PROMISSORY NOTE

$10,000,000                                                     March 31, 1997


FOR VALUE RECEIVED, the undersigned, ADVANCED TISSUE SCIENCES, INC., a
Delaware corporation ("ATS"), HEREBY PROMISES TO PAY, in lawful money of the
United States of America and in immediately available funds, or ATS Common
Stock (this and certain other capitalized terms used herein are defined in
Article 1 of this Note) at ATS' election in accordance with Section 2.3
hereof, to SMITH & NEPHEW SNATS, INC., a Delaware corporation ("S&N"), the
principal sum of TEN MILLION DOLLARS ($10,000,000), such principal to be
payable on the earlier of (i) March 31, 2000 or (ii) the date upon which ATS
and its Affiliates no longer have an ownership interest in the Dermagraft
Company as the result of exercise of rights under the Dermagraft Company
Formation Agreement by either party thereto in connection with (A) a material
default by ATS or its Affiliates under such agreement, (B) sale, assignment or
other transfer by ATS or its Affiliates of interests in the Dermagraft
Company, (C) withdrawal by ATS or its Affiliates from the Dermagraft Company
or (D) a change of control (as specified in the Dermagraft Company Formation
Agreement) of ATS or any ATS Affiliates having an ownership interest in the
Dermagraft Company.  ATS further agrees to pay interest in like money on the
unpaid principal amount hereof from time to time from the date hereof until
paid in full (both before and after a judgment).  Periodic interest ("Periodic
Interest") shall be paid on the unpaid principal amount hereof from time to
time at a fluctuating rate per annum equal to 1% per annum above the LIBOR
Rate, payable quarterly in arrears on the last Business Day of each Quarter,
commencing June 30, 1997, and upon payment in full of the unpaid principal
hereof.  In addition, deferred interest ("Deferred Interest") shall accrue on
the unpaid principal amount hereof at a rate equal to 3% per annum, and shall
be payable in U.S. dollars and in immediately available funds, or ATS Common
Stock at ATS' election in accordance with Section 2.3 hereof, on March 31,
2000, or upon payment in full of the unpaid principal hereof.  Upon the
occurrence and during the continuance of an uncured Event of Default, any
unpaid principal, Periodic Interest and Deferred Interest shall be payable
upon S&N's demand in U.S. dollars and in immediately available funds, or ATS
Common Stock at ATS' election in accordance with Section 2.3 hereof.
Notwithstanding the foregoing, interest payable hereunder shall not exceed the
maximum rate permitted by applicable law.


                                   ARTICLE I
                                  DEFINITIONS

     Section 1.1.     Definitions.  As used herein, the following terms shall
have the indicated meanings:

     "Affiliate" shall mean, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.

     "ATS" shall have the meaning specified in the first paragraph of this
Note.

     "ATS Common Stock" shall mean common stock, $.01 par value per share, of
ATS.

     "Business Day" shall mean any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Delaware, or is a day
on which banking institutions located in such state are required or authorized
by law or other governmental action to close.

     "Deferred Interest" shall have the meaning specified in the first
paragraph of this Note.


<PAGE>
      
     "Dermagraft Company" shall mean the "Company' as defined in the
Dermagraft Heads of Agreement.

     "Dermagraft Company Formation Agreement" shall mean the agreement, to be
executed by ATS or its Affiliate and S&N or its Affiliate, governing the
formation of the Dermagraft Company.

     "Dermagraft Heads of Agreement" shall mean the Heads of Agreement, dated
April 29, 1996, between ATS and Smith & Nephew plc.

     "Event of Default: shall mean any of the events described or listed in
Section 3.1 of this Note.

     "Indebtedness" shall mean (A) all indebtedness, obligations or other
liabilities for borrowed money or for the deferred purchase price of property
or services; (B) obligations as lessee under leases; (C) obligations under
direct or indirect guaranties, endorsements (other than for collection or
deposit in the ordinary course of business) and obligations (contingent or
otherwise) to purchase, repurchase or otherwise acquire or assure a creditor
against loss, in respect of indebtedness or obligations or to provide funds
for the payment or discharge thereof; (D) all indebtedness, obligations or
other liabilities evidenced by any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidence of indebtedness, secured or
unsecured, convertible, subordinated or otherwise or any other instruments
commonly known as "securities" and all indebtedness, obligations or other
liabilities evidenced by any subscription, agreement or other undertaking to
purchase or acquire any of the foregoing "securities"; (E) all reimbursement
obligations and other liabilities with respect to letters of credit; (F) all
indebtedness, obligations or other liabilities secured by a lien on any asset
of ATS or any subsidiary of ATS, whether or not such indebtedness, obligations
or liabilities are assumed by or are a personal liability of ATS or any
subsidiary of ATS, all as of such time; and (G) all indebtedness, obligations
or other liabilities in respect of interest rate contracts and foreign
currency exchange agreements.

     "LIBOR Rate" shall mean, as to interest payable for any Quarter, the rate
per annum listed in the Wall Street Journal under "Money Rates" as the three
month "London Interbank Offered Rates (LIBOR)" rate applicable for the first
Business Day of such Quarter, or if such rate is not published a reasonable,
comparable rate determined by S&N.

     "Note" shall mean this Promissory Note, as amended or modified from time
to time.

     "Periodic Interest" shall have the meaning specified in the first
paragraph of this Note.

     "Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental authority or regulatory body.

     "Quarter" shall mean any period of three calendar months ending on the
last day of March, June, September or December.

     "S&N" shall have the meaning specified in the first paragraph of this
Note.

     Section 1.2.     Terms.  Terms used in this Note shall be deemed to refer
to the masculine, feminine, neuter, singular or plural, as the identity of the
person or persons, firm or corporation may in the context require.

                                   -2-

<PAGE>

                                  ARTICLE II
                               TERMS OF PAYMENT

     Section 2.1.     Payments and Computations.

     (a)     ATS shall make each payment hereunder not later than 12:00 noon
(Delaware time) on the day when due, in lawful money of the United States and
immediately available funds, by wire transfer addressed to the account of
Smith & Nephew SNATS, Inc., Account No. 0921750, The First National Bank of
Chicago, ABA No. 071000013, by order of Advanced Tissue Sciences, Inc.

     (b)     Interest shall accrue from day to day and all computations of
interest shall be made by S&N on the basis of a year of 360 days and the
actual number of days elapsed.

     (c)     Whenever any payment to be made hereunder shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest.

     Section 2.2.     Prepayment.  ATS shall have the right to prepay the
unpaid principal outstanding under this Note, in whole or in part, at any time
and from time to time without penalty.

     Section 2.3.     Payment in ATS Common Stock.  (a)  In lieu of paying any
principal or interest payment hereunder in U.S. dollars, ATS may pay such
payment in shares of ATS Common Stock; provided, that each of the following
conditions is met:

     (i)  ATS provides S&N with at least thirty (30) days prior written notice
of ATS's election to make such payment in shares of ATS Common Stock;

     (ii)  each of the shares of ATS Common Stock issued to S&N as payment,
when delivered to S&N, (A) is duly registered under the Securities Act of
1933, as amended, and under any applicable state securities laws, (B) is
listed and freely tradeable on the Nasdaq Stock Market, and (C) is duly
authorized, validly issued, fully paid and nonassessable and free from any
lien (statutory or other), claim, charge, security interest, pledge, right of
first refusal, preemptive right or any other restriction or encumbrance of any
kind; and

     (iii)  at the time such payment is made, ATS Common Stock is actively
traded on the Nasdaq Stock Market.

     (b)     In the event that ATS pays any principal or interest payment in
shares of ATS Common Stock in accordance with Section 2.3(a), ATS will deliver
such shares to S&N on the day that the principal or interest is to be paid and
shall only deliver to S&N whole shares of such ATS Common Stock.  Such shares
shall be in good and transferable form, shall be registered in the name of S&N
or such other name as S&N shall designate and, at the option of S&N, shall be
delivered by wire transfer or book entry at a depository or clearing house
designated by S&N.

     (c)     For purposes of determining the number of shares of ATS Common
Stock payable for any principal or interest payment, such shares shall be
valued at the average of the high and low sales prices reported on the Nasdaq
Stock Market for each of the ten (10) trading days immediately preceding the
day such payment is made.

                                   -3-

<PAGE>

                                  ARTICLE III
                    EVENTS OF DEFAULT; RIGHTS AND REMEDIES

     Section 3.1.     Events of Default.  Each of the following occurrences 
shall constitute an Event of Default under this Note and any such Event of 
Default shall be deemed "continuing" until cured or waived in writing:

     (a)     Failure to Make Principal Payments When Due.ATS shall fail to pay
when due any principal under this Note and such failure shall continue for
more than ten (10) days after ATS receives notice of such failure;

     (b)     Failure to Make Interest Payments When Due.  ATS shall fail to
pay when due any interest under this Note and such failure shall continue for
more than ten (10) days after ATS receives notice of such failure;

     (c)     Breach Under Any Joint Venture Documents.  ATS, or any Affiliate
of ATS, shall have breached any of its representations and warranties,
covenants or other agreements contained in the Dermagraft Heads of Agreement,
the Dermagraft Company Formation Agreement or any other agreement or
instrument relating to the joint venture formed pursuant to the Dermagraft
Heads of Agreement, as any such agreement or instrument is amended from time
to time, and such breach shall continue for more than twenty (20) days after
ATS receives notice of the occurrence thereof; provided,that no such grace
period shall apply, and an Event of Default shall exist immediately upon such
breach, if such breach can not, in S&N's reasonable determination, be cured by
ATS or the applicable ATS Affiliate during such grace period;

     (d)     Other Defaults.  ATS shall default in the performance of or
compliance with any term contained in this Note (other than as covered by
subsection (a) or (b) above), and such default shall continue more than ten
(10) days after ATS receives notice of such default; provided,that no such
grace period shall apply, and an Event of Default shall exist immediately upon
such default, if such default can not, in S&N's reasonable determination, be
cured by ATS during such grace period;

     (e)     Default As To Other Indebtedness.  ATS or any of its Affiliates
shall fail to make any payment when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) on any Indebtedness
(whether of principal or interest thereon), other than under this Note, if the
aggregate amount of such Indebtedness is Five Hundred Thousand Dollars
($500,000) or more, and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Indebtedness if the effect of such failure is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any other material
default under any agreement or instrument relating to any such Indebtedness,
or any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of
such default or event is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness and such failure to make payment, default or
event has not been waived by the party or parties not in breach under such
agreement or instrument; or any such Indebtedness shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof; or the holder of
any lien, in any amount, shall commence foreclosure of such lien upon property
of ATS or any of its Affiliates having a value in excess of Five Hundred
Thousand Dollars ($500,000); provided that no such failure, default or event
referred to in this subsection (e) shall be an Event of Default if being
contested in good faith by appropriate proceedings which are sufficient to
prevent imminent foreclosure or attachment of any asset, are promptly
instituted and diligently conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with generally accepted
accounting principles, shall have been made therefor;

                                   -4-

<PAGE>
      
     (f)     Involuntary Bankruptcy; Appointment of Receiver, etc.  (i) An
involuntary case shall be commenced against ATS, and the petition shall not be
dismissed within sixty (60) days after commencement of the case, or a court
having jurisdiction in the premises shall enter a decree or order for relief
in respect of ATS, in an involuntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereinafter in effect; or any other
similar relief shall be granted under any applicable federal, state or foreign
law; or

     (ii)  A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over ATS, or over all or a
substantial part of the property of ATS, shall be entered; or an interim
receiver, trustee or other custodian of ATS, or of all or a substantial part
of the property of ATS, shall be appointed or a warrant of attachment,
execution or similar process against any substantial part of the property of
ATS, shall be issued and any such event shall not be stayed, vacated,
dismissed, bonded or discharged within sixty (60) days after entry,
appointment or issuance;

     (g)     Voluntary Bankruptcy. Appointment of Receiver, etc.  ATS shall
have an order for relief entered with respect to it or commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in
an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking of possession by a receiver, trustee or other custodian for all or a
substantial part of its property; ATS shall make any assignment for the
benefit of creditors or shall be unable or fail, or admit in writing its
inability, to pay its debts as such debts become due; or ATS shall take any
corporate action to authorize any of the foregoing; and

     (h)     Dissolution.  Any order, judgment or decree shall be entered 
against ATS decreeing its involuntary dissolution or split up and such order 
shall remain undischarged and unstayed for a period in excess of thirty (30) 
days; or ATS shall otherwise dissolve or cease to exist.

     Section 3.2.     Rights and Remedies.  Upon the occurrence of any Event
of Default described in the foregoing Section 3.1(e), 3.1(f) or 3.1(g) with
respect to ATS, the unpaid principal amount of and any and all accrued
interest on this Note shall automatically become immediately due and payable
in U.S. dollars and in immediately available funds, or ATS Common Stock at
ATS' election in accordance with Section 2.3 hereof, without presentment,
demand, or protest or other requirements of any kind (including, without
limitation, valuation and appraisement, diligence, presentment, notice of
intent to demand or accelerate and of acceleration), all of which are hereby
expressly waived by ATS; and upon the occurrence and during the continuance of
any other Event of Default, S&N may by written notice to ATS declare the
unpaid principal amount of and any and all accrued and unpaid interest on this
Note to be, and the same shall thereupon be, immediately due and payable in
U.S. dollars and in immediately available funds, or ATS Common Stock at ATS'
election in accordance with Section 2.3 hereof, without presentment, demand,
or protest or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to demand
or accelerate and of acceleration), all of which are hereby expressly waived
by ATS.  In addition to the foregoing, upon the occurrence of an Event of
Default, S&N may by written notice to ATS require that, in lieu of U.S.
dollars, ATS pay the unpaid principal amount of and any and all accrued
interest on this Note in ATS Common Stock in accordance with Section 2.3
hereof, provided that ATS has not paid such unpaid principal and accrued
interest either in U.S. dollars and in immediately available funds or in ATS
Common Stock.

                                   -5-

<PAGE>

                                  ARTICLE IV
                                 MISCELLANEOUS

     Section 4.1.     Amendments, etc.  No amendment or waiver of any
provision of this Note, nor consent to any departure by ATS herefrom, shall in
any event be effective unless the same shall be in writing and signed by S&N;
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

     Section 4.2.     Notices.  All notices, requests and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given when (a) delivered by hand, (b) sent by telecopier (with receipt
confirmed), provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by Express Mail,
Federal Express or other express delivery service (receipt requested), in each
case to the appropriate addresses and telecopier numbers set forth below or as
a party may designate as to itself by notice to the other parties):

     (a)     If to S&N:

     Smith & Nephew SNATS, Inc.
     One Commerce Center, Suite 788
     1201 North Orange Street
     Wilmington, Delaware 19801
     Attention:  President
     Telecopy:  (302) 884-6752

     with a copy to:

     Smith & Nephew North America
     1450 Brooks Road
     Memphis, Tennessee 38116
     Attention:  General Counsel
     Telecopy:  (901) 396-7824

     (b)     If to ATS:

     Advanced Tissue Sciences, Inc.
     10933 Torrey Pines Road
     La Jolla, California 92037
     Attention:  Vice President, Finance and Administration
     Telecopy:  (619) 450-5732

     with a copy to:

     Advanced Tissue Sciences, Inc.
     10933 Torrey Pines Road
     La Jolla, California 92037
     Attention:  Director, Legal Affairs
     Telecopy:  (619) 450-5732

     Section 4.3.     No Waiver; Remedies.  No failure on the part of S&N to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right.  The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.

                                   -6-

<PAGE>

     Section 4.4.     Costs and Expenses.  ATS agrees to pay on demand all
losses, costs and expenses, if any (including reasonable counsel fees and
expenses), in connection with the enforcement of this Note, including, without
limitation, costs and expenses sustained by S&N as a result of a default by
ATS in the performance of its obligations contained in this Note or any
document delivered in connection herewith.

     Section 4.5.     Binding Effect; Governing Law.  This Note shall be
binding upon and inure to the benefit of ATS and S&N and their respective
successors and assigns.  S&N may negotiate this Note or assign all or any
part, or any interest in, S&N's rights and benefits hereunder, to any
Affiliate of S&N or, in connection with the sale of substantially all of S&N's
or its Affiliates' assets, to any person acquiring such assets, and to the
extent of such negotiation or assignment the transferee or assignee shall have
no less rights and benefits against ATS than it would have had if it were S&N
hereunder. This Note shall be governed by, and construed in accordance with,
the laws of the State of Delaware.

     Section 4.6.     Severability of Provisions.  Any provision of this Note
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

     Section 4.7.     Headings.  The Article and Section headings of this Note
are for convenience of reference only and shall not, for any purpose, be
deemed a part of this Note.


     IN WITNESS WHEREOF, ATS has caused this Note to be executed in its name
by its duly authorized officer and its corporate seal to be affixed hereto.

                                   ADVANCED TISSUE SCIENCES, INC.


        [SEAL]

                                   By:_____________________________
                                    Name:  Michael V. Swanson
                                    Title: Vice President, Finance and
                                              Administration


                                  -7-