Document:

EXHIBIT 10.3

                               FINANCING AGREEMENT

     Financing  Agreement,  dated as of March 17, 2006, by and among PRG-SCHULTZ
INTERNATIONAL,  INC., a Georgia  corporation  (the "Parent"),  PRG-SCHULTZ  USA,
INC., a Georgia  corporation  (the  "Borrower"),  each  subsidiary of the Parent
listed as a "Guarantor" on the signature pages hereto (together with the Parent,
each a "Guarantor" and collectively,  jointly and severally,  the "Guarantors"),
the lenders,  from time to time, party hereto (each a "Lender" and collectively,
the  "Lenders"),  ABLECO  FINANCE  LLC, a  Delaware  limited  liability  company
("Ableco"), as collateral agent for the Lenders (in such capacity, together with
any  successor   collateral  agent,  the  "Collateral   Agent"),   and  THE  CIT
GROUP/BUSINESS  CREDIT,  INC., a New York corporation ("CIT"), as administrative
agent  for  the  Lenders  (in  such   capacity,   together  with  any  successor
administrative   agent,  the  "Administrative   Agent"  and  together  with  the
Collateral Agent, each an "Agent" and collectively, the "Agents").

                                    RECITALS

     The  Borrower  has  asked the  Lenders  to  extend  credit to the  Borrower
consisting of (a) a term loan in the aggregate  principal  amount of $25,000,000
and (b) a revolving  credit  facility in an  aggregate  principal  amount not to
exceed $20,000,000 at any time outstanding, which will include a subfacility for
the  issuance of letters of credit.  The proceeds of the term loan and the loans
made under the revolving  credit  facility  shall be used to refinance  existing
senior indebtedness of the Borrower, for general working capital purposes of the
Borrower and to pay fees and expenses related to this Agreement and the Exchange
Offer  Transaction  (as defined  below).  The letters of credit will be used for
general working capital purposes of the Borrower. The Lenders are severally, and
not jointly,  willing to extend such credit to the Borrower subject to the terms
and conditions hereinafter set forth.

     In consideration of the premises and the covenants and agreements contained
herein, the parties hereto agree as follows:

                                   ARTICLE I

                           DEFINITIONS; CERTAIN TERMS

     Section 1.01  Definitions.  As used in this Agreement,  the following terms
shall  have  the  respective  meanings  indicated  below,  such  meanings  to be
applicable equally to both the singular and plural forms of such terms:

     "Ableco"  has the meaning  specified  therefor in the  preamble  hereto and
shall include its permitted assigns and successors.

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     "Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account  Receivable,  chattel paper,  or a
general intangible.

     "Account  Receivable"  means,  with  respect  to any  Person,  all of  such
Person's now owned or hereafter acquired right, title, and interest with respect
to  "accounts"  (as that term is defined in Article 9 of the Code),  and any and
all  "supporting  obligations"  (as that term is defined in the Code) in respect
thereof.

     "Action" has the meaning specified therefor in Section 12.12.

     "additional amount" has the meaning specified therefor in Section 2.08(a).

     "Administrative  Agent" has the meaning specified  therefor in the preamble
hereto.

     "Administrative  Agent's  Account" means an account at a bank designated by
the  Administrative  Agent  from  time to time as the  account  into  which  the
Borrower shall make all payments to the Administrative  Agent for the benefit of
the Agents and the Lenders under this Agreement and the other Loan Documents.

     "Affiliate"  means,  with  respect to any  Person,  any other  Person  that
directly  or  indirectly  through  one  or  more  intermediaries,  controls,  is
controlled  by, or is under common  control with,  such Person.  For purposes of
this definition,  "control" of a Person means the power, directly or indirectly,
either to (i) vote 10% or more of the Capital Stock having ordinary voting power
for the  election  of  directors  of such  Person  or (ii)  direct  or cause the
direction of the  management  and policies of such Person whether by contract or
otherwise.  Notwithstanding  anything herein to the contrary,  in no event shall
any Agent or any Lender be considered an "Affiliate" of any Loan Party.

     "After  Acquired  Property"  means any fee-owned  interest in real property
acquired by the Parent or any of its  Subsidiaries  after the date hereof with a
Current Value in excess of $200,000.

     "Agent" and "Agents" have the respective meanings specified therefor in the
preamble hereto.

     "Agent Advances" has the meaning specified therefor in Section 10.08(a).

     "Agreement"  means this  Financing  Agreement,  including  all  amendments,
modifications  and  supplements  and any  exhibits  or  schedules  to any of the
foregoing,  and shall refer to the Agreement as the same may be in effect at the
time such reference becomes operative.

     "Albertsons  Receivables" means Accounts  Receivable owing from Albertsons,
Inc. with a due date no later than 60 days after the invoice date.

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     "Articles  of  Amendment"  means  the  articles  of  amendment  adopted  by
resolution  of the board of directors of the Parent on March 15, 2006  regarding
the Series A Preferred Stock and the Series B Preferred Stock.

     "Assignment and Acceptance" means an assignment and acceptance entered into
by an assigning Lender and an assignee,  in accordance with Section 12.07 hereof
and  substantially  in the  form  of  Exhibit  A-1  hereto  or such  other  form
acceptable to the Agents.

     "Authorized Officer" means, with respect to any Person, the chief executive
officer, chief financial officer,  president or executive vice president of such
Person.

     "Availability"  means,  at any time, the sum of (a) the difference  between
(i) the lesser of (A) the Borrowing  Base,  and (B) the Total  Revolving  Credit
Commitment,  and (ii) the sum of (A) the aggregate  outstanding principal amount
of all Revolving Loans, (B) all Letter of Credit Obligations, and (C) the excess
of (x) the aggregate  amount,  if any, of all trade payables of the Borrower and
the Domestic  Guarantors  which are past due by more than 30 days and are not in
dispute,  over  (y) 10% of  trade  payables  of the  Borrower  and the  Domestic
Guarantors at such time, and (b) Qualified Cash.

     "Bankruptcy  Code" means the United States  Bankruptcy Code (11 U.S.C.  ss.
101, et seq.),  the Bankruptcy  and Insolvency Act (Canada),  and the Companies'
Creditors Arrangement Act (Canada), each as amended, and any successor statutes.

     "Base LIBOR Rate" means the rate per annum,  determined  by  Administrative
Agent in accordance with its customary procedures, and utilizing such electronic
or other quotation  sources as it considers  appropriate  (rounded  upwards,  if
necessary,  to the  next  1/16%),  on the  basis of the  rates  at which  Dollar
deposits are offered to major banks in the London  interbank  market on or about
11:00  a.m.  (New York time) 3 Business  Days prior to the  commencement  of the
applicable Interest Period, for a term and in amounts comparable to the Interest
Period and amount of the LIBOR Rate Loan requested by the Borrower in accordance
with this Agreement,  which  determination shall be conclusive in the absence of
manifest error.

     "Board" means the Board of Governors of the Federal  Reserve  System of the
United States.

     "Borrower" has the meaning specified therefor in the preamble hereto.

     "Borrowing  Base"  means,  as of  any  date  of  determination,  an  amount
determined  by the  Administrative  Agent  in  the  exercise  of  its  Permitted
Discretion, with reference to the most recent Borrowing Base Certificate,  equal
to the  difference  between (a) the sum of (i) up to 85% of the value of the Net
Amount of Eligible Accounts Receivable, less the amount, if any, of the Dilution
Reserve,  plus (ii) the lesser of (A) up to 20% of the Eligible Backlog, and (B)
50% of the amount  determined  under clause (a)(i) of this  definition,  and (b)
without  duplication,  the sum of (i) the  Preliminary  Reserve,  plus (ii) such
reserves as the Administrative Agent may deem appropriate in the exercise of its
Permitted Discretion.

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     "Borrowing Base  Certificate"  means a certificate  signed by an Authorized
Officer of the Borrower and setting forth the  calculation of the Borrowing Base
in compliance with Section  7.01(a)(vii),  substantially  in the form of Exhibit
B-1.

     "Brazilian Pledge Agreement" has the meaning specified therefore in Section
5.03(a).

     "Business Day" means any day that is not a Saturday,  Sunday,  or other day
on which  banks are  authorized  or  required to close in the State of New York,
except that, if a  determination  of a Business Day shall relate to a LIBOR Rate
Loan,  the term  "Business  Day" also shall  exclude  any day on which banks are
closed for dealings in U.S. Dollar deposits in the London interbank market.

     "Canadian  Employee  Benefit  Laws"  shall  mean the  Canada  Pension  Plan
(Canada),  the Income Tax Act (Canada),  the Pension Benefits Standards Act 1985
(Canada),  the Employment Insurance Act (Canada), the Pension Benefits Act (Nova
Scotia), the Workers'  Compensation Act (Nova Scotia), the Labour Standards Code
(Nova Scotia),  the Occupational Health and Safety Act (Nova Scotia), the Health
and Sciences  Insurance Act (Nova  Scotia) and any federal,  provincial or local
counterparts or equivalents, in each case, as amended from time to time.

     "Canadian  Guarantee" means the general and continuing  guarantee  executed
and delivered by the Canadian  Guarantor in favor of Collateral  Agent,  for the
benefit  of  the  Agents,  and  Lenders,   in  form  and  substance   reasonably
satisfactory to the Agents.

     "Canadian   Guarantor"  means  PRG-Schultz  Canada  Corp.,  a  Nova  Scotia
unlimited liability company.

     "Canadian Pledge  Agreement" means the share pledge agreement  executed and
delivered  by  PRG-Schultz  Canada,  Inc.,  a Georgia  corporation,  in favor of
Collateral  Agent,  for the  benefit  of the  Agents  and  Lenders,  in form and
substance reasonably satisfactory to the Agents.

     "Canadian Security Agreement" means the general security agreement executed
and delivered by the Canadian  Guarantor,  in favor of Collateral Agent, for the
benefit of the Agents and Lenders, in form and substance reasonably satisfactory
to the Agents.

     "Capital  Expenditures"  means,  with respect to any Person for any period,
the  sum of (i)  the  aggregate  of all  expenditures  by  such  Person  and its
Subsidiaries  during such period that in  accordance  with GAAP are or should be
included in "property,  plant and equipment" or in a similar fixed asset account
on its balance sheet, whether such expenditures are paid in cash or financed and
including all Capitalized  Lease Obligations paid or payable during such period,
and (ii) to the extent not  covered by clause (i) above,  the  aggregate  of all
expenditures by such Person and its  Subsidiaries  during such period to acquire
by purchase or otherwise  the business or fixed assets of, or the Capital  Stock
of, any other Person.

     "Capital Guideline" means any law, rule, regulation,  policy,  guideline or
directive (whether or not having the force of law and whether or not the failure
to comply therewith would be unlawful) (i) regarding capital  adequacy,  capital

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<PAGE>

ratios,  capital  requirements,  the  calculation of a bank's capital or similar
matters,  or (ii)  affecting  the amount of capital  required  to be obtained or
maintained by any Lender,  any Person  controlling any Lender, or the L/C Issuer
or the manner in which any Lender, any Person controlling any Lender, or the L/C
Issuer allocates capital to any of its contingent liabilities (including letters
of credit), advances, acceptances, commitments, assets or liabilities.

     "Capitalized Lease" means, with respect to any Person, any lease of real or
personal  property by such Person as lessee  which is required  under GAAP to be
capitalized on the balance sheet of such Person.

     "Capitalized  Lease  Obligations"   means,  with  respect  to  any  Person,
obligations of such Person and its Subsidiaries under Capitalized  Leases,  and,
for purposes hereof,  the amount of any such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.

     "Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares,  interests,  participations  or other  equivalents  (however
designated and whether or not voting) of corporate  stock, and (ii) with respect
to any Person that is not a corporation, any and all partnership,  membership or
other equity interests of such Person.

     "Cash  Equivalents"  means  (i)  marketable  direct  obligations  issued or
unconditionally  guaranteed  by the United  States  Government  or issued by any
agency or instrumentality thereof and backed by the full faith and credit of the
United  States,  in each  case,  maturing  within  six  months  from the date of
acquisition  thereof;  (ii)  commercial  paper,  maturing not more than 270 days
after the date of issue rated P-1 by Moody's or A-1 by S & P; (iii) certificates
of deposit  maturing  not more than 270 days after the date of issue,  issued by
commercial  banking  institutions  and money market or demand  deposit  accounts
maintained at commercial banking institutions,  each of which is a member of the
Federal  Reserve  System and has a combined  capital and  surplus and  undivided
profits  of not  less  than  $500,000,000;  (iv)  repurchase  agreements  having
maturities  of not more  than 90 days  from the date of  acquisition  which  are
entered  into  with  banks  included  in  the  commercial  banking  institutions
described  in clause  (iii)  above and which are  secured by  marketable  direct
obligations  of the United States  Government or any agency  thereof,  (v) money
market  accounts  maintained  with  mutual  funds  having  assets  in  excess of
$2,500,000,000; (vi) tax exempt securities rated A or better by Moody's or A+ or
better by S&P, and (vii) with respect to Foreign Subsidiaries, investments which
are  comparable in term and credit  quality to those  described in the foregoing
clauses (i) - (vi).

     "CFC" means a controlled  foreign  corporation  (as that term is defined in
the IRC).

     "Change in Law" has the meaning specified therefor in Section 4.05(a).

     "Change of Control" means each occurrence of any of the following:

     (a) the acquisition by any person,  including any syndicate or group deemed
to be a "person"  under  Section  13(d)(3) of the  Exchange  Act, of  beneficial
ownership,  directly  or  indirectly,   through  a  purchase,  merger  or  other
acquisition  transaction  or series of  transactions,  of shares of the  Capital
Stock of the Parent  entitling  that person to exercise 50% or more of the total

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<PAGE>

voting power of all shares of such Capital Stock  entitled to vote  generally in
elections of directors,  other than any  acquisition  by the Parent,  any of its
Subsidiaries or any employee benefit plans of the Parent,

     (b) the Parent ceases to own and control,  directly or indirectly,  100% of
the shares of the Capital Stock of the Borrower,

     (c)  during  any  consecutive  two-year  period,  individuals  who  at  the
beginning  of that  two-year  period  constituted  the board of directors of the
Parent (together with any new directors whose election to the board of directors
of the Parent,  or whose  nomination  for  election by the  shareholders  of the
Parent,  was  approved  by a vote of a majority of the  directors  then still in
office  who were  either  directors  at the  beginning  of such  period or whose
election or nomination for election were  previously so approved)  cease for any
reason to constitute a majority of the board of directors then in office, or

     (d) the occurrence of an Indenture Change of Control.

     "CIT" has the meaning  specified  therefor in the preamble hereto and shall
include its permitted successors and assigns.

     "Claims Management System" means the database  repository of the Parent and
its  Subsidiaries  which  tracks  all  claims of  clients  of the Parent and its
Subsidiaries   through   the  claim  life  cycle  from   prospective   claim  to
work-in-process to approved for invoicing.

     "Code" means the New York Uniform  Commercial  Code, as in effect from time
to time;  provided,  however,  that in the event  that,  by reason of  mandatory
provisions  of  law,  any or all of the  attachment,  perfection,  priority,  or
remedies with respect to Collateral  Agent's Liens on any Collateral is governed
by the Uniform  Commercial Code as enacted and in effect in a jurisdiction other
than the State of New York,  the term "Code"  shall mean the Uniform  Commercial
Code as enacted and in effect in such other jurisdiction  solely for purposes of
the provisions  thereof relating to such attachment,  perfection,  priority,  or
remedies.

     "Collateral" means all of the property and assets and all interests therein
and proceeds thereof now owned or hereafter  acquired by any Person upon which a
Lien is granted or purported to be granted by such Person as security for all or
any part of the Obligations pursuant to the Loan Documents.

     "Collateral  Agent" has the  meaning  specified  therefor  in the  preamble
hereto.

     "Collection Account" and "Collection  Accounts" have the meanings specified
therefor in Section 8.01(a).

     "Collections" means all cash, checks, notes,  instruments,  and other items
of  payment  (including  insurance  proceeds,  proceeds  of cash  sales,  rental
proceeds, and tax refunds).

     "Commitments"  means, with respect to each Lender,  such Lender's Revolving
Credit Commitment and Term Loan Commitment.

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<PAGE>

     "Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated  Net Income of such Person and its  Subsidiaries  for such  period,
plus without  duplication,  the sum of the following  amounts of such Person and
its  Subsidiaries  for such  period and to the extent  deducted  in  determining
Consolidated Net Income of such Person and its Subsidiaries for such period: (a)
Consolidated Net Interest Expense,  (b) net income tax expense, (c) depreciation
expense,  (d) amortization  expense,  and (e) to the extent actually paid during
such period,  fees and expenses  related to the consummation of the transactions
contemplated  to be closed on or about the Effective  Date under this  Agreement
(including the Exchange Offer Transaction).

     "Consolidated Net Income" means, with respect to any Person for any period,
the net income  (loss) of such  Person  and its  Subsidiaries  for such  period,
determined on a  consolidated  basis and in accordance  with GAAP, but excluding
from the determination of Consolidated Net Income (without  duplication) (a) any
non-cash extraordinary or non-recurring gains or losses or any non-cash gains or
losses  solely to the extent  that they will not  result in cash  charges in any
future period,  (b)  restructuring  charges in an aggregate amount not to exceed
$1,250,000 in any Fiscal Year or $5,000,000 in the aggregate  during the term of
this  Agreement;  provided  if the actual  amount of the  restructuring  charges
excluded  from  Consolidated  Net Income is less than  $1,250,000  in any Fiscal
Year, then the unused portion may be carried forward to subsequent  Fiscal Years
and excluded from  Consolidated  Net Income in such  subsequent  Fiscal Years so
long as the aggregate  amount excluded from  Consolidated  Net Income during the
term of this Agreement does not exceed  $5,000,000,  (c) effects of discontinued
operations, (d) interest that is paid-in-kind,  (e) interest income, and (f) any
tax refunds, net operating losses or other net tax benefits received during such
period on account of any prior period.

     "Consolidated  Net Interest  Expense" means, with respect to any Person for
any period,  gross cash interest expense of such Person and its Subsidiaries for
such period  determined  on a  consolidated  basis and in  accordance  with GAAP
(including interest expense paid to Affiliates of such Person), less (i) the sum
of (A) interest  income for such period and (B) gains for such period on Hedging
Agreements  (to the extent not  included  in  interest  income  above and to the
extent not deducted in the calculation of gross interest expense), plus (ii) the
sum of (A)  losses  for such  period on  Hedging  Agreements  (to the extent not
included in such gross  interest  expense) and (B) the upfront costs or fees for
such period  associated  with Hedging  Agreements (to the extent not included in
such gross interest expense),  in each case,  determined on a consolidated basis
and in accordance with GAAP.

     "Consolidated  Senior Debt"  means,  as of any date of  determination,  the
aggregate  principal  amount of all Revolving Loans and the aggregate  principal
amount of the Term Loan.

     "Contingent  Obligation"  means, with respect to any Person, any obligation
of such Person  guaranteeing or intended to guarantee any Indebtedness,  leases,
dividends or other obligations ("primary  obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,  including (i)
the direct or  indirect  guaranty,  endorsement  (other than for  collection  or
deposit  in the  ordinary  course  of  business),  co-making,  discounting  with
recourse or sale with  recourse by such  Person of the  obligation  of a primary
obligor,  (ii) the  obligation  to make  take-or-pay  or  similar  payments,  if
required,  regardless  of  nonperformance  by any other  party or  parties to an
agreement,  (iii) any obligation of such Person, whether or not contingent,  (A)

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to purchase any such primary obligation or any property  constituting  direct or
indirect security therefor,  (B) to advance or supply funds (1) for the purchase
or payment of any such primary  obligation or (2) to maintain working capital or
equity capital of the primary  obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (C) to purchase property, assets, securities or
services  primarily  for the purpose of assuring  the owner of any such  primary
obligation of the ability of the primary obligor to make payment of such primary
obligation  or (D)  otherwise  to assure  or hold  harmless  the  holder of such
primary obligation against loss in respect thereof; provided,  however, that the
term "Contingent  Obligation" shall not include any product warranties  extended
in the ordinary  course of  business.  The amount of any  Contingent  Obligation
shall be deemed to be an amount  equal to the stated or  determinable  amount of
the primary obligation with respect to which such Contingent  Obligation is made
(or,  if less,  the maximum  amount of such  primary  obligation  for which such
Person may be liable  pursuant to the terms of the  instrument  evidencing  such
Contingent Obligation) or, if not stated or determinable, the maximum reasonably
anticipated  liability with respect thereto (assuming such Person is required to
perform thereunder), as determined by such Person in good faith.

     "Control  Agreement"  means a  control  agreement,  in form  and  substance
reasonably  satisfactory to the Agents,  executed and delivered by the Parent or
one of  its  Subsidiaries,  Collateral  Agent,  Administrative  Agent,  and  the
applicable securities intermediary or commodities  intermediary (with respect to
a Securities Account) or bank (with respect to a Deposit Account).

     "Current Value" has the meaning specified therefor in Section 7.01(o).

     "Default"  means an event which,  with the giving of notice or the lapse of
time or both, would constitute an Event of Default.

     "Deposit Account" means any deposit account (as that term is defined in the
Code).

     "Dilution" means, as of any date of determination, a percentage, based upon
the  experience  of the  immediately  prior 12  months,  that is the  result  of
dividing the Dollar amount of (a) bad debt write-downs,  discounts,  advertising
allowances,  credits, or other dilutive items with respect to the Borrower's and
the Domestic  Guarantors'  Account  Receivables  during such period,  by (b) the
Borrower's  and the  Domestic  Guarantors'  billings  with  respect  to  Account
Receivables during such period (excluding extraordinary items).

     "Dilution  Reserve"  means,  as of any  date of  determination,  an  amount
sufficient to reduce the advance rate against  Eligible  Accounts  Receivable by
one percentage point for each percentage point by which Dilution is in excess of
5%.

     "Disposition"  means any  transaction,  or series of related  transactions,
pursuant  to  which  any  Person  or  any of its  Subsidiaries  sells,  assigns,
transfers or otherwise  disposes of any property or assets (whether now owned or
hereafter  acquired)  to any other  Person,  in each  case,  whether  or not the

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consideration therefor consists of cash, securities or other assets owned by the
acquiring Person.

     "Dissolved Subsidiaries" means PRGRS, Inc., a Delaware corporation,  PRGLS,
Inc.,  a  Delaware  corporation,  Cost  Recovery  Professionals  PTY,  Ltd.,  an
Australian  proprietary  company,  Profit  Recovery  Professionals  PTY, Ltd, an
Australian  proprietary company, PRG Holding Co. (France) No. 1, LLC, a Delaware
limited liability  company,  and PRG Holding Co. (France) No. 2, LLC, a Delaware
limited liability company.

     "Dollar,"  "Dollars"  and the  symbol "$" each  means  lawful  money of the
United States of America.

     "Domestic  Guarantor"  means any Guarantor  organized under the laws of the
United States or the District of Columbia (including the PR Partnership).

     "Domestic Loan Party" means any Loan Party that is organized under the laws
of the United States or the District of Columbia (including the PR Partnership).

     "Domestic  Subsidiary" means any Subsidiary of the Parent that is organized
under the laws of the United States or the District of Columbia  (including  the
PR Partnership).

     "Effective  Date" means the date, on or before March 31, 2006, on which all
of the  conditions  precedent  set forth in Section 5.01 are first  satisfied or
waived.

     "Eligible  Accounts  Receivable"  means  the  Accounts  Receivable  of  the
Borrower and the Domestic  Guarantors (other than the PR Partnership) which are,
and at all times continue to be, acceptable to the  Administrative  Agent in its
Permitted  Discretion.  In general,  an Account Receivable may, in the Permitted
Discretion of the Administrative Agent, be deemed to be eligible if:

     (a) delivery of the  merchandise  or the rendition of the services has been
completed with respect to such Account Receivable and the Account Receivable has
not resulted from a transaction  wherein goods are placed on  consignment or are
sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill
and hold,  or any other  terms by reason  of which the  payment  by the  Account
Debtor may be conditional;

     (b) no return, rejection, repossession or dispute has occurred with respect
to such  Account  Receivable,  the Account  Debtor has not  asserted any setoff,
defense or counterclaim with respect to such Account  Receivable,  and there has
not occurred any  extension of the time for payment with respect to such Account
Receivable  without the consent of the Administrative  Agent,  provided that, in
the case of any  dispute,  setoff,  defense or  counterclaim  with respect to an
Account  Receivable,  the portion of such Account Receivable not subject to such
dispute, setoff, defense or counterclaim will not be ineligible solely by reason
of this clause (b);

     (c) such Account Receivable is lawfully owned by the Borrower or one of the
Domestic  Guarantors  (other than the PR Partnership) free and clear of any Lien
other than in favor of the  Collateral  Agent for the  benefit of the Agents and

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the  Lenders  and  otherwise  continues  to  be  in  full  conformity  with  all
representations  and  warranties  made by the  Borrower  and the other  Domestic
Guarantors  (other than the PR  Partnership)  to the Agents and the Lenders with
respect thereto in the Loan Documents;

     (d) such Account Receivable is unconditionally payable in Dollars within 30
days from the invoice date (other than with respect to  Albertsons  Receivables,
Meijer Receivables,  Supervalu Receivables,  Toys R Us Receivables, and Wal Mart
Holdback  Receivables) and is not evidenced by a promissory note,  chattel paper
or any other instrument or other document unless such promissory  note,  chattel
paper or other instrument or document,  together with an appropriate  instrument
of transfer  executed in blank by the Borrower,  has been delivered to and is in
the possession of the Collateral Agent;

     (e) no more than 60 days have elapsed from the invoice due date and no more
than 90 days have  elapsed  from the invoice  date with  respect to such Account
Receivable;  provided  that (i) in the case of Albertsons  Receivables,  no more
than 90 days have  elapsed  from the  invoice due date and no more than 120 days
have elapsed from the invoice  date with  respect to such  Accounts  Receivable,
(ii) in the case of Meijer  Receivables,  no more than 75 days have elapsed from
the  invoice  due date and no more than 135 days have  elapsed  from the invoice
date with respect to such  Accounts  Receivable,  (iii) in the case of Supervalu
Receivables, no more than 120 days have elapsed from the invoice due date and no
more than 150 days have  elapsed  from the  invoice  date with  respect  to such
Accounts Receivable,  (iv) in the case of Toys R Us Receivables, no more than 75
days  have  elapsed  from the  invoice  due date and no more  than 135 days have
elapsed from the invoice date with respect to such Accounts Receivable,  and (v)
Wal Mart Holdback Receivables will not be ineligible under this clause (e);

     (f) such Account Receivable is not due from an Affiliate of the Borrower or
its Subsidiaries;

     (g) such Account Receivable does not constitute an obligation of the United
States or any other  Governmental  Authority  (unless all steps  required by the
Administrative  Agent in connection  therewith,  including  notice to the United
States Government under the Federal Assignment of Claims Act or any action under
any state statute  comparable to the Federal Assignment of Claims Act, have been
duly taken in a manner satisfactory to the Administrative  Agent;  provided that
from the  Effective  Date through and  including the date that is 120 days after
the Effective Date, Accounts Receivable owing from the Army & Air Force Exchange
in an aggregate  amount not to exceed  $250,000 (when  aggregated  with any U.S.
Retail Key Client WIP of the Army & Air Force  Exchange  that is not  ineligible
because  of clause  (b) of the  proviso in the  definition  of "U.S.  Retail Key
Client WIP") will not be ineligible  under this clause (g) regardless of whether
all steps  required  by the  Administrative  Agent to be taken under the Federal
Assignment  of  Claims  Act or  any  state  statute  comparable  to the  Federal
Assignment of Claims Act have been taken);

     (h) the Account  Debtor (or the  applicable  office of the Account  Debtor)
with respect to such Account  Receivable  is located in the  continental  United
States,  unless such  Account  Receivable  is supported by a letter of credit or
other  similar  obligation  satisfactory  to  the  Administrative  Agent  in its
Permitted Discretion;

                                       10
<PAGE>

     (i) the Account  Debtor with  respect to such Account  Receivable  is not a
supplier to or creditor of the Borrower or the Domestic  Guarantors  (other than
the PR  Partnership)  of goods or  services  in  excess  of  $50,000;  provided,
however,  that in the event that an Account  Debtor is a supplier to or creditor
of  the  Borrower  or  one  of  the  Domestic  Guarantors  (other  than  the  PR
Partnership)  such Account  Receivable will be eligible under this clause if the
Account   Debtor  has  executed  a  non-offset   letter   satisfactory   to  the
Administrative  Agent in its Permitted  Discretion;  provided further,  however,
that  if  such an  Account  Debtor  has not  executed  a  non-offset  agreement,
Administrative Agent, in its discretion,  may include as eligible the net amount
due from such Account Debtor to the Borrower or such Domestic  Guarantors (other
than the PR Partnership);

     (j) not more than 50% of the aggregate amount of all Accounts Receivable of
the Account Debtor with respect to such Account  Receivable have remained unpaid
60 days past the  invoice due date or 90 days past the  invoice  date;  provided
that  (i) in the  case of  Albertsons  Receivables,  not  more  than  50% of the
aggregate amount of all Albertsons  Receivable have remained unpaid 90 days past
the  invoice  due date or 120 days past the  invoice  date,  (ii) in the case of
Meijer  Receivables,  not more than 50% of the  aggregate  amount of all  Meijer
Receivable  have  remained  unpaid 75 days past the invoice due date or 135 days
past the invoice date, (iii) in the case of Supervalu Receivables, not more than
50% of the aggregate amount of all Supervalu Receivable have remained unpaid 120
days past the invoice due date or 150 days past the invoice date, or (iv) in the
case of Toys R Us Receivables,  not more than 50% of the aggregate amount of all
Toys R Us Receivables  have remained unpaid 75 days past the invoice due date or
135 days past the invoice date;

     (k) (i) the Account Debtor with respect to such Account  Receivable has not
filed a petition for bankruptcy or any other relief under the Bankruptcy Code or
any other law relating to bankruptcy,  insolvency,  reorganization  or relief of
debtors,  made an assignment for the benefit of creditors,  had filed against it
any petition or other  application  for relief under the Bankruptcy  Code or any
such other law, (ii) has not failed, suspended business operations,  or called a
meeting of its creditors  for the purpose of obtaining any financial  concession
or accommodation, or (iii) has not had or suffered to be appointed a receiver or
a trustee for all or a significant portion of its assets or affairs;

     (l) in the  case  of an  Account  Debtor  who is an  individual,  is not an
employee  of  the  Borrower  or  the  Domestic  Guarantors  (other  than  the PR
Partnership)  or any of  their  respective  Affiliates  and has not died or been
declared incompetent;

     (m) the  Administrative  Agent is, and continues to be,  satisfied with the
credit  standing  of the  Account  Debtor in  relation  to the  amount of credit
extended and the  Administrative  Agent believes,  in its Permitted  Discretion,
that the prospect of collection  of such Account  Receivable is not impaired for
any reason; and

     (n) the Account Receivable does not represent the right to receive progress
payments,  installment billings (other than Milestone  Accounts),  bill and hold
invoices,  retainage  invoices,  or other advance billings that are due prior to
the completion of performance by the Borrower or one of the Domestic  Guarantors
(other than the PR Partnership) of the subject contract for goods or services.

                                       11
<PAGE>

     "Eligible  Backlog"  means  as of any  date of  determination  and  without
duplication,  (a) the U.S.  Retail Key Client WIP as of the most  recent  fiscal
quarter  end  multiplied  by (b) the  lesser of (i) the U.S.  Retail  Key Client
Effective Fee Rate and (ii) 20 percent,  multiplied  by (c) the U.S.  Retail Key
Client Claim Retention Rate.

     "Employee Plan" means an employee  benefit plan (other than a Multiemployer
Plan) covered by Title IV of ERISA and maintained (or that was maintained at any
time  during the six (6)  calendar  years  preceding  the date of any  borrowing
hereunder) for employees of any Loan Party or any of its ERISA Affiliates.

     "Environmental  Actions" means any complaint,  summons,  citation,  notice,
directive, order, claim, litigation,  investigation,  judicial or administrative
proceeding,  judgment,  letter  or other  communication  from  any  Governmental
Authority  involving  violations of Environmental  Laws or Releases of Hazardous
Materials (i) from any assets, properties or businesses of any Loan Party or any
of  its  Subsidiaries  or any  predecessor  in  interest;  (ii)  from  adjoining
properties or businesses;  or (iii) onto any facilities which received Hazardous
Materials  generated  by any  Loan  Party  or any  of  its  Subsidiaries  or any
predecessor in interest.

     "Environmental  Laws"  means  the  Comprehensive   Environmental  Response,
Compensation  and  Liability Act (42 U.S.C.  ss. 9601,  et seq.),  the Hazardous
Materials  Transportation  Act (49  U.S.C.  ss.  1801,  et seq.),  the  Resource
Conservation  and Recovery Act (42 U.S.C.  ss. 6901, et seq.), the Federal Clean
Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et
seq.),  the Toxic  Substances  Control Act (15 U.S.C. ss. 2601 et seq.), as such
laws may be  amended  or  otherwise  modified  from time to time,  and any other
present or future  applicable  federal  (including  the  federal  government  of
Canada),  state,  provincial,   local  or  foreign  statute,   ordinance,  rule,
regulation,  order,  judgment,  decree, permit, license or other legally binding
determination of any Governmental  Authority  imposing liability or establishing
standards  of conduct for  protection  of the  environment  or other  government
restrictions  relating to the  protection  of the  environment  or the  release,
emission,  deposit,  discharge,  leaching,  migration or spill of any  Hazardous
Materials into the environment.

     "Environmental  Liabilities  and  Costs"  means all  liabilities,  monetary
obligations,  Remedial Actions, losses, damages, punitive damages, consequential
damages,  treble  damages,  costs and expenses  (including all reasonable  fees,
disbursements  and  expenses of counsel,  experts and  consultants  and costs of
investigations  and  feasibility  studies),  fines,  penalties,   sanctions  and
interest  incurred  as a result  of any  claim  or  demand  by any  Governmental
Authority  or any third party,  and which  relate to the  liability or potential
liability  of any Loan Party with  respect to any  environmental  condition or a
Release  of  Hazardous  Materials  from or onto (i) any  property  currently  or
formerly  owned by any Loan  Party or any of its  Subsidiaries  or (ii) any Real
Property which received Hazardous  Materials  generated by any Loan Party or any
of its Subsidiaries.

     "Environmental Lien" means any Lien in favor of any Governmental  Authority
for Environmental Liabilities and Costs.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended,   and  any  successor  statute  of  similar  import,   and  regulations
thereunder, in each case, as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.

                                       12
<PAGE>

     "ERISA Affiliate" means, with respect to any Person,  any trade or business
(whether or not incorporated)  which is a member of a group of which such Person
is a member  and which  would be deemed to be a  "controlled  group"  within the
meaning of Sections 414(b), (c), (m) and (o) of the IRC.

     "Event of Default" means any of the events set forth in Section 9.01.

     "Excess  Cash Flow" means,  with respect to any Person for any period,  (i)
Consolidated  Net Income of such Person and its  Subsidiaries  for such  period,
plus (ii) all  non-cash  items of such Person and its  Subsidiaries  deducted in
determining  Consolidated Net Income for such period,  less (iii) the sum of (A)
all non-cash gains of such Person and its  Subsidiaries  included in determining
Consolidated  Net Income for such  period,  (B) all cash  principal  payments on
Indebtedness (other than voluntary prepayments of the Term Loan made pursuant to
Section 2.05(b)(ii)) of such Person and its Subsidiaries made during such period
(but in the case of the Revolving  Loans or other revolving  credit  facilities,
only to the  extent  there is an  equivalent  permanent  reduction  of the Total
Revolving  Credit  Commitment or the commitment to provide such other  revolving
credit  facility) to the extent such  Indebtedness  is permitted to be incurred,
and such  payments are  permitted  to be made,  under this  Agreement,  (C) cash
payments of taxes by such Person and its  Subsidiaries  during such period,  (D)
loan servicing fees paid in cash during such period on Indebtedness permitted to
be incurred under this Agreement,  (E) the cash portion of Capital  Expenditures
made by such  Person  and its  Subsidiaries  during  such  period to the  extent
permitted to be made under this  Agreement,  (F) the excess,  if any, of Working
Investment at the end of such period over Working Investment at the beginning of
such period (or, if the difference  results in an amount that is less than zero,
minus the excess, if any, of Working  Investment at the beginning of such period
over Working  Investment at the end of such period),  and (G) cash restructuring
charges of such Person and its Subsidiaries  whether accrued in such period or a
prior period.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Exchange Offer  Transaction" has the meaning specified therefor in Section
5.01(k).

     "Exchange  Offer  Transaction  Documents"  means the  Indenture for the 10%
Senior  Convertible  Notes,  the Indenture for the 11% Senior Notes,  the Senior
Notes, the Senior  Convertible  Notes, the Articles of Amendment,  and the other
agreements  and  documents  executed or delivered in  connection  therewith,  as
amended or modified in accordance with the terms hereof and thereof.

     "Existing  Bridge  Facility"  means the credit  facility  evidenced by that
certain  Credit  Agreement,  dated as of  December  23,  2005,  by and among the
Parent,  certain  Subsidiaries  of the Parent  signatory  thereto,  the  lenders
signatory  thereto,  and the Existing Bridge Facility Agent,  and the agreements
related thereto.

     "Existing Bridge Facility Agent" means Blum Strategic Partners II, L.P.

                                       13
<PAGE>

     "Existing Bridge Facility  Lenders" means the lenders party to the Existing
Bridge Facility.

     "Existing  Credit  Facility"  means the credit  facility  evidenced by that
certain Amended and Restated Credit Agreement, dated as of November 30, 2004, by
and among the Parent,  certain Subsidiaries of the Parent signatory thereto, and
the Existing Credit Facility Lender, and the agreements related thereto.

     "Existing Credit Facility Lender" means Bank of America, N.A.

     "Existing  Indenture" means that certain Indenture dated as of November 26,
2001 between the Parent and SunTrust Bank, as trustee, as amended or modified in
accordance with the terms hereof and thereof.

     "Existing Notes" means the 4.75%  Convertible  Subordinated  Notes due 2006
issued by the Parent pursuant to the Existing Indenture.

     "Extraordinary  Receipts"  means any cash  received by the Parent or any of
its  Subsidiaries  not in the ordinary course of business (and not consisting of
proceeds of Dispositions or Indebtedness or any foreign, United States, state or
local tax  refunds),  including  (i) pension plan  reversions,  (ii) proceeds of
insurance (other than the proceeds of business  interruption  insurance),  (iii)
judgments,  proceeds  of  settlements  or  other  consideration  of any  kind in
connection with any cause of action,  (iv) condemnation  awards (and payments in
lieu thereof),  (v) indemnity  payments,  and (vi) any purchase price adjustment
received in connection with any purchase agreement and any amounts received from
escrow arrangements in connection with any purchase agreement.

     "Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal to, for each day during such  period,  the  weighted  average of the
rates on  overnight  Federal  funds  transactions  with  members of the  Federal
Reserve  System  arranged by Federal  funds  brokers,  as  published on the next
succeeding  Business Day by the Federal  Reserve  Bank of New York,  or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations  for such day on such  transactions  received  by the  Administrative
Agent from three Federal funds brokers of recognized standing selected by it.

     "Fee Letter" means that certain fee letter, dated as of even date herewith,
among the Borrower and the Administrative Agent.

     "Field Survey and Audit" means a field survey and audit of the Loan Parties
and  an  appraisal  of the  Collateral  performed  by  auditors,  examiners,  or
appraisers selected by the Administrative Agent, at the sole cost and expense of
the Borrower.

     "Filing  Authorization  Letter"  means a letter duly  executed by each Loan
Party  authorizing  the Collateral  Agent to file  financing  statements in such
office  or  offices  as may be  necessary  or,  in the  opinion  of the  Agents,
desirable  to perfect the  security  interests  purported  to be created by each
Security Agreement.

                                       14
<PAGE>

     "Final  Maturity  Date" means March 17, 2010, or such earlier date on which
(a) the Total  Revolving  Credit  Commitment is terminated for any reason or (b)
all or any portion of the Obligations  shall become due and payable  pursuant to
the terms of Section 9.01.

     "Financial  Statements" means (i) the audited consolidated balance sheet of
the Borrower and its  Subsidiaries  for the Fiscal Year ended December 31, 2004,
and the related consolidated  statement of operations,  shareholders' equity and
cash flows for the Fiscal Year then ended,  and (ii) the unaudited  consolidated
balance  sheet of the  Borrower  and its  Subsidiaries  for the 12 months  ended
December  31,  2005,  and the  related  consolidated  statement  of  operations,
shareholder's equity and cash flows for the 12 months then ended.

     "First  Test  Period"  means  the  period  ended  on  the  last  day of the
applicable Person's first fiscal quarter ended after the Effective Date.

     "Fiscal  Year"  means  the  fiscal  year of the  Parent  (or,  prior to the
Effective  Date, the Borrower) and its  Subsidiaries  ending on December 31st of
each year.

     "Fixed Charge  Coverage  Ratio"  means,  with respect to any Person for any
period,  the  ratio  of (a)  the  Consolidated  EBITDA  of such  Person  and its
Subsidiaries  for  such  period,  to  (b)  the  sum  of  (i)  all  principal  of
Indebtedness of such Person and its Subsidiaries scheduled to be paid or prepaid
during such period,  plus (ii) gross cash interest  expense on the  Consolidated
Senior Debt during such period,  plus (iii) all income tax  liabilities  of such
Person and its Subsidiaries  that accrued during such period, to the extent that
the amount of such liabilities is greater than zero, plus (iv) cash dividends or
distributions paid by such Person and its Subsidiaries  (other than, in the case
of the Parent, dividends or distributions paid to the Parent or its wholly-owned
Subsidiaries)  during such period,  plus (v) Capital  Expenditures  made by such
Person and its Subsidiaries during such period; provided that (A) for the Fiscal
Year 2007,  the principal  paid on the Term Loan in each fiscal quarter shall be
deemed to be  $1,000,000,  and (B) for the Fiscal  Year 2008 and the Fiscal Year
2009, the principal paid on the Term Loan in each fiscal quarter shall be deemed
to  be  $2,000,000.  In  determining  the  Fixed  Charge  Coverage  Ratio  for a
particular  period, the calculation of the income tax liabilities of such Person
and its  Subsidiaries  described in clause (ii)(C) of the immediately  preceding
sentence  shall  be  made  without  giving  effect  to  any  tax  refunds,   tax
receivables,  net operating  losses or other net tax benefits that were received
or receivable during such period on account of any prior periods.

     "Foreign  Guarantor"  means any Guarantor  that is not organized  under the
laws of any state of the United States or the District of Columbia.

     "Foreign  Subsidiary"  means  any  Subsidiary  of the  Parent  that  is not
organized  under the laws of any state of the United  States or the  District of
Columbia.

     "Funding   Losses"   has  the   meaning   specified   therefor  in  Section
2.04(f)(ii)(B).

     "Funds Flow Agreement"  means that certain Funds Flow  Agreement,  dated of
even date herewith, by and among the Administrative Agent, the Collateral Agent,
the Lenders, and each Loan Party.

                                       15
<PAGE>

     "GAAP" means generally accepted  accounting  principles in effect from time
to time in the United  States,  provided  that for the  purpose of Section  7.03
hereof and the definitions  used therein,  "GAAP" shall mean generally  accepted
accounting  principles  in effect on the date hereof and  consistent  with those
used in the preparation of the Financial Statements,  provided, further, that if
there  occurs  after  the date of this  Agreement  any  change in GAAP or in the
methodologies used thereunder that affects in any respect the calculation of any
covenant  contained in Section 7.03  hereof,  the Agents and the Borrower  shall
negotiate in good faith  amendments  to the  provisions of this  Agreement  that
relate to the  calculation  of such  covenant  with the  intent  of  having  the
respective  positions of the Lenders and the Borrower  after such change in GAAP
conform as nearly as possible to their  respective  positions  as of the date of
this  Agreement  and,  until any such  amendments  have been  agreed  upon,  the
covenants  in Section 7.03 hereof  shall be  calculated  as if no such change in
GAAP had occurred.

     "German  Guarantor"  means  PRG-Schultz   (Deutschland)   GmbH,  a  company
incorporated  under the laws of Germany  registered  in  commercial  register of
Neuss under registered number HRB 12404.

     "German  Pledge  Agreement" has the meaning  specified  therefor in Section
5.03(b).

     "German Security  Agreement" has the meaning specified  therefor in Section
5.03(b).

     "Governmental  Authority"  means any  nation or  government,  any  Federal,
(including  the federal  government  of Canada)  state,  province,  city,  town,
municipality,  county,  local or other political  subdivision thereof or thereto
and any department, commission, board, bureau, instrumentality,  agency or other
entity  exercising  executive,  legislative,  judicial,  taxing,  regulatory  or
administrative powers or functions of or pertaining to government.

     "Guaranteed  Obligations"  has the  meaning  specified  therefor in Section
11.01.

     "Guarantor" (i) has the meaning specified  therefor in the preamble to this
Agreement,  and (ii) means each other Person which  guarantees,  pursuant to the
requirements  of  Section  7.01(b)  or  otherwise,   all  or  any  part  of  the
Obligations.

     "Guaranty"  means (i) the guaranty of each Guarantor party hereto contained
in Article XI hereof,  and (ii) each other guaranty made by any other  Guarantor
in favor of the  Collateral  Agent for the benefit of the Agents and the Lenders
pursuant to the requirements of Section 7.01(b) or otherwise.

     "Hazardous  Materials" means (a) any element,  compound or chemical that is
defined,  listed or otherwise  classified  as a  contaminant,  pollutant,  toxic
pollutant,  toxic or  hazardous  substance,  extremely  hazardous  substance  or
extremely   hazardous   chemical,   hazardous  waste,  or  special  waste  under
Environmental  Laws,  including any  pollutant,  contaminant,  waste,  hazardous
waste,  toxic substance or dangerous good which is defined or identified as such
in any  Environmental  Law and  which  is  present  in the  environment  in such
quantity or state that it contravenes any  Environmental  Law; (b) petroleum and
its  refined  products;  (c)  polychlorinated   biphenyls;   (d)  any  substance
exhibiting   a   hazardous   waste   characteristic,    including   corrosivity,

                                       16
<PAGE>

ignitability,  toxicity or  reactivity as well as any  radioactive  or explosive
materials; and (e) any raw materials or building components containing hazardous
substances  (including  asbestos-containing  materials)  listed or classified as
such under Environmental Laws.

     "Hedging Agreement" means any interest rate, foreign currency, commodity or
equity swap, collar, cap, floor or forward rate agreement, or other agreement or
arrangement  designed  to protect  against  fluctuations  in  interest  rates or
currency,  commodity or equity values  (including any option with respect to any
of  the  foregoing  and  any   combination   of  the  foregoing   agreements  or
arrangements),  and any  confirmation  executed  in  connection  with  any  such
agreement or arrangement.

     "Highest Lawful Rate" means,  with respect to any Agent or any Lender,  the
maximum  non-usurious  interest  rate,  if any, that at any time or from time to
time  may be  contracted  for,  taken,  reserved,  charged  or  received  on the
Obligations  under  laws  applicable  to such  Agent or such  Lender  which  are
currently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher  maximum  non-usurious
interest rate than applicable laws now allow.

     "Inactive  Subsidiaries"  means  PRG  USA,  Inc.,  a  Georgia  corporation,
PRG-Schultz  Insurance Limited,  a Bermuda company,  Howard Schultz & Associates
(Asia)  Limited,  a  company  organized  under  the  laws  of  Singapore,   HS&A
International  PTE  LTD,  a  company  organized  under  the  laws of Hong  Kong,
PRG-Schultz  (Thailand)  Co.,  Limited,  a company  organized  under the laws of
Thailand, PRGDS, LLC, a Georgia limited liability company, and Howard Schultz de
Mexico, S.A. de C.V., a company organized in Mexico.

     "Indebtedness" means, with respect to any Person, without duplication,  (i)
all indebtedness of such Person for borrowed money; (ii) all obligations of such
Person for the deferred purchase price of property or services (other than trade
payables  or other  accounts  payable  incurred in the  ordinary  course of such
Person's  business and not outstanding for more than 90 days after the date such
payable was created);  (iii) all obligations of such Person  evidenced by bonds,
debentures,  notes or other similar  instruments or upon which interest payments
are customarily made; (iv) all  reimbursement,  payment or other obligations and
liabilities  of such Person  created or arising under any  conditional  sales or
other title  retention  agreement  with respect to property  used or acquired by
such Person, even though the rights and remedies of the lessor, seller or lender
thereunder  may be limited to  repossession  or sale of such  property;  (v) all
Capitalized  Lease  Obligations  of  such  Person;   (vi)  all  obligations  and
liabilities,  contingent or otherwise,  of such Person, in respect of letters of
credit,   acceptances  and  similar   facilities;   (vii)  all  obligations  and
liabilities,  calculated in accordance  with accepted  practice,  of such Person
under Hedging Agreements;  (viii) all Contingent Obligations;  (ix) all monetary
obligations  under  any  receivables  factoring,  receivable  sales  or  similar
transactions  and all  monetary  obligations  under  any  synthetic  lease,  tax
ownership/operating lease, off-balance sheet financing or similar financing; and
(x) all  obligations  referred to in clauses (i) through (ix) of this definition
of another Person secured by (or for which the holder of such  Indebtedness  has
an  existing  right,  contingent  or  otherwise,  to be secured  by) a Lien upon
property owned by such Person, even though such Person has not assumed or become

                                       17
<PAGE>

liable for the  payment of such  Indebtedness.  The  Indebtedness  of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.

     "Indemnified Matters" has the meaning specified therefor in Section 12.15.

     "Indemnitees" has the meaning specified therefor in Section 12.15.

     "Indenture  Change of  Control"  has the  meaning  ascribed to a "Change in
Control" in the Indenture for the 10% Senior  Convertible Notes or the Indenture
for the 11% Senior Notes, as applicable.

     "Indenture  for  the 10%  Senior  Convertible  Notes"  means  that  certain
Indenture dated as of March 17, 2006 between the Parent and U.S. Bank,  National
Association,  as trustee,  as amended or modified in  accordance  with the terms
hereof and thereof.

     "Indenture for the 11% Senior Notes" means that certain  Indenture dated as
of March 17, 2006 between the Parent and U.S.  Bank,  National  Association,  as
trustee, as amended or modified in accordance with the terms hereof and thereof.

     "Insolvency  Proceeding"  means any proceeding  commenced by or against any
Person under any provision of the Bankruptcy Code or under any other  bankruptcy
or insolvency law, assignments for the benefit of creditors,  formal or informal
moratoria,  compositions, or extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.

     "Intercompany Subordination Agreement" means the Intercompany Subordination
Agreement,  dated as of the  Effective  Date,  duly executed by each of the Loan
Parties, substantially in the form of Exhibit I-1.

     "Interest  Period"  means,  with  respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan and ending 1, 2, or
3 month(s) thereafter;  provided, however, that (a) if any Interest Period would
end on a day that is not a Business Day, such Interest  Period shall be extended
(subject to clauses  (c)-(e)  below) to the next  succeeding  Business  Day, (b)
interest shall accrue at the applicable  rate based upon the LIBOR Rate from and
including the first day of each Interest  Period to, but  excluding,  the day on
which any Interest Period  expires,  (c) any Interest Period that would end on a
day that is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in another calendar month, in which case such
Interest  Period shall end on the next preceding  Business Day, (d) with respect
to an Interest  Period that begins on the last Business Day of a calendar  month
(or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period),  the Interest Period shall end on the
last  Business Day of the calendar  month that is 1, 2, or 3 month(s)  after the
date on which the  Interest  Period  began,  and (e)  Borrower  may not elect an
Interest Period which will end after the Final Maturity Date.

     "IRC" means the Internal Revenue Code of 1986, as amended (or any successor
statute thereto) and the regulations thereunder.

                                       18
<PAGE>

     "L/C Issuer" means such bank as the Administrative  Agent may select in its
sole and absolute discretion.

     "L/C  Subfacility"  means  that  portion  of  the  Total  Revolving  Credit
Commitment equal to $5,000,000.

     "Lease"  means any lease of real property to which any Loan Party or any of
its Subsidiaries is a party as lessor or lessee.

     "Lender" has the meaning specified therefor in the preamble hereto.

     "Letter of Credit" has the meaning specified therefor in Section 3.01(a).

     "Letter  of Credit  Application"  has the  meaning  specified  therefor  in
Section 3.01(a).

     "Letter of Credit Collateral Account" has the meaning specified therefor in
Section 3.01(b).

     "Letter  of Credit  Fees" has the  meaning  specified  therefor  in Section
3.03(b).

     "Letter  of  Credit   Guaranty"   means  one  or  more  guaranties  by  the
Administrative  Agent in favor of the L/C  Issuer  guaranteeing  the  Borrower's
obligations to the L/C Issuer under a reimbursement agreement,  Letter of Credit
Application or other like document in respect of any Letter of Credit.

     "Letter of Credit Obligations" means, at any time and without  duplication,
the  sum of (i) the  Reimbursement  Obligations  at such  time,  plus  (ii)  the
aggregate  maximum  amount  available  for  drawing  under the Letters of Credit
outstanding  at such time,  plus (iii) all amounts for which the  Administrative
Agent may be liable to the L/C Issuer pursuant to any Letter of Credit Guaranty.

     "Liabilities" has the meaning specified therefor in Section 2.07.

     "LIBOR Deadline" has the meaning set forth in Section 2.04(f)(ii)(A).

     "LIBOR Notice" means a written notice in the form of Exhibit L-1.

     "LIBOR Option" has the meaning specified therefor in Section 2.04(f)(i).

     "LIBOR Rate" means,  for each Interest Period for each LIBOR Rate Loan, the
rate  per  annum  determined  by  Administrative   Agent  (rounded  upwards,  if
necessary,  to the next  1/16%) by  dividing  (a) the Base  LIBOR  Rate for such
Interest Period, by (b) 100% minus the Reserve  Percentage;  provided,  however,
that the LIBOR Rate shall be subject to a minimum rate of 4.25 percentage points
per annum, and, accordingly,  to the extent that the LIBOR Rate on any day would
be less than the foregoing  minimum rate,  the LIBOR Rate hereunder for such day
automatically  shall be deemed  increased to such minimum  rate.  Subject to the

                                       19
<PAGE>

minimum  rate for the LIBOR Rate  described in this  definition,  the LIBOR Rate
shall be  adjusted on and as of the  effective  day of any change in the Reserve
Percentage.

     "LIBOR  Rate Loan"  means each  portion of a Loan that bears  interest at a
rate determined by reference to the LIBOR Rate.

     "Lien"  means any  mortgage,  deed of trust,  pledge,  lien  (statutory  or
otherwise),  security  interest,  charge or other  encumbrance  or  security  or
preferential  arrangement of any nature, including any conditional sale or title
retention  arrangement,  any  Capitalized  Lease  and  any  assignment,  deposit
arrangement or financing lease intended as, or having the effect of, security.

     "Loan"  means  the Term  Loan or any  Revolving  Loan made by an Agent or a
Lender to the Borrower pursuant to Article II hereof.

     "Loan Account" means an account maintained  hereunder by the Administrative
Agent on its books of account at the  Payment  Office,  and with  respect to the
Borrower,  in which the  Borrower  will be  charged  with all Loans made to, all
Letters of Credit  issued for the benefit of or at the request of, and all other
Obligations incurred by, the Borrower.

     "Loan  Document"  means  this  Agreement,  the Funds  Flow  Agreement,  the
Intercompany  Subordination Agreement, any Guaranty, any Security Agreement, any
Mortgage, any Letter of Credit Application, any Filing Authorization Letter, the
Fee Letter, the Brazilian Pledge Agreement, the Canadian Guarantee, the Canadian
Security  Agreement,   the  Canadian  Pledge  Agreement,   the  German  Security
Agreement, the German Pledge Agreement, the Meridian Pledge Agreements,  and any
other agreement,  instrument, and other document executed and delivered pursuant
hereto or thereto or otherwise  evidencing  or securing any Loan,  any Letter of
Credit  Obligation or any other  Obligation;  provided that Loan Documents shall
not include any Hedging Agreement.

     "Loan Party" means the Borrower or any Guarantor.

     "Lockbox Bank" has the meaning specified therefor in Section 8.01(a).

     "Lockboxes" has the meaning specified therefor in Section 8.01(a).

     "Material Adverse Effect" means a material adverse effect on any of (i) the
operations, business, assets, properties, or financial condition of the Domestic
Loan  Parties  taken as a whole or the Loan Parties  taken as a whole,  (ii) the
ability  of any Loan  Party to  perform  any of its  obligations  under any Loan
Document to which it is a party, (iii) the legality,  validity or enforceability
of this Agreement or any other Loan Document, or (iv) the rights and remedies of
any Agent or any Lender under any Loan Document.

     "Material Contract" means, with respect to the Parent and its Subsidiaries,
(i) the contracts or agreements involving the top 15 customers based on revenues
of the Parent and its Subsidiaries for the most recent Fiscal Year, and (ii) all
other contracts or agreements the loss of which could  reasonably be expected to
result in a Material Adverse Effect to the Loan Parties taken as a whole.

                                       20
<PAGE>

     "Meijer  Receivables"  means  Accounts  Receivable  owing from Meijer Great
Lakes  Limited  Partnership  with a due date no  later  than 75 days  after  the
invoice date.

     "Meridian" means Meridian  Corporation  Limited (formerly known as Meridian
VAT Corporation Limited), a company incorporated in the Isle of Jersey.

     "Meridian   Intercompany   Payable"  means  the  approximately   $4,700,000
intercompany  payable owed by Meridian and the UK  Subsidiaries to the Parent or
its  Subsidiaries  as of the date  hereof,  as  adjusted  from  time to time for
additional transfer pricing and payments thereon.

     "Meridian  Pledge  Agreements"  means  the  security  interest   agreements
executed and delivered by each of the Parent and HS&A  Acquisition - UK, Inc., a
Texas  corporation,  in favor of Collateral Agent, for the benefit of the Agents
and Lenders, each in form and substance reasonably satisfactory to the Agents.

     "Meridian  Subsidiaries" means Meridian and each of its direct and indirect
Subsidiaries.

     "Milestone  Accounts" shall mean Accounts  Receivable which satisfy each of
the following  criteria:  (i) they arise out of a contract between Borrower or a
Domestic Guarantor and a customer of Borrower or such Domestic Guarantor,  which
contract  provides for  services to be  performed  by such  Borrower or Domestic
Guarantor  to be divided  into  "units" or  "milestones"  and such  Borrower  or
Domestic Guarantor shall be entitled to collect and enforce payment in full from
the customer for such Account  Receivable  despite other "units" or "milestones"
under the contract  being not yet  completed;  (ii) the  applicable  Borrower or
Domestic  Guarantor shall have delivered an invoice for such Account  Receivable
and the  customer  shall have  accepted  such  invoice;  and (iii) such  Account
Receivable shall not be subject to any offset,  setoff or right of recoupment on
the part of the customer.

     "Moody's" means Moody's Investors Service, Inc. and any successor thereto.

     "Mortgage" means a mortgage,  deed of trust or deed to secure debt, in form
and substance  reasonably  satisfactory  to the Agents,  made by a Loan Party in
favor of the  Collateral  Agent for the  benefit of the Agents and the  Lenders,
securing the Obligations  and delivered to the Collateral  Agent pursuant to the
provisions hereof or otherwise.

     "Multiemployer  Plan"  means a  "multiemployer  plan" as defined in Section
4001(a)(3) of ERISA to which any Loan Party or any of its ERISA  Affiliates  has
contributed  to, or has been  obligated  to  contribute,  at any time during the
preceding six (6) years.

     "Net Amount of Eligible  Accounts  Receivable"  means the aggregate  unpaid
invoice amount of Eligible Accounts Receivable less, without duplication, sales,
excise or  similar  taxes,  returns,  discounts,  chargebacks,  claims,  advance
payments,  credits  and  allowances  of any  nature at any time  issued,  owing,
granted,  outstanding,  available  or  claimed  with  respect  to such  Eligible
Accounts Receivable.

                                       21
<PAGE>

     "Net Cash  Proceeds"  means,  (i) with  respect to any  Disposition  by any
Person or any of its  Subsidiaries,  the amount of cash  received  (directly  or
indirectly)  from time to time (whether as initial  consideration or through the
payment or disposition of deferred consideration) by or on behalf of such Person
or such Subsidiary,  in connection  therewith after deducting therefrom only (A)
the amount of any Indebtedness secured by any Permitted Lien on any asset (other
than  Indebtedness  assumed by the purchaser of such asset) which is required to
be, and is, repaid in connection with such Disposition  (other than Indebtedness
under this Agreement),  (B) reasonable expenses related thereto incurred by such
Person or such  Subsidiary in connection  therewith,  (C) transfer taxes paid to
any  taxing  authorities  by  such  Person  or  such  Subsidiary  in  connection
therewith,  and  (D)  net  income  taxes  to be paid  in  connection  with  such
Disposition (after taking into account any tax credits or deductions and any tax
sharing arrangements) and (ii) with respect to the issuance or incurrence of any
Indebtedness by any Person or any of its  Subsidiaries,  or the sale or issuance
by any Person or any of its Subsidiaries of any shares of its Capital Stock, the
aggregate  amount of cash received  (directly or  indirectly)  from time to time
(whether  as initial  consideration  or through the  payment or  disposition  of
deferred  consideration)  by or on behalf of such Person or such  Subsidiary  in
connection  therewith,  after deducting  therefrom only (A) reasonable  expenses
related  thereto  incurred  by such  Person  or such  Subsidiary  in  connection
therewith,  (B)  transfer  taxes  paid by such  Person  or  such  Subsidiary  in
connection therewith and (C) net income taxes to be paid in connection therewith
(after  taking into  account any tax credits or  deductions  and any tax sharing
arrangements);  in each case of clause (i) and (ii) to the  extent,  but only to
the extent, that the amounts so deducted are (x) actually paid to a Person that,
except in the case of reasonable  out-of-pocket expenses, is not an Affiliate of
such Person or any of its  Subsidiaries  and (y) properly  attributable  to such
transaction or to the asset that is the subject thereof.

     "New Lending Office" has the meaning specified therefor in Section 2.08(d).

     "Non-U.S. Lender" has the meaning specified therefor in Section 2.08(d).

     "North American Excess Cash Flow" means, with respect to any Person for any
period, (i) North American  Consolidated Net Income of such Person and its North
American  Subsidiaries  for such period,  plus (ii) all  non-cash  items of such
Person  and its  North  American  Subsidiaries  deducted  in  determining  North
American  Consolidated Net Income for such period, less (iii) the sum of (A) all
non-cash gains of such Person and its Subsidiaries included in determining North
American  Consolidated  Net  Income  for such  period,  (B) all  cash  principal
payments on Indebtedness (other than voluntary prepayments of the Term Loan made
pursuant  to  Section  2.05(b)(ii))  of  such  Person  and  its  North  American
Subsidiaries  made during such period (but in the case of the Revolving Loans or
other  revolving  credit  facilities,  only to the extent there is an equivalent
permanent  reduction of the Total Revolving Credit  Commitment or the commitment
to provide such other revolving credit facility) to the extent such Indebtedness
is permitted to be incurred,  and such payments are permitted to be made,  under
this Agreement,  (C) payments of taxes made in cash by such Person and its North
American  Subsidiaries  during such period, (D) loan servicing fees paid in cash
during  such  period  on  Indebtedness  permitted  to  be  incurred  under  this
Agreement,  (E) the cash portion of Capital Expenditures made by such Person and
its North American Subsidiaries during such period to the extent permitted to be
made under this  Agreement,  (F) the excess,  if any, of North American  Working

                                       22
<PAGE>

Investment at the end of such period over North American  Working  Investment at
the beginning of such period (or, if the difference results in an amount that is
less than zero, minus the excess,  if any, of North American Working  Investment
at the beginning of such period over North  American  Working  Investment at the
end of such period),  and (G) cash restructuring  charges of such Person and its
North American Subsidiaries whether accrued in such period or a prior period.

     "North American  Consolidated Net Income" means, with respect to any Person
for any  period,  the net income  (loss) of such  Person and its North  American
Subsidiaries  for  such  period,  determined  on a  consolidated  basis  and  in
accordance  with GAAP,  but excluding from the  determination  of North American
Consolidated Net Income (without duplication) (a) any non-cash  extraordinary or
non-recurring  gains or losses  or any  non-cash  gains or losses  solely to the
extent  that they will not  result in cash  charges in any  future  period,  (b)
restructuring  charges in an aggregate  amount not to exceed  $1,250,000  in any
Fiscal Year or $5,000,000 in the  aggregate  during the term of this  Agreement;
provided if the actual amount of the  restructuring  charges excluded from North
American  Consolidated  Net Income is less than  $1,250,000  in any Fiscal Year,
then the unused  portion may be carried  forward to subsequent  Fiscal Years and
excluded from North American  Consolidated Net Income in such subsequent  Fiscal
Years so long as the aggregate amount excluded from North American  Consolidated
Net Income during the term of this  Agreement  does not exceed  $5,000,000,  (c)
effects of  discontinued  operations,  (d) interest  that is  paid-in-kind,  (e)
interest income, and (f) any tax refunds,  net operating losses or other net tax
benefits received during such period on account of any prior period

     "North  American  Subsidiary"  means  any  Subsidiary  of a Person  that is
organized  under the laws of the United  States,  the District of  Columbia,  or
Canada.

     "North American  Working  Investment"  means, at any date of  determination
thereof, (i) the sum, for any Person and its North American Subsidiaries, of (A)
the unpaid face amount of all Accounts  Receivable  of such Person and its North
American  Subsidiaries as at such date of determination,  plus (B) the aggregate
amount of prepaid expenses of such Person and its North American Subsidiaries as
at such date of determination, minus (ii) the sum, for such Person and its North
American Subsidiaries,  of (A) the unpaid amount of all accounts payable of such
Person and its North  American  Subsidiaries  as at such date of  determination,
plus (B) the  aggregate  amount of all  accrued  expenses of such Person and its
North American Subsidiaries as at such date of determination (including deferred
compensation,  but,  excluding from accounts payable and accrued  expenses,  the
current portion of long-term debt and all accrued interest and taxes).

     "Notice  of  Borrowing"  has the  meaning  specified  therefor  in  Section
2.02(a).

     "Obligations" means all present and future indebtedness,  obligations,  and
liabilities  of each Loan Party to the Agents and the  Lenders,  or any of them,
under the Loan Documents, whether or not the right of payment in respect of such
claim is reduced  to  judgment,  liquidated,  unliquidated,  fixed,  contingent,
matured, disputed, undisputed, legal, equitable, secured, unsecured, and whether
or not such claim is discharged,  stayed or otherwise affected by any proceeding
referred to in Section 9.01.  Without  limiting the generality of the foregoing,
the  Obligations  of each Loan Party  under the Loan  Documents  include (a) the
obligation  (irrespective  of  whether  a  claim  therefor  is  allowed  in  any
Insolvency  Proceeding) to pay principal,  interest,  charges,  expenses,  fees,

                                       23
<PAGE>

reasonable  attorneys  fees and  disbursements,  indemnities  and other  amounts
payable by such Person under the Loan Documents,  and (b) the obligation of such
Person to reimburse any amount in respect of any of the foregoing that any Agent
or any Lender (in its sole  discretion) may elect to pay or advance on behalf of
such Person.

     "Other Taxes" has the meaning specified therefor in Section 2.08(b).

     "Parent" has the meaning specified therefor in the preamble hereto.

     "Participant  Register"  has the  meaning  specified  therefor  in  Section
12.07(g).

     "Payment  Office" means the  Administrative  Agent's office located at 1211
Avenue of the Americas, New York, New York or at such other office or offices of
the  Administrative  Agent as may be  designated in writing from time to time by
the Administrative Agent to the Collateral Agent and the Borrower.

     "PBGC" means the Pension  Benefit  Guaranty  Corporation  or any  successor
thereto.

     "Permits" has the meaning specified therefor in Section 6.01(n).

     "Permitted  Discretion"  means  a  determination  made in the  exercise  of
reasonable  (from the  perspective  of a secured  asset-based  lender)  business
judgment.

     "Permitted  Dispositions" means (a) Dispositions of obsolete,  worn-out, or
surplus equipment in the ordinary course of business,  (b) Dispositions of other
property or assets for cash in an aggregate amount not less than the fair market
value of such  property or assets,  provided  that the Net Cash Proceeds of such
Dispositions in the case of clauses (a) and (b) do not exceed  $1,000,000 in the
aggregate,  (c) the use or transfer of cash and Cash  Equivalents  by the Parent
and its  Subsidiaries  in a manner that is not  prohibited  by the terms of this
Agreement or the other Loan Documents,  (d) the licensing or sublicensing by the
Parent  and  its  Subsidiaries,  (i)  on  a  non-exclusive  basis,  of  patents,
trademarks,  copyrights,  and other intellectual property rights in the ordinary
course of business,  or (ii) on a  non-exclusive  or exclusive  basis,  patents,
trademarks,  copyrights,  and other  intellectual  property rights in connection
with a  Disposition  permitted  under  clause  (q) of this  definition,  (e) the
granting of leases or subleases to other Persons not materially interfering with
the conduct of business of any of the Loan Parties, (f) the abandonment or other
Disposition of patents,  trademarks,  copyrights or other intellectual  property
rights that are neither necessary nor economically desirable in the operation of
the Loan  Parties'  business,  (g) the  Disposition  of Accounts  Receivable  in
connection  with the collection or compromise  thereof in the ordinary course of
business and in a manner not inconsistent  with the provisions of this Agreement
(excluding any  securitization  or factoring or similar  transactions),  (h) the
sale or issuance of (i) the Capital Stock of any Subsidiary of the Parent to the
Borrower (so long as such sale or issuance is made subject to Collateral Agent's
Liens on such Capital  Stock),  (ii) the Borrower's  Capital Stock to the Parent
(so long as such sale or issuance is made subject to Collateral Agent's Liens on
such Capital Stock),  or (iii) the Parent's Capital Stock to any Person (so long
as a  Change  of  Control  would  not  result  therefrom),  (i)  sales  or other
Dispositions  of assets from the Parent or any of its  Subsidiaries  (other than
the  Borrower)  to the  Borrower,  to any  Domestic  Guarantor  (other  than the
Parent),  or to the Canadian  Guarantor,  (j) so long as no Event of Default has

                                       24
<PAGE>

occurred  and  is  continuing  or  would  result   therefrom,   sales  or  other
Dispositions  of assets from any  Foreign  Subsidiary  (other than the  Canadian
Guarantor) to any Foreign  Guarantor,  (k) sales or other Dispositions of assets
from any Subsidiary of the Parent that is not the Borrower or a Guarantor to the
Parent or any of its  Subsidiaries,  (l)  transfers  of  property  subject  to a
casualty  event upon receipt of the net cash proceeds of such casualty event and
application of such net cash proceeds to the  Obligations to the extent required
under Section  2.05(c),  (m) Liens expressly  permitted under Section 7.02(a) to
the extent constituting Dispositions,  (n) investments expressly permitted under
Section  7.02(e)  to the  extent  constituting  Dispositions,  (o)  Dispositions
expressly  permitted under Section  7.02(c)(ii),  (p) voluntary  terminations of
Hedging  Agreements,  and (q)  Dispositions  set  forth in that  certain  letter
agreement regarding  Dispositions dated as of the date hereof between the Agents
and Borrower.

     "Permitted Indebtedness" means:

     (a) any Indebtedness owing to any Agent and any Lender under this Agreement
and the other Loan Documents;

     (b) Indebtedness listed on Schedule 7.02(b), and any Permitted  Refinancing
thereof;

     (c) Indebtedness evidenced by Capitalized Lease Obligations entered into in
order to finance  Capital  Expenditures  made by the Loan Parties in  accordance
with the provisions of Section 7.03(d), which Indebtedness, when aggregated with
the  principal  amount of all  Indebtedness  incurred  under this clause (c) and
clause  (d)  of  this  definition,  does  not  exceed  $2,000,000  at  any  time
outstanding;

     (d) purchase money Indebtedness  incurred to enable a Loan Party to acquire
equipment in the ordinary course of its business,  and any Permitted Refinancing
thereof,  which  Indebtedness,  when aggregated with the principal amount of all
Indebtedness  incurred under this clause (c) and clause (d) of this  definition,
does not exceed $2,000,000 at any time outstanding;

     (e)  Indebtedness  of  Meridian  or any of its  Subsidiaries  in respect of
Meridian's  or  any  of  its   Subsidiaries'   obligations  to  the  French  VAT
authorities;  provided that such Indebtedness  shall not have a cross-default to
the Indebtedness arising under this Agreement and the other Loan Documents;

     (f) Indebtedness of the Parent or any of its Subsidiaries under any Hedging
Agreement  so long as such Hedging  Agreements  are used solely as a part of its
normal  business  operations  as a risk  management  strategy  or hedge  against
changes  resulting  from market  operations  and not as a means to speculate for
investment purposes on trends and shifts in financial or commodities markets;

     (g) Indebtedness  owed by any Subsidiary of the Parent to the Parent or any
of its  Subsidiaries  so long as the making of the  investment  by the Parent or
such  Subsidiary  that is  acting  as the  lender  is a  Permitted  Intercompany
Investment;

                                       25
<PAGE>

     (h)  solely  for the  period  from  and  after  the  Effective  Date to and
including  November  26,  2006,  Indebtedness  of the  Parent  evidenced  by the
Existing Notes in an aggregate principal amount not to exceed $6,250,000;

     (i)  Indebtedness  of the  Parent  evidenced  by  the  Senior  Notes  in an
aggregate principal amount not to exceed $50,000,000 plus the amount of interest
that has  accrued  as of the  Effective  Date on the  Existing  Notes  exchanged
pursuant  to the  Exchange  Offer  Transaction,  and any  Permitted  Refinancing
thereof;

     (j) Indebtedness of the Parent evidenced by the Senior Convertible Notes in
an aggregate  principal  amount not to exceed  $60,000,000  (not  including  any
paid-in-kind  interest  on  such  Indebtedness  pursuant  to  the  terms  of the
Indenture for the 10% Senior  Convertible Notes as of the date hereof),  and any
Permitted Refinancing thereof;

     (k) Subordinated Debt and any Permitted Refinancing thereof;

     (l) unsecured  Indebtedness in an aggregate amount not to exceed $1,000,000
at any time outstanding;

     (m)  Indebtedness  arising from the  honoring by a bank or other  financial
institution  of  a  check,   draft  or  similar  instrument  and  consisting  of
obligations  in respect  of cash  management  or  pooling  or netting  services,
overdraft  protections and similar  arrangements in each case in connection with
cash management and deposit accounts arising in the ordinary course of business;

     (n) Indebtedness  arising in connection with endorsement of instruments for
deposit in the ordinary course of business;

     (o)  Indebtedness  incurred in  connection  with the financing of insurance
premiums in the ordinary course of business in an aggregate amount not to exceed
$1,500,000 at any time outstanding;

     (p)  Indebtedness  securing Liens expressly  permitted by clause (f) of the
definition of "Permitted Liens";

     (q) Indebtedness incurred in connection with a Permitted Disposition solely
to the extent arising under agreements providing for customary  indemnification,
adjustments of the purchase price, or similar adjustments; and

     (r)  Contingent  Obligations  of the  Parent  in  respect  of  Indebtedness
permitted  to be  incurred  pursuant  to clauses  (a) - (f) or (m) - (q) of this
definition.

     "Permitted  Intercompany  Investments" means (a) investments  consisting of
loans (or,  solely if required by applicable law or thin  capitalization  rules,
contributions)  by any  Domestic  Loan Party or the  Canadian  Guarantor  to any
Foreign Guarantor (other than the Canadian Guarantor) so long as (i) all parties
to such transaction are party to the Intercompany  Subordination  Agreement, and
(ii) the aggregate  amount of such  investments  outstanding at any time (net of

                                       26
<PAGE>

any repayment thereof) does not exceed $3,000,000, (b) investments consisting of
loans (or,  solely if required by applicable law or thin  capitalization  rules,
contributions)  by any Loan  Party to any  Foreign  Subsidiary  (other  than any
Foreign Guarantor or the Meridian  Subsidiaries) so long as the aggregate amount
of such investments  outstanding at any time (net of any repayment thereof) does
not exceed  $5,000,000,  (c)  investments  consisting  of loans  (or,  solely if
required by applicable law or thin capitalization  rules,  contributions) by any
Loan Party to any Meridian  Subsidiary so long as the  aggregate  amount of such
investments  outstanding  at any time (net of any  repayment  thereof)  does not
exceed $6,000,000, (d) solely for the first 90 days following the Effective Date
(or  such  longer  period  as the  Collateral  Agent  shall  reasonably  agree),
investments  consisting  of loans by any  Subsidiary of the Parent to the Parent
(for the avoidance of doubt, it being understood and agreed that the proceeds of
such loans  (other than loans made by the  Borrower  to the Parent as  expressly
permitted  by Section  7.02(h))  shall be sent by the Parent to the Borrower for
deposit in the  Collection  Account in  accordance  with Section  8.01(b)),  (e)
investments  consisting of loans (or,  solely if required by  applicable  law or
thin  capitalization  rules,  contributions)  by the Parent to any Domestic Loan
Party or the Canadian  Guarantor,  and (f) investments  consisting of loans (or,
solely  if   required  by   applicable   law  or  thin   capitalization   rules,
contributions)  by any  Subsidiary  of the Parent that is not the  Borrower or a
Guarantor  to any other  Subsidiary  of the Parent that is not the Borrower or a
Guarantor.

     "Permitted Investments" means (a) investments in cash and Cash Equivalents,
(b)   Permitted   Intercompany   Investments,   (c)   Permitted   Reorganization
Transactions, (d) Hedging Agreements so long as such Hedging Agreements are used
solely as a part of normal business  operations as a risk management strategy or
hedge against  changes  resulting  from market  operations and not as a means to
speculate  for  investment  purposes  on  trends  and  shifts  in  financial  or
commodities  markets,  (e)  loans to one or more  directors,  officers  or other
employees  of the  Parent  or its  Subsidiaries  in  connection  with  any  such
director's,  officer's or employee's  acquisition  of shares of Capital Stock of
the  Parent  in an amount  not  greater  than the  purchase  price  paid by such
director,  officer  or  employee  for such  shares  of  Capital  Stock and in an
aggregate amount not to exceed $250,000 at any time outstanding, (f) investments
received  by the  Parent  or any of its  Subsidiaries  pursuant  to any  plan of
reorganization  or  liquidation  or  other  similar  arrangement  that  has gone
effective in an Insolvency  Proceeding  of any Person,  (g) the  endorsement  of
negotiable  instruments  held for collection in the ordinary course of business,
(h) deposits made in the ordinary  course of business to secure the  performance
of leases or to obtain utilities, (i) advances to employees of the Parent or its
Subsidiaries  made  in the  ordinary  course  of  business;  provided  that  the
aggregate  amount of such  advances  at any time  outstanding  shall not  exceed
$250,000,  (j) the  acquisition  by the  Borrower or any  Domestic  Guarantor of
Accounts Receivable held by the Parent or any of its Subsidiaries; provided that
(i) any such  acquisition  is in the ordinary  course of business,  and (ii) the
acquired  Accounts  Receivable are payable or  dischargeable  in accordance with
customary  terms,  (k)  Indebtedness  expressly  permitted  by clause (g) of the
definition of "Permitted  Indebtedness" (without duplication of any other clause
in this definition) or clause (r) of the definition of "Permitted Indebtedness",
in each case, solely to the extent constituting investments, (l) Liens expressly
permitted by clause (f) of the definition of "Permitted  Liens" or clause (q) of
the  definition  of  "Permitted  Liens",  in each  case,  solely  to the  extent
constituting  investments,  (m)  investments  expressly  permitted under Section
7.02(h),  (n) investments made by the Borrower or any of its Subsidiaries in the
form  of  non-cash  consideration  received  in  connection  with a  Disposition
described in clauses (c) - (p) of the  definition of  "Permitted  Dispositions",
and  (o)  other  investments  in an  aggregate  amount  not to  exceed  $250,000
outstanding at any time.

                                       27
<PAGE>

     "Permitted Liens" means:

     (a) Liens securing the Obligations;

     (b) Liens for taxes,  assessments,  levies,  or  governmental  charges  the
payment  of which is not  overdue  by more than 30 days and,  if overdue by more
than 30 days (i) such taxes,  assessments,  levies,  or  governmental  are being
contested in good faith by appropriate  proceedings for which adequate  reserves
have  been   established  in  accordance   with  GAAP,  or  (ii)  secure  taxes,
assessments,  levies,  or  governmental  charges in an  aggregate  amount not to
exceed $50,000.

     (c) Liens  imposed by law such as  carriers',  warehousemen's,  mechanics',
materialmen's and other similar Liens arising in the ordinary course of business
and securing  obligations  (other than Indebtedness for borrowed money) that are
not  overdue  by more than 30 days and,  if overdue by more than 30 days (i) are
being contested in good faith and by appropriate  proceedings promptly initiated
and diligently conducted,  and a reserve or other appropriate provision, if any,
as shall be  required  by GAAP shall  have been made  therefor,  or (ii)  secure
obligations in an aggregate amount not to exceed $50,000;

     (d)  Liens  described  on  Schedule  7.02(a),  and any  Lien  granted  as a
modification, renewal, extension, replacement, or substitute therefor so long as
such modification,  renewal, extension, replacement, or substitute therefor does
not extend coverage thereof to other property or assets;

     (e) Liens  arising  under  Capitalized  Leases or securing  purchase  money
Indebtedness permitted under the definition of Permitted Indebtedness; provided,
however,  that (A) no such Lien shall  extend to or cover any other  property of
any Loan Party or any of its Subsidiaries  (other than the proceeds and products
of the property that is the subject of the  Capitalized  Lease or purchase money
Indebtedness  and  accessions  thereto),  and (B) the  principal  amount  of the
Indebtedness  secured  by any such Lien  shall not  exceed  the  lesser the fair
market value or the cost of the property so held or acquired and customary  fees
incurred in connection therewith;

     (f)  deposits  and pledges of cash  securing  (i)  obligations  incurred in
respect of  workers'  compensation,  unemployment  insurance  or other  forms of
governmental  insurance  or benefits,  (ii) the  performance  of bids,  tenders,
leases,   contracts  (other  than  for  the  payment  of  money)  and  statutory
obligations, (iii) obligations on surety or appeal bonds, but only to the extent
such deposits or pledges are made or otherwise  arise in the ordinary  course of
business and secure  obligations not past due, or (iv) letters of credit or bank
guarantees to support payment of items set forth in this clause (f);

     (g)  easements,  zoning  restrictions  and  similar  encumbrances  on  real
property and minor  irregularities  in the title  thereto that do not (i) secure
obligations for the payment of money or (ii) materially impair the value of such
property or its use by any Loan Party or any of its  Subsidiaries  in the normal
conduct of such Person's business;

                                       28
<PAGE>

     (h) leases or subleases granted to other Persons not materially interfering
with the conduct of the business of the Parent or any of its Subsidiaries;

     (i) (i) non-exclusive  licenses or sub-licenses by the Parent or any of its
Subsidiaries of patents, trademarks,  copyrights, or other intellectual property
rights in the ordinary  course of business and not  interfering  in any material
respect  with the  ordinary  conduct of the business of the Parent or any of its
Subsidiaries, or (ii) exclusive or non-exclusive licenses or sub-licenses by the
Parent or any of its Subsidiaries of patents,  trademarks,  copyrights, or other
intellectual   property  rights  in  connection  with  a  Disposition  expressly
permitted by clause (q) of the definition of "Permitted Dispositions";

     (j) precautionary financing statement filings regarding operating leases or
consignments of goods;

     (k) Liens  arising out of the  existence  of judgments or awards not giving
rise to an Event of Default;

     (l)  statutory  and common law  landlords'  liens under leases to which the
Parent or any of its Subsidiaries is a party;

     (m) Liens securing refinancing  Indebtedness permitted to be incurred under
clauses  (b),  (c),  or (d)  of  the  definition  of  "Permitted  Indebtedness";
provided, that such Liens do not extend to any property or assets other than the
property or assets that served as collateral for the refinanced Indebtedness;

     (n)  bankers'  Liens,  rights of setoff and other  similar  Liens  existing
solely  with  respect  to Cash and Cash  Equivalents  on  deposit in one or more
accounts  maintained by Parent or any of its Subsidiaries,  in each case granted
in the ordinary  course of business of such Person in favor of the bank or banks
with which such accounts are maintained,  securing amounts owing to such bank or
its  affiliates   with  respect  to  cash   management  and  operating   account
arrangements,   including   those   involving   pooled   accounts   and  netting
arrangements;  provided  that in no case  shall any such  Liens  secure  (either
directly or indirectly) the repayment of any Indebtedness for borrowed money;

     (o)  Liens  (i) on  advances  of  Cash  or Cash  Equivalents  or  Permitted
Investments  in  favor  of the  seller  of any  property  to be  acquired  in an
investment permitted  hereunder,  (ii) on any earnest money deposits made by the
Parent or any of its  Subsidiaries  in  connection  with any letter of intent or
purchase agreement permitted hereunder, and (iii) consisting of any agreement to
dispose of property in a Disposition permitted under Section 7.02(c);

     (q) deposits and pledges of Cash and Cash Equivalents securing Indebtedness
permitted by clause (e) of the definition of "Permitted Indebtedness";  provided
that the amount of such deposits and pledges  outstanding  at any time shall not
exceed 10% of the gross value added tax refunds received by Meridian from France
calculated on a rolling 12 month basis;

                                       29
<PAGE>

     (r)  Liens  securing  Indebtedness  in an  aggregate  amount  not to exceed
$100,000  arising out of  conditional  sale,  title  retention,  consignment  or
similar  arrangements  for the sale of goods  entered  into by the Parent or its
Subsidiaries in the ordinary course of business; and

     (s) other Liens securing  Indebtedness in an aggregate amount not to exceed
$200,000.

     "Permitted  Merger"  means (a) the merger of a Domestic  Subsidiary  (other
than the  Borrower)  or the Canadian  Guarantor  with and into the Borrower or a
Domestic  Guarantor,  (b) the  merger of a Foreign  Subsidiary  (other  than the
Canadian  Guarantor) with and into a Foreign  Guarantor (other than the Canadian
Guarantor),  and (c) the merger of any  Subsidiary of the Borrower that is not a
Guarantor with and into the Borrower or another  Subsidiary of the Borrower,  in
the  case of each of  clauses  (a),  (b),  and  (c),  so long as (i) no Event of
Default  shall have  occurred or be  continuing  either  before or after  giving
effect to such merger, (ii) the Borrower gives the Agents at least 15 days prior
written notice of such merger,  (iii) (A) in the case of a merger  involving the
Borrower, the Borrower is the continuing or surviving Person, (B) in the case of
a  merger  involving  a  Domestic  Guarantor  (other  than  a  merger  involving
Borrower), such Domestic Guarantor is the continuing or surviving Person, (C) in
the case of a merger involving a Foreign  Guarantor,  such Foreign  Guarantor is
the continuing or surviving Person, and (v) the Agents' and Lenders' Lien in all
or any portion of the Collateral,  including without limitation,  the existence,
perfection, and priority of any Lien thereon, are not adversely affected by such
merger.

     "Permitted  Preferred  Stock" means and refers to (a) any  Preferred  Stock
issued by the Parent  (and not by one or more of its  Subsidiaries)  that is not
Prohibited  Preferred Stock, (b) the Series A Preferred Stock, or (c) the Series
B Preferred Stock.

     "Permitted Refinancing" means any extension,  refinancing,  or modification
of  any  Indebtedness;   provided  that  (i)  such  extension,   refinancing  or
modification  is  pursuant  to terms  that are not  less  favorable  to the Loan
Parties  and the  Lenders  than the terms of the  Indebtedness  being  extended,
refinanced or modified, (ii) after giving effect to such extension,  refinancing
or modification,  the amount of such Indebtedness is not greater than the amount
of Indebtedness outstanding immediately prior to such extension,  refinancing or
modification  plus accrued  interest thereon and the fees incurred in connection
with  the  extension,   refinancing,  or  modification,  (iii)  such  extension,
refinancing or modification  does not result in an increase in the interest rate
with respect to the Indebtedness so extended, refinanced, or modified, (iv) such
extension,  refinancing or  modification  does not result in a shortening of the
average  weighted  maturity of the  Indebtedness  so  extended,  refinanced,  or
modified, (v) if the Indebtedness that is extended,  refinanced, or modified was
subordinated  in  right of  payment  to the  Obligations,  then  the  terms  and
conditions  of  the  extension,   refinancing,   or  modification  must  include
subordination  terms and conditions that are at least as favorable to the Agents
and the Lenders as those that were  applicable to the extended,  refinanced,  or
modified  Indebtedness,  (vi)  the  covenants  and  events  of  default  of  the
Indebtedness that is extended,  refinanced or modified are not less favorable to
the Loan Parties, the Agents or the Lenders than the terms and conditions of the
Indebtedness being extended, refinanced, or modified, and (vii) the Indebtedness
that is extended,  refinanced, or modified is not recourse to any Person that is
liable on  account  of the  Obligations  other  than  those  Persons  which were
obligated with respect to the  Indebtedness  that was extended,  refinanced,  or
modified.

                                       30
<PAGE>

     "Permitted   Reorganization   Transaction"   means  (a)  the   dissolution,
liquidation,  or winding-up of any Domestic Subsidiary (other than the Borrower)
or the Canadian  Guarantor  so long as (i) the assets (if any) of such  Domestic
Subsidiary or the Canadian  Guarantor are  transferred to a Domestic Loan Party,
(ii)  no  Event  of  Default  shall  have  occurred  and  be  continuing  either
immediately before or after giving effect to such transaction, (iii) the Agents'
and  Lenders'  Lien  in  any  Collateral,  including,  without  limitation,  the
existence,  perfection  and  priority  of any Lien  thereon,  are not  adversely
affected by such  dissolution or  winding-up,  and (vi) such Domestic Loan Party
shall have  executed and delivered or  authorized,  as  applicable,  any and all
security   agreements,   financing   statements,   fixture  filings,  and  other
documentation  reasonably  requested  by any  Agent  in  order  to  include  the
transferred assets within the Collateral,  or (b) the dissolution,  liquidation,
or winding-up of any Foreign  Subsidiary (other than the Canadian  Guarantor) so
long as (i) the assets of such Foreign  Subsidiary are  transferred to a Foreign
Guarantor  (other than the Canadian  Guarantor)  or its parent  (other than with
respect to any Foreign  Subsidiary that is a Subsidiary of the Parent),  (ii) no
Event of Default shall have occurred and be continuing either immediately before
or after giving effect to such transaction, (iii) the Agents' and Lenders' Liens
in any Collateral,  including, without limitation, the existence, perfection and
priority of any Lien thereon,  are not adversely affected by such dissolution or
winding-up,  and (iv) the applicable  Foreign  Guarantor shall have executed and
delivered  or  authorized,  as  applicable,  any  and all  security  agreements,
financing  statements,  fixture  filings,  and  other  documentation  reasonably
requested  by any Agent in order to include the  transferred  assets  within the
Collateral.

     "Person"  means an  individual,  corporation,  limited  liability  company,
partnership,    association,    joint-stock   company,   trust,   unincorporated
organization,  joint  venture  or other  enterprise  or entity  or  Governmental
Authority.

     "Post-Default Rate" means a rate of interest per annum equal to the rate of
interest  otherwise  in effect  from time to time  pursuant to the terms of this
Agreement plus 2.0 percentage points, or, if a rate of interest is not otherwise
in effect, interest at the highest rate specified herein for any Loan (or in the
case of the Letter of Credit  Fee,  the highest  Letter of Credit Fee  specified
herein) prior to the Event of Default plus 2.0 percentage points.

     "PPSA" means the Personal Property Security Act of the applicable  Canadian
province or provinces in respect of the Canadian Guarantor, each as amended from
time to time.

     "PR  Partnership"  means  PRG-Schultz  Puerto Rico,  a foreign  partnership
organized under the laws of Puerto Rico.

     "Preferred Stock" means, as applied to the Capital Stock of any Person, the
Capital  Stock of any class or classes  (however  designated)  that is preferred
with respect to the payment of dividends,  or as to the  distribution  of assets
upon any voluntary or  involuntary  liquidation  or  dissolution of such Person,
over shares of Capital Stock of any other class of such Person.

                                       31
<PAGE>

     "Preliminary  Reserve"  means (a) during the period from and  including the
Effective Date through and including the date that the Borrower  delivers to the
Agents and Lenders the financial statements required to be delivered pursuant to
Section  7.01(a)(i)  for the fiscal  quarter  ending  March 31, 2006 (the "First
Period Financial Statements"), a reserve in the amount of $5,000,000, (b) during
the period from but  excluding  the date that the  Borrower  delivers  the First
Period  Financial  Statements  through and  including the date that the Borrower
delivers to Agents and Lenders the financial statements required to be delivered
pursuant to Section  7.01(a)(i) for the fiscal quarter ending June 30, 2006 (the
"Second Period Financial Statements"), (A) a reserve in the amount of $3,500,000
if Consolidated  EBITDA during the period covered by the First Period  Financial
Statements  was  greater  than or equal to  $2,400,000,  or (B) a reserve in the
amount of $5,000,000 if Consolidated  EBITDA of the Parent and its  Subsidiaries
during the period covered by the First Period Financial Statements was less than
$2,400,000,  and (c)  during  the period  from but  excluding  the date that the
Borrower delivers the Second Period Financial  Statements  through and including
the Final Maturity Date, $0;  provided that if the Borrower is not in compliance
with the  financial  covenants  set  forth in  Section  7.03 on the date that it
delivers the Second Period Financial Statements,  the amount of the "Preliminary
Reserve"  will be the  amount of the  reserve  set  forth in clause  (b) of this
definition  until the first date that the  Borrower  delivers  to the Agents and
Lenders a certified  calculation of the financial covenants set forth in Section
7.03  pursuant  to  Section  7.01(a)(v)  which  shows  that the  Borrower  is in
compliance with such financial covenants.

     "Prohibited Preferred Stock" means any Preferred Stock that by its terms is
mandatorily redeemable or subject to any other payment obligation (including any
obligation to pay dividends,  other than dividends of shares of Preferred  Stock
of the same class and series  payable in kind or  dividends  of shares of common
stock) on or before a date that is less than 6 months  after the Final  Maturity
Date,  or,  on or before  the date  that is less  than 6 months  after the Final
Maturity  Date, is  redeemable  at the option of the holder  thereof for cash or
assets or securities  (other than  distributions  in kind of shares of Preferred
Stock of the same class and series or of shares of common stock).

     "property"  means  any  right or  interest  in or to  property  of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.

     "Pro Rata Share" means:

     (a) with  respect to a Lender's  obligation  to make  Revolving  Loans,  to
participate  in Letters of Credit,  and to reimburse the L/C Issuer with respect
to Letters of Credit,  and right to receive  payments  of  interest,  fees,  and
principal with respect  thereto,  the  percentage  obtained by dividing (i) such
Lender's  Revolving  Credit  Commitment,  by (ii)  the  Total  Revolving  Credit
Commitment,  provided,  that, if the Total Revolving Credit  Commitment has been
reduced to zero, the numerator shall be the aggregate unpaid principal amount of
such  Lender's  Revolving  Loans  and  its  interest  in the  Letter  of  Credit
Obligations and the denominator  shall be the aggregate  unpaid principal amount
of all Revolving Loans and Letter of Credit Obligations,

     (b) with respect to a Lender's  obligation  to make the Term Loan and right
to receive payments of interest,  fees, and principal with respect thereto,  the
percentage obtained by dividing (i) such Lender's Term Loan Commitment,  by (ii)

                                       32
<PAGE>

the Total Term Loan Commitment,  provided that if the Total Term Loan Commitment
has been reduced to zero, the numerator shall be the aggregate  unpaid principal
amount of such Lender's  portion of the Term Loan and the  denominator  shall be
the aggregate unpaid principal amount of the Term Loan, and

     (c) with  respect  to all  other  matters  (including  the  indemnification
obligations  arising under Section 10.05),  the percentage  obtained by dividing
(i)  the  sum of such  Lender's  Revolving  Credit  Commitment  and  the  unpaid
principal  amount of such Lender's  portion of the Term Loan, by (ii) the sum of
the Total Revolving Credit  Commitment and the aggregate unpaid principal amount
of the Term Loan,  provided,  that, if such Lender's Revolving Credit Commitment
shall have been reduced to zero, such Lender's Revolving Credit Commitment shall
be deemed to be the aggregate unpaid principal amount of such Lender's Revolving
Loans and its  interest  in the  Letter of Credit  Obligations  and if the Total
Revolving Credit Commitment shall have been reduced to zero, the Total Revolving
Credit Commitment shall be deemed to be the aggregate unpaid principal amount of
all Revolving Loans and Letter of Credit Obligations.

     "Qualified  Cash"  means,  as of any date of  determination,  the amount of
unrestricted cash and Cash Equivalents of the Borrower and its Subsidiaries that
is subject to a control  agreement in favor of Collateral  Agent, upon which the
Collateral  Agent has a perfected  first  priority  Lien, and that is on deposit
with banks,  or in securities  accounts with securities  intermediaries,  or any
combination thereof.

     "Rating Agencies" has the meaning specified therefor in Section 2.07.

     "Reference  Bank" means  JPMorgan  Chase Bank,  N.A., its successors or any
other  commercial  bank designated by the  Administrative  Agent to the Borrower
from time to time.

     "Reference  Rate"  means the rate of  interest  publicly  announced  by the
Reference  Bank in New York,  New York from time to time as its reference  rate,
base rate or prime rate;  provided,  however,  that the Reference  Rate shall be
subject to a minimum rate of 7.0 percentage points per annum, and,  accordingly,
to the  extent  that  the  Reference  Rate on any day  would  be less  than  the
foregoing  minimum rate, the Reference Rate hereunder for such day automatically
shall be deemed increased to such minimum rate. The reference rate, base rate or
prime rate is determined  from time to time by the Reference  Bank as a means of
pricing some loans to its  Borrower and neither is tied to any external  rate of
interest or index nor necessarily  reflects the lowest rate of interest actually
charged by the Reference Bank to any particular  class or category of customers.
Subject to the minimum rate for the Reference Rate described in this definition,
each change in the Reference Rate shall be effective from and including the date
such change is publicly announced as being effective.

     "Reference Rate Loan" means a Loan that bears interest at a rate determined
by reference to the Reference Rate.

     "Register" has the meaning specified therefor in Section 12.07(d).

     "Registered Loan" has the meaning specified therefore in Section 12.07(d).

                                       33
<PAGE>

     "Regulation  T",  "Regulation  U" and  "Regulation  X" mean,  respectively,
Regulations T, U and X of the Board or any successor, as the same may be amended
or supplemented from time to time.

     "Reimbursement  Obligations"  means  the  obligation  of  the  Borrower  to
reimburse  the  Administrative  Agent or any Lender for  amounts  payable by the
Administrative  Agent or any Lender under a Letter of Credit Guaranty in respect
of any drawing made under any Letter of Credit,  together with interest  thereon
as provided in Section 2.04.

     "Reinvestment  Eligible Funds" means (a) Net Cash Proceeds  which,  but for
the application of Section  2.05(d)(iv),  would be required to be used to prepay
the  Loans  pursuant  to  Section  2.05(c)(vi)  or  (b)  Extraordinary  Receipts
consisting  of insurance or  condemnation  proceeds  paid as the result of loss,
destruction,   casualty,  condemnation  or  expropriation  which,  but  for  the
application of Section  2.05(d)(iv),  would be required to be used to prepay the
Loans pursuant to Section 2.05(c)(viii).

     "Reinvestment  Notice"  has the  meaning  specified  therefore  in  Section
2.05(d).

     "Related Fund" means a fund,  money market account,  investment  account or
other  account  managed  by a  Lender  or an  Affiliate  of such  Lender  or its
investment manager.

     "Related Party  Assignment" has the meaning  specified  therefor in Section
12.07(b).

     "Related  Party  Register" has the meaning  specified  therefore in Section
12.07(d).

     "Release"  means  any  spilling,   leaking,  pumping,  pouring,   emitting,
emptying,  discharging,   injecting,  escaping,  leaching,  seeping,  migrating,
dumping or disposing of any Hazardous  Material  (including  the  abandonment or
discarding of barrels,  containers and other closed  receptacles  containing any
Hazardous  Material)  into the  indoor or  outdoor  environment,  including  the
movement of Hazardous  Materials through or in the ambient air, soil, surface or
ground water, or property.

     "Remedial  Action"  means,  with  respect  to  the  presence  of  Hazardous
Materials at concentrations  exceeding those allowed by Environmental  Laws, all
actions  taken to (i) clean up,  remove,  remediate,  contain,  treat,  monitor,
assess,  evaluate  or in  any  other  way  address  Hazardous  Materials  in the
environment;  (ii)  prevent  or  minimize  a Release  or  threatened  Release of
Hazardous  Materials  so they do not migrate or endanger or threaten to endanger
public health or welfare or the environment;  (iii) perform pre-remedial studies
and investigations and post-remedial  operation and maintenance  activities;  or
(iv) any other actions authorized by 42 U.S.C. ss. 9601.

     "Reportable Event" means an event described in Section 4043 of ERISA (other
than an event not subject to the  provision  for 30-day notice to the PBGC under
the regulations promulgated under such Section).

     "Required Lenders" means  collectively,  (a) the Required Revolving Lenders
and (b) the Required Term Loan Lenders.

                                       34
<PAGE>

     "Required   Revolving   Lenders"   means  Lenders  whose  Pro  Rata  Shares
(calculated under clause (a) of the definition thereof) aggregate more than 50%.

     "Required   Term  Loan  Lenders"   means  Lenders  whose  Pro  Rata  Shares
(calculated under clause (b) of the definition thereof) aggregate more than 50%.

     "Reserve  Percentage"  means,  on any  day,  for any  Lender,  the  maximum
percentage prescribed by the Board (or any successor Governmental Authority) for
determining  the  reserve  requirements  (including  any  basic,   supplemental,
marginal, or emergency reserves) that are in effect on such date with respect to
eurocurrency  funding (currently  referred to as "eurocurrency  liabilities") of
that Lender.

     "Revolving  Credit  Commitment"  means,  with respect to each  Lender,  the
commitment of such Lender to make Revolving  Loans to the Borrower in the amount
set forth opposite such Lender's name in Schedule R-1 hereto, as such amount may
be terminated or reduced from time to time in accordance  with the terms of this
Agreement.

     "Revolving Loan" and "Revolving Loans" have the meaning specified  therefor
in Section 2.01(a)(i).

     "Revolving Loan Lender" means a Lender with a Revolving Credit Commitment.

     "Revolving  Loan  Obligations"  means any  Obligations  with respect to the
Revolving Loans (including the principal thereof,  the interest thereon, and the
fees and expenses specifically related thereto).

     "SEC" means the Securities and Exchange  Commission or any other similar or
successor agency of the Federal government administering the Securities Act.

     "Second  Test  Period"  means  the  period  ended  on the  last  day of the
applicable Person's second fiscal quarter ended after the Effective Date.

     "Securities  Act" means the  Securities  Act of 1933,  as  amended,  or any
similar  Federal  statute,  and the rules and regulations of the SEC thereunder,
all as the same shall be in effect from time to time.

     "Securities Account" means a securities account (as that term is defined in
the Code).

     "Securitization" has the meaning specified therefor in Section 2.07.

     "Securitization  Parties"  has the  meaning  specified  therefor in Section
2.07.

     "Security  Agreement"  means a Security  Agreement,  in form and  substance
reasonably  satisfactory  to the  Agents,  made by a Loan  Party in favor of the
Collateral  Agent for the benefit of the Agents and the  Lenders,  securing  the
Obligations and delivered to the Collateral Agent.

                                       35
<PAGE>

     "Senior  Convertible Notes" means the 10% Senior Convertible Notes due 2011
issued by the Parent  pursuant to the Indenture  for the 10% Senior  Convertible
Notes.

     "Senior  Notes"  means the 11% Senior  Notes due 2011  issued by the Parent
pursuant to the Indenture for the 11% Senior Notes.

     "Series  A  Preferred  Stock"  means  the 9%  senior  series A  convertible
participating Preferred Stock of the Parent.

     "Series B  Preferred  Stock"  means  the 10%  senior  series B  convertible
participating Preferred Stock of the Parent.

     "Settlement   Period"  has  the  meaning  specified   therefor  in  Section
2.02(d)(i) hereof.

     "Solvent"  means,  with respect to any Person on a particular date, that on
such date (a) such  Person is able to realize  upon its assets and pay its debts
and other  liabilities,  contingent  obligations  and other  commitments as they
mature in the normal course of business, (b) such Person does not intend to, and
does not believe that it will,  incur debts or liabilities  beyond such Person's
ability to pay as such debts and liabilities  mature, and (c) such Person is not
engaged in business or a transaction,  and is not about to engage in business or
a transaction,  for which such Person's  property would constitute  unreasonably
small capital.

     "Standard & Poor's" means Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc. and any successor thereto.

     "Subordinated  Debt" means  Indebtedness of the Parent that is on terms and
conditions  (including  payment  terms,  interest  rates,  covenants,  remedies,
defaults and other material  terms)  reasonably  satisfactory  to the Agents and
which has been expressly subordinated in right of payment to all Indebtedness of
the  Parent  under  the  Loan  Documents  by the  execution  and  delivery  of a
subordination  agreement,  in form and substance reasonably  satisfactory to the
Agents.

     "Subsidiary"   means,   with  respect  to  any  Person  at  any  date,  any
corporation,  limited or general partnership,  limited liability company, trust,
estate, association,  joint venture or other business entity (i) the accounts of
which  would  be  consolidated  with  those  of such  Person  in  such  Person's
consolidated  financial statements if such financial statements were prepared in
accordance  with  GAAP or (ii) of which  more  than  50% of (A) the  outstanding
Capital Stock having (in the absence of contingencies)  ordinary voting power to
elect a  majority  of the  board of  directors  or other  managing  body of such
Person,  (B) in the case of a  partnership  or limited  liability  company,  the
interest  in the  capital or profits of such  partnership  or limited  liability
company, or (C) in the case of a trust,  estate,  association,  joint venture or
other entity,  the  beneficial  interest in such trust,  estate,  association or
other entity  business  is, at the time of  determination,  owned or  controlled
directly or indirectly through one or more intermediaries, by such Person.

     "Supervalu  Receivables"  means Accounts  Receivables  owing from Supervalu
Inc. with a due date no later than 120 days after the invoice date.

                                       36
<PAGE>

     "Taxes" has the meaning specified therefor in Section 2.08(a).

     "Term Loan" has the meaning specified therefor in Section 2.01(a)(ii).

     "Term Loan Commitment"  means, with respect to each Lender,  the commitment
of such  Lender  to make its  portion  of the Term Loan to the  Borrower  in the
amount  set forth in  Schedule  R-1  hereto,  as the same may be  terminated  or
reduced from time to time in accordance with the terms of this Agreement.

     "Term Loan Lender" means a Lender with a Term Loan Commitment.

     "Term Loan Obligations" means any Obligations with respect to the Term Loan
(including  the  principal  thereof,  the  interest  thereon,  and the  fees and
expenses specifically related thereto).

     "Termination  Event"  means (i) a  Reportable  Event  with  respect  to any
Employee  Plan,  (ii) any event  that  causes any Loan Party or any of its ERISA
Affiliates to incur  liability  under Section 409,  502(i),  502(l),  515, 4062,
4063,  4064,  4069,  4201,  4204 or 4212 of ERISA or Section 4971 or 4975 of the
IRC, (iii) the filing of a notice of intent to terminate an Employee Plan or the
treatment of an Employee Plan  amendment as a termination  under Section 4041 of
ERISA,  (iv) the institution of proceedings by the PBGC to terminate an Employee
Plan, or (v) any other event or condition which might  constitute  grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Employee Plan.

     "Third  Test  Period"  means  the  period  ended  on  the  last  day of the
applicable Person's third fiscal quarter ended after the Effective Date.

     "Title  Insurance  Policy"  means a  mortgagee's  loan policy,  in form and
substance  satisfactory to the Collateral Agent,  together with all endorsements
made from  time to time  thereto,  issued  by or on behalf of a title  insurance
company  satisfactory  to the Collateral  Agent,  insuring the Lien created by a
Mortgage in an amount and on terms satisfactory to the Agents,  delivered to the
Collateral Agent.

     "Total  Commitment"  means the sum of the Total Revolving Credit Commitment
and the Total Term Loan Commitment.

     "Total  Revolving  Credit  Commitment"  means the sum of the amounts of the
Lenders'  Revolving  Credit  Commitments,  which amount is $20,000,000 as of the
Effective Date.

     "Total Term Loan  Commitment"  means the sum of the amounts of the Lenders'
Term Loan Commitments, which amount is $25,000,000 as of the Effective Date.

     "Toys R Us Receivables"  means Accounts  Receivables  owing from Toys R Us,
Inc. with a due date no later than 75 days after the invoice date.

     "Transferee" has the meaning specified therefor in Section 2.08(a).

                                       37
<PAGE>

     "TTM EBITDA" means, as of any date of  determination  and with respect to a
Person,  the Consolidated  EBITDA of such Person and its Subsidiaries for the 12
month period most recently ended; provided, however, that (a) in the case of the
First Test Period, TTM EBITDA shall be calculated as the Consolidated  EBITDA of
such Person and its  Subsidiaries  for the period from and after January 1, 2006
up to and including  the last day of the First Test Period,  times 4, (b) in the
case  of  the  Second  Test  Period,  TTM  EBITDA  shall  be  calculated  as the
Consolidated  EBITDA of such Person and its Subsidiaries for the period from and
after  January  1,  2006 up to and  including  the last day of the  Second  Test
Period,  times 2, (c) in the case of the Third Test Period,  TTM EBITDA shall be
calculated as the  Consolidated  EBITDA of such Person and its  Subsidiaries for
the period from and after  January 1, 2006 up to and  including  the last day of
the Third Test Period, times 1.3333.

     "UK  Subsidiaries"  means Tamebond  Limited,  a company organized under the
laws of the United Kingdom and PRG-Schultz UK Ltd, a company organized under the
laws of the United Kingdom.

     "U.S.  Retail Key Client  Claim  Retention  Rate"  means the sum of (a) the
net-approved claims of U.S. Retail Key Clients that are in the Claims Management
System as of most recent fiscal quarter and (b) changes to  work-in-process  for
U.S. Retail Key Clients for such fiscal quarter,  divided by the gross claims of
U.S. Retail Key Clients that are in the Claims Management System produced during
such fiscal quarter.

     "U.S.  Retail  Key  Client  Effective  Fee Rate"  means,  as of any date of
determination,  the revenue of the Borrower and the Domestic  Guarantors  (other
than the PR  Partnership)  from the U.S.  Retail Key Clients for the most recent
fiscal  quarter as determined in  accordance  with GAAP divided by  net-approved
claims of U.S. Retail Key Clients that are in the Claims  Management  System for
such fiscal quarter.

     "U.S.  Retail Key Client  WIP" means the claims of U.S.  Retail Key Clients
that are in the Claims  Management  System not yet approved for  invoicing,  but
presented to the client or vendor awaiting  approval;  provided that U.S. Retail
Key  Client WIP shall not  include  any claim (a) that is more than 6 months old
(determined  from the date that the payment  giving rise to the claim was made),
(b) that is in an amount less than $1,000.

     "U.S. Retail Key Clients" means, as of any date of  determination,  the top
40 United  States  retail  clients of the Borrower  and the Domestic  Guarantors
(other than the PR Partnership)  based on revenue recognized by the Borrower and
the Domestic  Guarantors  (other than the PR Partnership) for the 12 months most
recently  ended  (not  including  (a) any client  that has filed a petition  for
bankruptcy  or any  other  relief  under  the  Bankruptcy  Code or any other law
relating to bankruptcy, insolvency, reorganization or relief of debtors, made an
assignment  for the benefit of  creditors,  had filed  again it any  petition or
other application for relief under the Bankruptcy Code or any such other law, or
(b)  clients  that are the  United  States or any other  Governmental  Authority
(unless all steps required by the Administrative Agent in connection  therewith,
including notice to the United States Government under the Federal Assignment of
Claims Act or any  action  under any state  statute  comparable  to the  Federal
Assignment of Claims Act, have been duly taken in a manner  satisfactory  to the
Administrative  Agent;  provided  that  from  the  Effective  Date  through  and
including the date that is 120 days after the Effective  Date,  U.S.  Retail Key

                                       38
<PAGE>

Client WIP of the Army & Air Force Exchange in an aggregate amount not to exceed
$250,000 (when  aggregated with any Accounts  Receivable of the Army & Air Force
Exchange  that are not  ineligible  because of the  proviso in clause (g) of the
definition of "Eligible Accounts Receivable") shall not be ineligible under this
clause (b) regardless of whether all steps required by the Administrative  Agent
to be taken  under the  Federal  Assignment  of Claims Act or any state  statute
comparable to the Federal Assignment of Claims Act have been taken).

     "Wal Mart  Holdback  Receivables"  means  Accounts  Receivable  owing  from
Wal-Mart  Stores,  Inc.  equal to  $217,000  due in the  fiscal  quarter  ending
September 30, 2006 and $24,000 due in the fiscal  quarter  ending  September 30,
2007.

     "WARN" has the meaning specified therefor in Section 6.01(z).

     "Working  Investment" means, at any date of determination  thereof, (i) the
sum, for any Person and its  Subsidiaries,  of (A) the unpaid face amount of all
Accounts  Receivable  of such  Person  and its  Subsidiaries  as at such date of
determination,  plus (B) the aggregate amount of prepaid expenses of such Person
and its Subsidiaries as at such date of  determination,  minus (ii) the sum, for
such  Person  and its  Subsidiaries,  of (A) the unpaid  amount of all  accounts
payable of such Person and its  Subsidiaries  as at such date of  determination,
plus (B) the  aggregate  amount of all  accrued  expenses of such Person and its
Subsidiaries as at such date of determination  (including deferred compensation,
but,  excluding from accounts payable and accrued expenses,  the current portion
of long-term debt and all accrued interest and taxes).

     Section 1.02 Terms  Generally.  The definitions of terms herein shall apply
equally to the  singular  and plural  forms of the terms  defined.  Whenever the
context may require,  any pronoun  shall  include the  corresponding  masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without  limitation,"  whether or not so
expressly  stated in each such  instance  and the term  "or" has,  except  where
otherwise  indicated,  the inclusive meaning represented by the phrase "and/or."
The word "will"  shall be  construed  to have the same meaning and effect as the
word "shall." Unless the context  requires  otherwise,  (a) any definition of or
reference  to any  agreement,  instrument  or  other  document  herein  shall be
construed as referring to such  agreement,  instrument or other document as from
time to time amended,  restated,  supplemented or otherwise modified (subject to
any restrictions on such amendments, restatements,  supplements or modifications
set forth herein),  (b) any reference herein to any Person shall be construed to
include such Person's  successors and assigns,  (c) the words "herein," "hereof"
and  "hereunder,"  and words of similar  import,  shall be construed to refer to
this Agreement in its entirety and not to any particular  provision hereof,  (d)
all references  herein to Articles,  Sections,  Exhibits and Schedules  shall be
construed to refer to Articles and Sections of, and Exhibits and  Schedules  to,
this  Agreement and (e) the words "asset" and  "property"  shall be construed to
have the same  meaning  and  effect  and to  refer to any and all  tangible  and
intangible  assets and  properties,  including  cash,  securities,  accounts and
contract rights.  References in this Agreement to  "determination"  by any Agent
include  estimates  honestly  made by such  Agent  (in the case of  quantitative
determinations)  and  beliefs  honestly  held by  such  Agent  (in  the  case of
qualitative determinations).

                                       39
<PAGE>

     Section  1.03  Accounting  and  Other  Terms.  Unless  otherwise  expressly
provided  herein,  each accounting term used herein shall have the meaning given
it under GAAP. All terms used in this  Agreement  which are defined in Article 8
or Article 9 of the Code and which are not otherwise  defined  herein shall have
the same meanings herein as set forth therein.

     Section  1.04 Time  References.  Unless  otherwise  indicated  herein,  all
references  to time of day refer to Eastern  Standard  Time or Eastern  daylight
saving  time,  as in effect in New York City on such day.  For  purposes  of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and  including"  and the words "to" and "until" each
means "to but excluding," provided,  however, that with respect to a computation
of fees or interest  payable to any Agent,  any Lender or the L/C  Issuer,  such
period shall in any event  consist of at least one full day. When the payment of
any obligation or the performance of any covenant,  duty or obligation is stated
to be due on a day  that  is not a  Business  Day  or  delivery  of any  notice,
document, certificate or other writing is stated to be required on a day that is
not a Business  Day,  the date of such  payment  (other than as described in the
definition of "Interest  Period"),  performance  or delivery shall extend to the
immediately succeeding Business Day.

                                   ARTICLE II

                                    THE LOANS

     Section 2.01 Commitments.

     (a)   Subject  to  the  terms  and   conditions   and   relying   upon  the
representations and warranties herein set forth:

     (i) each  Revolving  Loan Lender  severally  agrees to make loans (each,  a
"Revolving Loan" and,  collectively,  the "Revolving  Loans") to the Borrower at
any time and from time to time  from the  Effective  Date to the Final  Maturity
Date, or until the earlier  reduction of its Revolving Credit Commitment to zero
in  accordance  with the  terms  hereof,  in an  aggregate  principal  amount of
Revolving  Loans at any time  outstanding  not to exceed  the  lesser of (A) the
amount of such Lender's Revolving Credit Commitment,  and (B) the amount of such
Lender's Pro Rata Share of the then extant Borrowing Base; and

     (ii)  each  Term  Loan  Lender   severally  agrees  to  make  a  term  loan
(collectively,  the "Term Loan") to the Borrower on the  Effective  Date,  in an
aggregate  principal  amount  equal to the  amount  of such  Lender's  Term Loan
Commitment.

     (b) Notwithstanding the foregoing:

     (i) The aggregate  principal  amount of Revolving Loans  outstanding at any
time to the Borrower  shall not exceed the lower of (A) the  difference  between
(x) the Total Revolving Credit Commitment and (y) the aggregate Letter of Credit
Obligations and (B) the difference  between (x) the then current  Borrowing Base
and (y) the  aggregate  Letter  of  Credit  Obligations.  The  Revolving  Credit
Commitment of each Lender shall automatically and permanently be reduced to zero
on the Final  Maturity  Date.  Within the  foregoing  limits,  the  Borrower may
borrow,  repay and reborrow the Revolving  Loans, on or after the Effective Date
and prior to the Final  Maturity  Date,  subject  to the terms,  provisions  and
limitations set forth herein.

                                       40
<PAGE>

     (ii) The aggregate  principal amount of the Term Loan made on the Effective
Date shall not exceed the Total Term Loan  Commitment.  Any principal  amount of
the Term Loan that is repaid or prepaid may not be reborrowed.

     Section 2.02 Making the Loans.

     (a) The  Borrower  shall give the  Administrative  Agent  prior  telephonic
notice  (immediately  confirmed in writing, in substantially the form of Exhibit
2.01(b)(ii)  hereto (a "Notice of Borrowing")),  (i) in the case of a LIBOR Rate
Loan,  not later  than  12:00  noon  (New York City  time) on the date that is 3
Business Days prior to the date of the proposed Loan (or such shorter  period as
the Administrative Agent is willing, in its sole discretion, to accommodate from
time to time),  or (ii) in the case of a  Reference  Rate  Loan,  not later than
12:00 noon (New York City  time) on the of the  proposed  Loan (or such  shorter
period  as the  Administrative  Agent is  willing,  in its sole  discretion,  to
accommodate  from time to time).  Such Notice of Borrowing shall specify (A) the
principal  amount of the proposed  Loan,  and (B) the proposed  borrowing  date,
which must be a Business Day,  and,  with respect to the Term Loan,  must be the
Effective  Date, (C) whether the proposed Loan is to be a Reference Rate Loan or
a LIBOR  Rate  Loan,  and (D) in the  case of a LIBOR  Rate  Loan,  the  initial
Interest Period to be applicable  thereto,  which shall be a period contemplated
by the definition of the term "Interest  Period".  If no election as to the type
of Loan is specified, then the requested Loan shall be a Reference Rate Loan. If
no Interest  Period is specified with respect to any requested  LIBOR Rate Loan,
then the  Borrower  shall be deemed to have  selected an Interest  Period of one
month's  duration.  The  Administrative  Agent and the  Lenders  may act without
liability upon the basis of written, telecopied or telephonic notice believed by
the  Administrative  Agent in good  faith to be from the  Borrower  (or from any
Authorized Officer thereof  designated in writing  purportedly from the Borrower
to the  Administrative  Agent).  The Borrower hereby waives the right to dispute
the Administrative  Agent's record of the terms of any such telephonic Notice of
Borrowing.  The  Administrative  Agent and each Lender shall be entitled to rely
conclusively on any Authorized  Officer's  authority to request a Loan on behalf
of the Borrower until the  Administrative  Agent receives  written notice to the
contrary.  The Administrative Agent and the Lenders shall have no duty to verify
the authenticity of the signature appearing on any written Notice of Borrowing.

     (b) Each  Notice  of  Borrowing  pursuant  to this  Section  2.02  shall be
irrevocable  and the Borrower  shall be bound to make a borrowing in  accordance
therewith.  Except for Revolving Loans deemed made pursuant to Section  3.01(c),
each  Revolving  Loan shall be made in a minimum amount of $100,000 and shall be
in integral multiples of $100,000 in excess thereof.

     (c) (i) Except as  otherwise  provided in this Section  2.02(c),  all Loans
under  this  Agreement  shall  be  made  by  the  Lenders   simultaneously   and
proportionately  to  their  Pro  Rata  Shares  of  the  Total  Revolving  Credit
Commitment  and the  Total  Term Loan  Commitment,  as the case may be, it being
understood  that no Lender  shall be  responsible  for any  default by any other
Lender in that other Lender's  obligations  to make a Loan requested  hereunder,

                                       41
<PAGE>

nor shall the  Commitment of any Lender be increased or decreased as a result of
the default by any other Lender in that other Lender's obligation to make a Loan
requested  hereunder,  and each  Lender  shall be  obligated  to make the  Loans
required  to be made by it by the  terms  of this  Agreement  regardless  of the
failure by any other Lender.

     (ii) Notwithstanding any other provision of this Agreement, and in order to
reduce  the  number of fund  transfers  among the  Borrower,  the Agents and the
Lenders, the Borrower,  the Agents and the Lenders agree that the Administrative
Agent may (but shall not be  obligated  to),  and the  Borrower  and the Lenders
hereby irrevocably authorize the Administrative Agent to, fund, on behalf of the
Lenders with a Revolving Credit Commitment,  Revolving Loans pursuant to Section
2.01,  subject to the procedures  for  settlement set forth in Section  2.02(d);
provided,  however, that (a) the Administrative Agent shall in no event fund any
such Revolving  Loans if the  Administrative  Agent shall have received  written
notice from the  Collateral  Agent or the Required  Lenders prior to the time of
the  proposed  Revolving  Loan  that  one or  more of the  conditions  precedent
contained  in Section  5.02 will not be  satisfied  at the time of the  proposed
Revolving Loan, and (b) the Administrative Agent shall not otherwise be required
to determine that, or take notice whether,  the conditions  precedent in Section
5.02 have been satisfied. If the Borrower gives a Notice of Borrowing requesting
a Revolving Loan and the Administrative  Agent elects not to fund such Revolving
Loan on behalf of the Revolving Loan Lenders, then promptly after receipt of the
Notice of Borrowing  requesting  such Revolving Loan, the  Administrative  Agent
shall  notify each  Revolving  Loan  Lender of the  specifics  of the  requested
Revolving Loan and that it will not fund the requested  Revolving Loan on behalf
of  the  Revolving  Loan  Lenders.  If the  Administrative  Agent  notifies  the
Revolving  Loan  Lenders  that it will not fund a  requested  Revolving  Loan on
behalf of such Revolving Loan Lenders, each Revolving Loan Lender shall make its
Pro Rata Share of the Revolving Loan available to the  Administrative  Agent, in
immediately  available funds, at the Payment Office no later than 3:00 p.m. (New
York City time) (provided that the  Administrative  Agent requests  payment from
such Revolving Loan Lender not later than 1:00 p.m. (New York City time)) on the
date of the proposed  Revolving  Loan.  The  Administrative  Agent will make the
proceeds of such  Revolving  Loans  available  to the Borrower on the day of the
proposed  Revolving Loan by causing an amount,  in immediately  available funds,
equal to the proceeds of all such Revolving Loans received by the Administrative
Agent at the Payment Office or the amount funded by the Administrative  Agent on
behalf of the Revolving Loan Lenders to be deposited in an account designated by
the Borrower.

     (iii) If the  Administrative  Agent has notified the Revolving Loan Lenders
that the  Administrative  Agent, on behalf of such Revolving Loan Lenders,  will
fund  a  particular  Revolving  Loan  pursuant  to  Section   2.02(c)(ii),   the
Administrative  Agent may assume that each such  Revolving  Loan Lender has made
such  amount  available  to  the  Administrative  Agent  on  such  day  and  the
Administrative  Agent, in its sole  discretion,  may, but shall not be obligated
to, cause a  corresponding  amount to be made  available to the Borrower on such
day. If the Administrative  Agent makes such  corresponding  amount available to
the Borrower and such corresponding  amount is not in fact made available to the
Administrative Agent by any such Revolving Loan Lender, the Administrative Agent
shall be  entitled  to recover  such  corresponding  amount on demand  from such
Revolving Loan Lender together with interest thereon, for each day from the date
such  payment was due until the date such  amount is paid to the  Administrative
Agent,  at the  Federal  Funds Rate for 3 Business  Days and  thereafter  at the

                                       42
<PAGE>

Reference  Rate.  During the period in which such  Revolving Loan Lender has not
paid such  corresponding  amount to the  Administrative  Agent,  notwithstanding
anything to the contrary contained in this Agreement or any other Loan Document,
the amount so advanced by the  Administrative  Agent to the Borrower shall,  for
all purposes hereof,  be a Revolving Loan made by the  Administrative  Agent for
its own  account.  Upon any such  failure by a Revolving  Loan Lender to pay the
Administrative  Agent, the Administrative Agent shall promptly thereafter notify
the  Borrower  of such  failure  and the  Borrower  shall  immediately  pay such
corresponding amount to the Administrative Agent for its own account.

     (iv)  Nothing  in this  Section  2.02(c)  shall be  deemed to  relieve  any
Revolving  Loan Lender from its  obligations  to fulfill  its  Revolving  Credit
Commitment hereunder or to prejudice any rights that the Administrative Agent or
the  Borrower  may have  against  any  Revolving  Loan Lender as a result of any
default by such Revolving Loan Lender hereunder.

     (d) (i) With respect to all periods for which the Administrative  Agent has
funded Revolving Loans pursuant to Section  2.02(c),  on Wednesday of each week,
or if the  applicable  Wednesday is not a Business  Day,  then on the  following
Business Day, or such shorter period as the  Administrative  Agent may from time
to  time  select  (any  such  week or  shorter  period  being  herein  called  a
"Settlement Period"),  the Administrative Agent shall notify each Revolving Loan
Lender of the unpaid principal  amount of the Revolving Loans  outstanding as of
the last day of each such  Settlement  Period.  In the event that such amount is
greater than the unpaid principal  amount of the Revolving Loans  outstanding on
the last day of the Settlement  Period  immediately  preceding  such  Settlement
Period (or, if there has been no preceding  Settlement Period, the amount of the
Revolving  Loans  made on the  date  of such  Revolving  Loan  Lender's  initial
funding),  each Revolving Loan Lender shall promptly (and in any event not later
than 2:00 p.m. (New York City time) if the Administrative Agent requests payment
from such  Lender  not later  than  12:00 noon (New York City time) on such day)
make available to the Administrative  Agent its Pro Rata Share of the difference
in immediately  available funds. In the event that such amount is less than such
unpaid principal  amount,  the  Administrative  Agent shall promptly pay over to
each  Revolving  Loan Lender its Pro Rata Share of the difference in immediately
available funds. In addition,  if the  Administrative  Agent shall so request at
any time  when a Default  or an Event of  Default  shall  have  occurred  and be
continuing,  or any other  event  shall have  occurred  as a result of which the
Administrative  Agent shall  determine  that it is desirable  to present  claims
against the Borrower for  repayment,  each  Revolving Loan Lender shall promptly
remit to the  Administrative  Agent or, as the case may be,  the  Administrative
Agent shall promptly remit to each  Revolving Loan Lender,  sufficient  funds to
adjust the  interests  of the  Revolving  Loan  Lenders in the then  outstanding
Revolving Loans to such an extent that,  after giving effect to such adjustment,
each such Revolving  Loan Lender's  interest in the then  outstanding  Revolving
Loans  will be equal to its Pro  Rata  Share  thereof.  The  obligations  of the
Administrative  Agent and each Revolving Loan Lender under this Section  2.02(d)
shall be absolute and  unconditional.  Each  Revolving Loan Lender shall only be
entitled to receive  interest on its Pro Rata Share of the Revolving Loans which
have been funded by such Revolving Loan Lender.

     (ii) In the event that any Revolving  Loan Lender fails to make any payment
required  to be made by it pursuant to Section  2.02(d)(i),  the  Administrative
Agent shall be entitled to recover such corresponding amount on demand from such
Revolving Loan Lender together with interest thereon, for each day from the date
such  payment was due until the date such  amount is paid to the  Administrative

                                       43
<PAGE>

Agent,  at the  Federal  Funds Rate for 3 Business  Days and  thereafter  at the
Reference  Rate.  During the period in which such  Revolving Loan Lender has not
paid such  corresponding  amount to the  Administrative  Agent,  notwithstanding
anything to the contrary contained in this Agreement or any other Loan Document,
the amount so advanced by the  Administrative  Agent to the Borrower shall,  for
all purposes hereof,  be a Revolving Loan made by the  Administrative  Agent for
its own  account.  Upon any such  failure by a Revolving  Loan Lender to pay the
Administrative  Agent, the Administrative Agent shall promptly thereafter notify
the  Borrower  of such  failure  and the  Borrower  shall  immediately  pay such
corresponding amount to the Administrative Agent for its own account. Nothing in
this Section  2.02(d)(ii)  shall be deemed to relieve any Revolving  Loan Lender
from its obligation to fulfill its Revolving Credit  Commitment  hereunder or to
prejudice  any rights that the  Administrative  Agent or the  Borrower  may have
against any Revolving  Loan Lender as a result of any default by such  Revolving
Loan Lender hereunder.

     Section 2.03 Repayment of Loans; Evidence of Debt.

     (a) The  outstanding  principal  of all  Revolving  Loans  shall be due and
payable on the Final Maturity Date.

     (b) The  outstanding  principal  of the Term  Loan  shall be  repayable  in
consecutive  quarterly  installments,  on the first day of each January,  April,
July,  and October  commencing on April 1, 2007 and ending on the Final Maturity
Date, as follows:

        PAYMENT DATE                  AMOUNT
 ---------------------------- ----------------------
        April 1, 2007                 $250,000
 ---------------------------- ----------------------
        July 1, 2007                  $250,000
 ---------------------------- ----------------------
        October 1, 2007               $250,000
 ---------------------------- ----------------------
        January 1, 2008               $250,000
 ---------------------------- ----------------------
        April 1, 2008                 $500,000
 ---------------------------- ----------------------
        July 1, 2008                  $500,000
 ---------------------------- ----------------------
        October 1, 2008               $500,000
 ---------------------------- ----------------------
        January 1, 2009               $500,000
 ---------------------------- ----------------------
        April 1, 2009                 $500,000
 ---------------------------- ----------------------
        July 1, 2009                  $500,000
 ---------------------------- ----------------------
        October 1, 2009               $500,000
 ---------------------------- ----------------------
        January 1, 2010               $500,000
 ---------------------------- ----------------------

                                       44
<PAGE>

;  provided,  however,  that the last such  installment  shall be in the  amount
necessary  to repay in full the unpaid  principal  amount of the Term Loan.  The
outstanding principal of the Term Loan shall be repaid in full on the earlier of
(i) the termination of the Total Revolving Credit  Commitment and (ii) the Final
Maturity Date.

     (c) Each Lender shall  maintain in  accordance  with its usual  practice an
account or accounts  evidencing the  Indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

     (d) The  Administrative  Agent  shall  maintain  accounts in which it shall
record  (i) the  amount  of each  Loan made  hereunder,  (ii) the  amount of any
principal  or interest  due and  payable or to become due and  payable  from the
Borrower to each Lender  hereunder  and (iii) the amount of any sum  received by
the  Administrative  Agent  hereunder  for the  account of the  Lenders and each
Lender's share thereof.

     (e) The entries made in the accounts  maintained pursuant to paragraphs (c)
or (d) of this Section 2.03 shall be prima facie  evidence of the  existence and
amounts of the obligations  recorded  therein;  provided that the failure of any
Lender  or the  Administrative  Agent to  maintain  such  accounts  or any error
therein shall not in any manner  affect the  obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.

     (f)  Any  Lender  may  request  that  Loans  made by it be  evidenced  by a
promissory  note. In such event,  the Borrower shall execute and deliver to such
Lender a  promissory  note  payable to such  Lender (or,  if  requested  by such
Lender,  to such Lender and its  registered  assigns) in a form furnished by the
Collateral Agent and reasonably  satisfactory to the Borrower.  Thereafter,  the
Loans evidenced by such promissory note and interest  thereon shall at all times
(including after assignment  pursuant to Section 12.07) be represented by one or
more  promissory  notes in such form payable to the payee named  therein (or, if
such  promissory  note is a registered  note,  to such payee and its  registered
assigns).

     Section 2.04 Interest.

     (a)  Revolving  Loans.  Each  Revolving  Loan  shall bear  interest  on the
principal  amount thereof from time to time  outstanding,  from the date of such
Loan until such principal is repaid, as follows:  (i) if the relevant  Revolving
Loan is a LIBOR Rate Loan, at a rate per annum equal to the LIBOR Rate plus 3.75
percentage  points,  and  (ii)  otherwise,  at a rate  per  annum  equal  to the
Reference Rate plus 1.0 percentage point.

     (b) Term Loan.  The Term Loan shall bear interest on the  principal  amount
thereof from time to time  outstanding,  from the date of the making of the Term
Loan until such  principal  amount is repaid,  as follows:  (i) if the  relevant
portion of the Term Loan is a LIBOR Rate Loan,  at a rate per annum equal to the
LIBOR Rate plus 8.50 percentage points, and (ii) otherwise,  at a rate per annum
equal to the Reference Rate plus 5.50 percentage points.

     (c) Default  Interest and Fees.  To the extent  permitted by law,  upon the
occurrence  and  during  the  continuance  of an  Event of  Default,  (i) at the
election of the Required  Revolving Lenders (and written notice of such election
shall be given by such  Lenders to each  Agent),  the  principal  of, and unpaid
interest on, all Revolving  Loans shall bear interest,  from the date such Event
of Default  occurred  until the date such Event of Default is cured or waived in

                                       45
<PAGE>

writing in  accordance  herewith,  at all times during such period at a rate per
annum equal to the Post-Default  Rate with respect to the Revolving Loans,  (ii)
at the  election of the Required  Term Loan Lenders (and written  notice of such
election  shall be given by such Lenders to each Agent),  the  principal of, and
unpaid interest on, the Term Loan shall bear interest,  from the date such Event
of Default  occurred  until the date such Event of Default is cured or waived in
writing in  accordance  herewith,  at all times during such period at a rate per
annum equal to the Post-Default Rate with respect to the Term Loan, and (iii) at
the election of the  Required  Revolving  Lenders  (and  written  notice of such
election  shall be given by such  Lenders to each  Agent),  the Letter of Credit
Fees  shall be  increased  by 2.0  percentage  points  above the per annum  rate
otherwise applicable hereunder.

     (d) Interest  Payment Dates.  Interest on each Reference Rate Loan shall be
payable monthly, in arrears,  on the first day of each month,  commencing on the
first day of the  month  following  the month in which  such Loan is made and at
maturity (whether upon demand, by acceleration or otherwise).  Interest on LIBOR
Rate Loans shall be payable on the  earliest of (i) the last day of the Interest
Period  applicable  thereto,  (ii) the  occurrence  of an Event  of  Default  in
consequence of which the Required  Lenders or Collateral Agent on behalf thereof
elect to accelerate  the maturity of all or any portion of the  Obligations,  or
(iii)  termination of this Agreement  pursuant to the terms hereof.  Interest at
the Post-Default Rate shall be payable on demand. The Borrower hereby authorizes
the  Administrative  Agent to, and the  Administrative  Agent may,  from time to
time,  charge the Loan  Account  pursuant to Section 4.02 with the amount of any
interest payment due hereunder.

     (e) General.  All interest  shall be computed on the basis of a year of 360
days for the actual  number of days,  including  the first day but excluding the
last day, elapsed.

     (f) LIBOR Option.

     (i) LIBOR Election.  In lieu of having  interest  charged at the rate based
upon the Reference Rate, the Borrower shall have the option (the "LIBOR Option")
to have  interest  on all or a  portion  of the  Loans be  charged  at a rate of
interest based upon the LIBOR Rate. On the last day of each applicable  Interest
Period, unless the Borrower properly has exercised the LIBOR Option with respect
thereto,  the interest  rate  applicable  to such LIBOR Rate Loan  automatically
shall convert to the rate of interest then applicable to Reference Rate Loans of
the same type  hereunder.  At any time that an Event of Default has occurred and
is  continuing,  the  Borrower no longer  shall have the option to request  that
Loans bear  interest at the LIBOR Rate and  Administrative  Agent shall have the
right to convert the interest  rate on all  outstanding  LIBOR Rate Loans to the
rate then applicable to Reference Rate Loans hereunder.

     (A) The  Borrower  may,  at any time and from  time to time,  so long as no
Event of Default has  occurred  and is  continuing,  elect to exercise the LIBOR
Option by notifying  Administrative Agent prior to 12:00 noon (New York time) at
least 3 Business Days prior to the commencement of the proposed  Interest Period
(the "LIBOR  Deadline").  Notice of the Borrower's  election of the LIBOR Option
for a  permitted  portion of the Loans and an Interest  Period  pursuant to this

                                       46
<PAGE>

Section  shall be made by delivery  to  Administrative  Agent of a LIBOR  Notice
received by  Administrative  Agent before the LIBOR Deadline.  Promptly upon its
receipt of each such LIBOR  Notice,  Administrative  Agent shall  provide a copy
thereof to each of the  Lenders  having a  Commitment  of the type to which such
LIBOR Notice relates.

     (B) Each LIBOR Notice shall be irrevocable and binding on the Borrower.  In
connection with each LIBOR Rate Loan, the Borrower shall indemnify,  defend, and
hold  Administrative  Agent and the Lenders  harmless against any loss, cost, or
expense  incurred by  Administrative  Agent or any Lender as a result of (1) the
payment of any principal of any LIBOR Rate Loan other than on the last day of an
Interest  Period  applicable  thereto  (including  as a  result  of an  Event of
Default),  (2) the  conversion of any LIBOR Rate Loan other than on the last day
of the  Interest  Period  applicable  thereto,  or (3) the  failure  to  borrow,
convert,  continue  or prepay any LIBOR Rate Loan on the date  specified  in any
LIBOR Notice  delivered  pursuant  hereto (such  losses,  costs,  and  expenses,
collectively,   "Funding  Losses").   Funding  Losses  shall,  with  respect  to
Administrative  Agent or any Lender, be deemed to equal the amount determined by
Administrative  Agent or such Lender to be the excess, if any, of (x) the amount
of interest that would have accrued on the  principal  amount of such LIBOR Rate
Loan had such  event not  occurred,  at the  LIBOR  Rate  that  would  have been
applicable  thereto,  for the period from the date of such event to the last day
of the then current  Interest  Period  therefor (or, in the case of a failure to
borrow,  convert or  continue,  for the period that would have been the Interest
Period  therefor),  minus (y) the amount of interest  that would  accrue on such
principal amount for such period at the interest rate which Administrative Agent
or such Lender would be offered were it to be offered,  at the  commencement  of
such period,  Dollar  deposits of a  comparable  amount and period in the London
interbank market. A certificate of Administrative Agent or a Lender delivered to
the Borrower  setting forth any amount or amounts that  Administrative  Agent or
such Lender is entitled to receive  pursuant to this Section shall be conclusive
absent manifest error.

     (C) The  Borrower  shall have not more than 5 LIBOR Rate Loans in effect at
any given time.  The Borrower  only may exercise the LIBOR Option for LIBOR Rate
Loans of at least $500,000 and integral multiples of $100,000 in excess thereof.

     (ii)  Prepayments.  The  Borrower  may prepay LIBOR Rate Loans at any time;
provided,  however,  that in the event that LIBOR Rate Loans are  prepaid on any
date  that  is not the  last  day of the  Interest  Period  applicable  thereto,
including  as  a  result  of  any  automatic  prepayment  through  the  required
application  by  Administrative  Agent of proceeds of  Collections in accordance
with Section 4.04 or for any other reason,  including  early  termination of the
term of this Agreement or  acceleration of all or any portion of the Obligations
pursuant to the terms hereof,  the Borrower shall  indemnify,  defend,  and hold
Administrative Agent and the Lenders and their participants harmless against any
and all Funding Losses in accordance with subsection (ii) above.

                                       47
<PAGE>

     (iii) Special Provisions Applicable to LIBOR Rate.

     (A) The LIBOR Rate may be adjusted by Administrative  Agent with respect to
any  Lender  on a  prospective  basis to take into  account  any  additional  or
increased  costs to such  Lender of  maintaining  or  obtaining  any  eurodollar
deposits  or  increased  costs  due  to  changes  in  applicable  law  occurring
subsequent to the commencement of the then applicable Interest Period, including
changes in tax laws (except changes of general applicability in corporate income
tax  laws) and  changes  in the  reserve  requirements  imposed  by the Board of
Governors  of the  Federal  Reserve  System (or any  successor),  excluding  the
Reserve Percentage,  which additional or increased costs would increase the cost
of funding  loans  bearing  interest at the LIBOR Rate.  In any such event,  the
affected Lender shall give the Borrower and Administrative  Agent notice of such
a determination and adjustment and Administrative  Agent promptly shall transmit
the notice to each other  Lender  and,  upon its  receipt of the notice from the
affected Lender, the Borrower may, by notice to such affected Lender (1) require
such Lender to furnish to the Borrower a statement  setting  forth the basis for
adjusting  such LIBOR Rate and the  method  for  determining  the amount of such
adjustment,  or (2)  repay the LIBOR  Rate  Loans  with  respect  to which  such
adjustment  is made  (together  with any  amounts due under  subsection  (ii)(B)
above).

     (B) In  the  event  that  any  change  in  market  conditions  or any  law,
regulation, treaty, or directive, or any change therein or in the interpretation
of  application  thereof,  shall  at any time  after  the  date  hereof,  in the
reasonable  opinion of any  Lender,  make it unlawful  or  impractical  for such
Lender to fund or  maintain  LIBOR Rate  Loans or to  continue  such  funding or
maintaining,  or to determine or charge  interest rates at the LIBOR Rate,  such
Lender shall give notice of such changed  circumstances to Administrative  Agent
and the Borrower and Administrative  Agent promptly shall transmit the notice to
each other  Lender  and (1) in the case of any LIBOR  Rate Loans of such  Lender
that are outstanding, the date specified in such Lender's notice shall be deemed
to be the last day of the Interest Period of such LIBOR Rate Loans, and interest
upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the
rate then applicable to Reference Rate Loans,  and (2) the Borrower shall not be
entitled to elect the LIBOR Option until such Lender determines that it would no
longer be unlawful or impractical to do so.

     (iv) No Requirement of Matched Funding.  Anything to the contrary contained
herein notwithstanding, neither Administrative Agent, nor any Lender, nor any of
their participants,  is required actually to acquire eurodollar deposits to fund
or otherwise match fund any Obligation as to which interest accrues at the LIBOR
Rate.  The  provisions  of this  Section  shall  apply as if each  Lender or its
participants had match funded any Obligation as to which interest is accruing at
the LIBOR Rate by acquiring  eurodollar deposits for each Interest Period in the
amount of the LIBOR Rate Loans.

     Section 2.05 Reduction of Commitment; Prepayment of Loans.

     (a) Reduction of Commitments.

     (i) Revolving Credit  Commitments.  The Total Revolving  Credit  Commitment
shall terminate on the Final Maturity Date. On or after the first anniversary of
the Effective  Date, the Borrower may,  without  premium or penalty,  reduce the
Total Revolving Credit Commitment to an amount (which may be zero) not less than
the sum of (A) the aggregate unpaid principal amount of all Revolving Loans then
outstanding,  (B) the aggregate  principal amount of all Revolving Loans not yet
made as to which a Notice of  Borrowing  has been  given by the  Borrower  under
Section  2.02,  (C) the  Letter of Credit  Obligations  at such time and (D) the
stated  amount of all Letters of Credit not yet issued as to which a request has
been made and not withdrawn.  Each such reduction shall be in an amount which is
an integral multiple of $1,000,000 (unless the Total Revolving Credit Commitment
in effect immediately prior to such reduction is less than $1,000,000), shall be
made by  providing  not less than 3 Business  Days prior  written  notice to the
Administrative  Agent  and  shall be  irrevocable;  provided  that,  a notice of
termination  of the  Commitments  delivered  by the Borrower may state that such
notice is conditioned upon the consummation of financing that will refinance the
Indebtedness  under this Agreement,  in which case such notice may be revoked by
the Borrower if such condition is not satisfied (by notice to the Administrative
Agent  on or prior to the  specified  effective  date),  and if such  notice  is
revoked then,  anything to the contrary  contained herein  notwithstanding,  the
failure to terminate the  Commitments on the date specified in such notice shall
not constitute an Event of Default.  Once reduced,  the Total  Revolving  Credit
Commitment  may not be  increased.  Each such  reduction of the Total  Revolving
Credit  Commitment shall reduce the Revolving  Credit  Commitment of each Lender
proportionately in accordance with its Pro Rata Share thereof.

     (ii) Term Loan.  The Total Term Loan  Commitment  shall  terminate upon the
making of the Term Loan on the Effective Date.

     (b) Optional Prepayment.

     (i) Revolving Loans. The Borrower may prepay without penalty or premium the
principal of any Revolving Loan, in whole or in part.

     (ii) Term Loan. On or after the first anniversary of the Effective Date, so
long  as (A)  no  Default  or  Event  of  Default  shall  have  occurred  and be
continuing,  and (B) Availability is greater than or equal to $10,000,000  after
giving effect to such  payment,  the Borrower may, upon at least 3 Business Days
prior written notice to the  Administrative  Agent,  prepay the principal of the
Term Loan, in whole or in part.  Each  prepayment  made pursuant to this Section
2.05(b)(ii)  shall be accompanied by (A) the payment of accrued  interest to the
date of such payment on the amount  prepaid,  and (B) the prepayment  premium as
set forth in the Fee Letter.  Each such prepayment  shall be applied against the
remaining installments of principal due on the Term Loan in the inverse order of
maturity.

     (c) Mandatory Prepayment.

     (i) The  Borrower  will  immediately  prepay the  Revolving  Loans within 1
Business Day at any time that the  aggregate  principal  amount of all Revolving
Loans plus the outstanding  amount of all Letter of Credit  Obligations  exceeds
the lesser of (A) the Total Revolving Credit  Commitment,  and (B) the Borrowing
Base,  to the full  extent of any such  excess.  On each day that any  Revolving

                                       48
<PAGE>

Loans or Letter of Credit Obligations are outstanding, the Borrower shall hereby
be deemed to  represent  and  warrant  to the Agents  and the  Lenders  that the
Borrowing  Base  calculated  as of such day  equals  or  exceeds  the  aggregate
principal  amount  of all  Revolving  Loans and  Letter  of  Credit  Obligations
outstanding on such day. If at any time after the Borrower has complied with the
first  sentence  of this  Section  2.05(c)(i),  the  aggregate  Letter of Credit
Obligations  is  greater  than the  lesser  of (x) the  Total  Revolving  Credit
Commitment,  and (y) the then current Borrowing Base, the Borrower shall provide
cash collateral to the  Administrative  Agent in an amount equal to 105% of such
excess,  which  cash  collateral  shall be  deposited  in the  Letter  of Credit
Collateral  Account and,  provided  that no Event of Default shall have occurred
and be  continuing,  returned  to the  Borrower,  at such time as the  aggregate
Letter  of  Credit  Obligations  plus  the  aggregate  principal  amount  of all
outstanding Revolving Loans no longer exceeds the then current Borrowing Base.

     (ii) The Borrower will immediately prepay the outstanding  principal amount
of the Term Loan in the event  that the Total  Revolving  Credit  Commitment  is
terminated for any reason.

     (iii) The  Administrative  Agent shall on each Business Day apply all funds
transferred  to or  deposited  in the  Administrative  Agent's  Account,  to the
payment,  in  whole or in  part,  of the  outstanding  principal  amount  of the
Revolving Loans.

     (iv)  Within 10 days of  delivery  to the Agents and the Lenders of audited
annual financial  statements pursuant to Section  7.01(a)(iii),  commencing with
the delivery to the Agents and the Lenders of the financial  statements  for the
Fiscal Year ended  December 31, 2006 or, if such  financial  statements  are not
delivered to the Agents and the Lenders on the date such statements are required
to be delivered  pursuant to Section  7.01(a)(iii),  10 days after the date such
statements  are required to be delivered to the Agents and the Lenders  pursuant
to Section  7.01(a)(iii),  the Borrower shall prepay the  outstanding  principal
amount of the Loans in an amount  equal to (A) the  greater of (x) 50% of Excess
Cash Flow of the Parent and its  Subsidiaries  for such Fiscal Year, and (y) 50%
of  North  American  Excess  Cash  Flow of the  Parent  and its  North  American
Subsidiaries  for such  Fiscal  Year,  minus  (B) the  amount  of all  voluntary
prepayments  of the Term  Loan made  during  such  period  pursuant  to  Section
2.05(b)(ii).

     (v) Within 1 Business  Day of delivery to the Agents and the Lenders of the
Borrowing  Base  Certificate  pursuant to Section  7.01(a),  the  Borrower  will
immediately  prepay the outstanding  principal amount of the Loans to the extent
that the  outstanding  principal  amount of the Term  Loan,  plus the  aggregate
outstanding  principal  amount  of  all  Revolving  Loans,  plus  the  aggregate
outstanding  amount of all Letter of Credit  Obligations  exceeds the  aggregate
amount of Collections from Accounts  Receivable of the Borrower and the Domestic
Guarantors  during the 150 days  immediately  preceding  such date,  to the full
extent of any such excess.

     (vi)  Within  1  Business  Day  of  the  receipt  of  any  proceeds  of any
Disposition  by the  Parent or any of its  Domestic  Subsidiaries  and  within 3
Business Days of the receipt of any proceeds of any  Disposition  by any Foreign

                                       49
<PAGE>

Subsidiary of the Parent, in each case other than a Permitted Disposition (other
than a Permitted  Disposition of the type described in clauses (a), (b), and (q)
of the  definition  of Permitted  Dispositions),  the Borrower  shall prepay the
outstanding  principal amount of the Loans in an amount equal to 100% of the Net
Cash Proceeds received by such Person in connection with such Disposition to the
extent  that the  aggregate  amount of Net Cash  Proceeds  received  by all Loan
Parties and their  Subsidiaries (and not paid to the  Administrative  Agent as a
prepayment of the Loans) shall exceed $250,000 for all such  Dispositions in any
Fiscal Year.  Nothing  contained in this  subsection  (vi) shall permit any Loan
Party or any of its  Subsidiaries  to make a Disposition  of any property  other
than a Permitted Disposition.

     (vii)  Within 1 Business Day of the receipt of any proceeds of any issuance
or  incurrence  by  the  Parent  or  any of  its  Domestic  Subsidiaries  of any
Indebtedness  and within 3 Business  Days of the receipt of any  proceeds of any
issuance or incurrence by any Foreign  Subsidiary of any  Indebtedness  (in each
case, other than Indebtedness  referred to in clauses (a) - (j) and (m) - (r) of
the definition of Permitted  Indebtedness),  the Borrower shall prepay the Loans
in an amount equal to 100% of the Net Cash  Proceeds  received by such Person in
connection  therewith.  The  provisions  of this  subsection  (vii) shall not be
deemed to be  implied  consent  to any such  issuance  or  incurrence  otherwise
prohibited by the terms and conditions of this Agreement.

     (viii)  Within 1 Business  Day of the sale or issuance by the Parent or any
of its  Domestic  Subsidiaries  of any shares of its Capital  Stock and within 3
Business Days of the sale or issuance by any Foreign Subsidiary of any shares of
its Capital  Stock (in each case,  other than  issuances  of (A) common  Capital
Stock by any Subsidiary of the Parent to its parent,  (B) the Series A Preferred
Stock or the Series B Preferred Stock, or (C) common Capital Stock of the Parent
issued upon  conversion of the Senior  Convertible  Notes in accordance with the
Indenture for the 10% Senior  Convertible  Notes), the Borrower shall prepay the
Loans  in an  amount  equal to 100% of the Net Cash  Proceeds  received  by such
Person in connection  therewith.  The provisions of this subsection (viii) shall
not be deemed to be  implied  consent  to any such  sale or  issuance  otherwise
prohibited by the terms and conditions of this Agreement.

     (ix)  Within 1  Business  Day of the  receipt  by the  Parent or any of its
Domestic  Subsidiaries of any Extraordinary  Receipts and within 3 Business Days
of the  receipt by any  Foreign  Subsidiary  of the Parent of any  Extraordinary
Receipts, the Borrower shall prepay the outstanding principal of the Loans in an
amount  equal  to 100% of such  Extraordinary  Receipts,  net of any  reasonable
expenses incurred in collecting such Extraordinary  Receipts, to the extent that
the aggregate amount of Extraordinary  Receipts received by all Loan Parties and
their Subsidiaries (and not paid to the Administrative  Agent as a prepayment of
the Loans) shall  exceed  $250,000  for all such  Extraordinary  Receipts in any
Fiscal Year.

     (d) Application of Payments.

     (i) Except as set forth in Section 2.05(d)(iii) below, each prepayment made
pursuant to subsections (c)(iv), (c)(vi), (c)(vii), (c)(viii), and (c)(ix) above
shall be applied,  first, to the Term Loan, until paid in full,  second,  to the
Revolving Loans, until paid in full, and third, to cash collateralization of the
Letters  of  Credit  in an  amount  up to  105%  of the  undrawn  amount  of all
outstanding   Letters  of  Credit,   until  such  Letters  of  Credit  are  cash

                                       50
<PAGE>

collateralized  in an amount equal to 105% of the greatest amount for which such
Letters of Credit may be drawn.  Each such  prepayment of the Term Loan shall be
applied against the remaining  installments of principal of the Term Loan in the
inverse order of their maturity.

     (ii) Each  prepayment  made  pursuant to  subsection  (c)(v) above shall be
applied,  first, to the Revolving  Loans,  until paid in full,  second,  to cash
collateralization  of the  Letters  of  Credit  in an  amount  up to 105% of the
undrawn  amount of all  outstanding  Letters  of Credit,  until such  Letters of
Credit are cash collateralized in an amount equal to 105% of the greatest amount
for which such Letters of Credit may be drawn, and third to the Term Loan, until
paid in full. Each such prepayment of the Term Loan shall be applied against the
remaining  installments  of principal  of the Term Loan in the inverse  order of
their maturity.

     (iii) Each  prepayment  pursuant to Section  2.05(c)(vi),  with  respect to
proceeds   resulting  from  the  Disposition  of  Accounts   Receivable  or  the
Disposition  of all or  substantially  all of the assets or Capital Stock of any
Person,  which  Disposition  includes  Accounts  Receivable and other assets, or
pursuant  to  Section   2.05(c)(ix),   with  respect  to   insurance   proceeds,
condemnation  awards, or payments in lieu thereof related to a casualty or other
loss which  includes  the loss of Accounts  Receivable,  in each case,  shall be
applied  as  follows:  (A) an  amount  up to the  book  value  of such  Accounts
Receivable  (determined at the time of such  Disposition  or event  resulting in
such insurance proceeds or condemnation  award) shall be applied,  (1) first, to
the outstanding principal amount of the Revolving Loans, until paid in full, (2)
second,  to cash  collateralization  of the Letters of Credit in an amount up to
105% of the  undrawn  amount of all  outstanding  Letters of Credit,  until such
Letters  of Credit  are cash  collateralized  in an amount  equal to 105% of the
greatest amount for which such Letters of Credit may be drawn, and (3) third, to
the outstanding  principal  amount of the Term Loan, until paid in full, and (B)
any remaining proceeds shall be applied, (1) first, to the outstanding principal
amount of the Term Loan,  until paid in full,  (2)  second,  to the  outstanding
principal amount of the Revolving  Loans,  until paid in full, and (3) third, to
cash  collateralization  of the Letters of Credit in an amount up to 105% of the
undrawn  amount of all  outstanding  Letters  of Credit,  until such  Letters of
Credit are cash collateralized in an amount equal to 105% of the greatest amount
for which such Letters of Credit may be drawn.

     (iv) The foregoing to the contrary  notwithstanding,  Borrower shall not be
required to make a prepayment otherwise required pursuant to Section 2.05(c)(vi)
or  Section  2.05(c)(ix)  with  Reinvestment  Eligible  Funds so long as: (A) no
Default or Event of Default  has  occurred  and is  continuing  on the date such
Person receives such Reinvestment Eligible Funds or on the date such amounts are
to be released to Borrower  pursuant to this  paragraph  (iv),  (B) the Borrower
delivers  a notice (a  "Reinvestment  Notice")  on or prior to the date that the
applicable Person is required to apply the monies constituting such Reinvestment
Eligible Funds  notifying the Agents of the intent of the  applicable  Person to
use such  Reinvestment  Eligible  Funds (1) to repair,  restore,  or replace the
assets that were the subject of the Disposition, casualty or condemnation giving
rise to such  amounts  with assets of equal or greater  fair market  value which
will be  useful in the  conduct  of their  business  in the  ordinary  course of

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<PAGE>

business, (2) within the period specified in such notice, which period shall not
to exceed the  earlier of (x) 180 days  after the  receipt of such  Reinvestment
Eligible Funds by the applicable  Loan Party or its Subsidiary and (y) the Final
Maturity  Date,  and (C) pending the  reinvestment  described  in clause  (B)(1)
above,  such  Reinvestment  Eligible  Amounts are deposited in a cash collateral
account over which  Collateral  Agent (on behalf of the Lenders) has a perfected
first-priority  Lien. If all or any portion of such Reinvestment  Eligible Funds
are not used in  accordance  with  the  preceding  sentence  within  the  period
specified in the Reinvestment  Notice, the remaining portion shall be applied to
the Loans in accordance  with Section  2.05(d) on the last day of such specified
period.

     (e) Interest and Fees.  Any  prepayment  made pursuant to this Section 2.05
(other than prepayments made pursuant to subsections (c)(i), (c)(ii),  (c)(iii),
(c)(iv), and (c)(v) of this Section 2.05) shall be accompanied by the payment of
accrued  interest  on  the  principal  amount  being  prepaid  to  the  date  of
prepayment,  and if such  prepayment  would reduce the amount of the outstanding
Loans to zero at a time  when the Total  Revolving  Credit  Commitment  has been
terminated,  such  prepayment  shall be  accompanied  by the payment of all fees
accrued to such date pursuant to Section 2.06.

     (f) Cumulative Prepayments.  Except as otherwise expressly provided in this
Section 2.05,  payments with respect to any  subsection of this Section 2.05 are
in addition to payments  made or required to be made under any other  subsection
of this Section 2.05.

     Section 2.06 Fees. In addition to the fees set forth in this Agreement, the
Borrower  shall  pay to the  Administrative  Agent the fees set forth in the Fee
Letter in the amounts and on the dates set forth in the Fee Letter.

     Section 2.07  Securitization.  The Borrower  hereby  acknowledges  that the
Lenders   and   their   Affiliates   may  sell  or   securitize   the  Loans  (a
"Securitization")  through the pledge of the Loans as  collateral  security  for
loans to the Lenders or their Affiliates or through the sale of the Loans or the
issuance  of direct or  indirect  interests  in the  Loans,  which  loans to the
Lenders or their  Affiliates  or direct or indirect  interests  will be rated by
Moody's,  Standard & Poor's or one or more other  rating  agencies  (the "Rating
Agencies").  The Borrower shall cooperate with the Lenders and their  Affiliates
to effect the  Securitization  including by (a) amending this  Agreement and the
other Loan  Documents,  and executing such additional  documents,  as reasonably
requested by the Lenders in connection  with the  Securitization,  provided that
(i) any such  amendment or  additional  documentation  does not impose  material
additional  costs on the  Borrower  and (ii) any such  amendment  or  additional
documentation  does not materially  adversely  affect the rights,  or materially
increase the obligations,  of the Borrower under the Loan Documents or change or
affect in a manner adverse to the Borrower the financial terms of the Loans, (b)
providing  such  information  as may be  reasonably  requested by the Lenders in
connection with the rating of the Loans or the Securitization, and (c) providing
in  connection  with any  rating  of the Loans a  certificate  (i)  agreeing  to
indemnify the Lenders and their Affiliates,  any of the Rating Agencies,  or any
party providing credit support or otherwise  participating in the Securitization
(collectively,  the "Securitization Parties") for any losses, claims, damages or
liabilities (the  "Liabilities") to which the Lenders,  their Affiliates or such
Securitization  Parties may become subject insofar as the Liabilities  arise out
of or are based upon any untrue  statement  or alleged  untrue  statement of any
material fact  contained in any Loan Document or in any writing  delivered by or

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<PAGE>

on behalf of any Loan Party to any Agent or Lender in  connection  with any Loan
Document or arise out of or are based upon the  omission or alleged  omission to
state  therein a material fact  required to be stated  therein,  or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not misleading, and such indemnity shall survive any transfer by
the  Lenders or their  successors  or assigns of the Loans and (ii)  agreeing to
reimburse the Agents,  the Lenders and their  Affiliates  for any legal or other
expenses  reasonably  incurred by such Persons in connection  with defending the
Liabilities.

     Section 2.08 Taxes.

     (a) Except as otherwise  provided in this Section,  any and all payments by
any Loan Party hereunder or under any other Loan Document shall be made free and
clear of and without deduction for any and all present or future taxes,  levies,
imposts, deductions,  charges or withholdings,  and all liabilities with respect
thereto,  excluding  (i) taxes imposed on (or measured by) the net income of any
Agent,  any Lender or the L/C Issuer (or any  transferee  or  assignee  thereof,
including a participation  holder (any such entity, a "Transferee")) as a result
of a present or former  connection  between such Person and the  jurisdiction of
the  Governmental  Authority  imposing  the tax (other than any such  connection
arising solely from such recipient having  executed,  delivered or performed its
obligations  or  received  a  payment  under,  or  enforced,  any  of  the  Loan
Documents),  (ii) any branch profit taxes imposed by the United States, or (iii)
by the  jurisdiction  in which such  Person is  organized  or has its  principal
lending office (all such nonexcluded taxes, levies, imposts, deductions, charges
withholdings and liabilities,  collectively or  individually,  "Taxes").  If any
Loan Party  shall be  required to deduct any Taxes from or in respect of any sum
payable  hereunder  to  any  Agent,  any  Lender  or  the  L/C  Issuer  (or  any
Transferee),  (A)  the  sum  payable  shall  be  increased  by  the  amount  (an
"additional  amount")  necessary so that after  making all  required  deductions
(including  deductions  applicable to additional sums payable under this Section
2.08) such  Agent,  such  Lender or the L/C Issuer  (or such  Transferee)  shall
receive an amount equal to the sum it would have received had no such deductions
been made,  (B) such Loan Party  shall make such  deductions,  and (C) such Loan
Party shall pay the full amount deducted to the relevant Governmental  Authority
in accordance with applicable law.

     (b) In addition, each Loan Party agrees to pay to the relevant Governmental
Authority  in  accordance  with  applicable  law any present or future  stamp or
documentary  taxes or any other  excise or  property  taxes,  charges or similar
levies  that  arise  from any  payment  made  hereunder  or from the  execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan  Document  ("Other  Taxes").  Each Loan Party  shall  deliver to each
Agent,  each Lender and the L/C Issuer official receipts in respect of any Taxes
or Other Taxes payable  hereunder  promptly after payment of such Taxes or Other
Taxes.

     (c) The Loan Parties  hereby  jointly and severally  indemnify and agree to
hold each Agent,  each Lender and the L/C Issuer harmless from and against Taxes
and Other Taxes  (including Taxes and Other Taxes imposed on any amounts payable
under this Section 2.08) paid by such Person, whether or not such Taxes or Other
Taxes were correctly or legally  asserted.  Such  indemnification  shall be paid
within 10 days  from the date on which  any such  Person  makes  written  demand
therefore specifying in reasonable detail the nature and amount of such Taxes or
Other Taxes.

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<PAGE>

     (d) Each Lender that is organized under the laws of a jurisdiction  outside
the United States (a "Non-U.S.  Lender") agrees that it shall, no later than the
Effective  Date  (or,  in the  case of a Lender  which  becomes  a party  hereto
pursuant to Section 12.07 hereof after the Effective  Date,  promptly  after the
date upon which such Lender  becomes a party hereto)  deliver to the Agents (or,
in the case of an assignee of a Lender  which (x) is an Affiliate of such Lender
or a Related  Fund of such  Lender and (y) does not  deliver an  Assignment  and
Acceptance to the Administrative  Agent pursuant to the last sentence of Section
12.07(b) for recordation  pursuant to Section 12.07(c),  to the assigning Lender
only, and in the case of a participant, to the Lender granting the participation
only) a  properly  completed  and duly  executed  copy of either  U.S.  Internal
Revenue Service Form W-8BEN, W-8ECI or W-8IMY or any subsequent versions thereof
or  successors  thereto,  in each case  claiming  complete  exemption  from U.S.
Federal withholding tax and payments of interest hereunder.  In addition, in the
case of a Non-U.S.  Lender claiming exemption from U.S. Federal  withholding tax
under  Section  871(h) or 881(c) of the Internal  Revenue  Code,  such  Non-U.S.
Lender  hereby  represents  to the Agents and the  Borrower  that such  Non-U.S.
Lender is not a bank for  purposes  of Section  881(c) of the  Internal  Revenue
Code,  is  not  a  10-percent   shareholder   (within  the  meaning  of  Section
871(h)(3)(B) of the Internal Revenue Code) of the Parent and is not a controlled
foreign  corporation  related  to the  Parent  (within  the  meaning  of Section
864(d)(4) of the Internal Revenue Code), and such Non-U.S. Lender agrees that it
shall  promptly  notify  the Agents in the event any such  representation  is no
longer  accurate.  Such forms shall be delivered by each  Non-U.S.  Lender on or
before  the date it  becomes  a party to this  Agreement  (or,  in the case of a
Lender which  becomes a party hereto  pursuant to Section 12.07 hereof after the
Effective  Date,  promptly after the date upon which such Lender becomes a party
hereto) and on or before the date,  if any,  such  Non-U.S.  Lender  changes its
applicable  lending  office by  designating a different  lending  office (a "New
Lending  Office").  In addition,  such Non-U.S.  Lender shall deliver such forms
within 20 days after receipt of a written request  therefor from any Agent,  the
assigning  Lender  or  the  Lender  granting  a  participation,  as  applicable.
Notwithstanding  any other  provision  of this Section  2.08, a Non-U.S.  Lender
shall not be required to deliver any form pursuant to this Section  2.08(d) that
such Non-U.S. Lender is not legally able to deliver.

     (e) The Loan  Parties  shall not be  required  to  indemnify  any  Non-U.S.
Lender,  or pay any  additional  amounts to any Non-U.S.  Lender,  in respect of
United States Federal  withholding  tax pursuant to this Agreement to the extent
that (i) the  obligation  to  withhold  amounts  with  respect to United  States
Federal withholding tax existed on the date such Non-U.S.  Lender became a party
to this  Agreement  (or,  in the case of a  Transferee  that is a  participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S.  Lender
designated  such New Lending Office with respect to a Loan;  provided,  however,
that this  clause  (i) shall not apply to the extent  the  indemnity  payment or
additional  amounts  any  Transferee,  or Lender (or  Transferee)  through a New
Lending Office, would be entitled to receive (without regard to this clause (i))
do not exceed the indemnity payment or additional amounts that the Person making
the  assignment,  participation  or transfer to such  Transferee,  or Lender (or
Transferee)  making the designation of such New Lending Office,  would have been
entitled to receive in the absence of such assignment,  participation,  transfer
or designation,  or (ii) the obligation to pay such additional amounts would not
have  arisen  but for a failure  by such  Non-U.S.  Lender  to  comply  with the
provisions of clause (d) above.

                                       54
<PAGE>

     (f) The  obligations  of the Loan  Parties  under this  Section  2.08 shall
survive the  termination  of this Agreement and the payment of the Loans and all
other amounts payable hereunder.

     (g) If any Loan Party is required to pay  additional  amounts to any Lender
or any  Governmental  Authority  for the  account of any Lender as a result of a
change of law  occurring  after the date  hereof,  then  such  Lender  shall use
reasonable efforts  (consistent with legal and regulatory  restrictions) to file
or provide to Agent any certificate or document reasonably  requested in writing
by the Agent to change the jurisdiction of its applicable  lending office if the
making of such a filing or change  would avoid the need for or reduce the amount
of any such indemnity payment or additional  amount that may thereafter  accrue,
would not require  such Lender to disclose  any  information  such Lender  deems
confidential  and  would  not,  in the sole  determination  of such  Lender,  be
otherwise  disadvantageous  to such Lender;  provided that the mere existence of
fees, charges,  costs or expenses that such Loan Party has offered and agreed to
pay on behalf of the  Lender  shall not be deemed to be  disadvantageous  to the
Lender.

     (h) If any  additional  amount  payable by any Loan Party is made to or for
the  account of any Lender on account of Taxes  then,  if any Lender  receives a
refund of such Taxes,  such Lender shall  reimburse to the Borrower such refund,
net of all  out-of-pocket  expenses  of such  Lender  that are  related  to such
refund;  provided that (i) such Lender shall not be obligated to disclose to the
Borrower any information  regarding its tax affairs and  computations,  and (ii)
nothing  herein shall be  construed  so as to  interfere  with the right of such
Lender to arrange its tax affairs as it deems appropriate; provided further that
any Loan Party, upon request of any Agent or Lender,  agrees to repay the amount
paid over to the Loan Party  (plus any  penalties,  interest,  or other  charges
imposed by the relevant  Governmental  Authority) to such Agent or Lender in the
event such Agent or Lender is  required  to repay  such  refund to the  relevant
Governmental Authority.

                                  ARTICLE III

                                LETTERS OF CREDIT

     Section 3.01 Letter of Credit Guaranty.

     (a) In order to assist the  Borrower  in  establishing  or opening  standby
letters of credit,  which shall not have expiration  dates that exceed 12 months
from the date of issuance (although, subject to the terms and conditions hereof,
any such standby letter of credit may be extendable for successive periods of up
to  12  months  on  terms  and  conditions   reasonably   satisfactory   to  the
Administrative Agent and subject to the conditions set forth in Article V) (each
a "Letter of  Credit"),  with the L/C Issuer,  the Borrower  has  requested  the
Administrative  Agent to join in the applications for such Letters of Credit, or
guarantee  payment  or  performance  of such  Letters  of Credit  and any drafts
thereunder through the issuance of a Letter of Credit Guaranty,  thereby lending
the   Administrative   Agent's   credit  to  that  of  the  Borrower,   and  the
Administrative   Agent  has  agreed  to  do  so.  These  arrangements  shall  be
coordinated by the Administrative Agent, subject to the terms and conditions set
forth below. The Administrative  Agent shall not be required to be the issuer of
any Letter of Credit. The Borrower will be the account party for the application
for each  Letter of Credit,  which  shall be on a computer  transmission  system

                                       55
<PAGE>

approved by the  Administrative  Agent and the L/C Issuer, or such other written
form or computer transmission system as may from time to time be approved by the
Administrative Agent and the L/C Issuer, and shall be duly completed in a manner
reasonably  satisfactory to the Administrative  Agent,  together with such other
certificates,  agreements,  documents  and other papers and  information  as the
Administrative  Agent and the L/C Issuer may reasonably  request (the "Letter of
Credit  Application").  In the event of any  conflict  between  the terms of any
Letter of Credit Application and this Agreement, for purposes of this Agreement,
the terms of this Agreement shall control.

     (b) The aggregate Letter of Credit  Obligations shall not exceed the lowest
of (i) the difference  between (A) the Total Revolving Credit Commitment and (B)
the aggregate principal amount of all Revolving Loans then outstanding, (ii) the
difference between (A) the Borrowing Base and (B) the aggregate principal amount
of all  Revolving  Loans then  outstanding,  and (iii) the L/C  Subfacility.  In
addition,  the terms and  conditions of all Letters of Credit and all changes or
modifications thereof by the Borrower or the L/C Issuer shall in all respects be
subject to the prior  approval  of the  Administrative  Agent in the  reasonable
exercise of its sole and absolute discretion;  provided,  however,  that (i) the
expiry date of all Letters of Credit  shall be no later than 5 days prior to the
Final  Maturity Date unless,  on or prior to 5 days prior to the Final  Maturity
Date either (A) such Letters of Credit shall be cash collateralized in an amount
equal to 105% of the face amount of such Letters of Credit by deposit of cash in
such  amount  in an  account  under  the  sole  and  exclusive  control  of  the
Administrative  Agent for the  benefit  of the  Administrative  Agent or the L/C
Issuer (the "Letter of Credit  Collateral  Account")  or (B) the Borrower  shall
provide  the  Administrative  Agent  and  the  Revolving  Loan  Lenders  with an
indemnification,   in  form  and  substance   reasonably   satisfactory  to  the
Administrative  Agent,  from a commercial  bank or other  financial  institution
acceptable  to the Agents for any Letter of Credit  Obligations  with respect to
such Letters of Credit and (ii) the Letters of Credit and all  documentation  in
connection therewith shall be in form and substance  reasonably  satisfactory to
the Administrative Agent and the L/C Issuer.

     (c) The  Administrative  Agent shall have the right,  without notice to the
Borrower,   to  charge  the  Loan  Account  with  the  amount  of  any  and  all
Indebtedness, liabilities and obligations of any kind (including indemnification
for breakage costs,  capital adequacy and reserve requirement  charges) incurred
by the Agents or the Revolving Loan Lenders under the Letter of Credit  Guaranty
or incurred by the L/C Issuer with  respect to a Letter of Credit at the earlier
of (i) payment by the  Administrative  Agent or the Revolving Loan Lenders under
the Letter of Credit  Guaranty or (ii) the occurrence of any Default or Event of
Default. Any amount charged to the Loan Account shall be deemed a Revolving Loan
hereunder  made by the  Revolving  Loan Lenders to the  Borrower,  funded by the
Administrative  Agent on behalf of the  Revolving  Loan  Lenders  and subject to
Section  2.02 of this  Agreement.  Any  charges,  fees,  commissions,  costs and
expenses charged to the  Administrative  Agent for the Borrower's account by the
L/C  Issuer  in  connection  with  or  arising  out  of  Letters  of  Credit  or
transactions  relating  thereto will be charged to the Loan Account in full when
charged to or paid by the  Administrative  Agent  and,  when  charged,  shall be
conclusive on the Borrower  absent  manifest  error.  Each of the Revolving Loan
Lenders and the  Borrower  agrees that the  Administrative  Agent shall have the
right to make such charges regardless of whether any Default or Event of Default
shall have occurred and be continuing or whether any of the conditions precedent
in Section 5.02 have been satisfied.

                                       56
<PAGE>

     (d) The Borrower unconditionally indemnifies each Agent and each Lender and
holds  each  Agent and each  Lender  harmless  from any and all  loss,  claim or
liability  incurred by any Agent or any Lender arising from any  transactions or
occurrences relating to Letters of Credit, any drafts or acceptances thereunder,
the  Collateral  relating  thereto,  and all  Obligations  in  respect  thereof,
including  any such loss or claim  due to any  action  taken by the L/C  Issuer,
other  than for any such  loss,  claim or  liability  arising  out of the  gross
negligence or willful  misconduct of the L/C Issuer,  any Agent or any Lender as
determined  by  a  final  non-appealable   judgment  of  a  court  of  competent
jurisdiction.  The Borrower  further  agrees to jointly and severally  hold each
Agent and each  Lender  harmless  from any  errors or  omission,  negligence  or
misconduct by the L/C Issuer;  provided that the foregoing  shall not excuse any
Agent or any Lender  from any  liability  to the  Borrower  to the extent of any
direct damages  suffered by the Borrower that are caused by such Agent's or such
Lender's  gross  negligence  or  willful  misconduct  as  determined  by a final
non-appealable  judgment of a court of competent  jurisdiction.  The  Borrower's
unconditional  obligations  to each  Agent,  each Lender and the L/C Issuer with
respect to Letters of Credit  hereunder  shall not be modified or diminished for
any reason or in any manner whatsoever,  other than as a result of such Agent's,
such  Lender's or the L/C Issuer's  gross  negligence  or willful  misconduct as
determined  by  a  final  non-appealable   judgment  of  a  court  of  competent
jurisdiction.   The   Borrower   agrees  that  any   charges   incurred  by  the
Administrative  Agent or the L/C Issuer for the Borrower's account hereunder may
be charged to the Loan Account.

     (e) Upon any  payments  made to the L/C  Issuer  under the Letter of Credit
Guaranty,  the Agents or the Revolving Loan Lenders,  as the case may be, shall,
without  prejudice  to their rights under this  Agreement  (including  that such
unreimbursed amounts shall constitute Loans hereunder),  acquire by subrogation,
any  rights,  remedies,  duties or  obligations  granted  or  undertaken  by the
Borrower  in favor of the L/C Issuer in any  application  for Letters of Credit,
any standing agreement relating to Letters of Credit or otherwise,  all of which
shall be  deemed to have been  granted  to the  Agents  and the  Revolving  Loan
Lenders and apply in all respects to the Agents and the  Revolving  Loan Lenders
and  shall  be in  addition  to any  rights,  remedies,  duties  or  obligations
contained herein.

     Section 3.02 Participations.

     (a) Purchase of Participations. Immediately upon issuance by the L/C Issuer
of any Letter of Credit pursuant to this  Agreement,  each Revolving Loan Lender
shall be deemed to have irrevocably and  unconditionally  purchased and received
from the  Administrative  Agent,  without  recourse or  warranty,  an  undivided
interest and  participation,  to the extent of such  Revolving Loan Lender's Pro
Rata Share,  in all  obligations of the  Administrative  Agent in such Letter of
Credit  (including  all  Reimbursement  Obligations of the Borrower with respect
thereto pursuant to the Letter of Credit Guaranty or otherwise).

     (b) Sharing of Payments.  In the event that the Administrative  Agent makes
any payment in respect of the Letter of Credit  Guaranty and the Borrower  shall
not have repaid  such amount to the  Administrative  Agent,  the  Administrative
Agent  shall  charge  the  Loan  Account  in the  amount  of  the  Reimbursement
Obligation, in accordance with Sections 3.01(c) and 4.02 of this Agreement.

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     (c) Obligations Irrevocable.  The obligations of a Revolving Loan Lender to
make  payments to the  Administrative  Agent for the account of the Agents,  the
Revolving  Loan  Lenders  or the L/C Issuer  with  respect to a Letter of Credit
shall be  irrevocable,  without any  qualification  or exception  whatsoever and
shall be made in  accordance  with the terms and  conditions  of this  Agreement
under all circumstances, including any of the following circumstances:

     (i) any lack of validity or  enforceability of this Agreement or any of the
other Loan Documents;

     (ii) the existence of any claim,  setoff,  defense or other right which the
Borrower  may have at any time  against a  beneficiary  named in such  Letter of
Credit or any  transferee  of such  Letter of Credit (or any Person for whom any
such  transferee  may be acting),  any Agent,  any Lender,  or any other Person,
whether  in  connection  with  this  Agreement,   such  Letter  of  Credit,  the
transactions  contemplated herein or any unrelated  transactions  (including any
underlying  transactions  between  the  Borrower  or any  other  party  and  the
beneficiary named in such Letter of Credit);

     (iii) any draft,  certificate  or any other document  presented  under such
Letter of Credit proving to be forged,  fraudulent,  invalid or  insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;

     (iv) the  surrender or impairment  of any security for the  performance  or
observance of any of the terms of any of the Loan Documents;

     (v) any failure by any Agent to provide any  notices  required  pursuant to
this Agreement relating to such Letter of Credit;

     (vi) any  payment by the L/C Issuer  under  such  Letter of Credit  against
presentation  of a draft or certificate  which does not comply with the terms of
such Letter of Credit; or

     (vii) the occurrence of any Default or Event of Default.

     Section 3.03 Letters of Credit.

     (a) Request for  Issuance.  The  Borrower  may,  upon notice not later than
12:00  noon,  New York City  time,  at least 2  Business  Days in advance of the
issuance  thereof,  request the  Administrative  Agent to assist the Borrower in
establishing  or opening a Letter of Credit by delivering to the  Administrative
Agent, with a copy to the L/C Issuer, a Letter of Credit  Application,  together
with any necessary related documents. The Administrative Agent shall not provide
support,  pursuant to the Letter of Credit Guaranty, if the Administrative Agent
shall have received  written  notice from the  Collateral  Agent or the Required
Lenders on the Business Day immediately preceding the proposed issuance date for
such Letter of Credit that one or more of the  conditions  precedent  in Section
5.02 will not have been  satisfied on such date,  and the  Administrative  Agent
shall not otherwise be required to determine that, or take notice  whether,  the
conditions precedent set forth in Section 5.02 have been satisfied.

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     (b) Letter of Credit  Fees.  The Borrower  shall pay to the  Administrative
Agent for the account of the  Revolving  Loan Lenders,  in  accordance  with the
Revolving  Loan  Lenders'  Pro Rata  Shares (x) for any Letter of Credit  issued
hereunder, a non-refundable fee equal to 3.75 percentage points per annum of the
stated  amount of such  Letter of  Credit,  payable  on the date such  Letter of
Credit is issued or extended and (y) for any amendment to an existing  Letter of
Credit  that   increases  the  stated  amount  of  such  Letter  of  Credit,   a
non-refundable  fee equal to 3.75 percentage points per annum of the increase in
the stated amount of such Letter of Credit, payable on the date of such increase
(the "Letter of Credit Fees").

     (c) L/C Issuer Charges.  The Borrower shall pay to the Administrative Agent
the standard charges assessed by the L/C Issuer in connection with the issuance,
administration, amendment, payment or cancellation of Letters of Credit.

     (d)  Charges  to the Loan  Account.  The  Borrower  hereby  authorizes  the
Administrative  Agent to, and the  Administrative  Agent may, from time to time,
charge the Loan Account  pursuant to Sections 3.01(c) and 4.02 of this Agreement
with the amount of any Letter of Credit Fees or charges  due under this  Section
3.03.

                                   ARTICLE IV

                      FEES, PAYMENTS AND OTHER COMPENSATION

     Section 4.01 [Intentionally Omitted].

     Section 4.02 Payments; Computations and Statements.

     (a) The Borrower will make each payment under this Agreement not later than
12:00  noon  (New York City  time) on the day when due,  in lawful  money of the
United  States  of  America  and  in  immediately   available   funds,   to  the
Administrative  Agent's  Account.  All payments  received by the  Administrative
Agent after 12:00 noon (New York City time) on any Business Day will be credited
to the Loan Account on the next  succeeding  Business Day. All payments shall be
made by the Borrower without set-off,  counterclaim,  deduction or other defense
to the  Agents and the  Lenders.  Except as  provided  in  Section  2.02,  after
receipt,   the  Administrative  Agent  will  promptly  thereafter  cause  to  be
distributed  like funds  relating  to the  payment of  principal  ratably to the
Lenders in accordance  with their Pro Rata Shares and like funds relating to the
payment of any other amount  payable to any Lender to such Lender,  in each case
to be applied in accordance with the terms of this Agreement,  provided that the
Administrative Agent will cause to be distributed all interest and fees received
from or for the account of the Borrower not less than once each month and in any
event  promptly  after  receipt  thereof.  The Lenders and the  Borrower  hereby
authorize the Administrative  Agent to, and the Administrative  Agent may charge
the Loan Account of the Borrower with any amount due and payable by the Borrower
under any Loan  Document.  Each of the Lenders and the Borrower  agrees that the
Administrative  Agent shall have the right to make such  charges  whether or not
any Default or Event of Default shall have occurred and be continuing or whether
any of the conditions precedent in Section 5.02 have been satisfied.  Any amount
charged to the Loan  Account of the  Borrower  shall be deemed a Revolving  Loan
hereunder  made by the  Revolving  Loan Lenders to the  Borrower,  funded by the
Administrative  Agent on behalf of the  Revolving  Loan  Lenders  and subject to
Section 2.02 of this Agreement;  provided,  however,  that without  limiting the
Administrative Agent's obligation to charge items to the Loan Account (including
pursuant to the proviso of the next sentence),  the foregoing shall not obligate
the  Administrative  Agent to make  Revolving  Loans if all of the conditions to
funding  under this  Agreement  (including  those set forth in Section  2.01 and
Article V) have not been  satisfied  or waived.  The Lenders  and the  Borrowers

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confirm that any charges which the Administrative  Agent may so make to the Loan
Account of the Borrowers as herein provided will be made as an  accommodation to
the Borrowers and solely at the Administrative Agent's discretion, provided that
the  Administrative  Agent  shall  from  time to time  upon the  request  of the
Collateral  Agent,  charge the Loan Account of the Borrowers with any amount due
and payable under any Loan  Document.  Whenever any payment to be made under any
such Loan Document shall be stated to be due on a day other than a Business Day,
such  payment  shall  be made  on the  next  succeeding  Business  Day and  such
extension of time shall in such case be included in the  computation of interest
or fees,  as the  case may be.  All  computations  of fees  shall be made by the
Administrative Agent on the basis of a year of 360 days for the actual number of
days  (including  the first day but  excluding  the last day)  occurring  in the
period for which such fees are payable. Each determination by the Administrative
Agent of an interest rate or fees hereunder  shall be conclusive and binding for
all purposes in the absence of manifest error.

     (b) The Administrative Agent shall provide the Borrower, promptly after the
end of each calendar  month, a summary  statement (in the form from time to time
used by the  Administrative  Agent) of the opening and closing daily balances in
the Loan Account of the Borrower during such month, the amounts and dates of all
Loans made to the  Borrower  during  such  month,  the  amounts and dates of all
payments on account of the Loans to the Borrower during such month and the Loans
to which such payments were applied, the amount of interest accrued on the Loans
to the  Borrower  during  such month,  any  Letters of Credit  issued by the L/C
Issuer for the account of the Borrower  during such month,  specifying  the face
amount  thereof  and the amount of charges to the Loan  Account or Loans made to
the  Borrower  during such month to  reimburse  the  Revolving  Loan Lenders for
drawings made under Letters of Credit,  and the amount and nature of any charges
to the Loan  Account  made  during  such month on account of fees,  commissions,
expenses  and other  Obligations.  All  entries on any such  statement  shall be
presumed to be correct  and, 30 days after the same is sent,  shall be final and
conclusive absent manifest error.

     Section 4.03 Sharing of Payments,  Etc.  Except as provided in Section 2.02
hereof, if any Lender shall obtain any payment (whether voluntary,  involuntary,
through the exercise of any right of set-off,  or  otherwise)  on account of any
Obligation  in excess of its  ratable  share of  payments  on account of similar
obligations  obtained by all the Lenders,  such Lender shall forthwith  purchase
from the other Lenders such  participations in such similar  obligations held by
them as shall be necessary to cause such  purchasing  Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase  from each Lender shall be rescinded and such Lender shall repay to the
purchasing  Lender the purchase  price to the extent of such  recovery  together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's  required  repayment to (ii) the total amount
so recovered from the purchasing  Lender of any interest or other amount paid by

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the purchasing Lender in respect of the total amount so recovered). The Borrower
agrees  that any  Lender so  purchasing  a  participation  from  another  Lender
pursuant  to this  Section  4.03 may, to the fullest  extent  permitted  by law,
exercise  all of its rights  (including  the  Lender's  right of  set-off)  with
respect  to such  participation  as fully  as if such  Lender  were  the  direct
creditor of the Borrower in the amount of such participation.

     Section 4.04 Apportionment of Payments.  Subject to Section 2.02 hereof and
to any written agreement among the Agents or the Lenders:

     (a) All payments of principal and interest in respect of outstanding Loans,
all payments in respect of the Reimbursement  Obligations,  all payments of fees
(other than the fees with  respect to Letters of Credit  provided for in Section
3.03(b)(ii) and the audit and collateral monitoring fees provided for in Section
4.01) and all other  payments  in  respect  of any other  Obligations,  shall be
allocated by the Administrative  Agent among such of the Lenders as are entitled
thereto,  in  proportion  to their  respective  Pro Rata Shares or  otherwise as
provided  herein  or, in  respect  of  payments  not made on account of Loans or
Letter of Credit  Obligations,  as designated by the Person making  payment when
the payment is made.

     (b) After the occurrence and during the continuance of an Event of Default,
the  Administrative  Agent may, and upon the  direction of the Required  Lenders
shall,  apply all payments in respect of any Obligations and all proceeds of the
Collateral,  subject to the provisions of this Agreement,  (i) first, ratably to
pay the Obligations in respect of any fees, expense reimbursements,  indemnities
and other  amounts  then due to the Agents or the L/C Issuer until paid in full;
(ii) second,  ratably to pay interest due in respect of the Agent Advances until
paid in full, (iii) third, ratably to pay principal of Agent Advances until paid
in full,  (iv)  fourth,  ratably to pay any fees,  expense  reimbursements,  and
indemnities  then due to the  Revolving  Loan  Lenders  until paid in full;  (v)
fifth,  ratably  to pay  interest  due in  respect  of the  Revolving  Loans and
Reimbursement  Obligations  until  paid in  full;  (vi)  sixth,  ratably  to pay
principal of the Revolving  Loans and Letter of Credit  Obligations  (or, to the
extent such Obligations are contingent, to provide cash collateral in respect of
such Obligations (it being understood and agreed that with respect to any Letter
of  Credit,  the  amount  of such cash  collateral  must be equal to 105% of the
greatest  amount  for which such  Letter of Credit  may be drawn)  until paid in
full;  (vii)  seventh,  ratably  to pay any fees,  expense  reimbursements,  and
indemnities then due to the Term Loan Lenders until paid in full; (viii) eighth,
ratably to pay interest due in respect of the Term Loan until paid in full; (ix)
ninth,  ratably to pay  principal  of the Term Loan until paid in full,  and (x)
tenth, to the ratable payment of all other Obligations then due and payable.

     (c) In each  instance,  so long as no Event of Default has  occurred and is
continuing,  Section  4.04(b) shall not be deemed to apply to any payment by the
Borrower  specified  by the Borrower to the  Administrative  Agent to be for the
payment of Term Loan  Obligations  then due and payable  under any  provision of
this  Agreement or the  prepayment  of all or part of the  principal of the Term
Loan in accordance with the terms and conditions of Section 2.05.

     (d) For purposes of Section  4.04(b),  (other than clause  (viii)  thereof)
"paid in full"  means with  respect to any  Obligations,  payment in cash of all
amounts owing under the Loan Documents in respect of such Obligations, including
fees, interest,  default interest,  interest on interest, expense reimbursements
and indemnities,  specifically including in each case any of the foregoing which
would accrue after the commencement of any Insolvency Proceeding irrespective of
whether a claim is allowable in such Insolvency Proceeding, except to the extent

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that default or overdue  interest (but not any other  interest)  and fees,  each
arising  from  or  related  to a  default,  are  disallowed  in  any  Insolvency
Proceeding; provided, however, that for purposes of such clause (viii), "paid in
full"  means with  respect to any  Obligations,  payment in cash of all  amounts
owing under the Loan Documents in respect of such  Obligations,  including fees,
interest,  default interest,  interest on interest,  expense  reimbursements and
indemnities,  specifically  including  in each case any of the  foregoing  which
would accrue after the commencement of any Insolvency Proceeding irrespective of
whether a claim is allowable in such Insolvency Proceeding.

     (e) In the event of a direct  conflict  between the priority  provisions of
this Section 4.04 and other provisions contained in any other Loan Document,  it
is the  intention of the parties  hereto that both such  priority  provisions in
such  documents  shall be read  together and  construed,  to the fullest  extent
possible,  to be in  concert  with  each  other.  In the  event  of any  actual,
irreconcilable  conflict  that cannot be resolved  as  aforesaid,  the terms and
provisions of this Section 4.04 shall control and govern.

     Section 4.05 Increased Costs and Reduced Return.

     (a) If any Lender,  any Agent or the L/C Issuer shall have  determined that
the adoption or  implementation  of, or any change in, any law, rule,  treaty or
regulation,  or any policy,  guideline  or  directive  of, or any change in, the
interpretation  or administration  thereof by, any court,  central bank or other
administrative or Governmental Authority, or compliance by any Lender, any Agent
or the L/C Issuer or any Person  controlling any such Lender,  any such Agent or
the L/C Issuer with any  directive  of, or guideline  from,  any central bank or
other  Governmental  Authority  or  the  introduction  of,  or  change  in,  any
accounting  principles  applicable to any Lender, any Agent or the L/C Issuer or
any Person  controlling  any such  Lender,  any such Agent or the L/C Issuer (in
each case,  whether or not having the force of law)  (each,  a "Change in Law"),
shall (i)  subject  any  Lender,  any  Agent or the L/C  Issuer,  or any  Person
controlling  any such Lender,  any such Agent or the L/C Issuer to any tax, duty
or other charge with  respect to this  Agreement or any Loan made by such Lender
or such Agent or any Letter of Credit  issued by the L/C  Issuer,  or change the
basis of taxation of payments to any Lender,  any Agent or the L/C Issuer or any
Person  controlling  any such  Lender,  any such  Agent or the L/C Issuer of any
amounts  payable  hereunder  (except  for taxes on the overall net income of any
Lender,  any Agent or the L/C Issuer or any Person  controlling any such Lender,
any such Agent or the L/C Issuer),  (ii) impose,  modify or deem  applicable any
reserve,  special deposit or similar requirement against any Loan, any Letter of
Credit or against  assets of or held by, or deposits with or for the account of,
or credit  extended  by, any  Lender,  any Agent or the L/C Issuer or any Person
controlling any such Lender, any such Agent or the L/C Issuer or (iii) impose on
any  Lender,  any Agent or the L/C  Issuer or any  Person  controlling  any such
Lender,  any such  Agent or the L/C Issuer any other  condition  regarding  this
Agreement or any Loan or Letter of Credit,  and the result of any event referred
to in clauses  (i),  (ii),  or (iii) above shall be to increase  the cost to any
Lender, any Agent or the L/C Issuer of making any Loan, issuing, guaranteeing or
participating  in any Letter of Credit,  or  agreeing to make any Loan or issue,

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guaranty  or  participate  in any  Letter of  Credit,  or to reduce  any  amount
received or  receivable  by any Lender,  any Agent or the L/C Issuer  hereunder,
then,  upon demand by any such  Lender,  any such Agent or the L/C  Issuer,  the
Borrower shall pay to such Lender,  such Agent or the L/C Issuer such additional
amounts as will  compensate  such Lender,  such Agent or the L/C Issuer for such
increased costs or reductions in amount.

     (b) If any Lender,  any Agent or the L/C Issuer shall have  determined that
any  Change in Law  either  (i)  affects  or would  affect the amount of capital
required or expected to be maintained by any Lender, any Agent or the L/C Issuer
or any Person  controlling  such Lender,  such Agent or the L/C Issuer,  and any
Lender,  any Agent or the L/C Issuer  determines that the amount of such capital
is  increased  as a  direct  or  indirect  consequence  of  any  Loans  made  or
maintained,  Letters of Credit  issued or any  guaranty  or  participation  with
respect thereto, any Lender's, any Agent's or the L/C Issuer's or any such other
controlling Person's other obligations hereunder,  or (ii) has or would have the
effect of reducing  the rate of return on any  Lender's,  any Agent's or the L/C
Issuer's any such other controlling Person's capital to a level below that which
such Lender,  such Agent or the L/C Issuer or such controlling Person could have
achieved  but for such  circumstances  as a  consequence  of any  Loans  made or
maintained,  Letters of Credit  issued,  or any guaranty or  participation  with
respect  thereto or any  agreement to make Loans,  to issue Letters of Credit or
such  Lender's,  such  Agent's or the L/C  Issuer's  or such  other  controlling
Person's other obligations  hereunder (in each case, taking into  consideration,
such  Lender's,  such  Agent's or the L/C  Issuer's  or such  other  controlling
Person's  policies with respect to capital  adequacy),  then, upon demand by any
Lender, any Agent or the L/C Issuer, the Borrower shall pay to such Lender, such
Agent or the L/C  Issuer  from  time to time  such  additional  amounts  as will
compensate  such  Lender,  such  Agent  or the  L/C  Issuer  for  such  cost  of
maintaining  such  increased  capital or such reduction in the rate of return on
such  Lender's,  such  Agent's or the L/C  Issuer's  or such  other  controlling
Person's capital.

     (c) All amounts  payable  under this Section 4.05 shall bear  interest from
the date that is 10 days  after the date of demand by any  Lender,  any Agent or
the L/C  Issuer  until  payment  in full to such  Lender,  such Agent or the L/C
Issuer at the Reference  Rate. A certificate  of such Lender,  such Agent or the
L/C Issuer claiming  compensation under this Section 4.05,  specifying the event
herein above  described  and the nature of such event shall be submitted by such
Lender,  such  Agent  or the L/C  Issuer  to the  Borrower,  setting  forth  the
additional  amount due and an explanation of the calculation  thereof,  and such
Lender's,  such Agent's or the L/C Issuer's  reasons for invoking the provisions
of this Section 4.05, and shall be final and conclusive absent manifest error.

                                   ARTICLE V

                               CONDITIONS TO LOANS

     Section 5.01 Conditions Precedent. The obligation of any Lender to make the
initial  Loans (or any other Person to  otherwise to extend any credit  provided
for hereunder), is subject to the fulfillment,  to the satisfaction or waiver of
the Agents (the making of such  initial  extension of credit by any Lender being
conclusively deemed to be its satisfaction or waiver of the following),  of each
of the conditions precedent set forth below:

     (a) Payment of Fees,  Etc.  The Borrower  shall have paid all fees,  costs,
expenses and taxes then payable pursuant to Sections 2.06 or 12.04.

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<PAGE>

     (b)  Representations  and  Warranties;  No Event of Default.  The following
statements  shall be true and correct:  (i) the  representations  and warranties
contained in Article VI and in each other Loan Document or certificate delivered
to any  Agent  or any  Lender  pursuant  hereto  or  thereto  on or prior to the
Effective Date are true and correct in all material  respects  (except that such
materiality  qualifier  shall  not  be  applicable  to any  representations  and
warranties  that already are  qualified or modified by  materiality  in the text
thereof) on and as of the  Effective  Date as though made on and as of such date
(it being understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material  respects  only as of such  specified  date) and (ii) no Default or
Event of Default shall have occurred and be continuing on the Effective Date.

     (c) [Intentionally Omitted].

     (d) Delivery of Documents.  The Collateral  Agent shall have received on or
before the Effective Date the following, each in form and substance satisfactory
to the Agents and, unless indicated otherwise, dated the Effective Date:

     (i) the Canadian Guarantee, duly executed by the Canadian Guarantor;

     (ii)  the  Canadian  Security  Agreement,  duly  executed  by the  Canadian
Guarantor;

     (iii) the Canadian Pledge Agreement,  duly executed by PRG-Schultz  Canada,
Inc., a Georgia  corporation,  together with the original stock certificates (if
any)  representing  all of the stock of the Canadian  Guarantor,  accompanied by
proper instruments of transfer;

     (iv) the Fee Letter, duly executed by the Borrower;

     (v) the Funds Flow Agreement, duly executed by each Loan Party;

     (vi) the Intercompany  Subordination Agreement,  duly executed by each Loan
Party;

     (vii) the Meridian Pledge  Agreements,  duly executed by each of the Parent
and HS&A Acquisition - UK, Inc., a Texas corporation, together with the original
stock  certificates  (if  any)  representing  all  of  the  stock  of  Meridian,
accompanied by proper instruments of transfer;

     (viii) the Security Agreement,  duly executed by each Loan Party,  together
with the original stock certificates  representing all of the stock of such Loan
Party's Subsidiaries and all intercompany  promissory notes of such Loan Parties
required  to be  delivered  pursuant  to the  terms of the  Security  Agreement,
accompanied  by  undated  stock  powers  executed  in  blank  and  other  proper
instruments of transfer;

     (ix) a Filing  Authorization  Letter,  duly  executed  by each Loan  Party,
together with appropriate financing statements and PPSA registration  statements

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duly filed in such office or offices as may be  necessary  or, in the opinion of
the Collateral Agent,  desirable to perfect the security interests  purported to
be created by each Security Agreement;

     (x)  certified  copies  of all  effective  financing  statements  and  PPSA
registration  statements which name as debtor any Loan Party and which are filed
in the offices  referred to in clause (xii) above,  together with copies of such
financing  statements  and  PPSA  registration  statements  and the  results  of
searches  for any tax Lien and  judgment  Lien filed  against such Person or its
property;

     (xi) a  termination  and release  agreement  with  respect to the  Existing
Credit  Facility,  duly  executed by the Loan  Parties and the  Existing  Credit
Facility  Lender,   together  with  termination  statements  for  all  financing
statements and PPSA  registration  statements  filed by the Existing  Lender and
covering  any  portion  of the  Collateral  and  releases  for all  intellectual
property  security  agreements  or  assignments  filed in favor of the  Existing
Lender and covering any portion of the Collateral;

     (xii) a  termination  and release  agreement  with  respect to the Existing
Bridge Facility, duly executed by the Loan Parties, the Existing Bridge Facility
Lenders,  and the Existing  Bridge  Facility  Agent,  together with  termination
statements for all financing  statements and PPSA registration  statements filed
by the Existing Bridge Facility Agent and covering any portion of the Collateral
and releases for all intellectual  property  security  agreements or assignments
filed in favor of the Existing Bridge Facility Agent and covering any portion of
the Collateral;

     (xiii) a copy of the  resolutions  of each Loan Party,  certified as of the
Effective Date by a secretary or assistant  secretary  thereof,  authorizing (A)
the transactions  contemplated by the Loan Documents to which such Loan Party is
or will be a party, and (B) the execution, delivery and performance by such Loan
Party of each Loan  Document  to which such Loan Party is or will be a party and
the execution and delivery of the other documents to be delivered by such Person
in connection herewith and therewith;

     (xiv) a  certificate  of a secretary  or  assistant  secretary of each Loan
Party,  certifying the names and true signatures of the  representatives of such
Loan Party  authorized to sign each Loan Document to which such Loan Party is or
will be a party and the other  documents  to be executed  and  delivered by such
Loan Party in connection  herewith and therewith,  together with evidence of the
incumbency of such authorized officers;

     (xv)  a  certificate  of  the  appropriate  official(s)  of  the  state  of
organization  and  each  state  of  foreign  qualification  of each  Loan  Party
certifying as to the  subsistence  in good standing of, and the payment of taxes
by, such Loan Party in such states (except, in the case of the states of foreign
qualification,  where the failure to be so qualified or in good standing,  or to
pay such  taxes,  individually  or in the  aggregate,  could not  reasonably  be
expected to result in a Material Adverse Effect);

     (xvi) a true and complete  copy of the charter,  certificate  of formation,
certificate  of  limited  partnership  or other  publicly  filed  organizational
document  of each Loan  Party,  certified  (A) as of a recent  date prior to the
Effective Date by an appropriate  official of the state of  organization of such
Loan Party, and (B) by a secretary or assistant  secretary of such Loan Party as

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being a true and complete copy of the publicly filed organizational document for
such Loan Party, which shall set forth the same complete name of such Loan Party
as is set forth herein and the  organizational  number of such Loan Party, if an
organized number is issued in such jurisdiction;

     (xvii)  a copy  of the  charter  and  by-laws,  limited  liability  company
agreement,  operating  agreement,  agreement  of  limited  partnership  or other
organizational  document  of each  Loan  Party,  together  with  all  amendments
thereto,  certified  as of  the  Effective  Date  by a  secretary  or  assistant
secretary of such Loan Party;

     (xviii) an opinion of (a) (i) Weil,  Gotshal & Manges LLP,  and (ii) Arnall
Golden  Gregory LLP,  counsel to the Loan  Parties,  (b)  Stikeman  Elliott LLP,
counsel to the Canadian  Guarantor,  (c) Stewart McKelvey Stirling Scales,  Nova
Scotia counsel to the Canadian Guarantor, and (c) McConnell Valdes, Puerto Rican
counsel  to the  Collateral  Agent,  each  substantially  in the form of Exhibit
5.01(d) and as to such other matters as the Agents may reasonably request;

     (xix) a certificate of an Authorized Officer of the Borrower, certifying as
to the matters set forth in Section 5.01(b);

     (xx) a copy of the Financial Statements;

     (xxi) a copy of the financial  projections described in Section 6.01(g)(ii)
hereof;

     (xxii)  a  solvency  certificate  of the  chief  financial  officer  of the
Borrower in the form of Exhibit S-1;

     (xxiii) evidence of the insurance coverage required by Section 7.01 and the
terms  of each  Security  Agreement,  with  such  endorsements  as to the  named
insureds  or lender  loss  payees  thereunder  as the  Agents  may  request  and
providing  that such policy may be terminated or canceled (by the insurer or the
insured  thereunder)  only upon 30 days prior written  notice to the  Collateral
Agent and each such named insured or loss payee;

     (xxiv) a certificate of an Authorized  Officer of the Borrower,  certifying
the names and true  signatures  of the persons  that are  authorized  to provide
Notices of Borrowing,  Letter of Credit Applications and all other notices under
this Agreement and the other Loan Documents;

     (xxv) a landlord waiver,  in form and substance  satisfactory to the Agents
and which may be  included  as a  provision  contained  in the  relevant  Lease,
executed by each landlord with respect to each of the following  locations:  600
Galleria Parkway, Atlanta, GA 30339;

     (xxvi)  the  Loan  Parties  shall  have  received  all  material  licenses,
approvals or evidence of other actions required by any Governmental Authority in
connection  with the  execution and delivery by the Loan Parties of the Exchange

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<PAGE>

Offer  Transaction  Documents  and with  the  consummation  of the  transactions
contemplated thereby;

     (xxvii) a certificate  of an Authorized  Officer of the Parent,  certifying
that  attached  thereto are  complete and correct  copies of the Exchange  Offer
Transaction Documents;

     (xxviii) such  depository  account,  blocked  account,  lockbox account and
similar agreements and other documents,  each in form and substance satisfactory
to the Agents,  as the Agents may request  with respect to the  Borrower's  cash
management system; and

     (xxviii) such other agreements,  instruments, approvals, opinions and other
documents,  each satisfactory to the Agents in form and substance, as the Agents
may reasonably request.

     (e) Material  Adverse Effect.  The Agents shall have  determined,  in their
sole judgment,  that no event or development  shall have occurred since December
31, 2005 which  could  reasonably  be  expected to result in a Material  Adverse
Effect.

     (f)  Proceedings.  No claim,  action,  suit,  investigation,  litigation or
proceeding  is pending  or  threatened  in any court or before any  Governmental
Authority which relates to the transactions  contemplated  hereby or which could
reasonably be expected to result in a Material Adverse Effect.

     (g)   Management   Reference   Checks.   The  Agents  shall  have  received
satisfactory reference checks for key management of each Loan Party.

     (h) Due  Diligence.  The  Agents  shall  have  completed  their  legal  due
diligence  with  respect to each Loan  Party and the  results  thereof  shall be
acceptable  to  the  Agents,  in  their  sole  and  absolute   discretion.   The
Administrative  Agent shall have  received a Field  Survey and Audit,  dated not
earlier  than 30 days prior to the  Effective  Date,  and such Field  Survey and
Audit and the results thereof shall be acceptable to the  Administrative  Agent,
in its sole and absolute discretion.

     (i)  Availability.  After  giving  effect  to all  Loans  to be made on the
Effective Date and the Letters of Credit to be issued on the Effective Date, the
Availability  shall not be less than $11,500,000  (calculated  without regard to
any reserves imposed by the Administrative Agent). The Borrower shall deliver to
the  Agents  a  certificate  of the  chief  financial  officer  of the  Borrower
certifying as to the calculation of Availability.

     (j) Revolving  Loans and Letters of Credit on Effective Date. The aggregate
amount of all  Revolving  Loans to be made and Letters of Credit to be issued on
the Effective Date shall not exceed $5,000,000.

     (k) Exchange  Offer  Transaction.  The Agents shall have received  evidence
reasonably  satisfactory  to them,  including  a  certificate  of an  Authorized
Officer of the Parent certifying, that concurrent with the making of the initial
Loans or Letter  of  Credit,  the  Parent  will  simultaneously  consummate  the
exchange (the "Exchange Offer Transaction") of not less than $118,750,000 of the
Existing Notes for (i) a ratable portion of up to $50,000,000 (as such principal
amount may be increased by the amount of accrued  interest on the Existing Notes

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<PAGE>

that have been  exchanged)  of Senior  Notes,  (ii) a ratable  portion  of up to
$60,000,000  of Senior  Convertible  Notes,  and (iii) a ratable  portion of the
Series A Preferred  Stock in  accordance  with the terms and  conditions  of the
Exchange Offer Transaction Documents.

     Section 5.02 Conditions  Precedent to All Loans and Letters of Credit.  The
obligation of any Agent or any Lender to make any Loan or of the  Administrative
Agent to assist the Borrower in  establishing or opening any Letter of Credit is
subject to the fulfillment of each of the following conditions precedent:

     (a)  Representations  and  Warranties;  No Event of Default.  The following
statements shall be true and correct,  and the submission by the Borrower to the
Administrative  Agent of a Notice of  Borrowing  with respect to each such Loan,
and the Borrower's acceptance of the proceeds of such Loan, or the submission by
the  Borrower  of a Letter of Credit  Application  with  respect  to a Letter of
Credit, and the issuance of such Letter of Credit,  shall each be deemed to be a
representation  and  warranty by each Loan Party on the date of such Loan or the
date of issuance  of such Letter of Credit  that:  (i) the  representations  and
warranties contained in Article VI and in each other Loan Document,  certificate
or other writing delivered any Agent or any Lender pursuant hereto or thereto on
or prior to the date of such Loan or such  Letter of Credit are true and correct
in all material  respects (except that such  materiality  qualifier shall not be
applicable to any  representations  and warranties that already are qualified or
modified by  materiality  in the text  thereof) on and as of such date as though
made on and as of such date (except to the extent that any such  representations
or warranties  expressly relate solely to an earlier date), and (ii) at the time
of and after giving effect to the making of such Loan and the application of the
proceeds thereof or at the time of issuance of such Letter of Credit, no Default
or Event of Default has  occurred  and is  continuing  or would  result from the
making of the Loan to be made,  or the  issuance  of such Letter of Credit to be
issued, on such date.

     (b) Notices.  The Administrative  Agent shall have received (i) a Notice of
Borrowing pursuant to Section 2.02 hereof or (ii) a Letter of Credit Application
pursuant to Section 3.03 hereof, as applicable.

     Section 5.03 Conditions  Subsequent to All Loans. The Loan Parties agree to
fulfill,  on or  before  the  date  applicable  thereto,  each of the  following
conditions subsequent (the failure by the Loan Parties to so perform or cause to
be performed any of the  following to  constitute an immediate  Event of Default
hereunder):

     (a) One or before  the date that is 1  Business  Days  after the  Effective
Date, the Collateral Agent shall have received a Control Agreement,  in form and
substance  satisfactory  to the  Agents,  regarding  the  Borrower's  securities
account located at Merrill Lynch.

     (b) On or before the date that is 2 Business Days after the Effective Date,
the  Collateral  Agent shall have  received the opinion of Carey Olsen,  Isle of
Jersey counsel to the Collateral Agent, regarding the Meridian Pledge Agreement.

     (c) On or before the date that is 5 Business Days after the Effective Date,
the Collateral  Agent shall have received stock pledge agreement with respect to
the Capital Stock of Profit Recovery Brasil Ltda., a company organized under the
laws of Brazil (the "Brazilian Pledge Agreement"),  which stock pledge agreement

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<PAGE>

shall be in form and substance reasonably  satisfactory to the Agents (including
being  governed  by the  laws of the  jurisdiction  of  organization  of  Profit
Recovery Brasil Ltda., a company  organized under the laws of Brazil),  together
with (i)  appropriate  certificates  and instruments of transfer with respect to
such Capital Stock (to the extent such Capital Stock is certificated),  and (ii)
all other  documentation,  including one or more opinions of counsel  reasonably
satisfactory to the Agents,  that is, in the opinion of the Agents,  appropriate
with respect to the execution and delivery of such stock pledge agreement.

     (d) On or before the date that is 5 Business Days after the Effective Date,
the Collateral  Agent shall have received (i) an account  pledge  agreement with
respect to the Accounts  Receivable and Deposit Account of the German  Guarantor
(the "German  Security  Agreement"),  which account pledge agreement shall be in
form and  substance  reasonably  satisfactory  to the  Agents  (including  being
governed  by the  laws  of  the  jurisdiction  of  organization  of  the  German
Guarantor),  (ii) a share pledge  agreement with respect to the Capital Stock of
the German  Guarantor  (the  "German  Pledge  Agreement"),  which  share  pledge
agreement shall be in form and substance  reasonably  satisfactory to the Agents
(including being governed by the laws of the jurisdiction of organization of the
German  Guarantor),  together with  appropriate  certificates and instruments of
transfer with respect to such Capital Stock (to the extent such Capital Stock is
certificated), and (iii) all other documentation, including one or more opinions
of counsel reasonably satisfactory to the Agents, that is, in the opinion of the
Agents,  appropriate  with respect to the execution and delivery of such account
pledge agreement and share pledge agreement.

     (e) On or before  the date that is 10  Business  Days  after the  Effective
Date,  the the Agents  shall  have  received  a Control  Agreement  for the Loan
Parties'  Deposit  Account  located  at the Royal  Bank of  Canada,  in form and
substance reasonably satisfactory to the Agents.

     (f) On or before the date that is 30 days  after the  Effective  Date,  the
Agents shall have received  certified copies of the policies of insurance of the
Parent and its Subsidiaries.

     (g) As soon as  reasonably  practicable,  but in any event on or before the
date that is 90 days after the  Effective  Date (or such  longer  period (not to
exceed 180 days) as the Collateral Agent may reasonably agree), the Borrower and
the  Domestic  Guarantors  shall  have (i) moved the  Lockboxes  and  Collection
Account from the Lockbox Bank listed on Schedule 8.01 to a financial institution
acceptable to the Agents,  (ii) established a cash management  system reasonably
satisfactory to Collateral Agent,  (iii) delivered to the Agents an updated form
of Schedule  6.01(v)  and an updated  form of  Schedule  8.01,  each in form and
substance  satisfactory  to the Agents,  which  schedules,  upon delivery to and
approval by the Agent,  shall,  without any further  action by any party hereto,
update and replace  Schedule 6.01(v) and Schedule 8.01,  respectively,  attached
hereto,  and (iv)  delivered  to the Agents  such  depository  account,  blocked
account,  lockbox  account,  or  other  similar  agreements,  each in  form  and
substance satisfactory to the Agents, in respect of the Lockboxes and Collection
Account at such new financial institution.

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<PAGE>

     (h) The Loan Parties  shall have used  commercially  reasonable  efforts to
deliver to the Collateral Agent, on or before the date that is 90 days after the
Effective Date, landlord waivers, in form and substance reasonably  satisfactory
to the Agents and which may be included as a provision contained in the relevant
Lease,  executed  by the  landlords  for the Loan  Parties'  premises  listed on
Schedule 5.03(b).

     (i) On or before the date that is 90 days  after the  Effective  Date,  the
Canadian  Guarantor  shall  deliver to the  Collateral  Agent the results of the
Canadian statutory lien searches, which shall be satisfactory to Agents.

                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

     Section  6.01  Representations  and  Warranties.  Each  Loan  Party  hereby
represents  and  warrants  to the  Agents,  the  Lenders  and the L/C  Issuer as
follows:

     (a) Organization, Good Standing, Etc. Each Loan Party (i) is a corporation,
limited  liability  company  or  limited  partnership  duly  organized,  validly
existing  and in good  standing (in each  jurisdiction  where to be so has legal
significance)  under the laws of the state or jurisdiction of its  organization,
(ii) has all  requisite  power and  authority  to conduct  its  business  as now
conducted and as currently  contemplated  and, in the case of the  Borrower,  to
make the borrowings hereunder,  and to execute and deliver each Loan Document to
which it is a party,  and to consummate the transactions  contemplated  thereby,
and (iii) is duly  qualified  to do  business  and is in good  standing  in each
jurisdiction  in which the character of the properties  owned or leased by it or
in which the  transaction  of its business makes such  qualification  necessary,
except, in the case of jurisdictions of foreign qualification, where the failure
to be so qualified or in good standing,  individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.

     (b)  Authorization,  Etc. The execution,  delivery and  performance by each
Loan  Party of each Loan  Document  to which it is or will be a party,  (i) have
been  duly  authorized  by all  necessary  action,  (ii)  do not  and  will  not
contravene its charter or by-laws,  its limited  liability  company or operating
agreement  or its  certificate  of  partnership  or  partnership  agreement,  as
applicable,  (iii)  do  not  violate  any  applicable  law  or  any  contractual
restriction  binding  on or  otherwise  affecting  it or any of its  properties,
except  where any  violation  could not  reasonably  be  expected to result in a
Material  Adverse  Effect,  (iv) do not and will not  result in or  require  the
creation of any Lien (other than Permitted Liens) upon or with respect to any of
its   properties,   and  (v)  do  not  and  will  not  result  in  any  default,
noncompliance,  suspension,  revocation, impairment, forfeiture or nonrenewal of
any permit,  license,  authorization or approval applicable to its operations or
any of its properties, except where any such default, noncompliance, suspension,
revocation,  impairment,  forfeiture  or  nonrenewal  could  not  reasonably  be
expected to result in a Material Adverse Effect.

     (c)  Governmental  Approvals.  No authorization or approval or other action
by, and no notice to or filing with, any  Governmental  Authority is required in
connection with the due execution, delivery and performance by any Loan Party of

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<PAGE>

any Loan Document to which it is or will be a party except (i) such as have been
obtained or made and are in full force and effect,  (ii)  filings  necessary  to
perfect Liens created by the Loan Documents, and (iii) authorizations, approvals
or actions the failure to obtain or perform  individually  or in the  aggregate,
could not reasonably be expected to result in a Material Adverse Effect.

     (d)  Enforceability  of Loan  Documents.  This Agreement is, and each other
Loan  Document  to which any Loan  Party is or will be a party,  when  delivered
hereunder,  will be, a legal,  valid  and  binding  obligation  of such  Person,
enforceable  against such Person in accordance with its terms,  except as may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
other similar laws and subject to general  principles  of equity,  regardless of
whether considered in a proceeding in equity or at law.

     (e) Subsidiaries. Schedule 6.01(e) is a complete and correct description of
the name, jurisdiction of incorporation and ownership of the outstanding Capital
Stock of each  Subsidiary  of the Parent as of the  Effective  Date.  All of the
issued and outstanding  shares of Capital Stock of such  Subsidiaries  have been
validly issued and are fully paid and nonassessable, and the holders thereof are
not entitled to any preemptive, first refusal or other similar rights. Except as
indicated on such Schedule, all such Capital Stock is owned by the Parent or one
or more of its wholly-owned  Subsidiaries,  free and clear of all Liens,  except
nonconsensual  Permitted Liens. Except as indicated on Section 6.01(e) as of the
Effective Date, there are no outstanding  equity securities of the Parent or any
of its Subsidiaries  and no outstanding  obligations of the Parent or any of its
Subsidiaries convertible into or exchangeable for, or warrants, options or other
rights  for  the  purchase  or  acquisition  from  the  Parent  or  any  of  its
Subsidiaries,  or other  obligations  of any  Subsidiary  to issue,  directly or
indirectly, any shares of Capital Stock of any Subsidiary of the Parent.

     (f)  Litigation;  Commercial  Tort Claims.  Except as set forth in Schedule
6.01(f),  (i)  there is no  pending  or,  to the  knowledge  of any Loan  Party,
threatened action, suit or proceeding  affecting any Loan Party before any court
or other  Governmental  Authority or any arbitrator that (A) could reasonably be
expected to result in a Material Adverse Effect or (B) as of the Effective Date,
calls into  question the validity or  enforceability  of, or otherwise  seeks to
invalidate,  this Agreement or any other Loan  Document,  and (ii) except as set
forth on Schedule  6.01(f),  as of the Effective  Date, none of the Loan Parties
holds any commercial tort claims in respect of which a claim has been filed in a
court of law or a written  notice by an  attorney  has been given to a potential
defendant.

     (g) Financial Condition.

     (i) The Financial  Statements,  copies of which have been delivered to each
Agent  and  each  Lender,   fairly  present,  in  all  material  respects,   the
consolidated  financial  condition of the Parent and its  Subsidiaries as at the
respective  dates  thereof and the  consolidated  results of  operations  of the
Parent and its  Subsidiaries  for the fiscal  periods  ended on such  respective
dates,  all in  accordance  with GAAP,  and since  December 31, 2005 no event or
development has occurred that has had or could  reasonably be expected to result
in a Material Adverse Effect.

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<PAGE>

     (ii) The Parent has heretofore  furnished to each Agent and each Lender (A)
projected monthly balance sheets, income statements and statements of cash flows
of the Parent  and its  Subsidiaries  for the period  from  December  31,  2005,
through  December 31, 2006,  and (B) projected  annual  balance  sheets,  income
statements and statements of cash flows of the Parent and its  Subsidiaries  for
the  Fiscal  Years  ending  in 2006  through  2008,  which  projected  financial
statements  shall be updated from time to time  pursuant to Section  7.01(a)(x).
Such  projections,  as so  updated,  are  believed  by the  Parent  at the  time
furnished to be reasonable, have been prepared on a reasonable basis and in good
faith by the Parent,  and have been based on assumptions  believed by the Parent
to be reasonable at the time made and upon the best  information then reasonably
available to the Parent (it being  understood  that actual results may vary from
such projections and that such variations may be material).

     (h)  Compliance  with  Law,  Etc.  No Loan  Party  is in  violation  of its
organizational  documents,  any law, rule, regulation,  judgment or order of any
Governmental Authority applicable to it or any of its property or assets, or any
material term of any agreement or instrument  (including any Material  Contract)
binding  on or  otherwise  affecting  it or  any of its  properties  where  such
violation could  reasonably be expected to result in a Material  Adverse Effect,
and no Default or Event of Default has occurred and is continuing.

     (i) ERISA. Except as set forth on Schedule 6.01(i),  (i) each Employee Plan
is in substantial  compliance with ERISA and the IRC, (ii) no Termination  Event
has  occurred nor is  reasonably  expected to occur with respect to any Employee
Plan,  (iii) the most recent  annual  report  (Form 5500 Series) with respect to
each Employee Plan,  including any required  Schedule B (Actuarial  Information)
thereto,  copies of which have been filed with the Internal  Revenue Service and
delivered to the Agents,  is complete  and correct in all material  respects and
fairly  presents the funding status of such Employee Plan, and since the date of
such report there has been no material  adverse  change in such funding  status,
(iv) copies of each agreement entered into with the PBGC, the U.S. Department of
Labor or the Internal  Revenue  Service  with respect to any Employee  Plan have
been delivered to the Agents,  (v) no Employee Plan had an accumulated or waived
funding  deficiency or permitted decrease which would create a deficiency in its
funding  standard  account or has applied for an extension  of any  amortization
period  within  the  meaning of  Section  412 of the IRC at any time  during the
previous 60 months, and (vi) no Lien imposed under the IRC or ERISA exists or is
likely to arise on account of any  Employee  Plan  within the meaning of Section
412 of the IRC. Except as set forth on Schedule 6.01(i), no Loan Party or any of
its ERISA  Affiliates  has incurred any  withdrawal  liability  under ERISA with
respect to any  Multiemployer  Plan, or is aware of any facts indicating that it
or any of its ERISA  Affiliates  may in the  future  incur  any such  withdrawal
liability.  Except as set forth on Schedule 6.01(i), no Loan Party or any of its
ERISA  Affiliates  nor any  fiduciary of any Employee  Plan has (A) engaged in a
nonexempt prohibited  transaction  described in Sections 406 of ERISA or 4975 of
the IRC, (B) failed to pay any required  installment  or other payment  required
under  Section  412 of the IRC on or  before  the due  date  for  such  required
installment  or  payment,  (C)  engaged in a  transaction  within the meaning of
Section 4069 of ERISA or (D) incurred  any  liability to the PBGC which  remains
outstanding  other  than the  payment  of  premiums,  and there  are no  premium
payments which have become due which are unpaid. Except as set forth on Schedule
6.01(i), there are no pending or, to the knowledge of any Loan Party, threatened
claims, actions,  proceedings or lawsuits (other than claims for benefits in the
normal  course)  asserted or  instituted  against (1) any  Employee  Plan or its

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assets,  (2) any  fiduciary  with respect to any Employee  Plan, or (3) any Loan
Party or any of its ERISA  Affiliates with respect to any Employee Plan.  Except
as required by Section  4980B of the  Internal  Revenue  Code or as set forth on
Schedule  6.01(i),  no Loan Party or any of its ERISA  Affiliates  maintains  an
employee  welfare  benefit  plan (as  defined  in Section  3(1) of ERISA)  which
provides health or life insurance benefits (through the purchase of insurance or
otherwise)  for any  retired or former  employee of any Loan Party or any of its
ERISA Affiliates or coverage after a participant's termination of employment.

     (j) Taxes,  Etc.  (i) All  Federal  (including  the federal  government  of
Canada)  and all  material  state,  provincial,  and local tax returns and other
reports  required  by  applicable  law to be filed by any Loan  Party  have been
filed,  or extensions  have been obtained,  and (ii) all taxes,  assessments and
other  governmental  charges  imposed upon any Loan Party or any property of any
Loan Party and which  have  become due and  payable  have been paid,  except (A)
taxes,  assessments  or other  governmental  charges  contested in good faith by
proper  proceedings  which stay the  enforcement  of any Lien resulting from the
non-payment  thereof and with respect to which  adequate  reserves have been set
aside for the payment thereof in accordance with GAAP, or (B) taxes, assessments
or other governmental charges in an aggregate amount not to exceed $50,000.

     (k)  Regulations  T, U and X. No Loan  Party is or will be  engaged  in the
business of extending  credit for the purpose of purchasing  or carrying  margin
stock  (within the meaning of Regulation T, U or X), and no proceeds of any Loan
will be used to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock.

     (l) [Intentionally Omitted]

     (m) [Intentionally Omitted]

     (n) Permits,  Etc.  Each Loan Party has,  and is in  compliance  with,  all
permits, licenses,  authorizations,  approvals,  entitlements and accreditations
required  for such Person  lawfully  to own,  lease,  manage or  operate,  or to
acquire,  each business currently owned, leased,  managed or operated,  or to be
acquired,  by such  Person,  except  to the  extent  such  failure  to obtain or
noncompliance  could not reasonably be expected to result in a Material  Adverse
Effect.  No condition  exists or event has occurred which, in itself or with the
giving  of  notice or lapse of time or both,  would  result  in the  suspension,
revocation,  impairment,  forfeiture or non-renewal of any such permit, license,
authorization,  approval,  entitlement or  accreditation,  and there is no claim
that any  thereof is not in full  force and  effect,  except to the extent  such
suspension,   revocation,   impairment,  forfeiture  or  non-renewal  could  not
reasonably be expected to result in a Material Adverse Effect.

     (o) Properties. (i) Each Loan Party has good and marketable title to, valid
leasehold  interests  in, or valid  licenses  to use,  all  property  and assets
material to its business,  free and clear of all Liens,  except  Permitted Liens
and minor  irregularities or deficiencies in title that,  individually or in the
aggregate,  do not  interfere  with its  ability  to  conduct  its  business  as
currently conducted or to utilize such property for its intended purpose. Except
as could not reasonably be expected to result in a Material Adverse Effect,  all
such  properties  and assets are in good working order and  condition,  ordinary

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wear and tear  excepted.  Schedule  6.01(o)  sets forth a complete  and accurate
list, as of the Effective Date, of the location, by state and street address, of
all real property owned or leased by each Loan Party.  As of the Effective Date,
each  Loan  Party has valid  leasehold  interests  in the  Leases  described  on
Schedule 6.01(o) to which it is a party.

     (ii) Schedule  6.01(o) sets forth as of the Effective  Date with respect to
each  such  Lease  located  in the  United  States,  the  commencement  date and
termination  date.  Each such Lease is valid and  enforceable in accordance with
its terms in all material  respects  and is in full force and effect,  except to
the extent that the failure of such Lease to be valid and enforceable or in full
force and  effect  could not  reasonably  be  expected  to result in a  Material
Adverse  Change.  No consent or approval of any landlord or other third party in
connection with any such Lease is necessary for any Loan Party to enter into and
execute  the Loan  Documents  to which it is a  party,  except  as set  forth on
Schedule  6.01(o) or except to the extent that the failure to obtain any consent
or  approval of any  landlord  could not  reasonably  be expected to result in a
Material Adverse Effect.

     (p) Full  Disclosure.  Each Loan  Party has  disclosed  to the  Agents  all
agreements,  instruments  and  corporate  or other  restrictions  to which it is
subject,  and all  other  matters  known  to it,  that,  individually  or in the
aggregate,  could reasonably be expected to result in a Material Adverse Effect.
None  of  the  other  reports,  financial  statements,   certificates  or  other
information (other than to the extent comprised of projections and other forward
looking statements) furnished by or on behalf of any Loan Party to the Agents in
connection  with the  negotiation of this  Agreement or delivered  hereunder (as
modified  or  supplemented  by other  information  so  furnished)  contains  any
material  misstatement  of fact or omits to state any material fact necessary to
make the statements  therein,  in the light of the circumstances  under which it
was made, not materially  misleading as of the date such information is dated or
certified;  provided that, with respect to projected  financial  information and
other forward  looking  statements,  each Loan Party  represents  only that such
information  was  prepared in good faith based upon  assumptions  believed to be
reasonable at the time (it being  understood  that actual  results may vary from
such  projections  and forward  looking  statements  and such  variances  may be
material).  As of the Effective  Date, to the Borrower's  knowledge  there is no
contingent  liability or fact that could  reasonably  be expected to result in a
Material  Adverse Effect which has not been set forth in a footnote  included in
the Financial Statements or a Schedule hereto.

     (q) [Intentionally Omitted].

     (r) Environmental Matters. Except as set forth on Schedule 6.01(r), (i) the
operations of each Loan Party are in  compliance  in all material  respects with
all Environmental  Laws; (ii) there has been no Release at any of the properties
owned  or  operated  by any  Loan  Party  or a  predecessor  in  interest  whose
liabilities the Borrower is legally responsible, or at any disposal or treatment
facility which received Hazardous  Materials  generated by any Loan Party or any
predecessor  in  interest  which  could  reasonably  be  expected to result in a
Material Adverse Effect; (iii) no Environmental Action has been asserted against
any Loan Party or any predecessor in interest whose  liabilities the Borrower is
legally  responsible  nor does any Loan  Party have  knowledge  or notice of any
threatened  or  pending  Environmental  Action  against  any  Loan  Party or any
predecessor  in  interest  which  could  reasonably  be  expected to result in a
Material  Adverse  Effect;  (iv) no  Environmental  Actions  have been  asserted
against any facilities that may have received Hazardous  Materials  generated by

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any Loan Party or any predecessor in interest which could reasonably be expected
to result in a Material Adverse Effect; (v) no property now or formerly owned or
occupied by a Loan Party has been used as a treatment  or disposal  site for any
Hazardous  Material;  (vi) no Loan  Party has  failed  to  report to the  proper
Governmental  Authority the occurrence of any Release which is required to be so
reported by any Environmental  Laws which could reasonably be expected to result
in a Material Adverse Effect; (vii) each Loan Party holds all licenses,  permits
and approvals  required  under any  Environmental  Laws in  connection  with the
operation of the business  carried on by it, except for such  licenses,  permits
and  approvals  as to which a Loan  Party's  failure to  maintain or comply with
could not  reasonably be expected to result in a Material  Adverse  Effect;  and
(viii) no Loan Party has received any notification pursuant to any Environmental
Laws  that (A) any work,  repairs,  construction  or  Capital  Expenditures  are
required  to  be  made  as  a  condition  of  continued   compliance   with  any
Environmental  Laws, or any license,  permit or approval issued pursuant thereto
or (B) any  license,  permit  or  approval  referred  to  above  is  about to be
reviewed,  made subject to  limitations  or  conditions,  revoked,  withdrawn or
terminated,  in each case,  except as could not reasonably be expected to result
in a Material Adverse Effect.

     (s)  Insurance.  Each Loan Party keeps its property  adequately  insured in
accordance  with  the  insurance  requirements  set  forth in  Section  7.01(h).
Schedule  6.01(s)  sets forth a list of all  insurance  maintained  by each Loan
Party on the Effective Date.

     (t)  Use of  Proceeds.  The  proceeds  of the  Loans  shall  be used to (a)
refinance  existing  Indebtedness of the Borrower owed under the Existing Credit
Facility to the Existing  Facility Lender and under the Existing Bridge Facility
to the Existing Bridge Facility Lenders, (b) pay fees and expenses in connection
with the transactions  contemplated  hereby and the Exchange Offer  Transaction,
and (c) fund working capital of the Borrower.

     (u) Solvency. After giving effect to the transactions  contemplated by this
Agreement  and before and after giving effect to each Loan and Letter of Credit,
the Loan Parties taken as a whole on a consolidated basis are Solvent.

     (v) Location of Bank Accounts.  Schedule  6.01(v) sets forth a complete and
accurate list as of the Effective  Date of all deposit,  checking and other bank
accounts,  all securities and other accounts  maintained  with any broker dealer
and all other similar  accounts  maintained by each Loan Party,  together with a
description  thereof  (i.e.,  the bank or broker dealer at which such deposit or
other account is maintained and the account number and the purpose thereof).

     (w) Intellectual  Property.  Except as set forth on Schedule 6.01(w),  each
Loan Party  owns or  licenses  or  otherwise  has the right to use all  material
licenses,   permits,   patents,  patent  applications,   trademarks,   trademark
applications,  service marks,  tradenames,  copyrights,  copyright applications,
franchises,  authorizations,  non-governmental  licenses  and  permits and other
intellectual  property  rights  that  are  necessary  for the  operation  of its
business,  without  infringement  upon or conflict  with the rights of any other
Person with respect thereto, except, in each case, which, individually or in the
aggregate,  could not  reasonably  be expected  to result in a Material  Adverse
Effect.  Set forth on Schedule 6.01(w) is a complete and accurate list as of the
Effective  Date  of  all  such  material  licenses,   permits,  patents,  patent
applications,  trademarks,  trademark applications,  service marks,  tradenames,
copyrights, copyright applications, franchises, authorizations, non-governmental
licenses and permits and other intellectual  property rights of each Loan Party.
No slogan or other advertising device, product, process, method, substance, part

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or other material now employed,  or now contemplated to be employed, by any Loan
Party infringes upon or conflicts with any rights owned by any other Person, and
no claim or litigation  regarding any of the foregoing is pending or threatened,
except for such  infringements  and  conflicts  which  could not  reasonably  be
expected to result in,  individually  or in the  aggregate,  a Material  Adverse
Effect.  To the  knowledge  of each Loan Party,  no patent,  invention,  device,
application,  principle or any statute, law, rule, regulation,  standard or code
is  pending  or  proposed,  which,  individually  or  in  the  aggregate,  could
reasonably be expected to result in a Material Adverse Effect.

     (x)  Material  Contracts.  Set forth on Schedule  6.01(x) is a complete and
accurate  list as of the Effective  Date of all Material  Contracts of each Loan
Party,  showing  the  parties and subject  matter  thereof.  Each such  Material
Contract  (i) is in full force and effect  and is binding  upon and  enforceable
against each Loan Party that is a party  thereto  and, to the  knowledge of such
Loan Party,  all other parties thereto in accordance  with its terms,  except to
the extent that failure of such Material Contract to be in full force and effect
or binding upon and enforceable against the parties thereto could not reasonably
be expected to result in a Material Adverse Effect,  (ii) has not been otherwise
amended or modified,  except for  amendments  or  modifications  which could not
reasonably be expected to result in a Material Adverse Effect,  and (iii) is not
in default due to the action of any Loan Party or, to the  knowledge of any Loan
Party, any other party thereto, except to the extent that any such default could
not reasonably be expected to result in a Material Adverse Effect.

     (y) Holding  Company and Investment  Company Acts. None of the Loan Parties
is (i) a "holding  company" or a "subsidiary  company" of a "holding company" or
an "affiliate" of a "holding  company",  as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended, or (ii) an "investment company"
or an  "affiliated  person" or "promoter" of, or "principal  underwriter"  of or
for,  an  "investment  company",  as such terms are  defined  in the  Investment
Company Act of 1940, as amended.

     (z) Employee and Labor Matters. Except as could not, individually or in the
aggregate,  reasonably  to be expected to result in a Material  Adverse  Effect,
there is (i) no unfair labor practice  complaint pending or, to the knowledge of
any Loan  Party,  threatened  against  any Loan Party  before  any  Governmental
Authority  and no  grievance or  arbitration  proceeding  pending or  threatened
against any Loan Party which  arises out of or under any  collective  bargaining
agreement, (ii) no strike, labor dispute,  slowdown,  stoppage or similar action
or  grievance  pending  or  threatened  against  any Loan  Party or (iii) to the
knowledge of any Loan Party,  no union  representation  question  existing  with
respect  to the  employees  of any Loan Party and no union  organizing  activity
taking  place with respect to any of the  employees  of any Loan Party.  No Loan
Party or any of its ERISA  Affiliates  has incurred any  liability or obligation
under the Worker Adjustment and Retraining  Notification Act ("WARN") or similar
state law,  which remains unpaid or  unsatisfied.  The hours worked and payments
made to employees of any Loan Party have not been in violation of the Fair Labor

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Standards Act or any other applicable legal  requirements,  except to the extent
such  violations  could not,  individually  or in the  aggregate,  reasonably be
expected to result in a Material Adverse Effect.  All material payments due from
any Loan Party on account of wages and employee health and welfare insurance and
other  benefits  have been paid or accrued as a  liability  on the books of such
Loan Party, except where the failure to do so could not,  individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

     (aa) [Intentionally Omitted]

     (bb) No  Bankruptcy  Filing.  No board of  directors  of any Loan Party has
taken any action to  authorize  the filing of a petition  by it under any state,
provincial,  federal  (including  the federal  government  of Canada) or foreign
bankruptcy or insolvency laws or the liquidation  (except as expressly permitted
by Section  7.02(c)) of all or a major  portion of such Loan  Party's  assets or
property.

     (cc) Separate Existence.

     (i) All  customary  formalities  regarding  the  separate  existence of the
Parent on the one hand and each  other Loan Party on the other hand have been at
all times since its formation observed.

     (ii) The  Parent  has not at any time since its  formation  commingled  its
assets with those of any of its  Affiliates  or any other Person (other than the
cash pooling account at Bank Mendes Gans). The Parent has at all times since its
formation  accurately  maintained  its own bank  accounts  (other  than the cash
pooling account at Bank Mendes Gans) and separate books of account.

     (iii) The Parent has at all times since its formation  identified itself in
all dealings with the public,  under its own name and as a separate and distinct
Person. The Parent has not at any time since its formation  identified itself as
being a division or a part of any other Person.

     (dd) Name;  Jurisdiction of Organization;  Organizational ID Number;  Chief
Place of Business;  Chief Executive Office; FEIN. Schedule 6.01(dd) sets forth a
complete and accurate  list as of the date hereof of (i) the exact legal name of
each Loan Party, (ii) the jurisdiction of organization of each Loan Party, (iii)
the organizational  identification  number of each Loan Party (or indicates that
such Loan Party has no organizational identification number), (iv) each place of
business of each Loan Party,  (v) the chief executive  office of each Loan Party
and (vi) the federal employer  identification  number of each Loan Party (or, in
the case of the  Canadian  Guarantor,  the Canada  Customs  and  Revenue  Agency
business number).

     (ee) [Intentionally Omitted]

     (ff) Locations of Collateral.  There is no location at which any Loan Party
has any Collateral  other than (i) those locations  listed on Schedule  6.01(ff)
and (ii) any other locations approved in writing by the Agents from time to time
or otherwise permitted under Section 7.01(l).  Schedule 6.01(ff) hereto contains
a true,  correct and complete list, as of the Effective Date, of the legal names
and  addresses  of each  warehouse  at which  Collateral  of each Loan  Party is
stored.  None of the  receipts  received  by any Loan Party  from any  warehouse
states that the goods  covered  thereby are to be  delivered to bearer or to the
order of a named Person or to a named Person and such named Person's assigns.

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<PAGE>

     (gg) Security  Interests.  Each Security  Agreement creates in favor of the
Collateral Agent, for the benefit of the Agents and the Lenders,  a legal, valid
and enforceable  security interest in the Collateral  covered thereby (except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization,  moratorium,  or similar laws relating to or limiting creditors'
rights generally).  Upon (i) the filing of the financing statements described in
Section  5.01(d)(v),  (ii) the filings in the United States Patent and Trademark
Office and United  States  Copyright  Office,  and (iii) taking of possession or
control  by the  Collateral  Agent of the  Collateral  with  respect  to which a
security  interest  may be  perfected  only  by  possession  or  control  (which
possession  or  control  shall be given to the  Collateral  Agent to the  extent
possession  or  control by the  Collateral  Agent is  required  herein or in the
Security  Agreement),  such  security  interests in and Liens on the  Collateral
granted thereby shall be perfected,  first priority security  interests (subject
to  Permitted  Liens),  and no  further  recordings  or  filings  are or will be
required in connection  with the creation,  perfection  or  enforcement  of such
security interests and Liens.

     (hh) [Intentionally Omitted].

     (ii) [Intentionally Omitted].

     (jj) Exchange Offer  Transaction  Documents.  As of the Effective Date, the
Borrower has delivered to the Agents a complete and correct copy of the material
Exchange  Offer  Transaction  Documents  (including  all  schedules,   exhibits,
amendments,  supplements,  modifications,  and assignments). As of the Effective
Date, no Loan Party that is a party thereto is in default in the  performance or
compliance with any provisions thereof. The Exchange Offer Transaction Documents
comply in all material  respects with, and the Exchange  Offer  Transaction  has
been  consummated in accordance with, in all material  respects,  all applicable
laws. As of the Effective Date, the Exchange Offer Transaction  Documents are in
full force and effect and have not been terminated,  rescinded or withdrawn. The
execution,  delivery and performance of the Exchange Offer Transaction Documents
do not and will not require any registration with,  consent,  or approval of, or
notice to, or other action with or by, any  Governmental  Authority,  other than
consents or approvals  that have been  obtained and that are still in full force
and effect.  To the best of the Loan  Parties'  knowledge,  as of the  Effective
Date,  none of the  representations  or  warranties  of any other  Person in any
Exchange Offer Transaction Document are untrue.

     (kk) Canadian Withholdings and Remittances.  Each applicable Loan Party has
withheld  from each  payment made to any of their  present or former  employees,
officers and directors,  and to all persons who are  non-residents of Canada for
the purposes of the Income Tax Act (Canada) all material amounts required by law
to be withheld,  including all payroll deductions  required to be withheld,  and
furthermore, remitted such withheld amounts within the prescribed periods to the
appropriate  Governmental Authority,  except to the extent that failure to do so
could not reasonably be expected to result in a Material  Adverse  Effect.  Each
applicable Loan Party has remitted all material  contributions required pursuant
to the Canada  Pension Plan  (Canada),  provincial  pension plan  contributions,

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workers compensation assessments, employment insurance premiums, employer health
taxes, municipal real estate taxes and other taxes and obligations payable under
the  applicable  law  by  it  and  has  remitted  such  amounts  to  the  proper
Governmental Authority within the time required under the applicable law, except
to the extent that failure to do so could not  reasonably  be expected to result
in a Material Adverse Effect.

     (ll) Dissolved  Subsidiaries.  Each  Dissolved  Subsidiary has been legally
dissolved.  No Dissolved  Subsidiary owns any material assets,  has any material
liabilities, or engages in any business activity.

     (mm) Inactive  Subsidiaries.  No Inactive Subsidiary owns any assets (other
than assets of de minimis  value),  has any  liabilities  (other than de minimis
liabilities), or engages in any business activity.

                                  ARTICLE VII

                          COVENANTS OF THE LOAN PARTIES

     Section 7.01 Affirmative Covenants. So long as any principal of or interest
on any Loan, Reimbursement Obligation,  Letter of Credit Obligation or any other
Obligation   (whether   or  not   due)   (other   than   unasserted   contingent
indemnification  Obligations)  shall remain  unpaid or any Lender shall have any
Commitment  hereunder,  each  Loan  Party  will  and  will  cause  each  of  its
Subsidiaries to:

     (a) Reporting Requirements. Furnish to each Agent and each Lender:

     (i) as soon as available  and in any event within 47 days (or 62 days if an
extension  has been  obtained for the filing of an  equivalent  periodic  report
under Rule 12b-25 of the General Rules and  Regulations  under the Exchange Act)
after the end of the first 3 fiscal  quarters  of each Fiscal Year of the Parent
and  its   Subsidiaries,   consolidated   balance   sheets,   consolidated   and
consolidating statements of operations and consolidated statements of cash flows
of the Parent and its  Subsidiaries  as at the end of such quarter,  and for the
period commencing at the end of the immediately preceding Fiscal Year and ending
with the end of such quarter, setting forth in each case in comparative form the
figures for the corresponding date or period of the immediately preceding Fiscal
Year,  all in reasonable  detail and  certified by an Authorized  Officer of the
Parent as fairly presenting, in all material respects, the financial position of
the Parent and its Subsidiaries as of the end of such quarter and the results of
operations and cash flows of the Parent and its  Subsidiaries  for such quarter,
in  accordance  with GAAP applied in a manner  consistent  with that of the most
recent audited financial statements of the Parent and its Subsidiaries furnished
to the Agents and the Lenders,  subject to normal year-end audit adjustments and
the absence of footnotes;

     (ii) as soon as available, and in any event within 45 days after the end of
the last fiscal quarter of each Fiscal Year of the Parent and its  Subsidiaries,
internally prepared consolidated balance sheets and consolidating  statements of
operations as at the end of such fiscal month, and for the period  commencing at
the end of the immediately preceding Fiscal Year and ending with the end of such
fiscal month, all in reasonable detail and certified by an Authorized Officer of
the  Parent  as fairly  presenting,  in all  material  respects,  the  financial

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position of the Parent and its  Subsidiaries  as at the end of such fiscal month
and the  results of  operations,  of the Parent  and its  Subsidiaries  for such
fiscal month, in accordance  with GAAP applied in a manner  consistent with that
of the most recent audited financial  statements furnished to the Agents and the
Lenders,  subject  to normal  year-end  audit  adjustments  and the  absence  of
footnotes;

     (iii) as soon as available, and in any event within 90 days (or 105 days if
an extension has been obtained for the filing of an equivalent  periodic  report
under Rule 12b-25 of the General Rules and  Regulations  under the Exchange Act)
after  the  end  of  each  Fiscal  Year  of the  Parent  and  its  Subsidiaries,
consolidated  balance  sheets,  consolidated  and  consolidating  statements  of
operations and retained earnings and consolidated and  consolidating  statements
of cash flows of the Parent and its  Subsidiaries  as at the end of such  Fiscal
Year,  setting forth in each case in comparative form the corresponding  figures
for the immediately preceding Fiscal Year, all in reasonable detail and prepared
in accordance with GAAP, and accompanied by a report and an opinion, prepared in
accordance with generally accepted auditing standards,  of independent certified
public accountants of recognized  standing selected by the Parent and reasonably
satisfactory to the Agents (which opinion shall be without (A) a "going concern"
or like  qualification or exception (other than the "going concern" exception in
the  opinion  delivered  with  the  audited  consolidated  balance  sheet of the
Borrower and its  Subsidiaries for the Fiscal Year ended December 31, 2005), (B)
any  qualification  or  exception  as to the  scope  of such  audit,  or (C) any
qualification  which relates to the treatment or  classification of any item and
which,  as a condition to the removal of such  qualification,  would  require an
adjustment to such item, the effect of which would be to cause any noncompliance
with the provisions of Section 7.03,  together with a written  statement of such
accountants  (1) to the effect that,  in making the  examination  necessary  for
their audit of such financial  statements,  they have not obtained any knowledge
of the  existence of an Event of Default or a Default under Section 7.03 and (2)
if such  accountants  shall have  obtained any  knowledge of the existence of an
Event of Default or such  Default  under  Section  7.03,  describing  the nature
thereof;

     (iv) as soon as available, and in any event within 30 days after the end of
the first two  fiscal  months  in each  fiscal  quarter  of the  Parent  and its
Subsidiaries,  internally prepared  consolidated  balance sheets,  consolidating
statements of operations as at the end of such fiscal month,  and for the period
commencing at the end of the immediately  preceding  Fiscal Year and ending with
the end of such fiscal  month,  all in  reasonable  detail and  certified  by an
Authorized Officer of the Parent as fairly presenting, in all material respects,
the financial  position of the Parent and its Subsidiaries as at the end of such
fiscal month and the results of  operations  of the Parent and its  Subsidiaries
for such fiscal month,  in accordance  with GAAP applied in a manner  consistent
with that of the most  recent  audited  financial  statements  furnished  to the
Agents and the Lenders,  subject to normal  year-end audit  adjustments  and the
absence of footnotes;

     (v)  simultaneously  with the delivery of the  financial  statements of the
Parent and its  Subsidiaries  required by clauses (i),  (ii),  and (iii) of this
Section  7.01(a),  a  certificate  of an  Authorized  Officer  of the Parent (A)
stating  that such  Authorized  Officer  has  reviewed  the  provisions  of this
Agreement  and the other Loan  Documents and has made or caused to be made under
his or her  supervision a review of the  condition and  operations of the Parent
and its Subsidiaries during the period covered by such financial statements with
a view to determining whether the Parent and its Subsidiaries were in compliance
with all of the  provisions  of this  Agreement  and such Loan  Documents at the

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times such compliance is required  hereby and thereby,  and that such review has
not disclosed,  and such  Authorized  Officer has no knowledge of, the existence
during  such period of an Event of Default or Default or, if an Event of Default
or Default  existed,  describing the nature and period of existence  thereof and
the action which the Parent and its  Subsidiaries  propose to take or have taken
with respect thereto and (B) attaching a schedule showing the calculation of the
financial covenants specified in Section 7.03;

     (vi) as soon as available  and in any event within 15 days after the end of
each fiscal month of the Parent and its Subsidiaries, reports in form and detail
satisfactory  to the Agents (A) listing all Accounts  Receivable of the Borrower
and the Domestic Guarantors in the United States, Canada, and the United Kingdom
as of the end of such fiscal  month,  which shall  include the amount and age of
each Account Receivable, showing separately those which are more than 30, 60, 90
and  120  days  old and a  description  of all  Liens,  set-offs,  defenses  and
counterclaims with respect thereto,  and such other information as any Agent may
reasonably  request,  (B)  setting  forth  the  amount of the  Collections  from
Accounts  Receivable  of the Borrower and the  Domestic  Guarantors  during such
fiscal month and during the 150 days immediately  preceding the last day of such
fiscal month, and (C) detailing the 6 month U.S. Retail Key Client WIP as of the
end of such fiscal month;

     (vii) as soon as available and in any event within 15 days after the end of
each  fiscal  month  of the  Parent  and  its  Subsidiaries,  a  Borrowing  Base
Certificate certified by an Authorized Officer of the Borrower as being accurate
and  complete,  current as of the close of business as of the end of such fiscal
month, supported by schedules showing the derivation thereof and containing such
detail and other  information as any Agent may  reasonably  request from time to
time,  provided  that (A) the  Borrowing  Base set forth in the  Borrowing  Base
Certificate  shall be effective  from and including the date such Borrowing Base
Certificate  is duly  received  by the Agents to but not  including  the date on
which a subsequent Borrowing Base Certificate is received by the Agents,  unless
any Agent disputes the  eligibility of any property  included in the calculation
of the  Borrowing  Base  or the  valuation  thereof  or  any  other  information
contained  therein  by notice of such  dispute to the  Borrower,  and (B) in the
event of any  dispute  about the  eligibility  of any  property  included in the
calculation  of the  Borrowing  Base  or the  valuation  thereof,  such  Agent's
Permitted Discretion shall control or any other information contained therein;

     (viii)  simultaneously with the delivery of the financial statements of the
Parent and its  Subsidiaries  required by clauses  (i) and (ii) of this  Section
7.01(a),  reports  in form and  detail  reasonably  satisfactory  to the  Agents
setting forth (A) the U.S. Retail Key Client  Effective Fee Rate for such fiscal
quarter, and (B) the U.S. Retail Key Client Claim Retention Rate for such fiscal
quarter.

     (ix) as soon as available  and in any event within 30 days after the end of
each fiscal month of the Parent and its Subsidiaries, reports in form and detail
reasonably  satisfactory to the Agents and certified by an Authorized Officer of
the Parent setting forth (A) the intercompany  receivables of the Parent and its
Subsidiaries,  (B) accounts payable of the Borrower and the Domestic  Guarantors

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as of the end of such fiscal  month  which  shall  include the amount and age of
each account  payable,  and such other  information  as any Agent may reasonably
request, and (C) the general ledger reconciliation for the United States;

     (x) no later  than 30 days  after the  commencement  of each  Fiscal  Year,
financial  projections,  supplementing and superseding the financial projections
for the period  referred to in Section  6.01(g)(ii)(A),  displayed on a month by
month basis for such Fiscal Year for the Parent and its  Subsidiaries,  all such
financial  projections  to be prepared on a reasonable  basis and in good faith,
and to be based on  assumptions  believed by the Parent to be  reasonable at the
time made and from the best information then available to the Parent;

     (xi) promptly after any Loan Party knows that it is being investigated by a
Governmental   Authority  (other  than  routine   inquiries),   notice  of  such
investigation and,  thereafter,  prompt reporting of any information relative to
such investigation requested by either of the Agents; provided that if such Loan
Party is prohibited  under  applicable  law, rule, or regulation from disclosing
such investigation to the Agents, then it shall not be obligated to provide such
notice and reporting to the Agents;

     (xii) as soon as possible,  and in any event  within 3 Business  Days of an
Authorized  Officer's  knowledge  of an  Event  of  Default  or  Default  or the
occurrence  of any event or  development  that could  reasonably  be expected to
result in a Material  Adverse  Effect,  the written  statement of an  Authorized
Officer  of the  Parent  setting  forth the  details of such Event of Default or
Default or other event or development  having a Material  Adverse Effect and the
action which the affected Loan Party proposes to take with respect thereto;

     (xiii) (A) as soon as  possible  and in any event  within 10 days after any
Loan Party or any ERISA  Affiliate  thereof knows or has reason to know that (1)
any  Reportable  Event with respect to any Employee Plan has  occurred,  (2) any
Termination  Event with respect to any  Employee  Plan has  occurred,  or (3) an
accumulated funding deficiency has been incurred or an application has been made
to the  Secretary of the Treasury  for a waiver or  modification  of the minimum
funding  standard  (including  installment  payments)  or an  extension  of  any
amortization  period  under  Section 412 of the IRC with  respect to an Employee
Plan, a statement of an  Authorized  Officer of the Borrower  setting  forth the
details of such occurrence and the action, if any, which such Loan Party or such
ERISA Affiliate  proposes to take with respect thereto,  (B) promptly and in any
event  within 3 days  after  receipt  thereof,  or the  obtaining  of  knowledge
thereof,  by any  Authorized  Officer of any Loan  Party or any ERISA  Affiliate
thereof from the PBGC,  copies of each notice  received by any Loan Party or any
ERISA Affiliate thereof of the PBGC's intention to terminate any Plan or to have
a trustee appointed to administer any Plan, (C) promptly and in any event within
10 days after the filing thereof with the Internal  Revenue Service if requested
by any Agent,  copies of each Schedule B (Actuarial  Information)  to the annual
report (Form 5500 Series) with respect to each Employee  Plan and  Multiemployer
Plan (in the case of  Multiemployer  Plans, as soon as  commercially  reasonably
possible,  but in no event  later  than 30 days  following  such  request),  (D)
promptly  and in any  event  within 10 days  after  any Loan  Party or any ERISA
Affiliate thereof knows or has reason to know that a required installment within
the meaning of Section 412 of the IRC has not been made when due with respect to
an Employee  Plan,  (E) promptly  and in any event  within 3 days after  receipt
thereof by any Loan  Party or any ERISA  Affiliate  thereof  from a sponsor of a

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Multiemployer  Plan or from the PBGC, a copy of each notice received by any Loan
Party or any ERISA  Affiliate  thereof  concerning  the  imposition or amount of
withdrawal  liability  under  Section  4202 of ERISA  or  indicating  that  such
Multiemployer Plan may enter reorganization  status under Section 4241 of ERISA,
and (F)  promptly  and in any event  within 10 days  after any Loan Party or any
ERISA  Affiliate  thereof  sends  notice of a plant  closing or mass  layoff (as
defined  in WARN) to  employees,  copies of each such  notice  sent by such Loan
Party or such ERISA Affiliate thereof;

     (xiv)  promptly after the  commencement  thereof but in any event not later
than 10 Business Days after  service of process with respect  thereto on, or the
obtaining of  knowledge  thereof by, any  Authorized  Officer of any Loan Party,
notice of each action, suit or proceeding before any court or other Governmental
Authority or other  regulatory body or any arbitrator  which could reasonably be
expected to result in a Material Adverse Effect;

     (xv) as soon as  possible  and in any event  within 5  Business  Days after
execution,  receipt or delivery thereof, (A) copies of any material notices that
an  Authorized  Officer of any Loan  Party  executes  or  receives  (or  obtains
knowledge of) in connection  with any Material  Contract,  and (B) copies of any
default  notices with respect to the Parent's lease for the premises  located at
600 Galleria Parkway, Atlanta, GA 30339;

     (xvi)  promptly  after  the  sending  or  filing  thereof,  copies  of  all
statements, reports and other information any Loan Party sends to any holders of
its  Indebtedness  or its  securities  or  files  with  the SEC or any  national
(domestic or foreign) securities exchange;

     (xvii)  promptly  upon receipt  thereof,  copies of any "final"  management
letters  submitted  to any Loan Party by its  auditors  in  connection  with any
annual or interim audit of the books thereof; and

     (xviii)  promptly  upon  request,  such other  information  concerning  the
condition or operations,  financial or otherwise, of any Loan Party as any Agent
may from time to time may reasonably request.

     (b) Additional Guaranties and Collateral Security. Cause:

     (i) each Subsidiary of any Loan Party (the "New Subsidiary") to execute and
deliver to the  Collateral  Agent  promptly  and in any event within 20 days (or
such  longer  period  (which  longer  period  shall  not  exceed 15 days) as the
Collateral Agent is willing,  in its Permitted  Discretion,  to accommodate from
time to  time)  after  the  formation  or  acquisition  thereof  (A) a  Guaranty
guaranteeing the  Obligations,  (B) a Security  Agreement,  together with (x) if
such New Subsidiary has any Domestic  Subsidiaries,  (I)  certificates  (if any)
evidencing  all of the  Capital  Stock  of such  Subsidiary  owned  by such  New
Subsidiary, (II) undated stock powers executed in blank, and (III) such opinions
of counsel and such approving certificate of such Subsidiary as either Agent may
reasonably  request  in  respect  of  complying  with  any  legend  on any  such
certificate  or any other matter  relating to such  shares,  and (y) if such New
Subsidiary has any first-tier  Subsidiaries  that are CFCs, (I) certificates (if
any)  evidencing  all (or, 65% of the  outstanding  voting Capital Stock of such
Subsidiary if pledging or hypothecating  more than 65% of the total  outstanding
voting Capital Stock of such Subsidiary  reasonably  could be expected to result
in material adverse tax consequences as determined by the Agents in consultation
with  the  Loan  Parties)  of the  outstanding  voting  Capital  Stock  of  such
Subsidiary,   (II)  undated  stock  powers  executed  in  blank  with  signature
guaranteed, and (III) such opinions of counsel and such approving certificate of
such  Subsidiary as either Agent may reasonably  request in respect of complying
with any legend on any such  certificate  or any other  matter  relating to such
shares,  (C) if such New Subsidiary has a fee interest in any real property that
would  constitute  After  Acquired  Real  Property if it were acquired by a Loan
Party, one or more Mortgages  creating on such real property a perfected,  first
priority Lien on such real property, a Title Insurance Policy covering such real
property,  a  current  ALTA  survey  of  such  real  property  and a  surveyor's
certificate,  a Phase I Environmental  Site Assessment with respect to such real
property, certified to the Collateral Agent by a company reasonably satisfactory

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to the Collateral Agent, each in form and substance  reasonably  satisfactory to
the Agents,  together with such other  agreements,  instruments and documents as
the either Agent may  reasonably  require  whether  comparable  to the documents
required under Section 7.01(o) or otherwise;  provided that the Agents shall not
require a Mortgage and other  documents  for any parcel of real  property if the
mortgage  recording  tax  associated  therewith is material  (in the  reasonable
judgment of the Agents) in relation to the Current Value of such real  property,
and (D) such other agreements,  instruments, approvals, legal opinions, or other
documents  reasonably  requested  by either  Agent in order to create,  perfect,
establish the first  priority of or otherwise  protect any Lien  purported to be
covered by any such Security  Agreement or Mortgage,  or otherwise to effect the
intent  that  such  New  Subsidiary  shall  become  bound  by all of the  terms,
covenants and  agreements  contained in the Loan Documents and that all property
and assets of such New Subsidiary  shall become  Collateral for the Obligations;
provided  that the  foregoing  Guaranty  and  Security  Agreement  shall  not be
required  to be  provided  to the  Collateral  Agent  with  respect  to any  New
Subsidiary  of a Loan  Party that is a CFC if  providing  such  documents  would
result in  material  adverse tax  consequences  as  determined  by the Agents in
consultation with the Loan Parties; and

     (ii) each Loan  Party  that is the owner of the  Capital  Stock of such New
Subsidiary  to execute and deliver  promptly and in any event within 20 days (or
such  longer  period  (which  longer  period  shall  not  exceed 15 days) as the
Collateral Agent is willing,  in its Permitted  Discretion,  to accommodate from
time to time)  after the  formation  or  acquisition  of such New  Subsidiary  a
joinder  to the  Security  Agreement  (if it is not  already  a party  thereto),
together with (A) if such New Subsidiary is not a CFC or is a CFC and the pledge
of 100% of the voting  Capital  Stock of such CFC would not  result in  material
adverse tax  consequences as determined by the Agents in  consultation  with the
Loan Parties,  (w)  certificates (if any) evidencing all of the Capital Stock of
such New Subsidiary,  (x) undated stock powers or other appropriate  instruments
or assignment executed in blank with signature guaranteed,  (y) such opinions of
counsel and such approving  certificate of such New Subsidiary as the Agents may
reasonably  request  in  respect  of  complying  with  any  legend  on any  such
certificate  or any other  matter  relating to such  shares,  and (z) such other
agreements,  instruments,  approvals, legal opinions, or other documents, or (B)
if such New Subsidiary is a CFC and the granting of a pledge of more than 65% of
the  voting  Capital  Stock of such CFC would  result in  material  adverse  tax
consequences as determined by the Agents in consultation  with the Loan Parties,
(w) certificates (if any) evidencing 65% of the outstanding voting Capital Stock
of  such  New  Subsidiary,   (x)  undated  stock  powers  or  other  appropriate
instruments or assignment executed in blank with signature  guarantee,  (y) such
opinions of counsel and such approving certificate of such New Subsidiary as the
Agents may  reasonably  request in respect of  complying  with any legend on any
such certificate or any other matter relating to such shares, and (z) such other
agreements,   instruments,   approvals,   legal  opinions,  or  other  documents
reasonably requested by either Agent.

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<PAGE>

     (c) Compliance with Laws, Etc.  Comply,  and cause each of its Subsidiaries
to  comply,   in  all  material   respects  with  all  applicable  laws,  rules,
regulations, orders, judgments and awards (including any settlement of any claim
that, if breached,  could give rise to any of the  foregoing)  (except,  in each
case,  to the  extent  that  non-compliance  could not,  individually  or in the
aggregate,  reasonably be expected to result in a Material Adverse Effect), such
compliance  to include (i) paying before the same become  delinquent  all taxes,
assessments and governmental  charges or levies (other than those that are in de
minimis  amounts)  imposed  upon it or upon its income or profits or upon any of
its  properties,  and (ii) paying all other lawful  claims which if unpaid might
become a Lien or charge upon any of its properties, except, in each case, (A) to
the  extent  contested  in good  faith  by  proper  proceedings  which  stay the
enforcement of any Lien resulting from the non-payment  thereof and with respect
to which  adequate  reserves  have  been set aside for the  payment  thereof  in
accordance  with GAAP, or (B) taxes,  assessments  and  governmental  charges or
levies or any other  such  lawful  claims in an  aggregate  amount not to exceed
$50,000.

     (d)  Preservation  of Existence,  Etc. Other than as expressly set forth in
Section  7.02(c),  maintain and preserve,  and cause each of its Subsidiaries to
maintain and  preserve,  its  existence,  rights and  privileges,  and become or
remain,  and cause each of its Subsidiaries to become or remain,  duly qualified
and in  good  standing  in each  jurisdiction  in  which  the  character  of the
properties  owned or leased by it or in which the  transaction  of its  business
makes  such  qualification  necessary,  except to the  extent  failure to do so,
individually or in the aggregate,  could not reasonably be expected to result in
a Material  Adverse Effect;  provided that nothing in this Section 7.01(d) shall
prevent  the  withdrawal  by the Parent or any  Subsidiary  of the Parent of its
qualification  as  a  foreign   corporation  in  any  jurisdiction   where  such
withdrawal,  individually or in the aggregate,  could not reasonably be expected
to result in a Material Adverse Effect.

     (e) Keeping of Records and Books of  Account.  Keep,  and cause each of its
Subsidiaries  to keep,  adequate  records  and books of account,  with  complete
entries,  in all material respects,  made to permit the preparation of financial
statements in accordance with GAAP.

     (f)  Inspection  Rights.  Permit,  and cause  each of its  Subsidiaries  to
permit, the agents and representatives of any Agent at any time and from time to
time during normal business hours and, so long as no Default or Event of Default
shall have occurred and be  continuing,  upon  reasonable  advance notice to the
Borrower,  at the  expense of the  Borrower,  to examine  and make copies of and
abstracts  from its  records  and books of  account,  to visit and  inspect  its
properties,  to verify leases, notes, accounts receivable,  deposit accounts and
its other assets, to conduct audits,  physical counts,  valuations,  appraisals,
Phase I Environmental  Site  Assessments  (and, (i) if an Event of Default shall
have occurred and be continuing and if requested by the  Collateral  Agent based
upon the results of any such Phase I Environmental  Site Assessment,  or (ii) in
the event a  Governmental  Authority so orders and the Borrower  does not timely
respond,  a Phase II Environmental Site Assessment of any real property owned by
the Borrower),  field examinations,  or enterprise valuations and to discuss its

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affairs, finances and accounts with any of its directors,  officers,  managerial
employees, independent accountants or any of its other representatives; provided
that  the  Borrower  shall  be  given  the  opportunity  to be  present  in  any
discussions with the Borrower's independent accountants.  The Borrower shall pay
(i) $1,500 per day per  examiner  plus the  examiner's  out-of-pocket  costs and
reasonable  expenses  incurred  in  connection  with  all such  visits,  audits,
inspections,  valuations,  and  field  examinations,  and  (ii)  the cost of all
audits,  appraisals  and business  valuations  (including  enterprise  valuation
appraisals)  conducted by third party  auditors or  appraisers  on behalf of the
Agents;  provided  that so long as no  Default  or Event of  Default  shall have
occurred and be continuing,  the Borrower shall not be obligated to pay for more
than 3 such audits and 1 such  business or  enterprise  valuation  in any Fiscal
Year.

     (g)  Maintenance of Properties,  Etc. (i) Maintain and preserve,  and cause
each of its  Subsidiaries to maintain and preserve,  all of its properties which
are  necessary  or useful in the proper  conduct of its business in good working
order and condition, ordinary wear and tear excepted, and (ii) comply, and cause
each of its  Subsidiaries  to comply,  at all times with the  provisions  of all
leases to which it is a party as lessee or under which it occupies property,  so
as to prevent any loss or forfeiture thereof or thereunder, in each case, except
to the extent that failure to do so, individually or in the aggregate, could not
reasonably  be expected to result in a Material  Adverse  Effect;  provided that
nothing  in  this  Section  7.01(g)  shall  prevent  Permitted  Dispositions  or
liquidations,  dissolutions,  consolidations,  or  mergers  that  are  expressly
permitted by, and effected in accordance with, Section 7.02(c).

     (h) Maintenance of Insurance.  Maintain, and cause each of its Subsidiaries
to maintain,  insurance with  responsible and reputable  insurance  companies or
associations  (including  comprehensive general liability,  hazard, and business
interruption  insurance)  with respect to its properties  and business,  in such
amounts and  covering  such risks as is required by any  Governmental  Authority
having  jurisdiction  with  respect  thereto  or  as  is  carried  generally  in
accordance  with sound  business  practice by  companies  in similar  businesses
similarly  situated and in any event in amount,  adequacy  and scope  reasonably
satisfactory to the Collateral  Agent. All policies  covering the Collateral are
to be made payable to the Collateral Agent for the benefit of the Agents and the
Lenders,  as its  interests  may appear,  in case of loss,  under a standard non
contributory  "lender" or "secured  party"  clause and are to contain such other
provisions  as the  Collateral  Agent may require to fully  protect the Lenders'
interest in the  Collateral  and to any payments to be made under such policies.
All  certificates  of insurance are to be delivered to the Collateral  Agent and
the policies  are to be premium  prepaid,  with the loss payable and  additional
insured  endorsement in favor of the Collateral  Agent and such other Persons as
the Collateral  Agent may designate from time to time, and shall provide for not
less than 30 days prior written notice to the  Collateral  Agent of the exercise
of any right of cancellation. If any Loan Party or any of its Subsidiaries fails
to maintain such insurance, the Collateral Agent may arrange for such insurance,
but at the Borrower's  expense and without any  responsibility on the Collateral
Agent's  part  for  obtaining  the  insurance,  the  solvency  of the  insurance
companies,  the adequacy of the coverage,  or the collection of claims. Upon the
occurrence  and during the  continuance  of an Event of Default,  the Collateral
Agent shall have the sole right, in the name of the Lenders,  any Loan Party and
its  Subsidiaries,  to file claims  under any  insurance  policies,  to receive,
receipt and give  acquittance  for any payments that may be payable  thereunder,
and to  execute  any  and all  endorsements,  receipts,  releases,  assignments,
reassignments or other documents that may be necessary to effect the collection,
compromise or settlement of any claims under any such insurance policies.

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     (i) Obtaining of Permits,  Etc.  Obtain,  maintain and preserve,  and cause
each of its  Subsidiaries  to  obtain,  maintain  and  preserve,  and  take  all
necessary  action  to  timely  renew,  all  permits,  licenses,  authorizations,
approvals,  entitlements and accreditations which are necessary or useful in the
proper conduct of its business,  except to the extent failure to do so could not
reasonably be expected to result in a Material Adverse Effect.

     (j) Environmental.  (i) Keep any property either owned or operated by it or
any of its Subsidiaries free of any Environmental  Liens; (ii) comply, and cause
each of its Subsidiaries to comply, in all material respects with  Environmental
Laws;  (iii) provide the Agents written notice within 10 Business Days after any
Release of a  Hazardous  Material  in excess of any  reportable  quantity  under
Environmental  Laws from or onto property  owned or operated by it or any of its
Subsidiaries and take any Remedial Actions required to abate said Release;  (iv)
provide the Agents with written notice within 10 Business Days after the receipt
of any of the following:  (A) notice that an  Environmental  Lien has been filed
against  any owned  property of any Loan Party or any of its  Subsidiaries;  (B)
commencement of an Environmental  Action or notice that an Environmental  Action
will be filed against any Loan Party or any of its Subsidiaries;  and (C) notice
of a violation, citation or other administrative order which could reasonably be
expected to result in a Material  Adverse  Effect and (v) defend,  indemnify and
hold  harmless  the  Agents and the  Lenders  and their  transferees,  and their
respective  employees,  agents,  officers  and  directors,  from and against any
claims, demands, penalties, fines, liabilities,  settlements,  damages, costs or
expenses (including  attorney and consultant fees,  investigation and laboratory
fees, court costs and litigation  expenses) incurred by or asserted against such
Person to the  extent  arising  out of (A) the  presence,  disposal,  release or
threatened release of any Hazardous  Materials on any property at any time owned
or occupied by any Loan Party or any of its Subsidiaries (or its predecessors in
interest  or title),  (B) any  personal  injury  (including  wrongful  death) or
property  damage (real or personal)  arising out of or related to such Hazardous
Materials,  (C) any  investigation,  lawsuit  brought or threatened,  settlement
reached or  government  order  relating  to such  Hazardous  Materials,  (D) any
violation of any Environmental Law or (E) any Environmental Action filed against
any Agent or any Lender;  provided that no Loan Party shall have any  obligation
under  clause (v) to the extent that the  condition  arises out of or relates to
the gross  negligence  or willful  misconduct  of any  indemnified  party or its
agents or representatives or results in a violation of Environmental Laws or the
presence or release of  Hazardous  Materials  that first  occur at a  particular
property after that property has been  transferred to any  indemnified  party or
their successors or assigns.

     (k) Further  Assurances.  Take such  action and  execute,  acknowledge  and
deliver,  and cause each of its  Subsidiaries  to take such action and  execute,
acknowledge  and  deliver,  at its  sole  cost  and  expense,  such  agreements,
instruments or other documents as any Agent may reasonably  require from time to
time in order (i) to carry out more  effectively  the purposes of this Agreement
and the other  Loan  Documents,  (ii) to subject  to valid and  perfected  first
priority Liens  (subject to Permitted  Liens) any of the Collateral or any other
property of any Loan Party and its Subsidiaries, (iii) to establish and maintain
the validity and  effectiveness  of any of the Loan  Documents and the validity,
perfection and priority of the Liens intended to be created thereby, and (iv) to
better assure, convey, grant, assign, transfer and confirm unto each Agent, each
Lender and the L/C Issuer the rights now or hereafter  intended to be granted to
it under  this  Agreement  or any other Loan  Document.  In  furtherance  of the

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foregoing,  to the maximum extent  permitted by applicable  law, each Loan Party
(A) authorizes each Agent to execute any such  agreements,  instruments or other
documents in such Loan Party's name and to file such agreements,  instruments or
other documents in any appropriate  filing office,  (B) authorizes each Agent to
file any  financing  statement  required  hereunder  or  under  any  other  Loan
Document,  and any continuation  statement or amendment with respect thereto, in
any appropriate  filing office without the signature of such Loan Party, and (C)
ratifies the filing of any financing statement,  and any continuation  statement
or amendment  with respect  thereto,  filed  without the  signature of such Loan
Party prior to the date hereof.

     (l) Change in Collateral;  Collateral Records. (i) Give the Agents not less
than 10 days prior written  notice of any change in the location of any material
portion Collateral, other than to (or in-transit between) locations set forth on
Schedule  6.01(ff)  and with  respect  to which the  Collateral  Agent has filed
financing  statements and otherwise fully perfected its Liens thereon,  and (ii)
execute and deliver,  and cause each of its Subsidiaries to execute and deliver,
to the Agents for the benefit of the Agents and the  Lenders  from time to time,
solely for the Agents'  convenience in maintaining a record of Collateral,  such
written  statements  and  schedules  as  the  Agents  may  reasonably   request,
designating, identifying or describing the Collateral.

     (m) Landlord Waivers; Collateral Access Agreements.

     (i) At any time any Collateral  related to the Borrowing Base is located on
any real  property of the  Borrower or any other Loan Party  (whether  such real
property  is now  existing or acquired  after the  Effective  Date) which is not
owned by the  Borrower  or any other Loan  Party,  use  commercially  reasonable
efforts to obtain  written  subordinations  or  waivers,  in form and  substance
reasonably  satisfactory to the Agents, of all present and future Liens to which
the owner or lessor of such  premises  may be  entitled  to assert  against  the
Collateral  located  at such  premises;  provided,  that in the  event  the Loan
Parties  are  unable to obtain  any such  written  subordination  or waiver  the
Administrative Agent may, in its reasonable discretion,  establish such reserves
as it deems necessary with respect to any such Collateral; and

     (ii)  Use  commercially   reasonable   efforts  to  obtain  written  access
agreements,  in  form  and  substance  reasonably  satisfactory  to the  Agents,
providing  access to  Collateral  related to the  Borrowing  Base located on any
premises  not owned by the  Borrower  or any other Loan Party in order to remove
such  Collateral  or books and  records  from such  premises  during an Event of
Default;  provided,  that in the event the Loan Parties are unable to obtain any
such written access agreements,  the Administrative Agent may, in its reasonable
discretion,  establish  such reserves as it deems  necessary with respect to any
such Collateral.

     (n)  Subordination.  Cause all  Indebtedness  and other  obligations now or
hereafter  owed by any Loan  Party to Parent or any of its  Subsidiaries,  to be
subordinated  in right of payment  and  security to the  Indebtedness  and other
Obligations   owing  to  the  Agents  and  the  Lenders  in  accordance  with  a
subordination agreement in form and substance satisfactory to the Agents.

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     (o)  After  Acquired  Property.  Upon the  acquisition  by it or any of its
Subsidiaries of any After Acquired  Property,  immediately so notify the Agents,
setting  forth with  specificity  a description  of the interest  acquired,  the
location of the real property, any structures or improvements thereon and either
an appraisal or such Loan Party's  good-faith  estimate of the current  value of
such real  property (for purposes of this  Section,  the "Current  Value").  The
Collateral  Agent shall  notify such Loan Party  whether it intends to require a
Mortgage and the other documents  referred to below. Upon receipt of such notice
requesting  a  Mortgage,  the Person  which has  acquired  such  After  Acquired
Property  shall as promptly as practicable  furnish to the Collateral  Agent the
following,  each in form and substance reasonably satisfactory to the Collateral
Agent:  (i) a Mortgage  with respect to such real  property  and related  assets
located at the After Acquired Property, each duly executed by such Person and in
recordable  form; (ii) evidence of the recording of the Mortgage  referred to in
clause  (i)  above in such  office or  offices  as may be  necessary  or, in the
opinion of the  Collateral  Agent,  desirable  to create and perfect a valid and
enforceable first priority lien on the property  purported to be covered thereby
or to  otherwise  protect the rights of the Agents and the  Lenders  thereunder,
(iii) a Title Insurance Policy,  (iv) a survey of such real property,  certified
to the  Collateral  Agent and to the issuer of the Title  Insurance  Policy by a
licensed professional surveyor reasonably  satisfactory to the Collateral Agent,
(v) Phase I Environmental  Site  Assessments with respect to such real property,
certified to the Collateral  Agent by a company  reasonably  satisfactory to the
Collateral  Agent,  , and (vi) such other  documents or  instruments  (including
guarantees  and  opinions  of counsel) as the  Collateral  Agent may  reasonably
require.  The Borrower  shall pay all fees and  expenses,  including  reasonable
attorneys fees and expenses,  and all title insurance  charges and premiums,  in
connection  with each Loan  Party's  obligations  under  this  Section  7.01(o).
Anything to the contrary contained herein notwithstanding,  the Collateral Agent
shall not require (A) a Mortgage on any leased real property,  or (B) a Mortgage
on any real  property  owned in fee if the  mortgage  recording  tax  associated
therewith is material (in the reasonable  judgment of the Agents) in relation to
the Current Value

     (p) Fiscal Year.  Cause the Fiscal Year of the Parent and its  Subsidiaries
to end on December  31st of each  calendar  year unless the Agents  consent to a
change in such  fiscal  year of Parent  and its  Subsidiaries  (and  appropriate
related changes to this Agreement).

     (q) Meridian  Subsidiaries.  Cause (i) the UK Subsidiaries to make payments
to  Meridian  in the amount of their  excess cash flow (the "UK Excess Cash Flow
Payments"),  and (ii)  Meridian to make  payments to the Parent or its  relevant
Subsidiary  in the amount of the UK Excess Cash Flow  Payments  until payment in
full by Meridian and the UK Subsidiaries  of all  outstanding  amounts under the
Meridian Intercompany Payable. Upon payment in full of the Meridian Intercompany
Payable, the Parent shall cause the UK Subsidiaries to deliver to the Collateral
Agent (A) a pledge agreement,  in form and substance reasonably  satisfactory to
the Agents,  with  respect to the  Accounts  Receivable  of the UK  Subsidiaries
(other than the Accounts  Receivable  for auditing  services  performed by third
party agents  pursuant to  associate  agreements  with the Parent),  and (B) all
other   documentation  that  is,  in  the  reasonable  opinion  of  the  Agents,
appropriate for such pledge agreement.

     Section 7.02 Negative Covenants. So long as any principal of or interest on
any Loan,  Reimbursement  Obligation,  Letter of Credit  Obligation or any other
Obligation   (whether   or  not   due)   (other   than   unasserted   contingent
indemnification  Obligations)  shall remain  unpaid or any Lender shall have any
Commitment hereunder,  each Loan Party shall not and shall not permit any of its
Subsidiaries to:

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     (a) Liens, Etc. Create,  incur, assume or suffer to exist, or permit any of
its Subsidiaries to create,  incur,  assume or suffer to exist, any Lien upon or
with respect to any of its properties,  whether now owned or hereafter acquired;
file or suffer to exist under the Uniform  Commercial Code or any similar law or
statute of any jurisdiction,  a financing  statement (or the equivalent thereof)
that names it or any of its Subsidiaries as debtor;  sign or suffer to exist any
security  agreement  authorizing  any  secured  party  thereunder  to file  such
financing  statement (or the  equivalent  thereof);  sell any of its property or
assets subject to an  understanding  or agreement,  contingent or otherwise,  to
repurchase such property or assets (including sales of accounts receivable) with
recourse to it or any of its  Subsidiaries or assign or otherwise  transfer,  or
permit any of its Subsidiaries to assign or otherwise  transfer,  any account or
other right to receive  income;  other than,  as to all of the above,  Permitted
Liens.

     (b) Indebtedness.  Create, incur, assume,  guarantee or suffer to exist, or
otherwise  become or  remain  liable  with  respect  to,  or  permit  any of its
Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise
become or remain liable with respect to, any  Indebtedness  other than Permitted
Indebtedness.

     (c) Fundamental Changes;  Dispositions.  Wind-up, liquidate or dissolve, or
merge,  consolidate or amalgamate  with any Person,  or convey,  sell,  lease or
sublease,  transfer or otherwise  dispose of,  whether in one  transaction  or a
series of related  transactions,  all or any part of its  business,  property or
assets,  whether now owned or  hereafter  acquired,  or  purchase  or  otherwise
acquire, whether in one transaction or a series of related transactions,  all or
substantially  all of the  assets of any Person (or any  division  thereof),  or
permit any of its  Subsidiaries to do any of the foregoing;  provided,  however,
that

     (i) the Parent and its Subsidiaries may enter into Permitted Mergers;

     (ii)  the  Parent   and  its   Subsidiaries   may  enter   into   Permitted
Reorganization Transactions; and

     (iii) the Parent and its Subsidiaries may make Permitted Dispositions.

     (d) Change in Nature of Business;  Change in Independent  Certified  Public
Accountant.  Make, or permit any of its  Subsidiaries to make, any change in the
nature of its business  described on Schedule  7.02(d) or acquire any properties
or assets  that are not  reasonably  related  to the  conduct  of such  business
activities or ancillary  thereto.  Make any change in its independent  certified
public accountant  without the prior written consent (which consent shall not be
unreasonably withheld) of the Agents.

     (e) Loans, Advances, Investments, Etc. Make any loan, advance, guarantee of
obligations,  other extension of credit or capital  contributions to, or hold or
invest in, or purchase  or  otherwise  acquire any shares of the Capital  Stock,
bonds,  notes,  debentures or other  securities of, or make any other investment
in, any other  Person,  or  purchase or own any  futures  contract or  otherwise
become  liable for the  purchase or sale of currency or other  commodities  at a
future  date  in  the  nature  of a  futures  contract,  or  permit  any  of its
Subsidiaries  to do  any of the  foregoing  (including  any  guarantee  by  such

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Subsidiaries of the Parent's  obligations  under the Existing Notes,  the Senior
Notes, or the Senior Convertible Notes), except for: (i) investments existing on
the date hereof,  as set forth on Schedule 7.02(e) hereto,  but not any increase
in the amount thereof as set forth in such Schedule or any other modification of
the terms thereof, and (ii) Permitted Investments.

     (f) Lease Obligations.  Create,  incur or suffer to exist, or permit any of
its Subsidiaries to create,  incur or suffer to exist, any obligations as lessee
for the payment of rent for any real or personal property in connection with any
sale and leaseback transaction.

     (g) [Intentionally Omitted]

     (h)  Restricted  Payments.  (i)  Declare  or  pay  any  dividend  or  other
distribution,  direct or indirect,  on account of any Capital  Stock of any Loan
Party or any of its Subsidiaries,  now or hereafter  outstanding,  (ii) make any
repurchase, redemption, retirement, defeasance, sinking fund or similar payment,
purchase or other  acquisition  for value,  direct or  indirect,  of any Capital
Stock of any Loan Party or any direct or indirect parent of any Loan Party,  now
or  hereafter  outstanding,  (iii) make any payment to retire,  or to obtain the
surrender of, any outstanding warrants, options or other rights for the purchase
or acquisition of shares of any class of Capital Stock of any Loan Party, now or
hereafter  outstanding,  or (iv) pay any  management  fees or any other  fees or
expenses  (including the  reimbursement  thereof by any Loan Party or any of its
Subsidiaries)  pursuant to any management agreement to any Affiliate of any Loan
Party or any Subsidiary of an Affiliate of a Loan Party; provided, however, that
(A) the Borrower  may pay  dividends or make loans or advances to the Parent (1)
in amounts necessary to enable the Parent to pay customary  expenses that it has
incurred  in the  ordinary  course  of its  business  solely  as a result of its
ownership  and  operation of the Borrower and its  Subsidiaries  (including  (x)
salaries,  bonuses, other benefits and related reasonable and customary expenses
incurred by directors,  officers,  employees of the Parent,  (y)  reasonable and
necessary  expenses  (including  reasonable   professional  fees  and  expenses)
incurred by the Parent to comply with  reporting  obligations  under  federal or
state laws or under this Agreement or any of the other Loan  Documents,  and (z)
indemnification  claims made by the senior  officers of the Parent to the extent
permitted by Section 7.02(j)),  (2) in amounts necessary to enable the Parent to
pay taxes when due and owing solely as a result of its ownership of the Borrower
and its  Subsidiaries,  and (3) in amounts necessary to enable the Parent to pay
out-of-pocket  legal,  accounting,  and filing  costs and other  expenses in the
nature of overhead in the ordinary course of business, (B) any Subsidiary of the
Parent (other than the Borrower) may pay dividends to its shareholders; provided
that the  proceeds of any  dividends  paid to the Parent  shall be sent no later
than the next  Business  Day after  receipt  thereof to the Borrower for deposit
into the  Collection  Account,  (C) the Parent may pay  dividends in the form of
common Capital  Stock,  and (D) common Capital Stock of the Parent may be issued
upon the  conversion  of the Senior  Convertible  Notes in  accordance  with the
Indenture for the 10% Senior  Convertible Notes and the Series A Preferred Stock
and the Series B Preferred Stock may be issued; provided further,  however, that
so long as no Event of Default has  occurred and is  continuing  or would result
therefrom,  the  Borrower  may pay  dividends  or make loans and advances to the
Parent in amounts  necessary  to (I)  enable  the Parent to pay the  semi-annual
interest  payments that are due and payable in cash to the holders of the Senior
Notes or the holders of the Senior Convertible Notes, and (II) enable the Parent
to pay the  interest  payment  that is due and  payable  to the  holders  of the
Existing Notes on or about May 26, 2006; provided further, however, that so long
as no Event of Default has occurred and is  continuing  and  Availability  after
giving effect to such payment for the 13 week period immediately succeeding such
payment is equal to or greater than  $5,000,000 (it being  understood and agreed

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that (a) the  projections  showing  Availability  after  giving  effect  to such
payment for the 13 week period  immediately  succeeding such payment shall be in
form and satisfactory to the Agents,  and (b) the Agents shall have the right to
retain,  at the Loan Parties'  expense,  a third party consultant to verify such
projections),  the Borrower may pay  dividends or make loans and advances to the
Parent  in  amounts  necessary  to  enable  the  Parent  to  pay  the  aggregate
outstanding principal amount of the Existing Notes to the holders thereof on the
maturity date of such Existing Notes.

     (i) Federal  Reserve  Regulations.  Permit any Loan or the  proceeds of any
Loan under this  Agreement to be used for any purpose that would cause such Loan
to be a margin loan under the provisions of Regulation T, U or X of the Board.

     (j) Transactions with Affiliates.  Enter into, renew,  extend or be a party
to, or permit any of its Subsidiaries to enter into, renew, extend or be a party
to, any transaction or series of related  transactions  (including the purchase,
sale,  lease,  transfer  or  exchange  of  property or assets of any kind or the
rendering  of  services  of any  kind)  with any  Affiliate,  except  (i) in the
ordinary course of business and necessary or desirable for the prudent operation
of its business,  for fair consideration and on terms no less favorable to it or
its  Subsidiaries  than  would  be  obtainable  in  a  comparable  arm's  length
transaction with a Person that is not an Affiliate  thereof,  (ii)  transactions
with another Loan Party,  (iii) the payment of reasonable and customary fees and
out-of-pocket  expenses of the members of the board of  directors or officers of
the Parent or any of its Subsidiaries,  (iv) reasonable and customary  director,
officer  and  employee  compensation  (including  bonuses)  and  other  benefits
(including retirement,  health, stock option, severance and other benefit plans)
and, in the case of senior officers,  indemnification  arrangements  approved in
good  faith  by the  board of  directors  of the  Parent,  (iv)  employment  and
severance  arrangements  between  the  Parent  and its  Subsidiaries  and  their
respective  directors,  officers and employees,  to the extent  approved in good
faith by the board of directors of the Parent, and (v) transactions permitted by
Section 7.02(e) or (h).

     (k)  Limitations  on Dividends  and Other  Payment  Restrictions  Affecting
Subsidiaries.  Create or otherwise  cause,  incur,  assume,  suffer or permit to
exist or become effective any consensual  encumbrance or restriction of any kind
on the ability of any  Subsidiary  of any Loan Party (i) to pay  dividends or to
make any other  distribution  on any shares of Capital Stock of such  Subsidiary
owned by any Loan Party or any of its Subsidiaries,  (ii) to pay or prepay or to
subordinate any Indebtedness  owed to any Loan Party or any of its Subsidiaries,
(iii) to make loans or advances to any Loan Party or any of its  Subsidiaries or
(iv) to transfer  any of its  property or assets to any Loan Party or any of its
Subsidiaries,  or permit  any of its  Subsidiaries  to do any of the  foregoing;
provided,  however,  that  nothing in any of clauses  (i)  through  (iv) of this
Section 7.02(k) shall prohibit or restrict compliance with:

     (A) this Agreement and the other Loan Documents;

     (B) the Indenture for the 11% Notes;

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     (C) any agreements in effect on the date of this Agreement and described on
Schedule 7.02(k);

     (D) any applicable law, rule or regulation  (including  applicable currency
control laws and applicable state corporate statutes  restricting the payment of
dividends in certain circumstances);

     (E) in the case of clause  (iv),  any  agreement  setting  forth  customary
restrictions on the subletting,  assignment or transfer of any property or asset
that is leased or licensed;

     (F) in the case of clause (iv), any agreement, instrument or other document
evidencing a Permitted Lien that restricts,  on customary terms, the transfer of
any property or assets subject thereto;

     (G) encumbrances or restrictions imposed by any Permitted  Refinancing that
is otherwise permitted by the Loan Documents;  provided that the encumbrances or
restrictions  in the  Indebtedness  as extended,  refinanced or modified are not
materially  more  restrictive  than those that existed prior to such  extension,
refinancing, or modification;

     (H)  customary  restrictions  and  conditions  contained  in any  agreement
relating to the sale of any property  permitted  under Section  7.02(c)  pending
consummation of such sale;

     (I)  customary  restrictions  related to deposits  or net worth  imposed by
suppliers or landlords  under  contracts  entered into in the ordinary course of
business; or

     (J) agreements  evidencing Permitted  Indebtedness incurred by a Subsidiary
that is not a Loan Party.

     (l) Limitation on Issuance of Preferred  Stock.  Except for the issuance or
sale of Permitted Preferred Stock by the Parent, issue or sell or enter into any
agreement  or  arrangement  for the  issuance  and sale of, or permit any of its
Subsidiaries to issue or sell or enter into any agreement or arrangement for the
issuance and sale of, any shares of Prohibited  Preferred  Stock, any securities
convertible into or exchangeable for Prohibited Preferred Stock or any warrants.

     (m)  Modifications  of Indebtedness,  Organizational  Documents and Certain
Other  Agreements;  Etc. (i) Amend,  modify or  otherwise  change (or permit the
amendment,  modification or other change in any manner of) any of the provisions
of the  Indebtedness  evidenced by the Existing Notes,  the Senior Notes, or the
Senior  Convertible  Notes if such  amendment,  modification or change (A) would
alter  Section 6.11 of the  Indenture  for the 10% Senior  Convertible  Notes or
Section 6.11 of the Indenture for the 11% Senior  Convertible  Notes,  (B) would
shorten the fixed maturity or increase the principal  amount of, or increase the
rate or shorten  the time of payment of interest  on, or increase  the amount or
shorten  the time of payment of any  principal  or  premium  payable  whether at
maturity,  at a date fixed for  prepayment  or by  acceleration  or otherwise or
increases the amount of, or accelerate the time of payment of, any fees or other
amounts payable in connection therewith, (C) relates to any material affirmative
or negative  covenants or any events of default or remedies  thereunder  and the
effect of which is to subject the Parent or any of its  Subsidiaries to any more

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onerous or more restrictive  provisions,  or (D) otherwise adversely affects the
interests  of the  Agents or  Lenders  under  this  Agreement  or any other Loan
Document in any material  respect;  (ii) amend,  modify or otherwise  change (or
permit the amendment,  modification or other change in any manner of) its or any
of its  Subsidiaries'  Subordinated  Debt  or of  any  instrument  or  agreement
(including  any  purchase  agreement,  indenture,  loan  agreement  or  security
agreement)   relating  to  any  such   Subordinated   Debt  if  such  amendment,
modification  or change  would  shorten the final  maturity  or average  life to
maturity of, or require any payment to be made earlier than the date  originally
scheduled  on,  such  Subordinated   Debt,  would  increase  the  interest  rate
applicable to such Subordinated Debt, would change the subordination  provisions
of such  Subordinated  Debt, or would otherwise be adverse to the Lenders or the
issuer of such Subordinated  Debt in any material respect,  (iii) except for the
Obligations,  make any voluntary or optional  payment,  prepayment,  redemption,
defeasance,  sinking fund payment,  repurchase or other acquisition for value of
any of its or its Subsidiaries'  Indebtedness  described in clauses (h) - (l) of
the definition of "Permitted Indebtedness" (including by way of depositing money
or securities with the trustee therefor before the date required for the purpose
of paying any  portion of such  Indebtedness  when due),  or refund,  refinance,
replace or exchange any other Indebtedness for any such Indebtedness  (except to
the extent such refunded,  refinanced,  replaced,  or exchanged  Indebtedness is
otherwise expressly permitted by the definition of "Permitted Indebtedness"), or
make any payment, prepayment,  redemption,  defeasance,  sinking fund payment or
repurchase  of any such  Indebtedness  as a result of any asset sale,  change of
control,  issuance and sale of debt or equity  securities or similar  event,  or
give any notice with respect to any of the  foregoing,  (iv) except as permitted
by Section 7.02(c),  amend, modify or otherwise change its name, jurisdiction of
organization, organizational identification number or FEIN, or (v) amend, modify
or otherwise change its certificate of incorporation or bylaws (or other similar
organizational  documents),  including  by the  filing  or  modification  of any
certificate of designation,  or any agreement or arrangement entered into by it,
with  respect  to  any  of  its  Capital  Stock  (including  any   shareholders'
agreement),  or enter into any new agreement  with respect to any of its Capital
Stock,  except  any such  amendments,  modifications  or changes or any such new
agreements or arrangements  pursuant to this clause (v) that either individually
or in the  aggregate,  could not  reasonably be expected to result in a Material
Adverse Effect.

     (n) Investment Company Act of 1940. Engage in any business,  enter into any
transaction,  use any  securities  or take any other action or permit any of its
Subsidiaries  to do any of the  foregoing,  that  would  cause  it or any of its
Subsidiaries  to  become  subject  to  the  registration   requirements  of  the
Investment  Company Act of 1940, as amended,  by virtue of being an  "investment
company" or a company "controlled" by an "investment company" not entitled to an
exemption within the meaning of such Act.

     (o)  Compromise  of Accounts  Receivable.  Compromise or adjust any Account
Receivable  (or  extend  the time of payment  thereof)  or grant any  discounts,
allowances  or credits or permit any of its  Subsidiaries  to do so other  than,
provided no Default or Event of Default has occurred and is  continuing,  in the
ordinary course of its business;  provided,  however, in no event shall any such
discount,  allowance  or credit  exceed  $200,000 in the  aggregate  and no such
extension  of the time for payment  extend  beyond 60 days from the original due
date thereof.

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     (p) ERISA.  (i) Engage,  or permit any ERISA  Affiliate  to engage,  in any
transaction described in Section 4069 of ERISA; (ii) engage, or permit any ERISA
Affiliate to engage, in any prohibited  transaction  described in Section 406 of
ERISA  or 4975  of the IRC for  which a  statutory  or  class  exemption  is not
available or a private  exemption has not previously been obtained from the U.S.
Department  of Labor;  (iii)  adopt or permit any ERISA  Affiliate  to adopt any
employee  welfare benefit plan within the meaning of Section 3(1) of ERISA which
provides  health or life insurance  benefits to employees  after  termination of
employment  other than as required by Section  601 of ERISA or  applicable  law;
(iv) fail to make any contribution or payment to any Multiemployer Plan which it
or any ERISA  Affiliate may be required to make under any agreement  relating to
such Multiemployer  Plan, or any law pertaining  thereto; or (v) fail, or permit
any  ERISA  Affiliate  to fail,  to pay any  required  installment  or any other
payment required under Section 412 of the IRC on or before the due date for such
installment or other payment.

     (q)  Environmental.   Permit  the  use,  handling,   generation,   storage,
treatment,  release or disposal of Hazardous  Materials at any property owned or
leased by it or any of its Subsidiaries, except in compliance with Environmental
Laws and so long as such use, handling, generation,  storage, treatment, release
or disposal of Hazardous Materials does not result in a Material Adverse Effect.

     (r) Certain  Agreements.  Agree to any material amendment or other material
change to or material  waiver of any of its rights under any Material  Contract,
in each case that could  reasonably be expected to result in a Material  Adverse
Effect.

     (s) Canadian Employee Benefits.  Incur any material liability or obligation
under the Canadian Employee Benefit Laws or establish any pension plan, deferred
compensation plan,  retirement income plan, stock option or stock purchase plan,
profit  sharing  plan,  bonus plan or policy,  employee  group  insurance  plan,
program,  policy  or  practice,  formal  or  informal,  with  respect  to  their
respective  employees  in  Canada,  that in any  such  case,  is  equivalent  or
substantially  equivalent  to a "defined  benefit  plan" (as  defined in Section
3(35) of ERISA).

     (t) Inactive  Subsidiaries.  Permit any of the Inactive Subsidiaries to own
any assets (other than assets with a de minimis  value),  incur any  liabilities
(other than de minimis liabilities), or engage in any business activity.

     Section 7.03 Financial  Covenants.  So long as any principal of or interest
on any Loan, Reimbursement Obligation,  Letter of Credit Obligation or any other
Obligation   (whether   or  not   due)   (other   than   unasserted   contingent
indemnification  Obligations)  shall remain  unpaid or any Lender shall have any
Commitment hereunder, each Loan Party shall not:

     (a) Leverage  Ratio.  Permit the ratio of  Consolidated  Senior Debt of the
Parent and its Subsidiaries as of the last day of each period set forth below to
TTM EBITDA of the Parent and its Subsidiaries for such period to be greater than
the applicable ratio set forth opposite such period:

                                       95
<PAGE>

                  APPLICABLE PERIOD                    LEVERAGE RATIO
                  ------------------------------------ -------------------------
                  For the 12 month period              5.75:1.00
                  ending March 31, 2006
                  ------------------------------------ -------------------------
                  For the 12 month period              4.00:1.00
                  ending June 30, 2006
                  ------------------------------------ -------------------------
                  For the 12 month period              2.75:1.00
                  ending September 30, 2006
                  ------------------------------------ -------------------------
                  For the 12 month period              2.50:1.00
                  ending December 31, 2006
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending March 31, 2007
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending June 30, 2007
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending September 30, 2007
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending December 31, 2007
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending March 31, 2008
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending June 30, 2008
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending September 30, 2008
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending December 31, 2008
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending March 31, 2009
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending June 30, 2009
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending September 30, 2009
                  ------------------------------------ -------------------------
                  For the 12 month period              2.00:1.00
                  ending December 31, 2009
                  ------------------------------------ -------------------------

     (b) Fixed Charge Coverage Ratio.  Permit the Fixed Charge Coverage Ratio of
the Parent and its  Subsidiaries  for the period set forth below to be less than
the applicable ratio set forth opposite such period:

                APPLICABLE PERIOD                   FIXED CHARGE COVERAGE RATIO
                ----------------------------------- ---------------------------
                For the 3 month period              1.20:1.00
                ending June 30, 2006
                ----------------------------------- ---------------------------
                For the 6 month period              1.30:1.00
                ending September 30, 2006
                ----------------------------------- ---------------------------

                                       96
<PAGE>

                For the 9 month period              1.70:1.00
                ending December 31, 2006
                ----------------------------------- ---------------------------
                For the 12 month period             1.60:1.00
                ending March 31, 2007
                ----------------------------------- ---------------------------
                For the 12 month period             1.90:1.00
                ending June 30, 2007
                ----------------------------------- ---------------------------
                For the 12 month period             2.20:1.00
                ending September 30, 2007
                ----------------------------------- ---------------------------
                For the 12 month period             2.30:1.00
                ending December 31, 2007
                ----------------------------------- ---------------------------
                For the 12 month period             2.40:1.00
                ending March 31, 2008
                ----------------------------------- ---------------------------
                For the 12 month period             2.40:1.00
                ending June 30, 2008
                ----------------------------------- ---------------------------
                For the 12 month period             2.40:1.00
                ending September 30, 2008
                ----------------------------------- ---------------------------
                For the 12 month period             2.40:1.00
                ending December 31, 2008
                ----------------------------------- ---------------------------
                For the 12 month period             2.40:1.00
                ending March 31, 2009
                ----------------------------------- ---------------------------
                For the 12 month period             2.40:1.00
                ending June 30, 2009
                ----------------------------------- ---------------------------
                For the 12 month period             2.40:1.00
                ending September 30, 2009
                ----------------------------------- ---------------------------
                For the 12 month period             2.40:1.00
                ending December 31, 2009
                ----------------------------------- ---------------------------

     (c) Consolidated  EBITDA.  Permit Consolidated EBITDA of the Parent and its
Subsidiaries  for the  period  set forth  below to be less  than the  applicable
amount set forth opposite such period:

                  APPLICABLE PERIOD                     CONSOLIDATED EBITDA
                  ------------------------------------- ------------------------
                  For the 3 month period                 $1,226,000
                  ending March 31, 2006
                  ------------------------------------- ------------------------
                  For the 6 month period                $3,917,000
                  ending June 30, 2006
                  ------------------------------------- ------------------------
                  For the 9 month period                $7,540,000
                  ending September 30, 2006
                  ------------------------------------- ------------------------
                  For the 12 month period               $14,045,000
                  ending December 31, 2006
                  ------------------------------------- ------------------------
                  For the 12 month period               $15,957,000
                  ending March 31, 2007
                  ------------------------------------- ------------------------

                                       97
<PAGE>

                  For the 12 month period               $18,525,000
                  ending June 30, 2007
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,909,000
                  ending September 30, 2007
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,020,000
                  ending December 31, 2007
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,036,000
                  ending March 31, 2008
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,036,000
                  ending June 30, 2008
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,036,000
                  ending September 30, 2008
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,036,000
                  ending December 31, 2008
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,036,000
                  ending March 31, 2009
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,036,000
                  ending June 30, 2009
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,036,000
                  ending September 30, 2009
                  ------------------------------------- ------------------------
                  For the 12 month period               $20,036,000
                  ending December 31, 2009
                  ------------------------------------- ------------------------

     (d) Capital  Expenditures.  Make Capital Expenditures in any Fiscal Year in
excess of the amount set forth in the following table for the applicable period:

Fiscal Year 2006                     $6,000,000
------------------------------------ ------------------------------------------
Fiscal Year 2007                     $6,000,000
------------------------------------ ------------------------------------------
Fiscal Year 2008                     $6,000,000
------------------------------------ ------------------------------------------
Fiscal Year 2009                     $6,000,000
------------------------------------ ------------------------------------------
Fiscal Year 2010                     $6,000,000
------------------------------------ ------------------------------------------

                                  ARTICLE VIII

                      MANAGEMENT, COLLECTION AND STATUS OF
                    ACCOUNTS RECEIVABLE AND OTHER COLLATERAL

     Section 8.01 Collection of Accounts Receivable; Management of Collateral.

     (a) On or  prior to the  Effective  Date,  the  Borrower  and the  Domestic
Guarantors  shall  assist the  Administrative  Agent in (i)  establishing,  and,
during the term of this Agreement,  maintaining one or more lockboxes identified
on Schedule  8.01 hereto  (collectively,  the  "Lockboxes")  with the  financial
institutions  set  forth  on  Schedule  8.01  hereto  or  such  other  financial
institutions  selected by the Borrower and approved by the Administrative  Agent
(which approval shall not be unreasonably withheld) (each being referred to as a
"Lockbox Bank"), and (ii)  establishing,  and during the term of this Agreement,
maintaining an account (the "Collection  Account") with each Lockbox Bank as set
forth  on  Schedule  8.01.  The  Borrower  and  the  Domestic  Guarantors  shall

                                       98
<PAGE>

irrevocably instruct their Account Debtors,  with respect to Accounts Receivable
of the Borrower and the Domestic Guarantors, to remit all payments to be made by
checks or other drafts to the  Lockboxes and to remit all payments to be made by
wire transfer or by Automated  Clearing House,  Inc.  payment as directed by the
Administrative Agent and shall instruct each Lockbox Bank to deposit all amounts
received in its Lockbox to the  Collection  Account at such  Lockbox Bank on the
day  received  or, if such day is not a  Business  Day,  on the next  succeeding
Business  Day.  Until the  Administrative  Agent has advised the Borrower to the
contrary after the occurrence and during the continuance of an Event of Default,
the Borrower  and the  Domestic  Guarantors  may and will  enforce,  collect and
receive all amounts  owing on the Accounts  Receivable  of the Borrower and such
Domestic   Guarantors  for  the  Administrative   Agent's  benefit  and  on  the
Administrative  Agent's behalf,  but at the Borrower's  expense;  such privilege
shall  terminate,  at the election of any Agent,  upon the occurrence and during
the continuance of an Event of Default. All checks, drafts, notes, money orders,
acceptances,  cash and other evidences of Indebtedness  received directly by the
Borrower or any Domestic  Guarantor  from any Account  Debtor,  as proceeds from
Accounts Receivable of the Borrower or such Domestic  Guarantor,  or as proceeds
of any  other  Collateral,  shall  be held  by the  Borrower  or  such  Domestic
Guarantor  in trust for the Agents and the Lenders and upon receipt be deposited
by the Borrower or such  Domestic  Guarantor in original  form and no later than
the next Business Day after receipt thereof into a Collection  Account.  Neither
the Borrower nor any Domestic  Guarantor shall commingle such  collections  with
the  Borrower's or such Domestic  Guarantor's  (as the case may be) own funds or
the funds of any  Subsidiary  or  Affiliate  of the  Borrower  or such  Domestic
Guarantor  (as the case may be) or with the  proceeds of any assets not included
in the Collateral, in each case other than with respect to the funds sent to the
Borrower  pursuant  to Section  8.01(b)  and other than the funds in the Deposit
Accounts  of the  Borrower  that  will  perform  the cash  management  functions
currently  performed by Bank Mendes Gans.  All funds  received in the Collection
Account shall be sent by wire transfer or Automated Clearing House, Inc. payment
to the Payment Office to be credited to the  Administrative  Agent's Account for
application at the end of each Business Day to reduce the then principal balance
of the Revolving  Loans,  conditional  upon final payment to the  Administrative
Agent. No checks,  drafts or other  instruments  received by the  Administrative
Agent shall  constitute  final  payment to the  Administrative  Agent unless and
until such checks, drafts or instruments have actually been collected.

     (b) All funds (other the proceeds of dividends, loans, or advances that are
permitted  to be made by the  Borrower  to the Parent  pursuant  to the  express
provisions of Section 7.02(h)), received by the Parent in its Deposit Account at
Bank Mendes Gans shall be sent no later than the next Business Day after receipt
thereof to the Borrower for deposit into the  Collection  Account.  On or before
the date that is 90 days after the Effective  Date (or such longer period as the
Collateral  Agent  shall  reasonably  agree),  the Parent  shall have closed its
Deposit  Account  at Bank  Mendes  Gans  and  shall  have  transferred  all cash
management  functions  performed  by Bank  Mendes  Gans  to one or more  Deposit
Accounts of the Borrower that are subject to Control  Agreements in favor of the
Collateral Agent.

     (c) After the occurrence and during the continuance of an Event of Default,
the Collateral Agent may, and at the request of the Administrative  Agent or the
Required  Lenders,  the Collateral  Agent shall,  send a notice of assignment or
notice of the  Lenders'  security  interest to any and all Account  Debtors and,
thereafter,  the  Collateral  Agent  shall have the sole  right to  collect  the
Accounts  Receivable  and payment  intangibles  of the Borrower and the Domestic
Guarantors  or take  possession  of the  Collateral  and the books  and  records

                                       99
<PAGE>

relating  thereto.  After the occurrence and during the continuation of an Event
of Default,  the Borrower and the Domestic  Guarantors  shall not, without prior
written  consent of the Agents,  grant any  extension  of time of payment of any
Account  Receivable  or payment  intangible,  compromise  or settle any  Account
Receivable or payment intangible for less than the full amount thereof, release,
in whole or in part, any Person or property liable for the payment  thereof,  or
allow any credit or discount whatsoever thereon.

     (d) The Borrower and each Domestic  Guarantor hereby appoints each Agent or
its  designee  on  behalf  of such  Agent as the  Borrower's  and such  Domestic
Guarantor's  attorney-in-fact  provided  that each Agent  agrees not to exercise
such power except upon the occurrence and during the  continuance of an Event of
Default to (i) endorse the Borrower's or such Domestic Guarantor's name upon any
notes,  acceptances,  checks, drafts, money orders or other evidences of payment
relating to the Accounts  Receivable or payment  intangibles  of the Borrower or
such Domestic Guarantor,  (ii) sign the Borrower's or such Domestic  Guarantor's
name on any invoice or bill of lading relating to any of the Accounts Receivable
or payment  intangibles  of the  Borrower  or such  Domestic  Guarantor,  drafts
against  Account  Debtors  with  respect  to  Accounts   Receivable  or  payment
intangibles  of  the  Borrower  or  such  Domestic  Guarantor,  assignments  and
verifications  of  Accounts  Receivable  or payment  intangibles  and notices to
Account  Debtors with respect to Accounts  Receivable or payment  intangibles of
the Borrower or such Domestic  Guarantor,  (iii) send  verification  of Accounts
Receivable  of the  Borrower  or such  Domestic  Guarantor,  and (iv) notify the
Postal Service  authorities to change the address for delivery of mail addressed
to the  Borrower or such  Domestic  Guarantor  to such address as such Agent may
designate  and to do all  other  acts and  things  necessary  to carry  out this
Agreement; provided that such Agent or designees shall use reasonable efforts to
simultaneously  provide  a copy of such  notification  to the  Borrower  or such
Domestic  Guarantor (it being  understood that failure of such Agent or designee
to provide  such notice to the  Borrower  shall not result in  liability to such
Agent or designee  hereunder).  All acts of said attorney or designee are hereby
ratified and approved, and said attorney or designee shall not be liable for any
acts of omission  or  commission  (other  than acts of  omission  or  commission
constituting  gross  negligence  or willful  misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction),  or for any error
of judgment or mistake of fact or law; this power being coupled with an interest
is  irrevocable  until all of the Loans  and  other  Obligations  under the Loan
Documents are paid in full and all of the Commitments are terminated.

     (e) Nothing herein  contained shall be construed to constitute any Agent as
agent of the Borrower or any Domestic Guarantor for any purpose whatsoever,  and
the Agents shall not be  responsible  or liable for any  shortage,  discrepancy,
damage,  loss or destruction of any part of the Collateral wherever the same may
be located and regardless of the cause thereof (other than from acts of omission
or commission  constituting gross negligence or willful misconduct as determined
by a final non-appealable  judgment of a court of competent  jurisdiction).  The
Agents shall not, under any  circumstance or in any event  whatsoever,  have any
liability  for any  error or  omission  or delay  of any kind  occurring  in the
settlement,  collection  or payment  of any of the  Accounts  Receivable  of the

                                      100
<PAGE>

Borrower  or the  Domestic  Guarantors  or any  instrument  received  in payment
thereof or for any damage  resulting  therefrom  (other than acts of omission or
commission  constituting gross negligence or willful misconduct as determined by
a final  non-appealable  judgment  of a court of  competent  jurisdiction).  The
Agents, by anything herein or in any assignment or otherwise,  do not assume any
of the  obligations  under any contract or  agreement  assigned to any Agent and
shall not be responsible  in any way for the  performance by the Borrower or any
Domestic Guarantor of any of the terms and conditions thereof.

     (f) If any Account  Receivable  of the Borrower or any  Domestic  Guarantor
includes a charge for any tax payable to any Governmental Authority,  each Agent
is hereby  authorized  (but in no event  obligated) in its discretion to pay the
amount thereof to the proper taxing authority for the Borrower's  account and to
charge the Borrower  therefor.  The Borrower and the Domestic  Guarantors  shall
notify the Agents if any Account  Receivable  of the  Borrower  or the  Domestic
Guarantors includes any taxes due to any such Governmental Authority and, in the
absence  of such  notice,  the  Agents  shall  have the right to retain the full
proceeds of such Account  Receivable  and shall not be liable for any taxes that
may be due by reason of the sale and delivery creating such Account Receivable.

     (g)  Notwithstanding  any other terms set forth in the Loan Documents,  the
rights and  remedies  of the Agents and the  Lenders  herein  provided,  and the
obligations  of the Loan Parties set forth  herein,  are  cumulative  of, may be
exercised  singly or  concurrently  with,  and are not  exclusive  of, any other
rights,  remedies  or  obligations  set forth in any other Loan  Document  or as
provided by law.

     Section  8.02  Accounts  Receivable  Documentation.  The  Borrower  and the
Domestic  Guarantors  will at such  intervals  as the  Administrative  Agent may
require,  execute and deliver  confirmatory  written assignments of the Accounts
Receivable  to the  Administrative  Agent and furnish such further  schedules or
information as the  Administrative  Agent may reasonably request relating to the
Accounts  Receivable,  including sales invoices or the equivalent,  credit memos
issued,  remittance  advices,  reports and copies of deposit slips and copies of
original  shipping or delivery  receipts for all merchandise  sold. In addition,
the Borrower and the Domestic  Guarantors shall notify the Administrative  Agent
of any  non  compliance  in  respect  of  the  representations,  warranties  and
covenants contained in Section 8.03. The items to be provided under this Section
8.02 are to be in form reasonably  satisfactory to the Administrative  Agent and
are to be executed and delivered to the  Administrative  Agent from time to time
solely for their  convenience  in  maintaining  records of the  Collateral.  The
Borrower's or any Domestic  Guarantor's failure to give any of such items to the
Administrative Agent shall not affect, terminate,  modify or otherwise limit the
Collateral Agent's Lien on the Collateral. Neither the Borrower nor any Domestic
Guarantor  shall  re-date any  invoice or sale or make sales on extended  dating
beyond that customary in the Borrower's or such Domestic  Guarantor's  industry,
and shall not re-bill any Accounts  Receivable  without promptly  disclosing the
same to the Administrative  Agent and providing the Administrative  Agent with a
copy of such  re-billing,  identifying  the same as such. If the Borrower or any
Domestic  Guarantor becomes aware of anything  materially  detrimental to any of
the Borrower's or any Domestic  Guarantor's  customers'  credit, the Borrower or
such Domestic Guarantor will promptly advise the Administrative Agent thereof.

                                      101
<PAGE>

     Section  8.03  Status of  Accounts  Receivable.  With  respect to  Accounts
Receivable of any Loan Party at the time the Accounts Receivable becomes subject
to the  Collateral  Agent's  Lien,  each Loan Party  covenants,  represents  and
warrants:  (a) such Loan Party  shall be the sole  owner,  free and clear of all
Liens (except for the Liens granted in the favor of the Collateral Agent for the
benefit of the Agents and the Lenders and Permitted Liens); (b) unless otherwise
indicated  in writing  to the  Administrative  Agent,  each  Account  Receivable
identified by Borrower as an Eligible  Account  Receivable  in a Borrowing  Base
report submitted to either Agent shall be a good and valid account  representing
a bona fide  indebtedness  incurred by the Account Debtor  therein named,  for a
fixed sum as set forth in the invoice relating thereto;  (c) no Eligible Account
Receivable  identified  by the  Borrower or a Domestic  Guarantor as an Eligible
Account Receivable in a Borrowing Base report submitted to either Agent shall be
subject to any defense,  offset,  counterclaim,  discount or allowance except as
may be stated in the invoice relating  thereto,  discounts and allowances as may
be  customary in such Loan  Party's  business and as otherwise  disclosed to the
Agents;  (d) none of the  transactions  underlying or giving rise to any Account
Receivable  identified  by the  Borrower or a Domestic  Guarantor as an Eligible
Account  Receivable in a Borrowing  Base report  submitted to either Agent shall
violate any applicable  state or federal laws or regulations,  and all documents
relating thereto shall be legally  sufficient under such laws or regulations and
shall be legally  enforceable in accordance  with their terms;  (e) no agreement
under  which  any  deduction  or offset of any kind,  other  than  normal  trade
discounts,  may be  granted  or shall  have been  made by such Loan  Party at or
before the time any Account Receivable  identified by the Borrower or a Domestic
Guarantor as an Eligible Account Receivable in a Borrowing Base report submitted
to either Agent is created; (f) all agreements,  instruments and other documents
relating  to any Account  Receivable  identified  by the  Borrower or a Domestic
Guarantor as an Eligible Account Receivable in a Borrowing Base report submitted
to either  Agent shall be true and correct in all  material  respects and in all
material  respects what they purport to be; (g) to such Loan Party's  knowledge,
all  signatures  and  endorsements  that  appear  on  all  material  agreements,
instruments and other documents relating to any Account Receivable identified by
the Borrower or a Domestic  Guarantor  as an Eligible  Account  Receivable  in a
Borrowing  Base  report  submitted  to either  Agent  shall be  genuine  and all
signatories  and endorsers  shall have full capacity to contract;  (h) such Loan
Party shall  maintain  books and records  pertaining to said  Collateral in such
detail,  form and scope as the Agents shall  reasonably  require;  (i) such Loan
Party shall promptly (and in any event within 5 Business Days) notify the Agents
if any Account  Receivable  identified by the Borrower or any Domestic Guarantor
as an Eligible Account Receivable in a Borrowing Base report submitted to either
Agent arises out of contracts with any Governmental Authority,  and will execute
any  instruments  and take any steps  required  by the  Agents in order that all
monies due or to become due under any such  contract  shall be  assigned  to the
Collateral Agent and notice thereof given to such  Governmental  Authority under
the Federal Assignment of Claims Act or any similar state or local law; (j) such
Loan Party will,  immediately  upon learning  thereof,  report to the Agents any
material  loss  or  destruction  of,  or  substantial  damage  to,  any  of  the
Collateral, and any demand, notice, document or other information received by it
that question or calls into doubt the validity, enforceability or collectability
of any of the Eligible Accounts  Receivable;  (k) if any amount payable under or
in connection  with any Account  Receivable is evidenced by a promissory note or
other  instrument,  such  promissory  note or  instrument  shall be  immediately
pledged,  endorsed,  assigned  and  delivered  to the  Collateral  Agent for the
benefit of the Agents and the Lenders as  additional  Collateral;  (l) such Loan
Party shall not  re-date  any  invoice or sale or make sales on extended  dating
beyond that which is customary in the ordinary course of its business and in the
industry; and (m) such Loan Party is not and shall not be entitled to pledge any
Agent's or any Lender's credit on any purchases or for any purpose whatsoever.

                                      102
<PAGE>

     Section  8.04  Collateral  Custodian.  Upon the  occurrence  and during the
continuance  of any Event of  Default,  the  Collateral  Agent  may,  and at the
request of the  Administrative  Agent or the Required  Lenders,  the  Collateral
Agent  shall,  at any time and from  time to time  employ  and  maintain  on the
premises of any Loan Party a  custodian  selected  by the  Collateral  Agent who
shall have full  authority  to do all acts  necessary to protect the Agents' and
the  Lenders'  interests.  Each Loan  Party  hereby  agrees to, and to cause its
Subsidiaries  to,  cooperate  with any such  custodian  and to do  whatever  the
Collateral  Agent may reasonably  request to preserve the Collateral.  All costs
and expenses incurred by the Collateral Agent by reason of the employment of the
custodian  shall be the  responsibility  of the Borrower and charged to the Loan
Account in accordance with Section 4.02(a).

                                   ARTICLE IX

                                EVENTS OF DEFAULT

     Section 9.01 Events of Default.  If any of the following  Events of Default
shall occur and be continuing:

     (a) the Borrower  shall fail to pay (i) any  principal of any Loan when due
(whether by scheduled maturity,  required  prepayment,  acceleration,  demand or
otherwise),  or (ii) any interest on any Loan, any Collateral Agent Advance, any
Reimbursement  Obligation,  or any fee,  indemnity or other amount payable under
this  Agreement  or any other  Loan  Document  when due  (whether  by  scheduled
maturity, required prepayment, acceleration, demand or otherwise);

     (b) any  representation  or warranty made or deemed made by or on behalf of
any Loan Party or by any officer of the foregoing  under or in  connection  with
any Loan Document or under or in  connection  with any report,  certificate,  or
other document  delivered to any Agent, any Lender or the L/C Issuer pursuant to
any Loan Document shall have been incorrect in any material respect when made or
deemed made;

     (c) any Loan Party  shall fail to perform or comply  with any  covenant  or
agreement contained in Section 7.01(a), Sections 7.02(a) - (m), Section 7.02(o),
Section 7.02(r), Section 7.03, Section 8.01(a), or Section 8.01(b);

     (d) any Loan Party  shall fail to  perform or comply  with any other  term,
covenant or agreement contained in any Loan Document to be performed or observed
by it and, except as set forth in subsections (a), (b), and (c), of this Section
9.01, such failure, if capable of being remedied, shall remain unremedied for 20
days after the  earlier of the date a senior  officer of any Loan Party  becomes
aware of such  failure and the date written  notice of such  default  shall have
been given by any Agent to such Loan Party;

     (e) the Parent or any of its  Subsidiaries  shall fail to pay any principal
of or interest or premium on any of its Indebtedness (excluding the Obligations)
to the  extent  that the  aggregate  principal  amount of all such  Indebtedness

                                      103
<PAGE>

exceeds $1,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration,  demand or otherwise)  and such failure shall  continue  after the
applicable  grace  period,  if any,  specified in the  agreement  or  instrument
relating to such  Indebtedness,  or any other  default  under any  agreement  or
instrument  relating to any such  Indebtedness,  or any other event, shall occur
and shall continue after the applicable grace period, if any,  specified in such
agreement  or  instrument,  if  the  effect  of  such  default  or  event  is to
accelerate, or to permit the acceleration of, the maturity of such Indebtedness;
or any such Indebtedness shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment),  redeemed,
purchased  or defeased or an offer to prepay,  redeem,  purchase or defease such
Indebtedness  shall be  required to be made,  in each case,  prior to the stated
maturity thereof;

     (f)  the  Parent  or  any of  its  Subsidiaries  (i)  shall  institute  any
proceeding  or voluntary  case seeking to adjudicate it a bankrupt or insolvent,
or seeking dissolution,  liquidation,  winding up, reorganization,  arrangement,
adjustment,  protection,  relief or composition of it or its debts under any law
relating to  bankruptcy,  insolvency,  reorganization  or relief of debtors,  or
seeking  the entry of an order  for  relief or the  appointment  of a  receiver,
trustee,  custodian  or other  similar  official  for any such Person or for any
substantial  part of its property,  (ii) shall be generally not paying its debts
as such debts  become due or shall  admit in writing  its  inability  to pay its
debts  generally,  (iii)  shall  make a general  assignment  for the  benefit of
creditors,  or (iv)  shall  take any  action to  authorize  or effect any of the
actions set forth above in this subsection (f);

     (g) any  proceeding  shall be  instituted  against the Parent or any of its
Subsidiaries  seeking to  adjudicate  it a  bankrupt  or  insolvent,  or seeking
dissolution,  liquidation, winding up, reorganization,  arrangement, adjustment,
protection,  relief of  debtors,  or seeking the entry of an order for relief or
the appointment of a receiver,  trustee, custodian or other similar official for
any such Person or for any  substantial  part of its  property,  and either such
proceeding  shall remain  undismissed or unstayed for a period of 30 days or any
of the actions  sought in such  proceeding  (including the entry of an order for
relief  against  any such  Person or the  appointment  of a  receiver,  trustee,
custodian or other similar  official for it or for any  substantial  part of its
property) shall occur;

     (h) any  provision  of any Loan  Document  shall at any time for any reason
(other than pursuant to the express terms thereof) cease to be valid and binding
on or enforceable  against any Loan Party intended to be a party thereto, or the
validity or enforceability thereof shall be contested by any party thereto, or a
proceeding  shall be commenced by any Loan Party or any  Governmental  Authority
having  jurisdiction  over any of them,  seeking to establish the  invalidity or
unenforceability  thereof,  or any Loan Party shall deny in writing  that it has
any liability or obligation purported to be created under any Loan Document;

     (i) any Security  Agreement,  any Mortgage or any other security  document,
after delivery thereof  pursuant  hereto,  shall for any reason fail or cease to
create a valid and perfected  and,  except to the extent  permitted by the terms
hereof or thereof,  first priority Lien in favor of the Collateral Agent for the
benefit of the Agents and the Lenders on any Collateral  purported to be covered
thereby (other than Collateral with an aggregate fair market value not in excess
of $500,000);

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     (j) any bank at which any  deposit  account,  blocked  account,  or lockbox
account of any Loan  Party is  maintained  shall fail to comply  with any of the
terms of any  deposit  account,  blocked  account,  lockbox  account  or similar
agreement  to  which  such  bank  is a  party  or any  securities  intermediary,
commodity  intermediary or other  financial  institution at any time in custody,
control or possession of any investment property of any Loan Party shall fail to
comply with any of the terms of any  investment  property  control  agreement to
which such  Person is a party,  and such Loan  Party  fails to move the funds in
such deposit  account,  blocked  account,  or lockbox  account or the investment
property in control of such securities  intermediary,  commodity intermediary or
other financial  institution (as the case may be) as soon as possible (but in no
event  later than 30 days)  after the date that any Agent or any Lender  informs
such Loan Party of such failure to comply;

     (k) one or more  judgments,  awards,  or orders (or any  settlement  of any
claim that, if breached,  could result in a judgment,  order,  or award) for the
payment of money exceeding $1,000,000 in the aggregate shall be rendered against
Parent or any of its Subsidiaries and remain  unsatisfied,  or the Parent or any
of its Subsidiaries  shall agree to the settlement of any one or more pending or
threatened  actions,  suits, or proceedings  affecting any Loan Party before any
court or other Governmental  Authority or any arbitrator or mediator,  providing
for the payment of money exceeding $1,000,000 in the aggregate,  and in the case
of any  such  judgment,  order,  award  or  settlement  either  (i)  enforcement
proceedings  shall have been  commenced by any creditor upon any such  judgment,
order,  award or  settlement,  or (ii) there shall be a period of 10 consecutive
days  after  entry  thereof  during  which a stay  of  enforcement  of any  such
judgment,  order,  award  or  settlement,  by  reason  of a  pending  appeal  or
otherwise,  shall not be in effect;  provided,  however, that any such judgment,
order, award or settlement shall not give rise to an Event of Default under this
subsection if and for so long as (A) the amount of such judgment,  order,  award
or settlement is covered by a valid and binding policy of insurance  between the
defendant and the insurer covering full payment thereof and (B) such insurer has
been notified, and has not disputed the claim made for payment, of the amount of
such judgment, order, award or settlement;

     (l) the Parent or any of its Subsidiaries is enjoined, restrained or in any
way  prevented  by the order of any  court or any  Governmental  Authority  from
conducting all or any material part of the business of the Loan Parties taken as
a whole for more than 30 consecutive days;

     (m) any cessation of a  substantial  part of the business of any Loan Party
for a period of more than 30  consecutive  days which  materially  and adversely
affects the ability of any Loan Party to continue  its  business on a profitable
basis;

     (n) the  indictment  of the  Parent  or any of its  Subsidiaries  under any
criminal statute,  or commencement of criminal or civil proceedings  against any
Loan Party,  pursuant to which statute or proceedings  the penalties or remedies
sought or available  include  forfeiture  to any  Governmental  Authority of any
material  portion of the  property  of such  Person,  in each  case,  that could
reasonably be expected to result in a Material Adverse Effect;

     (o) any  Loan  Party  or any of its  ERISA  Affiliates  shall  have  made a
complete or partial  withdrawal from a  Multiemployer  Plan, and, as a result of
such  complete  or  partial  withdrawal,  any  Loan  Party  or any of its  ERISA

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Affiliates  incurs  a  withdrawal   liability  in  an  annual  amount  exceeding
$1,000,000;  or a Multiemployer Plan enters  reorganization status under Section
4241 of ERISA,  and, as a result  thereof  any Loan  Party's or any of its ERISA
Affiliates' annual contribution  requirements with respect to such Multiemployer
Plan increases in an annual amount exceeding $1,000,000;

     (p) any  Termination  Event with  respect to any  Employee  Plan shall have
occurred,  and, 30 days after notice  thereof  shall have been given to any Loan
Party by any Agent, (i) such Termination  Event (if correctable)  shall not have
been  corrected,  and (ii) the then current value of such Employee Plan's vested
benefits  exceeds the then current value of assets allocable to such benefits in
such  Employee  Plan by more than  $1,000,000  (or, in the case of a Termination
Event involving  liability under Section 409, 502(i),  502(l),  515, 4062, 4063,
4064,  4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the IRC, the
liability is in excess of such amount);

     (q)  the  Parent  or  any of its  Subsidiaries  shall  be  liable  for  any
Environmental  Liabilities  and Costs the payment of which could  reasonably  be
expected to result in a Material Adverse Effect; or

     (r) a Change of Control shall have occurred;

then, and in any such event,  the Collateral Agent may, and shall at the request
of the Required Lenders, by notice to the Borrower,  (i) terminate or reduce all
Commitments,  whereupon all  Commitments  shall  immediately be so terminated or
reduced,  (ii)  declare  all  or any  portion  of the  Loans  and  Reimbursement
Obligations  then  outstanding  to be due  and  payable,  whereupon  all or such
portion of the aggregate  principal of all Loans and Reimbursement  Obligations,
all accrued and unpaid interest thereon,  all fees and all other amounts payable
under this Agreement and the other Loan  Documents  shall become due and payable
immediately, without presentment, demand, protest or further notice of any kind,
all of which are hereby  expressly waived by each Loan Party, and (iii) exercise
any and all of its other rights and remedies under applicable law, hereunder and
under the other Loan Documents;  provided,  however, that upon the occurrence of
any Event of Default  described in  subsection  (f) or (g) of this Section 9.01,
without any notice to any Loan Party or any other Person or any act by any Agent
or any Lender, all Commitments shall  automatically  terminate and all Loans and
Reimbursement Obligations then outstanding, together with all accrued and unpaid
interest  thereon,  all fees and all other amounts due under this  Agreement and
the  other  Loan  Documents  shall  become  due and  payable  automatically  and
immediately,  without presentment, demand, protest or notice of any kind, all of
which are expressly waived by each Loan Party. Upon demand by the Administrative
Agent after the occurrence and during the  continuation of any Event of Default,
the Borrower  shall deposit with the  Administrative  Agent with respect to each
Letter  of  Credit  then  outstanding  cash in an  amount  equal  to 105% of the
greatest  amount for which such  Letter of Credit  may be drawn.  Such  deposits
shall be held by the  Administrative  Agent in the  Letter of Credit  Collateral
Account as security for, and to provide for the payment of, the Letter of Credit
Obligations.

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                                   ARTICLE X

                                     AGENTS

     Section 10.01  Appointment.  Each Lender (and each subsequent  maker of any
Loan by its making  thereof)  hereby  irrevocably  appoints and  authorizes  the
Administrative Agent and the Collateral Agent to perform the duties of each such
Agent as set forth in this Agreement including: (i) to receive on behalf of each
Lender  any  payment  of  principal  of or  interest  on the  Loans  outstanding
hereunder and all other amounts accrued hereunder for the account of the Lenders
and paid to such  Agent,  and,  subject to Section  2.02 of this  Agreement,  to
distribute  promptly  to each  Lender  its Pro  Rata  Share of all  payments  so
received;  (ii) to distribute to each Lender copies of all material  notices and
agreements  received  by such Agent and not  required  to be  delivered  to each
Lender pursuant to the terms of this  Agreement,  provided that the Agents shall
not have any  liability  to the Lenders for any Agent's  inadvertent  failure to
distribute any such notices or agreements to the Lenders;  (iii) to maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the  Obligations,  the Loans, and related matters and to maintain,
in  accordance  with its  customary  business  practices,  ledgers  and  records
reflecting the status of the Collateral and related matters;  (iv) to execute or
file  any and all  financing  or  similar  statements  or  notices,  amendments,
renewals,  supplements,  documents,  instruments,  proofs of claim,  notices and
other  written  agreements  with  respect  to this  Agreement  or any other Loan
Document;  (v) to make the Loans and Agent Advances, for such Agent or on behalf
of the  applicable  Lenders  as  provided  in this  Agreement  or any other Loan
Document;  (vi) to perform,  exercise,  and enforce any and all other rights and
remedies of the Lenders with respect to the Loan Parties,  the  Obligations,  or
otherwise  related to any of same to the  extent  reasonably  incidental  to the
exercise by such Agent of the rights and remedies specifically  authorized to be
exercised  by such  Agent  by the  terms of this  Agreement  or any  other  Loan
Document;  (vii) to incur and pay such fees  necessary  or  appropriate  for the
performance  and  fulfillment  of its  functions  and  powers  pursuant  to this
Agreement or any other Loan  Document;  and (viii)  subject to Section  10.03 of
this  Agreement,  to take such  action as such Agent  deems  appropriate  on its
behalf to administer the Loans and the Loan Documents and to exercise such other
powers  delegated to such Agent by the terms hereof or the other Loan  Documents
(including  the power to give or to refuse to give notices,  waivers,  consents,
approvals  and  instructions  and  the  power  to  make  or to  refuse  to  make
determinations  and  calculations)  together with such powers as are  reasonably
incidental  thereto  to carry out the  purposes  hereof and  thereof.  As to any
matters  not  expressly  provided  for by  this  Agreement  and the  other  Loan
Documents  (including  enforcement or collection of the Loans), the Agents shall
not be required  to exercise  any  discretion  or take any action,  but shall be
required to act or to refrain  from acting (and shall be fully  protected  in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such  instructions of the Required Lenders shall be binding upon all Lenders
and all makers of Loans;  provided,  however,  that the L/C Issuer  shall not be
required to refuse to honor a drawing  under any Letter of Credit and the Agents
shall not be required to take any action which, in the reasonable opinion of any
Agent, exposes such Agent to liability or which is contrary to this Agreement or
any other Loan Document or applicable law.

     Section  10.02  Nature  of  Duties.  The  Agents  shall  have no  duties or
responsibilities  except those  expressly set forth in this  Agreement or in the
other  Loan  Documents.  The  duties  of the  Agents  shall  be  mechanical  and

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administrative in nature.  The Agents shall not have by reason of this Agreement
or any other Loan  Document a fiduciary  relationship  in respect of any Lender.
Nothing in this  Agreement or any other Loan  Document,  express or implied,  is
intended to or shall be construed to impose upon the Agents any  obligations  in
respect of this  Agreement or any other Loan  Document  except as expressly  set
forth  herein  or  therein.   Each  Lender   shall  make  its  own   independent
investigation  of the  financial  condition  and affairs of the Loan  Parties in
connection  with the making and the continuance of the Loans hereunder and shall
make its own appraisal of the creditworthiness of the Loan Parties and the value
of the Collateral,  and the Agents shall have no duty or responsibility,  either
initially  or on a  continuing  basis,  to provide any Lender with any credit or
other  information  with respect  thereto,  whether coming into their possession
before the initial Loan hereunder or at any time or times  thereafter,  provided
that, upon the reasonable request of a Lender,  each Agent shall provide to such
Lender any  documents  or reports  delivered  to such Agent by the Loan  Parties
pursuant to the terms of this Agreement or any other Loan Document. If any Agent
seeks  the  consent  or  approval  of the  Required  Lenders  to the  taking  or
refraining  from  taking any action  hereunder,  such  Agent  shall send  notice
thereof to each Lender.  Each Agent shall  promptly  notify each Lender any time
that the  Required  Lenders  have  instructed  such Agent to act or refrain from
acting pursuant hereto.

     Section 10.03  Rights,  Exculpation,  Etc. The Agents and their  directors,
officers,  agents  or  employees  shall not be liable  for any  action  taken or
omitted to be taken by them under or in  connection  with this  Agreement or the
other  Loan  Documents,  except  for  their  own  gross  negligence  or  willful
misconduct  as  determined  by a final  non-appealable  judgment  of a court  of
competent  jurisdiction.  Without limiting the generality of the foregoing,  the
Agents  (i) may  treat  the  payee of any Loan as the  owner  thereof  until the
Collateral Agent receives written notice of the assignment or transfer  thereof,
pursuant to Section 12.07 hereof,  signed by such payee and in form satisfactory
to the Collateral Agent; (ii) may consult with legal counsel  (including counsel
to any Agent or counsel to the Loan Parties),  independent  public  accountants,
and other experts selected by any of them and shall not be liable for any action
taken or omitted to be taken in good faith by any of them in accordance with the
advice of such counsel or experts;  (iii) make no warranty or  representation to
any  Lender  and shall not be  responsible  to any  Lender  for any  statements,
certificates,  warranties or representations  made in or in connection with this
Agreement or the other Loan Documents; (iv) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this  Agreement or the other Loan  Documents on the part of any
Person,  the existence or possible existence of any Default or Event of Default,
or to inspect the Collateral or other property (including the books and records)
of any Person; (v) shall not be responsible to any Lender for the due execution,
legality, validity,  enforceability,  genuineness,  sufficiency or value of this
Agreement  or the other  Loan  Documents  or any other  instrument  or  document
furnished pursuant hereto or thereto;  and (vi) shall not be deemed to have made
any representation or warranty regarding the existence,  value or collectability
of the  Collateral,  the  existence,  priority or perfection  of the  Collateral
Agent's  Lien  thereon,  or any  certificate  prepared  by  any  Loan  Party  in
connection  therewith,  nor shall the  Agents  be  responsible  or liable to the
Lenders for any failure to monitor or  maintain  any portion of the  Collateral.
The  provisions of this Section 10.03 are subject to, and shall not limit in any
respect, the provisions of Section 12.07. The Agents shall not be liable for any
apportionment or distribution of payments made in good faith pursuant to Section
4.04, and if any such  apportionment or distribution is subsequently  determined
to have been made in error the sole  recourse of any Lender to whom  payment was
due but not made,  shall be to recover from other  Lenders any payment in excess
of the amount which they are  determined  to be entitled.  The Agents may at any

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time  request  instructions  from the  Lenders  with  respect to any  actions or
approvals  which by the  terms of this  Agreement  or of any of the  other  Loan
Documents the Agents are permitted or required to take or to grant,  and if such
instructions are promptly requested,  the Agents shall be absolutely entitled to
refrain from taking any action or to withhold any approval under any of the Loan
Documents  until they shall have  received such  instructions  from the Required
Lenders.  Without  limiting  the  foregoing,  no Lender  shall have any right of
action  whatsoever  against  any  Agent  as a result  of such  Agent  acting  or
refraining  from acting under this  Agreement or any of the other Loan Documents
in accordance with the instructions of the Required Lenders.

     Section  10.04  Reliance.  Each Agent  shall be  entitled  to rely upon any
written  notices,  statements,  certificates,  orders or other  documents or any
telephone  message believed by it in good faith to be genuine and correct and to
have been  signed,  sent or made by the proper  Person,  and with respect to all
matters  pertaining to this Agreement or any of the other Loan Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.

     Section  10.05  Indemnification.  To the  extent  that any Agent or the L/C
Issuer is not  reimbursed and  indemnified  by any Loan Party,  the Lenders will
reimburse and  indemnify  such Agent and the L/C Issuer from and against any and
all liabilities,  obligations,  losses, damages, penalties,  actions, judgments,
suits,  costs,  expenses,  advances  or  disbursements  of any  kind  or  nature
whatsoever  which may be imposed on, incurred by, or asserted against such Agent
or the L/C Issuer in any way relating to or arising out of this Agreement or any
of the other Loan  Documents or any action taken or omitted by such Agent or the
L/C  Issuer  under  this  Agreement  or any  of the  other  Loan  Documents,  in
proportion to each Lender's Pro Rata Share, including advances and disbursements
made  pursuant to Section  10.08;  provided,  however,  that no Lender  shall be
liable  for any  portion  of such  liabilities,  obligations,  losses,  damages,
penalties, actions, judgments, suits, costs, expenses, advances or disbursements
for which  there has been a final  judicial  determination  that such  liability
resulted  from such  Agent's or the L/C  Issuer's  gross  negligence  or willful
misconduct.  The  obligations  of the  Lenders  under this  Section  10.05 shall
survive the payment in full of the Loans and the termination of this Agreement.

     Section  10.06 Agents  Individually.  With respect to its Pro Rata Share of
the Total  Commitment  hereunder and the Loans made by it, each Agent shall have
and may exercise the same rights and powers hereunder and is subject to the same
obligations  and liabilities as and to the extent set forth herein for any other
Lender or maker of a Loan.  The terms  "Lenders"  or  "Required  Lenders" or any
similar terms shall,  unless the context clearly  otherwise  indicates,  include
each  Agent  in its  individual  capacity  as a  Lender  or one of the  Required
Lenders.  Each Agent and its Affiliates may accept deposits from, lend money to,
and generally  engage in any kind of banking,  trust or other  business with the
Borrower as if it were not acting as an Agent  pursuant  hereto without any duty
to account to the other Lenders.

     Section 10.07 Successor Agent.

     (a) Each Agent may resign from the  performance  of all its  functions  and
duties  hereunder  and under the other Loan  Documents  at any time by giving at

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least 30 Business  Days prior  written  notice to the  Borrower and each Lender.
Such  resignation  shall take effect upon the acceptance by a successor Agent of
appointment  pursuant  to  clauses  (b) and (c) below or as  otherwise  provided
below.

     (b) Upon any such notice of resignation, the Required Lenders shall appoint
a successor  Agent which  successor  Agent shall, so long as no Event of Default
shall have occurred and be continuing,  be reasonably acceptable to the Borrower
(which consent shall not be unreasonably  withheld,  delayed,  or  conditioned).
Upon the acceptance of any appointment as Agent hereunder by a successor  Agent,
such successor Agent shall  thereupon  succeed to and become vested with all the
rights,  powers,  privileges and duties of the retiring Agent,  and the retiring
Agent shall be discharged from its duties and  obligations  under this Agreement
and the other Loan  Documents.  After any Agent's  resignation  hereunder  as an
Agent,  the  provisions  of this  Article X shall inure to its benefit as to any
actions  taken or  omitted  to be taken by it while it was an Agent  under  this
Agreement and the other Loan Documents.

     (c) If a  successor  Agent  shall not have been so  appointed  within  said
thirty (30) Business Day period,  the retiring  Agent,  with the consent  (which
consent shall not be  unreasonably  withheld,  delayed,  or  conditioned) of the
other  Agent shall then  appoint a  successor  Agent who shall serve as an Agent
until such time, if any, as the Required Lenders,  with the consent of the other
Agent, appoint a successor Agent as provided above.

     Section 10.08 Collateral Matters.

     (a) Either Agent may from time to time make such disbursements and advances
("Agent Advances") which such Agent, in its sole discretion,  deems necessary or
desirable  to  preserve,  protect,  prepare  for sale or lease or dispose of the
Collateral  or any portion  thereof,  to enhance the  likelihood or maximize the
amount of repayment by the Borrower of the Loans, reimbursement obligations with
respect  to the  Letters of Credit,  and other  Obligations  or to pay any other
amount  chargeable  to the  Borrower  pursuant  to the terms of this  Agreement,
including  costs,  fees and expenses as described  in Section  12.04;  provided,
however,  that (i) the Agents shall not make any Agent  Advance that would cause
the aggregate principal amount of all Agent Advances outstanding at such time to
exceed  the  lesser of (A)  $2,000,000,  and (B) an  amount  equal to 10% of the
Borrowing  Base then in  effect,  without  the  prior  consent  of the  Required
Lenders,  (ii) the  Administrative  Agent shall not make any Agent  Advance that
would cause the  aggregate  principal  amount of all Agent  Advances made by the
Administrative  Agent  outstanding  at such  time to  exceed  the  lesser of (A)
$1,000,000,  and (B) an amount equal to 5% of the Borrowing Base then in effect,
without the prior consent of the Collateral  Agent,  (iii) the Collateral  Agent
shall not make any Agent Advance that would cause the aggregate principal amount
of all Agent Advances made by the Collateral  Agent  outstanding at such time to
exceed  the  lesser  of (A)  $1,000,000,  and (B) an  amount  equal to 5% of the
Borrowing Base then in effect,  without the prior consent of the  Administrative
Agent.  The Agent  Advances  shall be  repayable on demand and be secured by the
Collateral.  The Agent Advances shall constitute Obligations hereunder which may
be charged to the Loan Account in accordance with Section 4.02. The Agent making
such Agent  Advance shall notify each Lender and the Borrower in writing of each
such Agent  Advance,  which notice shall include a description of the purpose of
such Agent Advance.

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     (b) The Administrative  Agent shall not make any Revolving Loans or provide
any  Letters  of  Credit  or  Letter  of  Credit   Guaranties  to  the  Borrower
intentionally  and with actual knowledge that such Revolving  Loans,  Letters of
Credit,  or  Letter of Credit  Guaranties  (as the case may be) would  cause the
aggregate amount of the total  outstanding  Revolving Loans and Letter of Credit
Obligations  to exceed the  Borrowing  Base,  without  the prior  consent of all
Lenders, except that the Administrative Agent may make such additional Revolving
Loans or  provide  such  additional  Letters  of  Credit  or  Letter  of  Credit
Guaranties,  intentionally  and with actual knowledge that such Revolving Loans,
Letters  of  Credit,  or Letter of Credit  Guaranties  (as the case may be) will
cause the total outstanding  Revolving Loans and Letter of Credit Obligations to
exceed the Borrowing  Base, as the  Administrative  Agent may deem  necessary or
advisable in its discretion;  provided,  however: (i) the total principal amount
of the  additional  Revolving  Loans,  Letters  of  Credit,  or Letter of Credit
Guaranties  (as the case may be)  which  the  Administrative  Agent  may make or
provide after  obtaining  such actual  knowledge  that the  aggregate  principal
amount of the Revolving Loans and Letter of Credit  Obligations  equal or exceed
the Borrowing Base shall not (A) exceed, when taken together with Agent Advances
made by the  Administrative  Agent,  the  lesser of (x)  $1,000,000,  and (y) an
amount  equal to 5% of the  Borrowing  Base,  and (B) cause the total  principal
amount of the  Revolving  Loans and Letter of Credit  Obligations  to exceed the
Total Revolving Credit Commitment,  and (ii) no such additional Revolving Loans,
Letters of Credit,  or Letter of Credit Guaranties (as the case may be) shall be
outstanding  more than ninety (90) days from the date such additional  Revolving
Loan,  Letter of Credit, or Letter of Credit Guaranty was made or issued (as the
case may be),  except as the  Required  Lenders  may  otherwise  agree.  Without
limiting its obligations  under Section 10.05, each Revolving Loan Lender agrees
that  it  shall  make   available  to  the   Administrative   Agent,   upon  the
Administrative  Agent's demand,  in Dollars in immediately  available  funds, an
amount equal to such  Revolving  Lender's Pro Rata Share of each such  Revolving
Loan or obligation of the Administrative Agent in respect of each such Letter of
Credit or Letter of Credit  Guaranty (as the case may be). If such funds are not
made available to the  Administrative  Agent by such Revolving Loan Lender,  the
Administrative Agent shall be entitled to recover such funds on demand from such
Revolving Loan Lender, together with interest thereon for each day from the date
such  payment was due until the date such  amount is paid to the  Administrative
Agent,  at the  Federal  Funds Rate for 3 Business  Days and  thereafter  at the
Reference  Rate. For the avoidance of doubt, it is understood  that,  subject to
the limitation set forth in clause (i)(A) above, this Section 10.08(b) shall not
restrict the Administrative Agent's ability to make Agent Advances.

     (c) The Lenders hereby  irrevocably  authorize the Collateral Agent, at its
option  and in its  discretion,  to release  any Lien  granted to or held by the
Collateral  Agent upon any Collateral upon  termination of the Total  Commitment
and payment in full in cash of all Obligations;  or constituting  property being
sold or disposed of in compliance with the terms of this Agreement and the other
Loan  Documents;  or  constituting  property in which the Loan Parties  owned no
interest  at the  time the Lien was  granted  or at any time  thereafter;  or if
approved,  authorized or ratified in writing by the Lenders. Upon request by the
Collateral Agent at any time, the Lenders will confirm in writing the Collateral
Agent's authority to release particular types or items of Collateral pursuant to
this Section 10.08(c).

     (d) Without in any manner limiting the Collateral  Agent's authority to act
without any specific or further  authorization or consent by the Lenders (as set
forth in Section  10.08(c)),  each  Lender  agrees to confirm in  writing,  upon
request by the Collateral Agent, the authority to release  Collateral  conferred

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upon the Collateral Agent under Section 10.08(c). Upon receipt by the Collateral
Agent  of  confirmation  from  the  Lenders  of its  authority  to  release  any
particular  item or types of Collateral,  and upon prior written  request by any
Loan Party, the Collateral Agent shall (and is hereby irrevocably  authorized by
the Lenders to) execute  such  documents  as may be  necessary  to evidence  the
release of the Liens  granted  to the  Collateral  Agent for the  benefit of the
Agents and the Lenders upon such  Collateral;  provided,  however,  that (i) the
Collateral  Agent shall not be  required  to execute any such  document on terms
which, in the Collateral  Agent's opinion,  would expose the Collateral Agent to
liability or create any  obligations  or entail any  consequence  other than the
release of such Liens without recourse or warranty,  and (ii) such release shall
not in any manner  discharge,  affect or impair the Obligations or any Lien upon
(or obligations of any Loan Party in respect of) all interests in the Collateral
retained by any Loan Party.

     (e) The Collateral Agent shall have no obligation  whatsoever to any Lender
to assure that the Collateral exists or is owned by the Loan Parties or is cared
for, protected or insured or has been encumbered or that the Lien granted to the
Collateral  Agent pursuant to this Agreement or any other Loan Document has been
properly or sufficiently or lawfully created,  perfected,  protected or enforced
or is  entitled  to any  particular  priority,  or to  exercise at all or in any
particular  manner  or under any duty of care,  disclosure  or  fidelity,  or to
continue  exercising,  any of the  rights,  authorities  and  powers  granted or
available to the  Collateral  Agent in this  Section  10.08 or in any other Loan
Document,  it being understood and agreed that in respect of the Collateral,  or
any act, omission or event related thereto,  the Collateral Agent may act in any
manner it may deem  appropriate,  in its sole  discretion,  given the Collateral
Agent's  own  interest  in the  Collateral  as one of the  Lenders  and that the
Collateral Agent shall have no duty or liability whatsoever to any other Lender,
except as otherwise provided herein.

     Section 10.09 Agency for Perfection. Each Lender hereby appoints each Agent
and each  other  Lender as agent and bailee for the  purpose of  perfecting  the
security  interests  in and  liens  upon the  Collateral  in  assets  which,  in
accordance  with Article 9 of the Code,  can be perfected  only by possession or
control (or where the security  interest of a secured  party with  possession or
control has priority over the security  interest of another  secured  party) and
each Agent and each  Lender  hereby  acknowledges  that it holds  possession  or
control  of any such  Collateral  for the  benefit  of the  Collateral  Agent as
secured  party.  Should  any  Lender  obtain  possession  or control of any such
Collateral, such Lender shall notify the Collateral Agent thereof, and, promptly
upon the Collateral Agent's request therefor shall deliver possession or control
of such Collateral to the Collateral  Agent or in accordance with the Collateral
Agent's  instructions.  Each Loan Party by its  execution  and  delivery of this
Agreement hereby consents to the foregoing.

                                   ARTICLE XI

                                    GUARANTY

     Section  11.01  Guaranty.  Each  Guarantor  hereby  jointly  and  severally
unconditionally  and  irrevocably  guarantees  the  punctual  payment  when due,
whether at stated maturity, by acceleration or otherwise,  of all Obligations of
the Borrower  now or hereafter  existing  under any Loan  Document,  whether for
principal,  interest (including all interest that accrues after the commencement
of any Insolvency Proceeding irrespective of whether a claim therefor is allowed

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in such case or proceeding),  fees, expenses or otherwise (such obligations,  to
the extent not paid by the Borrower,  being the "Guaranteed  Obligations"),  and
agrees  to pay any and all  expenses  (including  reasonable  counsel  fees  and
expenses of one primary  counsel and any local counsel for the Collateral  Agent
and one primary  counsel and any local  counsel  for the  Administrative  Agent)
incurred  by the  Agents,  the  Lenders  and the L/C  Issuer (or any of them) in
enforcing  any rights  under the  guaranty  set forth in this  Article.  Without
limiting the  generality of the  foregoing,  each  Guarantor's  liability  shall
extend to all amounts that  constitute  part of the Guaranteed  Obligations  and
would be owed by the  Borrower  to the  Agents,  the  Lenders and the L/C Issuer
under any Loan  Document  but for the fact that  they are  unenforceable  or not
allowable  due to the  existence  of a  bankruptcy,  reorganization  or  similar
proceeding involving any Loan Party.

     Section  11.02  Guaranty  Absolute.  Each  Guarantor  jointly and severally
guarantees that the Guaranteed  Obligations  will be paid strictly in accordance
with the terms of the Loan Documents, regardless of any law, regulation or order
now or hereafter in effect in any  jurisdiction  affecting  any of such terms or
the rights of the Agents,  the Lenders or the L/C Issuer with  respect  thereto.
Each Guarantor  agrees that this Article  constitutes a guaranty of payment when
due and not of  collection  and waives  any right to require  that any resort be
made by any  Agent or any  Lender to any  Collateral.  The  obligations  of each
Guarantor under this Article are independent of the Guaranteed Obligations,  and
a  separate  action or  actions  may be  brought  and  prosecuted  against  each
Guarantor to enforce  such  obligations,  irrespective  of whether any action is
brought  against  any Loan Party or whether any Loan Party is joined in any such
action or actions.  The liability of each Guarantor  under this Article shall be
irrevocable,  absolute  and  unconditional  irrespective  of, and, to the extent
permitted by law, each Guarantor hereby  irrevocably  waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:

     (a) any lack of  validity  or  enforceability  of any Loan  Document or any
agreement or instrument relating thereto;

     (b) any change in the time,  manner or place of payment of, or in any other
term of, all or any of the  Guaranteed  Obligations,  or any other  amendment or
waiver of or any consent to  departure  from any Loan  Document,  including  any
increase  in  the  Guaranteed   Obligations  resulting  from  the  extension  of
additional credit to any Loan Party or otherwise;

     (c) any taking, exchange,  release or non-perfection of any Collateral,  or
any taking,  release or amendment or waiver of or consent to departure  from any
other guaranty, for all or any of the Guaranteed Obligations;

     (d) the  existence of any claim,  set-off,  defense or other right that any
Guarantor  may  have  at  any  time  against  any  Person,  including,   without
limitation, any Agent, any Lender or the L/C Issuer;

     (e) any change,  restructuring  or termination  of the  corporate,  limited
liability company or partnership structure or existence of any Loan Party; or

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     (f) any other  circumstance  (including any statute of  limitations) or any
existence of or reliance on any representation by the Agents, the Lenders or the
L/C  Issuer  that  might  otherwise  constitute  a  defense  available  to, or a
discharge of, any Loan Party or any other guarantor or surety.

     This Article shall continue to be effective or be  reinstated,  as the case
may be,  if at any time any  payment  of any of the  Guaranteed  Obligations  is
rescinded  or must  otherwise be returned by the Agents,  the  Lenders,  the L/C
Issuer or any other Person upon the insolvency,  bankruptcy or reorganization of
the Borrower or otherwise, all as though such payment had not been made.

     Section 11.03 Waiver. To the extent permitted by law, each Guarantor hereby
waives (i)  promptness  and  diligence,  (ii) notice of acceptance and any other
notice with respect to any of the  Guaranteed  Obligations  and this Article and
any requirement that the Agents, the Lenders or the L/C Issuer exhaust any right
or take any action against any Loan Party or any other Person or any Collateral,
(iii) any right to compel or direct any  Agent,  any Lender or the L/C Issuer to
seek  payment or recovery of any amounts  owed under this  Article  from any one
particular fund or source or to exhaust any right or take any action against any
other Loan Party, any other Person or any Collateral,  (iv) any requirement that
any Agent, any Lender or the L/C Issuer protect,  secure,  perfect or insure any
security  interest or Lien on any property  subject thereto or exhaust any right
to take any action against any Loan Party,  any other Person or any  Collateral,
and (v) any other defense available to any Guarantor. Each Guarantor agrees that
the Agents,  the Lenders and the L/C Issuer shall have no  obligation to marshal
any assets in favor of any Guarantor or against, or in payment of, any or all of
the  Obligations.  Each Guarantor  acknowledges  that it will receive direct and
indirect benefits from the financing  arrangements  contemplated herein and that
the waiver set forth in this Section 11.03 is knowingly made in contemplation of
such benefits.  To the extent permitted by law, each Guarantor hereby waives any
right to revoke this Article,  and acknowledges  that this Article is continuing
in nature and applies to all Guaranteed Obligations,  whether existing now or in
the future.

     Section  11.04  Continuing  Guaranty;   Assignments.   This  Article  is  a
continuing  guaranty  and shall (a) remain in full  force and  effect  until the
later of (i) the cash payment in full of the Guaranteed  Obligations (other than
indemnification  obligations  as to which no claim has been  made) and all other
amounts  payable  under this Article and (ii) the Final  Maturity  Date,  (b) be
binding upon each  Guarantor,  its  successors  and assigns and (c) inure to the
benefit of and be enforceable by the Agents,  the Lenders and the L/C Issuer and
their  successors,  pledgees,  transferees  and  assigns.  Without  limiting the
generality  of the  foregoing  clause  (c),  any  Lender may  pledge,  assign or
otherwise  transfer all or any portion of its rights and obligations  under this
Agreement  (including  all or any  portion of its  Commitments,  its Loans,  the
Reimbursement  Obligations and the Letter of Credit  Obligations owing to it) to
any other Person,  and such other Person shall thereupon  become vested with all
the benefits in respect thereof granted such Lender herein or otherwise, in each
case as provided in Section 12.07.

     Section 11.05  Subrogation.  No Guarantor  will exercise any rights that it
may now or hereafter  acquire against any Loan Party or any other guarantor that
arise  from  the  existence,   payment,   performance  or  enforcement  of  such
Guarantor's obligations under this Article,  including any right of subrogation,
reimbursement,  exoneration,  contribution or  indemnification  and any right to
participate  in any claim or remedy of the Agents and the  Lenders  against  any
Loan Party or any other guarantor or any Collateral,  whether or not such claim,
remedy  or right  arises in equity or under  contract,  statute  or common  law,

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including  the  right  to take or  receive  from any  Loan  Party  or any  other
guarantor, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security solely on account of such claim, remedy or
right, unless and until all of the Guaranteed  Obligations and all other amounts
payable  under this  Article  shall have been paid in full in cash and the Final
Maturity Date shall have occurred.  If any amount shall be paid to any Guarantor
in  violation  of the  immediately  preceding  sentence at any time prior to the
later of the payment in full in cash of the Guaranteed Obligations and all other
amounts  payable  under this Article and the Final  Maturity  Date,  such amount
shall be held in trust for the  benefit of the Agents and the  Lenders and shall
forthwith  be paid to the Agents and the Lenders to be  credited  and applied to
the  Guaranteed  Obligations  and all other amounts  payable under this Article,
whether matured or unmatured, in accordance with the terms of this Agreement, or
to be held as Collateral for any Guaranteed Obligations or other amounts payable
under this Article thereafter  arising.  If (i) any Guarantor shall make payment
to the Agents and the Lenders of all or any part of the Guaranteed  Obligations,
(ii) all of the Guaranteed  Obligations and all other amounts payable under this
Article  shall be paid in full in cash  and  (iii)  all  Commitments  have  been
terminated,  the Agents and the Lenders  will, at such  Guarantor's  request and
expense,  execute and deliver to such Guarantor appropriate  documents,  without
recourse  and without  representation  or  warranty,  necessary  to evidence the
transfer by  subrogation  to such  Guarantor  of an  interest in the  Guaranteed
Obligations resulting from such payment by such Guarantor.

     Section 11.06 German Guarantor.

     (a) Each Agent and each Lender  agrees to restrict the  enforcement  of any
guarantee or indemnity  granted by a Guarantor which is organized under the laws
of Germany and  constituted  in the form of a German limited  liability  company
"Gesellschaft  mit  beschrankter  Haftung  - GmbH"  (each,  a  "Relevant  German
Guarantor")  only if and only to the extent  (sofern und  soweit)  that (i) such
guarantee or indemnity  secures the  liabilities of an Affiliate  other than the
liabilities  of any  Subsidiary  of a Relevant  German  Guarantor  and - for the
avoidance of doubt - the liabilities of such Relevant German  Guarantor and (ii)
the payment  under such  guarantee or indemnity  towards the secured  obligation
would otherwise cause the Relevant  German  Guarantor's net assets,  taking into
account  good will and other  hidden  reserves in its  assets,  to fall not only
temporarily below its registered share capital "Stammkapital".  For the purposes
of the  calculation  of any sums to be  enforced,  loans  or  other  liabilities
incurred  in  violation  of  the  provisions  of the  Loan  Documents  shall  be
disregarded.

     (b) In a  situation  where  a  Relevant  German  Guarantor  does  not  have
sufficient  assets to maintain  its  registered  share  capital as  described in
clause (a) above,  such Relevant German Guarantor shall, to the extent permitted
by the applicable  Insolvency Laws, dispose, in consultation with the Agents, of
all assets which are not necessary for its business "nicht betriebsnotwendig" on
market  terms where the relevant  assets are shown in the balance  sheet of such
Relevant German Guarantor with a book value which is lower than the market value
of such assets.

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     (c) The  limitation  pursuant  to this  Section  11.06  shall  not apply if
following the call of guarantee obligations "Inanspruchnahme" or the enforcement
of security  interests by an Agent or a Lender,  the Relevant  German  Guarantor
does not provide  conclusive  evidence to such Agent or Lender, in particular by
submitting  interim financial  statements for the last completed month within 10
Business  Days  following  receipt  of such  call of  guarantee  obligations  or
enforcement of security  interests,  or, following  receipt of interim financial
statements,  by  submitting  audited  financial  statements up to the same month
within 25 Business Days following a further request by an Agent or a Lender.

                                  ARTICLE XII

                                  MISCELLANEOUS

     Section 12.01 Notices,  Etc. All notices and other communications  provided
for hereunder shall be in writing and shall be mailed,  telecopied or delivered,
if to any Loan Party, at the following address:

                  PRG-SCHULTZ USA, INC.
                  600 Galleria Parkway, Suite 100
                  Atlanta, GA 30339
                  Attention:  Peter Limeri; Vic Allums
                  Telephone:  770-779-3243; 770-779-6610
                  Telecopier:  770-779-3034

                  with a copy to:

                  WEIL, GOTSHAL & MANGES LLP
                  200 Crescent Court
                  Suite 300
                  Dallas, TX  75201
                  Telephone:  214-746-7700
                  Telecopier:  214-746-7777
                  Attention:  Angela L. Fontana, Esq.

                  if to the Administrative Agent, to it at the following
                  address:

                  THE CIT GROUP/BUSINESS CREDIT, INC.
                  900 Ashwood Parkway, Suite 610
                  Atlanta, GA 30338
                  Telephone:  770-522-7681
                  Telecopier:  770-522-7673
                  Attention:  Regional Credit Manager

                  with a copy to:

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<PAGE>

                  HAHN & HESSEN LLP
                  488 Madison Avenue
                  New York, NY 10022
                  Attention:  Leonard Lee Podair, Esq.
                  Telephone:  212-478-7200
                  Telecopier:  212-478-7400

                  if to the Collateral Agent, to it at the following address:

                  ABLECO FINANCE LLC
                  299 Park Avenue, 23rd Floor
                  New York, New York  10171
                  Attention:  Eric Miller
                  Telephone:  212-891-1549
                  Telecopier:  212-891-1541

                  with a copy to:

                  PAUL, HASTINGS, JANOFSKY & WALKER LLP
                  515 South Flower Street
                  Los Angeles, CA  90071
                  Attention:  John Francis Hilson, Esq.
                  Telephone:  213-683-6300
                  Telecopier:  213-996-3300

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties complying as to delivery with the terms
of this  Section  12.01.  All such  notices  and other  communications  shall be
effective,  (i) if mailed, when received or 3 days after deposited in the mails,
whichever  occurs first,  (ii) if telecopied,  when transmitted and confirmation
received, or (iii) if delivered, upon delivery, except that notices to any Agent
or the L/C Issuer  pursuant to Articles II and III shall not be effective  until
received by such Agent or the L/C Issuer, as the case may be.

     Section 12.02 Amendments,  Etc. Except for actions  expressly  permitted by
the terms of this  Agreement to be taken by an Agent,  no amendment or waiver of
any provision of this  Agreement or any other Loan  Document,  no consent to any
departure by any Loan Party therefrom,  and no release of Collateral  (except as
otherwise  expressly  provided in this  Agreement and the other Loan  Documents)
shall in any event be  effective  unless the same shall be in writing and signed
by the  Required  Lenders or by the  Collateral  Agent  with the  consent of the
Required Lenders, and then such amendment,  waiver, consent, or release shall be
effective only in the specific  instance and for the specific  purpose for which
given, provided,  however, that no amendment,  waiver, consent, or release shall
(i) increase the Commitment of any Lender,  reduce the principal of, or interest
on, the Loans or the Reimbursement Obligations payable to any Lender, reduce the
amount of any fee payable  for the account of any Lender,  or postpone or extend
any date fixed for any  payment of  principal  of, or  interest  or fees on, the

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Loans or  Letter of  Credit  Obligations  payable  to any  Lender,  in each case
without the written  consent of any Lender affected  thereby,  (ii) increase the
Total  Commitment  without the written consent of each Lender,  (iii) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Loans  that is  required  for the  Lenders  or any of  them to take  any  action
hereunder without the written consent of each Lender, (iv) amend the definitions
of "Required  Lenders" or "Pro Rata Share"  without the written  consent of each
Lender,  (v) release all or a substantial  portion of the Collateral  (except as
otherwise provided in this Agreement and the other Loan Documents),  subordinate
any Lien granted in favor of the Collateral  Agent for the benefit of the Agents
and the Lenders,  or release the Borrower or any  Guarantor  without the written
consent of each Lender, (vi) amend, modify or waive Section 4.04 or this Section
12.02 of this  Agreement  without the written  consent of each Lender,  or (vii)
amend the  definitions  of "Borrowing  Base",  "Eligible  Accounts  Receivable",
"Eligible  Backlog",  or "Net Amount of Eligible Accounts  Receivable",  in each
case, in a manner that  increases the  borrowing  availability  of the Borrower,
without the written consent of each Lender.  Notwithstanding  the foregoing,  no
amendment,  modification,  waiver or consent shall, unless in writing and signed
by an Agent,  affect the rights or duties of such Agent (but not in its capacity
as a Lender) under this Agreement or the other Loan Documents.  Section 12.03 No
Waiver;  Remedies,  Etc.  No  failure  on the part of any Agent or any Lender to
exercise,  and no delay in  exercising,  any right  hereunder or under any other
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise  of any right  under any Loan  Document  preclude  any other or further
exercise  thereof or the exercise of any other right. The rights and remedies of
the Agents and the Lenders  provided  herein and in the other Loan Documents are
cumulative  and are in addition to, and not exclusive of, any rights or remedies
provided  by law.  The  rights  of the  Agents  and the  Lenders  under any Loan
Document  against any party  thereto are not  conditional  or  contingent on any
attempt by the Agents and the Lenders to exercise  any of their rights under any
other Loan Document against such party or against any other Person.

     Section 12.04  Expenses;  Taxes;  Attorneys  Fees. The Borrower will pay on
demand, all reasonable out-of-pocket costs and expenses incurred by or on behalf
of each Agent (and, in the case of clauses (b) through (m) below,  each Lender),
regardless  of whether the  transactions  contemplated  hereby are  consummated,
including  reasonable  out-of-pocket fees, costs, client charges and expenses of
one primary  counsel  and any local  counsel  for the  Collateral  Agent and one
primary counsel and any local counsel for the Administrative Agent,  accounting,
due   diligence,   periodic   field   audits,   physical   counts,   valuations,
investigations,  searches  and  filings,  monitoring  of assets,  appraisals  of
Collateral,    title   searches   and   reviewing   environmental   assessments,
miscellaneous  disbursements,  examination,  travel,  lodging and meals, arising
from or relating  to: (a) the  negotiation,  preparation,  execution,  delivery,
performance  and  administration  of this Agreement and the other Loan Documents
(including the preparation of any additional Loan Documents  pursuant to Section
7.01(b)  or the  review  of any of the  agreements,  instruments  and  documents
referred  to in  Section  7.01(f)),  (b) any  requested  amendments,  waivers or
consents  to this  Agreement  or the other  Loan  Documents  whether or not such
documents  become effective or are given, (c) the preservation and protection of
any of the Lenders' rights under this Agreement or the other Loan Documents, (d)
the defense of any claim or action  asserted or brought against any Agent or any
Lender by any Person that arises  from or relates to this  Agreement,  any other
Loan Document, the Agents' or the Lenders' claims against any Loan Party, or any
and all matters in connection therewith,  (e) the commencement or defense of, or
intervention in, any court proceeding  arising from or related to this Agreement
or any other Loan Document, (f) the filing of any petition,  complaint,  answer,
motion or other pleading by any Agent or any Lender, or the taking of any action
in  respect  of the  Collateral  or other  security,  in  connection  with  this

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Agreement or any other Loan Document,  (g) the  protection,  collection,  lease,
sale,  taking  possession of or liquidation of, any Collateral or other security
in connection with this Agreement or any other Loan Document, (h) any attempt to
enforce any Lien or security  interest in any  Collateral  or other  security in
connection  with this Agreement or any other Loan  Document,  (i) any attempt to
collect from any Loan Party,  (j) all  liabilities  and costs arising from or in
connection  with the  past,  present  or  future  operations  of any Loan  Party
involving any damage to real or personal  property or natural  resources or harm
or injury  alleged to have resulted from any Release of Hazardous  Materials on,
upon or into such property, (k) any Environmental Liabilities and Costs incurred
in connection  with the  investigation,  removal,  cleanup or remediation of any
Hazardous  Materials  present or arising out of the  operations  of any facility
owned or operated by any Loan Party, (l) any Environmental Liabilities and Costs
incurred in connection  with any  Environmental  Lien, or (m) the receipt by any
Agent or any Lender of any advice from  professionals with respect to any of the
foregoing.  Without  limitation of the  foregoing or any other  provision of any
Loan Document:  (x) the Borrower  agrees to pay all stamp,  document,  transfer,
recording  or filing  taxes or fees and  similar  impositions  now or  hereafter
determined  by any Agent or any  Lender to be payable  in  connection  with this
Agreement or any other Loan Document, and the Borrower agrees to save each Agent
and each Lender  harmless from and against any and all present or future claims,
liabilities  or losses with respect to or resulting  from any omission to pay or
delay in paying any such taxes, fees or impositions,  (y) the Borrower agrees to
pay all  broker  fees that may become due in  connection  with the  transactions
contemplated  by this  Agreement  and the other Loan  Documents,  and (z) if the
Borrower fails to perform any covenant or agreement  contained  herein or in any
other Loan Document,  any Agent may itself perform or cause  performance of such
covenant or  agreement,  and the expenses of such Agent  incurred in  connection
therewith shall be reimbursed on demand by the Borrower.

     Section 12.05 Right of Set-off.

     (a) Each of the  Lenders  agrees  that it shall not,  without  the  express
written  consent of the Agents,  and that it shall, to the extent it is lawfully
entitled to do so, upon the written request of either Agent, set off against the
Obligations,  any  amounts  owing by such  Lender  to  Borrower  or any  deposit
accounts of Borrower now or hereafter  maintained with such Lender.  Each of the
Lenders further agrees that it shall not, unless specifically requested to do so
in writing by either Agent, take or cause to be taken any action, including, the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral.

     (b) If, at any time or times  any  Lender  shall  receive  (i) by  payment,
foreclosure,  setoff,  or otherwise,  any proceeds of Collateral or any payments
with  respect to the  Obligations,  except  for any such  proceeds  or  payments
received by such Lender from Administrative  Agent pursuant to the terms of this
Agreement, or (ii) payments from Administrative Agent in excess of such Lender's
ratable portion of all such  distributions by Administrative  Agent, such Lender
promptly shall (1) turn the same over to Administrative Agent, in kind, and with
such  endorsements  as may be required to negotiate  the same to  Administrative
Agent, or in immediately available funds, as applicable,  for the account of all
of the Lenders and for  application to the  Obligations  in accordance  with the
applicable  provisions of this Agreement,  or (2) purchase,  without recourse or

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warranty, an undivided interest and participation in the Obligations owed to the
other Lenders so that such excess payment  received shall be applied  ratably as
among the Lenders in accordance with their Pro Rata Shares;  provided,  however,
that to the extent that such excess payment  received by the purchasing party is
thereafter  recovered  from  it,  those  purchases  of  participations  shall be
rescinded in whole or in part, as applicable,  and the applicable portion of the
purchase price paid therefor  shall be returned to such  purchasing  party,  but
without  interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.

     Section  12.06  Severability.  Any  provision  of this  Agreement  which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  portions  hereof  or  affecting  the  validity  or
enforceability of such provision in any other jurisdiction.

     Section 12.07 Assignments and Participations.

     (a) This Agreement and the other Loan  Documents  shall be binding upon and
inure to the benefit of each Loan Party and each Agent and each Lender and their
respective successors and permitted assigns; provided, however, that none of the
Loan  Parties may assign or transfer  any of its rights  hereunder  or under the
other Loan  Documents  without the prior written  consent of each Lender and any
such  assignment  without the Lenders'  prior written  consent shall be null and
void.

     (b) Each Lender may (x) with the written  consent of the  Collateral  Agent
(which  consent shall not be  unreasonably  withheld,  conditioned  or delayed),
assign to one or more other  lenders or other  entities  all or a portion of its
rights and obligations  under this Agreement with respect to all or a portion of
its Term Loan  Commitment  and any Term Loan made by it and (y) with the written
consent  of each  Agent  (which  consent  shall  not be  unreasonably  withheld,
conditioned  or delayed),  assign to one or more other lenders or other entities
all or a portion of its rights and obligations under this Agreement with respect
to all or a portion of its Revolving  Credit  Commitment and the Revolving Loans
made by it; provided, however, that (i) such assignment is in an amount which is
at least  $5,000,000  or a multiple  of  $1,000,000  in excess  thereof  (or the
remainder of such  Lender's  Commitment)  (except such minimum  amount shall not
apply to an  assignment  by a Lender  to (x) an  Affiliate  of such  Lender or a
Related  Fund of such Lender or (y) a group of new  Lenders,  each of whom is an
Affiliate  or  Related  Fund of each  other  of each  other  to the  extent  the
aggregate  amount to be assigned to all such new Lenders is at least  $5,000,000
or a multiple of $1,000,000 in excess  thereof),  (ii) except as provided in the
last  sentence of this  Section  12.07(b),  the parties to each such  assignment
shall execute and deliver to the Collateral Agent (and the Administrative Agent,
if applicable), for its acceptance, an Assignment and Acceptance,  together with
any promissory note subject to such assignment and such parties shall deliver to
the Collateral  Agent, for the benefit of the Collateral Agent, a processing and
recordation  fee of $5,000 (except the payment of such fee shall not be required
(y) in connection  with an assignment by a Lender to an Affiliate of such Lender
or to a Related  Fund of such  Lender or (z) if  Collateral  Agent,  in its sole
discretion,  waives  payment  of such fee) and (iii) no  written  consent of the
Collateral Agent or the Administrative Agent shall be required (1) in connection
with any assignment by a Lender to an Affiliate of such Lender or a Related Fund

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of such  Lender or (2) if such  assignment  is in  connection  with any  merger,
consolidation,  sale,  transfer,  or other disposition of all or any substantial
portion of the business or loan portfolio of such Lender.  Upon such  execution,
delivery and  acceptance,  from and after the effective  date  specified in each
Assignment  and  Acceptance,  which  effective date shall be at least 3 Business
Days after the delivery  thereof to the Collateral Agent (or such shorter period
as  shall  be  agreed  to by the  Collateral  Agent  and  the  parties  to  such
assignment),  (A) the assignee thereunder shall become a "Lender" hereunder and,
in addition to the rights and obligations hereunder held by it immediately prior
to such effective date, have the rights and obligations hereunder that have been
assigned to it pursuant to such  Assignment and Acceptance and (B) the assigning
Lender  thereunder  shall, to the extent that rights and  obligations  hereunder
have been assigned by it pursuant to such Assignment and Acceptance,  relinquish
its rights and be released from its  obligations  under this Agreement  (and, in
the case of an Assignment and Acceptance  covering all or the remaining  portion
of an assigning  Lender's  rights and  obligations  under this  Agreement,  such
Lender  shall  cease  to be a party  hereto).  Notwithstanding  anything  to the
contrary  contained in this Section 12.07(b),  a Lender may assign any or all of
its rights under the Loan  Documents to an Affiliate of such Lender or a Related
Fund of such Lender  without  delivering  an  Assignment  and  Acceptance to the
Agents or to any other Person (a "Related Party Assignment"); provided, however,
that (I) the Borrower and the  Administrative  Agent may continue to deal solely
and directly with such  assigning  Lender until an Assignment and Acceptance has
been delivered to the Administrative Agent for recordation on the Register, (II)
the  Collateral  Agent  may  continue  to deal  solely  and  directly  with such
assigning  Lender until receipt by the  Collateral  Agent of a copy of the fully
executed  Assignment  and  Acceptance  pursuant to Section  12.07(e),  (III) the
failure of such assigning  Lender to deliver an Assignment and Acceptance to the
Agents  shall not  affect the  legality,  validity,  or  binding  effect of such
assignment,  and (IV) an Assignment and Acceptance  between the assigning Lender
and an  Affiliate  of such  Lender or a  Related  Fund of such  Lender  shall be
effective  as of the  date  specified  in such  Assignment  and  Acceptance  and
recorded  on the  Related  Party  Register  (as such term is  defined in Section
12.07(d) herein).

     (c) By executing and delivering an Assignment and Acceptance, the assigning
Lender and the assignee  thereunder confirm to and agree with each other and the
other parties hereto as follows:  (i) other than as provided in such  Assignment
and Acceptance,  the assigning  Lender makes no  representation  or warranty and
assumes  no  responsibility  with  respect  to  any  statements,  warranties  or
representations  made in or in connection  with this Agreement or any other Loan
Document or the  execution,  legality,  validity,  enforceability,  genuineness,
sufficiency  or value of this  Agreement  or any other Loan  Document  furnished
pursuant hereto;  (ii) the assigning Lender makes no  representation or warranty
and assumes no  responsibility  with respect to the  financial  condition of any
Loan Party or any of its  Subsidiaries  or the  performance or observance by any
Loan  Party of any of its  obligations  under this  Agreement  or any other Loan
Document  furnished  pursuant hereto;  (iii) such assignee  confirms that it has
received a copy of this  Agreement and the other Loan  Documents,  together with
such other documents and  information it has deemed  appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance;  (iv)
such  assignee  will,  independently  and without  reliance  upon the  assigning
Lender,  any Agent or any Lender and based on such documents and  information as
it shall deem appropriate at the time, continue to make its own credit decisions
in  taking  or not  taking  action  under  this  Agreement  and the  other  Loan
Documents;  (v) such assignee  appoints and  authorizes  the Agents to take such
action as agents on its behalf and to exercise such powers under this  Agreement

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and the other Loan  Documents as are delegated to the Agents by the terms hereof
and thereof,  together with such powers as are reasonably  incidental hereto and
thereto;  and (vi) such assignee  agrees that it will perform in accordance with
their terms all of the obligations  which by the terms of this Agreement and the
other Loan Documents are required to be performed by it as a Lender.

     (d) The  Administrative  Agent shall,  acting  solely for this purpose as a
non-fiduciary agent of the Borrower,  maintain, or cause to be maintained at the
Payment  Office,  a copy of each  Assignment  and  Acceptance  delivered  to and
accepted by it and a register (the  "Register") for the recordation of the names
and addresses of the Lenders and the Commitments of, and the principal amount of
the Loans (and stated interest  thereon) (the "Registered  Loans") and Letter of
Credit  Obligations owing to each Lender from time to time.  Subject to the last
sentence  of this  Section  12.07(d),  the  entries  in the  Register  shall  be
conclusive  and  binding  for  all  purposes,  absent  manifest  error,  and the
Borrower,  the  Agents  and the  Lenders  may treat  each  Person  whose name is
recorded  in the  Register  as a  Lender  hereunder  for  all  purposes  of this
Agreement.  The Register  shall be available for  inspection by the Borrower and
any Lender at any reasonable  time and from time to time upon  reasonable  prior
notice.  In the case of an  assignment  pursuant to the last sentence of Section
12.07(b)  as to which an  Assignment  and  Acceptance  is not  delivered  to the
Administrative Agent, the assigning Lender shall, acting solely for this purpose
as a  non-fiduciary  agent of the  Borrower,  maintain a register  (the "Related
Party Register") comparable to the Register on behalf of the Borrower.  Any such
Related Party Register  shall be available for  inspection by the Borrower,  any
Agent  and any  Lender  at any  reasonable  time  and  from  time  to time  upon
reasonable prior notice.

     (e)  Upon  receipt  by  the  Administrative  Agent  of  an  Assignment  and
Acceptance, and subject to any consent required from the Administrative Agent or
the  Collateral  Agent  pursuant  to  Section  12.07(b)  (which  consent  of the
Collateral  Agent must be evidenced by the  Collateral  Agent's  execution of an
acceptance to such Assignment and Acceptance),  the  Administrative  Agent shall
accept such assignment, record the information contained therein in the Register
and provide to the Collateral Agent a copy of the fully executed  Assignment and
Acceptance.

     (f) A Registered  Loan (and the  registered  note, if any,  evidencing  the
same) may be assigned or sold in whole or in part only by  registration  of such
assignment  or sale on the  Register or the  Related  Party  Register  (and each
registered  note shall  expressly so provide).  Any assignment or sale of all or
part of such  Registered Loan (and the registered  note, if any,  evidencing the
same) may be effected  only by  registration  of such  assignment or sale on the
Register or the Related  Party  Register,  together  with the  surrender  of the
registered note, if any, evidencing the same duly endorsed by (or accompanied by
a written  instrument of assignment or sale duly executed by) the holder of such
registered  note,  whereupon,  at the request of the  designated  assignee(s) or
transferee(s),  one or more new registered notes in the same aggregate principal
amount shall be issued to the designated assignee(s) or transferee(s).  Prior to
the  registration  of  assignment  or  sale  of any  Registered  Loan  (and  the
registered note, if any, evidencing the same), the Agents shall treat the Person
in whose name such Registered Loan (and the registered note, if any,  evidencing
the same) is  registered  as the owner  thereof for the purpose of receiving all
payments thereon, notwithstanding notice to the contrary.

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     (g) In the event that any Lender sells participations in a Registered Loan,
such Lender shall maintain a register for this purpose as a non-fiduciary  agent
of the  Borrower  on  which  it  enters  the  name  of all  participants  in the
Registered  Loans  held by it and the  principal  amount  (and  stated  interest
thereon)  of the  portion  of the  Registered  Loan that is the  subject  of the
participation  (the  "Participant   Register").   A  Registered  Loan  (and  the
registered note, if any, evidencing the same) may be participated in whole or in
part only by registration of such participation on the Participant Register (and
each  registered  note shall expressly so provide).  Any  participation  of such
Registered  Loan (and the registered  note, if any,  evidencing the same) may be
effected  only by the  registration  of such  participation  on the  Participant
Register. Any such Participant Register shall be available for inspection by the
Borrower,  any Agent and any Lender at any reasonable time and from time to time
upon reasonable prior notice.

     (h) Any Non-U.S.  Lender who is assigned an interest in any portion of such
Registered  Loan  pursuant to an  Assignment  and  Acceptance  shall comply with
Section 2.08(d).

     (i) Each  Lender  may  sell  participations  to one or more  banks or other
entities  in or to all or a portion  of its rights  and  obligations  under this
Agreement  and the other  Loan  Documents  (including,  all or a portion  of its
Commitments,  the  Loans  made by it,  and its Pro Rata  Share of the  Letter of
Credit  Obligations);  provided,  that (i) such Lender's  obligations under this
Agreement  (including  without  limitation,  its Commitments  hereunder) and the
other Loan  Documents  shall  remain  unchanged;  (ii) such Lender  shall remain
solely  responsible  to the other  parties  hereto for the  performance  of such
obligations,  and the Borrower,  the Agents and the other Lenders shall continue
to deal solely and directly  with such Lender in  connection  with such Lender's
rights and obligations  under this Agreement and the other Loan  Documents;  and
(iii) a participant shall not be entitled to require such Lender to take or omit
to take any action hereunder  except (A) action directly  effecting an extension
of the maturity  dates or decrease in the  principal  amount of the Loans or the
Letter of Credit Obligations,  (B) action directly effecting an extension of the
due dates or a decrease in the rate of interest payable on the Loans or the fees
payable under this Agreement, or (C) actions directly effecting a release of all
or a  substantial  portion of the  Collateral  or any Loan Party  (except as set
forth in Section 10.08 of this Agreement or any other Loan  Document).  The Loan
Parties agree that each participant shall be entitled to the benefits of Section
2.08 and Section 4.05 of this Agreement with respect to its participation in any
portion of the Commitments and the Loans as if it was a Lender.

     Section 12.08 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate  counterparts,  each of
which shall be deemed to be an original,  but all of which taken  together shall
constitute one and the same  agreement.  Delivery of an executed  counterpart of
this Agreement by telefacsimile  shall be equally as effective as delivery of an
original  executed  counterpart  of this  Agreement.  Any  party  delivering  an
executed  counterpart of this Agreement by  telefacsimile  also shall deliver an
original  executed  counterpart  of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this  Agreement.  The foregoing shall apply to each other Loan
Document mutatis mutandis.

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     Section 12.09  GOVERNING  LAW. THIS  AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS  EXPRESSLY  PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN  DOCUMENT)  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH,  THE LAW OF THE STATE OF NEW YORK  APPLICABLE TO CONTRACTS  MADE AND TO BE
PERFORMED IN THE STATE OF NEW YORK.

     Section 12.10 CONSENT TO JURISDICTION;  SERVICE OF PROCESS AND VENUE.  EACH
OF THE PARTIES HERETO AGREE THAT ANY LEGAL ACTION OR PROCEEDING  WITH RESPECT TO
THIS  AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK IN THE  COUNTY OF NEW YORK OR OF THE  UNITED  STATES  DISTRICT
COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK,  AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT,  EACH PARTY HERETO HEREBY IRREVOCABLY  ACCEPTS IN RESPECT OF ITS
PROPERTY,  GENERALLY  AND  UNCONDITIONALLY,  THE  JURISDICTION  OF THE AFORESAID
COURTS;  PROVIDED,  HOWEVER,  THAT  ANY SUIT  SEEKING  ENFORCEMENT  AGAINST  ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT,  AT COLLATERAL  AGENT'S OPTION,  IN
THE  COURTS OF ANY  JURISDICTION  WHERE  COLLATERAL  AGENT  ELECTS TO BRING SUCH
ACTION OR WHERE  SUCH  COLLATERAL  OR OTHER  PROPERTY  MAY BE FOUND.  EACH PARTY
HERETO HEREBY IRREVOCABLY  CONSENTS TO THE SERVICE OF ANY AND ALL LEGAL PROCESS,
SUMMONS,  NOTICES,  AND DOCUMENTS IN ANY SUIT,  ACTION, OR PROCEEDING BROUGHT IN
THE UNITED STATES OF AMERICA ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE  OTHER  LOAN  DOCUMENTS  BY THE  MAILING  (BY  REGISTERED  MAIL OR
CERTIFIED MAIL,  POSTAGE PREPAID) OR DELIVERING OF A COPY OF SUCH PROCESS TO (i)
WITH RESPECT TO LOAN PARTIES,  C/O THE BORROWER,  AT THE BORROWER'S  ADDRESS FOR
NOTICES AS SET FORTH IN SECTION  12.01,  AND (ii) WITH RESPECT TO OTHER  PARTIES
HERETO AT THE ADDRESS FOR NOTICES FOR SUCH PARTY SET FORTH IN SECTION 12.01. THE
PARTIES  HERETO  AGREE THAT A FINAL  JUDGMENT IN ANY SUCH  ACTION OR  PROCEEDING
SHALL BE CONCLUSIVE  AND MAY BE ENFORCED IN OTHER  JURISDICTIONS  BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER  PERMITTED BY LAW
OR TO COMMENCE LEGAL  PROCEEDINGS OR OTHERWISE  PROCEED AGAINST ANY PARTY HERETO
IN ANY OTHER  JURISDICTION.  EACH PARTY HERETO HEREBY  EXPRESSLY AND IRREVOCABLY
WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE  JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT  IN ANY  SUCH  COURT  REFERRED  TO  ABOVE  AND ANY  CLAIM  THAT ANY SUCH
LITIGATION  HAS BEEN BROUGHT IN AN  INCONVENIENT  FORUM.  TO THE EXTENT THAT ANY
PARTY HERETO HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM  JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER  THROUGH SERVICE OR NOTICE,  ATTACHMENT
PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS  PROPERTY,  EACH  PARTY  HERETO  HEREBY  IRREVOCABLY  WAIVES  SUCH
IMMUNITY IN RESPECT OF ITS  OBLIGATIONS  UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.

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     Section 12.11 WAIVER OF JURY TRIAL,  ETC.  EACH LOAN PARTY,  EACH AGENT AND
EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR  COUNTERCLAIM  CONCERNING  ANY RIGHTS UNDER THIS  AGREEMENT OR THE OTHER LOAN
DOCUMENTS,  OR UNDER ANY AMENDMENT,  WAIVER,  CONSENT,  INSTRUMENT,  DOCUMENT OR
OTHER AGREEMENT  DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH,  OR ARISING FROM ANY  FINANCING  RELATIONSHIP  EXISTING IN CONNECTION
WITH  THIS  AGREEMENT,   AND  AGREES  THAT  ANY  SUCH  ACTION,   PROCEEDINGS  OR
COUNTERCLAIM  SHALL BE TRIED  BEFORE A COURT  AND NOT  BEFORE A JURY.  EACH LOAN
PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY AGENT
OR ANY LENDER HAS  REPRESENTED,  EXPRESSLY OR  OTHERWISE,  THAT ANY AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION,  PROCEEDING OR COUNTERCLAIM,  SEEK
TO ENFORCE THE FOREGOING WAIVERS.  EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL  INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO
THIS AGREEMENT.

     Section  12.12  Consent  by the  Agents and  Lenders.  Except as  otherwise
expressly  set  forth  herein  to  the  contrary,  if  the  consent,   approval,
satisfaction,   determination,   judgment,  acceptance  or  similar  action  (an
"Action") of any Agent or any Lender shall be permitted or required  pursuant to
any provision  hereof or any provision of any other  agreement to which any Loan
Party is a party and to which any Agent or any  Lender  has  succeeded  thereto,
such Action  shall be required to be in writing and may be withheld or denied by
such Agent or such Lender,  in its sole discretion,  with or without any reason,
and without  being  subject to question or  challenge  on the grounds  that such
Action was not taken in good faith.

     Section 12.13 No Party Deemed  Drafter.  Each of the parties  hereto agrees
that no party hereto shall be deemed to be the drafter of this Agreement.

     Section 12.14  Reinstatement;  Certain Payments.  If any claim is ever made
upon any Agent,  any Lender or the L/C Issuer for  repayment  or recovery of any
amount or  amounts  received  by such  Agent,  such  Lender or the L/C Issuer in
payment or on account of any of the Obligations,  such Agent, such Lender or the
L/C Issuer shall give prompt notice of such claim to each other Agent and Lender
and the Borrower, and if such Agent, such Lender or the L/C Issuer repays all or
part of such amount by reason of (i) any judgment,  decree or order of any court
or administrative  body having  jurisdiction over such Agent, such Lender or the
L/C  Issuer  or any of its  property,  or (ii)  any  good  faith  settlement  or
compromise  of any such claim  effected  by such  Agent,  such Lender or the L/C
Issuer  with any such  claimant,  then and in such event each Loan Party  agrees
that (A) any such judgment,  decree,  order,  settlement or compromise  shall be
binding upon it notwithstanding  the cancellation of any Indebtedness  hereunder
or under the other Loan  Documents or the  termination  of this Agreement or the
other Loan Documents,  and (B) it shall be and remain liable to such Agent, such
Lender or the L/C Issuer  hereunder for the amount so repaid or recovered to the
same extent as if such amount had never  originally been received by such Agent,
such Lender or the L/C Issuer.

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     Section  12.15  Indemnification.  In  addition to each Loan  Party's  other
Obligations  under this  Agreement,  each Loan  Party  agrees  to,  jointly  and
severally,  defend, protect, indemnify and hold harmless each Agent, each Lender
and the L/C Issuer and all of their respective officers,  directors,  employees,
attorneys,  consultants and agents  (collectively called the "Indemnitees") from
and against any and all losses, damages,  liabilities,  obligations,  penalties,
fees,   reasonable   out-of-pocket  costs  and  expenses  (including  reasonable
out-of-pocket  attorneys fees, costs and expenses of one primary counsel and any
local  counsel for the  Collateral  Agent and one primary  counsel and any local
counsel for the  Administrative  Agent)  incurred by such  Indemnitees,  whether
prior to or from and after the  Effective  Date,  whether  direct,  indirect  or
consequential,  as a result of or arising  from or relating to or in  connection
with  any of the  following:  (i) the  negotiation,  preparation,  execution  or
performance or enforcement of this Agreement,  any other Loan Document or of any
other document executed in connection with the transactions contemplated by this
Agreement,  (ii) any Agent's or any Lender's furnishing of funds to the Borrower
or the L/C Issuer's issuing of Letters of Credit for the account of the Borrower
under this  Agreement or the other Loan  Documents,  including the management of
any  such  Loans,  the  Reimbursement   Obligations  or  the  Letter  of  Credit
Obligations,   (iii)  any  matter   relating  to  the   financing   transactions
contemplated  by this  Agreement or the other Loan  Documents or by any document
executed in connection with the  transactions  contemplated by this Agreement or
the other  Loan  Documents,  or (iv) any  claim,  litigation,  investigation  or
proceeding relating to any of the foregoing,  whether or not any Indemnitee is a
party thereto (collectively, the "Indemnified Matters"); provided, however, that
the Loan Parties  shall not have any  obligation  to any  Indemnitee  under this
Section  12.15 for any  Indemnified  Matter  caused by the gross  negligence  or
willful misconduct of such Indemnitee,  as determined by a final  non-appealable
judgment  of a court of  competent  jurisdiction  or  caused by a breach of such
Indemnitee's   obligations   hereunder   or  under  any  Loan   Document.   Such
indemnification  for all of the  foregoing  losses,  damages,  fees,  costs  and
expenses of the  Indemnitees  are  chargeable  against the Loan Account.  To the
extent that the  undertaking  to  indemnify,  pay and hold harmless set forth in
this Section  12.15 may be  unenforceable  because it is violative of any law or
public  policy,  each Loan Party shall,  jointly and  severally,  contribute the
maximum  portion which it is permitted to pay and satisfy under  applicable law,
to the payment  and  satisfaction  of all  Indemnified  Matters  incurred by the
Indemnitees.  This Indemnity  shall survive the repayment of the Obligations and
the discharge of the Liens granted under the Loan Documents.

     Section 12.16 Records.  The unpaid  principal of and interest on the Loans,
the interest rate or rates applicable to such unpaid principal and interest, the
duration of such applicability, the Commitments, and the accrued and unpaid fees
payable  pursuant  to  Sections  2.06 or 3.03  hereof,  shall  at all  times  be
ascertained  from the  records of the  Agents,  which  shall be  conclusive  and
binding absent manifest error.

     Section 12.17 Binding Effect. This Agreement shall become effective when it
shall have been  executed  by each Loan  Party,  each Agent and each  Lender and
thereafter  shall be binding  upon and inure to the  benefit of each Loan Party,
each  Agent and each  Lender,  and their  respective  successors  and  permitted
assigns,  except that the Loan Parties  shall not have the right to assign their
rights  hereunder or any interest  herein  without the prior written  consent of
each Lender, and any assignment by any Lender shall be governed by Section 12.07
hereof.

                                      126
<PAGE>

     Section 12.18 Interest. It is the intention of the parties hereto that each
Agent and each Lender shall  conform  strictly to usury laws  applicable  to it.
Accordingly,  if the  transactions  contemplated  hereby  or by any  other  Loan
Document  would be usurious as to any Agent or any Lender under laws  applicable
to it  (including  the laws of the United States of America and the State of New
York or any other jurisdiction whose laws may be mandatorily  applicable to such
Agent or such Lender  notwithstanding  the other  provisions of this Agreement),
then, in that event,  notwithstanding anything to the contrary in this Agreement
or any other Loan Document or any agreement  entered into in connection  with or
as security for the Obligations,  it is agreed as follows:  (i) the aggregate of
all consideration  which constitutes  interest under law applicable to any Agent
or any Lender that is contracted  for, taken,  reserved,  charged or received by
such Agent or such Lender  under this  Agreement  or any other Loan  Document or
agreements  or  otherwise  in  connection  with the  Obligations  shall under no
circumstances  exceed the maximum  amount  allowed by such  applicable  law, any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Agent or such Lender on the principal  amount of the Obligations (or, to
the extent that the principal amount of the Obligations shall have been or would
thereby be paid in full,  refunded by such Agent or such Lender,  as applicable,
to the Borrower);  and (ii) in the event that the maturity of the Obligations is
accelerated by reason of any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that  constitutes  interest  under law applicable to any Agent or any Lender may
never include more than the maximum amount allowed by such  applicable  law, and
excess  interest,  if any,  provided for in this Agreement or otherwise shall be
canceled  automatically by such Agent or such Lender,  as applicable,  as of the
date of such  acceleration  or prepayment  and, if  theretofore  paid,  shall be
credited by such Agent or such Lender, as applicable, on the principal amount of
the Obligations  (or, to the extent that the principal amount of the Obligations
shall have been or would thereby be paid in full, refunded by such Agent or such
Lender to the Borrower).  All sums paid or agreed to be paid to any Agent or any
Lender for the use, forbearance or detention of sums due hereunder shall, to the
extent  permitted by law applicable to such Agent or such Lender,  be amortized,
prorated,  allocated  and  spread  throughout  the full term of the Loans  until
payment in full so that the rate or amount of  interest  on account of any Loans
hereunder does not exceed the maximum amount allowed by such  applicable law. If
at an time and from time to time (i) the amount of interest payable to any Agent
or any  Lender  on any  date  shall  be  computed  at the  Highest  Lawful  Rate
applicable to such Agent or such Lender  pursuant to this Section 12.18 and (ii)
in respect of any subsequent interest  computation period the amount of interest
otherwise  payable to such Agent or such Lender would be less than the amount of
interest  payable to such Agent or such Lender  computed  at the Highest  Lawful
Rate  applicable  to such  Agent or such  Lender,  then the  amount of  interest
payable to such Agent or such  Lender in  respect  of such  subsequent  interest
computation  period  shall  continue to be  computed at the Highest  Lawful Rate
applicable  to such  Agent or such  Lender  until the total  amount of  interest
payable to such Agent or such Lender  shall  equal the total  amount of interest
which would have been  payable to such Agent or such Lender if the total  amount
of interest had been computed without giving effect to this Section 12.18.

                                      127
<PAGE>

     For purposes of this Section 12.18,  the term  "applicable  law" shall mean
that law in effect  from  time to time and  applicable  to the loan  transaction
between the Borrower,  on the one hand,  and the Agents and the Lenders,  on the
other,  that  lawfully  permits  the  charging  and  collection  of the  highest
permissible,  lawful  non-usurious rate of interest on such loan transaction and
this  Agreement,  including  laws of the  State of New York and,  to the  extent
controlling, laws of the United States of America.

     The right to accelerate  the maturity of the  Obligations  does not include
the right to  accelerate  any  interest  that has not  accrued as of the date of
acceleration.

     Section 12.19 Confidentiality. Each Agent and each Lender agrees (on behalf
of  itself  and  each of its  affiliates,  directors,  officers,  employees  and
representatives)  to  keep  confidential,   in  accordance  with  its  customary
procedures  for  handling  confidential   information  of  this  nature  and  in
accordance with safe and sound practices of comparable  companies,  any material
non-public  information  supplied  to it by the Loan  Parties  pursuant  to this
Agreement  or the other Loan  Documents  (and which at the time is not, and does
not  thereafter  become,  publicly  available  or  available to such Person from
another source not known to be subject to a  confidentiality  obligation to such
Person not to disclose such  information),  provided  that nothing  herein shall
limit the  disclosure  of any such  information  (i) to the extent  required  by
statute,  rule, regulation or judicial process, (ii) to counsel for any Agent or
any Lender (it being  understood that the person to whom such disclosure is made
will be informed of the  confidential  nature of such information and instructed
to  keep  such  information   confidential),   (iii)  to  examiners,   auditors,
accountants or  Securitization  Parties (it being  understood that the person to
whom such disclosure is made will be informed of the confidential nature of such
information  and  instructed  to keep such  information  confidential),  (iv) in
connection  with any  litigation  to which any Agent or any Lender is a party or
(v) to any assignee or participant (or  prospective  assignee or participant) so
long as such assignee or participant  (or  prospective  assignee or participant)
first agrees, in writing,  to be bound by confidentiality  provisions similar in
substance to this Section  12.19.  Each Agent and each Lender agrees that,  upon
receipt  of a  request  or  identification  of the  requirement  for  disclosure
pursuant to clause (iv) hereof, it will make reasonable efforts to keep the Loan
Parties  informed of such  request or  identification;  provided  that each Loan
Party  acknowledges  that each  Agent and each  Lender  may make  disclosure  as
required or requested by any Governmental  Authority or  representative  thereof
and that each Agent and each  Lender may be subject to review by  Securitization
Parties or other  regulatory  agencies  and may be  required  to provide  to, or
otherwise make available for review by, the  representatives  of such parties or
agencies any such non-public information.

     Section  12.20 Section  Headings.  Headings and numbers have been set forth
herein for  convenience  only.  Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.

     Section 12.21  Integration.  This  Agreement,  together with the other Loan
Documents,  reflects the entire understanding of the parties with respect to the
transactions  contemplated  hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

                                      128
<PAGE>

     Section  12.22 Release of Security  Interest or Guaranty.  Upon the sale or
other  disposition  of any  Collateral  that  is  expressly  permitted  by  this
Agreement or which has been expressly  consented to in accordance with the terms
hereof,  or the  sale or  other  disposition  of all of the  Capital  Stock of a
Guarantor  that is permitted by this Agreement or to which has been consented to
in accordance with the terms hereof,  for which a Loan Party desires to obtain a
release,  such Loan  Party  shall  deliver  to the  Agents a  certificate  of an
Authorized  Officer (a) stating that the Collateral or the Capital Stock subject
to such  disposition is being sold or otherwise  disposed of in compliance  with
the terms hereof and (b)  specifying  the Collateral or Capital Stock being sold
or otherwise disposed of in the proposed  transaction.  Upon the receipt of such
certificate the Collateral Agent shall, at such Loan Party's expense, so long as
the Collateral  Agent (i) has no reason to believe that the facts stated in such
certificate  are not true and  correct,  and (ii) shall have  received  evidence
satisfactory  to it that  arrangements  reasonably  satisfactory to it have been
made for  delivery  of the Net  Cash  Proceeds  if and as  required  by  Section
2.05(c),  execute and deliver such  releases as may be  reasonably  requested by
such Loan Party.  Upon payment in full in cash of the  Obligations in accordance
with the  provisions of this  Agreement and the expiration or termination of the
Commitments,  the Liens  granted by any Loan  Document  shall  terminate and all
rights to the  Collateral  shall  revert to the Loan Parties or any other Person
entitled thereto.  At such time,  Collateral Agent will execute and deliver such
documents and  termination  statements to terminate such Liens as any Loan Party
reasonably requests to evidence such termination.

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

                                      129
<PAGE>

                                        BORROWER:

                                        PRG-SCHULTZ USA, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

<PAGE>

                                        GUARANTORS:

                                        PRG-SCHULTZ INTERNATIONAL, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRG-SCHULTZ CANADA, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        THE PROFIT RECOVERY GROUP MEXICO, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRG-SCHULTZ PUERTO RICO, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        THE PROFIT RECOVERY GROUP COSTA
                                        RICA, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary
<PAGE>

                                        GUARANTORS:

                                        PRG-SCHULTZ CHILE, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRG INTERNATIONAL, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRGFS, INC.,
                                        a Delaware corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRGTS, LLC,
                                        a Georgia limited liability company

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

<PAGE>

                                        GUARANTORS:

                                        HS&A ACQUISITION - UK, INC.,
                                        a Texas corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRG-SCHULTZ AUSTRALIA, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRG-SCHULTZ BELGIUM, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRG-SCHULTZ EUROPE, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        THE PROFIT RECOVERY GROUP GERMANY, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary
<PAGE>

                                        GUARANTORS:

                                        PRG-SCHULTZ FRANCE, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        THE PROFIT RECOVERY GROUP NETHERLANDS,
                                        INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        THE PROFIT RECOVERY GROUP NEW ZEALAND,
                                        INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRG-SCHULTZ SCANDINAVIA, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRG-SCHULTZ PORTUGAL, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary
<PAGE>

                                        GUARANTORS:

                                        PRG-SCHULTZ SWITZERLAND, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        THE PROFIT RECOVERY GROUP ITALY, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        THE PROFIT RECOVERY GROUP SPAIN, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        THE PROFIT RECOVERY GROUP ASIA, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        THE PROFIT RECOVERY GROUP SOUTH AFRICA,
                                        INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary
<PAGE>

                                        GUARANTORS:

                                        PRG-SCHULTZ JAPAN, INC.,
                                        a Georgia corporation

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary

                                        PRG-SCHULTZ PUERTO RICO,
                                        a Puerto Rico partnership

                                        By: /s/  C. McKellar, Jr.
                                           -------------------------------------
                                        Name:  Clinton McKellar, Jr.
                                        Title: Senior Vice President,
                                               General Counsel & Secretary
<PAGE>

                                        GUARANTORS:

                                        PRG-SCHULTZ DEUTSCHLAND GMBH,
                                        a company incorporated in Neuss, Germany

                                        By: /s/ Kia Zadegan
                                           -------------------------------------
                                        Name:  Kia Zadegan
                                        Title: Managing Director

<PAGE>

                                        COLLATERAL AGENT AND LENDER:

                                        ABLECO FINANCE LLC,
                                        a Delaware limited liability company

                                        By: /s/ Eric Miller
                                           -------------------------------------
                                        Name:   Eric Miller
                                        Title:  Senior Vice President

<PAGE>

                                        ADMINISTRATIVE AGENT AND LENDER:

                                        THE CIT GROUP/BUSINESS CREDIT, INC.,
                                        a New York corporation

                                        By: /s/ Veronica Lubczenko
                                           -------------------------------------
                                        Name:   Veronica Lubczenko
                                        Title:  SVP

<PAGE>

                                        LENDERS:

                                        BLUM STRATEGIC PARTNERS II, L.P.

                                        By: Blum Strategic GP II, L.L.C., its
                                            general partner

                                            By: /s/ Gregory Hitchan
                                               ---------------------------------
                                               Name:  Gregory Hitchan
                                               Title:  Member

                                        BLUM STRATEGIC PARTNERS II, GMBH
                                        & CO. KG

                                        By: Blum Strategic GP II, L.L.C., its
                                            managing limited partner

                                            By: /s/ Gregory Hitchan
                                               ---------------------------------
                                               Name:  Gregory Hitchan
                                               Title: Member and General Counsel

                                        PARKCENTRAL GLOBAL HUB LIMITED

                                        By: /s/ Steven Blasnik
                                           -------------------------------------
                                                Name:  Steven Blasnik
                                                Title:    President

                                        PETRUS SECURITIES, LP

                                        By: Perot Investments, Inc., its general
                                            partner

                                            By: /s/ Steven Blasnik
                                               ---------------------------------
                                               Name:  Steven Blasnik
                                               Title:    President
<PAGE>

                               FINANCING AGREEMENT

                           DATED AS OF MARCH 17, 2006

                                  BY AND AMONG

                        PRG-SCHULTZ INTERNATIONAL, INC.,
                                    AS PARENT

                    THE SUBSIDIARIES OF PARENT PARTY HERETO,

                   THE LENDERS FROM TIME TO TIME PARTY HERETO,

                               ABLECO FINANCE LLC,
                              AS COLLATERAL AGENT,

                                       AND

                      THE CIT GROUP/BUSINESS CREDIT, INC.,
                             AS ADMINISTRATIVE AGENT

<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
<S>                                                                                                          <C>
                                                                                                             Page

ARTICLE I             DEFINITIONS; CERTAIN TERMS.................................................................1
         Section 1.01          Definitions.......................................................................1
         Section 1.02          Terms Generally..................................................................38
         Section 1.03          Accounting and Other Terms.......................................................38
         Section 1.04          Time References..................................................................38

ARTICLE II            THE LOANS.................................................................................39
         Section 2.01          Commitments......................................................................39
         Section 2.02          Making the Loans.................................................................39
         Section 2.03          Repayment of Loans; Evidence of Debt.............................................43
         Section 2.04          Interest.........................................................................44
         Section 2.05          Reduction of Commitment; Prepayment of Loans.....................................47
         Section 2.06          Fees.............................................................................51
         Section 2.07          Securitization...................................................................51
         Section 2.08          Taxes............................................................................52

ARTICLE III           LETTERS OF CREDIT.........................................................................54
         Section 3.01          Letter of Credit Guaranty........................................................54
         Section 3.02          Participations...................................................................56
         Section 3.03          Letters of Credit................................................................57

ARTICLE IV            FEES, PAYMENTS AND OTHER COMPENSATION.....................................................58
         Section 4.01          Audit and Collateral Monitoring Fees.............................................58
         Section 4.02          Payments; Computations and Statements............................................59
         Section 4.03          Sharing of Payments, Etc.........................................................60
         Section 4.04          Apportionment of Payments........................................................60
         Section 4.05          Increased Costs and Reduced Return...............................................61

ARTICLE V             CONDITIONS TO LOANS.......................................................................63
         Section 5.01          Conditions Precedent.............................................................63
         Section 5.02          Conditions Precedent to All Loans and Letters of Credit..........................67
         Section 5.03          Conditions Subsequent to All Loans...............................................68

ARTICLE VI            REPRESENTATIONS AND WARRANTIES............................................................68
         Section 6.01          Representations and Warranties...................................................68

ARTICLE VII           COVENANTS OF THE LOAN PARTIES.............................................................77
         Section 7.01          Affirmative Covenants............................................................77
         Section 7.02          Negative Covenants...............................................................87
         Section 7.03          Financial Covenants..............................................................92

ARTICLE VIII          MANAGEMENT, COLLECTION AND STATUS OF ACCOUNTS RECEIVABLE AND OTHER COLLATERAL.............93
         Section 8.01          Collection of Accounts Receivable; Management of Collateral......................93
         Section 8.02          Accounts Receivable Documentation................................................95
         Section 8.03          Status of Accounts Receivable and Other Collateral...............................96
         Section 8.04          Collateral Custodian.............................................................97
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                  (continued)
<S>                                                                                                          <C>
                                                                                                             Page

ARTICLE IX            EVENTS OF DEFAULT.........................................................................97
         Section 9.01          Events of Default................................................................97

ARTICLE X             AGENTS...................................................................................101
         Section 10.01         Appointment.....................................................................101
         Section 10.02         Nature of Duties................................................................102
         Section 10.03         Rights, Exculpation, Etc........................................................102
         Section 10.04         Reliance........................................................................103
         Section 10.05         Indemnification.................................................................103
         Section 10.06         Agents Individually.............................................................103
         Section 10.07         Successor Agent.................................................................104
         Section 10.08         Collateral Matters..............................................................104
         Section 10.09         Agency for Perfection...........................................................105

ARTICLE XI            GUARANTY.................................................................................106
         Section 11.01         Guaranty........................................................................106
         Section 11.02         Guaranty Absolute...............................................................106
         Section 11.03         Waiver..........................................................................107
         Section 11.04         Continuing Guaranty; Assignments................................................108
         Section 11.05         Subrogation.....................................................................108

ARTICLE XII           MISCELLANEOUS............................................................................109
         Section 12.01         Notices, Etc....................................................................109
         Section 12.02         Amendments, Etc.................................................................110
         Section 12.03         No Waiver; Remedies, Etc........................................................111
         Section 12.04         Expenses; Taxes; Attorneys Fees.................................................111
         Section 12.05         Right of Set-off................................................................112
         Section 12.06         Severability....................................................................113
         Section 12.07         Assignments and Participations..................................................113
         Section 12.08         Counterparts....................................................................116
         Section 12.09         GOVERNING LAW...................................................................116
         Section 12.10         CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE...........................117
         Section 12.11         WAIVER OF JURY TRIAL, ETC.......................................................117
         Section 12.12         Consent by the Agents and Lenders...............................................118
         Section 12.13         No Party Deemed Drafter.........................................................118
         Section 12.14         Reinstatement; Certain Payments.................................................118
         Section 12.15         Indemnification.................................................................118
         Section 12.16         Records.........................................................................119
         Section 12.17         Binding Effect..................................................................119
         Section 12.18         Interest........................................................................120
         Section 12.19         Confidentiality.................................................................121
         Section 12.20         Section Headings................................................................121
         Section 12.21         Integration.....................................................................121
         Section 12.22         Release of Security Interest or Guaranty........................................121
</TABLE>

                                      -ii-
<PAGE>

                              SCHEDULE AND EXHIBITS

Schedule R-1          Lenders and Lenders' Commitments
Schedule 5.03(b)      Postclosing Landlord Waivers
Schedule 6.01(e)      Subsidiaries
Schedule 6.01(f)      Litigation; Commercial Tort Claims
Schedule 6.01(i)      ERISA
Schedule 6.01(o)      Real Property
Schedule 6.01(r)      Environmental Matters
Schedule 6.01(s)      Insurance
Schedule 6.01(v)      Bank Accounts
Schedule 6.01(w)      Intellectual Property
Schedule 6.01(x)      Material Contracts
Schedule 6.01(dd)     Name; Jurisdiction of Organization; Organizational ID
                      Number; Chief Place of Business; Chief Executive Office;
                      FEIN
Schedule 6.01(ff)     Collateral Locations
Schedule 7.02(a)      Existing Liens
Schedule 7.02(b)      Existing Indebtedness
Schedule 7.02(e)      Existing Investments
Schedule 7.02(d)      Nature of Business
Schedule 7.02(k)      Limitations on Dividends and Other Payment Restrictions
Schedule 8.01         Lockbox Banks and Lockbox Accounts

Exhibit A-1           Form of Assignment and Acceptance
Exhibit B-1           Form of Borrowing Base Certificate
Exhibit I-1           Form of Intercompany Subordination Agreement
Exhibit L-1           Form of LIBOR Notice
Exhibit S-1           Form of Solvency Certificate

Exhibit 2.01(b)(ii)   Form of Notice of Borrowing
Exhibit 5.01(d)       Forms of Opinions of Counsel

                                     -iii-EXHIBIT 10.4

                               SECURITY AGREEMENT

     This SECURITY  AGREEMENT (this "Agreement") is made this 17th day of March,
2006,  among Grantors listed on the signature pages hereof and those  additional
entities  that  hereafter  become  parties  hereto  by  executing  the  form  of
Supplement  attached  hereto as Annex 1  (collectively,  jointly and  severally,
"Grantors" and each individually "Grantor"),  and ABLECO FINANCE LLC, a Delaware
limited  liability  company,  in  its  capacity  as  collateral  agent  for  the
below-defined   Lender  Group   (together   with  its  successors  and  assigns,
"Collateral Agent").

                              W I T N E S S E T H:

     WHEREAS, pursuant to that certain Financing Agreement of even date herewith
(as amended,  restated,  supplemented  or otherwise  modified from time to time,
including all schedules  thereto,  the "Financing  Agreement") among PRG-SCHULTZ
INTERNATIONAL,  INC., a Georgia corporation ("Parent"), PRG-SCHULTZ USA, INC., a
Georgia  corporation  (the  "Borrower"),  each  Subsidiary of Parent listed as a
"Guarantor" on the signatures  pages thereto (such  Subsidiaries,  together with
the Parent, each individually a "Guarantor",  and individually and collectively,
jointly and severally, the "Guarantors"), the lenders that are from time to time
parties thereto (each a "Lender" and, collectively,  the "Lenders"),  Collateral
Agent,  and The CIT  Group/Business  Credit,  Inc., a New York  corporation,  as
administrative  agent for the Lender Group,  the Lender Group is willing to make
certain  financial  accommodations  available  to  Borrower  from  time  to time
pursuant to the terms and conditions thereof, and

     WHEREAS,  Collateral  Agent has agreed to act as  collateral  agent for the
benefit of the Lender Group in connection with the transactions  contemplated by
this Agreement, and

     WHEREAS,  in order to induce the Lender  Group to enter into the  Financing
Agreement  and the other Loan  Documents  and to induce the Lender Group to make
financial accommodations to Borrower as provided for in the Financing Agreement,
Grantors  have  agreed to grant a  continuing  security  interest  in and to the
Collateral in order to secure the prompt and complete  payment,  observance  and
performance  of, (a) all of the  present and future  obligations  of each of the
Grantors  arising from this Agreement,  the Financing  Agreement,  or any of the
other Loan Documents,  including under any Guaranty,  and (b) all Obligations of
Borrower  (clauses  (a) and (b) being  hereinafter  referred to as the  "Secured
Obligations"), and

     NOW,  THEREFORE,  for and in  consideration  of the recitals made above and
other good and valuable consideration,  the receipt, sufficiency and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:

     1. Defined  Terms.  All  capitalized  terms used herein  (including  in the
preamble  and  recitals  hereof)  without  definition  shall  have the  meanings
ascribed  thereto in the Financing  Agreement.  Any terms used in this Agreement
that are defined in the Code shall be construed  and defined as set forth in the
Code unless otherwise  defined herein or in the Financing  Agreement;  provided,
however,  that to the extent that the Code is used to define any term herein and
such  term is  defined  differently  in  different  Articles  of the  Code,  the
definition  of such term  contained  in Article 9 of the Code shall  govern.  In
addition to those terms  defined  elsewhere in this  Agreement,  as used in this
Agreement, the following terms shall have the following meanings:

     (a) "Account" means an account (as that term is defined in the Code).

<PAGE>

     (b)  "Account  Debtor"  means any Person who is  obligated  on an  Account,
Chattel Paper, or a General Intangible.

     (c) "Agreement" has the meaning specified therefor in the preamble hereto.

     (d) "Books"  means  books and records  (including  each  Grantor's  Records
indicating,  summarizing,  or evidencing  such Grantor's  assets  (including the
Collateral) or liabilities,  each Grantor's  Records  relating to such Grantor's
business operations or financial condition,  and each Grantor's goods or General
Intangibles related to such information).

     (e) "Borrower" has the meaning  specified  therefor in the recitals to this
Agreement.

     (f) "Capital  Stock" has the meaning  specified  therefor in the  Financing
Agreement

     (g) "Cash  Equivalents" has the meaning specified therefor in the Financing
Agreement.

     (h)  "Chattel  Paper" means  chattel  paper (as that term is defined in the
Code) and includes tangible chattel paper and electronic chattel paper.

     (i) "Code" means the New York Uniform  Commercial  Code,  as in effect from
time to time; provided,  however, that in the event that, by reason of mandatory
provisions  of  law,  any or all of the  attachment,  perfection,  priority,  or
remedies with respect to Collateral  Agent's Lien on any  Collateral is governed
by the Uniform  Commercial Code as enacted and in effect in a jurisdiction other
than the State of New York,  the term "Code"  shall mean the Uniform  Commercial
Code as enacted and in effect in such other jurisdiction  solely for purposes of
the provisions  thereof relating to such attachment,  perfection,  priority,  or
remedies.

     (j) "Collateral" has the meaning specified therefor in Section 2.

     (k) "Collateral  Agent" has the meaning specified  therefor in the preamble
to this Agreement.

     (l) "Commercial  Tort Claims" means commercial tort claims (as that term is
defined in the Code),  and  includes  those  commercial  tort  claims  listed on
Schedule 1 attached hereto and made a part hereof.

     (m) "Copyrights"  means copyrights and copyright  registrations,  including
the copyright  registrations  and  recordings  thereof and all  applications  in
connection  therewith listed on Schedule 6.01(w) of the Financing  Agreement and
made a part hereof, and (i) all reissues, continuations,  extensions or renewals
thereof, (ii) all income, royalties,  damages and payments now and hereafter due
or payable under and with respect thereto, including payments under all licenses
entered into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (iii) the right to sue for past, present and
future infringements and dilutions thereof,  (iv) the goodwill of each Grantor's
business  symbolized by the foregoing  and connected  therewith,  and (v) all of
each Grantor's rights corresponding thereto throughout the world.

     (n) "Copyright  Security Agreement" means each Copyright Security Agreement
among  Grantors,  or any of them, and Collateral  Agent,  for the benefit of the
Lender Group, in substantially  the form of Exhibit A attached hereto,  pursuant
to which  Grantors  have  granted to  Collateral  Agent,  for the benefit of the
Lender Group, a security interest in all their respective Copyrights.

     (o) "Deposit Account" means any deposit account (as that term is defined in
the Code).

     (p) "Equipment" means equipment (as that term is defined in the Code).

                                       2
<PAGE>

     (q) "Event of Default" has the meaning specified  therefor in Article IX of
the Financing Agreement.

     (r)  "Financing  Agreement"  has  the  meaning  specified  therefor  in the
recitals to this Agreement.

     (s) "Fixtures" means fixtures (as that term is defined in the Code).

     (t)  "General  Intangibles"  means  general  intangibles  (as that  term is
defined in the Code) and, in any event, including payment intangibles,  contract
rights,  rights to  payment,  rights  arising  under  common law,  statutes,  or
regulations,  choses or things  in  action,  goodwill  (including  the  goodwill
associated  with any  Trademark,  Patent,  or Copyright),  Patents,  Trademarks,
Copyrights,  URLs and domain  names,  industrial  designs,  other  industrial or
Intellectual Property or rights therein or applications therefor,  whether under
license or otherwise,  programs,  programming materials,  blueprints,  drawings,
purchase orders,  customer lists,  monies due or recoverable from pension funds,
route  lists,  rights to payment and other rights under any royalty or licensing
agreements,  including  Intellectual  Property  Licenses,  infringement  claims,
computer programs,  information contained on computer disks or tapes,  software,
literature, reports, catalogs, pension plan refunds, pension plan refund claims,
insurance premium rebates,  tax refunds,  and tax refund claims,  uncertificated
securities,  and any other personal  property other than Commercial Tort Claims,
money,  Accounts,  Chattel Paper,  Deposit Accounts,  goods,  Investment Related
Property,  Negotiable  Collateral,  and  oil,  gas,  or  other  minerals  before
extraction.

     (u)  "Grantor"  and  "Grantors"  have  the  respective  meanings  specified
therefor in the preamble to this Agreement.

     (v) "Guarantor" and  "Guarantors"  have the respective  meanings  specified
therefor in the recitals to this Agreement.

     (w)  "Guaranty"  has  the  meaning  specified  therefor  in  the  Financing
Agreement.

     (x)  "Insolvency  Proceeding"  has the  meaning  specified  therefor in the
Financing Agreement.

     (y)  "Intellectual  Property"  means  any  and  all  Intellectual  Property
Licenses,  Patents,  Copyrights,  Trademarks,  the goodwill associated with such
Trademarks, trade secrets and customer lists.

     (z) "Intellectual  Property Licenses" means rights under or interest in any
Patent, Trademark,  Copyright or other intellectual property, including software
license  agreements  with any other party,  whether the applicable  Grantor is a
licensee or licensor  under any such license  agreement,  including  the license
agreements listed on Schedule 6.01(w) of the Financing  Agreement (but excluding
any off-the-shelf  software license  agreement) and made a part hereof,  and the
right to use the  foregoing in  connection  with the  enforcement  of the Lender
Group's rights under the Loan  Documents,  subject in each case, to the terms of
such license agreement, and including the right to prepare for sale and sell any
and all Inventory and Equipment now or hereafter owned by any Grantor and now or
hereafter covered by such licenses.

     (aa) "Inventory" means inventory (as that term is defined in the Code).

     (bb) "Investment  Related Property" means (i) investment  property (as that
term is  defined  in the  Code),  and (ii) all of the  following  regardless  of
whether classified as investment property under the Code: all Pledged Interests,
Pledged Operating Agreements, and Pledged Partnership Agreements.

     (cc) "Lender" and "Lenders" have the respective meanings specified therefor
in the recitals to this Agreement.

                                       3
<PAGE>

     (dd) "Lender Group" means Collateral Agent,  Administrative  Agent, and the
Lenders.

     (ee) "Loan  Document" has the meaning  specified  therefor in the Financing
Agreement.

     (ff) "Motor Vehicles" shall mean all trucks,  trailers,  tractors,  service
vehicles,  automobiles and other registered mobile  equipment,  in each case, to
the extent that Section  9-311 of the Code  provides  that a perfected  security
interest  may  not  be  obtained  therein  through  the  filing  of a  financing
statement.

     (gg)  "Negotiable  Collateral"  means  letters of credit,  letter of credit
rights,  instruments,  promissory  notes,  drafts and documents (as that term is
defined in the Code).

     (hh)  "Obligations"  has the meaning  specified  therefor in the  Financing
Agreement.

     (ii)  "Parent" has the meaning  specified  therefor in the preamble to this
Agreement.

     (jj) "Patents" means patents and patent applications, including the patents
and patent  applications  listed on Schedule 6.01(w) of the Financing  Agreement
and  made a part  hereof,  and  (i)  all  renewals  thereof,  (ii)  all  income,
royalties,  damages and payments now and hereafter due or payable under and with
respect  thereto,   including  payments  under  all  licenses  entered  into  in
connection  therewith and damages and payments for past or future  infringements
or  dilutions  thereof,  (iii)  the right to sue for past,  present  and  future
infringements  and  dilutions  thereof,  and (iv) all of each  Grantor's  rights
corresponding thereto throughout the world.

     (kk) "Patent Security Agreement" means each Patent Security Agreement among
Grantors,  or any of them, and Collateral  Agent,  for the benefit of the Lender
Group, in substantially the form of Exhibit B attached hereto, pursuant to which
Grantors have granted to Collateral  Agent, for the benefit of the Lender Group,
a security interest in all their respective Patents.

     (ll) "Permitted Liens" has the meaning specified  therefor in the Financing
Agreement.

     (mm)  "Person"  has  the  meaning  specified   therefor  in  the  Financing
Agreement.

     (nn) "Pledged  Companies" means, each Person listed on Schedule 2 hereto as
a "Pledged Company",  together with each other Person, all or a portion of whose
Capital Stock,  is acquired or otherwise  owned by a Grantor after the Effective
Date.

     (oo)  "Pledged  Interests"  means all of each  Grantor's  right,  title and
interest  in and to all of the  Capital  Stock  now or  hereafter  owned by such
Grantor,  regardless of class or designation,  including, in each of the Pledged
Companies, and all substitutions therefor and replacements thereof, all proceeds
thereof and all rights relating thereto, including any certificates representing
the Capital  Stock,  the right to request  after the  occurrence  and during the
continuation of an Event of Default that such Capital Stock be registered in the
name of  Collateral  Agent or any of its  nominees,  the  right to  receive  any
certificates representing any of the Capital Stock and the right to require that
such  certificates be delivered to Collateral Agent together with undated powers
or assignments of investment  securities with respect thereto,  duly endorsed in
blank by such Grantor,  all warrants,  options,  share  appreciation  rights and
other rights, contractual or otherwise, in respect thereof and of all dividends,
distributions  of income,  profits,  surplus,  or other  compensation  by way of
income or liquidating distributions,  in cash or in kind, and cash, instruments,
and  other  property  from  time  to time  received,  receivable,  or  otherwise
distributed in respect of or in addition to, in substitution  of, on account of,
or in exchange for any or all of the foregoing.

     (pp)  "Pledged  Interests  Addendum"  means a  Pledged  Interests  Addendum
substantially in the form of Exhibit C to this Agreement.

                                       4
<PAGE>

     (qq) "Pledged  Operating  Agreements"  means all of each Grantor's  rights,
powers, and remedies under the limited liability company operating agreements of
each of the Pledged Companies that are limited liability companies.

     (rr) "Pledged  Partnership  Agreements" means all of each Grantor's rights,
powers,  and remedies  under the  partnership  agreements of each of the Pledged
Companies that are partnerships.

     (ss) "Proceeds" has the meaning specified therefor in Section 2.

     (tt) "Real  Property"  means any estates or interests in real  property now
owned or hereafter acquired by any Grantor and the improvements thereto.

     (uu) "Records" means  information that is inscribed on a tangible medium or
which  is  stored  in an  electronic  or  other  medium  and is  retrievable  in
perceivable form.

     (vv) "Security Interest" has the meaning specified therefor in Section 2.

     (ww)  "Secured  Obligations"  has the meaning  specified in the recitals to
this Agreement.

     (xx)  "Securities  Account"  means a  securities  account  (as that term is
defined in the Code).

     (yy) "Supporting Obligations" means supporting obligations (as such term is
defined in the Code),  and includes  letters of credit and guaranties  issued in
support of Accounts, Chattel Paper, documents, General Intangibles, instruments,
or Investment Related Property.

     (zz) "Trademarks"  means trademarks,  trade names,  registered  trademarks,
trademark applications, service marks, registered service marks and service mark
applications,  including  the  trade  names,  registered  trademarks,  trademark
applications,  registered service marks and service mark applications  listed on
Schedule 6.01(w) of the Financing  Agreement and made a part hereof, and (i) all
renewals  thereof,  (ii) all income,  royalties,  damages and  payments  now and
hereafter  due or payable  under and with respect  thereto,  including  payments
under all licenses entered into in connection therewith and damages and payments
for past or future  infringements or dilutions  thereof,  (iii) the right to sue
for past,  present and future  infringements  and  dilutions  thereof,  (iv) the
goodwill of each  Grantor's  business  symbolized by the foregoing and connected
therewith, and (v) all of each Grantor's rights corresponding thereto throughout
the world.

     (aaa)  "Trademark   Security   Agreement"  means  each  Trademark  Security
Agreement among Grantors,  or any of them, and Collateral Agent, for the benefit
of the Lender Group,  in  substantially  the form of Exhibit D attached  hereto,
pursuant to which Grantors have granted to Collateral  Agent, for the benefit of
the Lender Group, a security interest in all their respective Trademarks.

     (bbb) "URL" means "uniform resource locator," an internet web address.

     2. Grant of Security.

     (a) Each  Grantor,  in order to secure  the  prompt  payment  of all of the
Secured   Obligations   (other   than  the  Term   Loan   Obligations),   hereby
unconditionally,  grants,  assigns  and  pledges to  Collateral  Agent,  for the
benefit of the Revolving  Loan Lenders,  Collateral  Agent,  and  Administrative
Agent, a continuing  security  interest in all personal property of such Grantor
whether  now owned or  hereafter  acquired  or  arising  and  wherever  located,
including such  Grantor's  right,  title,  and interest in and to the following,
whether now owned or  hereafter  acquired or arising and  wherever  located (the
"Collateral"):

     (i) all of such Grantor's Accounts;

                                       5
<PAGE>

     (ii) all of such Grantor's Books;

     (iii) all of such Grantor's Chattel Paper;

     (iv) all of such Grantor's interest with respect to any Deposit Account;

     (v) all of such Grantor's Equipment and Fixtures;

     (vi) All of such Grantor's General Intangibles;

     (vii) all of such Grantor's Inventory;

     (viii) all of such Grantor's Investment Related Property;

     (ix) all of such Grantor's Negotiable Collateral;

     (x) all of such Grantor's rights in respect of Supporting Obligations;

     (xi) all of such  Grantor's  interest with respect to any  Commercial  Tort
Claims;

     (xii) all of such  Grantor's  money,  cash and Cash  Equivalents,  or other
assets of each such  Grantor  that now or  hereafter  come into the  possession,
custody, or control of Collateral Agent or any other member of the Lender Group;

     (xiii) all of the proceeds and products, whether tangible or intangible, of
any of the foregoing,  including proceeds of insurance or Commercial Tort Claims
covering or relating to any or all of the  foregoing,  and any and all Accounts,
Books,  Chattel  Paper,  Deposit  Accounts,   Equipment,   General  Intangibles,
Inventory,  Investment  Related  Property,  Negotiable  Collateral,   Supporting
Obligations,  money, or other tangible or intangible property resulting from the
sale, lease, license,  exchange,  collection, or other disposition of any of the
foregoing,  the proceeds of any award in condemnation with respect to any of the
property of Grantors,  any rebates or refunds,  whether for taxes or  otherwise,
and all  proceeds  of any such  proceeds,  or any  portion  thereof or  interest
therein,  and the proceeds thereof,  and all proceeds of any loss of, damage to,
or destruction of the above, whether insured or not insured,  and, to the extent
not otherwise included,  any indemnity,  warranty, or guaranty payable by reason
of  loss or  damage  to,  or  otherwise  with  respect  to any of the  foregoing
Collateral (the  "Proceeds").  Without limiting the generality of the foregoing,
the term "Proceeds"  includes whatever is receivable or received when Investment
Related  Property or  proceeds  are sold,  exchanged,  collected,  or  otherwise
disposed of, whether such disposition is voluntary or involuntary,  and includes
proceeds of any indemnity or guaranty payable to any Grantor or Collateral Agent
from time to time with respect to any of the Investment Related Property.

Anything contained in this Agreement to the contrary  notwithstanding,  the term
"Collateral" (and any defined term used therein) shall not include:

     (A) any contract,  lease,  permit,  license,  charter, or license agreement
covering real or personal property of any Grantor if (x) under the terms of such
contract,  lease, permit, license,  charter, or license agreement, or applicable
law with respect  thereto,  the grant of a security  interest or Lien therein or
collateral assignment of rights,  warranties or interests therein,  requires the
consent of the other party to such contract,  lease, permit, license, charter or
license agreement or is prohibited as a matter of law or under the terms of such
contract,  lease, permit, license,  charter, or license agreement,  and (y) such
prohibition  has not been  waived or the  consent  thereto of the other party to
such contract,  lease,  permit,  license,  charter, or license agreement has not
been obtained; provided, that the foregoing exclusion (1) shall not apply if any
described  prohibition is unenforceable  under Section 9-406, 9-407, or 9-408 of
the Code or other  applicable law, (2) shall not apply when such  prohibition is
no longer in  effect,  and (3) shall not  limit,  impair,  or  otherwise  affect

                                       6
<PAGE>

Collateral Agent's continuing security interests in and Liens upon any rights or
interests  of any  Grantor  in or to (I)  monies  due or to become due under any
described  contract,  lease,  permit,  license,  charter,  or license  agreement
(including any Accounts), or (II) any proceeds from the sale, license, lease, or
other disposition of any such contract,  lease,  permit,  license,  charter,  or
license agreement;

     (B) any property (and any accessions,  fixtures,  and attachments  thereto)
that is purchased or acquired  with  proceeds of, and subject to a Lien in favor
of the provider of, purchase money  Indebtedness  permitted to be incurred under
the  Financing  Agreement  or  Capitalized  Lease  Obligations  permitted  to be
incurred  under the  Financing  Agreement,  to the extent that (x) the  contract
evidencing such purchase money Indebtedness or Capitalized Lease Obligations, as
the case may be,  expressly  prohibits the grant of a security  interest or Lien
(other  than  the  security  interest  or  Lien  securing  such  purchase  money
Indebtedness  or  Capitalized  Lease  Obligations)  on such  property  (and  any
accessions, fixtures, and attachments thereto), and (y) such prohibition has not
been waived or the consent of the provider of such purchase  money  Indebtedness
or  Capitalized  Lease  Obligations  has not been obtained;  provided,  that the
foregoing  exclusion (1) shall not apply when such  prohibition  is no longer in
effect,  and (2) shall not limit,  impair,  or otherwise  affect the  Collateral
Agent's continuing  security interests in and Liens upon any rights or interests
of any Grantor in or to any proceeds,  substitutions,  or  replacements  of such
goods (and any accessions, fixtures, and attachments thereto), to the extent not
covered,  or to the extent  permitted  if  covered,  by the Lien  securing  such
purchase money Indebtedness or Capitalized Lease Obligations;

     (C) any "intent to use" trademark or service mark application  contained in
General  Intangibles  if  granting  a  security  interest  therein  is deemed to
invalidate,  void,  cancel,  or abandon  such  application;  provided,  that the
foregoing exclusion (x) shall not apply when the granting of a security interest
in such application is no longer deemed to invalidate,  void, cancel, or abandon
such  application,  and  (y)  shall  not  limit,  impair,  or  otherwise  affect
Collateral Agent's continuing security interests in and Liens upon any rights or
interests of any Grantor in or to any proceeds from the sale, license, lease, or
other dispositions of any such application;

     (D) voting  Capital  Stock of any  Subsidiary  of a Grantor  that is a CFC,
solely to the extent that (x) such Capital Stock represents more than 65% of the
outstanding voting Capital Stock of such Subsidiary,  and (y) hypothecating more
than 65% of the total outstanding  voting Capital Stock of such Subsidiary could
reasonably be expected to result in material adverse tax consequences; provided,
that (1) immediately  upon the amendment of the IRC to allow for the pledge of a
greater  percentage of voting Capital Stock in such Subsidiary  without material
adverse tax consequences,  such pledge shall include such greater  percentage of
voting Stock of such  Subsidiary  from that time forward,  and (2) the foregoing
exclusion  shall in no way be construed to limit,  impair,  or otherwise  affect
Agent's continuing  security interests in and Liens upon any rights or interests
of any Grantor in or to any proceeds from the sale or other  disposition  of any
such Capital Stock; or

     (E) any  Deposit  Accounts  (and the  funds on  deposit  from  time to time
therein) that are zero balance  employee  benefit,  payroll,  fiduciary or trust
accounts; or

     (F) Motor Vehicles.

     (b) Each  Grantor,  in order to secure  the  prompt  payment  of all of the
Secured  Obligations (other than the Revolving Loan Obligations),  hereby grants
to Collateral Agent, for the benefit of the Term Loan Lenders, Collateral Agent,
and  Administrative  Agent,  a  continuing  security  interest  in all  personal
property of such Grantor whether now owned or hereafter  acquired or arising and
wherever located,  including such Grantor's right, title, and interest in and to
the Collateral,  whether now owned or hereafter acquired or arising and wherever
located.

     (c) This Agreement secures the payment of all amounts which constitute part
of the Secured  Obligations  and would be owed by Grantors,  or any of them,  to
Collateral  Agent,  the Lender Group, or any of them, but for the fact that they

                                       7
<PAGE>

are  unenforceable  or  not  allowable  due to the  existence  of an  Insolvency
Proceeding involving any Grantor.

     3. Grantors Remain Liable. Anything herein to the contrary notwithstanding,
(a) each of the Grantors  shall remain liable under the contracts and agreements
included  in  the  Collateral  to  perform  all of the  duties  and  obligations
thereunder to the same extent as if this  Agreement had not been  executed,  (b)
the exercise by Collateral  Agent or any other member of the Lender Group of any
of the rights  hereunder shall not release any Grantor from any of its duties or
obligations under such contracts and agreements included in the Collateral,  and
(c) none of the  members  of the  Lender  Group  shall  have any  obligation  or
liability  under such  contracts and  agreements  included in the  Collateral by
reason of this  Agreement,  nor shall any of the members of the Lender  Group be
obligated to perform any of the obligations or duties of any Grantors thereunder
or to take any  action to  collect or  enforce  any claim for  payment  assigned
hereunder.  Until an Event of Default shall occur and be  continuing,  except as
otherwise  provided in this Agreement,  the Financing  Agreement,  or other Loan
Documents,  Grantors  shall have the right to  possession  and  enjoyment of the
Collateral for the purpose of conducting the ordinary course of their respective
businesses,  subject to and upon the terms hereof and of the Financing Agreement
and the other Loan Documents.  Without limiting the generality of the foregoing,
it is the intention of the parties hereto that record and  beneficial  ownership
of the Pledged Interests, including all voting, consensual, and dividend rights,
shall  remain in the  applicable  Grantor  until the  occurrence  of an Event of
Default  and until  Collateral  Agent  shall  notify the  applicable  Grantor of
Collateral  Agent's  exercise of voting,  consensual,  or  dividend  rights with
respect to the Pledged Interests pursuant to Section 15 hereof.

     4.  Representations  and  Warranties.  Each Grantor  hereby  represents and
warrants as follows:

     (a) As of the Effective  Date, the exact legal name of each of the Grantors
is set forth on the signature pages of this Agreement.

     (b)  Schedule  6.01(o)  of the  Financing  Agreement  sets  forth  all Real
Property owned by Grantors as of the Effective Date.

     (c) As of the Effective  Date, no Grantor has any interest in, or title to,
any registered Copyrights,  Intellectual Property Licenses, material Patents, or
material  Trademarks  except as set forth on Schedule  6.01(w) of the  Financing
Agreement.  This Agreement is effective to create a valid and continuing Lien on
such United States Copyrights,  Intellectual  Property  Licenses,  United States
Patents and United States Trademarks and, upon filing of the Copyright  Security
Agreement  with the  United  States  Copyright  Office  and filing of the Patent
Security  Agreement and the Trademark  Security Agreement with the United States
Patent and Trademark Office, and the filing of appropriate  financing statements
in the  jurisdictions  listed on  Schedule  3 hereto,  all action  necessary  or
desirable to protect and perfect the Collateral  Agent's Liens on each Grantor's
United States Patents, United States Trademarks, or United States Copyrights has
been taken and such perfected  Liens are  enforceable as such as against any and
all creditors of and purchasers from any Grantor.

     (d)  This  Agreement  creates  a valid  security  interest  in favor of the
Collateral Agent, for the benefit of the Lender Group, in the Collateral of each
of Grantors,  to the extent a security interest therein can be created under the
Code,  securing the payment of the Secured  Obligations.  Except to the extent a
security  interest  in the  Collateral  cannot be  perfected  by the filing of a
financing  statement under the Code, all filings and other actions  necessary or
desirable to perfect and protect such security  interest have been duly taken or
will have been  taken  upon the  filing of  financing  statements  listing  each
applicable  Grantor, as a debtor, and Collateral Agent, as secured party, in the
jurisdictions  listed next to such Grantor's name on Schedule 3 attached hereto.
Upon the making of such filings,  Collateral  Agent shall have a first  priority
(subject to Permitted  Liens) perfected  security  interest in the Collateral of
each Grantor to the extent such security interest can be perfected by the filing
of a financing statement.

                                       8
<PAGE>

     (e) (i) Except for the Liens  created  hereby,  each Grantor is and will at
all times be, subject to the right to dispose of the same in accordance with the
terms of the  Financing  Agreement,  the sole holder of record and the legal and
beneficial owner, free and clear of all Liens other than Permitted Liens, of the
Pledged  Interests  indicated  on Schedule 2 as being owned by such Grantor and,
when  acquired  by such  Grantor,  any  Pledged  Interests  acquired  after  the
Effective Date; (ii) all of the Pledged  Interests are duly authorized,  validly
issued,  fully paid and nonassessable  and the Pledged  Interests  constitute or
will  constitute the percentage of the issued and  outstanding  Capital Stock of
the  Pledged  Companies  of such  Grantor  identified  on  Schedule  2 hereto as
supplemented or modified by any Pledged Interests  Addendum or any Supplement to
this  Agreement;  (iii) such  Grantor has the right and  requisite  authority to
pledge,  the Investment  Related  Property pledged by such Grantor to Collateral
Agent as provided  herein;  (iv) all actions  necessary or desirable to perfect,
establish  the first  priority  (subject to  Permitted  Liens) of, or  otherwise
protect,  Collateral Agent's Liens in the Investment Related Collateral, and the
proceeds  thereof,  have been duly taken, (A) upon the execution and delivery of
this  Agreement;  (B) upon the taking of possession  by Collateral  Agent of any
certificates  constituting  the Pledged  Interests,  to the extent such  Pledged
Interests are represented by certificates, together with undated powers endorsed
in blank by the applicable Grantor;  (C) upon the filing of financing statements
in the applicable  jurisdiction set forth on Schedule 3 attached hereto for such
Grantor  with  respect to the Pledged  Interests  of such  Grantor  that are not
represented by certificates, and/or (D) with respect to any Securities Accounts,
upon the  delivery of Control  Agreements  with respect  thereto;  and (iv) each
Grantor has delivered to and deposited with  Collateral  Agent (or, with respect
to any Pledged  Interests  created or obtained  after the Effective  Date,  will
deliver and deposit in accordance with Sections 6 and 8 hereof) all certificates
representing  the  Pledged  Interests  owned by such  Grantor to the extent such
Pledged  Interests are represented by certificates,  and undated powers endorsed
in blank with respect to such certificates.  None of the Pledged Interests owned
or held by such  Grantor  has been issued or  transferred  in  violation  of any
securities   registration,   securities   disclosure  or  similar  laws  of  any
jurisdiction to which such issuance or transfer may be subject.

     (f) No consent, approval, authorization, or other order or other action by,
and no notice to or filing with, any Governmental  Authority or any other Person
is  required  (i) for the  grant  of a Lien by such  Grantor  on the  Collateral
pursuant to this  Agreement or for the  execution,  delivery,  or performance of
this  Agreement by such Grantor except (x) as have been obtained or made and are
in full force and effect,  (y) filings  necessary  to perfect the Liens  created
hereby,  and (z) those the failure to obtain,  individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect, or (ii)
for the exercise by Collateral  Agent of the voting or other rights provided for
in this  Agreement  with  respect  to the  Investment  Related  Property  or the
remedies in respect of the Collateral pursuant to this Agreement,  except as may
be required in connection with such  disposition of Investment  Related Property
by laws affecting the offering and sale of securities generally.

     5. [Intentionally Omitted]

     6.  Covenants.  Each Grantor,  jointly and severally,  covenants and agrees
with Collateral  Agent and the Lender Group that from and after the date of this
Agreement and until the date of termination of this Agreement in accordance with
Section 22 hereof:

     (a) Possession of Collateral.  In the event that any Collateral,  including
proceeds,  is  evidenced  by or consists of  Negotiable  Collateral,  Investment
Related Property,  or Chattel Paper, and if and to the extent that perfection or
priority of Collateral  Agent's Liens is dependent on or enhanced by possession,
the applicable Grantor,  immediately upon the request of Collateral Agent and in
accordance  with  Section 8 hereof,  shall  execute  such  other  documents  and
instruments as shall be requested by Collateral Agent or, if applicable (subject
to any  limitations on delivery set forth in any other subclause of this Section
6),  endorse and deliver  physical  possession  of such  Negotiable  Collateral,
Investment Related Property, or Chattel Paper to Collateral Agent, together with
such undated powers endorsed in blank as shall be requested by Collateral Agent;

                                       9
<PAGE>

     (b) Chattel Paper.

     (i)  Each  Grantor  shall  take all  steps  reasonably  necessary  to grant
Collateral Agent control of all electronic  Chattel Paper in accordance with the
Code and all "transferable records" as that term is defined in Section 16 of the
Uniform  Electronic  Transaction  Act and Section 201 of the federal  Electronic
Signatures  in Global and  National  Commerce  Act as in effect in any  relevant
jurisdiction;  provided  that  Grantors  shall have no obligation to comply with
this Section  6(b)(i) until the aggregate  value of electronic  Chattel Paper in
which Grantors have an interest exceeds $50,000;

     (ii) If any Grantor retains  possession of any Chattel Paper or instruments
(which  retention of possession  shall be subject to the extent permitted hereby
and by the Financing Agreement),  promptly upon the request of Collateral Agent,
such Chattel Paper and  instruments  shall be marked with the following  legend:
"This writing and the obligations evidenced or secured hereby are subject to the
Liens of Ableco  Finance LLC, as Collateral  Agent for the benefit of the Lender
Group ";  provided  that  Grantors  shall have no obligation to comply with this
Section  6(b)(ii) or to deliver Chattel Paper or instruments to Collateral Agent
until the aggregate value of Chattel Paper or instruments in which Grantors have
an interest exceeds $50,000;

     (c) Control Agreements.

     (i) Except to the extent  otherwise  permitted by the Financing  Agreement,
each Grantor shall obtain an  authenticated  Control  Agreement,  from each bank
holding a Deposit Account for such Grantor;

     (ii) Except to the extent otherwise  permitted by the Financing  Agreement,
each Grantor shall obtain authenticated Control Agreements,  from each issuer of
uncertificated securities,  securities intermediary, or commodities intermediary
issuing or holding any financial assets or commodities to or for any Grantor;

     provided  that  anything to the contrary  contained  herein or in the other
Loan  Documents  notwithstanding,  (A) the  Grantors  need not  deliver  Control
Agreements  with  respect to Deposit  Accounts of the type  described in Section
2(a)(E);  (B) the  Grantors  need not  deliver  Control  Agreements  for Deposit
Accounts of any  Grantor  maintained  as of the date hereof in any  jurisdiction
other  than the  United  States  (or any  state or other  political  subdivision
thereof) other than (x) the Deposit Account of the German Guarantor with account
number 396695900 located at Deutsche Bank; and (y) the Deposit Account(s) of the
Canadian Guarantor with account numbers 1029263 and 4006433 located at the Royal
Bank  of  Canada  (the  "RBC  Operating  Accounts");  (B)  with  respect  to the
Securities  Account with account number 2583439844 located at Merrill Lynch, the
Collateral  Agent shall not give any  instructions  directing the disposition of
funds from time to time  credited  to such  account or withhold  any  withdrawal
rights from such Grantor  with respect to such funds from time to time  credited
to such Securities  Account or give any notice of sole or exclusive control over
such  Securities  Account  unless an Event of Default shall have occurred and be
continuing;  (C) with respect to the RBC Operating Accounts, all funds in excess
of  $3,000,000  therein  shall be sent by wire  transfer or  Automated  Clearing
House,  Inc. payment to the Payment Office to be credited to the  Administrative
Agent's  Account for  application  at the end of each Business Day to reduce the
then principal balance of the Revolving Loans, conditional upon final payment to
the Administrative Agent.

     (d)  Letter  of  Credit  Rights.  Each  Grantor  that  is  or  becomes  the
beneficiary  of a letter of credit  shall  promptly  (and in any event within 15
days after becoming a beneficiary),  notify  Collateral  Agent thereof and, upon
the reasonable  request by Collateral  Agent,  use its  commercially  reasonable
efforts to into a tri-party  agreement with  Collateral  Agent and the issuer or
confirmation  bank with  respect  to  letter-of-credit  rights  (as that term is
defined in the Code) assigning such letter-of-credit  rights to Collateral Agent
and directing all payments thereunder to Collateral Agent's Account, all in form
and substance  reasonably  satisfactory  to Collateral  Agent;  provided that no

                                       10
<PAGE>

Grantors  shall have no  obligation  to comply with this  Section 6(d) until the
aggregate  face  amount of all  letters  of credit  for which any  Grantor is or
becomes a beneficiary of exceeds $50,000;

     (e) Commercial  Tort Claims.  Each Grantor shall promptly (and in any event
within 15 days of receipt  thereof),  notify  Collateral  Agent in writing  upon
incurring or otherwise  obtaining a Commercial  Tort Claim  involving a claim in
excess of  $250,000  after the date hereof  against  any third  party and,  upon
request of  Collateral  Agent,  promptly  amend  Schedule  1 to this  Agreement,
authorize  the  filing of  additional  financing  statements  or  amendments  to
existing financing  statements and do such other acts or things deemed necessary
or desirable  by  Collateral  Agent to give  Collateral  Agent a first  priority
(subject to Permitted Liens), perfected security interest in any such Commercial
Tort Claim;

     (f) Government  Contracts.  If any Account or Chattel Paper arises out of a
contract  or  contracts  with the United  States of  America or any  department,
agency, or  instrumentality  thereof,  Grantors shall promptly (and in any event
within 15 days of the  creation  thereof)  notify  Collateral  Agent  thereof in
writing and execute any  instruments  or take any steps  reasonably  required by
Collateral  Agent in order  that all  moneys  due or to become  due  under  such
contract or contracts shall be assigned to Collateral  Agent, for the benefit of
the Lender Group, and notice thereof given under the Assignment of Claims Act or
other  applicable  law;  provided that Grantors  shall not be required to comply
with this  Section 6(f) with  respect to any  contract if the  aggregate  annual
revenue  arising  thereunder  during the most recently  ended Fiscal Year of the
Parent was less than $50,000;

     (g) Intellectual Property.

     (i) Upon the reasonable request of Collateral Agent, in order to facilitate
filings with the United States Patent and Trademark Office and the United States
Copyright Office, each Grantor shall execute and deliver to Collateral Agent one
or more Copyright Security Agreements,  Trademark Security Agreements, or Patent
Security  Agreements  to  evidence  Collateral  Agent's  Lien on such  Grantor's
Patents,  Trademarks, or Copyrights, and the General Intangibles of such Grantor
relating thereto or represented thereby;

     (ii)  Each  Grantor  shall  have  the  duty,  to the  extent  necessary  or
economically  desirable in the  operation  of such  Grantor's  business,  (A) to
promptly sue for infringement,  misappropriation, or dilution and to recover any
and all damages for such  infringement,  misappropriation,  or dilution,  (B) to
prosecute diligently any trademark  application or service mark application that
is part of the  material  Trademarks  pending as of the date hereof or hereafter
until the termination of this Agreement,  (C) to prosecute diligently any patent
application  that is part of the material  Patents pending as of the date hereof
or  hereafter  until  the  termination  of this  Agreement,  and (D) to take all
reasonable  and necessary  action to preserve and maintain all of such Grantor's
material Copyrights,  Intellectual Property Licenses,  material Trademarks,  and
material Patents,  and its rights therein,  including the filing of applications
for renewal,  affidavits of use, affidavits of noncontestability  and opposition
and  interference  and  cancellation  proceedings.   Any  expenses  incurred  in
connection  with the  foregoing  shall be borne by the  appropriate  Grantor  in
accordance with Section 12.04 of the Financing  Agreement.  Each Grantor further
agrees not to abandon any Trademark, Patent, Copyright, or Intellectual Property
License  that is necessary or  economically  desirable in the  operation of such
Grantor's business without the prior written consent of Collateral Agent;

     (iii)  Grantors  acknowledge  and agree that the Lender Group shall have no
duties with respect to the  Trademarks,  Patents,  Copyrights,  or  Intellectual
Property  Licenses.  Without  limiting  the  generality  of this  Section  6(g),
Grantors acknowledge and agree that no member of the Lender Group shall be under
any obligation to take any steps necessary to preserve rights in the Trademarks,
Patents, Copyrights, or Intellectual Property Licenses against any other Person,
but any  member of the Lender  Group may do so at its option  from and after the

                                       11
<PAGE>

occurrence and during the  continuance of an Event of Default,  and all expenses
incurred in  connection  therewith  (including  reasonable  fees and expenses of
attorneys and other professionals) shall be for the sole account of Borrower and
shall  be  chargeable  to the  Loan  Account  pursuant  to  Section  4.02 of the
Financing Agreement;

     (iv) In no event shall such  Grantor,  either  itself or through any agent,
employee, licensee, or designee, file an application for the registration of any
Copyright with the United States  Copyright  Office  without  giving  Collateral
Agent prior written  notice  thereof or any Patent or Trademark  with the United
States Patent and  Trademark  Office  without  giving  Collateral  Agent written
notice thereof promptly thereafter.  Promptly upon any such filing, each Grantor
shall comply with Section 6(g)(i) hereof;

     (h) Investment Related Property.

     (i) If any Grantor shall receive or become  entitled to receive any Pledged
Interests  after the Effective  Date, it shall promptly (and in any event within
15 days of receipt  thereof) deliver to Collateral Agent a duly executed Pledged
Interests Addendum identifying such Pledged Interests;

     (ii) All sums of money and property paid or  distributed  in respect of the
Investment  Related  Property which are received by any Grantor shall be held by
the Grantors in trust for the benefit of Collateral  Agent  segregated from such
Grantor's  other  property,  and such  Grantor  shall  deliver it  forthwith  to
Collateral Agent in the exact form received;

     (iii) [intentionally omitted];

     (iv) Such  Grantor  shall not make or  consent  to any  amendment  or other
modification or waiver with respect to any Pledged Interests,  Pledged Operating
Agreement,  or Pledged  Partnership  Agreement,  or enter into any  agreement or
permit to exist any restriction with respect to any Pledged  Interests,  in each
case, that would materially  adversely affect the rights of Collateral Agent and
the other members of the Lender Group or the value of the applicable  Collateral
other than pursuant to the Loan Documents;

     (v) Each Grantor agrees that it will use  commercially  reasonable  efforts
upon the reasonable  request of the Collateral  Agent in obtaining all necessary
approvals  and making all necessary  filings under  federal,  state,  local,  or
foreign law in connection  with the  Collateral  Agent's Liens on the Investment
Related Property or any sale or transfer thereof;

     (vi) As to all limited liability company or partnership  interests,  issued
under any Pledged Operating  Agreement or Pledged  Partnership  Agreement,  each
Grantor hereby  represents,  warrants and covenants  that the Pledged  Interests
issued  pursuant  to such  agreement  (A) are not and  shall  not be dealt in or
traded on securities exchanges or in securities markets, (B) do not and will not
constitute  investment company securities,  and (C) are not and will not be held
by such Grantor in a securities  account  unless  simultaneously  therewith  the
securities  intermediary  and such Grantor  shall have  executed and delivered a
Control  Agreement in favor of the Collateral  Agent.  In addition,  none of the
Pledged Operating Agreements,  the Pledged Partnership Agreements,  or any other
agreements  governing  any of the  Pledged  Interests  issued  under any Pledged
Operating Agreement or Pledged Partnership  Agreement,  provide or shall provide
that such Pledged Interests are securities  governed by Article 8 of the Uniform
Commercial Code as in effect in any relevant jurisdiction;

     (i) [Intentionally Omitted];

     (j) [Intentionally Omitted]; and

     (k) Other Actions as to Any and All Collateral. Each Grantor shall promptly
(and in any event  within 15 days of acquiring  or  obtaining  such  Collateral)
notify Collateral Agent in writing upon (i) acquiring or otherwise obtaining any
Collateral after the date hereof consisting of Trademarks,  Patents, Copyrights,
Intellectual  Property  Licenses,  Investment  Related  Property,  Chattel Paper
(electronic,  tangible or otherwise),  documents (as defined in Article 9 of the

                                       12
<PAGE>

Code),  promissory notes (as defined in the Code), or instruments (as defined in
the  Code),  or (ii)  any  amount  in  excess  of  $50,000  payable  under or in
connection with any of the Collateral being or becoming evidenced after the date
hereof by any Chattel Paper, documents,  promissory notes, or instruments,  and,
in each such case upon the  request of Agent and in  accordance  with  Section 8
hereof,  promptly execute such other documents,  or if applicable,  deliver such
Chattel Paper,  other documents,  promissory notes, or instruments in accordance
with  Section 6 hereof,  or do such other  acts or things  deemed  necessary  or
desirable by Collateral Agent to protect Collateral Agent's Liens therein.

     7. Relation to Other Security  Documents.  The provisions of this Agreement
shall be read and construed with the other Loan  Documents  referred to below in
the manner so indicated.

     (a) Financing Agreement. In the event of any conflict between any provision
in this Agreement and a provision in the Financing Agreement,  such provision of
the Financing Agreement shall control.

     (b) Patent, Trademark, Copyright Security Agreements. The provisions of the
Copyright  Security  Agreements,   Trademark  Security  Agreements,  and  Patent
Security  Agreements are  supplemental to the provisions of this Agreement,  and
nothing  contained in the  Copyright  Security  Agreements,  Trademark  Security
Agreements,  or the Patent Security  Agreements shall limit any of the rights or
remedies of Collateral Agent hereunder.

     8. Further Assurances.

     (a) Each Grantor  agrees that from time to time,  at its own expense,  such
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action,  that may be necessary or that Collateral Agent may
reasonably  request,  in order to perfect and protect  Collateral  Agent's Liens
granted or  purported  to be  granted  hereby or to enable  Collateral  Agent to
exercise  and enforce its rights and remedies  hereunder  with respect to any of
the Collateral.

     (b)  Each  Grantor  authorizes  the  filing  by  Collateral  Agent  of such
financing or continuation  statements,  or amendments thereto,  and such Grantor
will execute and deliver to Collateral Agent such other  instruments or notices,
as may be necessary or as Collateral Agent may reasonably  request,  in order to
perfect and preserve the Liens granted or purported to be granted hereby.

     (c) Each Grantor  authorizes  Collateral Agent at any time and from time to
time to file, transmit, or communicate, as applicable,  financing statements and
amendments (i) describing the Collateral as "all personal property of debtor" or
"all  assets  of  debtor"  or words  of  similar  effect,  (ii)  describing  the
Collateral  as being of equal or lesser scope or with greater  detail,  or (iii)
that contain any information required by part 5 of Article 9 of the Code for the
sufficiency or filing office  acceptance.  Each Grantor also hereby ratifies any
and all financing statements or amendments  previously filed by Collateral Agent
in any jurisdiction.  The Collateral Agent agree to, upon the reasonable request
of the Borrower, furnish copies of such filings to the extent available.

     (d) Each Grantor hereby further authorizes Collateral Agent to make filings
with the United States Patent and  Trademark  Office or United States  Copyright
Office (or any successor  office or any similar  office in any other country) or
other documents for the purpose of perfecting, confirming, continuing, enforcing
or protecting the security interest granted by such Grantor  hereunder,  without
the  signature  of such  Grantor,  and  naming  such  Grantor,  as  debtor,  and
Collateral  Agent,  as secured  party.  Collateral  Agent  agrees  to,  upon the
reasonable request of the Borrower, furnish copies of such filings to the extent
available.

     (e)  Each  Grantor  acknowledges  that it is not  authorized  to  file  any
financing  statement or amendment or  termination  statement with respect to any
financing  statement filed in connection  with this Agreement  without the prior

                                       13
<PAGE>

written  consent of Collateral  Agent,  subject to such  Grantor's  rights under
Section 9-509(d)(2) of the Code.

     9. Collateral Agent's Right to Perform  Contracts.  Upon the occurrence and
during  the  continuance  of an  Event  of  Default,  Collateral  Agent  (or its
designee) may proceed to perform any and all of the  obligations  of any Grantor
contained in any contract,  lease,  or other  agreement and exercise any and all
rights of any Grantor  therein  contained as fully as such Grantor itself could.
The reasonable  expenses of Collateral  Agent  incurred in connection  therewith
shall be payable, jointly and severally, by Grantors.

     10.  Collateral  Agent  Appointed  Attorney-in-Fact.  Each  Grantor  hereby
irrevocably appoints Collateral Agent its attorney-in-fact,  with full authority
in the  place  and  stead of such  Grantor  and in the name of such  Grantor  or
otherwise,  at such time as an Event of Default has occurred  and is  continuing
under the Financing Agreement,  to take any action and to execute any instrument
which  Collateral Agent may reasonably deem necessary or advisable to accomplish
the purposes of this Agreement, including:

     (a) to ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in connection
with the Accounts or any other Collateral of such Grantor;

     (b) to receive and open all mail  addressed  to such  Grantor and to notify
postal  authorities  to change  the  address  for the  delivery  of mail to such
Grantor to that of Collateral Agent;

     (c) to  receive,  indorse,  and  collect  any drafts or other  instruments,
documents, Negotiable Collateral or Chattel Paper;

     (d) to file any  claims or take any  action or  institute  any  proceedings
which Collateral Agent may deem necessary or desirable for the collection of any
of the  Collateral  of such  Grantor  or  otherwise  to  enforce  the  rights of
Collateral Agent with respect to any of the Collateral;

     (e) to repair,  alter,  or supply  goods,  if any,  necessary to fulfill in
whole or in part the purchase  order of any Person  obligated to such Grantor in
respect of any Account of such Grantor;

     (f)  subject  to  pre-existing  rights  and  licenses,  to use any  labels,
Patents,  Trademarks,  trade names,  URLs,  domain  names,  industrial  designs,
Copyrights,  advertising  matter or other  industrial or  intellectual  property
rights, in advertising for sale and selling Inventory and other Collateral; and

     (g) subject to pre-existing rights and licenses, Collateral Agent on behalf
of the Lender Group shall have the right,  but shall not be obligated,  to bring
suit  in its  own  name to  enforce  the  Trademarks,  Patents,  Copyrights  and
Intellectual  Property Licenses and, if Collateral Agent shall commence any such
suit, the appropriate  Grantor shall, at the request of Collateral Agent, do any
and all lawful acts and execute any and all proper documents reasonably required
by Collateral Agent in aid of such enforcement.

     To the extent  permitted by law, each Grantor hereby ratifies all that such
attorney-in-fact  shall lawfully do or cause to be done by virtue  hereof.  This
power of attorney is coupled  with an interest  and shall be  irrevocable  until
this Agreement is terminated.

     11.  Collateral Agent May Perform.  If any of Grantors fails to perform any
agreement  contained  herein,  Collateral  Agent may  itself  perform,  or cause
performance of, such agreement,  and the reasonable expenses of Collateral Agent
incurred in connection  therewith  shall be payable,  jointly and severally,  by
Grantors.

     12.  Collateral  Agent's Duties.  The powers  conferred on Collateral Agent
hereunder are solely to protect  Collateral  Agent's interest in the Collateral,
for the  benefit  of the  Lender  Group,  and  shall  not  impose  any duty upon
Collateral Agent to exercise any such powers. Except for the safe custody of any

                                       14
<PAGE>

Collateral  in its actual  possession  and the  accounting  for moneys  actually
received  by it  hereunder,  Collateral  Agent  shall  have  no  duty  as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. Collateral Agent
shall  be  deemed  to  have  exercised   reasonable  care  in  the  custody  and
preservation  of any Collateral in its actual  possession if such  Collateral is
accorded  treatment  substantially  equal to that which Collateral Agent accords
its own property.

     13. Collection of Accounts,  General Intangibles and Negotiable Collateral.
At any time upon the  occurrence  and  during  the  continuation  of an Event of
Default,  Collateral Agent or Collateral Agent's designee may (a) notify Account
Debtors of any Grantor that the Accounts, General Intangibles,  Chattel Paper or
Negotiable Collateral have been assigned to Collateral Agent, for the benefit of
the Lender Group, or that Collateral Agent has a security interest therein,  and
(b)  collect  the  Accounts,   General  Intangibles  and  Negotiable  Collateral
directly,  and any collection  costs and expenses shall  constitute part of such
Grantor's Secured Obligations under the Loan Documents.

     14.  Disposition  of Pledged  Interests by  Collateral  Agent.  None of the
Pledged Interests existing as of the date of this Agreement are, and none of the
Pledged Interests hereafter acquired on the date of acquisition thereof will be,
registered or qualified  under the various  federal or state  securities laws of
the  United  States and  disposition  thereof  after an Event of Default  may be
restricted to one or more private  (instead of public) sales in view of the lack
of such  registration.  Each Grantor  understands  that in connection  with such
disposition, Collateral Agent may approach only a restricted number of potential
purchasers  and further  understands  that a sale under such  circumstances  may
yield a lower price for the Pledged Interests than if the Pledged Interests were
registered and qualified  pursuant to federal and state securities laws and sold
on the open market.  Each  Grantor,  therefore,  agrees that:  (a) if Collateral
Agent shall, pursuant to the terms of this Agreement,  sell or cause the Pledged
Interests or any portion thereof to be sold at a private sale,  Collateral Agent
shall  have the right to rely upon the  advice  and  opinion  of any  nationally
recognized brokerage or investment firm (but shall not be obligated to seek such
advice  and the  failure to do so shall not be  considered  in  determining  the
commercial  reasonableness  of such  action)  as to the best  manner in which to
offer the Pledged  Interest  or any portion  thereof for sale and as to the best
price reasonably  obtainable at the private sale thereof;  and (b) such reliance
shall be conclusive  evidence that Collateral  Agent has handled the disposition
in a commercially reasonable manner.

     15. Voting Rights.

     (a) Upon the occurrence and during the continuation of an Event of Default,
(i) Collateral  Agent may, at its option,  and with 2 Business Days prior notice
to any  Grantor,  and in  addition  to all  rights  and  remedies  available  to
Collateral  Agent under any other  agreement,  at law, in equity,  or otherwise,
exercise all voting  rights,  and all other  ownership or  consensual  rights in
respect  of  the  Pledged  Interests  owned  by  such  Grantor,   but  under  no
circumstances  is Collateral  Agent  obligated by the terms of this Agreement to
exercise such rights,  and (ii) if Collateral  Agent duly exercises its right to
vote any of such Pledged  Interests,  each Grantor  hereby  appoints  Collateral
Agent, such Grantor's true and lawful  attorney-in-fact and IRREVOCABLE PROXY to
vote such Pledged  Interests in any manner  Collateral Agent deems advisable for
or  against  all  matters  submitted  or  which  may be  submitted  to a vote of
shareholders,  partners  or members,  as the case may be. The  power-of-attorney
granted hereby is coupled with an interest and shall be  irrevocable  until this
Agreement is terminated.

     (b) For so long as any  Grantor  shall  have the right to vote the  Pledged
Interests  owned by it,  such  Grantor  covenants  and agrees  that it will not,
without  the  prior  written  consent  of  Collateral  Agent,  vote or take  any
consensual  action with respect to such Pledged Interests which would materially
adversely  affect the rights of  Collateral  Agent and the other  members of the
Lender Group, the value of the Pledged Interests,  or that would be inconsistent
with or result in any violation of any  provision of the Financing  Agreement or
any other Loan Document.

                                       15
<PAGE>

     16. Remedies. Upon the occurrence and during the continuance of an Event of
Default:

     (a) Collateral Agent may exercise in respect of the Collateral, in addition
to other rights and remedies  provided for herein,  in the other Loan Documents,
or otherwise  available to it, all the rights and remedies of a secured party on
default  under  the Code or any  other  applicable  law.  Without  limiting  the
generality of the  foregoing,  each Grantor  expressly  agrees that, in any such
event,   Collateral  Agent  without  demand  of  performance  or  other  demand,
advertisement or notice of any kind (except a notice specified below of time and
place of public or private  sale) to or upon any of Grantors or any other Person
(all and each of which demands,  advertisements and notices are hereby expressly
waived to the maximum extent permitted by the Code or any other applicable law),
may take  immediate  possession of all or any portion of the  Collateral and (i)
require  Grantors  to, and each  Grantor  hereby  agrees that it will at its own
expense and upon request of Collateral Agent forthwith,  assemble all or part of
the  Collateral  as  directed  by  Collateral  Agent  and make it  available  to
Collateral Agent at one or more locations where such Grantor regularly maintains
Inventory,  and  (ii)  without  notice  except  as  specified  below,  sell  the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Collateral Agent's offices or elsewhere, for cash, on credit, and upon
such other terms as  Collateral  Agent may deem  commercially  reasonable.  Each
Grantor  agrees that,  to the extent notice of sale shall be required by law, at
least 10 days notice to any of Grantors of the time and place of any public sale
or the  time  after  which  any  private  sale  is to be made  shall  constitute
reasonable   notification  and  specifically  such  notice  shall  constitute  a
reasonable  "authenticated  notification of  disposition"  within the meaning of
Section 9-611 of the Code.  Collateral  Agent shall not be obligated to make any
sale of Collateral  regardless  of notice of sale having been given.  Collateral
Agent may adjourn any public or private  sale from time to time by  announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.

     (b) Subject to  pre-existing  rights and licenses that are permitted  under
the Financing  Agreement,  Collateral  Agent is hereby  granted a  non-exclusive
license or other right to use,  without  liability  for  royalties  or any other
charge, each Grantor's labels, Patents,  Copyrights,  rights of use of any name,
trade secrets,  trade names,  Trademarks,  service marks and advertising matter,
URLs,  domain  names,  industrial  designs,  other  industrial  or  intellectual
property or any property of a similar  nature,  whether owned by any of Grantors
or with respect to which any of Grantors have rights under license,  sublicense,
or other  agreements,  as it pertains to the Collateral,  in preparing for sale,
advertising for sale and selling any Collateral, and each Grantor's rights under
all  licenses  and all  franchise  agreements  shall  inure  to the  benefit  of
Collateral Agent.

     (c) Any cash held by Collateral  Agent as Collateral  and all cash proceeds
received by  Collateral  Agent in respect of any sale of,  collection  from,  or
other  realization  upon all or any  part of the  Collateral  shall  be  applied
against  the  Secured  Obligations  in the  order  set  forth  in the  Financing
Agreement.  In the event the proceeds of Collateral are  insufficient to satisfy
all of the Secured  Obligations  in full,  each Grantor shall remain jointly and
severally liable for any such deficiency.

     (d) Each Grantor hereby acknowledges that the Secured Obligations arose out
of a commercial transaction,  and agrees that if an Event of Default shall occur
and be continuing  Collateral Agent shall have the right to an immediate writ of
possession without notice of a hearing. Collateral Agent shall have the right to
the appointment of a receiver for the properties and assets of each of Grantors,
and each Grantor hereby consents to such rights and such  appointment and hereby
waives any objection  such Grantors may have thereto or the right to have a bond
or other security posted by Collateral Agent.

     17. Remedies Cumulative.  Each right, power, and remedy of Collateral Agent
as  provided  for in this  Agreement  or in the other Loan  Documents  or now or
hereafter  existing  at law or in equity or by  statute  or  otherwise  shall be
cumulative and concurrent and shall be in addition to every other right,  power,
or remedy  provided for in this  Agreement or in the other Loan Documents or now
or hereafter  existing at law or in equity or by statute or  otherwise,  and the
exercise or beginning of the exercise by Collateral Agent, of any one or more of
such rights,  powers,  or remedies shall not preclude the  simultaneous or later
exercise  by  Collateral  Agent  of any or all such  other  rights,  powers,  or
remedies.

                                       16
<PAGE>

     18.  Marshaling.  Collateral  Agent  shall not be  required  to marshal any
present  or  future  collateral  security  (including  but  not  limited  to the
Collateral) for, or other  assurances of payment of, the Secured  Obligations or
any of them or to resort to such  collateral  security  or other  assurances  of
payment in any particular  order,  and all of its rights and remedies  hereunder
and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights and remedies, however existing
or arising.  To the extent that it lawfully may, each Grantor hereby agrees that
it will not invoke any law relating to the marshaling of collateral  which might
cause  delay in or impede  the  enforcement  of  Collateral  Agent's  rights and
remedies  under  this  Agreement  or under  any  other  instrument  creating  or
evidencing  any of the  Secured  Obligations  or under  which any of the Secured
Obligations is outstanding or by which any of the Secured Obligations is secured
or payment  thereof is  otherwise  assured,  and, to the extent that it lawfully
may, each Grantor hereby irrevocably waives the benefits of all such laws.

     19. [Intentionally Omitted]

     20.  Merger,  Amendments;  Etc. THIS WRITTEN  AGREEMENT,  TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE  CONTRADICTED  BY EVIDENCE OF PRIOR,  CONTEMPORANEOUS  OR SUBSEQUENT ORAL
AGREEMENTS  OF THE  PARTIES.  THERE  ARE NO  UNWRITTEN  AGREEMENTS  BETWEEN  THE
PARTIES.  No waiver of any  provision of this  Agreement,  and no consent to any
departure by any of Grantors  herefrom,  shall in any event be effective  unless
the same  shall be in  writing  and signed by  Collateral  Agent,  and then such
waiver or consent shall be effective  only in the specific  instance and for the
specific  purpose  for  which  given.  No  amendment  of any  provision  of this
Agreement  shall be effective  unless the same shall be in writing and signed by
Collateral Agent and each of Grantors to which such amendment applies.

     21. Addresses for Notices.  All notices and other  communications  provided
for hereunder  shall be given in the form and manner and delivered to Collateral
Agent at its address specified in Section 12.01 of the Financing Agreement,  and
to any of the Grantors at their respective  addresses specified in the Financing
Agreement or Guaranty, as applicable, or, as to any party, at such other address
as shall be designated by such party in a written notice to the other party.

     22. Continuing  Security Interest:  Assignments under Financing  Agreement.
This Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the  Obligations  have been paid
in full in cash in accordance with the provisions of the Financing Agreement and
the Commitments have expired or have been  terminated,  (b) be binding upon each
of Grantors,  and their respective  successors and assigns, and (c) inure to the
benefit  of,  and be  enforceable  by,  Collateral  Agent,  and its  successors,
transferees  and  permitted  assigns.  Without  limiting the  generality  of the
foregoing  clause (c), any the Lender may, in accordance  with the provisions of
Section 12.07 of the Financing  Agreement,  assign or otherwise  transfer all or
any portion of its rights and obligations  under the Financing  Agreement to any
other Person,  and such other Person shall thereupon  become vested with all the
benefits in respect thereof granted to such the Lender herein or otherwise. Upon
payment in full in cash of the  Obligations in accordance with the provisions of
the Financing  Agreement and the expiration or  termination of the  Commitments,
the Liens granted hereby shall terminate and all rights to the Collateral  shall
revert  to  Grantors  or any  other  Person  entitled  thereto.  At  such  time,
Collateral  Agent will  execute  and  deliver  such  documents  and  termination
statements  to  terminate  such Liens as such  Grantor  reasonably  requests  to
evidence such termination.  No transfer or renewal,  extension,  assignment,  or
termination  of this  Agreement or of the  Financing  Agreement,  any other Loan
Document,  or any other  instrument  or document  executed and  delivered by any
Grantor to Collateral  Agent nor any additional  Advances or other loans made by
any the Lender to Borrower, nor the taking of further security, nor the retaking
or  re-delivery  of the  Collateral  to Grantors,  or any of them, by Collateral
Agent,  nor any other act of the Lender Group, or any of them, shall release any
of  Grantors  from any  obligation,  except a release or  discharge  executed in
writing by Collateral  Agent in accordance  with the provisions of the Financing
Agreement.  Collateral Agent shall not by any act, delay, omission or otherwise,

                                       17
<PAGE>

be deemed to have  waived any of its rights or remedies  hereunder,  unless such
waiver is in writing and signed by Collateral  Agent and then only to the extent
therein set forth.  A waiver by  Collateral  Agent of any right or remedy on any
occasion  shall not be  construed  as a bar to the exercise of any such right or
remedy which Collateral Agent would otherwise have had on any other occasion.

     23. GOVERNING LAW;  CONSENT TO JURISDICTION;  SERVICE OF PROCESS AND VENUE;
WAIVER OF JURY TRIAL, ETC.

     (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY  PROVIDED
TO THE  CONTRARY  IN  ANOTHER  LOAN  DOCUMENT  IN  RESPECT  OF SUCH  OTHER  LOAN
DOCUMENT),  SHALL BE GOVERNED BY, AND CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF
THE STATE OF NEW YORK  APPLICABLE  TO CONTRACTS  MADE AND TO BE PERFORMED IN THE
STATE OF NEW YORK.

     (b) ANY LEGAL ACTION OR  PROCEEDING  WITH RESPECT TO THIS  AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE
COUNTY OF NEW YORK OR OF THE  UNITED  STATES  DISTRICT  COURT  FOR THE  SOUTHERN
DISTRICT OF NEW YORK,  AND, BY EXECUTION  AND DELIVERY OF THIS  AGREEMENT,  EACH
PARTY HERETO HEREBY  IRREVOCABLY  ACCEPTS IN RESPECT OF ITS PROPERTY,  GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO
HEREBY  IRREVOCABLY  CONSENTS  TO THE  SERVICE  OF ANY  AND ALL  LEGAL  PROCESS,
SUMMONS,  NOTICES,  AND DOCUMENTS IN ANY SUIT,  ACTION, OR PROCEEDING BROUGHT IN
THE UNITED STATES OF AMERICA ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE  OTHER  LOAN  DOCUMENTS  BY THE  MAILING  (BY  REGISTERED  MAIL OR
CERTIFIED MAIL, POSTAGE PREPAID) OR DELIVERING OF A COPY OF SUCH PROCESS TO SUCH
PARTY,  AT SUCH PARTY'S ADDRESS FOR NOTICES AS SET FORTH IN SECTION 12.01 OF THE
FINANCING  AGREEMENT.  THE  PARTIES  HERETO  AGREE  THAT A FINAL  NON-APPEALABLE
JUDGMENT  IN ANY  SUCH  ACTION  OR  PROCEEDING  SHALL BE  CONCLUSIVE  AND MAY BE
ENFORCED IN OTHER  JURISDICTIONS  BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED  BY LAW.  NOTHING  HEREIN  SHALL  AFFECT  THE  RIGHT ANY PARTY TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE  PROCEED  AGAINST  SUCH  PARTY IN ANY OTHER  JURISDICTION.  EACH PARTY
HERETO HEREBY EXPRESSLY AND IRREVOCABLY  WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE  JURISDICTION OR
LAYING OF VENUE OF ANY SUCH  LITIGATION  BROUGHT IN ANY SUCH COURT  REFERRED  TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT PARTY HERETO HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM  JURISDICTION  OF ANY  COURT OR FROM ANY  LEGAL  PROCESS  (WHETHER  THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,  ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE)  WITH RESPECT TO ITSELF OR ITS PROPERTY,  EACH PARTY HERETO HEREBY
IRREVOCABLY  WAIVES  SUCH  IMMUNITY  IN  RESPECT OF ITS  OBLIGATIONS  UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.

     (c) EACH  GRANTOR,  EACH AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION,  PROCEEDING OR  COUNTERCLAIM  CONCERNING ANY RIGHTS
UNDER  THIS  AGREEMENT  OR THE OTHER  LOAN  DOCUMENTS,  OR UNDER ANY  AMENDMENT,
WAIVER, CONSENT,  INSTRUMENT,  DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN
THE  FUTURE MAY BE  DELIVERED  IN  CONNECTION  THEREWITH,  OR  ARISING  FROM ANY
FINANCING  RELATIONSHIP  EXISTING IN CONNECTION WITH THIS AGREEMENT,  AND AGREES
THAT ANY SUCH ACTION,  PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY. EACH GRANTOR  CERTIFIES THAT NO OFFICER,  REPRESENTATIVE,
AGENT OR  ATTORNEY  OF ANY AGENT OR ANY LENDER  HAS  REPRESENTED,  EXPRESSLY  OR
OTHERWISE,  THAT ANY AGENT OR ANY LENDER  WOULD NOT, IN THE EVENT OF ANY ACTION,

                                       18
<PAGE>

PROCEEDING OR COUNTERCLAIM,  SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH GRANTOR
HEREBY  ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS
AND THE LENDERS ENTERING INTO THIS AGREEMENT.

     24.  New  Subsidiaries.  Pursuant  to  Section  7.01(b)  of  the  Financing
Agreement,  any new direct or indirect  Subsidiary  (whether by  acquisition  or
creation) of Grantor is required to enter into this  Agreement by executing  and
delivering  in favor of Collateral  Agent a supplement to this  Agreement in the
form of Annex 1 attached  hereto.  Upon the execution and delivery of Annex 1 by
such new Subsidiary,  such Subsidiary shall become a Grantor  hereunder with the
same force and effect as if originally named as a Grantor herein.  The execution
and delivery of any instrument  adding an additional  Grantor as a party to this
Agreement shall not require the consent of any Grantor hereunder. The rights and
obligations  of each  Grantor  hereunder  shall  remain in full force and effect
notwithstanding the addition of any new Grantor hereunder.

     25.  Collateral  Agent.  Each  reference  herein to any right  granted  to,
benefit conferred upon or power exercisable by the "Collateral Agent" shall be a
reference to Collateral Agent, for the benefit of the Lender Group.

     26. Miscellaneous.

     (a) This  Agreement  may be executed in any number of  counterparts  and by
different  parties on separate  counterparts,  each of which,  when executed and
delivered,  shall be deemed to be an  original,  and all of  which,  when  taken
together,  shall  constitute  but one and the  same  Agreement.  Delivery  of an
executed  counterpart of this  Agreement by  telefacsimile  or other  electronic
method of transmission  shall be equally as effective as delivery of an original
executed  counterpart  of this  Agreement.  Any  party  delivering  an  executed
counterpart of this Agreement by  telefacsimile  or other  electronic  method of
transmission  also  shall  deliver  an  original  executed  counterpart  of this
Agreement but the failure to deliver an original executed  counterpart shall not
affect the validity,  enforceability,  and binding effect of this Agreement. The
foregoing shall apply to each other Loan Document mutatis mutandis.

     (b) Any provision of this  Agreement  which is prohibited or  unenforceable
shall be  ineffective  to the  extent of such  prohibition  or  unenforceability
without  invalidating the remaining  provisions  hereof in that  jurisdiction or
affecting  the  validity  or  enforceability  of  such  provision  in any  other
jurisdiction.

     (c) Headings used in this Agreement are for convenience  only and shall not
be used in connection with the interpretation of any provision hereof.

     (d) The pronouns used herein shall include, when appropriate, either gender
and both  singular and plural,  and the  grammatical  construction  of sentences
shall conform thereto.

     (e) Unless the context of this Agreement or any other Loan Document clearly
requires otherwise, references to the plural include the singular, references to
the singular  include the plural,  the terms  "includes" and "including" are not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning  represented  by the  phrase  "and/or."  The words  "hereof,"  "herein,"
"hereby,"  "hereunder,"  and similar  terms in this  Agreement or any other Loan
Document refer to this  Agreement or such other Loan  Document,  as the case may
be, as a whole and not to any  particular  provision  of this  Agreement or such
other Loan Document, as the case may be. Section, subsection,  clause, schedule,
and exhibit references herein are to this Agreement unless otherwise  specified.
Any reference in this  Agreement or in any other Loan Document to any agreement,
instrument,  or document  shall include all  alterations,  amendments,  changes,
extensions, modifications, renewals, replacements,  substitutions, joinders, and
supplements,  thereto and thereof, as applicable (subject to any restrictions on
such alterations,  amendments,  changes,  extensions,  modifications,  renewals,
replacements,  substitutions,  joinders,  and supplements set forth herein). Any
reference  herein or in any other Loan Document to the satisfaction or repayment
in full of the  Obligations  shall mean the  repayment  in full in cash (or cash
collateralization  in accordance with the terms hereof) of all Obligations other
than unasserted contingent indemnification  Obligations. Any reference herein to
any Person shall be construed to include such Person's  successors and permitted
assigns.  Any  requirement  of a writing  contained  herein or in any other Loan
Document  shall be satisfied by the  transmission  of a Record and any Record so
transmitted  shall constitute a  representation  and warranty as to the accuracy
and completeness of the information contained therein.

                                       19
<PAGE>

     IN WITNESS  WHEREOF,  the  undersigned  parties  hereto have  executed this
Agreement by and through their duly authorized officers,  as of the day and year
first above written.

                                      GRANTORS:

                                      PRG-SCHULTZ INTERNATIONAL, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG-SCHULTZ USA, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG-SCHULTZ CANADA, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      THE PROFIT RECOVERY GROUP MEXICO, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG-SCHULTZ PUERTO RICO, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      THE PROFIT RECOVERY GROUP COSTA RICA,
                                      INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

<PAGE>

                                      GRANTORS:

                                      PRG-SCHULTZ CHILE, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG INTERNATIONAL, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRGFS, INC.,
                                      a Delaware corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRGTS, LLC,
                                      a Georgia limited liability company

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      HS&A ACQUISITION - UK, INC.,
                                      a Texas corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG-SCHULTZ AUSTRALIA, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

<PAGE>

                                      GRANTORS:

                                      PRG-SCHULTZ BELGIUM, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      THE PROFIT RECOVERY GROUP
                                      GERMANY, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG-SCHULTZ FRANCE, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      THE PROFIT RECOVERY GROUP NETHERLANDS,
                                      INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      THE PROFIT RECOVERY GROUP NEW ZEALAND,
                                      INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG-SCHULTZ SCANDINAVIA, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

<PAGE>

                                      GRANTORS:

                                      PRG-SCHULTZ PORTUGAL, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG-SCHULTZ SWITZERLAND, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      THE PROFIT RECOVERY GROUP ITALY, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      THE PROFIT RECOVERY GROUP SPAIN, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      THE PROFIT RECOVERY GROUP ASIA, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      THE PROFIT RECOVERY GROUP SOUTH AFRICA,
                                      INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG-SCHULTZ JAPAN, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

<PAGE>

                                      GRANTORS:

                                      PRG-SCHULTZ EUROPE, INC.,
                                      a Georgia corporation

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

                                      PRG-SCHULTZ PUERTO RICO,
                                      a Puerto Rico partnership

                                      By:  /s/ C. McKellar, Jr.
                                         ---------------------------------------
                                      Name: Clinton McKellar, Jr.
                                      Title: Senior Vice President,
                                             General Counsel & Secretary

<PAGE>

                                      COLLATERAL AGENT:

                                      ABLECO FINANCE LLC, a Delaware limited
                                      liability company, as Collateral Agent

                                      By:  /s/ Eric Miller
                                         ---------------------------------------
                                      Name:  Eric Miller
                                      Title: Senior Vice President

<PAGE>

                                   SCHEDULE 1

                             COMMERCIAL TORT CLAIMS

  [include specific case caption or description per Official Code Comment 5 to
                           Section 9-108 of the Code]

<PAGE>

                                   SCHEDULE 1

                                PLEDGED COMPANIES

<TABLE>
<CAPTION>
<S>                              <C>                             <C>                <C>             <C>
-------------------------------- ------------------------------- ------------------ --------------- ----------------- --------------
                                                                     NUMBER OF         CLASS OF      PERCENTAGE OF     CERTIFICATE
        NAME OF PLEDGOR             NAME OF PLEDGED COMPANY        SHARES/UNITS       INTERESTS       CLASS OWNED         NOS.
-------------------------------- ------------------------------- ------------------ --------------- ----------------- --------------
</TABLE>

<PAGE>

                                   SCHEDULE 3

              LIST OF UNIFORM COMMERCIAL CODE FILING JURISDICTIONS

         Grantor                            Jurisdictions

<PAGE>

                          ANNEX 1 TO SECURITY AGREEMENT
                               FORM OF SUPPLEMENT

     Supplement No. ____ (this "Supplement") dated as of _______________, 200__,
to the  Security  Agreement  dated as of March 17, 2006 (as  amended,  restated,
supplemented or otherwise modified from time to time, the "Security  Agreement")
by  each  of the  parties  listed  on the  signature  pages  thereto  and  those
additional  entities  that  thereafter  become  parties  thereto  (collectively,
jointly and severally,  "Grantors" and each  individually  "Grantor") and ABLECO
FINANCE LLC, in its capacity as Collateral  Agent for the Lender Group (together
with its successors, "Collateral Agent").

                              W I T N E S S E T H:

     WHEREAS, pursuant to that certain Financing Agreement dated as of March 17,
2006 (as amended,  restated,  supplemented  or otherwise  modified  from time to
time,  including  all  schedules  thereto,  the  "Financing   Agreement")  among
PRG-SCHULTZ INTERNATIONAL,  INC., a Georgia corporation ("Parent"),  PRG-SCHULTZ
USA, INC., a Georgia  corporation  (the  "Borrower"),  each Subsidiary of Parent
listed as a "Guarantor"  on the  signatures  pages  thereto (such  Subsidiaries,
together with the Parent, each individually a "Guarantor",  and individually and
collectively,  jointly and severally,  the  "Guarantors"),  the lenders that are
from time to time  parties  thereto  (each a  "Lender"  and,  collectively,  the
"Lenders"),  Collateral Agent, and The CIT  Group/Business  Credit,  Inc., a New
York corporation, as administrative agent for the Lender Group, the Lender Group
is willing to make certain financial  accommodations  available to Borrower from
time to time pursuant to the terms and conditions thereof;

     WHEREAS,  capitalized  terms used herein and not otherwise  defined  herein
shall have the meanings assigned to such terms in the Security  Agreement or the
Financing Agreement; and

     WHEREAS,  Grantors  have entered  into the  Security  Agreement in order to
induce the Lender Group to make certain  financial  accommodations  to Borrower;
and

     WHEREAS, pursuant to Section 7.01(b) of the Financing Agreement, new direct
or indirect  Subsidiaries  of Borrower,  must  execute and deliver  certain Loan
Documents,  including the Security Agreement,  and the execution of the Security
Agreement by the  undersigned  new Grantor or Grantors  (collectively,  the "New
Grantors") may be  accomplished  by the execution of this Supplement in favor of
Collateral Agent, for the benefit of the Lender Group;

     NOW,  THEREFORE,  for and in  consideration of the foregoing and other good
and  valuable  consideration,  the receipt and  sufficiency  of which are hereby
acknowledged, each New Grantor hereby agrees as follows:

     1. In  accordance  with  Section  24 of the  Security  Agreement,  each New
Grantor,  by its  signature  below,  becomes  a  "Grantor"  under  the  Security
Agreement  with the same force and effect as if  originally  named  therein as a
"Grantor"  and each New  Grantor  hereby  (a)  agrees  to all of the  terms  and
provisions of the Security Agreement  applicable to it as a "Grantor" thereunder
and (b) represents and warrants that the  representations and warranties made by
it as a "Grantor"  thereunder are true and correct on and as of the date hereof.
In  furtherance  of the  foregoing,  (i) each New  Grantor,  as security for the
payment and performance in full of the Secured  Obligations (other than the Term
Loan  Obligations),  does hereby grant,  assign, and pledge to Collateral Agent,
for  the  benefit  of  the  Revolving  Loan  Lenders,   Collateral   Agent,  and
Administrative Agent, a security interest in and security title to all assets of
such New Grantor  including,  all property of the type described in Section 2 of
the  Security  Agreement  to secure the full and prompt  payment of such Secured
Obligations,  and  (ii)  each New  Grantor,  as  security  for the  payment  and
performance  in full of the Secured  Obligations  (other than the Revolving Loan
Obligations), does hereby grant, assign, and pledge to Collateral Agent, for the
benefit of the Term Loan Lenders,  Collateral Agent, and Administrative Agent, a
security  interest  in and  security  title to all  assets  of such New  Grantor
including,  all  property  of the type  described  in Section 2 of the  Security
Agreement  to secure the full and prompt  payment of such  Secured  Obligations.
Schedule 6.01(w),  "Intellectual Property", attached hereto shall be made a part

<PAGE>

of the Security Agreement for all purposes of the Security  Agreement.  Schedule
1,  "Commercial  Tort Claims",  Schedule 2, "Pledged  Companies" and Schedule 3,
"List  of  Uniform  Commercial  Code  Filing  Jurisdictions",   attached  hereto
supplement Schedule 1, Schedule 2, and Schedule 3 respectively,  to the Security
Agreement  and shall be deemed a part  thereof for all  purposes of the Security
Agreement.  Each  reference to a "Grantor" in the  Security  Agreement  shall be
deemed to include each New  Grantor.  The  Security  Agreement  is  incorporated
herein by reference.

     2. Each New Grantor  represents  and warrants to  Collateral  Agent and the
Lender Group that this  Supplement  has been duly executed and delivered by such
New Grantor and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, except as enforceability thereof may be
limited  by  bankruptcy,   insolvency,   reorganization,   fraudulent  transfer,
moratorium  or other  similar laws  affecting  creditors'  rights  generally and
general  principles  of equity  (regardless  of whether such  enforceability  is
considered in a proceeding at law or in equity).

     3. This Supplement may be executed in multiple counterparts,  each of which
shall be deemed to be an  original,  but all such  separate  counterparts  shall
together  constitute but one and the same instrument.  Delivery of a counterpart
hereof by facsimile transmission or by e-mail transmission shall be as effective
as delivery of a manually executed counterpart hereof.

     4. Except as expressly  supplemented  hereby,  the Security Agreement shall
remain in full force and effect.

     5. This  Supplement  shall be construed in accordance  with and governed by
the laws of the  State of New  York,  without  regard  to the  conflict  of laws
principles thereof.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

     IN  WITNESS  WHEREOF,  each New  Grantor  and  Collateral  Agent  have duly
executed this Supplement to the Security  Agreement as of the day and year first
above written.

NEW GRANTORS:                         [NAME OF NEW GRANTOR]

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

                                      [NAME OF NEW GRANTOR]

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

AGENT:                                ABLECO FINANCE LLC, a Delaware limited
                                      liability company, as Collateral Agent

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

<PAGE>

                                    EXHIBIT A

                          COPYRIGHT SECURITY AGREEMENT

     This COPYRIGHT SECURITY AGREEMENT (this "Copyright Security  Agreement") is
made this ___ day of ___________,  200__, among Grantors listed on the signature
pages  hereof  (collectively,   jointly  and  severally,   "Grantors"  and  each
individually  "Grantor"),  and ABLECO FINANCE LLC, a Delaware limited  liability
company, in its capacity as Collateral Agent for the Lender Group (together with
its successors, the "Collateral Agent").

                              W I T N E S S E T H:
                               - - - - - - - - - -

     WHEREAS, pursuant to that certain Financing Agreement dated as of March 17,
2006 (as amended,  restated,  supplemented  or otherwise  modified  from time to
time,  including  all  schedules  thereto,  the  "Financing   Agreement")  among
PRG-SCHULTZ INTERNATIONAL,  INC., a Georgia corporation ("Parent"),  PRG-SCHULTZ
USA, INC., a Georgia  corporation  (the  "Borrower"),  each Subsidiary of Parent
listed as a "Guarantor"  on the  signatures  pages  thereto (such  Subsidiaries,
together with the Parent, each individually a "Guarantor",  and individually and
collectively,  jointly and severally,  the  "Guarantors"),  the lenders that are
from time to time  parties  thereto  (each a  "Lender"  and,  collectively,  the
"Lenders"),  Collateral Agent, and The CIT  Group/Business  Credit,  Inc., a New
York corporation, as administrative agent for the Lender Group, the Lender Group
is willing to make certain financial  accommodations  available to Borrower from
time to time pursuant to the terms and conditions thereof;

     WHEREAS,  the members of the Lender Group are willing to make the financial
accommodations to Borrower as provided for in the Financing Agreement,  but only
upon the  condition,  among  others,  that  Grantors  shall  have  executed  and
delivered to Collateral Agent, for the benefit of the Lender Group, that certain
Security  Agreement of even date herewith  (including  all annexes,  exhibits or
schedules  thereto,  as from time to time  amended,  restated,  supplemented  or
otherwise modified, the "Security Agreement"); and

     WHEREAS,  pursuant to the  Security  Agreement,  Grantors  are  required to
execute and deliver to  Collateral  Agent,  for the benefit of the Lender Group,
this Copyright Security Agreement;

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
herein contained and for other good and valuable consideration,  the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

     1. DEFINED  TERMS.  All  capitalized  terms used but not otherwise  defined
herein  have  the  meanings  given  to them  in the  Security  Agreement  or the
Financing Agreement.

     2. GRANT OF SECURITY INTEREST IN COPYRIGHT COLLATERAL.

     (a) Each  Grantor,  in order to secure  the  prompt  payment  of all of the
Secured  Obligations  (other than the Term Loan  Obligations),  hereby grants to
Collateral  Agent,  for the benefit of the Revolving  Loan  Lenders,  Collateral
Agent, and  Administrative  Agent, a continuing first priority security interest
in all of such  Grantor's  right,  title  and  interest  in,  to and  under  the
following,   whether  presently   existing  or  hereafter  created  or  acquired
(collectively, the "Copyright Collateral"):

     (i) all of such Grantor's  Copyrights and  Intellectual  Property  Licenses
relating to Copyrights  to which it is a party  including  those  referred to on
Schedule I hereto;

     (ii) all reissues, continuations or extensions of the foregoing; and

<PAGE>

     (iii) all products and proceeds of the  foregoing,  including  any claim by
such Grantor against third parties for past,  present or future  infringement or
dilution of any  Copyright  or any  Copyright  licensed  under any  Intellectual
Property License.

     (b) Each  Grantor,  in order to secure  the  prompt  payment  of all of the
Secured  Obligations (other than the Revolving Loan Obligations),  hereby grants
to Collateral Agent, for the benefit of the Term Loan Lenders, Collateral Agent,
and  Administrative  Agent, a continuing first priority security interest in all
of such  Grantor's  right,  title and  interest  in, to and under the  Copyright
Collateral, whether presently existing or hereafter created or acquired.

     (c) This Copyright  Security  Agreement  secures the payment of all amounts
which constitute part of the Secured  Obligations and would be owed by Grantors,
or any of them, to Collateral  Agent, the Lender Group, or any of them,  whether
or not  they are  unenforceable  or not  allowable  due to the  existence  of an
Insolvency Proceeding involving any Grantor.

     3. SECURITY  AGREEMENT.  The security  interests  granted  pursuant to this
Copyright  Security  Agreement  are  granted in  conjunction  with the  security
interests  granted to  Collateral  Agent,  for the benefit of the Lender  Group,
pursuant to the Security Agreement. Each Grantor hereby acknowledges and affirms
that the rights and  remedies of  Collateral  Agent with respect to the security
interest in the Copyright  Collateral made and granted hereby are more fully set
forth  in the  Security  Agreement,  the  terms  and  provisions  of  which  are
incorporated by reference herein as if fully set forth herein.

     4. AUTHORIZATION TO SUPPLEMENT. Grantors shall give Collateral Agent prompt
notice in writing of any additional  United States  copyright  registrations  or
applications  therefor as provided in the Security  Agreement.  Grantors  hereby
authorize  Collateral  Agent  unilaterally  to modify this Agreement by amending
Schedule  I to  include  any  future  United  States  registered  copyrights  or
applications therefor of Grantors.  Notwithstanding the foregoing, no failure to
so modify this Copyright Security Agreement or amend Schedule I shall in any way
affect,  invalidate  or detract  from  Collateral  Agent's  continuing  security
interest in all Collateral, whether or not listed on Schedule I.

     5.  COUNTERPARTS.  This Copyright Security Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
such  separate  counterparts  shall  together  constitute  but one and the  same
instrument.  In proving  this  Copyright  Security  Agreement  or any other Loan
Document in any  judicial  proceedings,  it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom such
enforcement  is  sought.  Any  signatures  delivered  by a  party  by  facsimile
transmission  or by e-mail  transmission  shall be deemed an original  signature
hereto.

     6. CONSTRUCTION. Unless the context of this Copyright Security Agreement or
any other Loan Document  clearly  requires  otherwise,  references to the plural
include the singular,  references to the singular include the plural,  the terms
"includes" and "including" are not limiting, and the term "or" has, except where
otherwise  indicated,  the inclusive meaning represented by the phrase "and/or."
The words "hereof," "herein,"  "hereby,"  "hereunder," and similar terms in this
Copyright  Security Agreement or any other Loan Document refer to this Copyright
Security  Agreement or such other Loan Document,  as the case may be, as a whole
and not to any particular provision of this Copyright Security Agreement or such
other Loan Document, as the case may be. Section, subsection,  clause, schedule,
and exhibit  references herein are to this Copyright  Security  Agreement unless
otherwise  specified.  Any reference in this Copyright  Security Agreement or in
any other Loan Document to any agreement,  instrument, or document shall include
all  alterations,  amendments,  changes,  extensions,  modifications,  renewals,
replacements,  substitutions, joinders, and supplements, thereto and thereof, as
applicable  (subject  to  any  restrictions  on  such  alterations,  amendments,
changes,  extensions,  modifications,  renewals,  replacements,   substitutions,
joinders,  and  supplements  set forth herein).  Any reference  herein or in any
other Loan Document to the  satisfaction or repayment in full of the Obligations
shall  mean  the  repayment  in full  in  cash  (or  cash  collateralization  in
accordance  with the terms  hereof) of all  Obligations  other  than  unasserted
contingent indemnification Obligations. Any reference herein to any Person shall
be construed to include such  Person's  successors  and permitted  assigns.  Any
requirement of a writing contained herein or in any other Loan Document shall be
satisfied by the  transmission  of a Record and any Record so transmitted  shall
constitute a representation  and warranty as to the accuracy and completeness of
the information contained therein.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

     IN WITNESS  WHEREOF,  each  Grantor  has  caused  this  Copyright  Security
Agreement to be executed and delivered by its duly authorized  officer as of the
date first set forth above.

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

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

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

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

                                      ACCEPTED AND ACKNOWLEDGED BY:

                                      ABLECO FINANCE LLC, a Delaware limited
                                      liability company, as Collateral Agent

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

<PAGE>

                                   SCHEDULE I
                                       TO
                          COPYRIGHT SECURITY AGREEMENT

                             COPYRIGHT REGISTRATIONS

<TABLE>
<CAPTION>
<S>                       <C>                    <C>                     <C>                    <C>
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
        GRANTOR                  COUNTRY               COPYRIGHT            REGISTRATION NO.      REGISTRATION DATE
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>

                                                COPYRIGHT LICENSES

<PAGE>

                                    EXHIBIT B

                            PATENT SECURITY AGREEMENT

     This PATENT SECURITY  AGREEMENT (this "Patent Security  Agreement") is made
this ___ day of ___________,  200__,  among the Grantors listed on the signature
pages  hereof  (collectively,   jointly  and  severally,   "Grantors"  and  each
individually  "Grantor"),  and ABLECO FINANCE LLC, a Delaware limited  liability
company, in its capacity as collateral agent for the Lender Group (together with
its successors, "Collateral Agent").

                              W I T N E S S E T H:
                               - - - - - - - - - -

     WHEREAS, pursuant to that certain Financing Agreement dated as of March 17,
2006 (as amended,  restated,  supplemented  or otherwise  modified  from time to
time,  including  all  schedules  thereto,  the  "Financing   Agreement")  among
PRG-SCHULTZ INTERNATIONAL,  INC., a Georgia corporation ("Parent"),  PRG-SCHULTZ
USA, INC., a Georgia  corporation  (the  "Borrower"),  each Subsidiary of Parent
listed as a "Guarantor"  on the  signatures  pages  thereto (such  Subsidiaries,
together with the Parent, each individually a "Guarantor",  and individually and
collectively,  jointly and severally,  the  "Guarantors"),  the lenders that are
from time to time  parties  thereto  (each a  "Lender"  and,  collectively,  the
"Lenders"),  Collateral Agent, and The CIT  Group/Business  Credit,  Inc., a New
York corporation, as administrative agent for the Lender Group, the Lender Group
is willing to make certain financial  accommodations  available to Borrower from
time to time pursuant to the terms and conditions thereof;

     WHEREAS,  the  members of Lender  Group are  willing to make the  financial
accommodations to Borrower as provided for in the Financing Agreement,  but only
upon the  condition,  among  others,  that the Grantors  shall have executed and
delivered to Collateral Agent, for the benefit of the Lender Group, that certain
Security  Agreement of even date herewith  (including  all annexes,  exhibits or
schedules  thereto,  as from time to time  amended,  restated,  supplemented  or
otherwise modified, the "Security Agreement"); and

     WHEREAS,  pursuant to the  Security  Agreement,  Grantors  are  required to
execute and deliver to  Collateral  Agent,  for the benefit of the Lender Group,
this Patent Security Agreement;

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
herein contained and for other good and valuable consideration,  the receipt and
sufficiency  of which are hereby  acknowledged,  each Grantor  hereby  agrees as
follows:

     1. DEFINED  TERMS.  All  capitalized  terms used but not otherwise  defined
herein  have  the  meanings  given  to them  in the  Security  Agreement  or the
Financing Agreement.

     2. GRANT OF SECURITY INTEREST IN PATENT COLLATERAL.

     (a) Each  Grantor,  in order to secure  the  prompt  payment  of all of the
Secured  Obligations  (other than the Term Loan  Obligations),  hereby grants to
Collateral  Agent,  for the benefit of the Revolving  Loan  Lenders,  Collateral
Agent, and  Administrative  Agent, a continuing first priority security interest
in all of such  Grantor's  right,  title  and  interest  in,  to and  under  the
following,   whether  presently   existing  or  hereafter  created  or  acquired
(collectively, the "Patent Collateral"):

     (i) all of its  Patents  and  Intellectual  Property  Licenses  relating to
Patents to which it is a party including those referred to on Schedule I hereto;

     (ii) all reissues, continuations or extensions of the foregoing; and

<PAGE>

     (iii) all products and proceeds of the  foregoing,  including  any claim by
such Grantor against third parties for past,  present or future  infringement or
dilution of any Patent or any Patent  licensed under any  Intellectual  Property
License.

     (b) Each  Grantor,  in order to secure  the  prompt  payment  of all of the
Secured  Obligations (other than the Revolving Loan Obligations),  hereby grants
to Collateral Agent, for the benefit of the Term Loan Lenders, Collateral Agent,
and  Administrative  Agent, a continuing first priority security interest in all
of such  Grantor's  right,  title and  interest  in,  to and  under  the  Patent
Collateral, whether presently existing or hereafter created or acquired.

     (c) This Patent Security Agreement secures the payment of all amounts which
constitute  part of the  Obligations  and would be owed by  Grantors,  or any of
them, to Collateral Agent, the Lender Group, or any of them, whether or not they
are  unenforceable  or  not  allowable  due to the  existence  of an  Insolvency
Proceeding involving any Grantor.

     3. SECURITY  AGREEMENT.  The security  interests  granted  pursuant to this
Patent Security Agreement are granted in conjunction with the security interests
granted to Collateral  Agent,  for the benefit of the Lender Group,  pursuant to
the Security  Agreement.  Each Grantor hereby  acknowledges and affirms that the
rights and remedies of Collateral Agent with respect to the security interest in
the Patent  Collateral  made and granted  hereby are more fully set forth in the
Security  Agreement,  the terms and  provisions  of which  are  incorporated  by
reference herein as if fully set forth herein.

     4.  AUTHORIZATION TO SUPPLEMENT.  If any Grantor shall obtain rights to any
new  patentable  inventions  or become  entitled  to the  benefit  of any patent
application or patent for any reissue, division, or continuation, of any patent,
the  provisions of this Patent  Security  Agreement  shall  automatically  apply
thereto.  Grantors shall give prompt notice in writing to Collateral  Agent with
respect to any such new patent  rights as  provided in the  Security  Agreement.
Without  limiting  Grantors'  obligations  under this Section 5, Grantors hereby
authorize  Collateral  Agent  unilaterally  to modify this Agreement by amending
Schedule I to include any such new patent  rights of  Grantors.  Notwithstanding
the foregoing,  no failure to so modify this Patent Security  Agreement or amend
Schedule  I shall in any way  affect,  invalidate  or  detract  from  Collateral
Agent's continuing security interest in all Collateral, whether or not listed on
Schedule I.

     5.  COUNTERPARTS.  This Patent  Security  Agreement  may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
such  separate  counterparts  shall  together  constitute  but one and the  same
instrument. In proving this Patent Security Agreement or any other Loan Document
in any judicial proceedings, it shall not be necessary to produce or account for
more than one such counterpart signed by the party against whom such enforcement
is sought. Any signatures  delivered by a party by facsimile  transmission or by
e-mail transmission shall be deemed an original signature hereto.

     6.  CONSTRUCTION.  Unless the context of this Patent Security  Agreement or
any other Loan Document  clearly  requires  otherwise,  references to the plural
include the singular,  references to the singular include the plural,  the terms
"includes" and "including" are not limiting, and the term "or" has, except where
otherwise  indicated,  the inclusive meaning represented by the phrase "and/or."
The words "hereof," "herein,"  "hereby,"  "hereunder," and similar terms in this
Patent  Security  Agreement  or any other  Loan  Document  refer to this  Patent
Security  Agreement or such other Loan Document,  as the case may be, as a whole
and not to any particular  provision of this Patent  Security  Agreement or such
other Loan Document, as the case may be. Section, subsection,  clause, schedule,
and exhibit  references  herein are to this  Patent  Security  Agreement  unless
otherwise  specified.  Any reference in this Patent Security Agreement or in any
other Loan Document to any agreement,  instrument, or document shall include all
alterations,   amendments,   changes,   extensions,   modifications,   renewals,
replacements,  substitutions, joinders, and supplements, thereto and thereof, as
applicable  (subject  to  any  restrictions  on  such  alterations,  amendments,
changes,  extensions,  modifications,  renewals,  replacements,   substitutions,
joinders,  and  supplements  set forth herein).  Any reference  herein or in any
other Loan Document to the  satisfaction or repayment in full of the Obligations
shall  mean  the  repayment  in full  in  cash  (or  cash  collateralization  in
accordance  with the terms  hereof) of all  Obligations  other  than  unasserted
contingent indemnification Obligations. Any reference herein to any Person shall
be construed to include such  Person's  successors  and permitted  assigns.  Any
requirement of a writing contained herein or in any other Loan Document shall be
satisfied by the  transmission  of a Record and any Record so transmitted  shall
constitute a representation  and warranty as to the accuracy and completeness of
the information contained therein.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

     IN WITNESS WHEREOF,  each Grantor has caused this Patent Security Agreement
to be executed and delivered by its duly authorized officer as of the date first
set forth above.

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

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

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

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

                                      ACCEPTED AND ACKNOWLEDGED BY:

                                      ABLECO FINANCE LLC, a Delaware limited
                                      liability, as Collateral Agent

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

<PAGE>

                                    EXHIBIT C

                           PLEDGED INTERESTS ADDENDUM

     This Pledged  Interests  Addendum,  dated as of _________  ___,  20___,  is
delivered pursuant to Section 6 of the Security Agreement referred to below. The
undersigned  hereby agrees that this Pledged Interests  Addendum may be attached
to that  certain  Security  Agreement,  dated as of March 17, 2006 (as  amended,
restated,  supplemented  or otherwise  modified from time to time, the "Security
Agreement"),  made by the  undersigned,  together with the other  Grantors named
therein,  to Ableco  Finance  LLC,  a Delaware  limited  liability  company,  as
Collateral Agent.  Initially capitalized terms used but not defined herein shall
have  the  meaning  ascribed  to  such  terms  in the  Security  Agreement.  The
undersigned  hereby agrees that the additional  interests listed on this Pledged
Interests  Addendum  as set forth  below shall be and become part of the Pledged
Interests  pledged by the  undersigned to the  Collateral  Agent in the Security
Agreement and any pledged company set forth on this Pledged  Interests  Addendum
as set forth below shall be and become a "Pledged  Company"  under the  Security
Agreement, each with the same force and effect as if originally named therein.

     The undersigned  hereby certifies that the  representations  and warranties
set forth in Section 4 of the Security Agreement of the undersigned are true and
correct as to the Pledged Interests listed herein on and as of the date hereof.

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

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

<PAGE>

<TABLE>
<CAPTION>
<S>                              <C>                            <C>                <C>              <C>
-------------------------------- ------------------------------ ------------------ ---------------- ----------------- --------------
                                                                    NUMBER OF         CLASS OF       PERCENTAGE OF     CERTIFICATE
        NAME OF PLEDGOR             NAME OF PLEDGED COMPANY       SHARES/UNITS        INTERESTS       CLASS OWNED         NOS.
-------------------------------- ------------------------------ ------------------ ---------------- ----------------- --------------
</TABLE>

<PAGE>

                                    EXHIBIT D

                          TRADEMARK SECURITY AGREEMENT

     This TRADEMARK SECURITY AGREEMENT (this "Trademark Security  Agreement") is
made this ___ day of ___________,  200__, among Grantors listed on the signature
pages  hereof  (collectively,   jointly  and  severally,   "Grantors"  and  each
individually  "Grantor"),  and ABLECO FINANCE LLC, a Delaware limited  liability
company, in its capacity as Collateral Agent for the Lender Group (together with
its successors, "Collateral Agent").

                              W I T N E S S E T H:

     WHEREAS, pursuant to that certain Financing Agreement dated as of March 17,
2006 (as amended,  restated,  supplemented  or otherwise  modified  from time to
time,  including  all  schedules  thereto,  the  "Financing   Agreement")  among
PRG-SCHULTZ INTERNATIONAL,  INC., a Georgia corporation ("Parent"),  PRG-SCHULTZ
USA, INC., a Georgia  corporation  (the  "Borrower"),  each Subsidiary of Parent
listed as a "Guarantor"  on the  signatures  pages  thereto (such  Subsidiaries,
together with the Parent, each individually a "Guarantor",  and individually and
collectively,  jointly and severally,  the  "Guarantors"),  the lenders that are
from time to time  parties  thereto  (each a  "Lender"  and,  collectively,  the
"Lenders"),  Collateral Agent, and The CIT  Group/Business  Credit,  Inc., a New
York corporation, as administrative agent for the Lender Group, the Lender Group
is willing to make certain financial  accommodations  available to Borrower from
time to time pursuant to the terms and conditions thereof;

     WHEREAS,  the members of the Lender Group are willing to make the financial
accommodations to Borrower as provided for in the Financing Agreement,  but only
upon the  condition,  among  others,  that  Grantors  shall  have  executed  and
delivered to Collateral  Agent,  for the benefit of Lender  Group,  that certain
Security Agreement dated of even date herewith (including all annexes,  exhibits
or schedules thereto,  as from time to time amended,  restated,  supplemented or
otherwise modified, the "Security Agreement"); and

     WHEREAS,  pursuant to the  Security  Agreement,  Grantors  are  required to
execute and deliver to Collateral  Agent, for the benefit of Lender Group,  this
Trademark Security Agreement;

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
herein contained and for other good and valuable consideration,  the receipt and
sufficiency  of which are hereby  acknowledged,  each Grantor  hereby  agrees as
follows:

     1. DEFINED  TERMS.  All  capitalized  terms used but not otherwise  defined
herein  have  the  meanings  given  to them  in the  Security  Agreement  or the
Financing Agreement.

     2. GRANT OF SECURITY INTEREST IN TRADEMARK COLLATERAL.

     (a) Each  Grantor,  in order to secure  the  prompt  payment  of all of the
Secured  Obligations  (other than the Term Loan  Obligations),  hereby grants to
Collateral  Agent,  for the benefit of the Revolving  Loan  Lenders,  Collateral
Agent, and  Administrative  Agent, a continuing first priority security interest
in all of such  Grantor's  right,  title  and  interest  in,  to and  under  the
following,   whether  presently   existing  or  hereafter  created  or  acquired
(collectively, the "Trademark Collateral"):

     (i) all of its Trademarks and Intellectual  Property  Licenses  relating to
Trademarks  to which it is a party  including  those  referred  to on Schedule I
hereto;

     (ii) all reissues, continuations or extensions of the foregoing; and

<PAGE>

     (iii) all products and proceeds of the  foregoing,  including  any claim by
such Grantor against third parties for past,  present or future (i) infringement
or dilution of any Trademark or any Trademark  licensed  under any  Intellectual
Property License or (ii) injury to the goodwill associated with any Trademark or
any Trademark licensed under any Intellectual Property License.

     (b) Each  Grantor,  in order to secure  the  prompt  payment  of all of the
Secured  Obligations (other than the Revolving Loan Obligations),  hereby grants
to Collateral Agent, for the benefit of the Term Loan Lenders, Collateral Agent,
and  Administrative  Agent, a continuing first priority security interest in all
of such  Grantor's  right,  title and  interest  in, to and under the  Trademark
Collateral, whether presently existing or hereafter created or acquired.

     (c) Without  limiting  the  generality  of the  foregoing,  this  Trademark
Security  Agreement  secures the payment of all amounts which constitute part of
the  Obligations  and would be owed by Grantors,  or any of them,  to Collateral
Agent, the Lender Group, or any of them,  whether or not they are  unenforceable
or not allowable due to the existence of an Insolvency  Proceeding involving any
Grantor.

     3. SECURITY  AGREEMENT.  The security  interests  granted  pursuant to this
Trademark  Security  Agreement  are  granted in  conjunction  with the  security
interests  granted to  Collateral  Agent,  for the benefit of the Lender  Group,
pursuant to the Security Agreement. Each Grantor hereby acknowledges and affirms
that the rights and  remedies of  Collateral  Agent with respect to the security
interest in the Trademark  Collateral made and granted hereby are more fully set
forth  in the  Security  Agreement,  the  terms  and  provisions  of  which  are
incorporated by reference herein as if fully set forth herein.

     4.  AUTHORIZATION TO SUPPLEMENT.  If any Grantor shall obtain rights to any
new  trademarks,  the  provisions of this  Trademark  Security  Agreement  shall
automatically  apply  thereto.  Grantors  shall give prompt notice in writing to
Collateral Agent with respect to any such new trademarks or renewal or extension
of any trademark  registration  as provided in the Security  Agreement.  Without
limiting  Grantors'  obligations under this Section 5, Grantors hereby authorize
Collateral Agent unilaterally to modify this Agreement by amending Schedule I to
include  any  such  new  trademark  rights  of  Grantors.   Notwithstanding  the
foregoing,  no failure to so modify this Trademark  Security  Agreement or amend
Schedule  I shall in any way  affect,  invalidate  or  detract  from  Collateral
Agent's continuing security interest in all Collateral, whether or not listed on
Schedule I.

     5.  COUNTERPARTS.  This Trademark Security Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
such  separate  counterparts  shall  together  constitute  but one and the  same
instrument.  In proving  this  Trademark  Security  Agreement  or any other Loan
Document in any  judicial  proceedings,  it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom such
enforcement  is  sought.  Any  signatures  delivered  by a  party  by  facsimile
transmission  or by e-mail  transmission  shall be deemed an original  signature
hereto.

     6. CONSTRUCTION. Unless the context of this Trademark Security Agreement or
any other Loan Document  clearly  requires  otherwise,  references to the plural
include the singular,  references to the singular include the plural,  the terms
"includes" and "including" are not limiting, and the term "or" has, except where
otherwise  indicated,  the inclusive meaning represented by the phrase "and/or."
The words "hereof," "herein,"  "hereby,"  "hereunder," and similar terms in this
Trademark  Security Agreement or any other Loan Document refer to this Trademark
Security  Agreement or such other Loan Document,  as the case may be, as a whole
and not to any particular provision of this Trademark Security Agreement or such
other Loan Document, as the case may be. Section, subsection,  clause, schedule,
and exhibit references herein are to this Agreement unless otherwise  specified.
Any reference in this Trademark Security Agreement or in any other Loan Document
to any  agreement,  instrument,  or  document  shall  include  all  alterations,
amendments,   changes,  extensions,   modifications,   renewals,   replacements,
substitutions,  joinders,  and supplements,  thereto and thereof,  as applicable
(subject  to  any  restrictions  on  such  alterations,   amendments,   changes,
extensions, modifications, renewals, replacements,  substitutions, joinders, and
supplements  set forth  herein).  Any  reference  herein  or in any  other  Loan
Document to the satisfaction or repayment in full of the Obligations  shall mean
the repayment in full in cash (or cash  collateralization in accordance with the
terms   hereof)   of  all   Obligations   other   than   unasserted   contingent
indemnification  Obligations.  Any  reference  herein  to any  Person  shall  be
construed  to include  such  Person's  successors  and  permitted  assigns.  Any
requirement of a writing contained herein or in any other Loan Document shall be
satisfied by the  transmission  of a Record and any Record so transmitted  shall
constitute a representation  and warranty as to the accuracy and completeness of
the information contained therein.

                            [signature page follows]

<PAGE>

     IN WITNESS  WHEREOF,  each  Grantor  has  caused  this  Trademark  Security
Agreement to be executed and delivered by its duly authorized  officer as of the
date first set forth above.

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

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

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

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

                                      ACCEPTED AND ACKNOWLEDGED BY:

                                      ABLECO FINANCE LLC, a Delaware limited
                                      liability company, as Collateral Agent

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

<PAGE>

                                   SCHEDULE I
                                       to
                          TRADEMARK SECURITY AGREEMENT

                      TRADEMARK REGISTRATIONS/APPLICATIONS

<TABLE>
<CAPTION>
<S>                       <C>                    <C>                     <C>                    <C>
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
                                                                             APPLICATION/
        GRANTOR                  COUNTRY                  MARK             REGISTRATION NO.         APP/REG DATE
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>

                                   TRADE NAMES

                              COMMON LAW TRADEMARKS

                         TRADEMARKS NOT CURRENTLY IN USE

                               TRADEMARK LICENSES

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}]]