<PAGE>   1


                                                                   EXHIBIT 10.37
                               LOAN AGREEMENT


     Jay F.  Joliat (the "Lender"), hereby commits to Caraco Pharmaceutical
Laboratories, Ltd., a Michigan corporation (the "Borrower") to lend the amount
of three hundred thousand dollars ($300,000), in accordance with the terms and
conditions of this Loan Commitment Letter (the "Commitment").  This Commitment
is subject to the satisfaction of all of the conditions set forth herein.

(1)  Commitment Amount - The Lender will loan the amount of three hundred
     thousand dollars ($300,000) to the Borrower on or before October 18, 1996.

(2)  Closing Date - Subject to the satisfaction of the terms and conditions of
     this Commitment, the Loan will be funded on October 18, 1996, or such
     other date as is satisfactory to the Lender (the "Closing Date").

(3)  Promissory Note - On the Closing Date, the Borrower will execute a
     promissory note (the "Note"), in the principal amount of $300,000.  The
     form and substance of such Note must be satisfactory to the Lender.
     Interest will accrue under such Note at the per annum rate of ten percent
     (10%) so long as there shall be no event of default.  The entire principal
     balance, together with all interest and other charges due and payable
     under the Note, will be due and-payable upon the first to occur of the one
     year anniversary of the Closing Date or demand by the Lender.

(4)  Prepayment - Borrower shall be permitted to prepay the Note at any time,
     without penalty, provided all prepayments will be applied first to the
     payment of any fees or charges due under the Note, if any, second to the
     payment of all outstanding interest, and third to the payment of all
     outstanding principal in the inverse order of maturity.

(5)  Loan Agreement - On the Closing Date, in order to secure the full, prompt
     and faithful performance by the Borrower of its obligations under the
     Note, the Borrower will execute and deliver a loan agreement (the "Loan
     Agreement"), in form and substance satisfactory to the Lender, pursuant to
     which the Borrower will grant to the Lender a first, prior and senior, and
     continuing security interest in and to all "Collateral".  The term
     "Collateral" refers collectively to all of the Borrower's tangible and
     intangible personal property, whether now owned or hereafter acquired, or
     in which Borrower now has or may hereafter acquire an interest including
     without limitation all of the following items of property:

     (a)  all of Borrower's accounts, accounts receivable, notes receivable,
          and other rights of Borrower in and to


<PAGE>   2



          payments due for goods sold or services rendered, whether owned,
          existing, or arising  as of or subsequent to the Closing Date;

     (b)  all of Borrower's inventory (whether raw materials, work in
          process, or finished goods), supplies, parts, and goods, whether
          owned, existing, or arising as of or subsequent to the Closing Date;

     (c)  all of Borrower's furniture, fixtures, machinery, equipment,
          tools, leasehold improvements, vehicles, together with all other
          tangible personal property, whether owned, existing, or arising as
          of or subsequent to the Closing Date;

     (d)  all contract rights, chattel paper, leases and other general
          intangibles, including without limitation all rights to any refund
          of any taxes assessed against or paid by Borrower, insurance premium
          refunds, unearned premiums, insurance proceeds, chose in action,
          goodwill, going concern value, trademarks, copyrights, service
          marks, tradenames, and patents, technology and know how, whether
          owned, existing or arising as of or subsequent to the Closing Date,
          including without limitation all new drug applications to, and
          approvals of such applications from, the Federal Drug
          Administration;

     (e)  all securities held by or issued to Borrower, including without
          limitation all shares of stock, warrants, options, and debentures,
          whether owned, existing, or arising as of or subsequent to the
          Closing Date;

     (f)  all instruments, documents of title, policies and certificates of
          insurance, bank deposits, deposit accounts, checking accounts and
          cash, whether owned, existing, or arising as of or subsequent to
          the Closing Date;

     (g)  any and all proceeds (of sale, insurance, or otherwise),
          replacements, substitutions, additions, improvements, products, and
          accessions to, for or of the foregoing; and

     (h)  all books, records and documents relating to all of the
          foregoing.

     The Lender's rights in the Collateral will be perfected by the filing of
     Uniform Commercial Code Financing Statements (Form UCC-1) in the State of
     Michigan and Wayne County, Michigan, and the Borrower shall also execute
     and deliver such other instruments and do such other things as is
     necessary from time to time to grant to Lender a first, prior and senior
     security interest in and to the Collateral.


<PAGE>   3



(6)  Inter-Creditor Agreement - The Lender agrees to enter into an
     "Inter-Creditor Agreement", in form and substance satisfactory to the
     Lender, which will provide, among other things, for the relative rights
     and remedies of the Lender with respect to the Loan and Collateral.

(7)  Indemnification - In further consideration of the Lender's commitment to
     make the Loan pursuant to this Commitment, Borrower agrees to indemnify,
     defend and hold harmless the Lender from and against all damages,
     liabilities, losses, costs, and expenses, including without limitation
     attorneys' fees, arising out of or relating to any claims brought by
     reason of the extension of the Loan or the transactions contemplated
     hereby, except to the extent of a Lender's willful misconduct.

(8)  Warrant Agreement - The Lender shall receive a warrant agreement to
     purchase 300,000 shares of Caraco Common Stock at the purchase price of
     $1.31 per share.  The Lender may divide said 300,000 shares in any matter
     in which the Lender deems.

(9)  Affirmative and Negative Covenants - So long as Borrower shall be
     indebted to the Lender under the Notes, Lender agrees as follows:

     (a)  No dividends or distribution, whether in cash, stock or other
          property, shall be declared or paid to any shareholder;

     (b)  The Borrower shall not enter into, or agree or make any
          agreement to enter into, any transaction outside of the ordinary
          course of business;

     (c)  All budgets and expenditures shall be approved by the Lender,
          within their discretion; and

     (d)  The continuing employment status and wage rates of all
          employees, and all employment policies and contracts, shall be
          approved in advance by the Lender, within their discretion.

(10) Events of Default - The occurrence of any one or more of the following
     events, among such other occurrences as may be provided for in the Notes,
     will be an event of default under the Note:

     (a)  The failure of Borrower to make any payment, as and when due,
          of principal, interest or any other charge due and payable under the
          Note and/or under any other evidences of indebtedness of the
          Borrower to any person;

     (b)  The death or termination of employment with the Borrower,
          without regard to the reason or lack of reason therefor, of William
          R. Hurd;


<PAGE>   4


     (c)  Either Borrower shall voluntarily apply for the appointment
          of a custodian, trustee or receiver to take custody or dispose of
          any substantial portion of assets; or a court of competent
          jurisdiction shall appoint a custodian, trustee or receiver to take
          custody or dispose of any substantial portion of the assets of the
          Borrower pursuant to any involuntary proceeding, and either (i)
          Borrower shall indicate approval of, consent to, or acquiescence to
          such appointment, or (ii) such custodian, trustee, or receive shall
          not be discharged within thirty (30) days; or Borrower shall
          voluntarily seek protection from creditors under any applicable
          state or federal bankruptcy, liquidation or dissolution, insolvency,
          or debt reorganization laws; or any of Borrower's creditors shall
          institute any proceeding against Borrower under any applicable state
          or federal bankruptcy, liquidation or dissolution, insolvency, or
          debt reorganizations laws, and the same shall not be dismissed or
          discharged within thirty (30) days;

     (d)  The temporary or permanent liquidation, dissolution, or other
          discontinuance of the Borrower's corporate existence; the merger or
          consolidation of Borrower; the sale or transfer of all or
          substantially all of Borrower's assets; and/or the sale or transfer
          of not less than 50% of the outstanding shares of capital stock of
          the Borrower;

     (e)  There shall be more than seven persons on the Borrower's
          Board of Directors, and the Lender shall not be a member of the
          Borrower's Board of Directors; and/or

     (f)  The occurrence of any breach or violation by Borrower under
          any of the Loan Documents.

(11) General Provisions - This Commitment shall be governed by, construed,
     interpreted, and enforced in accordance with the internal laws of the
     State of Michigan.  This Commitment may not be modified orally or by
     contrary course of conduct, and no modifications shall be effective unless
     in writing and signed by the Lender.  This Commitment inures solely to the
     benefit of the Borrower and may not be assigned or transferred by
     Borrower.  This Commitment may be negotiated and transferred by the
     Lender.  BORROWER CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF
     THE STATE OF MICHIGAN FOR ANY DISPUTES ARISING UNDER THIS COMMITMENT.
     BORROWER EXPRESSLY WAIVES ALL OBJECTIONS IT NOW HAS OR MAY HAVE TO VENUE,
     WHETHER BASED ON INCONVENIENCE OR ANY OTHER REASON.  TO THE EXTENT THAT
     BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM THE JURISDICTION
     OF ANY COURT OR FROM ANY LEGAL PROCESS, HOWSOEVER OCCURRING, WITH RESPECT
     TO BORROWER OR ITS PROPERTIES, BORROWER HEREBY IRREVOCABLY WAIVES SUCH
     IMMUNITY.  BORROWER HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY


<PAGE>   5





     JURY IN ANY ACTION OR SUIT BROUGHT UNDER OR PURSUANT TO THIS COMMITMENT.


                                  LENDER:



                                  /s/Jay F. Joliat
                                  --------------------
                                  Jay F. Joliat


                                  BORROWER:


                                  CARACO PHARMACEUTICAL LABORATORIES, LTD.



                                  /s/William R. Hurd
                                  --------------------------------
                                  William R. Hurd
                                  President


Date: October 18, 1996