Document:

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                                                                    EXHIBIT 4.02

                   PHARMA SERVICES INTERMEDIATE HOLDING CORP.
    $219,000,000 PRINCIPAL AT MATURITY 11 1/2% SENIOR DISCOUNT NOTES DUE 2014

                          Registration Rights Agreement

                                                              New York, New York
                                                                  March 18, 2004

Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York  10013

Ladies and Gentlemen:

            Pharma Services Intermediate Holding Corp., a corporation organized
under the laws of the State of Delaware (the "Issuer"), proposes to issue and
sell to Citigroup Global Markets Inc. (the "Initial Purchaser") $219,000,000
aggregate principal amount at maturity of its 11 1/2% senior discount notes due
2014 (the "Notes") upon the terms set forth in a purchase agreement dated March
11, 2004 (the "Purchase Agreement") relating to the initial placement of the
Notes (the "Initial Placement"). The Notes will be issued pursuant to the
Indenture (as defined herein). To induce the Initial Purchaser to enter into the
Purchase Agreement and to satisfy a condition of your obligations thereunder,
the Issuer (as defined herein) hereby agrees with you for your benefit and the
benefit of the registered holders from time to time of Notes and Exchange Notes
(as defined herein) (including the Initial Purchaser) (each a "Holder" and,
together, the "Holders" for as long as such Person holds Notes), as follows:

            1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following defined terms shall have the following
respective meanings:

            "Act" shall mean the Securities Act of 1933, as amended.

            "Affiliate" of, or Person "affiliated" with, any specified Person
shall mean any Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified Person. For purposes of this definition, "control" of a Person
shall mean the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled by" and "under common control with" shall have
meanings correlative to the foregoing.

            "Agreement" shall have the meaning set forth in the preamble hereto.

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            "Broker-Dealer" shall mean any broker or dealer registered as such
under the Exchange Act.

            "Business Day" shall mean any day other than a Saturday, a Sunday or
a legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City.

            "Commission" shall mean the Securities and Exchange Commission.

            "Conduct Rules" shall have the meaning set forth in Section 4(t)
hereof.

            "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

            "Exchange Notes" shall mean debt securities of the Issuer identical
in all material respects to the Notes (except that the additional interest
provisions, the transfer restrictions and the restrictive legends shall be
modified or eliminated, as appropriate) and to be issued under the Indenture.

            "Exchange Offer Registration Period" shall mean the up to 90-day
period following the consummation of the Registered Exchange Offer, exclusive of
any period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.

            "Exchange Offer Registration Statement" shall mean a registration
statement of the Issuer on an appropriate form under the Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments thereto, in each case including
the Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.

            "Exchanging Dealer" shall mean any Holder (which may include the
Initial Purchaser) that is a Broker-Dealer and elects to exchange any Notes that
it acquired for its own account as a result of market-making activities or other
trading activities (but not directly from any Issuer or any Affiliate of any
Issuer) for Exchange Notes.

            "Final Memorandum" shall have the meaning set forth in the Purchase
Agreement.

            "Holder(s)" shall have the meaning set forth in the preamble hereto.

            "Indenture" shall mean the Indenture relating to the Notes, to be
dated as of the original issuance of the Notes, between the Issuer and the
Trustee, as amended, amended and restated or supplemented from time to time in
accordance with the terms thereof.

            "Initial Placement" shall have the meaning set forth in the preamble
hereto.

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            "Initial Purchaser" shall have the meaning set forth in the preamble
hereto.

            "Inspector" shall have the meaning set forth in Section 4(q)(ii).

            "Issuer" shall have the meaning set forth in the preamble hereto.

            "Losses" shall have the meaning set forth in Section 6(d) hereof.

            "Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount at maturity of Notes and Exchange Notes, as the case
may be, registered under a Registration Statement.

            "Managing Underwriters" shall mean the investment banker or
investment bankers and manager or managers that shall administer an underwritten
offering.

            "Notes" shall have the meaning set forth in the preamble hereto.

            "Person" shall mean an individual, trustee, corporation,
partnership, limited liability company, joint stock company, trust,
unincorporated association, union, business association, firm or other legal
entity.

            "Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Notes or the Exchange Notes covered by such
Registration Statement, and all amendments and supplements thereto and all
material incorporated by reference therein.

            "Purchase Agreement" shall have the meaning set forth in the
preamble hereto.

            "Registered Exchange Offer" shall mean the proposed offer of the
Issuer to issue and deliver to the Holders of the Notes that are not prohibited
by any law or policy of the Commission from participating in such offer a like
aggregate principal amount at maturity of Exchange Notes in exchange for the
Notes.

            "Registration Default" shall have the meaning set forth in Section
3(c).

            "Registration Default Period" shall have the meaning set forth in
Section 3(c)(vii).

            "Registration Statement" shall mean any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Notes or the
Exchange Notes pursuant to the provisions of this Agreement, any amendments and
supplements to such registra-

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tion statement, including post-effective amendments (in each case including the
Prospectus contained therein), all exhibits thereto and all material
incorporated by reference therein.

            "Shelf Registration" shall mean a registration effected pursuant to
Section 3 hereof.

            "Shelf Registration Period" shall have the meaning set forth in
Section 3(b)(ii) hereof.

            "Shelf Registration Statement" shall mean a "shelf" registration
statement of the Issuer prepared and filed with the Commission pursuant to the
provisions of Section 3 hereof which covers some or all of the Notes or Exchange
Notes, as applicable, on an appropriate form under Rule 415 under the Act, or
any successor or similar rule that may be adopted by the Commission, amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.

            "Trustee" shall mean the trustee with respect to the Notes under the
Indenture.

            "underwriter" shall mean any Person deemed an "underwriter," under
the Act, of the Notes or Exchange Notes in connection with an offering thereof
under a Shelf Registration Statement.

            2. Registered Exchange Offer.

            (a) To the extent not prohibited by any applicable law or any
applicable interpretation or any applicable policy of the staff of the
Commission, (i) the Issuer shall use its reasonable best efforts to prepare and,
not later than 360 days following the Closing Date (or if such 360th day is not
a Business Day, the next succeeding Business Day), file with the Commission the
Exchange Offer Registration Statement with respect to the Registered Exchange
Offer and (ii) the Issuer shall use its reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective under the Act not
later than 420 days following the Closing Date (or if such 420th day is not a
Business Day, the next succeeding Business Day).

            (b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Issuer shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Notes for Exchange Notes (assuming that such Holder is not
an Affiliate of the Issuer, acquires the Exchange Notes in the ordinary course
of such Holder's business, is not engaged in and does not intend to engage in
and has no arrangements or understandings with any Person to participate in the
distribution of the Exchange Notes, is not a broker-dealer tendering Notes
directly acquired from the Issuer for its own account and is not prohibited by
any law, interpretation or policy of the Commission from participating in the
Registered Exchange Offer) to trade such

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Exchange Notes from and after their receipt without any limitations or
restrictions under the Act and under state securities or blue sky laws.

            (c) In connection with the Registered Exchange Offer, the Issuer
shall:

            (i) mail to each Holder a copy of the Prospectus forming part of the
      Exchange Offer Registration Statement, together with an appropriate letter
      of transmittal and related documents;

            (ii) keep the Registered Exchange Offer open for not less than 30
      days after the date notice thereof is mailed to the Holders (or longer if
      required by applicable law);

            (iii) if the Issuer receives notice from an Exchanging Dealer that
      such Exchanging Dealer holds Notes acquired for the account of such
      Exchanging Dealer as a result of market making or other trading
      activities, use its reasonable best efforts to keep the Exchange Offer
      Registration Statement continuously effective under the Act, supplemented
      and amended as required under the Act to ensure that it is available for
      sales of Exchange Notes by Exchanging Dealers during the Exchange Offer
      Registration Period;

            (iv) utilize the services of a depositary for the Registered
      Exchange Offer with an address in the Borough of Manhattan in New York
      City, which may be the Trustee or an Affiliate of the Trustee;

            (v) permit Holders to withdraw tendered Notes at any time prior to
      the close of business, New York City time, on the last Business Day on
      which the Registered Exchange Offer is open by sending to the entity
      specified in the Prospectus, a facsimile or letter setting forth the name
      of such Holder, the principal amount of the Notes delivered for exchange
      and a statement that such Holder is withdrawing such Holder's election to
      have such Notes exchanged;

            (vi) prior to effectiveness of the Exchange Offer Registration
      Statement, if requested by the Commission, provide a supplemental letter
      to the Commission (A) stating that the Issuer is conducting the Registered
      Exchange Offer in reliance on the position of the Commission in Exxon
      Capital Holdings Corporation (pub. avail. May 13, 1988) and Morgan Stanley
      and Co. Incorporated (pub. avail. June 5, 1991); and (B) including a
      representation that the Issuer has not entered into any arrangement or
      understanding with any Person to distribute the Exchange Notes to be
      received in the Registered Exchange Offer and that, to the best of the
      Issuer's information and belief, each Holder participating in the
      Registered Exchange Offer is acquiring the Exchange Notes in the ordinary
      course of business and has no arrangement or understanding with any Person
      to participate in the distribution of the Exchange Notes; and

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            (vii) comply in all material respects with all applicable laws
      relating to the Registered Exchange Offer.

            (d) Promptly after the close of the Registered Exchange Offer, the
Issuer shall:

            (i) accept for exchange all Notes validly tendered and not validly
      withdrawn pursuant to the Registered Exchange Offer in accordance with the
      terms of the Exchange Offer Registration Statement and letter of
      transmittal, which shall be an exhibit thereto;

            (ii) deliver to the Trustee for cancellation in accordance with
      Section 4(r) hereof all Notes so accepted for exchange; and

            (iii) cause the Trustee promptly to authenticate and deliver to each
      Holder of Notes a principal amount of Exchange Notes equal to the
      principal amount of the Notes of such Holder so accepted for exchange;
      provided that in the case of any Notes held in global form by a
      depository, authentication and delivery to such depository of one or more
      replacement Notes in global form in an equivalent amount thereto for the
      account of such Holders in accordance with the Indenture shall satisfy
      such authentication and delivery requirement.

            (e) Each Holder, by tendering Notes for exchange for Exchange Notes,
acknowledges and agrees that any Broker-Dealer and any such Holder using the
Registered Exchange Offer to participate in a distribution of the Exchange Notes
(x) could not under Commission policy as in effect on the date of this Agreement
rely on the position of the Commission in Morgan Stanley and Co. Incorporated
(pub. avail. June 5, 1991) and Exxon Capital Holdings Corporation (pub. avail.
May 13, 1988), as interpreted in Shearman & Sterling (pub. avail. July 2, 1993)
and similar no-action letters; and (y) must comply with the registration and
prospectus delivery requirements of the Act in connection with any secondary
resale transaction and must be covered by an effective registration statement
containing the selling security holder information required by Items 507 and 508
of Regulation S-K, as applicable, under the Act if the resales are of Exchange
Notes obtained by such Holder in exchange for Notes acquired by such Holder
directly from any Issuer or one of its Affiliates. Accordingly, each Holder
participating in the Registered Exchange Offer shall be required to represent to
the Issuer in writing (which may be contained in the letter of transmittal
contemplated by the Registered Exchange Offer) that, at the time of the
consummation of the Registered Exchange Offer:

            (i) any Exchange Notes received by such Holder will be acquired in
      the ordinary course of business;

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            (ii) such Holder will have no arrangement or understanding with any
      Person to participate in the distribution of the Notes or the Exchange
      Notes within the meaning of the Act; and

            (iii) such Holder is not an Affiliate of the Issuer.

            (f) If the Initial Purchaser determines that it is not eligible to
participate in the Registered Exchange Offer with respect to the exchange of
Notes constituting any portion of an unsold allotment, at the written request of
the Initial Purchaser, the Issuer shall issue and deliver to the Initial
Purchaser or the Person purchasing Exchange Notes registered under a Shelf
Registration Statement as contemplated by Section 3 hereof from the Initial
Purchaser, in exchange for such Notes, or Exchange Notes, as the case may be, a
like principal amount of the Notes (the "Private Exchange Notes") of the Issuer
that are identical in all material respects to the Exchange Notes except for the
placement of a restrictive legal legend on such Private Exchange Notes. The
Issuer shall use its reasonable best efforts to cause the CUSIP Service Bureau
to issue the same CUSIP number for such Private Exchange Notes as for Exchange
Notes issued pursuant to the Registered Exchange Offer.

            3. Shelf Registration.

            (a) If (i) due to any change in law, applicable interpretations
thereof or changes in policy by the Commission's staff, the Issuer determines
upon advice of its outside counsel that it is not permitted to effect the
Registered Exchange Offer as contemplated by Section 2 hereof; (ii) for any
other reason the Exchange Offer Registration Statement is not declared effective
within 420 days, or the Registered Exchange Offer is not consummated within 450
days, after the Issue Date; or (iii) prior to the 20th day following
consummation of the Registered Exchange Offer the Issuer receives written notice
that (A) the Initial Purchaser so requests with respect to Notes (or Private
Exchange Notes) that are not eligible to be exchanged for Exchange Notes in the
Registered Exchange Offer and that are held by it following consummation of the
Registered Exchange Offer; (B) any Holder (other than the Initial Purchaser or
Exchanging Dealer) is not eligible to participate in the Registered Exchange
Offer; or (C) in the case that the Initial Purchaser participates in the
Registered Exchange Offer or acquires Private Exchange Notes pursuant to Section
2(f) hereof, the Initial Purchaser does not receive freely tradeable Exchange
Notes in exchange for Notes constituting any portion of an unsold allotment (it
being understood that (x) the requirement that the Initial Purchaser deliver a
Prospectus containing the information required by Items 507 and 508 of
Regulation S-K, as applicable, under the Act in connection with sales of
Exchange Notes acquired in exchange for such Notes shall result in such Exchange
Notes being not "freely tradeable"; and (y) the requirement that an Exchanging
Dealer deliver a Prospectus in connection with sales of Exchange Notes acquired
in the Registered Exchange Offer in exchange for Notes acquired as a result of
market-making activities or other trading activities shall not result in such
Exchange Notes being not "freely tradeable"), the Issuer shall effect a Shelf
Registration Statement in accordance with Section 3(b) hereof. For all purposes
of this Agreement, the obligation to have a Shelf Registration Statement
declared effective under

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Section 3(a)(iii) shall be deemed to arise as set forth in Section 3(b)(i). The
obligation to file a Shelf Registration Statement under Section 3(a)(iii) shall
be deemed to arise on the later of the 360th day after the Issue Date or the day
the Issuer receives notice relating to a Section 3(a)(iii) Shelf Registration
Statement.

            (b) (i) The Issuer shall as promptly as reasonably practicable (but
in no event more than 30 days after so required or requested pursuant to Section
3(a)(i) or (ii) and no later than the later of the 60th day after so required
pursuant to Section 3(a)(iii) or the 90th day after the Issue Date), file with
the Commission, and thereafter shall use its reasonable best efforts to cause to
be declared effective under the Act (within 90 days after so required or
requested pursuant to Section 3(a)(i) or (ii) or within 60 days of the filing
date of a Shelf Registration Statement required or requested pursuant to Section
3(a)(iii)), a Shelf Registration Statement relating to the offer and sale of the
Notes or the Exchange Notes, as applicable, by the Holders thereof from time to
time in accordance with the methods of distribution elected by a majority of
such Holders and set forth in such Shelf Registration Statement; provided,
however, that nothing in this Section 3(b) shall require the filing of a Shelf
Registration Statement prior to the deadline for filing the Exchange Offer
Registration Statement set forth in Section 2(a); provided, further, that no
Holder (other than the Initial Purchaser) shall be entitled to have the Notes
held by it covered by such Shelf Registration Statement unless such Holder
agrees in writing to be bound by all of the provisions of this Agreement
applicable to such Holder; and provided, further, that with respect to Exchange
Notes or Private Exchange Notes received by the Initial Purchaser in exchange
for Notes constituting any portion of an unsold allotment, the Issuer may, if
permitted by current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration Statement containing
the information required by Items 507 and 508 of Regulation S-K, as applicable,
in satisfaction of its obligations under this subsection with respect thereto,
and any such Exchange Offer Registration Statement, as so amended, shall be
referred to herein as, and governed by the provisions herein applicable to, a
Shelf Registration Statement.

            (ii) The Issuer shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective, supplemented and amended as
required by the Act, in order to permit the Prospectus forming part thereof to
be usable by Holders for a period of two years from the original issuance date
of the Notes or such shorter period that will terminate when all the Notes or
Exchange Notes, as applicable, covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement or cease to be
outstanding (in any such case, such period being called the "Shelf Registration
Period"). The Issuer shall be deemed not to have used its reasonable best
efforts to keep a Shelf Registration Statement effective during the Shelf
Registration Period if it voluntarily takes any action that would result in
Holders of Notes covered thereby not being able to use such Shelf Registration
Statement to offer and sell such Notes covered by such Shelf Registration
Statement at any time during the Shelf Registration Period, unless such action
is (x) required by the Commission, applicable law or otherwise undertaken by the
Issuer in good faith and for valid

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business reasons (not including avoidance of the Issuer's obligations
hereunder), including the acquisition or divestiture of assets, and (y)
permitted pursuant to Section 4(k)(ii) hereof.

            (c) In the event that:

            (i) within 360 days after the Issue Date, neither the Exchange Offer
      Registration Statement nor, if required to be filed pursuant to Section
      3(a)(i) or (ii) above, any Shelf Registration Statement has been filed
      with the Commission;

            (ii) within 30 days after a Shelf Registration Statement is required
      to be filed pursuant to Section 3(a)(i) or (ii), so long as such 30th day
      is a day after the 420th day following the Issue Date, the Shelf
      Registration Statement has not been filed with Commission;

            (iii) within 420 days after the Issue Date, the Exchange Offer
      Registration Statement has not been declared effective as required by
      Section 2(a);

            (iv) within 450 days after the Issue Date, neither the Exchange
      Offer has been consummated nor, if required to be filed pursuant to
      Section 3(a)(i) or (ii) above, the Shelf Registration Statement has been
      declared effective;

            (v) within 60 days of the day on which the obligation to file a
      Shelf Registration Statement arises pursuant solely to Section 3(a)(iii)
      above, the Issuer fails to file such Shelf Registration Statement with the
      Commission;

            (vi) within 60 days of the day on which the obligation to have a
      Shelf Registration Statement declared effective arises pursuant solely to
      Section 3(a)(iii) above, such Shelf Registration Statement has not been
      declared effective; or

            (vii) after either the Exchange Offer Registration Statement or the
      Shelf Registration Statement has been declared effective, such
      Registration Statement thereafter ceases to be effective or fails to be
      usable in connection with resales of Notes or Exchange Notes in accordance
      with and during the periods specified in this Agreement, other than as
      permitted pursuant to Section 3(b)(ii) and Section 4(k)(ii).

(each such event a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, as liquidated damages for such Registration Default, additional
interest will accrue on the aggregate principal amount solely those Notes and
Exchange Notes subject to such Registration Default (in addition to the stated
interest on the Notes and Exchange Notes) from and including the date on which
any such Registration Default shall occur to, but excluding the date that is the
earlier of (1) the date on which all Registration Defaults applicable to the
subject Notes and Exchange Notes have been cured or (2) the date on which all
the Notes and Exchange Notes oth-

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erwise become freely transferable by Holders other than Affiliates of the Issuer
without further registration under the Act. Additional interest will accrue at
an initial rate of 0.25% per annum, which rate shall increase by 0.25% per annum
for each subsequent 90-day period during which such Registration Default
continues up to a maximum of 1.00% per annum. Any such accrued interest shall be
payable in cash to holders of the notes on each interest payment date at such
time as interest on the Notes is payable in cash. If, after the cure of all
Registration Defaults then in effect, there is a subsequent Registration
Default, the rate of additional interest for such subsequent Registration
Default shall initially be 0.25% regardless of the rate in effect with respect
to any prior Registration Default at the time of cure of such Registration
Default. Notwithstanding the foregoing, the amount of additional interest
payable shall not increase because more than one Registration Default has
occurred and is pending.

            4. Additional Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:

            (a) the Issuer shall:

                  (i) furnish to each of you or your counsel, not less than
            three Business Days prior to the filing thereof with the Commission,
            a copy of the Exchange Offer Registration Statement or the Shelf
            Registration Statement, as the case may be, and each amendment
            thereto and each amendment or supplement, if any, to the Prospectus
            included therein (and upon written request, all documents
            incorporated by reference therein after the initial filing) and
            shall use its reasonable best efforts to reflect in each such
            document, when so filed with the Commission, such comments as you
            reasonably propose within a reasonable time prior to such filing;

                  (ii) in the case of an Exchange Offer Registration Statement,
            to the extent permitted by the Act, include the information in
            substantially the form set forth in Annex A hereto on the facing
            page of the Exchange Offer Registration Statement, in substantially
            the form set forth in Annex B hereto in the forepart of the Exchange
            Offer Registration Statement in a section setting forth details of
            the Exchange Offer, in substantially the form set forth in Annex C
            hereto in the underwriting or plan of distribution section of the
            Prospectus contained in the Exchange Offer Registration Statement,
            and in substantially the form set forth in Annex D hereto in the
            letter of transmittal delivered pursuant to the Registered Exchange
            Offer; and

                  (iii) in the case of a Shelf Registration Statement, subject
            to clause (n) below, include the names of the Holders that propose
            to sell Notes or Exchange Notes pursuant to the Shelf Registration
            Statement as selling security

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            holders and the applicable information required by Items 507 and 508
            of Regulation S-K as provided by the Holders.

            (b) The Issuer shall ensure that:

                  (i) any Registration Statement and any amendment thereto and
            any Prospectus forming part thereof and any amendment or supplement
            thereto complies in all material respects with the Act; and

                  (ii) any Registration Statement and any amendment thereto does
            not, when it becomes effective, contain an untrue statement of a
            material fact or omit to state a material fact required to be stated
            therein or necessary to make the statements therein not misleading.

            (c) The Issuer shall advise you, the Holders of Notes or Exchange
      Notes covered by any Shelf Registration Statement and any Exchanging
      Dealer under any Exchange Offer Registration Statement that has provided
      in writing to the Issuer a telephone or facsimile number and address for
      notices, and, if requested by you or any such Holder or Exchanging Dealer,
      shall confirm such advice in writing (which notice pursuant to clauses
      (ii)-(v) hereof shall be accompanied by an instruction to suspend the use
      of the Prospectus until the Issuer shall have remedied the basis for such
      suspension):

                  (i) when a Registration Statement or any amendment thereto has
            been filed with the Commission and when the Registration Statement
            or any post-effective amendment thereto has become effective;

                  (ii) of any request by the Commission for any amendment or
            supplement to the Registration Statement or the Prospectus or for
            additional information;

                  (iii) of the issuance by the Commission of any stop order
            suspending the effectiveness of the Registration Statement or the
            initiation of any proceedings for that purpose;

                  (iv) of the receipt by the Issuer of any notification with
            respect to the suspension of the qualification of the Notes included
            therein for sale in any jurisdiction or the initiation of any
            proceeding for such purpose; and

                  (v) of the happening of any event that requires any change in
            the Registration Statement or the Prospectus so that, as of such
            date, the statements therein are not misleading and do not omit to
            state a material fact required to be stated therein or necessary to
            make the statements therein (in the case of the

                                      -11-
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            Prospectus, in the light of the circumstances under which they were
            made) not misleading; provided that such notice need not identify
            the reasons for such event that requires such change in the
            Registration Statement.

            (d) The Issuer shall use its reasonable best efforts to obtain the
      withdrawal of any order suspending the effectiveness of any Registration
      Statement or the qualification of the Notes therein for sale in any
      jurisdiction at the earliest possible time.

            (e) The Issuer shall furnish to each Holder of Notes or Exchange
      Notes covered by any Shelf Registration Statement, without charge, at
      least one copy of such Shelf Registration Statement and any post-effective
      amendment thereto, including, upon written request, all material
      incorporated therein by reference and exhibits thereto (including exhibits
      incorporated by reference therein).

            (f) The Issuer shall, during the Shelf Registration Period, deliver
      to each Holder of Notes or Exchange Notes covered by any Shelf
      Registration Statement, without charge, as many copies of the Prospectus
      (including each preliminary Prospectus) included in such Shelf
      Registration Statement and any amendment or supplement thereto as such
      Holder may reasonably request. The Issuer consents to the use (in all
      cases in accordance with applicable law and subject to compliance with the
      terms of this Agreement) of the Prospectus or any amendment or supplement
      thereto by each of the selling Holders of Notes in connection with the
      offering and sale of the Notes covered by the Prospectus, or any amendment
      or supplement thereto, included in the Shelf Registration Statement.

            (g) The Issuer shall furnish to each Exchanging Dealer which so
      requests, without charge, at least one copy of the Exchange Offer
      Registration Statement and any post-effective amendment thereto,
      including, upon written request, all material incorporated by reference
      therein, and all exhibits thereto (including exhibits incorporated by
      reference therein).

            (h) The Issuer shall promptly deliver to the Initial Purchaser, each
      Exchanging Dealer and each other Person required to deliver a Prospectus
      during the Exchange Offer Registration Period, without charge, as many
      copies of the Prospectus included in such Exchange Offer Registration
      Statement and any amendment or supplement thereto as any such Person may
      reasonably request. The Issuer consents to the use (in all cases in
      accordance with applicable law and subject to compliance with the terms of
      this Agreement) of the Prospectus or any amendment or supplement thereto
      by the Initial Purchaser, any Exchanging Dealer and any such other Person
      that may be required to deliver a Prospectus following the Registered
      Exchange Offer in connection with the offering and sale of the Exchange
      Notes covered by the Prospectus, or any amendment or supplement thereto,
      included in the Exchange Offer Registration Statement.

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            (i) Prior to the Registered Exchange Offer or any other offering of
      Notes or Exchange Notes pursuant to any Registration Statement, the Issuer
      shall arrange, if necessary, for the qualification of the Notes or the
      Exchange Notes for sale under the laws of such jurisdictions as any Holder
      shall reasonably request and will maintain such qualification in effect so
      long as required; provided that in no event shall the Issuer be obligated
      (i) to qualify to do business in any jurisdiction where it is not then so
      qualified or (ii) to take any action that would subject it to taxation or
      service of process in suits, other than those arising out of the Initial
      Placement, the Registered Exchange Offer or any offering pursuant to a
      Shelf Registration Statement, in any such jurisdiction where it is not
      then so subject.

            (j) The Issuer shall cooperate with the Holders to facilitate the
      timely preparation and delivery of certificates representing Exchange
      Notes or Notes to be issued or sold pursuant to any Registration Statement
      free of any restrictive legends and in such denominations and registered
      in such names as Holders may request.

            (k)

                  (i) Upon the occurrence of any event contemplated by
            subsections (c)(ii) through (v) above, the Issuer shall promptly
            prepare a post-effective amendment to the applicable Registration
            Statement or an amendment or supplement to the related Prospectus or
            file any other required document so that, as thereafter delivered to
            the Initial Purchaser, the Prospectus will not include an untrue
            statement of a material fact or omit to state any material fact
            necessary to make the statements therein, in the light of the
            circumstances under which they were made, not misleading. In such
            circumstances, the period of effectiveness of the Exchange Offer
            Registration Statement provided for in Section 2 hereof and the
            Shelf Registration Statement provided for in Section 3(b) hereof
            shall each be extended by the number of days from and including the
            date of the giving of a notice of suspension pursuant to Section
            4(c) hereof to and including the date when the Initial Purchaser,
            the Holders and any known Exchanging Dealer shall have received such
            amended or supplemented Prospectus pursuant to this Section 4; or

                  (ii) Upon the occurrence or existence of any pending corporate
            development or any other material event that, in the reasonable
            judgment of the Issuer, makes it appropriate to suspend the
            availability of a Shelf Registration Statement and the related
            Prospectus, the Issuer shall give notice (without notice of the
            nature or details of such events) to the Holders that the
            availability of the Shelf Registration is suspended and, upon actual
            receipt of any such notice, each Holder agrees not to sell any
            registrable Notes pursuant to the Shelf Registration until such
            Holder's receipt of copies of the supplemented or amended Prospectus
            provided for in Section 4(h) hereof, or until it is advised

                                      -13-
<PAGE>

            in writing by the Issuer that the Prospectus may be used, and has
            received copies of any additional or supplemental filings that are
            incorporated or deemed incorporated by reference in such Prospectus.
            The period during which the availability of the Shelf Registration
            and any Prospectus is suspended shall not exceed 45 days in any
            three-month period or 90 days in any twelve-month period.

      Notwithstanding this Section 4(k), in no event shall the Issuer be
      required to maintain the effectiveness of any Exchange Offer Registration
      Statement or Shelf Registration Statement beyond the second anniversary of
      the original Issue Date of the Notes, except as set forth in Section
      3(b)(ii). As soon as practicable following receipt of notice from the
      Issuer in accordance with Sections 4(c) or (k) hereof, as the case maybe,
      each Holder and Exchanging Dealer agrees to suspend use of the Prospectus
      until such Holder and Exchanging Dealer receives copies of the amended or
      supplemented Prospectus or until it receives written notice from the
      Issuer that the use of the applicable Prospectus may be resumed.

            (l) Not later than the effective date of any Registration Statement,
      the Issuer shall provide a CUSIP number for the Notes or the Exchange
      Notes, as the case may be, registered under such Registration Statement
      and provide the Trustee with printed certificates for such Notes or
      Exchange Notes, in a form eligible for deposit with The Depository Trust
      Company.

            (m) The Issuer shall comply with all applicable rules and
      regulations of the Commission and make generally available to their
      security holders as soon as practicable after the effective date of the
      applicable Registration Statement an earnings statement satisfying the
      provisions of Section 11(a) of the Act.

            (n) The Issuer shall cause the Indenture to be qualified under the
      Trust Indenture Act of 1939, as amended, in a timely manner.

            (o) The Issuer may require each Holder of Notes to be sold pursuant
      to any Shelf Registration Statement to furnish to the Issuer such
      information regarding the Holder and the distribution of such Notes as the
      Issuer may from time to time reasonably require for inclusion in such
      Registration Statement. The Issuer may exclude from such Shelf
      Registration Statement the Notes or Exchange Notes of any Holder that
      unreasonably fails to furnish such information within a reasonable time
      after receiving such request and the failure to include such Notes or
      Exchange Notes of any such Holder shall not be deemed to be a default
      hereunder. Each Holder agrees to promptly furnish additional information
      required to be disclosed in order to make the information previously
      furnished to the Issuer by such Holder, regarding such Holder, not
      materially misleading.

                                      -14-
<PAGE>

            (p) In the case of any Shelf Registration Statement, the Issuer
      shall enter into such and take all other appropriate actions (including,
      if requested by Holders representing 10% of the aggregate principal amount
      of Notes covered by such Shelf Registration Statement, an underwriting
      agreement in customary form) in order to expedite or facilitate the
      registration or the disposition of the Notes or Exchange Notes, and in
      connection therewith, if an underwriting agreement is entered into, cause
      the same to contain indemnification provisions and procedures no less
      favorable than those set forth in Section 6 (or such other provisions and
      procedures acceptable to the Majority Holders and the Managing
      Underwriters, if any, with respect to all parties to be indemnified
      pursuant to Section 6).

            (q) In the case of any Shelf Registration Statement, the Issuer
      shall:

                  (i) upon written request and reasonable advance notice, make
            reasonably available for inspection by the Holders of Notes or
            Exchange Notes to be registered thereunder, any underwriter
            participating in any disposition pursuant to such Shelf Registration
            Statement, and any attorney retained by the Holders or any such
            underwriter all relevant financial and other records, pertinent
            corporate documents and properties of the Issuer during normal
            business hours at the offices where such information is typically
            kept;

                  (ii) upon written request and reasonable advance notice, cause
            the officers, directors and employees of the Issuer to supply all
            relevant information reasonably requested by the Holders or any such
            underwriter or attorney in connection with any such Shelf
            Registration Statement (each an "Inspector") as is customary for
            similar due diligence examinations during normal business hours at
            the offices where such information is typically kept; provided,
            however, that each Inspector shall agree in writing that any
            confidential information referred to in Section 4(q)(i) above or
            this Section 4(q)(ii) shall be kept confidential by such Inspector,
            unless such disclosure is made in connection with a court proceeding
            or required by law, or such information becomes available to the
            public generally or through a third party (other than an Affiliate
            of such Inspector) without an accompanying obligation of
            confidentiality; provided, further, that prior written notice shall
            be provided as soon as practicable to the Issuer of the potential
            disclosure of any information in connection with a court proceeding
            or required by law to permit the Issuer to obtain a protective order
            or take such other action to prevent disclosure of such information;

                  (iii) make such representations and warranties to the Holders
            of Notes or Exchange Notes registered thereunder and the
            underwriters, if any, in form, substance and scope as are
            customarily made by issuers to underwriters in primary underwritten
            offerings and covering matters including, but not lim-

                                      -15-
<PAGE>
            ited to, those set forth in the Purchase Agreement as may be
            reasonably requested;

                  (iv) obtain opinions of counsel to the Issuer (which may be
            the Issuer's internal counsel) and updates thereof (which counsel
            and opinions (in form, scope and substance) shall be reasonably
            satisfactory to the Managing Underwriters, if any) addressed to each
            selling Holder (if then customary in underwritten offerings) and the
            underwriters, if any, covering such matters as are customarily
            covered in opinions requested in underwritten offerings and such
            other matters as may be reasonably requested by such Holders and
            underwriters;

                  (v) obtain "cold comfort" letters and updates thereof from the
            independent certified public accountants of the Issuer (and, if
            necessary, any other independent certified public accountants of the
            Issuer or any subsidiary of the Issuer or of any business acquired
            by the Issuer for which financial statements and financial data are,
            or are required to be, included in the Shelf Registration
            Statement), addressed to the underwriters, if any, in customary form
            and covering matters of the type customarily covered in "cold
            comfort" letters in connection with primary underwritten offerings;
            and

                  (vi) deliver such documents and certificates as may be
            reasonably requested by the Majority Holders and the Managing
            Underwriters, if any, including those to evidence compliance with
            Section 4(l) and with any customary conditions contained in the
            underwriting agreement or other customary agreement entered into by
            the Issuer.

      The actions set forth in clauses (iii), (iv), (v) and (vi) of this Section
      4(q) shall be performed at each closing under any underwriting or similar
      agreement as and to the extent required thereunder.

            (r) If a Registered Exchange Offer is to be consummated, upon
      delivery of the Notes by Holders to the Issuer (or to such other Person as
      directed by the Issuer) in exchange for the Exchange Notes, the Issuer
      shall mark, or caused to be marked, on the Notes so exchanged that such
      Notes are being canceled in exchange for the Exchange Notes. In no event
      shall the Notes be marked as paid or otherwise satisfied.

            (s) The Issuer will use its reasonable best efforts if the Notes
      have been rated prior to the initial sale of such Notes pursuant to the
      Purchase Agreement, to confirm such ratings will apply to the Notes or the
      Exchange Notes, as the case may be, covered by an Exchange Offer
      Registration Statement.

                                      -16-

<PAGE>

            (t) In the event that any Broker-Dealer shall underwrite any Notes
      or Exchange Notes or participate as a member of an underwriting syndicate
      or selling group or "assist in the distribution" (within the meaning of
      the Conduct Rules of the National Association of Securities Dealers, Inc.
      (the "Conduct Rules")) thereof, whether as a Holder or as an underwriter,
      a placement or sales agent or a broker or dealer in respect thereof, or
      otherwise, the Issuer shall assist such Broker-Dealer in complying with
      the requirements of such Conduct Rules, including, without limitation, by:

                  (i) if such Conduct Rules shall so require, engaging a
            "qualified independent underwriter" (as defined in such Rules) to
            participate in the preparation of the Registration Statement, to
            exercise usual standards of due diligence with respect thereto and,
            if any portion of the offering contemplated by such Registration
            Statement is an underwritten offering or is made through a placement
            or sales agent, to recommend the yield of such Notes or Exchange
            Notes;

                  (ii) indemnifying any such qualified independent underwriter
            to the extent of the indemnification of underwriters provided in
            Section 6 hereof; and

                  (iii) providing such information to such Broker-Dealer as may
            be required in order for such Broker-Dealer to comply with the
            requirements of such Conduct Rules.

            (u) The Issuer shall cooperate with the Holders participating in the
      disposition of the Notes and one counsel acting on behalf of all such
      Holders in connection with the filings, if any, required to be made with
      the NASD.

            (v) The Issuer shall use its reasonable best efforts to take all
      other steps necessary to effect the registration of the Notes or the
      Exchange Notes, as the case may be, covered by a Registration Statement.

            5. Registration Expenses. The Issuer shall bear all expenses
incurred in connection with the performance of its obligations under Sections 2,
3 and 4 hereof, and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel designated by the Majority Holders to act as counsel for the Holders in
connection therewith and, in the case of any Exchange Offer Registration
Statement, will reimburse the Initial Purchaser for the reasonable fees and
disbursements of such one firm or counsel acting in connection therewith. Each
Holder shall pay all commissions and transfer taxes, if any, relating to the
sale or disposition of such Holder's Notes.

            6. Indemnification and Contribution.

            (a) The Issuer agrees to indemnify and hold harmless each Holder of
Notes or Exchange Notes, as the case may be, covered by any

                                      -17-

<PAGE>

Registration Statement (including the Initial Purchaser and, with respect to any
Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging
Dealer), the directors, officers, employees and agents of each such Holder and
each Person who controls any such Holder within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal, state or
foreign statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement as originally filed
or in any amendment thereof, or in any preliminary prospectus or the Prospectus,
or in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and jointly and severally agree to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Issuer will not be liable in
any case to the extent that any such loss, claim, damage or liability arises out
of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Issuer by or on behalf of any such
Holder relating to such Holder specifically for inclusion therein.

            The Issuer also agrees to indemnify or contribute as provided in
Section 6(d) (below) to Losses of each underwriter of Notes or Exchange Notes,
as the case may be, registered under a Shelf Registration Statement, its
directors, officers, employees or agents and each Person who controls such
underwriter on substantially the same basis as that of the indemnification of
the Initial Purchaser and the selling Holders provided in this Section 6(a) and
shall, if requested by any Holder, enter into an underwriting agreement
reflecting such agreement, as provided in Section 4(p) hereof.

            (b) The Holder of Notes covered by a Registration Statement
(including the Initial Purchaser and, with respect to any Prospectus delivery as
contemplated in Section 4(h) hereof, each Exchanging Dealer) severally agrees to
indemnify and hold harmless the Issuer, its directors, officers or agents and
each Person who controls the Issuer within the meaning of either the Act or the
Exchange Act, to the same extent as the foregoing indemnity from the Issuer to
each such Holder, but only in reliance upon and conformity with written
information relating to such Holder furnished to the Issuer by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any such Holder may otherwise have.

            (c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect

                                      -18-

<PAGE>

thereof is to be made against the indemnifying party under this Section 6,
notify the indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses; and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ one
firm of separate counsel (in addition to one local counsel firm), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with an actual
conflict of interest; (ii) the actual or potential defendants in, or targets of,
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded, based upon the advice
of counsel, that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party; (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action; or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. It is
understood, however, that the indemnifying party shall, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general circumstances, be liable for
the fees and expenses of only one firm of attorneys (in addition to one local
counsel) at any time for all such indemnified parties. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding and (ii) does not include a statement as to, or an
admission of, fault or culpability or failure to act by or on behalf of any
indemnified party.

            (d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party shall
have a joint and several obligation to contribute

                                      -19-

<PAGE>

to the aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection with investigating or defending
same) (collectively "Losses") to which such indemnified party may be subject in
such proportion as is appropriate to reflect the relative benefits received by
such indemnifying party, on the one hand, and such indemnified party, on the
other hand, from the Initial Placement and the Registration Statement which
resulted in such Losses; provided, however, that in no case shall the Initial
Purchaser or any subsequent Holder of any Note or Exchange Note be responsible,
in the aggregate, for any amount in excess of the purchase discount or
commission applicable to such Note or, in the case of an Exchange Note,
applicable to the Note that was exchangeable into such Exchange Note, as set
forth on the cover page of the Final Memorandum, nor shall any underwriter be
responsible for any amount in excess of the underwriting discount or commission
applicable to the Notes purchased by such underwriter under the Registration
Statement which resulted in such Losses. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with the statements or omissions which resulted
in such Losses as well as any other relevant equitable considerations. The
relative benefits received by the Issuer shall be deemed to be equal to the
total net proceeds from the Initial Placement (before deducting expenses) as set
forth on the cover page of the Final Memorandum. The relative benefits received
by the Initial Purchaser shall be deemed to be equal to the total purchase
discounts and commissions as set forth on the cover page of the Final Memorandum
and benefits received by any other Holders shall be deemed to be equal to the
value of receiving Notes or Exchange Notes, as applicable, registered under the
Act. Benefits received by any underwriter shall be deemed to be equal to the
total underwriting discounts and commissions, as set forth on the cover page of
the Prospectus forming a part of the Registration Statement which resulted in
such Losses. Relative fault shall be determined by reference to, among other
things, whether any alleged untrue statement of a material fact or omission to
state a material fact relates to information provided by the indemnifying party,
on the one hand, or by the indemnified party, on the other hand, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The parties agree that
it would not be just and equitable if contribution were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 6, each Person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
Person who controls the Issuer within the meaning of either the Act or the
Exchange Act, each officer of the Issuer who shall have signed the Registration
Statement and each director of the Issuer shall have the same rights to

                                      -20-

<PAGE>

contribution as the Issuer, subject in each case to the applicable terms and
conditions of this paragraph (d).

            (e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Issuer or any of the officers, directors or controlling Persons referred to
in this Section 6, and will survive the sale by a Holder of Notes covered by a
Registration Statement.

            7. Underwritten Registrations.

            (a) If any of the Notes or Exchange Notes, as the case may be,
covered by any Shelf Registration Statement are to be sold in an underwritten
offering, the Managing Underwriter(s) shall be selected by the Majority Holders
and shall be reasonably satisfactory to the Issuer.

            (b) No Person may participate in any underwritten offering pursuant
to any Shelf Registration Statement, unless such Person (i) agrees to sell such
Person's Notes or Exchange Notes, as the case may be, on the basis reasonably
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements; and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.

            8. No Inconsistent Agreements. The Issuer has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.

            9. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, otherwise than with the prior written
consent of (i) the Issuer and (ii) the Majority Holders; provided that, with
respect to any matter that directly or indirectly affects any rights of the
Initial Purchaser hereunder, the Issuer shall obtain the written consent of the
Initial Purchaser against which such amendment, qualification, supplement,
waiver or consent is to be effective. Notwithstanding the foregoing (except the
foregoing proviso), a waiver or consent to departure from the provisions hereof
with respect to a matter that relates exclusively to the rights of Holders whose
Notes or Exchange Notes, as the case may be, are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by the Majority Holders, determined on the
basis of Notes or Exchange Notes, as the case may be, being sold rather than
registered under such Registration Statement.

                                      -21-

<PAGE>

            10. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
telex, telecopier or air courier guaranteeing overnight delivery:

            (a) if to a Holder, at the most current address given by such Holder
      to the Issuer in accordance with the provisions of this Section 10, which
      address initially is, with respect to each Holder, the address of such
      Holder maintained by the Registrar under the Indenture, with a copy in
      like manner to Citigroup Global Markets Inc.;

            (b) if to you, initially at the respective addresses set forth in
      the Purchase Agreement; and

            (c) if to the Issuer, initially at its address set forth in the
      Purchase Agreement.

            All such notices and communications shall be deemed to have been
duly given at the time delivered personally, if personally delivered; two
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day, if timely delivered to a nationally recognized air
courier guaranteeing overnight delivery.

            The Initial Purchaser or the Issuer by notice to the other parties
may designate additional or different addresses for subsequent notices or
communications.

            11. Successors. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto,
including, without the need for an express assignment or any consent, by the
Issuer and subsequent Holders of Notes and Exchange Notes. The Issuer hereby
agrees to extend the benefits of this Agreement to any Holder of Notes or
Exchange Notes, and any such Holder may specifically enforce the provisions of
this Agreement as if an original party hereto; provided, however, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Notes or Exchange Notes in violation of the terms of the Indenture or
Purchase Agreement.

            12. Counterparts. This Agreement may be in signed counterparts, each
of which shall be an original and all of which together shall constitute one and
the same agreement.

            13. Headings. The headings used herein are for convenience only and
shall not affect the construction hereof.

            14. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York.

                                      -22-

<PAGE>

            15. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted with respect to the Notes and
Exchange Notes. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

            16. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.

            17. Notes Held by the Issuer, etc. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Notes or Exchange
Notes is required hereunder, Notes or Exchange Notes, as applicable, held by the
Issuer or its Affiliates (other than subsequent Holders of Notes or Exchange
Notes if such subsequent Holders are deemed to be Affiliates solely by reason of
their holdings of such Notes or Exchange Notes) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.

            18. Submission to Jurisdiction. By the execution and delivery of
this Agreement, the Issuer submits to the non-exclusive jurisdiction of any
federal or state court in the State of New York in any suit or proceeding
arising out of or relating to this Agreement or brought under federal or state
securities laws. By receiving the rights and benefits under this Agreement, each
Holder also submits to the non-exclusive jurisdiction of any federal or state
court in the State of New York in any suit or proceeding arising out of or
relating to this Agreement or brought under federal or state securities laws.

                            [Signature Page Follows]

                                      -23-

<PAGE>

                [signature page to Registration Rights Agreement]

            If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Issuer and the Initial Purchaser.

                                      Very truly yours,

                                      PHARMA SERVICES INTERMEDIATE HOLDING CORP.

                                      By: /s/ John S. Russell
                                          --------------------------------------
                                          John S. Russell
                                          Vice President

<PAGE>

The  foregoing  Agreement is
hereby  confirmed and accepted
as of the date first above written.

CITIGROUP GLOBAL MARKETS INC.

By: /s/ Kevin M. Sisson
    ---------------------------------
    Name:  Kevin Sisson
    Title:    Director

<PAGE>

                                                                      SCHEDULE I

Initial Purchaser:

Citigroup Global Markets Inc.

                                    Sch. I-1

<PAGE>

                                                                         ANNEX A

            Each Broker-Dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Notes where such Notes were acquired by
such Broker-Dealer as a result of market-making activities or other trading
activities. The Issuer has agreed that, starting on the expiration date and
ending on the close of business 90 days after the expiration date, it will make
this Prospectus available to any Broker-Dealer for use in connection with any
such resale. See "Plan of Distribution."

                                       A-1

<PAGE>

                                                                         ANNEX B

            Each Broker-Dealer that receives Exchange Notes for its own account
in exchange for Notes, where such Notes were acquired by such Broker-Dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."

                                       B-1

<PAGE>

                                                                         ANNEX C

                              Plan of Distribution

            Each Broker-Dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Broker-Dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Issuer has agreed that, starting on
the expiration date and ending on the close of business 90 days after the
expiration date, it will make this Prospectus, as amended or supplemented,
available to any Broker-Dealer for use in connection with any such resale. In
addition, until __________, 200__, all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.

            The Issuer will not receive any proceeds from any sale of Exchange
Notes by Broker-Dealers. Exchange Notes received by Broker-Dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
Broker-Dealer and/or the purchasers of any such Exchange Notes. Any
Broker-Dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Act and any profit of any such resale of
Exchange Notes and any commissions or concessions received by any such Persons
may be deemed to be underwriting compensation under the Act. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.

            For a period of 90 days after the Expiration Date, the Issuer will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Broker-Dealer that requests such documents
in the letter of transmittal. The Issuer has agreed to pay all expenses incident
to the Exchange Offer (including the expenses of one counsel for the holder of
the Notes) other than commissions or concessions of any brokers or dealers and
will indemnify the holders of the Notes (including any Broker-Dealers) against
certain liabilities, including liabilities under the Act.

                                       C-1

<PAGE>

                                                                         ANNEX D

[ ]   CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
      COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
      THERETO.

      Name: _________________________________________
      Address: ______________________________________
               ______________________________________

If the undersigned is not a Broker-Dealer, the undersigned represents that it
acquired the Exchange Notes in the ordinary course of its business, it is not
engaged in, and does not intend to engage in, a distribution of Exchange Notes
and it has no arrangements or understandings with any Person to participate in a
distribution of the Exchange Notes. If the undersigned is a Broker-Dealer that
will receive Exchange Notes for its own account in exchange for Notes, it
represents that the Notes to be exchanged for Exchange Notes were acquired by it
as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.

                                       D-1EX-10.8

 

Exhibit 10.8

EMPLOYMENT CONTINUITY AGREEMENT

     THIS EMPLOYMENT CONTINUITY AGREEMENT (this “Agreement”) is between LSB BANCSHARES, INC., a
North Carolina Corporation (referred to in this Agreement as the “Company,” which term includes any
subsidiary of the Company where the context so requires), and NICHOLAS A. DAVES, a Senior Vice
President of the Company and a resident of Winston-Salem, North Carolina (“Executive”), and is
effective as of December 24, 1997 (the “Effective Date”).

     The Company’s Board of Directors (the “Board”) acknowledges that Executive’s contributions to
the growth and success of the Company will be substantial. As a publicly held corporation, the
Board recognizes that there exists a possibility of a change in control of the Company. The Board
also recognizes that the possibility of such a change in control may contribute to uncertainty on
the part of the Executive and may result in the departure or distraction of the Executive from his
responsibilities.

     Outstanding management of the Company is essential to advancing the best interests of the
Company and its shareholders. In the event of a threat or occurrence of a bid to acquire or change
control of the Company or to effect a business combination, it is particularly important that the
Company’s business be continued with a minimum of disruption. The Board believes that the
objective of securing and retaining the Executive will be achieved if the Executive is given
assurances of employment security so that he will not be distracted by personal uncertainties and
risks created by such circumstances.

     The Board believes that such assurances will secure the continued services of the Executive in
the performance of his regular duties and such extra duties as may be required of him during such
periods of uncertainty and enable the Company to rely on such Executive to manage its affairs
during any such period with less concern for his personal risks.

     The Executive previously entered into an Amended and Restated Employment Contract dated
September 29, 1995, by and between Old North State Bank and Executive, which such parties
subsequently amended by a First Amendment to Amended and Restated Employment Contract dated October
30, 1996 (collectively the “Prior Employment Contract”), and such Prior Employment Contract
currently sets forth the terms and conditions of Executive’s employment with the Company.

     The Stock Option and Compensation Committee of the Board (the “Committee”) has recommended,
and the Board has approved, entering into this Agreement with the Executive in order to achieve the
foregoing objectives in return for which the Executive agrees to terminate the Prior Employment
Contract, which will be null and void upon the execution of this Agreement except for Section 6
thereof titled “Stock Options,” it being agreed that the stock options described therein shall
survive the termination of the Prior Employment Contract and shall continue to be exercisable
pursuant to the terms and conditions set forth in such stock options.

     Accordingly, the Company and Executive enter into this Agreement to induce Executive to remain
an employee of the Company and to continue to devote his full energy to the Company’s affairs, and
the Company and the Executive hereby terminate the Prior Employment Contract and agree that
Executive shall not have any further rights under said Prior Employment Contract after this time,
except with respect to the stock options described in Section 6 titled “Stock Options” of the Prior
Employment Contract, which shall remain outstanding notwithstanding the termination of the Prior
Employment Contract and shall be exercisable according to the terms and conditions set forth
therein.

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     1. Term. Upon execution by the Company and Executive, this Agreement is effective as
of the Effective Date. This Agreement automatically continues in effect through December 31, 1998,
and thereafter through each successive December 31 unless the Company and the Executive agree in
writing thirty days before the end of any calendar year to terminate this Agreement as of the end
of that calendar year (although this Agreement may terminate automatically under Section 5); and
this Agreement automatically continues in effect from year to year thereafter unless the Company
and the Executive agree in writing to terminate it.

     2. Employment.

          (a) Effective Date. The Company and Executive hereby agree that Executive’s
employment shall continue on and after the Effective Date. The terms and conditions of Executive’s
employment are further described in Section 3 of this Agreement.

          (b) Employment Period. If Executive is employed by the Company on a Control Change
Date (as defined in Section 2(c) of this Agreement), the Company further agrees that the Company
shall continue to employ Executive, and Executive further agrees that he shall continue as an
employee of the Company, for at least the Employment Period. For purposes of this Agreement, the
Employment Period begins on a Control Change Date and ends on the earlier of the third anniversary
of a Control Change Date or Executive’s Normal Retirement Date (as defined under the Lexington
State Bank Employees Pension Plan, as in effect on the Effective Date or as amended thereafter
prior to a Control Change Date). During the Employment Period and thereafter, the terms and
conditions of Executive’s employment shall be as described in Section 4 of this Agreement.

          (c) Change in Control and Control Change Date. For purposes of this Agreement, a
Change in Control occurs if, after the Effective Date, (i) any Person (other than a trustee or
other fiduciary holding securities under an employee benefit plan of the Company or the Company
itself) becomes the owner or beneficial owner of Company securities having 20% or more of the
combined voting power of the then outstanding Company securities that may be cast for the election
of the Board (other than as a result of an issuance of securities initiated by the Company, or open
market purchases approved by the Board, as long as the majority of the Board approving the
purchases are directors at the time the purchases are made); or (ii) as the direct or indirect
result of, or in connection with, a cash tender or exchange offer, a merger, consolidation,
reorganization or other business combination, a sale of all or substantially all of the Company’s
assets, a contested election of directors, or any combination of these transactions or similar
events, and, with respect to (i) or (ii) above, the Continuing Directors (as defined below) cease
to constitute a majority of the Board, or any successor’s board. For purposes of the preceding
sentence, “Continuing Director” means any member of the Board while a member of the Board, and who
(i) was a director of the Company before the consummation of the transactions described in the
preceding sentence or (ii) whose subsequent nomination for election or election to the Board was
recommended or approved by a majority of the Continuing Directors; and “Person” means any
individual, firm, corporation, partnership, limited liability company, trust or other entity,
including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, and any
successor (by merger or otherwise) of such entity.

               For purposes of this Agreement, a Control Change Date is the date on which an event described
in (i) or (ii) of the first sentence of this Section 2(c) is consummated. If a Change in Control
occurs on account of a series of transactions, a Control Change Date is the closing date of the
last of such transactions.

2

 

     3. Terms of Employment Before a Control Change Date.

          (a) General Duties. Executive shall continue to exercise such authority and perform
such executive duties as are commensurate with the authority being exercised and duties being
performed by Executive immediately before the Effective Date. However, if the Company and
Executive agree, the authority and duties of the Executive may be changed without affecting
Executive’s rights under this Agreement.

          (b) Place of Employment. Executive’s services shall be performed at the location
where Executive was employed immediately before the Effective Date. However, if the Company and
Executive agree, the location of Executive’s employment may be changed without affecting
Executive’s rights under this Agreement.

          (c) Working Facilities and Support Staff. Executive is entitled to an office of a
size and with furnishings and other appointments at least equal to those provided to Executive
before the Effective Date. Executive is entitled to secretarial and other assistance, and to such
other facilities, equipment, and supplies at least equal to those provided to Executive before the
Effective Date.

          (d) Expenses Generally. Executive is entitled to receive prompt reimbursement for all
reasonable expenses incurred by Executive. Reimbursement shall be made in accordance with the
Company’s policies and procedures in effect on the Effective Date or as amended prior to a Control
Change Date.

          (e) Meetings, Conventions, and Seminars. Executive is encouraged to attend seminars,
professional meetings and conventions, and educational courses that are reasonably related to
Executive’s employment with the Company. The cost of travel, tuition or registration, food, and
lodging for attending those activities shall be paid by the Company. Other costs shall be paid by
Executive, unless the Company authorizes those costs. If such other costs are authorized expenses,
Executive shall be reimbursed after satisfying the Company’s policies and procedures for such
reimbursement.

          (f) Promotional Expenses. Executive is encouraged to incur reasonable expenses for
promoting the Company’s business. Such promotional expenses include travel, entertainment
(including memberships in social and athletic clubs), professional advancement, and community
service expenses. Executive agrees to bear those expenses except to the extent that those expenses
are incurred at the Company’s specific direction or those expenses are specifically authorized by
the Company as expenses that the Company may pay directly or indirectly through reimbursement to
Executive.

          (g) Outside Activities. Executive may (i) serve on corporate, civic, or charitable
boards or committees; (ii) deliver lectures, fulfill speaking engagements, or teach at educational
institutions; and (iii) manage personal investments, provided that such activities do not
materially interfere with the performance of Executive’s responsibilities for the Company. To the
extent that any such activities have been conducted by Executive before the Effective Date, such
prior conduct of activities and any subsequent conduct of activities similar in nature and scope
shall not be deemed to interfere with the performance of Executive’s responsibilities for the
Company.

          (h) Compensation and Benefits. Executive’s compensation and benefits shall be the
same as those in effect on the Effective Date, subject to periodic review and adjustment by the
Company or as amended prior to a Control Change Date.

               As of the Effective Date, Executive’s compensation includes, but is not limited to, the
following: (i) a base salary of $116,900; (ii) incentive compensation pursuant to the Company’s

3

 

Management Incentive Plan; (iii) deferred compensation pursuant to the Company’s Deferred
Compensation Plan; (iv) participation in the Lexington State Bank Employees Savings Plus Plan; (v)
participation in the Lexington State Bank Employees Pension Plan; (vi) participation in the
Company’s 1996 Omnibus Stock Incentive Plan; and (vii) participation in the 1989 Employee Stock
Option Plan of Piedmont Bancshares Corporation (that the Company assumed in connection with its
merger on August 11, 1997 with Old North State Bank), to the extent of the stock options granted
thereunder prior to the Effective Date, which stock options shall remain outstanding and
exercisable according to the terms and conditions set forth therein.

               As of the Effective Date, Executive’s benefits include, but are not limited to, the following:
(i) group life, accidental death and dismemberment, long-term disability, and medical insurance;
(ii) paid vacation and holidays; and (iii) sick leave.

               This Section 3(h) does not change the terms of any compensation arrangement, benefit program
or benefit plan maintained by the Company and does not give Executive any additional vested
interest in any compensation or benefit to which Executive is not already entitled under any such
program or plan on the Effective Date.

     4. Terms of Employment On and After a Control Change Date.

          (a) General. During the Employment Period and thereafter, the terms and conditions of
Executive’s employment, as described in Section 3, shall continue in effect, except that such terms
and conditions are fixed as of the day before a Control Change Date and Executive’s compensation
and benefits are governed by Section 4(b).

          (b) Compensation and Benefits. During the Employment Period and thereafter, the
Company shall (i) continue to pay Executive an annual base salary not less than Executive’s annual
base salary on the day before a Control Change Date, (ii) pay Executive during each successive
twelve-month period beginning on a Control Change Date incentive compensation in amounts not less
in amount that those paid to Executive during the twelve-month period preceding the day before a
Control Change Date, and (iii) continue all compensation and employee benefit plans and programs,
including all compensation, plans and benefits described in Section 3(h) of this Agreement, at
levels in effect on the day before a Control Change Date (to the extent practicable and subject to
such reductions as may be required to maintain such plans in compliance with applicable
nondiscrimination and other federal laws regulating employee benefit plans and programs) or pay
Executive an amount necessary to provide essentially comparable benefits (assuming, in the case of
insured benefits, that Executive is then insurable at standard rates).

     5. Disability or Death of Executive.

          (a) Termination of Employment on Disability. The Company, pursuant to a resolution
duly adopted by the Board, may terminate this Agreement if Executive becomes Disabled by giving
Executive written notice of its intention to terminate Executive’s employment, subject to the terms
and conditions specified in the notice. If Executive becomes Disabled and does not return to the
performance of his duties for the Company in accordance with the terms and conditions set forth in
the notice, Executive’s employment with the Company shall terminate (the “Disability Effective
Date”). For purposes of this Agreement, “Disabled” has the meaning set forth under the Long Term
Disability Plan of Lexington State Bank or any successor plan or amendment to such Plan. If
Executive’s employment is terminated because Executive is Disabled, Executive will not receive any
Continued Compensation under this Agreement but is entitled, after the Disability Effective Date,
to receive disability and other benefits on a basis comparable to those provide by the Company to
disabled employees and their families in

4

 

accordance with such plans, programs, and policies relating to Executive’s disability, if any,
as in effect on the Effective Date or as amended thereafter.

          (b) Termination of Employment on Death. If Executive dies, this Agreement shall
automatically terminate as of the date of death of the Executive. If Executive’s employment is
terminated because the Executive dies, Executive will not receive any Continued Compensation under
this Agreement but is entitled, after the date of death, to receive death and other benefits on a
basis comparable to those provided by the Company to deceased employees and their families in
accordance with such plans, programs, and policies relating to Executive’s death, if any, as in
effect on the Effective Date or as amended thereafter.

     6. Liquidated Damages Upon Termination of Employment Other Than By Disability or
Death.

          (a) General. Executive is entitled to receive Continued Compensation according to the
remaining provisions of this Section 6 if Executive’s employment with the Company terminates
because of an event described in Section 6(b) or 6(c). If Executive’s employment terminates and an
event described in Section 6(b) or 6(c) has not occurred, Executive is not entitled to any
Continued Compensation under this Section 6. If Executive’s employment terminates before a Control
Change Date and if Executive reasonably demonstrates that such termination of employment was taken
at the request of a third party who had taken steps reasonably calculated to effect a Change of
Control or otherwise arose in connection with or anticipation of a Change of Control, then for
purposes of this Agreement, the Executive’s employment shall be treated as if it had terminated
during the Employment Period.

          (b) Termination by the Company. Subject to the conditions of Section 7(c), Executive
is entitled to receive Continued Compensation if Executive’s employment is terminated by the
Company without cause (“cause” being limited to Executive’s acts of theft, embezzlement, fraud, or
moral turpitude involving or negatively affecting the Company).

          (c) Voluntary Termination. Subject to the conditions of Section 7(c), Executive is
entitled to receive Continued Compensation if Executive voluntarily terminates employment after (i)
Executive does not receive salary increases, incentive compensation, stock options and other
benefits comparable to that which Executive received in prior years or, if greater, that other
executives in comparable positions in comparable companies receive in the current year; or (ii)
Executive’s salary, incentive compensation, stock options or other benefits are reduced and such
reduction is not consistent with reductions for executives in comparable positions with comparable
companies; or (iii) Executive’s status, title(s), office(s), working conditions, or management
responsibilities are diminished (other than changes in reporting or management responsibilities
required by applicable federal or state law); or (iv) Executive’s place of employment is changed in
any way without Executive’s consent. Executive will be entitled to receive Continued Compensation
on account of his voluntary termination under this Section 6(c) only if such voluntary termination
occurs within six months after an event described in (i), (ii), (iii), or (iv) above, or within six
months after the last in a series of such events.

          (d) Continued Compensation. If Executive’s employment terminates before a Control
Change Date or after the Employment Period because of an event described in Section 6(b) or 6(c),
subject to the conditions of Section 7(c), Continued Compensation equal to Executive’s Base Period
Income shall be paid in twelve equal monthly installments. If Executive’s employment terminates
during the Employment Period because of an event described in Section 6(b) or 6(c), subject to the
conditions of Section 7(c), Continued Compensation equal to three times Executive’s Base Period
Income shall be paid in thirty-six equal monthly installments. Continued Compensation payments to
Executive shall commence on the first day of the month following Executive’s termination of
employment with the Company because of an event described in Section 6(b) or 6(c) and shall
continue on the first day of each

5

 

month thereafter until paid in full, subject to receipt by the Company of notification from
the Accounting Firm (defined below) of its determination regarding the reduction, if any, of
Continued Compensation according to Section 6(g).

          (e) Base Period Income. Executive’s Base Period Income shall equal his annual base
salary as of his termination date, plus an amount equal to the incentive compensation awarded to or
accrued for Executive for the fiscal year immediately prior to the fiscal year in which Executive’s
termination date occurs (but in no event shall such amount be less than the incentive compensation
amount required to be paid during the Employment Period under Section 4(b)(ii) if the Executive’s
employment terminates during the Employment Period). Amounts of such base salary and incentive
compensation that Executive has elected to defer during the relevant period shall be included in
Base Period Income.

          (f) Other Payments or Benefits. In addition to any payments provided under this
Agreement or under any other arrangement between the Company and Executive, Executive shall be
entitled on termination of employment to (i) any cash or property due him as a result of the
exercise of a stock option granted under the Company’s 1996 Omnibus Stock Incentive Plan or a
successor plan or the 1989 Employee Stock Option Plan of Piedmont Bancshares Corporation (that the
Company assumed in connection with its merger of August 11, 1997 with Old North State Bank) or
under any other incentive, benefit or compensation plan of the Company, (ii) any payments or
benefits due him, whether or not “parachute payments” as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the “Code”) (but subject to Section 6(g)), including amounts that
Executive is entitled to receive under Company maintained tax-qualified plans and any health care
coverage under Company maintained welfare plans for which Executive pays the cost, and (iii) only
on termination of employment other than on account of disability or death, an office of a size and
furnishings and exclusive secretarial assistance at least equal to that provided Executive prior to
termination of employment and Company-paid out-placement services, each for one year after the
termination of Executive’s employment.

          (g) Certain Reduction of Continued Compensation.

               (i) For purposes of this Section 6(g),

                    (A) A “Payment” means any amount that, if paid, would be a payment or distribution in the
nature of compensation to or for the benefit of Executive, whether paid or payable pursuant to this
Agreement or otherwise;

                    (B) “Continued Compensation” means a Payment paid or payable pursuant to Section 6(d)
(calculated as if there were no reduction of Continued Compensation according to this Section
6(g));

                    (C) “Net After Tax Receipts” means the Present Value of a Payment net of all taxes imposed on
Executive with respect to that Payment under Sections 1 and 4999 of the Code, determined by
applying the highest marginal rate under Section 1 of the Code that applied to Executive’s taxable
income for the immediately preceding taxable year;

                    (D) “Present Value” means the value determined in accordance with Section 280G(d)(4) of the
Code; and

                    (E) “Reduced Amount” means the smallest aggregate amount of all Payments that (1) is less than
the sum of all Payments and (2) results in aggregate Net After Tax Receipts

6

 

that are equal to or greater than the Net After Tax Receipts that would result if the
aggregate Payments were any other amount less than the sum of all Payments.

               (ii) Notwithstanding any other Section of this Agreement, if the accounting firm that is
engaged to audit the Company’s financial statements (the “Accounting Firm”) determines that receipt
of all Payments would subject Executive to tax under Section 4999 of the Code, it shall determine
whether some amount of Payments would meet the definition of a “Reduced Amount.” If the Accounting
Firm determines that there is a Reduced Amount, one or more Payments shall be reduced to that
Reduced Amount, but not below zero. If any reduction of Payments is required by the preceding
sentence, (A) Payments other than Continued Compensation shall be reduced first, and (B) Continued
Compensation shall be reduced in a manner that shortens the period over which Continued
Compensation is paid (and, thus, the number of monthly installments payable) but does not reduce
the amount of a monthly installment that would be paid but for this Section 6(g).

               (iii) If the Accounting Firm determines that one or more Payments should be reduced to the
Reduced Amount, the Company shall promptly notify Executive of that determination, sending a copy
of the detailed calculations by the Accounting Firm. All determinations made by the Accounting
Firm under this Section 6(g) are binding upon the Company and Executive and shall be made within
sixty days after Executive’s employment termination, unless reasonable cause requires an extension
of time. The Accounting Firm shall furnish written notice to the Company and Executive of any
required extension before the end of the sixty-day period; but the Accounting Firm shall make its
determinations under this Section as soon as possible and not later than six months after
Executive’s employment terminates.

               (iv) It is the intention of the Company and Executive to reduce one or more Payments only if
the aggregate Net After Tax Receipts to Executive would be increased by that reduction. However,
it is possible that, as a result of uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm under this Section, amounts shall have
been paid or distributed under this Agreement to or for the benefit of Executive, which amounts
should not have been so paid or distributed (“Overpayment”), or that additional amounts not paid or
distributed under the Plan to or for the benefit of Executive could have been so paid or
distributed (“Underpayment”), in each case, consistent with the calculation of the Reduced Amount.
If the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue
Service against the Company or Executive, which assertion the Accounting Firm believes has a high
probability of success, or based upon controlling precedent or other substantial authority,
determines that an Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to Executive, which loan Executive shall repay to the Company on terms
acceptable to Executive and the Company together with interest at the applicable federal rate under
Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been
made and no amount is payable by Executive to the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which Executive is subject to tax under Section 1 or
4999 of the Code or generate a refund of such taxes. If the Accounting Firm, based upon
controlling precedent or other substantial authority, determines that an Underpayment has occurred,
the Accounting Firm shall promptly notify the Company of the amount of the Underpayment. The
Company shall take action to address the Underpayment in a manner that as nearly as possible
restores Executive to the position he would have been in if there had been no Underpayment.

     7. Executive Covenants.

          (a) Confidential Information. Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge, or data relating to the
Company and its business, which is obtained by Executive during Executive’s employment by the
Company and

7

 

which is not public knowledge (other than by acts by Executive or his representatives in
violation of this Agreement). After the termination of Executive’s employment with the Company,
Executive shall not, without the Company’s prior written consent, communicate or divulge any such
information, knowledge, or data to anyone other than the Company and those designated by it to
receive such information, knowledge, or data except pursuant to an order of a court or governmental
agency. In no event may an asserted violation of this Section 7(a) constitute a basis for
deferring or withholding any amounts otherwise payable to Executive under this Agreement.

          (b) Records and Files. All records and files concerning the Company or the Company’s
customers belong to and shall remain the property of the Company.

          (c) Covenant Not to Compete.

               (i) Executive agrees that if his employment terminates for any reason other than when he
becomes Disabled or dies, then during the period in which Executive is entitled to Continued
Compensation under Section 6 of this Agreement, he shall not serve as an employee of, or become a
director of, or render advisory or other services for, or in connection with, or make any financial
investment in excess of 5% of the outstanding capital stock of a bank or other financial
institution that has a banking office in Forsyth County, North Carolina, counties contiguous to
Forsyth County, North Carolina, or counties in which the Company has a banking office on the date
of termination of Executive’s employment. Executive further agrees that during the period in which
Executive is entitled to Continued Compensation under Section 6, he shall not actively induce any
Company employee to terminate employment with the Company in favor of promised or prospective
employment with or on behalf of Executive or Executive’s post-termination employer.

               (ii) Executive agrees and acknowledges that any breach of the covenants contained in this
Section 7(c) shall cause irreparable injury to the Company, and that the remedy at law for any such
breach shall be inadequate, and that the Company shall be entitled to appropriate equitable relief.

               (iii) The covenants contained in this Section 7(c) shall inure to the benefit of the Company
and its affiliated employers and subsidiaries and their successors.

               (iv) The restrictions contained in this Section 7(c) are considered by the parties hereto to
be fair and reasonable and necessary for the protection of the legitimate business interests of the
Company.

               (v) Notwithstanding Sections 3, 4 or 6, if Executive violates this Section 7(c), any unpaid
Continued Compensation shall immediately be forfeited as of the date of any violation.

     8. Legal Fees and Expenses. The Company shall pay all legal fees and expenses, if
any, incurred by Executive in obtaining, enforcing, or defending any right or benefit provided by
this Agreement, whether successful or not. Payments under this Section are not Continued
Compensation and are not subject to reduction under any other Section of this Agreement.

     9. Governing Law. This Agreement and performance hereunder and all suits, actions
and other proceedings hereunder shall be construed in accordance with and under and pursuant to the
laws of the State of North Carolina, (except its choice of law provisions to the extent that they
would require the application of the laws of a state other than the State of North Carolina), and
in any suit, action or other proceeding that may be brought arising out of, in connection with, or
by reason of this Agreement, the laws of the State of North Carolina (except its choice of law
provisions to the extent that they would

8

 

require the application of the laws of a state other than the State of North Carolina) shall
be applicable and shall govern to the exclusion of the law of any other forum, without regard to
the jurisdiction in which any suit, action or other proceeding may be instituted.

     10. Amendment. This Agreement may not be amended except by the written agreement of
Executive and the Company (with the Company acting by adoption of a resolution by the Board
recommended by the Committee).

     11. Binding Effect. The parties agree that this Agreement is enforceable under the
laws of the State of North Carolina. This Agreement is binding on the Company, its successors, and
assigns and on Executive and his personal representatives; and the Company will not consolidate or
merge into or with another corporation, or transfer all or substantially all of its assets to
another corporation (the “Successor Corporation”) unless the Successor Corporation shall assume
this Agreement, and upon such assumption, Executive and the Successor Corporation shall become
obligated to perform the terms and conditions of this Agreement. This Agreement inures to the
benefit of and is enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If Executive dies while
any amounts are payable under this Agreement, all such amounts, unless otherwise provided, shall be
paid in accordance with the terms of this Agreement to Executive’s spouse, or if none, to his
devisee, legatee, or other designee or, if there be no such designee, to his estate.

     12. Notice. For purposes of this Agreement, notices and all other communications
shall be in writing and are effective when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, addressed to Executive or his personal representative at
his last known address. All notices to the Company shall be directed to the attention of the
Chairman of the Board. Such other addresses may be used as either party may have furnished to the
other in writing. Notices of change of address are effective only upon receipt.

     13. Miscellaneous. No provision of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in writing signed by
Executive and the Company. A waiver of any breach of or compliance with any provision or condition
of this Agreement is not a waiver of similar or dissimilar provisions or conditions. The
invalidity or unenforceability of any provision of this Agreement does not affect the validity or
enforceability of any other provision of this Agreement, which remains in full force and effect.

     14. No Assignment. Executive may not assign, alienate, anticipate, or otherwise
encumber any rights, duties, or amounts that he might be entitled to receive under this Agreement.

     The parties have executed this Agreement effective as of the 24th day of December, 1997.

	 	 	 	 	 	 	 
	 	 	LSB BANCSHARES, INC.
	 
	 	 	 	 	 	 
	 	 	/s/ Robert F. Lowe 
	

	 	By:
	 	ROBERT F. LOWE	 	 
	

	 	Its:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	NICHOLAS A. DAVES
	 
	 	 	 	 	 	 
	 	 	/s/ Nicholas A. Daves 

9

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