EXHIBIT 10.23
 



                                  EXOGEN, INC.



                         COMMON STOCK PURCHASE AGREEMENT



                                 August 10, 1998



<PAGE>
                                TABLE OF CONTENTS


                                                                          Page
                                                                          ----

1.       Purchase and Sale of Stock..........................................1
         1.1.     Sale and Issuance of Common Stock..........................1
         1.2.     Closing....................................................1
         1.3.     Actions at the Closing.....................................1

2.       Representations and Warranties of the Company.......................2
         2.1.     Organization and Good Standing; Power and Authority;
                  Qualifications.............................................2
         2.2.     Authorization..............................................2
         2.3.     Capitalization.............................................3
         2.4.     Valid Issuance of Common Stock.............................3
         2.5.     Consents...................................................3
         2.6.     Litigation.................................................3
         2.7.     Compliance with Other Instruments..........................4
         2.8.     Financial Statements.......................................4
         2.9.     SEC Filings................................................4
         2.10.    Other Information..........................................5
         2.11.    Intellectual Property Rights...............................5
         2.12.    Title to Assets and Properties; Insurance..................6
         2.13.    Compliance with Laws; Permits..............................6
         2.14.    Offering Exemption.........................................7
         2.15.    Taxes......................................................7

3.       Representations and Warranties of S&N...............................7
         3.1.     Authorization..............................................7
         3.2.     Purchase Entirely for Own Account..........................7
         3.3.     Disclosure of Information..................................8
         3.4.     Investment Experience......................................8
         3.5.     Accredited Investor........................................8
         3.6.     Restricted Securities......................................8

4.       Use of Proceeds.....................................................8

5.       Transfer Taxes......................................................8

6.       Expenses............................................................9

7.       Miscellaneous.......................................................9
         7.1.     Survival of Warranties.....................................9
         7.2.     Successors and Assigns.....................................9
         7.3.     Governing Law..............................................9
         7.4.     Counterparts...............................................9
         7.5.     Titles and Subtitles.......................................9
         7.6.     Notices....................................................9

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         7.7.     Finder's Fee..............................................10
         7.8.     Attorneys' Fees...........................................10
         7.9.     Amendments and Waivers....................................10
         7.10.    Severability..............................................10
         7.11.    Entire Agreement..........................................10
         7.12.    Press Releases and Announcements..........................10


                                       ii
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                                    SCHEDULES


Schedule 1.3(b)

Schedule 2.3

Schedule 2.5

Schedule 2.6

Schedule  2.11

Schedule  2.13




                                      iii
<PAGE>


                                     ANNEXES

ANNEX A                    -        Registration Rights Agreement

ANNEX B                    -        Secretary's Certificate

ANNEX C                    -        Opinion of Brobeck, Phleger & Harrison LLP




                                       iv
<PAGE>
                         COMMON STOCK PURCHASE AGREEMENT


                  THIS STOCK  PURCHASE  AGREEMENT  is made as of the 10th day of
August,  1998,  by  and  between  Exogen,  Inc.,  a  Delaware  corporation  (the
"Company"), and Smith & Nephew Holdings, Inc., a Delaware corporation ("S&N").


                  THE PARTIES HEREBY AGREE AS FOLLOWS:


                  1. Purchase and Sale of Stock.

                  1.1. Sale and Issuance of Common  Stock.  Subject to the terms
and conditions of this Agreement,  S&N agrees to purchase at the Closing and the
Company  agrees to sell and issue to S&N at the Closing,  820,000  shares of the
Company's  common  stock,  $.0001  par value per share  ("Common  Stock"),  at a
purchase  price  per  share  of  $5.00  (such  transaction  referred  to as  the
"Purchase"  and the aggregate  purchase  price of $4,100,000  referred to as the
"Purchase Price").

                  1.2. Closing.  The purchase and sale of the Common Stock shall
take place at the offices of Brobeck,  Phleger & Harrison  LLP,  1633  Broadway,
47th floor,  New York,  New York 10019 at 10:00 a.m. New York Time,  on the date
hereof,  or at such time and place upon which the  Company  and S&N shall  agree
(the  "Closing").  To the extent  possible,  at the Closing,  the Company  shall
deliver to S&N a certificate or certificates representing the Common Stock which
S&N is purchasing, registered in the name of S&N or its nominee, against payment
of the Purchase Price by wire transfer to the Company's bank account (designated
at least one  business  day prior to the  Closing) in the amount of the Purchase
Price.  If the Company is not able to deliver the certificate  representing  the
Common Stock at Closing,  then the Company shall deliver such  certificate(s) to
S&N no later than five (5) business days following the Closing.

                  1.3. Actions at the Closing. Simultaneously with, or prior to,
the execution and delivery of this Agreement, the following actions shall occur:

                      (a) The Registration  Rights Agreement (the  "Registration
Rights  Agreement"),  by and between the Company and S&N,  substantially  in the
form of  Annex A  hereto,  and  all  other  schedules,  certificates  and  other
documents  being  delivered  pursuant to or in connection with this Agreement by
any party hereto at or prior to the Closing shall be duly executed and delivered
by the parties thereto.

                      (b) The Company shall deliver to S&N  certificates of good
standing  from the  jurisdictions  set forth on Schedule  1.3(b)  under its name
dated as of a date no earlier than five days prior to the Closing.

                      (c) The Common Stock to be issued shall have been approved
for listing on The NASDAQ Stock Market, subject to official notice of issuance.
<PAGE>
                      (d)  The  Company  shall  deliver  to  S&N  a  certificate
executed by the secretary of the Company,  substantially  in the form of Annex B
hereto,  certifying (i) a copy of its  organizational  documents  (including the
Certificate  of  Incorporation  and  bylaws of the  Company),  (ii)  resolutions
authorizing the transaction and (iii) incumbency matters.

                      (e) S&N shall  receive  from  Brobeck,  Phleger & Harrison
LLP,  counsel for the  Company,  an opinion  addressed  to S&N,  dated as of the
Closing,  satisfactory  in form and  substance to S&N,  which shall  include the
opinions set forth in Annex C hereto. 

                  2.  Representations and Warranties of the Company. The Company
hereby represents and warrants to the S&N and Smith & Nephew, Inc. that:

                  2.1.  Organization  and Good  Standing;  Power and  Authority;
Qualifications.  Each of the Company and its subsidiary, Exogen (Europe) GmbH, a
German corporation (the "Subsidiary") is duly organized, validly existing and in
good standing under the laws of its  jurisdiction of  organization  and (ii) has
all requisite  power and authority to own,  lease and operate its properties and
to carry on its business as presently conducted and as proposed to be conducted.
The Company has all  requisite  power and  authority to enter into and carry out
the  transactions  contemplated  by this Agreement and the other documents being
delivered  pursuant to or in  connection  with this  Agreement  to which it is a
party.  Each of the Company and its Subsidiary is qualified to transact business
as a foreign  corporation  in, and is in good standing  under the laws of, those
jurisdictions that constitute all of the jurisdictions  wherein the character of
the  property  owned or leased or the nature of the  activities  conducted by it
makes  such  qualification  necessary  and where  failure  to so  qualify  would
individually  or in  the  aggregate  have  a  material  adverse  effect  on  the
properties,  business, prospects,  operations,  earnings, assets, liabilities or
the condition  (financial or otherwise) of the Company and its Subsidiary  taken
as a whole,  whether or not in the  ordinary  course of  business  (a  "Material
Adverse Effect").  All of the outstanding  shares of capital stock of each class
(other than  director  qualifying  shares) of the  Subsidiary  have been validly
issued  and fully  paid and  nonassessable,  and are owned  beneficially  and of
record, by the Company, free and clear of Encumbrances.

                  2.2.  Authorization.  All corporate  action on the part of the
Company,   its   officers,   directors  and   shareholders   necessary  for  the
authorization,  execution and delivery of this Agreement and the other documents
being delivered by the Company  pursuant to or in connection with this Agreement
, the performance of all obligations of the Company hereunder and thereunder and
the  authorization,  issuance  and  delivery  of the  Common  Stock  being  sold
hereunder has been taken,  and this Agreement and the other documents  delivered
by this Company  pursuant to or in  connection  with this  Agreement  constitute
valid and legally binding  obligations of the Company,  enforceable  against the
Company in  accordance  with their  respective  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.


                                      -2-
<PAGE>
                  2.3.  Capitalization.  The  authorized  capitalization  of the
Company immediately following the Purchase will consist of: (a) 3,000,000 shares
of preferred stock of the Company (the "Preferred Stock"),  par value $.0001 per
share, of which no shares are issued and outstanding;  and (b) 27,000,000 shares
of  Common  Stock,  par  value  $.0001  per  share  ("Common  Stock"),  of which
11,882,718  shares are issued and outstanding as of August 6, 1998, and all such
outstanding shares are validly issued, fully paid and nonassessable. No class of
capital stock ("Capital Stock") of the Company is entitled to preemptive rights.
As of August 6, 1998, there are no outstanding options,  warrants,  subscription
rights,  calls or  commitments  of any  character  whatsoever  relating  to,  or
securities or rights  convertible  into, shares of any class of Capital Stock of
the  Company,  or  contracts  by which the Company or its  Subsidiary  is or may
become  bound  to issue  additional  shares  of its  Capital  Stock or  options,
warrants or other rights to purchase or acquire any shares of its Capital Stock,
except as follows:  (i) 1,350,000  shares of Common Stock have been reserved for
issuance  pursuant to the Company's  1995 Stock  Option/Stock  Issuance Plan (of
which options to purchase 1,025,560 shares of Common Stock have been granted and
are  outstanding),  (ii) 350,000  shares of Common Stock have been  reserved for
issuance  pursuant  to the  Company's  Employee  Stock  Purchase  Plan (of which
164,811  shares of Common  Stock have been  purchased  and are included in total
shares of Common  Stock  outstanding),  and (iii) as set forth on  Schedule  2.3
hereto,  shares of Common  Stock  reserved  for  issuance  pursuant to a certain
warrant to purchase Common Stock of the Company and certain warrant obligations.
The Company has not declared or paid any dividend or made any other distribution
of cash, stock or other property to its stockholders.

                  2.4. Valid Issuance of Common Stock. The Common Stock which is
being purchased by S&N hereunder,  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,  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
the Company or others.

                  2.5. Consents.  Except as disclosed on Schedule 2.5 hereto and
for  any  post-Closing  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 the  Company  or its  Subsidiary  is  required  in
connection  with  the  consummation  of the  transactions  contemplated  by this
Agreement  and the other  documents  delivered by the Company  pursuant to or in
connection with this Agreement.

                  2.6. Litigation.  Except as set forth in the SEC Documents (as
defined below),  there is no civil,  criminal or  administrative  action,  suit,
claim, notice, hearing, inquiry, proceeding or investigation at law or in equity
by  or  before   any  court,   arbitrator   or   similar   panel,   governmental
instrumentality  or other  agency now pending or, to the best  knowledge  of the
Company,  threatened  against  the  Company  or its  Subsidiary  or any of their
respective  directors or executive officers in their capacities as directors and
executive  officers of the  Company or the assets  (including  the  Intellectual
Property) of the Company or its Subsidiary (a "Litigation"). Neither the Company
nor its Subsidiary is a party or subject to the  provisions of any order,  writ,
injunction,   judgment  or  decree  of  any  court  or   government   agency  or
instrumentality.  There is

                                      -3-
<PAGE>
no action,  suit,  proceeding or  investigation by the Company or its Subsidiary
currently  pending or which either of the Company or its  Subsidiary  intends to
initiate.

                  2.7. Compliance with Other Instruments.  The Company is not in
violation  or  default of any  provisions  of its Second  Amended  and  Restated
Certificate of Incorporation or Amended and Restated Bylaws. Neither the Company
nor  its  Subsidiary  is in  violation  or  default  of  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 the Company,  of any provision
of  domestic  (federal,  state  or  local)  or  foreign  law,  statute,  rule or
regulation  applicable  to the  Company  or the  Subsidiary  except  where  such
violation  or  default  would  not,  individually  or in the  aggregate,  have a
Material  Adverse  Effect.  The  execution,  delivery  and  performance  of this
Agreement  and the other  documents  delivered by the Company  pursuant to or in
connection  with this  Agreement  by the  Company  and the  consummation  of the
transactions  contemplated  hereby and  thereby  will not (x) result in any such
violation or be in conflict with or  constitute,  with or without the passage of
time  and  giving  of  notice,  either  a  default  under  any  such  agreement,
instrument,  judgment,  order,  writ,  decree  or  contract  referred  to in the
previous sentence (including any registration rights agreements),  or (y) result
in the  creation  of any lien,  charge  or  Encumbrance  upon any  assets of the
Company or its Subsidiary or the suspension, revocation, impairment, forfeiture,
or  nonrenewal  of any  material  permit,  license,  authorization,  or approval
applicable to the Company or its Subsidiary, their business or operations or any
of their assets or properties.

                  2.8. Financial Statements. The financial statements (including
any related schedule and/or notes) included in the SEC Documents (the "Financial
Statements")  are complete  and correct in all  material  respects and have been
prepared in accordance with generally accepted accounting  principles applied on
a consistent basis throughout the periods  indicated.  The Financial  Statements
fairly present the consolidated financial condition,  operating results, changes
in  shareholders'  equity and cash flows of the Company as of the dates, and for
the periods,  indicated therein.  Except as set forth in the SEC Documents,  the
Company has no liabilities or obligations,  contingent or otherwise,  except (i)
liabilities  and  obligations  in the respective  amounts  reflected or reserved
against in the Company's  balance  sheet (the  "Balance  Sheet") as of March 31,
1998 included in the SEC Documents or (ii) liabilities and obligations  (matured
or unmatured, fixed or contingent) incurred since March 31, 1998 in the ordinary
course of business  consistent  (in amount and kind) with past practice (none of
which is a liability  resulting  from breach of  contract,  breach of  warranty,
tort, infringement,  claim or lawsuit) which individually or in the aggregate do
not have a Material  Adverse  Effect.  Since March 31, 1998, the Company and its
Subsidiary  have operated their  business only in the ordinary  course and there
has not been  individually  or in the  aggregate  any  change  that would have a
Material  Adverse  Effect (a  "Material  Adverse  Change")  other  than  changes
disclosed in the SEC Documents.  Except as set forth in the SEC  Documents,  the
Company has never had, nor does it presently have, any subsidiaries,  nor has it
owned,  nor does it presently own,  whether  directly or indirectly  owned,  any
capital stock or other  proprietary  interest,  directly or  indirectly,  in any
corporation, association, trust, partnership, joint venture or other entity.

                  2.9. SEC Filings.  The Company has filed all proxy statements,
reports  and other  documents  required  to be filed by it under the  Securities
Exchange Act of 1934,  as amended (the  "Exchange  Act") from and after July 20,
1995 (the "SEC Documents"), and the 

                                      -4-
<PAGE>
Company has delivered to the Investor  copies of all SEC Documents so filed from
and after October 1, 1997.  Each SEC Document was in compliance in all materials
respects  with the  requirements  of its  respective  report form and, as of its
filing date, no such SEC Document  filed by the Company with the  Securities and
Exchange Commission ("SEC") contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the  statements  made therein,  in the light of the  circumstances
under which they were made, not misleading.

                  2.10.  Other  Information.  The Company has  delivered  to S&N
copies  of all press  releases,  reports  to  stockholders  and other  documents
released to the public since October 1, 1997.

                  2.11.  Intellectual  Property  Rights.  Except as disclosed on
Schedule  2.11(a)  hereto,  to  the  Company's  knowledge  the  Company  or  its
Subsidiary  owns or has the right to use all of the  Intellectual  Property  (as
defined below) necessary,  required or desirable for the conduct of its business
as presently or as presently proposed to be conducted,  except where the absence
of any  thereof  would not  individually  or in the  aggregate  have a  Material
Adverse Effect.

                      (a) Except as disclosed on Schedule  2.11(b),  neither the
Company  nor  its   Subsidiary   has   interfered   with,   infringed   upon  or
misappropriated  any Intellectual  Property rights of third parties,  except for
interferences,  infringements and misappropriations which would not individually
or in the aggregate have a Material Adverse Effect,  and neither the Company nor
its  Subsidiary  has  received  any claim,  demand or notice  alleging  any such
interference, infringement or misappropriation (including any claim that it must
license or  refrain  from using any  Intellectual  Property  rights of any third
party).  To the best  knowledge  of the Company,  no third party has  interfered
with, infringed upon or misappropriated any Intellectual  Property rights of the
Company  or  its  Subsidiary,   except  for  interferences,   infringements  and
misappropriations  which  would  not  individually  or in the  aggregate  have a
Material Adverse Effect.

                  As used in this Agreement,  "Intellectual  Property" means all
intellectual  property  owned,  leased,  licensed  or used by the Company or its
Subsidiary,  including  without  limitation,  (i) all world wide  inventions and
discoveries  (whether  patentable or unpatentable  and whether or not reduced to
practice),  all improvements  thereto, and all patents,  patent applications and
patent    disclosures,    together   with   all   reissuances,    continuations,
continuations-in-part,  revisions,  extensions and reexaminations  thereof, (ii)
all trademarks,  service marks,  trade dress,  logos,  trade names and corporate
names, together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated  therewith,  and all applications,
registrations,  renewals and  derivatives  in  connection  therewith,  (iii) all
copyrightable  works,  all copyrights and all  applications,  registrations  and
renewals  in  connection  therewith,  (iv) all mask works and all  applications,
registrations  and renewals in connection  therewith,  (v) all  know-how,  trade
secrets  and   confidential   business   information,   whether   patentable  or
unpatentable and whether or not reduced to practice  (including ideas,  research
and development, know-how, formulas, compositions,  manufacturing and production
processes and techniques,  technical data,  designs,  drawings,  specifications,
customer  and  supplier  lists,  addresses,  phone  numbers,  pricing 


                                   -5-

<PAGE>
and cost information,  and business and marketing plans and proposals), (vi) all
other proprietary  rights of any type or description  (regardless of whether the
same have been formally  registered),  (vii) all copies and tangible embodiments
thereof (in whatever  form or medium) and (viii) all licenses and  agreements in
connection with the foregoing.

                  2.12. Title to Assets and Properties; Insurance.

                      (a) Each of the  Company and its  Subsidiary  has good and
marketable title, or a valid leasehold  interest in or contractual right to use,
all of its assets and  properties,  free and clear of any mortgages,  judgments,
claims,  liens,  security  interests,   pledges,   escrows,   charges  or  other
encumbrances  of any kind or character  whatsoever  ("Encumbrances"),  except in
each case for such defects in title and such other liens and Encumbrances  which
do not individually or in the aggregate materially detract from the value to the
Company or its  Subsidiary of the  properties  and assets of the Company and its
Subsidiary taken as a whole.

                      (b) The Company and its Subsidiary  maintain  insurance in
such  amounts  (to  the  extent  available  in  the  public  market),  including
self-insurance,  retainage and deductible arrangements,  and of such a character
as is reasonable for companies  engaged in the same or similar  business. 


                  2.13.Compliance with Laws; Permits.

                      (a) Except as provided in Schedule  2.13,  the Company and
its  Subsidiary  are in  compliance,  and the  business  of the  Company and its
Subsidiary have been conducted in compliance with, all federal, state, local and
foreign laws, rules, ordinances, codes, consents, authorizations, registrations,
regulations, decrees, directives, judgments and orders applicable to them, their
business  and the  ownership  of their  assets  including,  but not  limited to,
Environmental  Laws (as defined  below) except where the failure to comply would
not individually or in the aggregate have a Material Adverse Effect. The Company
and its  Subsidiary  have all  federal,  state,  local and foreign  governmental
licenses,  permits,  qualifications and authorizations  ("Permits") necessary in
the conduct of the business as currently conducted. All such Permits are in full
force and effect,  and no  violations  have been recorded in respect of any such
Permits;  no  proceeding  is pending or, to the best  knowledge  of the Company,
threatened  to revoke  or limit  any such  Permit;  and no such  Permit  will be
suspended,  canceled  or  adversely  modified as a result of the  execution  and
delivery  of this  Agreement  or the other  documents  delivered  by the Company
pursuant to or in connection  with this  Agreement and the  consummation  of the
transactions  contemplated  hereby or  thereby,  except in any of the  foregoing
cases  where  failure  to have  such  Permit  would not  individually  or in the
aggregate have a Material Adverse Effect.

                      (b) For purposes of this Agreement,  "Environmental  Laws"
means,   without   limitation,   the   Comprehensive   Environmental   Response,
Compensation  and Liability Act, 42 U.S.C.  ss.ss.  9601, et seq.; the Emergency
Planning and Community  Right-to-Know  Act of 1986, 42 U.S.C.  ss.ss.  11001, et
seq.;  the Resource  Conservation  and Recovery Act, 42 U.S.C.  ss.ss.  6901, et
seq.;  the Toxic  Substances  Control Act, 15 U.S.C.  ss.ss.  2601, et seq.; the
Federal  Insecticide,  Fungicide,  and Rodenticide Act, 7 U.S.C.  ss.ss. 136, et
seq.;  the Clean Air Act, 42 U.S.C.  ss.ss.  7401, et seq.;  the Clean Water Act
(Federal Water Pollution Control Act), 33 U.S.C.

                                      -6-
<PAGE>
ss.ss.  1251, et seq.;  the Safe Drinking Water Act, 42 U.S.C.  ss.ss.  300f, et
seq.; the Occupational Safety and Health Act, 29 U.S.C. ss.ss. 641, et seq.; the
Hazardous  Materials  Transportation Act, 49 U.S.C. ss.ss. 1801, et seq.; as any
of the above  statutes have been or may be amended from time to time,  all rules
and regulations promulgated pursuant to any of the above statutes, and any other
foreign,  federal,  state or local law, statute,  ordinance,  rule or regulation
governing  environmental  matters,  as the same have been or may be amended from
time to time,  including  any common law cause of action  providing any right or
remedy with respect to environmental  matters,  and all applicable  judicial and
administrative decisions, orders, and decrees relating to environmental matters.

                  2.14.  Offering  Exemption.   Assuming  the  accuracy  of  the
representations and warranties contained in Section 3 hereof, the offer and sale
of the Common Stock and the issuance and delivery of the Common Stock to S&N are
each exempt from registration  under the Securities Act of 1933, as amended (the
"Securities  Act") and under applicable state securities and "blue sky" laws, as
currently in effect and are otherwise in compliance with applicable  federal and
state securities laws.

                  2.15.  Taxes.  The  Company and its  Subsidiary  have filed or
caused to be filed all income tax  returns  which are  required  to be filed and
have paid or caused to be paid all Taxes (as  defined  below)  that have  become
due,  except  Taxes the  validity or amount of which is being  contested in good
faith by appropriate  proceedings  and with respect to which  adequate  reserves
have been set aside.  "Taxes," for purposes of this Agreement,  means any taxes,
assessments, duties, fees, levies, imposts, deductions, withholdings, including,
without limitation,  income,  gross receipts,  ad valorem,  value added, excise,
real or personal property,  asset,  sales, use, license,  payroll,  transaction,
capital,   net  worth  and  franchise  taxes,   estimated  taxes,   withholding,
employment,   social  security,   workers  compensation,   utility,   severance,
production,  unemployment compensation,  occupation,  premium, windfall profits,
transfer and gains taxes, or other governmental charges of any nature whatsoever
imposed by any  government  or taxing  authority  of any  country  or  political
subdivision of any country and any liabilities with respect  thereto,  including
any  penalties,  additions to tax, fines or interest  thereon,  and includes any
liability  of the  Company  and its  Subsidiary  arising  under any tax  sharing
agreement to which it is or has been a party.

                  3.   Representations   and   Warranties  of  S&N.  S&N  hereby
represents and warrants that:

                  3.1.  Authorization.  This Agreement constitutes the valid and
legally binding  obligation of S&N,  enforceable  against S&N in accordance with
its terms against S&N in accordance with their  respective  terms, (i) except 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.

                  3.2. Purchase Entirely for Own Account. This Agreement is made
with S&N in reliance upon S&N's  representation  to the Company,  which by S&N's
execution of this 

                                      -7-
<PAGE>
Agreement S&N hereby confirms,  that the Common Stock to be received by S&N will
be acquired for investment for S&N's own account, not as a nominee or agent, for
investment  purposes only, and not with a view to the resale or  distribution of
any part thereof within the meaning of the  Securities  Act, and that S&N has no
present  intention  of selling,  granting  any  participation  in, or  otherwise
distributing the same. By executing this Agreement,  S&N further represents that
it does not have any contract,  undertaking,  agreement or arrangement  with any
person to sell,  transfer or grant  participation to such person or to any third
person,  with  respect to the Common  Stock.  S&N  represents  that it will not,
directly or indirectly,  offer, sell,  pledge,  transfer or otherwise dispose of
(or solicit any offers to buy,  purchase or  otherwise  acquire or take a pledge
of) any of the shares of Common Stock except in compliance  with the  Securities
Act), and the rules and regulations  promulgated thereunder and applicable state
securities  laws. S&N  represents  that it has full power and authority to enter
into this Agreement.

                  3.3.  Disclosure of Information.  S&N believes it has received
all the information it considers  necessary or appropriate for deciding  whether
to  purchase  the  Common  Stock.  S&N  further  represents  that  it has had an
opportunity to ask questions and receive answers from the Company  regarding the
terms and  conditions  of the  offering  of the  Common  Stock.  The  foregoing,
however,  does not limit or modify the  representations  and  warranties  of the
Company in Section 2 of this Agreement or the right of S&N to rely thereon.

                  3.4. Investment  Experience.  S&N is an investor in securities
of companies in the development  stage and acknowledges  that it is able to fend
for itself,  can bear the economic risk of its investment and has such knowledge
and  experience  in  financial  or business  matters  such that it is capable of
evaluating the merits and risks of its investment in the Common Stock.

                  3.5.  Accredited  Investor.  S&N is an  "accredited  investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.

                  3.6. Restricted Securities. S&N understands that the shares of
Common Stock it is  purchasing  are  characterized  as  "restricted  securities"
("Restricted Securities") under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable  regulations  such securities may not be
resold without  registration under the Securities Act, except in certain limited
circumstances.  In this connection,  S&N represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.

                  4. Use of Proceeds.  The net proceeds  received by the Company
from the sale of the Common Stock as contemplated by this Agreement will be used
by the Company for general working capital purposes.

                  5. Transfer  Taxes.  The Company  agrees that it will pay, and
will hold S&N harmless  from, any and all liability with respect to any stamp or
similar  Taxes  which may be  determined  to be payable in  connection  with the
execution  and  delivery and  performance  of this  Agreement,  and that it will
similarly pay and hold S&N harmless from all Taxes in respect of the issuance of
the Common Stock to S&N.


                                      -8-
<PAGE>
                  6.  Expenses.  Each of the  Company  and S&N shall pay all the
costs and  expenses  incurred  by it or on its  behalf in  connection  with this
Agreement and the consummation of the transactions contemplated hereby.

                  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 part hereto,  S&N, with respect to a breach by Exogen
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  an  action  for  specific  performance  of any such
covenant or agreement contained in such agreement.

                  7. Miscellaneous.

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

                  7.2.  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 (including transferees of any shares of
Common Stock sold hereunder),  except that the Company may not assign its rights
and  obligations  under this  Agreement to any person  without the prior written
consent of S&N, except in connection with a merger, consolidation or sale of all
or  substantially  all of the assets of the Company.  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.

                  7.3.  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.

                  7.4.  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.

                  7.5.  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.

                  7.6. 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  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.

                                      -9-
<PAGE>
                  7.7.  Finder's Fee. Each party  represents  that it neither is
nor will be obligated for any finder's fee or commission in connection with this
transaction.  S&N agrees to indemnify  and to hold harmless the Company from any
liability  for any  commission or  compensation  in the nature of a finder's fee
(and the costs and  expenses of  defending  against  such  liability or asserted
liability) for which S&N or any of its officers,  employees,  or representatives
is responsible.

                  The Company agrees to indemnify and hold harmless S&N from any
liability  for any  commission or  compensation  in the nature of a finder's fee
(and the costs and  expenses of  defending  against  such  liability or asserted
liability)  for  which  the  Company  or  any  of  its  officers,  employees  or
representatives is responsible.

                  7.8.  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.

                  7.9.  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
S&N. Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding, each future holder of all such securities, and the Company. 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.

                  7.10.  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.

                  7.11.  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  other  party  in any  manner  by any
warranties,  representations,  or  covenants  except as  specifically  set forth
herein or therein.

                  7.12.  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  party;  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).

                                      -10-
<PAGE>

                  IN WITNESS  WHEREOF,  the parties  have  executed  this Common
Stock Purchase 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 Avenue
                                                       P.O. Box 6860
                                                       Piscataway, NJ 08855



                                    SMITH & NEPHEW HOLDINGS, INC.



                                    By:    /s/ P. David Southworth
                                           -------------------------------
                                           Name:       P. David Southworth
                                           Title:      President
                                           Address:    1450 Brooks Road
                                                       Memphis, TN  38116









               [SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT]


                                      -11-
<PAGE>
                             SCHEDULE OF EXCEPTIONS
                                       TO
                              COMMON STOCK PURCHASE
                           AGREEMENT (THE "AGREEMENT")
                                 BY AND BETWEEN
                           EXOGEN INC. (THE "COMPANY")
                                       AND
                      SMITH & NEPHEW HOLDINGS, INC. ("S&N")



                  CAPITALIZED  TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED
SHALL HAVE THE RESPECTIVE MEANINGS ASCRIBED TO SUCH TERMS IN THE AGREEMENT.

                  DISCLOSURE UNDER ANY SECTION SHALL CONSTITUTE DISCLOSURE UNDER
THE  SCHEDULE  OF  EXCEPTIONS  WITHOUT  THE  NEED  FOR   CROSS-REFERENCES.   ALL
DESCRIPTIONS  OF  AGREEMENTS OR OTHER  MATTERS  APPEARING  HEREIN ARE SUMMARY IN
NATURE AND ARE QUALIFIED BY REFERENCE TO THE COMPLETE DOCUMENTS, WHICH HAVE BEEN
SUPPLIED TO S&N OR WHICH THE COMPANY WILL MAKE AVAILABLE TO S&N UPON REQUEST. IN
NO  EVENT  SHALL  ANY   DISCLOSURE   HEREUNDER  BE  DEEMED  TO   CONSTITUTE   AN
ACKNOWLEDGEMENT  THAT SUCH  DISCLOSURE  IS MATERIAL TO THE BUSINESS OR FINANCIAL
CONDITION OF THE COMPANY.

                  THE   REPRESENTATIONS,   WARRANTIES,   COVENANTS   AND   OTHER
OBLIGATIONS  AND AGREEMENTS OF THE COMPANY IN THE AGREEMENT ARE MADE,  GIVEN AND
UNDERTAKEN  SUBJECT TO THE  DISCLOSURES  IN THIS SCHEDULE OF  EXCEPTIONS  AND AS
PROVIDED IN THIS AGREEMENT.


                                       i
<PAGE>
                                 SCHEDULE 1.3(b)


                  Delaware
                  New Jersey



                                       ii
<PAGE>


                                  SCHEDULE 2.3



                  On  September 8, 1997,  the Company and  Johnston  Associates,
Inc, a Delaware  corporation  ("Johnston"),  entered into an advisory  agreement
pursuant to which,  the Company  issued to Johnston,  for an aggregate  purchase
price of $20,000,  a warrant to purchase up to 100,000  shares of the  Company's
Common  Stock at an  exercise  price  equal to $4.50  per share  (the  "Purchase
Warrant").  The Purchase  Warrant is exercisable  until (i) September 8, 2002 or
(ii)  November 1, 1998 in the event that the Company does not, by July 31, 1998,
consummate a strategic partnering  transaction relating to the commercialization
of certain of the Company's technologies (a "Strategic Partnering Transaction").
Further,  if the Company  consummates  Strategic  Partnering  Transactions  with
companies introduced by Johnston for three specific technologies,  Johnston will
be entitled to a warrant to purchase 75,000 shares of the Company's Common Stock
at an exercise price equal to $4.50 per share (the  "Transaction  Warrants") for
each of the  three  transactions;  provided,  however,  that  for any  Strategic
Partnering  Transaction  consummated  prior to July 31, 1998,  Johnston  will be
entitled to a warrant to purchase  125,000 shares of the Company's  Common Stock
instead of 100,000 shares. Such Transaction Warrants shall expire five (5) years
from the date of issuance.


























                                      iii
<PAGE>


                                  SCHEDULE 2.5 



                  There are no exceptions.







                                       iv
<PAGE>




                                  SCHEDULE 2.6



                  Reference  is made to the  information  contained  in Part II,
Item 1 of the  Company's  Quarterly  Report on Form 10-Q for the  Quarter  Ended
March 31, 1998. The hearings on pending  motions in both the litigation  matters
described have been  adjourned,  pending  settlement  negotiations  which are in
process. There can be no assurance that a settlement will be finalized, in which
event the litigation would continue.


                                       v
<PAGE>


                                  SCHEDULE 2.11



                  See Schedule 8 to Master  Agreement  between Exogen,  Inc. and
Smith & Nephew, Inc. dated as of August 10, 1998.


                                       vi
<PAGE>
                                  SCHEDULE 2.13



                  There are no exceptions.




                                      vii
<PAGE>
                                                                         ANNEX A










                                  EXOGEN, INC.



                          REGISTRATION RIGHTS AGREEMENT



                                 August 10, 1998


<PAGE>
                                TABLE OF CONTENTS

1.       Registration Rights.............................................1
           1.1.   Definitions............................................1
           1.2.   Shelf Registration.....................................2
           1.3.   Company Registration...................................4
           1.4.   Obligations of the Company.............................4
           1.5.   Furnish Information....................................7
           1.6.   Expenses of Registration...............................7
           1.7.   Expenses of Company Registration.......................8
           1.8.   Underwriting Requirements..............................8
           1.9.   Delay of Registration..................................9
           1.10.  Indemnification........................................9
           1.11.  Reports Under Securities Exchange Act of 1934.........12
           1.12.  Assignment of Registration Rights.....................12
           1.13.  Limitations on Subsequent Registration Rights.........13
           1.14.  "Market Stand-Off Agreement"..........................13
           1.15.  No Required Sale......................................14

2.       Miscellaneous..................................................14
           2.1.   Successors and Assigns................................14
           2.2.   Governing Law.........................................14
           2.3.   Counterparts..........................................14
           2.4.   Titles and Subtitles..................................14
           2.5.   Notices...............................................14
           2.6.   Expenses..............................................14
           2.7.   Amendments and Waivers................................14
           2.8.   Severability..........................................15
           2.9.   Nominees for Beneficial Owners........................15
           2.10.  Specific Performance..................................15
           2.11.  No Inconsistent Agreements............................15
           2.12.  Entire Agreement......................................16


<PAGE>
                          REGISTRATION RIGHTS AGREEMENT


                  THIS REGISTRATION  RIGHTS AGREEMENT is made as of the 10th day
of  August,  1998 by and  between  Exogen,  Inc.,  a Delaware  corporation  (the
"Company"), and Smith & Nephew Holdings, Inc., a Delaware corporation ("S&N").


                                    RECITALS


                  WHEREAS,  the Company and S&N are parties to the Common  Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement");


                  WHEREAS,  in order to induce  the  Company  to enter  into the
Stock  Purchase  Agreement  and to  induce  S&N to invest  funds in the  Company
pursuant to the Stock Purchase Agreement,  S&N and the Company hereby agree that
this  Agreement  shall govern the rights of S&N to cause the Company to register
shares of Common Stock  issuable to S&N and certain  other  matters as set forth
herein;


                  NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

                  1.  Registration  Rights.  The Company covenants and agrees as
follows:

                  1.1. Definitions. For purposes of this Section 1:


                      (a) The term "Act" means the  Securities  Act of 1933,  as
amended.

                      (b) The term "register,"  "registered," and "registration"
refer  to a  registration  effected  by  preparing  and  filing  a  registration
statement or similar  document in compliance with the Securities Act of 1933, as
amended (the "Act"),  and the declaration or ordering of  effectiveness  of such
registration statement or document;

                      (c) The term "Registrable Securities" means (1) the Common
Stock issued  pursuant to the Stock Purchase  Agreement and (2) any Common Stock
of the Company  issued as (or issuable  upon the  conversion  or exercise of any
warrant,  right or  other  security  which is  issued  as) a  dividend  or other
distribution  with  respect to, or in exchange  for or in  replacement  of, such
Common Stock,  excluding in all cases, however, any Registrable Securities which
are sold, assigned,  pledged,  hypothecated or otherwise disposed of by S&N in a
transaction  in which S&N's  rights  under this  Agreement  are not  assigned or
assignable;

                      (d) The number of shares of  "Registrable  Securities then
outstanding"  shall be  determined  by the  number of  shares  of  Common  Stock
outstanding  which  are,  and the
<PAGE>
number of shares  of Common  Stock  issuable  pursuant  to then  exercisable  or
convertible  securities  which  are,  Registrable  Securities;  and 

                      (e) The term "Holder"  means S&N and any  transferees  and
assignees permitted by Section 1.12.

                  1.2. Shelf Registration.

                      (a)  The  Company  shall,   subject  to  the   limitations
specified  in  this  Agreement,  use  its  best  efforts  (i) to  file  a  shelf
registration  statement  on Form S-3 or any other form  available to the Company
within  ninety (90) days from the date hereof (the "Filing  Date")  covering the
registration under the Act of all Registrable  Securities then outstanding to be
offered or sold on a delayed or continuous  basis as provided by this Agreement,
pursuant to Rule 415 of the Act (the "Shelf Registration  Statement");  and (ii)
to maintain the effectiveness of the Shelf  Registration  Statement for a period
of two (2) years  from the date of this  Agreement  (or such  shorter  period in
accordance with Section 1.4(a)).

                      (b) If any  offering  pursuant  to Section  1.2(a)  hereof
involves  an  underwritten  offering,  an  underwriter  will be  selected by the
Holders of two-thirds of the Registrable  Securities then  outstanding and shall
be reasonably  acceptable to the Company. In such event, the right of any Holder
to include its Registrable  Securities in such registration shall be conditioned
upon such Holder's  participation in such underwriting and the inclusion of such
Holder's  Registrable  Securities  in the  underwriting  to the extent  provided
herein. All Holders proposing to distribute  Registrable Securities through such
underwriting  shall  (together  with the Company as provided in Section  1.4(e))
enter into an  underwriting  agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other provision
of this  Section  1.2, if the  underwriter  advises the Holders in writing  that
marketing   factors  require  a  limitation  of  the  number  of  shares  to  be
underwritten,  then the number of shares of Registrable  Securities  that may be
included in the  underwriting  shall be allocated  among all Holders  thereof in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder;  provided,  however, that the number of shares
of  Registrable  Securities  to be  included in such  underwriting  shall not be
reduced  unless all Other  Securities  (as  defined  below)  are first  entirely
excluded from the underwriting.

                      (c)  Notwithstanding  the foregoing,  if the Company shall
furnish to the Holders a certificate  signed by the Chief  Executive  officer or
President of the Company  stating that, in the good faith  judgment of the Board
of Directors of the Company,  it would be seriously  detrimental (a "Detrimental
Condition") to the Company and its stockholders for a registration  statement to
be filed or to become or remain effective, as the case may be, and provided that
the  Detrimental  Condition  has not resulted from actions taken by the Company,
(i) the Company  shall have the right to defer taking action with respect to the
filing of the Shelf Registration  Statement for a period of not more than ninety
(90) days after the Filing Date, (ii) in case a Shelf Registration Statement has
been filed but has not become effective, the Company may cause such registration
statement  to be  withdrawn  or may  postpone  amending  or  supplementing  such
registration statement until such Detrimental Condition no longer exists, but in
no event for more than ninety (90) days,  or (iii) in case a Shelf  Registration
Statement  has been filed and has become  effective,  the Company may cause such
registration  statement to be withdrawn and its effectiveness  terminated or may
postpone  amending  or  supplementing  such  registration  statement  until such
Detrimental  Condition  no longer  exists,  but in no event for more


                                       2
<PAGE>
than ninety (90) days. The Company may not declare a Detrimental  Condition,  or
take any of the actions specified in clauses (i), (ii) or (iii) of the preceding
sentence  (and can take only one such action  specified in  clauses(i),  (ii) or
(iii) per Detrimental Condition), more than once in any twelve-month period. The
Company shall give written notice of its determination to postpone or withdraw a
registration  statement and of the fact that the Detrimental  Condition for such
postponement  or withdrawal no longer exists,  in each case,  promptly after the
occurrence  thereof.  The following  events or  circumstances  may result in the
filing of a registration  statement being  seriously  detrimental to the Company
and its shareholders: a pending material acquisition, merger or sale or purchase
of assets,  pending or  threatened  material  litigation,  pending or threatened
material  regulatory or  governmental  action,  pending  material  change in the
business,  prospects,  condition  (financial  or  other)  or  properties  of the
Company.  The foregoing list is for illustrative  purposes only and is not meant
to be exclusive.

                      (d) If the Company  shall give any notice of  postponement
or withdrawal of any registration  statement,  the Company shall not, during the
period of postponement  or withdrawal  pursuant to clauses (i), (ii) or (iii) of
the prior  paragraph,  register  any  Common  Stock,  other than  pursuant  to a
registration  statement on Form S-4 or S-8 (or an equivalent  registration  form
then in effect). Each Holder of Registrable Securities agrees that, upon receipt
of any notice from the Company that the Company has  determined  to withdraw any
registration  statement pursuant to the immediately  preceding  paragraph,  such
Holder will  discontinue its disposition of Registrable  Securities  pursuant to
such registration  statement and, if so directed by the Company, will deliver to
the Company (at the Company's  expense) all copies,  other than  permanent  file
copies,  then  in such  Holder's  possession  of the  prospectus  covering  such
Registrable Securities that was in effect at the time of receipt of such notice.
If the Company shall have  withdrawn or  prematurely  terminated a  registration
statement  filed under this  Section 1.2  (whether  pursuant to the  immediately
preceding paragraph, or as a result of any stop order, injunction or other order
or  requirement  of the SEC or any  other  governmental  agency or  court),  the
Company shall not be considered to have effected an effective  registration  for
the  purposes  of this  Agreement  until  the  Company  shall  have  filed a new
registration  statement  covering  the  Registrable  Securities  covered  by the
withdrawn registration statement and such registration statement shall have been
declared effective and shall not have been withdrawn.  If the Company shall give
any notice of  withdrawal  or  postponement  of a  registration  statement,  the
Company  shall,  at such time as the  Detrimental  Condition  that  caused  such
withdrawal or  postponement  no longer exists (but in no event later than ninety
(90)  days  after  the date of the  postponement  or  withdrawal),  use its best
efforts to effect the  registration  under the Securities Act of the Registrable
Securities  covered by the  withdrawn  or  postponed  registration  statement in
accordance  with this Section 1.2 (unless the Holder shall have  withdrawn  such
request,  in which case the Company  shall not be considered to have effected an
effective registration for the purposes of this Agreement).


                                       3
<PAGE>
                      (e) The  registration  statement  filed  pursuant  to this
Section 1.2 may include  other  securities  of the Company (i) which are held by
persons who, by virtue of agreements  with the Company,  are entitled to include
their securities in any such  registration,  (ii) which are held by officers and
directors  of the Company,  or (iii) which are being  offered for the account of
the Company  (collectively,  the securities referred to in clauses (i), (ii) and
(iii) in this paragraph are hereinafter referred to as the "Other Securities").

                  1.3. Company  Registration.  If (but without any obligation to
do  so)  the  Company  proposes  to  register  (including  for  this  purpose  a
registration  effected by the Company for  stockholders  other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration  relating
solely to the sale of  securities  to  participants  in a Company  stock option,
stock purchase or similar plan or a SEC Rule 145 transaction,  a registration on
any form which does not include  substantially  the same information as would be
required to be included in a  registration  statement  covering  the sale of the
Registrable  Securities or a  registration  in which the only Common Stock being
registered is Common Stock issuable upon  conversion of debt securities that are
also being  registered),  the Company  shall,  at such time,  promptly give each
Holder written  notice of such  registration.  Upon the written  request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 2.5, the Company shall,  subject to the provisions of
Section  1.8,  cause  to be  registered  under  the Act  all of the  Registrable
Securities that each such Holder has requested to be registered. No registration
effected  pursuant  to  this  Section  1.3  shall  relieve  the  Company  of its
obligations  to effect the  required  registration  pursuant to Section 1.2. Any
Holder  shall  have the right to  withdraw  his  request  for  inclusion  of its
Registrable  Securities in any registration  statement  pursuant to this Section
1.3 by giving written notice to the Company of its request to withdraw.

                  1.4.  Obligations  of the Company.  When  required  under this
Section 1 to effect the registration of the Registrable Securities,  the Company
shall, as expeditiously as reasonably possible:


                      (a)  Prepare  and file with the  Securities  and  Exchange
Commission  (the "SEC") a Shelf  Registration  Statement or, if applicable,  any
other form of  registration  statement,  as the case may be, with respect to the
Registrable  Securities  and use its best  efforts  to cause  such  registration
statement to become  effective  within one hundred  twenty (120) days after such
registration  statement was filed and to keep such Shelf Registration  Statement
effective for a period up to the second  anniversary of the date hereof or until
the  distribution  contemplated  in the Shelf  Registration  Statement  has been
completed;  provided,  however,  that before filing a registration  statement or
prospectus or any amendments or supplements  thereto,  or comparable  statements
under securities or blue sky laws of any jurisdiction,  the Company will furnish
to one counsel for the Holders (the  "Holders'  Counsel")  participating  in the
planned  offering  (selected  by the Holders of  two-thirds  of the  Registrable
Securities   then   outstanding   included  in  such   registration),   and  the
underwriters,  if  any,  copies  of all  such  documents  proposed  to be  filed
(including  all  exhibits  thereto),  which  documents  will be  subject  to the
reasonable review and reasonable comment of such counsel.


                                       4
<PAGE>
                      (b)  Prepare  and file  with the SEC such  amendments  and
supplements to such registration statement and the prospectus used in connection
with  such  registration  statement  as may be  necessary  to  comply  with  the
provisions of the Act with respect to the disposition of all securities  covered
by such registration statement.

                      (c) Furnish to the Holders  whose  Registrable  Securities
are  covered by the Shelf  Registration  Statement  such  numbers of copies of a
prospectus,   including  a  preliminary  prospectus,   in  conformity  with  the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.

                      (d) Use its best  efforts  to  register  and  qualify  the
securities covered by such registration statement under such other securities or
blue sky laws of such  jurisdictions  as shall be  reasonably  requested  by the
Holders  whose  Registrable  Securities  are  covered by the Shelf  Registration
Statement;  provided  that the  Company  shall  not be  required  in  connection
therewith  or as a  condition  thereto to qualify  to do  business  or to file a
general consent to service of process in any such states or jurisdictions unless
the Company is already subject to service in such jurisdiction.

                      (e) In the event the Registrable Securities are to be sold
through an underwritten public offering,  enter into and perform its obligations
under an underwriting  agreement, in usual and customary form, with the managing
underwriter of such offering.  The Holders  proposing to distribute  Registrable
Securities  through such underwritten  public offering shall also enter into and
perform their obligations under such an agreement.

                      (f) In the event the Registrable Securities are to be sold
through an underwritten public offering, use its best efforts to furnish, on the
date that such Registrable Securities are delivered to the underwriters for sale
in connection  with a  registration  pursuant to this Section 1, (i) an opinion,
dated such date,  of the counsel  representing  the Company for the  purposes of
such registration, in form and substance as is customarily given to underwriters
in an underwritten  public offering,  addressed to the underwriters,  and (ii) a
letter,  dated such date, from the independent  certified public  accountants of
the Company  addressed to the  underwriters,  stating that such  accountants are
independent  public accountants within the meaning of the Act and the applicable
published  rules  and  regulations  thereunder,  and  otherwise  in form  and in
substance as is customarily given by independent certified public accountants to
underwriters in connection with an underwritten public offering.

                      (g) Promptly  notify (i) each Holder  selling  Registrable
Securities covered by such registration statement and each managing underwriter,
if any: (A) when the  registration  statement,  the prospectus or any prospectus
supplement  related  thereto or  post-effective  amendment  to the  registration
statement has been filed and, with respect to the registration  statement or any
post-effective  amendment,  when  the  same  has  become  effective,  (B) of the
issuance  by the SEC of any  stop  order  suspending  the  effectiveness  of the
registration  statement or the initiation of any  proceedings  for that purpose,
(C) of the  receipt  by the  Company  of any  notification  with  respect to the
suspension of the qualification of any Registrable

                                       5
<PAGE>
Securities for sale under the securities or blue sky laws of any jurisdiction or
the  initiation of any  proceeding  for such purpose,  and (D) when a prospectus
relating to the registration statement is required to be delivered under the Act
of the  happening of any event as a result of which the  prospectus  included in
such registration  statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated  therein
or necessary to make the  statements  therein not misleading in the light of the
circumstances  then  existing;  and (ii)  Holders'  Counsel  and  each  managing
underwriter  of any request by the SEC for  amendments  or  supplements  to such
registration   statement  or  prospectus   related  thereto  or  for  additional
information. If the notification relates to an event described in clause (i)(D),
the Company  shall,  in  accordance  with  paragraph  (b) of this  Section  1.4,
promptly  prepare  and  furnish to each Holder  selling  Registrable  Securities
covered by such registration statement and each managing underwriter,  if any, a
reasonable number of copies of a prospectus  supplemented or amended so that, as
thereafter  delivered to the  purchasers of such  Registrable  Securities,  such
prospectus  shall not include an untrue  statement of a material fact or omit to
state a material  fact  required to be stated  therein or  necessary to make the
statements therein in the light of the circumstances  under which they were made
not misleading.

                      (h)  Cooperate  with the  selling  Holders of  Registrable
Securities  and the  managing  underwriter,  if any,  to  facilitate  the timely
preparation  and delivery of certificates  not bearing any  restrictive  legends
representing  the Registrable  Securities to be sold, and cause such Registrable
Securities to be issued in such  denominations  and  registered in such names in
accordance  with the  underwriting  agreement  prior to any sale of  Registrable
Securities  to  the  underwriters  or,  if  not  an  underwritten  offering,  in
accordance  with  the   instructions  of  the  selling  Holders  of  Registrable
Securities  at least  three  business  days  prior  to any  sale of  Registrable
Securities  and  instruct  any  transfer  agent  and  registrar  of  Registrable
Securities to release any stop transfer  orders in respect  thereto  Comply with
all applicable rules and regulations of the SEC, and make generally available to
its security holders, as soon as reasonably practicable after the effective date
of the registration statement (and in any event within 16 months thereafter), an
earnings  statement (which need not be audited)  covering the period of at least
twelve  consecutive  months  beginning with the first day of the Company's first
calendar quarter after the effective date of the registration  statement,  which
earnings  statement shall satisfy the provisions of Section 11(a) of the Act and
Rule 158 thereunder.

                      (i) Cause all such Registrable  Securities covered by such
registration  statement  to be listed on the  principal  securities  exchange on
which similar  securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange,  or (ii) if no similar  securities are then so listed, to either cause
all such Registrable  Securities to be listed on a national  securities exchange
or to  secure  designation  of all such  Registrable  Securities  as a  National
Association of Securities  Dealers,  Inc. Automated  Quotation System ("NASDAQ")
"national market system security" within the meaning of Rule 11Aa2-1 of the 1934
Act (as defined below) or, failing that,  secure NASDAQ  authorization  for such
shares and, without  limiting the generality of the foregoing,  take all actions
that may be required by the Company as the issuer of such Registrable Securities
in order to facilitate the managing underwriter's arranging for the registration
of at least two market

                                       6
<PAGE>
makers as such with  respect to such shares  with the  National  Association  of
Securities Dealers, Inc. (the "NASD").

                      (j) Provide and cause to be  maintained  a transfer  agent
and registrar for all such Registrable  Securities  covered by such registration
statement not later than the effective date of such registration statement.

                      (k)  Deliver   promptly  to  Holders'   Counsel  and  each
underwriter,  if  any,  copies  of all  correspondence  between  the SEC and the
Company,  its counsel or auditors and all memoranda relating to discussions with
the SEC or its staff with  respect  to the  registration  statement,  other than
those  portions  of any such  memoranda  which  contain  information  subject to
attorney-client privilege with respect to the Company, and, upon receipt of such
confidentiality   agreements  as  the  Company  may  reasonably  request,   make
reasonably available for inspection by Holders' Counsel, by any underwriter,  if
any,   participating  in  any  disposition  to  be  effected  pursuant  to  such
registration  statement and any attorney,  accountant or other agent retained by
any such  underwriter,  all  pertinent  financial and other  records,  pertinent
corporate  documents  and  properties  of  the  Company,  and  cause  all of the
Company's officers, directors and employees to supply all information reasonably
requested by Holders' Counsel or such underwriter, attorney, accountant or agent
in connection with such registration statement.

                      (l) Use  reasonable  best efforts to obtain the withdrawal
of any order suspending the effectiveness of the registration statement.

                      (m)  Upon   written   request,   furnish  to  each  Holder
participating in the offering and the managing  underwriter,  without charge, at
least one conformed copy of the  registration  statement and any  post-effective
amendments thereto,  including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference).

                      (n) Take all such other commercially reasonable actions as
are necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities.

                  1.5. Furnish Information. It shall be a condition precedent to
the  obligations  of the Company to take any action  pursuant to this  Section 1
with respect to the  Registrable  Securities  of the Holders  whose  Registrable
Securities  are covered by the Shelf  Registration  Statement  that each of such
Holders  shall furnish to the Company such  information  regarding  itself,  the
Registrable  Securities  held by it, and the intended  method of  disposition of
such securities as shall be required to effect the registration of such Holders,
Registrable Securities.

                  1.6. Expenses of Registration.


                      (a)  "Expenses"  shall mean any and all fees and  expenses
incident to the  Company's  performance  of or  compliance  with this Section 1,
including,  without limitation: (i) SEC, stock exchange or NASD registration and
filing fees and all listing fees and fees


                                       7
<PAGE>
with respect to the inclusion of securities in NASDAQ, (ii) fees and expenses of
compliance  with state  securities or "blue sky" laws and in connection with the
preparation of a "blue sky" survey,  including  without  limitation,  reasonable
fees and expenses of blue sky counsel, (iii) printing and copying expenses, (iv)
messenger and delivery  expenses,  (v) expenses  incurred in connection with any
road show, (vi) fees and  disbursements  of counsel for the Company,  (vii) with
respect to each registration,  the fees and disbursements of one counsel for the
selling  Holder(s)  (selected by the Holders of  two-thirds  of the  Registrable
Securities  then  outstanding  included in such  registration),  (viii) fees and
disbursements of the Company's  independent  public  accountants  (including the
expenses of any audit  and/or  "cold  comfort"  letter) and fees and expenses of
other persons, including special experts, retained by the Company, (ix) any fees
and expenses  payable to a Qualified  Independent  Underwriter  (as such term is
defined in Conduct  Rule 2720 of the NASD's  By-Laws) and (x) any other fees and
disbursements of underwriters, if any, customarily paid by issuers or sellers of
securities.

                      (b) The Company shall pay all Expenses with respect to any
registration pursuant to Section 1.2, whether or not such registration statement
becomes  effective or remains  effective for the period  contemplated by Section
1.2(a).

                      (c) Notwithstanding  the foregoing,  (i) the provisions of
this Section 1.6 shall be deemed amended to the extent  necessary to cause these
expense  provisions  to comply  with  "blue sky" laws of each state in which the
offering is made and (ii) in connection with any  registration  hereunder,  each
Holder of Registrable  Securities  being  registered  shall pay all underwriting
discounts and commissions  and any transfer  taxes, if any,  attributable to the
sale of such  Registrable  Securities,  pro rata with  respect  to  payments  of
discounts and  commissions  in accordance  with the number of shares sold in the
offering  by such  Holder,  and  (iii)  the  Company  shall,  in the case of all
registrations under this Section 1, be responsible for all its internal expenses
(including,  without  limitation,  all salaries and expenses of its officers and
employees performing legal or accounting duties).

                  1.7. Expenses of Company Registration.  The Company shall bear
and pay all Expenses  incurred in  connection  with any  registration  filing or
qualification  of  Registrable  Securities  with  respect  to the  registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12), but excluding  underwriting discounts and commissions relating
to Registrable Securities.

                      1.8.  Underwriting  Requirements.  In connection  with any
offering involving an underwriting of shares of the Company's capital stock, the
Company  shall not be required  under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon  between the Company and the  underwriters  selected by it (or by
other  persons  entitled  to  select  the  underwriters),  and then only in such
quantity  as the  underwriters  determine  in  their  sole  discretion  will not
jeopardize  the success of the offering by the  Company.  If the total amount of
securities,  including Registrable  Securities,  requested by stockholders to be
included in such offering  exceeds the amount of  securities  sold other than by
the  Company  that the  underwriters  determine  in  their  sole  discretion  is
compatible

 
                                       8
<PAGE>
with the success of the offering,  then the Company shall be required to include
in the  offering  only that  number of such  securities,  including  Registrable
Securities,  that the  underwriters  determine in their sole discretion will not
jeopardize  the  success of the  offering  (the  securities  so  included  to be
apportioned  pro rata  among the  selling  stockholders  according  to the total
amount of  securities  entitled to be  included  therein  owned by each  selling
stockholder or in such other  proportions as shall mutually be agreed to by such
selling  stockholders,  but in any event subject to the apportionment  rights of
certain  selling  stockholders  under  Section  1.8 of the  Registration  Rights
Agreement,  dated October 20, 1997, between the Company and certain stockholders
of  the  Company).  For  purposes  of  the  preceding  parenthetical  concerning
apportionment,  for any  selling  stockholder  that is a Holder  of  Registrable
Securities and that is a partnership or corporation, corporate partners, retired
partners and  stockholders of such Holder,  or the estates and family members of
any such partners and retired  partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling  stockholder," and
any pro-rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate  amount of shares carrying  registration  rights owned by all
entities and individuals  included in such "selling  stockholder," as defined in
this sentence.

                  1.9.  Delay of  Registration.  The Holders  shall not have any
right to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any  controversy  that might arise with respect to
the interpretation or implementation of this Section 1.

                  1.10. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:

                      (a) To the  extent  permitted  by law,  the  Company  will
indemnify and hold harmless the Holder whose Registrable  Securities are covered
by the Registration Statement, its directors, officers,  fiduciaries,  employees
and  stockholders or general or limited  partners (and the directors,  officers,
employees and stockholders thereof), any underwriter (as defined in the Act) for
such Holders and each person,  if any, who controls such Holders or  underwriter
within the meaning of the Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), each officer,  director,  employee,  stockholder or partner of
such underwriter,  against any losses, claims, damages, or liabilities (joint or
several)  or  actions or  proceedings  (whether  commenced  or  threatened)  and
expenses  (including  reasonable  fees of counsel  and any  amounts  paid in any
settlement  effected  with the  Company's  consent),  to which  they may  become
subject under the Act, the 1934 Act or any state securities law, insofar as such
losses,  claims,  damages,  or liabilities (or actions or proceedings in respect
thereof)  ("Claims")  or  expenses  arise  out of or are  based  upon any of the
following statements,  omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such  registration  statement,  including any  preliminary  prospectus,  summary
prospectus  or  final  prospectus   contained   therein  or  any  amendments  or
supplements thereto,  together with documents incorporated by reference therein,
(ii) the omission or alleged  omission to state therein a material fact required
to  be  stated  therein,  or  necessary  to  make  the  statements  therein  not
misleading,  or (iii) any  violation or alleged  violation by the Company of the
Act, the


                                       9
<PAGE>
1934 Act, any state securities law or any rule or regulation  promulgated  under
the Act, the 1934 Act or any state  securities  law; and the Company will pay to
such Holders, and each such underwriter or controlling person any legal or other
expenses  reasonably  incurred  by  them in  connection  with  investigating  or
defending  any such  loss,  claim,  damage,  liability,  expense  or  action  or
proceeding;  provided,  however,  that (A) the indemnity  agreement contained in
this  Section  1.10 shall not apply to amounts  paid in  settlement  of any such
Claim if such  settlement is effected  without the consent of the Company (which
consent shall not be unreasonably withheld), (B) the Company shall not be liable
in any case for any such Claim to the  extent  that it arises out of or is based
upon a Violation  which occurs in reliance upon and in  conformity  with written
information  furnished expressly for use in connection with such registration by
any such Holders,  or any such underwriter or controlling person. Such indemnity
and  reimbursement of expenses shall remain in full force and effect  regardless
of any  investigation  made by as on behalf of such indemnified  party and shall
survive the transfer of such securities by such Holder.

                      (b) To the extent  permitted  by law,  each  Holder  whose
Registrable  Securities are covered by the Shelf  Registration  Statement  will,
severally and not jointly,  indemnify and hold harmless the Company, each of its
directors,  each of its officers who has signed the registration statement, each
person,  if any,  who  controls  the Company  within the meaning of the Act, any
underwriter,  and any controlling  person of any such  underwriter,  against any
losses,  claims,  damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, or the 1934 Act, insofar as
such Claim  arises out of or is based  upon any  Violation,  in each case to the
extent (and only to the extent) that such Violation  occurs in reliance upon and
in conformity with written  information  furnished by such Holder  expressly for
use in connection with such registration; and such Holder will pay, as incurred,
any legal or other  expenses  reasonably  incurred by any person  intended to be
indemnified  pursuant to this Section 1.10, in connection with  investigating or
defending  any such  Claim;  provided,  however,  that the  indemnity  agreement
contained in this Section 1.10 shall not apply to amounts paid in  settlement of
any such  Claim if such  settlement  is  effected  without  the  consent of such
Holder, which consent shall not be unreasonably  withheld;  provided that, in no
event shall any  indemnity  under this Section 1.10 exceed the net proceeds from
the offering  received by such  Holder.  Such  indemnity  and  reimbursement  of
expenses shall remain in full force and effect  regardless of any  investigation
made by as on behalf of such indemnified party and shall survive the transfer of
such securities by such Holder.

                      (c) Promptly after receipt by an  indemnified  party under
this Section 1.10 of notice of the  commencement  of any action  (including  any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the  indemnifying  party a written  notice of the  commencement  thereof and the
indemnifying  party shall have the right to  participate  in, and, to the extent
the indemnifying  party so desires,  jointly with any other  indemnifying  party
similarly  noticed,   to  assume  the  defense  thereof  with  counsel  mutually
satisfactory  to the  parties;  provided,  however,  that an  indemnified  party
(together with all other  indemnified  parties which may be represented  without
conflict by one counsel)  shall have the right to retain one  separate  counsel,
with  the  fees  and  expenses  to be paid  by the  indemnifying  party,  (i) if
representation  of  such  indemnified  party

                                       10
<PAGE>
by the counsel retained by the indemnifying  party would be inappropriate due to
actual or potential  differing  interests between such indemnified party and any
other  party  represented  by  such  counsel  in  such  proceeding;  (ii) if the
indemnifying party fails to take reasonable steps necessary to defend diligently
the  action  or  proceeding  within 30 days  after  receiving  notice  from such
indemnified  party; or (iii) if such indemnified party who is a defendant in any
action or  proceeding  which is also  brought  against  the  indemnifying  party
reasonably  shall have  concluded  that there may be one or more legal  defenses
available to such indemnified  party which are not available to the indemnifying
party. The failure to deliver written notice to the indemnifying  party within a
reasonable time of the  commencement  of any such action,  if prejudicial to its
ability to defend such  action,  shall  relieve such  indemnifying  party of any
liability to the indemnified  party under this Section 1.10, but the omission so
to deliver written notice to the  indemnifying  party will not relieve it of any
liability that it may have to any  indemnified  party  otherwise than under this
Section 1.10.

                      (d) If the  indemnification  provided  for in this Section
1.10 is held  by a court  of  competent  jurisdiction  to be  unavailable  to an
indemnified party with respect to any Claim or expense referred to therein, then
the  indemnifying   party,  in  lieu  of  indemnifying  such  indemnified  party
hereunder,  shall  contribute to the amount paid or payable by such  indemnified
party as a result of such Claim or expense in such  proportion as is appropriate
to reflect the relative fault of the  indemnifying  party on the one hand and of
the  indemnified  party  on the  other in  connection  with  the  statements  or
omissions  that resulted in such Claim or expense as well as any other  relevant
equitable  considerations.  The relative fault of the indemnifying  party and of
the  indemnified  party shall be determined by reference to, among other things,
whether  the  untrue or  alleged  untrue  statement  of a  material  fact or the
omission  to state a  material  fact  relates  to  information  supplied  by the
indemnifying party or by the indemnified party and the parties, relative intent,
knowledge,  access to  information,  and  opportunity to correct or prevent such
statement  or  omission.  If,  however,  the  allocation  provided  in the first
sentence  of this  paragraph  is not  permitted  by  applicable  law,  then each
indemnifying  party  shall  contribute  to the  amount  paid or  payable by such
indemnified  party in such proportion as is appropriate to reflect not only such
relative faults but also the relative benefits of the indemnifying party and the
indemnified party as well as any other relevant  equitable  considerations.  The
parties  hereto agree that it would not be just and  equitable if  contributions
pursuant to this Section 1.10(d) were to be determined by pro rata allocation or
by any other method of  allocation  which does not take account of the equitable
considerations  referred to in the preceding  sentences of this Section 1.10(d).
The amount  paid or  payable in respect of any Claim  shall be deemed to include
any legal or other expenses  reasonably  incurred by such  indemnified  party in
connection  with  investigating  or defending  such Claim.  No person  guilty of
fraudulent  misrepresentation  (within the meaning of Section  11(f) of the Act)
shall be  entitled  to  contribution  from any person who was not guilty of such
fraudulent  misrepresentation.  Notwithstanding anything in this Section 1.10(d)
to the  contrary,  no  indemnifying  party  (other  than the  Company)  shall be
required  pursuant to this Section 1.10(d) to contribute any amount in excess of
the  net  proceeds  received  by  such  indemnifying  party  from  the  sale  of
Registrable  Securities  in the offering to which the Claims of the  indemnified
parties  relate,  less the amount of any  indemnification  payment  made by such
indemnifying party pursuant to Section 1.10(b).

                                       11
<PAGE>
                      (e) Notwithstanding the foregoing,  to the extent that the
provisions on  indemnification  and  contribution  contained in the underwriting
agreement  entered into in connection with the underwritten  public offering are
in conflict with the foregoing  provisions,  the provisions in the  underwriting
agreement  shall control.  

                      (f) The  obligations of the Company and Holders under this
Section  1.10 shall  survive  the  completion  of any  offering  of  Registrable
Securities  in a  registration  statement  under this Section 1, and  otherwise.


                  1.11.  Reports Under  Securities  Exchange Act of 1934. With a
view to making  available  to the Holders the  benefits of Rule 144  promulgated
under the Act and any other rule or  regulation  of the SEC that may at any time
permit  a  Holder  to sell  securities  of the  Company  to the  public  without
registration or pursuant to a registration on Form S-3, the Company agrees to:


                      (a) make and keep public information  available,  as those
terms are understood and defined in SEC Rule 144, at all times;

                      (b) take  such  action as is  necessary  to  maintain  the
Holder's  ability  to  utilize  Form  S-3 for  the  sale  of  their  Registrable
Securities;  (c) file  with the SEC in a timely  manner  all  reports  and other
documents  required  of the  Company  under  the Act and the 1934  Act;  and (d)
furnish to any Holder,  so long as the Holder owns any  Registrable  Securities,
forthwith  upon  request  (i) a written  statement  by the  Company  that it has
complied with the reporting  requirements  of SEC Rule 144, the Act and the 1934
Act (at any time after it so  qualifies),  (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents filed by
the Company with the SEC, and (iii) such other  information as may be reasonably
requested  in  availing  any Holder of any rule or  regulation  of the SEC which
permits the selling of any such securities  without  registration or pursuant to
such form.


                  1.12. Assignment of Registration Rights.

                      (a)  The  rights  to  cause  the   Company   to   register
Registrable Securities pursuant to this Section 1 may be assigned (but only with
all  related  obligations)  by a Holder to a  transferee  or  assignees  of such
securities who acquires at least two percent (2%) of the Registrable  Securities
(as adjusted for stock splits,  combinations  and the like),  provided:  (i) the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such  registration  rights are being  assigned;  (ii) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement,  including, without limitation, the provisions
of Section 1.14 below; and (iii) such assignment shall be effective only if such
transfer  is  exempt  from  registration  under  the Act.  For the  purposes  of
determining the number of shares of Registrable  Securities held by a transferee
or assignee,  the holding of 

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<PAGE>
transferees and assignees of a partnership who are partners or retired  partners
of such partnership  (including  spouses and ancestors,  lineal  descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together with the partnership;
provided that all assignees and transferees  who would not qualify  individually
for assignment of registration rights shall have a single  attorney-in-fact  for
the purpose of  exercising  any rights,  receiving  notices or taking any action
under this Section 1.

(b)  Subject to clause (a) above,  the right to have the  Company  register  the
Registrable Securities pursuant to this Section 1 may not otherwise be assigned;
provided,  however,  that any  heir or the  estate  of S&N  which  acquires  the
Registrable Securities from such Holder by will or intestate succession shall be
entitled to have the Company  register the  Registrable  Securities  pursuant to
this  Section 1  (provided  that such heirs or such  estate  shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving any notices
or taking any action under this Section 1), and (ii) any  individual  Holder may
sell, assign or transfer Registrable Securities to his or her spouse or children
or to a trust  established  for the  benefit of his or her  spouse,  children or
himself or herself,  and such  transferee  shall be entitled to have the Company
register the Registrable Securities pursuant to this Section 1, if, and only if,
such transferee agrees in writing to be bound by the terms of this Agreement. In
each such event and for purposes of this  Agreement,  the term  "Holder" as used
herein  shall  include all such heirs,  such estate or such  transferees. 

                  1.13. Limitations on Subsequent  Registration Rights. From and
after the date of this  Agreement,  the  Company  shall not,  without  the prior
written consent of the Holders of two-thirds of the Registrable  Securities then
outstanding,  enter into any agreement with any holder or prospective  holder of
any securities of the Company that would allow such holder or prospective holder
to include such securities in any  registration  filed under Section 1.2 hereof,
unless under the terms of such agreement,  such holder or prospective holder may
include such  securities  in any such  registration  only to the extent that the
inclusion  of such  holder's  securities  will  not  reduce  the  amount  of the
Registrable Securities of the Holders that is included.

                  1.14.  "Market Stand-Off"  Agreement.  S&N hereby agrees that,
during the period of duration  specified  by the Company and an  underwriter  of
Common Stock or other securities of the Company, following the effective date of
a  registration  statement of the Company  filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including,  without limitation, any short
sale),  grant any option to purchase or otherwise  transfer or dispose of (other
than to those who agree to be  similarly  bound) any  securities  of the Company
held by it at any time during such period except  Common Stock  included in such
registration, and S&N agrees to enter into an agreement to such effect with such
underwriter;  provided,  however,  that (a) all  officers  and  directors of the
Company  enter into  similar  agreements,  and, (b) such market  stand-off  time
period shall not exceed 120 days.  If the  underwriters  agree to any waivers of
such  restrictions,  then S&N shall be entitled to sell,  transfer or dispose of
the same number or amount of  securities  of the Company as the person or entity
receiving  such  waiver,  upon the same terms and  conditions  set forth in such
waiver.


                                       13
<PAGE>
                  In order to enforce the  foregoing  covenant,  the Company may
impose stop-transfer  instructions with respect to the Registrable Securities of
S&N (and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.

                  1.15. No Required  Sale.  Nothing in this  Agreement  shall be
deemed to create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.

                  2. Miscellaneous.

                  2.1.  Successors  and Assigns.  Except as  otherwise  provided
herein,  and provided that the transfer or assignment is in accordance  with the
terms  hereof,  the terms and  conditions of this  Agreement  shall inure to the
benefit of and be binding  upon the  respective  successors  and  assigns of the
parties  (including  any  permitted  transferees  of any  shares of  Registrable
Securities).  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.

                  2.2.  Governing Law. This  Agreement  shall be governed by and
construed  under the laws of the State of Delaware  without regard to principles
of conflicts or choice of laws.

                  2.3.  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.

                  2.4.  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.

                  2.5. 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  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 in the Stock  Purchase  Agreement,  or at such  other
address as such party may designate by ten (10) days' advance  written notice to
the other parties.

                  2.6. Expenses.  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.

                  2.7. Amendments and Waivers. Any term of this Agreement may be
amended and the  observance of any term of this  Agreement may be waived (either
generally or 


                                       14
<PAGE>
in a particular instance and either  retroactively or prospectively),  only with
the  written  consent  of the  Company  and the  Holders  of  two-thirds  of the
Registrable  Securities  then  outstanding.  Any amendment or waiver effected in
accordance  with this  Section  2.7  shall be  binding  upon each  Holder of any
Registrable  Securities  then  outstanding,  each  future  Holder  of  all  such
Registrable Securities, and the Company.

                  2.8. 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.

                  2.9. Nominees for Beneficial Owners. If Registrable Securities
are held by a nominee for the  beneficial  owner thereof,  the beneficial  owner
thereof  may,  at its  option,  be  treated  as the  Holder of such  Registrable
Securities  for purposes of any request or other action by any Holder or Holders
of Registrable  Securities  pursuant to this Agreement (or any  determination of
any number or percentage of shares constituting  Registrable  Securities held by
any Holder or Holders of Registrable Securities contemplated by this Agreement),
provided that the Company shall have received assurances reasonably satisfactory
to it of such beneficial ownership.

                  2.10.  Specific  Performance.  The parties hereto  acknowledge
that there would be no adequate  remedy at law if any party fails to perform any
of its obligations hereunder, and accordingly agree that each party, in addition
to any other  remedy to which it may be entitled  at law or in equity,  shall be
entitled to injunctive relief,  including specific performance,  to enforce such
obligations  without  the  posting of any bond,  and,  if any  action  should be
brought in equity to enforce any of the  provisions of this  Agreement,  none of
the parties  hereto shall raise the defense that there is an adequate  remedy at
law.

                  2.11. No Inconsistent  Agreements.  The Company represents and
warrants to S&N that the rights granted to the Holders of Registrable Securities
hereunder  do not in any way  conflict  with and are not  inconsistent  with any
other  agreements  to which  the  Company  is a party  or by which it is  bound.
Without  the  prior  written  consent  of  the  holders  of  two-thirds  of  the
Registrable  Securities  then  outstanding,  neither  the Company nor any Holder
will,  on or after the date of this  Agreement,  enter into any  agreement  with
respect to its securities which is inconsistent  with the rights granted in this
Agreement or otherwise  conflicts  with the  provisions  hereof,  other than any
lock-up  agreement  with the  underwriters  in  connection  with any  registered
offering  effected  hereunder,  pursuant to which the Company shall agree not to
register for sale, and the Company shall agree not to sell or otherwise  dispose
of,  Common  Stock  or  any  securities   convertible  into  or  exercisable  or
exchangeable  for Common Stock,  for a specified period following the registered
offering.  The  Company  further  agrees that if any other  registration  rights
agreement  entered into after the date of this  Agreement with respect to any of
its securities  contains terms which are more favorable to, or less  restrictive
on, the other party thereto than the terms and  conditions in this Agreement are
(insofar as they are  applicable to the Holders),  then the terms and conditions
of this  Agreement  shall  immediately  be deemed to have been  amended 

                                       15
<PAGE>
without  further  action by the  Company or any of the  Holders  of  Registrable
Securities so that the Holders shall be entitled to the benefit of any such more
favorable or less restrictive terms or conditions.

                  2.12. Entire Agreement. This Agreement (including the Exhibits
hereto,  if any)  constitutes  the full and entire  understanding  and agreement
between the parties with regard to the subjects hereof and thereof.



                  IN  WITNESS   WHEREOF,   the  parties   have   executed   this
Registration Rights 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 Avenue
                                           P.O. Box 6860
                                           Piscataway, NJ 08855



                                  SMITH & NEPHEW HOLDINGS, INC.


                                  By: /s/ P. David Southworth
                                      -----------------------
                                  Name:   P. David Southworth
                                  Title:  President
                                  Address: 1450 Brooks Road
                                           Memphis, TN 38116





                [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

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