Document:

<PAGE>   1
                                                                   Exhibit 10.18

                       AMENDED AND RESTATED LOAN AGREEMENT

                                      among

                       APPLIED ANALYTICAL INDUSTRIES, INC.
                                as U.S. Borrower

           AAI APPLIED ANALYTICAL INDUSTRIES DEUTSCHLAND GmbH & CO. KG
                               as German Borrower

                    CERTAIN SUBSIDIARIES OF THE U.S. BORROWER
                                  as Guarantors

                                       and

                              BANK OF AMERICA, N.A.
                                     as Bank

                          Dated as of November 30, 1999

<PAGE>   2

                                TABLE OF CONTENTS

                                                                            PAGE

ARTICLE I    DEFINITIONS......................................................1

   1.01     DEFINED TERMS.....................................................1
   1.02     ACCOUNTING TERMS..................................................7

ARTICLE II  LOANS.............................................................7

   2.01     REVOLVING LOANS...................................................7
   2.02     REVOLVING NOTE....................................................7
   2.03     INTEREST ON REVOLVING LOANS.......................................7
   2.04     COMMITMENT FEE....................................................7
   2.05     DEUTSCHE MARK LOAN................................................8

ARTICLE III    ADDITIONAL PROVISIONS REGARDING REVOLVING LOANS................9

   3.01     DEFAULT RATE......................................................9
   3.02     PREPAYMENTS.......................................................9
   3.03     CAPITAL ADEQUACY.................................................10
   3.04     INCREASED COSTS..................................................10
   3.05     TAXES, ETC.......................................................11
   3.06     PAYMENTS AND COMPUTATIONS........................................11

ARTICLE IV  CONDITIONS OF LENDING............................................12

   4.01     CONDITIONS TO CLOSING DATE.......................................12
   4.02     CONDITIONS TO EACH LOAN..........................................13
   4.03     ADDITIONAL CONDITIONS TO THE DEUTSCHE MARK LOAN..................14

ARTICLE V  REPRESENTATIONS AND WARRANTIES....................................14

   5.01     CORPORATE EXISTENCE AND POWER....................................14
   5.02     AUTHORIZATION OF LOAN AGREEMENT..................................14
   5.03     NO VIOLATION OF CORPORATE RESTRICTIONS...........................14
   5.04     GOVERNMENTAL CONSENTS............................................15
   5.05     LITIGATION.......................................................15
   5.06     OTHER AGREEMENTS.................................................15
   5.07     TAXES............................................................15
   5.08     LIENS............................................................15
   5.09     ERISA............................................................16
   5.10     SUBSIDIARIES.....................................................16
   5.11     REGULATION U.....................................................16
   5.12     PATENTS AND TRADEMARKS...........................................16
   5.13     FINANCIAL INFORMATION PROVIDED...................................16
   5.14     ENVIRONMENTAL COMPLIANCE.........................................16
   5.15     YEAR 2000 COMPLIANCE.............................................17

ARTICLE VI  AFFIRMATIVE COVENANTS............................................17

   6.01  AFFIRMATIVE COVENANTS...............................................17

ARTICLE VII  NEGATIVE COVENANTS..............................................22

   7.01     NEGATIVE COVENANTS...............................................22

ARTICLE VIII  EVENTS OF DEFAULT AND ACCELERATION.............................24

   8.01     EVENTS OF DEFAULT................................................24
   8.02     REMEDIES.........................................................25

ARTICLE IX  MISCELLANEOUS....................................................26

   9.01     NOTICES..........................................................26

                                       i
<PAGE>   3

   9.02     WAIVER...........................................................26
   9.03     SURVIVAL.........................................................27
   9.04     SUCCESSORS AND ASSIGNS...........................................27
   9.05     COSTS............................................................27
   9.06     AMENDMENT; WAIVER; CONSENTS......................................27
   9.07     YEAR.............................................................27
   9.08     PAYMENT ON BUSINESS DAY..........................................27
   9.09     COUNTERPARTS.....................................................28
   9.10     ASSIGNMENT.......................................................28
   9.11     TERM.............................................................28
   9.12     CAPTIONS.........................................................28
   9.13     GOVERNING LAW....................................................28
   9.14     ARBITRATION......................................................28
   9.15     LOAN DOCUMENTS...................................................29
   9.16     BINDING EFFECT; REPLACEMENT OF EXISTING LOAN AGREEMENT;
            TERMINATION......................................................30

ARTICLE X  GUARANTY..........................................................30

   10.01    GUARANTY.........................................................30
   10.02    OBLIGATIONS UNCONDITIONAL........................................31
   10.03    REINSTATEMENT....................................................32
   10.04    CERTAIN ADDITIONAL WAIVERS.......................................32
   10.05    REMEDIES.........................................................32
   10.06    CONTINUING GUARANTEE.............................................33
   10.07    RIGHTS OF CONTRIBUTION...........................................33

                                       ii

<PAGE>   4

                                    Exhibits

Exhibit 2.02           Form of Revolving Note
Exhibit 2.05           Form of Deutsche Mark Note
Exhibit 5.05           Litigation
Exhibit 5.08           Liens
Exhibit 5.10           Subsidiaries
Exhibit 5.14           Environmental Compliance
Exhibit 6.01(b)(3)     Form of Borrowing Base Certificate
Exhibit 6.01(c)        Form of Officer's Certificate
Exhibit 7.01(a)(i)     Indebtedness

                                      iii
<PAGE>   5

                       AMENDED AND RESTATED LOAN AGREEMENT

         THIS AMENDED AND RESTATED LOAN AGREEMENT, dated as of November 30, 1999
(the "Loan Agreement"), is by and between

         APPLIED ANALYTICAL INDUSTRIES, INC., a corporation organized and
existing under the laws of the State of Delaware and having its principal place
of business in Wilmington, North Carolina (the "U.S. Borrower");

         AAI APPLIED ANALYTICAL INDUSTRIES DEUTSCHLAND GmbH & CO. KG, a
corporation organized and existing under the laws of Germany and having its
principal place of business in Neu-Ulm, Germany (the "German Borrower");

         Certain Subsidiaries of the U.S. Borrower from time to time party
hereto (the "Guarantors"); and

         BANK OF AMERICA, N.A., a national banking association formerly known as
NationsBank, N.A. organized and existing under the laws of the United States and
having offices in Wilmington, North Carolina (the "Bank").

RECITALS

         A. The U.S. Borrower and the Bank are parties to that certain Loan
Agreement dated as of December 30, 1996 (as amended by a First Amendment to Loan
Agreement dated as of February 13, 1998, a Second Amendment to Loan Agreement
dated as of May 19, 1998 and an Amendment and Forbearance Agreement dated as of
August 27, 1999, the "Existing Loan Agreement").

         B. The parties hereto desire that the Existing Loan Agreement be
further amended and restated as set forth herein.

         C. The Bank has agreed to amend and restate the Existing Loan Agreement
on the terms and conditions hereinafter set forth.

         NOW, THEREFORE, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         1.01     DEFINED TERMS.

                  For the purposes hereof:

<PAGE>   6

                  "Adjusted LIBOR Rate" means the rate as determined by the Bank
         at which U.S. dollar deposits in the requested amount and for one month
         interest periods are offered to prime banks in the London Interbank
         Market, as published weekly by the Federal Reserve Bank of New York in
         its H-15 Statistical Release, such rate being adjusted for the cost of
         reserve requirements as prescribed by the Federal Reserve System. The
         Adjusted LIBOR Rate for any Saturday or Sunday or any other day on
         which the London interbank market is not open shall be the Adjusted
         LIBOR Rate for the immediately preceding day on which the London
         interbank market is open;

                  "Bank" means Bank of America, N.A. or any successor thereto;

                  "Borrowers" means, collectively, the U.S. Borrower and the
         German Borrower and "Borrower" means any one of them;

                  "Borrowing Base" means, as of any day, the sum of (a) 80% of
         Eligible Receivables plus (b) the lesser of (i) 75% of Fixed Asset
         Value and (ii) $32,754,000 minus (c) all indebtedness for borrowed
         money, howsoever evidenced, or its equivalent (including but not
         limited to leases required to be capitalized under Generally Accepted
         Accounting Principles and letters of credit), other than Revolving
         Loans outstanding hereunder, incurred by, or issued for the benefit of,
         the Credit Parties; provided that (A) in the case of clauses (a) and
         (b)(i) above, such amounts shall be as set forth in the most recent
         Borrowing Base Certificate delivered to the Bank in accordance with the
         terms of Section 6.01(b)(3) and (B) the advance rates set forth above
         shall be subject to appraisals conducted from time to time by the Bank
         and may be increased or decreased by the Bank at any time and from time
         to time in the exercise of its reasonable credit judgment (it being
         understood that the U.S. Borrower hereby consents to any such increases
         or decreases and acknowledges that decreasing the advance rates or
         increasing the reserves may limit or restrict the availability of
         Revolving Loans requested by the U.S.
         Borrower);

                  "Borrowing Base Certificate" shall have the meaning assigned
         to such term in Section 6.01(b)(3);

                  "Business Day" means any day not a Saturday, Sunday or legal
         holiday on which the Bank is open for business in Wilmington, North
         Carolina; provided, however, that with respect to the Deutsche Mark
         Loan such day shall also be a day on which dealings between banks are
         carried on in U.S. dollar deposits and in Deutsche Marks in the London
         interbank market;

                  "Cash Flow Coverage Ratio" means, for any consecutive four
         fiscal quarterly periods of the U.S. Borrower, the ratio for the U.S.
         Borrower and its consolidated Subsidiaries of (x) EBITDA minus cash
         dividends (each computed for such four consecutive fiscal quarterly
         periods) to (y) current maturities of long term debt and capitalized
         leases (each computed for such four consecutive fiscal quarterly
         periods) plus 20% of the average outstanding principal balance of the
         Revolving Loans for such four consecutive fiscal quarterly periods plus
         interest expense plus current provision for income taxes (each computed
         for such four consecutive fiscal quarterly periods);

                                       2
<PAGE>   7

                  "Closing Date" means the date as of which this Loan Agreement
         is executed by the Credit Parties and the Bank;

                  "Commitment" means the commitment by the Bank to make Loans to
         the Borrowers hereunder;

                  "Consistent Basis" in reference to the application of
         Generally Accepted Accounting Principles, means that the accounting
         principles observed in the period referred to are comparable in all
         material respects to those applied in the most recent preceding period,
         except for the impact of implementing new rules or regulations;

                  "Credit Parties" means the Borrowers and the Guarantors and
         "Credit Party" means any one of them;

                  "Deutsche Mark Loan" means the Loan made pursuant to Section
         2.05(a) hereof;

                  "Deutsche Mark Note" means the promissory note of the German
         Borrower executed and delivered as provided in Section 2.05(a) hereof;

                  "Domestic Subsidiary" means a direct or indirect Subsidiary of
         the U.S. Borrower that is domiciled, incorporated or organized under
         the laws of any State of the United States of America or the District
         of Columbia;

                  "EBITDA" means, for any period of computation, earnings of the
         U.S. Borrower and its consolidated Subsidiaries before interest
         expense, provision for income taxes, depreciation and amortization,
         other non-cash charges and lease expense under the tax retention
         operating lease (or similar agreement) entered into with the Bank or
         any of its affiliates;

                  "Eligible Receivables" means, as of any date of determination
         and without duplication, the aggregate book value of all accounts
         receivable, receivables, and obligations for payment created or arising
         from the sale of inventory or the rendering of services in the ordinary
         course of business (collectively, the "Receivables"), owned by or owing
         to the U.S. Borrower or any of its Subsidiaries, net of allowances and
         reserves for doubtful or uncollectible accounts and sales adjustments
         consistent with such Person's internal policies and in any event in
         accordance with Generally Accepted Accounting Principles, but excluding
         in any event (i) any Receivable which is (a) not subject to a
         perfected, first priority lien in favor of the Bank to secure the
         Obligations or (b) subject to any other lien that is not permitted
         hereunder, (ii) Receivables which are more than 120 days past due or
         150 days past invoice date (net of reserves for bad debts in connection
         with any such Receivables), (iii) 50% of the book value of any
         Receivable not otherwise excluded by clause (ii) above but owing from
         an account debtor which is the account debtor on any existing
         Receivable then excluded by such clause (ii), unless the exclusion by
         such clause (ii) is a result of a legitimate dispute by the account
         debtor and the applicable Receivable is no more than 150 days past due,
         (iv) Receivables evidenced by

                                       3
<PAGE>   8

         notes, chattel paper or other instruments, unless such notes, chattel
         paper or instruments have been delivered to and are in the possession
         of the Bank, (v) Receivables owing by an account debtor which is not
         solvent or is subject to any bankruptcy or insolvency proceeding of any
         kind, (vi) Receivables which are contingent or subject to offset,
         deduction, counterclaim, dispute or other defense to payment, in each
         case to the extent of such offset, deduction, counterclaim, dispute or
         other defense, (vii) Receivables for which any direct or indirect
         Subsidiary or any affiliate of the U.S. Borrower is the account debtor,
         (viii) Receivables representing a sale to the government of the United
         States or any agency or instrumentality thereof unless the Federal
         Assignment of Claims Act has been complied with to the satisfaction of
         the Bank with respect to the granting of a security interest in such
         Receivable, with or other similar applicable law and (ix) Receivables
         which fail to meet such other specifications and requirements as may
         from time to time be established by the Bank in its reasonable
         discretion;

                  "Event of Default" shall have the meaning given to said term
         in Section 8.01 hereof;

                  "Fixed Asset Value" means, as of any date of determination and
         without duplication, the lower of the aggregate net book value (based
         on a FIFO or a moving average cost valuation, consistently applied) or
         fair market value (determined on the basis of the most recent appraisal
         acceptable to the Bank) of all equipment, fixtures and real estate
         owned by the U.S. Borrower and its Domestic Subsidiaries less
         appropriate reserves determined in accordance with Generally Accepted
         Accounting Principles but excluding in any event (i) any such asset
         which is (a) not subject to a perfected, first priority lien in favor
         of the Bank to secure the Obligations or (b) subject to any other lien
         not permitted hereunder, (ii) any such asset which is not in good
         condition or fails to meet standards for sale or use imposed by
         governmental agencies, departments or divisions having regulatory
         authority over such assets, (iii) any such asset located outside of the
         United States, (iv) any such asset which is leased or on consignment,
         and (v) any such asset which fails to meet such other specifications
         and requirements as may from time to time be established by the Bank in
         its reasonable discretion;

                  "Foreign Subsidiary" means each Subsidiary of the U.S.
         Borrower that is not a Domestic Subsidiary;

                  "Funded Debt" means, without duplication, (i) all interest
         bearing obligations of the U.S. Borrower and its consolidated
         Subsidiaries including, without limitation, all obligations evidenced
         by promissory notes or other similar contracts but excluding such items
         as trade payables and accruals and (ii) all outstanding obligations
         under the tax retention operating lease (or similar agreements) entered
         into with the Bank or any of its affiliates;

                  "Funded TROL Obligations" means, at any time, the sum of the
         then outstanding amount of each of (i) the Loans, (ii) the accrued but
         unpaid interest on the Loans, (iii) the Holder Advances, and (iv) the
         accrued but unpaid Holder Yield, as each of such capitalized terms is
         defined in the Participation Agreement;

                                       4
<PAGE>   9

                  "Generally Accepted Accounting Principles" means those
         principles of accounting set forth in pronouncements of the Financial
         Accounting Standards Board, the American Institute of Certified Public
         Accountants, or which have other substantial authoritative support and
         are applicable in the circumstances as of the date of a report, as such
         principles are from time to time supplemented and amended;

                  "German Borrower" shall have the meaning given to said term in
         the Recitals hereof;

                  "German Borrower Obligations" means all obligations of the
         German Borrower (in its capacity as such) hereunder, under the Deutsche
         Mark Note or otherwise in connection with the Deutsche Mark Loan;

                  "Guaranteed Obligations" means, without duplication, (a) in
         the case of a Guarantor that is a Domestic Subsidiary, all Obligations,
         and (b) in the case of the Guarantor that is the U.S. Borrower or a
         Foreign Subsidiary, all German Borrower Obligations;

                  "Guarantors" means, collectively, the U.S. Borrower and each
         of its Subsidiaries and "Guarantor" means any one of them;

                  "Loan Documents" means this Loan Agreement, the Notes and the
         Security Documents;

                  "Loans" means, collectively, the Revolving Loans and the
         Deutsche Mark Loan;

                  "Maturity Date" means May 31, 2000;

                  "Mortgages" means those mortgage and security agreements to be
         given by the U.S. Borrower and/or certain Domestic Subsidiaries
         pursuant to Section 6.01(s) to secure the Obligations;

                  "Notes" means, collectively, the Revolving Note and the
         Deutsche Mark Note;

                  "Obligations" means a collective reference to (a) all
         obligations of the U.S. Borrower to the Bank in connection with the
         Revolving Loans and (b) all German Borrower Obligations;

                  "Participation Agreement" means that certain Participation
         Agreement, dated as of October 2, 1998 among the U.S. Borrower, First
         Security Bank, N.A., as Owner Trustee under the AAI Realty Trust
         1998-1, the lenders and holders identified therein and from time to
         time party thereto, and NationsBank, N.A. (now known as Bank of
         America, N.A.) as Agent, such Participation Agreement comprising part
         of the documentation relating to the tax retention operating lease
         transaction entered into by the U.S. Borrower;

                                       5
<PAGE>   10

                  "Person" means an individual, a corporation, a partnership, a
         joint venture, an association, a joint stock company, a trust, an
         unincorporated organization or a government or any agency or political
         subdivision thereof;

                  "Pledge Agreement" means that certain Pledge Agreement dated
         as of August 27, 1999 among the U.S. Borrower, the Domestic
         Subsidiaries and the Bank, as such agreement may be amended or modified
         from time to time;

                  "Prime Rate" means the rate of interest publicly announced by
         the Bank in Charlotte, North Carolina from time to time as its "prime
         rate." The Prime Rate is not necessarily the best or lowest rate of
         interest offered by the Bank;

                  "Revolving Loan" means a Loan made pursuant to Section 2.01
         hereof;

                  "Revolving Note" means the promissory note of the U.S.
         Borrower executed and delivered as provided in Section 2.02 hereof;

                  "Revolving Loan Committed Amount" shall have the meaning given
         to said term in Section 2.01;

                  "Security Agreement" means that certain Security Agreement
         dated as of August 27, 1999 among the U.S. Borrower, the Domestic
         Subsidiaries and the Bank, as such agreement may be amended or modified
         from time to time;

                  "Security Documents" means, collectively, the Mortgages, the
         Pledge Agreement, the Security Agreement, each of the agreements and
         documents executed by the German Borrower and the other Foreign
         Subsidiaries in favor of the Bank to secure the German Borrower
         Obligations and each other agreement or document executed by a Credit
         Party in favor of the Bank to secure the Obligations, as each such
         agreement or document may be amended or modified from time to time;

                  "Subsidiary" means any corporation, association, partnership,
         limited liability company, joint venture or other business entity more
         than 50% of the outstanding voting stock or other equity interests of
         which at the time is owned or controlled directly or indirectly by the
         U.S. Borrower and/or by one or more of its Subsidiaries;

                  "Tangible Net Worth" means total stockholders' equity of the
         U.S. Borrower determined in accordance with Generally Accepted
         Accounting Principles on a Consistent Basis, with no upward adjustments
         due to a revaluation of assets, minus the book value of assets which
         would be treated as intangibles under Generally Accepted Accounting
         Principles, including, but not limited to, goodwill, trade-names,
         trademarks, copyrights, patents and unamortized debt discount and minus
         loans or advances to employees, stockholders, subsidiaries, affiliates
         or related companies and minus investment in subsidiaries; and

                  "U.S. Borrower" shall have the meaning given to said term in
         the Recitals hereof.

                                       6
<PAGE>   11

         1.02     ACCOUNTING TERMS.

         All accounting terms not specifically defined herein shall be construed
in accordance with then current Generally Accepted Accounting Principles applied
on a Consistent Basis.

                                   ARTICLE II

                                      LOANS

         2.01     REVOLVING LOANS.

         Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, the Bank agrees to make
Revolving Loans to the U.S. Borrower, at any time and from time to time until
the Maturity Date, in an aggregate principal amount at any time outstanding not
to exceed the lesser of (i) TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the
"Revolving Loan Committed Amount") and (ii) the Borrowing Base, for purposes of
financing the U.S. Borrower's working capital needs. The U.S. Borrower may
borrow, repay and reborrow hereunder on or after the date hereof and prior to
the Maturity Date, subject to the terms, provisions and limitations set forth
herein. The outstanding principal balance of the Revolving Loans, together with
all accrued but unpaid interest, fees and other charges, shall be due and
payable in full on the Maturity Date.

         2.02     REVOLVING NOTE.

         The Revolving Loans made by the Bank shall be evidenced by the
Revolving Note duly executed by the U.S. Borrower, dated the Closing Date, in
substantially the form of Exhibit 2.02 attached hereto, payable to the order of
the Bank in a principal amount equal to the Revolving Loan Committed Amount.

         2.03     INTEREST ON REVOLVING LOANS.

         Subject to section 3.01 hereof, the outstanding principal balance of
the Revolving Loans shall bear interest at a rate equal to the Adjusted LIBOR
Rate plus 2.25%. Interest calculated at the foregoing rate shall be due and
payable monthly in arrears on the last day of each calendar month.

         2.04     COMMITMENT FEE.

         The U.S. Borrower agrees to pay the Bank a commitment fee in an amount
equal to 0.375% per annum of the average daily unused portion of the Revolving
Loan Committed Amount, such fee to be paid monthly in arrears on the last day of
each calendar month.

                                       7
<PAGE>   12

         2.05     DEUTSCHE MARK LOAN.

                  (a) Subject to the terms and conditions hereof, the Bank
         agrees to make on or before March 31, 2000 a term loan to the German
         Borrower in Deutsche Marks in an aggregate principle amount equal to DM
         12,000,000 (the "Deutsche Mark Loan"). Amounts repaid on the Deutsche
         Mark Loan may not be reborrowed. The outstanding principal balance of
         the Deutsche Mark Loan, together with all accrued but unpaid interest,
         fees and other charges, shall be due and payable in full on the
         Maturity Date. The proceeds of the Deutsche Mark Loan will be used by
         the German Borrower to repay in full loans made to the German Borrower
         by its German banks, which loans have been supported by standby letters
         of credit issued by the Bank.

                  (b) The Deutsche Mark Loan shall be made, shall be repaid and
         shall bear interest in accordance with the terms of a Promissory Note
         dated the Closing Date and executed by the German Borrower in favor of
         the Bank in substantially the form of Exhibit 2.05 (the "Deutsche Mark
         Note"), the terms of which are incorporated herein by reference.

                  (c) (i) If, as a result of the implementation of the European
                  economic and monetary union ("EMU"), (i) any currency
                  available for borrowing under this Credit Agreement (a
                  "national currency") ceases to be lawful currency of the state
                  issuing the same and is replaced by a European single or
                  common currency (the "Euro") or (ii) any national currency and
                  the Euro are at the same time both recognized by the central
                  bank or comparable governmental authority of the state issuing
                  such currency as lawful currency of such state, then any
                  amount payable hereunder by any party hereto in such national
                  currency shall instead be payable in the Euro and the amount
                  so payable shall be determined by redenominating or converting
                  such amount into the Euro at the exchange rate officially
                  fixed by the European Central Bank for the purpose of
                  implementing the EMU, provided, that to the extent any EMU
                  legislation provides that an amount denominated either in the
                  Euro or in the applicable national currency can be paid either
                  in Euros or in the applicable national currency, each party to
                  this Loan Agreement shall be entitled to pay or repay such
                  amount in Euros or in the applicable national currency. Prior
                  to the occurrence of the event or events described in clause
                  (i) or (ii) of the preceding sentence, each amount payable
                  hereunder in any such national currency will, except as
                  otherwise provided herein, continue to be payable only in that
                  national currency.

                           (ii) The Borrowers shall from time to time, at the
                  request of the Bank, pay to the Bank for the account of the
                  Bank the amount of any cost or increased cost incurred by, or
                  of any reduction in any amount payable to or in the effective
                  return on its capital to, or of interest or other return
                  foregone by, the Bank or any holding company of the Bank as a
                  result of the introduction of, changeover to or operation of
                  the Euro in any applicable state.

                                       8
<PAGE>   13

                           (iii) In addition, this Loan Agreement and the
                  Deutsche Mark Note (including, without limitation, the
                  definition of Adjusted LIBOR Rate) will be amended to the
                  extent determined by the Bank (acting reasonably and in
                  consultation with the Borrowers) to be necessary to reflect
                  such implementation of the EMU and change in currency and to
                  put the Bank and the Borrowers in the same position, so far as
                  possible, that they would have been in if such implementation
                  and change in currency had not occurred. Except as provided in
                  the foregoing provisions of this Section, no such
                  implementation or change in currency nor any economic
                  consequences resulting therefrom shall (i) give rise to any
                  right to terminate prematurely, contest, cancel, rescind,
                  alter, modify or renegotiate the provisions of this Loan
                  Agreement or (ii) discharge, excuse or otherwise affect the
                  performance of any obligations of the German Borrower under
                  this Loan Agreement, the Deutsche Mark Note or other Loan
                  Documents.

                                   ARTICLE III

                 ADDITIONAL PROVISIONS REGARDING REVOLVING LOANS

         3.01     DEFAULT RATE.

         If a Borrower shall default in the payment when due (subject to
applicable grace periods, if any) of the principal of or interest on any Loan or
any other amount becoming due hereunder, such Borrower shall on demand from time
to time pay interest on any overdue payment of principal and, to the extent
permitted by law, on overdue payments of interest up to the date of actual
payment (after as well as before judgment):

                           (i) in the case of principal of or interest on a Loan
         at a rate equal to 2% per annum above the rate which would otherwise be
         payable hereunder; and

                           (ii) in the case of any other amount payable
         hereunder or under any of the other Loan Documents (other than
         principal of or interest on any Loan referred to in clause (i) above),
         at a rate 2% per annum above the Prime Rate.

         3.02     PREPAYMENTS.

                  (a) Voluntary Prepayments. The Borrowers shall have the right
         at any time and from time to time to prepay any Loan in whole or in
         part, without premium or penalty; provided, however, partial
         prepayments of any Loan shall be applied to principal installments
         thereunder in the inverse order of maturities.

                  (b) Mandatory Prepayments. If at any time the aggregate
         outstanding principal amount of Revolving Loans shall exceed the lesser
         of (i) the Revolving Loan Committed Amount and (ii) the Borrowing Base,
         the U.S. Borrower immediately shall prepay the Revolving Loans in an
         amount sufficient to eliminate such excess.

                                       9
<PAGE>   14

         3.03     CAPITAL ADEQUACY.

                  (a) In the event that the Bank shall have determined that the
         adoption or implementation on or after the Closing Date under the
         Existing Loan Agreement of any applicable law, rule, regulation or
         guideline regarding capital adequacy, or any change therein, or any
         change in the interpretation or administration thereof by any
         governmental authority, central bank or comparable agency charged with
         the interpretation or administration thereof or by any court, or
         compliance by the Bank (or any lending office of the Bank) with any
         request or directive made or issued after the Closing Date regarding
         capital adequacy (whether or not having the force of law) of any such
         authority, central bank or comparable agency, has or would have the
         effect of reducing the rate of return on the Bank's capital as a
         consequence of its obligations hereunder to a level below that which
         the Bank could have achieved but for such adoption, change or
         compliance (taking into consideration the Bank's policies as the case
         may be, with respect to capital adequacy) by an amount deemed by the
         Bank to be material, then from time to time the Borrowers shall pay to
         the Bank such additional amount or amounts as will compensate the Bank
         for any such reduction suffered; provided, however, that no such
         amounts shall be payable with respect to a reduction in rate of return
         incurred more than 90 days before the Bank demands compensation under
         this Section.

                  (b) Failure on the part of the Bank to demand compensation for
         any reduction in return on capital with respect to any period shall not
         constitute a waiver of the Bank's rights to demand compensation for any
         reduction in return on capital in such period or in any other period.
         The protection of this Section shall be available to the Bank
         regardless of any possible contention of invalidity or inapplicability
         of the law, regulation or condition which shall have been imposed.

         3.04     INCREASED COSTS.

         At any time that the Bank shall incur increased costs or reductions in
the amounts received or receivable hereunder with respect to any Loan because of
any change since the Closing Date under the Existing Loan Agreement in any
applicable law, governmental rule, regulation, guideline or order (or in the
interpretation or administration thereof and including the introduction of any
new law or governmental rule, regulation, guideline or order) including without
limitation the imposition, modification or deemed applicability of any reserves,
deposits or similar requirements as related to such Deutsche Mark Loan (such as,
for example, but not limited to, a change in official reserve requirements, but,
in all events, excluding reserves to the extent included in the computation of
the Adjusted LIBOR Rate), then the Borrower shall pay to the Bank within 15 days
after written demand therefor (which demand shall state the basis therefor),
such additional amounts (in the form of an increased rate of, or a different
method of calculating, interest or otherwise as the Bank may determine in its
reasonable discretion) as may be required to compensate the Bank for such
increased costs or reductions in amounts receivable hereunder. Upon determining
in good faith that any additional amounts will be payable pursuant to this
subsection, the Bank will give prompt written notice thereof to the Borrower,
which notice shall set forth in reasonable detail the basis of the calculation
of such additional amounts.

                                       10
<PAGE>   15

         3.05     TAXES, ETC.

                  (a) All payments made by a Borrower hereunder, under a Note or
         under any Loan Document will be made without set-off, counterclaim,
         deduction or other defense. All such payments shall be made free and
         clear of and without deduction for any present or future income,
         franchise, sales, use, excise, stamp or other taxes, levies, imposts,
         deductions, charges, fees, withholdings, restrictions or conditions of
         any nature now or hereafter imposed, levied, collected, withheld or
         assessed by any jurisdiction (whether pursuant to United States
         Federal, state, local or foreign law) or by any political subdivision
         or taxing authority thereof or therein, and all interest, penalties or
         similar liabilities, excluding taxes on the overall net income of the
         Bank (such nonexcluded taxes are hereinafter collectively referred to
         as the "Taxes"). If a Borrower shall be required by law to deduct or to
         withhold any Taxes from or in respect of any amount payable hereunder,
         (i) the amount so payable shall be increased to the extent necessary so
         that after making all required deductions and withholdings (including
         Taxes on amounts payable to the Bank pursuant to this sentence) the
         Bank receives an amount equal to the sum it would have received had no
         such deductions or withholdings been made, (ii) such Borrower shall
         make such deductions or withholdings, and (iii) such Borrower shall pay
         the full amount deducted or withheld to the relevant taxation authority
         in accordance with applicable law. Whenever any Taxes are payable by a
         Borrower, as promptly as possible thereafter, such Borrower shall send
         the Bank an official receipt showing payment. In addition, each
         Borrower agrees to pay any present or future taxes, charges or similar
         levies which arise from any payment made hereunder or from the
         execution, delivery, performance, recordation or filing of, or
         otherwise with respect to, this Loan Agreement, the Notes or any other
         Loan Document (hereinafter referred to as "Other Taxes").

                  (b) The U.S. Borrower will indemnify the Bank for the amount
         of Taxes or Other Taxes (including, without limitation, any Taxes or
         Other Taxes imposed by any jurisdiction on amounts payable under this
         Section 3.05) paid by the Bank (including penalties, interest and
         expenses for nonpayment, late payment or otherwise) arising therefrom
         or with respect thereto, whether or not such Taxes or Other Taxes were
         correctly or legally asserted. This indemnification shall be paid
         within 30 days from the date on which the Bank makes written demand.

                  (c) If the U.S. Borrower fails to perform its obligations
         under this Section 3.05, the U.S. Borrower shall indemnify the Bank for
         any incremental taxes, interest or penalties that may become payable as
         a result of any such failure.

         3.06     PAYMENTS AND COMPUTATIONS.

         Except as otherwise specifically provided herein or in another Loan
Document, all payments hereunder shall be made to the Bank in U.S. dollars in
immediately available funds at its offices in Wilmington, North Carolina not
later than 11:00 a.m. (Wilmington, North Carolina time) on the date when due.
Payments received after such time shall be deemed to have been received on the
next succeeding Business Day. Whenever any payment hereunder shall be stated to
be due

                                       11
<PAGE>   16

on a day which is not a Business Day, the due date thereof shall be extended to
the next succeeding Business Day (subject to accrual of interest and fees for
the period of such extension).

                                   ARTICLE IV

                              CONDITIONS OF LENDING

         4.01     CONDITIONS TO CLOSING DATE.

         This Loan Agreement shall be and become effective as of the Closing
Date when all of the conditions set forth in this Section 4.01 shall have been
satisfied or waived in writing by the Bank.

                  (a) Execution of Loan Agreement and Notes. The Bank shall have
         received a duly executed original of this Loan Agreement and the Notes.

                  (b) Closing Certificate. The Bank shall have received a
         certificate from the chief financial officer of the U.S. Borrower, in
         form and substance satisfactory to the Bank, certifying inter alia that
         (i) no Event of Default nor any event which upon notice or lapse of
         time or both would constitute such an Event of Default shall have
         occurred and be continuing as of the Closing Date, and (ii) the
         representations and warranties of the Credit Parties made in or
         pursuant to the Loan Documents are true in all material respects on and
         as of the Closing Date.

                  (c) Fees. The U.S. Borrower shall have paid all fees due and
         owing to the Bank, including without limitation all reasonable fees and
         expenses of the Bank and its counsel actually incurred in connection
         with any of the Loan Documents and the transactions contemplated
         thereby to the extent invoiced.

                  (d) Security Agreement and Financing Statements. The Bank
         shall have received (i) a duly executed original of an amendment to the
         Security Agreement in form and substance acceptable to the Bank, (ii)
         executed UCC-1 financing statements from the U.S. Borrower and each
         Domestic Subsidiary with respect to each location in which each such
         Credit Party has or maintains personal property, and (iii) searches of
         Uniform Commercial Code filings in the jurisdiction of the U.S.
         Borrower's and each Domestic Subsidiary's chief executive office and
         each jurisdiction where any Collateral (as defined in the Security
         Agreement) is located or where a filing would need to be made in order
         to perfect the Bank's security interest in the Collateral, together
         with copies of the financing statements on file in each such
         jurisdiction and evidence that no liens exist thereon other than as
         expressly approved by the Bank or permitted by the Loan Documents.

                  (e) Pledge Agreement. The Bank shall have received (i) a duly
         executed original of an amendment to the Pledge Agreement in form and
         substance acceptable to the Bank, (ii) evidence satisfactory to the
         Bank that it has a first priority pledge of 100% of the ownership
         interests in each Domestic Subsidiary and a first priority pledge of
         65%

                                       12
<PAGE>   17

         of the ownership interests in each first tier Foreign Subsidiary; (iii)
         all stock certificates evidencing the stock pledged to the Bank
         pursuant to the Pledge Agreement, together with duly executed in blank
         undated stock powers attached thereto, and (iv) evidence and
         information satisfactory to the Bank regarding the capital and
         ownership structure of the U.S. Borrower and its Subsidiaries.

                  (f) Guaranty. Each of the Guarantors other than the Foreign
         Subsidiaries shall have executed this Loan Agreement.

                  (g) Corporate Documents. The Bank shall have received, in form
         and content satisfactory to the Bank, (i) copies of resolutions of the
         board of directors of the U.S. Borrower and each Domestic Subsidiary
         approving and adopting the execution and delivery of this Loan
         Agreement, the other Loan Documents, and each other document or
         instrument executed and delivered in connection herewith, certified by
         a secretary or assistant secretary of each such Credit Party to be true
         and correct and in force and effect as of the Closing Date; (ii)
         incumbency information for the U.S. Borrower and each Domestic
         Subsidiary certified by a secretary or assistant secretary to be true
         and correct as of the Closing Date; (iii) good standing certificates
         from appropriate governmental authorities dated as of a recent date
         with respect to the U.S. Borrower and the Domestic Subsidiaries; and
         (iv) an opinion of legal counsel to the U.S. Borrower and each Domestic
         Subsidiary, which shall cover, among other things, authority, legality,
         validity, binding effect and enforceability of the Loan Documents and
         the attachment, perfection and validity of liens, addressed to the Bank
         and dated as of the Closing Date.

                  (h) TROL Facility. The Bank shall have received a duly
         executed original of an amendment to the Participation Agreement and
         the related agreements, such amendment to be in form and substance
         acceptable to the Bank, the effect of which is to reduce the Holder
         Commitments thereunder to $450,000 and the Lender Commitments
         thereunder to $14,550,000, thereby capping the tax retention operating
         lease transaction described therein at $15,000,000.

                  (i) Evidence of Insurance. The Bank shall have received
         certificates of insurance of the U.S. Borrower and its Domestic
         Subsidiaries evidencing liability and casualty insurance meeting the
         requirements set forth in the Loan Documents and naming the Bank as
         additional insured, sole loss payee or mortgagee, as appropriate.

         4.02     CONDITIONS TO EACH LOAN.

         The Bank shall not be obligated to make any Loan hereunder unless (a)
the conditions set forth in Section 4.01 hereof have been satisfied or waived in
writing by the Bank, (b) the representations and warranties contained in Article
V hereof are true and correct as of the date of the making of such Loan and (c)
immediately after the making of such Loan no Event of Default nor any event
which upon notice or lapse of time or both would constitute such an Event of
Default shall have occurred and be continuing.

                                       13
<PAGE>   18

         4.03     ADDITIONAL CONDITIONS TO THE DEUTSCHE MARK LOAN.

         On or prior to the funding date of any installment of the Deutsche Mark
Loan, the Bank shall have received (a) evidence satisfactory to the Bank that
(i) the proceeds of the Deutsche Mark Loan will be used to immediately repay in
full the German Borrower's indebtedness to its German banks and (ii) the letters
of credit previously issued by the Bank to support such indebtedness will be
returned to the Bank for cancellation immediately upon such repayment, (b) such
security documents and evidence of collateral filings as the Bank may request
with respect to the assets of the German Borrower and the other Foreign
Subsidiaries, all such documents and filings to be in form and substance
satisfactory to the Bank and its counsel and (c) such corporate authority
documents, officer's certificates, insurance certificates, legal opinions and
similar documents as the Bank reasonably requests in connection with the
Deutsche Mark Loan, the German Borrower and the Foreign Subsidiaries, all such
documents to be in form and substance satisfactory to the Bank and its counsel.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         Each Credit Party hereby represents and warrants to the Bank that:

         5.01     CORPORATE EXISTENCE AND POWER.

         Such Credit Party is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and is duly
qualified and in good standing as a foreign corporation authorized to do
business in every jurisdiction where the failure to so qualify would have a
material adverse effect on such Person. Further, each Credit Party has all power
and authority to own and operate its properties and to carry on its business as
now conducted.

         5.02     AUTHORIZATION OF LOAN AGREEMENT.

         Each Credit Party has the power and authority to enter into this Loan
Agreement and to perform its obligations under and consummate the transactions
contemplated by this Loan Agreement and has by proper corporate action duly
authorized the execution and delivery of this Loan Agreement. When executed and
delivered, this Loan Agreement and the other Loan Documents will be valid and
binding obligations of each Credit Party which is a party thereto, enforceable
in accordance with their respective terms.

         5.03     NO VIOLATION OF CORPORATE RESTRICTIONS.

         Neither the execution and delivery of this Loan Agreement, nor the
performance of the obligations under or consummation of the transactions
contemplated by this Loan Agreement, violates or will violate any law or
governmental order, conflicts or will conflict with any provision of any charter
document or by-law of any Credit Party or any material term or

                                       14
<PAGE>   19

provision of any agreement or instrument to which any Credit Party is a party or
by which any Credit Party is bound, or constitutes or will constitute a breach
of or a default under any such agreement or instrument (unless appropriate
written waivers have been received and delivered to the Bank).

         5.04     GOVERNMENTAL CONSENTS.

         No consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority on the part of any Credit Party
is required as a condition to the execution, delivery or performance of this
Loan Agreement or any of the other Loan Documents by the Credit Parties.

         5.05     LITIGATION.

         Except as set forth on Exhibit 5.05 attached hereto, there are no
material pending, or to the best knowledge of a Credit Party, threatened, legal
proceedings to which any Credit Party is a party or of which any of its
properties are the subject.

         5.06     OTHER AGREEMENTS.

         No Credit Party is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
material agreement or instrument to which it is a party.

         5.07     TAXES.

         Each Credit Party has filed or caused to be filed all federal, state
and local tax returns which are required to be filed by such Credit Party and
has paid or caused to be paid all taxes as shown on said returns or on any
assessment to the extent such taxes have become due, except for taxes which are
being contested in good faith and against which reserves in accordance with
Generally Accepted Accounting Principles will be established. No Credit Party
knows of any proposed material tax assessments against it. No extension of time
for assessment or payment of any federal, state or local tax by a Credit Party
is in effect.

         5.08     LIENS.

         None of the assets of the Credit Parties is subject to any mortgage,
pledge, title retention lien or other lien, encumbrance or security interest,
except (i) for current taxes not delinquent or taxes being contested in good
faith and by appropriate proceedings, (ii) liens arising in the ordinary course
of business for sums not due or sums being contested in good faith and by
appropriate proceedings, but not involving any borrowed money or the deferred
purchase price of property or services, (iii) mechanics' and materialmen's
liens, reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other similar title exceptions
or encumbrances affecting real property which do not in the aggregate materially
detract from the value of said properties or materially interfere with their use
in the ordinary conduct of the Credit Parties' business and (iv) to the extent
shown in Exhibit 5.08.

                                       15
<PAGE>   20

         5.09     ERISA.

         No Credit Party has incurred any accumulated unfunded deficiency within
the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA") or
incurred any material liability to the Pension Benefit Guaranty Corporation
("PBGC") established under such Act (or any successor thereto under such Act) in
connection with the employee benefit plans established or maintained by the
Credit Parties. Each Credit Party is in compliance in all material respects with
those provisions of ERISA and the regulations and public interpretations
thereunder which are applicable to the U.S. Borrower and its Subsidiaries. No
Reportable Event (as defined in ERISA) has occurred with respect to any Plan.

         5.10     SUBSIDIARIES.

         The U.S. Borrower has no Subsidiaries as of the date hereof except as
set forth on Exhibit 5.10 attached hereto.

         5.11     REGULATION U.

         No Borrower is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System). The proceeds of the Loans will be used
for the purposes described in Article II and not for the purpose of purchasing
or carrying margin stock.

         5.12     PATENTS AND TRADEMARKS.

         Each Credit Party possesses all of the necessary patents, licenses,
trademarks, trademark rights, tradenames, tradename rights and copyrights
material to conduct its business as now conducted, without known conflict with
any patent, license, trademark, tradename or copyright of any other Person.

         5.13     FINANCIAL INFORMATION PROVIDED.

         The U.S. Borrower represents that the financial information it has
heretofore furnished to the Bank dated September 30, 1999 with regard to its
operations is true and correct, and presents fairly the financial position of
the U.S. Borrower, and there have been no material adverse changes since that
date.

         5.14     ENVIRONMENTAL COMPLIANCE.

         Each Credit Party has fully complied with all laws, ordinances,
regulations and orders, including without limitation all zoning, safety and
environmental laws, ordinances, regulations and orders, applicable to its
business or properties and the present uses by such Credit Party of its
properties do not violate any such laws, ordinances, regulations or orders.
There is not currently and in the past there has not been (i) any use,
treatment, storage or disposal of any hazardous

                                       16
<PAGE>   21

substance or material or pollutant on any of the such Credit Party's properties,
except as of the date hereof as disclosed on Exhibit 5.14 attached hereto, (ii)
any spill, leakage, discharge or release of any hazardous substance or material
or pollutant thereon or therefrom, or (iii) any off-site disposal by the such
Credit Party of any hazardous substance or material or pollutant in any
location, except as disclosed on Exhibit 5.14 attached hereto.

         5.15     YEAR 2000 COMPLIANCE.

         The U.S. Borrower has (i) initiated a review and assessment of all
areas within its and each of its Subsidiaries' businesses and operations
(included those affected by suppliers, vendors and customers) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications may not be able to recognize and properly perform date-sensitive
functions after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. Based on the foregoing,
each Credit Party believes that all computer applications (including those of
its suppliers, vendors and customers) that are material to its or any of its
Subsidiaries' business and operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent
that a failure to do so could not reasonably be expected to have a material
adverse effect on such Credit Party.

                                   ARTICLE VI

                              AFFIRMATIVE COVENANTS

         6.01     AFFIRMATIVE COVENANTS

         Each Credit Party agrees that as long as its obligations hereunder
remain outstanding and until the Commitment hereunder is terminated (unless the
Bank shall otherwise consent in writing), such Credit Party will, and will cause
its Subsidiaries to with respect to the subsections (e) through (o) below:

                  (a) within ninety (90) days of the end of each fiscal year,
         deliver or cause to be delivered to the Bank either (i) the U.S.
         Borrower's Annual Report on Form 10-K for such fiscal year or (ii) a
         detailed consolidated financial report of the U.S. Borrower and its
         Subsidiaries as of the end of such fiscal year (including a balance
         sheet, income statement and statements of cash flows and stockholders'
         equity) based on Generally Accepted Accounting Principles applied on a
         Consistent Basis containing an unqualified opinion of nationally
         recognized independent certified public accountants;

                  (b) deliver or cause to be delivered:

                           (1) within forty-five (45) days after the end of each
                  fiscal quarter of each fiscal year, either (i) the copy of
                  Form 10-Q for such quarter as filed with the Securities and
                  Exchange Commission or (ii) financial information and reports
                  as

                                       17
<PAGE>   22

                  of the end of such fiscal quarter (including a balance sheet
                  and income statement, in form and detail satisfactory to the
                  Bank) of the U.S. Borrower and its Subsidiaries (in
                  consolidated form) certified by the chief financial officer of
                  the U.S. Borrower to be true and correct; and

                           (2) as soon as available, and in any event within
                  twenty-five (25) days after the close of each of the first
                  eleven calendar months of the fiscal year of the U.S.
                  Borrower, (i) a consolidated balance sheet and income
                  statement of the U.S. Borrower and its Subsidiaries, as of the
                  end of such month, together with related consolidated
                  statements of operations and consolidated statements of
                  retained earnings and of cash flows for such month, in each
                  case setting forth in comparative form consolidated figures
                  for (A) the corresponding period of the preceding fiscal year
                  and (B) management's proposed budget for such period, all such
                  financial information to be in form and detail reasonably
                  acceptable to the Bank, and (ii) an accounts receivable aging,
                  accounts payable aging, and a collateral value maintenance
                  calculation, each in form and detail reasonably acceptable to
                  the Bank.

                           (3) within twenty-five (25) days after the end of
                  each calendar month, a certificate as of the end of the
                  immediately preceding month, substantially in the form of
                  Exhibit 6.01(b)(3) and certified by chief financial officer of
                  the U.S. Borrower to be true and correct as of the date
                  thereof (a "Borrowing Base Certificate").

                  (c) together with each delivery of financial reports required
         by Section 6.01(a) and (b) hereof, deliver or cause to be delivered to
         the Bank a statement signed by the chief financial officer of the U.S.
         Borrower substantially in the form of Exhibit 6.01(c) hereto, setting
         forth that each Credit Party has kept, observed, performed and
         fulfilled each and every agreement binding on it contained in this Loan
         Agreement and the Loan Documents and is not at the time in default in
         the keeping, observance, performance or fulfillment of any of the
         terms, provisions and conditions of this Loan Agreement or any of the
         Loan Documents and that no Event of Default specified in Article VIII
         hereof, nor any event, which, upon notice or lapse of time or both,
         would constitute such an Event of Default, has occurred, or if such
         Event of Default exists or would occur as the case may be, stating the
         nature thereof, the period of existence thereof and what action the
         Credit Parties propose to take with respect thereto;

                  (d) promptly, from time to time, deliver or cause to be
         delivered to the Bank a copy of all filings made under the Securities
         and Exchange Act of 1934 and such other information regarding the U.S.
         Borrower's operations, business affairs and financial condition as the
         Bank may reasonably request. The Bank is hereby authorized to deliver a
         copy of any such financial information delivered hereunder to the Bank
         to any regulatory authority having jurisdiction over the Bank with
         appropriate confidential restrictions being noted on any submissions of
         such information;

                                       18
<PAGE>   23

                  (e) maintain or cause to be maintained all personal property
         material to its business in good working order and condition and make
         all needed repairs, replacements and renewals as are necessary to
         conduct its business in accordance with prudent business practices;

                  (f) do or cause to be done all things necessary to preserve
         and keep in full force and effect its corporate existence, rights and
         franchises;

                  (g) (i) comply with or contest in good faith all statutes and
         governmental regulations of which any Credit Party has knowledge and
         the noncompliance of which would have a material adverse effect on the
         financial condition of such Credit Party; and (ii) pay all taxes,
         assessments, governmental charges, claims for labor, supplies, rent and
         any other obligation which, if unpaid, might become a lien against any
         of its properties except liabilities being contested in good faith and
         against which adequate reserves have been established;

                  (h) at all times keep its insurable properties insured to such
         extent and against such risks, including, without limitation, public
         liability insurance, hazard insurance, worker's compensation and other
         insurance required by law and is customary with companies of comparable
         size in the same or similar business but at all times of the type and
         at least in the amount of the present coverage of the Credit Parties;

                  (i) preserve and protect its patents, licenses trademarks,
         trademark rights, tradenames, tradename rights and copyrights and
         maintain all of its other material properties and assets used or useful
         in the conduct of its business in good repair, working order and
         condition and from time to time cause to be made all proper
         replacements, betterments and improvements thereto;

                  (j) keep true books of records and accounts in accordance with
         Generally Accepted Accounting Principles applied on a Consistent Basis,
         and in which full, true and correct entries will be made of the Credit
         Parties' dealings and transactions;

                  (k) permit any officer of the Bank designated by the Bank to
         visit and inspect any of the Credit Parties' properties, books and
         financial records at such times as the Bank may reasonably request upon
         reasonable notice and during ordinary business hours;

                  (l) upon the request of the Bank, authorize any officer of the
         Bank to discuss its financial statements and financial affairs at any
         time and from time to time with the U.S. Borrower's independent
         certified public accountants upon reasonable notice and during ordinary
         business hours with a representative of the U.S. Borrower present;

                  (m) deliver to the Bank forthwith, upon any officer of a
         Credit Party obtaining knowledge of an Event of Default or an event
         which would constitute such an Event of Default but for the requirement
         that notice be given or time elapse or both, a certificate signed by
         the chief executive officer of the U.S. Borrower specifying the nature
         and

                                       19
<PAGE>   24

         period of existence thereof and what action the Credit Parties propose
         to take with respect thereto;

                  (n) within ten (10) days of the event becoming known to any
         officer of a Credit Party, notify the Bank in writing of the occurrence
         of any of the following events:

                           (i) the pendency or commencement of any action, suit
                  or proceeding at law or in equity under which a party or
                  parties seek an amount equal to or exceeding $250,000.00;

                           (ii) any event or condition which shall constitute an
                  event of default under any other agreement for borrowed money
                  or any known or potential materially adverse change in any
                  other material contractual agreement;

                           (iii) any levy of an attachment, execution or other
                  process against its assets; and

                           (iv) any change in any existing agreement or contract
                  which may materially adversely affect any of its businesses or
                  affairs, financial or otherwise;

                  (o) the U.S. Borrower shall (i) at all times, make prompt
         payment of all contributions required under all employee benefit plans
         ("Plans") to meet the minimum funding standard set forth in ERISA (as
         defined in Section 5.09) with respect to its Plans; (ii) within thirty
         (30) days after the filing thereof, furnish to the Bank copies of each
         annual report/return (Form 5500 Series), as well as all schedules and
         attachments required to be filed with the Department of Labor and/or
         the Internal Revenue Service pursuant to ERISA, and the regulations
         promulgated thereunder, in connection with each of its Plans for each
         Plan Year (as defined in ERISA); (iii) notify the Bank immediately of
         any fact, including, but not limited to, any Reportable Event (as
         defined in ERISA) arising in connection with any of its Plans, which
         might constitute grounds for termination thereof by the PBGC or for,
         the appointment by the appropriate United States District Court of a
         trustee to administer such Plan, together with a statement, if
         requested by the Bank, as to the reason therefor and the action, if
         any, proposed to be taken with respect thereof; and (iv) furnish to the
         Bank, upon its request, such additional information concerning any of
         the U.S. Borrower's Plans as may be reasonably requested;

                  (p) satisfy or cause to be satisfied the following financial
         tests:

                           (i) the U.S. Borrower will maintain as of the end of
                  each fiscal quarter (commencing with the fiscal quarter ending
                  December 31, 1999) Tangible Net Worth of not less than
                  $40,000,000.00;

                           (ii) the U.S. Borrower shall maintain a Cash Flow
                  Coverage Ratio computed as of the last day of each fiscal
                  quarter (commencing with the fiscal quarter ending December
                  31, 1999) of (A) with respect to the fiscal quarter

                                       20
<PAGE>   25

                  ending December 31, 1999, not less than 1.25 to 1.0 and (B)
                  with respect to the fiscal quarter ending March 31, 2000, not
                  less than 1.00 to 1.0;

                           (iii) the U.S. Borrower shall maintain a ratio of
                  Funded Debt to EBITDA computed as of the last day of each
                  fiscal quarter (commencing with the fiscal quarter ending
                  December 31, 1999) of (A) with respect to the fiscal quarter
                  ending December 31, 1999 (such ratio to be calculated using
                  annualized EBITDA for the fiscal quarter then ended, i.e.
                  EBITDA for the fiscal quarter ending December 31, 1999 times
                  4), not greater than 5.30 to 1.0 and (B) with respect to the
                  fiscal quarter ending March 31, 2000 (such ratio to be
                  calculated using annualized EBITDA for the two fiscal quarter
                  period then ended, i.e. aggregate EBITDA for the fiscal
                  quarters ending December 31, 1999 and March 31, 2000 times 2),
                  not greater than 3.90 to 1.0; and

                           (iv) the U.S. Borrower shall maintain at all times
                  Eligible Receivables such that, on each day, the product of
                  (A) Eligible Receivables times (B) 80% is no less than
                  $13,000,000.

                  (q) at any time any Person becomes a Subsidiary of the U.S.
         Borrower, the U.S. Borrower shall promptly (but in any event within 30
         days after the date thereof or within such longer period of time as
         agreed to by the Bank): (a) notify the Bank thereof, (b) cause such
         Subsidiary to become a Guarantor hereunder by execution of a joinder
         agreement in form and substance satisfactory to the Bank, (c) cause
         such Subsidiary to pledge its material assets to the Bank pursuant to
         security documents in form and substance satisfactory to the Bank and
         (d) deliver to the Bank with the joinder agreement and other documents
         referred to above, such supporting resolutions, incumbency
         certificates, corporate formation and organizational documentation and
         opinions of counsel as the Bank may reasonably request;

                  (r) the Credit Parties will, and will cause each of their
         respective Subsidiaries to, take all actions reasonably necessary to
         assure that the Credit Parties' computer based systems (which if not
         functional would have a material adverse effect on the Credit Parties)
         are able to operate and effectively process data in a manner that is
         Year 2000 Compliant (as defined in Section 5.15). At the request of the
         Bank, the Credit Parties shall provide information to the Bank
         concerning the Credit Parties' Year 2000 compliance; and

                  (s) within 30 days from the Closing Date, the Credit Parties
         shall (i) execute and provide for the recordation of the Mortgages and
         UCC financing statements evidencing the Bank's liens pursuant to the
         Mortgages, (ii) perform all other acts reasonably necessary to perfect
         the Bank's liens, (iii) arrange for title insurance acceptable to the
         Bank in respect of the properties covered by the Mortgages, and (iv)
         deliver to the Bank opinions of local counsel, satisfactory in form and
         substance to the Bank, concerning the Mortgages and related UCC
         financing statements and the perfection of the Bank's interest therein.

                                       21
<PAGE>   26

                                   ARTICLE VII

                               NEGATIVE COVENANTS

         7.01     NEGATIVE COVENANTS

         Each Credit Party agrees that as long as its obligations hereunder
remain outstanding and until the Commitment is terminated (unless the Bank shall
otherwise consent in writing), no Credit Party shall:

                  (a) incur, create, assume or permit to exist any indebtedness
         for borrowed money, howsoever evidenced, or its equivalent (including
         but not limited to leases required to be capitalized under Generally
         Accepted Accounting Principles), except

                           (i) indebtedness set forth in the financial
                  statements referred to in Section 5.13 hereof and as set forth
                  in Exhibit 7.01(a)(i);

                           (ii) additional indebtedness extended by the Bank;
                  and

                           (iii) purchase money indebtedness incurred to finance
                  the acquisition of equipment on installment contracts with
                  terms not to exceed 6 months;

                  (b) incur, create or permit to exist any pledge, lien, charge
         or other encumbrance of any nature whatsoever on the property of the
         U.S. Borrower or any of its Subsidiaries, whether now owned or
         hereafter acquired, other than

                           (i) liens as disclosed in Exhibit 5.08 hereto;

                           (ii) any unfiled lien of materialmen, mechanics,
                  workmen, warehousemen, carriers, landlords or repairmen;
                  provided that if such a lien shall be perfected and shall not
                  be contested in good faith, it shall be discharged of record
                  immediately by payment, bond or otherwise;

                           (iii) tax liens which are being contested in good
                  faith, or which constitute liens for taxes the payment of
                  which is not yet required;

                           (iv) liens in favor of the Bank;

                           (v) liens incurred in connection with the purchase
                  money indebtedness permitted under Section 1.01(a)(iii); and

                           (vi) liens on assets securing indebtedness or
                  obligations in amounts less than $10,000.00;

                                       22
<PAGE>   27

                  (c) sell, lease, transfer or otherwise dispose of any of the
         properties and assets of the U.S. Borrower or any of its Subsidiaries
         to any Person other than sales in the ordinary course of business;

                  (d) seek or permit dissolution or liquidation of any Credit
         Party in whole or in part; provided, however, that any Subsidiary other
         than a Borrower that is not material to the U.S. Borrower and its
         Subsidiaries taken as a whole may liquidate, wind-up or dissolve itself
         (i) into a Credit Party or (ii) otherwise in a transaction in which the
         assets of such dissolving Subsidiary become owned by a Credit Party;

                  (e) guaranty, or become liable for, the obligations of any
         other Person other than the Obligations (provided, however, (i) this
         shall not prevent the U.S. Borrower or any of its Subsidiaries from
         endorsing negotiable instruments for collections in the ordinary course
         of business and (ii) this shall not prevent the U.S. Borrower from
         entering into (A) those guarantees, endorsements or debt assumptions
         for related, affiliate or subsidiary entities of the U.S. Borrower
         described on Schedule 7.01(a)(i) or (B) additional guarantees,
         endorsements or debt assumptions for related, affiliate or subsidiary
         entities of the U.S. Borrower so long as the aggregate amount of such
         guaranties, endorsements or debt assumptions shall not exceed
         $4,000,000.00 at any time);

                  (f) make any loans or advances in excess of $500,000.00 in the
         aggregate; provided, however, the U.S. Borrower may make loans or
         advances to related, affiliate or subsidiary entities of the U.S.
         Borrower so long as the aggregate amount of such loans or advances
         shall not exceed, at any time, an amount equal to $6,100,000.00 or such
         greater amount as the Bank may designate in writing to the U.S.
         Borrower;

                  (g) consolidate with, merge into or be acquired by any Person;
         provided, however, a Credit Party shall be permitted to enter into
         merger and/or consolidation transactions so long as such Credit Party
         is the surviving entity; provided further that, if a Borrower is a
         party to any such transaction, such Borrower shall be the surviving
         entity;

                  (h) change the general character of business of the U.S.
         Borrower or any of its Subsidiaries or engage in any type of business
         not reasonably related to the business of the U.S.
         Borrower or any of its Subsidiaries as presently conducted;

                  (i) (1) pay any cash dividends to the shareholders of the U.S.
         Borrower, (2) make any distribution on any shares of any class of the
         capital stock of the U.S. Borrower which results in a reduction to
         stockholders' equity, (3) apply any Credit Party's property or assets
         to the purchase, redemption or other retirement of any shares of any
         class of capital stock resulting in a reduction to stockholders' equity
         or (4) amend in any way the capital structure of the U.S. Borrower;

                  (j) create or permit to exist or become effective, directly or
         indirectly, any prohibition or restriction on the creation or existence
         of any lien upon the assets of the U.S. Borrower or any of its
         Subsidiaries other than as set forth herein; or

                                       23
<PAGE>   28

                  (k) create or permit to exist any Subsidiary unless such
         Subsidiary becomes a Guarantor hereunder pursuant to a joinder
         agreement.

                                  ARTICLE VIII

                       EVENTS OF DEFAULT AND ACCELERATION

         8.01     EVENTS OF DEFAULT.

         Any of the following shall constitute an "Event of Default" under this
Loan Agreement:

                  (a) Nonpayment. Nonpayment when and as due of any principal,
         interest or other payment hereunder or under the Revolving Notes and
         the continuation of such nonpayment for a period of five (5) days.

                  (b) Breach of Covenants. Other than as set forth in Section
         8.01(a) hereof, the failure to perform and observe any covenant or
         other obligation contained herein or in any other Loan Documents and
         the continuation of such failure for a period of thirty (30) days after
         receipt of written notice from the Bank thereof.

                  (c) False Statements. If any representation or warranty made
         by a Credit Party in this Loan Agreement, any other Loan Document or in
         any document, certificate, statement or report heretofore or hereafter
         made shall be untrue in any material respect.

                  (d) Bankruptcy. In the event that a Borrower or any Guarantor

                           (1) shall make an assignment for the benefit of
                  creditors; or

                           (2) has a petition initiating a proceeding under any
                  section or chapter of the Bankruptcy Code or its amendments,
                  filed by or against a Borrower or any Guarantor and, if
                  against a Borrower or any Guarantor, such petition is not set
                  aside within ninety (90) days after such filing; or

                           (3) shall file any proceedings for dissolution or
                  liquidation; or

                           (4) has a receiver, trustee or custodian appointed
                  for all or part of its or his assets; or

                           (5) seeks to make an adjustment, settlement or
                  extension of its or his debts with its or his creditors
                  generally; or

                           (6) has a notice of an action for enforcement of a
                  lien filed or recorded or a judgment lien or execution
                  obtained against it or him in excess of an aggregate of
                  $50,000.00 which notice of lien is not removed, insured,
                  reserved for

                                       24
<PAGE>   29

                  (in amounts satisfactory to the Bank), satisfied, bonded or
                  contested in good faith within thirty (30) days after any
                  officer of a Credit Party becomes aware of such lien;

                  (e) if an event of default occurs under any agreement for
         Funded Debt by and between a Credit Party and the Bank which is in
         existence as of the date hereof or which is entered into subsequent to
         the date hereof;

                  (f) if a Credit Party in the performance of any other
         agreement for Funded Debt between it and any other lender defaults and
         such default permits such other lender to accelerate such other
         indebtedness of such Credit Party for borrowed money;

                  (g) any change shall occur with respect to the chief executive
         officer management position of the U.S. Borrower; or

                  (h) any Guarantor shall default in the performance of any
         obligation hereunder.

         8.02     REMEDIES.

         Upon the occurrence of any such Event of Default and after the
applicable grace period, if any, and unless the Bank agrees to waive in writing
such an Event of Default:

                  (a) Termination of Commitment. The Bank, in its sole
         discretion, may terminate the Commitment.

                  (b) Acceleration of Indebtedness. All of the indebtedness of
         any and every kind owing by a Credit Party to the Bank, howsoever
         evidenced, now existing or hereafter arising, shall become due and
         payable upon written notice to the U.S. Borrower (other than an Event
         of Default described in Section 8.01(d) in which case such indebtedness
         shall become due and payable immediately without necessity of written
         demand) without the necessity of any other demand, presentment, protest
         or notice upon a Credit Party, all of which are hereby expressly waived
         by the Credit Parties.

                  (c) Acceleration of Obligations. All of the obligations of the
         Credit Parties under the Loan Documents shall thereupon be immediately
         due and payable without the necessity of any other demand, presentment,
         protest or notice upon a Credit Party, all of which are hereby
         expressly waived by the Credit Parties.

                  (d) Right of Set-Off. Regardless of the adequacy of the
         collateral, the Bank shall have the right, immediately and without
         further action by it, to set-off against a Note, all money owed by the
         Bank in any capacity to a Credit Party, whether or not due, and the
         Bank shall be deemed to have exercised such right of set-off and to
         have made a charge against any such money immediately upon the
         occurrence of such event of default even though such charge is made or
         entered on the books of the Bank subsequent thereto.

                                       25
<PAGE>   30

         If the Bank exercises its right of set-off described in this paragraph,
         it will provide the U.S. Borrower, in adequate detail, a description of
         all amounts set-off against a Note.

                                   ARTICLE IX

                                  MISCELLANEOUS

         9.01     NOTICES.

         All notices and other communications hereunder shall be sufficiently
given and shall be deemed given when delivered or when mailed by registered or
certified mail, postage prepaid, addressed as follows:

                  (a)      if to the Borrower:

                           Applied Analytical Industries, Inc.
                           2320 Scientific Park Drive
                           Wilmington, North Carolina  28405

                           Attention:  Eugene T. Haley

                           Phone:           (910) 254-7000
                           Telecopy:        (910) 815-2354

                  (b)      if to the Bank

                           Bank of America, N.A.
                           155 North Front Street
                           Wilmington, North Carolina  28401

                           Attention:  David Houston

                           Phone:           (910) 251-5325
                           Telecopy:        (910) 251-5251

         9.02     WAIVER.

         No failure or delay on the part of the Bank in the exercise of any
right, power or privilege hereunder or under any other Loan Document shall
operate as a waiver of any such right, power or privilege nor shall any such
failure or delay preclude any other or further exercise thereof. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law.

                                       26
<PAGE>   31

         9.03     SURVIVAL.

         All covenants, agreements, representations and warranties made herein
and in the other Loan Documents shall survive the making by the Bank of the
Loans and the execution and delivery to the Bank of the Loan Documents and shall
continue in full force and effect so long as any of the indebtedness of the
Borrower to the Bank evidenced by the Notes or any obligations under the
Commitment remain outstanding.

         9.04     SUCCESSORS AND ASSIGNS.

         This Loan Agreement and the Loan Documents shall inure to the benefit
of and be binding upon successors and assigns of the Bank; provided, however, no
Credit Party shall assign any of its rights or obligations hereunder without the
prior written consent of the Bank.

         9.05     COSTS.

         The U.S. Borrower agrees to pay all reasonable costs and expenses in
connection with the preparation, execution, delivery and administration of the
Loan Documents and any amendments or modifications thereto, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel to the
Bank (including the allocated costs of internal counsel), and, after the
occurrence of an Event of Default, costs and expenses of the Bank in connection
with the enforcement of this Loan Agreement or the other Loan Documents
(including without limitation reasonable attorneys fees) and to hold the Bank
harmless from any and all such costs, expenses and liabilities.

         9.06     AMENDMENT; WAIVER; CONSENTS.

         No approval, decision, option or action required of the Bank
("Approval") hereunder nor any modification, amendment or waiver ("Waiver") of
any provision of this Loan Agreement or any other Loan Document nor any consent
to any departure by a Credit Party therefrom ("Consent") shall in any event be
effective unless the same shall be in writing signed by the Bank and delivered
in accordance with the provisions of Section 9.01 hereof, and then such
Approval, Waiver or Consent shall be effective only in the specific instance and
for the purpose for which given but any such Approval, Waiver or Consent when
signed shall be effective and binding upon the Bank. No notice to or demand on a
Credit Party in any case shall entitle the recipient any other or further notice
or demand in the same, similar or other circumstances.

         9.07     YEAR.

         Interest, fees and premiums hereunder shall be computed on the basis of
a three hundred sixty (360) day year for the actual number of days in the
billing period.

         9.08     PAYMENT ON BUSINESS DAY.

         Should any installment or other payment of the principal of or interest
on the Notes become due and payable on other than a Business Day, the maturity
thereof shall be extended to

                                       27
<PAGE>   32

the next succeeding Business Day thereafter and in the case of an installment of
principal, interest shall be payable thereon at the rate per annum herein
specified during such extension.

         9.09     COUNTERPARTS.

         This Loan Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original, and it
shall not be necessary in making proof of this Loan Agreement to produce or
account for more than one such counterpart.

         9.10     ASSIGNMENT.

         The Bank may, at any time, transfer or assign all or any portion of the
indebtedness evidenced by a Note held by the Bank and the terms hereof shall
extend to any subsequent holder of a Note.

         9.11     TERM.

         The term of this Loan Agreement shall be until the Bank is no longer
obligated to lend under the Commitment and the Bank has received payment in full
of the unpaid principal and interest of the Notes.

         9.12     CAPTIONS.

         The captions herein are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope of this Loan
Agreement nor the interest of any provisions hereof.

         9.13     GOVERNING LAW.

         This Loan Agreement and the other Loan Documents and all matters
relating thereto shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina. Each Credit Party
hereby submits to the jurisdiction and venue of the state and federal courts of
North Carolina and agrees that the Bank may, at its option, enforce its rights
under the Loan Documents in such courts. The Credit Parties hereby agrees that
both the federal and state courts in Mecklenburg County, North Carolina are a
convenient forum and agrees not to raise as a defense that such courts are not a
convenient forum.

         9.14     ARBITRATION.

         ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING
BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS INSTRUMENT,
AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS,
INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE
DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT
(OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND

                                       28
<PAGE>   33

PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS LOAN AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS LOAN
AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.

                  A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE
CITY OF THE BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS INSTRUMENT,
AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OR CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.

                  B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION
PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
ARBITRATION PROVISION; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION
AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW;
OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES
SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF
POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF
HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER
THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN
ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASSIONING RESORT TO SUCH
REMEDIES.

         9.15     LOAN DOCUMENTS.

         The Bank agrees to provide the U.S. Borrower with copies of all of the
Loan Documents in acceptable electronic format.

                                       29
<PAGE>   34

         9.16     BINDING EFFECT; REPLACEMENT OF EXISTING LOAN AGREEMENT;
                  TERMINATION.

                  (a) This Loan Agreement shall become effective at such time on
         or after the Closing Date when it shall have been executed by the
         Credit Parties and the Bank, and thereafter this Loan Agreement shall
         be binding upon and inure to the benefit of the Credit Parties and the
         Bank and their respective successors and assigns. The Credit Parties
         and the Bank each hereby agrees that, at such time as this Loan
         Agreement shall have become effective pursuant to the terms of the
         immediately preceding sentence, (i) the Existing Loan Agreement
         automatically shall be deemed amended, restated and replaced in its
         entirety by this Loan Agreement, and all obligations and commitments
         outstanding under the Existing Loan Agreement shall be governed by the
         terms of this Loan Agreement (as such obligations or commitments may be
         modified or amended hereunder) and (ii) the promissory notes executed
         by the U.S. Borrower in connection with the Existing Loan Agreement
         automatically shall be substituted and replaced by the promissory notes
         executed in connection with this Loan Agreement. The Credit Parties
         further agree, upon the request of the Bank, to promptly take such
         actions, as reasonably requested, as are appropriate to carry out the
         intent of this Loan Agreement and the other Loan Documents, including,
         but not limited to, such actions as are reasonably necessary to ensure
         that the Bank has a perfected security interest in any and all
         collateral securing the Credit Parties' obligations hereunder and under
         the other Loan Documents, subject to no Liens other than Permitted
         Liens.

                  (b) The term of this Loan Agreement shall commence on the
         effective date pursuant to subsection (a) above and shall continue
         until no Loans or any other amounts payable hereunder or under any of
         the other Loan Documents shall remain outstanding and until the
         Commitment hereunder shall have expired or been terminated.

                                    ARTICLE X

                                    GUARANTY

         10.01    GUARANTY.

         Each of the Guarantors hereby jointly and severally guarantees to the
Bank as hereinafter provided the prompt payment of the Guaranteed Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise and after giving effect to any grace periods) strictly
in accordance with the terms hereof. Each of the Guarantors hereby further
agrees that if any of the Guaranteed Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration or
otherwise and after giving effect to any grace periods), such Guarantor will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration or otherwise and
after giving effect to any

                                       30
<PAGE>   35

grace periods) in accordance with the terms of such extension or renewal. This
is a guaranty of payment and not of collection.

         Notwithstanding any provision to the contrary contained herein or in
any other of the Loan Documents, to the extent the obligations of any Guarantor
as guarantor hereunder shall be adjudicated to be invalid or unenforceable for
any reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the
obligations of such Guarantor hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or state and
including, without limitation, the Federal Bankruptcy Code).

         10.02    OBLIGATIONS UNCONDITIONAL.

         The obligations of the Guarantors under Section 10.01 hereof are
absolute and unconditional, irrespective of the value, genuineness, validity,
regularity or enforceability of this Agreement or any of the other Loan
Documents, or any other agreement or instrument referred to herein or therein or
relating hereto or thereto, or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 10.02 that the obligations of the Guarantors hereunder shall be absolute
and unconditional under any and all circumstances. Each of the Guarantors agrees
that it shall have no right of subrogation, indemnity, reimbursement or
contribution against a Borrower or any other guarantor for amounts paid under
this Guaranty until such time as the Bank has been paid in full, the Commitment,
if any, has been terminated and no Person or governmental authority shall have
any right to request any return or reimbursement of funds from the Bank in
connection with monies received under the Loan Documents. Without limiting the
generality of the foregoing, it is agreed that, to the fullest extent permitted
by law, the occurrence of any one or more of the following shall not alter or
impair the liability of the Guarantors hereunder which shall remain absolute and
unconditional as described above:

                  (i) at any time or from time to time, without notice to the
         Guarantors, the time for any performance of or compliance with any of
         the Guaranteed Obligations shall be extended, or such performance or
         compliance shall be waived;

                  (ii) any of the acts mentioned in any of the provisions of
         this Agreement or any of the other Loan Documents or any other
         agreement or instrument referred to herein or therein or relating
         hereto or thereto shall be done or omitted;

                  (iii) the maturity of any of the Guaranteed Obligations shall
         be accelerated, or any of the Guaranteed Obligations shall be modified,
         supplemented or amended in any respect, or any right under any of the
         Loan Documents or any other agreement or instrument referred to in the
         Loan Documents shall be waived or any other guarantee of any of the
         Guaranteed Obligations or any security therefor shall be released or
         exchanged in whole or in part or otherwise dealt with;

                                       31
<PAGE>   36

                  (iv) any lien granted to, or in favor of, the Bank as security
         for any of the Guaranteed Obligations shall fail to attach or be
         perfected or shall be released or discharged in whole or in part; or

                  (v) any of the Guaranteed Obligations shall be determined to
         be void or voidable (including, without limitation, for the benefit of
         any creditor of any Guarantor or any other guarantor) or shall be
         subordinated to the claims of any Person (including, without
         limitation, any creditor of any guarantor).

         With respect to its obligations hereunder, each of the Guarantors
hereby expressly waives diligence, presentment, demand of payment, protest and
all notices whatsoever, and any requirement that the Bank exhaust any right,
power or remedy or proceed against any Person under this Agreement or any of the
other Loan Documents or any other agreement or instrument referred to herein or
therein or relating hereto or thereto, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.

         10.03    REINSTATEMENT.

         The obligations of the Guarantors under this Article X shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Guaranteed Obligations is rescinded
or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each of the Guarantors agrees that it will
indemnify the Bank on demand for all reasonable costs and expenses (including,
without limitation, fees and expenses of counsel) incurred by the Bank in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.

         10.04    CERTAIN ADDITIONAL WAIVERS.

         Without limiting the generality of the provisions of this Article X,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss.
26-7 through 26-9 inclusive. Each of the Guarantors agrees that it shall have no
right of recourse to security for the Guaranteed Obligations, except through the
exercise of the rights of subrogation pursuant to Section 10.02.

         10.05    REMEDIES.

         Each of the Guarantors agrees that, to the fullest extent permitted by
law, as between the Guarantors, on the one hand, and the Bank, on the other
hand, the Guaranteed Obligations may be declared to be forthwith due and payable
as provided in Article VIII hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Article
VIII) for purposes of Section 10.01 hereof notwithstanding any stay, injunction
or other prohibition preventing such declaration (or preventing the Guaranteed
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Guaranteed Obligations
being deemed to have become automatically due and payable), the Guaranteed
Obligations (whether or not due and payable by any other Person) shall forthwith

                                       32
<PAGE>   37

become due and payable by the Guarantors for purposes of said Section 10.01. The
Guarantors acknowledge and agree that their obligations hereunder are secured in
accordance with the terms of the Security Documents and that the Bank may
exercise remedies thereunder in accordance with the terms thereof.

         10.06    CONTINUING GUARANTEE.

         The guarantee in this Article X is a continuing guarantee, and shall
apply to all Guaranteed Obligations whenever arising.

         10.07    RIGHTS OF CONTRIBUTION.

                  (a) With respect to the Domestic Subsidiaries in their
         capacities as Guarantors, such Guarantors agree among themselves that,
         in connection with payments made hereunder, each such Guarantor shall
         have contribution rights against the other such Guarantors as permitted
         under applicable law. Such contribution rights shall be subordinate and
         subject in right of payment to the obligations of such Guarantors under
         the Loan Documents and no such Guarantor shall exercise such rights of
         contribution until all Guaranteed Obligations have been paid in full
         and the Commitment terminated.

                  (b) With respect to the U.S. Borrower and the Foreign
         Subsidiaries in their capacities as Guarantors, such Guarantors agree
         among themselves that, in connection with payments made hereunder, each
         such Guarantor shall have contribution rights against the other such
         Guarantors as permitted under applicable law. Such contribution rights
         shall be subordinate and subject in right of payment to the obligations
         of such Guarantors under the Loan Documents and no such Guarantor shall
         exercise such rights of contribution until all Guaranteed Obligations
         have been paid in full and the Commitment terminated.

                                       33
<PAGE>   38

         IN WITNESS WHEREOF, the parties hereto have executed or caused this
instrument to be executed under seal as of the day and year first above written.

U.S. BORROWER
AND A GUARANTOR:                          APPLIED ANALYTICAL INDUSTRIES, INC.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

GERMAN BORROWER:                          AAI APPLIED ANALYTICAL INDUSTRIES
                                          DEUTSCHLAND GmbH & CO. KG

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

DOMESTIC SUBSIDIARIES:                    APPLIED ANALYTICAL INDUSTRIES
                                          LEARNING CENTER, INC.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          AAI TECHNOLOGIES, INC.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          AAI PROPERTIES, INC.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          KANSAS CITY ANALYTICAL SERVICES, INC.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

<PAGE>   39

                                          MEDICAL & TECHNICAL RESEARCH
                                          ASSOCIATES, INC.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          AAI JAPAN, INC.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

FOREIGN SUBSIDIARIES:                     APPLIED ANALYTICAL INDUSTRIES
                                          ITALY, S.r.l.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          AAI UK LTD.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          AAI VERMOGENSVER-
                                          WALTUNGSGESELLSCHAFT mgH

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          L.A.B. VERWALTUNGS-GESELLSCHAFT mbH

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          APPLIED ANALYTICAL INDUSTRIES
                                          DEUTSCHLAND GmbH

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

<PAGE>   40

                                          L.A.B. BENELUX B.V.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          APPLIED ANALYTICAL INDUSTRIES
                                          FRANCE S.A.R.L.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          NEOSAN ARZNEIMITTEL-
                                          VERTRIEBSGESELLSCHAFT mbH

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          I.P.A.- INTERNATIONALE PHARMA
                                          AGENTUR GmbH

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          INPHARMCO GESELLSCHAFT zur
                                          VERMARKTUNG VON ARZNEIMITTELN mbH

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          LAB (GREAT BRITAIN) LIMITED

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          PROSCIENTIA HOLDING AG

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

<PAGE>   41

                                          TECHNOPHARM S.A.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

BANK:                                     BANK OF AMERICA, N.A.

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:<PAGE>   1

                                                                     EXHIBIT 4.7

                       FIRST AMENDMENT TO CREDIT AGREEMENT
                                   AND WAIVER

         THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER, dated as of the
15th day of November, 1999 (this "Amendment"), is made among MATRIA HEALTHCARE,
INC., a Delaware corporation (the "Borrower"), the Required Lenders (as defined
in the Credit Agreement referred to below), and FIRST UNION NATIONAL BANK, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent").

                                    RECITALS

         A. The Borrower, certain banks and other financial institutions, the
Administrative Agent, and Harris Trust and Savings Bank, as Co-Agent, are
parties to a Credit Agreement, dated as of January 19, 1999 (the "Credit
Agreement"), providing for the availability of certain credit facilities to the
Borrower upon the terms and conditions set forth therein. Capitalized terms used
herein without definition shall have the meanings given to them in the Credit
Agreement.

         B. The Borrower and the Required Lenders have agreed to amend the
Credit Agreement, and the Required Lenders have agreed to waive certain
requirements contained therein, upon the terms and conditions set forth herein.

                             STATEMENT OF AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                                    ARTICLE I

                                   AMENDMENTS

       1.1  Applicable Margin Percentages. The pricing matrix contained in the
definition of "Applicable Margin Percentage" set forth in SECTION 1.1 of the
Credit Agreement is hereby amended and restated in its entirety as follows:

<PAGE>   2

<TABLE>
<CAPTION>
                                                                        Applicable Margin
                                                                     Percentage for Foreign
                                               Applicable Margin       Currency Revolving
                                                Percentage for             Loans and
               Leverage Ratio                   Base Rate Loans           LIBOR Loans
               --------------                  -----------------     ----------------------
  <S>                                               <C>                    <C>
    Greater than or equal to 3.0 to 1.0 .            2.250%                 3.250%
  Greater than or equal to 2.5 to 1.0 but
            less than 3.0 to 1.0                     2.000%                 3.000%
  Greater than or equal to 2.0 to 1.0 but
            less than 2.5 to 1.0                     1.750%                 2.750%
  Greater than or equal to 1.5 to 1.0 but
            less than 2.0 to 1.0                     1.500%                 2.500%
            Less than 1.5 to 1.0                     1.250%                 2.250%
</TABLE>

                                   ARTICLE II

                                     WAIVER

         2.1 Interest Rate Protection. In consideration of the agreement by the
Borrower to the amendments set forth in SECTION 1.1, the Required Lenders hereby
agree to waive any Default or Event of Default arising from noncompliance by the
Borrower with SECTION 6.8 of the Credit Agreement (Interest Rate Protection).
The waiver of the Required Lenders set forth herein is limited as specified and
shall not constitute or be deemed to constitute an amendment, modification or
waiver of any provision of the Credit Agreement or a waiver of any Default or
Event of Default except as expressly set forth herein.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         The Borrower hereby represents and warrants as follows:

         3.1  Representations and Warranties. Each of the representations and
warranties of the Borrower contained in the Credit Agreement and in the other
Credit Documents will be true and correct on and as of the Amendment Effective
Date (as hereinafter defined) and after giving effect to this Amendment with the
same effect as if made on and as of such date (except to the extent any such
representation or warranty is expressly stated to have been made as of a
specific date, in which case such representation or warranty is true and correct
as of such date).

                                       2

<PAGE>   3

       3.2  No Default. On and as of the Amendment Effective Date and after
giving effect to this Amendment, no Default or Event of Default will have
occurred and be continuing.

                                   ARTICLE IV

                                  MISCELLANEOUS

       4.1 Effect of Amendment. From and after the effective date of the
amendments to the Credit Agreement set forth herein, all references to the
Credit Agreement set forth in any other Credit Document or other agreement or
instrument shall, unless otherwise specifically provided, be references to the
Credit Agreement as amended by this Amendment and as may be further amended,
modified, restated or supplemented from time to time. This Amendment is limited
as specified and shall not constitute or be deemed to constitute an amendment,
modification or waiver of any provision of the Credit Agreement except as
expressly set forth herein. Except as expressly amended hereby, the Credit
Agreement shall remain in full force and effect in accordance with its terms.

       4.2 Governing Law. This Amendment shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia (without regard to
the conflicts of law provisions thereof).

         4.3 Severability. To the extent any provision of this Amendment is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in any such jurisdiction, without prohibiting or
invalidating such provision in any other jurisdiction or the remaining
provisions of this Amendment in any jurisdiction.

       4.4 Successors and Assigns. This Amendment shall be binding upon, inure
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.

       4.5 Construction. The headings of the various sections and subsections of
this Amendment have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof.

       4.6 Counterparts; Effectiveness. This Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. This Amendment
shall become effective on the date (the "Amendment Effective Date") upon which
the Administrative Agent shall have received an executed counterpart hereof from
each of the Borrower and the Required Lenders.

                                       3

<PAGE>   4

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.

                                      MATRIA HEALTHCARE, INC.

                                      By:      /s/ Donald R. Millard
                                               --------------------------------
                                      Title:   President and CEO

                                      FIRST UNION NATIONAL BANK, as
                                      Administrative Agent and as Lender

                                      By:      /s/ J. Matthew MacIver, Jr.
                                               --------------------------------
                                      Title:   Vice President

                                      HARRIS TRUST AND SAVINGS BANK,
                                      as Co-Agent and as Lender

                                      By:      /s/ Stan C. Rosendahl
                                               --------------------------------
                                      Title:   Vice President

                                      BANKERS TRUST COMPANY

                                      By:      /s/ G. Andrew Keith
                                               --------------------------------
                                      Title:   Principal

                                       4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00006-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00006-of-00352.parquet"}]]