Exhibit 10.1


                            DATED 12TH AUGUST, 1997








                                   LOAN AGREEMENT
                                       for a
                           U.S. $16,000,000 LOAN FACILITY

                                         to

                                 DERMEQUIP, L.L.C.




                                    PROVIDED BY
                              THE CHASE MANHATTAN BANK







                                  NORTON ROSE
                                    London


<PAGE>

                                    CONTENTS
                                    --------

CLAUSE                               HEADING                          PAGE

  1     Purpose and definitions                                         3
  2     The Facility                                                    9
  3     Conditions                                                     10
  4     Advances                                                       10
  5     Interest and Interest Periods; alternative interest rates      11
  6     Repayment, prepayment and cancellation                         13
  7     Fees and expenses                                              14
  8     Payments and Taxes; accounts and calculations                  15
  9     Representations and warranties                                 18
 10     Undertakings                                                   20
 11     Events of Default                                              22
 12     Indemnities                                                    27
 13     Unlawfulness and increased costs; mitigation                   28
 14     Setoff                                                         31
 15     Assignment, transfer and lending offices                       31
 16     Notices and other matters                                      32
 17     Governing law and jurisdiction                                 34


<PAGE>


          THIS AGREEMENT is dated 12th August, 1997 and made BETWEEN:

(1)   DERMEQUIP, L.L.C. as Borrower; and

(2)   THE CHASE MANHATTAN BANK as Bank.

IT IS AGREED as follows:

1     PURPOSE AND DEFINITIONS
      -----------------------

1.1   Purpose
      -------
   
      This Agreement sets out the terms and conditions upon and subject to
      which the Bank agrees to make available to the Borrower, under the 
      guarantees of the Guarantors, a loan facility of up to U.S.$16,000,000 
      to be used for its general corporate purposes.

1.2   Definitions
      -----------
     
      In this Agreement, unless the context otherwise requires:

      "ADVANCE" means each borrowing of a portion of the Commitment by the
      Borrower or (as the context may require) the principal amount of such
      borrowing;

      "BANKING DAY" means a day (other than Saturday or Sunday) on which banks
      are open for business in London and in New York City;

      "BANK" means The Chase Manhattan Bank of 125 London Wall, London EC2Y 5AJ
      and includes its successors in title and transferees;

      "BORROWED MONEY" means Indebtedness in respect of (i) money borrowed or
      raised and debit balances at banks, (ii) any bond, note, loan stock, 
      debenture or similar debt instrument, (iii) acceptance or documentary 
      credit facilities, (iv) receivables sold or discounted (otherwise than 
      on a non-recourse basis), (v) deferred payments for assets or services 
      acquired, (vi) finance leases and hire purchase contracts, (vii) swaps,
      forward foreign exchange contracts, futures and other derivatives, 
      (viii) any other transaction (including without limitation forward sale
      or purchase agreements) having the commercial effect of a borrowing or 
      raising of money or of any of (ii) to (vii) above and (ix) guarantees 
      in respect of Indebtedness of any person falling within any of (i) to 
      (viii) above;

      "BORROWER" means DermEquip, L.L.C. of Corporation Trust Center, 1209
      Orange Street, Wilmington, Delaware, USA;

      "COMMITMENT" means at any relevant time $16,000,000 as reduced by any
      relevant term of this Agreement and so that, if at such time the 
      Commitment has been reduced 


<PAGE>


      to zero, references to the Bank's Commitment shall be construed as a 
      reference to the Bank's Commitment immediately prior to such reduction 
      to zero;

      "CONTRIBUTION" means the principal amount of the Loan owing to the Bank
      at any relevant time;

      "DEFAULT" means any Event of Default or any event or circumstance which
      would, upon the giving of a notice by the Bank and/or the expiry of the
      relevant period and/or the fulfilment of any other condition (in each 
      case as specified in clause 11.1), constitute an Event of Default;

      "DOLLARS" and "$" mean the lawful currency of the United States of
      America and in respect of all payments to be made under this Agreement 
      in Dollars mean funds which are for same day settlement in the New York 
      Clearing House Interbank Payments System (or such other U.S. dollar 
      funds as may at the relevant time be customary for the settlement of 
      international banking transactions denominated in U.S. dollars);

      "DRAWDOWN DATE" means each date being (in each case) a single date in
      each of August 1997, September 1997, December 1997 and March 1998, on 
      which the relevant Advances set out in schedule 1 are, or are to be 
      drawn down by the Borrower;

      "DRAWDOWN NOTICE" means a notice in the form or substantially in the 
      form of schedule 2, duly completed with particulars of the relevant 
      Advance;

      "DRAWDOWN PERIOD" means the period from the date of this Agreement and
      ending on whichever is the earlier of (i) 31st March 1998 or (ii) the 
      date on which (a) the Loan is equal to the Commitment or (b) the 
      Borrower cancels the whole of the undrawn Commitment under clause 6.5 or 
      (c) the Commitment is reduced to zero pursuant to clause 11.2 or;

      "ENCUMBRANCE" means any mortgage, charge (whether fixed or floating),
      pledge, lien, hypothecation, assignment by way of security, trust 
      arrangement for the purpose of providing security or other security 
      interest of any kind securing any obligation of any person or any other 
      arrangement having the effect of conferring rights of retention or 
      set-off or other disposal rights over an asset (including without 
      limitation title transfer and/or retention arrangements having a 
      similar effect) and includes any agreement to create any of the 
      foregoing but does not include liens arising in the ordinary course of
      trading by operation of law and not by way of contract;

      "ENVIRONMENTAL LAW" includes all or any law, statute, rule, regulation,
      treaty, by-law, code of practice, order, notice, demand or decision of 
      the courts or of any governmental authority or agency or any other 
      regulatory or other body in any jurisdiction relating to Environmental 
      Matters;


                                    4

<PAGE>


      "ENVIRONMENTAL MATTERS" includes (a) the generation, deposit, disposal,
      keeping, treatment, transportation, transmission, handling, importation,
      exportation, processing, collection, sorting, presence or manufacture 
      of any waste (as defined in the Environmental Protection Act 1990) of 
      any Relevant Substance; (b) nuisance, noise, defective premises, health 
      and safety at work or elsewhere; and (c) the pollution, conservation or 
      protection of the environment (both natural and built) or of man or any 
      living organisms supported by the environment or any other matter 
      whatsoever affecting the environment or any part of it;

      "EVENT OF DEFAULT" means any of the events or circumstances described in
      clause 11.1;

      "EXISTING LIABILITIES" means liabilities incurred by the Borrower in the
      course of its ordinary business operations (i) under an agreement to 
      lease property to the US Guarantor, (ii) from equipment purchases or 
      (iii) for professionals' fees;

      "FINAL REPAYMENT DATE" means 30 June 2004;

      "FIRST REPAYMENT DATE" means 30 June 1998;

      "GROUP" means Smith & Nephew plc and each of its Subsidiaries;

      "GUARANTEES" means the UK Guarantee and the US Guarantee;

      "GUARANTORS" means the UK Guarantor and the US Guarantor;

      "INDEBTEDNESS" means any obligation for the payment or repayment of
      money, whether as principal or as surety and whether present or future, 
      actual or contingent;

      "INTEREST PAYMENT DATE" means the last day of an Interest Period;

      "INTEREST PERIOD" means in relation to any Advance or the Loan each
      period for the calculation of interest in respect of such Advance or 
      the Loan ascertained in accordance with clauses 5.2 and 5.3;

      "LIBOR" means, in relation to a particular period, the cost of funds to
      the Bank of providing Dollar funding for a period equal to such period;

      "LOAN" means the aggregate principal amount owing to the Bank under this
      Agreement at any relevant time;

      "MARGIN" means 0.25 per cent per annum;


                                    5


<PAGE>


      "MATERIAL SUBSIDIARY" means at any time a Subsidiary of the UK Guarantor:

      (a)    whose profit before interest (receivable and payable) and
             taxation (consolidated in the case of a Subsidiary which itself 
             has Subsidiaries) or whose gross assets (consolidated in the 
             case of a Subsidiary which itself has Subsidiaries) represent 
             in each case not less than 15 per cent of the consolidated 
             profit before interest (receivable and payable) and taxation or,
             as the case may be, consolidated gross assets of the Group taken
             as a whole in each case attributable to the shareholders of the 
             UK Guarantor, all as calculated respectively by reference to the 
             then latest accounts (consolidated or unconsolidated, as the 
             case may be) of such Subsidiary and the then latest consolidated
             balance sheet of the Group provided that (i) in the case of a 
             Subsidiary acquired after the end of the financial period to
             which the then latest consolidated balance sheet relates, the 
             reference to the then latest consolidated balance sheet for the 
             purposes of the calculation above shall, until consolidated 
             accounts for the financial period in which the acquisition is 
             made have been prepared as aforesaid, be deemed to be a
             reference to a consolidation of the then latest consolidated 
             balance sheet and such Subsidiary's latest relevant accounts, 
             adjusted as deemed appropriate by the auditors of the UK 
             Guarantor; and (ii) if, in the case of a Subsidiary which itself
             has Subsidiaries, no consolidated accounts are prepared, its
             consolidated profit before interest (receivable and payable) and
             taxation and consolidated gross assets shall be determined on 
             the basis of pro forma consolidated accounts of the relevant 
             Subsidiary and its Subsidiaries prepared for this purpose; or

      (b)    to which is transferred the whole or substantially the whole of
             the assets and undertaking of a Subsidiary which immediately 
             prior to such transfer is a Material Subsidiary.

      A report by the auditors of the UK Guarantor that in their opinion a
      Subsidiary is or is not or was not at any particular time or throughout 
      any specified period a Material Subsidiary shall, in the absence of 
      manifest error, be conclusive and binding on all parties;

      "MONTH" or "MONTHS" means a period beginning in one calendar month and
      ending in the relevant later calendar month on the day numerically
      corresponding to the day of the calendar month in which it started, 
      provided that (i) if the period started on the last Banking Day in a 
      calendar month or if there is no such numerically corresponding day, 
      it shall end on the last Banking Day in such later calendar month and 
      (ii) if such numerically corresponding day is not a Banking Day, the 
      period shall end on the next following Banking Day in such later 
      calendar month but if there is no such Banking Day it shall end on the 
      preceding Banking Day and "MONTHLY" shall be construed accordingly;


                                    6


<PAGE>


      "PERMITTED LEASES" means finance leases entered into by the Borrower as
      lessor in the course of its ordinary business operations;

      "QUOTATION DATE" means, in relation to an Interest Period or other 
      period for which LIBOR is to be determined, the date on which 
      quotations would customarily be provided by leading banks in the London
      Interbank Market for deposits in the relevant currency for delivery on 
      the first day of that Interest Period or other period;

      "RELEVANT SUBSTANCE" means any substance whatsoever (whether in a solid
      or liquid form or in the form of a gas or vapour and whether alone or 
      in combination with any other substance) or waste (as defined in the
      Environmental Protection Act 1990) which is capable of causing harm to 
      man or any other living organism supported by the environment, or 
      damaging the environment or public health or welfare;

      "REPAYMENT DATES" means, subject to clause 8.3, (i) the First Repayment
      Date, (ii) each of the twenty-three (23) dates falling at three (3) 
      monthly intervals after the First Repayment Date and (iii) the Final 
      Repayment Date;

      "SECURITY AGREEMENTS" means the security agreements (in the agreed form
      as evidenced by their initialling by Norton Rose on behalf of the Bank 
      and by the UK Guarantor) entered into or, as the case may be, to be 
      entered into by the Borrower in favour of the UK Guarantor and the US 
      Guarantor;

      "SUBSIDIARY" of a person means any company or entity directly or
      indirectly controlled by such person, for which purpose "CONTROL" 
      means either ownership of more than 50 per cent of the voting share 
      capital (or equivalent right of ownership) of such company or entity 
      or power to direct its policies and management whether by contract or 
      otherwise;

      "TAXES" includes all present and future taxes, levies, imposts, duties,
      fees or charges of whatever nature together with interest thereon and
      penalties in respect thereof and "TAXATION" shall be construed 
      accordingly;

      "TOTAL CONSOLIDATED GROSS ASSETS OF THE GROUP" means the total
      consolidated gross assets of the Group taken as a whole, as calculated 
      by reference to the then latest consolidated balance sheet of the Group 
      provided that (i) in the case of a Subsidiary acquired after the end of 
      the financial period to which the then latest consolidated balance 
      sheet of the Group relates, the reference to the then latest 
      consolidated balance sheet of the Group for the purposes of the 
      calculation above shall, until consolidated accounts of the Group for 
      the financial period in which the acquisition is made have been 
      prepared as aforesaid, be deemed to be a reference to a consolidation 
      of the then latest consolidated balance sheet and such Subsidiary's 
      latest relevant accounts, adjusted as deemed appropriate by the
      auditors of the UK Guarantor; and (ii) if, in the case of a Subsidiary 
      which itself has Subsidiaries, no consolidated accounts are prepared, 
      its consolidated gross assets shall be determined 


                                    7


<PAGE>


      on the basis of pro forma consolidated accounts of the relevant 
      Subsidiary and its Subsidiaries prepared for this purpose;

      "UK GUARANTEE" means the guarantee of the UK Guarantor in the form of
      schedule 4;

      "US GUARANTEE" means the guarantee of the US Guarantor in the form of
      schedule 5;

      "UK GUARANTOR" means Smith & Nephew plc (Company registration number
      324357) of  2 Temple Place, Victoria Embankment, London WC2R 3BP; and

      "US GUARANTOR" means Advanced Tissue Sciences, Inc. of 10933 North 
      Torrey Pines Road, La Jolla, California, USA.

1.3   Headings
      --------
   
      Clause headings and the table of contents are inserted for convenience 
      of reference only and shall be ignored in the interpretation of this 
      Agreement.

1.4   Construction of certain terms
      -----------------------------
   
      In this Agreement, unless the context otherwise requires:

      (a)    references to clauses and schedules are to be construed as 
             references to the clauses of, and schedules to, this Agreement 
             and references to this Agreement include its schedules;
 
      (b)    references to (or to any specified provision of) this Agreement 
             or any other document shall be construed as references to this 
             Agreement, that provision or that document as in force for the 
             time being and as from time to time amended in accordance with 
             its terms, or, as the case may be, with the agreement of the 
             relevant parties and (where such consent is, by the terms of
             this Agreement or the relevant document, required to be obtained 
             as a condition to such amendment being permitted) the prior 
             written consent of the Bank;

      (c)    references to a "REGULATION" include any present or future 
             regulation, rule, directive, requirement, request or guideline 
             (whether or not having the force of law) of any agency, 
             authority, central bank or government department or any self-
             regulatory or other national or supra-national authority;

      (d)    words importing the plural shall include the singular and vice 
             versa;

      (e)    references to a time of day are to London time;


                                    8


<PAGE>


      (f)    references to a "PERSON" shall be construed as including 
             references to an individual, firm, company, corporation, 
             unincorporated body of persons or any State or any of its 
             agencies;

      (g)    references to "ASSETS" include all or part of any business, 
             undertaking, real property, personal property, uncalled capital 
             and any rights (whether actual or contingent, present or future)
             to receive, or require delivery of, any of the foregoing;

      (h)    references to a "GUARANTEE" include references to an indemnity 
             or other assurance against financial loss including, without 
             limitation, an obligation to purchase assets or services as a 
             consequence of a default by any other person to pay any 
             Indebtedness and "GUARANTEED" shall be construed accordingly;

      (i)    a reference to any event or circumstance having a "MATERIAL 
             ADVERSE EFFECT" means in relation to any event or circumstance 
             that the occurrence or existence of the same, taken alone or in 
             combination with other events or circumstances which have 
             occurred, is likely in the reasonable opinion of the Bank 
             directly or indirectly to have a material adverse effect on the 
             ability of the Borrower to perform its present and future 
             obligations under this Agreement and/or on the ability of the 
             UK Guarantor to perform its present and future obligations under
             the UK Guarantee;

      (j)    references to the "EQUIVALENT" of an amount specified in a 
             particular currency (the "SPECIFIED CURRENCY AMOUNT") shall be 
             construed as a reference to the amount of the other relevant 
             currency which can be purchased with the specified currency 
             amount in the London foreign exchange market at or about 11 a.m.
             on the day on which the calculation falls to be made for spot 
             delivery as determined by the Bank; and

      (k)    references to any enactment shall be deemed to include 
             references to such enactment as re-enacted, amended or extended.

2     THE FACILITY
      ------------
                  
2.1   Amount
      ------
      
      The Bank, relying upon each of the representations and warranties in
      clause 9, agrees to lend to the Borrower upon and subject to the terms 
      of this Agreement the principal sum of up to $16,000,000.


                                    9

<PAGE>

3     CONDITIONS
      ----------

3.1   Documents and evidence
      ----------------------
   
      The obligation of the Bank to make its Commitment available shall be
      subject to the condition that the Bank shall have received, not later 
      than two Banking Days before the day on which the Drawdown Notice in 
      respect of the first Advance is given, the documents and evidence 
      specified in schedule 3 in form and substance satisfactory to the Bank.

3.2   General conditions precedent
      ----------------------------
    
      The obligation of the Bank to make available each Advance is subject to
      the further conditions that:

      (a)    at the date of the first Drawdown Notice and on the first 
             Drawdown Date the representations and warranties set out in 
             clause 9.1, the representations and warranties set out in 
             clause 4.1 of the UK Guarantee and the representations and 
             warranties set out in clause 3 of the US Guarantee are true and 
             correct on and as of each such date as if each were made with 
             respect to the facts and circumstances existing at such date; and

      (b)    at the date of each Drawdown Notice and on each Drawdown Date, 
             no Default shall have occurred and be continuing or would result 
             from the making of such Advance.

3.3   Waiver of conditions precedent
      ------------------------------
   
      The conditions specified in this clause 3 are inserted solely for the
      benefit of the Bank and may be waived in whole or in part and with or 
      without conditions by the Bank in respect of the first or any other 
      Advance without prejudicing the right of the Bank to require fulfilment 
      of such conditions in whole or in part in respect of any other Advance.

4     ADVANCES
      --------
              
4.1   Drawdown
      --------
   
      Subject to the terms and conditions of this Agreement an Advance shall 
      be made available to the Borrower following receipt by the Bank from 
      the Borrower of a Drawdown Notice not later than 10 a.m. on the third 
      Banking Day before the proposed Drawdown Date.  A Drawdown Notice shall
      be effective on actual receipt by the Bank and, once given, shall, 
      subject as provided in clause 5.5(a), be irrevocable.  Subject to 
      clause 5.5, Advances may only be drawn down on Banking Days within the 
      relevant monthly period during the Drawdown Period as set out in 
      schedule 1, only one 


                                   10

<PAGE>


      Advance may be drawn down in each such relevant period and the Drawdown 
      Date for such Advance must be the first day of an Interest Period.

4.2   Amount
      ------
    
      Each Advance shall be of the relevant amount set out in schedule 1.

4.3   Termination of Commitment
      -------------------------
   
      Any part of the Commitment which remains undrawn and uncancelled at the
      end of the Drawdown Period shall thereupon be automatically reduced 
      to zero.  If any Advance is not drawn down within the relevant monthly 
      period set out in schedule 1, that Advance will be cancelled and the 
      Commitment shall be reduced by the amount of the undrawn Advance.

4.4   Application of proceeds
      -----------------------
   
      Without prejudice to the Borrower's obligations under clause 10.1(c), 
      the Bank shall have no responsibility for the application of the 
      proceeds of any Advance by the Borrower.

5     INTEREST AND INTEREST PERIODS; ALTERNATIVE INTEREST RATES
      ---------------------------------------------------------

5.1   Normal interest rate
      --------------------
   
      The Borrower shall pay interest on each Advance or, as the case may be,
      the Loan in respect of each Interest Period on the relevant Interest 
      Payment Date at the rate per annum determined by the Bank to be the 
      aggregate of (a) the Margin and (b) LIBOR.

5.2   Selection of Interest Periods
      -----------------------------
   
      From and including the date of the first Drawdown Date, each Interest
      Period shall be of the duration of three (3) months.

5.3   Determination of Interest Periods
      ---------------------------------
   
      Each Interest Period shall be of the duration specified in clause 5.2 
      but so that:

      (a)    the initial Interest Period in respect of each Advance shall 
             commence on the relevant Drawdown Date and each subsequent 
             Interest Period in respect of such Advance shall commence on the 
             expiry of the previous Interest Period; and

      (b)    the initial Interest Period in respect of each Advance after the 
             first Advance shall end on the same day as the then current 
             Interest Period for the previous Advance or, as the case may be, 
             the Loan and, on the last day of such


                                   11


<PAGE>


             Interest Period, such Advances shall be consolidated into, and 
             shall thereafter constitute, the Loan.
                  
5.4   Interest for late payment
      -------------------------
   
      If the Borrower fails to pay any sum (including, without limitation, any
      sum payable pursuant to this clause 5.4) on its due date for payment 
      under this Agreement the Borrower shall pay interest on such sum from 
      the due date up to the date of actual payment (as well after as before 
      judgment) at a rate determined by the Bank pursuant to this clause.  
      The period beginning on such due date and ending on such date of 
      payment shall be divided into successive periods of not more than three
      months as selected by the Bank each of which (other than the first, 
      which shall commence on such due date) shall commence on the last day 
      of the preceding such period.  The rate of interest applicable to each 
      such period shall be the aggregate (as determined by the Bank) of (c)
      one per cent per annum, (d) the Margin and (c) LIBOR, unless such 
      unpaid sum is an amount of principal which shall have become due and 
      payable, by reason of a declaration by the Bank under clause 11.2(b) 
      or a prepayment pursuant to clause 13.1, prior to the next succeeding 
      Interest Payment Date relating thereto, in which case the first such 
      period selected by the Bank shall end on such Interest Payment Date and
      interest shall be payable on such unpaid sum during such period at a 
      rate one per cent above the rate applicable thereto immediately before 
      it shall have become so due and payable.  Interest under this clause 
      5.4 shall be due and payable on the last day of each period determined 
      by the Bank pursuant to this clause 5.4 or, if earlier, on the date
      on which the sum in respect of which such interest is accruing shall 
      actually be paid.  If, for the reasons specified in clause 5.5(a), the 
      Bank is unable to determine a rate in accordance with the foregoing 
      provisions of this clause 5.4, interest on any sum not paid on its due 
      date for payment shall be calculated at a rate determined by the Bank 
      to be one per cent per annum above the aggregate of the Margin and the 
      cost of funds to the Bank.  The Bank will notify the Borrower of the 
      interest rate and interest periods determined under this clause 5.4.

5.5   Market disruption; non-availability
      -----------------------------------
   
      (a)    If and whenever, at any time prior to the commencement of any 
             Interest Period deposits in Dollars are not available to the 
             Bank in the London Interbank Market in the ordinary course of 
             business in sufficient amounts to fund the Advance for such 
             Interest Period the Bank shall forthwith give notice (a 
             "DETERMINATION NOTICE") to the Borrower.  A Determination Notice
             shall contain particulars of the relevant circumstances giving 
             rise to its issue.  After the giving of any Determination Notice
             the undrawn amount of the Commitment shall not be borrowed from 
             the Bank until notice to the contrary is given to the Borrower 
             by the Bank.  No commitment commission, as calculated in
             accordance with clause 7.1(b), shall be payable in respect of 
             such period when the Commitment cannot be borrowed.


                                   12


<PAGE>
      

      (b)    During the period of 10 days after any Determination Notice 
             has been given by the Bank under clause 5.5(a), the Bank shall 
             certify an alternative basis (the "SUBSTITUTE BASIS") for making
             available or, as the case may be, maintaining the relevant 
             Advance.  The Substitute Basis may (without limitation) include 
             alternative interest periods, alternative currencies or 
             alternative rates of interest but shall include a margin above 
             the cost of funds to the Bank equivalent to the Margin.  Each 
             Substitute Basis so certified shall be binding upon the Borrower
             and shall take effect in accordance with its terms from the date
             specified in the Determination Notice until such time as the 
             Bank notifies the Borrower that none of the circumstances 
             specified in clause 5.5(a) continues to exist whereupon the
             normal interest rate fixing provisions of this Agreement shall 
             apply, but so that the Borrower shall always have the right to 
             prepay the Loan in full rather than accepting the terms of the 
             Substitute Basis or carry forward any Advance that remains 
             undrawn in accordance with clause 5.5(c).

      (c)    In relation to the Advances available for drawdown pursuant to 
             clause 4.1 in the periods August 1997, September 1997 and 
             December 1997 only, upon the occurrence of the circumstances 
             set out in clause 5.5(a) the Borrower shall have the additional 
             right to direct the Bank to carry forward any such Advance
             that the Borrower is unable to draw down during the relevant 
             period because of the restrictions in clause 5.5(a) and add the 
             amount of such Advance to the amount of the Advance for the next
             following period.

6     REPAYMENT, PREPAYMENT AND CANCELLATION
      --------------------------------------

6.1   Repayment
      ---------
   
      The Borrower shall, subject to clause 6.2, repay the Loan by equal
      instalments, one such instalment to be repaid on the First Repayment 
      Date and on each of the Repayment Dates with the final instalment (and 
      any balance of the Loan) to be repaid on the Final Repayment Date.  
      The schedule of repayments is set out in schedule 1.  If the Commitment
      is not drawn in full or is cancelled in part pursuant to clause 6.5 the
      amount of each repayment instalment shall be reduced proportionately.

6.2   Voluntary prepayment
      --------------------
   
      The Borrower may prepay the Loan in whole or part (being $1,000,000 or
      any larger sum which is an integral multiple of $1,000,000 or the 
      balance of the Loan) on any Interest Payment Date without premium or 
      penalty.  Upon any notice of such prepayment being given, the 
      Commitment shall be reduced by an amount equal to the amount of such 
      prepayment.


                                   13


<PAGE>


6.3   Amounts payable on prepayment
      -----------------------------
    
      Any prepayment under this Agreement shall be made together with: (a)
      accrued interest to the date of prepayment; (b) any additional amount 
      payable under clause 8.4 or 13.2; and (c) all other sums payable by the 
      Borrower to the Bank under this Agreement including, without 
      limitation, any accrued commitment commission payable under clause 
      7.1(b) and any amounts payable under clause 12.1.

6.4   Notice of prepayment
      --------------------
    
      No prepayment may be effected under this clause 6 unless the Borrower
      shall have given the Bank at least 30 Banking Days' notice of its 
      intention to make such prepayment.  Every notice of prepayment shall 
      be effective only on actual receipt by the Bank, shall be irrevocable 
      and shall oblige the Borrower to make such prepayment on the date 
      specified.  No amount prepaid may be reborrowed and any amount prepaid 
      shall be applied in reducing the repayment instalments under clause 6 
      in inverse order of their due dates for payment.  The Borrower may not 
      prepay the Loan or any part thereof save as expressly provided in this 
      Agreement.

6.5   Cancellation of Commitments
      ---------------------------
   
      The Borrower may at any time during the Drawdown Period by notice to the
      Bank (effective only on actual receipt) cancel with effect from a date 
      not less than 30 Banking Days after the receipt by the Bank of such 
      notice the whole or any part (being $1,000,000 or any larger sum which 
      is an integral multiple of $1,000,000 or the balance of the undrawn 
      Commitment) of the Commitment which has not then been borrowed or 
      requested in a Drawdown Notice.  Any such notice of cancellation, once 
      given, shall be irrevocable and upon such cancellation taking effect 
      the Commitment of the Bank shall be reduced accordingly.

7     FEES AND EXPENSES
      -----------------
                       
7.1   Fees
      ----
   
      The Borrower shall pay to the Bank whether or not any part of the
      Commitment is ever advanced:

      (a)    on the date of this Agreement, for the account of the Bank, an
             arrangement fee of $25,000;
 
      (b)    subject to clause 5.5(a), on the dates falling at quarterly 
             intervals after the date of this Agreement and on the last day 
             of the Drawdown Period for the account of the Bank, commitment 
             commission computed from the date of this Agreement at the rate 
             of 0.10 per cent per annum on the daily undrawn and uncancelled 
             amount of the Bank's Commitment.


                                   14


<PAGE>
      

7.2   Expenses
      --------
   
      The Borrower shall pay to the Bank on demand:

      (a)    all reasonable expenses (including legal, printing and out-of-
             pocket expenses) incurred by the Bank in connection with the 
             negotiation, preparation and execution of this Agreement and of 
             any amendment or extension of, or the granting of any waiver or 
             consent under, this Agreement or either of the Guarantees; and

      (b)    all reasonable expenses (including legal and out-of-pocket 
             expenses) incurred by the Bank in contemplation of, or otherwise
             in connection with, the enforcement or attempted enforcement of,
             or preservation or attempted preservation of any rights under, 
             this Agreement or either of the Guarantees, including, without 
             limitation, the fees and expenses of accountants or other
             experts incurred in relation to any investigation into the 
             affairs of the Borrower or either of the Guarantors, or 
             otherwise in respect of the moneys owing under this Agreement 
             or either of the Guarantees, together with interest at the rate 
             referred to in clause 5.4 from the date on which such expenses
             were incurred to the date of payment (as well after as before 
             judgment).
             
7.3   Value Added Tax
      ---------------
   
      All fees and expenses payable pursuant to this clause 7.3 shall be paid
      by the Borrower together with an amount equal to any value added tax 
      payable by the Bank in respect of such fees and expenses (if applicable).

7.4   Stamp and other duties
      ----------------------

      The Borrower shall pay all stamp, documentary, registration or other
      duties or Taxes (including any duties or Taxes payable by, or assessed 
      on, the Bank but excluding Taxes on the overall net income, profits or 
      gains of the Bank) imposed on or in connection with this Agreement or 
      either of the Guarantees or the Loan and shall indemnify the Bank 
      against any liability arising by reason of any delay or omission by the 
      Borrower to pay such duties or Taxes.

8     PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS
      ---------------------------------------------

8.1   No set-off or counterclaim
      --------------------------
   
      All payments to be made by the Borrower under this Agreement shall be
      made in full, without any set-off or counterclaim whatsoever and, 
      subject as provided in clause 8.4, free and clear of any deductions or 
      withholdings, in Dollars (except for costs, charges or expenses which 
      shall be payable in the currency in which they are incurred) on the 


                                   15


<PAGE>


      due date to the account of the Bank at such bank as the Bank may from 
      time to time specify for this purpose.

8.2   Payments by the Bank
      --------------------
   
      All sums to be advanced by the Bank to the Borrower under this Agreement
      shall be remitted in Dollars on the relevant Drawdown Date and shall 
      be paid by the Bank to the account of the Borrower specified in the 
      relevant Drawdown Notice.

8.3   Non-Banking Days
      ----------------
   
      When any payment under this Agreement would otherwise be due on a day
      which is not a Banking Day, the due date for payment shall be postponed
      to the next following Banking Day unless such Banking Day falls in the 
      next calendar month in which case payment shall be made on the 
      immediately preceding Banking Day.

8.4   Grossing-up for Taxes
      ---------------------
    
      If at any time the Borrower is required to make any deduction or
      withholding in respect of Taxes from any payment due under this 
      Agreement for the account of the Bank, the sum due from the Borrower 
      in respect of such payment shall be increased to the extent necessary 
      to ensure that, after the making of such deduction or withholding, 
      the Bank receives on the due date for such payment (and retains, free 
      from any liability in respect of such deduction or withholding) a net 
      sum equal to the sum which it would have received had no such deduction
      or withholding been required to be made and the Borrower shall 
      indemnify the Bank against any losses or costs incurred by the Bank by 
      reason of any failure of the Borrower to make any such deduction or
      withholding or by reason of any increased payment not being made on 
      the due date for such payment.  The Borrower shall promptly deliver to 
      the Bank any receipts, certificates or other proof evidencing the 
      amounts (if any) paid or payable in respect of any such deduction or 
      withholding.

8.5   Bank accounts
      -------------
   
      The Bank shall maintain, in accordance with its usual practices, an
      account or accounts evidencing the amounts from time to time lent by, 
      owing to and paid to it under this Agreement.  Such accounts shall, 
      in the absence of manifest error, be conclusive as to the amount from 
      time to time owing by the Borrower under this Agreement.

8.6   Calculations
      ------------
   
      All interest and other payments of an annual nature under this Agreement
      shall accrue from day to day and be calculated on the basis of actual 
      days elapsed and a 360 day year.  In calculating the actual number of 
      days elapsed in a period which is one of a 


                                   16


<PAGE>


      series of consecutive periods with no interval between them or a period
      on the last day of which any payment falls to be made in respect of 
      such period, the first day of such period shall be included but the 
      last day excluded.

8.7   Certificates conclusive
      -----------------------
   
      Any certificate or determination of the Bank as to any rate of interest
      or any amount payable under this Agreement shall, in the absence of 
      manifest error, be conclusive and binding on the Borrower.

8.8   Clawback of Tax benefit
      -----------------------
   
      If following any increase in any sum payable under this Agreement as is
      referred to in clause 8.4, the Bank shall receive or be granted a credit
      against or remission for any Taxes payable by it, the Bank shall, 
      subject to the Borrower having made any increased payment in accordance 
      with clause 8.4 and to the extent that the Bank can do so in its sole 
      opinion without prejudicing the retention of the amount of such credit 
      or remission and without prejudice to the right of the Bank to obtain 
      any other relief or allowance which may be available to it and to 
      conduct its own tax affairs as it thinks fit, reimburse the Borrower 
      with such amount as the Bank shall in its absolute discretion certify 
      to be the proportion of such credit or remission as will leave the 
      Bank (after such reimbursement) in no better and no worse position 
      than it would have been in had there been no such deduction or 
      withholding from the payment by the Borrower.  Such reimbursement shall 
      be made promptly upon the Bank certifying (which it shall do if 
      reasonably requested by the Borrower) that the amount of such credit or 
      remission has been received by it.  Nothing contained in this Agreement
      shall oblige the Bank to rearrange its tax affairs or to disclose any 
      information regarding its tax affairs and computations.  Without 
      prejudice to the generality of the foregoing the Borrower, by virtue 
      of this clause 8.8, is not entitled to enquire about the Bank's tax 
      affairs.
      
8.9   Certification to secure a Tax benefit
      -------------------------------------
 
      If, in order to make any payment due under this Agreement to the Bank 
      without deduction or withholding for or on account of Tax or to secure 
      the benefit of any reduced rate of such deduction or withholding, the 
      Borrower requires a direction from or the consent of a government or 
      taxing authority:
      
      (a)    the Borrower agrees to use its reasonable endeavours to complete
             (accurately and in the manner reasonably acceptable to the Bank) 
             execute, arrange for any required certification of, and deliver 
             to the Bank or such government or taxing authority as the Bank 
             directs, any form or document reasonably required of it, and to 
             provide such information as the Bank or such government or 
             taxing authority may reasonably require or request in order to
             assist or enable the Bank to secure that such a direction or 
             consent is given


                                   17


<PAGE>


             to the Borrower in respect of any payment.  The Borrower shall 
             perform its obligations under this clause 8.9(a) promptly upon 
             the earlier of:

             (i)    being notified that the form document or information is 
                    required or requested; and

             (ii)   demand being made by the Bank or the relevant government 
                    or taxing authority, as the case may be;

      (b)    the Bank agrees to use its reasonable endeavours to complete, 
             execute and arrange for delivery to the Borrower, or such 
             government or taxing authority as the Borrower may reasonably 
             direct, any form or document that may be required or reasonably 
             requested in order to enable the Borrower to be given such 
             direction or consent.

9     REPRESENTATIONS AND WARRANTIES
      ------------------------------

9.1   The Borrower represents and warrants to the Bank that:
   
      (a)    Due incorporation:  the Borrower is a limited liability company 
             duly incorporated and validly existing under the laws of the 
             State of Delaware and has power to carry on its business as it 
             is now being conducted and to own its property and other assets;

      (b)    Corporate power to borrow:  the Borrower has power to execute, 
             deliver and perform its obligations under this Agreement and to 
             borrow the Commitment; all necessary corporate, shareholder and 
             other action has been taken to authorise the execution, delivery
             and performance of the same and no limitation on the powers of 
             the Borrower to borrow will be exceeded as a result of 
             borrowings under this Agreement;

      (c)    Binding obligations:  this Agreement constitutes valid and 
             legally binding obligations of the Borrower enforceable in 
             accordance with its terms and such obligations rank at least 
             pari passu with all other unsecured and unsubordinated 
             Indebtedness of the Borrower;

      (d)    No conflict with other obligations:  the execution and delivery 
             of, the borrowing of the Commitment and the performance of its 
             obligations under, and compliance with the provisions of, this 
             Agreement by the Borrower will not (i) materially contravene 
             any existing applicable law, statute, rule or regulation
             or any judgment, decree or permit to which the Borrower is 
             subject, (ii) materially conflict with, or result in any breach 
             of any of the terms of, or constitute a default under, any 
             agreement or other instrument to which the Borrower is a party 
             or is subject or by which it or any of its property is bound, 
             (iii) materially contravene or conflict with any provision 


                                   18


<PAGE>


             of the Borrower's Certificate of Formation, Articles of 
             Organisation or Limited Liability Company Operating Agreement or
             (iv) result in the creation or imposition of or oblige the 
             Borrower to create any Encumbrance on any of the Borrower's 
             undertakings, assets, rights or revenues;

      (e)    Consents obtained:  every consent, authorisation, licence or 
             approval of, or registration with or declaration to, 
             governmental or public bodies or authorities or courts required 
             by the Borrower to authorise, or required by the Borrower in 
             connection with, the execution, delivery, validity, 
             enforceability or admissibility in evidence of this Agreement 
             or the performance by the Borrower of its obligations under this 
             Agreement has been obtained or made and is in full force and 
             effect and there has been no default in the observance of the 
             conditions or restrictions (if any) imposed in, or in
             connection with, any of the same;

      (f)    No filings required:  it is not necessary to ensure the legality,
             validity, enforceability or admissibility in evidence of this 
             Agreement that it or any other instrument be notarised, filed, 
             recorded, registered or enrolled in any court, public office or 
             elsewhere in the States of Delaware or California or under 
             federal laws of the United States of America, or that any
             stamp, registration or similar tax or charge be paid in the 
             States of Delaware or California or under federal laws on or in 
             relation to this Agreement and this Agreement is in proper form 
             for its enforcement in the courts of the States of Delaware and 
             California and under federal law;

      (g)    No litigation:  no litigation, arbitration or administrative 
             proceeding is taking place, pending or, to the knowledge of the 
             officers of the Borrower, threatened against the Borrower which 
             could have a material adverse effect on the business, assets or 
             financial condition of the Borrower;

      (h)    No defaults:  the Borrower is not (nor would with the giving of 
             notice or lapse of time or the satisfaction of any other 
             condition or any combination thereof be) in breach of or in 
             default under any agreement relating to Indebtedness to which 
             it is a party or by which it may be bound where the amount, or 
             aggregate amount at any one time, of the Indebtedness in relation
             to which there is a breach or default is greater than $500,000 
             or its equivalent in the currency in which the same is 
             denominated and payable and no other Default has occurred and 
             is continuing;

      (i)    Choice of law:  the choice by the Borrower of English law to 
             govern this Agreement and the submission by the Borrower to the 
             non-exclusive jurisdiction of the High Court of Justice in 
             England are valid and binding;


                                   19

<PAGE>


      (j)    No immunity:  neither the Borrower nor any of its assets is 
             entitled to immunity on the grounds of sovereignty or otherwise 
             from any legal action or proceeding (which shall include, without 
             limitation, suit, attachment prior to judgment, execution or 
             other enforcement);

      (k)    No withholding Taxes:  no Taxes are imposed by withholding, 
             deduction or similar means on any payment to be made by the 
             Borrower under this Agreement or are imposed on or by virtue of 
             the execution or delivery by the Borrower of this Agreement or 
             any document or instrument to be executed or delivered under
             this Agreement;

      (l)    Compliance with consents and licences:  every consent, 
             authorisation, licence or approval required by the Borrower in 
             connection with the conduct of its business and the ownership, 
             use, exploitation or occupation of its property and assets has 
             been obtained and is in full force and effect and there has 
             been no material default in the observance of the conditions and
             restrictions (if any) imposed in, or in connection with, any of 
             the same and, to the knowledge of the officers of the Borrower, 
             no circumstances have arisen whereby any material remedial 
             action is likely to be required to be taken by, or at the 
             expense of, the Borrower under or pursuant to any law or 
             regulation applicable to the business, property or assets of 
             the Borrower; and

      (m)    Clean company:  prior to the date of this Agreement the Borrower 
             has not undertaken any trading or incurred any material 
             liabilities of any nature whatsoever (actual or contingent) other 
             than the Existing Liabilities and there are no Encumbrances over
             any of the Borrower's assets or undertakings.
            
9.2   Repetition
      ----------
   
      The representations and warranties in clause 9.1 (other than 9.1(m))
      shall be deemed to be repeated by the Borrower on and as of each 
      Drawdown Date and each Interest Payment Date as if made with reference 
      to the facts and circumstances existing on each such day.

10    UNDERTAKINGS
      ------------

      The Borrower undertakes with the Bank that, from the date of this
      Agreement and so long as any moneys are owing under this Agreement or 
      remain available for drawing by the Borrower, it will:

      (a)    Notice of Default: promptly upon becoming aware of the same 
             inform the Bank of any occurrence which materially adversely 
             affects its ability to perform its obligations under this 
             Agreement and of any Default and from time to time, if so 
             requested by the Bank, confirm to the Bank in writing 


                                   20


<PAGE>


             that, save as otherwise stated in such confirmation, no Default 
             has occurred and is continuing;


      (b)    Consents and licences: without prejudice to clauses 3 and 9.1, 
             obtain or cause to be obtained, maintain in full force and effect 
             and comply in all material respects with the conditions and 
             restrictions (if any) imposed in, or in connection with, every 
             consent, authorisation, licence or approval of governmental or 
             public bodies or authorities or courts and do, or cause to be
             done, all other acts and things which may from time to time be 
             necessary under applicable law except where the failure to 
             maintain or comply would not have a material adverse effect on 
             the Borrower's ability to comply with this Agreement;

      (c)    Use of proceeds: use the proceeds of drawings under this 
             Agreement exclusively for the purpose specified in clause 1.1;
                  
      (d)    Pari passu: ensure that its obligations under this Agreement 
             shall, without prejudice to the provisions of clause 10.2, at 
             all times rank at least pari passu with all its other present 
             and future unsecured and unsubordinated Indebtedness;

      (e)    Provision of information: provide the Bank with such confidential
             financial and other information concerning the Borrower and its 
             affairs as the Bank may from time to time reasonably require and 
             which the Bank undertakes to keep confidential;

      (f)    Insurance: insure and keep insured all its properties and assets
             with underwriters or insurance companies of repute to such extent 
             and against such risks as prudent companies engaged in businesses 
             similar to those of the Borrower and located in a similar 
             location to the Borrower normally insure;  

      (g)    Compliance with laws and regulations: comply in all material 
             respects with the terms and conditions of all laws, regulations, 
             agreements, licences and concessions material to the carrying on 
             of its business; and

      (h)    Notice of litigation: it will, upon becoming aware that the same 
             is threatened or pending and in any case promptly after the 
             commencement thereof, give to the Bank notice in writing of any 
             material litigation, alternative dispute resolution, arbitration 
             or administrative proceedings or any dispute affecting the 
             Borrower or any of its assets, rights or revenues which is
             reasonably likely to be determined against the Borrower and which,
             if so determined, is reasonably likely to have a material adverse 
             effect.


                                   21


<PAGE>


10.2  The Borrower undertakes with the Bank that, from the date of this
      Agreement and so long as any moneys are owing under this Agreement or 
      remain available for drawing by the Borrower:
            
      (a)    Negative pledge: it will not permit:
         
             (i)      any Encumbrance by the Borrower to subsist, arise or 
                      be created or extended over all or any part of its 
                      present or future undertaking, assets, rights or 
                      revenues to secure or prefer any present or future 
                      Indebtedness of the Borrower or any other person; or

             (ii)     any Indebtedness of the Borrower to be guaranteed by any 
                      person (other than the Guarantors) unless the benefit of 
                      such guarantee, or such other guarantee as the Bank 
                      considers equivalent thereto, is at the same time
                      extended equally and rateably to the obligations of the 
                      Borrower under this Agreement to the satisfaction of the 
                      Bank,

      (b)    Disposals: it will not sell, transfer, lend or otherwise dispose 
             of or cease to exercise direct control over any part (being either 
             alone or when aggregated with all other disposals falling to be 
             taken into account pursuant to this clause 10.2(b) material in 
             the opinion of the Bank in relation to the undertaking, assets, 
             rights and revenues of the Borrower) of its present or future 
             undertaking, assets, rights or revenues (otherwise than by 
             transfers, sales or disposals for full consideration in the 
             ordinary course of day-to-day trading) whether by one or a 
             series of transactions related or not; and

      (c)    Loans and guarantees: it will not make any loans, grant any credit
             (save for normal trade credit in the ordinary course of day-to-
             day trading) or give any guarantee to or for the benefit of any 
             person;

      provided that notwithstanding the prohibitions in clause 10.2(a) and (b)
      the Borrower may enter into and permit to subsist the Permitted Leases 
      and the Security Agreements to secure or prefer the obligations 
      specified in them.

11    EVENTS OF DEFAULT
      -----------------

11.1  Each of the events and circumstances set out below is an Event of 
      Default (whether or not caused by any reason outside the control of 
      the Borrower or either Guarantor):

      (a)    Non-payment:  the Borrower fails to pay any sum due from it under 
             this Agreement in the currency, at the time (or within five 
             Banking Days thereafter where the failure to pay is due solely 
             to an administrative or systems error arising in the 
             transmission of funds) and in the manner stipulated in this
             Agreement; or


                                   22


<PAGE>


      (b)    Breach of certain obligations:  the Borrower commits any breach 
             of or omits to observe any of the obligations or undertakings 
             expressed to be assumed by it under clause 10.2 or the UK 
             Guarantor commits any breach of or omits to observe or perform 
             any of the obligations or undertakings expressed to be assumed 
             by it under clause 5.2 of the UK Guarantee;  or

      (c)    Breach of other obligations:  the Borrower or the UK Guarantor 
             commits any breach of or omits to observe any of the obligations 
             or undertakings expressed to be assumed by it under this 
             Agreement or, as the case may be, the UK Guarantee other than 
             (in the case of the Borrower) failure to pay any sum when due or
             any breach of the provisions referred to in clause 11.1(b) and, 
             in respect of any such breach or omission which in the opinion 
             of the Bank is capable of remedy, such action as the Bank may 
             require shall not have been taken within 14 days of the Bank 
             notifying the Borrower, the UK Guarantor and the US Guarantor of
             such default and of such required action; or

      (d)    Misrepresentation:  any representation or warranty made or 
             deemed to be made or repeated by or in respect of the Borrower 
             in or pursuant to this Agreement or by the UK Guarantor in or 
             pursuant to the UK Guarantee or in any notice, certificate or 
             statement referred to in or delivered under this Agreement or 
             the UK Guarantee is or proves to have been incorrect or
             misleading in any material respect; or


      (e)    Cross-default:  any Borrowed Money of the Borrower or of the UK 
             Guarantor or any of its Material Subsidiaries:
                      
             (i)      is not paid when due; or


             (ii)     becomes (whether by declaration or automatically in 
                      accordance with the relevant agreement or instrument 
                      constituting the same) due and payable prior to the 
                      date when it would otherwise have become due; or

             (iii)    any creditor of the Borrower, the UK Guarantor or any 
                      of its Material Subsidiaries becomes entitled to 
                      declare any Borrowed Money of the Borrower or the UK 
                      Guarantor or any of its Material Subsidiaries so due and 
                      payable or to require cash collateralisation or 
                      security for any such Borrowed Money or any facility or
                      commitment available to the Borrower, or the UK 
                      Guarantor or any of its Material Subsidiaries relating 
                      to Borrowed Money is withdrawn, suspended or cancelled,
                      in the case of sub-paragraphs (ii) and (iii), by
                      reason of any default (however described) of the company 
                      concerned;

             and provided such default has not been cured or remedied within 
             14 days of its occurrence (or, if the terms of the relevant 
             agreement or instrument 


                                   23


<PAGE>


             require notification to the Borrower, UK Guarantor or Material 
             Subsidiary (as the case may be), then within 14 days from such 
             notification) and the amount, or aggregate amount at any one 
             time, of all Borrowed Money of the UK Guarantor or any of its 
             Material Subsidiaries in relation to which any of the foregoing
             events shall have occurred and be continuing is equal to or 
             greater than 10,000,000 or its equivalent in the currency in 
             which the same is denominated and payable; or

      (f)    Legal process:  any judgment or order made against the Borrower, 
             the UK Guarantor or any of its Material Subsidiaries is not 
             stayed or complied with within seven days or a creditor so 
             entitled attaches or takes possession of, or a distress, 
             execution, sequestration or other process is levied or enforced
             upon or sued out against, any material part of the undertakings, 
             assets, rights or revenues of the Borrower, the UK Guarantor or 
             any of its Material Subsidiaries and is not discharged within 
             14 days; or


      (g)    Insolvency:  the Borrower, the UK Guarantor or any of its 
             Material Subsidiaries is deemed unable to pay its debts within 
             the meaning of section 123 of the Insolvency Act 1986 or 
             otherwise becomes insolvent or stops or suspends making payments
             (whether of principal or interest) with respect to all or any 
             class of its debts or announces an intention to do so, provided
             however that an internal restructuring, rearrangement or 
             reconstruction of the Group that may otherwise breach this clause 
             may be permitted by the Bank giving its prior written approval; 
             or
             
      (h)    Other insolvency events:

             (i)      any petition is presented or other step is taken for 
                      the purpose of winding up the Borrower, the UK Guarantor 
                      or any of its Material Subsidiaries, save for such 
                      petition or step which the UK Guarantor demonstrates to 
                      the satisfaction of the Bank to be frivolous, vexatious
                      or an abuse of the process of the court (or which is 
                      dealt with or discharged or otherwise withdrawn within 
                      30 days) or an order is made or resolution passed for 
                      the winding up of the Borrower, the UK Guarantor or any
                      of its Material Subsidiaries or a notice is issued 
                      convening a meeting for the purpose of passing any such
                      resolution,

             (ii)     any petition is presented or other step is taken for the 
                      purpose of the appointment of an administrator of the 
                      Borrower, the UK Guarantor or any of its Material 
                      Subsidiaries, save for such petition or step which is 
                      taken by a creditor of the Borrower, the UK Guarantor 
                      or any of its Material Subsidiaries and which the UK 
                      Guarantor demonstrates to the satisfaction of the Bank 
                      to be frivolous, vexatious or an abuse of the process 
                      of the court (or which is dealt 


                                   24


<PAGE>


                      with or discharged or otherwise withdrawn within 30 
                      days), or the Bank believes that any such petition or 
                      other step is imminent or an administration order is 
                      made in relation to the Borrower, the UK Guarantor or 
                      any of its Material Subsidiaries, or

             (iii)    any administrative or other receiver is appointed of the 
                      Borrower, the UK Guarantor or any of its Material 
                      Subsidiaries or any part of their respective assets
                      and/or undertakings or any other steps are taken to 
                      enforce any Encumbrance over all or any part of the 
                      assets of the Borrower, the UK Guarantor or any of its 
                      Material Subsidiaries and such appointment or step is
                      not dealt with or discharged or otherwise withdrawn 
                      within 30 days; or

      (i)    Compositions:  any steps are taken, or negotiations commenced, 
             by the Borrower, the UK Guarantor or any of its Material 
             Subsidiaries or by any of their respective creditors with a 
             view to proposing any kind of composition, compromise, 
             arrangement, reconstruction or re-adjustment involving such
             company and any of its creditors, such step or negotiation 
             arising from such company's inability or likely future inability 
             to pay its debts as they fall due, provided however that an 
             internal restructuring, rearrangement or reconstruction of the 
             Group that may otherwise breach this clause may be permitted by 
             the Bank giving its prior written approval; or

      (j)    Analogous proceedings:  there occurs, in relation to the 
             Borrower, the UK Guarantor or any of its Material Subsidiaries, 
             in any country or territory in which any of them carries on 
             business (including, without limitation, the United States of 
             America) or to the jurisdiction of whose courts any part of
             their respective assets is subject, any event which, in the 
             reasonable opinion of the Bank, appears in that country or 
             territory to correspond with, or have an effect equivalent or 
             similar to, any of those mentioned in clauses 11.1(f) to 11.1(i)
             inclusive (other than proceedings that can be demonstrated to 
             the reasonable satisfaction of the Bank to be frivolous, 
             vexatious or an abuse of court processes or which is dealt with 
             or discharged or otherwise withdrawn within 30 days) or the 
             Borrower, the UK Guarantor or any of its Material Subsidiaries 
             otherwise becomes subject, in any such country or territory, to
             the operation of any law relating to insolvency, bankruptcy or 
             liquidation; or


      (k)    Change of Control:  control (as defined in section 435 of the 
             Insolvency Act 1986) of the UK Guarantor is acquired without the 
             prior written consent of the Bank by any person and/or his 
             associates (as defined in that section) not having control of 
             the UK Guarantor at the date of this Agreement (but so that
             the occurrence of such an event shall only be an Event of 
             Default on and from the date falling 10 Banking Days from the 
             occurrence of such event); or


                                   25


<PAGE>


      (l)    Unlawfulness:  it becomes unlawful at any time for the Borrower 
             or the UK Guarantor to perform all or any of its obligations 
             under this Agreement or the UK Guarantee or any obligation of 
             the Borrower under this Agreement or of the UK Guarantor under 
             the UK Guarantee becomes invalid, ineffective or unenforceable 
             for any reason or the Borrower or the UK Guarantor becomes
             unable, for any reason, to perform the same; or


      (m)    Repudiation:  the Borrower or the UK Guarantor repudiates this 
             Agreement or the UK Guarantee or does or causes or permits to 
             be done any act or thing evidencing an intention to repudiate 
             this Agreement or the UK Guarantee; or

      (n)    Ownership of Borrower:  the membership interests of the Borrower 
             ceases to be wholly-owned by the Guarantors; or

      (o)    Environmental matters: the Bank becomes subject to any actual or
             potential liability in relation to any Relevant Substance on or 
             from any property owned, occupied or leased by the Borrower, the 
             UK Guarantor or any of its Subsidiaries or, in consequence of 
             the application of any Environmental Law, the claims of the Bank 
             are subordinated to the claims of any governmental authority or
             agency.
            
11.2  Acceleration
      ------------
    
      The Bank may at any time after the happening of an Event of Default and
      so long as the same is continuing by notice to the Borrower declare 
      that:

      (a)    the obligation of the Bank to make its Commitment available 
             shall be terminated, whereupon the Commitment shall be reduced 
             to zero forthwith; and/or

      (b)    the Loan and all interest and commitment commission accrued and 
             all other sums payable under this Agreement have become 
             immediately due and payable or have become due and payable on 
             demand, whereupon the same shall, immediately or in accordance 
             with the terms of such notice, become so due and payable.

      On, and on each day after, the making of any such declaration, the Bank
      shall be entitled, to the exclusion of the Borrower, to select the 
      duration of Interest Periods having regard to its expectations for the 
      period during which such Event of Default will continue and to the 
      amount of additional costs that may be incurred should the Borrower 
      prepay the Loan during the Interest Period selected; but, for the 
      avoidance of doubt, without limiting in any way the Borrower's 
      obligations under clause 12.1.


                                   26


<PAGE>


11.3  Demand basis
      ------------
     
      If, pursuant to clause 11.2(b), the Bank declares the Loan to be due 
      and payable on demand then the Bank may at any time by written notice 
      to the Borrower (a) call for repayment of the Loan on such date as may 
      be specified in such notice whereupon the Loan shall become due and 
      payable on the date so specified together with all interest and 
      commitment commission accrued and all other sums payable under this 
      Agreement or (b) withdraw such declaration with effect from the date 
      specified in such notice.

12    INDEMNITIES
      -----------
                 
12.1  Miscellaneous indemnities
      -------------------------
    
      The Borrower shall on demand indemnify the Bank, without prejudice to 
      any of its other rights under this Agreement, against any loss (including
      loss of Margin) or expense reasonably incurred which the Bank shall 
      certify as sustained or incurred by it as a consequence of:

      (a)    any default in payment by the Borrower of any sum under this 
             Agreement when due;

      (b)    the occurrence of any other Event of Default;

      (c)    any prepayment of all or part of the Loan being made under 
             clause 13.1 otherwise than on an Interest Payment Date relating 
             to the part of the Loan prepaid; or

      (d)    any Advance not being made for any reason (excluding any 
             default by the Bank) after a Drawdown Notice has been given;

      including, in any such case, but not limited to, any loss or expense
      sustained or incurred by the Bank in maintaining or funding all or any 
      part of its Contribution or in liquidating or re-employing deposits 
      from third parties acquired or contracted for to fund all or any part 
      of its Contribution or any other amount owing to the Bank.

12.2  Currency of account; currency indemnity
      ---------------------------------------
    
      No payment by the Borrower under this Agreement which is made in a
      currency other than the currency ("CONTRACTUAL CURRENCY") in which such
      payment is required to be made pursuant to this Agreement shall discharge
      the obligation in respect of which it is made except to the extent of 
      the net proceeds in the Contractual Currency received by the Bank upon 
      the sale of the currency so received, after taking into account any 
      premium and costs of exchange in connection with such sale.  For the 
      avoidance of doubt the Bank shall not be obliged to accept any such 
      payment in a currency other than the Contractual Currency nor shall 
      the Bank be liable to the Borrower for any 


                                   27


<PAGE>


      loss or alleged loss arising from fluctuations in exchange rates between 
      the date on which such payment is so received by the Bank and the date 
      on which the Bank effects such sale, as to which the Bank shall have an 
      absolute discretion.  If any sum due from the Borrower under this 
      Agreement or any order or judgment given or made in relation hereto is 
      required to be converted from the Contractual Currency or the currency 
      in which the same is payable under such order or judgment (the "FIRST 
      CURRENCY") into another currency (the "SECOND CURRENCY") for the 
      purpose of (a) making or filing a claim or proof against the Borrower, 
      (b) obtaining an order or judgment in any court or other tribunal or 
      (c) enforcing any order or judgment given or made in relation to this 
      Agreement, the Borrower shall indemnify and hold harmless the Bank from
      and against any loss suffered as a result of any difference between 
      (i) the rate of exchange used for such purpose to convert the sum in 
      question from the first currency into the second currency and (ii) the 
      rate or rates of exchange at which the Bank may in the ordinary course 
      of business purchase the first currency with the second currency upon 
      receipt of a sum paid to it in satisfaction, in whole or in part, of 
      any such order, judgment, claim or proof.  Any amount due from the 
      Borrower under the indemnity contained in this clause shall be due as 
      a separate debt and shall not be affected by judgment being obtained 
      for any other sums due under or in respect of this Agreement and the 
      term "RATE OF EXCHANGE" includes any premium and costs of exchange
      payable in connection with the purchase of the first currency with 
      the second currency.

13    UNLAWFULNESS AND INCREASED COSTS; MITIGATION
      --------------------------------------------

13.1  Unlawfulness
      ------------
    
      If it is or becomes contrary to any law or regulation for the Bank to
      contribute to Advances or the Loan or to maintain its Commitment or 
      fund its Contribution, the Bank shall promptly notify the Borrower 
      whereupon (a) the Bank's Commitment shall be reduced to zero and (b) 
      the Borrower shall be obliged to prepay the Contribution of the Bank 
      either (i) forthwith or (ii) on a future specified date not being 
      earlier than the latest date permitted by the relevant law or 
      regulation.  Any prepayment pursuant to this clause 13.1 shall be 
      made together with all amounts referred to in clause 6.3.

13.2  Increased costs
      ---------------
     
      If the result of any change in, or in the interpretation or application
      of, or the introduction of, any law or any regulation, request or 
      requirement (whether or not having the force of law, but, if not having 
      the force of law, with which the Bank or, as the case may be, its 
      holding company habitually complies), including (without limitation) 
      those relating to Taxation, capital adequacy, liquidity, reserve 
      assets, cash ratio deposits and special deposits, is to:

      (a)    subject the Bank to Taxes or change the basis of Taxation of the 
             Bank with respect to any payment under this Agreement (other than
             Taxes or Taxation


                                   28


<PAGE>


             on the overall net income, profits or gains of the Bank imposed 
             in the jurisdiction in which its principal or lending office 
             under this Agreement is located); and/or

      (b)    increase the cost to, or impose an additional cost on, the Bank 
             or its holding company in making or keeping available all or 
             part of the Bank's Commitment or maintaining or funding all or 
             part of the Bank's Contribution; and/or

      (c)    reduce the amount payable or the effective return to the Bank 
             under this Agreement; and/or

      (d)    reduce the Bank's or its holding company's rate of return on 
             its overall capital by reason of a change in the manner in which 
             it is required to allocate capital resources to the Bank's 
             obligations under this Agreement; and/or

      (e)    require the Bank or its holding company to make a payment or 
             forgo a return calculated by reference to or on any amount 
             received or receivable by the Bank under this Agreement; and/or

      (f)    require the Bank or its holding company to incur or sustain a 
             loss (including a loss of future potential profits) by reason 
             of being obliged to deduct all or part of the Bank's Commitment 
             or Contribution from its capital for regulatory purposes,

      then and in each such case (but subject to clause 13.3):

      (i)    the Bank shall notify the Borrower in writing of such event 
             promptly upon its becoming aware of the same; and

      (ii)   the Borrower shall on demand, made at any time whether or not 
             the Bank's Contribution has been repaid, pay to the Bank the 
             amount which the Bank specifies (in a certificate setting forth 
             the basis of the computation of such amount but not including 
             any matters which the Bank or its holding company reasonably 
             regards as confidential) is required to compensate the Bank 
             and/or its holding company for such liability to Taxes, increased 
             or additional cost, reduction, payment, forgone return or loss 
             (and the Bank agrees that such amount will be calculated in a 
             reasonable fashion).

      For the purposes of this clause 13.2 and clause 13.4 "HOLDING COMPANY"
      means, in relation to the Bank, the company or entity (if any) within 
      the consolidated supervision of which the Bank is included.


                                   29


<PAGE>


13.3  Exceptions
      ----------
     
      Nothing in clause 13.2 shall entitle the Bank to receive any amount in
      respect of compensation for any such liability to Taxes, increased or
      additional cost, reduction, payment, forgone return or loss to the 
      extent that the same:

      (a)    is the subject of an additional payment under clause 8.4;

      (b)    arises as a consequence of (or of any law or regulation 
             implementing) (i) the proposals for international convergence 
             of capital measurement and capital standards published by the 
             Basle Committee on Banking Regulations and Supervisory Practices 
             in July 1988 and/or (ii) any applicable directive of the 
             European Union (in each case) unless it results from any change 
             in, or in the interpretation or application of, such proposals 
             or any such applicable directive (or any law or regulation 
             implementing the same) occurring after the date hereof; or

      (c)    arises from a change in the basis of Taxation on the overall net 
             income, profits or gains of the Bank imposed in the jurisdiction 
             in which its principal or lending office under this Agreement is 
             located.

      For the purposes of clause 13.3(b) the term "APPLICABLE DIRECTIVE" means
      (exclusively) each of the Own Funds Directive (89/299/EEC of 17th 
      April 1989) and the Solvency Ratio Directive (89/647/EEC of 18th 
      December 1989).

13.4  Mitigation
      ----------
    
      If circumstances arise which would, or would upon the giving of notice,
      result in:

      (a)    the Borrower being required to make an increased payment to the 
             Bank pursuant to clause 8.4;

      (b)    the reduction of the Bank's Commitment to zero or the Borrower 
             being required to prepay the Bank's Contribution pursuant to 
             clause 13.1; or

      (c)    the Borrower being required to make a payment to the Bank to 
             compensate the Bank or its holding company for a liability to 
             Taxes, increased or additional cost, reduction, payment, forgone
             return or loss pursuant to clause 13.2(ii);

      then, without in any way limiting, reducing or otherwise qualifying the
      obligations of the Borrower under clause 8 and this clause 13, the 
      Bank shall endeavour to take such reasonable steps (and/or, in the case 
      of clause 13.2(ii) and where the increased or additional cost, reduction,
      payment, forgone return or loss is that of its holding company, endeavour
      to procure that its holding company takes such reasonable steps) as are 
      open to it (or, as the case may be, its holding company) to mitigate 
      or remove 


                                   30


<PAGE>


      such circumstances including the transfer of its rights and obligations 
      under this Agreement to another bank or financial institution unless 
      the taking of such steps might (in the opinion of the Bank) be unduly 
      prejudicial to the Bank (or, as the case may be, its holding company) 
      or be in conflict with the Bank's (or, as the case may be, its holding 
      company's) general banking policies or involve the Bank (or, as the 
      case may be, its holding company) in unreasonable expense or an 
      unreasonable increased administrative burden.

14    SETOFF
      ------
            
14.1  Set-off
      -------
    
      The Borrower authorises the Bank to apply any credit balance to which 
      the Borrower is then entitled on any account of the Borrower with the 
      Bank at any of its branches in or towards satisfaction of any sum then
      due and payable from the Borrower to the Bank under this Agreement.  For 
      this purpose the Bank is authorised to purchase with the moneys 
      standing to the credit of such account such other currencies as may be 
      necessary to effect such application.  The Bank shall not be obliged to
      exercise any right given to it by this clause 14.1.  The Bank shall 
      notify the Borrower (giving full details) forthwith upon the exercise 
      or purported exercise of any right of set-off.

15    ASSIGNMENT, TRANSFER AND LENDING OFFICES
      ----------------------------------------

15.1  Benefit and burden
      ------------------
    
      This Agreement shall be binding upon, and enure for the benefit of, the
      Bank and the Borrower and their respective successors.

15.2  No assignment by Borrower
      -------------------------
    
      The Borrower may not assign or otherwise transfer any of its rights or
      obligations under this Agreement without the prior written consent of 
      the Bank, such consent not to be unreasonably withheld or delayed, 
      save that it shall be reasonable for the Bank to withhold such consent 
      if the Borrower proposes to assign or otherwise transfer any of its 
      rights or obligations under this Agreement to:

      (a)    any person other than a wholly-owned Subsidiary of the UK 
             Guarantor; or
 
      (b)    any person incorporated in a jurisdiction other than the United 
             States of America or the United Kingdom,

      or if the Bank is of the opinion that, upon such assignment, either of
      the Guarantees will cease to continue in full force and effect.


                                   31


<PAGE>


15.3  Transfer
      --------
    
      The Bank may not assign or transfer all or any part of its rights,
      benefits and/or obligations under this Agreement without the prior 
      written consent of the UK Guarantor, such consent not to be 
      unreasonably withheld or delayed.

15.4  Disclosure of information
      -------------------------
    
      The Bank may disclose to a prospective transferee (with the consent of
      the UK Guarantor, such consent not to be unreasonably withheld or 
      delayed) such information about the Borrower as the Bank shall 
      consider appropriate in relation to this Agreement to the extent 
      necessary and for the sole purpose of effecting a transfer of an 
      interest in the Loan.

16    NOTICES AND OTHER MATTERS
      -------------------------
                               
16.1  Notices
      -------
    
      Every notice, request, demand or other communication under this 
      Agreement shall:

      (a)    be in writing delivered personally or by first-class prepaid 
             letter (airmail if available) or telefax;

      (b)    be deemed to have been received, subject as otherwise provided 
             in this Agreement, in the case of a letter when delivered and, 
             in the case of a telefax, when a complete and legible copy is 
             received by the addressee (unless the date of despatch is not 
             a business day in the country of the addressee or the time of 
             despatch of any telefax is after the close of business in the
             country of the addressee in which case it shall be deemed to 
             have been received at the opening of business on the next such 
             business day); and
             
      (c)    be sent:
         
             (i)      to the Borrower at:
                
                      10933 North Torrey Pines Road
                      La Jolla  California  92037
                      United States of America
                      Attention:     Jim Dick     or     Alan Suggett
                      Telefax:       (01482) 673127      (01904) 451031
                      and
                      Attention:     Mike Swanson   or   Gail Naughton
                      Telefax:       (619) 450 5732


                                   32


<PAGE>


             (ii)     to the Bank at:
                 
                      125 London Wall
                      London EC2Y 5AJ
                      United Kingdom
                      Telefax:     0171 777 4783
                      Attention:   Kathryn Jepson

             (iii)    to the UK Guarantor at:
                  
                      2 Temple Place
                      Victoria Embankment
                      London WC2R 3BP
                      United Kingdom
                      Telefax:     0171 240 7088
                      Attention:   Company Secretary

             (iv)     to the US Guarantor at:
                 
                      10933 North Torrey Pines Road
                      La Jolla  California  92037
                      United States of America
                      Telefax:     (619) 450 5732
                      Attention:    Michael V Swanson

      or to such other address or telefax number as is notified by the 
      relevant party to the other party to this Agreement.

16.2  No implied waivers, remedies cumulative
      ---------------------------------------
    
      No failure or delay on the part of the Bank or the Borrower to exercise
      any power, right or remedy under this Agreement shall operate as a 
      waiver thereof, nor shall any single or partial exercise by the Bank 
      or the Borrower of any power, right or remedy preclude any other or 
      further exercise thereof or the exercise of any other power, right or 
      remedy.  The remedies provided in this Agreement are cumulative and are 
      not exclusive of any remedies provided by law.

16.3  Counterparts
      ------------
    
      This Agreement may be executed in any number of counterparts and by the
      different parties on separate counterparts, each of which when so 
      executed and delivered shall be an original, but all counterparts shall
      together constitute one and the same instrument.


                                   33


<PAGE>


17    GOVERNING LAW AND JURISDICTION
      ------------------------------
                                    
17.1  Law
      ---
    
      This Agreement shall be governed by English law.

17.2  Submission to jurisdiction
      --------------------------
    
      The Borrower agrees for the benefit of the Bank that:

      (a)    if either party has any claim against any other arising out of 
             or in connection with this Agreement such claim shall (subject 
             to clause 17.2(c) be referred to the High Court of Justice in 
             England, to the jurisdiction of which both of the parties 
             irrevocably submits;

      (b)    the jurisdiction of the High Court of Justice in England over 
             any such claim against the Bank shall be an exclusive 
             jurisdiction and no courts outside England shall have 
             jurisdiction to hear or determine any such claim; and

      (c)    nothing in this clause shall limit the right of the Bank to 
             refer any such claim against the Borrower to any other court of 
             competent jurisdiction outside England, to the jurisdiction of 
             which the Borrower hereby irrevocably agrees to submit, nor 
             shall the taking of proceedings by the Bank before the courts 
             in one or more jurisdictions preclude the taking of proceedings 
             in any other jurisdiction whether concurrently or not.
                   
17.3  Agent for service of process
      ----------------------------
    
      The Borrower irrevocably designates, appoints and empowers the UK
      Guarantor at present of 2 Temple Place, Victoria Embankment, London 
      WC2R 3BP to receive for it and on its behalf service of process issued 
      out of the High Court of Justice in England in relation to any claim 
      arising out of or in connection with this Agreement.


                                   34



<PAGE>



IN WITNESS whereof the parties to this Agreement have caused this Agreement to
be duly executed on the date first above written.


THE BORROWER
------------

SIGNED for and on behalf           )
of DERMEQUIP, L.L.C.               )        JAMES L DICK
                                            Manager



THE BANK
--------

SIGNED for and on behalf           )
of THE CHASE MANHATTAN BANK        )        KATHRYN JEPSON
                                            Vice President





                                   35