
<PAGE>   1
                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

         SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") dated
as of February 9, 1996, between QUEST MEDICAL, INC., a Texas corporation, having
its principal office at One Allentown Parkway, Allen, Texas 75002 ("Borrower"),
and NATIONSBANK OF TEXAS, N.A., a national banking association, having its
principal office at 901 Main Street, Dallas, Texas 75202 ("Lender").

                                   BACKGROUND

         Borrower and Lender have entered into (1) the Credit Agreement dated as
of October 22, 1993, and (2) the First Amended and Restated Credit Agreement
dated as of March 31, 1995 (as amended, the "First Restated Credit Agreement")
providing for a line of credit in the maximum principal amount of $5,000,000
("Existing Facility A"), the proceeds of which are to be used for working
capital purposes, and a $15,000,000 term facility ("Existing Facility B"), the
proceeds of which were used to acquire all capital stock of Neuromed, Inc., a
Florida corporation. Borrower has requested that Lender renew Existing Facility
A and restate Existing Facility B to provide a $15,000,000 term facility
("Facility B"), the proceeds of which will be used to make acquisitions subject
to the terms of this Agreement.

         In consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration, receipt of which is
acknowledged by all parties hereto, the parties agree as follows:

                                    AGREEMENT

ARTICLE I. DEFINITIONS

         1.1 Definitions. The terms defined in this Article I (except as
otherwise expressly provided in this Agreement) for all purposes shall have the
following meanings:

         "Account" has the meaning assigned to such term in the UCC.

         "Acquisition Documents" means all agreements and documents related to
each Permitted Acquisition.

         "Additional Costs" has the meaning set forth in Section 2.15.

         "Advance" means an advance by Lender to Borrower pursuant to Article
II, and refers to a Facility A Advance or Facility B Advance.
<PAGE>   2
         "Affiliate" means any Person that directly or indirectly through one or
more Persons Controls, or is Controlled By or Under Common Control with,
Borrower or a Person who Controls or is Controlled by, Borrower.

         "Allen Property" means the real property described on Schedule 2,
together with all improvements and equipment located thereon.

         "Applicable Law" means the Laws of the United States of America
applicable to contracts made or performed in the State of Texas, including,
without limitation, 12 USC Sections 85 and 86 as amended to the date
hereof and as the same may be amended at any time and from time to time
hereafter and any other statute of the United States of America now or at any
time hereafter prescribing maximum rates of interest on loans and extensions of
credit, and the Laws of the State of Texas, including, without limitation,
Articles 5069-l.04 and 5069-l.07 (a), Title 79, Revised Civil Statutes of Texas,
1925, as amended at any time and from time to time hereafter and any other
statute of the State of Texas now or at any time hereafter prescribing maximum
rates of interest on loans and extensions of credit ("Art. l.04").

         "Applicable Margin" means (a) with respect to Prime Advances, 0.25% per
annum and (b) with respect to LIBOR Advances, 2.00% per annum. Notwithstanding
the foregoing, after completion of the first full fiscal quarter after the
Effective Date, effective on the date of receipt (if such date is a Business Day
or, if the date of receipt is not a Business Day, effective on the next Business
Day) by Lender from Borrower of a Compliance Certificate delivered to Lender for
any reason and demonstrating a change in the Margin Ratio to an amount so that
another Applicable Margin should be applied pursuant to the table set forth
below, the Applicable Margin for each Type of Advance shall mean the respective
amount set forth below opposite such relevant Margin Ratio in Columns A and B
below, until the first succeeding Quarterly Date which is at least one Business
Day after receipt by Lender from Borrower of a Compliance Certificate,
demonstrating a change in the Margin Ratio to an amount so that another
Applicable Margin shall be applied; provided that the Applicable Margin shall
never be a negative number.

<TABLE>
<CAPTION>
                                                                  Column A                 Column B
Margin Ratio                                                      Prime Base Rate          LIBOR Rate
- ------------                                                      ---------------          ----------
<S>                      <C>     <C>                              <C>                      <C>  
Equal to or greater than 2.00 to 1.00                             0.25%                    2.00%
Greater than or equal to 1.50 to 1.00 but less than 2.00          0%                       1.75%
to 1.00
Less than 1.50 to 1.00                                            0%                       1.50%
</TABLE>

         "Art. 1.04" has the meaning given to such term in the definition of
Applicable Law in Article I.

         "Borrowing" means a borrowing under Facility A or Facility B of the
same Type made on the same day.

                                      -2-
<PAGE>   3
         "Borrowing Base" means, at the time in question, an amount equal to the
sum of (a) 80% of Eligible Accounts and (b) 50% of Eligible Inventory.

         "Borrowing Base Certificate" means a certificate, signed by a duly
authorized officer of Borrower, in the form of Exhibit K, appropriately
completed.

         "Borrowing Notice" has the meaning set forth in Section 2.3(a).

         "Business Days" means days other than (a) Saturdays, Sundays and other
legal holidays or (b) days on which banking institutions are authorized or
obligated to close in Dallas, Texas or, with respect to any notice, payment or
calculation related to a LIBOR Advance, London, England.

         "Capital Leases" means capital leases and subleases, as defined in the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 13, dated November 1976, as amended.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Collateral" means that property of Borrower or any other Person in
which Lender shall have Liens to secure payment and performance of the
Obligation.

         "Collateral Documents" means all security agreements, pledge agreements
and any other agreements or documents executed or delivered to secure repayment
of the Obligation or part thereof.

         "Compliance Certificate" means a certificate, signed by a duly
authorized officer of Borrower, in the form of Exhibit G, appropriately
completed.

         "Consequential Loss" means with respect to (a) Borrower's payment of
all or any portion of the then-outstanding principal amount of a LIBOR Advance
on a day other than the last day of the related Interest Period, including,
without limitation, payments made as a result of the acceleration of the
maturity of a Note pursuant to Section 7.2, and (b) any of the circumstances
specified in Sections 2.3(c), 2.6, 2.8 and 2.15 on which a Consequential Loss
may be incurred, any loss, cost or expense incurred by Lender as a result of the
timing of the payment of the Advance or in liquidating, redepositing,
redeploying or reinvesting the principal amount so paid or affected by the
timing of the Advance or the circumstances described in Sections 2.3(c), 2.6,
2.8 and 2.15, which amount shall be the sum of (i) the interest that, but for
the payment or timing of Advance, Lender would have earned in respect of that
principal amount, reduced, if Lender is able to redeposit, redeploy, or reinvest
the principal amount, by the interest earned by Lender as a result of
redepositing, redeploying or reinvesting the principal amount plus (ii) any
expense or penalty incurred by such Lender by reason of liquidating,
redepositing, redeploying or reinvesting the principal amount. Each
determination by Lender of any Consequential Loss is, in the absence of manifest
error, conclusive and binding.

                                      -3-
<PAGE>   4
         "Continue," "Continuation" and "Continued" each refer to the
continuation pursuant to Section 2.11 of a LIBOR Advance from one Interest
Period to the next Interest Period.

         "Control" or "Controlled By" or "Under Common Control" mean possession,
direct or indirect, of power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or
otherwise); provided that, in any event (a) any Person which beneficially owns
20% or more (in number of votes) of the securities having ordinary voting power
for the election of directors of a corporation shall be presumed to control such
corporation, and (b) no Person shall be deemed to be an Affiliate of a
corporation solely by reason of his being an officer or director of such
corporation.

         "Conversion or Continuance Notice" has the meaning set forth in Section
2.11.

         "Current Maturities" means, for Borrower and its Subsidiaries,
determined in accordance with GAAP on a consolidated basis, scheduled principal
payments in respect of Term Debt, due within the twelve consecutive months
preceding the date of determination.

         "Current Maturities Coverage Ratio" means the ratio of (a) Net Earnings
Available for Current Maturities to (b) Current Maturities.

         "Debt" means, with respect to any Person, all debt, obligations and
liabilities of such Person, including without limitation, (a) all "liabilities"
which would be reflected on a balance sheet of such Person, prepared in
accordance with GAAP, (b) all obligations of such Person in respect of any
Guaranty, (c) all obligations of such Person in respect of any Capital Lease,
(d) all obligations, debt and liabilities secured by any Lien on any property or
assets of such Person and (e) all obligations of such Person in respect of
letters of credit, acceptances or similar obligations issued or created for the
account of such Person.

         "Debt for Borrowed Money" means, as to any Person, at any date, without
duplication, (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (d) all obligations of such Person in respect
of any Guaranty, (e) all obligations of such Person in respect of any Capital
Lease, and (f) all obligations, debt and liabilities secured by any Lien on any
property or assets of such Person.

         "Debtor Relief Laws" means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, fraudulent conveyance, insolvency,
reorganization or similar debtor relief Laws relating to the enforcement of
creditors' rights generally from time to time in effect.

                                      -4-
<PAGE>   5
         "Default" means any of the events specified in Section 7.1, whether or
not there has been satisfied any requirement in connection with such event for
the giving of notice, or the lapse of time, or the happening of any further
condition, event or act.

         "Device" has the meaning set forth in the FDA Act.

         "Distribution" means, as to any Person, (a) any declaration or payment
of any distribution or dividend (other than a stock dividend) on, or the making
of any pro rata distribution, loan, advance, or investment to or in any holder
(in its capacity as a partner, shareholder or other equity holder) of, any
partnership interest or shares of capital stock or other equity interest of such
Person, or (b) any purchase, redemption, or other acquisition or retirement for
value of any shares of partnership interest or capital stock or other equity
interest of such Person.

         "Dollars" and the sign "$" mean lawful money of the United States of
America.

         "Drug" has the meaning set forth in the FDA Act.

         "EBITDA" means, as of any date of determination, the sum of Borrower's
and its Subsidiaries' (a) pre-tax income or deficit, as the case may be
(excluding extraordinary items (including but not limited to capitalized finance
costs incurred in 1995 in the amount of $407,442 and purchased research and
development expense incurred in 1995 in the amount of $10,500,000) and income
from the sale of assets other than in the ordinary course of business), plus (b)
cash interest expense paid; amortization of Debt discounts; any payments or fees
with respect to letters of credit, bankers' acceptances or similar facilities;
fees and expenses with respect to interest rate swap or similar agreements or
foreign currency hedge, exchange or similar agreements, plus (c) consolidated
depreciation and amortization expense, all calculated on a consolidated basis in
accordance with GAAP, plus (d) with respect to any calculation including the
period from March 31, 1995 through December 31, 1995, research and development
expense related to the myocardial protection system developed by Borrower and
for which Borrower has applied for the trademark "MPS", and related Devices,
determined for the four fiscal quarters preceding the date of calculation.

         "Effective Date" means February 9, 1996.

         "Eligible Accounts" means at the time of any determination thereof,
each Account as to which the following requirements have been fulfilled to the
satisfaction of Lender:

                  (a) Borrower or a Subsidiary of Borrower has lawful and
         absolute title to such Account;

                  (b) Such Account is a valid, legally enforceable obligation of
         the Person who is obligated under such Account (the "account debtor")
         for goods or services delivered or rendered to such Person;

                                      -5-
<PAGE>   6
                  (c) There has been excluded from such Account any portion that
         is subject to any dispute, offset, counterclaim or other claim or
         defense on the part of the account debtor or to any claim on the part
         of the account debtor denying liability under such Account;

                  (d) Borrower or a Subsidiary of Borrower has full and
         unqualified right to assign and grant a security interest in such
         Account to Lender as security for the Obligation;

                  (e) Such Account is payable in Dollars and is evidenced by an
         invoice rendered to the account debtor and such Account is not
         evidenced by any chattel paper, promissory note or other instrument;

                  (f) Such Account is subject to a fully perfected first
         priority security interest in favor of Lender pursuant to the Loan
         Papers, prior to the rights of, and enforceable as such against, any
         other Person (including holders of a purchase money security interest);

                  (g) If the account debtor in respect of such Account is either
         located outside the United States of America or primarily conducts
         business in a jurisdiction outside the United States of America, or if
         the goods or services sold giving rise to such Account are to be
         delivered or performed outside of the United States of America, (i) the
         account debtor is located in a province of the Dominion of Canada in
         which all actions necessary to perfect a first priority security
         interest in all Collateral in favor of Lender have occurred, (ii) the
         entire amount of the payment obligation represented by such Account is
         secured by either (A) an irrevocable Dollar-denominated commercial
         letter of credit issued or confirmed by a financial institution (1) the
         short-term debt obligations of which have the same or higher rating, as
         established by either Standard & Poor's Corporation or Moody's
         Investors Service, Inc., as comparable obligations of Lender, (2) the
         short-term obligations of the holding company of such financial
         institution have the same or higher rating, as established by Standard
         & Poor's Corporation or Moody's Investors Service, Inc., as comparable
         obligations of NationsBank Corporation (if either or both of such
         financial institution and Lender do not have outstanding comparable
         short-term obligations or such obligations are not rated), or (3)
         acceptable to Lender (if (A) either or both of such financial
         institution and Lender and (B) either or both of the holding company of
         such financial institution and NationsBank Corporation do not have
         outstanding comparable short-term obligations or such obligations are
         not rated), the proceeds of which letter of credit have been assigned
         to Lender or which letter of credit shall specifically provide that
         payment thereunder shall be made solely to an account maintained by
         Borrower at Lender (which account and all property on deposit therein
         has been assigned to Lender), or (B) a receivables insurance policy
         issued by ExImBank or a private insurance company acceptable to Lender
         and ExImBank, in either case, the proceeds of which policy have been
         assigned to Lender;

                                      -6-
<PAGE>   7
                  (h) Such Account is not subject to any Lien in favor of any
         Person other than the Lien of Lender pursuant to the Loan Papers;

                  (i) Such Account has not been due and payable for more than 90
         days from the invoice date; and

                  (j) No account debtor in respect of such Account is (i) any
         Tribunal, domestic or foreign; provided, for purposes of determining
         "Eligible Account", "Tribunal" shall not include any government or
         university, medical department of any government or university or
         hospital associated with any government or university located in the
         United States of America, (ii) the subject of a proceeding under any
         Debtor Relief Laws, or (iii) the United States of America or any state;

provided, that, unless Lender agrees otherwise, no Accounts payable by an
account debtor shall constitute Eligible Accounts if 10% or more of the
aggregate dollar amount of all Accounts owed to Borrower by such account debtor
have been due and payable for 91 days or more from their respective invoice
dates.

         "Eligible Inventory" means, at the time of any determination thereof,
each item of Inventory (excluding work-in-progress) valued at the lower of cost
or market value, as to which the following requirements have been fulfilled to
the satisfaction of Lender:

                  (a) Borrower or a Subsidiary of Borrower has lawful and
         absolute title to such Inventory;

                  (b) Such Inventory is subject to a fully perfected first
         priority security interest in favor of Lender pursuant to the Loan
         Papers, prior to the rights of, and enforceable as such against, any
         other Person (including holders of a purchase money security interest);

                  (c) Such Inventory is (i) neither adulterated nor misbranded,
         (ii) not the subject of any pending or threatened proceeding or action
         by FDA or other Tribunal seeking the recall, seizure or condemnation or
         the prohibition of the sale, use or distribution of such Inventory,
         (iii) properly registered with FDA (if such registration is required),
         (iv) produced at an Establishment registered with FDA (if such
         registration is required), (v) not subject to any restriction on the
         distribution, sale or use by Lender or any purchaser at any foreclosure
         sale or other realization on the Collateral and (vi) not a Drug;

                  (d) Such Inventory was produced in compliance with the FDA Act
         and the Fair Labor Standards Act and related rules and regulations;

                                      -7-
<PAGE>   8
                  (e) Such Inventory is located at 5000-A Oakes Road, Fort
         Lauderdale, Florida, 2930-G and 2930-H Grace Lane, Costa Mesa,
         California or One Allentown Parkway, Allen, Texas.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

         "Establishment" has the meaning set forth in 21 CFR Section 807.3.

         "Event of Default" means the occurrence of any of the events specified
in Section 7.1, provided there has been satisfied any requirement in connection
with such event for the giving of notice, or the lapse of time, or the happening
of any further condition, event or act.

         "ExImBank" means Export-Import Bank of the United States, an agency of
the United States of America, and any successor entity.

         "Existing Facility A" has the meaning set forth in the Background
section.

         "Existing Facility B" has the meaning set forth in the Background
section.

         "Facility A Advance" means an Advance described in Section 2.1 to be
made from time to time by Lender to Borrower.

         "Facility A Commitment" means $5,000,000, as the same may be reduced or
terminated pursuant to Sections 2.7(b) and 2.8.

         "Facility A Commitment Fee" has the meaning set forth in Section
2.5(a).

         "Facility A Note" means the promissory note of Borrower payable to the
order of Lender, in substantially the form of Exhibit A, and any and all
renewals, extensions, modifications and amendments thereof and substitutions
therefor.

         "Facility A Termination Date" means December 31, 1997, or such earlier
date that the Facility A Commitment is terminated.

         "Facility B Advance" means an Advance described in Section 2.2 to be
made from time to time by Lender to Borrower.

         "Facility B Advance Note" means the promissory note of Borrower payable
to the order of Lender, in substantially the form of Exhibit B, and any and all
renewals, extensions, modifications and amendments thereof and substitutions
therefor.

                                      -8-
<PAGE>   9
         "Facility B Commitment" means $15,000,000, as the same may be reduced
or terminated pursuant to Sections 2.7(b) and 2.8.

         "Facility B Commitment Fee" has the meaning set forth in Section
2.5(b).

         "Facility B Note" means the Facility B Advance Note and each Facility B
Term Note.

         "Facility B Term Note" means each promissory note of Borrower payable
to the order of Lender, in substantially the form of Exhibit C, and any and all
renewals, extensions, modifications and amendments thereof and substitutions
therefor.

         "Facility B Termination Date" means December 31, 1997, or such earlier
date that the Facility B Commitment is terminated.

         "FDA" means the Food and Drug Administration and any successor.

         "FDA Act" means the Federal Food, Drug and Cosmetic Act, 21
USCSection301, et seq, and all amendments and successors thereto.

         "Financial Statements" means with respect to Borrower and its
Subsidiaries, consolidated and consolidating balance sheets, consolidated and
consolidating profit and loss statements, reconciliation of capital and surplus
(prepared as to fiscal quarters and fiscal years, only), and statements of cash
flow.

         "First Restated Credit Agreement" has the meaning specified in the
Background section.

         "Fixed Charges" means the sum of, for Borrower and its Subsidiaries,
determined in accordance with GAAP on a consolidated basis, (a) interest expense
(including interest expense pursuant to Capital Leases), plus (b) lease expense
payable for Operating Leases, determined for the four fiscal quarters preceding
the date of calculation.

         "Fixed Charges Coverage Ratio" means the ratio of Net Earnings
Available for Fixed Charges to Fixed Charges.

         "GAAP" means generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board, which are applicable in the
circumstances as of the date in question, and the requirement that such
principles be applied on a consistent basis shall mean that the accounting
principles observed in a current period are comparable in all material respects
to those applied in a preceding period. Unless otherwise indicated herein, all
accounting terms will be defined according to GAAP.

                                      -9-
<PAGE>   10
         "Government Securities" means direct obligations of the United States
of America or any agency thereof, or obligations fully guaranteed by the United
States of America or any agency thereof.

         "Guaranty" of any Person means any contract, agreement or understanding
of such Person pursuant to which such Person guarantees, or in effect
guarantees, any Debt of any other Person in any manner, whether directly or
indirectly; except that "Guaranty" shall not include the endorsement by such
Person in the ordinary course of business of negotiable instruments or documents
for deposit or collection.

         "Guaranty Agreement" means a Guaranty Agreement in the form of Exhibit
H, or, if executed in connection with the First Restated Credit Agreement, a
Guaranty Agreement (as that term is defined in the First Restated Credit
Agreement).

         "hereof", "hereto", "hereunder" and similar terms refer to this
Agreement and not to any particular section or provision of this Agreement.

         "Highest Lawful Rate" means at the particular time in question the
maximum rate of interest which, under Applicable Law, Lender is then permitted
to charge on the Obligation. If the maximum rate of interest which, under
Applicable Law, Lender is permitted to charge on the Obligation shall change
after the date hereof, the Highest Lawful Rate shall be automatically increased
or decreased, as the case may be, from time to time as of the effective time of
each change in the Highest Lawful Rate without notice to Borrower. For purposes
of determining the Highest Lawful Rate under the Applicable Law of the State of
Texas, the applicable rate ceiling shall be (a) the indicated rate ceiling
described in and computed in accordance with the provisions of Section (a)(l) of
Art. l.04; or (b) provided notice is given as required in Section (h)(1) of said
Art. l.04, the quarterly ceiling computed pursuant to Section (d) of said Art.
l.04; provided, however, that at any time the indicated rate ceiling, the
annualized ceiling or the quarterly ceiling, as applicable, shall be less than
18% per annum or more than 24% per annum, the provisions of Sections (b)(1) and
(2) of said Art. l.04 shall control for purposes of such determination, as
applicable.

         "Indemnitee" has the meaning set forth in Section 4.13.

         "Interest Period" means, with respect to any LIBOR Advance, the period
beginning on the date the Advance is made or continued as a LIBOR Advance and
ending one, two, three or six months thereafter (as Borrower shall select);
provided, however, that:

                  (a) Borrower may not select any Interest Period that ends
         after any principal repayment date (including the Facility A
         Termination Date, the Facility B Termination Date (with respect to
         Advances evidenced by the Facility B Advance Note), and the Maturity
         Date of the respective Facility B Term Note) unless, after giving
         effect to such selection, the aggregate principal amount of LIBOR
         Advances having Interest Periods that 

                                      -10-
<PAGE>   11
         end on or prior to such principal repayment date, shall be at least
         equal to the principal amount of Advances due and payable on and prior
         to such date;

                  (b) whenever the last day of any Interest Period would
         otherwise occur on a day other than a Business Day, the last day of
         such Interest Period shall be extended to occur on the next succeeding
         Business Day; provided, however, that if such extension would cause the
         last day of such Interest Period to occur in the next following
         calendar month, the last day of such Interest Period shall occur on the
         next preceding Business Day; and

                  (c) no Interest Period for a Facility A Advance may extend
         beyond the Facility A Termination Date, no Interest Period for a
         Facility B Advance may extend beyond the Facility B Termination Date
         (with respect to Advances evidenced by the Facility B Advance Note),
         and the Maturity Date of the respective Facility B Term Note.

         "Inventory" has the meaning assigned to such term in the UCC.

         "Investment" in any Person means any investment, whether by means of
share purchase, loan, advance, extension of credit, capital contribution or
otherwise, in or to such Person, the Guaranty of Debt of such Person or the
subordination of any claim against such Person to other Debt of such Person.

         "Laws" means all statutes, laws, ordinances, regulations, orders,
writs, injunctions, or decrees of the United States, any state or commonwealth,
any municipality, any foreign country, any territory or possession, or any
Tribunal.

         "Lending Office" means, with respect to Lender, its branch or
affiliate, (i) initially, the office of Lender, branch or affiliate identified
as such in Section 8.4(b), and (ii) subsequently, such other office of Lender,
branch or affiliate as Lender may designate to Borrower as the office from which
the Advances of Lender will be made and maintained and for the account of which
all payments of principal and interest on the Advances and the Commitment Fee
will thereafter be made. Lender may have more than one Lending Office for the
purpose of making Prime Advances and LIBOR Advances.

         "LIBOR Advance" means an Advance bearing interest at the LIBOR Rate.

         "LIBOR Rate" means a simple per annum interest rate equal to the lesser
of (a) the Highest Lawful Rate, and (b) the sum of the LIBOR Rate Basis plus the
Applicable Margin. The LIBOR Rate shall, with respect to LIBOR Advances subject
to reserve or deposit requirements, be subject to premiums assessed therefor by
Lender, which are payable directly to Lender. Once determined, the LIBOR Rate
shall remain unchanged during the applicable Interest Period.

         "LIBOR Rate Basis" means, for any Interest Period, the interest rate
per annum (rounded upward to the nearest 1/16th of one percent) determined by
Lender at approximately 9:00 a.m., 

                                      -11-
<PAGE>   12
on the date which is two Business Days before the first day of such Interest
Period to be the offered quotations that appear on the Reuter's Screen LIBO page
for dollar deposits in the London interbank market for a length of time
approximately equal to the Interest Period for the LIBOR Advance sought by
Borrower. If at least two such offered quotations appear on the Reuter's Screen
LIBO page, the LIBOR Rate shall be the arithmetic mean (rounded upward to the
nearest 1/16th of one percent) of such offered quotations, as determined by
Lender. If the Reuter's Screen LIBO page is not available or has been
discontinued, the LIBOR Rate Basis shall be the rate per annum that Lender
determines to be the arithmetic mean (rounded as aforesaid) of the per annum
rates of interest at which deposits in dollars in an amount approximately equal
to the principal amount of, and for a length of time approximately equal to the
Interest Period for, the LIBOR Advance sought by Borrower are offered to Lender
in immediately available funds in the London interbank market at 11:00 a.m.,
London time, on the date which is two Business Days prior to the first day of an
Interest Period.

         "Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any agreement to give or not to give any of the
foregoing), any conditional sale or other title retention agreement, any lease
in the nature thereof, and the filing of or agreement to give any financing
statement.

         "Listed Debt" means any debt security (the issuer of which is a
corporation organized under the laws of any of the United States of America)
rated, at any date of determination, any one of the three highest ratings by
Standard & Poor's Corporation or Moody's Investors Service, Inc., each regularly
traded on the New York Stock Exchange or the American Stock Exchange.

         "Listed Securities" means any equity security regularly traded on the
New York Stock Exchange or the American Stock Exchange.

         "Litigation" means any proceeding, claim, lawsuit and/or investigation
conducted or, to the knowledge of Borrower, threatened by or before any
Tribunal, including, but not limited to, proceedings, claims, lawsuits, and/or
investigations under or pursuant to any environmental, occupational, safety and
health, antitrust, unfair competition, securities, Tax, or other Law, or under
or pursuant to any contract, agreement or other instrument.

         "Loan Papers" means this Agreement, the Notes, any agreement securing
or assuring performance of the Obligation and all other agreements, certificates
and documents delivered by Borrower hereunder or any other Person pursuant
hereto.

         "Margin Ratio" means the ratio, as at any date of determination, of (a)
the sum of the aggregate unpaid principal of all outstanding Advances, plus all
accrued, unpaid interest on all Advances, plus the amount of all other
Obligations, to (b) EBITDA.

         "Material Adverse Change or Effect" means any act or circumstance which
(a) would be material and adverse to the combined financial condition, business
operations or prospects of 

                                      -12-
<PAGE>   13
Borrower and its Subsidiaries or any other Obligor, (b) in any material manner
whatsoever would adversely affect the validity or enforceability of any of the
Loan Papers or (c) in any material manner impairs the value of any material
portion of the Collateral.

         "Maturity Date" means, with respect to each Facility B Term Note, the
date five years after the date of such Facility B Term Note.

         "Maximum Amount" means the maximum amount of interest which, under
Applicable Law, Lender is permitted to charge on the Obligation.

         "NationsBank" means NationsBank of Texas, N.A., a national banking
association.

         "Net Earnings Available for Current Maturities" means, for Borrower and
its Subsidiaries, determined in accordance with GAAP on a consolidated basis,
(a) Net Income, plus depreciation and amortization and other non-cash charges,
plus (b) extraordinary non-cash charges (including but not limited to
capitalized finance costs incurred in 1995 in the amount of $407,442 and
purchased research and development expense incurred in 1995 in the amount of
$10,500,000), plus (c) with respect to any calculation including the period from
March 31, 1995 through December 31, 1995, research and development expense
related to the myocardial protection system developed by Borrower and for which
Borrower has applied for the trademark "MPS", and related Devices, determined
for the four fiscal quarters preceding the date of calculation.

         "Net Earnings Available for Fixed Charges" means, for Borrower and its
Subsidiaries, determined in accordance with GAAP on a consolidated basis, (a)
Net Income before Taxes, plus (b) extraordinary non-cash charges (including but
not limited to capitalized finance costs incurred in 1995 in the amount of
$407,442 and purchased research and development expense incurred in 1995 in the
amount of $10,500,000), plus (c) interest expense (including interest expense
pursuant to Capital Leases), plus (d) with respect to any calculation including
the period from March 31, 1995 through December 31, 1995, research and
development expense related to the myocardial protection system developed by
Borrower and for which Borrower has applied for the trademark "MPS", and related
Devices, plus (e) lease expense pursuant to Operating Leases, determined for the
four fiscal quarters preceding the date of calculation.

         "Net Income" means, for Borrower and its Subsidiaries, determined in
accordance with GAAP on a consolidated basis, net profit or loss.

         "Neuromed" means Neuromed, Inc., a Florida corporation.

         "Neuromed Agreement" means the Agreement for the Purchase and Sale of
All of the Issued Capital Stock of Neuromed, Inc. dated February 10, 1995,
between Borrower and William Borkan.

         "Notes" means the Facility A Note and the Facility B Notes.

                                      -13-
<PAGE>   14
         "Obligations" means all present and future obligations, indebtedness
and liabilities, and all renewals and extensions of all or any part thereof, of
Borrower and each Obligor to Lender arising from, by virtue of, or pursuant to
this Agreement, any of the other Loan Papers and any and all renewals and
extensions thereof or any part thereof, or future amendments thereto, all
interest accruing on all or any part thereof and reasonable attorneys' fees
incurred by Lender for the administration, execution of waivers, amendments and
consents, and in connection with any restructuring, workouts or in the
enforcement or the collection of all or any part thereof, whether such
obligations, indebtedness and liabilities are direct, indirect, fixed,
contingent, joint, several or joint and several. Without limiting the generality
of the foregoing, "Obligations" includes all amounts would be owed by Borrower,
each other Obligor and any other Person (other than Lender) to Lender under any
Loan Paper, but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
Borrower, any other Obligor or any other Person (including all such amounts
which would become due or would be secured but for the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding of Borrower, any other Obligor or any other Person under any Debtor
Relief Law).

         "Obligor" means (a) Borrower, (b) each other Person (other than Lender)
liable for performance of any of the obligations under the Loan Papers and (c)
each other Person the property of which secures the performance of any of the
obligations under the Loan Papers.

         "Operating Leases" means operating leases, as defined in the Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 13,
dated November 1976, as amended.

         "PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.

         "Permitted Acquisition" means the acquisition by Borrower or a
Subsidiary of Borrower of (a) all of the outstanding equity interest of any
Person or (b) all or a portion of the assets of any Person; provided, (i) the
board of directors of such Person has approved such acquisition and such
approval has not been revoked, and (ii) such Person or the assets of such Person
the subject of the proposed acquisition are used in the research, development,
design, production or marketing of Devices.

         "Permitted Investments" means Government Securities, Listed Debt,
Listed Securities and State Securities; provided Investments in Listed
Securities of a single issuer shall not exceed 25% of the outstanding equity
having voting rights of such issuer.

         "Permitted Liens" means: (a) Liens granted to Lender to secure the
Obligation, (b) Liens in assets of Borrower or a Subsidiary of Borrower which
assets are not required by the Loan Papers to be subject to a Lien in favor of
Lender or which are not required by the Loan Papers to not be 

                                      -14-
<PAGE>   15
subject to a Lien in favor of any Person, (c) Liens in the Allen Property to the
extent such Liens do not cover or purport to cover any asset of Borrower which
is subject to a Lien in favor of Lender, (d) pledges or deposits made to secure
payment of worker's compensation or occupational injury insurance (or to
participate in any fund in connection with worker's compensation or occupational
injury insurance), unemployment insurance, pensions or social security programs
or to secure performance of bids, tenders, contracts or leases, or to secure
statutory obligations, surety or appeal bonds, or indemnity, performance or
similar bonds in the ordinary course of business, (e) Liens imposed by mandatory
provisions of law such as for materialmen's, mechanics', warehousemen's and
other like Liens arising in the ordinary course of business, securing
indebtedness whose payment is not yet due or which are being contested in good
faith and as to which adequate cash reserves established in accordance with GAAP
have been provided, (f) Liens for taxes, assessments and governmental charges or
levies imposed upon a Person or upon such Person's income or profits or
property, if the same are not yet due and payable or if the same are being
contested in good faith and as to which adequate cash reserves have been
provided, (g) Liens in favor of MetLife Capital Corporation or its affiliates
upon the Allen Property in existence and of record on March 31, 1995, provided
such Liens do not secure Debt in excess of the amount of such Debt on March 31,
1995, as reduced by payments on and after March 31, 1995, or (h) Liens to secure
Borrower's or any Subsidiary's of Borrower obligations under lease agreements
related to the real property and improvements located at 5000-A Oakes Drive,
Fort Lauderdale, Florida and 2930-G and 2930-H Grace Lane, Costa Mesa,
California, or any reasonably comparable lease agreements entered into as
replacements for or expansion of such lease agreements.

         "Permitted Venture" means any Investment in any Person; provided, (a)
such Person has not conducted any operations (other than corporate, partnership
or joint venture organizational operations) prior to Borrower's Investment in
such Person, and (b) such Person's sole business shall be the design,
development, manufacture and/or marketing of Devices.

         "Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization, and a government or any department, Tribunal, agency or political
subdivision thereof.

         "Plan" means an employee benefit plan or other plan maintained by
Borrower for employees of Borrower covered by Title IV of ERISA, or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code of
1986, as amended ("Code").

         "Prime Advance" means an Advance bearing interest at the Prime Rate.

         "Prime Base Rate" means the prime interest rate charged by NationsBank
as announced or published by NationsBank from time to time as its prime rate,
and which may not be the lowest interest rate charged by NationsBank.

                                      -15-
<PAGE>   16
         "Prime Rate" means, with respect to each Prime Advance, a rate per
annum equal to the lesser of (a) the sum of (i) the Prime Base Rate, plus (ii)
the Applicable Margin and (b) the Highest Lawful Rate.

         "Principal Office" means the principal office of Lender located at 901
Main Street, Dallas, Texas 75202.

         "Quarterly Date" means March 31, June 30, September 30 and December 31.

         "Refinancing Advance" means an Advance which is used to pay the
principal of an existing Advance at the end of its Interest Period and which,
after giving effect to such application, does not result in an increase in the
aggregate outstanding amount of Advances.

         "Regulatory Modification" has the meaning set forth in Section 2.15.

         "Reportable Event" has the meaning specified in Title IV of ERISA.

         "Rights" means rights, remedies, powers and privileges.

         "Solvent" means, with respect to a particular date, that on such date
(a) the fair value of the property of a Person is greater than the total amount
of liabilities, including, without limitation, contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person is able
to realize upon its assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, or believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital after giving
due consideration to the prevailing practice in the industry in which such
Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or material
liability.

         "Special Counsel" means the law firm of Donohoe, Jameson & Carroll,
P.C., Dallas, Texas, Special Counsel to Lender, and each other attorney or law
firm representing Lender.

         "State Securities" means direct obligations of any state or political
subdivision thereof, rated, at any date of determination, A-1 or P-1 by Standard
& Poor's Corporation or Moody's Investors Service, Inc.

                                      -16-
<PAGE>   17
         "Subsidiary" of any Person means any corporation, limited liability
company, partnership, joint venture, trust or estate of which (or in which) more
than 50% of: (a) the outstanding capital stock having voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership or joint venture, or
(c) the beneficial interest of such trust or estate, is at the time directly or
indirectly owned by such Person, by such Person and one or more of its
Subsidiaries or by one or more of such Person's Subsidiaries.

         "Tangible Net Worth" means, with respect to Borrower, shareholders'
equity, as shown on a balance sheet prepared in accordance with GAAP on a
consolidated basis, less the aggregate book value of intangible assets shown on
such balance sheet (provided, goodwill shall not be used in any determination of
"Tangible Net Worth" if goodwill is shown on the balance sheet as a negative
number, provided further that goodwill shown on the balance sheet as a positive
number shall be deducted in determining "Tangible Net Worth").

         "Taxes" means all taxes, assessments, fees or other charges from time
to time or at any time imposed by any Laws or by any Tribunal.

         "Term Debt" means debt for borrowed money the original scheduled
maturity of the last installment of which was more than twelve months after the
date borrowed.

         "Total Liabilities" means all liabilities of Borrower which would be
classified as total liabilities on a balance sheet prepared in accordance with
GAAP on a consolidated basis.

         "Tribunal" means any state, commonwealth, federal, foreign,
territorial, or other court or governmental department, commission, board,
bureau, agency or instrumentality.

         "Type" refers to the distinction between Advances bearing interest at
the Prime Rate and LIBOR Rate.

         "UCC" means the Uniform Commercial Code of Texas, as amended.

         "Unrestricted Cash" means all cash, Government Securities, Listed Debt,
Listed Securities and State Securities owned by Borrower which are not subject
to any Lien.

         1.2 Accounting and Other Terms. All accounting terms used in this
Agreement which are not otherwise defined herein shall be construed in
accordance with GAAP consistently applied on a consolidated basis for Borrower
and its Subsidiaries, unless otherwise expressly stated herein. If after the
Effective Date any change in GAAP applicable to Borrower or its Subsidiaries
results in a change in the manner of any calculation under the Loan Papers,
Borrower and Lender shall negotiate amendments to the Loan Papers to accommodate
such changes in GAAP. References herein to one gender shall be deemed to include
all other genders. Except where the 

                                      -17-
<PAGE>   18
context otherwise requires, (a) definitions imparting the singular shall include
the plural and vice versa and (b) all references to time are deemed to refer to
Dallas time.

ARTICLE II. ADVANCES

         2.1 Facility A Advances. Lender agrees, upon the terms and subject to
the conditions of this Agreement, to make Facility A Advances to Borrower from
time to time from the Effective Date to the Facility A Termination Date;
provided, however, that immediately after giving effect to each Facility A
Advance pursuant to this Section 2.1, the aggregate principal amount of the
Facility A Advances shall at no time exceed the lesser of (a) the Facility A
Commitment and (b) the Borrowing Base.

         2.2 Facility B Advances. Lender agrees, upon the terms and subject to
the conditions of this Agreement, to make Facility B Advances to Borrower from
time to time from the Effective Date to the Facility B Termination Date;
provided, however, that (a) immediately after giving effect to each Facility B
Advance pursuant to this Section 2.2, the aggregate principal amount of the
Facility B Advances shall at no time exceed the Facility B Commitment, and (b)
each reborrowing of a Facility B Advance may be made only as a Refinancing
Advance.

         2.3 Manner of Borrowing.

         (a) Each Borrowing of Advances shall be made upon the written notice of
Borrower, received by Lender (i) not later than 12:00 noon three Business Days
prior to the date of the proposed Borrowing, in the case of LIBOR Advances; and
(ii) not later than 11:00 a.m. on the date of such Borrowing, in the case of
Prime Advances. Each such notice of a Borrowing (a "Borrowing Notice") shall be
by telecopy or telex, promptly confirmed by letter, in substantially the form of
Exhibit I specifying therein:

                  (i) the date of such proposed Borrowing, which shall be a
         Business Day;

                  (ii) whether such Borrowing is requested to be made under
         Facility A or Facility B;

                  (iii) the amount of such proposed Borrowing which, (A) shall
         not exceed the unused portion of the Facility A Commitment or Facility
         B Commitment, as appropriate, (B) shall not, in the case of Facility A
         Advances, when added to the aggregate principal of outstanding Facility
         A Advances, exceed the Borrowing Base, (C) shall, in the case of a
         Borrowing of LIBOR Advances, be in an amount of not less than $100,000
         or an integral multiple of $100,000 in excess thereof and (D) in the
         case of a Borrowing of Prime Advances, be in an amount of not less than
         $50,000 or an integral multiple of $10,000 in excess thereof;

                                      -18-
<PAGE>   19
                  (iv) the Type of Advances of which the Borrowing is to be
         comprised; and

                  (v) if the Borrowing is to be comprised of LIBOR Advances, the
         duration of the initial Interest Period applicable to such Advances.

         If the Borrowing Notice fails to specify the duration of the initial
Interest Period for any Borrowing comprised of LIBOR Advances, such Interest
Period shall be one month.

         (b) Provided that all conditions precedent to the making of such
Advance have been satisfied, Lender shall on the date of such Advance (other
than a Refinancing Advance) deposit the funds so requested in the deposit
account no. 1291792407 of Borrower with Lender.

         (c) After giving effect to any Borrowing, there shall not be more than
five different Interest Periods in effect.

         (d) No Interest Period for a Borrowing under Facility A shall extend
beyond the Facility A Termination Date and no Interest Period for a Borrowing
under Facility B shall extend beyond the Facility B Termination Date (with
respect to Advances evidenced by the Facility B Advance Note), and the Maturity
Date of the respective Facility B Term Note.

         (e) Borrower shall indemnify Lender against any Consequential Loss
incurred by Lender as a result of (i) any failure to fulfill, on or before the
date specified for the Advance, the conditions to the Advance set forth herein
or (ii) Borrower's requesting that an Advance not be made on the date specified
in the Borrowing Notice.

         2.4 Evidence of Indebtedness.

         (a) Facility A Advances shall be evidenced by the Facility A Note in
the amount of the Facility A Commitment in effect on the Effective Date. The
Facility B Advances shall be evidenced by the Facility B Advance Note in the
amount of the Facility B Commitment in effect on the Effective Date and each
Facility B Term Note issued pursuant to Section 2.4(b).

         (b) If the principal amount of any single proposed Facility B Advance
equals or exceeds $3,000,000, such Facility B Advance shall be evidenced by
either the Facility B Advance Note or, at the option of Borrower, a Facility B
Term Note. If Borrower elects for such Facility B Advance to be evidenced by a
Facility B Term Note, Borrower shall execute and deliver to Lender a Facility B
Term Note in the principal amount of such proposed Advance and dated as of the
date of such proposed Advance. If after giving effect to a proposed Facility B
Advance the principal amount of which is less than $3,000,000, the aggregate
outstanding principal of all Facility B Advances evidenced by the Facility B
Advance Note would equal or exceed $3,000,000, Borrower may, at its option,
execute and deliver to Lender a Facility B Term Note in the principal amount of
such proposed Advance plus the aggregate principal of all Facility B 

                                      -19-
<PAGE>   20
Advances outstanding under the Facility B Advance Note. Each Facility B Term
Note shall be issued with a number corresponding to its order of issue,
commencing with the number one, and dated as of the date of issue.

         (c) Absent manifest error, Lender's records shall be prima facie
evidence as to amounts owed Lender under the Notes and this Agreement.

         2.5 Fees.

         (a) Facility A Commitment Fee. Subject to the provisions of Section
8.12, Borrower shall pay to Lender a commitment fee ("Facility A Commitment
Fee") at the rate of 3/8% per annum on the average daily unused portion of the
Facility A Commitment. The Facility A Commitment Fee shall be payable in arrears
(i) on each Quarterly Date, commencing December 31, 1995 and (ii) on the
Facility A Termination Date.

         (b) Facility B Commitment Fee. Subject to the provisions of Section
8.12, Borrower shall pay to Lender a commitment fee ("Facility B Commitment
Fee") at the rate of 1/4% per annum on the average daily unused portion of the
Facility B Commitment. The Facility B Commitment Fee shall be payable in arrears
(i) on each Quarterly Date, commencing December 31, 1995 and (ii) on the
Facility B Termination Date.

         (c) Origination Fee. Subject to the provisions of Section 8.12,
Borrower shall pay to Lender an origination fee of $50,000 with respect to the
Facility B Commitment.

         2.6 Prepayments.

         (a) Borrower may, upon at least three Business Days prior written
notice to Lender stating the proposed date and aggregate principal amount of the
prepayment, prepay the outstanding principal amount of any Advances in whole or
in part, together with accrued interest to the date of such prepayment on the
principal amount prepaid without premium or penalty other than any Consequential
Loss; provided, however, that in the case of a prepayment of a Prime Advance,
the notice of prepayment may be given by telephone by 11:00 a.m. on the date of
prepayment. Each partial prepayment shall, in the case of LIBOR Advances, be in
an aggregate principal amount of not less than $100,000 or an integral multiple
of $100,000 in excess thereof and, in the case of Prime Advances, be in an
aggregate principal amount of not less than $50,000 or an integral multiple of
$10,000 in excess thereof. If any notice of prepayment is given, the principal
amount stated therein, together with accrued interest on the amount prepaid and
the amount, if any, due under Section 2.15, shall be due and payable on the date
specified in such notice.

         (b) If at any time the aggregate principal of outstanding Facility A
Advances exceeds the lesser of (a) the Facility A Commitment and (b) the
Borrowing Base, Borrower shall immediately prepay Facility A Advances then
outstanding in the aggregate amount equal to such 

                                      -20-
<PAGE>   21
excess, together with accrued interest to the date of such prepayment on the
principal amount prepaid without premium or penalty other than any Consequential
Loss.

         (c) Unless otherwise specified by Borrower, any prepayment of Advances
pursuant to this Section 2.6 shall be applied first to Prime Advances, if any,
then outstanding, and second to LIBOR Advances with the shortest remaining
Interest Periods outstanding.

         (d) No prepayments of Facility A Advances made solely pursuant to this
Section 2.6 shall cause the Facility A Commitment to be reduced. Each prepayment
of Facility B Advances made pursuant to this Section 2.6 shall (i) permanently
reduce the Facility B Commitment by the amount of such prepayment as of the date
of such prepayment and (ii) be applied to outstanding principal of Facility B
Advances in the inverse order of maturity.

         2.7 Repayment.

         (a) Facility A. Borrower shall repay to Lender the outstanding
principal amount of the Facility A Advances on the Facility A Termination Date.

         (b) Facility B. Borrower shall repay to Lender the outstanding
principal amount of (i) the Facility B Advances outstanding under the Facility B
Advance Note on the Facility B Termination Date and (ii) the Facility B Advances
outstanding under each Term Note on each Quarterly Date, commencing with the
first Quarterly Date occurring after the date of the respective Note, in an
amount equal to 1/20th of the original principal amount of the Note, with all
unpaid principal due on the fifth anniversary date of such Note. The Facility B
Commitment shall permanently reduce by the amount of each payment required by
this Section 2.7(b) on the date due.

         (c) General. The principal amount of each LIBOR Advance is due and
payable on the last day of the applicable Interest Period, which principal
payment may be made by means of a Refinancing Advance (subject to the other
provisions of this Agreement). On the date of a reduction of the Facility B
Commitment pursuant to Section 2.7(b) and of either Commitment pursuant to
Section 2.8, the aggregate amount of the applicable Advances outstanding on the
date of reduction in excess of such Commitment as reduced shall be due and
payable, which principal payment may not be made by means of a Refinancing
Advance.

         2.8 Reduction of Commitments.

         (a) Mandatory. The Facility B Commitment shall be reduced by the
aggregate original face amount of all Facility B Term Notes, effective as of the
date of issue of each Facility B Term Note.

         (b) Optional. Borrower shall have the right at any time and from time
to time upon not less than three Business Days' notice to Lender not later than
12:00 noon (if telephonic, 

                                      -21-
<PAGE>   22
to be confirmed by telex or in writing on or before the date of reduction or
termination), to terminate or reduce the Facility A Commitment or Facility B
Commitment, in whole or in part, provided that each partial termination shall be
in an aggregate amount which is an integral multiple of $50,000. Once reduced or
terminated, the Facility A Commitment or Facility B Commitment (as appropriate)
may not be increased or reinstated. On the date of any such reduction, Borrower
shall repay such principal amount (together with accrued interest thereon and
any Consequential Loss) of outstanding Advances as may be necessary so that
after such repayment, the aggregate unpaid principal amount of Advances does not
exceed the amount of the Facility A Commitment or Facility B Commitment (as
appropriate) as then reduced.

         2.9 Interest. Subject to Sections 2.10 and 8.12, Borrower shall pay
interest on the unpaid principal amount of each Advance from the date of such
Advance until such principal shall be paid in full, at the following rates per
annum:

         (a) Prime Advances. Prime Advances shall bear interest at a rate per
annum equal to the Prime Rate as in effect from time to time.

         (b) LIBOR Advances. LIBOR Advances shall bear interest at the rate per
annum equal to the LIBOR Rate applicable to such Advance, which at no time shall
exceed the Highest Lawful Rate.

         (c) Payment Dates. Accrued and unpaid interest on Prime Advances shall
be paid in arrears on each Quarterly Date, on the Facility A Termination Date
and the Facility B Termination Date, as appropriate, and on the maturity date of
each Facility B Term Note. Accrued and unpaid interest in respect of each LIBOR
Advance shall be paid on the last day of the appropriate Interest Period and on
the date of any prepayment or repayment of such Advance; provided, however, that
if any Interest Period for a LIBOR Advance exceeds three months, interest shall
also be paid on the date which falls three months after the beginning of such
Interest Period.

         (d) Index. Reference to any particular index or reference rate for
determining any applicable interest rate under this Agreement is for purposes of
calculating the interest due and is not intended as and shall not be construed
as requiring Lender to actually obtain its funds used to make any Advance at any
particular index or reference rate.

         2.10 Default Interest. During the continuation of any Event of Default,
Borrower shall pay, on demand, interest (after as well as before judgment to the
extent permitted by Law) on the principal amount of all Advances outstanding and
on all other Obligations due and unpaid hereunder for each Advance equal to the
Highest Lawful Rate.

         2.11 Continuation and Conversion Elections.

                                      -22-
<PAGE>   23
         (a) Borrower may upon irrevocable written notice to Lender and subject
to the terms of this Agreement:

                  (i) elect to convert, on any Business Day, all or any portion
         of outstanding Prime Advances (in an aggregate amount not less than
         $100,000 or an integral multiple of $100,000 in excess thereof) into
         LIBOR Advances; or

                  (ii) elect to convert, at the end of any Interest Period
         therefor, all or any portion of outstanding LIBOR Advances comprised in
         the same Borrowing (in an aggregate amount not less than $50,000 or an
         integral multiple of $10,000 in excess thereof), into Prime Advances;
         or

                  (iii) elect to continue, at the end of any Interest Period
         therefor, any LIBOR Advances;

         provided, however, that if the aggregate amount of outstanding LIBOR
Advances comprised in the same Borrowing shall have been reduced as a result of
any payment, prepayment or conversion of part thereof to an amount less than
$100,000, the LIBOR Advances comprised in such Borrowing shall automatically
convert into Prime Advances at the end of each respective Interest Period.

         (b) Borrower shall deliver a notice of conversion or continuation (a
"Conversion or Continuation Notice"), in substantially the form of Exhibit J, to
Lender not later than (i) 12:00 noon three Business Days prior to the proposed
date of conversion or continuation, if the Advances or any portion thereof are
to be converted into or continued as LIBOR Advances; and (ii) 10:00 a.m. on the
Business Day of the proposed conversion, if the Advances or any portion thereof
are to be converted into Prime Advances.

         Each such Conversion or Continuation Notice shall be by telecopy or
telex, promptly confirmed by letter, specifying therein:

                  (i) the Note to which the proposed conversion or continuation
         relates;

                  (ii) the proposed date of conversion or continuation;

                  (iii) the aggregate amount of Advances to be converted or
         continued;

                  (iv) the nature of the proposed conversion or continuation;
         and

                  (v) the duration of the applicable Interest Period.

         (c) If, upon the expiration of any Interest Period applicable to LIBOR
Advances, Borrower shall have failed to select a new Interest Period to be
applicable to such 

                                      -23-
<PAGE>   24
LIBOR Advances or if an Event of Default shall then have occurred and be
continuing, Borrower shall be deemed to have elected to convert such LIBOR
Advances into Prime Advances effective as of the expiration date of such current
Interest Period.

         (d) Notwithstanding any other provision contained in this Agreement,
after giving effect to any conversion or continuation of any Advances, there
shall not be outstanding Advances with more than five different Interest
Periods.

         2.12 Maximum Amount of Interest. In no event shall any interest rate
charged hereunder exceed the Highest Lawful Rate. If the amount of interest
payable for the account of Lender on any Quarterly Date in respect of the
immediately preceding interest computation period would exceed the Maximum
Amount, the amount of interest payable on such Quarterly Date shall be
automatically reduced to the Maximum Amount. If the amount of interest payable
for the account of Lender in respect of any interest computation period is
reduced pursuant to the immediately preceding sentence and the amount of
interest payable for its account in respect of any subsequent interest
computation period would be less than the Maximum Amount, then the amount of
interest payable for its account in respect of such subsequent interest
computation period shall be automatically increased to such Maximum Amount;
provided that at no time shall the aggregate amount by which interest paid for
the account of Lender has been increased pursuant to this sentence exceed the
aggregate amount by which interest paid for its account has theretofore been
reduced pursuant to the immediately preceding sentence.

         2.13 Computations. Subject to the provisions of Section 8.12 of this
Agreement, interest on all Advances as well as computation of the Facility A
Commitment Fee and the Facility B Commitment Fee, shall be calculated on the
basis of actual days elapsed, but computed as if each year consisted of 360
days. All LIBOR Advances shall bear interest from and including the first day of
the applicable Interest Period to (but not including) the last day of such
Interest Period. All Prime Advances shall bear interest from and including each
Quarterly Date to (but not including) the next Quarterly Date.

         2.14 Taxes. All payments made by Borrower under this Agreement shall be
made free and clear of and without deduction for or on account of any present or
future income, stamp or other Taxes (excluding, however, Taxes imposed on the
overall net income of Lender or any franchise Taxes).

         2.15 Capital Adequacy; Increased Costs.

         (a) If Lender shall have determined that any change after the Effective
Date in any applicable Law or guideline regarding capital adequacy, capital
maintenance or similar requirements against loan commitments made by Lender
(including any such applicable Law or guideline which may be adopted before the
date of this Agreement but which requirements are phased in over a period of
time), or any change therein, or any change in the interpretation or
administration thereof by any Tribunal, central bank or comparable agency
charged with the 

                                      -24-
<PAGE>   25
interpretation or administration thereof, or compliance by Lender (or any
Lending Office of Lender) or any corporation controlling Lender with any request
or directive regarding capital adequacy, capital maintenance or similar
requirements against loan commitments, whether or not having the force of law
(each such adoptions or modification and each interpretation or administration
being herein called a "Regulatory Modification"), has or would have the effect
of increasing the cost of Lender with respect to this Agreement as a result of
reducing the rate of return on Lender's or such corporation's capital as a
consequence of its obligations hereunder ("Additional Costs") to a level below
that which Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration Lender's or such corporation's
policies with respect to such capital impositions) by an amount deemed by Lender
to be material, then from time to time, Borrower shall pay to Lender such
Additional Costs as will compensate Lender for such reduction. No failure by
Lender to immediately demand payment of Additional Costs payable hereunder shall
constitute a waiver of Lender's right to demand payment of such Additional Costs
at any subsequent time. Determinations by Lender for purposes of this Section
2.15 shall be presumed correct, provided that such determinations are made
reasonably and in good faith. Nothing contained herein shall be construed or so
operate as to require Borrower to pay any interest, fees, costs or charges
greater than as permitted by Applicable Law.

         (b) If, after the date hereof, any Tribunal, central bank or other
comparable authority, shall at any time impose, modify or deem applicable any
reserve (including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, Lender,
or shall impose on Lender other conditions affecting a LIBOR Advance, the Notes,
or its obligation to make a LIBOR Advance; and the result of any of the
foregoing is to increase the cost to Lender of making or maintaining LIBOR
Advances, or to reduce the amount of any sum received or receivable by Lender
under this Agreement or under the Notes by an amount deemed by Lender to be
material, then, within five days after demand by Lender, Borrower shall pay to
Lender the additional amount or amounts as will compensate Lender for the
increased cost or reduction. A certificate of Lender claiming compensation under
this Section 2.15 and setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. If Lender demands compensation under this Section
2.15, Borrower may at any time, upon at least five Business Days' prior notice
to Lender either (i) repay in full the then outstanding principal amount of
LIBOR Advances, together with accrued interest thereon, or (ii) convert such
LIBOR Advances to Prime Advances in accordance with the provisions of this
Agreement; provided, however, that Borrower shall be liable for any
Consequential Loss arising pursuant to such actions.

         (c) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation or administration of
any Law shall make it unlawful, or any central bank or other Tribunal shall
assert that it is unlawful, for Lender to perform its obligations hereunder to
make LIBOR Advances or to continue to fund or maintain LIBOR Advances hereunder,
then, on notice thereof and demand therefor by Lender to Borrower, (i) each
LIBOR Advance will automatically, upon such demand, convert into a Prime Advance
and (ii) the 

                                      -25-
<PAGE>   26
obligation of Lender to make, or to convert into or Continue Advances as, LIBOR
Advances shall be suspended until Lender notifies Borrower that Lender has
determined that the circumstances causing such suspension no longer exist.

         (d) Upon the occurrence and during the continuance of any Default or
Event of Default, (i) each LIBOR Advance will automatically, on the last day of
the then existing Interest Period therefor, convert into a Prime Advance and
(ii) the obligation of Lender to make, or to convert into or Continue Advance
as, LIBOR Advances shall be suspended.

         (e) Failure on the part of Lender to demand compensation for any
increased costs, increased capital or reduction in amounts received or
receivable or reduction in return on capital pursuant to this Section 2.15 with
respect to any period shall not constitute a waiver of Lender's right to demand
compensation with respect to such period or any other period.

         (f) The obligations of Borrower under this Section 2.15 shall survive
any termination of this Agreement; provided that at no time may Lender demand
any compensation under Sections 2.15(a) or (b) for any amount with respect to
any period prior to the date which is six months prior to the date of the notice
or certificate delivered by Lender pursuant to either Section 2.15(a) or (b);
provided further that Lender shall not demand any compensation under Section
2.15(a) or (b) except in accordance with Lender's normal policies for
administering loans with similar provisions.

         (g) Determinations by Lender for purposes of this Section 2.15 shall be
conclusive, absent manifest error. Any certificate delivered to Borrower by
Lender pursuant to this Section 2.15 shall include in reasonable detail the
basis for Lender's demand for additional compensation.

ARTICLE III. CONDITIONS PRECEDENT TO ADVANCES.

         3.1 Conditions Precedent to Advances. The obligation of Lender to make
the first Advance to be made by it hereunder is subject to the satisfaction of
the following conditions:

         (a) Laws. The making of both the Facility A Commitment and the Facility
B Commitment shall not contravene any Law applicable to Lender.

         (b) No Default. (i) No Material Adverse Change, as determined by
Lender, shall have occurred and be continuing since September 30, 1995, and (ii)
there shall not be a Default or Event of Default existing.

         (c) Representations and Warranties. The representations and warranties
in Article VI and the other Loan Papers shall be true and correct in all
material respects.

                                      -26-
<PAGE>   27
         (d) Certificate. Borrower shall have delivered to Lender an officer's
certificate for each Obligor, executed by authorized officers of such Obligor,
dated the Effective Date, certifying (A) that attached thereto is a copy of its
certificate or articles of incorporation certified by the Secretary of State (or
other appropriate officer) of the jurisdiction of its incorporation, which is
true and complete, and in full force and effect, without amendment except as
shown, (B) that attached thereto is a copy of its bylaws, which is true and
complete, and in full force and effect, without amendment except as shown, (C)
that attached thereto is a copy of the resolutions of the board of directors of
such Obligor authorizing execution, delivery and performance of this Agreement
and all other Loan Papers, which are true and complete, are in full force and
effect, were duly adopted, have not been amended, modified, or revoked, and
constitute all resolutions of such Obligor adopted with respect to this loan
transaction, (D) that attached thereto are certificates of good standing and
certificates of existence for such Obligor issued not more than ten days prior
to the Effective Date, issued by the appropriate officer of the jurisdiction of
organization of such Obligor and of each jurisdiction in which the nature of
such Obligor's business or properties require such qualification, (E) with
respect to Borrower, that the pledged interests in Neuromed have been issued and
are outstanding and a description of the ownership of the pledged interests in
Neuromed, (F) with respect to each Obligor other than Borrower, a description of
the ownership of all authorized, issued and outstanding equity interests of such
Obligor and (G) to the incumbency, name, and signature of each officer
authorized to sign this Agreement and any other Loan Paper on its behalf. Lender
may conclusively rely on each certificate delivered pursuant to this Section
3.1(d) until it receives notice from Borrower in writing to the contrary.

         (e) Proceedings. All corporate proceedings of each Obligor taken in
connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be satisfactory in form and substance to
Lender and Special Counsel; and Lender shall have received, as of the Effective
Date, copies of all documents or other evidence which Lender or Special Counsel
may reasonably request in connection with said transactions.

         (f) Loan Papers. Each Obligor shall have delivered to Lender the Loan
Papers to be executed by such Obligor, dated as of the Effective Date,
appropriately completed.

         (g) Existing Facility A. Borrower shall have paid to Lender and Lender
shall have received all accrued unpaid interest on and fees (including
commitment fees) in respect of advances under Existing Facility A. All
outstanding, unpaid principal of advances under Existing Facility A shall be
renewed and restated and evidenced by the Facility A Note.

         (h) Existing Facility B. Borrower shall have paid to Lender and Lender
shall have received all outstanding, unpaid principal of, and accrued unpaid
interest on, and all fees (including commitment fees) in respect of advances
under Existing Facility B.

         (i) Origination Fee. Borrower shall have paid to Lender and Lender
shall have received the fee described in Section 2.5(c).

                                      -27-
<PAGE>   28
         (j) Documents. Borrower shall have delivered to Lender the following
(in the number of counterpart requested by Lender), all in form and substance
satisfactory to Lender:

                  (i) The results of UCC and other Lien searches against the
         assets of each Obligor, and evidence satisfactory to Lender that all
         Liens (other than Permitted Liens) in favor of any Person against
         assets of any Obligor shall have been released and any credit facility
         related to any of the above shall have been terminated.

                  (ii) Evidence satisfactory to Lender of the perfection and
         priority of the Liens in the Collateral.

                  (iii) If requested by Lender, reasonable evidence that any
         Obligor is the rightful owner and has good title to its Collateral, as
         applicable.

                  (iv) A certificate computed after giving effect to the Initial
         Advance, but demonstrating compliance on the Effective Date with all
         financial ratios described in Sections 5.8 and 5.10 (determined on a
         pro forma basis as of the Effective Date, based on the unaudited
         financial statements of Borrower as of December 31, 1995).

                  (v) Copies of insurance binders or certificates covering the
         assets of each Obligor indicating Lender as a loss payee.

                  (vi) Payment of all fees (including attorneys' fees) incurred
         by Lender.

                  (vii) Copies of all documentation relating to debt owed by
         Borrower and each other Obligor to any Person, including without
         limitation, all credit agreements, notes, collateral documents, bonds,
         instruments and other documentation in connection with any extension of
         credit.

                  (viii) Certificates for all of the outstanding capital stock
         of each Subsidiary of Borrower and stop transfer letters in favor of
         Lender.

                  (ix) Stock and other powers for all shares of the outstanding
         capital stock of each Subsidiary of Borrower.

         (k) Financial Condition Certificate. Lender shall have received a
certificate of each Obligor to the effect that: (i) the fair and saleable value
of the assets of such Obligor, after giving effect to this Agreement, the Notes
and the other Loan Papers, will exceed amounts that will be required to be paid
by such Obligor on or in respect of its existing debts (including contingent
liabilities) as they mature; (ii) such Obligor will not have unreasonably small
capital to carry out its business as now conducted or as proposed to be
conducted, and (iii) such Obligor has not incurred debts beyond its ability to
pay such debts as they mature.

                                      -28-
<PAGE>   29
         (l) Opinion of Counsel. Lender shall have received an opinion of
Fulbright & Jaworski L.L.P. acceptable to Lender and Special Counsel.

         (m) Further Documents. As of the Effective Date, Lender shall have
received, in form and substance satisfactory to Lender and Special Counsel, such
other documents and instruments as Lender may reasonably require to evidence the
status, organization or authority of Borrower, and to evidence payment of the
Obligation.

         3.2 Conditions Precedent to Facility B Advances. Lender shall not be
obligated to make any Facility B Advance unless:

         (a) Borrower shall have provided to Lender (all to be in form and
substance acceptable to Lender) (i) current financial statements of and
historical operating information on the Person which, or the assets of which, is
the proposed Permitted Acquisition, (ii) a pro-forma balance sheet of Borrower,
together with pro-forma operating projections of the three year period following
the acquisition, (iii) pro forma financial statements which consolidate the
financial statements of Borrower and the Person of which is the proposed
Permitted Acquisition (or if assets, only, of such Person are to be acquired,
financial statements based on the operations of such assets as a stand-alone
entity), prepared as if Borrower and such Person (or its assets to be acquired)
had operated as a single entity during the twelve-month period preceding the
effective date of proposed Permitted Acquisition, (iv) a pro-forma Compliance
Certificate showing calculations based on the financial statements described in
clause (iii), (v) a copy of the results of Borrower's due diligence with respect
to the Person which, or the assets of which, is the proposed Permitted
Acquisition, and (vi) such other documents and information as Lender may
reasonably request.

         (b) If the aggregate consideration payable by Borrower in respect of
the specific Permitted Acquisition equals or exceeds $5,000,000, Lender shall
have notified Borrower within ten days of receipt of the information described
in Section 3.2.(a) that Lender has consented to make a Facility B Advance to
fund all or a portion of such Permitted Acquisition.

         (c) If the principal amount of any single proposed Facility B Advance
equals or exceeds $3,000,000, or if after giving effect to a proposed Facility B
Advance the principal amount of which is less than $3,000,000, the aggregate
outstanding principal of all Facility B Advances not evidenced by a Facility B
Term Note equals or exceeds $3,000,000, and Borrower has elected to have such
principal amount evidenced by a Facility B Term Note, Borrower has executed and
delivered to Lender a Facility B Term Note in accordance with Section 2.4(b).

         (d) All terms of the proposed acquisition and the related Acquisition
Documents shall be acceptable to Lender in its sole discretion, and the
Acquisition shall have been consummated in accordance with the terms, provisions
and conditions of the Acquisition Documents, without amendments, consents or
waivers with respect thereto (except with the express written consent of
Lender).

                                      -29-
<PAGE>   30
         (e) Lender shall have completed all due diligence related to the
proposed acquisition deemed necessary in its sole discretion, and all such
information revealed in connection with such due diligence shall be acceptable
to Lender in its sole discretion.

         (f) Lender receives:

                  (i) Copies of all opinions rendered by any counsel in
         connection with the proposed acquisition and the Acquisition Documents,
         together with letters authorizing Lender to rely thereon.

                  (ii) A copy of all Acquisition Documents, all in form and
         substance satisfactory to Lender, certified by an officer of Borrower
         to be true and complete.

                  (iii) Evidence satisfactory to Lender of the completion of all
         transactions related to the proposed acquisition.

                  (iv) Evidence reasonably satisfactory to Lender that on the
         date of the proposed acquisition: (A) each Tribunal, the consent of
         which is necessary, has consented to the proposed acquisition; and (B)
         all representations and warranties in the Acquisition Documents related
         to the proposed acquisition are true and correct.

                  (v) The results of UCC and other Lien searches against the
         assets and equity of the Person to be acquired or assets to be
         acquired, as appropriate, and evidence satisfactory to Lender that all
         Liens in favor of any Person against all material assets shall have
         been released and any credit facility related to any of the above shall
         have been terminated.

                  (vi) Evidence satisfactory to Lender of the perfection and
         priority of the Liens in the assets to be acquired.

                  (vii) If requested by Lender, reasonable evidence that the
         Person to be acquired, or the Person from whom assets will be acquired,
         is the rightful owner and has good title to all material assets it
         purports to own, as applicable.

                  (viii) Copies of insurance binders or certificates covering
         all material assets to be acquired in connection with the proposed
         acquisition.

                  (ix) Payment of all fees (including attorneys' fees) incurred
         by Lender.

                  (x) Certificates for all of the outstanding capital stock or
         other equity interests of the Person to be acquired and stop transfer
         letters in favor of Lender.

                                      -30-
<PAGE>   31
         (xi) Stock and other powers for all shares of the outstanding capital
stock or other equity interests of the Person to be acquired.

         (g) Lender elects to fund all or any of the proposed Facility B Advance
(Lender having the right, in its sole discretion, to elect not to fund all or
any of each proposed Facility B Advance).

         3.3 Conditions Precedent to All Advances. Lender shall not be obligated
to make any Advance, if (a) there is in existence at such time a Default under
Section 4.2, 5.6, 5.7, 5.8, or 5.9; (b) an Event of Default has occurred and is
continuing; (c) if any representations and warranties contained in Article VI of
this Agreement shall be false or untrue in any material respect on the date of
such Advance, as if made on such date except for representations and warranties
that are by their express terms limited to a specific date; or (d) any
Subsidiary of Borrower has not executed and delivered to Lender a Guaranty
Agreement. Each request by Borrower for an Advance shall constitute a
representation by Borrower that it is in compliance with the provisions of this
Section 3.3.

         3.4 Legal Details. All documents executed or submitted pursuant hereto
by Borrower shall be satisfactory in form and substance to Lender and Special
Counsel. Lender and Special Counsel shall receive all information, and such
counterpart originals or certified or other copies of and such materials, as
Lender or Special Counsel may reasonably request. All legal matters incident to
the transactions contemplated by this Agreement (including, without limitation,
matters arising from time to time as a result of changes occurring with respect
to any Laws) shall be satisfactory to Special Counsel.

ARTICLE IV. AFFIRMATIVE COVENANTS

         From the date hereof, and so long as this Agreement is in effect and
until final payment in full of the Obligation and the performance of all other
obligations of Borrower under this Agreement and the other Loan Papers, Borrower
agrees and covenants that it shall, and shall cause each Subsidiary of Borrower
to, observe, perform, comply and fulfill each and every covenant, term and
provision set forth below:

         4.1 Books, Records and Properties. Borrower shall, and shall cause each
Subsidiary of Borrower to, maintain its books and records in accordance with
GAAP. Borrower during normal business hours and after reasonable notice by
Lender shall, and shall cause each Subsidiary of Borrower to, permit any of
Lender's agents or representatives to have access to and examine its books and
records, including statements and schedules with respect to the Collateral, and
to copy and make abstracts therefrom, and to inspect any of the properties of
Borrower and each Subsidiaries of Borrower to, at any time(s) hereafter during
normal business hours; provided, that any such access or inspection shall not
disrupt Borrower's operations.

                                      -31-
<PAGE>   32
         4.2 Financial Statements and Reports. Borrower shall furnish or cause
to be furnished to Lender the following Financial Statements and reports:

         (a) Accounting Period Statements. As soon as practicable after the end
of each fiscal quarter of Borrower and in any event within 45 days after the end
of each fiscal quarter of Borrower, copies of Financial Statements as of the end
of such quarter, all in reasonable detail and certified as complete and correct
in all material respects, subject to changes resulting from year-end adjustment,
by a financial officer of Borrower or any other Person acceptable to Lender;

         (b) Annual Statements. As soon as practicable after the end of each
fiscal year of Borrower and in any event within 90 days thereafter, copies of
annual Financial Statements, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and accompanied
by an unqualified opinion of independent certified public accountants approved
by Borrower's board of directors, which opinion shall state that the Financial
Statements have been prepared in accordance with GAAP, that their examination
has been made in accordance with generally accepted auditing standards and that
said financial statements present fairly the consolidated financial position of
Borrower and its Subsidiaries and their results of operations;

         (c) Compliance Certificate and related reports. Within 45 days after
the end of each fiscal quarter, the Compliance Certificate for the last day of
such quarter.

         (d) Borrowing Base Certificate and related reports. Within 15 days
after the end of each month:

                  (i) The Borrowing Base Certificate for the last day of such
         month;

                  (ii) A schedule showing for such month an aging of Accounts of
         Borrower in categories of current, 30 days past due, 60 days past due
         and 91 or more days past due; and

                  (iii) A schedule showing for such month Accounts payable by
         each account debtor of which 10% or more of the aggregate dollar amount
         of all Accounts owed to Borrower by such account debtor have been due
         and payable for 91 days or more from their respective invoice dates;

         (e) Contingent Liabilities Report. Promptly upon becoming aware,
written notice of any actual or potential contingent liabilities, including
Litigation, against Borrower or any Subsidiary of Borrower involving liability
in an amount which must be disclosed in either Borrower's financial statements
or filings with the Securities and Exchange Commission.

         (f) FDA Reports. Promptly upon receipt from FDA, a copy of each
inspection report received from FDA and responses from and to FDA.

                                      -32-
<PAGE>   33
         (g) SEC Filings. As soon as filed with the Securities and Exchange
Commission, copies of each of Borrower's forms 10-Q, 10-K and 8-K.

         4.3 Maintenance of Existence. Borrower shall cause to be done all
things necessary to preserve and keep in full force and effect Borrower's and
each of Borrower's Subsidiaries' existence as a corporation; provided, (a) any
Subsidiary of Borrower may merge with and into Borrower if Borrower is the
surviving entity and (b) any Subsidiary of Borrower may merge with and into
another Subsidiary of Borrower.

         4.4 Insurance. Borrower shall maintain, and shall cause each Subsidiary
of Borrower to, in force with financially sound and reputable insurers, the
insurance policies required pursuant to the Loan Papers in accordance with the
provisions thereof and such other policies with respect to its respective
property and business against such casualties and contingencies (including fire,
worker's compensation or occupational injury insurance, business interruption
and public liability) and in such amounts as is customary in the lines of
business of comparable size and financial strength, with a loss payee
endorsement for casualty insurance in favor of Lender and noncancelable without
30 days prior notice to Lender. Borrower shall supply evidence of such insurance
to Lender.

         4.5 Compliance with Applicable Laws. Borrower shall, and shall cause
each Subsidiary of Borrower to, comply with the requirements of all applicable
Laws and orders (including but not limited to the FDA Act, ERISA and
environmental laws) of Tribunals or other governmental authorizations necessary
to the ownership of Borrower's and each of Subsidiary's of Borrower properties
or to the conduct of its business if the result of failure to so comply would
have a Material Adverse Effect.

         4.6 Other Information and Documents. Borrower shall, and shall cause
each Subsidiary of Borrower to, promptly deliver to Lender such information,
certificates and documents in addition to those herein mentioned as Lender may
from time to time reasonably request.

         4.7 Default. Borrower shall report to Lender immediately any Default or
Event of Default, and any notice of any claimed default under any other Debt
agreement, specifying the default and steps taken or to be taken to cure.

         4.8 Taxes. Borrower shall pay any stamp, loan, transaction or similar
taxes that may be imposed on this Agreement, the Advances hereunder, the Notes,
or any of the transactions hereunder, and shall pay, and shall cause each
Subsidiary of Borrower to, all income, ad valorem, and other taxes of Borrower
or such Subsidiary before they become delinquent except taxes being contested by
appropriate means and in good faith and the levy and execution of which have
been stayed and continued to be stayed. Any such taxes must be paid before their
nonpayment causes a Lien (other than a Permitted Lien) to be filed on any of the
Collateral.

                                      -33-
<PAGE>   34
         4.9 Further Assurances. Borrower will, and will cause each other
Obligor to, on request of Lender, promptly correct any defect, error or omission
which may be discovered in the contents of any of the Loan Papers or in the
execution or acknowledgment thereof, and will execute, acknowledge and deliver
such further instruments and do such further acts as may be necessary or as may
be requested by Lender to carry out more effectively the purposes of this
Agreement and the Loan Papers and to subject to the Liens any of Borrower's or
any other Obligor's properties, rights or interests covered or intended to be
covered thereby, and to perfect and maintain all Liens at any time securing all
or any part of the debt hereunder.

         4.10 Filings. Borrower will pay all expenses incurred in connection
with the filing of any of the Loan Papers and every other instrument in addition
or supplemental to any thereof that shall be required by Law in order to perfect
and maintain the validity and effectiveness of Liens at any time securing all or
any part of the debt hereunder.

         4.11 Maintenance. Borrower will, and shall cause each Subsidiary of
Borrower to, maintain all of Borrower's and such Subsidiary's material property
in good condition and repair (wear and tear excepted) and make all necessary
replacements thereof, and preserve and maintain all material leases, licenses,
privileges, franchises, certificates and the like used in the operation of
Borrower's and such Subsidiary's business (other than with respect to any such
lease, license, privilege, franchise and certificate which the Board of
Directors of Borrower or such Subsidiary of Borrower has determined that the
expiration or termination of which is in the best interest of Borrower or such
Subsidiary of Borrower, respectively).

         4.12 ERISA Compliance. Borrower shall, and shall cause each Subsidiary
of Borrower to, (a) at all times, make prompt payment of all contributions
required under all Plans and required to meet the minimum funding standard set
forth in ERISA with respect to its Plans, (b) notify Lender immediately of any
fact, including, but not limited to, any Reportable Event arising in connection
with any of its Plans, which might constitute grounds for termination thereof by
the PBGC or for the appointment by the appropriate United States District Court
of a trustee to administer such Plan, together with a statement, if requested by
Lender as to the reason therefor and the action, if any, proposed to be taken
with respect thereto, and (c) furnish to Lender, upon its request, such
additional information concerning any of its Plans as may be reasonably
requested.

         4.13 Indemnity by Borrower. Borrower shall indemnify, save, and hold
harmless Lender and its shareholders, directors, officers, agents, attorneys,
and employees (collectively, the "Indemnitees") from and against: (a) any and
all claims, demands, actions, or causes of action that are asserted by any
Person other than Borrower, its shareholders, directors, officers, agents,
attorneys, and employees against any Indemnitee if the claim, demand, action or
cause of action relates to the Obligations, the use of proceeds of any Advance,
or the relationship of Borrower and Lender under this Agreement or any
transaction contemplated pursuant to this Agreement or any other Loan Paper, (b)
any proceeding or any administrative, investigative or arbitration proceeding by
or before any Tribunal or arbitral directly or indirectly related to (i) a
claim, 

                                      -34-
<PAGE>   35
demand, action or cause of action described in clause (a) above or (ii) any
claim, demand, proceeding, action or cause of action involving Borrower or any
Affiliate (including any shareholder) of Borrower in which any Indemnitee incurs
costs and expenses as a result of any requirement that such Indemnitee testify
or produce records therein (other than as a result of any Litigation commenced
by an Indemnitee or Borrower in which such Indemnitee is not a prevailing
party), and (c) any and all liabilities, losses, costs, or expenses (including
attorneys' fees and disbursements) that any Indemnitee suffers or incurs as a
result of any of the foregoing (other than as a result of any Litigation
commenced by an Indemnitee or Borrower in which such Indemnitee is not the
prevailing party); provided, however, that Borrower shall not have any
obligation under this Section 4.13 to a particular Indemnitee or with respect to
any of the foregoing arising out of the negligence or willful misconduct of such
Indemnitee. If any claim, demand, action or cause of action is asserted against
any Indemnitee, such Indemnitee shall promptly notify Borrower, but the failure
to so promptly notify Borrower shall not affect Borrower's obligations under
this Section 4.13 except to the extent such failure materially impairs
Borrower's ability to defend any such claim, demand, action or cause of action.
Any obligation or liability of Borrower to any Indemnitee under this Section
4.13 shall survive the expiration or termination of this Agreement and the
repayment of the Obligation.

ARTICLE V. NEGATIVE COVENANTS

         From the date hereof and so long as this Agreement is in effect and
until final payment in full of the Obligation, and the performance of all other
obligations of Borrower under this Agreement and the other Loan Papers, Borrower
agrees and covenants that it shall, and shall cause each of its Subsidiaries to,
observe, perform, comply and fulfill each and every covenant, term and provision
set forth below:

         5.1 Liens. Borrower shall not, and shall not permit any Subsidiary of
Borrower to, grant, permit or suffer to exist any Lien on any of its property or
assets, except (a) Permitted Liens, and (b) Liens granted under the Loan Papers.

         5.2 Transfer of Assets. Borrower shall not, and shall not permit any
Subsidiary of Borrower to, sell, lease, transfer, or otherwise dispose of assets
of Borrower or such Subsidiary, except (a) payments of business expenses of
Borrower or such Subsidiary in the ordinary course of business, (b) Inventory
and Investments in the ordinary course of business and for full and fair
consideration, (c) assets which Borrower or such Subsidiary determines in good
faith are worthless or obsolete, (d) assets not subject to a Lien or license in
favor of Lender the value of which, individually and in the aggregate, does not
exceed 5% of the gross revenue of Borrower and its Subsidiaries (determined on
or consolidated basis) during the preceding fiscal year from operations, or (e)
in connection with Investments permitted pursuant to Section 5.4.

                                      -35-
<PAGE>   36
         5.3 New Industry. Borrower shall not, and shall not permit any
Subsidiary of Borrower to, enter any industry or type of business which is not
directly related to the research, design, development, manufacture and/or
marketing of Devices.

         5.4 Restricted Investments. Borrower shall not make or have outstanding
any Investments, except for Permitted Investments, Permitted Acquisitions and
Permitted Ventures.

         5.5 Transactions with Affiliates. Borrower shall not, and shall not
permit any Subsidiary of Borrower to, enter into any transaction with any
Affiliate, except in the ordinary course of the business of Borrower or such
Subsidiary, and on fair and reasonable terms no less favorable to Borrower or
such Subsidiary than it would obtain in a comparable arm's length transaction
with a Person not an Affiliate.

         5.6 Fixed Charges Coverage Ratio. Borrower shall not permit the Fixed
Charges Coverage Ratio to be less than 2.50 to 1.00, as at the end of each
fiscal quarter of Borrower, commencing with the first fiscal quarter ending
after the Effective Date.

         5.7 Margin Ratio. Borrower shall not permit the Margin Ratio to be
greater than 2.50 to 1.00, as at the end of each fiscal quarter of Borrower,
commencing with the first fiscal quarter ending after the Effective Date.

         5.8 Total Liabilities to Tangible Worth Ratio. Borrower shall not
permit the ratio of Total Liabilities to Tangible Net Worth to be greater than
as indicated below, (a) as at the end of each fiscal quarter of Borrower, ending
during the period indicated or (b) on the date indicated:

             Effective Date through September 30, 1996            2.50 to 1.00
             October 31, 1996 and thereafter                      1.75 to 1.00

         5.9 Current Maturities Coverage Ratio. Borrower shall not permit the
Current Maturities Coverage Ratio to be less than 2.00 to 1.00, as at the end of
each fiscal quarter of Borrower, commencing with the first fiscal quarter ending
after the Effective Date.

         5.10 Capital Expenditures. Borrower shall not permit the aggregate
amount of Capital Expenditures incurred or paid during (a) any calendar year to
exceed $2,500,000, and (b) the period from and after the Effective Date through
February 9, 1998 to exceed $4,000,000 in the aggregate.

         5.11 Merger and Consolidation. Borrower shall not, and shall not permit
any Subsidiary of Borrower to, merge or consolidate with any other Person or
allow any other Person to merge or consolidate with it; provided, (a) Borrower
may merge or consolidate with any other Person if (i) Borrower is the surviving
entity and (ii) such merger or consolidation is the result of (A) a Permitted
Acquisition or (B) any other Investment, so long as no Default or Event of
Default exists prior to or after giving effect to such Investment and (b) each
Subsidiary of Borrower may 

                                      -36-
<PAGE>   37
merge with and into either Borrower or any other Subsidiary of Borrower if
Borrower or another Subsidiary of Borrower is the surviving entity, as
appropriate, and no Default or Event of Default exists prior to or after giving
effect thereto.

         5.12 Debt. Borrower shall not, and shall not permit any Subsidiary of
Borrower to, create, incur, assume, become or be liable in any manner in respect
of, or suffer to exist, any Debt for Borrowed Money, except (a) Debt under the
Loan Papers, (b) obligations in respect of trade payables (i) incurred by
Borrower or a Subsidiary of Borrower in the ordinary course of business and (ii)
acquired or assumed by Borrower or a Subsidiary of Borrower pursuant to a
Permitted Acquisition, (c) Debt the proceeds of which was used solely for the
acquisition and construction of the Allen Property not in excess of the amount
of such Debt on the Effective Date, as reduced by payments on and after the
Effective Date, (d) Debt payable to William Borkan pursuant to Section 1.2(iii)
of the Neuromed Agreement; provided, such amount shall not exceed $3,400,000 in
the aggregate, and (e) other Debt of Borrower and each of its Subsidiaries not
to exceed in the aggregate $250,000.

         5.13 Distributions.

         (a) Dividends. Borrower shall not declare, pay, make or become liable
for any Distribution, provided that so long as no Default or Event of Default
exists, Borrower may (i) declare and pay dividends on Borrower's capital stock
in an aggregate amount not to exceed in any calendar year (A) if no Facility B
Advance has been made, 75% of the prior fiscal year's Net Income (determined on
a non-cumulative basis), and (B) if a Facility B Advance has been made, 25% of
the prior fiscal year's Net Income (determined on a non-cumulative basis);
provided, further, if with respect to any calendar year, Borrower has made
Distributions otherwise permitted by Section 5.13(a)(i)(A), no Default or Event
of Default shall exist solely as a result of Borrower's requesting or receiving
a Facility B Advance during such calendar year but after such Distribution has
occurred; provided, further, prior to the declaration of each such dividend,
Borrower shall deliver to Lender not later than fifteen Business Days prior to
the proposed declaration date a certificate of the chief financial officer of
Borrower stating that (A) no Default or Event of Default exists or will result
from the declaration or payment or such dividend, and (B) attached to such
certificate are calculations of Sections 5.6, 5.7, 5.8, 5.9, 5.10, and 5.12,
calculated on a pro forma basis as at the date twelve months after the date of
payment of the proposed dividend, (ii) enter into transactions permitted by
Section 5.13(b) and (iii) make payments to William Borkan in accordance with the
Neuromed Agreement permitted by Section 5.12(d); provided further that no
Distribution otherwise permitted by Section 5.13(a)(i) or (ii) shall be made
prior to receipt by Lender of the audited financial statements of Borrower for
the fiscal year to which such proposed Distribution is attributable.

         (b) Treasury Stock. Borrower shall not declare, pay, make or become
liable for any Distribution, provided that so long as no Default or Event of
Default exists, Borrower may (i) acquire for cash Borrower's capital stock in an
aggregate amount not to exceed $1,000,000 in any calendar year; provided,
further, not later than seven days after each such acquisition of any of

                                      -37-
<PAGE>   38
Borrower's capital stock, Borrower shall deliver to Lender a certificate of the
chief financial officer of Borrower stating that no Default or Event of Default
exists or will result from the declaration or payment or such dividend and (ii)
enter into transactions permitted by Section 5.13(a); provided further that no
Distribution otherwise permitted by this Section 5.13(b) shall be made prior to
receipt by Lender of the audited financial statements of Borrower for the fiscal
year to which such proposed Distribution is attributable.

ARTICLE VI. REPRESENTATIONS AND WARRANTIES

         Borrower represents and warrants as follows:

         6.1 Organization; Qualification; Authority. Borrower and each
Subsidiary of Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the state indicated on Schedule 1. Borrower and
each Subsidiary of Borrower has the power to own its properties and to carry on
its businesses as now being conducted. The Board of Directors of Borrower has
duly authorized the execution, delivery and performance of the Loan Papers to be
executed by Borrower. No consent of the shareholders of Borrower is required as
a prerequisite to the validity and enforceability of any Loan Papers or any
other document contemplated hereby. Borrower has full legal right and corporate
power, and authority to execute, deliver, and perform its obligations under the
Loan Papers to be executed and delivered by it.

         6.2 Financial Statements. The audited financial statements for the
fiscal year ended December 31, 1994 and the unaudited financial statements for
the six months ended June 30, 1995 and for the most recent fiscal quarter
(including any related schedules and/or notes) are true and correct in all
material respects (subject, as to interim statements, to charges resulting from
audits and year-end adjustments) have been prepared in accordance with GAAP
(except, as to interim statements, for notes and year-end adjustments)
consistently followed throughout the periods specified, and fairly present in
accordance with GAAP the financial condition and results of operations of
Borrower as at the dates thereof and for the periods indicated. There has been
no material adverse change in the business, condition or operations (financial
or otherwise) of Borrower since December 31, 1994.

         6.3 Conflicting Agreements and Other Matters. Neither Borrower nor any
Subsidiary of Borrower is a party to any contract or agreement or subject to any
restriction which materially and adversely affects the ability of Borrower to
perform its obligations under the Loan Papers. Neither the execution nor
delivery of this Agreement, the Notes, or the other Loan Papers, nor fulfillment
of nor compliance with the terms and provisions of this Agreement, the Notes or
the other Loan Papers will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien (except for Liens created by
the Loan Papers) upon any of the properties or assets of Borrower or any
Subsidiary of Borrower pursuant to the articles of incorporation of Borrower or
such Subsidiary, any award of any arbitrator or any agreement, instrument,
order, judgment, decree, 

                                      -38-
<PAGE>   39
statute, law, rule or regulation to which Borrower or such Subsidiary is
subject. Neither Borrower nor any Subsidiary of Borrower is a party to, or
otherwise subject to any provision contained in, any instrument evidencing
indebtedness of Borrower or such Subsidiary, any agreement relating thereto or
any other contract or agreement which limits the amount of, or otherwise imposes
restrictions on the incurring of, Debt of Borrower of the type to be evidenced
by the Notes.

         6.4 Governmental Consent. Neither the nature of Borrower or any
Subsidiary of Borrower, its businesses or properties, nor any relationship
between Borrower, any Subsidiary of Borrower and any other Person, nor any
circumstance in connection with the execution, delivery and performance of this
Agreement, the Loan Papers or the Notes is such as to require any authorization,
consent, approval, exemption of other action by or notice to or filing with any
court or Tribunal (other than routine filings and recordings to perfect Liens)
in connection with the execution and delivery of this Agreement, the Notes, the
other Loan Papers, or fulfillment of or compliance with the terms and provisions
hereof, of the Notes or of the other Loan Papers.

         6.5 Enforceability. This Agreement is, the other Loan Papers are and
the Notes when delivered will be legal, valid and binding obligations of
Borrower enforceable against Borrower in accordance with their terms, except as
limited by Debtor Relief Laws.

         6.6 Actions Pending. Other than as described on Schedule 3, there is no
Litigation pending or, to the knowledge of Borrower, threatened against Borrower
or any Subsidiary of Borrower, or any properties or rights of Borrower or any
Subsidiary of Borrower, by or before any court, arbitrator or Tribunal which may
reasonably be expected to result in any Material Adverse Effect. There is no
Litigation pending or, to the knowledge of Borrower, threatened against Borrower
or any Subsidiary of Borrower which purports to affect the validity or
enforceability of this Agreement, either Note or any of the other Loan Papers.

         6.7 Outstanding Debt. Neither Borrower nor any Subsidiary of Borrower
has any outstanding Debt except (a) as described on the balance sheet of
Borrower for the fiscal year ended December 31, 1994, (b) as described in the
balance sheet of Neuromed for the fiscal year ended October 31, 1994, (c) trade
payables incurred in the ordinary course of business and (d) Debt for Borrowed
Money owed to Lender. There exists no default under the provisions of any
instrument evidencing such Debt or of any material agreement relating thereto.

         6.8 Title to Properties. Borrower and each Subsidiary of Borrower has
good and indefeasible title to its respective real properties (other than
properties which it leases) and good title to all of its other material
properties and assets used in the operations of its business, subject to no Lien
of any kind except Liens permitted by Section 5.1. All leases necessary in any
material respect for the conduct of the respective businesses of Borrower are
valid and subsisting and are in full force and effect.

                                      -39-
<PAGE>   40
         6.9 Taxes. Borrower and each Subsidiary of Borrower has paid all taxes
and assessments owed by it to the extent that such taxes and assessments have
become due, except such taxes as are being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP.

         6.10 Regulation G, etc. Neither Borrower nor any Subsidiary of Borrower
owns or has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System (herein called "margin stock"). None of the proceeds of any Advance will
be used, directly or indirectly, for the purpose, whether immediate, incidental
or ultimate, of purchasing or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally incurred
to purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation G. Neither Borrower nor any agent acting on its
behalf has taken or will take any action which might cause this Agreement or the
Notes to violate Regulation G, Regulation T, Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Securities Exchange Act of 1934, as amended, in each case as in effect now
or as the same may hereafter be in effect.

         6.11 ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan. No liability to the PBGC has been or is expected by
Borrower or any Subsidiary of Borrower to be incurred with respect to any Plan
by Borrower or any Subsidiary of Borrower which is or would be materially
adverse to Borrower or any Subsidiary of Borrower. Neither Borrower nor any
Subsidiary of Borrower has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to Borrower.

         6.12 Disclosure. Neither this Agreement or any other document,
certificate or statement furnished, or to be furnished, to Lender by or on
behalf of Borrower or any other Obligor in connection herewith or therewith
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading in any material respect.

         6.13 Environmental Matters. Borrower, each Subsidiary of Borrower, the
plants and sites each owns, and to the best of Borrower's knowledge after due
inquiry of the owners of leased property the plants and sites which each leases
have complied with all federal, state, local and regional statutes, ordinances,
orders, judgments, rulings and regulations relating to any matters of pollution
or of environmental regulation or control except, in any such case, where such
failure to comply would not result in a Material Adverse Effect. Without
limiting the generality of the preceding sentence, neither Borrower nor any
Subsidiary of Borrower has received notice of and does not have actual knowledge
of any actual or claimed or asserted failure so to comply which alone or
together with any other such failure is material and would result in a 

                                      -40-
<PAGE>   41
Material Adverse Effect. During periods of use, ownership, occupancy or
operation by Borrower and each Subsidiary of Borrower, none of Borrower, any
Subsidiary of Borrower, or their respective plants or sites have managed,
generated, released or disposed of, any hazardous wastes, hazardous substances,
hazardous materials, toxic substances or toxic pollutants, as those terms are
used or defined in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Clean Air Act and the
Clean Water Act, in material violation of or in a manner which would result in
liability under such statutes or any regulations promulgated pursuant thereto or
any other applicable law, except where such noncompliance or liability would not
result in a Material Adverse Effect.

         6.14 Sufficiency of Capital. Borrower and each Subsidiary of Borrower
are, and after consummation of this Agreement and after giving effect to the
Obligation incurred and Liens created by Borrower and each Subsidiary of
Borrower in connection herewith will be, Solvent.

         6.15 Affiliates. No Affiliate of Borrower exists, except as identified
on Schedule 1.

ARTICLE VII. DEFAULT

         7.1 Events of Default. The term "Event of Default" as used herein,
means the occurrence and continuance of any one or more of the following events
(including the passage of time, if any, specified therefor):

         (a) Borrower shall fail to pay any amount, whether principal, interest
or other amounts, payable hereunder or under the Notes when due and such failure
shall continue for three days from the date due; or

         (b) (i) Any representation or warranty made by Borrower or any other
Obligor under or in connection with any Loan Paper shall prove to have been
incorrect in any material respect when made or (ii) (A) a breach of any
representation or warranty made by any party thereto (other than Borrower) under
or in connection with any Acquisition Document is discovered, (B) Lender makes a
determination that such breach has caused or will cause a Material Adverse
Change or Effect and gives notice thereof to Borrower, and (C) such breach has
not already been cured or paid for by such party, or, alternatively, Borrower or
such party does not cure such breach or the situation giving rise thereto to the
complete satisfaction of Lender within 30 days after receipt of such notice from
Lender; or

         (c) Borrower shall fail to perform or observe any term, covenant or
agreement contained in Sections 5.6, 5.7, 5.8 or 5.9 and such failure shall
continue for two consecutive months or any other provision of Article V of this
Agreement; or


                                      -41-
<PAGE>   42
         (d) Borrower or any other Obligor shall fail to perform or observe any
term, covenant or agreement contained in any Loan Paper on its part to be
performed or observed, other than described in Section 7.1(a), (b), or (c), and
such default has continued for a period of 30 days; or

         (e) Borrower, any Subsidiary of Borrower or any other Obligor shall
fail to pay any Debt (other than under the Loan Papers) which is, singly or in
the aggregate, in an amount equal to or greater than $100,000, or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other default under any agreement or
instrument relating to any such Debt, or any other event, shall occur and shall
continue after the applicable grace or cure 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 Debt; or any
such Debt 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

         (f) Borrower, any Subsidiary of Borrower or any other Obligor shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
Borrower, any Subsidiary of Borrower or any other Obligor seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any Debtor Relief Laws, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or for any
substantial part of its property; or Borrower, any Subsidiary of Borrower or any
other Obligor shall take any action to authorize any of the actions set forth
above in this Section 7.1(f); or

         (g) Any judgment or order for the payment of money in excess of 10% of
Unrestricted Cash (calculated as at the date of entry of the judgment or order)
shall be rendered against Borrower, any Subsidiary of Borrower or any other
Obligor and either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or

         (h) Lender for any reason shall cease to have a valid and perfected
first priority security interest in any material portion (as reasonably
determined by Lender) of the Collateral purported to be covered thereby; or

         (i) FDA or any Tribunal shall issue any order resulting in the banning,
recall or seizure of any Device of Borrower or any Subsidiary of Borrower the
sales of which Device constituted 5% or more of gross sales revenue of Borrower
(determined on a consolidated basis) for the twelve months preceding the date
such order is issued; or

                                      -42-
<PAGE>   43
         (j) Any Inventory of Borrower or any Subsidiary of Borrower produced in
the United States of America is not produced in compliance with the Fair Labor
Standards Act and such failure results in the banning, recall or seizure of
Inventory constituting 5% or more of the value (valued at the greater of market
or book value without giving effect to such ban, recall or seizure or any other
write down is the value of such Inventory) of all Inventory of Borrower or such
Subsidiary, respectively; or

         (k) Any material provision of the Loan Papers shall at any time for any
reason cease to be valid and binding on Borrower or any other Obligor or shall
be declared to be null and void, or the validity or enforceability thereof shall
be contested by Borrower or any other Obligor, or a proceeding shall be
commenced by any Tribunal having jurisdiction over Borrower, any other Obligor
or any Collateral, seeking to establish the invalidity or unenforceability
thereof and such proceeding (if commenced by a Person other than Borrower or any
other Obligor) shall remain undismissed or unstayed for a period of 30 days, or
Borrower or any other Obligor shall deny that it has any or further liability or
obligation thereunder; or

         (l) The occurrence of a default or event of default (howsoever
designated) contained in any other Loan Paper and such default or event of
default shall continue beyond any applicable grace or cure period.

         7.2 Remedies Upon Default. If an Event of Default specified in Section
7.1(f) shall occur and be continuing, the aggregate unpaid principal balance of
and accrued interest on the Obligation shall thereupon become due and payable
and the Facility A Commitment and the Facility B Commitment shall immediately
terminate concurrently therewith, without any action by Lender and without
diligence, presentment, demand, protest, notice of protest or intent to
accelerate, or notice of any other kind, all of which are hereby expressly
waived. Should any other Event of Default occur and be continuing, Lender may do
any one or more of the following:

         (a) Acceleration. Declare the entire unpaid balance of the Obligation,
or any part thereof, immediately due and payable, whereupon it shall be due and
payable without any action by Lender and without diligence, presentment, demand,
protest, notice of protest or intent to accelerate or notice of any other kind,
all of which are hereby expressly waived.

         (b) Termination. Terminate the Facility A Commitment and the Facility B
Commitment.

         (c) Judgment. Reduce any claim to judgment.

         (d) Rights. Exercise any and all Rights afforded by the Laws of the
State of Texas or any other jurisdiction, including, but not limited to, the
UCC, or by any other Loan Papers, or by Law or equity, or otherwise.

                                      -43-
<PAGE>   44
         (e) Offset. Exercise the Rights of offset and/or banker's Lien against
the interest of Borrower and each other Obligor in and to every account and
other property of Borrower and each other Obligor which is in the possession of
Lender, to the extent of the full amount of the Obligation.

         7.3 Performance by Lender. Should any covenant, duty or agreement of
Borrower fail to be performed in all material respects in accordance with the
terms of this Agreement or the Collateral Documents, Lender may, at its option,
perform, or attempt to perform, such covenant, duty or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of Lender, promptly pay
any amount expended by Lender in such performance or attempted performance to
Lender at Lender's Principal Office, together with interest thereon at the
lesser of (a) the Prime Rate plus 3% and (b) the Highest Lawful Rate from the
date of such expenditure by Lender until paid. Notwithstanding the foregoing, it
is expressly understood that Lender shall not have any liability or
responsibility for the performance of any duties of Borrower hereunder.

         7.4 Lender Not in Control. None of the covenants or other provisions
contained in this Agreement shall, or shall be deemed to, give Lender the Rights
or power to exercise control over the affairs management of Borrower, the power
of Lender being limited to the Right to exercise the remedies provided in this
Article VII; provided that, if Lender becomes the owner of any interest in
Borrower, whether through foreclosure or otherwise, Lender shall be entitled to
exercise such legal Rights as it may have by being an owner of such interest in
Borrower.

         7.5 Waivers. The acceptance by Lender at any time and from time to time
of part payment on the Obligation shall not be deemed to be a waiver of any
Event of Default or Default then existing. No waiver by Lender of any particular
Event of Default or Default shall be deemed to be a waiver of any Event of
Default or Default other than said particular Event of Default or Default. No
delay or omission by Lender in exercising any Right under any Loan Papers shall
impair such Right or be construed as a waiver thereof or an acquiescence
therein, nor shall any single or partial exercise of any such Right preclude
other or further exercise thereof, or the exercise of any other Right under the
Loan Papers or otherwise.

         7.6 Cumulative Rights. All Rights available to Lender under the Loan
Papers shall be cumulative of and in addition to all other Rights granted to
Lender at Law or in equity, whether or not the Obligation be due and payable and
whether or not Lender shall have instituted any suit for collection or other
action in connection with any Loan Paper.

         7.7 Expenditures by Lender. Any sums, including reasonable attorneys'
fees, spent by Lender pursuant to the exercise of any Right provided in this
Article VII shall become part of the Obligation and shall bear interest at a
rate per annum equal to the lesser of (a) the Prime Rate plus 3% and (b) the
Highest Lawful Rate from the date spent until the date repaid by Borrower.

                                      -44-
<PAGE>   45
ARTICLE VIII. MISCELLANEOUS

         8.1 Money. Unless stipulated otherwise, all references herein to
"Dollars", "money", "payments", or other similar financial or monetary terms,
are references to currency of the United States of America.

         8.2 Headings. The headings, captions and arrangements used in this
Agreement and the other Loan Papers are, unless specified otherwise, for
convenience only and shall not be deemed to limit, amplify or modify the terms
of any Loan Paper, nor affect the meaning thereof.

         8.3 Articles, Sections, and Exhibits. All references to "Article",
"Sections", "subparagraphs" or "subsections" contained herein are, unless
specifically indicated otherwise, references to articles, sections,
subparagraphs and subsections of this Agreement. All references to "Exhibits"
and "Schedules" contained herein are references to exhibits and schedules
attached hereto, all of which are made a part hereof for all purposes, the same
as if set forth herein verbatim. If any exhibit or schedule attached hereto
which is to be executed and delivered contains blanks or is otherwise required
to be updated from time to time, it shall be completed correctly and in
accordance with the terms and provisions contained and as contemplated herein
prior to, at the time of or after the execution and delivery thereof.

         8.4 Notices and Deliveries.

         (a) Manner of Delivery. All notices, communications and materials
(including all Information) to be given or delivered pursuant to this Agreement
shall, except in those cases where giving notice by telephone is expressly
permitted, be given or delivered in writing. All written notices, communications
and materials shall be sent by registered or certified mail, postage prepaid,
return receipt requested, by telecopier, or delivered by hand. In the event of a
discrepancy between any telephonic notice and any written confirmation thereof,
such written confirmation shall be deemed the effective notice except to the
extent Lender or Borrower has acted in reliance on such telephonic notice.

         (b) Addresses. All notices, communications and materials to be given or
delivered pursuant to this Agreement shall be given or delivered at the
following respective addresses and telecopier and telephone numbers and to the
attention of the following individuals or departments:

         (i)               if to Borrower, to it at:

                           Quest Medical, Inc.
                           One Allentown Parkway
                           Allen, Texas  75002

                           Telephone No: (214) 390-9800
                           Telecopier No: (214) 390-9687

                                      -45-
<PAGE>   46
                           Attention:  F. Robert Merrill III

                           if to Lender, to it at:

                           NationsBank of Texas, N.A.
                           NationsBank Plaza
                           901 Main Street
                           7th Floor
                           Dallas, Texas 75202

                           Telephone No: (214) 508-0365
                           Telecopier No: (214) 508-3140

                           Attention:  Commercial Banking

or at such other address, telecopier or telephone number or to the attention of
such other individual or department as the party to which such information
pertains may hereafter specify for the purpose in a notice to the other
specifically captioned "Notice of Change of Address".

         (c) Effectiveness. Each notice, communication and any material to be
given or delivered to Lender or Borrower pursuant to this Agreement shall be
effective or deemed delivered or furnished (i) if sent by certified mail, return
receipt requested, on the fifth Business Day after such notice, communication or
material is deposited in the mail, addressed as above provided, (ii) if sent by
telecopier, when such notice, communication or material is transmitted to the
appropriate number determined as above provided in this Section 8.4 and the
appropriate receipt is received or acknowledged, (iii) if sent by hand delivery
or overnight courier, when left at the address of the addressee addressed as
above provided and the appropriate receipt is received or acknowledged, and (iv)
if given by telephone, when communicated to the individual or any member of the
department specified as the individual or department to whose attention notices,
communications and materials are to be given or delivered except that notices of
a change of address, telecopier or telephone number or individual or department
to whose attention notices, communications and materials are to be given or
delivered shall not be effective until received.

         8.5 Place of Payment. All sums payable to Lender hereunder shall be
paid to Lender at either Lender's Principal Office or at a branch of Lender
within Dallas or Collin Counties, Texas, not later than noon, Dallas time, on
the date due, in immediately available funds. Except as provided in Article II,
if any payment falls due on other than a Business Day, then such due date shall
be extended to the next succeeding Business Day, and interest on such amount (if
applicable) shall be payable in respect to such extension.

                                      -46-
<PAGE>   47
         8.6 Survival of Agreements. All covenants, agreements, representations
and warranties made herein shall survive the execution and the delivery of the
Agreement, the Notes and the other Loan Papers.

         8.7 Parties in Interest. All covenants and agreements contained in the
Loan Papers shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto, except that Borrower may not assign its rights
hereunder without the prior written consent of Lender.

         8.8 Expenses. Borrower agrees (a) to pay all out-of-pocket expenses of
Lender in connection with the negotiation and preparation of this Agreement,
including exhibits and amendments, consents and waivers to any of the other Loan
Papers as may from time to time hereafter be requested or required, and the
reasonable fees and expenses of Special Counsel from time to time in connection
with the negotiation, preparation and execution of the Loan Papers, and (b) to
pay or reimburse Lender for all reasonable costs and expenses, including
reasonable fees and expenses of counsel to Lender, incurred in connection with
the enforcement or preservation of any rights under or the collection of any
amounts due pursuant to any of the Loan Papers. The obligations of Borrower
under this Section 8.8 shall survive any termination of this Agreement.

         8.9 Governing Law. This Agreement and all other Loan Papers shall be
deemed contracts made under the Laws of Texas and shall be construed and
enforced in accordance with and governed by the Laws of Texas, except to the
extent federal Laws govern the validity, construction, enforcement and
interpretation of all or any part of the Loan Papers. Without excluding any
other jurisdiction, Borrower agrees that the courts of Texas will have
jurisdiction over proceedings in connection herewith. Borrower and Lender hereby
agree that the provisions of Art. 5069-15.01 et seq. of the Revised Civil
Statutes of Texas, 1925, as amended, shall not apply to this Agreement and the
Notes.

         8.10 MANDATORY ARBITRATION. (A) ANY CONTROVERSY OR CLAIM BETWEEN OR
AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING
ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION
SERVICES, INC. ("JAMS"), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT
OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO
THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING,
TO COMPEL ARBITRATION OF ANY CONTROVERSY 

                                      -47-
<PAGE>   48
OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER
SUCH ACTION.

         (b) Special Rules. The arbitration shall be conducted in Dallas, Texas
and administered by JAMS who will appoint an arbitrator; if JAMS is unable or
legally precluded from administering the arbitration, then the American
Arbitration Association will serve. All arbitration hearings will be commenced
within ninety days of the demand for arbitration; further, the arbitrator shall
only, upon a showing of cause, be permitted to extend the commencement of such
hearing for up to an additional sixty days.

         (c) Reservations of Rights. Nothing in this Agreement or any other Loan
Paper shall be deemed to (i) limit the applicability of any otherwise applicable
statutes of limitation or repose and any waivers contained in this Agreement; or
(ii) be a waiver by Lender of the protection afforded to it by 12 U.S.C. Section
91 or any substantially equivalent state law; or (iii) limit the right of Lender
hereto (A) to exercise self help remedies such as (but not limited to) setoff,
or (B) to foreclose against any real or personal property collateral, or (C) to
obtain from a court provisional or ancillary remedies such as (but not limited
to) injunctive relief or the appointment of a receiver. Lender may exercise such
self help rights, foreclose upon such property, or obtain such provisional or
ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to this Agreement. At Lender's option, foreclosure
under a deed of trust or mortgage may be accomplished by any of the following:
the exercise of a power of sale under the deed of trust or mortgage, or by
judicial sale under the deed of trust or mortgage, or by judicial foreclosure.
Neither this exercise of self help remedies nor the institution or maintenance
of an action for foreclosure or provisional or ancillary remedies shall
constitute a waiver of the right of any party, including the claimant in any
such action, to arbitrate the merits of the controversy or claim occasioning
resort to such remedies.

         8.11 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
BORROWER HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER
OR RELATING TO THIS AGREEMENT, THE OTHER LOAN PAPERS, OR ANY RELATED MATTERS,
AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY.

         8.12 Maximum Amount Limitation. It is not the intention of any of the
parties to this Agreement to make an agreement violative of the Laws of any
applicable jurisdiction relating to usury. Regardless of any provision in this
Agreement, the Notes or any other Loan Paper, Lender shall never be entitled to
receive, collect or apply, as interest on the Obligation, any amount in excess
of the Maximum Amount. If Lender ever receives, collects or applies, as
interest, any such excess, such amount which would be excessive interest shall
be deemed a partial repayment of principal and treated hereunder as such; and if
principal is paid in full, any remaining excess shall be paid to Borrower. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, Borrower and Lender shall, to the

                                       -48-
<PAGE>   49
maximum extent permitted under Applicable Laws, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (b)
exclude voluntary prepayments and the effect thereof, and (c) amortize, prorate,
allocate and spread in equal parts, the total amount of interest throughout the
entire contemplated term of the Obligation so that the interest rate is uniform
throughout the entire term of the Obligation; provided that if the Obligation is
paid and performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of existence thereof
exceeds the Maximum Amount, Lender shall refund to Borrower the amount of such
excess or credit the amount of such excess against the total principal amount
owing, and, in such event, Lender shall not be subject to any penalties provided
by any Laws for contracting for, charging or receiving interest in excess of the
Maximum Amount. This Section 8.12 shall control every other provision of all
agreements among the parties to this Agreement pertaining to the transactions
contemplated by or contained in the Notes and the other Loan Papers.

         8.13 Severability. If any provision of this Agreement or any other Loan
Paper is held to be illegal, invalid or unenforceable under present or future
Laws during the term thereof, such provision shall be fully severable, the
appropriate agreement or instrument shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
and the remaining provisions thereof shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance therefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as a part of such
agreement or instrument a provision as similar in terms to the illegal, invalid
or unenforceable provision as may be possible and legal, valid and enforceable.

         8.14 Amendment. The provisions of this Agreement and each other Loan
Paper may not be amended, modified or waived except by the written agreement of
Borrower and Lender. This Agreement embodies the entire agreement among the
parties, supersedes all prior agreements and understandings, if any, relating to
the subject matter hereof, and may be amended only as provided above.

         8.15 Exceptions to Covenants. Borrower shall not be deemed to be
permitted to take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action or
omission would result in the breach of any other covenant contained herein.

         8.16 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.

         8.17 Restatement. This Agreement restates in its entirety the First
Restated Credit Agreement. All obligations of each Obligor pursuant to the First
Restated Credit Agreement are amended and restated by this Agreement, which is
not intended as a release or novation of any such obligation.

                                      -49-
<PAGE>   50
         8.18 ENTIRE AGREEMENT. THIS AGREEMENT AND THE LOAN PAPERS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY (A) EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES, OR (B)
THE COMMITMENT LETTER, DATED SEPTEMBER 25, 1995 FROM LENDER TO BORROWER (ALL THE
TERMS AND CONDITIONS OF WHICH ARE SUPERSEDED BY THE LOAN PAPERS). THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

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

                                       QUEST MEDICAL, INC.

                                       By:
                                          --------------------------------
                                          F. Robert Merrill III, Vice President

                                       NATIONSBANK OF TEXAS, N.A.

                                       By:
                                          --------------------------------
                                          Brian K. Schneider, Vice President

                                      -50-



