LUXTEC CORP /MA/
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>tenthree.txt
<TEXT>
                                                                    EXHIBIT 10.3


                      AMENDED AND RESTATED CREDIT AGREEMENT
                      -------------------------------------

     Agreement made as of this 14th day of June, 1999, by and among  PRIMESOURCE
SURGICAL,  INC.,  formerly  known as  Tucson  Medical  Corporation,  a  Delaware
corporation (the "Borrower"), as a borrower, BIMECO, INC., a Florida corporation
("Bimeco"),  MEDICAL COMPANIES ALLIANCE,  INC., a Utah corporation  ("MCA"), and
DOUGLASS  MEDICAL,  INC.,  a Florida  corporation  ("Douglass"),  as  guarantors
(Bimeco,  MCA and Douglass each a "Guarantor" and collectively the "Guarantors")
and  STATE  STREET  BANK  AND  TRUST  COMPANY,  a  Massachusetts  trust  company
(hereinafter referred to as the "Bank").

     WHEREAS,  the Borrower  wishes to amend credit  facilities with the Bank so
that the Borrower may borrow funds from the Bank (i) to finance the acquisitions
of  stock of FOUR  wholly-owned  subsidiaries  of HTD  Corporation,  a  Delaware
corporation  ("HTD") which are Futuretech of Maryland,  Inc.,  formerly known as
Megatech  Medical,  Inc.,  a  Maryland  corporation   ("Futuretech   Maryland"),
Futuretech  of  Washington,  Inc.,  formerly  known  as Omni  Medical,  Inc.,  a
Washington   corporation   ("Futuretech   Washington"),   Healthcare  Technology
Delivery, Inc., a Delaware corporation ("Healthcare"),  and Bimeco (each, a "HTD
Subsidiary" and collectively, the "HTD Subsidiaries"),  (ii) for general working
capital purposes,  (iii) certain future acquisitions of the Borrower approved by
the Bank, (iv) to repay existing credit facilities;  and to fund permitted stock
repurchases.  The HTD  Subsidiaries  and their  subsidiaries,  Futuretech,  Inc.
("Futuretech"),  an Alabama corporation that is a subsidiary of Healthcare,  MCA
that is a subsidiary of Healthcare, and Douglass that is a subsidiary of Bimeco,
are hereafter  collectively  referred to as the "Acute Care  Subsidiaries"  and,
individually, as an "Acute Care Subsidiary."

     WHEREAS,  the Bank has agreed to amend its existing credit  facilities with
the Borrower under the terms and conditions hereinafter set forth;

     NOW, THEREFORE, the parties hereby agree as follows:

ARTICLE I.          DEFINITIONS
----------          -----------

     Section 1.01.  Definitions.
     -------------  ------------

     As used herein and in the other Credit Documents, the following terms shall
have the following meanings;

     "Applicable  LIBOR  Rate"  shall  mean the LIBOR  Rate plus 3.75% per annum
unless adjusted pursuant to Section 2.06.

     "Applicable  Prime  Rate"  shall  mean the  Prime  Rate plus .75% per annum
unless adjusted pursuant to Section 2.06.

     "Acquisitions"  shall mean the (i) the acquisition of HTD by MEDIQ/PRN Life
Support Services  ("MEDIQ") and (ii) acquisition of all of the outstanding stock
of the Acute Care  Subsidiaries  by the  Borrower  pursuant to the  Acquisitions
Agreements.
<PAGE>
     "Acquisitions  Agreements"  shall mean the (i) Agreement and Plan of Merger
by and among HTD,  HTD  Management,  Inc.,  MEDIQ,  MEDIQ  Incorporated  and HTD
Acquisition  Corporation dated June 14, 1999 (the "MEDIQ Merger  Agreement") and
(ii) Stock Purchase Agreement among the Borrower, HTD, HTD Management, Inc., and
MEDIQ, dated June 14, 1999 (the "HTD Merger Agreement").

     "Acquisitions  Documents" shall mean all documents and instruments executed
in connection with the  Acquisitions,  including the MEDIQ Merger  Agreement and
the HTD  Merger  Agreement,  including  the  Escrow  Agreement  by and among the
Borrower, Penman Private Equity and Mezzanine Fund, L.P., EQUUS, II Incorporated
and Regis Farrell,  in their capacities as Stockholders'  Agents,  and The Chase
Manhattan Trust Company, National Association,  as Escrow Agent dated June 14th,
1999.

     "Banking  Day"  shall  mean  any day  which  the  Bank  is open to  conduct
commercial banking business in Boston, Massachusetts.

     "Credit  Documents"  shall mean this  Agreement,  the Notes,  the  Security
Agreement, the Guarantor Security Agreements, the Unlimited Guaranty Agreements,
the Pledge Agreements,  the Subordination  Side Letters,  the Landlord's Consent
and Estoppel Certificates,  the Collateral Assignment of Acquisitions Documents,
Intellectual  Property Security Agreement,  the Warrant Agreement,  the Warrant,
and all other documents, instruments and agreements now or hereafter executed in
connection with any of them.

     "Equity  Documents"  shall mean the  Convertible  Preferred  Stock Purchase
Agreement (the "Purchase Agreement"), the Stockholders' Agreement (as defined in
the  Purchase  Agreement)  the  Certificate  of  Designations,  Preferences  and
Relative  participating   Optional  and  Other  Special,   Rights  of  Series  C
Convertible Preferred Stock of Prime Source Surgical,  Inc. all dated as of June
14, 1999 and all instruments and documents related thereto.

     "Interest Rate Determination Date" shall mean each date for calculating the
LIBOR  Rate for  purposes  of  determining  the  interest  rate in respect of an
Interest  Period.  The  Interest  Rate  Determination  Date  shall be the second
Business Day prior to the first day of the related  Interest  Period for a LIBOR
Rate Loan.

     "Leverage  Ratio"  shall  mean the ratio at any time of total  Indebtedness
divided by the Borrower's trailing twelve month EBITDA.

     "LIBOR Rate" shall mean, for any given dare, the London  Interbank  Offered
Rate for the applicable  Interest  Period selected by the Borrower in accordance
with Sections 2.05(b) hereof as quoted by Barclays Bank PLC, London,  England or
by Lloyds Bank, London, England (and if such rate shall differ, the Lender shall
have the option of which rate applies for purposes of this  Agreement)  at 11:00
a.m.,  London time as adjusted by dividing (i) the LIBOR Rate for that  Interest
Period by (ii) a percentage  equal to 100% minus the stated  maximum  percentage
rate of all reserves (including,  without limitation,  any basic,  supplemental,
emergency or marginal  reserve  requirement)  required to be maintained  against
"Eurocurrency  liabilities"  as specified in  Regulation D (or against any other
category  of  liabilities  that  includes  deposits  by  reference  to which the
interest rate on LIBOR Rate Loans is determined or any category of extensions of
credit or other assets that includes  loans by a non-U.S.  office of a Lender to
U.S. residents).
                                       2
<PAGE>
     "LIBOR  Rate  Loans"  shall mean all or a portion of the  outstanding  Term
Credit  which  accrue and bear daily  interest  during  the  Interest  Period so
selected  at a per  annum  rate  equal  to the  Applicable  LIBOR  Rate for such
Interest Period pursuant to Section 2.05 hereof.

     "Notes" shall mean  collectively,  the Term Note and the  Revolving  Credit
Note, all  substitutions  and  replacements of either of the foregoing,  and any
other notes issued by the Borrower to the Bank pursuant to this Agreement.

     "Permitted  Acquisitions"  shall mean  acquisition of stock or assets of an
entity by the Borrower approved in writing by the Bank.

     "Permitted  Stock  Payments"  shall mean on terms  satisfactory to the Bank
payments (i) not to exceed  $87,500 to fund the repurchase of stock from Timothy
Wynne  pursuant  to the Stock  Redemption  Agreement  between the  Borrower  and
Timothy  Wynne dated March 31, 1999;  and (ii) not to exceed  $1,600,000 to fund
the  repurchase of stock from David Walla at up to $.875 per share pursuant to a
certain settlement  agreement between Borrower and David Walla acceptable to the
Bank and to fund the repurchase of stock of Timothy Wynne and Michael Wynne (the
"Wynnes") at up to $.875 per share pursuant to a stock  repurchase  agreement to
be entered into between the Borrower and the Wynnes which is  acceptable  to the
Bank.

     "Prime  Rate" shall mean the annual rate of interest  announced by the Bank
from time to time, at the  principal  office of the Bank,  225 Franklin  Street,
Boston, Massachusetts 02110, as its prime rate.

     "Regulation  D" shall mean  Regulation  D of the Board of  Governors of the
Federal  Reserve  System  from time to time in  effect,  and shall  include  any
successor  or other  regulation  or  official  interpretation  of said  Board of
Governors  relating to reserve  requirements  applicable  to member banks of the
Federal Reserve System.

     "Subsidiary"  shall mean any corporation,  business trust or other business
entity in which the Borrower or a Subsidiary  owns or has options to acquire 50%
or more of the voting control.

     "Unlimited  Guaranty  Agreements"  shall mean the  unlimited  guaranties of
Bimeco,  MCA and Douglass of the  obligations  of the Borrower  under the Credit
Documents.

     "Unutilized  Revolving Commitment" shall mean the excess of (i) the Maximum
Revolving  Credit  over  (ii) the  aggregate  outstanding  principal  amount  of
Revolving Credit Advances made by the Bank hereunder.

     The following terms are defined or described in the following sections:

         Affiliate                                               Section 5.15

         Bank                                                    Preamble

         Base Financial Statements                               Section 3.04

         Borrower                                                Preamble

         Borrowing Base                                          Section 2.03

         Borrowing Base Certificate                              Section 5.06

                                       3
<PAGE>
         Capital Expenditures                                    Section 5.26

         Closing                                                 Section 7.06

         Code                                                    Section 3.10

         Collateral Assignment of Acquisitions Documents         Section 4.01(g)

         Compliance Certificate                                  Section 5.06(c)

         CPA                                                     Section 5.06(a)

         Credit                                                  Section 2.01

         Current Assets                                          Section 5.27

         Current Liabilities                                     Section 5.27

         EBITDA                                                  Section 5.25

         Eligible Accounts Receivable                            Section 2.03(c)

         ERISA                                                   Section 3.10

         Event(s) of Default                                     Article VI

         Facility Fee                                            Section 2.12

         Guarantors                                              Preamble

         Guarantor Security Agreements                           Section 4.01(e)

         Indebtedness                                            Section 5.10

         Intellectual Property                                   Section 3.18

         Intellectual Property Security Agreement                Section 4.01(s)

         Key Licenses                                            Section 5.08

         Key-Man Life Insurance Policy                           Section 4.01(j)

         Landlord's Consent and Estoppel Certificates            Section 4.01(g)

         Maturity Date                                           Section 2.02(b)

         Maximum Revolving Credit                                Section 2.03(a)

         Net Worth                                               Section 5.24

         Rate Change Certificate                                 Section 2.06

         Rate Change Financial Statement(s)                      Section 2.06

         Restricted Payment(s)                                   Section 5.18

         Revolving Credit                                        Section 2.01

         Revolving Credit Advance(s)                             Section 2.03(a)

         Revolving Credit Note                                   Section 2.03(b)

         Security Agreement                                      Section 4.01(c)

         Special Counsel                                         Section 4.01(a)

         Stock                                                   Section 5.18

         Subordination Side Letter(s)                            Section 4.01(n)

         Term Credit                                             Section 2.01

         Term Note                                               Section 2.02(a)

         Total Liabilities                                       Section 5.24

         Warrants                                                Section 4.01(t)

         Warrant Agreement                                       Section 4.01(t)

                                        4
<PAGE>

     Section 1.02.  Accounting Terms.
     -------------  -----------------

     Unless otherwise  specified herein,  all accounting terms used herein shall
be  construed  in  accordance  with  generally  accepted  accounting  principles
consistently applied.

ARTICLE II.         AMOUNT AND TERMS OF THE CREDIT.
-----------         -------------------------------

     Section 2.01.  The Credit.
     -------------  -----------

     Subject  to  the  terms  and  conditions  hereof,  and in  reliance  on the
representations  and warranties  contained herein, the Bank hereby establishes a
credit  facility in favor of the Borrower in the aggregate  principal  amount of
$17,000,000 as set forth below (the "Credit"). The Credit shall consist of (i) a
secured term loan in the principal amount of $5,000,000 (the "Term Credit"), and
(ii) a  secured  revolving  line of credit in the  maximum  principal  amount of
$12,000000 (the "Revolving Credit").

     Section 2.02.  The Term Credit.
     -------------  ----------------

          (a) GENERAL TERMS; THE TERM NOTE.  Subject to the terms and conditions
herein,  on the date of the  Closing the Bank shall loan the  Borrower  the Term
Credit.  All amounts owed by the Borrower  with respect to the Term Credit shall
be evidenced by an amended and restated  promissory  note of the Borrower in the
principal amount of the Term Credit,  dated the date of the Closing, in the form
attached  hereto as EXHIBIT  2.02(a) (the "Term  Note").  The Term Credit may be
prepaid in whole or in part without  penalty in a minimum  amount of $50,000 and
an integral  multiple of $50,000,  or such lesser amount as is then  outstanding
provided  however that such payments shall be applied to the remaining  payments
under the Term Note in inverse  order of maturity or during the  occurrence  and
continuance of or Event of Default at the Bank's discretion.

          (b) PAYMENTS OF PRINCIPAL.  Unless accelerated  pursuant to Article VI
hereof,  the  principal  amount  of the  Term  Credit  shall  be  repaid  (i) in
forty-eight (48) monthly  installments payable on the first day of each calendar
month in the amount of (a) $75,000 from July 1, 1999  through June 1, 2000;  (b)
$95,834 from July 1, 2000 through June 1, 2001;  (c) $112,500  from July 1, 2001
through June 1, 2002;  (d) $133,334 from July 1, 2002 through June 1, 2003;  and
(e) a final  installment  in the amount of the entire unpaid balance of the Term
Credit (including principal,  all accrued but unpaid interest costs and fees and
any other  amounts  then due),  due and  payable on June 1, 2003 (the  "Maturity
Date").

          (c)  INTEREST.  The Term  Credit  shall bear  interest  as provided in
Section 2.04.


     Section 2.03.  The Revolving Credit.
     -------------  ---------------------

          (a)  GENERAL  TERMS.  Subject to the terms and  conditions  hereof and
provided that no default,  or Event of Default,  has occurred or is  continuing,
the Borrower may, from time to time from the date hereof up to the Maturity Date
borrow  and  reborrow  from the Bank,  and the Bank shall  advance  funds to the
Borrower as requested  pursuant to Section  2.03(f)  (each a  "Revolving  Credit
Advance" and collectively, the "Revolving Credit Advances");  PROVIDED, HOWEVER,

                                       5
<PAGE>
that the  aggregate of all Revolving  Credit  Advances  outstanding  at any time
shall not exceed an amount equal to the lesser of (i) $12,000,000  (the "Maximum
Revolving  Credit"),  or (ii) the Borrowing  Base.  The Revolving  Credit may be
prepaid in whole or in part without penalty.

          (b) THE REVOLVING  CREDIT NOTE.  All amounts owed by the Borrower with
respect to  Revolving  Credit  Advances  shall be  evidenced  by an amended  and
restated  revolving credit note in the principal amount of the Maximum Revolving
Credit,  dated the date hereof in the form  attached  hereto as Exhibit  2.03(b)
(the "Revolving Credit Note").

          (c) BORROWING BASE.  Subject to the  limitations set forth below,  the
"Borrowing  Base" shall consist of the 80% of Eligible  Accounts  Receivable and
45% of Eligible Inventory.

         "ELIGIBLE ACCOUNTS RECEIVABLE" shall mean an account receivable which
meets all of the following requirements:

                    (i)  such  account  receivable  is  subject  to a  perfected
          security interest in favor of the Bank and is subject to no other lien
          whatsoever other than a lien permitted under Section 5.12 hereof;

                    (ii) such  account  receivable  is owned by the Borrower and
          represents a complete bona fide transaction  which requires no further
          act under any  circumstances  on the part of the Borrower to make such
          account receivable payable by the account debtor;

                    (iii) such account  receivable  is no more than 90 days past
          due from invoice date;

                    (iv) the amount owing on the invoice evidencing such account
          receivable is a valid,  legally enforceable  obligation of the account
          debtor with respect thereto and is not subject to any material present
          or  contingent  offset,  deduction or  counterclaim,  dispute or other
          defense on the part of such account  debtor,  and no facts exist which
          are the basis for any future such action or claim;

                    (v) such  account  receivable  is not  evidenced  by chattel
          paper  or an  instrument  of any kind  unless  such  chattel  paper or
          instrument has been delivered to the Bank;

                    (vi) the goods giving rise to such account  receivable  were
          not, at the time of the sale thereof,  subject to any lien, other than
          a lien permitted under Section 5.12 hereof;

                    (vii)  the  account  debtor  with  respect  to such  account
          receivable  is not  insolvent  or the  subject  of any  bankruptcy  or
          insolvency  proceedings  of any  kind or of any  other  proceeding  or
          action,  pending,  or to the  knowledge of the  Borrower,  threatened,
          which might have a materially adverse effect on such account debtor;

                    (viii) the  account  debtor with  respect  thereto is not an
          Affiliate or employee of the Borrower or any Subsidiary;

                                       6
<PAGE>
                    (ix) if the account  debtor with respect  thereto is located
          outside of the United States of America,  the goods which gave rise to
          such account  receivable  were shipped  after  receipt by the Borrower
          from the account debtor of an  irrevocable  letter of credit issued or
          confirmed by a financial institution reasonably acceptable to the Bank
          and in form and substance  reasonably  acceptable to the Bank, payable
          in the amount of the face  value of the  Account in dollars at a place
          of payment located within the United States;

                    (x)  the  account  debtor  with  respect  thereto  is  not a
          governmental agency (except where the Borrower and account debtor have
          complied  with the  Federal  Assignment  of Claims  Act to the  Bank's
          satisfaction); and

                    (xi) such account  receivable is not  determined by the Bank
          to be  ineligible  for any other  reason  based  upon such  credit and
          collateral considerations as the Bank may reasonably deem appropriate.

         "ELIGIBLE INVENTORY"  shall  mean  inventory  which  meets  all  of the
         following requirements"

                    (i) such Inventory is owned by the Borrower, is subject to a
          perfected  security interest in favor of the Bank and is subject to no
          other lien  whatsoever  other than a lien permitted under Section 5.12
          hereof;

                    (ii) if such Inventory is located  within a premises  leased
          by the  Borrower,  the landlord  has  executed a Landlord  Consent and
          Estoppel Certificate for such premises;

                    (iii) such  Inventory is located within the United States at
          one of the  Borrower's  locations  or  (subject  to (i)  above) in the
          possession of the Borrower's sales representatives; and

                    (iv)  such  Inventory  is not  determined  by the Bank to be
          ineligible  for any  other  reason  as the  Bank may  reasonably  deem
          appropriate.

Notwithstanding the foregoing, no advances under the Revolving Credit shall be
made with respect to any inventory of the Borrower held by sales representatives
who have not executed in form and substance satisfactory to the Bank a "Memo on
Stock" or similar instrument. Inventory immediately loses the status of Eligible
Inventory if and when the Borrower sells it, otherwise passes title thereto or
consumes it or the Bank releases its security interest therein. After December
31, 1999, the Borrowing Base shall not include any account receivable or
inventory of the Borrower's Subsidiaries.

          (d) REVOLVING CREDIT PAYMENT. If at any time the aggregate outstanding
Revolving Credit Advances exceed the lesser of (i) the Maximum  Revolving Credit
or (ii) the Borrowing Base, then the Borrower shall  immediately pay such excess
to the Bank, and the Bank may, without prior notice to the Borrower,  charge any
of  Borrower's  accounts  with the Bank in order to  effect  such  payment,  and
following such charge, send notice thereof to the Borrower.

          (e) INTEREST.  The Revolving Credit shall bear interest as provided in
Section 2.04.
                                       7
<PAGE>
          (f) REQUESTS FOR ADVANCES. Each Revolving Credit Advance shall be made
on the day on which the Bank  receives  notice from the Borrower or, if such day
is not a Banking  Day, on the next  succeeding  Banking  Day,  provided the Bank
receives  notice  from the  Borrower  prior to 12:00  noon  Boston  time on such
Banking Day.  Each request for a Revolving  Credit  Advance shall be made to the
Bank in writing  (including  by telecopy)  or by telephone by a duly  authorized
representative of the Borrower (promptly followed by a request in writing),  and
the Bank may rely upon any telephone  request  which it  reasonably  believes is
made by such a  representative.  The Borrower  agrees to indemnify  and hold the
Bank harmless for any action,  including the making of Revolving Credit Advances
hereunder,  or loss or  expense,  taken or  incurred  by the Bank in good  faith
reliance upon such telephone  request.  At he time of the initial  request for a
Revolving  Credit  Advance made under this Section  2.03(f),  the Borrower shall
have  provided the Bank with a Compliance  Certificate  in the form  required by
Section  5.06(c)  hereof.  The Borrower hereby agrees (i) that the Bank shall be
entitled to rely upon the most recent  Compliance  Certificate in its possession
until it is  superseded  by another  Compliance  Certificate  and (ii) that each
request for a Revolving  Credit  Advance,  whether by telephone or in writing or
otherwise, shall constitute a confirmation of the representations and warranties
contained  in  the  most  recent  Compliance  Certificate  then  in  the  Bank's
possession.

          (g) PAYMENT UPON MATURITY DATE.  The Revolving  Credit shall expire on
the Maturity Date and all Revolving  Credit Advances then  outstanding  shall be
due and  payable on such date  together  with all  accrued  and unpaid  interest
thereon costs and fees and any other amounts then due.

     Section 2.04.  Interest on the Credit.
     -------------  -----------------------

     Subject to the terms of Section 2.05 relating to LIBOR Pricing Options, the
Term Credit and the Revolving  Credit  Advances shall bear interest prior to the
occurrence  of an Event of Default  or  maturity  (computed  on the basis of the
actual days elapsed over a 360-day year) at a  fluctuating  rate per annum equal
to the Applicable  Prime Rate or with respect to Term Loans the Applicable LIBOR
Rate, if such an election is made.  From and after the occurrence of an Event of
Default or maturity  (whether by demand,  acceleration  or otherwise) the unpaid
principal  balance  of the Term  Credit  and the  Revolving  Credit  shall  bear
interest at a  fluctuating  rate per annum equal to five  percent (5%) above the
rate of interest then payable with respect thereto.  Interest on the Term Credit
and the Revolving Credit shall be payable monthly in arrears on the first day of
each month  commencing July 1, 1999. The effective rate of interest shall change
on each date on which the Prime Rate shall change.

     Section 2.05.  Special Provisions Governing LIBOR Rate Loans.
     -------------  ----------------------------------------------

     Notwithstanding any other provisions of this Agreement to the contrary, the
following  provisions  shall  govern with  respect to LIBOR Rate Loans as to the
matters covered:

          (a) LIBOR RATE LOAN INTEREST  PERIODS.  In connection  with each LIBOR
Rate Loan, the Borrower shall elect an interest  period (the "Interest  Period")
to be applicable to such LIBOR Rate Loan, which Interest Period shall be, at the
option of the  Borrower,  a thirty (30),  sixty (60),  ninety (90),  one hundred
twenty (120),  and if available,  one hundred eighty (180), or three hundred and
sixty-five (365) day period; PROVIDED THAT:

                                       8
<PAGE>

                    (i) the  Interest  Period  for any  LIBOR  Rate  Loan  shall
          commence on the date of such LIBOR Rate Loan;

                    (ii) if an Interest Period would  otherwise  expire on a day
          that is not a Business Day,  such Interest  Period shall expire on the
          next succeeding  Business Day; provided,  further that if any Interest
          Period in respect of a LIBOR Rate Loan would otherwise expire on a day
          that is not a Business  Day but is a day of the month  after  which no
          further Business Day occurs in such month,  such Interest Period shall
          expire on the next preceding Business Day:

                    (iii) any  Interest  Period in  respect of a LIBOR Rate Loan
          that begins on the last Business Day of a calendar  month (or on a day
          for which there is not numerically  corresponding  day in the calendar
          month at the end of such  Interest  Period)  shall,  subject to clause
          (iv) below, end on the last Business Day of a calendar month;

                    (iv) no Interest  Period with respect to any LIBOR Rate Loan
          shall extend beyond the Maturity Date; and

                    (v) no  Interest  Period  shall be  selected  if at the time
          thereof an Event of Default is in existence.

          (b) Subject to the provisions hereof  (including,  without  limitation
Section  2.05(a))  and as long as there exists no Default,  the  Borrower  shall
have,  the option  (A) to elect to convert  integral  multiples  of One  Million
Dollars  ($1,000,000) of its outstanding Prime Rate Loans which are Term Credits
to LIBOR Rate Loans and (B)  effective on and as of the  expiration  date of the
Interest  Period of a LIBOR  Rate  Loan,  to  continue  such  LIBOR  Rate  Loan;
PROVIDED,  HOWEVER,  that (i) no more than  three (3)  LIBOR  Rate  Loans may be
outstanding  at any one time;  and (ii) a LIBOR Rate Loan may only be  continued
pursuant to clause (B) above if the outstanding  principal  amount of such LIBOR
Rate Loan equals or exceeds One Million Dollars  ($1,000,000).  Interest on each
LIBOR  Rate Loan  shall be  payable  monthly in arrears on the first day of each
month  commencing July 1, 1999. The Borrower shall deliver a notice (the "Notice
of Conversion/Continuation") to the Lender no later than 1:00 P.M. (Boston time)
at   least   three   (3)   Business    Days   in   advance   of   the   proposed
conversion/continuation date. A Notice of Conversion/Continuation  shall, in the
case of a conversion to, or  continuation  of, a LIBOR Rate Loan, be irrevocable
and shall be given by the Borrower in the form of EXHIBIT 2.05(b), appropriately
completed to specify (i) the proposed  conversion/continuation date (which shall
be  a   Business   Day),   (ii)   the   amount   of  the  Term   Credit   to  be
converted/continued,  (iii) whether the Term Credit to be converted/continued is
a Prime Rate Loan or a LIBOR Rate Loan, and (iv) the requested  Interest Period.
In lieu of delivering the above-described Notice of Conversion/Continuation, the
Borrower  may give the  Lender  telephonic  notice by the  required  time of any
proposed  conversion/continuation  under this Section 2.05; PROVIDED,  that such
notice  shall be  promptly  confirmed  in  writing  by  delivery  of a Notice of
Conversion/Continuation    to   the   Lender   on   or   before   the   proposed
conversion/continuation  date.  If the  Borrower  has  failed to timely  deliver
Notice of  Conversion/Continuation  or to give  such a  telephonic  notice  with
respect to a LIBOR Rate Loan,  the Borrower shall be deemed to have delivered to
the Lender a Notice of  Conversion/Continuation  electing to convert  such LIBOR
Rate Loan into a Prime  Rate Loan.  Any notice  pursuant  to this  Section  2.05
(including any telephonic  notice) shall be irrevocable on and after the date of
delivery  thereof to the Lender,  and the Borrower  shall be bound to convert or
continue in accordance therewith.
                                       9
<PAGE>
          (c) DETERMINATION OF INTEREST RATE. As soon as practicable after 10:00
A.M.  Boston  time) on an Interest  Rate  Determination  Date,  the Lender shall
determine  (which   determination   shall,  absent  manifest  error,  be  final,
conclusive and binding) the Applicable LIBOR Rate, which rate shall apply to the
LIBOR Rate Loans for which an  interest  rate is then being  determined  for the
applicable Interest Period, and the Lender shall promptly give notice thereof to
the Borrower.

          (d) SUBSTITUTED  RATE OF BORROWING.  In the event that on any Interest
Rate  Determination  Date the Lender  shall have  reasonably  determined  (which
determination  shall,  absent manifest error, be final,  conclusive and binding)
that:

                    (i) by reason of any changes  affecting the LIBOR market, or
          affecting the position of the Lender in such market, adequate and fair
          means do not exist for  ascertaining  the applicable  interest rate by
          reference to the LIBOR Rate with respect to the LIBOR Rate Loans as to
          which an interest rate determination is then being made; or

                    (ii) by reason of (A) any  change in any  applicable  law or
          governmental rule, regulation or order (or any interpretation  thereof
          and including the  introduction of any new law or  governmental  rule,
          regulation or order) or (B) other circumstances  affecting the Lender,
          the LIBOR  market or the  position of the Lender in such market  (such
          as, for example,  but not limited to,  official  reserve  requirements
          required by  Regulation  D to the extent not given effect in the LIBOR
          Rate), the LIBOR Rate shall not represent the effective pricing to the
          Lender for dollar  deposits of  comparable  amounts  for the  relevant
          period;

then, and in any such event, the Lender shall promptly (and in any event as soon
as possible  after being  notified of a borrowing,  conversion or  continuation)
give notice to the  Borrower of such  determination.  Thereafter,  the  Borrower
shall pay to the Lender  with  respect to the LIBOR Rate Loans of the  Borrower,
upon  written  demand  therefor,  such  additional  amounts  (in the  form of an
increased rate of, or a different  method of calculating,  interest or otherwise
as the Lender in its sole  discretion  shall  reasonably  determine) as shall be
required to cause the Lender to receive interest with respect to such LIBOR Rate
Loans for the Interest  Period  following the Interest Rate  Determination  Date
(the "Affected  Interest Period") at a rate equal to 2.0% per annum in excess of
the effective pricing to the Lender for dollar deposits to make or maintain such
LIBOR Rate  Loans.  A  certificate  as to  additional  amounts  owed the Lender,
showing in reasonable detail the basis for the calculation thereof, submitted in
good faith to the  Borrower by the Lender,  shall,  absent  manifest  error,  be
final, conclusive and binding.

          (e) REQUIRED TERMINATION AND PREPAYMENT. In the event that on any date
the Lender shall have reasonably  determined (which  determination shall, absent
manifest  error,   be  final,   conclusive  and  binding)  that  the  making  or
continuation of LIBOR Rate Loans has become unlawful by compliance by the Lender
in good faith with any law,  governmental rule,  regulation or order (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful), then, and in any such event, the Lender shall promptly give notice
to the Borrower of that  determination.  The obligation of the Lender to make or
maintain such LIBOR Rate Loans during any such period shall be determined at the

                                       10
<PAGE>
earlier  of the  termination  of the  Interest  Period  then in  effect  or when
required by law, and the Borrower  shall,  no later than the  termination of the
Interest  Period in effect at the time any such  determination  pursuant to this
Section  2.05(e) is made, or earlier when required by law, repay such LIBOR Rare
Loans,  together with all interest accrued thereon or automatically  convert the
LIBOR Rate Loans to a Prime Rate Loan.

          (f)  COMPENSATION.  The Borrower  shall  compensate  the Lender,  upon
written  request from the Lender  (which  request  shall set forth in reasonable
detail the basis for  requesting  such  amounts),  for all losses,  expenses and
liabilities (including,  without limitation,  any interest paid by the Lender to
lenders  of funds  borrowed  by Lender to make or carry the LIBOR Rate Loans and
any loss  sustained by the Lender in connection  with the  reemployment  of such
funds) that the Lender may sustain  with  respect to the  Borrower's  LIBOR Rate
Loans:  (i) if for any reason  (other  than a default or  manifest  error by the
Lender) a  borrowing  of any LIBOR Rate Loan does not occur on a date  specified
therefor in a notice of  borrowing  or a  telephonic  request for  borrowing  or
conversion/continuation, or a successive Interest Period does not commence after
notice  thereof is given;  (ii) if, for any reason,  any prepayment of any LIBOR
Rate  Loan  occurs  on a date  that is not the last day of the  Interest  Period
applicable to such LIBOR Rate Loan; (iii) if, for any reason,  any prepayment of
the LIBOR Rate Loans is not made on the date specified in a notice of prepayment
given by the  Borrower  with  respect  to such  LIBOR  Rate  Loan;  or (iv) as a
consequence  of any other default by the Borrower to repay such LIBOR Rate Loans
when, and on the terms, required by the terms of this Agreement.

          (g) QUOTATION OF LIBOR RATE. Notwithstanding anything contained herein
to the contrary,  if on any Interest Rate  Determination  Date the LIBOR Rate is
unavailable  by reason of the  failure  of the  referenced  lenders  to  provide
offered  quotations  to the Lender in accordance  with the  definition of "LIBOR
Rate",  the Lender  shall give the  Borrower  prompt  notice  within  three days
thereof  and any LIBOR Rate Loans  requested  shall be made as Prime Rate Loans;
provided,  however, that failure to give such notice within three days shall not
entitle the  Borrower  to obtain nor  require  the Lender to provide  LIBOR Rate
Loans if the LIBOR Rate is otherwise unavailable as provided for herein.

          (h) LIBOR RATE TAXES. The Borrower agrees that:

                    (i)  Promptly  upon notice from the Lender to the  Borrower,
          the Borrower  will pay,  prior to the date on which  penalties  attach
          thereto, all present and future income, stamp and other taxes, levies,
          or costs and charges whatsoever imposed, assessed, levied or collected
          on or in respect of the Term Loan  solely as a result of the  interest
          rate  being  determined  by  reference  to the LIBOR  Rate  and/or the
          provisions  of this  Agreement  relating  to the LIBOR Rate and/or the
          recording,  registration,  notarization or other  formalization of any
          thereof  and/or any payments of  principal,  interest or other amounts
          made  on or in  respect  of a Term  Loan  when  the  interest  rate is
          determined  by  reference  to the LIBOR Rate (all such taxes,  levies,
          cost and charges being herein collectively called "LIBOR Rate Taxes");
          PROVIDED  that LIBOR Rate Taxes shall not include  taxes imposed on or
          measured by the net income of the Lender by the country under the laws
          of which the  Lender is  organized  or any  political  subdivision  or
          taxing authority  thereof or therein,  or taxes imposed on or measured

                                       11
<PAGE>
          by the net income of any branch or subsidiary  of the Lender  (whether
          gross or net income) by any  jurisdiction  or  subdivision  thereof in
          which that branch or subsidiary is doing business.  The Borrower shall
          also pay such  additional  amounts equal to increases in taxes payable
          by the Lender,  which  increases are  attributable to payments made by
          the Borrower  described in the immediately  preceding sentence or this
          sentence.  Notwithstanding  anything contained in this Section 2.05(h)
          to the  contrary,  in the event  that the  Lender  shall  recover  any
          amounts in respect  of LIBOR Rate Taxes as to which the  Borrower  has
          previously rendered payment to Lender, then Lender shall reimburse the
          Borrower in full for such  amounts.  Promptly  after the date on which
          payment of any such LIBOR Rate Tax is due pursuant to applicable  law,
          the  Borrower  will at the  request of the  Lender,  furnish to Lender
          evidence,  in form and  substance  satisfactory  to  Lender,  that the
          Borrower has met its obligation under this Section 2.05(h); and

                    (ii) The Borrower  will  indemnify the Lender  against,  and
          reimburse the Lender on demand for, any LIBOR Rate Taxes as determined
          by the Lender in its good faith  discretion.  The Lender shall provide
          the   Borrower   with   appropriate   receipts  for  any  payments  or
          reimbursements made by the Borrower pursuant to this clause (ii).

          (i)  BOOKING  OF LIBOR  RATE  LOANS.  The  Lender  may make,  carry or
transfer  LIBOR  Rate  Loans at,  to, or for the  account  of, any of its branch
offices or the office of an affiliate of the Lender.

          (j) INCREASED  COSTS.  If, by reason of (i) the introduction of or any
change in  (including,  without  limitation,  any change by way of imposition or
increase  of  reserve  requirements)  or in the  interpretation  of  any  law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority or quasi-governmental  authority exercising
control over banks or financial  institutions  generally  (whether or not having
the force of law), any reserve (including,  without  limitation,  any imposed by
the Federal  Reserve  Board),  special  deposit or similar  requirement  against
assets of,  deposits  with or for the  account  of, or credit  extended  by, the
Lender or its applicable Lending office shall be imposed or deemed applicable or
other condition  affecting any of its LIBOR Rate Loans or its obligation to make
such LIBOR Rate Loans shall be imposed on the Lender or its  applicable  lending
office or the London  interbank  market,  and as a result thereof there shall be
any increase in the cost to the Lender of agreeing to make or making, funding or
maintaining  such LIBOR Rate Loans,  or there shall be a reduction in the amount
received  or  receivable  by the Lender or time,  upon  written  notice from and
demand by the Lender,  pay to the Lender for the  account of the Lender,  within
five  Business  Days  after  the  date  specified  in such  notice  and  demand,
additional  amounts  sufficient to indemnify the Lender  against such  increased
cost. A  certificate  in  reasonable  detail as to the amount of such  increased
cost, submitted to the Borrower by the Lender, shall, except for manifest error,
be final, conclusive and binding for all purposes.

          (k)  ASSUMPTIONS   CONCERNING   FUNDINGS  OF  LIBOR  RATE  LOANS.  The
calculation  of all amounts  payable to the Lender under this Section 2.05 shall
be made as though the Lender had  actually  funded the LIBOR Rate Loans  through
the purchase of a LIBOR deposit bearing interest at the LIBOR Rate applicable to
such LIBOR Rate Loan, in the case of a LIBOR Rate Loan,  through the transfer of
such LIBOR deposit from an offshore office of the Lender to a domestic office of
such Lender in the United States of America; it being understood that the Lender

                                       12
<PAGE>
may fund LIBOR Rate Loans in any manner it sees fir and the foregoing assumption
shall be  utilized  only for the  calculation  of  amounts  payable  under  this
subsection.

          (l) LIBOR RATE LOANS AFTER DEFAULT. After the occurrence of and during
the  continuance of a Default,  the Borrower may not elect to have a Term Credit
be made as a LIBOR Rate Loan or continued as, or converted to, a LIBOR Rate Loan
after the expiration of any Interest Period then in effect.

     Section 2.06.  Adjustments to Interest on the Credit.
     -------------  --------------------------------------

     The Borrower may twice annually request that the Bank adjust the Applicable
Prime  Rate and the  Applicable  LIBOR  Rate to Level II or Level  III set forth
below by  delivering  to the Bank a rate change  certificate  (the "Rate  Change
Certificate") in the form attached hereto as Exhibit 2.06 certifying that either
(i) the  unaudited  consolidated  financial  statements  of the Borrower and its
Subsidiaries for the  twelve-month  period ending June 30, or (ii) the unaudited
consolidated  financial  statements of the Borrower and its Subsidiaries for the
twelve-month period ending December 31 (each a "Rate Change Financial Statement"
and  collectively,  the "Rate Change  Financial  Statements")  attached  thereto
indicate  Leverage  Ratio of the Borrower for the trailing  twelve-month  period
that corresponds with the ratios opposite such levels set forth below.
<TABLE>
<CAPTION>
                                                                                                  Applicable
      Level         Leverage Ratio                            Applicable Prime Rate               LIBOR Rate
      -----         --------------                            ---------------------               ----------
<S>                 <C>                                    <C>                           <C>
Level 1             Greater than 2.5:1                     Prime Rate plus .75%          LIBOR Rate plus 3.75%

Level II            Greater than 1.5:1 and less than or    Prime Rate plus .25% per      LIBOR Rate plus 3.25% per
                    equal to 2.5:1                         annum                         annum

Level III           Less than or equal to 1.5:1            Prime Rate                    LIBOR Rate plus 3.00 per
                                                                                         annum
</TABLE>
     In the  event  that the Bank  adjusts  the  Applicable  Prime  Rate and the
Applicable  LIBOR  Rate to Level II or Level  III,  the  Borrower  shall  not be
entitled to a refund on account of interest  accrued  prior to and including the
date of the delivery of the Rare Change Financial Statement.  The Borrower shall
deliver to the Bank the Rate Change Financial Statements

     In the event that the  Borrower  fails to timely  deliver  the Rate  Change
Financial  Statements  within forty-five (45) days after the end of each six (6)
month period ending June 30 and December 31, the  Applicable  Prime Rate and the
Applicable  LIBOR Rate shall be  automatically  and immediately  adjusted to the
Level I until such time as the Rate Change Financial Statement is delivered.  In
the event that upon the  delivery of the Rate Change  Financial  Statement,  the
Bank re-adjusts the Applicable Prime Rate and the Applicable LIBOR Rate to Level
II or Level III,  the  Borrower  shall not be entitled to a refund on account of
interest  accrued  prior to and  including  the date of the delivery of the Rate
Change Financial Statement. In the event that upon delivery of audited financial
statements  pursuant to Section 5.06(a) hereof (the "Audited  Statements"),  the

                                       13
<PAGE>
Level corresponding to the Leverage Ratio is different than the Level previously
indicated by the Rate Change Financial Statement delivered pursuant to the first
sentence of this paragraph and the difference  indicates a higher interest rare,
the Applicable Prime Rate and the Applicable LIBOR Rate shall immediately adjust
to the Level indicated by the Audited  Statements.  In such event,  the Borrower
shall immediately repay to the Bank  retroactively for the period covered by the
Audited Statements as if such Level had been in effect for the entire period.

     The Borrower may request  from the Bank written  permission  to include the
twelve month  trailing  EBITDA of a Permitted  Acquisition  in  calculating  the
Leverage  Ratio  which  the  Bank  may  grant  in  its  reasonable   discretion.
Notwithstanding the foregoing,  the Bank agrees to allow the Borrower to include
the twelve month trailing  EBITDA of the Acute Care  Subsidiaries in calculating
the Leverage Ratio.

     In addition to the  foregoing,  upon the occurrence of an Event of Default,
the Applicable  Prime Rate and the Applicable  LIBOR Rate shall be automatically
and  immediately  adjusted to a Default  Rate of Interest as provided in Section
2.04.

     Section 2.07.  Method of Payment.
     -------------  ------------------

     All payments and  prepayments of principal and interest due under the Notes
and of  fees  their  hereunder  shall  be made by the  Borrower  to the  Bank in
immediately  available  funds.  Payments  received  by the Bank after 12:00 noon
Boston time shall be deemed  received on the next  succeeding  Banking  Day. All
payments of  principal,  interest or fees to be made to the Bank may be effected
by the Bank debiting  accounts of the Borrower with the Bank and sending  notice
thereof to the Borrower.

     Section 2.08.  Payment and Interest Cutoff.
     -------------  ----------------------------

     Notice of each prepayment pursuant to Section 2.03(a) shall be given to the
Bank not Later than 12:00 noon (Boston  time) on the date of payment,  and shall
specify the total  principal,  interest and penalty,  if any, of the Term Credit
and/or the Revolving Credit to be paid on such date. Notice of prepayment having
been given in  compliance  with this Section  2.08,  the amount  specified to be
prepaid shall become due and payable on the date  specified for  prepayment  and
from and after said date  (unless  the  Borrower  shall  default in the  payment
thereof)  interest  thereon  shall  cease  to  accrue.  Unpaid  interest  on the
principal  amount of the Revolving  Credit or Term Credit so prepaid  accrued to
the date of prepayment shall be due on the date of prepayment.

     Section 2.09.  Closing Fee.
     -------------  ------------

     The Borrower shall pay the Bank $140,000 at Closing.

     Section 2.10.  Expenses.
     -------------  ---------

     The Borrower Shall pay the Bank on demand all reasonable out-of-pocket fees
and expenses up to a maximum  amount of $7,500 per year  incurred by the Bank in
connection  with  examinations  of  the  books  and  records  of  the  Borrower,
appraisals of the assets of the Borrower and visits to the Borrower by officers,
employees and agents of the Bank. The Borrower  shall  cooperate with the Bank's
officers,  employees  and  agents in  connection  with each  audit or  appraisal
performed and comply with all reasonable requests in connection therewith.


                                       14
<PAGE>
     Section 2.11.  Cash Management Service.
     -------------  ------------------------

     At the Bank's  request,  the Borrower  shall at all times use the LMCS Cash
Management  Service provided by the Bank with respect to the Credit and shall at
all times maintain substantially all of its principal operating and disbursement
accounts with the Bank or alternatively a cash management system satisfactory to
the Bank;  provided,  however,  that the  Borrower  may  maintain the Acute Care
Subsidiaries'  current  operating and disbursement  accounts for a period not to
exceed one hundred and twenty  (120) days after the Closing;  provided  further,
however,  that the  aggregate  amount  of funds in the Acute  Care  Subsidiaries
operating and disbursement  accounts during the one hundred and twenty (120) day
period shall not exceed $1,500,000 at any time.

     Section 2.12.  Facility Fee.
     -------------  -------------

     The  Borrower  shall  pay the Bank a  revolving  credit  facility  fee (the
"Facility Fee") from and including the Closing to the date upon which the Bank's
commitment to make Revolving Credit Advances has terminated,  computed at a rate
of 3/8 of 1% per annum on the daily  average  Unutilized  Revolving  Commitment.
Such  Facility  Fee shall be due and payable in arrears on the first day of each
month, commencing July 1, 1999.

     Section 2.13.  Use of Credit Proceeds.
     -------------  -----------------------

     The  proceeds of the Term Credit  shall be used by the  Borrower to finance
the  Acquisitions.  The  proceeds of the  Revolving  Credit shall be used by the
Borrower to: (a) finance the Acquisitions,  (b) refinance existing  indebtedness
to the  Bank,  (c) pay  costs  and  expenses  incurred  in  connection  with the
Acquisitions and the  establishment  of the Credit and (d) the balance,  if any,
solely for general working capital purposes,  Permitted Acquisitions,  repayment
of indebtedness of entities  acquired in Permitted  Acquisitions,  and Permitted
Stock Payments.


ARTICLE III.        REPRESENTATIONS AND WARRANTIES.
------------        -------------------------------

     Borrower hereby represents and warrants that:

     Section 3.01.  Corporate Existence and Power; Organizational Structure.
     -------------  --------------------------------------------------------

     The Borrower is a corporation  duly  incorporated,  validly existing and in
good standing  under the laws of the State of Delaware,  and has full  corporate
and other power and  authority to conduct its business and own its assets as now
conducted and owned and as proposed to be conducted and owned.  The Borrower and
each of its Subsidiaries  are licensed or qualified as a foreign  corporation in
each  jurisdiction  where the conduct of its  business or the  ownership  of its
assets require such licensing or  qualification,  except where the failure to be
so  licensed  or  qualified  would not have a material  adverse  effect upon the
business,  assets,  operations,  or  financial  condition  or  prospects  of the
Borrower and its Subsidiaries, taken as a whole.

     There are presently  issued by the Borrower and its Subsidiaries the shares
of capital stock indicated on SCHEDULE 3.01, which shares are owned beneficially
and of  record  as set  forth  on  such  SCHEDULE  3.01.  The  Borrower  and its
Subsidiaries have received the consideration for which such stock was authorized

                                       15
<PAGE>
to be issued and have otherwise complied with all legal requirements relating to
the  authorization  and  issuance  of shares of stock  and all such  shares  are
validly issued, fully paid and non-assessable. The Borrower and its Subsidiaries
have no other  capital  stock of any class  outstanding.  Except as disclosed on
Schedule  3.01,  there are no (i)  outstanding  options,  warrants  or rights to
acquire any shares of the capital  stock or other  securities  of the  Borrower,
(ii)  outstanding  securities  or  obligations  which  are  convertible  into or
exchangeable  for any shares of the  capital  stock or other  securities  of the
Borrower, or (iii) preemptive or subscription rights,  contracts or arrangements
under which the Borrower is or may become  bound to sell or otherwise  issue any
shares of capital stock or other securities, other than as granted by law.

     Section 3.02.  Subsidiaries.
     -------------  -------------

     Except  as set  forth in  Schedule  3.02,  the  Borrower  currently  has no
Subsidiaries or any equity  investments in any other entity.  The Borrower shall
not  organize  or permit to exist any new  Subsidiaries,  or make any new equity
investments  in any other entity  without the prior written  consent of the Bank
(except for Permitted Acquisitions).

     Section 3.03.  Power and Authority Relative to Borrowing; Legal and Binding
     -------------  ------------------------------------------------------------
Nature; Compliance with Other Instruments.
------------------------------------------

     Except as set forth in  SCHEDULE  3.03,  the  Borrower  has full  power and
authority  and has taken all required  corporate  and other action  necessary to
permit it to execute and deliver and perform all of its obligations contained in
the Credit Documents to which it is a party, and to borrow  hereunder,  and none
of such actions will violate any  provision of law  applicable  to it, or of its
charter or by-laws or result in the breach of or  constitute a default under any
material agreement or instrument to which it is a party or by which it is bound.
Each of the Credit  Documents to which the Borrower is a party has been (or will
upon  execution be) duly  authorized  and validly  executed and is (or will upon
execution be) the valid and binding  obligations of the Borrower  enforceable in
accordance with its respective  terms.  Neither the execution or delivery by the
Borrower  of  any  of  the  Credit  Documents  to  which  it is a  party  or the
performance  of its  obligations  thereunder,  require the consent,  approval or
authorization of any person or governmental authority.

     The  provisions  of the Credit  Documents  executed  and  delivered  by the
Borrower in accordance with Sections  4.01(c) through (g) hereof have created in
favor of the  Bank  legal,  valid  and  enforceable  security  interests  in the
collateral  described  therein,  and all financing  statements and other filings
have been (or will  promptly  after the Closing be) filed or made as required by
applicable  law so as to cause  such  security  interests  to  constitute  fully
perfected first priority liens on all right,  title and interest of the Borrower
in such collateral.

     Neither the  Borrower  nor any of its  Subsidiaries  is in violation of any
term of its charter or by-laws,  and none of the Borrower or its Subsidiaries is
in  violation  of  any  material  agreement,  instrument,  mortgage,  indenture,
contract  or  any  judgment,   decree,  order,  statute,  rule  or  governmental
regulation  applicable to it. The  execution,  delivery and  performance  of the
Credit Documents will not result in the creation of any security interest, lien,
charge or  encumbrance  upon any of the  properties or assets of the Borrower or
its Subsidiaries except in favor of the Bank.

                                       16
<PAGE>
     Section 3.04.  Financial Condition.
     -------------  -------------------

     The following financial statements have been delivered to the Bank: (i) the
audited  consolidated  financial statements of the Borrower and its Subsidiaries
dated as of June 30, 1998 and the unaudited consolidated financial statements of
the  Borrower  and its  Subsidiaries  dated  as of March  31,  1999  (the  "Base
Financial Statements");  (ii) the unaudited consolidated financial statements of
each of the Acute Care  Subsidiaries  dated  December 31, 1998 (the  "Subsidiary
Financial  Statements")  The Base Financial  Statements are complete and correct
and present fairly and accurately the financial position of the Borrower and its
Subsidiaries,  on a  consolidated  basis,  as of the  date of  each of the  Base
Financial  Statements  and the results of  operations  of the  Borrower  and its
Subsidiaries  on a  consolidated  basis in conformity  with  generally  accepted
accounting principles consistently applied. Except as set forth on Schedule 3.04
hereof,  to the  best of the  Borrower's  knowledge,  the  Subsidiary  Financial
Statements  are  complete  and  correct and present  fairly and  accurately  the
financial  position  of  the  Acute  Care  Subsidiaries  as of the  date  of the
Subsidiary Financial Statements in conformity with generally accepted accounting
principles  consistently  applied.  The Borrower and the Acute Care Subsidiaries
have no material  contingent  liabilities or material  liabilities for taxes, or
any unusual or burdensome  agreement or commitment which would have a materially
adverse  effect on their  business  assets,  operations or financial  condition,
except as disclosed in the Base Financial  Statements,  the Subsidiary Financial
Statements and in this Agreement.

     Section 3.05.  No Material Adverse Change.
     -------------  ---------------------------

     Except as set forth in  SCHEDULE  3.05  hereto,  since the date of the Base
Financial  Statements there has been no material adverse change in the business,
assets, operation or condition (financial or otherwise) of the Borrower, and the
Borrower,  has not paid any dividends or made any  distributions on or purchased
or  otherwise  acquired  any  shares of its  capital  stock.  To the best of the
Borrower's  knowledge,  except as set forth in Schedule 3.05,  there has been no
material  adverse  change  in  the  business,  assets,  operation  or  condition
(financial or otherwise)  of the Acute Care  Subsidiaries  and none of the Acute
Care  Subsidiaries  has  paid any  dividends  or made  any  distributions  on or
purchased or otherwise acquired any shares of its capital stock.

     Section 3.06.  Litigation.
     -------------  -----------

     Except  as set  forth  in  SCHEDULE  3.06  hereto,  there  are no  suits or
proceedings  pending  or,  to the best  knowledge  of the  Borrower,  threatened
against or affecting the Borrower or any of its  respective  Subsidiaries  which
would  have a  material  adverse  effect  on  the  business,  assets,  financial
condition or prospects of the  Borrower or any  Subsidiary  or the  transactions
contemplated by the Credit Documents.

     Section 3.07.  Title.
     -------------  ------

     Except as set forth in SCHEDULE  3.07, the Borrower has good and marketable
title to, or valid leasehold  interests in, all of the properties and assets and
leasehold  interests  reflected in the Base  Financial  Statements,  or acquired
since such date (except for materials used,  inventory sold, accounts receivable
collected  and other items  disposed of, all in the ordinary  course of business
since the date of the Base  Financial  Statements),  free and clear of all liens

                                       18
<PAGE>
and  encumbrances  except  liens  permitted  by  Section  5.12,  and  easements,
restrictions and minor defects in title which do not, either  individually or in
the aggregate  materially  detract from the value or materially limit the use of
any real property.

     Section 3.08.  Tax Returns and Payments.
     -------------  -------------------------

     Except as set forth in Schedule 3.08 hereto, all of the tax returns and tax
reports of the  Borrower and its  Subsidiaries  required by law to be filed have
been duly filed,  or extensions of the time for filing have been duly  obtained,
and the Borrower and its Subsidiaries have paid all taxes shown due thereon. The
federal income tax returns of the Borrower and its Subsidiaries  have never been
audited by the Internal Revenue  Service.  There are in effect no waivers of the
applicable  statutes  of  limitations  for  federal  taxes  for any  period.  No
deficiency  assessment or proposed adjustment of the federal income taxes of the
Borrower or any of its  Subsidiaries  is pending  and to the best of  Borrower's
knowledge there is no proposed  liability of a substantial nature for any tax to
be imposed  upon any of its assets for which  there is not an  adequate  reserve
reflected  in the  Base  Financial  Statements.  To the  best of the  Borrower's
knowledge, no deficiency assessment or proposed adjustment of the federal income
taxes  of Acute  Care  Subsidiaries  is  pending  and to the best of  Borrower's
knowledge there is no proposed  liability of a substantial nature for any tax to
be imposed  upon any of its assets for which  there is not an  adequate  reserve
reflected in the Subsidiary Financial Statements.

     Section 3.09.  Compliance with Law, etc.
     -------------  -------------------------

     The Borrower and its Subsidiaries have all necessary  franchises,  permits,
licenses and other rights to allow them to conduct  their  business as presently
conducted  and as proposed to be  conducted,  and neither the  Borrower  nor any
Subsidiaries are in default with respect to any order or decree of any court, or
under any law, order or regulation of any governmental  authority,  or under the
provisions  of any  contract or  agreement to which any of them is a party or by
which they may be bound,  which default would have a material  adverse effect on
the business,  assets,  operations,  financial  condition or prospects of any of
them.

     Section 3.10.  Pension Matters.
     -------------  ----------------

     Neither the  Borrower  nor any of its  Subsidiaries  has  incurred  (a) any
material  accumulated  funding  deficiency  within the  meaning of the  Employee
Retirement  Income  Security  Act of  1974,  as  amended  ("ERISA"),  or (b) any
material liability to the Pension Benefit Guaranty Corporation established under
ERISA (or any successor  thereto  under ERISA) in  connection  with any employee
benefit  plan  established  or  maintained  by it; nor has  Borrower had any tax
assessed  against it by the Internal  Revenue Service for any alleged  violation
under  Section  4975 of the  Internal  Revenue  Code of 1986,  as  amended  (the
"Code").  Neither the  Borrower  nor any of its  Subsidiaries  has any  material
unfunded liability under a pension plan or a contingent liability for withdrawal
from a  multi-employer  pension  plan  except  as  disclosed  in  the  financial
statements  referred  to in the Base  Financial  Statements.  To the best of the
Borrower's  knowledge,  none of the Acute Care  Subsidiaries  have any  material
unfunded liability under a pension plan or a contingent liability for withdrawal
from a  multi-employer  pension  plan  except  as  disclosed  in the  Subsidiary
Financial Statements.

                                       18
<PAGE>
     Section 3.11.  Compliance with Regulation U.
     -------------  -----------------------------

     None of the  proceeds  of the  Credit  will be used to  purchase,  carry or
refinance any borrowing the proceeds of which were used to purchase or carry any
"margin securities" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System.

     Section 3.12.  Credit Agreements.
     -------------  ------------------

     Set forth on Schedule  3.12 is a complete  and correct list of all existing
loan  agreements,  indentures,  note  purchase  agreements,  guarantees or other
instruments  relating to extensions of credit or money borrowed for an amount in
excess of $50,000  under which the Borrower or any  Subsidiary  is or may become
directly or indirectly obligated.

     Section 3.13.  Leases and Options to Purchase.
     -------------  -------------------------------

     Set forth on Schedule  3.13 is a complete  and correct list of all existing
leases with respect to, or options to purchase any, real estate or any equipment
involving a commitment,  potential  commitment,  or series of commitments in any
twelve  month  period,  in excess of $50,000  under which the Borrower is or may
become directly or indirectly obligated as lessee or purchaser.

     Section 3.14.  Insolvency.
     -------------  -----------

     Neither the  Borrower  nor any of its  Subsidiaries  has (a) made a general
assignment  for the benefit of creditors,  (b) filed any  voluntary  petition in
bankruptcy or suffered the filing of an  involuntary  petition by its creditors,
(c)  suffered  the  appointment  of a  receiver  to  take  possession  of all or
substantially  all of its assets,  (c) suffered the attachment or other judicial
seizure of all, or substantially all of its assets,  (d) admitted in writing its
inability to pay its debts as they come due, or (e) made an offer of settlement,
extension or composition to its creditors generally.  After giving effect to the
financing  provided  for in this  Agreement,  the  Borrower  will not:  (a) have
liabilities (contingent or otherwise) which exceed the fair and salable value of
its assets;  (b) be left with unreasonably small capital with which to engage in
its business;  (c) have incurred,  or anticipate or reasonably should anticipate
incurring, debts beyond its ability to pay such debts as they mature.

     Section 3.15.  Real Estate Owned.
     -------------  ------------------

         Neither the Borrower nor any of its Subsidiaries owns any real
property.

     Section 3.16.  Hazardous Waste.
     -------------  ----------------

     Except as set forth in SCHEDULE  3.16,  neither of the  Borrower nor any of
its  Subsidiaries  has  generated,  stored  or  disposed  of any oil,  hazardous
substance or hazardous  material as amended in the  Comprehensive  Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. ss.9601, et seq.,
applicable state or federal laws, or regulations  adopted pursuant  thereto,  in
violation of applicable  law; and,  except as set forth on Schedule 3.16, to the
best of the  Borrower's  knowledge  there has been no  generation,  storage,  or
disposal of any such materials by anyone else on the property owned or leased by
the Borrower or the  subsidiaries,  nor have any such  materials been present on
such property.

                                       19
<PAGE>
     Section 3.17.  Permits.
     -------------  --------

     All  necessary  licenses and permits for the use and  occupancy of the real
property  owned or leased by the Borrower have been issued and are in full force
and effect  except as set forth on Schedule  3.17 hereto and except for any such
licenses  or  permits  the  absence of which  would not have a material  adverse
effect  upon  the  business,  assets,  operations,  or  financial  condition  or
prospects of the Borrower and its Subsidiaries, taken as a whole.

     Section 3.18.  Patents; Trademarks, Etc.
     -------------  -------------------------

     Set forth on SCHEDULE 3.18 hereto are all patents,  parent  rights,  patent
applications,  trademarks,  trademark  applications,  trade names,  brand names,
service marks,  and service  applications and all applications for such that are
in the  process  of  being  prepared,  owned  by or  registered  in the  name of
Borrower,  or of which  Borrower is a licensor or licensee or in which  Borrower
has any right  (collectively  with the trade  secrets  and  copyrights  owned or
licensed by the Borrower,  the "Intellectual  Property").  All such Intellectual
Property  is valid  and in full  force and  effect,  and there is no claim by or
demand of any person  pertaining  hereto,  and there are no suits or proceedings
pending or, to the  knowledge of Borrower  threatened,  against  Borrower  which
would have a material  adverse  effect upon any rights of Borrower in respect of
any such Intellectual  Property; nor to the knowledge of the Borrower is there a
basis for any such claim, suit, proceeding or investigation.

     Except  as set  forth  in  SCHEDULE  3.18.  hereto,  the  Borrower  owns or
possesses  adequate  licenses or other rights to use all  intellectual  Property
which is necessary for its business or operations as now conducted and where the
failure  to so have such  rights  would have a  material  adverse  effect on the
business, properties, assets, prospects, operations or conditions,  financial or
otherwise,  of  Borrower.  Furthermore,  except  as set forth in  Schedule  3.18
hereto, the Borrower represents and warrants that it has good right to assign or
transfer  its  interest  in the  Intellectual  Property  and the  assignment  or
transfer will not cause default or permit termination of the transferee's rights
or interest in the Intellectual  Property.  Except as set forth in Schedule 3.18
hereto,  the  Borrower has not granted or assigned to any other person or entity
any right to manufacture,  have  manufactured,  assemble or sell the products or
proposed products,  or to provide the services or proposed services of Borrower,
in connection with the Intellectual Property.

     Section 3.19.  No Omissions.
     -------------  -------------

     None  of the  representations  or  warranties  in  this  Agreement  nor any
document,  agreement,  statement,   certificate,   exhibit,  schedule  or  other
information  furnished or to be furnished by or on behalf of the Borrower to the
Bank pursuant to this Agreement contains any untrue statement of a material fact
or omits to state a material  fact  necessary  to make the  statements  of facts
contained therein not misleading.

ARTICLE IV.         CONDITIONS.
-----------         -----------

     Section 4.01.  Conditions to the Term Credit and the First Advances.
     -------------  -----------------------------------------------------

     The  obligation  of the Bank to extend the Term Credit and make the initial
advances  under  the  Revolving  Credit is  subject  to the  fulfillment  of the
following conditions:
                                       20
<PAGE>
          (a) LEGAL OPINIONS FROM COUNSEL FOR THE BORROWER AND  GUARANTORS.  The
Bank shall have received the written  opinion of (a) Nossaman,  Guthner,  Knox &
Elliott,  LLP, (b)  Kirkpatrick & Lockhart LLP  (Massachusetts  counsel) and (c)
Kirkpatrick and Lockhart LLP (Florida counsel), counsel to the Borrower, in form
satisfactory to Messrs. Goodwin, Procter & Hoar LLP, special counsel to the Bank
(said special counsel and any successor counsel shall be hereinafter referred to
as "Special  Counsel")  covering such matters as the Bank or its Special Counsel
may request.

          (b) THE NOTES.  The Borrower  shall have executed and delivered to the
Bank the Term Note and the Revolving Credit Note.

          (c) THE SECURITY  AGREEMENT.  The Bank shall have  received an amended
and restated security agreement executed by the Borrower in form satisfactory to
the Bank and its Special  Counsel (the  "Security  Agreement"),  granting to the
Bank a first priority  security  interest in and assignment of substantially all
of the assets of the Borrower.  All Uniform Commercial Code Financing Statements
and other filings (including without limitation,  filings with the United States
Patent and  Trademark  Office)  required in order to perfect  the liens  granted
under the Security  Agreement shall have been executed by the Borrower and shall
have been duly filed or recorded.

          (d) ACQUISITIONS CONSUMMATION.  Other than as consented to by the Bank
in writing:

                    (i) The provisions of the Acquisitions  Agreements shall not
          have been amended, modified, waived or terminated;

                    (ii)  All  of  the  representations  and  warranties  of the
          Sellers set forth in  Acquisitions  Agreements  shall be complete  and
          correct in all  material  respects on and as of Closing  with the same
          force and effect as though made on and as of such date;

                    (iii) All of the other  conditions to the obligations of the
          Borrower and  Subsidiaries  set forth in the  Acquisitions  Agreements
          shall have been satisfied;

                    (iv) Any material consent, authorization,  order or approval
          of  any  Person   required  in   connection   with  the   transactions
          contemplated by the  Acquisitions  Agreements shall have been obtained
          and shall be in full force and effect;

                    (v) All of the  items  required  to be  delivered  under the
          Acquisitions Agreements shall have been so delivered;

                    (vi)  The  merger  of   Futuretech,   Futuretech   Maryland,
          Futuretech  Washington,  and  Healthcare  into the Borrower shall have
          been  consummated in accordance with the  Acquisitions  Agreements and
          Delaware corporate law and the corporate laws of the respective states
          in which Futuretech,  Futuretech Maryland,  Futuretech Washington, and
          Healthcare are organized, as applicable;

                    (vii)  Contemporaneously  with the making by the Bank of the
          first extension of credit hereunder, the Borrower shall have furnished
          to the Bank a  certificate,  signed  by a  Financial  Officer,  to the

                                       21
<PAGE>
          effect that the closing has occurred under the Acquisitions Agreements
          and to the  effect  that  each of the  conditions  set  forth  in this
          Section 4.01(d) has been satisfied; and

                    (viii)  Contemporaneously with the making by the Bank of the
          first extension of credit hereunder, the Borrower shall have furnished
          to the Bank evidence,  satisfactory to the Bank, of the termination of
          existing  indebtedness of the Acute Care Subsidiaries  pursuant to the
          Acquisitions  Agreements,  including  payoff letters,  UCC-3's and any
          other documentation that the Bank may request.

          (e)  GUARANTOR  SECURITY  AGREEMENTS.  The Bank  shall  have  received
security  agreement  executed by each of the Guarantors in form  satisfactory to
the Bank and its Special Counsel (the "Guarantor Security Agreements"), granting
to the Bank a first priority security  interest  substantially all of the assets
of the Borrower.  All Uniform  Commercial  Code  Financing  Statements and other
filings (including without limitation, filings with the United Stares Patent and
Trademark  Office)  required  in order to perfect  the liens  granted  under the
Security  Agreement shall have been executed by the Borrower and shall have been
duly filed or recorded.

          (f) LANDLORD'S CONSENTS AND ESTOPPEL CERTIFICATES. The Bank shall have
received with respect to each parcel of real property leased by the Borrower (or
leased by a sales  representative  that has in its possession any Collateral (as
defined in the  Security  Agreement))  a duly  executed  Landlord's  Consent and
Estoppel  Certificate in form  satisfactory  to the Bank and its Special Counsel
(the "Landlord's Consent and Estoppel Certificates").

          (g) COLLATERAL  ASSIGNMENT OF ACQUISITIONS  DOCUMENTS.  The Bank shall
have received a Collateral Assignment of Acquisitions  Documents executed by the
Borrower  in  form  satisfactory  to the  Bank  and  its  Special  Counsel  (the
"Collateral Assignment of Acquisitions Documents").

          (h) PLEDGE  AGREEMENTS.  Each of the  Borrower  and Bimeco  shall have
executed and  delivered to the Bank a Pledge  Agreement on terms and  conditions
satisfactory to the Bank (the "Pledge Agreements").

          (i)  GUARANTY  AGREEMENTS.  Each  Guarantor  shall have  executed  and
delivered to the Bank the Unlimited Guaranty  Agreements on terms and conditions
satisfactory to the Bank.

          (j) KEY-MAN LIFE INSURANCE POLICY.  The Borrower shall have obtained a
life insurance policies in the minimum amount of $1,000,000 each with respect to
John Rooney and Michael Bayley.

          (k) INSURANCE. The Borrower shall have delivered to the Bank a list in
the  form of  Exhibit  4.01(k)  hereto,  certified  by the  president  or  chief
financial  officer of the Borrower,  of all  insurance  required by Section 5.05
showing the insurer, the face amount and the nature of the coverage and the Bank
as an  additional  insured and loss payee (or  beneficiary,  as the case may be)
under each policy then in force.

          (l)  OFFICER'S  CERTIFICATE  RE:  AUTHORIZATION,  REPRESENTATIONS  AND
WARRANTIES; ABSENCE OF DEFAULTS: TRADENAMES, PLACES OF BUSINESS AND LOCATIONS OF
COLLATERAL.  The  Borrower  shall have  delivered to the Bank a  certificate  in

                                       22
<PAGE>
substantially  the form of  EXHIBIT  4.01(L)  hereto  and  dated the date of the
Closing.

          (m) NO  DEFAULT.  No Event of Default  specified  in Article VI and no
event which, under Article VI with the giving of notice or the lapse of time, or
both,  would  constitute  an  Event  of  Default,  shall  have  occurred  and be
continuing.

          (n) SUBORDINATION SIDE LETTERS. Each of GE Capital Equity Investments,
Inc.,  Coleman Swenson Hoffman Booth IV L.P., John F. Rooney,  BAM  Enterprises,
LLC, Michael K. Bayley, William H. Lomicka,  Webbmont Holdings,  L.P., Investors
Equity,  Inc. and the Borrower  have duly  executed and  delivered to the Bank a
Subordination Side Letter on terms and conditions satisfactory to the Bank (each
a  "Subordination   Side  Letter"  and  collectively,   the  Subordination  Side
Letters").

          (o) PAYOFF  LETTER  AND  TERMINATION  STATEMENTS.  The Bank shall have
received  a payoff  letter  and UCC-3  Termination  Statements  and/or any other
instrument  necessary to terminate the security  interests  granted to all third
parties and provide  evidence of satisfaction all obligations of the Borrower to
such third parties.

          (p)  MATERIAL  ADVERSE  CHANGE.  There  shall  not have  occurred  any
material  adverse change in the condition  (financial or otherwise),  operation,
properties, assets, liabilities, earnings or prospects of the Borrower since the
date of the Base Financial statements delivered to the Bank.

          (q) CAPITALIZATION. The Borrower shall have at Closing available funds
in amount of at least  $19,550,000,  and delivered to the Bank evidence thereof,
derived from sources satisfactory to the Bank.

          (r) EQUITY INVESTMENT. The Borrower shall have received, and delivered
to the Bank evidence of an equity  investment of at least  $11,100,000  on terms
and conditions satisfactory to the Bank.

          (s) INTELLECTUAL  PROPERTY  SECURITY  AGREEMENTS.  The Bank shall have
received  from  the  Borrower  and its  Subsidiaries  an  Intellectual  Property
Security  Agreement in a form  satisfactory  to the Bank and its Special Counsel
(the "Intellectual Property Security Agreement").

          (t) WARRANT AND WARRANT  AGREEMENT.  The Borrower  shall have executed
and  delivered  to the Bank a  confirmation  of (i) the warrant  agreement  (the
"Warrant Agreement");  and (ii) the warrant (the "Warrant") dated as of February
5, 1998 in form satisfactory to the Bank and its Special Counsel.

          (u) MISCELLANEOUS  REQUIREMENTS.  The Borrower shall have delivered to
the  Bank  such  other  documents  as the  Bank  or its  Special  Counsel  shall
reasonably require.

     Section 4.02.  Conditions to Subsequent Advances.
     -------------  ----------------------------------

     Each request for a subsequent  Revolving  Credit Advance shall be deemed to
be a  representation  by the Borrower to the Bank that all  representations  and
warranties  contained  in Article  III  hereof or in any  Exhibit,  Schedule  or

                                       23
<PAGE>
Certificate attached hereto or delivered to the Bank in connection herewith were
true and correct when made and continue to be true and correct as of the date of
such advance,  and that no Event of Default specified in Article VI hereof,  and
no event which,  under said Article VI with the giving of notice or the lapse of
time, or both,  would  constitute an Event of Default,  has occurred and is then
continuing.

ARTICLE V.          COVENANTS OF THE BORROWER.
----------          --------------------------


     The Borrower hereby covenants as follows:

     Section 5.01.  Payment of Amounts Due, Etc.
     -------------  ----------------------------

     The  Borrower  will make all  payments  of  principal,  interest  and other
amounts in connection  with the Notes and this Agreement in accordance  with the
terms hereof and  thereof,  and will  observe,  perform and comply with each and
every one of the covenants,  terms and conditions contained herein, in the Notes
or in any other Credit  Document to be observed,  performed or complied  with by
it.

     Section 5.02.  Corporate Existence.
     -------------  --------------------

     The Borrower and its Subsidiaries  will maintain and preserve in full force
and effect its corporate  existence and will maintain and preserve in full force
and effect all material rights,  Licenses,  patents,  trademarks and franchises,
and comply with all applicable  regulations in all  jurisdictions  necessary for
the conduct of their business.

     Section 5.03.  Maintenance of Properties.
     -------------  --------------------------

     The Borrower and its Subsidiaries will maintain, preserve, protect and keep
all properties used or useful in the conduct of their  respective  businesses in
good repair,  working order and condition,  ordinary wear and tear excepted, and
from time to time shall make such repairs, renewals,  replacements,  betterments
and  improvements  thereto as in the judgment of the  Borrower's  management are
necessary to permit such business to be properly and advantageously conducted at
all dines.

     Section 5.04.  Payment of Taxes, Compliance with Laws, Etc.
     -------------  --------------------------------------------

     The  Borrower  and its  Subsidiaries  will  pay and  discharge  all  taxes,
assessments and  governmental  charges or levies imposed upon them or upon their
income or profits,  or upon any property belonging to them before the same shall
become in  default,  as well as all  lawful  claims  for  labor,  materials  and
supplies,  which,  if not paid when due, might become a lien or charge upon such
property or any part thereof;  provided,  however, that neither the Borrower nor
any of their respective  Subsidiaries shall be required to pay and discharge any
such tax,  assessment,  charge,  levy or claim so long as the  validity  thereof
shall be contested in good faith by appropriate proceedings, an adequate reserve
for  the  payment  thereof  is  established  on the  books  of the  Borrower  or
applicable   Subsidiary  in  accordance  with  generally   accepted   accounting
principles,  and the  Borrower  or  applicable  Subsidiary  shall  pay such tax,
assessment,  charge,  levy or claim before any taxing  authority  files any lien
with respect thereto.

                                       24
<PAGE>
     The  Borrower  and its  Subsidiaries  will at all times and in all material
respects  comply with all  applicable  provisions of laws,  rules,  regulations,
licenses, permits, approvals and orders and observe all requirements of federal,
state,  local and other  governmental  authorities  except  to the  extent  that
noncompliance would have an adverse effect on the business,  assets, operations,
financial condition or prospects of the Borrower.

     The Borrower and its Subsidiaries  will satisfy,  or cause to be satisfied,
the  minimum  annual  funding  standard,  within the  meaning of ERISA,  for any
employee  benefit plan  established  or  maintained  by them which is subject to
ERISA and neither of the Borrower nor any of their respective  Subsidiaries will
permit  any tax or penalty to be  incurred  by it as a result of any  failure to
satisfy any such minimum funding  requirement or as a result of any violation of
the provisions of Section 4975 of the Code or any regulation issued thereunder.

     Section 5.05.  Insurance.
     -------------  ----------

     The Borrower and its Subsidiaries  will at all times maintain  casualty and
liability  insurance with financially sound and reputable insurers  satisfactory
to the Bank in such  amounts and to the extent  customary  for  entities of like
size in similar businesses.  All insurance policies will name the Bank as a loss
payee or insured  mortgagee,  as applicable.  Each such  insurance  policy shall
contain a provision  requiring at least thirty (30) days' written  notice to the
Bank prior to the cancellation or modification of each such policy. Certificates
relating to such insurance shall be furnished by the Borrower to the Bank at the
Closing and hereafter upon demand by the Bank.

     Section 5.06.  Accounts and Reports.
     -------------  ---------------------

     The  Borrower and the  Guarantors  will furnish or cause to be furnished to
the Bank, the following reports:

          (a) ANNUAL  REPORTS.  As soon as available and in any event within one
hundred  and  twenty  (120)  days  after  the  end  of  each  fiscal  year,  (i)
consolidated and consolidating  audited financial statements of the Borrower and
its Subsidiaries, together with all notes thereto, prepared in reasonable detail
and in accordance with generally  accepted  accounting  principles  consistently
applied, such statements to be duly certified by a certified, independent public
accounting  firm  selected by the Borrower and  acceptable  to the Bank ("CPA"),
which statements  shall be accompanied by an (A) unqualified  opinion thereon by
the CPA,  and (B) a statement  executed  by the  Borrower's  President  or Chief
Financial Officer that to the best of his or her knowledge,  following  diligent
inquiry,  he or she does not know of any condition or event which constitutes an
Event of Default under this Agreement or which,  after notice,  or lapse of time
or both,  would constitute such an Event of Default,  or a statement  specifying
the nature and period of existence of any such condition or event.

          (b) MONTHLY  REPORTS.  As soon as  available,  and in any event within
thirty (30) days after the end of each monthly  accounting period in each fiscal
year  during  the  term  of  his  Agreement,  consolidated  unaudited  financial
statements of the Borrower and its  subsidiaries  prepared in reasonable  detail
and in accordance with generally  accepted  accounting  principles  consistently

                                       25
<PAGE>
applied,  certified by the President or Chief Financial Officer of due Borrower,
which  statements  shall contain balance sheets as of the end of such accounting
period,  statements  of profit  and loss and cash flow for the  period  from the
beginning of such fiscal year to the end of such accounting period.

          (c)  COMPLIANCE  CERTIFICATES.  With the annual  financial  statements
furnished  pursuant to subsections  (a) hereof and within thirty (30) days after
the end of each other fiscal quarter, an officer's certificate  substantially in
the form of Exhibit 5.05(c) hereto certified by the President or Chief Financial
Officer of the Borrower (the "Compliance  Certificate"),  and such other reports
as the Bank may reasonably request.

          (d) The Borrower  shall furnish to the Bank not later than twenty (20)
days  following  the end of each monthly  accounting  period a  "Borrowing  Base
Certificate"  in the form of EXHIBIT  5.06(d)  attached  hereto,  completed  and
signed by the Borrower's  Chief financial  Officer.  The Borrowing Base shown on
such certificate shall be of the last day of said monthly accounting period. The
Bank shall be under no obligation to make any further  Revolving Credit Advances
if a Borrowing Base Certificate is not delivered within the specified period.

          (e)  AUDITOR'S  MANAGEMENT  LETTER.  Promptly  after  receipt  by  the
Borrower,  copies of the management  letter, if any, provided by its independent
certified public accountants who audit the annual financial statements.

          (f) PUBLIC INFORMATION.  Promptly, copies of all reports and financial
statements  which the Borrower sends to its  stockholders,  in their capacity as
stockholders,  as a class or which the Borrower  files with the  Securities  and
Exchange Commission or any other public body.

          (g) Accounting  Principles.  Reports  furnished to the Bank under this
Agreement  shall be prepared in accordance  with generally  accepted  accounting
principles  consistently  applied  except  that  unaudited  statements  need not
contain  notes  thereto  and shall be  subject to normal  year end  adjustments.
Compliance  with the covenants set forth in this Agreement will be determined in
accordance with generally accepted accounting principles consistently applied.

     Section 5.07.  Information and Inspection.
     -------------  ---------------------------

     The Borrower  will furnish to the Bank from time to time  promptly upon the
Bank's  request,  full  information  pertinent  to any  covenant,  provision  or
condition  hereof or to any matter in  connection  with its business and, at all
reasonable  times during  normal  business  hours and as often as the Bank shall
reasonably request, permit any authorized  representative designated by the Bank
to visit and inspect any of their properties,  including their books and records
(and to make extracts  therefrom),  and to discuss their  affairs,  finances and
accounts with its officers. The Borrower will, in addition,  promptly furnish to
the Bank  such  financial  information  as the Bank  shall  reasonably  request.
Without limiting the generality of the foregoing,  the Bank shall be entitled to
conduct as many  examinations  of the books and  records of the  Borrower as the
Bank in its sole  discretion  deems  reasonable  and  necessary and the Borrower
shall pay on demand  the  Bank's  out-of-pocket  expenses  and field  audits and
appraisal fees as and to the extent provided in Section 2.08.

                                       26
<PAGE>
     Section 5.08.  Additional Notice.
     -------------  ------------------

     The Borrower will promptly advise the Bank of any change which  constitutes
or, after notice or lapse of time or both,  would constitute an Event of Default
as defined in Article VI of this  Agreement,  or a default in the performance by
the Borrower  under any covenant or agreement  contained in any other  agreement
(in which the Borrower has obligations, present or future, in excess of $50,000)
to which it is a party or by which it is bound  which has not been cured  within
the applicable grace period, if any. The Borrower will also promptly give notice
in writing to the Bank of each waiver, consent or amendment granted or made with
respect to borrowed money in excess of $50,000,  or any dispute or default under
or change in a material term of any license  agreement (the "Key  Licenses") set
forth in Schedule 5.08 during the prior fiscal year.

     Section 5.09.  Payment of Expenses.
     -------------  --------------------

     The Borrower will bear all  reasonable  out-of-pocket  fees and expenses of
the Bank in connection with the negotiation,  preparation, execution, amendment,
administration or enforcement of this Agreement,  the other Credit Documents and
the  transactions  contemplated  hereby (whether or not the Credit  hereunder is
consummated)  and the making and collection of the Credit  hereunder,  including
without limitation,  the fees and disbursements of Special Counsel for the Bank,
costs of appraisals, recording fees, taxes and filing fees.

     Section 5.10.  Limitation on Indebtedness.
     -------------  ---------------------------

     Neither the Borrower nor any of its  respective  Subsidiaries  will create,
incur,  assume,  or become,  be or remain liable in any manner in respect of, or
allow to exist, any indebtedness ("Indebtedness") (which term shall include: all
indebtedness,  obligations  and  liabilities  which in accordance with generally
accepted  accounting  principles  would be reflected on the balance sheet of the
Borrower as liability; all indebtedness, obligations and liabilities, whether or
not assumed by Borrower or any  Subsidiary,  secured by any mortgage,  pledge or
lien  existing  on  property  owned  by  the  Borrower  or any  Subsidiary;  all
indebtedness in respect of operating leases; and all amounts representing rental
payments  which, in accordance with generally  accepted  accounting  principles,
would be classified as a liability on its balance sheet), except for:

          (a) the Notes and any other  obligations  owed to the Bank  under this
Agreement or otherwise;

          (b)  Indebtedness  of the  Borrower  existing  as of the  date of this
Agreement which is specifically disclosed in SCHEDULE 5.10(b) attached hereto;

          (c) Indebtedness  representing  trade debt, wages,  employee benefits,
advance  payments  on sales  contracts  and other  indebtedness  incurred in the
ordinary course of business;

          (d) Indebtedness  existing as of the date of this Agreement secured by
liens permitted by subsections (a) and (e) of Section 5.12;

          (e) Liabilities for taxes, assessments, governmental charges, liens or
claims  described in Section  5.04 hereof to the extent that payment  thereof is
not required by such Section 5.04;

                                       27
<PAGE>
          (f)  Indebtedness  in respect of final  judgments  for the  payment of
money  not in  excess  of  $50,000  in the  aggregate  at any  time  outstanding
(excluding  sums covered by insurance)  remaining  unsatisfied and in effect for
any  period  of less  than  sixty  (60)  days or in  respect  of which a stay of
execution  shall have been obtained  pending an appeal or proceeding for review;
and

          (g) Indebtedness of entities acquired in Permitted Acquisitions.

Section 5.11 . Limitation on Liability for Obligations of Others.

         Neither the Borrower nor any of its Subsidiaries will assume,
guarantee, endorse or otherwise be or become liable, contingently or otherwise,
for the obligations of any other corporation, firm or entity or other person,
except for:

          (a)  the   endorsement  of  negotiable   instruments  for  deposit  or
collection in the normal course of its business; and

          (b)  guarantees  existing as of the date of this  Agreement  which are
specifically disclosed on Schedule 5.11(b) attached hereto.

     Section 5.12.  Limitation on Liens.
     -------------  --------------------

     Neither the Borrower nor any of its  Subsidiaries  will (i) create,  incur,
assume or allow to be created,  incurred or assumed, or to exist, any pledge of,
or any lien,  charge or  encumbrance  of any kind on, any of their  property  or
assets,  (ii)  subject  any of  such  assets  to  prior  payments  of any  other
indebtedness  whether  by  subordination   agreement,   transfer  of  assets  or
otherwise,  or (iii) own or  acquire  or agree to acquire  any  property  of any
character  subject to or upon any mortgage,  conditional sale agreement or other
title retention agreement,  provided,  however, that the foregoing  restrictions
shall not prohibit the Borrower:

          (a) from creating or allowing to exist any liens or encumbrances which
existed on the date hereof are set forth in SCHEDULE 5.12(a) hereto;

          (b) from creating or allowing to exist any liens in favor of the Bank;

          (c) from  allowing  to exist liens in respect of  judgments  or awards
which have been in force for less than the applicable appeal period or less than
sixty  (60)  days,  whichever  is  sooner,  so long as  execution  is not levied
thereunder,  or in respect of which the Borrower at the time shall in good faith
be prosecuting an appeal,  or proceedings  for review are pending and in respect
of which a stay of  execution  shall have been  obtained  pending such appeal or
review;

          (d) from  creating or allowing  to exist  deposits or pledges  made in
connection with, or to secure payment of, workmen's  compensation,  unemployment
insurance or similar programs;  liens,  charges or encumbrances  imposed by law,
such as carriers',  warehousemen's  and mechanics' liens and other liens arising
in the  ordinary  course  of  business  which  do  not,  individually  or in the
aggregate,  materially  detract  from the value or limit the use of any property
subject thereto; and

                                       28
<PAGE>
          (e) from creating or allowing to exist any liens securing indebtedness
solely for the purpose of acquiring  personal  property,  other than  inventory;
provided, however, that no such purchase money security interest shall extend to
any property other than the personal  property so acquired and provided  further
that the  amount  of any such  purchase  money  indebtedness  shall  not  exceed
$150,000,  nor the fair market value of such property at the time of acquisition
without the Bank's consent.

     Section 5.13.  Sale of Assets.
     -------------  ---------------

     Neither the Borrower nor any of its  Subsidiaries  will sell or transfer to
each  other or to any third  party any of their  respective  assets,  including,
without limitation,  accounts receivable whether with or without recourse, other
than as permitted by Section 5.16 hereof.

     Section 5.14.  Loans and Investments in Securities.
     -------------  ------------------------------------

     Neither the Borrower nor any of its  Subsidiaries  will,  without the prior
written consent of the Bank,  purchase or otherwise acquire or retain any stock,
assets or  obligations  of, or make any loans or advances to, or  investments in
any corporation, partnership or other entity or person, other than:

          (a)  obligations  of the  United  States  of  America,  or any  agency
thereof,  maturing  not more than one (1) year  from the date of issue  thereof,
provided that the Bank shall acquire a perfected first security  interest in any
such obligation simultaneously with its purchase or acquisition;

          (b)  certificates  of deposit or other  obligations  maturing not more
than one (1) year from the date of issue  thereof  issued by the Bank,  provided
that  the Bank  shall  acquire  a  perfected  first  security  interest  in such
obligation simultaneously with its purchase or acquisition; and

          (c) Permitted Acquisitions.

     Section 5.15.  Transactions With Affiliated Persons.
     -------------  -------------------------------------

     Neither  the  Borrower  nor any of its  Subsidiaries  will  enter  into any
transaction with an Affiliate, except (a) on terms no less favorable to Borrower
than  would  be  available  in a  bona  fide  arm's  length  transaction  with a
non-affiliated  person or entity, and provided that Borrower shall have obtained
the Bank's prior written  consent to any such  transaction  or series of related
transactions  involving an amount of $50,000 or more; (b) employment  agreements
entered into in the ordinary  course of business;  (c) in connection  with stock
option plans  acceptable to the Bank;  (d)  Permitted  Stock  Payments;  (e) any
dividends,  distributions or other Restricted  Payments  permitted under Section
5.18 hereof; (f) any Permitted Payments, and (g) those transactions set forth on
Schedule 5.15 hereto.  "Affiliate"  means: any officer,  director or shareholder
who owns five percent (5%) or more of any class of securities of any Borrower or
any  Subsidiary;  any entity where the Borrower owns directly or indirectly five
percent  (5%) or more of any  class of  securities  or  interest  issued by such
entity;  or any entity that  controls,  is controlled by or under common control
with, the Borrower.

                                       29
<PAGE>
     Section 5.16.  Consolidation, Merger or Disposition/Acquisition of Assets.
     -------------  -----------------------------------------------------------

     Neither the Borrower nor any of its  Subsidiaries  will,  without the prior
written  consent of the Bank,  consolidate  with or merge  into or with  another
firm, person or corporation, directly or indirectly, issue, sell, assign, pledge
or  otherwise  encumber or dispose of any shares of the  capital  stock or sell,
lease  or  otherwise  dispose  of  (other  than in the  ordinary  course  of its
business) all or any material portion of their properties or assets to any firm,
person or  corporation,  or acquire any material  portion of the  properties  or
assets of any other firm,  person or corporation,  whether in one or a series of
related transactions, except that:

          (a) any  Subsidiary  may merge into or  consolidate  with the Borrower
(provided that the Borrower shall be the surviving corporation);

          (b) the  Borrower  or any of its  Subsidiaries  may sell or  otherwise
dispose of any  property  which has become  uneconomic,  obsolete or worn out if
disposed of in the ordinary course of business; and

          (c) the Borrower may enter into Permitted Acquisitions  (including the
Acquisitions).

     Section 5.17.  Changes in Corporate Business.
     -------------  ------------------------------


     The Borrower will not materially alter the nature of its business.

     Section 5.18.  Restricted Payments.
     -------------  --------------------

     The Borrower shall not, directly or indirectly, declare, order, pay or make
Restricted payments other than, absent an Event of Default and provided that the
occurrence of which or payment  thereof will not constitute an Event of Default,
(i) any payment to the extent specifically  permitted hereunder;  (ii) Permitted
Stock  Payments;  (iii)  redemption  of unvested  options from  employees  whose
employment  is  terminated;  and  (iv)  distributions  payable  solely  in Stock
(including  without  limitation any  distribution of shares of common stock made
upon  conversion  of the  shares of Series C  Convertible  Preferred  Stock into
Common stock).  Notwithstanding  any other  provision of the Section 5.18,  this
Section  5.18 shall not be  construed  to  restrict or  prohibit  any  Permitted
Payments.

     "Restricted Payments" shall mean

          (a) any payment or  declaration  of any dividend on any class of Stock
of the Borrower;

          (b) any  redemption,  purchase or other  acquisition  by the Borrower,
directly or indirectly, of any shares of its Stock; and

          (c) any payment or  distribution  in cash or other  property or in any
other manner made by the Borrower on account of its obligations under the Equity
Documents (including any such payment or distribution by set-off,  recoupment or
from or by way of collateral).

     "Stock" shall mean capital stock and warrants or options to purchase stock.

                                       30
<PAGE>
     "Permitted  Payments"  shall mean each of the  following:  (i)  payments on
account of any  indemnity  claims or breach of contract  claims under the Equity
Documents;  (ii) payment of the fees and  reimbursement of expenses of directors
required  pursuant to the terms of the Equity  Documents;  and (iii)  payment of
outside legal,  accounting and due diligence fees and expenses required pursuant
to the terms of the Equity Documents.

     Section 5.19.  Restriction on Use of Proceeds.
     -------------  -------------------------------

     None of the  proceeds  of the  Credit  shall  be used  by the  Borrower  to
purchase  commodities  except for use in the ordinary  course of the  Borrower's
business,  or for the purpose of  purchasing  or carrying,  or  refinancing  any
borrowing  the  proceeds of which were used to  purchase  or carry,  any "margin
securities"  within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System.

     Section 5.20.  Bank Accounts.
     -------------  --------------

     Subject to Section 2.11 hereof,  the Borrower  shall  maintain at all times
all of its primary operating and disbursement accounts with the Bank.

     Section 5.21.  Further Security.
     -------------  -----------------

     The  Borrower  agrees to provide  the Bank with such  security  interest or
liens as the Bank may hereafter reasonably request with respect to the assets of
the Borrower.

     Section 5.22.  Material Agreements.
     -------------  --------------------

     The  Borrower  will observe and perform all of its  obligations  under each
material  agreement  to which it is a party,  except  where  the  failure  so to
observe  would not have a material  adverse  affect upon the  business,  assets,
operations, financial or other condition, or Prospects of the Borrower.

     Section 5.23.  Continuance of Key-Man Life Insurance.
     -------------  --------------------------------------

     The  Borrower  will  purchase  and  maintain  in full  force and effect two
key-man life insurance policies in the amount of $1,000,000 each on the lives of
John Rooney and Michael  Bayley and each such  policy and the  proceeds  thereof
will be collaterally  assigned to the Bank for the payment of the obligations of
the  Borrower to the Bank.  A  certificate  relating to such  insurance  will be
furnished by the Borrower to the Bank at Closing.

     Section 5.24.  Ratio Total Liabilities to Net Worth.
     -------------  -------------------------------------

     The ratio of (a) the  Borrower's  Total  Liabilities to (b) Net Worth shall
be, as of the last day of each fiscal  quarter,  equal to or less than the ratio
of 1.15 to 1.

     "Total  Liabilities"  shall mean the sum of all liabilities of the Borrower
and its  Subsidiaries,  on a consolidated  basis,  determined in accordance with
generally accepted accounting principles.

     "Net  Worth"  shall  mean  the  consolidated  assets  of  Borrower  and its
Subsidiaries  less  the  consolidated   liabilities  of  the  Borrower  and  its
Subsidiaries.
                                       31
<PAGE>
     Section 5.25.  Minimum EBITDA.
     -------------  ---------------

     The EBITDA of the Borrower and its  Subsidiaries  on a  consolidated  basis
shall  for the  three  month  period  ending  on the  last  day of each  quarter
indicated  below,  shall  equal or exceed  the amount  set forth  opposite  such
period:

          Three Month Period
          ------------------
Ending on the Following Quarter Ends                            Minimum EBITDA
------------------------------------                            --------------

September 30, 1999                                                 $750,000

December 31, 1999                                                  $800,000

March 31, 2000                                                     $800,000

June 30, 2000                                                      $850,000

September 30, 2000                                                 $900,000

Each Quarter End Thereafter                                        $950,000

     "EBITDA"  shall mean for any period the total of (a) the  consolidated  net
income of the Borrower and its Subsidiaries,  on a consolidated  basis, plus (b)
amounts paid by the Borrower and its Subsidiaries in respect of taxes,  plus (c)
to the extent deducted in calculating  net income,  the  consolidated  interest,
depreciation and amortization expense of the Borrower and its Subsidiaries.

     Section 5.26.  Maximum Capital Expenditures.
     -------------  -----------------------------

     Capital  Expenditures made or incurred by the Borrower and its Subsidiaries
on a consolidated basis, shall not exceed $500,000 without prior written consent
of the Bank from the Closing through the fiscal year of the Borrower ending June
30, 2000.  Thereafter,  Capital  Expenditures  shall not exceed $400,000 without
prior written consent of the Bank for any fiscal year of the Borrower  beginning
with the fiscal year ending June 30, 2001.

     "Capital   Expenditures"   shall  mean  expenditures   which  are  properly
chargeable to capital account in accordance with generally  accepted  accounting
principles  (including leases which are capitalized and research and development
expenses).

     Section 5.27.  Minimum Liquidity Ratio.
     -------------  ------------------------

     The ratio of the Borrower's Current Assets to Current  Liabilities shall at
all times during the periods indicated equal or exceed the indicated ratios:

                                                               Minimum Liquidity
              Periods                                                 Ratio
              -------                                                 -----

April 1, 1999 through                                                1.4 to 1
  June 30, 1999

July 1, 1999 through                                                 1.4 to 1
  September 30, 1999

Thereafter                                                           1.5 to 1

                                       32
<PAGE>
     "Current Assets" shall mean all cash, accounts receivable, and inventory of
the Borrower and its Subsidiaries, on a consolidated basis.

     "Current Liabilities" shall mean all accounts payable, all accruals and all
amounts  outstanding  under  the  Revolving  Credit  of  the  Borrower  and  its
Subsidiaries, on a consolidated basis.

     Section 5.28.  Minimum Fixed Charge Coverage.
     -------------  ------------------------------

     The ratio of the (a) EBITDA of the  Borrower and its  Subsidiaries  for the
immediately  preceding  three  month  period  to (b)  the  sum of (i)  fees  and
principal  amortization on the Credit, plus (ii) consolidated  interest expense,
plus (iii) capital lease payments, plus (iv) Capital Expenditures, plus (v) cash
income taxes of the Borrower and its Subsidiaries for the immediately  preceding
three month period,  shall,  as of the last day of each fiscal  quarter equal or
exceed the ratio indicated:

                  Quarter Ended                                        Ratio
                  -------------                                        -----

               September 30, 1999                                      1 to 1

               Each quarter end thereafter                             1.05 to 1

     Section 5.29.  Change of Control.
     -------------  ------------------


     The  shareholders  of the Borrower at Closing will at all times continue to
hold not less than 70% of the Borrower's  Stock on a fully diluted basis without
the prior written consent of the Bank.

     Section 5.30.  Sales Representations.
     -------------  ----------------------

     The Borrower agrees that prior to allowing any of its sales representatives
from taking into his or her  possession any of the Collateral (as defined in the
Security  Agreement) the Borrower shall (i) have each such sales  representative
execute  a  "Memo  on  Stock"  and  obtain  a  Landlord   Consent  and  Estoppel
Certificate,  if applicable,  in form and substance satisfactory to the Bank and
deliver  copies of the same to the Bank and (ii)  execute  all  UCC-1  financing
statements  and  similar  documents  as the Bank may request to provide the Bank
with a first priority perfected security interest in such Collateral.

     Section 5.31.  Subsidiaries.
     -------------  -------------

     The  Borrower  shall  have  no  Subsidiaries  other  than  Bimeco,  MCA and
Douglass.

                                       33
<PAGE>

     Section 5.32.  Utah Legal Opinion.
     -------------  -------------------

     On or before June 28, 1999,  the  Borrower and MCA shall have  delivered to
the Bank written opinion of Utah counsel (reasonably  acceptable to the Bank) to
the Borrower and MCA, in form and substance satisfactory to the Bank.

     Section  5.33.  Landlord's  Consent  and  Estoppel  Certificate  for Largo,
     --------------  -----------------------------------------------------------
Florida.  On or before June __, 1999,  the Borrower  shall (i) have ceased doing
--------
business at its office and warehouse facility located at 10700 76th Court North,
Largo,  Florida (the "Florida  Premises")  and have removed all assets from such
location to locations disclosed is the Security Agreement or (ii) have delivered
to the Bank a new duly executed Landlord's Consent and Estoppel  Certificate for
the Florida Premises in form and substance satisfactory to the Bank.

ARTICLE VI.         EVENTS OF DEFAULT.
-----------         ------------------


     If,  while any part of the  principal  of or interest on the Notes  remains
unpaid  or while  any part of the  Credit  shall  be in  effect,  any one of the
following "Events of Default" shall occur:

          (a) the  Borrower's  (i) failure to pay when due any  principal of the
Credit or (ii)  failure to pay any  interest,  fees or other  amounts due to the
Bank with  respect to the Credit if such failure  remains  uncured for three (3)
Banking Days after the due dates;

          (b) the  Borrower  or any of its  Subsidiaries  shall (i) apply for or
consent to the appointment of a receiver,  trustee or liquidator of it or of all
or a substantial  part of its assets;  (ii) admit in writing of its inability to
pay its debts as they mature; (iii) make a general assignment for the benefit of
creditors;  (iv) be  adjudicated a bankrupt or  insolvent;  (v) file a voluntary
petition in bankruptcy or a petition or an answer seeking  reorganization  or an
arrangement  with creditors to take  advantage of any insolvency  law; (vi) file
any answer admitting the material  allegations of a petition filed against it in
any bankruptcy,  reorganization or insolvency proceeding or fail to dismiss such
petition  within  thirty (30) days after the filing  thereof;  or (vii) take any
corporate action for the purpose of effecting any of the foregoing;

          (c) an  order,  judgment  or  decree  shall be  entered,  without  the
application,  approval or consent of the Borrower or any of its  Subsidiaries by
any court of competent jurisdiction, approving a petition seeking reorganization
or liquidation of any of the Borrower,  any of its  Subsidiaries or appointing a
receiver, trustee or liquidator of the Borrower, or of all or a substantial part
of its assets;

          (d) any  representation  or warranty  made by the  Borrower  herein or
hereunder or in any other  Credit  Document or in any  certificate,  document or
instrument  furnished  pursuant hereto or thereto shall prove to have been false
or incorrect in any material respect when made;

          (e) default by the  Borrower  in the  performance  of any  covenant or
agreement contained herein, or in any other Credit Document, unless such default

                                       34
<PAGE>
is (i) a default of a covenant set forth in Sections 5.03,  5.04, 5.05, 5.07 and
5.09, and (ii) is cured within thirty (30) days;

          (f) default by the  Borrower  in the  performance  of any  covenant or
agreement contained in any other agreement to which it is a party or by which it
is bound  involving  a  liability  or  obligation  of the  Borrower in excess of
$50,000  which shall not be  remedied  within the period of time (if any) within
which such other  agreement  permits  such  default to be  remedied  without the
consent or waiver of the other party  thereto,  unless such default is waived or
excused as a matter of law;

          (g) any guarantor of the Borrower's  obligations  hereunder shall take
any action to terminate its guarantee  (other than in accordance  with the terms
thereof) or there shall exist any payment default thereunder;

          (h) all or any substantial part of the assets of the Borrower shall be
condemned, seized or otherwise appropriated by any governmental authority or any
officer or instrumentally thereof;

          (i) a judgment or judgments  for the payment of money in excess of the
sum of $20,000 in the  aggregate  (not covered by  insurance)  shall be rendered
against the Borrower and such judgment or judgments shall remain unsatisfied and
in effect for any period of sixty (60) days without a stay of execution;

          (j) there shall occur any material  adverse change in the consolidated
financial condition of the Borrower;

          (k) either  John Rooney or Michael  Bayley  shall own less than 80% of
the Borrower's Stock on a fully diluted basis that each owned at the Closing; or

          (l) a Change of Control as defined in the Equity Documents;

then and in every such event, while such event shall be continuing, the Bank may
(i) terminate the Revolving Credit with respect to further advances, whereupon
no advances may be made hereunder, and/or (ii) declare the Notes to be forthwith
due and payable, whereupon the Notes shall forthwith become due and payable
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by the Borrower, and the right to borrow thereunder shall
terminate, and may exercise all rights and remedies under the Credit Documents
and applicable law. Notwithstanding the foregoing, the Notes shall be due and
payable without declaration or demand on the occurrence of an event under
paragraphs (b) and (c) of this Article VI.

ARTICLE VII.        MISCELLANEOUS.
------------        --------------

     Section 7.01.  Term of Agreement.
     -------------  ------------------

     This  Agreement  shall  terminate  on the  date  (the  "Termination  Date")
whenever the following  conditions shall have been met: (i) all principal of and
interest on the Notes and all other amounts due and payable under this Agreement
have been paid and  discharged  in full,  and (ii) the  Borrower  shall  have no
further right to borrow under this Agreement.

     Section 7.02.  Notices.
     -------------  --------

     Except as otherwise  specifically  provided in this Agreement,  all notices
and other communications hereunder shall be in writing and shall be delivered in
person,  mailed by United  States  registered  or  certified  first  class mail,

                                       35
<PAGE>
postage prepaid, sent by overnight courier, or telexed, telegraphed,  telecopied
or telefaxed to the parties hereto addressed as follows:

To the Bank:                   State Street Bank and Trust Company
                               225 Franklin Street
                               Boston, Massachusetts 02101
                               Attention:  Karen E. Pellegrini, Vice President
                               Telefax Number:  (617) 338-4041

With copies to:                Goodwin, Procter & Hoar LLP
                               Exchange Place
                               Boston, Massachusetts 02109
                               Attention:  Steven M. Ellis, P.C.
                               Telefax Number:  (617) 523-1231

To the Borrower:               PrimeSource Surgical, Inc.
                               3941 East 29th Street, Suite 601
                               Tucson, Arizona 85711
                               Attention: Michael K. Bayley
                               Telefax Number:  (520) 512-8019

With copies to:                Nossaman, Guthner, Knox & Elliott, LLP
                               50 California Street, 34th Floor
                               San Francisco, CA 94111-4799
                               Attention:  Stanley S. Taylor, Esq.
                               Telefax Number:  (415) 398-2438

     Any such  notice or demand  shall be deemed to have been duly given or made
and to have become effective (a) if delivered by hand or overnight  courier,  or
sent by  telegraph,  telecopy,  facsimile  or telex,  at the time of the receipt
thereof or the  sending of such  telegraph,  telecopy,  facsimile  or telex,  if
during normal  business hours on a Banking Day, and (b) if sent by registered or
certified  first-class mail, postage prepaid, on the third Banking Day following
the mailing thereof.

     Section 7.03.  No Waiver.
     -------------  ----------

     No  failure to  exercise,  and no delay in  exercising,  on the part of the
Bank, any right, power or privilege hereunder shall operate as a waiver thereof;
nor shall any  single or  partial  exercise  of any  right,  power or  privilege
hereunder  preclude any other or further  exercise hereof or the exercise of any
other right,  power or privilege.  The rights and remedies  herein  provided are
cumulative and not exclusive of any rights or remedies provided by law.

     Section 7.04.  Choice of Law; Construction.
     -------------  ----------------------------

     This  Agreement  and the Notes  shall each be deemed to be a contract  made
under the laws of the Commonwealth of  Massachusetts,  and shall be construed in
accordance with the laws of the Commonwealth of  Massachusetts.  The descriptive
headings of the several  Sections hereof are for convenience  only and shall not
control or affect the meaning or construction  of any of the provisions  hereof.

                                       36
<PAGE>
This Agreement, together with the Exhibits hereto and all documents, instruments
and agreements  executed  pursuant hereto,  constitutes the entire agreement and
understanding  between the parties  hereto  with  respect to the subject  matter
hereof,  supersedes  all prior  agreements,  understandings  or  representations
pertaining to the subject matter hereof, whether oral or written, and may not be
contradicted by evidence of any alleged oral agreement.

     Section 7.05.  Amendments, Waivers and Consents.
     -------------  ---------------------------------

     Compliance  by the  Borrower  with any term,  covenant or condition of this
Agreement may be omitted or waived (either generally or in a particular instance
and either  retroactively  or  prospectively)  only by a consent or  consents in
writing signed by the Bank.

     Section 7.06.  Closing.
     -------------  --------

     The closing of the Credit ("Closing") shall take place at 9:00 a.m. on June
__, 1999, at the offices of Goodwin, Procter & Hoar LLP. Exchange Place, Boston,
Massachusetts  02109,  or such  other time and place as the  parties  hereto may
agree.

     Section 7.07.  Assignment.
     -------------  -----------

     The  Bank  may  assign  all or a  portion  of  its  interests,  rights  and
obligations  under the  Credit and the Notes  held by it to  Citizens  Financial
Groups Inc.,  Citizens Bank or their  affiliates or designee or upon the consent
of the Borrower (not to be unreasonably withheld) to any other person or entity,
provided however,  that no such consent will be required upon the occurrence and
continuance of a default under the Credit Documents.

     Section 7.08.  Consent to Jurisdiction.
     -------------  ------------------------

     The Borrower and any  guarantor of the  Borrower's  obligations  under this
Agreement irrevocably consents and submits to the non-exclusive  jurisdiction of
the Superior Court in The  Commonwealth of  Massachusetts  and the United States
District Court for the Eastern  District of Massachusetts in connection with any
action,  proceeding  or claim  arising out of or relating to this  Agreement  or
other  document  executed  in  connection  with  this  Agreement.  In  any  such
litigation,  the Borrower and all guarantors  waive  personal  service and agree
that  service  may be  made  by  certified  mail  directed,  in the  case of the
Borrower, to the location specified for notices under this Agreement and, in the
case of guarantors, to their last known address.

     Section 7.09.  Waiver of Jury Trial.
     -------------  ---------------------

     The Borrower and the Bank hereby  waive their  respective  rights to a jury
trial of any claim or cause of action  based upon or  arising  out of any of the
Credit  Documents or any of the  transactions  contemplated  therein,  including
contract claims, tort claims,  breach of duty claims and all other common law or
statutory claims.

     Section 7.10.  Indemnity.
     -------------  ----------

     The  Borrower  hereby  indemnifies  and  agrees to hold  harmless  the Bank
(exclusive of the Bank's cost of funds and allocation of overhead and salaries),
any other financing  institutions  that  participate in the Credit,  and each of
their directors,  officers,  agents, employees and counsel, from and against any
and all losses, claims, damages,  liabilities or expenses imposed on or incurred

                                       37
<PAGE>

by any of them in  connection  with the lending  relationship  reflected in this
Agreement  except as a result of any  indemnified  party's  gross  negligence or
willful misconduct. This indemnity shall survive termination of the Agreement.

     Section 7.11.  Setoff.
     -------------  -------

     Any sums due from the Bank to the Borrower and any property of the Borrower
in the possession of the Bank may be held and treated as collateral security for
the  payment  of the  obligations  of the  Borrower  to the  Bank  and  upon the
occurrence  of any  Event  of  Default  and  while  such  Event  of  Default  is
continuing,  may be applied to the payment of such obligations regardless of the
adequacy of other collateral.  Any sums due from any financing  institution that
may  participate  in the Credit or property of the Borrower in the possession of
such  institution  may be held as  collateral  security  for the  payment of the
obligations  of the  Borrower the Bank as if such  institution  had extended the
Credit  directly to the Borrower and, upon the occurrence of an Event of Default
and while such Event of Default is continuing,  may be applied to the payment of
such obligations regardless of the adequacy of other collateral.

                                                   [END OF TEXT]


<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto have  executed  this  Amended and
Restated Credit Agreement under seal as of the date first above written.

                                            PRIMESOURCE SURGICAL, INC.


                                            By: /s/ John Rooney
                                                --------------------------------
                                                 Name:  John Rooney
                                                 Title: President


                                            BIMECO, INC.


                                            By: /s/ John Rooney
                                                --------------------------------
                                                 Name:  John Rooney
                                                 Title: President


                                            MEDICAL COMPANIES ALLIANCE, INC.


                                            By: /s/ John Rooney
                                                --------------------------------
                                                 Name:  John Rooney
                                                 Title: President


                                            DOUGLASS MEDICAL, INC.


                                            By: /s/ John Rooney
                                                --------------------------------
                                                 Name:  John Rooney
                                                 Title: President


                                            STATE STREET BANK AND TRUST COMPANY


                                            By: /s/ Karen E. Pellegrini
                                                --------------------------------
                                                 Name:   Karen E. Pellegrini
                                                 Title:  Vice President




</TEXT>
</DOCUMENT>
