into an agreement of any kind (including, without limitation, an agreement
for sale, development,  manufacture, license or distribution) with a third party
with respect to, or in connection  with,  any  ultrasound  or mechanical  stress
therapy  (and  any  intellectual  property  rights  relating  thereto)  for  the
treatments  and   indications   set  forth  in  Section  1  of  the  U.S.  Sales
Representative  Agreement,  the U.S.  Stocking  Distribution  Agreement,  Global
Stocking  Distribution  Agreement or Individual  Country  Stocking  Distribution
Agreement  or  any  new  indication,   including,  without  limitation,   spine,
cartilage, wounds, osteoporosis or other muscular-skeletal tissues, Exogen shall
give S&N notice  thereof.  If S&N so elects within 10 days following  receipt of
such notice, S&N shall have the right, on a non-exclusive basis, for a period of
45 days after receipt of such notice to negotiate  with Exogen with respect to a
letter of intent for any such agreement. During such 45 day period, Exogen shall
not execute a letter of intent or definitive  agreement with any other person or
entity.  If a letter of intent is  executed  with S&N within such 45 day period,
such letter of intent shall be subject to and  conditioned  upon approval by the
board  of  directors  of  Smith &  Nephew  plc no  later  than 45 days  from the
execution  of the letter of intent ( the period  from  execution  of a letter of
intent  until  approved  by such board of  directors  to be  referred  to as the
"Approval  Period").  During  the  Approval  Period  and for a period of 90 days
thereafter,  if  approved by the Smith & Nephew plc board of  directors,  Exogen
shall not initiate,  encourage or participate in any discussions with respect to
such  agreement or arrangement  with any other person or entity.  Exogen and S&N
shall  negotiate  in good faith the terms and  conditions  of any such letter of
intent and  agreement.  The  parties  acknowledge  that the letter of intent and
agreement may include the terms and  conditions  set forth in Schedule 7 to this
Agreement.

                  (b) If, at any time  during  the  effectiveness  of any of the
U.S. Sales Representative Agreement, the U.S. Stocking Distribution Agreement or
the Global Stocking Distribution Agreement,  Exogen desires to sell, transfer or
otherwise  dispose of  substantially  all of the assets of Exogen or to effect a
merger, consolidation,  recapitalization, issuance of shares of capital stock or
other  transaction,  as a result of which the stockholders of Exogen immediately
prior to such  transaction own less than a majority of the voting  securities of
the  surviving  entity  after such  transactions,  Exogen  shall give S&N notice
thereof.  If S&N so elects within 10 days following receipt of such notice,  S&N
shall have the right,  on a non-exclusive  basis,  for a period of 45 days after
receipt of such notice to  negotiate  with  Exogen  with  respect to a letter of
intent for any such  transaction.  During such 45 day period,  Exogen  shall not
execute  a letter of intent or  definitive  agreement  with any other  person or
entity.  If a letter of intent is  executed  with S&N within such 45 day period,
such letter of intent shall be subject to and  conditioned  upon approval by the
board of directors of Smith & Nephew plc during the Approval Period.  During the
Approval Period and for a period of 90 days thereafter, if approved by the Smith
& Nephew  plc board of  directors,  Exogen  shall  not  initiate,  encourage  or
participate in any discussions  with any other person or entity relating to such
transaction.  Exogen and S&N shall  negotiate  in good faith with respect to any
such letter of intent and transaction.  


                                       6
<PAGE>
                  (c) Nothing  set forth in Section  7(a) or (b) shall be deemed
to require  Exogen or S&N to enter into an  agreement  with the other party with
respect to the types of transactions or agreements covered by these Sections.


                  SECTION 8. Certain Covenants of Exogen.

                  (a) Exogen  shall use diligent  efforts to obtain,  as soon as
reasonably  practicable,  national reimbursement approval for the SAFHS 2000 and
3000 devices in each of France, Germany and Holland;  provided,  that failure to
obtain such  approvals  shall not  constitute a default under this  Agreement if
Exogen has otherwise complied with this Section 8(a).

                  (b) Exogen warrants and represents to S&N that,  except as set
forth on  Schedule  8, it is the sole and  exclusive  owner of the  patents  and
patent  applications  set forth in  Schedule 8 and the  inventions  therein  set
forth,  the trademarks and trademark  applications  set forth in Schedule 8, and
the  copyright in all software,  directions  for use,  labeling and  promotional
materials  heretofore  used in  association  with SAFHS  devices  (collectively,
"Intellectual  Property").  Exogen  will pay all  maintenance  fees  for  issued
patents prior to applicable due dates and renew all registered  trademarks prior
to applicable  renewal dates and  prosecute all patent  applications;  provided,
however,  that if Exogen elects not to maintain any patent,  renew any trademark
or  prosecute  any  patent  application  in  any  territory  in  which  S&N  has
distribution  or sales  representative  rights,  it shall give  notice to S&N at
least 60 days prior to the due date for such maintenance fee or renewal, and S&N
may pay such amounts and take such actions as are required for such maintenance,
renewal or prosecute  any patent  application  in any territory in which S&N has
distribution  or sales  representative  rights and  Exogen  shall  execute  such
agreements,  assignments or other  documents as may be required in order to make
S&N a co-assignee  or co-owner of any patent or trademark for which S&N has paid
a fee for so long as S&N continues to pay such fees.  Exogen shall not,  without
the prior written  approval of S&N,  which  approval  shall not be  unreasonably
withheld, sell, transfer,  convey, pledge or otherwise encumber the Intellectual
Property  or any  Intellectual  Property  developed  in the future  relating  to
Products in any territory in which S&N has distribution or sales  representative
rights; provided, however, that Exogen shall not be precluded from engaging in a
transaction  covered  by  Section  7 in  accordance  with such  Section  or from
granting a security  interest in  substantially  all of its assets in connection
with  obtaining a loan or line of credit or similar  financing  from one or more
financial  institutions,  provided  Exogen  delivers  an  effective  and legally
binding  agreement  from the secured  party  wherein the secured party agrees to
subordinate  its  claims  and  interests  to that  of S&N  and  not to  disturb,
terminate  or modify  any rights S&N may have with  respect to any  security  or
collateral  if the  secured  party  exercises  its rights  with  respect to such
security or collateral.

                  (c)  (i)  Exogen  shall   indemnify  S&N  and  its  employees,
         Affiliates, sales representatives and distributors from and against any
         claim or suit for patent,  trademark or copyright  infringement arising
         out of or connected  with the sale and  marketing  of Products.  Exogen
         warrants  and  represents  to S&N that it has  received  no  notice  of
         patent,  trademark or copyright  infringement from any third party with
         respect to 

                                       7
<PAGE>

         Products.  Exogen shall promptly notify S&N of any future suits, claims
         or demands relating to the Intellectual Property.

                      (ii) Each party shall  promptly  notify the other party of
         any lawsuit, demand, claim or other action or threat thereof in respect
         of which  indemnification  may be sought under Section 8(c)(i).  Exogen
         shall have sole  control  over the defense and  settlement  of any such
         action and S&N shall  reasonably  cooperate with Exogen in such defense
         at Exogen's expense.

                  (d) If  either  party  has  evidence  that a  third  party  is
         infringing the Intellectual Property, it will promptly notify the other
         party.

                      (i)  Exogen  shall  have the first  right to  enforce  any
         Intellectual  Property  rights  against  any  infringement  or  alleged
         infringement  thereof, and shall notify S&N, within three (3) months of
         receipt  of the  notice  referred  to  above,  whether  it  intends  to
         institute  suit  against any such  infringer or alleged  infringer.  If
         Exogen so elects, it shall have the right to control, settle and defend
         such suit in a manner  consistent with the terms and provisions of this
         Section  8(d) and shall at all times keep S&N informed as to the status
         thereof.  S&N may elect to share equally in the Expenses (as defined in
         Section  8(e)) of any such  suit,  by notice  to Exogen  within 30 days
         following receipt of Exogen's notice of intent to institute suit.

                      (ii) If Exogen  elects  not to  enforce  any  Intellectual
         Property  rights  relating  to  an  alleged  infringement  claim  in  a
         territory in which S&N has distribution or sales representative rights,
         S&N  may,  in its  sole  judgment,  institute  suit  against  any  such
         infringer or alleged infringer and control, settle and defend such suit
         in a manner  consistent  with the terms and  provisions of this Section
         8(d). In such event,  S&N shall at all times keep Exogen informed as to
         the status  thereof.  Exogen may elect to share equally in the Expenses
         of any such suit, by notice to S&N within 30 days following  receipt of
         S&N's  notice  of  intent  to  institute  suit.   Notwithstanding   the
         foregoing,  no settlement,  consent judgment or other voluntarily final
         disposition of any such suit may be entered into without the consent of
         Exogen, which consent will not be unreasonable withheld.

                      (iii) In any suit covered by this Section 8(d),  the party
         not  controlling  the  litigation  (the   "Participant   Party")  shall
         reasonably cooperate in such litigation.  Each party agrees that, if it
         is the Participant  Party, it may be named (if  appropriate) as a party
         in any suit  brought  by the  other  party  under  this  Section  8(d);
         provided that S&N shall not be made a party to a suit with respect to a
         territory   in  which  it  does   not   have   distribution   or  sales
         representative  rights.  Each party agrees to make  available  relevant
         records, papers, information, samples and specimens, as well as to have
         its employees testify upon request.

                                       8
<PAGE>
                      (iv) Any recovery of damages or costs in any  infringement
         suit under this Section 8(d), where such damages and costs relate to an
         infringement  claim in a  territory  in which S&N has  distribution  or
         sales representative rights, shall be applied as follows:

                           (A) first, either (I) equally to each party until all
Expenses of the suit have been reimbursed (or repaid in such other proportion as
actually paid by the  parties),  if the parties had agreed to share the Expenses
equally or (II) to the party solely  undertaking the Expenses of such suit until
all such Expenses have been reimbursed;

                           (B) if the  Participant  Party shared  equally in the
Expenses,  the  balance of any  recovery  shall be shared  equally  between  the
parties;

                           (C) if Exogen  controlled  the litigation and S&N did
not share equally in the Expenses,  the balance of any recovery shall be divided
75% to Exogen and 25% to S&N; and

                           (D) if S&N  controlled  the litigation and Exogen did
not share equally in the Expenses,  the balance of any recovery shall be divided
75% to S&N and 25% to Exogen.

                  Any damages or costs  recovered in a suit,  where such damages
and costs relate to an  infringement  claim in a territory in which S&N does not
have distribution or sales  representative  rights shall be for the sole benefit
of Exogen.

                  (e) Subject to Section 12.2,  Exogen shall  indemnify and hold
harmless  S&N and its  Affiliates  from all Losses and  Expenses  (as defined in
Section  12.2)  incurred  by S&N and its  Affiliates:  (i) as  required  by this
Agreement or any agreement  contemplated  hereby;  or (ii) in connection with or
arising  out of:  (A) any  breach  by  Exogen  of any of its  covenants  in this
Agreement or any  Agreement  contemplated  herein;  (B) any failure of Exogen to
perform any of its  obligations in this Agreement or any agreement  contemplated
herein;  (C) any breach of any warranty or the inaccuracy of any  representation
or warranty  of any Exogen or its  Affiliates  contained  or referred to in this
Agreement or any agreement  contemplated  hereby;  (D) the violation of any law,
rule or  regulation  by Exogen or its  Affiliates;  or (E) any personal  injury,
death or property damage arising out of or in connection  with the  manufacture,
use or sale of Products.  Provided, however, Exogen shall not be so obligated to
indemnify  S&N or its  Affiliates  to the extent  that  Losses were caused by or
resulted from the negligent act or omission or willful misconduct  following the
date  of this  Agreement  of S&N or its  Affiliates,  sales  representatives  or
distributors.

                  (f) During the term of the agreements to be executed  pursuant
to this  Agreement and for one year  following the  termination or expiration of
the last of such agreements, Exogen shall not solicit any employee of S&N or its
Affiliates. Notwithstanding the foregoing, Exogen shall not be in breach of this
covenant  if  Exogen  (i)  makes   solicitation 

                                       9
<PAGE>
for employment by general  advertisement  in periodicals of broad  distribution;
(ii)  hires  any  such  person  if at the  time  such  person  responds  to such
solicitation,  such person has terminated his or her employment  with S&N or its
Affiliate,  voluntarily or involuntarily, and Exogen has not otherwise solicited
such person;  or (iii) S&N is in default  under any of the  agreements  executed
pursuant  to this  Agreement  and such  person  provides  a  service  reasonably
necessary for Exogen to satisfy the obligations of S&N or Exogen thereunder.


                  SECTION 9. Certain Covenants of S&N.

                  (a) Until the earlier of August 1, 2008 or termination of this
Master  Agreement  and  all  agreements   contemplated  hereby,  and  except  as
specifically  provided for in this Master  Agreement,  without the prior written
approval of  Exogen's  board of  directors,  S&N will not (i) acquire any Exogen
Common Stock (or securities  exchangeable,  convertible or exercisable therefor)
other than as contemplated  herein and other than securities issued as dividends
on shares of Exogen  Common Stock  purchased by S&N pursuant to this  Agreement,
(ii) commence a tender offer for more than 20% of the then outstanding shares of
Exogen Common  Stock;  or (iii) make any public  announcement  relating to (i)or
(ii) above;  provided,  that the foregoing  shall not be applicable in the event
that any person or persons acting in concert not affiliated with S&N (as defined
in the  regulations  under the Securities  Exchange Act of 1934) (A) acquires or
makes a tender offer for outstanding  Common Stock of Exogen equal to or greater
than 20% of the  outstanding  shares of Exogen  Common  Stock  (other than in an
underwritten  public offering) or (B) indicates publicly its intention to effect
such a transaction.

                  (b)  Subject to Section  12.2,  S&N shall  indemnify  and hold
harmless Exogen and its Affiliates from all Losses and Expenses incurred by such
S&N and its  Affiliates  (i) as  required  by this  Agreement  or any  agreement
contemplated  hereby;  or (ii) in  connection  with or  arising  out of: (A) any
breach by S&N or its  Affiliates  of any of their  respective  covenants in this
Agreement or any Agreement  contemplated  herein;  (B) any failure of any S&N or
its Affiliates to perform any of their respective  obligations in this Agreement
or any  agreement  contemplated  herein;  (C) any breach of any  warranty or the
inaccuracy  of any  representation  or  warranty  of any  S&N or its  Affiliates
contained or referred to in this Agreement or any agreement contemplated hereby;
(D) the violation of any law, rule or  regulation by S&N or its  Affiliates;  or
(E)  any  personal  injury,  death  or  property  damage  arising  out  of or in
connection  with  repairs or  alterations  made to Products  without the written
approval of Exogen, which approval shall not be unreasonably withheld. Provided,
however,  S&N shall not be so obligated to indemnify Exogen or its Affiliates to
the  extent  that  Losses  caused  by or  resulting  from the  negligent  act or
omissions of Exogen or its Affiliates.

                  (c)  S&N  shall   comply  and  shall   cause  its   employees,
Affiliates,  sales  representatives and distributors to comply with all U.S. and
foreign labeling and other regulatory  requirements and restrictions  applicable
to the  marketing  and sale of Products  in the United  States and in such other
countries in which S&N has  exercised  its option to  distribute  Products.  All
Products shall be marked with Exogen's  trademarks and all product  labeling and
packaging that is not Exogen's  standard labeling and packaging 

                                       10
<PAGE>
shall be subject to Exogen's consent, which shall not be unreasonably withheld.

                  (d) During the term of the agreements to be executed  pursuant
to this  Agreement and for one year  following the  termination or expiration of
the last of such agreements, S&N shall not solicit any employee of Exogen or its
Affiliates.  Notwithstanding  the foregoing,  S&N shall not be in breach of this
covenant if S&N (i) makes  solicitation for employment by general  advertisement
in  periodicals of broad  distribution;  or (ii) hires any such person if at the
time such person responds to such  solicitation,  such person has terminated his
or her employment  with Exogen or its Affiliate,  voluntarily or  involuntarily,
and S&N has not otherwise  solicited such person;  or (iii) Exogen is in default
under any of the agreements  executed pursuant to this Agreement and such person
provides a service  reasonably  necessary for S&N to satisfy the  obligations of
S&N or Exogen thereunder.

                  (e)  Except as set forth  below,  S&N shall not enter  into or
assume any distribution or sales representative  agreement with any other person
or entity  pursuant to which S&N distributes or sells  "Competing  Products" (as
defined  below) in the United States or in any other country as to which S&N has
distribution or sales  representative  rights.  "Competing  Products" shall mean
non-invasive low intensity  ultrasonic or electrical  products for the treatment
of bone  fractures,  osteotomies,  arthrodeses  (other than spine  fusions)  and
distractive  osteogenesis.  Notwithstanding  anything  contained  herein  to the
contrary, S&N shall be permitted to acquire, through merger,  consolidation,  or
asset  acquisition  an entity,  assets or business  which  distributes  or sells
Competing  Products in the United  States or such other  country or countries if
such  acquisition is part of an acquisition  which includes  products other than
the Competitive Products ("Competitive  Acquisition").  S&N shall provide Exogen
with written  notice of any  Competitive  Acquisition  no later than the date on
which such Competitive  Acquisition is consummated and the parties shall discuss
the impact of the  Competitive  Acquisition on this  Agreement,  if any, and any
amendment  that  could be made to this  Agreement  in order to  accommodate  the
Competitive Acquisition. No later than 30 days following receipt of such notice,
Exogen  shall  elect by  written  notice  to S&N to  either  (i)  continue  this
Agreement  without  amendment;  (ii) continue this  Agreement  with amendment in
accordance  with the  discussions  referred to above;  or (iii)  terminate  this
Agreement,  in any of which cases,  subject to any amendment  under clause (ii),
S&N shall be permitted  to sell and  distribute  the  Competitive  Products.  If
Exogen elects the option set forth in clause (ii) above,  then the parties shall
negotiate in good faith for a period of 30 days with respect to such  amendment.
If Exogen  elects the option set forth in clause (iii)  above,  then Exogen will
pay S&N [****] if Exogen makes such

-------------
     [****]  REPRESENTS  MATERIAL WHICH HAS BEEN REDACTED  PURSUANT TO A REQUEST
FOR CONFIDENTIAL  TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.

                                       11
<PAGE>
election  prior to the first  anniversary  of this  Agreement;  [****] if Exogen
makes such election prior to the second anniversary of this Agreement; [****] if
Exogen makes such election  prior to the third  anniversary  of this  Agreement;
[****] if Exogen makes such  election  prior to the fourth  anniversary  of this
Agreement;  or [****] if Exogen  makes such  election  anytime  after the fourth
anniversary of this  Agreement.  Upon receipt of payment S&N shall, if requested
by Exogen,  assign to Exogen all  agreements  relating to the Products  with its
distributors.  In  addition,  S&N will allow Exogen to offer  employment  to all
Transferred  Employees (as defined in the U.S. Sales  Representative  Agreement)
who remain  employed by S&N and shall  cooperate  with Exogen in the transfer of
any such individuals who accept  re-employment with Exogen.  Provided,  however,
S&N shall not be liable or responsible  if Transferred  Employees do not wish to
be re-employed  by Exogen or elect to remain  employees of S&N. If Exogen elects
the option set forth in clause  (ii) above and the  parties  are unable to agree
upon an amendment to this Agreement  within the 30 day period,  Exogen may elect
between  the  options  set forth in clauses  (i) and (iii).  If Exogen  fails to
provide  notice of its  election of the options set forth in this  Section or in
the preceding  sentence,  then Exogen shall be deemed to have elected the option
contained in clause (i).  Nothing  contained  herein shall limit or prohibit S&N
from  acquiring  or owning  directly or  indirectly  not in excess of 10% of the
equity of an entity that is engaged in the manufacture,  sale or distribution of
a Competitive Product.

                  SECTION 10. Representations and Warranties of Exogen.

                  In addition to the  representations and warranties made on the
Initial  Closing Date by Exogen in the  Purchase  Agreement  and the U.S.  Sales
Representative Agreement, Exogen represents and warrants to S&N as follows:

                  10.1 Power and Authority.  Exogen has all requisite  power and
authority  to enter  into and carry out the  transactions  contemplated  by this
Agreement.  All corporate action on the part of Exogen, its officers,  directors
and shareholders necessary for the authorization, execution and delivery of this
Agreement and the  performance of all  obligations of Exogen  hereunder has been
taken, and this Agreement  constitutes the valid and legally binding  obligation
of Exogen,  enforceable  against Exogen in accordance with its terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general  application  affecting  enforcement of creditors'  rights
generally,  (ii) as limited by laws  relating  to the  availability  of specific
performance,  injunctive relief, or other equitable  remedies,  and (iii) to the
extent the  indemnification  provisions  contained  in the  Registration  Rights
Agreement may be limited by applicable federal or state securities laws.

                  10.2 Valid Issuance of Exogen Common Stock.  The Exogen Common
Stock being  purchased by S&N pursuant to Section 1 or which may be purchased by
S&N upon 

-------------
     [****]  REPRESENTS  MATERIAL WHICH HAS BEEN REDACTED  PURSUANT TO A REQUEST
FOR CONFIDENTIAL  TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.


                                       12
<PAGE>
exercise of the Option,  when issued,  sold and delivered in accordance with the
terms hereof for the consideration  expressed  herein,  will be duly and validly
issued and outstanding,  fully paid and nonassessable with no personal liability
attaching  to the  ownership  thereof,  free and clear of any  Encumbrances  (as
defined in the Purchase Agreement), other than Encumbrances,  if any, arising as
a result of  actions  taken by S&N,  and not  subject to  preemptive  or similar
rights of stockholders of Exogen or others.

                  10.3  Consents.  Except as  disclosed on Schedule 9 hereto and
for any notifications or filings as may be required under applicable  federal or
state  securities  laws,  if any,  which  shall  be made on a timely  basis,  no
consent,  approval,  order or authorization of, or registration,  qualification,
designation, declaration or filing with, any person (governmental or private) on
the part of Exogen or its Subsidiary  (as defined in the Purchase  Agreement) is
required in connection with the consummation of the transactions contemplated by
this Agreement.

                  10.4  Compliance  with  Other   Instruments.   The  execution,
delivery and performance of this Agreement by Exogen and the consummation of the
transactions  contemplated  hereby will not (x) result in any violation of or be
in conflict with or  constitute,  with or without the passage of time and giving
of notice,  either a default  under any  provisions  of its Second  Amended  and
Restated  Certificate  of  Incorporation  or Amended and  Restated  Bylaws,  any
provisions of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound,  or to the best  knowledge of Exogen,  of
any  provision of domestic  (federal,  state or local) or foreign law,  statute,
rule or regulation applicable to Exogen or the Subsidiary,  or (y) result in the
creation  of any lien,  charge or  Encumbrance  upon any assets of Exogen or its
Subsidiary or the suspension,  revocation, impairment, forfeiture, or nonrenewal
of any material permit, license, authorization, or approval applicable to Exogen
or its  Subsidiary,  their  business  or  operations  or any of their  assets or
properties.

                  10.5 ISO 9000 and CE Mark of  Approval.  Exogen  warrants  and
represents  to S&N  that the  SAFHS  2000  device  complies  with  International
Standards  Organization  ("ISO")  Certification  9003  and  the  Medical  Device
Directive and received the CE Mark of Approval on March 24, 1998,  and that such
certification  and  approval  will be  maintained  in full  force and  effect at
Exogen's  expense.  Exogen shall use its diligent efforts to obtain and maintain
ISO 9000  certification and the CE Mark of Approval for the SAFHS 3000 device at
Exogen's expense.

                  10.6 Millenium Compliance. Exogen represents and warrants that
the Products will process dates correctly  before, on and after January 1, 2000,
such that the features and performance of the Products will be unaffected by the
transition  from the twentieth  century to the twenty first  century;  provided,
however, that the Products are used in accordance with 

                                       13
<PAGE>
written instructions.

                  SECTION 11. Representations and Warranties of S&N.

                  In addition to the  representations and warranties made on the
Initial  Closing  Date  by S&N in the  Purchase  Agreement  and the  U.S.  Sales
Representative Agreement, S&N represents and warrants to Exogen as follows:

                  11.1  Power and  Authority.  S&N has all  requisite  power and
authority  to enter  into and carry out the  transactions  contemplated  by this
Agreement. All corporate action on the part of S&N, its officers,  directors and
shareholder  necessary  for the  authorization,  execution  and delivery of this
Agreement  and the  performance  of all  obligations  of S&N  hereunder has been
taken, and this Agreement  constitutes the valid and legally binding  obligation
of S&N,  enforceable  against S&N in  accordance  with its terms,  except (i) as
limited by applicable bankruptcy,  insolvency,  reorganization,  moratorium, and
other laws of general  application  affecting  enforcement of creditors'  rights
generally,  (ii) as limited by laws  relating  to the  availability  of specific
performance,  injunctive relief, or other equitable  remedies,  and (iii) to the
extent the  indemnification  provisions  contained  in the  Registration  Rights
Agreement may be limited by applicable federal or state securities laws.

                  11.2  Consents.  Except as  disclosed on Schedule 9 hereto and
for any notifications or filings as may be required under applicable  federal or
state  securities  laws,  if any,  which  shall  be made on a timely  basis,  no
consent,  approval,  order or authorization of, or registration,  qualification,
designation, declaration or filing with, any person (governmental or private) on
the  part  of S&N  is  required  in  connection  with  the  consummation  of the
transactions contemplated by this Agreement.

                  11.3  Compliance  with  Other   Instruments.   The  execution,
delivery and  performance of this Agreement by S&N and the  consummation  of the
transactions  contemplated  hereby will not result in any  violation of or be in
conflict with or  constitute,  with or without the passage of time and giving of
notice,   either  a  default  under  any   provisions  of  its   Certificate  of
Incorporation  or Bylaws,  any provisions of any  instrument,  judgment,  order,
writ,  decree or contract to which it is a party or by which it is bound,  or to
the best  knowledge  of S&N, of any  provision  of domestic  (federal,  state or
local) or foreign law, statute, rule or regulation applicable to S&N.

                  SECTION 12. Miscellaneous.

                  12.1 Survival of Warranties.  The warranties,  representations
and covenants of Exogen and S&N contained in or made pursuant to this  Agreement
shall survive the  execution and delivery of this  Agreement and shall in no way
be affected by any  investigation  of the subject  matter  thereof made by or on
behalf of S&N or Exogen.

                  12.2  Deductible.  "Losses"  means any and all losses,  costs,
obligations,   liabilities,   settlement  payments,  awards,  judgments,  fines,
penalties,  damages, expenses,  deficiencies and other charges. "Expenses" means
any and all reasonable expenses incurred in

                                       14
<PAGE>
connection with investigating,  defending,  or asserting any claim, action, suit
or proceeding incident to any matter indemnified  against hereunder  (including,
without limitation,  court filing fees, court costs,  arbitration fees or costs,
witness fees, and reasonable fees and disbursements of legal counsel. No payment
under Section 8(e) or 9(b) with respect to any Losses as a result of a breach of
a  representation  or  warranty  under  this  Agreement  or any other  agreement
contemplated  hereby shall be payable until the time such Losses  incurred by an
indemnitee shall aggregate more than $30,000 (the  "Deductible"),  and then only
to the extent that such Losses, in the aggregate for the indemnitee,  exceed the
Deductible.  For purposes of the preceding sentence, each of the representations
and  warranties  made by this Agreement and the agreement  executed  pursuant to
this  Agreement  shall be  deemed to have been made  without  the  inclusion  of
limitations or  qualifications  as to  materiality,  such as the words "Material
Adverse  Effect,"  "immaterial,"  "material"  and "in all material  respects" or
words of similar import.

                  12.3  Claim  Notice.  A party  seeking  indemnification  under
Sections  8(e)  and 9(b)  shall,  promptly  upon  becoming  aware  of the  facts
indicating that a claim for indemnification may be warranted,  give to the party
from whom  indemnification  is being sought a claim notice relating to such Loss
(a "Claim Notice"). Each Claim Notice shall specify the nature of the claim, the
applicable  provisions  of this  Agreement or other  instrument  under which the
claim for indemnity arises, and, if possible, the amount or the estimated amount
thereof.  No failure  or delay in giving a Claim  Notice (so long as the same is
given prior to expiration of the representation or warranty upon which the claim
is based) and no failure to include  any  specific  information  relating to the
claim (such as the amount or estimated  amount  thereof) or any reference to any
provision  of this  Agreement or other  instrument  under which the claim arises
shall affect the obligation of the party from whom indemnify is sought.

                  12.4 Remedies. In case any one or more of the covenants and/or
agreements  set forth in this  Agreement or any agreement  contemplated  by this
Agreement  shall have been breached by any party hereto,  S&N, with respect to a
breach by Exogen,  and Exogen,  with  respect to a breach by S&N, may proceed to
protect and enforce its rights either by suit in equity and/or by action at law,
including,  but not  limited  to, an action for  damages as a result of any such
breach and/or, where appropriate, an action for specific performance of any such
covenant or agreement contained in such agreement.

                  12.5  Successors  and Assigns.  Except as  otherwise  provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the  respective  successors,  permitted  assigns,  heirs and
personal  representatives  of the parties,  except that neither party may assign
its rights and obligations  under this Agreement to any person without the prior
written  consent  of the other  party or in  accordance  with  Section 7 of this
Agreement.  Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective  successors and
assigns any rights, remedies,  obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

                                       15
<PAGE>
                  12.6  Governing  Law.  This  Agreement  shall be governed  and
construed  under  the  laws of the  State  of  Delaware  without  regard  to the
principles of conflicts or choice of law.

                  12.7  Counterparts.  This  Agreement may be executed in two or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute one and the same instrument.

                  12.8 Titles and  Subtitles.  The titles and subtitles  used in
this  Agreement  are used for  convenience  only and are not to be considered in
construing or interpreting this Agreement.

                  12.9 Notices.  Unless otherwise provided,  any notice required
or permitted  under this Agreement shall be given in writing and shall be deemed
effectively   given  upon  personal   delivery  or   confirmation  of  facsimile
transmission  (with a copy to be sent in  accordance  with this  Section) to the
party to be notified or upon  deposit  with the United  States Post  Office,  by
registered or certified  mail,  postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof or
at such  other  address as such party may  designate  by ten (10) days'  advance
written  notice to the other party.  In the case of notices to be sent to S&N, a
copy shall  also be  delivered  to:  Smith & Nephew,  Inc.,  1450  Brooks  Road,
Memphis,   Tennessee  38116,   Attention   General  Counsel,   Facsimile  Number
901-396-7824.  In the case of notices to be sent to Exogen, a copy shall also be
delivered to Brobeck,  Phleger & Harrison,  LLP, 1633 Broadway,  47th Floor, New
York, New York 10019, Attention Ellen B. Corenswet, Esquire.

                  12.10  Attorneys'  Fees.  If any action at law or in equity is
necessary to enforce or interpret the terms of this  Agreement,  the  prevailing
party shall be entitled  to  reasonable  attorneys'  fees,  costs and  necessary
disbursements  in  addition  to any  other  relief  to which  such  party may be
entitled.

                  12.11 Amendments and Waivers. No term of this Agreement may be
amended,  discharged  or  terminated  and  the  observance  of any  term of this
Agreement may not be waived  (either  generally or in a particular  instance and
either retroactively or prospectively), without the prior written consent of the
parties. No waiver of any of the provisions of this Agreement shall be deemed to
or shall  constitute  a waiver of any other  provision  hereof  (whether  or not
similar).  No delay on the part of any party in exercising  any right,  power or
privilege hereunder shall operate as a waiver thereof.

                  12.12  Severability.   If  one  or  more  provisions  of  this
Agreement are held to be  unenforceable  under  applicable  law, such  provision
shall be excluded from this Agreement and the balance of the Agreement  shall be
interpreted  as if such  provision  were so excluded and shall be enforceable in
accordance with its terms.

                  12.13  Entire  Agreement.  This  Agreement  and the  documents
referred to herein  constitute the entire  agreement  between the parties and no
party  shall be  liable  or  bound  to the

                                       16
<PAGE>
other  party in any  manner by any  warranties,  representations,  or  covenants
except as specifically set forth herein or therein.

                  12.14 Press  Releases and  Announcements.  Each of the parties
hereto agrees that it will not issue any press release or announcement  relating
to the subject  matter of this Agreement  without the prior written  approval of
the  other  parties;  provided,  however,  that any  party  may make any  public
disclosure it believes in good faith is required by law, stock exchange rules or
regulation  (in which case the  disclosing  party shall  advise the other party,
provide  it  with  a  copy  of the  proposed  disclosure  prior  to  making  the
disclosure,  and use  reasonable  efforts  to agree  upon the text of such press
release, before issuing any such press release).

                  12.15  Arbitration.  Any dispute concerning this Agreement and
any  agreement  contemplated  hereunder  (except the U.S.  Sales  Representative
Agreement) shall be submitted to a panel of three arbitrators.  Each party shall
appoint one arbitrator and the two arbitrators shall appoint a third arbitrator.
The  arbitration  proceedings  shall be  conducted in  accordance  with the then
current  Rules  for  Large,   Complex  Disputes  of  the  American   Arbitration
Association,  or in  accordance  with  such  other  rules or  procedures  as the
Arbitrator  may  specify.  The  arbitration  shall  take  place  in  Wilmington,
Delaware. Each party will bear its own arbitration expenses plus one-half of the
arbitrators' fee. This arbitration shall be non-binding.


                                       17
<PAGE>



                  IN WITNESS  WHEREOF,  the parties have executed this Agreement
as of the date first above written.



                                    EXOGEN, INC.



                                    By: /s/ Patrick A. McBrayer
                                    ---------------------------
                                    Name:  Patrick A. McBrayer
                                    Title: President and Chief Executive Officer
                                    Address:    10 Constitution Ave.
                                                P.O. Box 6860
                                                Piscataway, NJ 08855
                                    Facsimile Number: 732-981-0648


                                    SMITH & NEPHEW, INC.



                                    By: /s/ Larry W. Papasan
                                    ------------------------
                                    Name:       Larry W. Papasan
                                    Title:      President
                                                Orthopaedic Division
                                    Address:    1450 Brooks Road
                                                Memphis, TN 38116
                                    Facsimile Number: 901-399-7824


                      [SIGNATURE PAGE TO MASTER AGREEMENT]


                                       18
<PAGE>
                                   SCHEDULE 5


                             TERMS AND CONDITIONS OF
                      U.S. STOCKING DISTRIBUTION AGREEMENT



General:                      S&N to have exclusive  rights in the United States
                              for the sale,  promotion and marketing of Products
                              (as  defined  in  the  U.S.  Sales  Representative
                              Agreement).

Term of Agreement:            From  execution and delivery  until July 30, 2008,
                              unless terminated  earlier pursuant to termination
                              rights.  S&N to  have  the  option  to  renew  for
                              consecutive    three-year    terms   on   mutually
                              acceptable  terms  and  conditions.  If terms  and
                              conditions  of first  renewal  term not agreed to,
                              then the  agreement  shall be renewed for one five
                              year  period  on a  non-exclusive  basis  with  no
                              Minimum Number of Orders  requirements (as defined
                              in the U.S. Sales Representative Agreement).

Termination rights:           Material default  by other  party not cured within
                              60 days after notice.

Exogen's responsibilities:    Manufacturing,  shipment  FOB New  Jersey  to S&N,
                              product training to S&N's sales personnel, product
                              warranty work at Exogen's expense, provision of up
                              to 100  demonstration  units  annually at standard
                              manufacturing  cost plus 25%,  maintenance of U.S.
                              regulatory    approvals,    CE    mark,    quality
                              registrations  and  U.S.   intellectual   property
                              rights in good standing.

S&N's                         Sales, marketing,  promotion and distribution. S&N
responsibilities:             to be  responsible  for  [****].  S&N  to  provide
                              reasonable  follow-up  contact with physicians and
                              patients.  Minimum Number of Units requirements to
                              be  negotiated  in  good  faith.  S&N to  pay  for
                              Products within 30 days of shipment.

-------------
     [****]  REPRESENTS  MATERIAL WHICH HAS BEEN REDACTED  PURSUANT TO A REQUEST
FOR CONFIDENTIAL  TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
                      
                                      i
<PAGE>
Transfer prices:              Transfer  prices  to be  established  for  first 4
                              years as set forth on the following chart based on
                              average  selling  price of  [****]  provided  that
                              transfer  prices to be  renegotiated  during  such
                              4-year period in good faith if the average selling
                              prices  increases  or  decreases by more than 15%.
                              See following table:

<TABLE>
<CAPTION>


                          Year 1               Year 2                 Year 3               Year 4
                          ------               ------                 ------               ------

<S>                      <C>                   <C>                    <C>                  <C>   
Annual Sale Price        [*****]               [*****]                [*****]              [*****]

Manufacturing Cost       [*****]               [*****]                [*****]              [*****]

Transfer Price           [*****]               [*****]                [*****]              [*****]

</TABLE>

Other terms:                  Parties   to  explore  in  good  faith  bona  fide
                              opportunities  for joint  manufacturing  (provided
                              such  opportunity  does  not  result  in  material
                              adverse  financial  consequences to either party).
                              If parties agree to such an  arrangement,  parties
                              to share equally any  manufacturing  costs savings
                              that are achieved.




-------------
     [****]  REPRESENTS  MATERIAL WHICH HAS BEEN REDACTED  PURSUANT TO A REQUEST
FOR CONFIDENTIAL  TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.

                                       ii
<PAGE>
                                   SCHEDULE 6A


                             TERMS AND CONDITIONS OF
                     GLOBAL STOCKING DISTRIBUTION AGREEMENT


General:                      S&N to have exclusive distribution rights (subject
                              to the  provisions  of  Section  6(a)(i)  of  this
                              Agreement)  for the sale,  promotion and marketing
                              of Products in all countries  other than Japan and
                              with respect to China,  Korea and Taiwan,  subject
                              to Teijin Limited's  distribution  rights pursuant
                              to an  undated  one page  letter  from  Exogen  to
                              Teijin  ("Letter  Agreement").Upon  written notice
                              from  S&N  of  its   intention   to  exercise  its
                              distribution rights in one or more of China, Korea
                              and Taiwan  (subject only to Teijin's rights under
                              the Letter  Agreement,  Exogen will notify  Teijin
                              Limited and commence  negotiations with respect to
                              such designated  country or pursuant to the Letter
                              Agreement.  If Teijin and Exogen do not enter into
                              an  agreement  covering the  specified  country or
                              countries within the specified time period, Exogen
                              shall so  notify  S&N and S&N  shall be  deemed to
                              have  exercised  its option with  respect to these
                              countries.


Term of Agreement:            From  execution and delivery  until July 30, 2008,
                              unless terminated  earlier pursuant to termination
                              rights.   S&N  to  have   option   to  renew   for
                              consecutive    three-year    terms   on   mutually
                              acceptable  terms  and  conditions.  If terms  and
                              conditions  of the  first  renewal  term  are  not
                              agreed to, then the agreement shall be renewed for
                              one five  years  period on a  non-exclusive  basis
                              with no Minimum Number of Orders requirements.

    
Termination rights:           Material  default by other party not cured  within
                              60 days after notice.


Exogen's                      Manufacturing,  shipment  FOB New  Jersey  to S&N,
responsibilities:             product training to S&N's sales personnel, product
                              warranty work at Exogen's expense, provision of up
                              to 100  demonstration  units  annually at standard
                              manufacturing   cost  plus  25%,   maintenance  of
                              regulatory    approvals,    CE    mark,    quality
                              registrations and 

                                      iii
<PAGE>
                              intellectual  property  rights  in good  standing,
                              except  as S&N may be  responsible  in  accordance
                              with the next succeeding paragraph.

S&N's                         Sales,  marketing,   promotion  and  distribution.
responsibilities:             Minimum  Number  of  Units   requirements   to  be
                              negotiated  in good  faith  for the  first two (2)
                              years of the term and shall be  negotiated in good
                              faith  at least  six  months  prior  to each  year
                              thereafter.    The   Minimum   Number   of   Units
                              requirement   shall  be   determined   based  upon
                              relevant criteria on a country-by-country basis or
                              on a multiple country basis including:  the number
                              of orthopaedic surgeons;  the number of fractures;
                              population;  reimbursement;  regulatory  approvals
                              and  status;   and  S&N  experience   with  trauma
                              products.  Use  diligent  efforts  to  obtain  and
                              maintain, at S&N's expense, import, regulatory and
                              reimbursement approvals in any country (other than
                              France,  Germany and Holland)  where S&N wishes to
                              commence  distribution.  S&N to pay  for  Products
                              within the time  period to be  negotiated  in good
                              faith   (principally   based   on   the   expected
                              reimbursement cycle) on a country by country basis
                              or on a multiple country basis, depending upon the
                              arrangement.    S&N   to   be   responsible    for
                              pre-certifying,  arranging shipping, invoicing and
                              making  collections  from  patients  and/or  their
                              insurers.  S&N  to  provide  reasonable  follow-up
                              contact with physicians and patients.


Transfer prices:              To   be    negotiated   in   good   faith   on   a
                              country-by-country  basis or on a multiple country
                              basis,  prices  to be  established  for the  first
                              three years based on an estimated  average selling
                              price and manufacturing  cost (taking into account
                              the projected market size,  reimbursement  levels,
                              competition and other relevant  factors) and to be
                              renegotiated  in good faith during such three-year
                              period if the average  selling price  increases or
                              decreases by more than 15%.  All payments  will be
                              made in U.S. Dollars.


Other terms:                  Parties   to  explore  in  good  faith  bona  fide
                              opportunities  for joint  manufacturing  (provided
                              such  opportunity  does  not  result  in  material
                              adverse  financial  consequences to either party).
                              If parties agree to such an  arrangement,  parties
                              to share equally any  manufacturing  costs savings
                              that are achieved.

                                       iv
<PAGE>
                                   SCHEDULE 6B


                             TERMS AND CONDITIONS OF
               INDIVIDUAL COUNTRY STOCKING DISTRIBUTION AGREEMENT
                (PRIOR TO EXERCISE OF GLOBAL DISTRIBUTION OPTION)


General:                      S&N to have exclusive  distribution rights for the
                              sale,  promotion  and marketing of Products in the
                              country,  subject  to  rights  of  Teijin  Limited
                              described in Schedule 6A.

Term of Agreement:            From  execution and delivery  until July 30, 2008,
                              unless terminated  earlier pursuant to termination
                              rights.   S&N  to  have   option   to  renew   for
                              consecutive    three-year    terms   on   mutually
                              acceptable  terms  and  conditions.  If terms  and
                              conditions  of the  first  renewal  term  are  not
                              agreed to, then the agreement shall be renewed for
                              one five  years  period on a  non-exclusive  basis
                              with no Minimum Number of Orders requirements.

Termination rights:           Material  default by other party not cured  within
                              60 days after notice.

Exogen's                      Manufacturing,  shipment  FOB New  Jersey  to S&N,
responsibilities:             product training to S&N's sales personnel, product
                              warranty work at Exogen's expense, provision of up
                              to 100  demonstration  units  annually at standard
                              manufacturing  cost plus 25%,  maintenance of U.S.
                              regulatory    approvals,    CE    mark,    quality
                              registrations and intellectual  property rights in
                              good standing, except as S&N may be responsible in
                              accordance with the next succeeding paragraph.

S&N's                         Sales,  marketing,   promotion  and  distribution.
responsibilities:             Minimum  Number  of  Units   requirements   to  be
                              negotiated  in good  faith  for the  first two (2)
                              years of the term and shall be  negotiated in good
                              faith  at least  six  months  prior  to each  year
                              thereafter.    The   Minimum   Number   of   Units
                              requirement   shall  be   determined   based  upon
                              relevant criteria on a country-by-country basis or
                              on a multiple country basis including:  the number
                              of orthopaedic surgeons;  the number of fractures;
                              population;  reimbursement;  regulatory  approvals
                              and  status;   and  S&N  experience   with  trauma
                              products.  Use  diligent  efforts  to  obtain  and
                              maintain, at S&N's expense, import, regulatory and
                              reimbursement approvals in any country (other than
                              U.S.,  France,  Germany  and

                                       v
<PAGE>
                              Holland)    where   S&N    wishes   to    commence
                              distribution.  S&N to pay for Products  within the
                              time  period to be  negotiated  in good faith on a
                              country-by-country  basis or on a multiple country
                              basis, depending on the distribution  arrangement.
                              S&N   to  be   responsible   for   pre-certifying,
                              arranging    shipping,    invoicing   and   making
                              collections  from patients  and/or their insurers.
                              S&N to provide  reasonable  follow-up contact with
                              physicians and patients.

Transfer prices:              To be  negotiated  in  good  faith;  prices  to be
                              established  for the first three years based on an
                              estimated  average selling price and manufacturing
                              cost  (taking into  account the  projected  market
                              size, reimbursement levels,  competition and other
                              relevant  factors) and to be  renegotiated in good
                              faith if the average  selling  prices  increase or
                              decrease by more than 15% during  such  three-year
                              period. All payments will be made in U.S. Dollars.




                                       vi
<PAGE>

                                   SCHEDULE 7


                      TERMS AND CONDITIONS TO SERVE AS THE
                        BASIS FOR GOOD FAITH NEGOTIATIONS


Any  such  agreement  that  involves  the  formation  of a joint  venture  would
contemplate (i)  administration of the joint venture by a board consisting of an
equal number of representatives  of S&N and Exogen,  (ii) contribution by Exogen
of such technology,  infrastructure  and licenses as shall be agreed upon, (iii)
contribution by S&N of such cash and regulatory support as shall be agreed upon,
and (iv) S&N to be exclusive  distributor on a transfer price  arrangement or on
the basis of sharing total  profits/losses  (after  interest on  distributorship
capital employed).


                                      vii
<PAGE>
                                   SCHEDULE 8

                            U.S. AND FOREIGN PATENTS,
                           TRADEMARKS AND APPLICATIONS


(L) indicates license
<TABLE>
<CAPTION>

PATENTS
Index No.      Number        Country       Status      Issued (Filing)    Inventor(s)             Description   
------------------------------------------------------------------------------------------------------------------------
Ultrasound
<S>          <C>            <C>         <C>            <C>               <C>             <C>                           
    1*       4530360        USA         Issued         7/23/85           Duarte          Method for Healing Bone
                                                                                         Fractures by Ultrasound
     2       5003965 /      USA         Issued         4/2/91            Talish /        Medical Device for Ultrasonic
             8042                                                        Lifshey         Treatment of Living Tissue
                                                                                         and/or Cells
    2A       1328485 /      Canada      Issued                           Talish /        Medical Device for Ultrasonic
             8042                                                        Lifshey         Treatment of Living Tissue
                                                                                         and/or Cells
     3       5186162 /      USA         Issued         2/16/93           Talish /        Ultrasonic Transducer Device
             0089                                                        Lifshey         for Treatment of Living
                                                                                         Tissues and/or Cells
     4       5211160 /      USA         Issued         5/18/93           Talish /        Ultrasound Orthopaedic
             0090                                                        Lifshey         Treatment Head and Body -
                                                                                         Mounting Means Therefor
     5       5520612 /      USA         Issued         5/28/96           Winder /        Acoustic System for Bone
             4031                                                        Talish / Ryaby  Fracture Therapy
    5A       Kokai #        Japan       Published      12/17/96          Winder /        Acoustic System for Bone
             8-332209                                                    Talish / Ryaby  Fracture Therapy
             601-11J
             (Cross
             Reference:
             Section 28)
    5B       080390 4031    Taiwan      Issued         8/11/96           Winder /        Acoustic System for Bone
                                                                         Talish et al    Fracture Therapy
     6       5556372 /      USA         Issued         9/17/96           Talish /        Apparatus for Ultrasonic Bone
             601-8                                                       Ryaby et al     Treatment (SAFHS 2000(R))
</TABLE>
-------------
     * Patent Term Extension under 35 USC#156:Filed 12/5/94;  Extension received
5/31/96; term extension --5 years to 11/12/2007.


                                      vii
<PAGE>
<TABLE>
<CAPTION>
<S>          <C>            <C>         <C>            <C>               <C>             <C>   
    6B       Pub.           EPO         Published      12/03/97          Talish /        Apparatus for Ultrasonic Bone
             #0-809-470                                                  Ryaby et al     Treatment (SAFHS 2000(R))
             601-8 PCT/EPO
    6F       Kokai          Japan       Published      9/17/96           Talish /        Acoustic System for Bone
             #8-238284                                                   Ryaby et al     Fracture Therapy
             601-8 Japan
     7       5626554 /      USA         Issued         5/6/97            Ryaby /         Gel Containment Structure
             601-4                                                       Talish /
                                                                         McCabe
     8       5755746        USA         Issued         5/26/98           Talish /        Locator Method & Apparatus
             601-3FWC                                                    Lifshey
    8B       Pub.           EPO         Published      12/12/97          Talish /        Locator Method & Apparatus
             #0-810-844                                                  Lifshey
             601-3 PCT/EPO
    8D       PCT/US95-1     China       Published      3/14/98           Talish /        Locator Method & Apparatus
             96742.I                    #CN-1175195A                     Lifshey
             601-3
             PCT/China
     9       5762616 601-7  USA         Issued         6/9/98            Talish          Apparatus for Ultrasonic
                                                                                         Treatment of Sites
                                                                                         Corresponding to the Torso
    9A       PCT/US97       PCT         Published      9/18/97           Talish          Apparatus for Ultrasonic
             WO97 / 33649                                                                Treatment of Sites
             601-7 PCT                                                                   Corresponding to the Torso
    11       D380440 601-9  USA         Issued         7/1/97            Talish /        Ultrasonic Transducer Housing
                                                                         Ryaby /         (Design Patent)
                                                                         Urgovitch
    11A      Reg. #         Japan       Registered     8/29/97           Talish /        Ultrasonic Transducer Housing
             998899 601-9J                                               Urgovitch /     (Japanese Design Patent)
                                                                         Scowen / Ryaby
    12*      5730705        USA         Issued         3/24/98           Talish /        Ultrasonic Treatment for Bony
             661905 601-13                                               Ryaby /         Ingrowth
                                                                         Tanzer / Bobyn
    25A      WO98 / 10729   PCT         Published      3/19/98           Talish          Cast Punch
             601-19 PCT
</TABLE>


------------
*Co-owned between Exogen, Inc. and inventors.

                                       ix
<PAGE>
<TABLE>
<CAPTION>
<S>          <C>            <C>         <C>            <C>               <C>             <C>   

    28       Kokai          Japan       Published      (10/28/97)        Winder /        Acoustic System for Bone
             #9-276352                                                   Talish / Ryaby  Fracture Therapy
             601-47 PCT
             Japan
             (Cross-reference:
             Section 5A)

Mechanical Strain
   2 (L)     5273028 /      USA         Issued         12/28/93          McLeod / Rubin  Non-Invasive Means for
             3009                                                                        In-Vivo Bone Growth
                                                                                         Stimulation
  2A (L)     183314         Mexico      Issued         5/23/93           McLeod / Rubin  Non-Invasive Means for
             1450-002                                                                    In-Vivo Bone Growth
                                                                                         Stimulation
  2C (L)     667113         Australia   Issued         5/26/93           McLeod / Rubin  Non-Invasive Means for
             2030/3009                                                                   In-Vivo Bone Growth
                                                                                         Stimulation
   3 (L)     5376065 3018   USA         Issued         12/27/94          McLeod / Rubin  Non-Invasive Method for
                                                                                         In-Vivo Bone Growth
                                                                                         Stimulation
   4 (L)     5103806 2025A  USA         Issued         4/14/92           McLeod / Rubin  Method for the Promotion of
                                                                                         Growth, Ingrowth & Healing of
                                                                                         Bone Tissue & Prevention of
                                                                                         Osteopenia by Mechanical
                                                                                         Loading of the Bone Tissue
   5 (L)     5191880 2025B  USA         Issued         3/9/93            McLeod / Rubin  Method for the Promotion of
                                                                                         Growth, Ingrowth & Healing of
                                                                                         Bone Tissue & Prevention of
                                                                                         Osteopenia by Mechanical
                                                                                         Loading of the Bone Tissue
Other
  1 (L)     4993413/        USA         Issued         2/19/91           McLeod /       Electromagnetic: Method and
            2032                                                         Rubin          Apparatus for Inducing a
                                                                                        Current and Voltage in Living
                                                                                        Tissue
    2       4719907         USA         Issued         1/19/88           Banko          Orthopedic Pin Placement Guide
            3.0-001


</TABLE>
                                       x
<PAGE>
<TABLE>
<CAPTION>
<S>          <C>            <C>         <C>            <C>               <C>             <C>   
PATENT APPLICATIONS

Index No.       Number         Country       Status     Issued (Filing)    Inventor(s)             Description
                                                              Date



                                                         [****]
 
TRADEMARKS

Index No.  Number            Country      Status        Issued (Filing)   Trademark
                                                        Date
    1      650974 10.1-002   USA          Registered    11/3/87           SAFHS(R)
    1A      7-112401 /        Japan        Listed        (10/31/95)        SAFHS(R)
           10.1-002J
    1B      548993 /          Canada       Registered    4/10/92           SAFHS(R)
           10.1-002C         Mexico
     2      74/530521         USA          Registered    7/11/95           EXOGEN(R)
           10.1-008
     3      720034 /          USA          Registered    7/16/96           SAFHS 2000(R)
           10.1-009
    3A      7 / 111521 /      Japan        Listed        (10/30/95)        SAFHS 2000(R)
           10.1-009J

TRADEMARK APPLICATIONS

Index No.  Number            Country      Status        Issued (Filing)   Trademark
                                                        Date
   2A      7-111520 /        Japan        Pending       (10/30/95)        EXOGEN(R)
           10.1-011J
    3A      7 / 111521 /      Mexico       Pending       (10/30/95)        SAFHS 2000(R)
           10.1-009J         Canada       Pending
     4      317,761 Exogen    USA          Pending       (7/1/97)          EXOGEN 2000(TM)
           10.-007

</TABLE>
------------
     [****]  REPRESENTS  MATERIAL WHICH HAS BEEN REDACTED  PURSUANT TO A REQUEST
FOR CONFIDENTIAL  TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.

                                       xi
<PAGE>
                                   SCHEDULE 9


                       CURRENT INTERNATIONAL ARRANGEMENTS


Note on termination rights/notice periods

Rights  to  terminate  and  the  notice   periods  for   termination   of  sales
representative,  distribution, marketing and consulting arrangements are subject
to  applicable  laws and  regulations.  This  Schedule 9  summarizes  the notice
periods Exogen believes are due under  applicable local laws as they exist as of
the Initial Closing Date. The laws of many countries require that notice periods
be extended depending on the duration of the sales representative, distribution,
marketing or consulting  arrangements.  Thus the  termination  rights and notice
periods  stated  below  may  change  due  to  the  continued  duration  of  such
arrangements and/or changes in applicable laws and regulations.

                                     [****]


------------
     [****]  REPRESENTS  MATERIAL WHICH HAS BEEN REDACTED  PURSUANT TO A REQUEST
FOR CONFIDENTIAL  TREATMENT PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.


                                      xii
<PAGE>


                                   SCHEDULE 10

                                REQUIRED CONSENTS

                                      None



                                      xiii