Document:

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                                                                    Exhibit 10.7

                                WARRANT AGREEMENT

                  THE WARRANT AGREEMENT (this "Agreement"), executed and
effective as of September 20, 2001, is and entered into by and between Frisby
Technologies Inc., a Delaware corporation (the "Company"), and the investor
party hereto named on the signature page hereof ("Buyer").

                                    Recitals:

                  A. As of the effective date hereof, Buyer has purchased 25,000
units ("Units"), with each Unit consisting of one share of the Company's common
stock, par value $.001 per share ("Company Common Stock"), and a warrant to
purchase one share of Company Common Stock.

                  B. Accordingly, the Company desires to grant to Buyer the
right to purchase 25,000 shares of Company Common Stock on the terms and
conditions set forth in this Agreement and in the Warrant Certificate (as
defined in Section 1). The right to purchase Company Common Stock granted
pursuant to this Agreement and the Warrant Certificate is referred to herein as
the "Warrant" and the shares of Company Common Stock and other securities
issuable upon the exercise of the Warrant are referred to herein as the "Warrant
Shares."

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

                  SECTION 1. Warrant Certificate. The Company will issue and
deliver a certificate evidencing the Warrant upon execution and delivery of this
Agreement, which certificate will be substantially in the form attached hereto
as Exhibit A (the "Warrant Certificate"). The Warrant Certificate will be dated
the date of issuance by the Company.

                  SECTION 2. Execution of Warrant Certificate. Warrant
Certificates will be signed on behalf of the Company by an authorized officer.

                  SECTION 3. Registration in Warrant Register. The Company will
number and register Warrant Certificates in its register (the "Warrant
Register") when issued. The Company may deem and treat the registered holder
from time to time of the Warrant Certificates (the "Holder") as the owner
thereof (notwithstanding any notation of ownership or other writing thereon made
by anyone) for all purposes and will not be affected by any notice to the
contrary. The Warrant Certificate initially issuable hereunder will be
registered initially in the name of Buyer.

                  SECTION 4. Transfer. Except as expressly permitted by this
Agreement, neither this Agreement, the Warrant, the Warrant Certificate nor the
Warrant Shares may be transferred, assigned, sold or otherwise disposed of
without the prior written consent of the Company, except in conjunction with an
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), and all applicable state securities laws, or an exemption from
registration under the Act and all applicable state securities laws. In the
absence of an effective registration under the Act, it

<PAGE>

shall be a condition to any such transfer, assignment, sale or other disposition
that the transferor first deliver to the Company a legal opinion from counsel,
in form and substance reasonably satisfactory to the Company, providing that
such transfer, assignment, sale or other disposition may be made pursuant to a
valid exemption under the Act and all applicable state securities laws and is
otherwise in compliance with the Act and all applicable state securities laws.
Until such time as the same have been registered under the Act, each Warrant
Certificate and each issued and outstanding Warrant Share will bear a legend
substantially to the effect set forth on the first page of the Warrant
Certificate.

                  SECTION 5. Exercise of Warrant.

                  (a) Subject to the terms of this Agreement, each Holder will
have the right, which may be exercised commencing on the date on which the form
of election to purchase annexed to the Warrant Certificate (the "Exercise
Notice") is delivered pursuant to Section 5(c), to receive from the Company the
number of fully paid and nonassessable Warrant Shares that the Holder may at the
time be entitled to receive upon exercise of the Warrant and payment of the
Exercise Price (as defined in Section 5(b)) then in effect for such Warrant
Shares. The right to exercise the Warrant will, notwithstanding anything to the
contrary contained herein, expire at 5:00 p.m., Winston-Salem time, on the fifth
anniversary of the effective date hereof (the "Expiration Date"). The
unexercised portion of the Warrant as of the Expiration Date will become void
and all rights hereunder and all rights in respect thereof under this Agreement
will cease as of such time.

                  (b) The price at which the Warrant may be exercised (the
"Exercise Price") will be $6.00 per Warrant Share, subject to adjustment
pursuant to the terms hereof.

                  (c) The Warrant may be exercised upon surrender to the Company
at its office designated for such purpose (as provided for in Section 11) of the
Warrant Certificate or Warrant Certificates to be exercised with the Exercise
Notice duly filled in and signed and payment to the Company of the Exercise
Price for the number of Warrant Shares in respect of which the Warrant is then
exercised. Payment of the aggregate Exercise Price will be made to the Company
in cash by wire transfer in immediately available funds to an account specified
by the Company to the Holder.

                  (d) Subject to the provisions of Section 6, as promptly as
reasonably practicable (but in any event within 14 days) after the exercise of
the Warrant in accordance with the terms set forth in Section 5(c), the Company
will issue and cause to be delivered to the Holder (or, subject to Section 4,
upon the written order of the Holder, to such person or persons as the Holder
may designate with the prior written consent of the Company which will not be
unreasonably withheld or delayed), a certificate or certificates for the number
of full Warrant Shares issuable upon the exercise of the Warrant in accordance
with the terms of this Agreement. The certificate or certificates for such
Warrant Shares will be deemed to have been issued and the Person (as defined in
Section 16) so named therein will be deemed to have become a holder of record of
such Warrant Shares as of the date of the surrender of the Warrant and payment
of the Exercise Price, irrespective of the date of delivery of such certificate
or certificates for Warrant Shares.

                  (e) Subject to the terms of this Agreement, the Warrant will
be exercisable, at the election of the Holder, either in full or from time to
time in part and, in the event that a Warrant Certificate is exercised in part
at any time prior to the Expiration Date, a new Warrant Certificate covering the
Warrant Shares for which the Warrant remains exercisable will be issued,
executed and delivered pursuant to the provisions of this Section 5(e) and
Section 2.

<PAGE>

                  (f) All Warrant Certificates surrendered upon exercise of the
Warrant will be cancelled and disposed of by the Company. The Company will keep
copies of this Agreement and any notices given or received hereunder available
for inspection by the Holder during normal business hours at its principal
offices.

                  SECTION 6. Payment of Taxes. The Company will pay all
documentary stamp taxes and other similar governmental charges (excluding all
foreign, federal, state and local income, capital gain, franchise, property,
estate, inheritance, gift or similar taxes) in connection with the issuance or
delivery of the Warrant and in connection with the initial issuance or delivery
of Warrant Shares upon the exercise of the Warrant in accordance with the terms
of this Agreement. The Company will not, however, be required to pay any tax
that may be payable in respect of any subsequent transfer of the Warrant or the
Warrant Shares or any transfer involved in the issuance and delivery of Warrant
Shares in a name other than that in which the Warrant to which such issuance
relates were registered, and, if any such tax would otherwise be payable by the
Company, no such issuance or delivery will be made unless and until the Person
requesting such issuance has paid to the Company the amount of any such tax, or
it is established to the reasonable satisfaction of the Company that any such
tax has been paid.

                  SECTION 7. Mutilated or Missing Warrant Certificates. If a
mutilated Warrant Certificate is surrendered to the Company, or if the Holder of
a Warrant Certificate claims and submits an affidavit or other evidence
satisfactory to the Company to the effect that the Warrant Certificate has been
lost, destroyed or wrongfully taken, the Company will issue a replacement
Warrant Certificate. Notwithstanding the foregoing, if required by the Company,
such Holder shall provide an indemnity bond, or other form of indemnity (which
may, if accepted by the Company, include an unsecured written agreement to
indemnify the Company), sufficient in the judgment of the Company to protect the
Company from any loss that it may suffer if a Warrant Certificate is replaced.

                  SECTION 8. Reservation of Warrant Shares.

                  (a) The Company will at all times reserve and keep available
out of the aggregate of its authorized but unissued Company Common Stock or its
authorized and issued Company Common Stock held in its treasury, for the purpose
of enabling it to satisfy any obligation to issue Warrant Shares upon exercise
of the Warrant, the maximum number of shares of Company Common Stock which may
then be deliverable upon the exercise in full of the Warrant.

                  (b) The Company covenants that all Warrant Shares and other
capital stock issued upon exercise of the Warrant will, upon payment of the
Exercise Price therefor and issue thereof, be validly authorized and issued,
fully paid, nonassessable and free, subject to Section 6, from all taxes, liens,
charges and security interests with respect to the issue thereof, except that
such Warrant Shares will be subject to the terms and conditions of this
Agreement.

                  SECTION 9. Adjustment of Exercise Price and Warrant Number.

                  (a) Initial Number of Warrant Shares. The number of Warrant
Shares issuable upon the exercise of the Warrant shall be 25,000 subject to
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Section 9.

                  (b) Adjustment for Changes in Capital Stock. If the Company:

<PAGE>

                           (i) makes a distribution on its Company Common Stock
in shares of its Company Common Stock or in shares of its capital stock other
than Company Common Stock;

                           (ii) subdivides or reclassifies its outstanding
shares of Company Common Stock into a greater number of shares;

                           (iii) combines or reclassifies its outstanding shares
of Company Common Stock into a smaller number of shares; or

                           (iv) issues by reclassification of its Company Common
Stock any shares of its capital stock (other than reclassifications arising
solely as a result of a change in the par value of the Company Common Stock);

then the number of Warrant Shares issuable upon the exercise of the Warrant
immediately prior to such action will be proportionately adjusted so that the
Holder of any Warrant thereafter exercised may receive the aggregate number and
kind of shares of capital stock of the Company which such Holder would have
owned immediately following such action if such Warrant had been exercised
immediately prior to such action.

                  (c) Effective Date of Adjustment for Changes in Capital Stock.
The adjustment will become effective immediately after the record date with
respect to any of the actions described in Section 9(b).

                  (d) Successive Adjustments for Changes in Capital Stock; No
Conflict With Adjustments for Other Distributions. Adjustments for changes in
capital stock described in Section 9(b) will be made successively whenever any
such event occurs. If the occurrence of any event listed above results in an
adjustment under Section 9(f), no further adjustment will be made under Section
9(b).

                  (e) Reserved.

                  (f) Adjustment for Other Distributions. If the Company
distributes to all holders of Company Common Stock (i) any evidences of
indebtedness of the Company or any of its subsidiaries, (ii) any assets of the
Company or any of its subsidiaries (including distributions of cash on Company
Common Stock), or (iii) any rights, options or warrants to acquire any of the
foregoing or to acquire any other securities of the Company, the number of
Warrant Shares issuable upon the exercise of the Warrant will be adjusted in
accordance with the formula:
                                       _      _
                           W'  =  W x |  M     |
                                      | ------ |
                                      |_ M - F_|

          where:
          W'       =        the adjusted number of Warrant Shares.
          W        =        the number of Warrant Shares issuable upon
                            the exercise of the Warrant immediately
                            prior to the record date for such event.
          M        =        the fair market value (as determined in
                            the good faith judgment of the Board of
                            Directors of the Company) of all issued and
                            outstanding shares of the Company capital
                            stock (immediately prior to such
                            distribution).

<PAGE>

          F        =        the fair market value (as determined in
                            the good faith judgment of the Board of
                            Directors of the Company) on the record date
                            for such event of all of the shares, the
                            indebtedness, assets, rights, options or
                            warrants so distributable.

                  (g) Successive Adjustments for Other Distributions;
Re-adjustment of Fair Market Value under Certain Circumstances. The adjustment
described in Section 9(f) will be made successively whenever any such
distribution is made and will become effective immediately after the record date
for the determination of stockholders entitled to receive the distribution. If
an adjustment is made pursuant to Section 9(f) as a result of the issuance of
rights, options or warrants and at the end of the period during which any such
rights, options or warrants are exercisable, not all such rights, options or
warrants shall have been exercised, the adjusted number of Warrant Shares will
be immediately readjusted as if "F" in the above formula was the fair market
value on the record date of the indebtedness or assets actually distributed upon
exercise of such rights, options or warrants.

                  Section 9(f) does not apply to any transaction described in
Section 9(b).

                  (h) Adjustment to Exercise Price. Upon each adjustment to the
number of Warrant Shares issuable upon the exercise of the Warrant pursuant to
this Section 9, the Exercise Price will be adjusted so that it is equal to the
Exercise Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which is the number of Warrant Shares issuable upon
the exercise of the Warrant immediately prior to such adjustment, and the
denominator of which is the number of Warrant Shares issuable upon the exercise
of the Warrant immediately after such adjustment; provided, that in no event
shall the Exercise Price be less than the then current par value of the Common
Stock.

                  (i) When No Adjustment Required. If an adjustment is made upon
the establishment of a record date for a distribution subject to Sections 9(b)
or 9(f) and such distribution is subsequently cancelled, the number of Warrant
Shares issuable upon the exercise of the Warrant and Exercise Price then in
effect will be readjusted, effective as of the date when the Board of Directors
determines to cancel such distribution, to that which would have been in effect
if such record date had not been fixed.

                  (j) Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price is adjusted, the Company will provide the notices
required by Section 10.

                  (k) Other Dilutive Events. Notwithstanding anything to the
contrary contained in this Section 9, no adjustment to the Exercise Price and
the number of Warrant Shares will be made in connection with the issuance of
additional securities by the Company for incremental equity capital.

                  SECTION 10. Notices to Warrant Holders.

                  (a) Promptly (but in no event more than ten days) after any
adjustment pursuant to Section 9, the Company will (i) cause to be filed with
the Company a certificate of an officer of the Company setting forth the number
of Warrant Shares issuable upon the exercise of the Warrant and the Exercise
Price after such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based, and (ii) cause
to be given to the Holder at its address appearing on the Warrant Register
written notice of such adjustments. Where

<PAGE>

appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 10.

                  (b) In the event (i) the Company authorizes the distribution
to all holders of shares of Company Common Stock of assets, including cash,
evidences of its indebtedness, or other securities; (ii) of any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or of the conveyance or transfer of all
or substantially all of the properties and assets of the Company, or of any
reclassification or other change of Company Common Stock issuable upon exercise
of the Warrant (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination); or (iii) the Company proposes to take any other action that would
require an adjustment to the Warrant Shares or the Exercise Price pursuant to
Section 9, then, in any such case, the Company will cause to be given to each
Holder at its address appearing on the Warrant Register, at least ten days prior
to the applicable record date hereinafter specified, or the date of the event in
the case of events for which there is no record date, in accordance with the
provisions of Section 11, a written notice with respect to any such action or
event. The failure to give the notice required by this Section 10 or any defect
therein shall not affect the legality or validity of any such action or event.

                  (c) Nothing contained in this Agreement or in any Warrant
Certificate will be construed as conferring upon the Holder (prior to the
exercise of the Warrant in accordance with the terms of this Agreement) the
right to vote or to consent or to receive notice as stockholder in respect of
the meetings of stockholders or the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company; provided,
however, that nothing in the foregoing provision is intended to detract from any
rights explicitly granted to any Holder hereunder.

                  SECTION 11. Notices to the Company and Warrant Holders. All
notices and other communications provided for or permitted hereunder will be
made by hand delivery, first-class mail, telex or telecopier (with telephone
confirmation of delivery thereof), or overnight air courier guaranteeing next
day delivery as provided in Schedule 1 hereto.

                  All such notices and communications will be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back if telexed; when receipt acknowledged, if telecopied; and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. The parties may change the addresses to
which notices are to be given by giving five days' prior written notice of such
change in accordance herewith.

                  SECTION 12. Certain Supplements and Amendments. The Company
may from time to time supplement or amend this Agreement without the approval of
the Holder in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable;
provided that any such supplement or amendment will not adversely affect the
interests of the Holder.

                  SECTION 13. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company will bind and inure to the
benefit of its respective successors and assigns hereunder.

<PAGE>

                  SECTION 14. Termination. This Agreement will terminate upon
the earlier to occur of the Expiration Date and the date on which the Warrant
shall have been exercised in full pursuant to this Agreement.

                  SECTION 15. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the state of Delaware, without
regard to the principles of conflicts of law.

                  SECTION 16. Benefits of this Agreement. Except as otherwise
expressly set forth in this Agreement, nothing in this Agreement will be
construed to give to any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust or association (each a "Person") other than the Company
and the Holder any legal or equitable right, remedy or claim under this
Agreement; but this Agreement will be for the sole and exclusive benefit of the
Company and the Holder.

                  SECTION 17. Certain Interpretive Matters. Unless the context
otherwise requires: (a) words in the singular include plural and in the plural
include the singular; (b) "or" is disjunctive but not exclusive; (c) "including"
means "including, without limitation"; (d) masculine pronouns include the
feminine pronouns and feminine pronouns include the masculine pronouns; (e) the
term "day' will mean calendar day; and (f) all references herein to Sections,
Exhibits or Schedules are references to Sections of or Exhibits or Schedules to
this Agreement, unless otherwise specified.

                  SECTION 18. Counterparts. This Agreement may be executed in
two counterparts, each of which shall for all purposes be deemed to be an
original and all such counterparts will together constitute but one and the same
instrument.

                  IN WITNESS WHEREOF, the parties hereto have caused the Warrant
Agreement to be duly executed as of the day and year first above written.

                                            FRISBY TECHNOLOGIES, INC.

                                            By:   /s/ Duncan R. Russell
                                                 ----------------------
                                                      Duncan R. Russell
                                                      President

                                                  /s/ Gregory S. Frisby
                                                 ----------------------
                                                      Gregory S. Frisby

<PAGE>

Schedule
--------

Schedule 1        Notices

Exhibits
--------

Exhibit A         Form of Warrant Certificate
Exhibit B         Form of Election to Purchase
Exhibit C         Form of Assignment

<PAGE>

Schedule 1

Notices

                  (a)      if to Buyer, at:

                           Gregory S. Frisby
                           3195 Centre Park Boulevard
                           Winston-Salem, North Carolina 27107

                           and

                  (b)      if to the Company, at:

                           Frisby Technologies, Inc.
                           3195 Centre Park Boulevard
                           Winston-Salem, North Carolina 27107
                           Facsimile No.: (336) 784-8682
                           Attention:  John Ruggiero, Chief Financial Officer

                           with a copy to:

                           Womble Carlyle Sandridge & Rice, PLLC
                           200 West Second Street
                           Winston-Salem, North Carolina 27101
                           Facsimile No.: (336) 733-8371
                           Attention: Jeffrey C. Howland and Peter A. Zorn

<PAGE>

EXHIBIT A

                           FORM OF WARRANT CERTIFICATE

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A WARRANT
AGREEMENT EXECUTED AND EFFECTIVE SEPTEMBER 20, 2001 BETWEEN THE ISSUER OF SUCH
SECURITIES AND THE BUYER REFERRED TO THEREIN. A COPY OF THE WARRANT AGREEMENT
WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON
WRITTEN REQUEST.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS
THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL, OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.

No.  W-26                                                        [25,000 Shares]

                            FRISBY TECHNOLOGIES, INC.

                  The Warrant Certificate certifies that Gregory S. Frisby, or
his or its registered assigns, is the registered holder of a warrant (the
"Warrant") to purchase the number of shares of common stock, par value $.001 per
share (the "Company Common Stock"), of Frisby Technologies, Inc., a Delaware
corporation (the "Company"), set forth above ("Warrant Shares") at the initial
exercise price (the "Exercise Price") equal to $6.00 per Warrant Share, payable
in lawful money of the United States of America, upon surrender of the Warrant
Certificate and payment of the Exercise Price at the office of the Company
designated for such purpose, but only subject to the conditions set forth herein
and in the Warrant Agreement referred to hereinafter. The Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrant are subject to
adjustment upon the occurrence of certain events, as set forth in the Warrant
Agreement. The Warrant is exercisable at any time prior to the Expiration Date
(as defined in the Warrant Agreement).

<PAGE>

                  The Warrant evidenced by this Warrant Certificate is issued
pursuant to a Warrant Agreement executed and effective as of September 20, 2001
(the "Warrant Agreement") duly executed and delivered by the Company, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrant. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company. Capitalized
terms used and not defined herein shall have the meaning ascribed thereto in the
Warrant Agreement. In the event of any conflict or inconsistency between the
terms of the Warrant Certificate and the Warrant Agreement, the Warrant
Agreement will govern.

                  The holder of the Warrant evidenced by the Warrant Certificate
may exercise such Warrant under and pursuant to the terms and conditions of the
Warrant Agreement by surrendering the Warrant Certificate, with the form of
election to purchase set forth hereon (and by this reference made a part hereof)
properly completed and executed, together with payment of the Exercise Price in
cash by wire transfer in immediately available funds. In the event that the
number of Warrant Shares for which the Warrant is exercised is less than the
maximum number of Warrant Shares for which the Warrant is exercisable, the
Company will issue to the holder hereof (or, if permitted, its registered
assignee) a new Warrant Certificate evidencing the remaining Warrant Shares.

                  The Warrant Agreement provides that upon the occurrence of
certain events the number of Warrant Shares issuable upon exercise of the
Warrant and the Exercise Price may, subject to certain conditions, be adjusted.

                  Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrant Shares.

                  Subject to the terms and conditions of the Warrant Agreement,
upon due presentation for registration of transfer of the Warrant Certificate at
the office of the Company a new Warrant Certificate or Warrant Certificates of
like tenor and evidencing in the aggregate a like number of Warrant Shares will
be issued to the transferee(s) in exchange for the Warrant Certificate, subject
to the limitations provided in the Warrant Agreement, without charge except for
any tax or other governmental charge imposed in connection therewith.

                  The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of the Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, of any distribution to the holder(s) hereof, and for all
other purposes, and the Company will not be affected by any notice to the
contrary. Neither the Warrant nor the Warrant Certificate entitles any holder
hereof to any rights of a stockholder of the Company.

                  [remainder of page intentionally left blank]

<PAGE>

                  IN WITNESS WHEREOF, Frisby Technologies, Inc. has caused the
Warrant Certificate to be signed by its Chairman and Chief Executive Officer or
by its President and has caused its corporate seal to be affixed hereunto or
imprinted hereon.

Executed and Effective: September 20, 2001

                                            FRISBY TECHNOLOGIES, INC.

                                            By: /s/ Duncan R. Russell
                                               ----------------------
                                                    Duncan R. Russell
                                                    President

                    [Signature Page for Warrant Certificate]

<PAGE>

EXHIBIT B

                          FORM OF ELECTION TO PURCHASE

                    (To Be Executed Upon Exercise of Warrant)

                  The undersigned hereby irrevocably elects to exercise the
right, represented by the Warrant Certificate, to receive ___________ shares of
Company Common Stock and herewith tenders payment for such shares to the order
of the Company in the amount of $__________ in accordance with the terms hereof.

                  The undersigned requests that a certificate for such shares be
registered in the name of _________________ whose address is ___________________
and that such shares be delivered to, whose address is ________________________.

                  If said number of shares is less than all of the shares of
Company Common Stock purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of such shares be
registered in the name of ___________________, whose address is _______________,
and that such Warrant Certificate be delivered to _______________________, whose
address is ______________________.

                  Capitalized terms used but not defined herein will have the
respective meanings ascribed to them in the Warrant Agreement to which this Form
of Election to Purchase is attached.

                                    Signature(s):
                                                 -------------------------------

                                    NOTE:    The above signature(s) must
                                             correspond with the name written
                                             upon the face of the Warrant
                                             Certificate in every particular,
                                             without alteration or enlargement
                                             or any change whatever. If the
                                             Warrant is held of record by two or
                                             more joint owners, all such owners
                                             must sign.

Date:
      ---------------------

<PAGE>

EXHIBIT C

                               FORM OF ASSIGNMENT

           (To be signed only upon assignment of Warrant Certificate)

                  FOR VALUE RECEIVED, _____________________hereby sells, assigns
and transfers unto ___________________ whose address is ________________________
and whose social security number or other identifying number is _______________,
the within Warrant Certificate, together with all right, title and interest
therein and to the Warrant represented thereby, and does hereby irrevocably
constitute and appoint ___________________________, attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.

                                    Signature(s):
                                                 -------------------------------

                                    NOTE:    The above signature(s) must
                                             correspond with the name written
                                             upon the face of the Warrant
                                             Certificate in every particular,
                                             without alteration or enlargement
                                             or any change whatever. If the
                                             Warrant is held of record by two or
                                             more joint owners, all such owners
                                             must sign.

Date:
      ---------------------

Agreed:

FRISBY TECHNOLOGIES, INC.

By:
   --------------------------
       Name:
       Title:<PAGE>
                                                                    EXHIBIT 10.1

                        EXECUTIVE EMPLOYMENT AGREEMENT OF
                                 HENRY M. BAROCO

         This Executive Employment Agreement ("AGREEMENT") is entered into
between PRIVATE BUSINESS, INC., a Tennessee corporation ("COMPANY"), and HENRY
M. BAROCO, a resident of Georgia ("EXECUTIVE"), executed as of August 10, 2001
and effective as of the Effective Date (as defined below). The Company and the
Executive are sometimes referred to herein as the "PARTIES."

1. Introduction. Pursuant to an Agreement and Plan of Merger between the
Company, Towne Services, Inc., and Towne Acquisition Corporation, a wholly owned
subsidiary of the Company, as of the date of the consummation of the merger
contemplated by such Agreement and Plan of Merger, Towne Acquisition Corporation
will merge with and into Towne Services, Inc. (the "EFFECTIVE DATE"). The
Company desires to employ Executive and the Executive desires to be employed by
the Company as of the Effective Date. Accordingly, the Company and the Executive
intend by this Agreement to specify the terms and conditions of the Executive's
employment relationship with the Company.

2. Employment. As of the Effective Date, the Company hereby employs the
Executive and the Executive hereby accepts employment with the Company upon
terms and conditions set forth herein.

3. Duties and Responsibilities.

   3.1 Extent of Service. The Executive shall, during the term of this
Agreement, devote such of his entire time, attention, energies and business
efforts to his duties as an executive of the Company as are reasonably necessary
to carry out his duties specified in Paragraph 3.2 below. The Executive shall
not, during the term of this Agreement, engage in any other business activity
(whether or not such business activity is pursued for gain, profit or other
pecuniary advantage) if such business activity would impair the Executive's
ability to carry out his duties hereunder. This Paragraph 3.1, however, shall
not be construed to prevent the Executive from investing his personal assets as
a passive investor.

   3.2 Position and Duties. Subject to the power of the Board of Directors of
the Company to elect and remove officers, the Executive shall serve the Company
as Chief Operating Officer of the Company; and shall perform, faithfully and
diligently, the services and functions relating to such office (or otherwise
reasonably incident to such office) as may be designated from time to time by
the Board of Directors of the Company or its designee(s); provided that all such
services and functions shall be reasonable and within the Executive's area of
expertise, and provided further that the Executive shall be physically capable
of performing the same. Furthermore, in the event Executive is employed by the
Company on January 1, 2002 and subject to the power of the Board of Directors of
the Company to elect and remove officers, the Executive shall also serve the
Company as President of the Company, upon appointment by the Company's Board of

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Directors; and shall perform, faithfully and diligently, the services and
functions relating to such office (or otherwise reasonably incident to such
office) as may be designated from time to time by the Board of Directors of the
Company or its designee(s); provided that all such services and functions shall
be reasonable and within the Executive's area of expertise, and provided further
that the Executive shall be physically capable of performing the same.

   3.3 Place of Employment. During the term of this Agreement, the Company shall
maintain its principal executive offices in the Nashville, Tennessee area, and
the Executive's primary place of employment shall be at such principal executive
offices. During the term of this Agreement, the Company will provide the
Executive with a private office and other customary staff support services
commensurate with the services and functions to be performed by him hereunder.

4. Salary and Other Benefits. Subject to the terms and conditions of this
Agreement:

   4.1 Salary. As compensation for his services during the term of his
employment under this Agreement, the Executive shall be paid at an annual rate
of not less than Two Hundred Twenty Five Thousand Dollars ($225,000), payable in
accordance with the then current payroll policies of the Company. Such salary
shall be subject to increase by the Board of Directors of the Company (or the
appropriate committee thereof) from time to time. The annual salary payable from
time to time by the Company to the Executive pursuant to this Paragraph 4.1 is
herein sometimes referred to as his "BASE SALARY. "

   4.2 Incentive Bonus Eligibility. Beginning with calendar year 2001 (prorated
from the Effective Date as to 2001), Executive shall be eligible to be paid an
annual incentive cash bonus ("BONUS") of up to one hundred percent (100%) of his
Base Salary subject to performance criteria for the Company and Executive
established from time to time by the Board of Directors, or its designee(s), and
Executive.

   4.3 Stock Option Grants.

       (a) General. Executive may be granted options to acquire shares of the
   Company's common stock at anytime at the discretion of the Board. Such grant
   shall be made pursuant to an Incentive Stock Option Agreement between the
   Company and Executive to the extent Executive is eligible for incentive
   options under applicable tax laws and, with respect to any excess, a
   Non-Qualified Stock Option Agreement between the Company and the Executive.
   In all events such options shall be subject to the terms and conditions of
   the Company's 1999 Amended and Restated Stock Option Plan, as the same may be
   amended from time to time (the "STOCK OPTION PLAN").

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       (b) Initial Grant. As of the Effective Date, the Company shall grant
   Executive an option to purchase 200,000 shares of Company common stock in
   accordance with the terms of Paragraph 4.3(a) and pursuant to the Stock
   Option Plan (the "INITIAL OPTION GRANT"). One-half of the Initial Option
   Grant (or options to purchase 100,000 shares) shall vest on December 31, 2001
   provided Executive remains employed on such date, and, beginning on the
   Effective Date, the remaining one-half of the Initial Option Grant shall vest
   1/48th per month of continued employment by the Executive on the last
   calendar day of each such month provided Executive remains employed on each
   such date.

       (c) Towne Options. Pursuant to the terms of the Agreement and Plan of
   Merger, the 294,685 outstanding stock options granted by Towne Services, Inc.
   to Executive prior to the Effective Date shall be assumed by the Company.

   4.4 Other Benefits. As long as the Executive is employed by the Company, the
Executive shall be entitled to receive the following benefits in addition to his
Base Salary:

       (a) The Executive shall have the right to participate in all group
   benefit plans of the Company in accordance with the Company's regular
   practices with respect to its senior officers; provided, however, that the
   Company shall pay for all premiums and deductibles for Executive's health
   insurance under such group benefit plans.

       (b) The Executive shall be entitled to reimbursement from the Company for
   reasonable out-of-pocket expenses incurred by him in the course of the
   performance of his duties hereunder, subject to compliance with the Company's
   standard expense policies and procedures.

       (c) The Executive shall be entitled to such vacation, holidays and other
   paid or unpaid leaves of absence as are consistent with the Company's policy
   for other senior officers.

   4.5 Housing. From the Effective Date until December 31, 2001, subject to
Executive's continued employment by the Company, the Company shall provide
Executive a two bedroom furnished apartment, including utilities.

   4.6 Automobile. On the Effective Date, the Company shall transfer to the
Executive title to the Company vehicle currently utilized by Executive.

   4.7 Acknowledgment. The Executive acknowledges that he has forgiven a portion
of his employment agreement with Towne Services, Inc. ("TOWNE") in return for
forgiveness of a note with Towne. Towne agreed to recognize the associated
salary expense (for tax purposes) over a sixty (60) month period beginning
February 2001. The Company agrees to continue to recognize the associated salary
expense in the same manner provided that Executive remains employed with the
Company. Should the Company terminate Executive's employment hereunder other
than for cause, Executive resign for any reason, or this agreement not be
renewed, the Company will recognize any outstanding portion in twenty-four (24)
monthly installments. If the Company terminates

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Executive's employment for cause, any remaining unrecognized associated salary
expense as of the Executive's last day of employment will be expensed.

5. Term. The term of this Agreement shall be from the Effective Date until
December 31, 2001 (the "INITIAL TERM"), and shall thereafter automatically be
extended for an additional period of one (1) year on a yearly basis, provided,
however, that on or after December 1, 2001, either the Executive or the Company
may terminate this Agreement by giving the other party thirty (30) days advance
notice that such party intends to terminate this Agreement.

6. Termination and Resignation. Notwithstanding Paragraph 5, the Company shall
have the right to terminate the Executive's employment hereunder at any time and
for any reason, and upon any such termination the Executive shall be entitled to
receive from the Company prompt payment of the amount determined pursuant to the
applicable subparagraph of Paragraph 7 below. The Executive shall have the right
to terminate his employment hereunder at any time by resignation, and he shall
thereupon be entitled to receive from the Company payment of the amount
determined pursuant to the applicable subparagraph of Paragraph 7 below.

7. Payments Upon Termination and Resignation.

   7.1 Pro Rata Payments. If (a) the Company at any time terminates the
Executive's employment for Cause (as defined below), or (b) prior to January 1,
2002, the Executive voluntarily resigns for any reason other than an uncured
material breach by the Company of any term of this Agreement, then in each case
the Executive shall be entitled to receive only his Base Salary on a pro rata
basis to the date of termination plus any amounts due Executive through the date
of termination in accordance with Paragraph 4.4. If the Executive during the
term of this Agreement dies or becomes disabled (being the inability of the
Executive to perform his normal employment duties for any six (6) months during
any twelve (12) month period because of either physical or mental incapacity),
the Executive or his estate shall be entitled to receive any amounts due
Executive pursuant to Paragraph 4.4 and to receive his Base Salary plus Bonus on
a pro rata basis to the date of termination or resignation. For purposes of this
Paragraph 7.1, "pro rata" shall mean the product of the Executive's annual Base
Salary and Bonus that would have been payable had the Executive's employment not
terminated multiplied by a fraction the denominator of which is 365 and the
numerator of which is the number of days during the calendar year that have
passed through the date of the termination of the Executive's employment.

   7.2 Multiple Base Salary. If (a) after January 1, 2002, Executive resigns for
any reason, (b) the Company at any time terminates the Executive's employment
without Cause, (c) the Company fails to renew Executive's employment effective
after the Initial Term, or (d) prior to January 1, 2002, Executive resigns
because of an uncured material breach by the Company of any term of this
Agreement, then in each case:

   (i) the Company will pay to the Executive, in equal 1/24 monthly payments
over a term of two (2) years, a payment of Nine Hundred Thirty Thousand Dollars
($930,000) as consideration for Executive's continued compliance with the
restrictive covenants set forth in Paragraphs 9.1, 9.2 and 9.3 of this Agreement
and as consideration for Executive's

<PAGE>
obligation to provide certain consulting services to the Company as set forth
in Paragraph 9.7 of this Agreement;

   (ii) any vested options previously granted to the Executive by the Company
shall remain exercisable for the remainder of their stated term; and

   (iii) for the period from the termination date until the date Executive
reaches the age sixty-five (65) (or, with respect to benefits provided to
Executive's spouse, until the date Executive's spouse reaches the age sixty-five
(65)) (the "CONTINUATION PERIOD"), the Company shall at its expense on behalf of
the Executive and his spouse arrange for the continuation of the life insurance,
disability, medical, dental and hospitalization benefits provided (x) to the
Executive at any time during the 90-day period prior to the date of such
termination or at any time thereafter or (y) to other similarly situated
executives who are in the employ of the Company during the Continuation Period.
Nothing provided herein shall be construed to limit Executive's post-employment
continuation rights under COBRA, and to the extent any such benefits are
continued pursuant to COBRA, the Company shall periodically reimburse Executive
for his out-of-pocket premiums for benefits continued pursuant to COBRA. The
coverage and benefits (including deductibles and costs) provided in this
Paragraph 7.3(iii) during the Continuation Period shall be no less favorable to
the Executive and his dependents and beneficiaries than the most favorable of
such coverages and benefits during any of the periods referred to in clauses (x)
and (y) above. The Company's obligation hereunder with respect to the foregoing
benefits shall be limited to the extent that the Executive obtains any such
benefits pursuant to a subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and benefits of the
combined benefit plans is no less favorable to the Executive than the coverages
and benefits required to be provided hereunder. This subsection (iii) shall not
be interpreted so as to limit any benefits to which the Executive or his
dependents or beneficiaries may be entitled under any of the Company's employee
benefit plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life insurance
benefits.

   7.3 Certain Definitions. The following terms not defined elsewhere in this
Agreement shall have the following definitions:

       (a) Termination by the Company of the Executive's employment for "CAUSE"
   shall mean termination upon a fraudulent act, the willful misappropriation of
   funds or properties of the Company, or the willful contravention of the
   standards referred to in the last sentence of Paragraph 8 below. For purposes
   of this definition, no act, or failure to act, on the Executive's part shall
   be considered "willful" unless done, or omitted to be done, by the Executive
   not in good faith and without reasonable belief that the Executive's action
   or omission was in the best interest of the Company. Notwithstanding the
   foregoing, the Executive shall not be deemed to have been terminated for
   Cause unless and until there shall have been delivered to the Executive a
   copy of a resolution, duly adopted by the affirmative vote of not less than
   one half (1/2) of the entire membership of the Board of Directors of the
   Company at a meeting of the Board duly called and held (after reasonable
   notice to the Executive and an opportunity for the Executive, together

<PAGE>

   with his counsel, to be heard before the Board) finding that in the good
   faith opinion of the Board the Executive was guilty of the conduct set forth
   above and specifying the particulars thereof in detail.

       (b) The "CODE" shall refer to the Internal Revenue of 1986, as amended.

       (c) A "MATERIAL BREACH" by the Company of this Agreement shall include,
   without limitation, the removal of the Executive without his prior written
   consent from the position of Chief Operating Officer (except in the event of
   termination for Cause) and the Company's failure during the Restricted Period
   to pay Executive any payments due Executive pursuant to Paragraph 7.2(i),
   which failure is not cured by the Company within ten (10) days following
   receipt of written notice thereof from Executive.

8. Preservation of Business; Fiduciary Responsibility. The Executive shall use
his best efforts to preserve the business and organization of the Company, to
keep available to the Company the services of present employees and to preserve
the business relations of the Company with suppliers, distributors, customers
and others. The Executive shall not knowingly commit any act, or in any way
assist others to commit any act, which would directly injure the Company. So
long as the Executive is employed by the Company, the Executive shall observe
and fulfill applicable standards of fiduciary responsibility attendant upon his
service and office.

9. Restrictive Covenants.

   9.1 Non-Compete. During the term of this Agreement (including any renewal
periods as provided in Paragraph 5) and for a period of twenty-four (24) months
following the termination of Executive's employment with the Company under this
Agreement, whether Executive's employment terminates pursuant to the provisions
of Paragraph 6 of this Agreement or otherwise (collectively, the "RESTRICTED
PERIOD"), Executive covenants and agrees that he will not, without the express
approval of the Board of Directors, directly or indirectly anywhere in the
continental United States engage in any activity which is, or participate or
invest in, or provide or facilitate the provision of financing to, or assist
(whether as owner, shareholder, member, partner, director, officer, trustee,
employee, agent or consultant, or in any other capacity), any business,
organization or person other than the Company (or any subsidiary or affiliate of
the Company) whose business, activities, products or services (collectively,
"BUSINESS ACTIVITIES") are competitive with either (i) any of the Business
Activities conducted or offered by the Company or its subsidiaries or affiliates
during any period in which Executive is employed by the Company or any of its
subsidiaries or affiliates, or has served as a director of the Company, which
Business Activities shall include in any event and without limitation providing
software products and marketing, training, management, billing, collection and
insurance brokerage services to entities in the business of purchasing or
financing accounts receivable or in the factoring business, or (ii) any other
Business Activities which the Company or its subsidiaries or affiliates conducts
or offers on, or is actively planning and actually conducts or offers within
twelve (12) months after the date Executive's employment with the Company
terminates. Notwithstanding the foregoing, (i) competitive Business Activities
shall not include Executive's activities in the equipment leasing business, such
as GE

<PAGE>

Capital, CIT, and Wells Fargo, and (ii) Executive may own, directly or
indirectly, solely as an investment, securities of any entity if Executive (a)
is not a controlling person with respect to such entity and (b) does not,
directly or indirectly, own five percent (5%) or more of any class of the
securities of such entity. Notwithstanding, the provisions contained in this
Section 9.1 shall not be binding on the Executive if, during the Restricted
Period, the Company materially breaches the terms of this Agreement, and such
material breach is not cured by the Company within ten (10) days following
receipt of a written notice from Executive which describes in detail the nature
of the material breach.

   9.2 Trade Secrets; Confidential Information. Executive covenants and agrees
that, at all times during and after the Restricted Period, he shall keep secret
and not disclose to others or appropriate to his own use or the use of others
any trade secrets, or secret or confidential information or knowledge pertaining
to the Company Business or the affairs of the Company or any of its affiliates
including without limitation trade know-how, trade secrets, consultant
contracts, customer lists, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans, business
acquisition plans, new personnel acquisition plans, technical processes, designs
and design projects, inventions and research projects; provided, however, that
the following shall not constitute a breach or violation of this Paragraph: any
disclosure made by the Executive in the course of his employment by the Company
as provided in this Agreement, or any disclosure reasonably believed by
Executive to be compelled by law or legal process. Information shall not be
deemed confidential or secret for purposes of this Agreement if it is generally
known in the industry.

   9.3 Employees of the Company. During the Restricted Period, Executive shall
not directly or indirectly hire away or solicit to hire away from the Company or
any of its affiliates any employee of the Company or its affiliates.

   9.4 Property of the Company. All memoranda, notes, lists, records and other
documents (and all copies thereof) made or compiled by Executive or made
available to Executive during his employment by the Company concerning the
business or affairs of the Company or any of its affiliates, other than any of
such which may pertain primarily personally to Executive, shall be the exclusive
property of the Company and shall be delivered to the Company promptly upon the
termination of Executive's employment with the Company or at any other time on
request by the Board of Directors of the Company or such affiliates.

   9.5 Rights and Remedies Upon Breach. If Executive breaches, or threatens to
commit a breach of, any of the provisions of Paragraphs 9.1 through 9.4 of this
Agreement (collectively, the "RESTRICTIVE COVENANTS"), the Company shall have
the following rights and remedies, each of which shall be independent of the
other and severally enforceable, and all of which shall be in addition to, and
not in lieu of, any other rights and remedies available to the Company: (a) the
right and remedy to have any of the Restrictive Covenants specifically enforced
by any court having jurisdiction and in Tennessee by an arbitration panel as
provided in Paragraph 12 of this Agreement, it being hereby acknowledged and
agreed by Executive that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will not provide an
adequate remedy to the Company; and (b) the right and remedy to require
Executive to

<PAGE>

account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits derived or received by Executive as a
result of any transactions constituting a breach of any of the Restrictive
Covenants, and Executive shall account for and pay over such benefits to the
Company.

   9.6 Severability of Covenants. If it is determined that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions. If it is
determined that any of the Restrictive Covenants, or any part thereof, is
unenforceable because of the duration of such provision, the geographical area
covered thereby, or any other determination of unreasonableness of the
provision, the arbitration panel making such determination shall have the power
to reduce the duration, area or scope of such provision and, in its reduced
form, such provision shall then be enforceable and shall be enforced.

   9.7 Consulting. For a period of twenty-four (24) months following the
termination of Executive's employment with the Company under this Agreement,
whether Executive's employment terminates pursuant to the provisions of
Paragraph 6 of this Agreement or otherwise, including the Company's failure to
renew Executive's employment after the Initial Term (collectively, the
"CONSULTING PERIOD"), Executive covenants and agrees that he will consult with
the Company from time to time, as reasonably requested by the Company with
Executive's consent which will not be unreasonably withheld.

10. Notice. All notices, requests, demands and other communications given under
or by reason of this Agreement shall be in writing and shall be deemed given
when delivered in person or when mailed, by certified mail (return receipt
requested), postage prepaid, addressed as follows (or to such other address as a
party may specify by notice pursuant to this provision):

                  (a)   To the Company:

                        Private Business, Inc.
                        9010 Overlook Boulevard
                        Brentwood, Tennessee 37027
                        Attention: Chairman

                  (b)   To Executive:

                        Henry M. Baroco
                        810 Thornberry Drive
                        Alpharetta, GA 30022

11. Controlling Law and Performability. The execution, validity, interpretation
and performance of this Agreement shall be governed by the law of the State of
Tennessee.

12. Arbitration. Any dispute or controversy arising under or in connection with
this Agreement shall be settled by arbitration in Nashville, Tennessee. In the
proceeding the Executive shall select one (1) arbitrator, the Company shall
select one (1) arbitrator and the

<PAGE>

two (2) arbitrators so selected shall select a third (3rd) arbitrator. The
decision of a majority of the arbitrators shall be binding on the Executive and
the Company. Should one party fail to select an arbitrator within five (5) days
after notice of the appointment of the an arbitrator by the other party or
should the two (2) arbitrators selected by the Executive and the Company fail to
select an arbitrator within ten (10) days after the date of the appointment of
the last of such two (2) arbitrators, any person sitting as a Judge of the
United States District Court for the Middle District of Tennessee, Nashville
Division, upon application of the Executive or the Company, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the first sentence of this
Paragraph 12. Any arbitration proceeding pursuant to this Paragraph 12 shall be
conducted in accordance with the rules of the American Arbitration Association.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction.

13. No Obligation to Mitigate. The Executive shall not be required to mitigate
the amount of any payment provided for in Paragraph 7 by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Paragraph 7 be reduced by any compensation earned by the Executive as a result
of employment by another employer or otherwise.

14. Additional Instruments. The Parties shall execute and deliver any and all
additional instruments and agreements that may be necessary or proper to carry
out the purposes of this Agreement.

15. Entire Agreement and Amendments. This Agreement contains the entire
agreement of the Parties relating to the matters contained herein and supersedes
all prior agreements and understandings, oral or written, between the Parties
with respect to the subject matter hereof. This Agreement may be changed only by
an agreement in writing signed by the Party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.

16. Separability. If any provision of the Agreement is rendered or declared
illegal or unenforceable by reason of any existing or subsequently enacted
legislation or by the decision of any arbitrator or by decree of a court of last
resort, the Parties shall promptly meet and negotiate substitute provisions for
those rendered or declared illegal or unenforceable to preserve the original
intent of this Agreement to the extent legally possible, but all other
provisions of this Agreement shall remain in full force and effect.

17. Assignments. The Company may assign this Agreement and in the event of an
assignment of this Agreement, all covenants, conditions and provisions hereunder
shall inure to the benefit of and be enforceable against the Company's
successors and assigns. The rights and obligations of Executive under this
Agreement are personal to him, and no such rights, benefits or obligations shall
be subject to voluntary or involuntary alienation, assignment or transfer.

18. Effect of Agreement. Subject to the provisions of Paragraph 17 with respect
to assignments, this Agreement shall be binding upon the Executive and his
heirs, executors, administrators, legal representatives and assigns and upon the
Company and respective successors and assigns.

<PAGE>

19. Execution. This Agreement may be executed in multiple counterparts each of
which shall be deemed an original and all of which shall constitute one and the
same instrument.

20. Waiver of Breach. The waiver by either Party of a breach of any provision of
the Agreement by the other Party shall not operate or be construed as a waiver
by such Party of any subsequent breach by such other Party.

   IN WITNESS WHEREOF, the Parties have executed this Agreement effective as set
forth above.

                                    PRIVATE BUSINESS, INC.

                                    By: /s/ William B. King
                                        ----------------------------------------
                                        William B. King, Chairman

                                    EXECUTIVE

                                    /s/ Henry M. Baroco
                                    --------------------------------------------
                                    HENRY M. BAROCO

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