Document:

Exhibit 10.27

                         COMMON STOCK PURCHASE AGREEMENT

         This Common Stock Purchase Agreement (the "Agreement") is made as of
April 23, 2001, between Pharmanetics, Inc, a North Carolina corporation (the
"Company"), and Bayer Corporation, an Indiana corporation (the "Purchaser").

     Section 1. Authorization and Sale of Common Stock

     1.1 Authorization. The Company has authorized the sale and issuance to
Purchaser of up to one million, four hundred fifty thousand (1,450,000) shares
of its Common Stock, no par value per share (the "Common Stock").

     1.2 Sale of Common Stock. Subject to the terms and conditions hereof, the
Company will issue and sell to the Purchaser and the Purchaser will buy from the
Company one million, four hundred fifty thousand (1,450,000) shares of Common
Stock (the "Shares") at a per share purchase price of $12.00 (the "Purchase
Price Per Share"), for an aggregate purchase price of seventeen million, four
hundred thousand dollars ($17,400,000.00).

     Section 2. Closing Date; Delivery

     2.1 Closing Date. The Closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the offices of Wyrick Robbins Yates &
Ponton LLP, 4101 Lake Boone Trail, Suite 300, Raleigh, North Carolina, at 12:00
p.m. on May 1, 2001, or at such other time, date and place upon which the
Company and the Purchaser shall mutually agree (the date of the Closing is
hereinafter referred to as the "Closing Date").

     2.2 Delivery. At the Closing, the Company will deliver to the Purchaser a
certificate or certificates representing the Shares against payment of the
purchase price therefor by wire transfer of immediately available funds or by
certified or cashier's check drawn on a United States bank, payable to the
Company in the amount of the applicable purchase price. The certificate or
certificates shall be subject to a legend restricting transfer under the
Securities Act of 1933, as amended (the "Securities Act"), and referring to
restrictions on transfer and rights of first refusal herein, such legend to be
substantially as follows:

          The shares represented by this certificate have been acquired for
          investment and have not been registered under the Securities Act of
          1933, as amended. Such shares may not be sold or transferred in the
          absence of such registration or an opinion of counsel satisfactory to
          the Company as to the availability of an exemption from registration.

          The shares represented by this certificate are subject to restrictions
          on transfer, including any sale, pledge or other hypothecation, set
          forth in an agreement between the Company and Bayer Corporation, a
          copy of which agreement may be obtained at no cost by written request
          made by the holder of record of this

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          certificate to the Secretary of the Company at the Company's principal
          executive offices.

     Section 3. Representations and Warranties of the Company

     The Company hereby represents and warrants to the Purchaser as follows:

     3.1 Organization. The Company and each of its Subsidiaries is a corporation
duly organized and validly existing under the laws of the State of North
Carolina and is in good standing under such laws. The Company and each of its
Subsidiaries has requisite corporate power and authority to own, lease and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company and each of its
Subsidiaries is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a Material Adverse Effect. The Company has furnished to the Purchaser
true and correct copies of the Articles of Incorporation and Bylaws as amended
of the Company and each of its Subsidiaries and will furnish upon request to the
Purchaser true and correct copies of any amendments thereto through the term of
this Agreement. The Company has two subsidiaries, Cardiovascular Diagnostics,
Inc. and Coeur Laboratories, Inc., each of which is wholly-owned by the Company.
References in Section 3 to the Company shall be deemed to include, where
appropriate, and to be given separately with respect to, the Company and each
Subsidiary.

     3.2 Capitalization. The authorized capital stock of the Company consists of
40,000,000 shares of Common Stock, no par value per share, of which 7,869,285
shares were issued and outstanding as of April 23, 2001 and 1,000,000 shares of
preferred stock, no par value, of which 120,000 shares designated as Series A
Convertible Preferred Stock (the "Preferred Stock") have been issued and 97,500
shares of Preferred Stock were issued and outstanding as of April 23, 2001. All
such issued and outstanding shares have been duly authorized and validly issued
and are fully paid and non-assessable. Upon Closing, the Company shall have at
least 10,294,285 "voting shares" within the meaning of the North Carolina
Shareholder Protection Act. The Company has reserved an additional (a) 1,477,399
shares of its Common Stock for issuance to employees, officers, directors and
consultants to the Company as may be determined by the Company's Board of
Directors from time to time pursuant to its stock option plans, of which
1,311,898 shares were subject to outstanding options as of April 23, 2001 (b)
975,000 shares of its Common Stock for issuance to holders of the Preferred
Stock upon conversion thereof, and (c) 251,000 shares of Common Stock for
issuance to holders of the Warrants upon exercise thereof. There are no other
options, warrants, conversion privileges or other contractual rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's or of any Subsidiary's capital stock or other securities.

     3.3 Authorization. The Company has all corporate right, power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby and thereby. All corporate action on the part of the Company and its
Board of Directors necessary for the authorization, execution, delivery and
performance of this Agreement by the Company, the authorization, sale, issuance
and delivery of shares of Common Stock contemplated hereby, and

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the performance of the Company's obligations hereunder has been taken. No
approval of the holders of capital stock of the Company is necessary under any
laws or under requirements of NASDAQ for the authorization, execution, delivery
and performance of this Agreement by the Company, the authorization, sale,
issuance and delivery of shares of Common Stock contemplated hereby, and the
performance of the Company's obligations hereunder. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms. Upon the issuance and delivery of the Shares as contemplated by this
Agreement, the Shares will be validly issued, fully paid and nonassessable. The
issuance and sale of the Shares contemplated hereby will not give rise to any
preemptive rights or rights of first refusal in existence on the date hereof on
behalf of any person. There are no preemptive rights, rights of first refusal or
other similar rights on behalf of any Person under any provision of applicable
law or any provision of the Articles of Incorporation or Bylaws of the Company
or of any agreement or instrument to which the Company is a party or by which
the Company is bound in respect of any capital stock or other securities of the
Company other than pursuant to this Agreement and the Preferred Stock
anti-dilution provisions. The issuance, sale and delivery of the Shares to the
Purchaser will convey to the Purchaser good and marketable title to such shares,
free and clear of all liens.

     3.4 No Conflict. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not (a) result in
any violation of, or default (with or without notice of lapse of time, or both),
or give rise to a right of termination, cancellation or acceleration of any
material obligation or to a loss of a material benefit, under, any provision of
the Certificate of Incorporation or Bylaws of the Company or any Subsidiary or
any mortgage, indenture, lease or other agreement or instrument, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any Subsidiary, or any of their respective properties or
assets; (b) result in the creation or imposition of any lien upon any assets or
properties of the Company or any Subsidiary except pursuant hereto; or (c)
violate or conflict with any law or Order applicable to the Company or any
Subsidiary or any of their respective assets or properties of any Governmental
Entity having jurisdiction over the Company or any Subsidiary or any of their
assets or properties.

     3.5 Accuracy of Reports.

     (a)  SEC Reports. All reports required to be filed by the Company with the
          Securities and Exchange Commission (the "SEC") under the Securities
          Exchange Act of 1934, as amended (the "Exchange Act"), have been duly
          filed, were in substantial compliance with the requirements of their
          respective forms, were complete and correct in all material respects
          as of the dates at which the information was furnished, and contained
          (as of such dates) no untrue statement of a material fact or omitted
          to state a material fact necessary in order to make the statements
          made therein, in light of the circumstances under which they were
          made, not misleading. Other than the SEC Reports, the Company has not
          filed or been required to file any other reports or statements with
          the SEC since January 1, 1998.

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     (b)  Financial Statements. Each of (i) the consolidated balance sheets
          (including the related notes and schedules) included in or
          incorporated by reference into the SEC Reports fairly presents the
          consolidated financial position of the Company and its Subsidiaries as
          of the date thereof, subject, in the case of unaudited statements, to
          normal year-end adjustments, and (ii) the consolidated statements of
          income (or statements of results of operations), shareholders' equity
          and cash flows (including the related notes and schedules) included in
          or incorporated by reference into the SEC Reports fairly presents the
          results of operations, retained earnings and cash flows, as the case
          may be, of the Company and its Subsidiaries (on a consolidated basis)
          for the periods set forth therein (subject, in the case of unaudited
          statements, to normal year-end adjustments and except as permitted by
          Form 10-Q of the SEC) in each case in accordance with GAAP applied on
          a consistent basis throughout the periods covered (except as stated
          therein or in the notes thereto) and in compliance with the rules and
          regulations of the SEC.

     (c)  Absence of Certain Changes. Except for transactions contemplated by
          this Agreement or as disclosed in the SEC Reports, since December 31,
          2000, there have not been any changes, conditions, occurrences,
          circumstances or other events that have had or could reasonably be
          expected to have a Material Adverse Effect.

     3.6 Governmental Consents, etc. No consent, approval or authorization of or
designation, declaration or filing with any Governmental Entity on the part of
the Company or any Subsidiary is required in connection with the execution and
delivery of this Agreement, the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby, except such filings
as may be required to be made with the SEC, the National Association of
Securities Dealers, Inc. (the "NASD") and the North Carolina Secretary of State.

     3.7 Litigation. Except as disclosed in SEC Reports, there are no claims,
suits, actions, proceedings, arbitrations or investigations pending or, to the
knowledge of the Company, threatened in writing against the Company or any of
its Subsidiaries; nor are there any Orders outstanding against or applicable to
the Company or any of its Subsidiaries or against or applicable to any of their
respective assets, properties or businesses.

     3.8 Intellectual Property.

     (a)  All patents and trademark applications and registrations related to
          the Intellectual Property exist and have been maintained in good
          standing, including without limitation, the timely payment of any
          maintenance fees and annuities thereon. The Company and its
          Subsidiaries have taken all commercially reasonable actions and made
          all commercially reasonable applications and filings pursuant to
          applicable law to secure, perfect and protect their rights in the
          Intellectual Property and neither the Company and its Subsidiaries nor
          any of their respective agents, employees, investors and counsel have
          practiced inequitable conduct under the patent

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          laws or other applicable laws with respect to any of the foregoing.
          The Company and its Subsidiaries have taken all commercially
          reasonable steps (including without limitation entering into employee
          invention, confidentiality, non-disclosure and non-competition
          agreements with all officers, directors, shareholders and employees of
          the Company and its Subsidiaries with access to or knowledge of the
          Intellectual Property used or held for use in the business of the
          Company and its Subsidiaries (and the products and technology of the
          Company and its Subsidiaries)) to safeguard and maintain the secrecy
          and confidentiality of, and to assign to the Company and its
          Subsidiaries, all of such officers, directors', shareholders' and
          employees' as applicable, rights in all such Intellectual Property
          invented or developed to the greatest extent, and not beyond the
          greatest extent permitted by applicable law. All consultants and
          contractors to the Company and its Subsidiaries have signed a
          confidentiality and invention assignment agreement for the benefit of
          the Company and its Subsidiaries to assign such consultants' or
          contractors' as applicable, rights in Intellectual Property to the
          Company and its Subsidiaries and to prohibit use or disclosure of
          trade secrets and confidential information.

     (b)  The Company and its Subsidiaries own or are duly licensed or otherwise
          have the right to use all the Intellectual Property and all such
          Intellectual Property is valid and enforceable by the Company and its
          Subsidiaries against third parties. The Company and its Subsidiaries
          own on an exclusive basis, free and clear of any encumbrances, have
          record title, and have the unrestricted right to use, license, sell or
          dispose of, and the right to bring infringement actions with respect
          to all the Intellectual Property. The Company and its Subsidiaries do
          not pay, and have no obligation (whether absolute or contingent) to
          pay, royalties, honoraria, fees or other payments to any Person by
          reason of the ownership, use, license, sale or disposition of any
          Intellectual Property right. Neither the Company nor any Subsidiary
          has received notice (written or oral) of any claim of any Person
          asserting rights in, or a conflict with, the Intellectual Property.
          Without limiting the foregoing, no other Person has claimed the right
          to use any Trademark which is identical or confusingly similar to any
          Trademark used by the Company and its Subsidiaries. Neither the
          Company nor any Subsidiary has provided notice (written or oral) to
          any Person of infringement of any Intellectual Property right and,
          there is no reasonable basis for such a claim.

     (C)  Except for the BMC litigation disclosed to Purchaser and which
          litigation has been finally settled, (i) no written or unwritten claim
          has been anticipated, evaluated or asserted against the Company or any
          Subsidiary to the effect that the operation or proposed operation of
          the business or making, using or selling any product or performance of
          any service infringes upon or conflicts with the rights of any Person
          with respect to any patents, patent application, Trademarks, trade
          names, trade secrets,

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          designs, inventions, works of authorship or copyrights, and (ii) no
          claim has been asserted, suspected or evaluated by the Company or any
          Subsidiary against any Person that such Person has infringed any of
          the Intellectual Property.

     (d)  Each of the parties thereto have performed, in all material respects,
          all obligations under each Intellectual Property Agreement which are
          required to be performed by such party, and there is no default (or
          event which with notice or lapse of time would constitute a default)
          thereunder. Each Intellectual Property Agreement is enforceable
          against each of the parties thereto pursuant to its terms.

     (e)  To the knowledge of the Company, the operation of the business
          (including without limitation the research and development operations
          of the Company and its Subsidiaries or the manufacture, sale, use,
          trade dress, packaging, license, or other exploitation of products and
          technology currently or proposed to be marketed or in development and
          delivery or performance of services) does not and will not infringe,
          trespass or otherwise violate the Intellectual Property rights of any
          Person. Without limiting the foregoing, neither the Company nor any
          Subsidiary has received a notice (written or oral) of infringement of
          any Intellectual Property right held by another Person and there is no
          reasonable basis for such a claim. Neither the Company nor any
          Subsidiary is obligated to indemnify any Person for any liability,
          cost or expense arising from such Person's use, sale, licensing or
          disposition of any Intellectual Property or such Person's manufacture,
          use, sale, license or other exploitation of any product, service or
          technology.

     (f)  No claim or potential claim has been evaluated or anticipated or
          suspected (i) to the effect that any of the Intellectual Property is
          invalid or unenforceable or (ii) otherwise related to the Intellectual
          Property, except for the BMC litigation.

     (g)  The Company and its Subsidiaries have developed all Intellectual
          Property used or held for use in the business through its own efforts
          for its own account and has good and clear title thereto, and there is
          no contract obligation, license, lien, encumbrance, alleged
          infringement, dispute, potential dispute, claim or other cloud of
          title concerning such Intellectual Property whatsoever. The
          Intellectual Property used or held for use in the business of the
          Company and its Subsidiaries is not being infringed by any third party
          proprietary interest, including (without limitation) any third party
          patent, copyright, Trademark, or trade secret interest. The
          Intellectual Property used or held for use in the business is, to the
          knowledge of the Company, fully eligible for protection under
          applicable law and has not been forfeited, abandoned, lapsed or
          donated in any way into the public domain. All of the trade secrets of
          the Company and its Subsidiaries have been maintained in confidence
          and are not known to any

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          third party. All personnel, including employees, agents, consultants
          and contractors, who have contributed to or participated in the
          conception and development of the Intellectual Property either (i)
          have been a party to a work-for-hire relationship with the Company and
          its Subsidiaries that has accorded the Company and its Subsidiaries
          full, effective and exclusive original ownership of all tangible and
          intangible property arising with respect to the Intellectual Property
          or (ii) have executed instruments of assignment in favor of the
          Company and its Subsidiaries as assignee that have conveyed to the
          Company and its Subsidiaries full, effective and exclusive ownership
          of all tangible and intangible property thereby arising with respect
          to the Intellectual Property. No agreements or arrangements are in
          effect with respect to the development, non-disclosure, marketing,
          distribution, licensing or promotion of the Intellectual Property by
          any independent contractor, salesperson, distributor, sublicensor or
          other remarketer or sales organization.

     3.9  Environmental Liability.

     (a)  Environmental Substance Liability. No event has occurred or condition
          exists or has existed and no operating practice has been or is being
          employed that could reasonably be expected to give rise to material
          liability on the part of the Company or any Subsidiary or any Person
          or entity for whose conduct the Company or any Subsidiary is or may be
          held responsible (together referred to in this subparagraph 3.9 as the
          "Company"), under any Environmental Law enacted on or prior to the
          date hereof as a result of or in connection with, the following:

          (i)  the using, generating, manufacturing, refining, transporting,
               treating, storing, handling, disposing, transferring, producing,
               or processing of any Substances by the Company in or near or from
               the Facilities or any other facilities owned or operated or used
               by the Company; or

          (ii) any intentional or unintentional Release or Threat of Release of
               any Substances in, from or near facilities of the Company into
               the Environment.

          (b)  Environmental Compliance. The Company has obtained and is in
               material compliance with all applicable Environmental Law and
               with all registrations, permits, licenses, approvals, consents,
               orders, or authorizations issued by or on behalf of any federal,
               state, or local Governmental Entity ("Environmental Permits")
               that are required pursuant to Environmental Law in connection
               with construction or operation of the Facilities

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               or any other facilities used or owned by the Company or the
               generation, treatment, storage, transportation, or disposal of
               any Substances by the Company. Such Environmental Permits are
               currently effective and sufficient for the ownership and
               operation of the Facilities and the operations of the Company as
               currently conducted, and the Company has no reason to believe
               that there is any basis for revocation, suspension, or
               modification of any such Environmental Permits.

          (c)  Offsite Disposal. All Substances generated by the Company or the
               Facilities have been transported, stored, treated and disposed of
               by carriers or treatment, storage and disposal facilities
               authorized or maintaining valid permits under all applicable
               Environmental Law and the Company has no knowledge of any Release
               or Threat of Release at any offsite disposal facility used by the
               Company.

          (d)  Environmental  Liens.  No lien has been imposed on the Facilities
               by any Governmental Entity at the federal,  state, or local level
               in connection  with the presence on or off the  Facilities of any
               Substances;

          (e)  Environmental Litigation. The Company has not: (i) entered into
               or been subject to any consent decree, compliance order, or
               administrative order relating to the Facilities or operations
               thereon; (ii) received notice under the citizen suit provisions
               of any Environmental Law in connection with the Facilities or
               operations thereon; (iii) received any request for information,
               notice, demand letter, administrative inquiry, or formal or
               informal complaint or claim with respect to any Environmental
               Condition on or off the Facilities; (iv) been subject to or
               threatened with any governmental or citizen enforcement action
               relating to the Facilities or any operations thereon; or (v) been
               subject to or threatened with any personal injury or property
               damage claims relating to any Environmental Condition on or off
               the Facilities, and the Company has no reason to believe that any
               of the above will be forthcoming.

          (f)  Underground Storage Tanks. There are no underground storage tanks
               at the Facilities.

          (g)  Asbestos-Containing Materials. To the knowledge of the Company,
               there are no asbestos-containing materials at the New Facility
               and to the knowledge of the Company, there is no
               asbestos-containing material at the Current Facility for which
               the Company is or will be responsible under Environmental Law or
               under any agreement with any third party or Governmental Entity.

          (h)  Environmental Reports. The Company has provided to the Purchaser
               all reports, audits, and assessments of Environmental Conditions
               relating to the Facilities or operations thereon, and all such
               reports, audits, and assessments are listed on Schedule 3.9.

     3.10 Compliance with Laws; Regulatory Approvals. Except as disclosed in the
SEC  Reports  and except for  matters  which in the  aggregate  would not have a
Material Adverse Effect, the Company and its Subsidiaries are in compliance with
all applicable  laws.  Except for matters

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which in the aggregate, as would not have a Material Adverse Effect, (a) all
Regulatory Approvals required by the Company and its Subsidiaries to conduct
their respective business as now conducted by them have been obtained and are in
full force and effect and (b) the Company and its Subsidiaries are in compliance
with the terms and requirements of such Regulatory Approvals.

     3.11 Disclosure. All disclosures made in this Agreement are modified by any
information set forth in the SEC Reports. Subject to such modification, no
representation or warranty of the Company contained in this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.

     Section 4.Representations and Warranties of the Purchaser

     The Purchaser hereby represents and warrants to the Company as follows:

     4.1 Investment. It will acquire the Shares and any other shares purchased
from the Company pursuant to this Agreement for investment for its own account,
not as a nominee or agent, and not with a view to, or for resale in connection
with, any distribution thereof. It understands that the Shares and any other
shares purchased by the Purchaser from the Company pursuant to this Agreement
have not been, and will not have been, registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
Purchaser's investment intent and the accuracy of the Purchaser's
representations as expressed herein. By reason of its business or financial
experience or the business or financial experience of its professional advisors
who are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, it directly or indirectly, could be
reasonably assumed to have the capacity to protect its own interest in
connection with the purchase of the Shares from the Company at the Closing.

     4.2 Organization. The Purchaser is a corporation duly organized and validly
existing in good standing under the laws of the State of Indiana, with all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as presently conducted and as proposed
to be conducted.

     4.3 Authority. The Purchaser has all corporate right, power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on behalf of the Purchaser.
This Agreement has been duly executed and delivered by the Purchaser and
constitutes a legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy. Subject to compliance
with such filings as may be required to be made with the SEC and the NASD, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with or result in any
violation of any

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obligation under any provision of the Articles of Incorporation or Bylaws of the
Purchaser or any mortgage, indenture, lease or other agreement or instrument,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Purchaser.

     4.4 Government Consents, etc. No consent, approval or authorization of or
designation, declaration or filing with any Governmental Entity on the part of
the Purchaser is required in connection with the valid execution and delivery of
this Agreement, the purchase of the Shares, or the consummation of any other
transaction contemplated hereby, except such filings as may be required to be
made with the SEC and the NASD.

     4.5 Investigation. The Purchaser has had a reasonable opportunity to
discuss the Company's business, management and financial affairs with the
Company's management and the Purchaser has received satisfactory responses from
management of the Company to the Purchaser's inquiries.

     Section 5. Conditions to Obligations of Purchaser

     5.1 Conditions to Obligations of Purchaser. The Purchaser's obligation to
purchase the Shares at the Closing is, at the option of the Purchaser, which may
waive any such conditions to the extent permitted by law, subject to the
fulfillment on or prior to the Closing Date of the following conditions:

          (a)  Representations and Warranties Correct. The representations and
               warranties made by the Company in Section 3 hereof shall be true
               and correct when made, and shall be true and correct on the
               Closing Date with the same force and effect as if they had been
               made on and as of said date.

          (b)  Covenants. All covenants, agreements and conditions contained in
               this Agreement to be performed by the Company on or prior to such
               purchase shall have been performed or complied with in all
               material respects.

          (c)  No Order  Pending.  There  shall not then be in effect  any order
               enjoining or restraining  the  transactions  contemplated by this
               Agreement.

          (d)  No Law Prohibiting or Restricting Such Sale. There shall not be
               in effect any law, rule or regulation prohibiting or restricting
               such sale or requiring any consent or approval of any person
               which shall not have been obtained to issue the Shares (except as
               otherwise provided in this Agreement).

          (e)  Opinion of Counsel. Counsel to the Company shall have delivered
               an opinion of counsel in form reasonably satisfactory to the
               Purchaser, in the form normally delivered by such counsel in
               connection with similar transactions.

     Section 6. Conditions to Obligations of Company

     6.1 Conditions to Obligations of Company.  The Company's obligation to sell
and issue the Shares at the Closing is, at the option of the Company,  which may
waive  any such

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conditions to the extent permitted by law, subject to the fulfillment on or
prior to the Closing Date of the following conditions:

          (a)  Representations and Warranties Correct. The representations and
               warranties made by the Purchaser in Section 4 hereof shall be
               true and correct when made, and shall be true and correct on the
               Closing Date with the same force and effect as if they had been
               made on and as of said date.

          (b)  Covenants. All covenants, agreements and conditions contained in
               this Agreement to be performed by the Purchaser on or prior to
               the Closing Date shall have been performed or complied with in
               all material respects.

          (c)  No Order  Pending.  There  shall not then be in effect  any order
               enjoining or restraining  the  transactions  contemplated by this
               Agreement.

          (d)  No Law Prohibiting or Restricting Such Sale. There shall not be
               in effect any law, rule or regulation prohibiting or restricting
               such sale or requiring any consent or approval of any person
               which shall not have been obtained to issue the Shares (except as
               otherwise provided in this Agreement).

     Section 7. Covenants of the Company

     Until the termination of this Agreement in accordance with Section 11.1
hereof or of the particular covenant, as the case may be:

     7.1 No Objection. Provided the Purchaser is in compliance with and has
performed all covenants, agreements and conditions contained in this Agreement
to be performed by the Purchaser, the Company shall not interpose any objection
or take any legal action as a plaintiff in connection with the acquisition by
the Purchaser of such number of shares of Common Stock as is permitted to be
owned by the Purchaser pursuant to this Agreement and the Company hereby
approves any such acquisition in accordance with the applicable provisions of
the North Carolina Business Corporation Act.

     7.2 Sale of Shares. The Company shall take such action as is reasonably
necessary, subject to compliance with applicable law, to issue and sell the
Shares to the Purchaser.

     7.3 Board of Directors.

          (a)  Board Representation. The Company shall be obligated to include
               in the slate of nominees recommended by the Company's Board of
               Directors or management to shareholders, for election as
               directors at the Company's next meeting of shareholders, one
               person designated by the Purchaser and reasonably acceptable to
               Company (any such person, a "Purchaser Nominee") In addition, if
               at any time the number of members constituting the entire Board
               of Directors shall equal or exceed nine, including the Purchaser
               Nominee appointed pursuant to the previous sentence, the
               Purchaser shall be entitled to designate and the Board shall
               appoint to the Board, an additional Purchaser Nominee in
               accordance with the provisions

                                       11
<PAGE>
               of this Section. In the event of a vacancy caused by the
               disqualification, removal, resignation or other cessation of
               service of any Purchaser Nominee from the Board, the Board shall
               elect as a Director (to serve until the Company's immediately
               succeeding annual meeting of shareholders) a new Purchaser
               Nominee who has been designated by the Purchaser. The Purchaser
               shall nominate each Purchaser Nominee in advance of each meeting
               of shareholders at which such Purchaser Nominee is to be elected.
               Under no circumstances shall any holder of the Company's capital
               stock (other than an individual) that Beneficially Owns fewer
               shares of the Voting Securities than the Purchaser be entitled to
               nominate, nor shall the Company nominate, more representatives of
               such holder to the Board of Directors than the Purchaser is
               entitled to nominate.

          (b)  Nominees. Any proposed Purchaser Nominee shall be a person
               acceptable to the Board in its reasonable discretion prior to the
               initial appointment, or election, as the case may be, of each
               Purchaser Nominee to the Board; provided, that at any time the
               President or Chief Financial Officer of the Purchaser's
               Diagnostics Division or the Senior Vice President or the Vice
               President - Marketing of the Near Patient Testing Segment of the
               Purchaser's Diagnostics Division, each shall be conclusively
               deemed to be acceptable to the Board for purposes of this
               Section; and provided, further, that once a Purchaser Nominee is
               accepted by, or deemed acceptable to, the Board, such person
               shall thereafter be conclusively deemed to be acceptable pursuant
               to this Agreement (together with such persons specified in the
               foregoing clauses (i) and (ii), the "Pre-Approved Persons"). Any
               objection by the Company to a proposed Purchaser Nominee must be
               made no later than five business days after the Purchaser
               delivers written notice of its proposed Purchaser Nominee;
               provided, however, that the Company shall in all cases notify the
               Purchaser of any such objection sufficiently in advance of the
               date on which proxy materials are mailed by the Company in
               connection with such election of directors to enable the
               Purchaser to propose an alternate Purchaser Nominee pursuant to
               and in accordance with the terms of this Agreement.

          (c)  Election of Directors. The Company agrees, subject to Section
               7.3(b) above, to include such Purchaser Nominee to be added to or
               retained on the Board pursuant to this Agreement in the slate of
               nominees recommended by the Board to the Company's shareholders
               for election as directors and shall use its reasonable efforts to
               cause the election or reelection of each such Purchaser Nominee
               to the Board at each meeting of shareholders at which such
               Purchaser Nominee is up for election, including soliciting
               proxies in favor of the election of such person(s), it being
               understood that efforts consistent with those used for other
               members of the slate recommended by the Board shall be deemed
               reasonable.

          (d)  Committees.  The Board will not establish an executive  committee
               authorized  to exercise the power of the Board  generally  unless
               the

                                       11
<PAGE>

               Purchaser is granted representation on such committee
               proportional to its representation on the Board, nor will the
               Board establish or employ committees (unless the Purchaser is
               granted proportional representation thereon) as a means designed
               to circumvent or having the effect of circumventing the rights of
               the Purchaser under this Agreement to representation on the
               Board.

          (e)  Termination. The provisions of this Section 7.3 shall terminate
               as at any time the Purchaser Beneficially Owns less than 5% of
               the Voting Securities.

     7.4 Change in Control. In the event of a Change in Control as defined in
subsections (b), (d) and (e) of the definition thereof, if the price per share
to be paid to shareholders of the Company in connection with the Change in
Control (the "Change in Control Price Per Share") is less than the Purchase
Price Per Share as to the Shares or $10.00 per share as to the Original Shares
and the Purchaser is not in default under that certain Distribution Agreement
dated as of April 23, 2001 between the Company and the Purchaser (the
"Distribution Agreement") through the date of the Change in Control, then the
Company shall be obligated to pay the Purchaser, (a) for each of the Shares the
Purchaser then holds, an amount equal to the Purchase Price Per Share minus the
Change in Control Price Per Share, and (b) for each of the Original Shares the
Purchaser then holds, an amount equal to $10.00 per Original Share minus the
Charge in Control Price Per Share, such amounts to be paid to the Purchaser in
addition to the Change in Control Price Per Share to be received in connection
with the Change in Control; provided that this covenant shall terminate as to
any Proposal for a Change in Control Transaction initiated after December 31,
2002, except with respect to closing of a Proposal or Change in Control
Transaction initiated prior to December 31, 2002.

     7.5 Change in Control Transactions. In the event that the Company receives,
commences negotiations with respect to, or otherwise obtains knowledge of, a
Proposal, it will promptly notify Purchaser and will provide Purchaser with an
opportunity to propose a Change in Control Transaction in which the Purchaser or
an Affiliate thereof would be the acquiring company and, in connection therewith
will provide Purchaser with all information and equivalent access to the
management and Board of Directors (including any committee of the Board of
Directors which may be formed to consider such a transaction) as is made
available to any other Person making a Proposal. Notwithstanding anything to the
contrary contained in this Section 7.5, the Company shall have no obligations
under this Section 7.5 to the extent that the Board of Directors determines that
complying with the obligations set forth in this Section 7.5 would constitute a
breach of duty to the Company or the shareholders of the Company.

          7.6  Registration Rights.

               (a)  Demand Registration.

                    (i)  At any time on or after the date hereof, the Purchaser,
                         provided the registration rights hereunder have not
                         lapsed as set forth in Section 7.6(i) hereof, may
                         demand in writing that the Company effect a
                         registration under the Securities Act of all or any
                         portion (but not less

                                       13
<PAGE>

                         than Shares with an aggregate fair market value of
                         $1,000,000); provided, however, that the Purchaser may
                         request registration of any amount of Registrable
                         Securities where the request relates to all remaining
                         Registrable Securities for the purpose of sale in the
                         manner specified in such demand. Such demand shall also
                         specify the number of Registrable Securities that the
                         Purchaser wishes to have so registered. The Company
                         shall, within 10 days of receipt of such demand, give
                         written notice of such demand to all other holders of
                         the Company's securities with contractual rights on a
                         pari passu basis to have such securities registered
                         under the Securities Act. Any such holder may, within
                         30 days of its receipt of such notice from the Company,
                         give a written notice (the "Inclusion Notice") to the
                         Company specifying the number of the Company's
                         securities which such holder wishes to include in such
                         registration. The Company shall prepare and file a
                         registration statement on any available form of
                         registration statement, for the public sale of the
                         Registrable Securities as soon as practicable;
                         provided, however, that if the Company shall furnish to
                         the holders of Registrable Securities (including the
                         Purchaser, the "Participating Holders") a certificate
                         signed by the Chairman or President of the Company
                         stating that in the good faith judgment of the Board of
                         Directors of the Company, that such Demand Registration
                         would materially interfere with, or require premature
                         disclosure of, any material financing, acquisition,
                         reorganization or other material transaction involving
                         the Company or any of its Subsidiaries, then the
                         Company's obligation to file a registration statement
                         shall be deferred for a reasonable period not to exceed
                         180 days from the date of such request, but in no event
                         more than 180 days during any 24 month period. Upon
                         written notice from the Company to the Participating
                         Holders delivered within 30 days of a demand to
                         register Registrable Securities under this Section
                         7.6(a), the Purchaser's right to demand registration
                         pursuant to this Section 7.6(a) shall be suspended
                         during the period commencing 90 days before the date
                         estimated in writing by the Company to be the date of
                         filing of a registration statement, and ending six
                         months following the effective date (or withdrawal
                         date) of a registration statement, for an underwritten
                         public offering of the Common Stock.

                    (ii) All Participating Holders (including the Purchaser)
                         proposing to distribute securities through such
                         registration shall enter into an underwriting agreement
                         with the managing or lead managing underwriter in the

                                       14
<PAGE>

                         form customarily used by such underwriter with such
                         changes thereto as the parties thereto shall agree. If
                         any Participating Holder disapproves of the terms of
                         any such underwriting, it may elect to withdraw
                         therefrom by written notice to the Company and the
                         managing or lead managing underwriter. Any Registrable
                         Securities so withdrawn from such underwriting shall be
                         withdrawn from such registration.

                    (iii)Whenever a registration is demanded pursuant to this
                         Section 7.6(a), unless a managing or lead managing
                         underwriter objects thereto, the Company may include in
                         such registration securities for offering by the
                         Company and any other holder of securities, it being
                         understood, however, that the Company's and such other
                         holder right of inclusion in such registration shall be
                         subordinate to, and not pari passu with, the rights of
                         the Participating Holders.

                    (iv) If the managing underwriter thereof determines that the
                         total number of shares of Registrable Securities to be
                         sold in such offering shall be limited due to market
                         conditions or otherwise, the reduction in the total
                         number of shares offered shall be made by first
                         excluding any shares of selling stockholders who are
                         not holders of contractual rights to have such shares
                         registered under the Securities Act and shares of
                         selling stockholders who are holders of contractual
                         rights to have such shares registered under the
                         Securities Act that are subordinate to those of the
                         Participating Holders and shares of selling
                         stockholders who are holders of contractual rights to
                         have such shares registered under the Securities Act
                         that are subordinate to those of the Purchaser, then,
                         if necessary, by reducing the total number of shares to
                         be sold by the Company, and then, if necessary, by
                         excluding pro rata (based on the number of Registrable
                         Securities held) the Registrable Securities to be sold
                         by the Participating Holders.

                    (v)  The Participating Holders shall have the right to
                         select the underwriter or underwriters and manager or
                         managers to administer such offering; provided,
                         however, that each Person so selected shall be
                         acceptable to the Company in its reasonable judgment.

                    (vi) The Company shall be obligated to effect not more than
                         two Demand Registrations. For purposes of the preceding
                         sentence, a Demand Registration shall not be deemed to
                         have been effected (i) unless a Demand Registration
                         Statement with respect thereto has become effective,
                         (ii) if after such Demand Registration Statement has
                         become effective, such Demand Registration Statement or
                         the related offer, sale or distribution of Registrable
                         Securities thereunder is interfered with by any stop
                         order, injunction or other order or requirement of the
                         SEC or other governmental agency or court for any
                         reason not attributable to the Participating Holders
                         and such interference is not thereafter eliminated,
                         (iii) if the conditions to closing specified in the
                         underwriting agreement entered into in connection with

                                       15
<PAGE>

                         such registration are not satisfied or waived, other
                         than by reason of a failure on the part of the
                         Participating Holders or (iv) the number of shares of
                         Registrable Securities to be sold by the Purchaser were
                         reduced pursuant to Subsection (iv) above. If the
                         Company shall have complied with its obligations under
                         this Agreement, a right to demand a registration
                         pursuant hereto shall be deemed to have been satisfied
                         upon the earlier of (x) the date as of which all of the
                         Registrable Securities included therein shall have been
                         distributed pursuant to the Demand Registration
                         Statement, and (y) the date as of which such Demand
                         Registration shall have been Continuously Effective for
                         a 60-day period or other period specified herein
                         following the effectiveness of such Demand Registration
                         Statement, provided no stop order or similar order, or
                         proceedings for such an order, is thereafter entered or
                         initiated.

                    (vii)The Company shall use the Company's commercially
                         reasonable efforts to keep the relevant registration
                         statement Continuously Effective, if a Demand
                         Registration Statement, for up to 60 days or until such
                         earlier date as of which all the Registrable Securities
                         under the Demand Registration Statement shall have been
                         disposed of in the manner described in the Registration
                         Statement, or such longer period (but in no event
                         longer than 120 days) as in the judgment of counsel for
                         the underwriters a prospectus is required by law to be
                         delivered in connection with sales of Registrable
                         Securities by an underwriter or dealer in accordance
                         with plan of distribution included in such Demand
                         Registration Statement. Notwithstanding the foregoing,
                         if for any reason the effectiveness of a Demand
                         Registration Statement pursuant to this Subsection is
                         delayed or suspended or filing of the Demand
                         Registration Statement or seeking effectiveness thereof
                         is postponed as permitted herein, the commencement of
                         the foregoing period shall be extended by the aggregate
                         number of days of such suspension or postponement.

                    (viii) Except for registration statements on Forms S-4, S-8
                         or any successor thereto, the Company will not file
                         with the SEC any other registration statement with
                         respect to its capital stock, whether for its own
                         account or that of other stockholders, from the date of
                         receipt of a notice from requesting holders pursuant to
                         this Section 7.6 until the completion of the period of
                         distribution of the registration contemplated thereby.

          (b)  Registration Statement Information Relating to the Purchaser. The
               Purchaser  shall promptly upon receipt of written request provide
               the  Company  or any  underwriter  or  counsel  participating  or
               otherwise  involved in any such registration with any information

                                       16
<PAGE>
               relating to the Purchaser or the Registrable Securities that is
               reasonably required to be included in the registration statement
               or the prospectus, or any amendment thereof, relating to such
               offering or required to cause the registration to be declared and
               remain effective. Such information shall be submitted in writing,
               signed by the Purchaser, or a duly authorized representative or
               agent thereof, and shall state that the information is submitted
               specifically for the purpose of inclusion in the registration
               statement, prospectus, offering circular or other document
               related to the registration or qualification of the Registrable
               Securities pursuant hereto. If the Purchaser fails within a
               reasonable time to provide such information, the Company may
               exclude from such registration the Registrable Securities
               requested by the Purchaser to be included therein.

          (c)  Registration Procedures.  If and whenever the Company is required
               to effect the  registration of any Registrable  Securities of the
               Purchaser pursuant hereto, the Company will:

               (i)  prepare and file with the SEC a registration statement with
                    respect to such Registrable Securities and use reasonable
                    efforts to cause such registration statement to become and
                    remain effective as provided herein; provided, however, that
                    before filing a Demand Registration Statement or prospectus
                    or any amendments or supplements thereto, including
                    documents incorporated by reference after the initial filing
                    of the Demand Registration Statement and prior to
                    effectiveness thereof, the Company shall furnish to counsel
                    for the Purchaser and underwriters, copies of all such
                    documents in the form substantially as proposed to be filed
                    with the SEC at a reasonable time prior to filing for review
                    and comment by such counsel;

               (ii) prepare and file with the SEC such amendments and
                    supplements to such Demand Registration Statement and the
                    prospectus used in connection with such Demand Registration
                    Statement as may be necessary to comply with the provisions
                    of the Securities Act and rules thereunder with respect to
                    the distribution of all securities covered by such Demand
                    Registration Statement and as may be reasonably requested by
                    the Purchaser or necessary to keep such Demand Registration
                    Statement effective. If the registration is for an
                    underwritten offering, the Company shall amend the Demand
                    Registration Statement or supplement the prospectus whenever
                    required by the terms of the underwriting agreement. Pending
                    such amendment or supplement the Purchaser and all other
                    members of the Purchaser Group, upon written notice by the
                    Company, shall cease making offers or Transfers of
                    Registrable Securities pursuant to the prior prospectus. In
                    the event that any Registrable Securities included in a
                    Demand Registration Statement subject to, or required by,
                    this Agreement remain unsold at the end of the period during

                                       17
<PAGE>

                    which the Company is obligated to use its commercially
                    reasonable efforts to maintain the effectiveness of such
                    Demand Registration Statement, the Company may file a
                    post-effective amendment to the Demand Registration
                    Statement for the purpose of removing such securities from
                    registered status;

               (iii)notify the Purchaser and the Underwriters' Representative
                    and (if requested) confirm such advise in writing, as soon
                    as practicable after notice thereof is received by the
                    Company (i) when the Demand Registration Statement or any
                    amendment thereto has been filed or becomes effective, the
                    prospectus or any amendment or supplement to the prospectus
                    included therein has been filed, and, to furnish the
                    Purchaser and the underwriters with copies thereof, (ii) of
                    any request by the SEC for amendments or supplements to the
                    Demand Registration Statement or the prospectus included
                    therein or for additional information, (iii) if at any time
                    the representations and warranties of the Company cease to
                    be true and correct, and (iv) of the receipt by the Company
                    of any notification with respect to the suspension or
                    qualification of the Registrable Securities for offering or
                    sale in any jurisdiction or the initiation or threatening of
                    any proceeding for such purpose;

               (iv) immediately notify the Purchaser, at any time when a
                    prospectus relating thereto is required to be delivered
                    under the Securities Act, of the happening of any event as a
                    result of which the prospectus included in the registration
                    statement, as then in effect, includes an untrue statement
                    of a material fact or omits to state any material fact
                    required to be stated therein or necessary to make the
                    statements therein not misleading in the light of the
                    circumstances then existing, and if it is necessary, in the
                    opinion of counsel to the Company, to prepare and file with
                    the SEC such amendments and supplements to such registration
                    statement and the prospectus used in connection therewith as
                    may be necessary to keep such registration statement
                    effective and current and to comply with the provisions of
                    the Securities Act with respect to the sale or other
                    disposition of all shares covered by such registration
                    statement, including such amendments and supplements as may
                    be necessary to reflect the intended method of disposition
                    from time to time of the Purchaser if the registration is
                    effected in connection with an offering which is not
                    underwritten;

               (v)  cooperate with the Purchaser and the Underwriters'
                    Representatives to facilitate the timely preparation and
                    delivery of certificates representing Registrable Securities
                    to be sold and not bearing any restrictive legends; and
                    enable such Registrable Securities to be in such
                    denomination and registered in such names as the

                                       18
<PAGE>

                    Underwriters'   Representative  may  request  at  least  two
                    business days prior to the sale of Registrable Securities to
                    the underwriters;

               (vi) cooperate with the Purchaser in connection with any filings
                    required to be made with the NASD, and otherwise use its
                    best efforts to comply with the rules, by-laws and
                    regulations of the NASD as they apply to the registration;

              (vii) furnish to the Purchaser such number of copies of a
                    prospectus, including a preliminary prospectus and any
                    amendments and any supplements thereto, in conformity with
                    the requirements of the Securities Act, as the Purchaser may
                    reasonably request in order to facilitate the public sale or
                    other disposition of the Registrable Securities owned by the
                    Purchaser;

             (viii) use reasonable efforts to register or qualify the
                    Registrable Securities covered by such registration
                    statement under such other securities or blue sky or other
                    applicable laws of such jurisdictions within the United
                    States as the Purchaser shall reasonably request to enable
                    the Purchaser to consummate the public sale or other
                    disposition of the Registrable Securities owned by the
                    Purchaser, and to obtain the withdrawal of any order
                    suspending the effectiveness of a Demand Registration
                    Statement, or the lifting of any suspension of the
                    qualification (or exemption from qualification) of the offer
                    and Transfer of any of the Registrable Securities in any
                    jurisdiction, at the earliest possible moment; except that
                    the Company shall not for any such purpose be required (i)
                    to qualify generally to do business as a foreign corporation
                    in any jurisdiction in which it would not be required to so
                    qualify but for such registration or qualification, (ii) to
                    subject itself to taxation in any such jurisdiction, or
                    (iii) to consent to general service of process in any such
                    jurisdiction;

               (ix) use its best efforts to furnish to the Purchaser who has
                    included Registrable Securities in the registration
                    statement a signed counterpart, addressed to the Purchaser,
                    of (A) an opinion of counsel for the Company, dated the date
                    of the closing under the underwriting agreement, and (B) a
                    "cold comfort" letter signed by the independent public
                    accountants who have issued a report on the Company's
                    financial statements included in such registration statement
                    dated the date of effectiveness of the registration
                    statement and the date of the closing under the underwriting
                    agreement, covering substantially the same matters with
                    respect to such registration statement (and the prospectus
                    included therein) and, in the case of such accountants'
                    letters, with respect to events subsequent to the date of
                    such financial statements, as are customarily covered in

                                       19
<PAGE>

                    opinions of issuer's counsel and in accountants' letters
                    delivered to underwriters in underwritten public offerings
                    of securities and, in the case of the accountants' letters,
                    such other financial matters as the Purchaser may reasonably
                    request;

               (x)  otherwise use its best efforts to comply with all applicable
                    rules and regulations of the SEC, and make available to its
                    security holders, as soon as reasonably practicable, an
                    earnings statement covering the period of at least 12
                    months, beginning with the first month of the first fiscal
                    quarter after the effective date of such registration
                    statement, which earnings statement shall satisfy the
                    provisions of Section 11(a) of the Securities Act;

               (xi) use its best efforts to list such Registrable Securities on
                    each securities exchange or over-the-counter market on which
                    shares of Common Stock are then listed, if such Registrable
                    Securities are not already so listed and if such listing is
                    then permitted under the rules of such exchange and, if
                    shares of Common Stock are not then listed on a securities
                    exchange or over-the-counter market, to use its best efforts
                    to cause such Registrable Securities to be listed on such
                    securities exchange or over-the-counter market as the
                    managing or lead managing underwriter shall reasonably
                    request;

               (xii)use its best efforts to provide a transfer agent and
                    registrar for such Registrable Securities not later than the
                    effective date of such registration statement;

               (xiii)if requested by the managing or lead managing underwriter
                    for any underwritten offering that includes any Registrable
                    Securities, enter into an underwriting agreement with the
                    underwriters of such offering, such agreement to contain
                    such representations and warranties by the Company and such
                    other terms and conditions as are contained in underwriting
                    agreements customarily used by such managing or lead
                    managing underwriter with such changes as the parties
                    thereto shall agree, including, without limitation,
                    provisions relating to indemnification and contribution in
                    lieu thereof;

               (xiv)cooperate with the Purchaser, and the Underwriters'
                    Representative for such offering in the marketing, and
                    customary selling efforts relating to the Registrable
                    Securities, including participating for a period not in
                    excess of five (5) business days per Demand Registration in
                    customary "road show" presentations as may be reasonably
                    requested by the Underwriters' Representative;

               (xv)promptly  notify the  Purchaser  of any stop order  issued or
                    threatened to be issued by the SEC in  connection  therewith

                                       20
<PAGE>

                    and take all  reasonable  actions  required  to prevent  the
                    entry of such stop order or to remove it if entered; and

               (xvi)make available for inspection by the Purchaser, any
                    underwriter participating in such offering and the
                    representatives of the Purchaser and such underwriter all
                    financial and other information as shall be reasonably
                    requested by them, and provide the Purchaser, any
                    underwriter participating in such offering and the
                    representatives of the Purchaser and such underwriter the
                    reasonable opportunity to discuss the business affairs of
                    the Company with its principal executives and independent
                    public accountants who have certified the audited financial
                    statements included in such registration statement, in each
                    case all as necessary to enable them to exercise their due
                    diligence responsibilities under the Securities Act;
                    provided, however, that information that the Company
                    determines, in its reasonable and good faith judgment, to be
                    confidential and which the Company advises such Person in
                    writing, is confidential shall not be disclosed unless such
                    Person signs a confidentiality agreement reasonably
                    satisfactory to the Company.

     (d)  Termination of Sales. During the effective period of any registration
          statement covering Registrable Securities, the Purchaser will not
          effect sales thereof after receipt of telegraphic or written notice
          from the Company to suspend sales to permit the Company to correct or
          update a registration statement or prospectus until the Purchaser
          receives written notice from the Company that the registration
          statement or prospectus has been corrected or updated. At the end of
          the effective period of any registration statement covering any
          Registrable Securities, the Purchaser shall discontinue sales of
          shares pursuant to such registration statement upon receipt of notice
          from the Company of its intention to remove from registration the
          shares covered by such registration statement which remain unsold, and
          the Purchaser shall notify the Company of the number of shares
          registered which remain unsold immediately upon receipt of such notice
          from the Company.

     (e)  Expenses of Registration. With respect to the Demand Registrations
          effected pursuant to Subsection (a) hereof, the Company shall bear and
          pay all expenses incurred in connection with any registration, filing,
          or qualification of Registrable Securities with respect to such Demand
          Registration, including all registration, filing and NASD fees, all
          fees and expenses of complying with securities or blue sky laws, all
          word processing, duplicating and printing expenses, messenger and
          delivery expenses, and the reasonable fees and disbursements of
          counsel for the Company, and of the Company's independent public
          accountants, including the expenses of "cold comfort" letters required
          by or incident to such performance and compliance (the "Registration
          Expenses"), but in no event shall the Company bear underwriting

                                       21
<PAGE>
          discounts and commissions relating to Registrable Securities or fees
          and expenses of the Purchaser's counsel (which shall be paid by the
          Purchaser) and provided that the Company shall not be required to pay
          for any expenses of any registration begun pursuant to Subsection (a)
          if the registration is subsequently withdrawn at the request of the
          Purchaser (in which case the Purchaser shall bear such expense), other
          than by reason of failure of the Company to comply with its covenants
          contained herein unless the Purchaser agrees that such withdrawn
          registration shall constitute one of the Demand Registrations under
          Subsection (a) hereof.

     (f)  Indemnification.

          (i)  In any registration in which the Purchaser participates, the
               Company will indemnify the Purchaser and each underwriter and
               selling broker for the Purchaser and each officer and director of
               the Purchaser and each person, if any, who controls the Purchaser
               or any such underwriter or broker within the meaning of Section
               15 of the Securities Act, against all claims, losses, damages,
               expenses and liabilities (or actions in respect thereof),
               including any of the foregoing incurred in settlement of any
               litigation, commenced or threatened, arising out of or based on
               any untrue statement (or alleged untrue statement) of a material
               fact contained in any preliminary prospectus or amended
               preliminary prospectus or in the prospectus, offering circular or
               other document incident to any registration, qualification or
               compliance (or in any related registration statement,
               notification or the like) as such may be amended or supplemented
               from time to time or any omission (or alleged omission) to state
               therein a material fact required to be stated therein or
               necessary to make the statements therein, in light of the
               circumstances under which they were made, not misleading, or any
               violation by the Company of the Securities Act or any rule or
               regulation promulgated thereunder or any state securities laws or
               regulations applicable to the Company in connection with any such
               registration, qualification or compliance, and will reimburse the
               Purchaser and each such underwriter, broker and controlling
               person for any legal and any other expenses reasonably incurred,
               as such expenses are incurred, in connection with investigating
               or defending any such claim, loss, damage, liability or action;
               provided, however, that the Company will not be liable in any
               such case to the extent that any such claim, loss, damage or
               liability arises out of or is based on any untrue statement or
               omission made in reliance upon and in conformity with written
               information furnished to the Company in an instrument executed by
               the Purchaser or the underwriter for the Purchaser or any
               representative of the Purchaser or the underwriter for the
               Purchaser and stated to be specifically for use therein.

                                       22
<PAGE>

          (ii) In any registration in which the Purchaser participates, the
               Purchaser will indemnify the Company and its officers and
               directors, each person, if any, who controls any thereof within
               the meaning of Section 15 of the Securities Act and their
               respective successors and any underwriter for the Company for
               such registration and each other security holder participating in
               the registration against all claims, losses, damages, expenses
               and liabilities (or actions in respect thereof) arising out of or
               based on any untrue statement (or alleged untrue statement) of a
               material fact contained in any preliminary prospectus or amended
               prospectus or in the prospectus, offering circular or other
               document incident to any registration statement, qualification or
               compliance (or in any related registration statement,
               notification or the like) as such may be amended or supplemented
               from time to time or any omission (or alleged omission) to state
               therein a material fact required to be stated therein or
               necessary to make the statements therein, in light of the
               circumstances under which they were made, not misleading, and
               will reimburse the Company and each other person indemnified
               pursuant to this paragraph (ii) for any legal and any other
               expenses reasonably incurred, as such expenses are incurred, in
               connection with investigating or defending any such claim, loss,
               damage, liability or action; provided, however, that this
               paragraph (ii) shall apply only if (and only to the extent that)
               such statement or omission was made in reliance upon and in
               conformity with written information (including, without
               limitation, written negative responses to inquiries) furnished to
               the Company specifically for inclusion in the prospectus,
               offering circular, or other document incident to the registration
               statement by an instrument duly executed by the Purchaser or its
               representatives, and as to which the Company had no actual
               knowledge. Notwithstanding the foregoing, the liability of the
               Purchaser under this paragraph (ii) shall be limited to an amount
               equal to the aggregate proceeds received by the Purchaser from
               the sale of its shares in such registration, unless such
               liability arises out of or is based on willful misconduct by the
               Purchaser.

          (iii)Each party entitled to indemnification hereunder (the
               "Indemnified Party") shall give notice to the party required to
               provide indemnification (the "Indemnifying Party") promptly after
               such Indemnified Party has actual knowledge of any claim as to
               which indemnity may be sought, and shall permit the Indemnifying
               Party (at its expense) to assume the defense of any claim or any
               litigation resulting therefrom, provided that counsel for the
               Indemnifying Party, who shall conduct the defense of such claim
               or litigation, shall be satisfactory to the Indemnified Party,
               and the Indemnified Party may participate in such defense at such
               party's expense, and provided, further, that the omission by any
               Indemnified Party to give notice as provided herein shall not
               relieve the Indemnifying Party of its obligations under this

                                       23
<PAGE>

               Section 7.6(f) except to the extent that the omission results
               from a failure of actual notice to the Indemnifying Party by the
               Indemnified Party and such Indemnifying Party is damaged solely
               as a result of the failure to give notice; and provided further,
               however, that the Indemnifying Party shall not be entitled to
               assume the defense for matters as to which there is, in the
               opinion of counsel to the Indemnified Party, a conflict of
               interest or separate and different defenses. No Indemnifying
               Party, in the defense of any such claim or litigation, shall,
               except with the consent of each Indemnified Party, consent to
               entry of any judgment or enter into any settlement which does not
               include as an unconditional term thereof the giving by the
               claimant or plaintiff to such Indemnified Party of a release from
               all liability in respect of such claim or litigation.

          (iv) The payments with respect to any indemnity required by this
               Section 7.6(f) shall be made by periodic payments during the
               course of the investigation or defense, as and when bills are
               received or expenses incurred, upon submission of supporting
               invoices or other claims for payment, including any calculations
               necessary to pro-rate any amounts payable pursuant to the
               indemnity.

     (g)  Contribution.

          (i)  If the indemnification provided for in Section 7.6(f) hereof is
               unavailable to the Indemnified Parties in respect of any losses,
               claims, damages, liabilities or expenses (or actions in respect
               thereof) referred to therein, then each such Indemnifying Party,
               in lieu of indemnifying such Indemnified Party, shall contribute
               to the amount paid or payable by such Indemnified Party as a
               result of such losses, claims, damages, liabilities or expenses
               (or actions in respect thereof) in such proportion as is
               appropriate to reflect the relative fault of the Indemnifying
               Party on the one hand and the Indemnified Party on the other in
               connection with the statement or omission which resulted in such
               losses, claims, damages, liabilities or expenses (or actions in
               respect thereof), as well as any other relevant equitable
               considerations. The relative fault shall be determined by
               reference to, among other things, whether the untrue statement
               (or alleged untrue statement) of a material fact or the omission
               (or alleged omission) to state a material fact relates to
               information supplied by the Indemnifying Party or the Indemnified
               Party and the parties' relative intent, knowledge, access to
               information and opportunity to correct or prevent such statement
               or omission. The Company and each Purchaser agree that it would
               not be just and equitable if contribution pursuant to this

                                       24
<PAGE>
               Section 7.6(g) were determined by pro rata allocation or by any
               other method of allocation which does not take account of the
               equitable considerations referred to above. The amount paid or
               payable by an Indemnified Party as a result of the losses,
               claims, damages, liabilities or expenses (or actions in respect
               thereof) referred to above in this Section 7.6(g) or in Section
               7.6(f) shall be deemed to include any legal or other expenses
               reasonably incurred by such Indemnified Party in connection with
               investigating or defending any such action or claim.

          (ii) Notwithstanding anything to the contrary contained herein, the
               obligation of the Purchaser to contribute pursuant to this
               Section 7.6(g ) is several and not joint and the Purchaser shall
               not be required to contribute any amount in excess of the amount
               by which the total price at which the shares of the Purchaser
               were offered to the public exceeds the amount of any damages
               which the Purchaser has otherwise been required to pay by reason
               of such untrue statement (or alleged untrue statement) or
               omission (or alleged omission).

          (iii)No person guilty of fraudulent misrepresentation (within the
               meaning of Section 11 (f) of the Securities Act) shall be
               entitled to contribution from any person who was not guilty of
               such fraudulent misrepresentation.

          (h)  Rule 144 Requirements. The Company shall make whatever filings
               with the SEC or otherwise and undertake to make publicly
               available and available to the Purchaser, pursuant to Rule 144 of
               the SEC under the Securities Act (or any successor rule or
               regulation), such information as is necessary to enable the
               Purchaser to make sales of Registrable Securities pursuant to
               that Rule. The Company shall furnish to the Purchaser, upon
               request, a written statement executed by the Company as to the
               steps it has taken to comply with the current public information
               requirements of Rule 144.

          (i)  Survival and Termination of Rights. The agreements and covenants
               contained in this Section 7.6 shall be continuing and shall
               survive any Transfer of the Shares to any member of the Purchaser
               Group. However, the rights of the Purchaser to cause the Company
               to register its Registrable Securities hereunder shall terminate
               with respect to such securities and such securities shall no
               longer be deemed to be Registrable Securities following a bona
               fide, firmly underwritten public offering of such Registrable
               Securities under the Securities Act or at such time as the
               Purchaser is able to dispose of all of its Registrable Securities
               in one three-month period pursuant to the provisions of Rule 144.

                                       25
<PAGE>

          (j)  Sales During Registration. If so requested by the Underwriters'
               Representative in connection with an offering of any Registrable
               Securities, the Company shall agree not to effect any sale or
               distribution of shares of Common Stock during the 7-day period
               prior to, and during the 90-day period beginning on, the date
               such Demand Registration Statement is declared effective under
               the Securities Act by the SEC. The Company agrees to use its
               commercially reasonable efforts to obtain from each holder of
               restricted securities of the Company the same as or similar to
               those being registered by the Company on behalf of the Purchaser,
               or any restricted securities convertible into or exchangeable or
               exercisable for any of its securities, an agreement not to effect
               any sale or distribution of such securities (other than
               securities purchased in a public offering) during any period
               referred to in this paragraph, except as part of any such Demand
               Registration Statement if permitted. Without limiting the
               foregoing, if the Company grants any Person (other than a holder
               of Registrable Securities) any rights to demand or participate in
               a Registration, the Company agrees that the agreement with
               respect thereto shall include such Person's agreement as
               contemplated by the previous sentence.

          (k)  Granting of Registration Rights. Notwithstanding anything to the
               contrary contained herein, the Company shall not, without the
               prior written consent of the Purchaser Group, grant any rights to
               any Persons to register any shares of capital stock or other
               securities of the Company if such rights could reasonably be
               expected to be superior to or be on parity with, the rights of
               the holders of Registrable Securities granted pursuant to this
               Agreement upon the exercise of Demand Registration rights
               contained herein.

     7.7 No Restrictions. The Company will not, prior to January 1, 2003, make
or recommend to its shareholders any amendment to the Company's Articles of
Incorporation or Bylaws which would impose limitations on the legal rights of
the Purchaser Group as Company shareholders (other than those imposed pursuant
to this Agreement) based upon the size of security holding permitted under this
Agreement, the business in which a security holder is engaged or other
considerations applicable to the Purchaser Group and not to security holders
generally.

     7.8 Share Listing. As soon as practicable, the Company shall take
reasonable action as is required to cause the Shares to be listed for trading on
The NASDAQ Stock Market ("NASDAQ").

     7.9 Preemptive Rights. The Company shall, prior to any issuance by the
Company of any of its securities (other than debt securities with no equity
feature), offer to the Purchaser by written notice the right, for a period of
thirty (30) days, to purchase the Purchaser's Pro Rata Share (as such term is
defined below) of such securities for cash at a price equal to the price or
other consideration for which such securities are to be issued; provided,
however, that the preemptive rights of the Purchaser pursuant to this Section
7.9 shall not apply to securities issued (A) upon conversion of any shares of

                                       26
<PAGE>

the Preferred Stock outstanding on the Closing Date (B) as a stock dividend or
upon any subdivision of shares of Common Stock, provided that the securities
issued pursuant to such stock dividend or subdivision are limited to additional
shares of Common Stock, (C) pursuant to options or other rights which are issued
pursuant to the 1994 or 1995 Stock Option Plans or any similar plan approved by
the Board of Directors of the Company and the holders of Voting Securities
within one year of such Board approval or (D) in payment of dividend obligations
on the Preferred Stock. The Company's written notice to the Purchaser shall
describe the securities proposed to be issued by the Company and specify the
number, price and payment terms. The Purchaser may accept the Company's offer as
to the full number of securities offered to it or any lesser number by written
notice thereof given by it to the Company prior to the expiration of the
aforesaid thirty (30) day period, in which event the Company shall promptly sell
and the Purchaser shall buy, upon the terms specified, the number of securities
agreed to be purchased by the Purchaser. For purposes of this Section 7.9, the
Purchaser's "Pro Rata Share" of offered securities shall be determined by
multiplying the full number of securities offered by the Company by a fraction,
the numerator of which shall be the number of shares of Common Stock held by the
Purchaser as of the date of the Company's notice of offer and the denominator of
which shall be the aggregate number of shares of Common Stock (calculated as
aforesaid) held on such date by all holders of capital stock of the Company. The
Company shall be free at any time following expiration of the thirty-day offer
period and prior to ninety (90) days after the expiration of the thirty day
offer period, to offer and sell to any third party or parties the number of the
securities not agreed by the Purchaser to be purchased by it, all at a price and
on payment terms no less favorable to the Company than those specified in such
notice of offer to the Purchaser. However, if such third party sale or sales are
not consummated within such ninety (90) day period, the Company shall not sell
such securities as shall not have been purchased within such period without
again complying with this Section 7.9.

     7.10 Share Buyback. In the event the Company or any of its Affiliates shall
repurchase shares of Voting Securities, including any redemption of the
Preferred Stock, the Company shall offer to purchase such number of shares of
Voting Securities as would be necessary on a pro rata basis to ensure that
Purchaser as an "other entity" does not exceed 20% Beneficial Ownership of the
Company's "Voting Shares" within the meaning of the North Carolina Shareholder
Protection Act. The purchase price per share of such Voting Securities shall be
the Average Market Price as of the date of the Purchaser's acceptance of the
offer to purchase.

     Section 8. Covenants of the Purchaser

     Until the termination of this Agreement in accordance with Section 11.1
hereof or of the particular covenant, as the case may be:

          8.1  Limitation on Ownership of Voting Securities.

          (a)  The Purchaser shall not (and shall not permit any Subsidiary to
               directly or indirectly) acquire Beneficial Ownership of any
               Voting Securities, or any other rights to acquire Voting
               Securities (except, in any case, by way of stock dividends or
               other distributions or offerings made available to holders of any
               Voting Securities generally) or authorize or make a tender,

                                       27
<PAGE>

               exchange or other offer, without the written consent of the
               Company, if the effect of such acquisition would be to increase
               the Voting Power of all Voting Securities then owned by the
               Purchaser or which it has a right to acquire to more than 20 % of
               the Total Voting Power of the Company.

          (b)  Nothing in Section 8.1 (a) above shall prevent the Purchaser from
               acquiring Voting Securities without regard to the limitation set
               forth therein (i) if an offer is made (as evidenced by the filing
               with the SEC of a Schedule 14D-1) by another person or group
               (which is not controlled by or under common control with the
               Purchaser) to purchase or exchange for cash or other
               consideration any Voting Securities which, if successful, would
               result in such Person or group owning or having the right to
               acquire more than 20 % of the Total Voting Power of the Company
               then in effect and such offer is not withdrawn, terminated or
               enjoined prior to the Purchaser acquiring Voting Securities in
               response thereto, or (ii) if it is publicly disclosed or the
               Purchaser otherwise learns that another Person or group has
               acquired any Voting Securities (or rights to acquire Voting
               Securities) which results in such Person or group owning or
               having the right to acquire Voting Securities that would result
               in a Total Ownership Percentage of not less than 20 % or (iii) a
               Proposal for a Change in Control Transaction is made to the
               Company other than by the Purchaser.

     8.2 Voting. The Purchaser shall vote all shares of Voting Securities which
it Beneficially Owns, at any shareholder meeting or in connection with any
action by written consent at or in which such shares of Voting Securities are
entitled to vote, (a) in favor of the slate of nominees (including any Purchaser
Nominee to be included in such slate in accordance with Section 7.3) proposed by
the Board, provided that the Company has complied with Section 7.3, and (b) on
any non-Company sponsored shareholder proposal which is opposed by the Company,
in accordance with the direction of the Board as to how such shares of Voting
Securities shall be voted. On all other matters the Purchaser shall be entitled
to vote the Voting Securities held by it in its discretion. The Purchaser, as
the holder of shares of Voting Securities, shall be present, in person or by
proxy, at all meetings of shareholders of the Company so that all shares of
Voting Securities beneficially owned by the Purchaser may be counted for the
purposes of determining the presence of a quorum at such meetings.

     8.3 Voting Trust, etc. The Purchaser shall not deposit any shares of Voting
Securities in a voting trust or, except as otherwise provided herein, subject
any Voting Securities to any arrangement or agreement with respect to the voting
of such Voting Securities.

     8.4 Solicitation of Proxies. The Purchaser shall not solicit proxies with
respect to any Voting Securities, and shall not become a "participant" in any
"election contest" (as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act relating to the election of directors of the Company).

     8.5 Acts in Concert with Others. The Purchaser Group shall not join a
partnership, limited partnership, syndicate or other group, or otherwise act in
concert with any third person, for the purpose of acquiring, holding, or
disposing of Voting Securities.

                                       28
<PAGE>

     8.6 Restrictions on Transfer of Voting Securities.

          (a)  The Purchaser shall not, directly or indirectly, sell or Transfer
               any Voting Securities for a period of one year commencing with
               the Closing Date.

          (b)  Subject to Section 8.6(a),  the Purchaser shall not,  directly or
               indirectly, sell or Transfer any Voting Securities, except

               (i)  to the  Company  or any  person  or  group  approved  by the
                    Company;

               (ii) to an Affiliate of the Purchaser, as long as such Affiliate
                    agrees to hold such Voting Securities subject to all the
                    provisions of this Agreement, including this Section 8.6,
                    and agrees to Transfer such Voting Securities to the
                    Purchaser or another Affiliate of the Purchaser if it ceases
                    to be an Affiliate of the Purchaser;

               (iii)pursuant to Rule 144 under the Securities Act (but only to
                    the extent the sale or Transfer of Voting Securities at any
                    time is in compliance with the volume limitations of
                    paragraph (e) thereunder);

               (iv) pursuant to an effective  registration  statement  under the
                    Securities Act;

               (v)  subject to the Company's right of first refusal as set forth
                    in Section 9.1 hereof, in transactions not otherwise
                    described in this Section 9.1(b) as long as such
                    transactions do not, directly or indirectly, individually or
                    in the aggregate, result, to the best knowledge of the
                    Purchaser, after reasonable inquiry, in any single person or
                    group owning or having the right to acquire Voting
                    Securities representing 5% or more of the Total Voting Power
                    of the Company then in effect;

               (vi) pursuant to a bona fide pledge of such Voting Securities to
                    an institutional lender to secure a loan, guarantee or other
                    financial support, provided that such lender agrees to hold
                    such Voting Securities subject to all provisions of this
                    Agreement and any sale or disposition by such lender of such
                    pledged Voting Securities shall be subject to the
                    limitations of this Section 8.6; or

               (vii)pursuant to a pro rata dividend to the  stockholders  of the
                    Purchaser.

     (c)  Notwithstanding Section 8.6(a), Purchaser may, directly or indirectly,
          sell or Transfer any Voting Securities:

          (i)  in response  to (A) an offer to purchase or exchange  for cash or
               other consideration any Voting Securities (I) which is made by or

                                       29
<PAGE>
               on behalf of the Company, or (II) which is made by another person
               or group and is either recommended to the shareholders of the
               Company by the Board of Directors or not opposed by the Board of
               Directors of the Company within the time such Board is required,
               pursuant to regulations under the Exchange Act, to advise the
               Company's shareholders of such Board's position on such offer, or
               (III) in the case of a merger or other business combination
               transaction, which has been approved by the shareholders of the
               Company (including approval without a meeting pursuant to the
               short-form merger provisions of the North Carolina Business
               Corporation Act) in a manner so as to be legally binding on all
               shareholders of the Company and so as to require the disposition
               by such shareholders of their shares pursuant to such merger or
               other business combination transaction (without regard to this
               Agreement) or (B) subject to the Company's rights of first
               refusal as set forth in Section 9.1, any other offer made by
               another person or group to purchase or exchange for cash or other
               consideration any Voting Securities which, if successful, would
               result in such person or group owning or having the right to
               acquire Voting Securities representing more than 50 % of the
               Total Voting Power of the Company then in effect;

          (ii) in the event of a merger or consolidation in which the holders of
               Voting Securities of the Company prior to the merger or
               consolidation cease to hold at least 51% of the voting securities
               of the surviving entity; or

          (iii) pursuant to a plan of liquidation of the Company.

     Any shares permitted to be sold hereunder shall be free and clear of the
restrictions contained in this Agreement.

     8.7 Non-Disclosure.

          (a)  During the duration of this Agreement and for a period of five
               (5) years thereafter, neither party shall disclose to third
               parties, or use for its benefit, in whole or in part, any
               Proprietary Information received from other party, except to the
               extent required to comply with the Food, Drug and Cosmetic Act
               (21 U.S.C. ss.ss. 301 et seq.) and the regulations promulgated
               thereunder and all foreign equivalents thereof or other laws.
               Each party shall take all reasonable steps to minimize the risk
               of disclosure of Proprietary Information, including, without
               limitation:

               (i)  ensuring that only its employees whose duties require them
                    to possess such information have access thereto; and

                                       30
<PAGE>

               (ii) exercising at least the same degree of care that it uses for
                    its own Proprietary Information.

          (b)  Duties Upon Termination. Except as otherwise permitted under this
               Agreement, upon request by the disclosing party after expiration
               or termination of this Agreement, the other party shall either
               return all of such disclosing party's Proprietary Information
               (including data, memoranda, drawings and other writings and tapes
               and all copies thereof) received or prepared by it or destroy the
               same, and in any event shall make no further use of such
               Proprietary Information at any time provided, however, that
               counsel for the receiving party may keep one copy of the
               Proprietary Information for purposes of ascertaining the
               receiving party's obligations pursuant to this Section 8.7.

          (c)  Use of Proprietary Information. During the duration of this
               Agreement and for a period of five (5) years thereafter, neither
               party shall use the other party's Proprietary Information for any
               purposes, except to perform its obligations hereunder. In no
               event shall the Purchaser use any Proprietary Information for
               commercial purposes subsequent to the termination of this
               Agreement.

          (d)  Injunctive Relief. Each party acknowledges that the other party
               would not have an adequate remedy at law for breach of any of the
               covenants contained in this Section 8.7 and hereby consents to
               the enforcement of same by the other party by means of temporary
               or permanent injunction issued by any court having jurisdiction
               thereof and further agrees that the other party shall be entitled
               to assert any claim it may have for damages resulting from the
               breach of such covenants in addition to seeking injunctive or
               other relief. The provisions of this Agreement relating to
               Proprietary Information shall supercede any prior agreements
               relating to Proprietary Information between the Purchaser and the
               Company.

     8.8 Company Right of Repurchase. If at any time there is a Change in
Control of the Purchaser involving another entity having any operations related
to rapid coagulation monitoring systems, then the Company shall have the right
to purchase all, but not a part of, the Voting Securities then Beneficially
Owned by the Purchaser and its Subsidiaries upon or prior to the effective date
of the Change in Control of the Purchaser. The purchase price per share of such
Voting Securities shall be the Average Market Price as of the date of the
Company's exercise of its right to repurchase.

     8.9 Acquisition of Stock. The Purchaser shall advise management of the
Company as to the Purchaser's acquisition of any additional shares of Voting
Securities, or rights thereto, in writing within 10 calendar days following any
such acquisition. All of the Purchaser's purchases of Voting Securities shall be
in compliance with applicable laws and regulations and the provisions of this
Agreement.

                                       31
<PAGE>

     Section 9. Company Right of First Refusal

     Until the termination of this Agreement in accordance with Section 11.1
hereof or of the particular covenant:

     9.1 Right of First Refusal. Prior to making any sale or Transfer of Voting
Securities of the Company pursuant to Section 8.6(a)(v), the Purchaser shall
give the Company the opportunity to purchase such Voting Securities in the
following manner:

          (a)  The Purchaser shall give notice (the "Transfer Notice") to the
               Company in writing of such intention specifying the approximate
               number of the proposed purchasers or transferees, the amount of
               Voting Securities proposed to be sold or transferred, the
               proposed price per share therefor (the "Transfer Price") and the
               other material terms upon which such disposition is proposed to
               be made.

          (b)  The Company shall have the right, exercisable by written notice
               given by the Company to the Purchaser within 30 days after
               receipt of such Transfer Notice, to purchase all but not part of
               the Voting Securities specified in such Transfer Notice for cash
               per share equal to the Transfer Price.

          (c)  If the Company exercises its right of first refusal hereunder,
               the closing of the purchase of the Voting Securities with respect
               to which such right has been exercised shall take place within 60
               calendar days after the Company receives notice, which period of
               time shall be extended if necessary in order to comply with any
               applicable laws and regulations. Upon exercise of its right of
               first refusal, the Company and the Purchaser shall be legally
               obligated to consummate the purchase contemplated thereby and
               shall use their best efforts to secure any approvals required in
               connection therewith.

          (d)  If the Company does not exercise its right of first refusal
               hereunder within the time specified for such exercise, the
               Purchaser shall be free, during the period of 90 calendar days
               following the expiration of such time for exercise, to sell the
               Voting Securities specified in such Transfer Notice and if no
               sale occurs within such time period, the Voting Securities shall
               again be subject to the provisions of this Section 9.1. The
               Purchaser's transferee shall acquire such Voting Securities free
               from any of the provisions of this Agreement; however, such
               Voting Securities shall be subject to any restrictions imposed
               under applicable securities laws.

          (e)  Notwithstanding anything to the contrary contained in this
               Section 9.1, if Purchaser intends to sell or Transfer any Voting
               Securities of the Company pursuant to Section 8.6(a)(v), and such
               proposed sale or Transfer is to an institutional purchaser
               approved by the Company at or above the Average Market Price,
               then the Company must exercise its right of first refusal, if at
               all, within ten (10) business days of receipt of the Transfer

                                       32
<PAGE>
               Notice, and if not, the proposed Transfer shall thereafter be
               subject to the provisions of subparagraph 9.1 (d) above.

     9.2 Tender Offer Sale. Prior to making any sale or exchange of Voting
Securities pursuant to Section 8.6(c)(i)(B) in response to a tender or exchange
offer, the Purchaser shall give the Company the opportunity to purchase such
Voting Securities in the following manner:

          (a)  The Purchaser shall give notice (the "Tender Notice") to the
               Company in writing of such intention no later than 10 calendar
               days prior to the latest time by which Voting Securities must be
               tendered in order to be accepted pursuant to such offer or to
               qualify for any proration applicable to such offer (the "Tender
               Date"), specifying the amount of Voting Securities proposed to be
               tendered. For purposes hereof, a tender offer to purchase Voting
               Securities shall be deemed to be an offer at the price specified
               therein, without regard to any provisions thereof with respect to
               proration or conditions to the offeror's obligation to purchase
               (assuming such conditions are not impossible of performance when
               the offer is made, without giving effect to the Company's right
               of first refusal).

          (b)  If the Tender Notice is given, the Company shall have the right,
               exercisable by giving notice to the Purchaser at least two
               business days prior to the Tender Date, to purchase all but not
               part of the Voting Securities specified in the Tender Notice for
               cash. If the Company exercises such right by giving such notice,
               the closing of the purchase of such Voting Securities shall take
               place not later than one business day prior to the Tender Date;
               provided, however, that if the purchase price specified in the
               tender offer includes any property other than cash, the value of
               any property included in the purchase price shall be jointly
               determined by a nationally recognized investment banking firm
               selected by each party or, in the event such firms are unable to
               agree, a third nationally recognized investment banking firm to
               be selected by such two firms.

          (c)  The parties shall use their best efforts to cause any
               determination of the value of any securities included in the
               purchase price to be made within three business days after the
               date of delivery of the Tender Notice. If the firms selected by
               the Purchaser and the Company are unable to agree upon the value
               of any such securities within such three-day period, the firms
               shall promptly select a third firm whose determination shall be
               made promptly and shall be conclusive.

          (d)  The parties shall use their best efforts to cause any
               determination of the value of property other than securities to
               be made within four business days after the date of delivery of
               the Tender Notice. If the firms selected by the Purchaser and the
               Company are unable to agree upon a value within such four-day
               period, the firms shall promptly select a third firm whose
               determination shall be made promptly and shall be conclusive.

                                       33
<PAGE>
          (e)  The purchase price to be paid by the Company pursuant to this
               Section 9.2 shall be (x) if such tender offer is consummated, the
               purchase price that the Purchaser would have received if it had
               tendered the Voting Securities purchased by the Company and all
               such Voting Securities had been purchased in such tender offer,
               including any increases in the price paid by the tender offeror
               after exercise by the Company of its right of first refusal
               hereunder, or (y) if such tender offer is not consummated, the
               highest bona fide price offered pursuant thereto, in each case
               with property, if any, to be valued as aforesaid. Each party
               shall bear the cost of its own investment banking firm and the
               parties shall share the cost of any third firm selected
               hereunder.

          (f)  If the Company does not exercise such right by giving such notice
               or fails to complete the purchase, then the Purchaser shall be
               free to accept the tender offer with respect to which the Tender
               Notice was given.

          (g)  If the Company does not purchase the shares, the Company will
               provide such assurance as the tender offeror shall reasonably
               request to provide the tender offeror with certificates for the
               Purchaser's shares without legends referring to this Agreement.

     9.3 Assignment of Rights. In the event that the Company elects to exercise
a right of first refusal under this Section 9, the Company may specify, prior to
closing such purchase and upon not less than three business days prior notice to
the Purchaser, another person as its designee to purchase the Voting Securities
to which such notice relates. If the Company shall designate another person as
the purchaser pursuant to this Section 9, the giving of notice of acceptance of
the right of first refusal by the Company shall constitute a legally binding
obligation of the Company to complete such purchase if such designee shall fail
to do so.

     Section 10. Definitions

     "Affiliate" of a Person has the meaning set forth in Rule 12b-2 under the
     Exchange Act.

     "Agreement" has the meaning set forth in the recitals hereof.

     "Average Market Price" of any security at any date shall be the average of
the closing prices for a share or other single unit of such security on the 30
consecutive trading days ending on the trading date last preceding the date of
determination of such price on the principal national securities exchange on
which such security is listed, or, if such security is not listed on any
national securities exchange, the average of the closing sales prices for a
share of such security on NASDAQ or, if such closing sales prices shall not be
reported on NASDAQ, the average of the mean between the closing bid and asked
prices of a share of such security in such case as reported by The Wall Street
Journal, or, if such prices shall not be so reported, as the same shall be
reported by the National Quotation Bureau Incorporated, or, in all other cases,
the value as determined by a single nationally recognized investment banking
firm jointly selected by the Company and the Purchaser. For this purpose, the
parties shall use their best efforts to cause any determination of the value to
be made within 10 business days after the date on which the value is to be

                                       34
<PAGE>

measured.  The  determination  by the  investment  banking firm  selected in the
manner set forth above shall be conclusive.

     "Beneficially Own" with respect to any securities means having "beneficial
ownership" of such securities (as determined pursuant to Rule 13d-3 under the
Exchange Act, as in effect on the date hereof, without limitation by the 60-day
provision in paragraph (d)(1)(i) thereof). The terms "Beneficial Ownership" and
"Beneficial Owner" have correlative meanings.

     "Change in Control" means the occurrence of any of the following events:

          (a)  the direct or indirect purchase or acquisition by any Person or
               13D Group (other than an Excluded Person) of Beneficial Ownership
               of Voting Securities or Common Securities of the Company if,
               after giving effect to such acquisition, such Person or 13D Group
               would Beneficially Own Voting Securities or Common Securities
               representing an Equity Percentage of 30% or more on a fully
               diluted basis;

          (b)  the consummation by the Company or any of its Subsidiaries of a
               merger, consolidation or other business combination with any
               Person (other than an Excluded Person) that requires the approval
               of the holders of the Company's capital stock, whether for such
               transaction or the issuance of securities in such transaction, if
               immediately after giving effect to such transaction, the Persons
               who Beneficially Owned Voting Securities or Common Securities
               immediately prior to such transaction Beneficially Own in the
               aggregate Voting Securities or Common Securities (or voting
               securities or common securities in the case of a surviving entity
               other than the Company) representing a Voting Ownership
               Percentage or a Total Ownership Percentage (or voting power or
               common equity ownership of common securities in the case of a
               surviving entity other than the Company) on a fully diluted basis
               of less than 50% immediately after giving effect to such
               transaction;

          (c)  the consummation by the Company of a plan of complete liquidation
               or dissolution of the Company;

          (d)  the sale of all or  substantially  all of the Company's assets to
               any Person (other than an Excluded Person); or

          (e)  the sale or transfer of all or substantially all of the Company's
               rights related to the manufacture and sale of products in the
               Company's Routine Product or Specialty Product division, as such
               terms are defined in the Distribution Agreement, to any Person
               (other than an Excluded Person).

     "Change in Control of the Purchaser" shall mean any of the following: (i) a
merger or consolidation to which the Purchaser is a party if the shareholders of
the Purchaser immediately prior to the effective date of such merger or
consolidation have Beneficial Ownership of voting securities representing less
than 50 % of the Total Voting Power of the surviving corporation following such
merger or consolidation; (ii) an acquisition by any person, entity or group of

                                       35
<PAGE>

direct or indirect Beneficial Ownership of voting securities of the Purchaser
representing 40 % or more of the Total Voting Power of the Purchaser then issued
and outstanding; (iii) a sale of all or substantially all the assets of
Purchaser; (iv) a liquidation of Purchaser; or (v) a change in the composition
of the Board of Directors of the Purchaser such that during any consecutive
24-month period, directors who are members of the Board at the beginning of such
24-month period, or their successors who were elected, nominated or recommended
by at least a majority of the Board of Directors as constituted at the time of
their appointment to the Board, cease to constitute at least a majority of the
Board of Directors.

     "Change in Control Transaction" means a transaction which, if consummated,
would result in a Change in Control.

     "Change in Control Price Per Share" has the meaning set forth in Section
7.4.

     "Closing" has the meaning set forth in Section 2.1.

     "Closing Date" has the meaning set forth in Section 2.1.

     "Common Stock" has the meaning set forth in Section 1.1.

     "Common Securities" means the Common Stock, the Preferred Stock and any
other securities of the Company (excluding non-voting securities (other than
capital stock) issued to directors, officers or employees of the Company as
compensation) to the extent to which such securities by the terms thereof (i)
are not effectively limited in amount as to dividends or amounts payable upon
liquidation of the Company or (ii) are otherwise a substantial equivalent of
Common Stock as to dividends or upon liquidation of the Company or upon
consummation of a merger or other extraordinary transaction in which the
outstanding shares of Common Stock participate.

     "Company" has the meaning set forth in the recitals hereof.

     "Continuously Effective," with respect to a specified registration
statement, shall mean that such registration statement shall not cease to be
effective and available for transfers of Registrable Securities thereunder for
longer than either (i) any ten (10) consecutive business days, or (ii) an
aggregate of fifteen (15) business days during the period specified in the
relevant provision of this Agreement.

     "Current Facility" means the equipment and space used in the operation of
the business prior to the effective date hereof, including the approximately
60,000 square feet of building space leased by the Company, and the surrounding
property leased, controlled, or used by the Company at 5301 Departure Drive,
Raleigh, North Carolina, 27616.

     "Demand Registration" shall have the meaning set forth in Section 7.6(a).

     "Distribution Agreement" has the meaning set forth in Section 7.4.

     "Environment" shall mean soil, surface waters, groundwaters, land, stream
sediments, surface or subsurface strata, indoor or outdoor air, and any
environmental medium.

                                       36
<PAGE>

     "Environmental Condition" shall mean any condition with respect to the
Environment on or off the Facilities, whether or not yet discovered, which could
or does result in any damage, loss, cost, expense, claim, demand, order, or
liability to or against the Company or the Purchaser by any third party
(including, without limitation, any government authority), including, without
limitation, any condition resulting from the operation of the Company's business
and/or the operation of the business of any other property owner or operator in
the vicinity of the Facilities and/or any activity or operation formerly
conducted by any person or entity on or off the Facilities.

     "Environmental Law" shall mean any statute,  rule,  regulation,  ordinance,
decree,  or order of any  Governmental  Entity or court,  including  common law,
relating to (i) the control of any potential pollutant, pathogen, or waste; (ii)
protection of the  Environment;  or (iii)  protection of public or  occupational
health and safety,  whether any of the foregoing are enacted or  promulgated  at
the federal,  state,  or local level,  including  but not limited to, the terms,
conditions,  restrictions,  and obligations imposed by any Environmental  Permit
(as defined  below).  The term  "Environmental  Law" shall  include,  but not be
limited to, the following statutes and regulations promulgated  thereunder:  the
Clean Air Act, 42 U.S.C.  ss. 7401 et seq.,  the Clean Water Act, 33 U.S.C.  ss.
1251 et seq., the Superfund  Amendments and  Reauthorization  Act, 42 U.S.C. ss.
1101 et seq.("SARA"),  the Toxic  Substances  Control Act, 15 U.S.C. ss. 2601 et
seq., the Safe Drinking Water Act, 42 U.S.C. ss. 300f et seq., the Comprehensive
Environmental  Response,  Compensation,  and Liability Act  ("CERCLA"),  and any
state, county, or local statues, regulations, or ordinances similar thereto.

     "Environmental Permits" has the meaning set forth in Section 3.9(b).

     "Equity Percentage" means, with respect to any Common Securities calculated
at any particular point in time, the ratio, expressed as a percentage of (a) the
total number of shares of Common Stock included in, or issuable upon conversion
of (whether or not then convertible), or otherwise constituting the economic
equivalent of, such Common Securities over (b) the total number of shares of
Common Stock then outstanding and the number of shares of Common Stock issuable
upon conversion of (whether or not then convertible), or otherwise constituting
the economic equivalent of, all outstanding Common Securities.

     "Exchange Act" has the meaning set forth in Section 3.5.

     "Excluded Person" shall mean (i) any member of the Purchaser Group, (ii)
any wholly owned Subsidiary of the Company, or (iii) any underwriter temporarily
holding Common Securities in connection with a public offering of such
securities.

     "Facilities" means either the Current Facility or the New Facility or both
of them.

     "Governmental Entity" means any government or any agency, bureau, board,
commission, court, department, political subdivision, tribunal, or other
instrumentality of any government (including any regulatory or administrative
agency), whether federal, state or local, domestic or foreign.

     "Group" shall have the meaning comprehended by Section 13(d)(3) of the
Exchange Act and the rules and regulations promulgated thereunder.

                                       37
<PAGE>
     "Inclusion Notice" has the meaning set forth in Section 7.6(a).

     "Indemnified Party" has the meaning set forth in Section 7.6(f).

     "Indemnifying Party" has the meaning set forth in Section 7.6(f).

     "Intellectual Property" means any and all, whether domestic or foreign,
patents, patent applications, patent rights, trade secrets, confidential
business information, formulae, processes, copyrights, software methodologies,
claims of infringement against third parties, licenses (other than software or
similar licenses commercially available), permits, license rights, contract
rights with employees, consultants and third parties, joint venture rights or
rights under any contract or agreement involving the license or transfer of
technology (whether to or from the Company or its Subsidiaries with third
parties), rights of priority, goodwill, Trademarks, trademark rights, works of
authorships, inventions and discoveries, and other such rights generally
classified as intangible, intellectual property assets in accordance with
generally accepted accounting principles; provided that when used with respect
to the Company or its Subsidiaries, the term refers to Intellectual Property
used or held for use in or required for use in connection with the business of
the Company or its Subsidiaries as now operated or as proposed to be operated by
the Company or its Subsidiaries in the future.

     "Intellectual Property Agreements" means all agreements, arrangements or
understandings (whether written or oral) pursuant to which the Company or any
Subsidiary has either purchased, sold, licensed, secured or disposed of rights
in Intellectual Property from or to another Person or agreed to do any of the
foregoing (other than licenses to commercially available off-the-shelf computer
software acquired or entered into by the Company or any Subsidiary in the
ordinary course of business).

     "Material Adverse Effect" means any material adverse effect on the
financial condition, business or operations of the Company and its Subsidiaries
taken as a whole.

     "NASD" has the meaning set forth in Section 3.6.

     "NASDAQ" has the meaning set forth in Section 7.8.

     "New Facility" means the equipment and space to which the Company has moved
the operation of the business, the approximately 60,000 square feet of building
space leased by the Company, and the surrounding property leased, controlled or
used by the Company at 9401 Globe Center, Morrisville, North Carolina 27560.

     "Order" means any judgment, decree, order, writ, award, ruling,
stipulation, injunction or determination of an arbitrator or court or other
Governmental Entity.

     "Original Shares" means the 600,000 shares of common stock of the Company
previously acquired by Chiron Diagnostics Corporation (predecessor to the
Company) as a result of the Company's exchange offer in 1998.

     "Participating Holders" has the meaning set forth in Section 7.6(a).

                                       38
<PAGE>

     "Permit" shall mean any permit, license, approval, consent, or
authorization issued by a federal, state, or local Governmental Entity pursuant
to Environmental Law, and any term, condition, restriction, or obligation
imposed thereby.

     "Person" means any individual, corporation, company, association,
partnership, joint venture, limited liability company, trust or unincorporated
organization, group (within the meaning of Rule 13d-5 under the Exchange Act) or
a government or any agency or political subdivision thereof (whether foreign,
federal, state, local or otherwise).

     "Pre-Approved Persons" has the meaning set forth in Section 7.3(b).

     "Preferred Stock" has the meaning set forth in Section 3.2.

     "Pro Rata Share" has the meaning set forth in Section 7.9.

     "Proposal" means any inquiry, indication of interest, proposal or offer
made to the Company or publicly disclosed by any Person relating to any Change
in Control Transaction.

     "Proprietary Information" means: all financial information, marketing
information, sales information, customer information, raw materials, know-how,
drawings, compositions, manufacturing and other specifications, analytical
procedures, flow sheets, reports, market studies, preclinical and clinical test
results, FDA and other regulatory submissions, software and other medical,
research, technical, and marketing information disclosed, directly or
indirectly, by either party or any of its Affiliates to the other party,
retroactively to December 17, 1997, in writing, marked "Confidential",
"Proprietary" or the like, or, if transmitted orally or by observation of
equipment or other material, confirmed by a writing so marked within sixty (60)
days of its disclosure, or which by its nature is information normally intended
to be held in confidence, unless the same: (a) is or becomes public knowledge
through no fault of the receiving party; (b) is legally in the possession of the
receiving party prior to receipt from the disclosing party; (c) is subsequently
and lawfully received from a third party without its breach of any nondisclosure
obligation; (d) is independently developed by employees of the receiving party
who have had no access to the Proprietary Information of the disclosing party;
or (e) is required to be disclosed by order of a court or administrative agency,
provided that in such event the party that is subject to the required disclosure
furnish the other party with adequate notice. Notwithstanding the immediately
preceding sentence, the Company agrees that all new materials and other
information which the Purchaser or its predecessor provided to the Company prior
to December 17, 1997, shall be treated as Proprietary Information.

     "Purchase Price Per Share" has the meaning set forth in Section 1.2.

     "Purchaser" has the meaning set forth in the recitals hereof.

     "Purchaser Group" shall mean (a) the Purchaser, (b) any Subsidiary of the
Purchaser, (c) any Affiliate of the Purchaser controlled by the Purchaser such
that the Purchaser has the legal or contractual power (including, without
limitation, through negative control or through the Purchaser's designees or
representatives on the board of directors or other governing body of such
Affiliate or under the articles of incorporation or other constituent documents
of such Affiliate or as a result of the voting rights of any securities or other

                                       39
<PAGE>

instruments issued by such Affiliate) to cause such Affiliate to comply with the
terms of this Agreement applicable to the Purchaser, and (d) any Person with
whom the Purchaser or any Person included in the foregoing clauses (b) or (c) is
part of a 13D Group.

     "Purchaser Nominee" has the meaning set forth in Section 7.3(a).

     "Register," "registered," and "registration" shall refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering by the SEC
of effectiveness of such registration statement or document.

     "Registrable Securities" shall mean (A) the Shares, (B) the Original Shares
and (C) any shares of Common Stock issued as (or issuable upon the conversion of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to or in replacement of the Common Stock described in
clauses (A), (B) and (C) above. In the event that the Common Stock is converted
into any other security pursuant to any merger, consolidation, recapitalization,
liquidation or other similar transaction, and if any securities are distributed
in respect of any Registrable Securities, then all of such securities shall be
considered Registrable Securities for purposes of this Agreement.

     "Registration Expenses" shall have the meaning set forth in Section 7.6(e).

     "Regulatory Approvals" means any and all certificates, permits, licenses,
franchises, concessions, grants, consents, approvals, orders, registrations,
authorizations, waivers, variances or clearance from a Governmental Entity.

     "Release" shall mean any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the Environment.

     "Securities Act" has the meaning set forth in Section 2.2.

     "SEC" has the meaning set forth in Section 3.5.

     "SEC Reports" means (i) the Company's Annual Report on Form 10-K for the
fiscal years ended December, 2000, 1999 and 1998; and (ii) each registration
statement, report on Form 8-K and Form 8-A, proxy statement, information
statement or other document, report or statement filed by the Company or any of
its Subsidiaries with the SEC since January 1, 1998, in each case in the form
(including financial statements, schedules, exhibits and any amendments thereto)
filed with the SEC.

     "Shares" has the meaning set forth in Section 1.2.

     "Subsidiary" means, as to any Person, any other Person more than fifty
percent (50%) of the shares of the voting securities or other voting interests
of which are owned or controlled, or the ability to select or elect more than
fifty percent (50%) of the directors or similar managers is held, directly or
indirectly, by such first Person or one or more of its Subsidiaries or by such
first Person and one or more of its Subsidiaries. A Subsidiary that is directly

                                       40
<PAGE>

or indirectly wholly-owned by another Person except for directors' qualifying
shares shall be deemed wholly-owned for purposes of this Agreement.

     "Substances" means any pollutant, toxic substance, hazardous substance,
hazardous material, pathogen, radioactive substance, solid waste, hazardous
waste, biological waste, petroleum, or petroleum substance as defined in or
regulated pursuant to any Environmental Law enacted on or prior to the date
hereof.

     "13D Group" shall mean any group of Persons who, with respect to those
acquiring, holding, voting or disposing of Voting Securities would, assuming
ownership of the requisite percentage thereof, be required under Section 13(d)
of the Exchange Act and the rules and regulations thereunder to file a statement
on Schedule 13D with the SEC as a "person" within the meaning of Section
13(d)(3) of the Exchange Act, or who would be considered a "person" for purposes
of Section 13(g)(3) of the Exchange Act. "13D Group" when used with reference to
standards or tests that are based on securities other than Voting Securities
shall have the foregoing meaning except that the words "Voting Securities" in
the second line of the definition of "13D Group", in the case of standards or
tests based on "securities of the Company", shall be replaced with the words
"securities of the Company".

     "Tender Notice" has the meaning set forth in Section 9.2(a).

     "Tender Date" has the meaning set forth in Section 9.2(a).

     "Threat of Release" shall mean a substantial likelihood of a Release that
requires action to prevent or mitigate damage to the Environment that may result
from such Release.

     "Total Ownership Percentage" means, with respect to any Person calculated
at a particular point in time, the ratio, expressed as a percentage, of (a) the
total number of shares of Common Stock Beneficially Owned by such Person and
issuable upon conversion of (whether or not then convertible), or otherwise
constituting the economic equivalent of, all Common Securities Beneficially
Owned by such Person, over (b) the total number of shares of Common Stock then
outstanding and the number of shares of Common Stock issuable upon conversion
(whether or not then convertible) of, or otherwise constituting the economic
equivalent of, all outstanding Common Securities.

     "Total Voting Power" means the total number of votes which may be cast in
the election of directors of a Person at any meeting of shareholders of the
Person if all securities entitled to vote in the election of directors of the
Person were present and voted at such meeting (other than votes that may be cast
only upon the happening of a contingency) plus, without duplication of any Votes
otherwise taken into account, the number of Votes attributable to any voting
securities issued by the Person since the most recent meeting of shareholders of
the Person.

     "Trademark" shall mean any word, name, symbol or device or any combination
thereof, whether or not registered, used to identify and distinguish a Person's
goods or services, including unique products, from those manufactured or sold by
others and to indicate the source of the goods or services, even if that source
is unknown.

                                       41
<PAGE>

     "Transfer" shall mean and include the act of selling, giving, transferring,
creating a trust (voting or otherwise), assigning or otherwise disposing of
(other than pledging, hypothecating or otherwise transferring as security) (and
correlative words shall have correlative meanings); provided, however, that any
transfer or other disposition upon foreclosure or other exercise of remedies of
a secured creditor after an event of default under or with respect to a pledge,
hypothecation or other transfer as security shall constitute a "Transfer."

     "Transfer Notice" has the meaning set forth in Section 9.1(a).

     "Transfer Price" has the meaning set forth in Section 9.1(a).

     "Underwriters' Representative" shall mean the managing underwriter, or, in
the case of a co-managed underwriting, the managing underwriter designated as
the Underwriters' Representative by the co-managers.

     "Votes" shall mean, at any time, with respect to any Voting Securities, the
total number of votes that would be entitled to be cast by the holders of such
Voting Securities generally (by the terms of such Voting Securities, the
Articles of Incorporation or any certificate of designations for such Voting
Securities) in a meeting for the election of Directors held at such time,
including the votes that would be able to be cast by holders of shares of any
preferred stock.

     "Voting Ownership Percentage" shall mean, calculated at a particular point
in time, the Voting Power represented by the Voting Securities Beneficially
Owned by the Person whose Voting Ownership Percentage is being determined.

     "Voting Power" shall mean, calculated at a particular point in time, the
ratio, expressed as a percentage, of (a) the Votes represented by the Voting
Securities with respect to which the Voting Power is being determined to (b)
Total Voting Power of the Company.

     "Voting Securities" means the shares of Common Stock, the Preferred Stock
and any other securities of the Company entitled to vote generally for the
election of directors, and any securities (other than employee stock options)
which are convertible into, or exercisable or exchangeable for, Voting
Securities.

     "Warrants" shall mean those certain warrants to purchase shares of the
Common Stock issued pursuant to that certain Preferred Stock and Warrant
Purchase Agreement dated as of February 24, 2000.

     Section 11. Miscellaneous

     11.1 Termination of Agreement.

          (a)  The Company may terminate its obligation to perform or observe
               any of its covenants and agreements hereunder if the Purchaser
               violates any of the covenants or agreements of the Purchaser
               under this Agreement or the Distribution Agreement, and the
               Purchaser may terminate its obligations to perform or observe any
               of its covenants and agreements hereunder if the Company violates

                                       42
<PAGE>

               or fails to perform any of the covenants or agreements of the
               Company under this Agreement; provided, however, that the Company
               or the Purchaser, as the case may be, may not terminate any of
               its obligations under this Agreement pursuant to this sentence
               unless it shall have delivered written notice of such default to
               the other party and such default shall not have been cured within
               30 calendar days after the delivery of such notice.

          (b)  From and after the termination of this Agreement, the covenants,
               obligations and agreements of the parties set forth herein shall
               be of no further force or effect and the parties shall be under
               no further obligation with respect thereto.

          (c)  Notwithstanding the provisions of this Section 11.1, the
               respective obligations of the Company and the Purchaser under
               Sections 7.6 and 8.7 of this Agreement shall survive any
               termination of this Agreement.

     11.2 Best Efforts. As long as the other party hereto is not in default of
          any material obligation under this Agreement, each of the Company and
          the Purchaser shall use its best efforts to take all actions required
          under any law, rule or regulation adopted subsequent to the date
          hereto in order that the respective agreements and covenants of the
          parties hereto may be carried out on a timely basis in the manner
          contemplated by this Agreement.

     11.3 Governing Law. This Agreement shall be governed in all respects by the
          laws of the State of North Carolina as applied to contracts entered
          into solely between residents of, and to be performed entirely within,
          such state.

     11.4 Survival. The representations and warranties in Sections 3 and 4 of
          this Agreement shall survive any investigation made by the Purchaser
          or the Company and the Closing, and shall expire one year after the
          Closing; provided that such representations and warranties shall not
          be construed so as to constitute representations and warranties
          concerning circumstances existing after the date of this Agreement
          (except for the representation made in Section 4.1 hereof which shall
          be deemed to be made by the Purchaser in connection with each purchase
          of shares purchased from the Company pursuant to this Agreement).

     11.5 Successors and Assigns. This Agreement shall be binding upon and shall
          inure to the benefit of the parties hereto and their respective
          successors and assigns. Except as otherwise provided in this
          Agreement, this Agreement may not be assigned by a party without the
          prior written consent of the other party except by operation of law
          and except, in the case of the Purchaser, to an Affiliate of the
          Purchaser, in which case the assignee shall be subject to all of the
          provisions of this Agreement. The Purchaser may not assign this
          Agreement to any pledgee of its shares of Common Stock.

     11.6 Entire Agreement; Amendment. This Agreement and the other documents
          delivered pursuant hereto constitute the full and entire understanding
          and agreement between the parties with regard to the subject matter
          hereof and thereof and supersede all prior agreements and
          understandings among the parties relating to the subject matter
          hereof. No party shall be liable or bound to any other party in any

                                       43
<PAGE>
          manner by any warranties, representations or covenants except as
          specifically set forth herein. Neither this Agreement nor any term
          hereof may be amended, waived, discharged or terminated other than by
          a written instrument signed by the party against whom enforcement of
          any such amendment, waiver, discharge or termination is sought.

     11.7 Notices and Dates. Any notice or other communication given under this
          Agreement shall be sufficient if in writing and delivered by hand, by
          messenger or by courier, or transmitted by facsimile, to a party at
          its address set forth below (or at such other address as shall be
          designated for such purpose by such party in a written notice to the
          other party hereto):

                  if to the Company, to it at:

                           Pharmanetics, Inc.
                           9401 Globe Center Drive
                           Suite 140
                           Morrisville, NC  27560
                           Attention:  President
                           Fax: (919) 954-9932

                  with a copy to:

                           Larry E. Robbins, Esq.
                           Wyrick Robbins Yates & Ponton, LLP
                           4101 Lake Boone Trail, Suite 300
                           Raleigh, North Carolina   27607
                           Fax: (919) 781-4865

                  if to Purchaser, to it at:

                           Bayer Corporation
                           63 North Street
                           Medfield, Massachusetts 02052
                           Attention: Senior Vice President and General Manager,
                           Near Patient
                           Testing Segment
                           Fax: (508) 359-3115

                                       44
<PAGE>

                  with copies to:

                           Bayer Corporation
                           63 North Street
                           Medfield, Massachusetts 02052
                           Attention: NPT Counsel
                           Fax: (508) 359-3885

                           Marilyn Mooney
                           Fulbright & Jaworski L.L.P.
                           801 Pennsylvania Avenue, N.W.
                           Washington, D.C. 20004-2615
                           Fax: (202) 662-4643

Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when delivered if delivered
personally, by messenger or by courier, or, if sent by facsimile, upon
confirmation of receipt.

    11.8  Specific Performance. The parties hereto acknowledge and agree that
          irreparable damage would occur in the event any of the provisions of
          this Agreement were not performed in accordance with their specific
          terms or were otherwise breached and that such damage would not be
          compensable in money damages and that it would be extremely difficult
          or impracticable to measure the resultant damages. It is accordingly
          agreed that any party hereto shall be entitled to an injunction or
          injunctions to prevent breaches of the provisions of the Agreement and
          to enforce specifically the terms and provisions hereof, in addition
          to any other remedy to which it may be entitled at law or equity, and
          such party that is sued for breach of this Agreement expressly waives
          any defense that a remedy in damages would be adequate and expressly
          waives any requirement in an action for specific performance for the
          posting of a bond by the party bringing such action.

    11.9  Further Assurances. The parties hereto shall do and perform or cause
          to be done and performed all such further acts and things and shall
          execute and deliver all such other agreements, certificates,
          instruments or documents as any other party may reasonably request
          from time to time in order to carry out the intent and purposes of
          this Agreement and the consummation of the transactions contemplated
          hereby. Neither the Company nor the Purchaser shall voluntarily
          undertake any course of action inconsistent with satisfaction of the
          requirements applicable to them set forth in this Agreement and each
          shall promptly do all such acts and take all such measures as may be
          appropriate to enable them to perform as early as practicable the
          obligations herein required to be performed by them.

    11.10 Counterparts. This Agreement may be executed in any number of
          counterparts, each of which may be executed by fewer than all of the
          parties, each of which shall be enforceable against the parties
          actually executing such counterparts, and all of which together shall
          constitute one instrument.

                                       45
<PAGE>

    11.11 Severability. In the event that any provision of this Agreement
          becomes or is declared by a court of competent jurisdiction to be
          illegal, unenforceable or void, this Agreement shall continue in full
          force and effect without said provision; provided, that no such
          severability shall be effective if it materially changes the economic
          impact of this Agreement on any party.

    11.12 Captions. Headings of the various sections of this Agreement have been
          inserted for convenience of reference only and shall not be relied
          upon in construing this Agreement. Use of any gender herein to refer
          to any person shall be deemed to comprehend masculine, feminine and
          neuter unless the context clearly requires otherwise.

    11.13 Public Statements. The Company and the Purchaser agree not to issue
          any public statement with respect to the Purchaser's investment or
          proposed investment in the Company or the terms of any agreement or
          covenant among them without the other party's reasonable prior written
          consent, except such disclosures as may be required under applicable
          law or under any applicable order, rule or regulation or, in the case
          of the Company, except as necessary to pursue discussions with other
          strategic Purchasers.

    11.14 Brokers.

          (a)  The Company has not engaged, consented to or authorized any
               broker, finder or intermediary to act on its behalf, directly or
               indirectly, as a broker, finder or intermediary in connection
               with the transactions contemplated by this Agreement. The Company
               hereby agrees to indemnify and hold harmless the Purchaser from
               and against all fees, commissions or other payments owing to any
               such person or firm acting on behalf of the Company hereunder.

          (b)  The Purchaser has not engaged, consented to or authorized any
               broker, finder or intermediary to act on its behalf, directly or
               indirectly, as a broker, finder or intermediary in connection
               with the transactions contemplated by this Agreement. The
               Purchaser hereby agrees to indemnify and hold harmless the
               Company from and against all fees, commissions or other payments
               owning to any such person or firm acting on behalf of the
               Purchaser hereunder,

    11.15 Costs and Expenses. Each party hereto shall pay its own costs and
          expenses incurred in connection herewith, including the fees of its
          counsel, auditors and other representatives, whether or not the
          transactions contemplated herein are consummated.

    11.16 No Third-Party Rights. Nothing in this Agreement shall create or be
          deemed to create any rights in any person or entity not a party to
          this Agreement except for such rights as may exist by virtue of any
          contract or other agreement existing on the date hereof.

    11.17 Attorneys' Fees, The prevailing party in any litigation between the
          Purchaser and the Company involving this Agreement shall be entitled
          to recover from the other party its reasonable attorneys' fees and
          costs,

                                       46
<PAGE>

    11.18 Amendment. Sections 7, 8, 9, 10 and 11 of that certain Stock Purchase
          Agreement dated August 28, 1998 between Cardiovascular Diagnostics,
          Inc. (predecessor to the Company) and Chiron Diagnostics Corporation
          (predecessor to the Purchaser) is hereby amended and restated in their
          entirety in Sections 7, 8, 9, 10 and 11, respectively, of this
          Agreement; provided that Section 8.6(a) shall be deemed satisfied with
          respect to the Original Shares.

                     [The next page is the signature page.]

                                       47
<PAGE>

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

                          PHARMANETICS, INC.

                      By:      /s/ John Funkhouser
                                 John Funkhouser
                                    President

                          BAYER CORPORATION

                      By:      /s/ Frances L. Tuttle
                                   Frances L. Tuttle
                                   Senior Vice President - Near Patient Testing

                                       48Exhibit 10.28

                   AMENDED AND RESTATED DISTRIBUTION AGREEMENT

         THIS AMENDED AND RESTATED DISTRIBUTION AGREEMENT, effective as of April
23, 2001 between PHARMANETICS, INC., a corporation organized and existing under
the laws of North Carolina, with its principal offices located at 9401 Globe
Center Drive, Suite 140, Morrisville, North Carolina 27560 ("Pharmanetics"), and
BAYER CORPORATION, an Indiana corporation, acting through its Diagnostics
Division, with an office at 63 North Street, Medfield, Massachusetts ("Bayer
Diagnostics").

                              W I T N E S S E T H:

         WHEREAS, Pharmanetics (formerly Cardiovascular Diagnostics, Inc.) ,
among other things, is engaged in the manufacture of certain hemostasis
diagnostic products; and

         WHEREAS, Bayer Diagnostics (the successor in interest to Chiron
Diagnostics Corporation) has experience and capability in the marketing and
distribution of such products and desires to distribute Pharmanetics's
hemostasis products by itself and through its Affiliates and distributors
(hereinafter Bayer Diagnostics, its Affiliates and distributors shall
collectively be referred to as "Bayer"); and

         WHEREAS, Pharmanetics and Bayer entered into that certain Distribution
Agreement, dated August 28, 1998 (the "DA"), pursuant to which Bayer agreed to
market and distribute certain of Pharmanetics's hemostasis diagnostic products
on the terms set forth therein; and

         WHEREAS, Pharmanetics and Bayer each deem it necessary and advisable to
amend certain provisions of the DA and to restate the terms and provisions of
the DA as amended.

         NOW, THEREFORE, the parties agree as follows:

Definitions.

         The following capitalized terms shall have the meanings set forth
below:

                                        1
<PAGE>

"Accent Instrument" means the TAS Accent heparin titration management
 instrument.

"Act" means the Food, Drug and Cosmetic Act (21 U.S.C.  ss.ss.  301 et seq.) and
the regulations promulgated thereunder and all foreign equivalents thereof.

"Affiliate" means any person or entity which, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, a party. "Control" means the direct or indirect, legal or
beneficial, (a) ownership of more than 50% of the outstanding voting rights of
such person or entity or (b) the power or ability to direct the management or
policies of such person or entity.

"CE Mark" means a symbol on product labeling that the device complies with the
requirements of European Union In Vitro Diagnostics Directive.

"Controls" means Products manufactured by Pharmanetics which are used for
quality control purposes.

"FDA" means the United States Food and Drug Administration or any successor
agency, and all foreign equivalents thereof.

"Good Manufacturing Practices" or "GMP" means the applicable current good
manufacturing practices promulgated from time to time by the FDA in accordance
with the Act, and all foreign equivalents thereof.

"Home Market" means the market for Products used by patients performing tests on
themselves at home (i.e., outside of hospital, institutional or physician office
locations).

"Instruments" means Pharmanetics's manual, compact, single test, portable
analyzer, the TAS (thrombolytic assessment system), which provides point of
patient care evaluations of hemostasis, and the Accent, portable compact
microprocessor-based docking station to be used in conjunction with the TAS for
purposes of heparin management during surgical procedures. Instruments sold by
Bayer hereunder shall bear a Bayer label for all Instruments sold subsequent to
an initial interim period, approximately 120 days after Pharmanetics receives
the necessary approved artwork from Bayer.

"IVDD" means the European Union In Vitro Diagnostics Directive.

"MDR" means medical device reporting promulgated by FDA, requiring event
malfunction, serios injury and death to be reported to FDA.

"New Products" means improvements and enhancements to Routine Products.

"Products"  means  Routine  Products,  New  Products,   Specialty  Products  and
Instruments.

"QSR" means the Quality System Regulation as promulgated by the FDA.
                                        2
<PAGE>

"Release Criteria" means the Pharmanetics standards used in tests to determine
whether a newly manufactured lot of New, Routine or Specialty Products is in
compliance with the applicable Specifications. The Release Criteria in effect on
the effective date of this Agreement are contained in Schedule 1.15. The Release
Criteria may be amended from time to time by Pharmanetics subject to the
reasonable approval of Bayer if such amendments alter the performance of the
Product in a clinically significant manner. If such amendments are subject to
approval Bayer shall approve the amended Release Criteria or suggest changes to
it within ten (10) business days, after which time elapses the amended Release
Criteria shall be effective.

"Routine Products" means Pharmanetics HMT, PT, aPTT, HTT, PRT and LHMT test
cards and associated Controls.

"Specialty Products" means any test cards sold by Pharmanetics, excluding
Routine Products and New Products, as they become available.

"Specifications" means the Pharmanetics design and manufacturing specifications
for each New, Routine or Speciality Product, Instrument or Accent Instrument, as
applicable. The Specifications in effect on the effective date of this Agreement
are contained in Schedule 1.18. The Specifications may be amended from time to
time by Pharmanetics and Pharmanetics shall provide Bayer with such amendments.

"Specified Markets" means the market for Products in the hospital. Bayer was
entitled to provide written notice to Pharmanetics that Bayer desired to add
distribution rights in any market in addition to the hospital market, other than
the Home Market, for a period of 120 days subsequent to the effective date of
the DA and any such market was added to the definition of Specified Markets.

"Territory" means the countries listed on Schedule 1.13.

"Vigilance" means the reporting of adverse events including MDR type events and
recalls to competent authorities in the European Union.

Distribution of Product.

Exclusive Rights.

Grant. Subject to the limitations contained herein, Pharmanetics hereby grants
to Bayer the sole and exclusive right to sell, market, promote, distribute, and
otherwise transfer, dispose, provide and place ("sell"): (i) Routine Products
and New Products within the Territory in the Specified Markets, and (ii)
Specialty Products within the Territory in the Specified Markets, but excluding
the United States and Canada from the definition of Territory for Specialty
Products. Pharmanetics shall not, directly or indirectly, through technology
licensing or otherwise, grant any third party any right to sell Routine Products
in the Territory in the Specified Markets during the term of this Agreement.
Pharmanetics hereby grants to Bayer the non-exclusive right to sell, market,
promote, distribute, and otherwise transfer, dispose, provide and place ("sell")
Instruments within the Territory in the Specified Markets during the term of
this Agreement.

                                        3
<PAGE>

Exceptions.  The rights  granted in paragraph  (a) above shall be subject to the
following exceptions:

Notwithstanding any other provision or implication of this Agreement,
Pharmanetics shall retain the right to provide Routine Products, New Products
and Specialty Products to collaborative partners and other entities
participating in such collaborations and such Routine Products, New Products and
Specialty Products shall bear the Bayer label in the Territory in the Specified
Markets. Collaborative partners shall mean entities collaborating with
Pharmanetics in the development of new Specialty Products.

Exclusivity. During the term of this Agreement, Bayer shall not sell in the
Territory in the Specified Markets any whole blood or plasma, point of care
Products except under the terms of this Agreement. Neither Bayer nor any of its
Affiliates or distributors shall distribute Products outside the Territory.

Requirements. Bayer shall purchase, and Pharmanetics shall supply, subject to
the limitations of Section 5.7, all of Bayer's requirements of Products,
including Routine Products, New Products, Specialty Products and Instruments for
resale within the Territory. During the term of this Agreement, and for a period
ending the later of five (5) years from the effective date of the DA or three
(3) years subsequent to termination hereof, neither Bayer nor any of its
Affiliates shall manufacture any Products (using technology based upon iron
oxide particles in combination with reagents in the presence of magnetic fields)
or purchase any Products (using technology based upon iron oxide particles in
combination with reagents in the presence of magnetic fields) from a supplier
other than Pharmanetics.

Performance Requirements. Bayer shall use reasonable efforts, as determined in
Bayer's sole discretion, to promote the sale of New and Routine Products. Bayer
and Pharmanetics contemplate that the promotional efforts may include preparing
promotional materials to be used in the Territory by Bayer, participating in
appropriate trade shows, advertising in trade publications applicable to the
Territory and directly soliciting orders from customers within the Territory by
the appropriate Bayer sales force as determined in Bayer's sole discretion.
Bayer shall be responsible for training customers with respect to New and
Routine Products sold. Prior to the end of Phase II Product Development,
Pharmanetics will promptly advise Bayer of the opportunity to market, promote
and distribute newly developed Specialty Products within the Territory but
excluding the USA and Canada. Upon receipt of such notice the parties shall meet
within thirty (30) days to discuss development of sales and marketing plans,
transfer pricing, customer support and market development materials for the
Specialty Product. A comprehensive plan shall be established for each Territory
where distribution of the Specialty Product is proposed by Bayer in response to
notice by Pharmanetics. The marketing plan will include, but not be limited to,
targeted launch dates, pricing, minimum sales quantities, the defined roles and
responsibilities between the parties, and funding of market development
activities. If Bayer determines not to market in the Territory subject to notice
or if a mutually acceptable plan cannot be developed within ninety (90) days
then Pharmanetics shall be entitled to terminate the grant of rights under
Section 2.1(a) for such specific country or countries subject to Pharmanetics

                                        4
<PAGE>

notice. Bayer has developed its own customer technical support capabilities,
and, except as provided in Section 2.8(g), shall have the sole responsibility
for providing technical support to customers. Bayer shall be entitled to
contract with Pharmanetics to supply technical support and training on terms as
mutually agreed upon by Pharmanetics and Bayer. Pharmanetics and Bayer shall
comply with the Act and other applicable international, legal, health and safety
requirements, laws and regulations in all of their marketing and sales
activities. Bayer shall not promote the Products for any intended or indications
for use not approved for Products by applicable regulatory agencies.

Terms and Conditions. All orders for Products shall be initiated by written
purchase orders. No order shall be binding unless consistent with this
Agreement. Acceptance by Pharmanetics of Bayer's purchase order is expressly
limited to and conditioned upon, and only upon, Bayer's acceptance of the terms
and conditions set forth in this Agreement, which may not be changed or waived
except in a writing signed by the parties. Bayer's purchase orders submitted to
Pharmanetics shall be governed by the terms of this Agreement. Bayer and
Pharmanetics agree that such orders and documents may include provisions which
identify Products, quantities of Products, shipping dates, delivery information
and prices and billing information in a manner not inconsistent with this
Agreement and such provisions shall be binding on the parties.

Rejection for Obvious Damage. Bayer and its distributors shall notify
Pharmanetics of obvious damage relating to the manufacturing or packaging of the
Products (other than damage solely associated with the shipping of the Products)
within forty-five (45) days of their respective receipt of the Products. Any
such Product not rejected for obvious damage within forty-five (45) days after
receipt by Bayer or its distributors (the "Rejection Period") shall be deemed
accepted. A rejection by Bayer shall mean that Pharmanetics has received within
the Rejection Period written notice of such rejection stating with particularity
the reason therefor. Pharmanetics shall as promptly as possible replace any
rejected Products at no cost to Bayer or its distributors. After the Rejection
Period, Bayer may not return any such obviously damaged Products for any reason
without Pharmanetics's prior written consent. Rejection for other reasons is
addressed in Section 5.7(c) below.

                                        5
<PAGE>

Expansion of Territory.

Pharmanetics will promptly advise Bayer in writing of opportunities for
extension of Bayer's distribution rights into any country outside the Territory
in which Pharmanetics desires to expand or any country where existing rights
lapse or are subject to competitive bid or in any country in which Pharmanetics
currently has a distribution agreement, in each case where Bayer has a
distribution network in place. Pharmanetics agrees not to enter into any
contract for distribution rights in such other country until the earlier of the
receipt of a proposal from Bayer regarding such country or the expiration of the
ninety (90) day period following Bayer's receipt of written notification
pursuant to this sub-section. In considering the award of any expansion
territory, the parties hereto agree to consider the relationship of Pharmanetics
and Bayer and Bayer's performance hereunder as a criteria in making any such
award. Nothing in this sub-section shall limit the rights of Pharmanetics to
solicit, review or negotiate with any party at any time with respect to areas
outside the Territory as the same may exist from time to time.

Notwithstanding the foregoing, if Pharmanetics determines to enter into any
agreement or significant negotiations with a third party granting distribution
rights to such party with respect to (i) Specialty Products in the United States
or Canada or (ii) Products in the Home Market, Pharmanetics will promptly advise
Bayer in writing prior to entering into any such negotiations or agreement
granting any such distribution rights to a third party. Pharmanetics agrees not
to enter into a distribution agreement for (i) Specialty Products in the United
States or Canada or (ii) Products in the Home Market until the earlier of the
receipt of a proposal from Bayer regarding such rights or the expiration of the
ninety (90) day period following Bayer's receipt of written notification
pursuant to this sub-section. In considering the award of any such rights,
Pharmanetics agrees to consider the relationship of Pharmanetics and Bayer and
Bayer's performance hereunder as a criteria in granting such distribution
rights. Nothing in this Sub-section shall limit the rights of Pharmanetics to
solicit, review or negotiate with any party at any time with respect to such
distribution rights. The provisions of this subparagraph relating to Bayer's
opportunity to gain distribution rights in the Home Market shall not be
available to Bayer if Bayer determines to enter any agreement with a third party
relating to the Home Market or if Bayer enters into significant negotiations
with a third party regarding the Home Market if such third party is not
Pharmanetics. Bayer shall discuss with Pharmanetics its plans regarding the Home
Market prior to entering the Home Market and prior to entering into an agreement
with a third party relating to the sale of products to the Home Market.

Pharmanetics will use its best efforts to facilitate and aid Bayer's
negotiations with Tokuyama Soda Company, Ltd., (excluding the payment of any
money) regarding distribution of Pharmanetics PT and aPTT cards in Japan, Korea
and Taiwan.

Pharmanetics and Bayer jointly developed and agreed to a worldwide distributor
transition plan to provide for granting distributor relationships in favor of
Bayer as and when permitted under any such existing distribution agreements.

Order Fulfillment of Specialty Products in the United States and Canada.

                                        6
<PAGE>

Pharmanetics hereby grants Bayer the non-exclusive right to process orders for
the Specialty Products within the United States and Canada in the Specified
Markets pursuant to the terms and conditions of this Section 2.8. Pharmanetics
shall be responsible for preparing all materials to be used in connection with
the marketing of the Specialty Products in the United States and Canada.
Pharmanetics, at its expense, shall provide Bayer with reasonable quantities of
such materials for use by Bayer in connection with its fulfillment duties
relating to the Specialty Products in the United States and Canada.

Pursuant to the terms and conditions of this Section 2.8, Bayer shall process
orders placed with Pharmanetics and received by Bayer directly from a
prospective customer for Specialty Products to be sold by Pharmanetics in the
United States or Canada (a "Specialty Product Order").

Immediately upon receipt of a Specialty Product Order (as defined below), Bayer
will provide Pharmanetics with information regarding the Specialty Product
Order, including the name and address of the customer, the Specialty Product to
be purchased by such customer, delivery dates and delivery instructions. Upon
Pharmanetics receipt of such information, Pharmanetics will provide Bayer with
the purchase price at which Pharmanetics will sell the Specialty Product to the
customer (the "Specialty Product Order Purchase Price").

Within one business day of Bayer's receipt of a Specialty Product Order Purchase
Price, Bayer will perform a credit check on the customer referred to in the
Specialty Product Order, and if Bayer at Bayer's reasonable discretion approves
such customer, then Bayer shall promptly request in writing that Pharmanetics
deliver to the Customer the Specialty Product(s) referred to in the Specialty
Product Order (an "Approved Specialty Product Order"). With respect to each
Approved Specialty Product Order, Bayer shall assume all responsibility for
billing the customer and collecting from the customer. In the event Bayer
rejects a Specialty Product Order, it shall promptly notify Pharmanetics of the
same in writing and Pharmanetics shall be permitted to process the rejected
Specialty Product Order.

Pharmanetics shall use its best efforts to deliver the Specialty Products
ordered by the customer in accordance with the delivery schedule and in the
quantities specified in the Approved Specialty Product Order. At no time shall
title to Specialty Products delivered pursuant to this Section 2.8(d) pass to
Bayer. Pharmanetics will provide Bayer with notice of a delivery pursuant to
this Section 2.8(d) promptly after shipment.

For each Specialty Product delivered to a Customer pursuant to this Section 2.8,
Bayer shall pay Pharmanetics an amount as set forth in Schedule 2.8. Such
amounts shall be due and payable seventy (70) days from date of invoice. The
failure of Bayer to collect any amounts due pursuant to any Approved Specialty
Product Order shall in no way affect amounts due to Pharmanetics, provided
however, that Bayer may deduct amounts customers refuse to pay for reasons
related to Product defects.

Pharmanetics shall be responsible for providing technical support to customers
of Specialty Products delivered pursuant to an Approved Specialty Product Order.

                                        7
<PAGE>

The provisions of this Section 2.8 shall in no way be deemed to restrict the
ability of Pharmanetics to provide Specialty Products to collaborative partners
and other entities participating in such collaborations and such Specialty
Products in the United States and Canada.

                                        8
<PAGE>

Marketing and Support Activities.

Quarterly Meetings; Reports. The parties shall meet at least quarterly to
discuss performance, quality, regulatory matters, sales and marketing plans,
pricing, customer support, product improvement suggestions and other information
concerning the marketing and development of the Products. Bayer shall provide
information available to it about the Products and their ability to compete with
other diagnostic products for related uses and to meet customer needs. Bayer
shall provide Pharmanetics on a monthly basis, by the fifteenth of each month,
general information regarding sales of the Products such as broad pricing trends
by geographic region as well as sales information indicating sales by country or
geographic region, where available to Bayer.

Promotional Material. Pharmanetics will furnish Bayer with examples of
promotional literature and advertisements it prepares for the Products. Bayer
shall not copy or utilize any promotional material prepared by it without
obtaining the prior written approval thereof from Pharmanetics. Pharmanetics's
approval shall not be unreasonably withheld or delayed. Bayer shall submit by
courier camera ready copy for the labels and package inserts to Pharmanetics for
approval. Pharmanetics shall respond within fourteen (14) days of receipt. If no
written objection is received from Pharmanetics within fourteen (14) days after
the courier package is received by Pharmanetics, Bayer will contact Pharmanetics
to obtain Pharmanetics's approval for the copy as submitted, or as modified in
accordance with Pharmanetics's instructions. If no written objection is received
by Bayer, approval by Pharmanetics will be deemed to have been granted after
such contact and the lapse of ten (10) days. Pharmanetics and Bayer shall comply
with all requirements of the Act, local laws, regulations and other laws in
their advertising and other promotional activities.

Packaging, Labeling. Pharmanetics shall manufacture, label and package the
Products in final form for distribution by Bayer. Bayer shall provide camera
ready copy for the labels containing Bayer trade dress. In addition to all
applicable legal requirements, the labels shall comply with the requirements set
forth in Section 3.4 below, shall display "Pharmanetics" and shall identify
Pharmanetics as the manufacturer of the Products. Bayer shall not repackage or
label any Products and shall not alter any Products or any package or label used
in connection with any Products except as specifically authorized by
Pharmanetics. In the event that Pharmanetics shall authorize or require
repackaging or re-labeling, Bayer shall comply in all respects with the
instructions of Pharmanetics, at the expense of Pharmanetics.

Trademarks and Trade Names. Pharmanetics hereby grants Bayer, the
nontransferable right to use in the Territory the trademarks and tradenames
listed on Schedule 3.4, and any other trademarks owned by Pharmanetics which it
may designate in writing for use by Bayer (the "Trademarks"), in connection with
the marketing and sale of the Products for the duration of the Agreement.
Bayer's distributors and Affiliates shall be entitled to the use of such
Trademarks, subject to the terms and conditions of this Agreement, so long as
such use is authorized only in connection with distribution of Products

                                        9
<PAGE>

hereunder and subject to terms and conditions substantially similar to those
contained in this Agreement. The Products shall be marketed and sold only under
the Trademarks and the name "Pharmanetics" as required under Section 3.3 and
such other marks as Bayer may use for its other products. Each Product marketed
and sold shall conspicuously bear the name and Trademarks of Pharmanetics in
addition to any Bayer marks. Each Instrument sold in connection with Specialty
Products delivered pursuant to Section 2.8 shall bear the "Rapidpoint Coag"
trademark. Bayer acknowledges that it has and will obtain no proprietary
interest in the Trademarks and agrees not to use the same as part of its
corporate or business name. Subject to the sale of any inventory existing as of
the date of any such termination, Bayer's, its distributors' and its Affiliates'
right to the use of any Trademark or other property of Pharmanetics shall
terminate immediately upon termination of this Agreement. Bayer shall use the
Trademarks only in the manner prescribed by Pharmanetics. Bayer hereby grants
Pharmanetics the nontransferable right to use in the Territory the trademarks
and tradenames listed on Schedule 3.4, and any other trademarks owned by Bayer
which it may designate in writing for use by Pharmanetics (the "Bayer
Trademarks"), in connection with the marketing and sale of the Products. During
the term of this Agreement, the Products shall be marketed and sold by Bayer
only under the Trademarks, the Bayer Trademarks, and such other marks as
Pharmanetics may use for its other products. Pharmanetics acknowledges that it
has and will obtain no proprietary interest in the Bayer Trademarks and agrees
not to use the same as part of its corporate or business name. Subject to the
sale of any inventory or work-in process existing at the date of any such
termination, Pharmanetics's right to the use of any Bayer Trademark or other
property of Bayer shall terminate immediately upon termination of this
Agreement. Pharmanetics shall use the Bayer Trademarks only in the manner
prescribed by Bayer. The Products are offered for sale and sold by Bayer and
Pharmanetics subject in every case to the condition that such sale does not
convey any licenses, express or implied, to manufacture, duplicate or otherwise
copy or reproduce any Product. In the event of termination of this Agreement,
Bayer shall not manufacture or have manufactured any devices, cards, components
or assemblies utilizing any information belonging to Pharmanetics.

Marketing Assistance/Training. Pharmanetics agrees to provide technical
training, and technical assistance to Bayer personnel at periodic intervals,
with the frequency and content to be determined by mutual agreement. Such
training will be provided by Pharmanetics at no additional cost to Bayer, except
that Bayer shall pay Pharmanetics's travel and related expenses associated with
providing such training.

Customer Inquiries and Complaints. Pharmanetics will utilize Bayer's GEM system
to log and track customer inquiries and complaints. Pharmanetics will maintain
technical resources to enable it to acknowledge reasonable requests from Bayer
for responses to customer inquiries within one business day.

Service. Except as otherwise provided in this Section, Pharmanetics agrees to
provide service and maintenance for Instruments sold by Bayer for its standard
fees as set forth on Schedule 3.6, and thereafter, as such fees change from time
to time, and in accordance with Pharmanetics's then applicable standard service

                                       10
<PAGE>

agreement. Pharmanetics shall offer to Bayer service contracts for Instruments
to Bayer customers to provide maintenance and services in accordance with its
standard contract. Pharmanetics shall provide Bayer with its service contract
price list and, at its option, Bayer shall be entitled to sell such contracts to
Bayer customers on behalf of Pharmanetics. Bayer shall bill for the service
contracts which it sells and payment by Bayer to Pharmanetics shall be within
thirty (30) days after Bayer receives payment for such service/maintenance
contract. Service and maintenance shall be provided by Pharmanetics or an
independent third party service company. To the extent that Pharmanetics intends
to contract with a third party for service and maintenance of the Products,
Pharmanetics will promptly advise Bayer in writing of the opportunity for Bayer
to perform such service and maintenance.

Product Warranty. Neither party nor its subdistributors shall make any
representation or warranty about the Products, whether in writing or orally,
except as is contained in written materials delivered to Bayer by Pharmanetics
expressly for use in promoting the sale of the Product or as may otherwise be
agreed to by Pharmanetics in writing.

                                       11
<PAGE>

Product Development.

Development by Pharmanetics. Pharmanetics shall consult with Bayer from time to
time about improvements which may be desired by Bayer and end users without
obligation to Pharmanetics. Bayer may, in its sole discretion, provide product
suggestions, information about integration with its critical care instruments
and data management systems, results of focus sessions and other expectations of
end users, and access to technology available to it which may be useful to
Pharmanetics. Pharmanetics will evaluate integrating its technology into Bayer's
products. Bayer agrees to take no action to modify or change Pharmanetics's
technology or the Products in any way without the prior written consent of
Pharmanetics.

               Pharmanetics will use its best efforts to give Bayer a minimum of
          one hundred twenty (120) days advance notice of any material changes
          in the form or functionality of the Products. Bayer shall have the
          right to accept or reject such material changes relating to Products
          to be delivered to its installed base of customers; provided, however,
          Bayer may not reject safety or critical performance changes. In the
          event material changes to Products or improvements to Pharmanetics'
          technology are rejected above, Pharmanetics will continue to provide
          technical and other reasonable support for previous versions of
          Products and technology as reasonably requested to fulfill customer
          demand for a period of time mutually agreed by Pharmanetics and Bayer.

Rights to Products and New Products.  Pharmanetics  shall own all right,  title,
and interest in and to the know-how and technology relating to the Products.

Regulatory Compliance.

Registrations.

Pharmanetics shall use commercially reasonable efforts to obtain and maintain
regulatory approvals, product registrations and requirements for it to sell the
Products in the Territory where applicable. Pharmanetics agrees to cooperate
with Bayer in any regulatory registration process to permit Bayer to participate
in such process where feasible. Pharmanetics shall have sole discretion as to
the commercial reasonableness of any acts required on its part to maintain any
regulatory approval or requirement.

Pharmanetics shall promptly provide to Bayer copies of all required Product
notifications and registrations to regulatory agencies (including device listing
reports).

Pharmanetics shall provide to Bayer all information in the possession of
Pharmanetics which provides assistance to Bayer in the registration of Products
in Territories that Bayer launches Products.

Pharmanetics will comply with the requirements of the IVDD applicable to and
required to be performed by Pharmanetics in order to allow Products to carry the
CE Mark by December 1, 2003 for Products introduced prior to that date, or

                                       12
<PAGE>

thereafter at the time of Product introduction for all other Products, provided
that such compliance requirements related to Bayer performance have been
completed.

Reporting Obligations. Bayer shall maintain, or cause to be maintained, all
complaint files and other records required to be maintained by the FDA and other
regulatory agencies with respect to Products purchased by Bayer from
Pharmanetics. Pharmanetics shall promptly provide to Bayer copies of all
complaints received, resultant investigations and follow-up communications with
respect to the Products sold to Bayer as well as responses sent, if any. Bayer
shall promptly provide Pharmanetics with copies of any complaints relating to
the Products received by Bayer. Except to the extent Bayer is otherwise required
by law, Pharmanetics shall submit to the FDA all reports of complaints,
malfunctions, failures or deterioration in the characteristics or performance or
instructions for use or inadequacy in labeling which may have led or lead to
death or serious injury and all other information about the Products required to
be submitted to any regulatory agency, including the reports required under
FDA's Medical Device Reporting rule, 21 CFR Parts 803 and 804, Vigilance
reporting required by the European Union and other adverse reporting
requirements applicable to the Products. All potential reports relating to Bayer
labeled products, will be reviewed jointly by Bayer and Pharmanetics and
approved by Bayer prior to submission to the FDA or other regulatory agencies or
authorities provided Pharmanetics shall in all cases be entitled to make filings
within any required regulatory deadlines.

Manufacturing and Design Control. Pharmanetics shall use its best efforts to
comply with all applicable QSR requirements, including all international
technical and quality standards applicable to the Products (including 150
9001/46001) which are incorporated into QSR, including GMP. From time-to-time,
with reasonable prior notice to Pharmanetics, Bayer may inspect Pharmanetics
facilities and upon reasonable request, review Pharmanetics's QSR compliance,
including methods used to audit its subcontractors for QSR compliance and other
applicable standards. Pharmanetics shall have sole discretion as to the
commercial reasonableness of any acts required on its part with respect to QSR
compliance, provided, however, Pharmanetics shall notify Bayer of any citations
from discussions with a regulatory body where such discussions and citations
relate to a material aspect of QSR compliance. Pharmanetics must inform Bayer of
all audits conducted by the FDA and other regulatory agencies and provide audit
outcomes, correspondence and corrective actions, if required.

Samples.  Pharmanetics shall retain samples of each lot of the Products for time
periods which are in accordance with GMP.

Product Recalls and Field Corrective Actions. In the event (i) any government
authority issues a directive or order that a Product be recalled, (ii) a court
of competent jurisdiction orders such a recall or (iii) Pharmanetics or Bayer
determines that a Product should be recalled or that a Field Corrective Action
or removal should occur, the parties shall take all appropriate corrective
action. Pharmanetics and Bayer will review any recommendation and agree to the
appropriateness of the corrective action prior to its initiation and the

                                       13
<PAGE>

notification of any affected customers. However, in the event the parties cannot
agree on the corrective action, the party having responsibility for the
corrective action may act at its discretion. Bayer will provide notice to its
customers of the required corrective action for the Products. Upon determination
of the party responsible for the recall or Field Corrective Action, such party
shall be responsible for the cost of notifying end users and for determining the
corrective actions to be taken and the costs associated with such actions.
Pharmanetics and Bayer shall fully cooperate with one another and provide all
reasonable assistance in conducting any recall or Field Corrective Action under
this Paragraph. Bayer shall maintain records of all sales of the Products
sufficient to carry out a recall with respect to Products purchased under the
Agreement. If the recall meets the definition of corrective action and removal,
and constitutes a risk to health, as defined by 21 CFR 806, corrective action
shall be carried out in accordance with regulations including reporting to the
FDA or under Vigilance reporting to the European Union competent authority and
other applicable regulatory agencies.

General Obligations of Pharmanetics and Bayer.

Except as otherwise expressly provided in the Agreement, Pharmanetics shall
manufacture, test, package, and label the Products pursuant to the terms,
conditions and subject to the limitation contained in this Agreement. Bayer
shall price, invoice and have shipped in the Territory or in the Specified
Markets, all Products pursuant to the terms, conditions and subject to the
limitations contained in this Agreement.

Pharmanetics shall manufacture, test, package, label and release and Bayer shall
maintain, store and ship the Products in accordance with all applicable GMP
requirements.

Each party shall promptly notify the other party of, and shall provide the other
party with copies of, any correspondence and other documentation received or
prepared in connection with any of the following events: (1) receipt of any
material correspondence from the FDA in connection with the manufacture, sale or
use of the Products; (2) any recall of the Products; (3) the withdrawal of the
Products from the market; (4) any regulatory comments relating to the
manufacture of the Products requiring a response or action by either party.

Pharmanetics shall maintain all manufacturing and analytical records, all
records of shipments of the Products from Pharmanetics, and all validation data
relating to the Products for the time periods required by applicable laws and
regulations. Pharmanetics shall make such data available to the FDA upon request
of the FDA, such request being made either directly to Bayer or to Pharmanetics,
or otherwise as required by applicable law.

Orders.

Forecasts.  Beginning with the execution hereof, Bayer shall provide monthly, by
the fifteenth day of each month, its estimated  forecast of its requirements for
the  Products for each of the six (6) months  following  the end of the month in

                                       14
<PAGE>

which such forecast is submitted (each a "Forecast"). All Forecasts under this
Agreement and updates thereof for any period will constitute a firm obligation
of Bayer to purchase the quantities of Products indicated for the first three
months of such Forecast.

Delivery. Pharmanetics shall use its best efforts to supply the Products ordered
by Bayer and shall supply Products in accordance with the delivery schedule and
in the quantities specified by Bayer provided; however, Pharmanetics shall not
be obligated to deliver Products to the extent that orders for such Products
exceed 125% of the quantities stated in the portion of any forecast which
contains the firm obligation of Bayer to purchase Products. Pharmanetics
shipments of Products shall be delivered FOB freight collect Pharmanetics's
distribution site, Raleigh, North Carolina, to Bayer's carrier at which time
title, ownership and risk of loss and damage shall pass to Bayer. Pharmanetics
shall deliver Products, properly packed for distribution (including, but not
limited to refrigerated distribution), to the carrier selected by Bayer at its
distribution site. All freight and insurance expenses, as well as any special
handling or special packing expenses requested by Bayer, shall be paid by Bayer.
(Packing for refrigerated distribution is not a special packing expense.) Bayer
shall bear any and all applicable taxes, duties and similar charges that may be
assessed against the Products after delivery to the carrier at Pharmanetics's
distribution site. Pharmanetics shall include shipping documents with Products
in accordance with Bayer's reasonable requests.

Acceptance of Products. Pharmanetics shall test each newly manufactured lot of
Products for conformance with the applicable Release Criteria. Each lot meeting
such Release Criteria shall be deemed accepted and Pharmanetics shall complete
and forward to Bayer a certificate of analysis for such lot in a form based upon
the Release Criteria and mutually agreed by the parties.

Packaging. All labels and labeling produced by Pharmanetics for Products,
including packaging layout, design and color, shall be consistent with artwork
supplied or approved by Bayer. Pharmanetics shall provide all necessary labels
and package inserts for all Products, as well as for the shipping container,
which labels and package inserts shall comply with applicable label and labeling
requirements of the FDA and other regulatory agencies, including the labeling
requirements of the IVDD. Bayer shall not use any other labels or package
inserts for any of such Products.

Taxes; Duties. The actual amount of sales, use, excise, value-added and similar
taxes levied upon or applicable to the transfer of Products to Bayer are payable
by Bayer. Bayer and its Affiliates shall pay all duties, tariffs, surcharges and
other customs and other governmental fees levied in connection with the export
of Products outside of the United States but within the Territory.

Quality. The parties shall in connection with the quarterly meetings required
under Section 3.1 cooperate to develop and implement a quality plan designed to
minimize or eliminate Product defects and provide for continuous improvement in
Product quality.

                                       15
<PAGE>

Product Warranty.

Standard Limited Warranty. Pharmanetics warrants that the Routine Products, New
Products and the Specialty Products shall, at the time of shipment, (a) conform
to the applicable Specifications; (b) comply with the requirements of the Act,
if applicable, and shall until their expiration date conform to the labeling and
package inserts approved by Pharmanetics; (c) will not be products that are
adulterated or misbranded within the meaning of the Act; (d) shall have been
manufactured, packaged, stored and shipped in conformity with applicable GMP
requirements; and (e) will not be products that may not be introduced into
interstate commerce pursuant to applicable federal or state law.

               Pharmanetics warrants that all Instruments and Accent Instruments
          shall, until the earlier of twenty-four (24) months from shipment by
          Pharmanetics or twelve (12) months after the date of installation with
          the customer: (a) conform to the Instrument and Accent Instrument
          Specifications, as applicable; (b) comply with the requirements of the
          Act, if applicable, and shall conform to the labeling and package
          inserts approved by Pharmanetics; (c) will not be products that are
          adulterated or misbranded within the meaning of the Act; (d) shall
          have been manufactured, packaged, stored and shipped in conformity
          with applicable GMP requirements; and (e) will not be products that
          may not be introduced into interstate commerce pursuant to applicable
          federal or state law.

               This limited warranty is contingent upon proper use of a Product
          in the application for which such Product was intended and does not
          cover Products that were modified without Pharmanetics's written
          approval, that have expired, or that were improperly stored or
          handled. Except as set forth in Schedule 6.1(b), as of the date of the
          execution of this Agreement, Pharmanetics has no knowledge that any of
          the Products, or the sale or use of any of the Products for their
          intended purposes infringe any intellectual property of any third
          party.

No Other Warranty. EXCEPT FOR THE EXPRESS LIMITED WARRANTIES SET FORTH IN
SECTION 6.1 ABOVE, PHARMANETICS GRANTS NO WARRANTIES FOR THE PRODUCTS, EXPRESS
OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND
PHARMANETICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF QUALITY, WARRANTY OF
MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF
NON-INFRINGEMENT.

Remedy  and  Limitation  of  Liability.  EXCEPT AS  OTHERWISE  PROVIDED  HEREIN,
PHARMANETICS'S LIABILITY AND BAYER AND ITS AFFILIATES,  ITS DISTRIBUTORS AND ITS
CUSTOMERS  SOLE REMEDY UNDER THE LIMITED  WARRANTY  UNDER  ARTICLE 6 HEREOF WITH
RESPECT TO ANY  PRODUCTS  SHALL BE  LIMITED  TO A REFUND OF BAYER'S  COST OF THE
PRODUCTS  OR  REPAIR  OR  REPLACEMENT,  IN ALL  EVENTS  AT  PHARMANETICS'S  SOLE
DISCRETION.  EXCEPT AS OTHERWISE PROVIDED HEREIN, IN NO EVENT SHALL PHARMANETICS

                                       16
<PAGE>

BE LIABLE FOR THE COST OF PROCUREMENT OF SUBSTITUTE PRODUCT OR FOR ANY-SPECIAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES FOR BREACH OF WARRANTY OR OTHERWISE.
PHARMANETICS SHALL BEAR THE EXPENSE OF FREIGHT FOR ALL RETURNED GOODS.

Card Dating. Pharmanetics guarantees to deliver all Routine Products within
three (3) months of the date of manufacture and with a minimum of nine (9)
months dating at the time of such delivery. Specialty Products delivered to
Bayer pursuant to Section 2.8 shall be shipped into Bayer inventory with 9
months dating.

Assertion of Claims. In any case where Bayer expects to make a claim against
Pharmanetics with respect to nonconforming Product, Bayer shall retain the
Product for the lesser of thirty (30) days or receipt of written authorization
and instructions of Pharmanetics either to dispose of the Product or to return
the Product to Pharmanetics. Bayer will provide Pharmanetics proof of
destruction of cards when requested by Pharmanetics.

Year 2000 Compliance. Subject to the limitations set forth in this Article 6,
Pharmanetics certifies to Bayer that all Products are year 2000-compliant.

Payments for Product.

Purchase Price. Payments for Product shall be made in accordance with Schedule
7.

Adjustments to the Purchase  Price.  The Card Purchase Price shall be subject to
adjustment as set forth in Schedule 7.

Failure of Efforts Maintain Distribution Rights. Notwithstanding anything to the
contrary in this Agreement, at any time upon sixty (60) days' written notice
where Bayer fails to (i) use commercially reasonable efforts to sell Products in
any country within the Territory, or (ii) maintain a distribution network or
other sales presence in any country within the Territory other than the United
States and Canada, and such failure persists beyond such sixty (60) day period,
Pharmanetics shall be entitled to terminate this Agreement with respect to the
grant of distribution rights for that specific country.

Payment. All Pharmanetics invoices shall be paid net 30 days from date of
invoice in US Dollars; provided, however, that if a customer will only accept a
single lot of material over an extended period of time, payment for such
Pharmanetics invoices shall be paid net sixty (60) days from date of
Pharmanetics's invoice in US Dollars. Bayer shall provide Pharmanetics with
documentation of such arrangements. Any invoiced amounts not paid when due shall
be subject to a service charge at the lower of the rate of one and one-half
(1.5%) percent per month or the maximum rate permitted by law. If Bayer fails to
make any payment to Pharmanetics when due, Pharmanetics shall give Bayer written
notice of such non-payment and Bayer shall have ten (10) days from the receipt
of such notice to make the payment. Pharmanetics may upon thirty (30) days

                                       17
<PAGE>

written notice to Bayer without affecting any other rights under this Agreement,
terminate this Agreement or cancel or delay shipments hereunder to Bayer for
non-payment by Bayer after such ten (10) day period.

Confidentiality.

"Proprietary Information" means: all financial information, marketing
information, sales information, customer information, raw materials, know-how,
drawings, compositions, manufacturing and other specifications, analytical
procedures, flow sheets, reports, market studies, preclinical and clinical test
results, FDA and other regulatory submissions, software and other medical,
research, technical, and marketing information disclosed, directly or
indirectly, by either party or any of its Affiliates to the other party,
retroactively to December 17, 1997, in writing, marked "Confidential",
"Proprietary" or the like, or, if transmitted orally or by observation of
equipment or other material, confirmed by a writing so marked within sixty (60)
days of its disclosure, or which by its nature is information normally intended
to be held in confidence, unless the same: (a) is or becomes public knowledge
through no fault of the receiving party; (b) is legally in the possession of the
receiving party prior to receipt from the disclosing party; (c) is subsequently
and lawfully received from a third party without its breach of any nondisclosure
obligation; (d) is independently developed by employees of the receiving party
who have had no access to the Proprietary Information of the disclosing party;
or (e) is required to be disclosed by order of a court or administrative agency,
provided that in such event the party that is subject to the required disclosure
furnish the other party with adequate notice. Notwithstanding the immediately
preceding sentence, Pharmanetics agrees that all new materials and other
information which Bayer provided to Pharmanetics prior to December 17, 1997,
shall be treated as Proprietary Information.

Non-Disclosure. During the duration of this Agreement and for a period of five
(5) years thereafter, neither party shall disclose to third parties, or use for
its benefit, in whole or in part, any Proprietary Information received from
other party, except to the extent required to comply with the Act or other laws.
Each party shall take all reasonable steps to minimize the risk of disclosure of
Proprietary Information, including, without limitation:

ensuring that only its employees whose duties require them to possess such
information have access thereto; and

exercising at least the same degree of care that it uses for its own Proprietary
Information.

Duties Upon Termination. Except as otherwise permitted under this Agreement,
upon request by the disclosing party after expiration or termination of this
Agreement, the other party shall either return all of such disclosing party's
Proprietary Information (including data, memoranda, drawings and other writings
and tapes and all copies thereof) received or prepared by it or destroy the
same, and in any event shall make no further use of such Proprietary Information

                                       18
<PAGE>

at any time provided, however, that counsel for the receiving party may keep one
copy of the Proprietary Information for purposes of ascertaining the receiving
party's obligations pursuant to this Section 8.

Use of Proprietary Information. During the duration of this Agreement and for a
period of five (5) years thereafter, neither party shall use the other party's
Proprietary Information for any purposes, except to perform its obligations
hereunder. In no event shall Bayer use any Proprietary Information for
commercial purposes subsequent to the termination of this Agreement.

Injunctive Relief. Each party acknowledges that the other party would not have
an adequate remedy at law for breach of any of the covenants contained in this
Section 8 and hereby consents to the enforcement of same by the other party by
means of temporary or permanent injunction issued by any court having
jurisdiction thereof and further agrees that the other party shall be entitled
to assert any claim it may have for damages resulting from the breach of such
covenants in addition to seeking injunctive or other relief. The provisions of
this Agreement relating to Proprietary Information shall supercede any prior
agreements relating to Proprietary Information between Bayer and Pharmanetics.

Indemnification.

Indemnification by Pharmanetics. Subject to Bayer's compliance with its
obligations set forth in Section 9.3 below, Pharmanetics shall indemnify, defend
and hold Bayer, its Affiliates, subdistributors, their directors, officers,
employees and agents harmless from and against any and all losses, damages,
liabilities, claims, demands, judgments, settlements, costs and expenses
(including, without limitation, reasonable attorneys' fees and other costs of
defense) (collectively "Losses") attributable to, or arising out of a breach by
Pharmanetics of any of Pharmanetics's warranties, representations, covenants or
obligations hereunder or any claim, lawsuit or other action by a third party
for, breach of contract, personal injury or property damage to the extent caused
by a breach by Pharmanetics of this Agreement, or out of or connected with the
use or sale of the Product to the extent directly caused by Pharmanetics's
fault, negligence or breach of any of its obligations hereunder concerning the
use or sale of the Product.

Indemnification by Bayer. Subject to Bayer's compliance with its obligations set
forth in Section 9.3 below, Bayer shall indemnify, defend and hold Pharmanetics
and its Affiliates, their shareholders, directors, officers, employees and
agents harmless from and against any and all Losses attributable to, or arising
out of a breach by Bayer of any of Bayer's warranties, representations,
covenants or obligations hereunder, or any claim, lawsuit or other action by a
third party for, breach of contract, personal injury or property damage to the
extent caused by a breach by Bayer or any of its Affiliates of this Agreement,
or out of or connected with the use or sale of the Product to the extent
directly caused by Bayer's fault, negligence or breach of any its obligations
hereunder concerning the use or sale of the Product.

Notice  and  Assistance.  A party  (the  "indemnitee")  which  intends  to claim
indemnification  under this Section 9 shall promptly notify the other party (the

                                       19
<PAGE>

"indemnitor") in writing of any action, claim or other matter in respect of
which the indemnitee or any of its employees or agents intend to claim such
indemnification. The indemnitee shall permit, and shall cause its employees and
agents to permit, the indemnitor, at its discretion, to settle any such action,
claim or other matter and agrees to the complete control of such defense or
settlement by the indemnitor; provided, however, that such settlement does not
adversely affect the indemnitee's rights hereunder or impose any obligations on
the indemnitee in addition to those set forth herein in order for it to exercise
such rights. No such action, claim or other matter shall be settled without the
prior written consent of the indemnitor and the indemnitor shall not be
responsible for any legal fees or other costs incurred other than as provided
herein. At the expense of the indemnitor, the indemnitee shall render the
indemnitor all assistance reasonably necessary in defending against such claim,
suit, or action. The indemnitee party shall have the right at its expense, to
retain separate counsel to act in an advisory capacity in connection with any
matter involving a claim for indemnity and the indemnitor will cooperate with
such counsel.

Patents.

Ownership. Except as provided herein with respect to trademarks, Bayer
acknowledges that it does not have, nor does it hereby acquire, any right, title
and interest in and to any patents, patent applications, trademarks or other
proprietary rights of Pharmanetics owned by Pharmanetics at the time of the
execution of this Agreement. Except as provided herein with respect to
trademarks, Pharmanetics acknowledges that it does not have, nor does it hereby
acquire, any right, title and interest in and to any patents, patent
applications, trademarks or other proprietary rights of Bayer owned by Bayer at
the time of the execution of this Agreement.

Patent Infringement.

Defense. Bayer agrees that Pharmanetics has the right to defend or at
Pharmanetics's option to settle, and Pharmanetics agrees at Pharmanetics's
expense, to defend or at Pharmanetics's option to settle, each claim, suit or
proceeding brought against Bayer or Bayer's customers arising out of or related
to an allegation of infringement of any United States patent, copyright, or
trademark or misappropriation of trade secrets by the sale of Products sold
hereunder or the use thereof, subject to the limitations hereinafter set forth.
Pharmanetics shall have sole control of any such action or settlement
negotiations, and Pharmanetics agrees to pay, subject to the limitations
hereinafter set forth, any final judgment (including all prejudgment and
post-judgment interest) entered against Bayer or Bayer's customers on such issue
in any such suit or proceeding defended by Pharmanetics. Bayer agrees that
Pharmanetics at Pharmanetics's sole option, shall be relieved of the foregoing
obligations unless Bayer shall notify Pharmanetics promptly in writing following
receipt of service of process or any other direct communication from the party
bringing a claim, suit or proceeding of such claim, suit or proceeding and give
Pharmanetics authority to proceed as contemplated herein, and at Pharmanetics's
expense, cooperates with Pharmanetics to settle and/or defend any such claim,
suit or proceeding. Pharmanetics shall not be liable for any costs or expenses
incurred without Pharmanetics's written authorization.

                                       20
<PAGE>

Limitation. Notwithstanding the provisions of subsection 10.2(a) above,
Pharmanetics assumes no liability for (i) infringements covering completed
Products when used in combination with another product or products or any
composition, assembly, combination method or process in which any of the
Products may be used in combination with another product or products; provided,
however, that such limitation shall not apply where the sale or use of the
Product (whether or not in any composition, assembly, combination, method or
process) is a sale for a use or a use intended or approved by Pharmanetics; (ii)
infringements involving any marking or branding not applied by Pharmanetics or
applied at the request of Bayer; or (iii) infringements involving the
modification or servicing of the Products, or any part thereof unless such
modification or servicing was performed by Pharmanetics or in accordance with
Pharmanetics's written instructions or approved by Pharmanetics.

THE FOREGOING PROVISIONS OF THIS SECTION 10.2 STATE THE ENTIRE LIABILITY AND
OBLIGATION OF PHARMANETICS AND THE EXCLUSIVE REMEDY OF BAYER, ITS AFFILIATES,
DISTRIBUTORS AND CUSTOMERS WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF PATENTS,
COPYRIGHTS, TRADEMARKS, OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS OR
ANY PART THEREOF.

Patent Enforcement. If Bayer believes that a third party is reasonably likely
infringing Pharmanetics's patent rights in the Territory, Bayer shall promptly
notify Pharmanetics of that fact and shall provide to Pharmanetics reasonable
evidence of any such claim based upon materials available to Bayer. Upon receipt
of evidence satisfactory to Pharmanetics of infringement, in Pharmanetics's sole
discretion Pharmanetics shall then have the sole right to take action against
such infringing third party. If Pharmanetics fails to take commercially
reasonable action within two (2)months to stop such infringement, and such
infringement, if allowed to continue, would have a substantial effect on Bayer's
sales of the Product, Bayer shall then be entitled to take commercially
reasonable action to stop such infringement, including the filing of suit;
provided, that Bayer shall not have such right so long as Pharmanetics is then
diligently taking action against at least one infringing third party in at least
one country in the Territory. If Bayer chooses to take such commercially
reasonable action, Pharmanetics shall cooperate with Bayer to enable Bayer to
take such action and Bayer shall have sole control over any lawsuit or
settlement. For purposes of this Section 10.2(d), "commercially reasonable
action" requires at a minimum advising the infringing party to cease and desist
its infringement. For purposes of this Section 10.2(d), "substantial effect on
Bayer's sales of the Product" means a third party offering for sale the Product
or an equivalent of the Product. For purposes of this Section 10.2(d),
"diligently taking action" means that Pharmanetics has filed at least one patent
infringement lawsuit against at least one infringer in at least one country. Any
recovery of damages or settlement amounts from any court actions or out of court
actions shall be divided as follows: one hundred percent to cover costs of the
parties until expenses are reimbursed in full and thereafter seventy five
percent to Pharmanetics and twenty-five percent to Bayer. Pharmanetics shall
have the right to settle any such action. Bayer shall have the right to
renegotiate its minimum performance obligations under Section 7.3 to the extent
they may be affected by such third party sales of the Product(s) in the
Territory.

                                       21
<PAGE>

Cooperation. If either party takes action against a third party pursuant to this
Section 10.2, or if a third party claims the manufacture, use or sale of Product
in the Territory infringes its patent or other proprietary rights, the other
party agrees to provide reasonable assistance by supplying information within
its control which may assist the party taking the enforcement action or
defending such claim.

Distribution Rights. Pharmanetics hereby grants to Bayer the right to act as its
authorized distributor in the Territory to use and sell the Products for the
term of this Agreement. During the term of this Agreement Pharmanetics shall not
bring any claim or action against Bayer or any of its Affiliates for the
infringement or misappropriation of any intellectual property owned or licensed
to Pharmanetics based upon the use or sale by Bayer or any of its Affiliates of
Products pursuant to the terms and conditions of this Agreement.

Term; Termination.

Term. The initial term of this Agreement shall be from the Effective Date until
December 31, 2003, unless terminated earlier under the provisions of this
Agreement. The parties intend to renew this Agreement at the end of each
five-year period (subject to the parties' renegotiation in good faith of minimum
purchase and price provisions) unless at least one hundred eighty (180) days
prior to the end of any five year term, either party provides to the other
written notice of its intent to terminate.

Termination for Cause - Either Party. Without prejudice to any other rights it
may have hereunder or at law or in equity, either party may terminate this
Agreement immediately by written notice to the other party upon the occurrence
of any of the following:

the other party becomes insolvent, an order for relief is entered against the
other party under any bankruptcy or insolvency laws or laws of similar import;

the other party makes an assignment for the benefit of its creditors or a
receiver or custodian is appointed for it or its business is placed under
attachment, garnishment or other process involving a significant portion of its
business;

after sixty (60) days' written notice from the terminating party without cure by
the other party of any material breach of this Agreement by the other party not
involving minimum sales or payments;

the  failure by Bayer to make any payment  due under this  Agreement  consistent
with the terms contained in Section 7.2;

the failure by Bayer to maintain  sales to end users as set forth in sub-section
7.3;

after sixty (60) days written notice from Pharmanetics, without cure by Bayer,
in the event of the sale of products by a distributor appointed by Bayer in the
Territory which are competitive with the Products; or

                                       22
<PAGE>

the "change of control" of Pharmanetics. Change of control of Pharmanetics shall
be defined as (i) the merger or consolidation of Pharmanetics with a third party
where Pharmanetics is not the surviving entity or (ii) the sale of all or
substantially all of Pharmanetics's assets or (iii) the sale or transfer of all
or substantially all of Pharmanetics's rights related to the manufacture and
sale of products in Pharmanetics's Routine Product or Specialty Product
division, provided, however, Pharmanetics may not terminate this Agreement for
this cause prior to December 31, 2002.

The "change of control" of Bayer where Bayer or the successor entity, as the
case may be, competes with Pharmanetics with respect to rapid diagnostic testing
of hemostasis in the Territory in the Specified Markets. For purposes of this
Section 11.2(h), "change of control" of Bayer shall have the meaning set forth
in Section 10.1(d) of the Common Stock Purchase Agreement between Bayer and
Pharmanetics, dated as of the date hereof.

                                       23
<PAGE>

Rights and Duties Upon Termination.

Termination of this Agreement, for whatever reason, shall not affect any rights
or obligations accrued by either party prior to the effective date of
termination, including under any purchase order for Products placed prior to the
effective date of termination.

Except as provided otherwise in this Section 11.3, upon termination of this
Agreement, Pharmanetics shall use reasonable efforts to continue to sell and
supply Products to Bayer and its Affiliates in such quantities as ordered but in
quantities no greater than reasonably appropriate in connection with fulfilling
contractual commitments to customers of Bayer, its Affiliates and its
subdistributors for a period not to exceed twelve (12) months; provided,
however, that such customers are end-user customers that purchased Products
during the six (6) months immediately prior to the termination of this
Agreement. Prices for Products shall remain at the level of the immediately
prior year adjusted solely for increases/decreases in material, labor, and
reasonable overhead; provided, however, that if the termination of this
Agreement does not relate to Section 11.2(c) or Section 11.2(d) or Section
11.2(e), any such price increases shall be limited to increases in the Producer
Price Index over the index for the year prior to any such termination. Upon
termination of this Agreement, and to the extent permitted under applicable law,
in each and every case for a price paid by Pharmanetics equal to the cost and
expense incurred by Bayer and its Affiliates to obtain such approvals and
registrations, Bayer, upon Pharmanetics's request, shall assign to Pharmanetics
(or such other entities designated by Pharmanetics) all product approvals,
registrations and regulatory approvals to sell Products in each country in the
Territory; or, if assignment of any such registration or approval is not
permissible under applicable law, where requested by Pharmanetics, Bayer shall
grant Pharmanetics (or its designee) a right of reference to such registrations
and approvals. Bayer shall otherwise use reasonable efforts to enable
Pharmanetics to import and sell the Products in such countries.

Upon termination of this Agreement by Bayer, Pharmanetics will not sell cards
bearing Bayer marks except to Bayer.

Sections of this Agreement shall survive any termination of this Agreement which
relate to confidentiality and indemnification, or otherwise which by their
nature cannot be accomplished or fulfilled prior to termination or which relate
to obligations of the parties accrued prior to termination.

Non-Competition. Bayer shall not, during the term of this Agreement,
manufacture, sell, distribute or cause to be distributed a competing point of
care coagulation product in the Territory in the Specified Markets.

                                       24
<PAGE>

Arbitration.

         Except for terminations pursuant to Section 11.3 above, all disputes,
         controversies and differences which may arise between the parties out
         of, in relation to or in connection with this Agreement, or for the
         breach thereof, or any claim based on or arising from any alleged
         wrongful conduct or omission related to this Agreement, may upon mutual
         agreement of the parties, be determined by arbitration. The arbitration
         shall be conducted in accordance with the Rules of the American
         Arbitration Association ("AAA"), Supplementary Procedures for Large
         Complex Disputes, in effect as of the commencement of the arbitration,
         as modified by the provisions of this paragraph. The arbitration shall
         be held in Raleigh, North Carolina if the arbitration is called for by
         Pharmanetics and in Boston, Massachusetts if the arbitration is called
         for by Bayer. Whenever a party desires to request arbitration
         proceedings, such party shall first cause its chief executive officer
         or other designated and authorized officer to contact the other party;
         which shall cause its chief executive officer or other designated and
         authorized officer to make good faith efforts to resolve any such
         dispute prior to arbitration or litigation.

         No provision of this section shall limit the right of either party to
         this Agreement to obtain provisional or ancillary remedies from a court
         of competent jurisdiction before, after or during the pendency of any
         arbitration if injunctive relief from the court is necessary to prevent
         serious and irreparable injury to one party or the other. The parties
         acknowledge that for purposes of this Agreement (1) preliminary
         injunctions, appointments of receivers, attachments, temporary
         protective orders and writs of possession constitute "provisional
         remedies," and (2) judicial actions to enforce a decision reached
         pursuant to this section constitute "ancillary remedies."

Miscellaneous.

Choice of Law. This Agreement and all purchase orders issued hereunder shall be
governed and interpreted, and all rights and obligations of the parties shall be
determined, in accordance with the laws of the State of North Carolina, without
regard to its conflict of laws rules.

Notices. All notices, approvals or other communications required hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally to such party or sent to such party by facsimile transmission
(confirmed in writing by other permitted means), air courier or by certified
mail, postage prepaid, to the following addresses:

                  To Bayer:

                  Bayer Diagnostics
                  63 North Street
                  Medfield, MA   02052
                  Attn:    Senior Vice President and General Manager,
                           New Patient Testing Segment
                  Fax:  508-359-3115

                                       25
<PAGE>

                  and with a copy to:

                  Bayer Diagnostics
                  63 North Street
                  Medfield, MA   02502
                  Attn:    NPT Counsel
                  Fax:     508-359-3885

                  To Pharmanetics:

                  Pharmanetics, Inc.
                  9401 Globe Center Drive
                  Suite 140
                  Morrisville, NC 27560
                  Attn: President
                  Fax: (919) 954-9932

                  and with a copy to:

                  Larry E.  Robbins, Esq.
                  Wyrick, Robbins, Yates & Ponton, LLP
                  4101 Lake Boone Trail
                  Suite 300
                  Raleigh, NC 27607
                  Fax (919) 781-4865

                           or to such other address as the addressee may have
                  specified in notice duly given to the sender as provided
                  herein. Such notice, request, demand, waiver, consent,
                  approval or other communications will be deemed to have been
                  given as of the date so delivered, transmitted by facsimile or
                  fifteen (15) days after so mailed.

                                       26
<PAGE>

Severability. In the event that any provision of this Agreement shall be found
in any jurisdiction to be in violation of public policy or illegal or
unenforceable in law or equity, such finding shall in no event invalidate any
other provision of this Agreement in that jurisdiction, and this Agreement shall
be deemed amended to the minimum extent required to comply with the law of such
jurisdiction.

Entire Agreement. This Agreement states the entire agreement between the parties
hereto about the transactions contemplated hereby and may not be amended or
modified except by written instrument duly executed by the parties hereto.

No Waiver. The failure of either party hereto to enforce at any time, or for any
period of time, any provision of this Agreement shall not be construed as a
waiver of such provision or of the right of such party thereafter to enforce
each and every provision.

Assignment, Binding Effect. Neither party shall assign this Agreement nor any of
their respective rights or obligations hereunder without the prior written
consent of the other party, except that either party may assign this Agreement
to any of its Affiliates or to any person to which substantially all of the
assets comprising its hemostasis products business are transferred by operation
of law or otherwise, including, but without limitation, by merger or transfer of
stock. Any other attempted assignment without such consent shall be void. Any
assignee or transferee of this Agreement and/or the rights or obligations
hereunder shall expressly assume in writing all obligations of the
assignor/transferor pursuant to this Agreement. In performing this Agreement,
Bayer may, upon sixty (60) days advance written notice, delegate to its
Affiliates its obligations hereunder. Bayer Diagnostics shall remain primarily
liable to Pharmanetics despite such delegation.

Independent Contractor. Each party shall act as the independent contractor of
the other party. Neither party shall be the legal agent of the other for any
purpose whatsoever and therefore has no right or authority to make or underwrite
any promise, warranty or representation, to execute any contract or otherwise to
assume any obligation or responsibility in the name of or in behalf of the other
party, except to the extent specifically authorized in writing by the other
party. Neither of the parties hereto shall be bound by or liable to any third
persons for any act or for any obligation or debt incurred by the other toward
such third party, except to the extent specifically agreed to in writing by the
party so to be bound.

Headings. All section headings contained in this Agreement are for convenience
of reference only, do not form a part of this Agreement and shall not affect in
any way the meaning or interpretation of this Agreement.

Counterparts. This Agreement may be executed in any number of counterparts and
any party hereto may execute any such counterpart, each of which when executed
and delivered shall be deemed to be an original and all of which counterparts
taken together shall constitute but one and the same instrument. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to account
for any of the other counterpart.

                                       27
<PAGE>

Force Majeure. Neither party shall be deemed to be in default for failure or
delay in performance to the extent of causes which are reasonably unforeseeable
or, if foreseeable, reasonably unremediable in spite of diligent efforts to
effect a reasonable remedy, and which are caused by act or omission of any
governmental authority or of the other party, compliance with new governmental
regulations, insurrection, riot, embargo, delays or shortages in transportation
or inability to obtain necessary materials, and Acts of God or Nature.

Insurance. Pharmanetics and Bayer shall at all times maintain insurance,
including product liability insurance, in the amount of $5,000,000.00. Each
party shall, at the request of the other party, provide such evidence of such
insurance as requested, including a certificate of insurance. Such insurance
shall not be canceled without at least thirty (30) days prior written notice to
Bayer.

Books and Records. Pharmanetics and Bayer shall, during the term of this
Agreement and for three (3) years thereafter, make and keep full and accurate
books and records showing the quantities of Products sold in sufficient detail
to determine applicable pricing pursuant to Section 7.2 and applicable Card,
commission, and Instrument credits pursuant to Sections 3.6, 5.6 and 5.7. Each
party shall be permitted to designate an independent third party such as a
nationally recognized accounting firm to inspect the applicable books and
records of the other party from time to time, during regular business hours to
the extent necessary to verify applicable pricing and credits. The designated
party shall report its findings to the requesting party. Each party agrees to
treat as Proprietary Information all information learned in the course of any
such inspection hereunder, except when it is necessary for the party to reveal
such information in order to enforce its rights under this Agreement.
Notwithstanding anything to the contrary contained herein, the party to be
inspected may waive at any time the requirement contained in this section
relating to the use of an independent third party.

Press Releases; Publicity. Neither party shall publicly disclose or announce any
term of this Agreement; provided, however, that a party may issue a press
release disclosing the existence of this Agreement and other terms only upon
prior written agreement of the other party, further provided, that each party
shall at all times be entitled to make disclosures required by applicable
securities laws.

                     [The next page is the signature page.]

                                       28
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the day and year first above written.

PHARMANETICS, INC.                             BAYER CORPORATION

By:  /s/ John Funkhouser                       By:  /s/ Frances L. Tuttle
     John Funkhouser                                Frances L. Tuttle
     President                                      Senior Vice President -
                                                      Near Patient Testing

                                       29

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