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                        THIRD AMENDMENT TO CREDIT AGREEMENT


THIS THIRD AMENDMENT is made as of the 5th day of August, 1998, and is by and
between Rehabilicare, Inc., a Minnesota corporation (the "Borrower"), and
Norwest Bank Minnesota, National Association, a national banking association
(the "Bank").

REFERENCE IS HEREBY MADE to that certain Credit Agreement dated as of December
1, 1994, as amended by a First Amendment dated June 27, 1996, and by a Second
Amendment dated April 24, 1998 (as amended, the "Credit Agreement"), made
between the Borrower and the Bank.  Capitalized terms not otherwise defined
herein shall have the respective meanings ascribed to them in the Credit
Agreement.

WHEREAS, the Borrower has requested the Bank (i) to increase the amount of the
Credit from $2,000,000.00 to $2,500,000.00, and (ii) to make a new term loan to
the Borrower in the amount of $2,500,000.00, a portion of the proceeds of which
will be used to pay off the Second Term Note; and,

WHEREAS, the Bank is willing to grant the Borrower's requests, subject to the
provisions of this Third Amendment;

NOW, THEREFORE, in consideration of the premises and for other valuable
consideration received, it is agreed as follows:

1.   Section 1.1 of the Credit Agreement is hereby amended by changing the
     definitions of "Credit" and "Notes" so that, when read in their entireties,
     they provide as follows:

          "Credit" shall mean the conditional revolving line of credit
          established by the Bank for the benefit of the Borrower in the amount
          of $2,500,000.00.  

          "Notes" shall mean the Current Note, the First Term Note and the Third
          Term Note.

2.   Section 1.1 of the Credit Agreement is hereby further amended by adding the
     following new definitions:

          "Interest Adjustment Date" shall mean August 1, 1999 and the same day
          of each year thereafter.

          "Third Term Note" shall mean an installment promissory note dated of
          even date with the Third Amendment to this Agreement, and made by the
          Borrower in the face amount of $2,500,000.00 payable to the Bank.  


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               "Treasury Rate" shall mean the yield on one-year United States
          Treasury securities,  the determination of which rate by the Bank on
          any particular Interest Adjustment Date shall be done by using the
          most recent available data published by the Federal Reserve Board.  

3.   Section 2.1 of the Credit Agreement is hereby amended by changing the first
     sentence of such Section so that, when read in its entirety, it provides as
     follows:

          Subject to the other provisions of this Agreement, the Bank may make
          advances under the Credit to the Borrower from time to time until the
          Maturity Date in an aggregate principal amount not exceeding the
          lesser of the Borrowing Base or TWO MILLION FIVE HUNDRED THOUSAND AND
          NO/100 DOLLARS ($2,500,000.00), at any one time outstanding.  

4.   The Credit Agreement is hereby further amended by adding the following as
     new Section 2B immediately after Section 2A:

          2B     THE THIRD TERM LOAN

          2B.1   Subject to the provisions of Section 3.4 hereof, the Bank
                 shall make a term loan to the Borrower on or before August 15,
                 1998 in one advance in the amount of $2,500,000.00.  Said term
                 loan shall be non-revolving, and evidenced by the Third Term
                 Note.  A portion of the proceeds of said term loan will be
                 used to pay off the Second Term Note.

          2B.2   Interest on the Third Term Note shall accrue at a fixed annual
                 rate equal to 8.05% until August 1, 1999.  From August 1, 1999
                 until the Third Term Note is fully paid, interest thereon
                 shall accrue at a fixed annual rate equal to 2.75% in excess
                 of the Treasury Rate, which interest rate shall be determined
                 as of each Interest Adjustment Date.  Interest shall be
                 calculated on the basis of actual number of days elapsed in a
                 year of 360 days.

          2B.3   Interest on the Third Term Note shall be payable ON DEMAND,
                 but until such demand is made, interest shall be payable
                 monthly, commencing September 1, 1998, and continuing on the
                 first day of each consecutive month thereafter, and upon
                 maturity.

          2B.4   The principal of the Third Term Note shall be repayable as
                 follows:

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                 Thirty-five (35) installments, each in the amount of
                 $69,445.00, commencing September 1, 1998, and continuing on
                 the first day of each consecutive month thereafter through and
                 including July 1, 2001; plus, one 
          


















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                 (1) final installment in an amount equal to the then-remaining
                 outstanding principal balance of the Third Term Note shall be
                 due and payable on August 1, 2001.
     
          2B.5   The Borrower may prepay the Third Term Note in whole or from
                 time to time in part without premium or penalty.  Partial
                 prepayments may be applied to scheduled installments of
                 principal in inverse order of their maturities.

5.   Section 3 of the Credit Agreement is hereby amended by adding the following
     as new Section 3.4:

          3.4    The Bank shall not fund the term loan contemplated by Section
                 2B hereof if, as of the date of funding, there exists any
                 Event of Default or any event which, with the giving of notice
                 or the passage of time (or both), could become an Event of
                 Default.

6.   Sections 4.1, 4.2 and 4.3 of the Credit Agreement are hereby amended by
     inserting the following immediately after the term "the Second Term Note,"
     wherever that term appears in said Sections:

          and the Third Term Note

7.   Sections 7.7 and 7.9 of the Credit Agreement are hereby amended so that,
     when read in their entireties, they provide as follows:

          7.7    TANGIBLE NET WORTH.  Permit its Tangible Net Worth to be less
                 than $19,500,000.00 as of June 30, 1999 and as of each fiscal
                 year end thereafter.

          7.9    NET PROFIT.  Fail to produce a net profit after taxes equal to
                 at least 2.0% of net sales as of each fiscal year end,
                 commencing June 30, 1999.  

8.   Section 8.1(A) of the Credit Agreement is hereby amended so that, when read
     in its entirety, it provides as follows:

          A.     PAYMENT.  Default in any payment of interest or of principal
                 on any one or more of the Notes when due, and continuance
                 thereof for 10 calendar days;

9.   Sections 8.1 and 8.2 of the Credit Agreement are hereby amended by
     inserting the following immediately after the term "the Second Term Note,"
     wherever that term appears in the concluding paragraphs of said Sections:

          and the Third Term Note



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10.  Section 9.3 of the Credit Agreement is hereby amended by inserting the
     following immediately after the term "the Second Term Note" in the fourth
     line of said Section:

          and the Third Term Note

11.  The Borrower and the Bank hereby agree that the terms and conditions
     governing the First Term Note (and advances made thereunder) are set forth
     in that certain Construction Loan Agreement dated October 20, 1994.  Said
     loan agreement remains in full force and effect.

12.  The Bank hereby waives the covenant set forth in Section 7.5 of the Credit
     Agreement for the limited purpose of permitting the Borrower to acquire
     Healthcare Business Unit of Henley Healthcare, Inc.  The waiver contained
     in the immediately preceding sentence shall not be deemed a waiver of any
     other term or condition set forth in the Credit Agreement, nor should it be
     deemed a waiver of future transactions which would violate the covenant set
     forth in Section 7.5 of the Credit Agreement.  

13.  Simultaneously with the execution of this Third Amendment, the Borrower
     shall execute and deliver to the Bank a new promissory note (which, for
     purposes of this Third Amendment only, shall hereinafter be referred to as
     the "New Revolving Note"), substantially in the form of attached Exhibit A.
     The New Revolving Note shall replace, but shall not be deemed payment or
     satisfaction of, the Current Note.  All references in the Credit Agreement
     to the "Current Note" shall be deemed to mean the New Revolving Note. 
     Exhibit A to this Third Amendment shall replace Exhibit A to the Credit
     Agreement.

14.  Simultaneously with the execution of this Third Amendment, the Borrower
     shall also execute and deliver to the Bank the Third Term Note.

15.  The Borrower hereby represents and warrants to the Bank as follows:

          A.     As of the date of this Third Amendment, the outstanding
                 principal balances of the Current Note, the First Term Note
                 and the Second Term Note (immediately prior to the payoff
                 contemplated by Section 4 hereof) are  $0.00, $719,491.17 and
                 $183.325.00, respectively, and accrued but unpaid interest
                 thereon equals  $0.00, $382.13, and $129.86, respectively.

          B.     The Credit Agreement, the Notes and the Security Agreement
                 constitute valid, legal and binding obligations owed by the
                 Borrower to the Bank, subject to no counterclaim, defense,
                 offset, abatement or recoupment.

          C.     As of the date of this Third Amendment, (i) all of the
                 representations and warranties contained in Sections 5.1, 5.4
                 and 5.5 of the Credit Agreement are 

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                 true, and (ii) there exists no Event of Default and no event
                 which, with the giving of notice or the passage of time, or
                 both, could become an Event of Default.

          D.     The execution, delivery and performance of this Third
                 Amendment, the New Revolving Note and the Third Term Note by
                 the Borrower are within its corporate powers, have been duly
                 authorized, and are not in contravention of law or the terms
                 of the Borrower's Articles of Incorporation or By-laws, or of
                 any undertaking to which the Borrower is a party or by which
                 it is bound.

          E.     All financial statements delivered to the Bank by or on behalf
                 of the Borrower, including any schedules and notes pertaining
                 thereto, have been prepared in accordance with Generally
                 Accepted Accounting Principles consistently applied, and fully
                 and fairly present the financial condition of the Borrower at
                 the dates thereof and the results of operations for the
                 periods covered thereby, and there have been no material
                 adverse changes in the financial condition or business of the
                 Borrower from March 31, 1998 to the date hereof.

16.  Upon request by the Bank, the Borrower shall deliver a Norwest Corporate
     Certificate Of Authority to the Bank dated as of the date of this Third
     Amendment, and in form and content acceptable to the Bank.

17.  Except as expressly modified by this Third Amendment, the Credit Agreement
     remains unchanged and in full force and effect.  

IN WITNESS WHEREOF, the Borrower and the Bank have executed this Third Amendment
as of the date first written above.
     
REHABILICARE, INC.                      NORWEST BANK MINNESOTA,
                                        NATIONAL ASSOCIATION
                                
By:_______________________________      By:________________________
                                             Gregory G. Quade,
Its:_______________________________          Vice President


By:_______________________________

Its:_______________________________




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