Document:

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                                                                    EXHIBIT 10.2

$200,000,000

SENIOR SUBORDINATED NOTES DUE 2010

REGISTRATION RIGHTS AGREEMENT

DATED AS OF OCTOBER 2, 2000

BY AND AMONG

ADVANCE PARADIGM, INC.
AS THE ISSUER

THE GUARANTORS AS DEFINED HEREIN

AND

RITE AID CORPORATION
AS THE INITIAL PURCHASER

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         This Registration Rights Agreement (this "Agreement") is made and
entered into as of October 2, 2000 by and among Advance Paradigm, Inc., a
Delaware corporation (the "Company"), the Guarantors (as defined below) and Rite
Aid Corporation, a Delaware corporation (the "Initial Purchaser"), which has
agreed to acquire the Company's Senior Subordinated Notes due 2010 (the "Notes")
pursuant to the Stock Purchase Agreement (as defined below) in connection with
the acquisition by the Company of the capital stock of PCS Holding Corporation
from the Initial Purchaser (the "PCS Acquisition").

         This Agreement is made pursuant to and in connection with the Stock
Purchase Agreement, dated as of July 11, 2000 (the "Purchase Agreement"), by and
among the Company and the Initial Purchaser. As an inducement to the Initial
Purchaser to enter into the Purchase Agreement and in satisfaction of a
condition to the obligations of the Initial Purchaser thereunder, the Company
agrees with the Initial Purchaser, (i) for the benefit of the Initial Purchaser
and (ii) for the benefit of the holders from time to time of the Notes
(including the Initial Purchaser) (each of the foregoing a "Holder" and together
the "Holders"), as follows:

1. Section        Definitions. Capitalized terms used in this Agreement without
definition shall have their respective meanings set forth in the Purchase
Agreement. All references to Sections herein are to Sections of this Agreement
unless otherwise indicated. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:

         "Act" or "Securities Act" means the Securities Act of 1933, as amended
         from time to time, and the rules and regulations of the Commission
         promulgated thereunder.

         "Additional Interest" has the meaning set forth in Section 3(e) hereof.

         "Amendment Effectiveness Deadline Date" has the meaning set forth in
         Section 3(c) hereof.

         "Base Interest" means the interest that would otherwise accrue on the
         Notes under the terms thereof and the Indenture, without giving effect
         to the provisions of this Agreement.

         "broker-dealer" means any broker or dealer registered with the
         Commission under the Exchange Act.

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                  "Commission" means the United States Securities and Exchange
         Commission.

         "Common Stock" means (i) initially, the Company's common stock, par
         value $0.01 per share, and (ii) following adoption of the Company's
         Second Amended and Restated Certificate of Incorporation, the Company's
         Class A Common Stock, par value $0.01 per share.

         "Damages Accrual Period" has the meaning set forth in Section 3(e)
         hereof.

         "Damages Payment Date" means each April 15 and October 15, being the
         dates on which interest is due and payable on the Notes, as more fully
         detailed in the Indenture.

         "Deferral Period" has the meaning set forth in Section 3(d) hereof.

         "DTC" means The Depository Trust Company.

         "Effectiveness Deadline Date" has the meaning set forth in Section 3(a)
         hereof.

         "Effectiveness Period" has the meaning set forth in Section 3(b)
         hereof.

         "Effective Time," in the case of (i) an Exchange Registration, shall
         mean the time and date as of which the Commission declares the Exchange
         Registration Statement effective or as of which the Exchange
         Registration Statement otherwise becomes effective and (ii) a Shelf
         Registration, shall mean the time and date as of which the Commission
         declares the Shelf Registration Statement effective or as of which the
         Shelf Registration Statement otherwise becomes effective.

         "Event" has the meaning set forth in Section 3(e) hereof.

         "Event Date" has the meaning set forth in Section 3(e) hereof.

         "Event Termination Date" has the meaning set forth in Section 3(e)
         hereof.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended from time to time, and the rules and regulations of the
         Commission promulgated thereunder.

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         "Exchange Notice" has the meaning set forth in Section 4(a) hereof.

                  "Exchange Offer" has the meaning set forth in Section 4(a)
         hereof.

         "Exchange Registration" has the meaning set forth in Section 7 hereof.

         "Exchange Registration Statement" has the meaning set forth in Section
         4(a) hereof.

         "Exchange Securities" has the meaning set forth in Section 4(a) hereof.

         "Filing Deadline Date" has the meaning set forth in Section 3(a)
         hereof.

                  "Guarantors" has the meaning set forth in the Indenture.

                  "Holder" has the meaning set forth in the preamble hereto.

         "Indenture" means the Indenture dated as of the date hereof among the
         Company, U.S. Trust of Texas, N.A., as trustee, and the Guarantors
         pursuant to which the Notes are being issued, as amended, supplemented
         or otherwise modified from time to time.

         "Issue Date" has the meaning set forth in Section 3(a) hereof.

         "Liquidated Damages Amount" has the meaning set forth in Section 3(e)
         hereof.

         "managing underwriters" means the investment banker or investment
         bankers and manager or managers that shall administer an underwritten
         offering, if any, as set forth in Section 10 hereof.

                  "Notes" has the meaning set forth in the preamble hereto.

                  "Notice and Questionnaire" means a written notice delivered to
         the Company containing substantially the information called for by the
         Form of Selling Securityholder Notice and Questionnaire attached hereto
         as Exhibit A, or any subsequent form in order to comply with the
         securities laws.

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         "Notice Holder" means, on any date, any Holder that has delivered a
         Notice and Questionnaire to the Company on or prior to such date.

         "Person" shall mean an individual, partnership, corporation, trust or
         unincorporated organization, or a government or agency or political
         subdivision thereof.

         "Piggyback Registration" has the meaning set forth in Section 2(a)
         hereof.

         "Prospectus" means the prospectus included in any Shelf Registration
         Statement or Exchange Registration Statement, as the case may be,
         (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 Registrable Securities
         covered by such Shelf Registration Statement or Exchange Registration
         Statement, and all amendments and supplements to the Prospectus,
         including post-effective amendments.

         "Purchase Agreement" has the meaning set forth in the preamble hereto.

         "Record Holder" means, with respect to any Damages Payment Date
         relating to the Notes as to which any Liquidated Damages Amount or
         Special Interest has accrued, the registered holder of such Notes, as
         the case may be, on the Record Date, as such term is defined in the
         Indenture, prior to the next succeeding Damages Payment Date.

         "Registrable Securities" shall mean, as the context requires, the (a)
         Notes until (i) in the circumstances contemplated by Section 4(a)
         hereof, the Notes have been exchanged for Exchange Securities in an
         Exchange Offer as contemplated in Section 4(a) hereof, (ii) the date on
         which such Notes have been effectively registered under the Securities
         Act and disposed of in accordance with the Shelf Registration
         Statement, (iii) the date on which such Notes are distributed to the
         public pursuant to Rule 144 under the Act (or similar provision then in
         effect), (iv) the date on which such Notes cease to be outstanding, or
         (v) the date on which the events described in either of Section 3(b)(i)
         or 3(b)(ii) have been deemed to have occurred; (b) Warrants and the
         shares of Common Stock issuable upon exercise of the Warrants, together
         with any share of Common Stock or other securities (whether securities
         of the Company

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         or another issuer) issued or proposed to be issued with respect to such
         shares of Common Stock (A) by way of stock dividend or other
         distribution, stock split or reverse stock split, or (B) in connection
         with a combination of shares, recapitalization, merger, consolidation,
         exchange offer or other reorganization, until the earlier to occur of
         (i) the date on which such Warrants or shares of Common Stock issuable
         upon exercise of the Warrants (other than any share issued upon
         exercise of a Warrant in accordance with a registration statement) have
         been disposed of in accordance with a registration statement and (ii)
         the date on which such Warrants or shares of Common Stock issuable upon
         exercise of the Warrants are distributed to the public pursuant to Rule
         144 under the Securities Act.

         "Registration Default" has the meaning set forth in Section 4(b)
         hereof.

         "Registration Default Period" has the meaning set forth in Section 4(b)
         hereof.

         "Resale Period" has the meaning set forth in Section 4(a) hereof.

         "Restricted Holder" shall mean (i) a holder that is an affiliate of the
         Company within the meaning of Rule 405 of the Securities Act, (ii) a
         holder who acquires Exchange Securities outside the ordinary course of
         such holder's business, (iii) a holder who has arrangements or
         understandings with any Person to participate in the Exchange Offer for
         the purpose of distributing Exchange Securities and (iv) a holder that
         is a broker-dealer, but only with respect to Exchange Securities
         received by such broker-dealer pursuant to an Exchange Offer in
         exchange for Registrable Securities acquired by the broker-dealer
         directly from the Company.

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

         "Shelf Registration Statement" means a "shelf" registration statement
         of the Company pursuant to the provisions of Section 3 hereof filed
         with the Commission which covers some or all of the Registrable
         Securities, as applicable, on an appropriate form under Rule 415 under
         the Act, or any similar rule that may be adopted by the Commission,
         amendments and supplements to such registration statement, including
         post-effective amendments, in each case including

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         the Prospectus contained therein, all exhibits thereto and all material
         incorporated by reference therein.

         "Subsequent Additional Interest" has the meaning set forth in Section
         3(e) hereof.

         "Trustee" means the trustee with respect to the Notes under the
         Indenture.

         "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
         any successor thereto, and the rules, regulations and forms promulgated
         thereunder, all as the same shall be amended from time to time.

         "underwriter" means any underwriter, initial purchaser or other
         investment banker or financial intermediary of Registrable Securities
         in connection with an offering thereof under a Shelf Registration
         Statement or otherwise.

         "Warrant Holders" has the meaning set forth in Section 2(a) hereof.

         "Warrants" means common stock purchase warrants entitling the holders
         to purchase an aggregate of 2% of the Company's Common Stock
         outstanding on the date of issuance of the Notes, on a fully diluted
         basis, after giving pro forma effect to the PCS Acquisition and the
         financing therefor, excluding the issuance of the Warrants, subject to
         certain adjustments.

         Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Registration Rights Agreement, and the words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Registration Rights Agreement as
a whole and not to any particular Section or other subdivision.

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2. Section        Piggyback Registrations.

                  (a) Right to Piggyback. Whenever the Company proposes to
register any of its common equity securities (other than Warrants and the shares
of Common Stock issuable upon exercise of the Warrants and shares of Common
Stock issued by the Company as part of the payment of the purchase price for the
affiliated companies comprising FFI Health Services) under the Securities Act
(other than a registration statement on Form S-8 or on Form S-4 or any similar
successor forms thereto), whether for its own account or for the account of one
or more securityholders of the Company, and the registration form to be used may
be used for any registration of Warrants and the shares of Common Stock issuable
upon exercise of the Warrants (a "Piggyback Registration"), the Company shall
give prompt written notice (in any event within 10 business days after its
receipt of notice of any exercise of other demand registration rights) to all
holders of the Warrants (the "Warrant Holders") of its intention to effect such
a registration and, subject to Sections 2(b) and 2(c), shall include in such
registration all Warrants and the shares of Common Stock issuable upon exercise
of the Warrants with respect to which the Company has received written requests
for inclusion therein within 15 days after the receipt of the Company's notice.
The Company may postpone or withdraw the filing or the effectiveness of a
Piggyback Registration at any time in its sole discretion.

         (b) Priority on Primary Registrations . If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company shall include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Warrants and the shares of Common Stock issuable upon exercise of
the Warrants requested to be included therein by the Warrant Holders, pro rata
among the Warrant Holders on the basis of the number of Warrants requested to be
registered by such Warrant Holders, (iii) third, the Participating Registrable
Securities (as defined in the Stockholders Agreement dated the date hereof,
between the Company, the Initial Purchasers and the other Persons named in such
Agreement (the "Stockholders Agreement") (the "Participating Registrable
Securities") requests to be included in such registration by the holders of such
securities on a pro rata basis based on the number of Participating Registrable
Securities requested to be included in such registration by such holders, and
(iv) fourth, other securities requested to be included in such registration pro
rata

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among the holders of such securities on the basis of the number of shares
requested to be registered by such holders or as such holders may otherwise
agree.

         (c) Priority on Secondary Registrations . If a Piggyback Registration
is an underwritten secondary registration on behalf of a holder of the Company's
securities other than Warrants and the shares of Common Stock issuable upon
exercise of the Warrants, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering, the
Company shall include in such registration (i) first, the securities proposed to
be included therein by the holders requesting such registration; (ii) second,
the securities requested to be included in such registration by the Company;
(iii) third, the Warrants and the shares of Common Stock issuable upon exercise
of the Warrants requested to be included therein by the Warrant Holders and the
securities of any other Person or Persons proposed to be included in such
registration pro rata among the Warrant Holders and such other Persons on the
basis of the number of shares requested to be registered by such Holders and
such other Persons.

         (d) Selection of Underwriters . If any Piggyback Registration is an
underwritten primary offering, the Company shall have the right to select the
managing underwriter or underwriters to administer any such offering.

         (e) Other Registrations . If the Company has previously filed a
registration statement with respect to Warrants and the shares of Common Stock
issuable upon exercise of the Warrants pursuant to this Section 2, and if such
previous registration has not been withdrawn or abandoned, the Company shall not
be obligated to cause to become effective any other registration of any of its
securities under the Securities Act, whether on its own behalf or at the request
of any holder or holders of such securities, until a period of at least three
months has elapsed from the effective date of such previous registration.

(f) Section       Shelf Registration. The Company and the Guarantors shall use
their reasonable best efforts to prepare and file or cause to be prepared and
filed with the Commission, as soon as practicable, but in any event, no later
than the date (the "Filing Deadline Date") that is 75 days after the date of
original issuance (the "Issue Date") of the Notes, a Shelf Registration
Statement relating to the offer and sale of the Registrable Securities by the
Holders from time to time in accordance with the methods of distribution elected
by such Holders and set forth in such Shelf Registration Statement and to cause
such Shelf

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Registration Statement to be declared effective under the Act no later than the
date (the "Effectiveness Deadline Date") that is 165 days following the Issue
Date. None of the Company*s securityholders (other than the Holders of
Registrable Securities) shall have the right to include any of the Company's
securities in the Shelf Registration Statement.

                  (g) The Company and the Guarantors shall use their reasonable
best efforts to keep the Shelf Registration Statement continuously effective in
order to permit the Prospectus forming part thereof to be usable by Holders for
such period expiring on the later of (i) two years from the date the Notes are
issued, or such longer period as the Initial Purchaser shall reasonably request
in order to facilitate the sale of the Notes and Warrants by the Initial
Purchaser; and (ii) two years after the date the Initial Purchaser is no longer
a Holder of any of the relevant Notes (in any such case, such period being
called the "Effectiveness Period"). Notwithstanding the foregoing, the
Effectiveness Period shall terminate upon the earliest of the following: (A)
when all the Notes covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement, (B) upon completion of an Exchange
Registration and (C) the date on which there ceases to be outstanding any
Registrable Securities.

                  (i) Notwithstanding anything to the contrary contained in this
                  Registration Rights Agreement, at the option of either the
                  Company or the Holders of at least 25% of the aggregate
                  principal amount of the Notes then outstanding (such Holders
                  not to include the Initial Purchaser), the Company will offer
                  to exchange the Notes for notes with identical terms pursuant
                  to a registered exchange offer as set forth in Section 4
                  hereof, and the Company's obligation to keep the Shelf
                  Registration Statement effective pursuant to Section 3(b)
                  above shall be deemed satisfied if and to the extent that the
                  Holders receive notes that are freely tradeable as a result of
                  any such registered exchange offer.

                  (ii) Notwithstanding anything to the contrary contained in
                  this Registration Rights Agreement or the Indenture, at any
                  time after two years from the date of issuance of the Notes if
                  the Initial Purchaser has requested the Shelf Registration
                  Statement to remain effective pursuant to Section 3(b) above,
                  the Company may redeem the Notes held by the Initial Purchaser
                  in whole, but not in part, at par plus accrued and unpaid
                  interest and any Liquidated Damages Amounts, upon not less

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                  than 20 nor more than 30 days notice to the Initial Purchaser,
                  which notice will have the effect of causing all Notes held by
                  the Initial Purchaser to become due and payable on the
                  redemption date specified in such notice, and the Company's
                  obligation to keep the Shelf Registration Statement effective
                  pursuant to Section 3(b) above shall be deemed satisfied and
                  suspended upon delivery of such notice to the Initial
                  Purchaser.

                  (h) Each Holder of Registrable Securities wishing to sell
Registrable Securities pursuant to a Shelf Registration Statement and related
Prospectus agrees to deliver a Notice and Questionnaire to the Company, at least
three (3) Business Days prior to any intended distribution of Registrable
Securities under the Shelf Registration Statement. From and after the date the
Shelf Registration Statement is declared effective, the Company shall, as
promptly as is practicable after the date a Notice and Questionnaire and such
other information as the Company may reasonably require pursuant to Section 6(l)
hereof is delivered, and in any event within five (5) Business Days after such
date, (i) if required by applicable law, file with the Commission a
post-effective amendment to the Shelf Registration Statement or prepare and, if
required by applicable law, file a supplement to the related Prospectus or a
supplement or amendment to any document incorporated therein by reference or
file any other required document so that the Holder delivering such Notice and
Questionnaire is named as a selling securityholder in the Shelf Registration
Statement and the related Prospectus in such a manner as to permit such Holder
to deliver such Prospectus to purchasers of the Registrable Securities in
accordance with applicable law and, if the Company shall file a post-effective
amendment to the Shelf Registration Statement, use its best efforts to cause
such post-effective amendment to be declared effective under the Securities Act
as promptly as is practicable, but in any event by the date (the "Amendment
Effectiveness Deadline Date") that is sixty (60) days after the date such
post-effective amendment is required by this clause to be filed; (ii) provide
such Holder copies of any documents filed pursuant to Section 3(c)(i) hereof;
and (iii) notify such Holder as promptly as practicable after the effectiveness
under the Securities Act of any post-effective amendment filed pursuant to
Section 3(c)(i) hereof; provided, that if such Notice and Questionnaire is
delivered during a Deferral Period, the Company shall so inform the Holder
delivering such Notice and Questionnaire and shall take the actions set forth in
clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in
accordance with Section 3(d) hereof, provided, further, that if under applicable
law the Company has more than one option as to the type or manner of making any
such filing, it will make the required filing or filings in the manner or of a
type that is reasonably

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expected to result in the earliest availability of the Prospectus for effecting
resales of Registrable Securities. Notwithstanding anything contained herein to
the contrary, any Holder that becomes a Notice Holder pursuant to the provisions
of Section 3(c) of this Agreement (whether or not such Holder was a Notice
Holder at the time the Shelf Registration Statement was declared effective)
shall be named as a selling securityholder in the Shelf Registration Statement
or related Prospectus in accordance with the requirements of this Section 3(c).

                  (i) The Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the requisite
period if the Company voluntarily takes any action that would result in Holders
of Registrable Securities covered thereby not being able to offer and sell any
such Registrable Securities during that period, unless (i) such action is
required by applicable law, (ii) upon the occurrence of any event contemplated
by paragraph 6(c)(2)(iii) below, and such action is taken by the Company in good
faith and for valid business reasons or (iii) the continued effectiveness of the
Shelf Registration Statement would require the Company to disclose a material
financing, acquisition or other corporate development, and the proper officers
of the Company shall have determined in good faith that such disclosure is not
in the best-interests of the Company and its stockholders, and, in the case of
clause (ii) above, the Company thereafter promptly complies with the
requirements of Section 6(i) below. The duration of all periods during which the
availability of the Shelf Registration Statement and the Prospectus is suspended
in accordance with clauses (i) through (iii) of the preceding sentence (each
such period of suspension being referred to herein as a "Deferral Period")
shall, without the Company incurring any obligation to pay liquidated damages
pursuant to Section 3(e) hereof, not, in the aggregate, exceed 90 days in any
12-month period; provided, that the Company shall be required to extend the
period of time during which the Company is required to maintain the Shelf
Registration Statement effective pursuant to this Agreement by the number of
days comprising the Deferral Period.

                  (j) The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if (i) the Shelf Registration
Statement has not been filed on or prior to the Filing Deadline Date, (ii) the
Shelf Registration Statement has not been declared effective under the
Securities Act on or prior to the Effectiveness Deadline Date or the Amendment
Effectiveness Deadline Date, as the case may be, (iii) the Shelf Registration
Statement ceases to be effective or usable in connection with resales of the
Registrable Securities for any period that does not constitute a Deferral
Period, or (iv) the aggregate duration of Deferral Periods in any period

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exceeds the number of days permitted in respect of such period pursuant to
Section 3(d) hereof (each of the events of a type described in any of the
foregoing clauses (i) through (iv) are individually referred to herein as an
"Event," and the Filing Deadline Date in the case of clause (i), the
Effectiveness Deadline Date or the Amendment Effectiveness Deadline Date, as the
case may be, in the case of clause (ii), the date on which the Shelf
Registration Statement ceases to be effective or usable in connection with
resales of the Registrable Securities for any period that does not constitute a
Deferral Period and the date on which the aggregate duration of Deferral Periods
in any period exceeds the number of days permitted by Section 3(d) hereof in the
case of clause (iv), being referred to herein as an "Event Date"). Events shall
be deemed to continue until the "Event Termination Date," which shall be the
following dates with respect to the respective types of Events: the date the
Shelf Registration Statement is filed in the case of an Event of the type
described in clause (i), the date the Shelf Registration Statement is declared
effective under the Securities Act in the case of an Event of the type described
in clauses (ii) and (iii), and termination of the Deferral Period that caused
the limit on the aggregate duration of Deferral Periods in a period set forth in
Section 3(d) hereof to be exceeded in the case of the commencement of an Event
of the type described in clause (iv).

                  Accordingly, commencing on (and including) any Event Date and
ending on (but excluding) the next date on which there are no Events that have
occurred and are continuing (a "Damages Accrual Period"), the Company agrees to
pay, as liquidated damages and not as a penalty, additional interest (in
addition to the interest otherwise due on the Notes), subject to the provisions
of Section 12(c), to each holder of the Notes during the first 90-day period
immediately following the occurrence of an Event in an amount equal to one half
of one percent (0.50%) per annum on the principal amount of the Notes (the
"Additional Interest"), payable on the Damages Payment Dates and in the same
manner as Base Interest to Record Holders of then outstanding Notes that are
Registrable Securities, accruing from such Event Date. The amount of Additional
Interest for such Event will increase by an additional one quarter of one
percent (0.25%) per annum for each subsequent 90-day period (the "Subsequent
Additional Interest" and, together with the Additional Interest, the "Liquidated
Damages Amount"), until the Event Termination Date, up to a maximum aggregate
amount of additional interest of two percent (2.00%) per annum with respect to
all Events; provided, that any Liquidated Damages Amount accrued with respect to
any Note or portion thereof called for redemption on a redemption date prior to
the Damages Payment Date, shall, in any such event, be paid instead to the
Holder who submitted such Notes or portion thereof for redemption on the
applicable redemption date, on such date. Notwithstanding the foregoing,

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no Liquidated Damages Amounts shall accrue as to any Registrable Security from
and after the earlier of (x) the date such security is no longer a Registrable
Security and (y) termination of the Effectiveness Period pursuant to Section
3(b) hereof. The rate of accrual of the Liquidated Damages Amount with respect
to any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Events. Following the cure
of all Events requiring the payment by the Company of Liquidated Damages Amounts
to the Holders of Registrable Securities pursuant to this Section, the accrual
of Liquidated Damages Amounts will cease (without in any way limiting the effect
of any subsequent Event requiring the payment of Liquidated Damages Amounts by
the Company).

                  All of the Company's obligations set forth in this Section
3(e) that are outstanding with respect to any Registrable Security at the time
such security ceases to be a Registrable Security shall survive until such time
as all such obligations with respect to such security have been satisfied in
full.

(k) Section       Exchange Registration. If permitted under applicable law,
rule, regulation and interpretations thereof, (including SEC no action letters),
at the option of the Company or as soon as practicable after the Holders of at
least 25% of the aggregate principal amount of the Notes originally issued (such
Holders not to include the Initial Purchaser) provide written notice to the
Company directing the Company to offer to exchange the Notes for notes with
identical terms, pursuant to a registered exchange offer (such notice
hereinafter called the "Exchange Notice"), the Company will file under the
Securities Act a registration statement relating to an offer to exchange (such
registration statement, the "Exchange Registration Statement", and such offer,
the "Exchange Offer") any and all of the Notes for a like aggregate principal
amount of notes issued by the Company and guaranteed by the Guarantors, which
notes and guarantee are substantially identical to the Notes and the related
Guarantee, respectively (and are entitled to the benefits of a trust indenture
which is substantially identical to the Indenture or is the Indenture and which
has been qualified under the Trust Indenture Act), except that they have been
registered pursuant to an effective registration statement under the Securities
Act (such new notes hereinafter called "Exchange Securities"). The Company
agrees to use its reasonable best efforts to cause the Exchange Registration
Statement to become effective under the Securities Act as soon as reasonably
practicable. The Exchange Offer will be registered under the Securities Act on
the appropriate form and will comply with all applicable tender offer rules and
regulations under the Exchange Act. The Company further agrees to use its
reasonable best efforts to commence and complete the Exchange Offer promptly,
but no later than 45 days

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after such registration statement has become effective, hold the Exchange Offer
open for at least 30 days and exchange Exchange Securities for all Registrable
Securities that have been properly tendered and not withdrawn on or prior to the
expiration of the Exchange Offer. The Exchange Offer will be deemed to have been
"completed" only if the notes and related guarantee received by Holders who
tender securities for exchange other than Restricted Holders in the Exchange
Offer for Registrable Securities are, upon receipt, transferable by each such
Holder without restriction under the Securities Act and the Exchange Act and
without material restrictions under the blue sky or securities laws of a
substantial majority of the States of the United States of America. The Exchange
Offer shall be deemed to have been completed upon the earlier to occur of (i)
the Company having exchanged the Exchange Securities for all outstanding
Registrable Securities pursuant to the Exchange Offer and (ii) the Company
having exchanged, pursuant to the Exchange Offer, Exchange Securities for all
Registrable Securities that have been properly tendered and not withdrawn before
the expiration of the Exchange Offer, which shall be on a date that is at least
30 days following the commencement of the Exchange Offer. The Company agrees (x)
to include in the Exchange Registration Statement a prospectus for use in
connection with resales of Exchange Securities by a broker-dealer, other than
resales of Exchange Securities received by a broker-dealer pursuant to an
Exchange Offer in exchange for Registrable Securities acquired by the
broker-dealer directly from the Company, and (y) to keep such Exchange
Registration Statement effective for a period (the "Resale Period") beginning
when Exchange Securities are first issued in the Exchange Offer and ending upon
the earlier of the expiration of the 30th day after the Exchange Offer has been
completed or such time as such broker-dealers no longer own any Registrable
Securities. With respect to such Exchange Registration Statement, each
broker-dealer that holds Exchange Securities received in an Exchange Offer in
exchange for Registrable Securities not acquired by it directly from the Company
shall have the benefit of the rights of indemnification and contribution set
forth in Sections 9(a), (c), (d) and (e) hereof.

                  (l) The Company shall take, and shall cause the Guarantors to
take, all actions necessary or advisable to be taken by it to ensure that the
transactions contemplated herein are effected as so contemplated, including all
actions necessary or desirable to register the Guarantee under the registration
statement contemplated in Section 4(a) hereof.

                  (m) Any reference herein to a registration statement as of any
time shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time and any reference herein to
any post-effective

                                       15
<PAGE>   16

amendment to a registration statement as of any time shall be deemed to include
any document incorporated, or deemed to be incorporated, therein by reference as
of such time.

                  (n) If any action under Section 4 of this Agreement would not
be permitted under applicable law, rule, regulation or any interpretation
thereof (including SEC no-action letters), the Company is not required (i) to
take such action or (ii) to amend the terms of the Notes or Warrants (including
the requirement, where applicable, that the Notes and Warrants are not
separately transferrable except under specified conditions).

3. Section        General Registration Procedures. If the Company files a
registration statement pursuant to Section 3 or Section 4, the following
provisions shall apply:

                  (a) At or before the Effective Time of the Exchange Offer or
the Shelf Registration, as the case may be, the Company shall use its reasonable
best efforts to cause the Indenture to be qualified under the Trust Indenture
Act of 1939.

                  (b) To the extent permitted by the Indenture, in the event
that such qualification would require the appointment of a new trustee under the
Indenture, the Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.

4. Section        Shelf Registration Procedures. In connection with any Shelf
Registration Statement, the following provisions shall apply:

         (a) The Company shall furnish to the Initial Purchaser, prior to the
         filing thereof with the Commission, a copy of any Shelf Registration
         Statement, and each amendment thereof and each amendment or supplement,
         if any, to the Prospectus included therein and shall use its reasonable
         best efforts to reflect in each such document, when so filed with the
         Commission, such comments as the Initial Purchaser reasonably may
         propose.

         (b) The Company and any Guarantors shall take such actions as may be
         necessary so that (i) any Shelf Registration Statement, and any
         amendment thereto, and any Prospectus forming part thereof, and any
         amendment or supplement thereto (and each report or other document
         incorporated therein by reference in each case) complies in all
         material respects with the Securities

                                       16
<PAGE>   17

         Act and the Exchange Act and the respective rules and regulations
         thereunder, (ii) any Shelf 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 and (iii) any Prospectus forming part of any Shelf
         Registration Statement, and any amendment or supplement to such
         Prospectus, does not include an untrue statement of a material fact or
         omit to state a material fact necessary in order to make the
         statements, in the light of the circumstances under which they were
         made, not misleading.

         (1) The Company shall advise the Initial Purchaser and, in the case of
         clause (i), the Holders and, if requested by the Initial Purchaser or
         any such Holder, confirm such advice in writing:

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

                  (ii) of any request by the Commission for amendments or
                  supplements to the Shelf Registration Statement or the
                  Prospectus included therein or for additional information.

         (2) The Company shall advise the Initial Purchaser and the Holders and,
         if requested by the Initial Purchaser or any such Holder, confirm such
         advice in writing of:

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

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

                  (iii) the happening of any event that requires the making of
                  any changes in the Shelf Registration Statement or the
                  Prospectus so that, as of such date, the Shelf Registration
                  Statement and the Prospectus

                                       17
<PAGE>   18

                  do not contain an untrue statement of a material fact 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 Prospectus, in light of the circumstances under
                  which they were made) not misleading (which advice shall be
                  accompanied by an instruction to suspend the use of the
                  Prospectus until the requisite changes have been made).

         (c) The Company shall use its reasonable best efforts to prevent the
         issuance, and, if issued, to obtain the withdrawal, of any order
         suspending the effectiveness of any Shelf Registration Statement at the
         earliest possible time.

         (d) The Company shall furnish to each Holder of Registrable Securities
         included within the coverage of any Shelf Registration Statement,
         without charge, at least one copy of such Shelf Registration Statement
         and any post-effective amendments thereto, including financial
         statements and schedules, and, if the Holder so requests in writing,
         all reports and other documents incorporated by reference in the Shelf
         Registration Statement and exhibits (including those incorporated by
         reference).

         (e) The Company shall, during the Effectiveness Period, deliver to each
         Holder of Registrable Securities included within the coverage of 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; and the Company consents (except
         upon and during the continuance of any event described in paragraphs
         3(d) or 6(c)(2)(iii) above) to the use of the Prospectus or any
         amendment or supplement thereto by each of the selling Holders of
         Registrable Securities in connection with the offering and sale of the
         Registrable Securities covered by the Prospectus or any amendment or
         supplement thereto during the Shelf Registration Period.

         (f) Prior to any offering of Registrable Securities pursuant to any
         Shelf Registration Statement, the Company shall register or qualify or
         cooperate with the Holders of Registrable Securities included therein
         and their respective counsel in connection with the registration or
         qualification of such Registrable Securities for offer and sale under
         the securities or blue sky laws of such United States jurisdictions as
         any such Holders reasonably request in writing and do any and all other
         acts or things necessary or advisable to enable the offer and sale in
         such jurisdictions of the Registrable Securities covered by such

                                       18
<PAGE>   19

         Shelf Registration Statement; provided, however, that in no event shall
         the Company be obligated to (i) qualify generally to do business or as
         a foreign corporation or as a dealer in securities in any jurisdiction
         where it would not otherwise be required to so qualify but for this
         Section 6(g), (ii) file any general consent to service of process in
         any jurisdiction where it is not as of the date hereof then so subject,
         (iii) subject itself to taxation in any such jurisdiction if it is not
         so subject, (iv) make any changes to its certificate of incorporation
         or by-laws or any agreement between it and its stockholders or (v)
         qualify any securities or take any action in any jurisdiction outside
         the United States.

         (g) Unless any Registrable Securities shall be in book-entry only form,
         the Company shall cooperate with the Holders of Registrable Securities
         to facilitate the timely preparation and delivery of certificates
         representing Registrable Securities to be sold pursuant to any Shelf
         Registration Statement free of any restrictive legends and in such
         permitted denominations and registered in such names as Holders may
         request in connection with the sale of Registrable Securities pursuant
         to such Shelf Registration Statement.

         (h) Upon the occurrence of any event contemplated by paragraph
         6(c)(2)(iii) above, the Company shall promptly prepare a post-effective
         amendment to any Shelf Registration Statement or an amendment or
         supplement to the related Prospectus or file any other required
         document so that, as thereafter delivered to purchasers of the
         Registrable Securities included therein, 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 (except,
         in each case, for an untrue statement of a material fact or omission of
         a material fact made in reliance on and in conformity with written
         information furnished to the Company by or on behalf of Holders
         specifically for use therein). The Company agrees to notify the Holders
         to suspend use of the Prospectus, and the Holders shall suspend use of
         the Prospectus, and not communicate such material non-public
         information to any third party, and not sell or purchase, or offer to
         sell or purchase, any securities of the Company, until the Company has
         amended or supplemented the Prospectus so it does not contain any such
         misstatement or omission. Subject to Section 3(d) hereof, at such time
         as such public disclosure is otherwise made or the Company determines
         in good faith and upon the advice of counsel that such disclosure is
         not necessary, the Company agrees to notify the Holders of such
         determination and to amend or

                                       19
<PAGE>   20

         supplement the Prospectus if necessary, so it does not contain any such
         untrue statement or omission therein and to furnish the Holders such
         numbers of copies of the Prospectus as so amended or supplemented as
         the Holders may reasonably request.

         (i) Not later than the effective date of any Shelf Registration
         Statement hereunder, the Company shall provide a CUSIP number for all
         Registrable Securities covered by any Shelf Registration Statement and
         provide the Trustee with certificates for the Notes that are in a form
         eligible for deposit with DTC.

         (j) The Company shall use its best efforts to comply with all
         applicable rules and regulations of the Commission and shall make
         generally available to its securityholders or otherwise provide in
         accordance with Section 11(a) of the Securities Act as soon as
         practicable after the effective date of the applicable Shelf
         Registration Statement an earnings statement satisfying the provisions
         of Section 11(a) of the Securities Act.

         (k) The Company may require each Holder of Registrable Securities to be
         sold pursuant to any Shelf Registration Statement to furnish to the
         Company such information regarding the Holder and the distribution of
         such Registrable Securities as is required by applicable law or
         regulations to be included in such Shelf Registration Statement.

         (l) The Company and the Guarantors shall use their reasonable best
         efforts to take all other steps necessary to effect the registration of
         the Registrable Securities covered by the Shelf Registration Statement
         contemplated hereby.

5. Section        Exchange Registration Procedures. In connection with the
Company's obligations with respect to the registration of Exchange Securities as
contemplated by Section 4(a) (the "Exchange Registration"), if applicable, the
Company shall, in a timely manner (or as otherwise specified):

         (a) prepare and file with the Commission, in a timely manner, an
         Exchange Registration Statement on any form which may be utilized by
         the Company and which shall permit the Exchange Offer and resales of
         Exchange Securities by broker-dealers during the Resale Period to be
         effected as contemplated by Section 4(a), and use its reasonable best
         efforts to cause such Exchange Registration Statement to become
         effective as soon as practicable thereafter;

                                       20
<PAGE>   21

         (b) as soon as practicable prepare and file with the Commission such
         amendments and supplements to such Exchange Registration Statement and
         the prospectus included therein as may be necessary to effect and
         maintain the effectiveness of such Exchange Registration Statement for
         the periods and purposes contemplated in Section 4(a) hereof and as may
         be required by the applicable rules and regulations of the Commission
         and the instructions applicable to the form of such Exchange
         Registration Statement, and promptly provide each broker-dealer holding
         Exchange Securities with such number of copies of the prospectus
         included therein (as then amended or supplemented), in conformity in
         all material respects with the requirements of the Securities Act and
         the Trust Indenture Act and the rules and regulations of the Commission
         thereunder, as such broker-dealer reasonably may request prior to the
         expiration of the Resale Period, for use in connection with resales of
         Exchange Securities;

         (c) promptly notify each broker-dealer that has requested or received
         copies of the prospectus included in such registration statement, and
         if requested, confirm such advice in writing, (i) when such Exchange
         Registration Statement or the prospectus included therein or any
         prospectus amendment or supplement or post-effective amendment has been
         filed, and, with respect to such Exchange Registration Statement or any
         post-effective amendment, when the same has become effective, (ii) of
         any comments by the Commission and by the blue sky or securities
         commissioner or regulator of any state with respect thereto or any
         request by the Commission for amendments or supplements to such
         Exchange Registration Statement or prospectus or for additional
         information, (iii) of the issuance by the Commission of any stop order
         suspending the effectiveness of such Exchange Registration Statement or
         the initiation or threatening of any proceedings for that purpose, (iv)
         of the receipt by the Company of any notification with respect to the
         suspension of the qualification of the Exchange Securities for sale in
         any jurisdiction or the initiation or threatening of any proceeding for
         such purpose, or (v) at any time during the Resale Period when a
         prospectus is required to be delivered under the Securities Act, that
         such Exchange Registration Statement, prospectus, prospectus amendment
         or supplement or post-effective amendment does not conform in all
         material respects to the applicable requirements of the Securities Act
         and the Trust Indenture Act and the rules and regulations of the
         Commission thereunder or contains an untrue statement of a material
         fact or omits to state any material fact required to be stated therein
         or necessary to make the statements

                                       21
<PAGE>   22

         therein not misleading in light of the circumstances then existing
         (which advice shall be accompanied by an instruction to suspend the use
         of the prospectus until the requisite changes have been made);

         (d) in the event that the Company would be required, pursuant to
         Section 7(c)(v) above, to notify any broker-dealers holding Exchange
         Securities, without delay prepare and furnish to each such holder a
         reasonable number of copies of a prospectus supplemented or amended so
         that, as thereafter delivered to purchasers of such Exchange Securities
         during the Resale Period, such prospectus shall conform in all material
         respects to the applicable requirements of the Securities Act and the
         Trust Indenture Act and the rules and regulations of the Commission
         thereunder and shall not 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 in light of the
         circumstances then existing;

         (e) use its reasonable best efforts to prevent the issuance, and, if
         issued, to obtain the withdrawal, of any order suspending the
         effectiveness of such Exchange Registration Statement or any
         post-effective amendment thereto at the earliest practicable date;

         (f) use its best efforts to (i) register or qualify the Exchange
         Securities under the securities laws or blue sky laws of such
         jurisdictions as are contemplated by Section 4(a) no later than the
         commencement of the Exchange Offer, (ii) keep such registrations or
         qualifications in effect and comply with such laws so as to permit the
         continuance of offers, sales and dealings therein in such jurisdictions
         until the expiration of the Resale Period and (iii) take any and all
         other actions as may be reasonably necessary or advisable to enable
         each broker-dealer holding Exchange Securities to consummate the
         disposition thereof in such jurisdictions; provided, however, that
         neither the Company nor the Guarantors shall be required for any such
         purpose to (w) qualify generally to do business or as a foreign
         corporation or as a dealer in securities in any jurisdiction where it
         would not otherwise be required to so qualify but for this Section
         7(f), (x) file any general consent to service of process in any
         jurisdiction where it is not as of the date hereof then so subject, (y)
         subject itself to taxation in any such jurisdiction if it is not so
         subject or (z) make any changes to its certificate of incorporation or
         by-laws or any agreement between it and its stockholders;

                                       22
<PAGE>   23

         (g) use its reasonable best efforts to obtain the consent or approval
         of each governmental agency or authority, whether federal, state or
         local, which may be required to effect the Exchange Registration, the
         Exchange Offer and the offering and sale of Exchange Securities by
         broker-dealers during the Resale Period;

         (h) provide a CUSIP number for all Exchange Securities, not later than
         the applicable Effective Time;

         (i) comply with all applicable rules and regulations of the Commission,
         and make generally available to its securityholders as soon as
         practicable but no later than eighteen months after the effective date
         of such Exchange Registration Statement, an earnings statement of the
         Company and its subsidiaries complying with Section 11(a) of the
         Securities Act (including, at the option of the Company, Rule 158
         thereunder).

6. Section        Registration Expenses. Except as otherwise provided in Section
10 hereof, the Company shall bear all fees and expenses incurred in connection
with the performance of its obligations under Sections 2, 3, 4, 5, 6 and 7 and
in the case of a Shelf Registration Statement, shall bear or reimburse the
Holders for 50% of the reasonable fees and disbursements of one firm of counsel
designated by the Company and reasonably acceptable to the Holders of a majority
of the Registrable Securities covered by the Shelf Registration Statement to act
as counsel therefor in connection therewith.

(a) Section       Indemnification and Contribution. In connection with any Shelf
Registration Statement or Exchange Registration Statement, the Company shall
indemnify and hold harmless the Initial Purchaser, each Holder, each underwriter
who participates in an offering of Registrable Securities, each Person, if any,
who controls any of such parties within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and each of their respective
directors, officers, employees, trustees and agents, as follows:

                  (i) against any and all loss, liability, claim, damage and
                  expense whatsoever, as incurred, arising out of any untrue
                  statement or alleged untrue statement of a material fact
                  contained in any Shelf Registration Statement or Exchange
                  Registration Statement (or any amendment thereto) covering
                  Registrable Securities, including all documents incorporated
                  therein by reference, or the omission or alleged omission

                                       23
<PAGE>   24

                  therefrom of a material fact required to be stated therein or
                  necessary to make the statements therein not misleading or
                  arising out of any untrue statement or alleged untrue
                  statement of a material fact contained in any Prospectus (or
                  any amendment or supplement thereto) or the omission or
                  alleged omission therefrom of a material fact necessary in
                  order to make the statements therein, in the light of the
                  circumstances under which they were made, not misleading;

                  (ii) against any and all loss, liability, claim, damage and
                  expense whatsoever, as incurred, to the extent of the
                  aggregate amount paid in settlement of any litigation, or
                  investigation or proceeding by any governmental agency or
                  body, commenced or threatened, or of any claim whatsoever
                  based upon any such untrue statement or omission, or any such
                  alleged untrue statement or omission, if such settlement is
                  effected with the written consent of the Company; and

                  (iii) against any and all expenses whatsoever, as incurred
                  (including reasonable fees and disbursements of counsel chosen
                  by the Holders, such Holder or any underwriter (except to the
                  extent otherwise expressly provided in Section 9(c) hereof)),
                  reasonably incurred in investigating, preparing or defending
                  against any litigation, or any investigation or proceeding by
                  any governmental agency or body, commenced or threatened, or
                  any claim whatsoever based upon any such untrue statement or
                  omission, or any such alleged untrue statement or omission, to
                  the extent that any such expense is not paid under
                  subparagraph (i) or (ii) of this Section 9(a);

(A) provided that this indemnity shall not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by the Initial Purchaser, such
Holder or any underwriter expressly for use in the Shelf Registration Statement
or Exchange Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto), that if any Holder who participates as
an underwriter in any such registration or any other Person who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person

                                       24
<PAGE>   25

asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of the securities
to such Person if such statement or omission was timely corrected in such final
prospectus. Any amounts advanced by the Company to an indemnified party pursuant
to this Section 9 as a result of such losses shall be returned to the Company if
it shall be finally determined by such a court in a judgment not subject to
appeal or final review that such indemnified party was not entitled to
indemnification by the Company.

                  (b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Initial Purchaser, each underwriter
who participates in an offering of Registrable Securities and the other selling
Holders and each of their respective directors, officers (including each officer
of the Company who signed the Shelf Registration Statement or Exchange
Registration Statement), employees, trustees and agents and each Person, if any,
who controls the Company, the Initial Purchaser, any underwriter or any other
selling Holder within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, from and against any and all loss, liability, claim,
damage and expense whatsoever described in the indemnity contained in Section
9(a) hereof, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Shelf
Registration Statement or Exchange Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by such
selling Holder expressly for use in the Shelf Registration Statement or Exchange
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto); provided, however, that no such Holder shall
be liable for any claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of Registrable Securities pursuant to the
Shelf Registration Statement or Exchange Registration Statement.

                  (c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers served on such
indemnified party, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any obligation or liability except to the
extent that the indemnifying party has been materially prejudiced by such delay
or failure. An indemnifying party may participate at its own expense in the
defense of any such action. If an indemnifying party so elects within a
reasonable time after receipt of such notice, such indemnifying party, jointly
with any other indemnifying party, may assume the defense of such action with
counsel chosen by it and approved by the indemnified

                                       25
<PAGE>   26

party or parties defendant in such action; provided that if any such indemnified
party reasonably determines that representation of such indemnifying party and
any indemnified party by the same counsel would present a conflict of interest,
then such indemnifying party or parties shall not be entitled to assume such
defense. If an indemnifying party is not entitled to assume the defense of such
action as a result of the proviso to the preceding sentence, counsel for such
indemnifying party shall be entitled to conduct the defense of such indemnifying
party and counsel for each indemnified party or parties shall be entitled to
conduct the defense of such indemnified party or parties. If an indemnifying
party assumes the defense of an action in accordance with and as permitted by
the provisions of this paragraph, such indemnifying party shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. In no event shall the indemnifying
party or parties be liable for the fees and expenses of more than one counsel
(in addition to any local counsel) separate from its own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances.

                  (d) In order to provide for just and equitable contribution in
circumstances in which the indemnity provision agreement provided for in this
Section 9 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company, the Initial
Purchaser and the Holders shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by said indemnity
agreement incurred by the Company, the Initial Purchaser and the Holders, as
incurred; provided that no Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person that was not guilty of such fraudulent
misrepresentation. As between the Company, the Initial Purchaser and the
Holders, such parties shall contribute to such aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement in such proportion as shall be appropriate to reflect the relative
fault of the Company, on the one hand, and the Initial Purchaser and the
Holders, on the other hand, with respect to the statements or omissions which
resulted in such loss, liability, claim, damage or expense, or action in respect
thereof, as well as any other relevant equitable considerations; provided,
however, that in no event shall the Initial Purchaser or any subsequent Holder
of any Notes be responsible, in the aggregate, for any amount in excess of the
amount of net proceeds received by the Initial Purchaser or such Holder from the
sale of the Registrable Securities pursuant to the Shelf Registration Statement
or Exchange Registration Statement. The relative fault

                                       26
<PAGE>   27

of the Company, on the one hand, and of the Initial Purchaser and the Holders,
on the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by or on behalf of the Initial
Purchaser or the Holders, on the other, and the parties* relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Initial Purchaser and the Holders of the
Registrable Securities agree that it would not be just and equitable if
contributions pursuant to this Section 9 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the relevant equitable considerations. For purposes of this Section 9(d), each
director, officer, employee, trustee, agent and Person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such Initial Purchaser or Holder, and each director, officer, employee,
trustee and agent of the Company, and each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as the Company. No
party shall be liable for contribution with respect to any action, suit,
proceeding or claim settled without its written consent.

2. Section        Underwritten Offering.

                  (a) The Holders of a majority in interest of Registrable
Securities covered by the Shelf Registration Statement who desire to do so may
sell such Registrable Securities in up to two underwritten offerings in
aggregate principal amount of not less than $100 million for the first such
offering and $75 million for the second such offering (i) pursuant to such Shelf
Registration Statement, (ii) pursuant to Rule 144A under the Securities Act or
another provision providing an exemption or exclusion from the registration
requirements thereof, or (iii) a block sale or other disposition pursuant to the
Shelf Registration Statement, in accordance with the conditions set forth below.
Any such offering is referred to in this Section 10 as an "underwritten
offering." In any such underwritten offering, the investment banker or bankers
and manager or managers that will administer the offering will be a nationally
recognized underwriting firm selected by, and the underwriting arrangements with
respect thereto will be approved by, the Holders of a majority of the
Registrable Securities to be included in such offering, in each case, subject to
the consent of the Company (not to be unreasonably withheld). No Holder may
participate in any underwritten offering contemplated hereby unless such Holder
(i) agrees to sell such Holder's Registrable Securities in accordance with any
approved

                                       27
<PAGE>   28

underwriting arrangements and (ii) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents required under the terms of such approved
underwriting arrangements. The Holders participating in any underwritten
offering shall be responsible for any expenses customarily borne by selling
securityholders, including discounts and commissions and, subject to the next
sentence, fees of counsel. The Company shall reimburse the selling
securityholders for 50% of the reasonable fees and expenses of counsel to the
selling securityholders and shall be responsible for the fees and disbursements
of its counsel, its independent public accountants and any printing expenses
incurred in connection with such underwritten offering. Notwithstanding the
foregoing, upon receipt of a request from the managing underwriter or a
representative of Holders of a majority of the Registrable Securities
outstanding to prepare and file an amendment or supplement to the Shelf
Registration Statement and Prospectus in connection with an underwritten
offering, the Company may delay the filing of any such amendment or supplement
for up to 90 days for the reasons set forth in Section 3(d) hereof.

                  (b) The Company and the Guarantors shall enter into such
customary agreements (including underwriting and purchase agreements in
customary form), and take all other customary actions that are reasonably
required in order to expedite or facilitate the registration or the disposition
of the Registrable Securities (including, without limitation, to cause members
of management of the Company and the Guarantors to participate in customary
"road-show" and marketing activities to the extent required by the underwriters
with a view to maximizing the price of the Notes sold in such offering), and in
connection therewith, if an underwriting or purchase agreement is entered into,
cause the same to contain indemnification provisions and procedures
substantially identical to those set forth in Section 9 hereof (or such other
provisions and procedures acceptable to the managing underwriters, if any) with
respect to all parties to be indemnified pursuant to Section 9 hereof.

                  (c) Subject to confidentiality agreements and applicable law,
the Company and the Guarantors shall (i) make reasonably available for
inspection by the Holders of Registrable Securities to be registered thereunder,
any underwriter participating in any disposition pursuant to such Shelf
Registration Statement, and any attorney, accountant or other agent retained by
such Holders or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries; (ii) cause the Company's officers, directors and employees to make
reasonably available for inspection all relevant

                                       28
<PAGE>   29

information reasonably requested by such Holders or any such underwriter,
attorney, accountant or agent in connection with any such Shelf Registration
Statement, in each case as is customary for similar due diligence examinations;
(iii) make such representations and warranties to the Holders of Registrable
Securities registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily made by the Company to underwriters in
secondary underwritten offerings of this type and covering matters including,
but not limited to, those set forth in the Purchase Agreement; (iv) obtain
opinions, upon reasonable request at least 30 days before effectiveness, of
counsel to the Company (who may be the general counsel of the Company) and a
bring down opinion upon closing (which counsel (if other than the general
counsel) and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any) in customary form (with
customary qualifications) addressed to each selling Holder 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 (it being agreed that the matters to be covered
by such opinion or a written statement by such counsel delivered in connection
with such opinions shall include, without limitation, as of the date of the
opinion and as of the effective date of the Shelf Registration Statement or most
recent post-effective amendment thereto, as the case may be, "negative
assurances" as to the absence from such Shelf Registration Statement and the
prospectus included therein, as then amended or supplemented, including the
documents incorporated by reference therein, of an untrue statement of a
material fact or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading); (v)
obtain, if reasonably requested, "comfort letters" and a bring down letter on
closing from the independent public accountants of the Company (and, if
necessary, any other independent public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the Shelf
Registration Statement), addressed to each such Holder of Registrable Securities
registered thereunder and the underwriters, if any, in customary form and
covering matters of the type customarily covered in "comfort letters" in
connection with secondary underwritten offerings of this type; and (vi) deliver
such other customary documents and certificates as may be reasonably requested
by any such Holders and the managing underwriters, if any, including those to
evidence compliance with Section 6(i) hereof and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company . The foregoing actions set forth in clauses (iii), (iv), (v) and (vi)
of this Section 10(c) shall

                                       29
<PAGE>   30

be performed at each closing under any underwritten offering to the extent
required thereunder.

3. Section        Rules 144 and 144A.

         The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further actions
as any Holder may request, to the extent required to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rules 144 and 144A under the
Securities Act, as such Rules may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of any
Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such information and requirements.

4. Section        Miscellaneous.

                  (a) No Conflicting Agreements. The Company is not, as of the
date hereof, a party to, nor shall it, on or after the date of this Agreement,
enter into, any agreement with respect to its securities that conflicts with the
rights granted to the Holders of Registrable Securities in this Agreement. The
Company represents and warrants that the rights granted to the Holders of
Registrable Securities hereunder do not in any way conflict with the rights
granted to the holders of the Company's securities under any other agreements.

                  (b) 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, unless the Company has obtained the written
consent of a majority in interest of the holders of Notes or Warrants, as the
case may be, and, if the Initial Purchaser holds at least 25% of the Notes or
Warrants, as the case may be, the written consent of the Initial Purchaser.

                                       30
<PAGE>   31

                  (c) Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if the Company fails to perform any of
its obligations hereunder and that the purchasers and the holders from time to
time of the Registrable Securities may be irreparably harmed by any such
failure, and accordingly agree that the Trustee shall be entitled, on behalf of
Holders of Notes to seek any available remedy for the enforcement of this
Agreement, including for the payment of any Liquidated Damages Amounts.
Notwithstanding the foregoing, the parties agree that the sole damages payable
for a violation of the terms of this Agreement with respect to which liquidated
damages are expressly provided shall be such liquidated damages. Nothing shall
preclude a Notice Holder or Holder of Registrable Securities from pursuing or
obtaining specific performance or other equitable relief with respect to this
Agreement. The parties hereto agree that the liquidated damages provided for in
Section 3(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement or Exchange Registration Statement to be filed or
declared effective or available for effecting resales of Registrable Securities
in accordance with the provisions hereof.

                  (d) 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:

                  1. if to a Holder, at the most current address given by such
                  Holder to the Company in accordance with the provisions of
                  this Section 12(d);

                  2. if to the Initial Purchaser, initially at the address set
                  forth in the Purchase Agreement; and

                  3. if to the Company, initially at its address set forth in
                  the Purchase Agreement.

All such notices and communications shall be deemed to have duly given when
received.

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

                                       31
<PAGE>   32

                  (e) Transfer of Registration Rights and Obligations. The
rights provided in this Agreement are for the benefit of all Holders in addition
to the Initial Purchaser, and all such Holders may enforce their rights and
remedies directly against the Company. In the event the Company issues or
distributes, or proposes to issue or distribute, any shares or other securities
of another issuer to any Holder and such shares or other securities would be
Registrable Securities, the Company shall use its reasonable best efforts to
cause such issuer to deliver to the Holders a written instrument, in form and
substance reasonably satisfactory to the Holders, that such issuer is bound by
and subject to all the terms and conditions of this Agreement to the same extent
as the Company and that the rights and remedies provided herein to the Holders
apply in all respects to the Registrable Securities of such issuer.

                  (f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and the Holders, including, without the need for an express
assignment or any consent by the Company thereto, subsequent Holders of
Registrable Securities. The Company hereby agrees to extend the benefits of this
Agreement to any Holder of Registrable Securities and any such Holder may
specifically enforce the provisions of this Agreement as if an original party
hereto.

                  (g) Counterparts. This agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

                  (h) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (i) GOVERNING LAW. This agreement shall be governed by the
laws of the State of New York, without giving effect to the rules governing
conflicts of laws.

                  (j) Severability. In the event that any one of 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.

                                       32
<PAGE>   33

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       33
<PAGE>   34

                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.

                      ADVANCE PARADIGM, INC.

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

                      THE GUARANTORS:

                         ADVP CONSOLIDATION, L.L.C.

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

                         ADVANCERX.COM, L.P.

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

                         ADVP MANAGEMENT, L.P.

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

                                       34
<PAGE>   35

                         ADVP OPERATIONS, L.P.

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

                         HMN HEALTH SERVICES, INC.

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

                         INNOVATIVE PHARMACEUTICAL
                         STRATEGIES, INC.

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

                         MATURE RX PLUS OF NEVADA, INC.

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

                         PHOENIX COMMUNICATIONS
                         INTERNATIONAL, INC.

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

                                       35
<PAGE>   36

                         FIRST FLORIDA INTERNATIONAL
                         HOLDINGS, INC.

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

                         INNOVATIVE MEDICAL RESEARCH, INC.

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

                         BAUMEL-EISNER NEUROMEDICAL
                         INSTITUTE, INC.

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

                         FOUNDATION HEALTH
                         PHARMACEUTICAL SERVICES, INC.

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

                         PCS HOLDING CORPORATION

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

                                       36
<PAGE>   37

                         PCS HEALTH SYSTEMS, INC.

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

                         CLINICAL PHARMACEUTICALS, INC.

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

                         PCS MAIL SERVICES, INC.

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

                         PCS SERVICES, INC.

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

                         PCS MAIL SERVICES OF BIRMINGHAM,
                         INC.

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

                                       37
<PAGE>   38

                         PCS MAIL SERVICES OF FT. WORTH, INC.

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

                         PCS MAIL SERVICES OF SCOTTSDALE, INC.

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

                         FFI RX MANAGED CARE, INC.

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

                         FIRST FLORIDA MANAGED CARE, INC.

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

                         AMBULATORY CARE REVIEW
                         SERVICES, INC.

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

                                       38
<PAGE>   39

                         RITE AID CORPORATION

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

                                       39
<PAGE>   40

                                                                       EXHIBIT A

                 SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE

         The undersigned beneficial holder of Senior Subordinated Notes due 2010
("Notes") of Advance Paradigm, Inc. (the "Company"), common stock purchase
warrants ("Warrants") or Series A Common Stock, par value $0.01 per share (the
"Common Stock" and together with the Notes and the Warrants, the "Registrable
Securities") of the Company understands that the Company has filed with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-3 (the "Shelf Registration Statement") for the registration and resale
under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"),
of the Registrable Securities in accordance with the terms of the Registration
Rights Agreement, dated as of October 2, 2000 (the "Registration Rights
Agreement") by and among the Company and Rite Aid Corporation. A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below. All capitalized terms not otherwise defined herein
shall have the meaning ascribed thereto in the Registration Rights Agreement.

         Each beneficial owner of Registrable Securities is entitled to the
benefits of the Registration Rights Agreement. In order to sell or otherwise
dispose of any Registrable Securities pursuant to the Shelf Registration
Statement, a beneficial owner of Registrable Securities generally will be
required to be named as a selling securityholder in the related prospectus,
deliver a prospectus to purchasers of Registrable Securities and be bound by
those provisions of the Registration Rights Agreement applicable to such
beneficial owner (including certain indemnification provisions, as described
below). Beneficial owners are encouraged to complete and deliver this Notice and
Questionnaire prior to the effectiveness of the Shelf Registration Statement so
that such beneficial owners may be named as selling securityholders in the
related prospectus at the time of effectiveness. Upon receipt of a completed
Notice and Questionnaire from a beneficial owner following the effectiveness of
the Shelf Registration Statement, the Company will, as promptly as practicable,
file such amendments to the Shelf Registration Statement or supplements to the
related prospectus as are necessary to permit such holder to deliver such
prospectus to purchasers of Registrable Securities. The Company has agreed to
pay liquidated damages pursuant to the Registration Rights Agreement under
certain circumstances as set forth therein.

                                      E-1
<PAGE>   41

         Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Shelf Registration
Statement and the related prospectus.

                                     NOTICE

         The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby gives notice to the Company of its intention to
sell or otherwise dispose of Registrable Securities beneficially owned by it and
listed below in Item 3 (unless otherwise specified under Item 3) pursuant to the
Shelf Registration Statement. The undersigned, by signing and returning this
Notice and Questionnaire, understands that it will be bound by the terms and
conditions of this Notice and Questionnaire and the Registration Rights
Agreement.

                                      E-2
<PAGE>   42

         The undersigned hereby provides the following information to the
Company and represents and warrants that such information is accurate and
complete:

                                  QUESTIONNAIRE

1        (a) Full Legal Name of Selling Securityholder:

         -----------------------------------------------------------------------

         (b) Full Legal Name of Registered Holder (if not the same as (a) above)
         through which Registrable Securities listed in (3) below are held:

         -----------------------------------------------------------------------

         (c) Full Legal Name of DTC Participant (if applicable and if not the
         same as (b) above) through which Registrable Securities listed in (3)
         below are held:

         -----------------------------------------------------------------------

2.       Address for Notices to Selling Securityholder:

         -----------------------------------------------------------------------

         -----------------------------------------------------------------------

         Telephone:
                   -------------------------------------------------------------
         Fax:
             -------------------------------------------------------------------
         Contact Person:
                        --------------------------------------------------------

3.       Beneficial Ownership of Registrable Securities:

         (a) Type and Principal Amount of Registrable Securities beneficially
         owned:

         -----------------------------------------------------------------------

         -----------------------------------------------------------------------

         b) CUSIP No(s). of such Registrable Securities beneficially owned:

         -----------------------------------------------------------------------

         -----------------------------------------------------------------------

4.       Beneficial Ownership of the Company's securities owned by the Selling
         Securityholder:

                                      E-3
<PAGE>   43

         Except as set forth below in this Item (4), the undersigned is not the
         beneficial or registered owner of any securities of the Company other
         than the Registrable Securities listed above in Item (3).

         (a) Type and Amount of Other Securities beneficially owned by the
         Selling Securityholder:

         -----------------------------------------------------------------------

         -----------------------------------------------------------------------

         (b) CUSIP No(s). of such Other Securities beneficially owned:

         -----------------------------------------------------------------------

         -----------------------------------------------------------------------

5.       Relationship with the Company:

         Except as set forth below, neither the undersigned nor any of its
         affiliates, officers, directors or principal equity holders (5% or
         more) has held any position or office or has had any other material
         relationship with the Company (or their predecessors or affiliates)
         during the past three years.

         State any exceptions here:

         -----------------------------------------------------------------------

         -----------------------------------------------------------------------

         -----------------------------------------------------------------------

6.       Plan of Distribution:

         Except as set forth below, the undersigned (including its donees or
         pledgees) intends to distribute the Registrable Securities listed above
         in Item (3) pursuant to the Shelf Registration Statement only as
         follows (if at all): such Registrable Securities may be sold from time
         to time directly by the undersigned or alternatively, through
         underwriters, broker-dealers or agents. If the Registrable Securities
         are sold through underwriters or broker-dealers, the Selling
         Securityholder will be responsible for underwriting discounts or
         commissions or agent's commissions. Such Registrable Securities may be
         sold in one or more transactions at fixed prices, at prevailing market
         prices at the time of sale, at varying prices determined at the time of
         sale, or at negotiated prices. Such sales may be effected in
         transactions (which may involve block transactions) (i) on any national
         securities exchange or quotation service on

                                      E-4
<PAGE>   44

         which the Registrable Securities may be listed or quoted at the time of
         sale, (ii) in the over-the-counter market, (iii) in transactions
         otherwise than on such exchanges or services, or in the
         over-the-counter market, or (iv) through the writing of options. In
         connection with sales of Registrable Securities or otherwise, the
         undersigned may enter into hedging transactions with broker-dealers,
         which may in turn engage in short sales of the Registrable Securities
         and deliver Registrable Securities to close out such short positions,
         or loan or pledge Registrable Securities to broker-dealers that in turn
         may sell such securities.

         State any exceptions here:

         -----------------------------------------------------------------------

         -----------------------------------------------------------------------

         -----------------------------------------------------------------------

         Note: In no event will such method(s) of distribution take the form of
         an underwritten offering of the Registrable Securities without the
         prior agreement of the Company.

         The undersigned acknowledges that it understands its obligation to
comply with the provisions of the Exchange Act and the rules thereunder relating
to stock manipulation, particularly Regulation M thereunder (or any successor
rules or regulations), in connection with any offering of Registrable Securities
pursuant to the Shelf Registration Statement. The undersigned agrees that
neither it nor any person acting on its behalf will engage in any transaction in
violation of such provisions.

         The Selling Securityholder hereby acknowledges its obligations under
the Registration Rights Agreement to indemnify and hold harmless certain persons
as set forth therein.

         Pursuant to the Registration Rights Agreement, the Company has agreed
under certain circumstances to indemnify the Selling Securityholders against
certain liabilities.

         In accordance with the undersigned's obligation under the Registration
Rights Agreement to provide such information as may be required by law for
inclusion in the Shelf Registration Statement, the undersigned agrees to
promptly notify the Company of any inaccuracies or changes in the information
provided herein that may occur subsequent to the date hereof at any time while
the Shelf

                                      E-5
<PAGE>   45

Registration Statement remains effective. All notices hereunder and pursuant to
the Registration Rights Agreement shall be made in writing at the address set
forth below.

         By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and the
related prospectus. The undersigned understands that such information will be
relied upon by the Company in connection with the preparation or amendment of
the Shelf Registration Statement and the related prospectus.

                                      E-6
<PAGE>   46

         IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.

Dated:                   Beneficial Owner

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

         PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO
ADVANCE PARADIGM, INC. AT:

                          5215 North O'Connor Boulevard
                                   Suite 1600
                               Irving, Texas 75039
                           Attention: General Counsel

                                      E-7<PAGE>   1
                                                                    EXHIBIT 10.3

         FORM OF WARRANT

THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS
WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE SUBJECT TO AND
HAVE THE BENEFIT OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 2, 2000
BETWEEN ADVANCE PARADIGM, INC. AND RITE AID CORPORATION, A COPY OF WHICH IS ON
FILE WITH ADVANCE PARADIGM, INC. THE WARRANTS EVIDENCED BY THIS CERTIFICATE HAVE
BEEN INITIALLY ISSUED WITH SENIOR SUBORDINATED NOTES DUE 2010 OF ADVANCE
PARADIGM, INC. AND ON OR PRIOR TO OCTOBER 2, 2002, ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND ARE SUBJECT TO CERTAIN ADJUSTMENTS UPON THE
REDEMPTION OR REPAYMENT OF THE NOTES AS SET FORTH IN THIS WARRANT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

Warrant No. 01                                             Dated October 2, 2000

                                     WARRANT

   TO PURCHASE SUCH NUMBER OF SHARES OF COMMON STOCK AS SET FORTH IN ARTICLE 1
                                    HEREIN OF
                             ADVANCE PARADIGM, INC.

                            EXPIRING OCTOBER 2, 2010

         THIS IS TO CERTIFY THAT, for value received, RITE AID CORPORATION
("RITE AID") or registered assigns (THE "HOLDER") is entitled to purchase from
ADVANCE PARADIGM, INC., a Delaware corporation (the "COMPANY"), at any time or
from time to time after the Second Anniversary and prior to 5:00 p.m., New York
City time, on October 2, 2010 ("EXPIRATION DATE"), at the place where the
Warrant Agency is located, at the Exercise Price, the number of

<PAGE>   2

shares of Common Stock of the Company, set forth in Article 1 herein, all
subject to adjustment and upon the terms and conditions hereinafter provided.

         The Warrants are being issued in connection with the issuance to Rite
Aid of $200 million aggregate principal amount of the Company's senior
subordinated Notes due 2010 pursuant to that certain Indenture dated as of
October 2, 2000, by and between the Company, the Trustee named therein and the
Guarantors parties thereto.

         The Warrants are subject to certain restrictions on transfer and
assignment as set forth in Section 6.4 herein.

         Certain terms used in this Warrant are defined in Article 5.

                                   ARTICLE 1

                                     GRANT

SECTION 1.1 Number of Shares Issuable upon Exercise of Warrant. The maximum
number of shares of Common Stock issuable upon exercise of the Warrant shall
initially be 780,000 shares (the "MAXIMUM AMOUNT"), subject to certain
anti-dilution adjustments as provided in Article 4 herein.

SECTION 1.2 Reduction upon Redemption or Repayment of the Notes in Part on or
Prior to the Second Anniversary. If the Company repurchases, redeems or repays
an aggregate principal amount of the Notes not to exceed $75.0 million pursuant
to Section 3.07 of the Indenture or, any principal amount, pursuant to Section
4.14 of the Indenture, in any case, on or prior to the Second Anniversary, then
without any further action by the Company, the Maximum Amount, as adjusted
pursuant to Article 4 herein, shall be reduced by the same percentage as the
percentage of Notes redeemed or repaid on or prior to the Second Anniversary.

SECTION 1.3 Cancellation upon Redemption or Repayment of the Notes in Full on or
Prior to the Second Anniversary. Notwithstanding anything to the contrary
contained herein, if the Company repurchases, redeems or repays one hundred
percent (100%) of the aggregate principal amount of the Notes pursuant to
Section 3.07 of the Indenture on or prior to the Second Anniversary, then
without any further action by the Company, this Warrant shall be cancelled and
of no further effect.

                                       2

<PAGE>   3

                                   ARTICLE 2

                              EXERCISE OF WARRANTS

SECTION 2.1 Method of Exercise. To exercise this Warrant, in whole or in part,
the Holder shall deliver on any Business Day, which Business Day shall be after
the Second Anniversary, to the Company, at the Warrant Agency, (a) this Warrant,
(b) the Form of Election to Purchase attached hereto as Annex A, and (c) payment
of the Exercise Price with respect to such Warrant Shares. Such payment may be
made, at the option of the Holder, either by cash, certified bank check in New
York Clearing House Funds or wire transfer in an amount equal to the product of
(i) the Exercise Price then in effect times (ii) the number of Warrant Shares
for which this Warrant is being exercised.

SECTION 2.2 Exercise by Surrender of Warrant. In addition to the method of
payment set forth in Section 2.1 hereof and in lieu of any cash payment required
thereunder, the Holder of the Warrant shall have the right at any time and from
time to time to exercise the Warrant, in full or in part, by surrendering the
Warrant Certificate and the Form of Election to Purchase attached hereto as
Annex B, in the manner specified in Section 2.1 in exchange for the number of
Warrant Shares determined according to the following cashless exercise formula:

         Warrant Shares = (A x B) - (A x C)
                          -----------------
                                  B

                  For purposes of the foregoing formula:

                                        A = the total number of shares with
                           respect to which this Warrant is then being
                           exercised.

                                        B = the Market Price.

                                        C = the Exercise Price then in effect at
                           the time of such exercise.

                                       3
<PAGE>   4

         Solely for the purposes of this Section 2.2, Market Price shall mean
the greater of Market Price on the date immediately prior to the date of
exercise or Current Market Price.

SECTION 2.3 Issuance of Certificates. The Company shall, as promptly as
practicable and in any event within three Business Days after receipt of such
Form of Election to Purchase, Warrant and payment, whether payment is made in
accordance with Section 2.1 or 2.2 above, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of shares of Common Stock to be
issued pursuant to such notice, subject to Section 2.5. The share certificate or
certificates so delivered shall be in such denominations as may be specified in
such notice, and shall be issued in the name of the Holder or such other name or
names as shall be designated in such notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and such Holder or any other Person so designated to be named
therein shall be deemed for all purposes to have become a Holder of record of
shares, as of the date the aforementioned notice and payment is deemed to have
been given to the Company. If this Warrant shall have been exercised only in
part, the Company shall, at the time of delivery of such certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights to
purchase the remaining shares of Common Stock called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant, or, at
the request of the Holder specified in such notice, appropriate notation may be
made on this Warrant which shall then be returned to the Holder. All Warrants
delivered for exercise shall be cancelled by the Company.

SECTION 2.4 Shares to Be Fully Paid and Nonassessable. All Warrant Shares shall
be validly issued, fully paid and nonassessable, issued without violation of any
preemptive or similar rights of any security holder of the Company and free from
all taxes, liens, and charges created by or through the Company with respect to
the issue thereof, and if the Common Stock is then listed on any national
securities exchange or quoted on Nasdaq, shall be duly listed or quoted thereon,
as the case may be.

SECTION 2.5 No Fractional Shares Required to Be Issued. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon such exercise of this Warrant, the Company shall pay to the Holder an
amount in cash equal to such fraction multiplied by the Market Price of one
share of Common Stock on the date of exercise.

                                       4
<PAGE>   5

SECTION 2.6 Share Legend. Each certificate for Warrant Shares, unless at the
time of exercise such shares are registered under the Securities Act, shall bear
the following legend:

         "This security has not been registered under the Securities Act of
         1933, as amended, and may not be sold or offered for sale unless
         registered under said Act and any applicable state securities laws or
         unless an exemption from such registration is available. This security
         is also subject to and has the benefit of a Registration Rights
         Agreement dated as of October 2, 2000 between Advance Paradigm, Inc.
         and Rite Aid Corporation, copies of which are on file with Advance
         Paradigm, Inc. The Warrants evidenced by this certificate have been
         initially issued with Senior Subordinated Notes due 2010 of Advance
         Paradigm, Inc. and on or prior to October 2, 2002, are subject to
         certain restrictions on transfer and are subject to certain adjustments
         upon the redemption or repayment of the Notes as set forth in this
         Warrant."

         Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public offering pursuant to a registration statement under the Securities
Act) shall also bear such legend unless, in the opinion of counsel selected by
the Holder of such certificate (who may be an employee of such Holder) and
reasonably acceptable to the Company, the securities represented thereby need no
longer be subject to restrictions on resale under the Securities Act.

SECTION 2.7 Reservation. The Company has duly reserved and will keep available
for issuance upon exercise of the Warrant the total number of Warrant Shares
deliverable from time to time upon exercise of all Warrants from time to time
outstanding.

SECTION 2.8 Taxes. The Company shall pay all expenses and any and all
documentary, stamp and other similar taxes which may be payable with respect to
the issuance and delivery of Warrant Shares and any new Warrant upon exercise of
this Warrant; provided, however that the Company shall not be required to pay
any transfer tax or taxes which may be payable in respect of any transfer
involved in the issue of the Warrant or Warrant Shares in the name other than
the registered holder of the Warrant surrendered upon exercise of the Warrant,
and the Company shall not

                                       5
<PAGE>   6

be required to issue or deliver such Warrant unless or until the Person or
Persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the reasonable satisfaction of
the Company that such tax has been paid.

                                   ARTICLE 3

                       WARRANT AGENCY; TRANSFER, EXCHANGE
                          AND REPLACEMENT OF WARRANTS

SECTION 3.1 Warrant Agency. As long as this Warrant remains outstanding, the
Company shall perform the obligations of and be the warrant agency with respect
to the Warrant (the "WARRANT AGENCY") at its address set forth on the signature
page or at such other address as the Company shall specify by written notice to
the Holder.

SECTION 3.2 Ownership of Warrant. The Company may deem and treat the Person in
whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any Person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until due presentment of this Warrant for registration of
transfer as provided in this Article 3.

SECTION 3.3 Transfer of Warrant. The Company agrees to maintain at the Warrant
Agency books for the registration of transfers of the Warrant, and transfer of
this Warrant and all rights hereunder shall be registered, in whole or in part,
on such books, upon surrender of this Warrant at the Warrant Agency, together
with the Form of Assignment attached hereto as Annex C, duly executed by the
Holder or its duly authorized agent or attorney. Subject to Section 6.4 herein,
upon surrender, the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denominations specified in
the instrument of assignment (which shall be whole numbers of shares only) and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, if any, and this Warrant shall promptly be cancelled.

SECTION 3.4 Division or Combination of Warrants. Subject to Section 6.4 herein,
this Warrant may be divided or combined with other Warrants upon presentment
hereof and of any Warrant or Warrants with which this Warrant is to be combined
at the Warrant Agency, together with the annexed Form of Assignment,

                                       6
<PAGE>   7

specifying the names and denominations (which shall be whole numbers of shares
only) in which the new Warrant or Warrants are to be issued, signed by the
Holder or Holders thereof or their respective duly authorized agents or
attorneys. Subject to compliance with Section 3.3 and 6.4 as to any transfer or
assignment which may be involved in the division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.

SECTION 3.5 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
evidence reasonably satisfactory to the Company of the ownership of and the
loss, theft, destruction or mutilation of any Warrant, and in the case of any
such loss, theft or destruction, upon receipt of indemnity or security
reasonably satisfactory to the Company (it being understood and agreed that if
the holder of the Warrant is Rite Aid or one of its subsidiaries or affiliates,
then a written agreement of indemnity alone shall be satisfactory to the Company
and no further security shall be required), the Company will make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of
like tenor and representing the right to purchase the same aggregate number of
shares of Common Stock.

SECTION 3.6 Expenses of Delivery of Warrants. The Company shall pay all expenses
and other charges payable in connection with the preparation, issuance and
delivery of Warrants hereunder.

                                   ARTICLE 4

                             ANTIDILUTION PROVISIONS

SECTION 4.1 Adjustment Generally. The Exercise Price and the number of shares of
Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time, as follows:

SECTION 4.2 Adjustment for Stock Dividends, Distributions and Subdivisions. In
the event the Company shall declare or pay any dividend or make any other
distribution on the Common Stock payable in shares of Common Stock, or shall
effect a subdivision of the outstanding Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock), then and in each such case, the applicable
Exercise Price in effect immediately prior to such stock dividend, distribution
or
                                       7
<PAGE>   8
subdivision shall, concurrently with the effectiveness of such stock dividend,
distribution or subdivision, be proportionately decreased, provided that, in the
event such issuance is declared but not effected, the applicable Exercise Price
shall be readjusted as if such issuance was not declared.

SECTION 4.3 Adjustments for Combination or Consolidation of Common Stock. In the
event the outstanding Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then and in each such case, the applicable Exercise Price in effect immediately
prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.

SECTION 4.4 Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In the event the Company (i) consolidates with or merges
into any other corporation or entity and is not the continuing or surviving
corporation or entity of such consolidation or merger, (ii) permits any other
corporation or entity to consolidate with or merge into the Company and the
Company is the continuing or surviving corporation but, in connection with such
consolidation or merger, the shares of Common Stock are changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (iii) transfers all or substantially all of its properties or
assets, directly or indirectly, to any other corporation or entity (other than
to a wholly owned Subsidiary of the Company if such Subsidiary remains wholly
owned by the Company after such transfer or any other transaction or series of
transactions related to such transfer), then, and in each such event, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Section 4.4 (but subject to prior reduction under Section 1.2
and (for the avoidance of doubt) not in the case of cancellation under Section
1.3), each Holder, upon any exercise at any time after the consummation of such
consolidation, merger or transfer, shall be entitled to receive, in lieu of the
shares of Common Stock issuable upon any exercise prior to such consummation,
the stock and other securities, cash and property to which such Holder would
have been entitled upon such consummation if such Holder had exercised its
Warrants immediately prior to such consummation (or, if applicable, any record
date with respect to such transaction), subject to adjustments (subsequent to
such corporate action) as nearly equivalent as possible to the adjustments
provided for in this Article 4. Notwithstanding anything contained herein to the
contrary, (A) the Company will not effect any of the transactions described in
clauses (i) through (iii) of this Section 4.4 unless, prior to the consummation
thereof, each corporation or entity (other than the Company) which may be
required to deliver any stock, securities, cash or property

                                       8
<PAGE>   9

upon the exercise of the Warrants shall assume, by written instrument, a copy of
which shall be delivered to each Holder, the obligation to deliver to such
Holder such shares of stock, securities, cash or property as such holder may be
entitled to receive upon exercise of the Warrants.

SECTION 4.5 Adjustments for Reclassification, Exchange and Substitution. If the
Common Stock issuable upon exercise of the Warrants is changed into the same or
a different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification or otherwise (other than a subdivision,
combination or consolidation of shares, or merger, consolidation or asset sale,
provided for in Sections 4.2, 4.3 and 4.4), then and in each such case, the
applicable Exercise Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionateley
adjusted such that the Warrants shall be exercisable into, in lieu of the number
of shares of Common Stock which the Holders would otherwise have been entitled
to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by the Holders upon exercise of the Warrants immediately before that
change. For avoidance of doubt, it is stipulated that the provisions of this
Section 4.5 shall not apply to any exchange, reclassification, or substitution
of shares of Common Stock into shares of Series B Preferred Stock pursuant to
the JLL Exchange Agreement. No class or series of Common Stock shall be so
changed into shares of any other class or series of stock unless a proportional
and equivalent change is made with respect to all other classes or series of
Common Stock.

SECTION 4.6 Adjustment of Exercise Price Upon Issuance of Additional Shares of
Common Stock. In the event the Company, at any time following the Issue Date,
issues or sells Additional Shares of Common Stock for no consideration or for
consideration per share less than the Current Market Price in effect immediately
prior to such issuance or sale, then and in each such event, the applicable
Exercise Price shall be reduced, concurrently with such issue or sale, to a
price (calculated to the nearest cent) determined by multiplying the applicable
Exercise Price by a fraction (i) the numerator of which shall be (A) the number
of shares of Common Stock outstanding immediately prior to such issue or sale,
plus (B) the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of Additional Shares of Common
Stock so issued or sold would purchase at the Current Market Price, and (ii) the
denominator of which shall be (A) the number of shares of Common Stock
outstanding immediately prior to such issue or sale plus (B) the number of
Additional Shares of Common Stock so issued or sold.

                                       9
<PAGE>   10

The provisions of this Section 4.6 shall not apply to any issuance or sale of
Additional Shares of Common Stock for which an adjustment is provided under
Section 4.7.

SECTION 4.7 Issue of Securities Deemed Issue of Additional Shares of Common
Stock. In the event (i) the Company at any time after the Issue Date shall
issue, sell or grant any Options or Convertible Securities, or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities and (ii) the consideration
per share for the Additional Shares of Common Stock issuable upon the exercise
of such Options, or in the case of Convertible Securities, the conversion or
exchange of such Convertible Securities shall be less than the Current Market
Price in effect immediately prior to such issue, sale or grant, or such record
date, as the case may be, then, and in each such case, (A) the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be issuances of Additional Shares of
Common Stock issued as of the time of such issue, sale or grant or, in case such
a record date shall have been fixed, as of the close of business on such record
date, and (B) the Exercise Price shall be adjusted in accordance with Section
4.6 on the date of and immediately prior to such issue, sale or grant, or the
record date, as the case may be. In any such case in which Additional Shares of
Common Stock are deemed to be issued or sold pursuant to this Section 4.7:

         (1) no further adjustment in the applicable Exercise Price shall be
         made upon the subsequent issue of Convertible Securities or Common
         Stock upon the exercise of such Options or conversion or exchange of
         such Convertible Securities;

         (2) if such Options or Convertible Securities by their terms provide,
         with the passage of time or otherwise, for any decrease in the
         consideration payable to the Company, or increase in the number of
         Additional Shares of Common Stock issuable, upon the exercise,
         conversion or exchange thereof, the adjustments to the Exercise Price
         computed upon the original issue, sale, grant or assumption thereof (or
         upon the occurrence of a record date with respect thereto), and any
         subsequent adjustments based thereon, shall, upon any such decrease or
         increase becoming effective, be recomputed (and the then applicable
         Exercise Price shall automatically be adjusted as so recomputed)

                                       10
<PAGE>   11

         to reflect such increase or decrease insofar as it affects such Options
         or the rights of conversion or exchange under such Convertible
         Securities which are outstanding at such time; and

         (3) no readjustment pursuant to the preceding clause (2) shall have the
         effect of increasing the applicable Exercise Price to an amount which
         exceeds the lower of (A) the applicable Exercise Price on the original
         adjustment date and (B) the applicable Exercise Price that would have
         resulted from any issuance of Additional Shares of Common Stock between
         the original adjustment date and such readjustment date.

The consideration per share deemed to be received by the Company for Additional
Shares of Common Stock relating to Options and Convertible Securities, shall be
determined by dividing (x) the total amount, if any, actually received by the
Company as consideration for the issue, sale, grant or assumption of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating to such
Options or Convertible Securities without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Company upon the exercise in full of such Options or the conversion or exchange
in full of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise in full of such Options for Convertible
Securities and the conversion or exchange in full of such Convertible
Securities, by (y) the maximum number of Additional Shares of Common Stock (as
set forth in the instruments relating to such Options or Convertible Securities,
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.

SECTION 4.8 Distribution of Assets. If the Company shall declare or make any
dividend or other distribution of evidences of its Indebtedness or assets
(including without limitation, securities, rights, warrants or options) to
Holders of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash other than ordinary cash
distributions not to exceed on an annual basis 12% of the Market Price of the
Common Stock, stock or other securities, property, rights or options by way of a
dividend, spin off, reclassification, corporate rearrangement or other similar
transaction) (a "DISTRIBUTION"), at any time after the issuance of this Warrant,
then, in each such case, the Exercise Price in effect immediately prior to the
close of business on the record date fixed for the determination of Holders of
Common Stock entitled to receive the Distribution shall be

                                       11
<PAGE>   12

reduced, effective as of the close of business on such record date, to a price
determined by multiplying such Exercise Price by a fraction of which (A) the
numerator shall be the Market Price of the Common Stock on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of Common Stock, and (B) the denominator shall be the Market Price of the
Common Stock on the trading day immediately preceding such record date.

SECTION 4.9 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the applicable Exercise Price pursuant to this
Article 4, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each Holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the consideration received or to be received by the Company for
any Additional Shares of Common Stock issued or sold or deemed to have been
issued, (ii) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (iii) the applicable Exercise Price in effect immediately prior
to such issue or sale and as adjusted and readjusted on account thereof. The
Company shall, upon the written request at any time of any Holder, furnish or
cause to be furnished to such Holder, a like certificate setting forth (i) the
applicable Exercise Price at the time in effect, and showing how it was
calculated, and (ii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon exercise. At the
request of the Holders of a majority of the then outstanding Warrants, the
Company will have the certificates referred to in this Section 4.10 prepared and
delivered by an internationally recognized independent accounting firm.

SECTION 4.10 Notwithstanding any of the foregoing provisions of this Article 4,
no adjustment in the Exercise Price need be made until all cumulative
adjustments amount to 1% or more of the Exercise Price as last adjusted. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment.

                                       12
<PAGE>   13

                                   ARTICLE 5

                                   DEFINITIONS

         The following terms, as used in this Warrant, have the following
meanings:

         "ADDITIONAL SHARES OF COMMON STOCK" means all shares of Common Stock
issued or sold by the Company after the Issue Date, whether or not subsequently
reacquired or retired by the Company, other than shares of Common Stock: (i)
issued upon the conversion or exchange of any series or class of Capital Stock
issued and outstanding on the Issue Date into another series or class of Capital
Stock of the Company without any additional consideration to the Company by the
holder thereof; (ii) issued upon conversion of any shares of Series A Preferred
Stock or Series B Preferred Stock into any class or series of Common Stock;
(iii) issued upon the exercise of Options or warrants that have been issued
prior to, and are outstanding as of, the Issue Date; (iv) issued upon exercise
of Options granted prior to the 120th day following the Issue Date to employees,
consultants, officers or directors of the Company pursuant to any stock option
plan in effect on the Issue Date and consistent with past practice, but in any
event not in excess of 25,000 shares during such 120-day period; (v) issued
prior to the 120th day following the Issue Date to customers in the ordinary
course of business consistent with past practice, but in any event not in excess
of 25,000 shares during such 120-day period; (vi) issued upon exercise of this
Warrant; and (vii) issued upon exercise of Management Options.

         "BUSINESS DAY" means any day except Saturday, Sunday and any day on
which banking institutions located in New York City, New York generally are
authorized or required by law or other governmental action to be closed.

         "CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents of corporate
stock, (iii) in the case of a partnership or limited liability company,
partnership interests (whether general or limited) and (iv) any other interest
or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing person.

         "COMMON STOCK" means the common stock, par value $0.01 per share, of
the Company and following the approval by the stockholders of the Company of the

                                       13
<PAGE>   14

adoption of the Second Amended and Restated Certificate of Incorporation of the
Company in connection with the Company's acquisition of 100% of the equity of
PCS Holding Corporation from Rite Aid, Common Stock shall be deemed to mean the
Class A Common Stock of the Company.

         "COMPANY" means Advance Paradigm, Inc., a Delaware corporation, and its
successors.

         "CONVERTIBLE SECURITIES" means any evidences of indebtedness, shares
(other than shares of Common Stock) or other securities that, by their terms,
are directly or indirectly convertible into or exchangeable for Additional
Shares of Common Stock. For the avoidance of doubt, it is stipulated that shares
of Series B Preferred Stock, whether issued on the date hereof or hereafter
shall not be deemed Convertible Securities.

         "CURRENT MARKET PRICE" means, as of any date, the average of the daily
Market Prices of the Common Stock for twenty consecutive Trading Days
immediately preceding such date.

         "EXERCISE PRICE" means $20.00, per share, subject to adjustment
pursuant to Article 4.

         "HOLDER" has the meaning set forth in the first paragraph of this
Warrant, provided that, prior to October 2, 2002, the Holder shall mean the
registered owner of the Notes to which this Warrant is originally attached,
unless such Warrant is detached from the Notes as set forth in Section 6.4
herein.

         "ISSUE DATE" means October 2, 2000.

         "JLL EXCHANGE AGREEMENT" means the Exchange Agreement dated as of the
Issue Date between the Company and Joseph Littlejohn & Levy Fund III, L.P., a
Delaware limited partnership, relating to the exchange of shares of Common Stock
into shares of Series B Preferred Stock, as the same may be amended,
supplemented or restated from time to time.

         "MANAGEMENT OPTIONS" means options to purchase up to an aggregate of
1,790,000 shares of Common Stock at an initial exercise price of $20 per share
issued to officers and employees on or before the Issue Date. For purposes of
this Warrant the Management Options shall be deemed issued before the Issue
Date.

                                       14
<PAGE>   15

         "MARKET PRICE" means:

         (a) with respect to any security, on any given day, (i) if such
security is listed or authorized for trading on a national securities exchange,
the last sale price of such security, regular way, on such date, or if no such
sale takes place on such date, the average of the closing bid and asked prices
thereof, on such date, in each case as officially reported on the principal
national securities exchange on which such security is listed or authorized for
trading; (ii) if such security is not listed or authorized for trading on a
national securities exchange but is quoted on the Nasdaq National Market, (A)
the price of the last trade, as reported on the Nasdaq National Market, not
identified as having been reported late to such system, or (B) if such security
is so traded, but not so quoted, the average of the last bid and ask prices, as
those prices are reported on the Nasdaq National Market, (iii) if such security
is not listed or authorized for trading on a national securities exchange or the
Nasdaq National Market or any comparable system but has a nationally recognized
existing trading market, the average of the closing bid and asked prices as
furnished by two members of the National Association of Securities Dealers, Inc.
selected from time to time by the Company for that purpose or (iv) if such
security is not listed or authorized for trading on a national securities
exchange or the Nasdaq National Market or any comparable system and does not
have a nationally recognized existing trading market, the fair value of such
security as (A) determined by an agreement between the Company and the Holders
of a majority of the outstanding Warrants or (B) if the Company and such Holders
fail to agree, determined jointly by an independent investment banking firm
retained by the Company and by an independent investment banking firm retained
by such Holders, or (C) if the Company or such Holders shall fail so to retain
an independent investment banking firm within five Business Days of the
retention of such firm by the Company or such Holders, as the case may be,
determined solely by the firm so retained or (D) if the firms so retained by the
Company and by such Holders shall be unable to reach joint determination within
15 Business Days of the retention of the last firm so retained, determined by
another independent investment banking firm chosen by the first two such firms;
and (b) with respect to any other asset or property, the fair market value of
such asset or property as (i) determined by an agreement between the Company and
the Holders of a majority of the outstanding Warrants or (ii) if the Company and
such Holders fail to agree, determined jointly by an independent investment
banking firm retained by the Company and by an independent investment banking
firm retained by such Holders, or (iii) if the Company or such Holders shall
fail so to retain an independent investment banking firm within five Business
Days of the retention of such firm by

                                       15
<PAGE>   16

the Company or such Holders, as the case may be, determined solely by the firm
so retained or (iv) if the firms so retained by the Company and by such Holders
shall be unable to reach a joint determination within 15 Business Days of the
retention of the last firm so retained, determined by another independent
investment banking firm chosen by the first two such firms.

         "NASD" means The National Association of Securities Dealers, Inc.

         "NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.

         "NOTES" shall mean the $200 million aggregate principal amount of
senior subordinated notes, initially bearing interest at the rate of 11% per
annum, issued to Rite Aid Corporation under an indenture (as such may be amended
or supplemented from time to time, the "INDENTURE") dated as of October 2, 2000,
among Advance Paradigm, Inc., the Trustee named therein and the Guarantors named
therein.

         "OPTIONS" means rights, options or warrants to subscribe for, purchase
or otherwise acquire either Additional Shares of Common Stock or Convertible
Securities. For avoidance of doubt, it is stipulated that the following are not
options: (i) any rights, options or warrants to subscribe for, purchase or
otherwise acquire the shares of Common Stock referred to in clause (iv) or (v)
of the definition of Additional Shares of Common Stock, and (ii) any right or
option to acquire shares of Series B Preferred Stock pursuant to the JLL
Exchange Agreement.

         "PCS ACQUISITION" means the Company's acquisition of all of the Capital
Stock of PCS Holding Corporation, from Rite Aid.

         "PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.

         "PRINCIPAL MARKET" means the Nasdaq National Market or if the Common
Stock is not traded on the Nasdaq National Market, then the principal securities
exchange or trading market for the Common Stock.

         "SECOND ANNIVERSARY" means October 2, 2002.

                                       16
<PAGE>   17

         "SECURITIES ACT" means the Securities Act of 1933, as amended, and
rules and regulations of the Securities and Exchange Commission thereunder.

         "SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).

         "TRADING DAY" means (x) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such other
national securities exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which a trade may be
made on the Nasdaq National Market or (z) if the applicable security is not
otherwise listed, admitted for trading or quoted, any day other than a Saturday
or Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.

         "WARRANT AGENCY" has the meaning set forth in Section 3.1.

         "WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of the Warrants.

                                       17
<PAGE>   18

                                   ARTICLE 6

                                  MISCELLANEOUS

SECTION 6.1 Notices. Notices and other communications provided for herein shall
be in writing and may be given by mail, courier, confirmed telex or facsimile
transmission and shall, unless otherwise expressly required, be deemed given
when received or, if mailed, four Business Days after being deposited in the
United States mail with postage prepaid and properly addressed. In the case of
the Holder, such notices and communications shall be addressed to its address as
known on the books maintained by the Warrant Agency, unless the Holder shall
notify the Warrant Agency that notices and communications should be sent to a
different address (or telex or facsimile number), in which case such notices and
communications shall be sent to the address (or telex or facsimile number)
specified by the Holder.

SECTION 6.2 Amendments. The provisions of this Warrant may be amended, modified
or waived only with the written consent of the Company and the Holder(s) of at
least fifty percent (50%) of the Warrants.

SECTION 6.3 Governing Law. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW).

SECTION 6.4 Transfer; Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements contained in this Warrant by or on behalf
of the Company or the Holder shall bind its successors and assigns, whether so
expressed or not.

         This Warrant shall be transferable and assignable by the Holder hereof
in whole or from time to time in part to any other Person, without the consent
of the Company, and the provisions of this Warrant shall be binding upon and
inure to the benefit of the Holder hereof and its successors and assigns,
subject to the following provisions:

         (a) Each Warrant is initially being issued with Senior Subordinated
Notes due 2010, each Note in a principal amount of $1,000. Prior to October 2,
2002, this Warrant may be transferred or assigned only together with the related

                                       18
<PAGE>   19

Notes and only for the purpose of effecting, or in conjunction with, an
exchange, transfer or assignment of such Notes.

         (b) Notwithstanding the foregoing, on or prior to October 2, 2002, Rite
Aid shall have the right at any time, and from time to time, to transfer any
Notes without the related Warrants in connection with sales of Notes pursuant to
Rule 144A under the Securities Act. In the event of any such separation, Rite
Aid will hold the related Warrants until October 2, 2002.

         (c) After October 2, 2002, this Warrant may be transferred or assigned
without regard to the related Notes to which this Warrant was initially issued.

SECTION 6.5 No Impairment; Regulatory Compliance and Cooperation; Notice of
Expiration

         (a) The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, free
and clear of all liens, and shall use its reasonable best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.

         (b) The Company shall deliver to each Holder of Warrants after August
1, 2010 but before September 1, 2010, notice of the Expiration Date. If the
Company fails to fulfill in a timely manner the notice obligation set forth in
the prior sentence, it shall provide such notice as soon as possible thereafter,
but no failure to fulfill in a timely manner such notice obligation shall result
in an extension of the Expiration Date.

SECTION 6.6 No Stockholder Rights. Prior to exercise of this Warrant, the Holder
shall not be entitled to any rights of a stockholder with respect to the shares

                                       19
<PAGE>   20

of Common Stock purchasable upon exercise, including, without limitation, the
right to vote such shares of Common Stock, receive dividends or other
distributions thereon, exercise preemptive rights or be notified of stockholder
meetings, and, except as explicitly stated herein, the Holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company.

                                       20
<PAGE>   21

         IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.

                                            ADVANCE PARADIGM, INC.

                                            By:
                                               -------------------
                                               Name:
                                               Title:
                                               Address:
                                               Attention:
                                               Telephone No:
                                               Facsimile No:

Attest:

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

                                       21
<PAGE>   22

                                                                         ANNEX A

             [FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 2.1]

         The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _______ Warrant Shares and
herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of Advance Paradigm,
Inc. in the amount of $________, all in accordance with the terms of Section 2.1
of the Warrant dated as of October 2, 2000 between Advance Paradigm, Inc. and
Rite Aid Corporation. The undersigned requests that certificates for such
securities be registered in the name of the undersigned whose address is
___________________ and that such certificates be delivered to the undersigned
at such address.

Dated:____________________ , 20___

                                               Signature ______________________
                                               (Signature must conform in
                                               all respects to name of
                                               Holder as specified on the
                                               face of the Warrant
                                               Certificate or with the
                                               name of the assignee
                                               appearing on the Form of
                                               Assignment attached
                                               hereto.)

                                               ________________________________
                                                       (Insert Social Security
                                                       or Other Identifying
                                                       Number of Holder)

                                      A-1
<PAGE>   23

                                                                         ANNEX B

             [FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 2.2]

         The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _______ Warrant Shares all
in accordance with the terms of Section 2.2 of the Warrant dated as of October
2, 2000 between Advance Paradigm, Inc. and Rite Aid Corporation. The undersigned
requests that certificates for such securities be registered in the name of the
undersigned whose address is _________________ and that such certificates be
delivered to the undersigned at such address. Attached hereto is a schedule
showing the undersigned's calculation of the number of Warrant Shares issuable
on such cashless exercise.

Dated:______________________ 20___

                                               Signature _______________________
                                               (Signature must conform in
                                               all respects to name of
                                               Holder as specified on the
                                               face of the Warrant
                                               Certificate or with the
                                               name of the assignee
                                               appearing on the Form of
                                               Assignment attached
                                               hereto.)

                                               _________________________________
                                                     (Insert Social Security
                                                     or Other Identifying
                                                     Number of Holder)

                                      B-1
<PAGE>   24

                                                                         ANNEX C

                              [FORM OF ASSIGNMENT]

             (To be executed by the registered Holder if such Holder
                  desires to transfer the Warrant Certificate.)

             FOR VALUE RECEIVED ______________ hereby sells, assigns and
transfers under
                ________________________________________________________
                 (Please print name and address of transferee)

the Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.

                                            Dated: _________________ ,20___
                                                       Signature:

                                                   _______________________
                                                   (Signature must conform in
                                                   all respects to name of
                                                   Holder as specified on the
                                                   face of the Warrant
                                                   Certificate.)

                                                   _____________________________
                                                       (Insert Social Security
                                                       or Other Identifying
                                                       Number of Holder)

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