Document:

Exhibit 4.7.1

                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT ("Agreement"), made and entered into this 31st
day of May, 2000, by and between OLD DOMINION FREIGHT LINE, INC., a Virginia
corporation ("Borrower"), and FIRST UNION NATIONAL BANK, a national banking
association ("Bank");

                                   WITNESSETH:

         WHEREAS, Borrower and Bank are parties to that certain Credit Agreement
dated June 14, 1995, as amended by First Amendment thereto dated February 2,
1996, by Second Amendment thereto dated April 29, 1996, by Third Amendment
thereto dated June 15, 1996, by Fourth Amendment thereto dated April 22, 1997,
and by Fifth Amendment thereto dated January 14, 2000 (as amended, the "Existing
Credit Agreement"), pursuant to which Bank agreed to extend certain financial
accommodations to Borrower;

         WHEREAS, Borrower has requested that Bank extend financial
accommodations to Borrower in order to provide funds for the refinancing of the
indebtedness owing by Borrower to Bank under the Existing Credit Agreement, for
working capital and such other corporate purposes as are permitted hereunder;
and

         WHEREAS, Bank has agreed to extend financial accommodations for such
purposes to Borrower in the form of (a) a $50,000,000 revolving line of credit,
and (b) a $12,500,000 standby letter of credit facility to be made in accordance
with, and subject to, the terms and conditions set forth below;

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

SECTION 1.        DEFINITIONS.

1.1 Defined Terms.  For purposes of this Agreement,  in addition to the terms
defined elsewhere in this Agreement, the following terms shall have the meanings
set forth below:

"Adjusted LIBOR Rate" shall mean the rate per annum equal to the LIBOR Rate plus
the Applicable Margin.
<PAGE>

         "Affiliate" shall mean any Person which, directly or indirectly, owns
or controls, on an aggregate basis, including all beneficial ownership and
ownership or control as a trustee, guardian or other fiduciary, at least five
percent (5%) of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors (irrespective of whether, at the time, Stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) of Borrower or any
Subsidiary, or is controlled by or is under common control with Borrower or any
Subsidiary, or any stockholders of Borrower or any Subsidiary. For the purpose
of this definition, "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise.

         "Agreement" or "this Agreement" shall mean this Agreement and all
amendments, modifications and supplements hereto and shall refer to this
Agreement as the same may be in effect at the time such reference becomes
operative.

         "Applicable Margin" shall mean, at any date of determination thereof, a
sum equal to the percentage set forth below corresponding to the Borrower's
Fixed Charge Coverage Ratio. The Applicable Margin shall be seven-tenths of one
percent (.70%) from the date hereof until reset based upon the Borrower's Fixed
Charge Coverage Ratio determined as of the Fiscal Quarter ending June 30, 2000
and as of the end of each successive Fiscal Quarter period thereafter, in
accordance with the following schedule (such change in the Applicable Margin to
take effect one (1) day after the Bank receives the Borrower's financial
statements for the relevant determination period indicating to the Bank's
satisfaction that the Applicable Margin should be reset), according to the
following schedule:

<TABLE>
<CAPTION>

        Fixed Charge Coverage Ratio                Applicable Margin
--------------------------------------------- -----------------------------
<S>                                                       <C>
Greater than 3.50 to 1.0                                 0.60%

Equal to or greater than 2.50 to 1.0 but                 0.70%
less than or equal to 3.50 to 1.0

Less than 2.50 to 1.0                                    0.85%
</TABLE>

<PAGE>

         "Assessment Rate" shall mean the assessment rate percentage (expressed
as a decimal rounded upwards, if necessary, to the next higher one hundredth of
one percent) paid by Bank to the Federal Deposit Insurance Corporation (or any
successor), excluding any refund, insuring Bank's liability for time deposits as
in effect from time to time.

         "Bank" shall mean First Union National Bank, a national banking
association.

         "Beneficiary" shall mean the beneficiary of a Letter of Credit issued
by Bank pursuant to this Agreement.

         "Borrower" shall mean Old Dominion Freight Line, Inc., a Virginia
 corporation.

         "Business Day" shall mean any day (excluding Saturday, Sunday and legal
holidays) on which commercial banks in Atlanta, Georgia are open.

         "CERCLA" shall mean the Comprehensive  Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.ss.9601 et. seq., as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.

         "Capitalized Lease Obligation" shall mean any Indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with Generally Accepted Accounting Principles,
and the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with Generally Accepted Accounting
Principles.

         "Closing" shall mean the consummation of the lending transaction
contemplated hereby to occur at the time and place set forth in Section 5.1
hereof.

         "Closing Date" shall mean the date referred to in Section 5.1 hereof.

         "Consolidated Subsidiary" shall mean any Subsidiary of Borrower which
is consolidated with Borrower under Borrower's finacial statements provided to
the Bank or is required to be consolidated with Borrower under Generally
Accepted Accounting Principles (including, limitation, the Guarantor).

         "Default" shall mean any event or condition which, with the giving of
notice or the passage of time or both, would

<PAGE>

constitute an Event of Default if Borrower took no action to correct the same.

         "Default Rate" shall mean the LIBOR Rate in effect on the first
Business Day the Default Rate is implemented by Bank plus two percent (2%).

         "Disposal" shall mean the intentional or unintentional abandonment,
discharge, deposit, injection, dumping, spilling, leaking, storing, burning,
thermal destruction or replacing of any substance so that it or any of its
constituents may enter the Environment.

         "Dollars" or "$" shall mean dollars of the United States of America.

         "EBIT" shall mean the earnings (or loss) before provision for income
taxes and interest for such fiscal period, as reflected on the financial
statements of Borrower supplied to Bank pursuant to Section 7.3(a) of this
Agreement, but excluding (a) any gain or loss arising from the sale of
non-operating assets, (b) any gain arising from any writeup of assets, (c)
earnings of any Subsidiary of Borrower accrued prior to the date it became a
Subsidiary, (d) earnings of any corporation, substantially all of the assets of
which have been acquired in any manner by Borrower or any of its Subsidiaries,
realized by such corporation prior to the date of such acquisition, (e) the
earnings of any Person to which the assets of Borrower or any of its
Subsidiaries shall have been sold, transferred or disposed of, or into which
Borrower or any of its Subsidiaries shall have been merged, or been a party to
any consolidation or other form of reorganization, prior to the date of such
transaction, (f) any gain arising from the acquisition of any securities of
Borrower or any of its Subsidiaries, and (g) any gain or loss arising from
extraordinary or non-recurring items, all determined in accordance with
Generally Accepted Accounting Principles.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules and regulations from time to time
promulgated thereunder.

         "Environment" shall mean any water, including, without limitation,
surface water and gravel water or water vapor, any land including land surface
or subsurface, stream sediments, air, fish, wildlife, plants and all other
natural resources or environmental media.
<PAGE>

         "Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances, regulations, codes and rules relating to the
protection of the Environment and/or governing the use, storage, treatment,
generation, transportation, processing, handling, production or Disposal of
Hazardous Substances and the policies, guidelines, procedures, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.

         "Environmental Permits" shall mean all licenses, permits, approvals,
authorizations, consents or registrations required by any applicable
Environmental Laws and all applicable judicial and administrative orders in
connection with ownership, lease, purchase, transfer, closure, use and/or
operation of any Property owned, leased or operated by Borrower and/or as may be
required for the storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances.

         "Event of Default" shall have the meaning specified in Section 9.1
hereof.

         "Financials" shall mean the audited balance sheet and statement of
income, retained earnings and cash flow of Borrower for the Fiscal Year ended
December 31, 1999; the Borrower-prepared balance sheet and statement of income
and cash flow of Borrower for the Fiscal Quarter ended March 31, 2000; and all
other financial statements of Borrower delivered by Borrower to Bank pursuant to
Section 7.3 of this Agreement.

         "Fiscal Quarter" shall mean one of the quarterly fiscal periods in the
Fiscal Year of Borrower.

         "Fiscal Year" shall mean the period of Borrower ending on December 31
of each calendar year and commencing on January 1 of each calendar year.

         "Fixed Charge Coverage Ratio" shall mean, for any Fiscal Quarter, the
ratio of (i) EBIT plus Gross Rents less Interest Income for such Fiscal Quarter
and the three (3) immediately preceding Fiscal Quarters to (ii) Interest Expense
less Interest Income plus Gross Rents for such Fiscal Quarter and the three (3)
immediately preceding Fiscal Quarters.

         "Funded Debt" shall mean all Indebtedness for money borrowed, whether
direct or contingent, as determined in accordance with Generally Accepted
Accounting Principles,

<PAGE>

including, without limitation, reimbursement and all other obligations with
respect to surety bonds and letters of credit, whether or not matured,
Capitalized Lease Obligations, the deferred purchase price of any Property or
asset or Indebtedness evidenced by a promissory note, bond, guaranty or similar
written obligation for the payment of money (including, but not limited to,
conditional sales or similar title retention agreements).

         "Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles as recognized by the American Institute of
Certified Public Accountants, consistently applied and maintained on a
consistent basis for Borrower throughout the period indicated and consistent
with the prior financial practices of Borrower as reflected on the Financials so
as to properly reflect the financial condition and results of operations and
changes in financial position of Borrower.

         "Gross Rents" shall mean the aggregate amount of all payments which
Borrower is required to make pursuant to the terms of any lease by Borrower of
any building (including, without limitation, any of Borrower's leased terminals
and similar facilities) or office equipment or revenue producing equipment which
lease has a term of more than six (6) months, including renewals thereof.

         "Guarantor" shall mean ODIS, Inc., a Delaware corporation and
Subsidiary of the Borrower.

         "Guaranty" shall mean the Guaranty Agreement dated of even date
herewith executed by the Guarantor to the Bank.

         "Hazardous Substances" shall mean, without limitation, any explosives,
radon, radioactive materials, asbestos, urea formaldehyde, foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, hazardous waste, hazardous or toxic substances, and any other
material defined as a hazardous substance in Section 101(14) of CERCLA.

         "Indebtedness" shall mean all liabilities, obligations and indebtedness
of any and every kind and nature, including, without limitation, the Obligations
and all obligations to trade creditors, whether heretofore, now or hereafter
owing, arising, due or payable to any Person and howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed or otherwise. Without in any way limiting the generality of the foregoing,
Indebtedness specifically includes the following:
<PAGE>

         (a) All obligations or liabilities of any Person that are secured by
any lien, claim, encumbrance or security interest upon Property owned by
Borrower, even though Borrower has not assumed or become liable for the payment
thereof;

         (b) All obligations or liabilities created or arising under any lease
of real or personal property, or conditional sale or other title retention
agreement with respect to Property used or acquired by Borrower, even though the
rights and remedies of the lessor, seller or lender thereunder are limited to
repossession of such Property;

         (c)      All unfunded pension fund obligations and liabilities; and

         (d)      Deferred taxes.

         "Interest Expense" shall mean with respect to any period of
determination the Borrower's and each Consolidated Subsidiary's total interest
on Indebtedness during such period, determined in accordance with Generally
Accepted Accounting Principles.

         "Interest Income" shall mean, with respect to any period of
determination the Borrower's and each Consolidated Subsidiary's total interest
income during such period, determined in accordance with Generally Accepted
Accounting Principles.

         "Investment" shall mean, as applied to any Person, any direct or
indirect purchase or other acquisition by such Person of Stock, indebtedness or
other securities or obligations of any other Person, or any direct or indirect
loan, advance, extension of credit or capital contribution by such Person to any
other Person, or any guaranty of such Person with respect to any liabilities or
obligations of any other Person.

         "LIBOR Rate" shall mean, for any day, the rate per annum (rounded to
the next higher 1/100 of 1%) for one (1) month deposits in US Dollars which
appears on the Telerate Page 3750 as of 11:00 a.m. London time, on such day, or
if such day is not a London business day, then the immediately preceding London
business day. If for any reason such rate is not available on the Telerate Page
3750, then the rate per annum at which interest shall accrue with reference to
the LIBOR Rate shall be such rate as determined by the Bank from another
recognized source or interbank quotation for the London Interbank Market.

         "LIBOR Rate Loans" shall mean the Revolving Loans.
<PAGE>

         "Letter of Credit" shall mean a standby letter of credit at any time
applied for by Borrower pursuant to a Letter of Credit Application and issued by
Bank for the account of Borrower pursuant to Section 3 hereof, and shall
include, without limitation, those standby letters of credit described on
Schedule 1.1A hereto.

         "Letter of Credit Application" shall mean Bank's standard form of
Application and Agreement For Irrevocable Standby Letter of Credit, and such
other documents as Bank may require for its issuance of a Letter of Credit.

         "Letter of Credit Facility" shall mean the facility referred to in
Section 3 hereof.

         "Letter of Credit Facility Commitment" shall mean $12,500,000.

         "Letter of Credit Obligations" shall mean that portion of the
Obligations constituting Borrower's obligation to reimburse Bank for all amounts
paid by Bank under, or with respect to, a Letter of Credit and all other
indebtedness, obligations and liabilities owing by Borrower to Bank under a
Letter of Credit Application.

         "Loan Documents" shall mean and collectively refer to this Agreement,
the Revolving Credit Note, the Letter of Credit Applications and all agreements
and other written matters whether heretofore, now or hereafter executed by or in
behalf of Borrower and/or delivered to Bank or any Participant, with respect to
this Agreement, or with respect to the transactions contemplated by this
Agreement.

         "Maximum Rate" shall mean the maximum non-usurious rate of interest
permitted by applicable state or federal law that at any time, or from time to
time, may be contracted for, taken, reserved, charged or received on the
Indebtedness in question or, to the extent permitted by applicable laws, under
such applicable laws which may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than applicable laws now allow.
Notwithstanding any other provision hereof, the Maximum Rate shall be calculated
on a daily basis (computed on the actual number of days elapsed over a year of
three hundred sixty (360) days.

         "Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
<PAGE>

         "Net Income" shall mean, for any period, net income of Borrower for
such period determined in accordance with Generally Accepted Accounting
Principles.

         "Obligations" shall collectively mean and include (i) the Revolving
Loans (including accrued interest owed in respect of the Revolving Loans) and
all other sums loaned or advanced by Bank to or on behalf of Borrower pursuant
to the terms of this Agreement, the Loan Documents or any other agreement
between Bank and Borrower, (ii) all liabilities, debts and obligations now or at
any time hereafter owing by Borrower to Bank under this Agreement or any of the
other Loan Documents or otherwise, (iii) the Letter of Credit Obligations and
all other obligations incurred by Bank, whether direct or indirect, contingent
or otherwise, due or not due, under each Letter of Credit Application or in
connection with the issuance of a Letter of Credit, (iv) all obligations and
sums due or that may become due under or in connection with any present or
future swap agreements (as defined in 11 U.S.C. ss. 101) between Borrower and
Bank, and (v) all other liabilities, debts and obligations of any and every
kind, including, but not limited to, all liabilities arising under any
agreements and contracts of guaranty, now or hereafter owing or to become due
from Borrower to Bank, whether created, evidenced, acquired or arising under
this Agreement or any of the other Loan Documents or any other instruments,
obligations, contracts or agreements of any and every kind, now or hereafter
existing or entered into between Borrower and Bank or otherwise, and whether
direct or indirect (including those acquired by assignment), absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all Revolving Loans, interest, charges, expenses, fees, attorneys' and
paralegals' fees and any other sums chargeable to Borrower by Bank under this
Agreement or any of the other Loan Documents.

         "Participant" shall mean any Person, now or any time hereafter,
participating with Bank in the extension of the credit facility from Bank to
Borrower pursuant to this Agreement.

         "Permitted Purchase Money Indebtedness" shall mean Purchase Money
Indebtedness of Borrower incurred after the date hereof which is secured by a
Purchase Money Lien and which, when aggregated with the principal amount of all
other such Purchase Money Indebtedness and Capitalized Lease Obligations
incurred during any fiscal year, does not exceed $15,000,000.
<PAGE>

         "Person" shall mean a corporation, an association, a partnership, a
limited liability company, an organization, a business, an individual or a
government or political subdivision thereof or any government agency.

         "Plan" shall mean an employee benefit plan now or hereafter maintained
for employees of Borrower that is covered by Title IV of ERISA.

         "Prime Rate" shall mean the interest rate publicly announced from time
to time by Bank to be its prime rate, which may not necessarily be its best
lending rate. The Prime Rate is a rate set by Bank based upon various factors
including Bank's cost and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans. Bank may price
some loans at, above or below the Prime Rate.

         "Prohibited Transaction" shall mean any transactions set forth in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.

         "Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.

         "Purchase Money Indebtedness" shall mean (i) Indebtedness (other than
the Obligations) for the payment of all or any part of the purchase price of any
rolling stock of tractors or trailers, (ii) any Indebtedness (other than the
Obligations) incurred at any time of or within ten (10) days prior to or after
the acquisition of any rolling stock of tractors or trailers for the purpose of
financing all or any part of the purchase price thereof, and (iii) any renewals,
extensions or refinancings thereof, but not any increases in the principal
amounts thereof outstanding at the time.

         "Purchase Money Lien" shall mean a lien upon Borrower's rolling stock
of tractors and trailers, but only if such lien shall at all times be confined
solely to the rolling stock of tractors and trailers the purchase price of which
was financed through the incurrence of the Purchase Money Indebtedness secured
by such lien.

         "Release" shall have the same meaning as given to that term in Section
101(22) of CERCLA.

         "Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA.
<PAGE>

         "Restricted Investment" shall mean any Investment except the following:

                 (i)      Investments to be used in the ordinary course of
          business;

                (ii)     Current  assets  arising  from the sale of goods  and
         services in the ordinary course of business of Borrower;

               (iii)    Investments and direct obligations of the United States
         of America, or any agency thereof or obligations guaranteed by the
         United States of America, provided that such obligations mature within
         one (1) year from the date of acquisition thereof;

                (iv)     Investments in certificates of deposit maturing withi
         one (1) year from the date of acquisition issued by a bank organized
         under the laws of the United States or any state thereof having capital
         surplus and undivided profits aggregating at least $500,000,000;

                 (v)      Investments in commercial paper maturing no more than
         one (1) year from the date of creation thereof and, at the time of
         acquisition, having a rating of at least A-1 or the equivalent thereof
         by Standard and Poor's Corporation or at least P-1 or the equivalent
         thereof by Moody's Investors Service, Inc.;

                (vi)     Investments  not to exceed  $1,000,000  in the
         aggregate in such Person or Persons as the Borrower in its discretion
         determines appropriate; and

               (vii)    Investment made in accordance with, and pursuant to, the
         investment policy of Borrower which is attached hereto as Schedule
         1.1B.

         "Revolving Credit Note" shall mean the promissory note of Borrower
executed and delivered to Bank pursuant to Section 2.2 hereof evidencing
Borrower's obligation to repay the Revolving Loans, together with any
amendments, modifications and supplements thereto, and any renewals or
extensions thereof, in whole or in part.

         "Revolving Line of Credit" shall mean the revolving line of credit made
available by Bank to Borrower pursuant to Section 2.1 hereof.
<PAGE>

         "Revolving Line of Credit Commitment" shall mean $50,000,000.

         "Revolving Loans" shall mean the loans made by Bank to Borrower under
the Revolving Line of Credit.

         "Solvent" shall mean, as to any Person, that such Person has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage and is able to pay its debts as they
mature and owns property having a value, both at fair valuation and at present
fair saleable value, greater than the amount required to pay its debts.

         "Stock" shall mean all shares, options, interests, partnerships or
other equivalents (howsoever designated) of or in a corporation, whether voting
or non-voting, including, without limitation, common stock, warrants, preferred
stock, convertible debentures and all agreements, instruments and documents
convertible, in whole or in part, into any one or more or all of the foregoing.

         "Subsidiary" shall mean any corporation, more than fifty percent (50%)
of the outstanding Stock having ordinary voting power to elect a majority of the
board of directors of which is at the time, directly or indirectly, owned by
Borrower and/or one or more Subsidiaries (irrespective of whether, at the time,
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency).

         "Tangible Net Worth" shall mean at any date the total shareholders'
equity (including capital stock, additional paid-in capital and retained
earnings after deducting treasury stock) appearing on a balance sheet of
Borrower and each Consolidated Subsidiary prepared as of such date in accordance
with Generally Accepted Accounting Principles, minus (a) the unamortized amount,
if any, of intangible assets and goodwill (including, without limitation,
franchises, licenses, patents, trademarks, trade names, copyrights, service
marks and brand names) as reflected on the balance sheet of Borrower, (b) any
Indebtedness owed to Borrower or any Consolidated Subsidiary by any Affiliate,
(c) any write-up in the book value of any fixed asset resulting from a
revaluation thereof subsequent to the Closing Date, and (d) the amount, if any,
at which any shares of Stock of Borrower or any Consolidated Subsidiary appear
on the asset side of the balance sheet of Borrower.
<PAGE>

         "Termination Date for Letter of Credit Facility" shall mean the
earliest of:

                  (i)      The date that is three hundred sixty four days after

         the date hereof;

                 (ii)     The date of  termination  of the Letter of Credit
         Facility by Bank after the occurrence of an Event of Default;

                (iii)    Such  date of  termination  of the  Letter of  Credit
         Facility as is mutually agreed upon by Bank and Borrower; and

                 (iv)     The date after all Obligations have been paid in full
         and Bank is no longer obligated to issue Letters of Credit hereunder.

         "Termination Date for Revolving Loans" shall mean the earliest of:

                  (i)      May 31, 2003;

                 (ii)     The date of  termination  of the  Revolving  Line of
         Credit by Bank after the occurrence of an Event of Default;

                (iii)    Such  date of  termination  of the  Revolving  Line of
         Credit as is mutually agreed upon by Bank and Borrower; and

                 (iv)     The date after all Obligations have been paid in full
         and Bank is no longer obligated to make Revolving Loans hereunder.

 "Total Capitalization" shall mean, at any date of determination thereof, the
sum of Funded Debt and Tangible Net Worth.

      1.2 Accounting Terms. Any accounting terms used in this Agreement hich are
not specifically defined shall have the meanings customarily given them in
accordance with Generally Accepted Accounting Principles; provided, however,
that, in the event that changes in Generally Accepted Accounting Principles
shall be mandated by the Financing Accounting Standards Board, or any similar
accounting body of comparable standing, or shall be recommended by Borrower's
certified public accountants, to the extent that such changes would modify such
accounting terms or the interpretation or computation thereof, such changes
shall be followed in defining such accounting terms only from and

<PAGE>

after such date as Borrower and Bank shall have amended this Agreement to the
extent necessary to reflect any such changes in the financial covenants and
other terms and conditions of this Agreement.

      1.3 Singular/Plural. Unless the context otherwise requires, words used
herein in the singular include the plural and words in the plural include the
singular.

      1.4 Other Terms. All other terms contained in this Agreement shall, when
the context so indicates, have the meanings provided for by the Uniform
Commercial Code of the State of North Carolina to the extent the same are used
or defined therein.

SECTION 2.        REVOLVING LINE OF CREDIT.

          2.1 Revolving Loans. Bank hereby establishes, upon the terms and
subject to the conditions of this Agreement and in reliance upon the
representations and warranties made by Borrower hereunder, a Revolving Line of
Credit in favor of Borrower in the amount of the Revolving Line of Credit
Commitment and agrees to make and remake one or more Revolving Loans to
Borrower, upon the terms and conditions set forth herein, from time to time on
any Business Day during the period from the date hereof through but not
including the Termination Date for Revolving Loans. Each request for a Revolving
Loan by Borrower shall be in an amount not less than $100,000. Subject to the
provisions of this Section below, Borrower may borrow, repay and reborrow any
amount of the Revolving Line of Credit provided that the aggregate principal
amount of Revolving Loans outstanding at any time under the Revolving Line of
Credit may not exceed the Revolving Line of Credit Commitment. Notwithstanding
the foregoing, Bank shall not have any obligation to make a Revolving Loan
requested by Borrower hereunder unless all of the conditions precedent set forth
in Sections 5.2 and 5.3 hereof are satisfied.

          2.2 Revolving Credit Note. At the Closing, Borrower shall execute and
deliver to Bank the Revolving Credit Note payable to the order of Bank for the
full amount of the Revolving Line of Credit Commitment. The Revolving Credit
Note shall be in the form of Exhibit A attached hereto and dated as of the
Closing Date. The amount of principal owing on the Revolving Credit Note at any
given time shall be the aggregate amount of all Revolving Loans made under the
Revolving Line of Credit, less all payments of principal theretofore paid by
Borrower to Bank on the Revolving Loans.
<PAGE>

          2.3 Payment of Interest on Revolving Loans. Subject to the provisions
of Section 2.5 below, Borrower shall pay to Bank interest on the unpaid
principal amount of the Revolving Loans outstanding at a rate equal to the
Adjusted LIBOR Rate. Interest will be calculated on a daily basis (computed on
the basis of actual days elapsed over a year of three hundred sixty (360) days).
Interest accrued on the Revolving Loans shall be due and payable in arrears on
the tenth (10th) day of each Fiscal Quarter after the date hereof, computed
through the last day of the prior Fiscal Quarter.

          2.4      [Intentionally deleted.]

          2.5 Default Rate; Post-Petition Interest. Notwithstanding any other
provision of this Agreement, upon the occurrence and during the continuance of
an Event of Default, the outstanding principal balance of the Revolving Loans,
and to the fullest extent permitted by applicable law, all interest accrued on
the Revolving Loans, shall bear interest at the Default Rate, and shall be
payable on demand. To the fullest extent permitted by applicable law, interest
shall continue to accrue on the Revolving Loans after the filing by or against
Borrower of any petition seeking any relief in bankruptcy or under any act or
law pertaining to insolvency or debtor relief, whether state, federal or
foreign.

          2.6      Mandatory  Repayment of Principal of Revolving Loans.
Borrower shall repay the principal of the Revolving Loans:

              (i)     In full, on the Termination Date for Revolving Loans; and

             (ii)     In full, upon the occurrence of any Event of Default and
          acceleration of the Obligations by Bank pursuant to Section 10.1
          hereof.

          2.7 Use of Proceeds of Revolving Loans. Borrower shall use the
proceeds of all Revolving Loans for working capital and such other legal and
proper corporate purposes (duly authorized by Borrower's board of directors) as
are permitted hereunder and are consistent with all applicable laws and
statutes.

          2.8 Disbursement of Revolving Loans. Borrower hereby irrevocably
authorizes Bank to disburse the proceeds of each Revolving Loan under this
Agreement (i) in accordance with the terms of any written instructions from
Borrower, (ii) in accordance with telephone instructions from any of Borrower's
duly authorized officers or other Persons in each case designated from time to
time in writing by Borrower, or (iii) by
<PAGE>

deposit or wire transfer to Borrower's controlled disbursement or depository
account with Bank in an amount equal to the sum communicated to Bank as being
necessary to cover checks or other items of payment drawn by Borrower upon such
account and presented to Bank for payment, but in no event shall Bank be
obligated to make Revolving Loans hereunder in amounts necessary to cover any
such checks or other items of payment presented to Bank to the extent that
Borrower is not otherwise entitled to receive Revolving Loans in such amounts
from Bank pursuant to the terms hereof.

          SECTION 3.        LETTER OF CREDIT FACILITY.

          3.1 Issuance of Letters of Credit. Bank hereby establishes, upon the
terms and subject to the conditions of this Agreement and in reliance upon the
representations and warranties made by Borrower hereunder, a letter of credit
facility in favor of Borrower in the amount of the Letter of Credit Facility
Commitment and agrees to issue one or more Letters of Credit for the account of
Borrower, upon the terms and conditions set forth herein, from time to time on
any Business Day during the period from the date hereof through but not
including the Termination Date for Letter of Credit Facility, provided that the
aggregate face amount of all Letters of Credit outstanding at any time shall not
exceed the Letter of Credit Facility Commitment and no Letter of Credit may have
an expiration date later than one (1) year from the date of its issuance, but
may provide for automatic renewal terms of one (1) year each if not terminated
within sixty (60) days of its expiration date. Notwithstanding the foregoing,
Bank shall not have any obligation to issue a Letter of Credit requested by
Borrower hereunder unless all of the conditions precedent set forth in Sections
5.2 and 5.3 hereof are satisfied.

          3.2 Letter of Credit Fees. In consideration of Bank's issuing Letters
of Credit for Borrower's account pursuant to Section 3.1 hereof, Borrower agrees
to pay Bank a fee equal to the Applicable Margin for LIBOR Rate Loans effective
on the date of issue of such Letter of Credit times the face amount of each
Letter of Credit issued from time to time pursuant to this Agreement, plus the
other charges customarily charged by Bank generally to its customers for
handling, amendments, drawings on and other administration of the Letters of
Credit. Issuance fees shall be deemed fully earned upon issuance of each Letter
of Credit, shall be due and payable in advance upon the issuance of the Letter
of Credit and shall not be subject to rebate or proration upon the termination
of this Agreement for any reason; provided, however, such issuance fee shall be
subject to proration in the event the Letter of Credit to which such fee

<PAGE>

applies is terminated or cancelled prior to the expiration date of such Letter
of Credit and Bank is released from or has no further liability under such
Letter of Credit.

          3.3      Reimbursement Obligation.

                   (a) Borrower hereby unconditionally agrees to reimburse Bank
on the day of any drawing under a Letter of Credit for the actual amount paid by
Bank on such drawing. Borrower shall also pay interest on each unreimbursed
drawing under a Letter of Credit at a rate per annum equal to the Default Rate
(computed on the basis of actual days elapsed over a year of three hundred sixty
(360) days). Interest owing under this Section 3.3 shall be due and payable at
such time as Borrower reimburses Bank for any drawing under a Letter of Credit
and on demand. To the fullest extent permitted by applicable law, interest shall
continue to accrue on each unreimbursed drawing under a Letter of Credit after
the filing by or against Borrower of any petition seeking any relief in
bankruptcy or under any act or law pertaining to insolvency or debtor relief,
whether state, federal or foreign.

                   (b) Borrower's obligation under this Section 3.3 to reimburse
Bank for each drawing under a Letter of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which Borrower may have or have had against
the Beneficiary, Bank or any other Person, including, without limitation, any
defense based upon:

                (i)      a failure of Borrower to receive all or any part of the
          consideration with respect to which such drawing under a Letter of
          Credit was made;

               (ii)     any lack of validity or enforceability of a Letter of
          Credit, the Letter of Credit Application relating thereto or any of
          the Loan Documents;

              (iii)    any amendment or waiver of or any consent to departure
          from any of the Loan Documents;

               (iv)     the existence of any claim, set-off, defense or other
          right which Borrower may have at any time against the Beneficiary (or
          any Persons for whom the Beneficiary may be acting), Bank or any other
          Person, whether in connection with this Agreement, the transactions
          contemplated herein or in the Loan Documents or any unrelated
          transaction;
<PAGE>

                (v)      any statement or any other document presented under a
          Letter of Credit proving to be forged, fraudulent, invalid or
          insufficient in any respect or any statement therein or made in
          connection therewith being untrue or inaccurate in any respect,
          provided any payment does not constitute gross negligence or willful
          misconduct on the part of Bank;

               (vi)     any  non-application  or  misapplication  by the
          Beneficiary or otherwise of the proceeds of any drawing under a Letter
          of Credit;

              (vii)    payment by Bank under a Letter of Credit against
          presentation of documentation which does not comply with the terms of
          such Letter of Credit, provided such payment does not constitute gross
          negligence or willful misconduct on the part of Bank; or

             (viii)   the failure by Bank to honor any drawing under a
          Letter of Credit, provided such failure does not constitute gross
          negligence or willful misconduct on the part of Bank.

     3.4 Actions of Beneficiary. Borrower assumes all risks of the acts or
omissions of each Beneficiary with respect to its use of a Letter of Credit.
Neither Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use which may be made of a Letter of Credit or any acts or
omissions of the Beneficiary in connection therewith; (b) the validity,
sufficiency or genuineness of documents, or of any endorsement thereon, even if
such documents should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; or (c) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, telecopier, telex or
otherwise, except that Borrower shall have a claim against Bank, and Bank shall
be liable to Borrower, to the extent of any damages suffered by Borrower which
Borrower proves were caused by Bank's willful failure, or gross negligence
resulting in Bank's failure, to make lawful payment under a Letter of Credit
after the presentation to it by a Beneficiary of all documentation required by
the terms of a Letter of Credit to accompany a drawing thereunder strictly
complying with the terms and conditions of a Letter of Credit.

     3.5 Outstanding Letters of Credit on Termination Date. On the Termination
Date for Letter of Credit Facility, if all outstanding Letters of Credit are not
terminated or cancelled and Bank released from all liability thereunder,
Borrower shall either (a) cause to be issued in favor of Bank as beneficiary a

<PAGE>

direct pay letter of credit from a commercial bank and in form both reasonably
acceptable to Bank providing for direct reimbursement to Bank of all sums paid
by Bank on the outstanding Letters of Credit or (b) deposit with Bank funds
equal to the undrawn face amount of all Letters of Credit then outstanding to be
held by Bank as security for the outstanding Letter of Credit Obligations.

SECTION 4.  PROVISIONS APPLICABLE TO BOTH THE REVOLVING LOANS AND THE LETTER OF
CREDIT OBLIGATIONS.

     4.1  Payments; Manner and Application of Payments.

      (a) All payments by Borrower on account of principal, interest and fees on
the Revolving Loans and the Letter of Credit Obligations shall be made in
immediately available funds to Bank at its office in Atlanta, Georgia prior to
1:00 p.m., Atlanta, Georgia time on the date payment is due, or at such other
place as is designated in writing by Bank. If any payment of principal, interest
or fees falls due on a day which is not a Business Day, then such due date shall
be extended to the next succeeding Business Day, and, with respect to principal,
interest shall accrue and be payable for such period of extension. Any payments
received by Bank later than 1:00 p.m. shall be deemed to have been made on the
next day.

       (b) In the event that Borrower does not pay to Bank within fifteen (15)
days of its request therefor of any interest, fees, costs or expenses payable by
Borrower pursuant to this Agreement or the Revolving Credit Note, or any Letter
of Credit Obligations, including, without limitation, the reimbursement
obligations set forth in Section 3.3 hereof, Borrower hereby irrevocably
authorizes Bank to pay itself the same by drawing such amounts as a Revolving
Loan under the Revolving Line of Credit as of the respective due dates of such
interest, fees, costs, expenses and Letter of Credit Obligations, but the
failure of Bank to so pay itself by drawing a Revolving Loan under the Revolving
Line of Credit shall not affect Borrower's obligation to pay such interest,
fees, costs, expenses and Letter of Credit Obligations.

       (c) The Bank may, but shall not be obligated to, debit the amount of any
payments of interest, fees, costs or expenses payable by Borrower to Bank under
this Agreement, when due, from one or more ordinary deposit accounts of the
Borrower maintained with the Bank, including, without limitation, Borrower's
account number 2073781132196. This authorization shall not affect the obligation
of Borrower to pay such sums when due, without notice, if there are insufficient
funds in such account to make

<PAGE>

such payment in full on the due date thereof, or if Bank fails to debit the
account.

       (d) Unless Bank is otherwise specifically instructed by Borrower, all
payments made by Borrower shall be applied (i) first, to the payment of accrued
and unpaid fees and interest on the Obligations, and (ii) second, to the payment
of unpaid principal on the Obligations; provided, however, that during the
continuance of an Event of Default, Bank shall apply all such payments to the
Obligations in any amounts and any priority as Bank in its sole discretion may
determine.

 4.2 Maximum Interest Rate. Nothing contained in this Agreement, in the
Revolving Credit Note or the other Loan Documents shall be deemed to establish
or require the payment of interest to Bank at a rate in excess of the Maximum
Rate. In the event that the rate of interest required to be paid under the
provisions of this Agreement, the Revolving Credit Note or the other Loan
Documents exceeds the Maximum Rate, the rate of interest required to be paid
hereunder and under the Revolving Credit Note shall be automatically reduced to
the Maximum Rate and any amounts collected in excess of the permissible amount
shall be deemed a prepayment of principal on the Revolving Loans and the Letter
of Credit Obligations.

 4.3 Increased Costs. If at any time after the date hereof, and from time to
time, Bank or any Participant shall determine reasonably and in good faith that
the adoption or modification of any applicable federal or state law, rule or
regulation regarding Bank's or any Participant's required levels of reserves,
insurance or capital (including any allocation of capital requirements or
conditions), or similar requirements, or any change therein or any
interpretation or administration thereof by any court, governmental authority,
central bank or comparable agency charged with the interpretation,
administration or compliance of Bank or any Participant with any of such
requirements (which are unforeseen by Bank at the present time), has or would
have the effect of (i) increasing Bank's or any Participant's net cost relating
to the Obligations of Borrower hereunder, (ii) reducing the yield or rate of
return of Bank or any Participant on the Obligations of Borrower hereunder to a
level below that which Bank or any Participant could have achieved but for the
adoption or modification of any such requirements, (iii) imposing any reserve,
special deposit or similar requirements relating to any extensions of credit on
or other assets of, or any deposits with or other liabilities of, Bank or any
Participant (such increases or reductions being collectively referred to herein
as "Increased Costs"), Borrower shall, within ten (10) days of any request by
Bank or any

<PAGE>

Participant, pay to Bank or such Participant such additional amounts as (in
Bank's or any Participant's sole judgment, after good faith and reasonable
computation) will compensate Bank or such Participant for such increase in net
costs or reduction in yield or rate of return of Bank or such Participant. Upon
making such request to Borrower for the payment of such additional amounts, Bank
and such Participant shall deliver to Borrower a notice setting forth the basis
for and calculation of such Increased Costs. No failure by Bank or any
Participant to demand payment of any additional amounts payable hereunder shall
constitute a waiver of Bank's or any Participant's right to demand payment of
any amounts arising at any subsequent time in accordance with the terms hereof.
Nothing herein contained shall be construed or so operate as to require Borrower
to pay any interest, fees, costs or charges greater than is permitted by
applicable law.

 4.4 Revolving Loan Fee. As a condition precedent to the Bank's obligations to
make any Revolving Loans, the Borrower shall pay to the Bank at Closing a
nonrefundable fee in the amount of $62,500.00, which fee shall be deemed fully
earned by the Bank upon Closing.

 4.5 Illegality; Impracticality. If it shall become unlawful for Bank to obtain
funds in the London interbank market in order to fund or maintain LIBOR Rate
Loans or otherwise to perform its obligations hereunder with respect to any such
LIBOR Rate Loan, upon not less than five (5) Business Days notice by Bank to
Borrower, the rate of interest on all such LIBOR Rate Loans shall be the Prime
Rate minus one percent (1%) per annum. Notwithstanding any other provision of
this Agreement to the contrary, if, upon receiving notice of an election by
Borrower of a LIBOR Rate Loan or a continuation thereof, (i) deposits in United
States dollars are not quoted or available to Bank in the London interbank
market, or (ii) by reason of national or international financial, political or
economic conditions or by reason of any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in effect, or the
interpretation or administration thereof by any governmental authority, or
compliance by Bank with any request or directive of such authority (whether or
not having the force of law), including, without limitation, exchange controls,
it is impracticable, unlawful or impossible for Bank to make or continue the
relevant LIBOR Rate Loan, then Borrower shall not be entitled, so long as such
circumstances continue, to request a LIBOR Rate Loan hereunder.

 4.6 Facility Fee. During the term of the Revolving Line of Credit, Borrower
shall pay Bank a facility fee at the rate of

<PAGE>

eighteen one-hundredths of one percent (0.18%) per annum on the daily
undisbursed portions of the Revolving Line of Credit Commitment if the Fixed
Charge Coverage Ratio is greater than 3.5 to 1.0; at the rate of twenty
one-hundredths of one percent (.20%) per annum on the daily undisbursed portion
of the Revolving Line of Credit Commitment if the Fixed Charge Coverage Ratio is
less than or equal to 3.5 to 1.0 and greater than or equal to 2.5 to 1.0; and at
the rate of one-quarter of one percent (.25%) if the Fixed Charge Coverage Ratio
is less than 2.5 to one. The facility fees from the date hereof through June 30,
2000 shall be twenty one-hundredths of one percent (.20%). Such facility fee
shall accrue from and including the Closing Date through but not including the
Termination Date for Revolving Loans, shall be calculated on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed, and
shall be payable quarterly in arrears on the first Business Day of each calendar
quarter commencing on July 1, 2000, or, if earlier, the Termination Date for
Revolving Loans. For purposes of this Section 4.6, the Fixed Charge Coverage
Ratio shall be determined based on the most recent financial statements
delivered by Borrower to the Bank under Section 7.3 hereof.

  4.7 All Obligations to Constitute One Loan. All Obligations of Borrower under
this Agreement shall constitute one general obligation of Borrower and shall be
secured by all security interests, liens, claims, encumbrances, and rights of
offset at any time or times hereafter granted by Borrower to Bank.

   SECTION 5.  CLOSING; CONDITIONS OF LOANS.

 5.1 Closing. The Closing shall take place on the date of the execution of this
Agreement by Bank ("Closing Date") at the offices of Smith Helms Mulliss &
Moore, L.L.P., Greensboro, North Carolina, or at such other time and place as
the parties hereto shall mutually agree.

 5.2 Conditions of Initial Revolving Loan and Issuance of Letter of Credit.
Notwithstanding any other provision of this Agreement or any other Loan
Document, and without affecting any other rights of Bank under the other
sections of this Agreement, Bank shall have no obligation under Sections 2.1 and
3.1 of this Agreement to make the initial Revolving Loan or issue any Letter of
Credit or assume obligations under any existing Letter of Credit on the Closing
Date unless and until, in addition to each of the conditions set forth in
Section 5.3 hereof, the following conditions have been satisfied in a manner
satisfactory to Bank and its counsel:
<PAGE>

       (a) No Injunction, Etc. No action, proceeding, investigation, regulation
or legislation shall have been instituted or proposed before any court,
governmental agency or legislative body to enjoin, restrain, or prohibit, or to
obtain substantial damages in respect of, or which is related to or arises out
of this Agreement or the consummation of the transactions contemplated hereby,
or which, in Bank's sole discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement.

       (b) Governmental Approvals. All necessary approvals, authorizations and
consents, if any be required, of all governmental bodies (including courts)
having jurisdiction with respect to the transactions contemplated by this
Agreement shall have been obtained.

       (c) Loan Documentation. Bank shall have received, on or prior to the
Closing Date, the following documents, each duly executed and delivered to Bank,
and each in form and substance satisfactory to Bank and its counsel:

       (i)  Revolving Credit Note. The duly executed Revolving Credit Note;

      (ii) Certificate of Secretary of Borrower. Certificate of the Secretary
or an Assistant Secretary of Borrower certifying (x) that attached thereto is a
true and complete copy of the bylaws of Borrower as in effect on the date of
such certification, (y) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Borrower, authorizing the
execution, delivery and performance of this Agreement and the other Loan
Documents, and the consummation of the transactions contemplated hereby and
thereby, and (z) as to the incumbency and genuineness of the signature of each
officer of Borrower executing this Agreement or any of the other Loan Documents;

     (iii) Articles of  Incorporation of Borrower.  Copies of the Articles of
Incorporation of Borrower, and all amendments thereto, certified by the
Secretary of State of Virginia;

      (iv)  Certificates of Good Standing.  Good standing  certificates  for
Borrower issued by the Secretary of State of Virginia, and the appropriate
official of each other jurisdiction where the conduct of Borrower's business
activities or the ownership of its properties necessitates qualification;

       (v) Certificate as to No Default. A certificate signed by an officer of
Borrower, in form and substance satisfactory to
<PAGE>

Bank and its counsel, dated as of the Closing Date, certifying that (x) the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are true, correct and complete as of such date, (y) that
Borrower is on such date in compliance with all of the terms and provisions set
forth in this Agreement and the other Loan Documents, and (z) on the Closing
Date, no Default or Event of Default exists;

      (vi)  Disbursement  Instructions.  Written  instructions from Borrower to
Bank as to any sums to be paid out of e proceeds of the initial Revolving Loan
made pursuant to this Agreement;

     (vii)  Opinion of Counsel.  A written  opinion of counsel to Borrower as to
the transactions contemplated by this Agreement and the other Loan Documents to
be in form and substance satisfactory to Bank and its counsel; and

    (viii) Guaranty. The duly executed Guaranty;

      (ix) Certificate of Secretary of Guarantor. Certificate of the Secretary
or an Assistant Secretary of Guarantor certifying (x) that attached thereto is a
true and complete copy of the bylaws of Guarantor as in effect on the date of
such certification, (y) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Guarantor, authorizing the
execution, delivery and performance of the Guaranty, and the consummation of the
transactions contemplated hereby and thereby, and (z) as to the incumbency and
genuineness of the signature of each officer of Guarantor executing the
Guaranty;

       (x) Articles of  Incorporation  of Guarantor.  Copies of the Articles of
Incorporation of Guarantor, and all amendments thereto, certified by the
Secretary of State of Delaware;

      (xi) Certificate of Good Standing.  Good standing  certificate for
Guarantor issued by the Secretary of State of Delaware, and the appropriate
official of each other jurisdiction where the conduct of Guarantor's business
activities or the ownership of its properties necessitates qualification;

     (xii) Supplemental Documentation. Such other documentation as Bank or its
counsel shall reasonably request.

          (d) No Material Adverse Change. Since December 31, 1999, there shall
not have occurred any material adverse change in the business, financial
condition or results of operations of Borrower, or any event, condition, or
state of facts which would
<PAGE>

be expected materially and adversely to affect the business, financial condition
or results of operations of Borrower.

 5.3 Conditions of All Loans and Letters of Credit. Notwithstanding any other
provision of this Agreement or any other Loan Document, and without affecting in
any manner the rights of Bank under the other sections of this Agreement, Bank
shall have no obligation under Sections 2.1 and 3.1 of this Agreement to make
any Revolving Loan or issue any Letter of Credit unless and until, in addition
to each of the conditions set forth in Section 5.2 hereof, the following
conditions have been and continue to be satisfied in a manner satisfactory to
Bank:

    (a) No Material Adverse Change. There shall not have occurred after the
Closing Date any material adverse change in the business, financial condition or
results of operations of Borrower, or any event, condition or state of facts
which would be expected materially and adversely to affect the business,
financial condition or results of operations of Borrower.

    (b) Delivery of Documents. Bank shall have received the originals or copies
of all documents required to be delivered to Bank pursuant to the terms of this
Agreement and all other certificates, reports and information required to be
delivered to Bank hereunder.

    (c) Representations and Warranties. The representations and warranties
contained in Section 6 of this Agreement and the other Loan Documents are and
shall continue to be true and correct (except to the extent that they shall be
untrue or incorrect solely as a result of occurrences permitted under this
Agreement).

    (d) No Default or Event of Default. No Default or Event of Default shall
have occurred and be continuing.

    (e) Performance of Agreement. All covenants and agreements on the part of
Borrower to be performed hereunder shall have been performed and, unless
otherwise expressly agreed, any conditions precedent set forth in Section 5.2
hereof shall have been fulfilled.

    (f) Letter of Credit  Application.  Bank shall have received a duly executed
Letter of Credit Application with respect to any Letter of Credit requested by
Borrower.
<PAGE>

  5.4 Waiver of Conditions. If Bank makes any Revolving Loan or issues any
Letter of Credit hereunder prior to the fulfillment of any of the conditions
precedent set forth in Sections 5.2 and 5.3 hereof, the making of such Revolving
Loan or the issuance of such Letter of Credit shall constitute only an extension
of time for the fulfillment of such condition and not a waiver thereof, and
Borrower shall thereafter use its best efforts to fulfill each such condition
promptly.

     SECTION 6. REPRESENTATIONS AND WARRANTIES.

     In order to induce Bank to enter into this Agreement and to make Revolving
Loans and issue Letters of Credit, Borrower makes the following warranties and
representations to Bank:

    6.1 Corporate Organization and Power. Borrower (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Virginia; (b) is qualified to do business and is in good standing in every
jurisdiction where the nature of its business or the ownership of its properties
requires it to be so qualified, including, without limitation, the State of
North Carolina; (c) has the power to engage in the transactions contemplated
hereby; and (d) has the full power, authority and legal right to execute and
deliver this Agreement and the other Loan Documents and to perform and observe
the terms and provisions thereof. Borrower has no Subsidiaries other than ODIS,
Inc. Except as set forth in Schedule 6.1 attached hereto, Borrower has not been
known as or used any other corporate, fictitious or trade names.

    6.2 Litigation; Government Regulation. Except as set forth on Schedule 6.2
attached hereto, there are no actions, suits or proceedings pending or, to the
knowledge of Borrower, threatened against or affecting Borrower at law or in
equity before any court or administrative officer or agency which might result
in a material adverse change in the business or financial condition of Borrower
or impair Borrower's ability to perform its obligations under the Loan
Documents. Borrower is not in violation of or in default under any applicable
statute, rule, order, decree, writ, injunction or regulation of any governmental
body (including any court) where such violation would have a materially adverse
effect upon Borrower's business, property, assets, operations or condition,
financial or otherwise.

    6.3 Taxes. Borrower is not delinquent in the payment of any taxes which have
been levied or assessed by any governmental authority against it or its assets.
Borrower has timely filed

<PAGE>

all tax returns which are required by law to be filed, and has paid all taxes
shown on said returns and all other assessments or fees levied upon Borrower or
upon its properties to the extent that such taxes, assessments or fees have
become due, except such amounts thereof as are being contested in good faith and
for which adequate provision has been made for such payment. To the knowledge of
the officers of Borrower, no material controversy in respect of income taxes is
pending or threatened.

    6.4 Enforceability of Loan Documents; Compliance With Other Instruments. The
Loan Documents are the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms. Borrower
is not subject to any corporate restriction or to any order, rule, regulation,
writ, injunction or decree of any court or governmental authority or to any
statute which materially and adversely affects its business, property, assets or
financial condition. Borrower is not a party to any labor dispute, there are no
strikes or walkouts relating to any labor contracts and no such contract is
scheduled to expire during the term of this Agreement. Borrower is not in
default in the payment of any amount owing under, or in the performance of any
other material obligation in respect of, any indenture, loan agreement,
mortgage, lease, deed or similar agreement related to the borrowing of monies to
which Borrower is a party or by which it is bound. Neither the execution,
delivery or performance of the Loan Documents, nor compliance therewith: (a)
conflicts or will conflict with or results or will result in any breach of, or
constitutes or will constitute with the passage of time or the giving of notice
or both, a default under, (i) the Articles of Incorporation or Bylaws of
Borrower, (ii) any law, order, writ, injunction or decree of any court or
governmental authority, or (iii) any agreement or instrument to which Borrower
is a party or by which Borrower or its Property is bound or (b) results or will
result in the creation or imposition of any lien, charge or encum-brance upon
its properties pursuant to any such agreement or instrument.

    6.5 Governmental Authorization. No authorization, consent or approval of any
governmental authority is required for the execution, delivery and performance
of the Loan Documents or the consummation of the transactions contemplated
thereby. Borrower has, and is in good standing with respect to, all governmental
approvals, permits, certificates, inspections, consents and franchises necessary
to continue to conduct its business as heretofore conducted and to own or lease
and operate its properties as now owned or leased by it. None of such approvals,
permits, certificates, consents, or franchises contains any term, provision,
condition or limitation more burdensome

<PAGE>

than such as are generally applicable to Persons engaged in the same or similar
business as Borrower.

     6.6 Event of  Default.  No event has  occurred  and is  continuing  which
constitutes a Default or an Event of Default.

    6.7 Margin Securities. None of the transactions contemplated by this
Agreement (including, without limitation thereof, the use of the proceeds of the
Revolving Loans) will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto. Borrower does not own or intend to carry or purchase directly or
indirectly any margin securities. None of the proceeds of the Revolving Loans
will be used to purchase or carry (or refinance any borrowing, the proceeds of
which were used to purchase or carry) any "margin security" within the meaning
of the Securities Exchange Act of 1934, as amended.

    6.8 Full Disclosure. None of the Loan Documents, nor any statements
furnished by or on behalf of Borrower to Bank in connection with the Loan
Documents, contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein not
misleading. To the best of Borrower's knowledge, there is no fact which Borrower
has not disclosed to Bank in writing which materially affects adversely or, to
the best of Borrower's knowledge, will materially affect adversely the assets,
business, profits or conditions (financial or otherwise) of Borrower or the
ability of Borrower to perform its obligations under the Loan Documents.

    6.9 Business Locations. Borrower's chief executive office, principal place
of business, and other offices, places of business and locations where Borrower
keeps its books and records are at the locations set forth on Schedule 6.9
attached hereto and made a part hereof.

    6.10 ERISA. Except as disclosed on Schedule 6.10 attached hereto, Borrower
does not have any Plan. Borrower has not received any notice to the effect that
it is not in full compliance with any of the requirements of ERISA. No fact or
situation that could result in a material adverse change in the financial
condition of Borrower, including, without limitation, any Reportable Event or
Prohibited Transaction, exists in connection with any Plan. Borrower has no
withdrawal liability in connection with a Multiemployer Plan.
<PAGE>

    6.11 Financials. The Financials delivered to Bank have been prepared in
accordance with Generally Accepted Accounting Principles (subject, in the case
of interim Financials, to timing and normal year-end adjustments), contain no
misstatement or omission, and fairly present the financial position, assets and
liabilities of Borrower as of the respective dates thereof and the results of
operations of Borrower for the respective periods then ended. Except for the
transactions contemplated by this Agreement, since the date of the last of the
Financials, there has been no material adverse change in the assets, liabilities
or financial position of Borrower or in the results of Borrower's operations,
and Borrower has not incurred any obligation or liability which would materially
and adversely affect its financial condition or business operations.

    6.12 Title to Property. Borrower has good, indefeasible and merchantable
title to and ownership of or valid leasehold or other interests in its Property,
including without limitation, the Property reflected in the Financials.

    6.13 Solvency. Borrower is Solvent.

    6.14 Use of Proceeds. Borrower's use of the proceeds of any Revolving Loans
made by Bank to Borrower pursuant to this Agreement are, and continue to be,
legal and proper corporate uses (duly authorized by its Board of Directors when
necessary) and such uses are consistent with all applicable laws and statutes,
as in effect as of the date hereof.

    6.15 Assets for Conduct of Business. Borrower possesses adequate assets,
licenses, patents, patent applications, copy-rights, trademarks and trade names
to conduct its business as heretofore conducted and all such licenses, patents,
patent applications, copyrights, trademarks and trade names are listed on
Schedule 6.15 attached hereto and made a part hereof.

    6.16 Trade Relations. To the best of Borrower's knowledge, there exists no
actual or threatened termination, cancellation or limitation of, or any
modification or change in, any business relationship of Borrower which would
materially and adversely effect such business relationship of Borrower or any
customer or any group of customers whose purchases individually or in the
aggregate are material to the business of Borrower, or with any material
supplier, and there exists no present condition or state of facts or
circumstances which would materially adversely affect Borrower or prevent
Borrower from conducting such business after the consummation of the transaction
contemplated by this Agreement in substantially the same manner in which it has
heretofore been conducted.
<PAGE>

    6.17 Compliance With Laws. Borrower has duly complied with, and its business
operations and leaseholds are in compliance in all material respects with, the
provisions of all federal, state and local laws, rules and regulations
applicable to Borrower or the conduct of Borrower's business, including, without
limitation, all Environmental Laws, and there have been no citations, notices or
orders of non-compliance received by Borrower under any such law, rule or
regulation which would have a material and adverse effect on the business of
Borrower or the value of its Property.

    6.18 Guaranty. Borrower has no outstanding guaranties of Indebtedness of
another Person except as otherwise permitted under Section 8.13 hereof.

    6.19 Environmental Matters. To the best of Borrower's knowledge and except
as disclosed on Schedule 6.19A attached hereto, no aboveground or underground
storage tanks containing Hazardous Substances are, or have been located on, any
Property owned, leased or operated by Borrower. No Property owned, leased or
operated by Borrower is, or has been, used for the Disposal of any Hazardous
Substance or for the treatment, storage or Disposal of Hazardous Substances. To
the best of Borrower's knowledge and except as disclosed in Schedule 6.19B
attached hereto, no Release of a Hazardous Substance has occurred, or is
threatened on, at, from or near any Property owned, leased or operated by
Borrower. Borrower is not subject to any existing, pending or threatened suit,
claim, notice of violation, or request for information under any Environmental
Law, nor has Borrower provided any notice or information under any Environmental
Law which would have a material adverse effect upon the business of Borrower or
the value of its Property. Borrower is in compliance in all material respects
with, and has obtained all Environmental Permits required by, all Environmental
Laws.

    6.20 Withholding Taxes. Borrower is current in respect to the payment of all
federal and state withholding taxes, and social security taxes. Borrower
currently accrues its payroll tax applications and maintains sufficient
available funds to satisfy its payroll tax liability.

    6.21 Labor Contract; Labor Disputes. Borrower is not a party to any
collective bargaining contract or agreement with its employees. Except as set
forth on Schedule 6.21 hereto, Borrower is not a party to, and there is not
pending or threatened, any labor dispute, strike, lockout, grievance, work
stoppage or walkout relating to any labor contract to which Borrower is a
<PAGE>

party. Borrower has complied with the provisions of the Fair Labor Standards Act
of 1938, as amended, and neither Borrower nor any of its officers, directors or
employees, has committed any unfair labor practice, as defined in the National
Labor Relations Act of 1947, as amended.

    6.22 Leases. Schedule 6.22A attached hereto lists, as of the Closing Date,
all capitalized leases of Borrower and Schedule 6.22B attached hereto lists, as
of the Closing Date, all operating leases of Borrower, including, in each case,
the name of the lessor, the description of the leased Property, whether real or
personal, and the location of such Property. Borrower enjoys peaceful and
undisturbed possession under all of its leases and all such leases are valid and
subsisting and in full force and effect.

    6.23 Reaffirmation of Warranties and Representations. Each request for a
Revolving Loan or a Letter of Credit by Borrower pursuant to this Agreement
shall constitute (a) an automatic warranty and representation by Borrower to
Bank that there does not then exist a Default or an Event of Default and (b) all
of the representations and warranties of Borrower contained in this Agreement
and the other Loan Documents continue to be true and correct.

    6.24 Survival of Warranties and Representations. Borrower covenants,
warrants and represents to Bank that all representations and warranties of
Borrower contained in this Agreement and the other Loan Documents shall be true
at the time of Borrower's execution of this Agreement and the other Loan
Documents and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto.

          SECTION 7. AFFIRMATIVE COVENANTS.

          Until payment in full of all Obligations of Borrower to Bank and
termination of the Bank's obligation to make Revolving Loans and issue Letters
of Credit hereunder, Borrower covenants and agrees that, unless Bank consents in
writing, Borrower will:

    7.1 Repayment of Obligations.  Repay the Obligations  according to the terms
 of this Agreement and the other Loan Documents.

    7.2 Performance Under Loan Documents. Perform all Obligations required to be
performed by it under the terms of this Agreement and the other Loan Documents
and any other agreements now or hereafter existing or entered into between
Borrower and Bank.
<PAGE>

    7.3  Financial  and  Business  Information  as to  Borrower.  Deliver to
Bank with respect to Borrower and each Consolidated Subsidiary:

    (a) As soon as practicable, but no later than sixty (60) days after the
close of each Fiscal Quarter, beginning with the current Fiscal Quarter, the
10-Q report and the Quarterly Report to Shareholders for such Fiscal Quarter or,
in the absence of such reports, a balance sheet of Borrower and each
Consolidated Subsidiary as of the close of each Fiscal Quarter, and a statement
of income and cash flow, for that portion of the Fiscal Year to date then ended,
prepared in accordance with Generally Accepted Accounting Principles (subject to
timing and normal year-end adjustments), applied on a basis consistent with that
of the preceding period or containing disclosure of the effect on the financial
position or results of operations of any change in the application of accounting
principles and practices during the Fiscal Quarter, and certified as accurate by
the chief financial officer of Borrower;

    (b) As soon as possible, but no later than one hundred twenty (120) days
after the close of each Fiscal Year of Borrower, beginning with the current
Fiscal Year, a balance sheet of Borrower and each Consolidated Subsidiary as of
the close of such Fiscal Year and statements of income, retained earnings and
cash flow for the Fiscal Year then ended, prepared in accordance with Generally
Accepted Accounting Principles, applied on a basis consistent with the preceding
year or containing disclosure of the effect on financial position or results of
operation of any change in the application of accounting principles and
practices during the Fiscal Year, and accompanied by a report thereon,
containing an unqualified opinion, without scope limitations imposed by
Borrower, from a firm of independent certified public accountants selected by
Borrower and acceptable to Bank;

    (c) Concurrently with the delivery of the financial statements described in
sub-section (b) hereof, a certificate from the independent certified public
accountants that in making their examination of the financial statements of
Borrower and each Consolidated Subsidiary, they obtained no knowledge of the
occurrence or existence of any Default or any Event of Default, or a statement
specifying the nature and period of existence of any such Default or Event of
Default;

    (d) Concurrently with the delivery of the financial statements described in
sub-sections (a) and (b) above, a certificate from the chief executive,
operating or financial officer of Borrower certifying to Bank that, to the best
of his knowledge, Borrower

<PAGE>

has kept, observed, performed and fulfilled each and every covenant, obligation
and agreement binding upon Borrower contained in this Agreement or the other
Loan Documents, and that no Default or Event of Default has occurred or
specifying any such Default or Event of Default, together with a financial
compliance worksheet, in form satisfactory to Bank, reflecting the computation
of the financial covenants set forth in Section 9 as of the end of the period
covered by such financial statements;

    (e) As soon as possible, but not later than forty-five (45) days after the
end of each Fiscal Year, an annual forecast of Borrower and each Consolidated
Subsidiary for the succeeding Fiscal Year in reasonable detail, including a
quarterly cash flow of Borrower for the succeeding Fiscal Year (each annual
forecast shall include a balance sheet and a statement of anticipated sales,
expenses and profit and loss before taxes for each Fiscal Quarter), together
with such changes and updates in such annual forecast as may be deemed necessary
by Borrower because of any material deviation or variance between the actual
results and the corresponding projections in such annual budget;

    (f) As soon as possible, but not later than ten (10) days after delivery to
Borrower, a copy of any management letter issued by Borrower's independent
public accountants with respect to the financial or accounting systems or
controls of Borrower or any Consolidated Subsidiary; and

    (g) Upon Bank's written request, such other information about the financial
condition and operations of Borrower and any Consolidated Subsidiary as Bank may
from time to time reasonably request.

    7.4 Notice of Certain Events. As soon as practicable, but in no event later
than five (5) Business Days after the occurrence thereof, give written notice to
Bank of: (a) any material litigation or proceeding brought against Borrower or
Guarantor, whether or not the claim is considered by Borrower to be covered by
insurance; (b) any written notice of a violation received by Borrower from any
governmental regulatory body or law enforcement authority which, if such
violation were established, might have a materially adverse effect on the
business of Borrower; (c) any labor controversy which has resulted in a strike
or other work action materially affecting Borrower; (d) any attachment,
judgment, lien, levy or order in excess of $500,000 which has been placed on or
assessed against Borrower or Guarantor or their respective Properties; (e) any
Default or Event of Default; and (f) any other matter which has resulted in
<PAGE>

a material adverse change in the financial condition or operations of Borrower.

    7.5 Corporate Existence and Maintenance of Properties. Maintain and preserve
its corporate existence and all rights, privileges and franchises now enjoyed
which are necessary for the conduct of Borrower's business, conduct its business
in an orderly, efficient and customary manner, keep its properties in good
working order and condition, and from time to time make all needed repairs to,
renewals of or replacements of its properties (except to the extent that any of
such properties is obsolete or is being replaced) so that the efficiency of such
property shall be fully maintained and preserved. Borrower shall file or cause
to be filed in a timely manner all reports, applications, estimates and licenses
which shall be required by any governmental authority and which, if not timely
filed, would have a material adverse effect on Borrower or its Property.

    7.6 Payment of Indebtedness; Performance of Other Obligations. Pay all
Indebtedness when due, and all other obligations in accordance with customary
trade practices, and comply with all acts, rules, regulations and orders of any
legislative, administrative or judicial body or official applicable to
Borrower's Property or any part thereof or to the operation of Borrower's
business; provided, however, that Borrower may in good faith by appropriate
proceedings in good faith and with due diligence contest any such Indebtedness,
obligations, acts, rules, regulations, orders and directions that do not
materially adversely affect the value of its Property, and if requested by Bank,
shall establish reserves reasonably satisfactory to Bank. Borrower shall also
observe and remain in compliance with all laws, ordinances, governmental rules
and regulations to which it is subject and obtain and maintain all licenses,
permits, franchises or other governmental authorizations necessary to the
ownership of its properties or the conduct of its business, and all covenants
and conditions of all agreements and instruments to which Borrower is a party
which failure to comply or failure to maintain would materially and adversely
affect the business, prospects, profits or condition (financial or otherwise) of
Borrower.

    7.7 Maintenance of Insurance. Maintain and pay for insurance upon all
Property covering such risks (but not including environmental coverage) and in
such amounts and with such insurance companies as shall be reasonably
satisfactory to Bank. Borrower shall also maintain, with financially sound and
reputable insurers, insurance with respect to its properties and business
against such casualties and contingencies of such types (including, but not
limited to, liability and cargo insurance)

<PAGE>

and in such amounts as is customary in the case of a Person in the same or
similar business. Bank acknowledges that on the Closing Date Borrower is
self-insured.

    7.8 Maintenance of Books and Records; Inspection. Maintain adequate books,
accounts and records, and prepare all financial statements required under this
Agreement in accordance with Generally Accepted Accounting Principles and in
compliance with the regulations of any governmental regulatory body having
jurisdiction over it; and, upon the occurrence of a Default or an Event of
Default, permit employees or agents of Bank at any reasonable time to inspect
Borrower's properties, and to examine or audit Borrower's books, accounts and
records and make copies and memoranda of them. Upon the occurrence of a Default
or an Event of Default, Borrower shall permit any representative of Bank during
normal business hours to visit and inspect any of the properties of Borrower, to
examine, make extracts and inspect all books of accounts, records, reports and
other papers, to make copies and extracts therefrom, and to discuss the affairs,
finances, accounts and related issues of Borrower with its officers, employees
and independent public accountants (and by this provision Borrower authorizes
said accountants to discuss the finances and affairs of Borrower), all at such
reasonable times and as often as may be reasonably requested.

    7.9 Compliance with ERISA. At all times make prompt payment of contributions
required to meet the minimum funding standards set forth in ERISA with respect
to any employee benefit plan; promptly upon request, furnish to Bank copies of
any annual report required to be filed under ERISA in connection with each
employee benefit plan; not withdraw from participation in, permit the
termination or partial termination of, or permit the occurrence of any other
event with respect to any employee benefit plan that could result in liability
to the Pension Benefit Guaranty Corporation; notify Bank as soon as practicable
of any Reportable Event and of any additional act or condition arising in
connection with any employee benefit plan which Borrower believes might
constitute grounds for the termination thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States district
court of a trustee to administer such plan; and furnish to Bank upon Bank's
request, such additional information about any employee benefit plan as may be
reasonably requested.

    7.10  Depository  Accounts  and Cash  Management  Services.  Maintain  at
all times after the Closing Date its principal depository banking accounts and
its cash management services at Bank.
<PAGE>

    7.11 Payment of Taxes. Pay and discharge all taxes, assessments and other
governmental charges or levies imposed upon Borrower or upon its income or
profits, or upon any Property belonging to Borrower, prior to the date on which
penalties attached thereto, and all lawful claims which, if unpaid, might become
a lien or charge upon any Property; provided, however, that Borrower may in good
faith by appropriate proceedings and with due diligence contest any such tax,
assessment, charge, levy or claim, if Borrower establishes any funded reserves
reasonably requested by Bank.

    7.12 Compliance with Laws. Comply in all material respects with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of Borrower's business and the ownership of its Property.

    7.13 Compliance with Environmental Laws. Comply in all material respects
with all Environmental Laws and not suffer, cause or permit the Disposal or
Release of Hazardous Substances at any Property owned, leased or operated by
Borrower in violation of any Environmental Law; provided, however, in the event
of such a Disposal or Release, Borrower shall be deemed to be in compliance with
the foregoing if, within the time required by applicable Environmental Laws,
Borrower shall take all necessary remedial action to contain, remove, clean up
and remediate such Disposal or Release, and mitigate all threats to the
Environment resulting therefrom, in compliance with all applicable Environmental
Laws. Borrower shall promptly notify Bank in the event of the Disposal of
Hazardous Substance at any Property owned, leased or operated by Borrower in
violation of any Environmental Law, or in the event of any Release or threatened
Release of a Hazardous Substance from any such Property in violation of any
Environmental Law, except for a Release which could be fully remediated in
accordance with applicable Environmental Laws for less than $100,000 in the
aggregate. Borrower shall promptly deliver to Bank copies of any documents
received from the United States Environmental Protection Agency or any state,
county or municipal environmental or health agency concerning Borrower's
operations or Property and of any document submitted by Borrower to the United
States Environmental Protection Agency or any state, county or municipal,
environmental or health agency concerning Borrower's operations or Property.
<PAGE>

      SECTION 8. NEGATIVE COVENANTS.

   Until payment in full of all Obligations of Borrower to Bank and termination
of the Bank's obligations to make Revolving Loans and issue Letters of Credit
hereunder, Borrower covenants and agrees that, unless Bank consents in writing,
Borrower will not, and will cause each Consolidated Subsidiary to not:

    8.1 Merger and Dissolution. Liquidate or dissolve, or enter into any
consolidation, merger, syndicate or other combination or sell, lease or dispose
of, in a single transaction or a series of related transactions, its business or
assets as a whole or such part as in the opinion of Bank constitutes a
substantial portion of its business or assets.

    8.2 Acquisitions. Acquire the business or all or a substantial portion of
the assets of any Person, whether by purchase of stock, assets or otherwise;
provided, however, Borrower may make such acquisitions provided the aggregate
payments (including cash and non-cash) therefor do not exceed $25,000,000 in the
aggregate.

    8.3 Funded Debt. Create, incur or suffer to exist any Funded Debt except
for: (a) the Obligations owed to Bank under this Agreement and the other Loan
Documents; (b) Funded Debt set forth on Schedule 8.3 attached hereto, and all
refinancings and renewals of the letters of credit and surety bonds set forth
thereon (which such renewals and refinancings may be in either surety bond or
letter of credit forms, regardless of whether the original obligation was in
letter of credit or surety bond form), so long as the aggregate amount of such
renewals and refinancings does not exceed $13,184,500; (c) Permitted Purchase
Money Indebtedness; (d) Indebtedness not to exceed $46,000,000 in the aggregate
principal amount evidenced by senior unsecured notes issued by Borrower pursuant
to the terms and provisions of those certain Note Purchase Agreements, dated as
of June 15, 1996, and February 25, 1998, respectively, between Borrower and the
purchasers named therein, as amended, modified or supplemented from time to time
("Note Purchase Agreements"), and all other Indebtedness outstanding under the
Note Purchase Agreements subject to the limitations with respect to the
principal amount thereof set forth in this clause (d); and (e) Funded Debt (in
addition to Funded Debt permitted in subsections 8(a) through 8(d)) not to
exceed $7,000,000 in the aggregate comprised of unsecured reimbursement
obligations incurred in connection with letters of credit or surety bonds issued
for the account of the Borrower by an issuer other than the Bank.

    8.4 Liens and Encumbrances. Create, assume or suffer to exist any deed of
trust, mortgage, encumbrance or other lien (including a lien of attachment,
judgment or execution) or
<PAGE>

security interest (including the interest of a conditional seller of goods),
securing a charge or obligation, on or of any of its Property, real or personal,
whether now owned or hereafter acquired, except for: (a) the liens set forth on
Schedule 8.4 attached hereto; and (b) Purchase Money Liens securing Permitted
Purchase Money Indebtedness which are not incurred in violation of Section 8.3
of this Agreement.

    8.5 Disposition of Property. Sell, lease, transfer, convey or otherwise
dispose of any of its Property except for sales or dispositions of its Property
in the ordinary course of business.

    8.6 Transactions With Related Persons. Except as set forth on Schedule 8.6
attached hereto, directly or indirectly, make any loan or advance, purchase,
assume or guarantee any note to or from any of its officers, directors,
stockholders or Affiliates, or to or from any member of the immediate family of
any of its officers, directors, shareholders or Affiliates, except for travel or
other reasonable expense advances to employees in the ordinary course of
business which do not total more than $100,000 in the aggregate outstanding at
any one time; or subcontract any operations to any Affiliate; or enter into, or
be a party to, any transaction with any Affiliate or officer, director or
stockholder of Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms which are fully disclosed to Bank and are no less favorable to Borrower
than would obtain in a comparable arm's length transaction with a Person not an
Affiliate or stockholder of Borrower.

    8.7 Restricted Investments. Make any Restricted Investment except for (a)
travel or other reasonable expense advances to employees permitted by Section
8.6 hereof; (b) prepaid expenses incurred in the ordinary course of business;
and (c) accounts created in the ordinary course of business.

    8.8 Restrictions on Dividends. Declare or pay any dividends (other than
dividends payable solely in its own Stock) upon any of its Stock, or purchase,
redeem or otherwise acquire, directly or indirectly, any shares of its Stock, or
make any distribution of cash, property or assets among the holders of shares of
its Stock, or make any material change in its capital structure; provided,
however, that for any Fiscal Year Borrower may pay dividends if and only if:

       (a) No Default or Event of Default shall then exist;

       (b) After giving effect to such dividend, no Default or Event of Default
shall exist; and

<PAGE>

       (c) Such dividend has been duly authorized by all necessary corporate
action and is permitted by applicable law.

    8.9 Fiscal Year. Change its Fiscal Year.

    8.10 Sale and Leasebacks. Enter into any arrangement with any Person
providing for the leasing by Borrower of any asset which has been sold or
transferred by Borrower to such Person if such arrangement occurs more than one
hundred eighty (180) days after the initial purchase of such asset by Borrower.

    8.11 New Business. Engage in any business other than the business in which
it is currently engaged or a business reasonably related thereto or make any
material change in any of its business objectives, purposes and operations which
might in any way adversely affect the repayment of the Obligations.

    8.12 Subsidiaries or Partnerships. At any time after the date hereof, become
a partner or joint venturer in any partnership or joint venture or create or
acquire any Subsidiary or transfer any assets to a Subsidiary. For purposes of
this Section 8.12, cartage agency and inter-line arrangements which in each case
do not constitute Investments by Borrower and do not result in Borrower's
incurrence of direct or contingent liabilities other than in the ordinary course
of business shall not constitute partnerships or joint ventures.

    8.13 Guaranty. Guarantee or otherwise, in any way, become liable with
respect to the obligations or liabilities of any Person except: (a) its
Affiliate's obligations to Bank; (b) by endorsement of instruments or items of
payment for deposit to the general account of Borrower or for delivery to Bank
on account of the Obligations; (c) those guaranties set forth on Schedule 8.13
attached hereto; and (d) guaranties supporting third-party loans to employees of
the Borrower in the ordinary course of business, not to exceed $100,000 in the
aggregate.

    8.14  Transactions  Affecting  Repayment  of  Indebtedness.  Enter  into any
transaction which materially and adversely affects Borrower's Property or
Borrower's ability to repay any Indebtedness.

    8.15 Tangible Net Worth. Permit Tangible Net Worth of Borrower and each
Consolidated Subsidiary to be less than (a) $95,000,000 on June 30, 2000, and
(b) at each Fiscal Quarter end thereafter, $95,000,000 plus the sum of fifty
percent (50%) of cumulative positive Net Income for each of the Fiscal Quarters
ending after June 30, 2000.
<PAGE>

    8.16 Funded Debt to Total Capitalization. Permit the percentage of (a)
Funded Debt of Borrower and each Consolidated Subsidiary, less the dollar amount
of undrawn letters of credit and surety bonds of Borrower ("Undrawn
Obligations") to (b) Total Capitalization of Borrower and each Consolidated
Subsidiary, less Undrawn Obligations, to be greater than 55% at any time, tested
at each Fiscal Quarter end hereafter.

    8.17 Fixed  Charge  Coverage  Ratio.  Permit the Fixed Charge  Coverage
Ratio to be less than 1.75 to 1.0 at any time.

          SECTION 9. EVENTS OF DEFAULT.

    9.1 Event of Default.  The  occurrence of any one or more of the following
events shall constitute an "Event of Default":

    (a) Borrower fails to pay any portion of the obligations when due and
payable;

    (b) Borrower fails or neglects to observe, perform or comply with any term,
provision, condition or covenant contained in Sections 7.3, 7.4 or Section 8 of
this Agreement;

    (c) Borrower fails or neglects to observe, perform or comply with any term,
provision, condition, covenant, warranty or representation contained in this
Agreement or the other Loan Documents or in any other agreement now existing or
hereafter executed evidencing, securing or relating in any way to the
Obligations of Borrower, which is required to be observed, performed or complied
with by Borrower, other than those enumerated in Section 9.1(b) above, and the
same is not cured within the earlier of twenty (20) days after (i) the earlier
to occur of (y) the date upon which Borrower has actual knowledge thereof, or
(z) the date upon which Borrower should have obtained actual knowledge thereof
assuming Borrower exercises due care and reasonable diligence under the
circumstances; or (ii) Bank's giving Borrower written notice thereof;

    (d) If any representation or warranty made in writing by or on behalf of
Borrower in this Agreement or in the other Loan Documents or in any other
agreement now existing or hereafter executed between Borrower and Bank, or in
connection with the transactions contemplated hereby or thereby, shall prove to
have been false or incorrect in any material respect at the time as of which
such representation or warranty was made;

    (e) The occurrence of any default or event of default on the part of
Borrower (including specifically, but without
<PAGE>

limitation, due to non-payment) under the terms of any agreement, document or
instrument pursuant to which Borrower has incurred any Funded Debt in excess of
$100,000 (other than the Obligations), which default is not cured within the
time, if any, permitted therefor in the agreement governing such Funded Debt;

    (f) The filing by Borrower of any voluntary petition seeking liquidation,
reorganization, arrangement, readjustment of its debts or for any other relief
under the Bankruptcy Code or under any other act or law pertaining to insolvency
or debtor relief, whether state, federal or foreign, now or hereafter existing,
or the appointment of a receiver, custodian or trustee of Borrower or for all or
a substantial part of Borrower's Property;

    (g) The filing against Borrower of any involuntary petition seeking
liquidation, reorganization, arrangement, readjustment of its debts or for any
other relief under the Bankruptcy Code or under any other act or law pertaining
to insolvency or debtor relief, whether state, federal or foreign, now or
hereafter existing, and such petition is not dismissed within sixty (60) days
after the filing thereof or, if within such sixty (60) day period an order for
relief under the Bankruptcy Code or any other applicable act or law shall be
entered, then immediately upon entry of such order;

    (h) Borrower ceases to be Solvent, or Borrower ceases to conduct its
business substantially as now conducted or is enjoined, restrained or in any way
prevented by court order from conducting all or any material part of its
business affairs;

    (i) A notice of lien, levy or assessment is filed of record to all or any of
Borrower's assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, including, without limitation, the Pension Benefit Guaranty
Corporation, or if any taxes or debts owing at any time or times hereafter to
any one of them becomes a lien or encumbrance upon Borrower's Property and the
same is not dismissed, released, bonded or discharged within thirty (30) days
after the same becomes a lien or encumbrance or, in the case of ad valorem
taxes, prior to the last day when payment may be made without penalty;

    (j) The entry of a judgment or the issuance of a warrant of attachment,
execution or similar process against Borrower or any of its Property in excess
of $500,000, which shall not be dismissed, released, discharged or bonded within
thirty (30) days from entry of judgment or the issuance of the warrant of
<PAGE>

attachment, execution or similar process against Borrower or any of its
Property;

    (k) If a  custodian,  trustee,  receiver  or  assignee  for the  benefit  of
creditors is appointed or takes possession of Borrower's Property; or

    (l) The occurrence of any of the following events: (i) the happening of a
Reportable Event with respect to any profit sharing or pension plan of Borrower
governed by ERISA; (ii) the appointment of a trustee by an appropriate United
States District Court to administer any such plan; (iii) the institution of any
proceedings by the Pension Benefit Guaranty Corporation to terminate any such
plan or to appoint a trustee to administer any such plan; (iv) the failure of
Borrower to furnish to Bank a copy of each report which is filed by Borrower
with respect to each such plan promptly after the filing thereof with the
Secretary of Labor or the Pension Benefit Guaranty Corporation; or (v) the
failure of Borrower to notify Bank promptly upon receipt by Borrower of any
notice of the institution of any proceeding or any other actions which may
result in the termination of any such plan; or

    (m) Guarantor fails or neglects to observe, perform or comply with any term,
provision, condition, covenant, warranty or representation contained in the
Guaranty.

          SECTION 10. RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT.

    10.1 Rights and Remedies. Upon the occurrence of any Event of Default, Bank
shall have, in addition to all other rights and remedies which Bank may have
under this Agreement, the other Loan Documents, and applicable law, the
following rights and remedies, all of which may be exercised with or without
further notice to Borrower:

    (a) The right to terminate the commitment of Bank to make Revolving Loans or
issue Letters of Credit hereunder, and, upon the occurrence of an Event of
Default specified in Section 9.1(f), (g) or (h), the obligation of Bank to make
Revolving Loans or issue Letters of Credit hereunder shall automatically be
deemed terminated;

    (b) The right to declare all or any part of the Obligations immediately due
and payable, whereupon such Obligations shall become immediately due and
payable, without presentment, demand, notice or legal process of any kind, all
of which are hereby expressly waived by Borrower; and upon the occurrence of an
<PAGE>

Event of Default specified in Section 9.1(f), (g) or (h), all of the Obligations
shall automatically become due and payable;

    (c) The right to setoff and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held in other than a fiduciary
or payroll account and any other indebtedness at any time owing by Bank to or
for the credit or account of Borrower against any and all of the Obligations;

    (d) Bank may cause the Beneficiary of each Letter of Credit outstanding to
draw upon such Letter of Credit for the undrawn amount thereof; and

    (e) The right to exercise any remedy available to Bank at law or in equity.

    10.2 Rights and Remedies With Respect to Letters of Credit. Upon the
occurrence of an Event of Default, Bank may, at its option, demand that Borrower
deposit with Bank funds equal to the undrawn face amount of all Letters of
Credit then outstanding. If Borrower fails to make such deposit within three (3)
Business Days after written demand therefor, Bank may, at its option, advance
such amount as a Revolving Loan hereunder, whether or not with the making of
such Revolving Loan the Revolving Line of Credit Commitment would be exceeded,
which shall be payable at the applicable interest rate set forth in Section 2.3
hereof. Any such funds deposited by Borrower or advanced by Bank as a Revolving
Loan shall be held by Bank in a interest bearing cash collateral account as
security for all of the Letter of Credit Obligations and to provide a fund from
which Bank shall make future payments upon drawings under the outstanding
Letters of Credit. At such time as all Letters of Credit have expired or have
been cancelled or terminated, any amount remaining in the cash collateral
account shall be applied against any outstanding Obligations owed by Borrower to
Bank, or if all Obligations have then been indefeasibly paid in full, returned
to Borrower. The provisions of this Section 10.2 shall survive the termination
of this Agreement.

    10.3 Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of
Bank's rights and remedies set forth in this Agreement is not intended to be
exhaustive and the exercise by Bank of any right or remedy shall not preclude
the exercise of any other rights or remedies, all of which shall be cumulative,
and shall be in addition to any other right or remedy given hereunder, under the
Loan Documents or under any other agreement between Borrower or Bank or which
may now or hereafter exist in law or in equity or by suit or otherwise. No delay
or failure to
<PAGE>

take action on the part of Bank in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or shall be construed to be
a waiver of any Default or Event of Default. No course of dealing between
Borrower and Bank or its agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or to constitute a waiver of
any Default or Event of Default.

          SECTION 11. PAYMENT OF EXPENSES.

  Whether or not the transactions contemplated by this Agreement shall be
consummated, Borrower will:

    11.1 Fees and Expenses. Pay or reimburse Bank and any Participant upon
demand for all expenses (including, without limitation, reasonable attorneys'
and paralegals' expenses) incurred or paid by Bank in connection with: (a) the
preparation, negotiation, execution, delivery, interpretation or enforcement of
this Agreement or the other Loan Documents, or any modification of or amendment
to this Agreement or the other Loan Documents if either requested by Borrower or
if an Event of Default has occurred or any sale or sales of any interest in the
extension of the credit facility to Borrower hereunder to one or more
Participants; (b) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Bank, Borrower or any other Person) in any way relating
to this Agreement or the other Loan Documents, or Borrower's affairs; (c) any
attempt to collect the Obligations or to enforce any rights of Bank against
Borrower or any other Person which may be obligated to Bank by virtue of this
Agreement or the other Loan Documents; and (d) any refinancing or restructuring
of the credit arrangement provided under this Agreement in the nature of a
"work-out" or in any insolvency or bankruptcy proceeding.

          SECTION 12. MISCELLANEOUS.

    12.1 Survival of Agreements. All agreements, representations and warranties
contained herein or made in writing by or on behalf of Borrower in connection
with the transactions contemplated hereby shall survive the execution and
delivery of this Agreement and the other Loan Documents. No termination or
cancellation (regardless of cause or procedure) of this Agreement shall in any
way affect or impair the powers, obligations, duties, rights and liabilities of
the parties
<PAGE>

hereto in any way with respect to (a) any transaction or event occurring prior
to such termination or cancellation, or (b) any of Borrower's undertakings,
agreements, covenants, warranties and representations contained in this
Agreement and the other Loan Documents and all such undertakings, agreements,
covenants, warranties and representations shall survive such termination or
cancellation. Borrower further agrees that to the extent Borrower makes a
payment or payments to Bank, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy, insolvency or similar state or federal law, common law or equitable
cause, then, to the extent of such payment or repayment, the Obligations or part
thereof intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been received by Bank.

    12.2 Governing Law. This Agreement shall be interpreted, and the rights and
liabilities of the parties hereto determined, in accordance with the internal
laws (as opposed to conflicts of law provisions) of the State of North Carolina.

    12.3 Notices. All notices and other communications hereunder shall be made
by telegram, telex, electronic transmitter or overnight air courier or certified
or registered mail, return receipt requested, and shall be deemed to be received
by the other party one (1) day after sending, if sent by telegram, telex,
electronic transmitter or overnight air courier, and three (3) days after
mailing, if sent by certified or registered mail. All notices shall be addressed
to the party to be notified as follows:

    (a)  If to Borrower:      Old Dominion Freight Line, Inc.
                              1730 Westchester Drive
                              High Point, North Carolina 27261
                              Attn: J. Wes Frye, Senior Vice
                                    President-Finance and Chief
                                    Financial Officer
                                    Facsimile No. 336-802-5289

         With a copy to:      Old Dominion Freight Line, Inc.
                              1730 Westchester Drive
                              High Point, North Carolina 27261
                              Attn: Joel B. McCarty, Esq.,
                                    Senior Vice President-
                                    General Counsel and
                                    Secretary
                                    Facsimile No. 336-802-5289
<PAGE>

    (b)      If to Bank:      First Union National Bank
                              300 North Greene Street, 5th Floor
                              Greensboro, North Carolina 27401
                                                (for street address)
                              Post Office Box 21965
                              Greensboro, North Carolina 27420
                                                (for post office box)
                              Attn:  Richard J. Rizzo, Jr.
                              Facsimile No. 336-378-4099

            With a copy to:   Smith Helms Mulliss & Moore, L.L.P
                              300 North Greene Street
                              Greensboro, North Carolina 27401
                                                (for street address)
                              Post Office Box 21927
                              Greensboro, North Carolina  27420
                                                (for post office box)
                              Attn:  W. Alexander Audilet, Esq.
                              Facsimile: 336-379-9558

or to such other address as each party may designate for itself by like notice
given in accordance with this Section 12.3.

    12.4 Indemnification of Bank and Participants. From and at all times after
the date of this Agreement, and in addition to all of Bank's other rights and
remedies against Borrower, Borrower agrees to indemnify Bank and each
Participant and hold Bank and each Participant harmless from and against any and
all claims, losses, damages, liabilities, suits, actions, proceedings, costs and
expenses of any kind or nature whatsoever (including without limitation,
attorney's fees, costs and expenses) incurred or suffered by or asserted against
Bank or any Participant, whether direct, indirect or consequential, as a result
of or arising from or in any way relating to (a) Borrower's failure to observe,
perform or discharge its duties hereunder; (b) any suit, action or proceeding
(including any inquiry or investigation) by any Person, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against any
Person under any statute or regulation, including without limitation, any
federal or state securities laws, or under any common law or equitable cause or
otherwise, arising from or in connection with the negotiation, preparation,
execution or performance of this Agreement or the other Loan Documents or any
transactions contemplated herein or therein, whether or not Bank or any
Participant is a party to any such action, proceeding, suit or the target of any
such inquiry or investigation; or (c) any claim, demand, action or suit which
may arise against Bank by reason of any action taken pursuant to this Agreement,
any Letter of Credit or any of the Loan

<PAGE>

Documents; provided, however, the foregoing indemnification shall not apply to
any liability resulting from the gross negligence or willful misconduct of Bank
or any Participant (as finally determined by a court of competent jurisdiction).
Without limiting the generality of the foregoing, this indemnity shall extend to
any claims asserted against Bank or any Participant by any Person under any
Environmental Laws. All of the foregoing losses, liabilities, damages, costs and
expenses of Bank and each Participant shall be payable by Borrower upon demand
by Bank and shall be additional Obligations hereunder. Notwithstanding any
contrary provision of this Agreement, the obligation of Borrower under this
Section 12.4 shall survive the payment in full of the obligations and the
termination of this Agreement.

    12.5 Waivers by Borrower. Except as otherwise provided for in this
Agreement, Borrower waives presentment, demand and protest and notice of
presentment, protest, default, non-payment, maturity and all other notices.

    12.6 Assignment. Borrower may not sell, assign or transfer this Agreement,
or the other Loan Documents or any portion thereof, including without
limitation, Borrower's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. Borrower hereby consents to Bank's participation, sale,
assignment, transfer or other disposition at any time or times hereafter of this
Agreement or the other Loan Documents, or of any portion hereof or thereof,
including without limitation, Bank's rights, title, interests, remedies, powers
and duties hereunder or thereunder.

    12.7 Participants. If a Participant shall at any time participate with Bank
in making loans hereunder or under any other agreement between Bank and
Borrower, Borrower hereby grants to such Participant (in addition to any other
rights which such Participant shall have) and such Participant shall have and
hereby is granted a continuing lien and security interest in any money,
securities or other Property of Borrower in the custody or possession of
Participant, including the right to set-off, to the extent of Participant's
participating interests in the Loans, as such Participant would have if it were
a direct lender to Borrower.

    12.8 Amendment. This Agreement and the other Loan Documents cannot be
amended, changed, discharged or terminated orally, but only by an instrument in
writing signed by Bank and Borrower.

    12.9 Severability. To the extent any provision of this Agreement is
prohibited by or invalid under applicable law, such

<PAGE>

provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.

    12.10 Entire Agreement. This Agreement and the other documents, certificates
and instruments referred to herein constitute the entire agreement between the
parties and supersede and rescind any prior agreements relating to the subject
matter hereof.

    12.11 Binding Effect. All of the terms of this Agreement and the other Loan
Documents, as the same may from time to time be amended, shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of Borrower and Bank. This provision, however, shall not be deemed to
modify Section 12.6.

    12.12 Captions. The captions to the various Sections and subsections of this
Agreement have been inserted for convenience only and shall not limit or affect
any of the terms hereof.

    12.13 Conflict of Terms. The provisions of the other Loan Documents are
incorporated in this Agreement by this reference thereto. Except as otherwise
provided in this Agreement and except as otherwise provided in the other Loan
Documents, if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision of the other Loan Documents, the provision
contained in this Agreement shall control.

    12.14 Injunctive Relief. Borrower recognizes that in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy of law may prove to be inadequate relief to
Bank. Borrower therefore agrees that Bank, if Bank so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.

    12.15 Construction of Agreement. Whenever the term "reasonable attorneys'
fees" is used in this Agreement or the other Loan Documents, such term shall
refer to the fees of counsel based upon usual and customary hourly rates and not
upon any fixed percentage of the Obligations.

    12.16 Time of Essence. Time is of the essence of this Agreement and the
other Loan Documents.

    12.17 Waiver of Jury Trial. BORROWER AND BANK AGREE THAT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT BY BANK OR
<PAGE>

BORROWER, ON OR WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO, SHALL BE TRIED ONLY BY A
COURT AND NOT BY A JURY. BANK AND BORROWER EACH HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND INTELLIGENTLY, AND WITH THE ADVICE OF THEIR RESPECTIVE
COUNSEL, WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL
BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. FURTHER, EACH BORROWER WAIVES
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. BORROWER ACKNOWLEDGES AND AGREES
THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THAT
BANK WOULD NOT EXTEND CREDIT TO BORROWER IF THE WAIVERS SET FORTH IN THIS
SECTION WERE NOT A PART OF THIS AGREEMENT.

    12.18 Arbitration. Upon demand of Borrower or Bank, whether made before or
after institution of any judicial proceeding, any claim or controversy arising
out of or relating to the Loan Documents (a "Dispute") shall be resolved by
binding arbitration conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and the Federal Arbitration Act. Disputes may include,
without limitation, tort claims, counterclaims, a dispute as to whether a matter
is subject to arbitration, claims brought as class actions, or claims arising
from documents executed in the future. A judgment upon the award may be entered
in any court having jurisdiction. Notwithstanding the foregoing, this
arbitration provision does not apply to disputes under or related to swap
agreements. All arbitration hearings shall be conducted in the city named in the
address of Bank in the "Notices" Section above. A hearing shall begin within 90
days of demand for arbitration and all hearings shall conclude within 120 days
of demand for arbitration. These time limitations may not be extended unless a
party shows cause for extension and then for no more than a total of 60 days.
The expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules
shall be applicable to claims of less than $1,000,000.00. Arbitrators shall be
licensed attorneys selected from the Commercial Financial Dispute Arbitration
Panel of the AAA. The parties do not waive applicable Federal or state
substantive law except as provided herein. Notwithstanding the preceding binding
arbitration provisions, Borrower and Bank agree to preserve, without diminution,
certain remedies that any party may exercise before or after an arbitration
proceeding is brought. The parties shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose

<PAGE>

against any real or personal property or other security by exercising a power of
sale or under applicable law by judicial foreclosure including a proceeding to
confirm the sale; (ii) all rights of self-help including peaceful occupation of
real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Any claim or controversy with
regard to any party's entitlement to such remedies is a Dispute.

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

                           OLD DOMINION FREIGHT LINE, INC.

                         By:           J. WES FRYE
                              -------------------------------
                      Title:  Senior Vice President - Finance
                              -------------------------------

                           FIRST UNION NATIONAL BANK

                         By:      RICHARD J. RIZZO, JR.
                              -------------------------------
                      Title:  Senior Vice President, Director
                              -------------------------------

<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES

Exhibit                    Description of Exhibit             Section
-------                    ----------------------             -------

  A                        Revolving Credit Note                2.2

Schedule                   Description of Schedule            Section
--------                   -----------------------            -------

 1.1A                      Letters of Credit                    1.1

 1.1B                      Investment Policy                    1.1

 6.1                       Other Corporate, Fictitious
                           or Trade Names                       6.1

 6.2                       Litigation                           6.2

 6.9                       Places of Business and
                           Principal Place of Business          6.9

 6.10                      Plans                                6.10

 6.15                      Patents, Trademarks and
                           Licenses                             6.15

 6.19A                     Environmental Matters (USTs)         6.19

 6.19B                     Environmental matters
                           (Releases)                           6.19

 6.21                      Labor Matters                        6.21

 6.22A                     Capitalized Leases                   6.22

 6.22B                     Operating Leases                     6.22

 8.3                       Funded Debt                          8.3

 8.4                       Permitted Liens                      8.4

 8.6                       Related Party Transactions           8.6

 8.13                      Permitted Guaranties                 8.13

<PAGE>

                                  EXHIBIT A TO
                                CREDIT AGREEMENT

                              REVOLVING CREDIT NOTE

         $50,000,000                                 Greensboro, North Carolina
                                                     May 31, 2000

         FOR VALUE RECEIVED, the undersigned OLD DOMINION FREIGHT LINE, INC., a
Virginia corporation ("Borrower"), promises to pay to FIRST UNION NATIONAL BANK,
a national banking association ("Bank"), or order, at the principal office of
the Bank in Greensboro, North Carolina, or at such other place as the Bank may
from time to time designate in writing, the principal sum of Fifty Million
Dollars ($50,000,000), or, if less, the unpaid balance of all Revolving Loans
made by the Bank to the Borrower under the Revolving Line of Credit extended by
the Bank to the Borrower pursuant to the Credit Agreement (as defined below),
together with interest on the unpaid principal amount of this Note at the rates
provided in the Credit Agreement.

         This Note is the Revolving Credit Note issued to evidence Revolving
Loans made by the Bank to the Borrower under the Revolving Line of Credit
pursuant to Section 2.1 of the Credit Agreement, dated of even date herewith,
between the Borrower and the Bank, as the same may from time to time be amended
or supplemented ("Credit Agreement"), and is entitled to the benefits of and the
remedies provided in, the Credit Agreement. All of the terms, conditions and
covenants of the Credit Agreement are expressly made a part of this Note, by
reference in the same manner and with the same effect as if set forth herein.
Reference is made to the Credit Agreement for provisions for the maturity,
payment, prepayment and acceleration of this Note. All capitalized terms used in
this Note without definition shall have the meanings ascribed to such terms in
the Credit Agreement.

         The Borrower, for itself and its successors and assigns, expressly
waives presentment for payment, demand, protest and notice of demand, notice of
dishonor and notice of nonpayment and all other notices.

         This Note shall be governed by, construed and enforced in accordance
with the internal laws, and not the laws of conflicts, of the State of North
Carolina.

<PAGE>

         In the event that this Note shall at any time after maturity be
collected by or through an attorney-at-law, the Borrower agrees to pay, in
addition to the entire unpaid principal balance and interest due hereunder, all
collection costs, including reasonable attorneys' fees, incurred by the Bank in
collecting the indebtedness due hereunder, computed on the basis of usual and
customary rates and not on the basis of a fixed percentage of the indebtedness
due hereunder.

         IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by
its duly authorized corporate officers and its corporate seal to be hereunto
affixed on the day and year first above written.

                                                 OLD DOMINION FREIGHT LINE, INC.

                                           By:         J. WES FRYE
                                                 -------------------------------
                                          Title: Senior Vice President - Finance
                                                 -------------------------------

<PAGE>

                                  Schedule 1.1A
                                  -------------

                                Letters of Credit

Schedule of outstanding letters of credit attached.

<PAGE>

                                  Schedule 1.1B
                                  -------------

                                Investment Policy

See Investment Policy attached.

<PAGE>

                                  Schedule 6.1
                                  ------------

                   Other Corporate, Fictitious or Trade Names

Subsidiary:  ODIS, Inc., a Delaware corporation

<PAGE>

                                  Schedule 6.2
                                  ------------

                                   Litigation

None.

<PAGE>

                                 Schedule 6.9
                                 ------------

                             Places of Business and
                           Principal Place of Business

Corporate Headquarters:

         1730 Westchester Drive
         High Point, North Carolina

Corporate Annex:

         1301 Lincoln Drive
         High Point, North Carolina  27260

See Schedule of Other Locations attached.

<PAGE>

                                  Schedule 6.10
                                  -------------

                                      Plans

1)       Old Dominion 401K Retirement Plan

2)       Old Dominion - Section 125 Plan

3)       Old Dominion - Voluntary Employee Benefits Association
                        (VEBA) Trust

4)       Nonqualified Deferred Compensation Plan of Old Dominion
         Freight Line, Inc.

<PAGE>

                                  Schedule 6.15
                                  -------------

                        Patents, Trademarks and Licenses

Registration Number                 Description               Registration Date
-------------------                 -----------               -----------------

     1,038,955                      Service Mark                 May 4, 1976

   Pending Applications                                  Application Number
   --------------------                                  ------------------

Old Dominion Speed Service                                    75/754,145

Transline                                                     75/553,637

     Other
     -----

"ODIE" Character -
unfiled copyright

<PAGE>

                                 Schedule 6.19A
                                 --------------

                          Environmental Matters (USTs)

See Schedule attached.

<PAGE>

                                 Schedule 6.19B
                                 --------------

                              Environmental Matters
                                   (Releases)

None.

<PAGE>

                                  Schedule 6.21
                                  -------------

                                  Labor Matters

         On or about May 20, 1999, a drivers and dockmen union election was held
at our Philadelphia, Pennsylvania terminal. The Teamsters Union won the election
by a vote of 28 to 23. Although required bargaining has taken place, the
Borrower and the Union have not signed a contract. The Borrower does not believe
that this situation has created or will create a material adverse effect on its
operations.

         Borrower is not a party to any labor contract at any of its terminals
or offices.

<PAGE>

                                 Schedule 6.22A
                                 --------------

                               Capitalized Leases
<TABLE>
<CAPTION>

       Lessor                      Description of                Location        Outstanding
       ------                      Leased Property               --------           Balance
                                   ---------------                                  -------

<S>                               <C>                            <C>                    <C>
 TransAmerica                  Various trailers obtained          Various          $ 316,319
 Business Credit               through Goggin Truck Line,
                               Inc. acquisition

</TABLE>

<PAGE>

                                 Schedule 6.22B
                                 --------------

                                Operating Leases

<TABLE>
<CAPTION>

See Schedule of terminal leases on Schedule 6.9.

                Lessor                               Description of Property              Location
                ------                               -----------------------              --------

<S>                                                        <C>                               <C>
E & J Enterprises                        163 - 1980-81 Great Dane Trailers                 Various

Nacarto                                  20 -  1997 Volvo Tractors obtained in Goggin      Various
                                               Truck Line, Inc. acquisition

Fleet Capital                            26 -  1997-98 Volvo tractors obtained in          Various
                                               Goggin Truck Line, Inc. acquisition

Wells Fargo                              7 -   1998 Volvo Tractors obtained in GOTL        Various
Norwest Financial                              acquisition

TransAmerica Business Credit             46 -  1997 and 1999 Volvo Tractors obtained in    Various
                                               GOTL acquisition

US Bank Corp                             8 -   1998 Volvo Tractors obtained in GOTL        Various
                                               acquisition

Paccar Financial                         28 -  1998 Peterbuilt Tractors obtained in GOTL   Various
                                               acquisition

Robert A. Cox, Jr., Trustee              Parcel of land together with improvements         4715 Evan Town Road, Greensboro,
                                         thereon, 38.43 acres, fronting SR#1126            NC  27406-9598
</TABLE>

<PAGE>

                                  Schedule 8.3
                                  ------------

                                   Funded Debt

Debtholder                                              Amount
----------                                              ------

American Casualty Company of Reading, PA -            $1,800,000
Surety Bond No. 929110773 - Unsecured

See Schedule 1.1A.

See Funded Debt secured by liens noted on
Schedule 8.4.

See Operating Lease noted on Schedule 6.22A.

<PAGE>

                                  Schedule 8.4
                                  ------------

                                 Permitted Liens

<TABLE>
<CAPTION>

  Secured Party                     Description of Property              Outstanding Balance       Location
  -------------                     -----------------------              -------------------       --------

<S>                                            <C>                            <C>                     <C>
Philadelphia National Bank        Various 1997-98 Tractors                 $ 1,158,823              Various

General Electric Credit           396 Trailers and 13 Tractors-            $ 1,426,444              Various
Corporation                       GOTL acquisition

IBM Credit Corporation            IBM AS/400-740 Processor;                $ 2,125,584             Corporate
                                  IBM AS/400-740 Processor                                          Office
                                  Upgrade; 9406 SYSTEM UNITS;
                                  AS/400 OPERATING SYSTEM;
                                  with various Peripherals and other
                                  units

First Union National Bank         $4,000,000 Promissory Note               $   916,642                n/a

                                                                           $ 5,627,493
                                                                           ============
</TABLE>
<PAGE>

                                  Schedule 8.6
                                  ------------

                           Related Party Transactions

See Section entitled "Compensation Committee Interlocks and Inside
Participation" in the Old Dominion Freight Line, Inc. Notice of Annual Meeting
of Shareholders - April 24, 2000, a copy of which is attached.

<PAGE>

                                  Schedule 8.13
                                  -------------

                              Permitted Guaranties

As part of the consideration for the sale of Deaton, Inc., Borrower maintains a
letter of credit totalling $500,000.00 to secure payment to Utica Mutual
Insurance Company for the self-insured retention portion of workmen compensation
claims.EXHIBIT 10.1

                  COPROMOTION AND FUTURE DEVELOPMENT AGREEMENT

                                     BETWEEN

                            KOS PHARMACEUTICALS, INC.

                                       AND

                         DUPONT PHARMACEUTICALS COMPANY

                                   May 3, 2000

<PAGE>

                                Table of Contents

1. Definitions..............................................................1
    1.1         Adverse Event(s)............................................1
    1.2         Affiliate...................................................1
    1.3         Business Day................................................2
    1.4         Cost Of Distribution........................................2
    1.5         Cost Of Manufacture.........................................2
    1.6         Development Committee.......................................2
    1.7         Effective Date..............................................2
    1.8         FDA.........................................................2
    1.9         Joint Copromotion Activities................................2
    1.10        Joint Marks.................................................2
    1.11        Kos Trademark...............................................2
    1.12        Know-How....................................................2
    1.13        Marketing Committee.........................................3
    1.14        Minimum Product Details.....................................3
    1.15        NDA.........................................................3
    1.16        Net Operating Profit........................................3
    1.17        Net Sales...................................................3
    1.18        Other Copromotion Activities................................3
    1.19        Party(ies)..................................................3
    1.20        Patents.....................................................3
    1.21        Product.....................................................4
    1.22        Product Detail(s)...........................................4
    1.23        Product Development Costs...................................4
    1.24        Safety Surveillance Cost....................................4
    1.25        Shared Copromotion Expenses.................................4
    1.26        Term........................................................5
    1.27        Territory...................................................5
    1.28        Third Party(ies)............................................5
    1.29        Year........................................................5
2. Grant of Rights..........................................................5
3. Term, Termination and Renegotiation......................................5
    3.1         Term........................................................5
    3.2         Early Termination...........................................5
    3.3         Renegotiation...............................................6
4. Fees and Payments........................................................6
    4.1         Stock Purchase Agreement....................................6
    4.2         Fees........................................................6
    4.3         Reimbursements..............................................6
    4.4         Product Profits.............................................6
    4.5         Payments....................................................7
    4.6         Taxes.......................................................7

5.  Development.............................................................7

<PAGE>

     5.1         Development Committee.......................................7
     5.2         Responsibilities of Development Committee...................7
     5.3         Meetings of the Development Committee.......................8
     5.4         Product Development Activities..............................8
     5.5         Funding of Product Development..............................9
     5.6         Publications...............................................10
6.  Copromotion.............................................................10
     6.1         Marketing Committee........................................10
     6.2         Responsibilities of Marketing Committee....................10
     6.3         Meetings of Marketing Committee............................11
     6.4         Joint Copromotion Activities...............................12
     6.5         Other Copromotion Activities...............................13
     6.6         Joint Copromotion Costs....................................14
     6.7         Shared Copromotion Expenses................................15
     6.8         Other Copromotion Matters..................................15
7.  Manufacturing and Supply................................................16
     7.1         Kos Responsibilities.......................................16
     7.2         Safety Surveillance Cost...................................17
     7.3         Cost of Manufacture........................................17
8.  Regulatory, Safety and Surveillance.....................................17
     8.1         Regulatory Matters.........................................17
     8.2         Adverse Events.............................................18
9.  Audit Rights............................................................18
10. Intellectual Property...................................................18
     10.1        Ownership of Intellectual Property.........................18
     10.2        Patent Prosecution.........................................19
     10.3        Notification of  Patent Litigation.........................19
     10.4        Patent Infringement........................................20
     10.5        Title to Trademarks........................................20
     10.6        Trademark License..........................................20
     10.7        Joint Marks................................................20
     10.8        Maintenance of Trademarks..................................20
     10.9        Notification of Trademark Litigation.......................21
     10.10       Trademark Infringement.....................................21
     10.11       Information and Settlements................................21
11. Confidentiality.........................................................21
     11.1        Disclosure of Know-How.....................................22
     11.2        Confidential Information...................................22
     11.3        Public Announcements.......................................22
12. Restrictive Covenants...................................................22
     12.1        Non-solicitation...........................................22
     12.2        Non-competition............................................23
13. Rights And Duties Upon Termination......................................23
     13.1        Payment Obligations........................................23

<PAGE>

     13.2        Continuing Obligations.....................................23
     13.3        Remedies...................................................24
14. Representations, Warranties and Indemnification.........................24
     14.1        Representations of Kos.....................................24
     14.2        Representations of DuPont..................................24
     14.3        Indemnification by Kos.....................................25
     14.4        Indemnification by DuPont..................................25
     14.5        Limitations on Indemnification.............................25
     14.6        Insurance..................................................26
15. Assignment..............................................................26
16. Notices.................................................................26
17. Miscellaneous...........................................................28
     17.1        Force Majeure..............................................28
     17.2        No Partnership or Joint Venture............................28
     17.3        Execution In Counterparts..................................28
     17.4        Governing Law..............................................28
     17.5        Waiver Of Breach...........................................28
     17.6        Severability...............................................29
     17.7        Entire Agreement...........................................29
18. Dispute Resolution......................................................29
     18.1        Internal Resolution........................................29
     18.2        Arbitration................................................29

<PAGE>

                  COPROMOTION AND FUTURE DEVELOPMENT AGREEMENT

         This Copromotion and Future Development Agreement (hereafter, the
"Agreement") is entered into as of the 3rd day of May, 2000, by and between Kos
Pharmaceuticals, Inc., a Florida corporation ("Kos"), and DuPont Pharmaceuticals
Company, a Delaware general partnership ("DuPont"), for the development and
marketing of Kos' fixed-dose combination niacin and lovastatin Product (as
defined below).

                                    Recitals

     A.     Kos is the owner of all right, title and interest in and to the
            Product and desires to copromote the Product and jointly plan other
            copromotion and future development activities for the Product with
            DuPont in the Territory (as defined below).

     B.     DuPont desires to copromote the Product and jointly plan other
            copromotion and future development activities for the Product with
            Kos in the Territory, and Kos is willing to grant DuPont such
            rights, all on the terms and subject to the conditions set forth in
            this Agreement.

     C.     Kos and DuPont desire to use their best efforts to work together to
            achieve the launch of the Product in the United States as quickly as
            possible, to aggressively promote the Product, and to optimize its
            sales. Kos and DuPont desire to jointly and equally detail the
            Product in the Territory.

     D.     Kos and DuPont shall on the date hereof enter into a Stock Purchase
            Agreement pursuant to which DuPont shall purchase an equity interest
            in Kos' common stock.

                                    Agreement

1.       Definitions

         1.1 Adverse Event(s) shall mean those events as defined by the FDA and
published in the U. S. Code of Federal Regulations, as amended from time to time
and published in the Federal Register.

         1.2 Affiliate shall mean any corporation, firm, partnership or other
entity that directly or indirectly owns, is owned by or is under common
ownership with a Party to the extent of at least fifty percent (50%) of the
equity or other ownership interest having the power to vote on or direct the
affairs of the entity and any

<PAGE>

person, firm, partnership, corporation or other entity actually controlled by,
controlling or under common control with a Party.

         1.3 Business Day shall mean a day on which commercial banks are open
for business in New York City. References in this Agreement to "days" other than
Business Days shall mean calendar days.

         1.4 Cost Of Distribution shall be ****************** of Net Sales.

         1.5 Cost Of Manufacture shall have the meaning set forth in Section
7.3.

         1.6 Development Committee shall mean the committee established and
conducted in accordance with the procedures set forth in Article 5.

         1.7 Effective Date shall mean the date upon which this Agreement is
effective and shall be the date this Agreement is entered into by both Parties.

         1.8 FDA shall mean the United States Food and Drug Administration and
any successor agency thereto and shall be deemed a reference to the Health
Protection Bureau for matters applicable to Canada.

         1.9 Joint Copromotion Activities shall have the meaning set forth in
Section 6.4.

         1.10 Joint Marks shall mean any trademark, service mark, copyright or
logo developed, applied for or registered or to be applied for or registered for
use in connection with educational activities or services, including "process of
care" materials or other jointly developed materials, not intended to be used
exclusively in association with the Product.

         1.11 Kos Trademark shall mean NicostatinTM, a trademark owned by Kos in
the Territory, and any other trademark, service mark or logo developed, applied
for, registered, or to be applied for or registered for use in connection with
the sale of the Product in the Territory, but shall not include Joint Marks.

         1.12 Know-How shall mean all present and future information developed
by Kos, whether or not in written form, that is not in the public domain and
that relates to the Product and shall include, without limitation, all
biological, chemical, pharmacological, toxicological, medical or clinical,
analytical, quality, manufacturing, research, or sales and marketing information
including all processes, methods, procedures, techniques, plans, programs, and
data and any other information relating to the Product or useful for the
development or commercialization of the Product in the Territory.

         1.13 Marketing Committee shall mean the committee established and
conducted in accordance with the procedures set forth in Article 6.

                                        2
<PAGE>

         1.14 Minimum Product Details shall mean the minimum number of Product
Details to be performed by each Party as determined in accordance with Section
6.4.

         1.15 NDA shall mean a New Drug Application for the Product in
accordance with the requirements of the FDA.

         1.16 Net Operating Profit shall mean Net Sales of the Product in the
Territory minus: (i) Cost of Distribution, Safety Surveillance Cost and Cost of
Manufacture; (ii) royalties payable to Third Parties; (iii) an amount equal to
** of Net Sales to be retained by Kos; and (iv) Shared Copromotion Expenses if
not previously reimbursed under Section 6.7(c) (including expenses prior to
first commercial sale).

         1.17 Net Sales shall mean the gross receipts representing sales of the
Product in the Territory to Third Parties less the following deductions:

         (i)      if included in the aggregate gross invoice price of the
                  Product, sales and excise taxes, duties, and any other
                  governmental charges imposed upon the production, importation,
                  use or sale of such Product;

         (ii)     trade, quantity and cash discounts allowed on the Product;

         (iii)    allowances or credits to customers on account of rejection or
                  return of the Product or on account of price reductions
                  affecting such Product;

         (iv)     Product rebates and Product charge-backs including those
                  granted to managed care entities and pharmaceutical benefit
                  management service entities; and

         (v)      provisions for actual or expected write-offs of uncollectible
                  customer accounts for previously recorded sales or other
                  reserves or provisions established consistent with U.S.
                  Generally Accepted Accounting Principles ("GAAP").

         1.18 Other Copromotion Activities shall have the meaning set forth in
Section 6.5.

         1.19 Party(ies) shall mean each of Kos and DuPont.

         1.20 Patents shall mean all patents and patent applications in the
Territory that are or become owned by Kos, or to which Kos otherwise has, now or
in the future, the right to grant licenses and license rights or sublicense and
sublicense rights, that generically or specifically cover the Product or a use
or formulation of the Product. Included within the definition of Patents are all
continuations, continuations-in-part, division, patents of addition, reissues,
renewals or extensions thereof. Also included within the definition of Patents
are any patents or patent

                                        3
<PAGE>

applications that generically or specifically claim any improvements on the
Product that are developed by Kos, or which Kos otherwise has the right to grant
licenses and license rights or sublicense and sublicense rights, now or in the
future, during the term of this Agreement. The current list of patent
applications and patents encompassed within Patents is set forth in Appendix A
attached hereto. Appendix A shall be updated by Kos at least annually during the
term of this Agreement, but the inadvertent failure to include an item on such
updates of Appendix A does not disqualify such item as a Patent under this
definition.

         1.21 Product shall mean all strengths and dosage forms of Kos'
fixed-dose extended release niacin and lovastatin combination product, that is
the subject of Investigational New Drug application number 56,027 effective from
June 26, 1998, or its successor applications, for all indications approved by
the FDA at any time during the Term.

         1.22 Product Detail(s) shall mean a face-to-face meeting, in an
individual or group practice or hospital setting, between (i) a professional
representative of the applicable Party, meeting the professional standards for
such representatives that are established by the Marketing Committee, and (ii) a
health care professional with prescribing authority, which health care
professional has been designated by the Marketing Committee as a member of the
target calling audience, during which a full presentation of the Product
attributes are orally presented. The presentation of the Product during any
Product Detail must be one of the *** presentations on which the most time is
spent during such meeting, for the period of time determined by the Marketing
Committee. When used as a verb, "Product Detail" shall mean to engage in a
Product Detail.

         1.23 Product Development Costs shall mean those out-of-pocket costs
approved by the Development Committee incurred in connection with Product
Development Activities defined in Section 5.4. Product Development Costs do not
include any expenditures for studies commenced prior to the approval of the NDA
unless specifically approved by DuPont. The amounts and reimbursement of Product
Development Costs shall be determined in accordance with Sections 5.4 and 5.5.

         1.24 Safety Surveillance Cost shall have the meaning set forth in
Section 7.2.

         1.25 Shared Copromotion Expenses shall mean all expenses approved by
the Marketing Committee directly related to the selling, marketing or promotion
of the Product in the Territory for Other Copromotion Activities. Shared
Copromotion Expenses do not include each Party's costs for Joint Copromotion
Activities. The specific components and amounts of Shared Copromotion Expenses
shall be determined in accordance with Section 6.7.

                                        4
<PAGE>

         1.25 Six-Month Period shall mean each period from January through June
and July through December of each Year.

         1.26 Term shall have the meaning set forth in Section 3.1.

         1.27 Territory shall mean the United States of America, its territories
and possessions, including Puerto Rico, and Canada.

         1.28 Third Party(ies) shall mean any person or entity other than Kos
and DuPont or their Affiliates.

         1.29 Year shall mean each twelve month period ending December 31 during
the Term.

2.       Grant of Rights

         Kos grants to DuPont the exclusive license right, to the extent of Kos'
rights and interests under the Patents and Know-How, to co-develop and copromote
the sale of the Product in the Territory, subject to Kos' right to co-develop
and copromote the Product in the Territory and all the other terms and
conditions of this Agreement. Kos shall retain all of its rights with respect to
the Product outside the Territory.

         DuPont shall have the opportunity to negotiate for license rights to
the Product in ****** prior to *************************************************
******************************. In each case in which Kos is contemplating
granting any license rights to the Product in ****** prior to such date, once
Kos decides to pursue granting such rights or begins negotiations with a Third
Party regarding such rights, Kos shall not grant any such rights for a period of
90 days, during which 90-day period DuPont is given an opportunity to negotiate
for such rights that is at least equal to the opportunity given to any other
Third Party.

3.       Term, Termination and Renegotiation

         3.1 Term. This Agreement shall have an Initial Term of ten (10) years
beginning on the Effective Date, unless earlier terminated pursuant to Section
3.2 (the "Initial Term"). After the Initial Term, this Agreement shall
automatically renew for one (1) year renewal terms unless it is terminated by
either Party at least sixty (60) days before the end of the then current term
(the "Initial Term" and the renewal terms are collectively referred to as the
"Term").

         3.2 Early Termination. Each Party shall have the right to terminate
this Agreement before the end of the Term (i) upon a material breach of this
Agreement by the other Party where such breach is not cured within ninety (90)
days following the other Party's receipt of written notice of such breach; (ii)
if the FDA withdraws marketing approval for the Product; (iii) upon the
bankruptcy or insolvency, or the

                                       5
<PAGE>

making or seeking to make or arrange an assignment for the benefit of creditors
of the other Party, or the initiation of proceedings in voluntary or involuntary
bankruptcy, or the appointment of a receiver or trustee of such Party's property
that is not discharged within ninety (90) days; (iv) if at least one patent
based on either of the patent applications U.S. Serial Numbers 08/368,378 and
08/814,974 has not issued within sixty (60) days of the Effective Date; (v) if a
U.S. patent based upon U.S. Serial Numbers 08/368,378 or 08/814,974, or based
upon another U.S. application not yet filed by Kos, and having a claim covering
the Product is declared invalid by a court of competent jurisdiction, is
dedicated to the public by Kos prior to its expiration or is otherwise
unenforceable and there are no remaining claims covering the Product in an
issued U.S. patent owned by Kos; or (vi) if the approval of the NDA for the
Product is delayed by more than 24 months from the date of submission of the
NDA.

         3.3 Renegotiation. In the event that (i) the indication in the approved
NDA is substantially narrower than that approved for Kos' Niaspan(R) product, or
(ii) a generic version of niacin plus lovastatin is approved by the FDA, then
the Parties shall promptly negotiate in good faith revisions with respect to the
Parties' obligations for Product Development Costs and Copromotion Activities
and the Term of the Agreement.

4.       Fees and Payments

         4.1 Stock Purchase Agreement. Contemporaneously with the execution of
this Agreement, the Parties shall execute a Stock Purchase Agreement pursuant to
which DuPont shall purchase an equity interest in Kos' common stock on the terms
set forth therein.

         4.2 Fees. In consideration for the co-development and copromotion
rights under the Patents and Know-How granted to DuPont in this Agreement,
DuPont shall pay a milestone payment of $17,500,000 to Kos upon Kos receiving
marketing clearance from the FDA for the Product. Such milestone payment shall
be due within 10 Business Days following the occurrence of the milestone.

         4.3 Reimbursements. The foregoing milestone payment shall be in
addition to the reimbursement payments DuPont is required to make pursuant to
Sections 5.5 and 6.7 and any other payments DuPont is required to make under
this Agreement.

         4.4 Product Profits. Subject to the provisions of Section 6.6, Kos and
DuPont shall each be entitled to receive 50% of the Net Operating Profit, or be
obligated to bear 50% of the Net Operating Profit in the event such amount is a
loss, for each quarter. The Net Operating Profit shall be calculated by Kos and
communicated to DuPont in writing within 45 days following the end of each
calendar quarter, except following the fourth calendar quarter, in which case
such

                                        6
<PAGE>

calculation shall be communicated within 60 days following the end of the
quarter. Kos shall pay to DuPont 50% of the Net Operating Profit within 10
Business Days following such written communication; in the event that such Net
Operating Profit amount is a loss, DuPont shall pay to Kos within 10 Business
Days following such written communication 50% of the amount of the loss.

         4.5 Payments. All payments under this Agreement shall be in U.S.
dollars in immediately available funds, and, unless instructed otherwise by the
receiving Party, shall be made via wire transfer to the account designated from
time to time by the receiving Party.

         4.6 Taxes. Unless otherwise required by law, each Party shall be
responsible for paying and reporting all of its own taxes and fees, including
without limitation income taxes, payroll taxes, franchise taxes and all taxes
and fees in connection with the Party conducting business in any jurisdiction.

5.       Development

         5.1 Development Committee. Within thirty (30) days following the
Effective Date, the Parties shall form a Development Committee whose
responsibility shall be to direct the regulatory and clinical development of the
Product other than in connection with the NDA approval for the United States.
The Development Committee shall have equal representation from Kos and DuPont
and shall have a chairperson designated by Kos and a vice-chairperson designated
by DuPont. The Development Committee may from time to time include additional
non-voting ad-hoc representatives from either Party on specific issues as the
need arises. As appropriate, the Development Committee may establish one or more
sub-committees to act on matters that may arise between meetings of the
Development Committee or to consider matters that would be more effectively
considered by a smaller committee.

         Each member of the Development Committee shall have one vote on all
matters, and whenever action is to be taken by vote of the Development
Committee, it shall be authorized by a majority vote and shall be binding on
both Parties. Any matters of the Committee that result in a tie vote that the
chairperson and vice-chairperson are unable to resolve shall be referred to the
dispute resolution provisions set forth in Article 18.

         5.2 Responsibilities of Development Committee. The Development
Committee shall be responsible for the planning and oversight of all preclinical
and clinical activities associated with the Product (except for studies required
prior to NDA approval in the United States), for all post-approval regulatory
matters concerning the Product, and for managing Product Development Costs. Such
planning and oversight responsibilities shall include, without limitation, the
following: (i) study protocol design, preparation and approval; (ii) the
selection and

                                        7
<PAGE>

recruitment of clinical sites and investigators; (iii) quality assurance and
auditing with respect to the conduct of studies; (iv) laboratory analysis of
study samples and specimens; (v) analysis of study data; (vi) safety monitoring
and reporting; (vii) preparation of study reports; (viii) regulatory reports;
(ix) post-approval meetings and other dialogue with the FDA; (x) medical and
scientific support for copromotion activities as requested by the Marketing
Committee; (xi) the establishment of timetables and cost budgets for all studies
and development activities associated with the Product and monitoring actual
performance; (xii) the creation of the draft initial Product development plan by
the end of the second quarter after the Effective Date; and (xiii) approval of
safety and surveillance and drug information efforts. DuPont's representatives
on the Development Committee shall be kept informed of pre-approval Product
development activities and shall be entitled to have a representative attend
meetings with the FDA.

         5.3 Meetings of the Development Committee. The first meeting of the
Development Committee shall occur within thirty (30) days after the Effective
Date. Thereafter, meetings shall be held once per calendar quarter unless no
later than thirty (30) days in advance of any meeting there is a determination,
by agreement of both Parties, that no new business or other activity has
transpired since the previous meeting, and that there is no need for a meeting.
In such instance, the next quarterly meeting will be scheduled. The Development
Committee shall also establish a procedure, agreeable to both Parties, for
either (i) calling special interim meetings of the Development Committee in the
event of the need for Development Committee decisions between regularly
scheduled meetings or (ii) establishing a process for making such interim
decisions.

         The location of such meetings shall alternate between Kos' offices in
the Miami, Florida metropolitan area and DuPont's offices in the Wilmington,
Delaware metropolitan area unless otherwise agreed upon between the Parties.
Development Committee meetings may, upon the agreement of both Parties, be via
teleconference and/or videoconference.

         Minutes of each Development Committee meeting shall be transcribed and
issued by a designee of the Committee within thirty (30) days after each meeting
and shall be approved by the chairperson and vice-chairperson no later than the
first order of business at the immediately succeeding Development Committee
meeting. Each Party shall bear their own expenses in connection with attending
meetings of the Development Committee.

         5.4 Product Development Activities. Subject to the direction of the
Development Committee, Kos shall be fully responsible for performing, or causing
to be performed, all development activities associated with the Product in the
Territory in compliance with "current Good Clinical Practices" and "current Good
Manufacturing Practices" as set forth by the FDA and otherwise in conformity
with all applicable local, state, and Federal laws and regulations. The Parties
agree

                                        8
<PAGE>

that, subject to the approval of the Development Committee, in executing its
responsibilities hereunder, Kos may rely on services performed by qualified
Third Party providers of such services or Kos may purchase services from DuPont.
Each Party agrees to spend at least $************ on such Product development
activities ("Product Development Activities") during the Term as agreed by the
Development Committee, unless Kos agrees to a lesser level of expenditures. Such
$************ amount to be spent by DuPont shall be paid by DuPont in accordance
with its 50% reimbursement obligations as set forth in Section 5.5. Such Product
Development Activities shall be limited to the following and may not be expanded
without the consent of both Kos and DuPont:

         a. Regulatory Requirements: All preclinical or clinical activities
            required for regulatory approval of the Product in Canada, and
            studies or other development activities that may be required after
            the approval of the NDA by the FDA, including without limitation,
            all preclinical or clinical studies required for safety, efficacy,
            quality, or manufacturing purposes.

         b. Phase IV Marketing Studies: To the extent requested by the Marketing
            Committee and approved by the Development Committee, all preclinical
            or clinical studies conducted for marketing purposes, including
            without limitation a long-term clinical outcome study.

         c. Studies for Additional Indications or Labeling: To the extent
            approved by both the Development Committee and the Marketing
            Committee, all preclinical or clinical studies to support regulatory
            approval in the Territory for new or modified treatment indications,
            new dosage forms, new strengths or other enhancements for the
            Product.

         5.5 Funding of Product Development. Kos shall be responsible for all
costs incurred in connection with the preclinical and clinical development of
the Product up to and including NDA submission, review and approval. DuPont
shall be responsible for providing funding for 50% of Product Development Costs;
provided, however, that neither DuPont nor Kos are obligated to agree to conduct
Product Development Activities that in the aggregate would create Product
Development Costs in excess of $********** during the Term. DuPont shall
reimburse Kos for 50% of all Product Development Costs incurred by Kos for
studies that commence after the date Kos receives marketing clearance from the
FDA for the Product. Such costs shall be paid within 10 Business Days of
DuPont's receipt of an invoice for such costs, which shall be delivered by Kos
within 45 days following the end of each calendar quarter, except for the fourth
calendar quarter, in which case such invoice shall be delivered within 90 days
following the end of the quarter. Each invoice shall indicate expenditures
incurred classified by categories (a), (b) and (c) in Section 5.4.
Notwithstanding the foregoing, Kos may deliver invoices to DuPont at any time
that the aggregate amount of Product Development Costs for which Kos

                                        9
<PAGE>

shall be entitled to seek 50% reimbursement from DuPont exceeds $********** and
DuPont shall reimburse Kos for such costs within 10 Business Days of DuPont's
receipt of such invoices. Kos will use its best efforts to provide DuPont with
at least 15 days advance notice of such invoices.

         5.6 Publications. The Development Committee, with input from the
Marketing Committee, shall have oversight responsibility for the publication by
either Party or their representatives of any scientific, medical, or technical
article or other publication relating to the Product. Such responsibility shall
include approval of content, manuscript, preparation, authorship and choice of
journal(s) to which such submission is intended as well as, to the extent
feasible, final pre-publication approval.

6.       Copromotion

         6.1 Marketing Committee. Within thirty (30) days after the Effective
Date, Kos and DuPont shall assemble a team of appropriate personnel from both
Kos and DuPont (the "Marketing Committee") to plan the pre-launch, launch, and
ongoing sales and promotional strategies and to review and direct such
activities for the Product in the Territory. The Marketing Committee shall have
equal representation from Kos and DuPont and shall have a chairperson designated
by Kos and a vice-chairperson designated by DuPont. The Marketing Committee may
from time to time include additional non-voting ad-hoc representatives from
either Party on specific issues as the need arises. As appropriate, the
Marketing Committee may establish one or more sub-committees to act on matters
that may arise between meetings of the Marketing Committee or to consider
matters that would be more effectively considered by a smaller committee.

         Each member of the Marketing Committee shall have one vote on all
matters, and whenever action is to be taken by vote of the Marketing Committee,
it shall be authorized by a majority vote and shall be binding on both Parties.
Any matters of the Committee that result in a tie vote that the chairperson and
vice-chairpersons are unable to resolve shall be referred to the dispute
resolution provisions set forth in Article 18.

         6.2 Responsibilities of Marketing Committee. The Marketing Committee
shall have planning, oversight, performance evaluation and decision-making
authority and responsibility for all sales, marketing and promotional activities
related to the Product and to the field sales forces of both Parties in the
Territory, except that the Marketing Committee shall have no direct authority
over the employees of either Party. The Committee's responsibilities shall
include, without limitation, the following activities: (i) develop, and modify
as appropriate, the fundamental marketing and promotion strategies; (ii) develop
a comprehensive annual marketing plan, calendarized by quarter; (iii) establish
and implement appropriate sales and marketing policies, programs, and
procedures; (iv) establish

                                       10
<PAGE>

targeted physician calling universe and corresponding reach and frequency call
plans; (v) establish the professional criteria for field sales representatives;
(vi) establish minimum Product Details by calendar quarter; (vii) develop
complementary strategies, policies, and objectives for managed care and
professional services representatives; (viii) oversee the preparation of
comprehensive annual business plans for the Product; (ix) develop and monitor
individual and area performance measures for all field sales activities; (x)
consult with Kos on pricing and discount strategies; (xi) establish and monitor
Product sampling practices; (xii) forecast annual and quarterly prescriptions
and sales and set appropriate production requirements for sales and samples;
(xiii) establish requirements for and regularly review prescription tracking,
call reporting, and other secondary market data; (xiv) develop and review all
marketing and promotional material such as Product Detail aids, advertising,
promotional give-aways, speaker kits, and direct mail; (xv) establish as
appropriate supplementary non-personnel promotional programs such as compliance,
telemarketing and internet activities; (xvi) develop and direct
professional/medical education programs including seminars, symposia,
participation at professional and medical conferences, and conventions,
physician advocacy programs, and event marketing programs; (xvii) plan and
coordinate all Product public relations activities; (xviii) plan and implement
appropriate training programs; (xix) plan and implement primary market research
activities; (xx) develop trademarks and packaging materials; and (xxi) determine
cost budgets for all activities and monitor actual performance. Notwithstanding
clauses (x) and (xiv) above, Kos shall bear final responsibility for determining
pricing for the Product and for ensuring that Product promotional materials
comply with the Federal Food, Drug and Cosmetic Act and all other applicable
laws and regulations, and for all costs associated with such compliance. Kos has
previously provided DuPont a copy of its standard operating procedure for
medical/regulatory/legal review of promotional materials.

         6.3 Meetings of Marketing Committee. Meetings of the Marketing
Committee shall be held quarterly commencing with the first quarter following
the Effective Date and until the filing of the NDA with the FDA, and shall be
held more often thereafter as determined by the Marketing Committee. The
location of Marketing Committee meetings and whether to hold them via
teleconference and/or videoconference shall be determined by the Marketing
Committee. Minutes of each Marketing Committee meeting shall be transcribed and
issued by a designee of the Committee within ten (10) Business Days after each
meeting and shall be approved by the chairperson and vice-chairperson not later
than the first order of business at the immediately succeeding Marketing
Committee meeting. Each Party shall bear its own expenses in connection with
attending meetings of the Marketing Committee. The Committee shall also
establish a procedure, agreeable to both Parties, for either (i) calling special
interim meetings of the Committee in the event a need for Committee decisions
arises between regularly scheduled meetings or (ii) establishing a process for
making such interim decisions.

                                       11
<PAGE>

         6.4 Joint Copromotion Activities. Subject to the direction of the
Marketing Committee, each of Kos and DuPont shall be responsible for performing
the following copromotion activities (the "Joint Copromotion Activities"), in
each case in accordance with the minimum activity levels established by the
Marketing Committee. It is the intent of the Parties that the minimum activity
levels established by the Marketing Committee for the categories of activities
described in clauses a. through d. below be the same for each party, and that no
amount of activity in any one such category may be substituted for or deemed
equivalent to activity in another such category.

            a. Field Sales: The Marketing Committee shall determine the target
               audience and the monthly call reach and frequency objectives for
               both sales organizations as appropriate. Each of Kos and DuPont
               commits to performing Minimum Product Details during each
               Six-Month Period during the Term, which shall not be less than
               ******* Product Details during each of the first six Six-Month
               Periods following the commencement of commercial sale of the
               Product in the Territory. Each Party shall maintain records of
               each Detail by its sales force using a call document which
               records the name and address of the member of the target
               audience, the date and position of the Detail and the number of
               samples delivered and shall supply a monthly record of the number
               of total Details to the other Party within 60 days of the end of
               each month in a form to be established by the Marketing
               Committee. The Marketing Committee shall determine the level and
               extent of hospital activities, including obtaining hospital
               formulary approval, conducting in-services and performing Product
               Details, and shall determine the equalization of activity between
               the Kos and DuPont sales forces given that DuPont is likely to
               conduct a greater amount of hospital activities. The Marketing
               Committee shall adjust the number of Product Details after the
               first 12 months as appropriate to optimize sales opportunities
               for the Product.

            b. Sampling: The Marketing Committee shall determine the level of
               sampling per member of the target audience. All sample
               distribution, reporting and storage shall be conducted by each
               Party in accordance with the Prescription Drug Marketing Act.

            c. Other Field Activities: The Marketing Committee shall determine
               the minimum level of effort each Party is required to commit to
               the field activities listed on Appendix B attached hereto,
               including without limitation managed care, professional services,
               clinical liason, CoumaCare and hospital based activities. The
               minimum amount of effort and

                                       12
<PAGE>

               resources that each Party is directed by the Marketing Committee
               to commit to each of the activities listed on Appendix B may be
               different, provided that the minimum overall effort and resources
               that each Party is directed to commit to all of such activities
               is determined by the Marketing Committee to be substantially
               equivalent.

            d. On-Going Sales Force Training: Each of Kos and DuPont agrees to
               provide periodic on-going training on the Product to their
               respective sales forces in accordance with training schedules and
               materials established by the Marketing Committee.

         6.5 Other Copromotion Activities. Other than the Joint Copromotion
Activities set forth in Section 6.4 and subject to the direction of the
Marketing Committee, Kos shall be fully responsible for performing, or causing
to be performed, all other copromotion activities relating to the Product in the
Territory (the "Other Copromotion Activities"). The Parties agree that, subject
to the approval of the Marketing Committee, in executing its responsibilities
hereunder, Kos may rely on services performed by qualified Third Party providers
of such services or Kos may purchase services from DuPont. Other Copromotion
Activities may include, without limitation, the following:

            a. Advertising, marketing and promotion materials including sales
               aids, give-aways, direct mail, speaker kits, etc.

            b. Samples

            c. Public Relations

            d. Medical education and physician advocacy programs, including
               event marketing meetings, medical symposia, and physician
               advocacy programs, medical meetings and conventions.

            e. Publications including scientific presentations, reprints, and
               supplements.

            f. Honoraria and educational grants.

            g. Persistency and compliance programs.

            h. Telemarketing programs.

            i. Training in connection with the launch of the Product, consisting
               principally of (i) preparing and distributing all training
               materials related to the Product; (ii) training the personnel at
               Kos and DuPont who shall be responsible for on-going training for
               each Party; (iii) organizing and conducting, with appropriate
               assistance from DuPont, all training activities involving the
               combined Product sales forces of the Parties or large segments
               thereof.

                                       13
<PAGE>

            j. Primary market research.

            k. Other activities as directed by the Marketing Committee.

         6.6 Joint Copromotion Costs.

             (a) Resources. It is the intent of Kos and DuPont that they will
devote equal resources to carry-out the Joint Copromotion Activities.
Accordingly, except as provided in this Section 6.6, each Party shall fully
bear, without recourse to the other Party, all of the costs incurred by such
Party in connection with such Party's performance of the Joint Copromotion
Activities.

             (b) Measurement of Joint Copromotion Activities. The methods for
measuring the actual number of Product Details and other Joint Copromotion
Activities shall be agreed upon by both Parties prior to the launch of the
Product in the Territory. Following the end of each Six-Month Period, the
Marketing Committee shall review the Joint Copromotion Activities, including
without limitation the number of Product Details performed by each Party during
the preceding Six-Month Period. The actual number of Product Details performed
by a Party during a Six-Month Period shall be expressed as a percentage of the
number of Minimum Product Details established for such period by the Marketing
Committee.

             (c) Six-Month Period Shortfalls by One Party. At the end of each
Six-Month Period, in the event that a Party (but only one Party) performed fewer
than 95% of the Minimum Product Details during that Six-Month Period, the
portion of the Net Operating Profit to which such Party would be otherwise
entitled for that Six-Month Period under Section 4.4 shall be adjusted such that
the payment received by such Party for the Six-Month Period is reduced (or
increased in the event such Net Operating Profit is a loss) by a percentage
equal to the percentage difference between the required number of Minimum
Product Details during such Six-Month Period and the actual number of Product
Details performed by such Party during such period. For example, if the Minimum
Product Details for a Six-Month Period is ******* and a Party actually performs
******* Product Details during such period (i.e. 85% of the Minimum Product
Details), such Party would be entitled to receive 35% [i.e., 50% - 15%] (or, in
the event of a loss, would be required to pay 65%) of the Net Operating Profit
during such Six-Month Period.

             (d) Six-Month Period Shortfalls by Both Parties. In the event that
both Parties perform fewer than 95% of the Minimum Product Details during the
same Six-Month Period, the Net Operating Profit for such period shall be divided
between the Parties pro rata based on the actual number of Product Details
performed by each Party during such period.

             (e) Adjustments to Net Operating Profit. Subject to clauses (c) and
(d) above, within 60 days of the end of each Six-Month Period, Kos shall invoice

                                       14
<PAGE>

DuPont for the adjustment (positive or negative), and Kos or DuPont, as
applicable, shall pay the other within 10 Business Days.

         6.7 Shared Copromotion Expenses.

             (a) Costs. All costs directly incurred by Kos in order to perform,
or cause to be performed, such Other Copromotion Activities as are approved by
the Marketing Committee shall constitute Shared Copromotion Expenses. Such costs
shall exclude mark-ups over actual direct costs and allocations of overhead;
provided, however, that (i) such costs may include, if approved by the Marketing
Committee, the costs of directly required incremental Kos personnel below the
level of Office Director, and (ii) the cost of samples shall be included at
their Cost of Manufacture but shall not include each Party's respective cost of
distributing samples to their own sales force.

             (b) Budgets. At least 90 days prior to each Year, the Marketing
Committee shall establish an annual budget for the Shared Copromotion Expenses
for such year, calendarized by quarter, and shall regularly review actual cost
performance compared with the budget. Prior to commencing any new activity not
provided for in the budget, the Marketing Committee will also approve a cost
budget for such activity. Kos shall not incur any Shared Copromotion Expense
that has not been included in the annual budget, approved by the Marketing
Committee in advance, or otherwise specifically authorized by the Marketing
Committee.

             (c) Funding of Shared Copromotion Expenses. Kos shall be
responsible for directly funding all Shared Copromotion Expenses.
Notwithstanding the foregoing sentence, Kos may deliver invoices to DuPont at
any time that the aggregate amount of Shared Copromotion Expenses for which Kos
shall be entitled to seek 50% reimbursement from DuPont exceeds $********** and
DuPont shall reimburse Kos for such costs with 10 Business Days of DuPont's
receipt of such invoices. Kos will use its best efforts to provide DuPont with
at least 15 days advance notice of such invoices.

         6.8 Other Copromotion Matters.

             (a) Booking of Sales Revenue. Kos shall record on its books all
revenue from gross and Net Sales of the Product.

             (b) Packaging. The Marketing Committee shall have the
responsibility for approving all packaging materials subject to input from the
Development Committee with respect to regulatory requirements and from Kos
manufacturing with respect to shipping and cost considerations. Subject to the
approval of the Marketing Committee with respect to size, positioning and other
relevant matters, Kos and DuPont shall both be entitled to have their corporate
logos appropriately displayed on Product packages.

                                       15
<PAGE>

             (c) Promotional Materials. Subject to the approval of the Marketing
Committee with respect to size, positioning and other relevant matters, Kos and
DuPont shall both be entitled to have their corporate logos appropriately
displayed on Product promotional materials.

             (d) Trademarks. The Marketing Committee shall approve the names,
design, and usage in the Territory of all new Kos Trademarks associated with the
Product; provided that if the Marketing Committee is unable to agree on matters
involving the Kos Trademarks, Kos shall have the authority to resolve such
disputes.

             (e) Field Sales Representatives. Except with the prior written
consent of both Parties, all field sales representatives who are responsible for
Product Details shall be full-time employees of the respective Parties. However,
without Kos' consent, DuPont shall have the right to contract with McKesson
HBOC, Inc. or its successor to employ a contract sales force to fulfill part of
DuPont's obligations for Product Details, provided that such contract sales
force is dedicated exclusively to DuPont and receives training and compensation
comparable to sales representatives of Kos and DuPont, and further provided that
such sales representatives meet the professional standards for such
representatives that are established by the Marketing Committee.

             (f) Sales Incentive Plan. DuPont shall implement and maintain an
incentive plan for the Product for its sales force that is consistent with its
overall sales incentive compensation plan for its own products.

7.       Manufacturing and Supply

         7.1 Kos Responsibilities. Kos shall use its commercially reasonable
best efforts to produce and timely supply the Product and Product samples for
the Territory. Kos shall manufacture, package, store and ship the Product and
Product samples in strict adherence to "current Good Manufacturing Practices" as
set forth by the FDA, consistent with the Product's approved NDA and the Quality
Agreement (to be negotiated by the Parties within 60 days of the Effective Date
and then attached hereto as Appendix D), and otherwise in conformity with all
applicable local, state, and Federal laws and regulations. Kos shall also use
its commercially reasonable best efforts to produce the Product at the highest
appropriate quality standards and at the least cost feasible. Kos shall supply
such Product and Product samples based on reasonable advance notification of
Product and Product sample requirements as forecasted by the Marketing
Committee, and Kos shall be responsible for providing capacity to support future
requirements for the Product and Product samples as determined by the Marketing
Committee.

         7.2 Safety Surveillance Cost. Safety Surveillance Cost shall mean Kos'
costs directly attributable to the Product, if any, for personnel and related
costs for

                                       16
<PAGE>

handling safety surveillance and customer inquiries; provided however, that such
costs shall not exceed the equivalent of four full time personnel without the
approval of DuPont.

         7.3 Cost of Manufacture. Cost of Manufacture shall be Kos' actual fully
allocated manufacturing cost directly related to the Product calculated in
accordance with GAAP, and determined consistent with Kos' cost accounting method
as set forth by example in Appendix C, and consistent with "cost of sales" as
disclosed in Kos' public financial statements for the respective period, plus a
mark-up of ***************** on such costs; provided that such mark-up shall not
be charged on the cost of lovastatin in excess of $***** per kilogram. DuPont
reserves the right to audit Kos' Cost of Manufacture twice per Year. In the
event Kos requires services from Third Party providers for manufacture or
distribution of the Product, Kos shall first offer DuPont the option to provide
such services.

8.       Regulatory, Safety and Surveillance

         8.1 Regulatory Matters.

             (a) Permits. Kos shall maintain all regulatory and governmental
permits, licenses and approvals that may be necessary to manufacture, ship, sell
and market the Product in the Territory.

             (b) Reporting. Kos shall be responsible for any reporting of
matters regarding the manufacture and sale of the Product, including Adverse
Events, to the FDA and other relevant regulatory authorities, in accordance with
applicable laws and regulations. Kos shall immediately notify DuPont of any such
matter and promptly furnish complete copies of such reports to DuPont. In the
event Kos or DuPont should become aware of information that may require a
recall, field alert, Product withdrawal or field correction arising from any
defect in the Product, it shall immediately notify the other Party in writing.

         8.2 Adverse Events. Promptly after the Effective Date, in recognition
of Kos' primary responsibility for reporting Adverse Events associated with the
Product, the Parties shall agree upon standard operating procedures for the
investigation and reporting of Adverse Events regarding the Product. The Parties
shall immediately implement such agreed procedures and shall provide each other
on a regular basis with any appropriate information that enables the other Party
to meet its regulatory obligations in the Territory with respect to the Product
or that is relevant to the safe use of the Product. The agreed procedures will
be reviewed jointly on a regular basis or when there is a change in regulations
governing Adverse Event reporting.

                                       17
<PAGE>

9.       Audit Rights

         Each of Kos and DuPont shall keep complete and accurate records of
their respective Product Details, incentive compensation payments for the
Product to sales representatives, and Kos shall keep complete and accurate
records of the Net Operating Profit and reimbursable expenses. Each Party shall
have the right, at such Party's expense, through a certified public accountant
or like person reasonably acceptable to the other Party, upon execution of a
confidentiality agreement, to examine such records during regular business hours
upon reasonable notice during the life of this Agreement and for six (6) months
after its termination; provided, however, that (i) such examination shall not
take place more often than once a Year and shall not cover such records for more
than the preceding Year, and (ii) such accountant shall report to such Party
only as to the accuracy of the reports or payments provided or made by the other
Party under this Agreement. Any adjustments required as a result of overpayments
or underpayments identified through a Party's exercise of audit rights, and any
other adjustments that may be required from time to time in order to correct
overpayments or underpayments under this Agreement, shall be made by subtracting
or adding, as appropriate, amounts from or to the next distribution of Net
Operating Profit in accordance with Section 4.4. The Party requesting the audit
shall bear the full cost of the audit unless such audit correctly discloses that
the discrepancy for the Year differs by more five percent (5%) from the amount
the accountant determines is correct, in such case the owing Party shall pay the
reasonable fees and expenses charged by the accountant. In the event that a
Party disputes an invoice or other payment obligation under this Agreement, such
Party shall timely pay the amount of the invoice or other payment obligation,
and the Parties shall resolve such dispute in accordance with Article 18.

10.      Intellectual Property

         10.1 Ownership of Intellectual Property. Kos shall have and retain sole
and exclusive right, title and interest in and to all inventions, discoveries,
writings, trade secrets, know-how, methods, practices, procedures, engineering
information, designs, devices, improvements, manufacturing information and other
technology, whether or not patentable or copyrightable, and any patent
applications, patents, or copyrights based thereon ("Inventions") that are made,
discovered, conceived, reduced to practice or generated by Kos (or its employees
or representatives) or jointly by Kos and DuPont (or their employees or
representatives) that in any way relate to the Product or the active ingredients
(niacin and lovastatin) in the Product. DuPont shall own exclusively all
Inventions made by DuPont (or its employees or representatives) that in any way
relate to the Product or the active ingredients in the Product. With respect to
any Inventions not relating in any way to the Product or the active ingredients
in the Product, each Party shall own all right, title and interest in and to all
such Inventions made, discovered, conceived, reduced to practice or generated
solely by such Party (or its employees or representatives), and the Parties
shall jointly own the right, title and interest in and to all such Inventions
made, discovered, conceived, reduced to practice or generated jointly by the
Parties (or their employees or

                                       18
<PAGE>

representatives). The Parties agree to cooperate in the filing of patent
applications upon such jointly-owned inventions. With respect to Inventions made
by DuPont that in any way relate to the Product or the active ingredients in the
Product, DuPont shall grant Kos a fully-paid, perpetual, exclusive license to
make, use or sell such Inventions, without limiting in any way DuPont's rights
with respect to the use of such Inventions. With respect to Inventions made
jointly by the Parties that in any way relate to the Product or the active
ingredients in the Product, Kos shall grant DuPont a fully-paid, perpetual,
exclusive license to make, use or sell such Inventions, without limiting in any
way Kos' rights with respect to the use of such Inventions.

         10.2 Patent Prosecution. Kos, at its expense, shall have responsibility
for filing, prosecution and maintenance of all Patents that it owns in the
Territory. Kos shall disclose to DuPont the complete texts of all Patents filed
by Kos in the Territory that relate to the Product as well as all information
received concerning the institution or possible institution of any interference,
opposition, re-examination, reissue, revocation, nullification or any official
proceeding involving a Patent anywhere in the Territory. Kos shall agree to keep
DuPont promptly and fully informed of the course of patent prosecution or other
proceedings including by providing DuPont with copies of substantive
communications, search reports and Third Party observations submitted to or
received from patent offices throughout the Territory. DuPont shall, if
requested by Kos, provide appropriate patent consultation to Kos. DuPont shall
hold all information disclosed to it under this Section as confidential subject
to the provisions of Section 11.2.

         10.3 Notification of Patent Litigation. In the event of the institution
of any suit by a Third Party against Kos or DuPont for patent infringement
involving the manufacture, use, sale, license or marketing of the Product
anywhere in the Territory, the Party sued shall promptly notify the other Party
in writing.

         10.4 Patent Infringement. In the event that Kos or DuPont becomes aware
of actual or threatened infringement of a Patent anywhere in the Territory, that
Party shall promptly notify the other Party in writing. Kos shall have the sole
right, but not the obligation, to investigate and/or bring an infringement
action against any Third Party. Kos shall have full control over the conduct of
such investigations and litigation, including the settlement thereof. The cost
of such investigation and litigation shall be borne entirely by Kos, with Kos
being entitled to the entire proceeds, if any, of such litigation, unless DuPont
agrees, at its sole discretion, within 20 days of such notice, to bear an equal
share of such cost, in which case it shall also be entitled to an equal share of
any proceeds of such litigation. DuPont shall reasonably assist Kos and
cooperate in any such investigation and litigation at Kos' request and at Kos'
expense, unless DuPont has otherwise agreed to

                                       19
<PAGE>

participate in the litigation. Should Kos choose not to bring an infringement
action regarding a particular Patent, DuPont shall then have the right,
exercisable at its sole discretion, to bring such an action. Any such
infringement action shall be at DuPont's expense, and it shall be solely
entitled to the entire proceeds, if any, of such litigation.

         10.5 Title to Trademarks. The ownership and all goodwill from the use
of any Kos Trademark shall vest in and inure to the benefit of Kos.

         10.6 Trademark License. Kos grants to DuPont a fully paid, exclusive
license to use the Kos Trademark in the Territory for the Term in connection
with the marketing and promotion of the Product as contemplated in this
Agreement, subject to Kos retaining full rights to use the Kos Trademark in the
Territory, and without limiting in any way Kos' rights with respect to the Kos
Trademark outside the Territory.

         10.7 Joint Marks. The Joint Marks shall be jointly filed for and
jointly owned on an equal basis by the Parties, and each Party shall have
co-exclusive rights to use the Joint Marks. During the Term, the Joint Marks
shall be used by the Parties solely in connection with the activities
contemplated by this Agreement as determined by the Marketing Committee. Upon
termination or expiration of this Agreement each Party shall have the right to
continue using the Joint Marks.

         10.8 Maintenance of Trademarks. Kos agrees to search, file, register
and maintain a registration for the Kos Trademark and the Joint Marks in the
Territory for the term of this Agreement for use with the Product. Such expenses
incurred in connection with the Kos Trademarks shall be paid solely by Kos, and
such expenses incurred in connection with the Joint Marks shall be shared
equally by the Parties, and shall be invoiced separate from the calculation of
Net Operating Profit. In the event that the Kos Trademark is not available for
use and registration in connection with the Product in the Territory due to a
rejection of the trademark by a government agency, actual or threatened
opposition, cancellation or litigation as to use and/or registration of the Kos
Trademark by a Third Party, and/or a decision by the Marketing Committee that
use of the Kos Trademark is likely to cause confusion with another's trademark,
Kos shall provide an alternate Kos Trademark and shall develop, search, file,
register and maintain such alternate Kos Trademark at Kos' sole expense,
provided that the selection of such alternate Kos Trademark shall be made by the
Marketing Committee in accordance with Section 6.8(d).

         10.9 Notification of Trademark Litigation. In the event of the
institution of any suit by a Third Party against Kos or DuPont for trademark
infringement involving the marketing, promotion or sale of the Product in
accordance with the annual marketing plan in the Territory, the Party sued shall
promptly notify the other Party in writing.

                                       20
<PAGE>

         10.10 Trademark Infringement. In the event that Kos or DuPont becomes
aware of actual or threatened infringement of a Kos Trademark anywhere in the
Territory, that Party shall promptly notify the other Party in writing. Kos
shall have the sole right, but not the obligation, to investigate and/or bring
an infringement and/or opposition or cancellation action against any Third
Party. Kos shall have full control over the conduct of such investigations and
litigation, including the settlement thereof. The cost of such investigation and
litigation shall be borne entirely by Kos, with Kos being entitled to the entire
proceeds, if any, of such litigation, unless DuPont agrees, at its sole
discretion, within 20 days of such notice, to bear an equal share of such cost,
in which case it shall also be entitled to an equal share of any proceeds of
such litigation. DuPont shall reasonably assist Kos and cooperate in any such
investigation and litigation at Kos' request and at Kos' expense, unless DuPont
has otherwise agreed to participate in the litigation. Should Kos choose not to
bring an infringement action regarding a particular Kos Trademark, DuPont shall
then have the right, exercisable at its sole discretion, to bring such an
action. Any such infringement action shall be at DuPont's expense, and it shall
be solely entitled to the entire proceeds, if any, of such litigation. In the
event that Kos or DuPont becomes aware of actual or threatened infringement of a
Joint Mark anywhere in the Territory, that Party shall promptly notify the other
Party in writing and the Parties shall promptly agree on the most appropriate
course of action with respect to such infringement, including the extent to
which the Parties shall share expenses and recoveries.

         10.11 Information and Settlements. Kos shall keep DuPont informed of
the status of any patent or trademark infringement litigation or settlement
thereof concerning the Product or the Kos Trademark, provided however that no
settlement or consent judgment or other voluntary final disposition of any suit
defended or action brought pursuant to this Article 10 shall be entered into
without the consent of DuPont if such settlement shall require DuPont to be
subject to an injunction or to make a monetary payment or shall otherwise
adversely affect DuPont's rights under this Agreement.

11.      Confidentiality

         11.1 Disclosure of Know-How. To the extent that Kos has disclosed or in
the future discloses to DuPont any Know-How, DuPont shall not acquire any
ownership rights in such Know-How by virtue of this Agreement or otherwise.

         11.2 Confidential Information. Kos and DuPont shall not use or reveal
or disclose to Third Parties any confidential information received from the
other Party or otherwise developed by either Party in the performance of
activities in furtherance of this Agreement without first obtaining the written
consent of the disclosing Party, except as may be otherwise provided in, or
required in order for a Party to fulfill its obligations under, this Agreement.
During and following the Term of this Agreement, this confidentiality obligation
shall not apply to such information that (i) is or becomes a matter of public
knowledge (other than by breach of this Agreement by the receiving Party), or
(ii) is required by law to be disclosed. Following the Term of this Agreement,
this confidentiality obligation shall not apply to such

                                       21
<PAGE>

information that (i) the receiving Party can establish was already known to it
or was in its possession at the time of disclosure, (ii) the receiving Party can
establish was independently developed by persons in its employ who had no
contact with and were not aware of the content of the confidential information,
or (iii) is disclosed to the receiving Party by a Third Party having the right
to do so. The Parties shall take reasonable measures to assure that no
unauthorized use or disclosure is made by others to whom access to such
information is granted.

         Nothing in this Agreement shall be construed as preventing either Party
from disclosing any information received from the other to an Affiliate of the
receiving Party who is necessary for the purposes of enabling the receiving
Party to fulfil its obligations under this Agreement, provided, the receiving
Party shall be responsible for breaches of the confidentiality obligations by
such Affiliate.

         11.3 Public Announcements. No public announcement or other disclosure
to Third Parties concerning the existence of or terms of this Agreement shall be
made, either directly or indirectly, by either Party, except as may be legally
required or as may be required for financial reporting purposes, without first
obtaining the written approval of the other Party and agreement upon the nature
and text of such announcement or disclosure. Each Party agrees that it shall
cooperate fully with the other with respect to all disclosures regarding this
Agreement to the Securities Exchange Commission and any other governmental or
regulatory agencies, including requests for confidential treatment of
proprietary information of either Party included in any such disclosure.

12.      Restrictive Covenants

         12.1 Non-solicitation. Without the prior written consent of the other
Party, each of Kos and DuPont agrees that during the term of this Agreement and
for one year following termination of this Agreement for any reason, it will not
directly or indirectly solicit for purposes of hiring any person employed by the
other Party or who was employed by the other Party within the then prior three
(3) months, or in any manner seek to induce any such person to leave his or her
employment.

         12.2 Non-competition.

              (a) During the Term of this Agreement, neither Party shall
promote, market or sell, or enter into any agreement to promote, market or sell,
in the Territory any oral product for any indication(s) for which the Product
shall have been promoted during the Term of this Agreement ("Other Product"),
other than an

                                       22
<PAGE>

***************************** unless pursuant to a business arrangement with the
other Party or with the other Party's prior written approval.

         (b) For purposes of this Section 12.2, an ****************************
with respect to a Party means (i) any Other Product that is ********************
************* or (ii) any Other Product that is ********************************
********************************************************************************
************************************************.

         (c) Notwithstanding Section 12.2(a) above, if one Party (the "Acquiring
Party") enters into a merger, acquisition or joint venture with a Third Party
who owns, licenses or otherwise controls any Other Product, both Parties shall
engage in good faith negotiations to enter into an arrangement whereby the other
Party (the "Non-Acquiring Party") will co-promote such Other Product. If the
Parties are unable to reach such an agreement within 90 days, then the
Non-Acquiring Party may terminate this Agreement.

13.      Rights And Duties Upon Termination

         13.1 Payment Obligations. In the event that this Agreement is
terminated for any reason prior to the end of the Term, other than termination
by DuPont pursuant to clauses (i), (iii), (iv) or (v) of Section 3.2 or
termination by Kos pursuant to clauses (i) or (iii) of Section 3.2, the
terminating Party shall reimburse the other Party 50% of the non-cancelable
Product Development Costs and Shared Copromotion Expenses incurred or committed
by the other Party as of the date such termination becomes effective, within 10
Business Days following the terminating Party's receipt of invoices from the
other Party.

         13.2 Continuing Obligations. The following provisions shall survive the
termination of this Agreement for any reason: Sections 4.6, 10.1, 10.5, 10.6,
10.7, 14.3, 14.4, 14.5 and 17.4 and Articles 9, 11, 12, 13 and 18. In addition,
any other provision required to interpret and enforce the Parties' rights and
obligations under this Agreement shall also survive, but only to the extent
required for the full observation and performance of this Agreement.

         13.3 Remedies. Termination of this Agreement in accordance with its
provisions shall not limit the remedies that may be otherwise available to
either Party in law or equity. Neither Kos nor DuPont shall be liable under this
Agreement for any indirect, incidental, punitive, exemplary, special or
consequential damages of any kind whatsoever sustained as a result of a breach
of this Agreement.

14.      Representations, Warranties and Indemnification

         14.1 Representations of Kos. Except as disclosed on Schedule 14.1, Kos
represents and warrants that (i) it owns the entire right, title and interest in
the

                                       23
<PAGE>

Patents and Know-How licensed by this Agreement, or otherwise has the right to
grant the license rights under this Agreement, (ii) it has the right to enter
into this Agreement, (iii) that there is nothing in any Third Party agreement
Kos has entered into that in any way will limit Kos' ability to perform all of
the obligations undertaken by Kos under this Agreement, (iv) it will not
encumber, with liens, mortgages, security interests or otherwise, the Patents
and Know-How, (v) it has disclosed to DuPont the complete texts of all Patents
as of the Effective Date as well as all information received by Kos as of the
Effective Date concerning the institution or possible institution of any
interference, opposition, reexamination, reissue, revocation, nullification or
any official proceeding involving a Patent anywhere in the Territory, (vi) it
has received no notice of infringement or misappropriation of any alleged rights
asserted by any Third Party in relation to any technology used in connection
with the manufacture, use or sale of the Product, and it is not aware of any
patent, know-how, trade secret, or other right of any Third Party which could
reasonably be expected to materially adversely affect its ability to carry out
its responsibilities under this Agreement or the manufacture, use or sale of the
Product or the rights granted to DuPont under this Agreement and (vii) it shall
be in compliance with all laws and regulations applicable to the subject matter
of this Agreement, including, without limitation, the Federal Food, Drug, and
Cosmetic Act and the Prescription Drug Marketing Act.

         14.2 Representations of DuPont. DuPont represents and warrants that (i)
it has the right to enter into this Agreement, (ii) there is nothing in any
Third Party agreement DuPont has entered into that in any way will limit
DuPont's ability to perform all of the obligations undertaken by DuPont under
this Agreement, (iii) as of the date hereof, it neither has in development nor
plans to develop any product which will be marketed during the Term which shall
compete with the Product, (iv) DuPont shall be in compliance with all laws and
regulations applicable to the subject matter of this Agreement, including,
without limitation, the Federal Food, Drug, and Cosmetic Act and the
Prescription Drug Marketing Act, (v) the services to be performed by DuPont in
connection with this Agreement will be performed only by individuals who are
employees of DuPont (except as set forth in Section 6.8(e)), and such services
will involve the promotion of the Product in a manner consistent with its
approved labeling and the promotional materials approved by Kos, and (vi) it
shall not represent to any Third Party that it has any proprietary or property
right or interest in the Product, or in any patent relating thereto, or in any
trademark used in connection therewith.

         14.3 Indemnification by Kos. Kos shall defend, indemnify and hold
harmless DuPont and its Affiliates and their officers, directors, shareholders,
employees, agents, representatives, successors and assigns from and against all
claims, complaints, or lawsuits for damages (collectively referred to as
"Claims") arising out of (i) any negligent act or omission, or willful
wrongdoing by Kos in the performance of this Agreement, (ii) the failure by Kos
to comply with any FDA or other governmental requirement, (iii) the infringement
or misappropriation by Kos

                                       24
<PAGE>

of any copyright, trademark, or service mark, as a result of Kos' marketing or
promotion of the Product which is not pursuant to the terms of this Agreement or
the annual marketing plan or in conformity with the direction of the Marketing
Committee, (iv) the infringement or misappropriation of any patent or trade
secret by Kos or DuPont as a result of Kos' or DuPont's marketing or promotion
of the Product under the terms of this Agreement, (v) any breach of any
representation or warranty of Kos, (vi) the manufacturing of the Product by Kos,
and (vii) the labeling or use of the Product. Kos shall not be obligated under
this Section to the extent that the Claim was the result of the non-performance,
negligence or willful misconduct of any employee or agent of DuPont or anyone
acting on behalf of DuPont, including its Affiliates and their officers,
directors, shareholders, employees, agents, representatives, successors and
assigns.

         14.4 Indemnification by DuPont. DuPont shall defend, indemnify and hold
harmless Kos and its Affiliates and their officers, directors, shareholders,
employees, agents, representatives, successors and assigns from and against all
Claims arising out of (i) any negligent act or omission, or willful wrongdoing
by DuPont in the performance of this Agreement, (ii) the failure by DuPont to
comply with any FDA or other governmental requirement, (iii) the infringement or
misappropriation by DuPont of any patent, copyright, trademark, or trade secret,
as a result of DuPont's marketing or promotion of the Product which is not
pursuant to the terms of this Agreement or the annual marketing plan or in
conformity with the direction of the Marketing Committee, and (iv) any breach of
any representation or warranty of DuPont. DuPont shall not be obligated under
this Section to the extent that the Claim was the result of the nonperformance,
negligence or willful misconduct of any employee or agent of Kos or anyone
acting on behalf of Kos, including its Affiliates and their officers, directors,
shareholders, employees, agents, representatives, successors and assigns.

         14.5 Limitations on Indemnification. The obligations to indemnify,
defend, and hold harmless set forth in Sections 14.3 and 14.4 shall be
contingent upon the Party seeking indemnification (the "Indemnitee"): (i)
notifying the indemnifying Party of a claim, demand or suit within five (5)
Business Days of receipt of same; provided, however, that Indemnitee's failure
or delay in providing such notice shall not relieve the indemnifying Party of
its indemnification obligation except to the extent the indemnifying Party is
prejudiced thereby; (ii) allowing the indemnifying Party and/or its insurers the
right to assume direction and control of the defense of any such claim, demand
or suit; (iii) using its best efforts to cooperate with the indemnifying Party
and/or its insurers in the defense of such claim, demand or suit; and (iv)
agreeing not to settle or compromise any claim, demand or suit without prior
written authorization of the indemnifying Party. The Indemnitee shall have the
right to participate in the defense of any such claim, demand or suit referred
to in this Section utilizing attorneys of its choice, at its own expense,
provided, however, that the indemnifying Party shall have full authority and
control to handle any such claim, demand or suit. Kos' indemnification
obligations under

                                       25
<PAGE>

clause (iv) of Section 14.3 shall be limited to the aggregate amount of Net
Operating Profit Kos has received from the sale of the Product under this
Agreement less the amount of such Net Operating Profits paid to DuPont.

         14.6 Insurance. Immediately upon the launch of the Product in the
Territory, and for a period of ************** after the expiration of this
Agreement or the earlier termination thereof, each Party shall obtain and/or
maintain, respectively, at its sole cost and expense, product liability
insurance in amounts, respectively, which are reasonable and customary in the
U.S. pharmaceutical industry for companies of comparable size and activities at
the respective place of business of each Party. Such product liability insurance
shall insure against************************************************************
*************arising out of the manufacture, sale, distribution, or marketing of
the Product in the Territory. Each Party shall provide written proof of the
existence of such insurance to the other Party upon request. Kos acknowledges
that ***********************

15.      Assignment

         Neither Party shall assign or transfer its rights or obligations under
this Agreement without the prior written consent of the other Party, except (i)
to an Affiliate, or (ii) in connection with a merger, or consolidation with, or
the sale to a Third Party of, the entire pharmaceutical business of such Party
or the entire cardiovascular pharmaceutical business of such Party, provided
that in the case of both clauses (i) and (ii) above, the other Party has no
reasonable objection to the Affiliate's or Third Party's ability or willingness
to perform the assigning Party's obligations hereunder or reasonably concludes
that the Affiliate or Third Party places the marketing of the Product at a
competitive disadvantage. Kos acknowledges and agrees that a change in the
structure of DuPont from a general partnership to a corporation shall not
require the prior written consent of Kos.

16.      Notices

         Any notice, request, approval or other document required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given when delivered in person, or sent by overnight courier service,
postage prepaid, or sent by certified or registered mail, return receipt
requested, or by facsimile transmission, to the following addresses of the
Parties and to the attention of the persons identified below (or to such other
address, addresses or persons as may be specified from time to time in a written
notice). Any notices given pursuant to this Agreement shall be deemed to have
been given and delivered upon the earlier of (i) if sent by overnight courier
service, on the date when received at the address set forth below as proven by a
written receipt from the delivery service verifying delivery, or (ii) if sent by
certified or registered mail, three (3) Business Days after mailed by certified
or registered mail postage prepaid and properly addressed, with return receipt
requested, or (iii) if sent by facsimile transmission,

                                       26
<PAGE>

on the day when sent by facsimile as confirmed by automatic transmission report
coupled with certified or registered mail or overnight courier service receipt
proving delivery, or (iv) if delivered in person, on the date of delivery to the
address set forth below as proven by written signature of the recipient.

Kos Pharmaceuticals, Inc:

                          1001 Brickell Bay Drive
                          25th Floor
                          Miami, Florida 33131
                          Facsimile: (305) 577-4596
                          Attention:  Mukesh P. Patel, Vice President, Licensing
                          Attention:  Juan F. Rodriguez, Vice President,
                                      Controller and  Secretary
Copy to:

                          Holland & Knight LLP
                          701 Brickell Avenue
                          Suite 3000
                          Miami, Florida 33131
                          Facsimile: (305) 789-7799
                          Attention: Steven Sonberg, Esq.

DuPont Pharmaceuticals Company:

                          Chestnut Run Plaza
                          974 Centre Road
                          Wilmington, Delaware  19807
                          Facsimile: (302) 992-3109
                          Attention: Executive Vice President,
                                     Cardiovascular/Thrombosis Franchise

Copy to:

                          Chestnut Run Plaza
                          974 Centre Road
                          Wilmington, Delaware  19807
                          Facsimile: (302) 892-8536
                          Attention: Associate General Counsel,
                                     Cardiovascular/Thrombosis Franchise

         Notwithstanding the foregoing, notice of any breach of this Agreement
delivered by a Party under Section 3.2 shall be provided in accordance with the
foregoing provisions to the chief executive officer of the other Party in
addition to the persons identified above.

                                       27
<PAGE>

17.      Miscellaneous

         17.1 Force Majeure. If the performance of any part of this Agreement by
either Party, or of any obligation under this Agreement, is prevented,
restricted, interfered with or delayed by reason of any cause beyond the
reasonable control of the Party liable to perform, unless conclusive evidence to
the contrary is provided, the Party so affected shall, upon giving written
notice to the other Party, be excused from such performance to the extent of
such prevention, restriction, interference or delay, provided that the affected
Party shall use its reasonable best efforts to avoid or remove such causes of
nonperformance and shall continue performance with the utmost dispatch whenever
such causes are removed. When such circumstances arise, the Parties shall
discuss what, if any modification of the terms of this Agreement may be required
in order to arrive at an equitable solution.

         17.2 No Partnership or Joint Venture. It is expressly agreed that Kos
and DuPont shall be independent contractors and that the relationship between
the two Parties shall not constitute a partnership, joint venture or agency.
Neither Kos nor DuPont shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior written consent of the other Party to
do so.

         17.3 Execution In Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.

         17.4 Governing Law. This Agreement shall be deemed to have been made in
the State of Florida and its form, execution, validity, construction and effect
shall be determined in accordance with the laws of the State of Florida.

         17.5 Waiver Of Breach. The failure of either Party at any time or times
to require performance of any provision hereof shall in no manner affect its
rights at a later time to enforce the same. No waiver by either Party of any
condition or term in any one or more instances shall be construed as a further
or continuing waiver of such condition or term or of another condition or term.

         17.6 Severability. In the event any portion of this Agreement were to
be held illegal, void or ineffective, the remaining portions of this Agreement
shall remain in full force and effect. If any of the terms or provisions of this
Agreement are in conflict with any applicable statute or rule of law, then such
terms or provisions shall be deemed inoperative to the extent that they may
conflict therewith and shall be deemed to be modified to conform with such
statute or rule of law. In the event that the terms and conditions of this
Agreement are materially altered as a result of this Section 17.6, the Parties
shall renegotiate the terms and conditions of this Agreement to resolve any
inequities.

                                       28
<PAGE>

         17.7 Entire Agreement. This Agreement and the Stock Purchase Agreement
shall constitute the entire agreement between the Parties relating to the
subject matter thereof and shall supersede all previous writings and
understandings. No terms or provisions of this Agreement shall be varied or
modified by any prior or subsequent statement, conduct or act of either of the
Parties, except that the Parties may amend this Agreement by written instruments
specifically referring to and executed in the same manner as this Agreement.

18.      Dispute Resolution

         18.1 Internal Resolution. Any dispute, controversy or claim arising out
of or relating to this Agreement, excluding termination, (collectively referred
to as "Dispute") shall be attempted to be settled by the Parties, in good faith,
by submitting each such Dispute to designated senior management representatives
of each Party, who shall meet within seven (7) Business Days as reasonably
requested by either Party to review any Dispute. If the Dispute is not resolved
by the designated representatives by mutual agreement within fourteen (14)
Business Days after a meeting to discuss the Dispute, either Party may at any
time thereafter provide the other written notice specifying the terms of such
Dispute in reasonable detail. Within seven (7) Business Days of receipt of such
notice, the presidents of each Party, or a member of management designated by
them, shall meet at a mutually agreed upon time and location for the purpose of
resolving such Dispute. They will discuss the problems and/or negotiate for a
period of up to twenty (20) Business Days in an effort to resolve the Dispute or
negotiate an acceptable interpretation or revision of the applicable portion of
this Agreement mutually agreeable to both Parties, without the necessity of
formal procedures relating thereto.

         18.2 Arbitration. If the Parties have been unable to resolve a dispute
through the above-described procedures, the Party initiating such procedures
may, in its discretion, within fourteen (14) Business Days after the
above-described procedures have been exhausted, propose non-binding arbitration
in accordance with the CPR Non-Administered Arbitration Rules in effect on the
date of this Agreement. The place of any such arbitration shall be Washington,
DC and it shall be conducted by a sole arbitrator. The Parties may not pursue
any other legal or equitable rights or remedies relating to any dispute until
the conclusion of the arbitration.

         In the event such arbitration is not commenced, the parties may pursue
any available legal or equitable rights or remedies.

                                       29
<PAGE>

         NOW THEREFORE, the Parties, through their authorized officers, have
executed this Agreement as of the date first written above.

                                  KOS PHARMACEUTICALS, INC

                                  By:_____________________________________
                                  Name:
                                  Title:

                                  Date:

                                  DUPONT PHARMACEUTICALS COMPANY

                                  By:_____________________________________
                                  Name:
                                  Title:
                                  Date:

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