Document:

PLEDGE AGREEMENT

      THIS PLEDGE AGREEMENT, dated as of November 14, 2001, is made by and among
Kroll Inc., an Ohio corporation  ("Pledgor"),  to Palisade  Concentrated  Equity
Partnership, L.P. ("Palisade"), as Collateral Agent (as hereinafter defined).

                           BACKGROUND TO THE AGREEMENT

      Pledgor,  Palisade,  the various  other  investors  named in the  Purchase
Agreement (as defined below) (Palisade and such other  investors,  collectively,
the "Investors") and Palisade as agent for Investors (Palisade in such capacity,
"Collateral  Agent") are parties to a Securities  Purchase Agreement dated as of
the date hereof (as amended,  modified,  restated or  supplemented  from time to
time,  the  "Purchase   Agreement")  pursuant  to  which,  among  other  things,
Collateral Agent and Investors have agreed,  subject to the terms and conditions
contained therein, to acquire from Pledgor an aggregate of $30,000,000 principal
amount of Pledgor's 6% Senior Secured  Subordinated  Convertible  Notes due 2006
(collectively the "Notes").

      In order to  induce  Collateral  Agent  and  Investors  to enter  into the
Purchase Agreement,  Pledgor,  among other things,  agreed to pledge and grant a
security  interest  to  Collateral  Agent,  for its  benefit and for the ratable
benefit of the Investors, in the Pledged Collateral (as hereinafter defined).

      NOW,  THEREFORE,  in  consideration of the premises and for other good and
valuable   consideration   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereby agree as follows:

SECTION  1.   Defined Terms
              -------------

              Unless  otherwise  defined  herein,  terms defined in the Purchase
Agreement shall have such defined meanings when used herein.

SECTION  2.   Pledge
              ------

              Pledgor  hereby  pledges,  assigns,  hypothecates,  transfers  and
grants a security  interest  to  Collateral  Agent,  for its benefit and for the
ratable   benefit  of  Investors,   in  all  of  the  following   (the  "Pledged
Collateral"):

              (a) the shares of stock of Pledgor set forth on Schedule A annexed
hereto and expressly made a part hereof (the "Pledged Stock"),  the certificates
representing  the Pledged Stock and all dividends,  cash,  instruments and other
property  or  proceeds  from  time to time  received,  receivable  or  otherwise
distributed in respect of or in exchange for any or all of the Pledged Stock;

              (b) all  additional  shares of stock of any issuer of the  Pledged
Stock (each an  "Issuer")  from time to time  acquired by Pledgor in any manner,
including,  without limitation,  stock dividends or a distribution in connection
with  any   increase  or  reduction   of  capital,   reclassification,   merger,
consolidation,  sale of assets,  combination of shares, stock split, spin-off or
split-off  (which

<PAGE>

shares shall be deemed to be part of the Pledged Collateral) with respect to the
Pledged Stock, and the certificates representing such additional shares, and all
dividends,  cash,  instruments  and other property or proceeds from time to time
received,  receivable or otherwise  distributed in respect of or in exchange for
any or all of such shares;

              (c) all shares issued pursuant to all options and rights,  whether
as an  addition  to, in  substitution  of or in  exchange  for any shares of the
Pledged Stock and all dividends, cash and instruments; and

              (d) all  securities  accounts  holding  Pledged  Stock  and/or any
security  entitlements  with  respect  to the  Pledged  Stock  (the  "Securities
Accounts") and all interest,  dividends,  options, warrants,  increases, profits
and income received therefrom,  all investment property in connection therewith,
all substitutions therefor and all proceeds thereof in any form.

SECTION  3.   Indebtedness Secured
              --------------------

              This  pledge  is made to  secure  and the  Pledged  Collateral  is
security for the payment of all  obligations of Pledgor to Collateral  Agent and
Investors  under the  Purchase  Agreement,  the Notes and all other  agreements,
documents and instruments now or at any time hereafter executed and/or delivered
by Pledgor to, with or in favor of  Collateral  Agent  and/or the  Investors  in
connection  therewith or related  thereto  including,  without  limitation,  all
reasonable  expenses  (including  reasonable  attorney  fees)  chargeable to the
Pledgor's  account or incurred by the  Collateral  Agent and/or the Investors in
connection  with the  Pledgor's  account  whether  provided for herein or in any
other agreement, instrument, or document executed by or on behalf of the Pledgor
in connection with this Agreement or the Pledged Stock (the "Indebtedness").

SECTION  4.   Delivery of Pledged Collateral
              ------------------------------

              All  certificates  representing  or  evidencing  the Pledged Stock
shall be  delivered  to and held by or on behalf of  Collateral  Agent  pursuant
hereto and shall be  accompanied  by duly  executed  instruments  of transfer or
assignment  in  blank,  all in form and  substance  reasonably  satisfactory  to
Collateral Agent. Pledgor hereby authorizes any Issuer upon demand by Collateral
Agent to deliver any certificates,  instruments or other distributions issued in
connection  with the Pledged  Collateral  directly to Collateral  Agent, in each
case to be held by Collateral  Agent,  subject to the terms  hereof.  Collateral
Agent shall have the right, at any time after an Event of Default (as defined in
the Notes) in its discretion and without notice to Pledgor, to transfer to or to
register in the name of  Collateral  Agent or any of its  nominees any or all of
the Pledged  Stock.  In addition,  Collateral  Agent shall have the right at any
time to exchange certificates or instruments  representing or evidencing Pledged
Stock for certificates or instruments of smaller or larger denominations.

SECTION  5.   Representations and Warranties
              ------------------------------

              Pledgor represents and warrants to Collateral Agent that:

              (a)  Pledgor is the direct and  beneficial  owner of each share of
the Pledged Stock as indicated on Schedule A hereto.

                                      -2-
<PAGE>

              (b)  All of the  shares  of  the  Pledged  Stock  have  been  duly
authorized, validly issued and are fully paid and nonassessable.

              (c) Upon  delivery of the Pledged Stock to the  Collateral  Agent,
this  Agreement  creates and grants a valid first priority lien on and perfected
security interest in the Pledged Stock,  subject to no prior security  interest,
lien,  charge or  encumbrance,  or to any  agreement  purporting to grant to any
third party a security interest in the property or assets of Pledgor which would
include the Pledged Collateral.

              (d) There are no  restrictions  on transfer  of the Pledged  Stock
contained  in the  certificate  of  incorporation  or  by-laws  of any Issuer or
otherwise  which have not otherwise been  enforceably  and legally waived by the
necessary parties.

              (e) To the  knowledge  of Pledgor,  none of the Pledged  Stock has
been  issued  or  transferred  in  violation  of  the  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 of any
Person and no consent, authorization, approval or other action by, and no notice
to or filing with, any governmental  authority or regulatory body is required by
the Pledgor  for the  exercise  by the  Collateral  Agent of the voting or other
rights  provided for in this Agreement or the remedies in respect of the Pledged
Collateral  pursuant to this Agreement,  except as may be required in connection
with such  disposition  by laws  affecting  the offering and sale of  securities
generally.

              (g) No notification of the pledge  evidenced  hereby to any Person
is required.

              (h)  As of  the  date  hereof,  there  are  no  existing  options,
warrants,  calls or commitments of any such character whatsoever relating to any
Pledged Stock and no indebtedness or other security convertible into any Pledged
Stock.

              (i) The Pledged Stock  constitutes  one-hundred  percent (100%) of
the issued and  outstanding  shares of capital stock of each Issuer  thereof set
forth on Schedule A annexed hereto.

              The  representations  and  warranties  set forth in this Section 5
(other than those  contained in Section  (k)) shall  survive the  execution  and
delivery of this Agreement.

SECTION  6.   Covenants
              ---------

              Pledgor  covenants  that,  until this  Agreement is  terminated in
accordance with the terms of Section 14 hereof:

              (a) Pledgor will not sell, assign,  transfer,  convey or otherwise
dispose of its rights in or to the Pledged  Collateral or any interest  therein;
nor will Pledgor create,  incur or permit to exist any pledge,  mortgage,  lien,
charge,  encumbrance or any security interest  whatsoever with respect to any of
the Pledged Collateral or the proceeds thereof other than that created hereby.

                                      -3-
<PAGE>

              (b) Pledgor will, at its expense, defend Collateral Agent's right,
title and security interest in and to the Pledged  Collateral against the claims
of any Person.

              (c)  Pledgor  shall at any time,  and from time to time,  upon the
written request of Collateral Agent,  execute and deliver such further documents
and do such further acts and things as Collateral  Agent may reasonably  request
in order to  effect  the  purposes  of this  Agreement  including,  but  without
limitation,  delivering to Collateral  Agent upon the  occurrence of an Event of
Default  irrevocable  proxies  in  respect  of the  Pledged  Collateral  in form
satisfactory to Collateral Agent.  Until receipt thereof,  following an Event of
Default this Agreement shall  constitute  Pledgor's proxy to Collateral Agent or
its  nominee  to vote all  shares  of  Pledged  Collateral  then  registered  in
Pledgor's name.

              (d) Pledgor shall not give any entitlement  orders with respect to
any Securities  Account or withdraw or trade any financial  assets or investment
property in connection with any Securities Account.

              (e) Pledgor will not consent to or approve the issuance of (i) any
additional  shares  of any  class  of  capital  stock  of any  Issuer;  (ii) any
securities convertible either voluntarily by the holder thereof or automatically
upon the  occurrence  or  nonoccurrence  of any event or condition  into, or any
securities  exchangeable for, any such shares;  or (iii) any warrants,  options,
contracts  or other  commitments  entitling  any person to purchase or otherwise
acquire any such shares.

SECTION  7.   Voting Rights and Dividends
              ---------------------------

              In addition to Collateral Agent's rights and remedies set forth in
Section 9 hereof,  in case an Event of Default  shall have occurred and has been
declared by Collateral Agent, Collateral Agent shall (a) be entitled to vote the
Pledged Collateral,  (b) be entitled to give consents, waivers and ratifications
in respect of the Pledged Collateral  (Pledgor hereby  irrevocably  constituting
and appointing Collateral Agent, with full power of substitution,  the proxy and
attorney-in-fact  of Pledgor for such  purposes)  and (c) be entitled to collect
and receive for its own use cash dividends paid on the Pledged Collateral. Until
an Event of  Default,  and during the  continuation  thereof,  Pledgor  shall be
permitted  to exercise or refrain  from  exercising  any voting  rights or other
powers unless, in the reasonable judgment of Collateral Agent, such action would
have a material  adverse  effect on the value of the Pledged  Collateral  or any
part  thereof.   After  an  Event  of  Default,  all  dividends  and  all  other
distributions  in respect of any of the  Pledged  Collateral,  whenever  paid or
made, shall be delivered to Collateral  Agent to hold as Pledged  Collateral and
shall,  if  received  by  Pledgor,  be  received  in trust  for the  benefit  of
Collateral Agent, be segregated from the other property or funds of Pledgor, and
be forthwith  delivered to  Collateral  Agent as Pledged  Collateral in the same
form  as so  received  (with  any  necessary  endorsement),  provided  that  any
dividends  payable in stock shall be  immediately  delivered  to the  Collateral
Agent to hold as Pledged Collateral hereunder.

SECTION  8.   Event of Default
              ----------------

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

                                       -4-
<PAGE>

              (a) the  occurrence  of an  "Event  of  Default"  as such  term is
defined in any of the Notes; or

              (b) the pledge of the Pledged  Collateral for any reason ceases to
be or is not a valid and perfected lien having a first priority.

SECTION  9.   Remedies
              --------

              In case an Event of Default shall have occurred and be declared by
Collateral Agent, Collateral Agent may during the continuation thereof:

              (a) Transfer any or all of the Pledged  Collateral  into its name,
or into the name of its nominee or nominees;

              (b)  Exercise  all  corporate  rights with  respect to the Pledged
Collateral including,  without limitation,  all rights of conversion,  exchange,
subscription or any other rights, privileges or options pertaining to any shares
of the Pledged  Collateral as if it were the absolute owner thereof,  including,
but without limitation,  the right to exchange, at its discretion, any or all of
the  Pledged   Collateral  upon  the  merger,   consolidation,   reorganization,
recapitalization  or  other  readjustment  of the  Issuer  thereof,  or upon the
exercise by the Issuer of any right,  privilege or option  pertaining  to any of
the Pledged Collateral, and, in connection therewith, to deposit and deliver any
and all of the  Pledged  Collateral  with any  committee,  depository,  transfer
agent,  registrar or other designated agent upon such terms and conditions as it
may determine,  all without  liability  except to account for property  actually
received by it; and

              (c) Subject to any requirement of applicable law, sell, assign and
deliver the whole or, from time to time,  any part of the Pledged  Collateral at
the time held by  Collateral  Agent,  at any private sale or at public  auction,
with or without demand,  advertisement or notice of the time or place of sale or
adjournment  thereof or otherwise (all of which are hereby  waived,  except such
notice as is  required  by  applicable  law and cannot be  waived),  for cash or
credit or for other  property  for  immediate or future  delivery,  and for such
price or prices and on such terms as Collateral Agent in its sole discretion may
determine, or as may be required by applicable law.

              Pledgor  hereby waives and releases any and all right or equity of
redemption,  whether before or after sale  hereunder.  At any such sale,  unless
prohibited  by  applicable  law,  Collateral  Agent may bid for and purchase the
whole or any part of the Pledged  Collateral so sold free from any such right or
equity of redemption.  All moneys received by Collateral Agent hereunder whether
upon sale of the Pledged  Collateral  or any part thereof or otherwise  shall be
held by Collateral Agent and applied by it as provided in Section 12 hereof.  No
failure  or delay on the part of  Collateral  Agent  in  exercising  any  rights
hereunder  shall  operate as a waiver of any such rights nor shall any single or
partial  exercise  of any such  rights  preclude  any other or  future  exercise
thereof or the exercise of any other rights  hereunder.  Collateral  Agent shall
have no duty as to the collection or protection of the Pledged Collateral or any
income thereon nor any duty as to preservation of any rights pertaining thereto,
except to apply the funds in  accordance  with the  requirements  of  Section 12
hereof.  Collateral  Agent may  exercise  its  rights  with  respect to all or a
portion of the  Pledged  Collateral  and/or all or a portion of the

                                      -5-
<PAGE>

property  of  Pledgor  without  resort  to  other  security  for or  sources  of
reimbursement  for the  Indebtedness.  In addition to the foregoing,  Collateral
Agent shall have all of the rights,  remedies and  privileges of a secured party
under  the UCC (as  defined  under the  Security  Agreement)  regardless  of the
jurisdiction in which enforcement hereof is sought.

SECTION  10.  Registration
              ------------

              If  Collateral  Agent shall  exercise its right to sell all or any
part of the Pledged Collateral, and if, in the opinion of counsel for Collateral
Agent,  it is necessary  to have the Pledged  Collateral  being sold  registered
under the provisions of the 1933 Act, Pledgor will use its reasonable commercial
efforts to cause the Issuer to execute and deliver,  and to cause the  directors
and officers of the Issuer to execute and deliver, all at Pledgor's expense, all
such instruments and documents and to do or cause to be done all such other acts
and things as may be  necessary to register  the Pledged  Collateral  being sold
under  the  provisions  of the  1933  Act.  Pledgor  shall  use  its  reasonable
commercial efforts to cause any such registration  statement to become effective
and to  remain  effective  for a period  of one year  from the date of the first
public offering of the Pledged  Collateral being sold and to make all amendments
thereto and to related  documents  which, in the opinion of Collateral  Agent or
its counsel, are necessary or advisable, all in conformity with the requirements
of the 1933 Act and the rules and  regulations  of the SEC  applicable  thereto.
Pledgor  shall also cause the Issuer to comply with the  provisions of the "Blue
Sky"  law  of  any  jurisdiction  which  Collateral  Agent  shall  designate  in
connection with any sale hereunder; and to cause the Issuer to make available to
its security holders, as soon as practicable,  an earnings statement (which need
not be audited)  covering a period of at least  twelve  months but not more than
eighteen months,  beginning with the first month after the effective date of any
such  registration   statement,   which  earnings  statement  will  satisfy  the
provisions of Section 11(a) of the 1933 Act. Pledgor  acknowledges that a breach
of any of the covenants  contained in this Section may cause irreparable  injury
to Collateral  Agent,  that Collateral Agent will have no adequate remedy at law
with  respect to such breach and, as a  consequence,  such  covenants of Pledgor
shall be specifically enforceable against Pledgor.

SECTION  11.  Private Sale
              ------------

              Notwithstanding   anything   contained  in  Section  10,   Pledgor
recognizes that Collateral Agent may be unable to effect (or to do so only after
delay which  would  adversely  affect the value that might be realized  from the
Pledged  Collateral)  a public sale of all or part of the Pledged  Collateral by
reason of certain  prohibitions  contained in the 1933 Act, and may be compelled
to resort to one or more private sales to a restricted  group of purchasers  who
will be obliged to agree, among other things, to acquire such Pledged Collateral
for their own account, for investment and not with a view to the distribution or
resale  thereof.  Pledgor agrees that any such private sale may be at prices and
on terms less favorable to the seller than if sold at public sales and that such
private  sales  shall  not  be  deemed  to  have  been  made  in a  commercially
unreasonable  manner because they were not registered under the 1933 Act and the
seller received a less favorable price. Pledgor agrees that Collateral Agent has
no obligation to delay the sale of any Pledged Collateral for the period of time
necessary  to permit the Issuer to register  the Pledged  Collateral  for public
sale under the 1933 Act.

                                      -6-
<PAGE>

SECTION  12.  Proceeds of Sale
              ----------------

              The proceeds of any collection,  recovery, receipt, appropriation,
realization  or sale of the Pledged  Collateral  shall be applied by  Collateral
Agent as follows:

              (a) First,  to the payment of all costs,  expenses  and charges of
Collateral  Agent,  as such, or the  reimbursement  of Collateral  Agent for the
prior payment of such costs,  expenses and charges  incurred in connection  with
the care and safekeeping of any of the Pledged  Collateral  (including,  without
limitation,  the expenses of any sale or other  proceeding,  the expenses of any
taking, reasonable attorneys' fees and expenses, court costs, any other expenses
incurred or expenditures or advances made by Collateral Agent in the protection,
enforcement  or  exercise  of its rights,  powers or  remedies  hereunder)  with
interest on any such  reimbursement  at the Interest  Rate (as defined under the
Notes)  then in effect  under the Notes plus two  percent  (2%) from the date of
payment.

              (b)  Second,  to the payment of the  Indebtedness,  in whole or in
part, in such order as Collateral Agent may elect,  whether such Indebtedness is
then due or not due.

              (c)  Third,   to  such  Persons  as  required  by  applicable  law
including, without limitation, Section 9-615(a)(3) of the UCC.

              (d) Fourth, to the extent of any surplus thereafter remaining,  to
Pledgor or as a court of competent jurisdiction may direct.

              In the  event  that  the  proceeds  of any  collection,  recovery,
receipt,  appropriation,  realization  or sale are  insufficient  to satisfy the
Indebtedness,  Pledgor  shall be liable  for the  deficiency  together  with (i)
interest  thereon at the  interest  rate then in effect under the Notes and (ii)
the  reasonable  fees of any attorneys  employed by Collateral  Agent to collect
such deficiency.

              Collateral  Agent,  in its sole and absolute  discretion,  with or
without notice to Pledgor, may deposit any proceeds of any collection, recovery,
receipt,  appropriation  or sale of the  Pledged  Collateral  in a  non-interest
bearing cash  collateral  deposit  account to be  maintained as security for the
Indebtedness.

SECTION  13.  Information
              -----------

              Pledgor will promptly give or cause to be given written  notice to
Collateral  Agent of any notices or other documents  received by it with respect
to Pledged Collateral registered in the name of Pledgor.

SECTION  14.  Termination
              -----------

              This  Agreement  shall  terminate and Pledgor shall be entitled to
the return, at Pledgor's  expense,  of such of the Pledged Collateral as has not
theretofore been sold or otherwise applied pursuant to this Agreement,  upon the
earlier of (a) payment in full of the Indebtedness , and (b) such time as all of
the  following  claims have been finally and  completely  settled,  adjudicated,
dismissed  or  otherwise  resolved  with  prejudice  to  Pledgor  and all of its
Subsidiaries without any material award, cost, penalty,  charge or other expense
being incurred by, or assessed against the Pledgor or any Subsidiary:  (i) those
certain tax  assessments  pending in Brazil against  O'Gara-Hess & Eisenhardt do

                                      -7-
<PAGE>

Brasil LTDA;  (ii) that certain matter pending in the Ontario  Superior Court of
Justice,  encaptioned  HSBC Securities  (Canada) Inc. v. Davies,  Ward & Beck v.
Lindquist  Avey  Macdonald  Baskerville  Inc, et al.,  and (iii)  those  matters
identified in Item 1 of Pledgor's  Quarterly  Report on Form 10-Q for the period
ending June 30, 2001.

SECTION  15.  Concerning Collateral Agent
              ---------------------------

              The  recitals  of fact  herein  shall be taken  as  statements  of
Pledgor for which Collateral Agent assumes no  responsibility.  Collateral Agent
makes no representation  to anyone as to the value of the Pledged  Collateral or
any part thereof or as to the  validity or adequacy of the security  afforded or
intended  to be  afforded  thereby  or as to the  validity  of  this  Agreement.
Collateral Agent shall be protected in relying upon any notice, consent, request
or other paper or document  believed by it to be genuine and correct and to have
been  signed by a proper  person.  The  permissive  rights of  Collateral  Agent
hereunder shall not be construed as duties of Collateral Agent. Collateral Agent
shall be under no obligation to take any action toward the  enforcement  of this
Agreement  or rights or remedies  in respect of any of the  Pledged  Collateral.
Collateral Agent shall not be personally  liable for any action taken or omitted
by it in good  faith and  reasonably  believed  by it to be within  the power or
discretion conferred upon it by this Agreement.

SECTION  16.  Regarding Collateral Agent
              --------------------------

              (a)  Each  Investor  hereby  designates  Palisade  to  act  as the
Collateral  Agent for such Investor under this  Agreement.  Each Investor hereby
irrevocably  authorizes the  Collateral  Agent to take such action on its behalf
under the  provisions  of this  Agreement  and to  exercise  such  powers and to
perform such duties  hereunder as are  specifically  delegated to or required of
the Collateral Agent by the terms hereof and such other powers as are reasonably
incidental  thereto and the Collateral  Agent shall hold all Pledged  Collateral
received  pursuant to this  Agreement for the ratable  benefit of the Investors.
The Collateral  Agent may perform any of its duties  hereunder by or through its
agents or employees. As to matters not expressly provided for in this Agreement,
the  Collateral  Agent may exercise any  discretion  or take any action it deems
reasonable and necessary under the  circumstances and the Collateral Agent shall
be fully protected in so acting.

              (b) Nature of Duties. The Collateral Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement. Neither the
Collateral  Agent nor any of its  officers,  directors,  employees,  partners or
agents  shall be (i)  liable  for any  action  taken or  omitted by them as such
hereunder or in  connection  herewith,  unless  caused by their gross (not mere)
negligence  or willful  misconduct,  or (ii)  responsible  in any manner for any
recitals,  statements,  representations or warranties made by the Pledgor or any
officer  thereof  contained  in this  Agreement or in any  certificate,  report,
statement or other  document  referred to or provided for in, or received by the
Collateral  Agent under or in connection  with, this Agreement or for the value,
validity,  effectiveness,  genuineness,  enforceability  or  sufficiency of this
Agreement  or for  any  failure  of  the  Pledgor  to  perform  its  obligations
hereunder. Collateral Agent shall not be under any obligation to any Investor to
ascertain  or to  inquire  as to the  observance  or  performance  of any of the
agreements  contained in, or conditions  of, this  Agreement,  or to inspect the
properties, books or records of the Pledgor.

              (c)  Indemnification.  To the extent the  Collateral  Agent is not
reimbursed  and  indemnified  by the Pledgor,  the Investors  will reimburse and
indemnify   Collateral   Agent  from  and

                                      -8-
<PAGE>

against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments,  suits,  costs,  expenses or  disbursements  of any kind or
nature  whatsoever  which may be imposed on, incurred by or asserted against the
Collateral Agent in performing its duties  hereunder,  or in any way relating to
or arising out of this  Agreement;  provided  that,  the Investors  shall not be
liable  for any  portion  of such  liabilities,  obligations,  losses,  damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Collateral Agent's gross (not mere) negligence or willful misconduct.

SECTION  17.  Notices
              -------

              Any notice or request  hereunder shall be given in accordance with
the terms of the Purchase Agreement.

SECTION  18.  Governing Law.
              -------------

              This  Agreement  shall be governed by, and construed in accordance
with, the internal laws of the State of New York without regard to the choice of
law principles  thereof.  Each of the parties hereto irrevocably  submits to the
exclusive  jurisdiction  of the  courts of the State of New York  located in New
York County and the United States  District  Court for the Southern  District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this  Agreement  and the  transactions  contemplated  thereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party  hereto  anywhere  in the world by the same  methods as are
specified  for the giving of notices under this  Agreement.  Each of the parties
hereto  irrevocably  consents to the  jurisdiction of any such court in any such
suit,  action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or  proceeding  brought in such courts and  irrevocably  waives any claim
that any such  suit,  action or  proceeding  brought  in any such court has been
brought in an inconvenient forum.

SECTION 19.   Amendments and Waivers.
              ----------------------

              Any term of this  Agreement  may be amended and the  observance of
any term of this  Agreement may be waived  (either  generally or in a particular
instance  and either  retroactively  or  prospectively),  only with the  written
consent of the Pledgor and the Collateral Agent. The Pledgor waives  presentment
and  protest of any  instrument  and notice  thereof,  notice of default and all
other notices to which the Pledgor might otherwise be entitled.

SECTION  20.  No Waiver; Cumulative Remedies.
              ------------------------------

              No failure on the part of the Collateral Agent to exercise, and no
delay in exercising,  any right,  power or remedy  hereunder  shall operate as a
waiver thereof nor shall any single or partial exercise of any such right, power
or remedy by Collateral  Agent preclude any other or further exercise thereof or
the  exercise  of any  right,  power  or  remedy.  All  remedies  hereunder  are
cumulative and are not exclusive of any other remedies provided by law.

                                      -9-
<PAGE>

SECTION  21.  Severability.
              ------------

              In case any security  interest or other right of Collateral  Agent
shall  be  held  to be  invalid,  illegal  or  unenforceable,  such  invalidity,
illegality or  unenforceability  shall not affect any other security interest or
other right, privilege or power granted under this Agreement.

SECTION  22.  Counterparts; Faxes.
              -------------------

              This Agreement may be executed in two or more  counterparts,  each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.  This Agreement may also be executed via facsimile,
which shall be deemed an original.

SECTION  23.  Miscellaneous
              -------------

              The  provisions  of this  Agreement  shall  be  binding  upon  the
successors and assigns of Pledgor.  The term "Collateral Agent", as used herein,
shall include any  successor or assign of Collateral  Agent at the time entitled
to the pledged interest in the Pledged Collateral.

SECTION  24.  Titles and Subtitles.
              --------------------

              The  titles  and  subtitles  used in this  Agreement  are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.

SECTION  25.  Recapture.
              ---------

              Anything in this  Agreement  to the contrary  notwithstanding,  if
Collateral   Agent   receives   any  payment  or  payments  on  account  of  the
Indebtedness,  which  payment or payments or any part  thereof are  subsequently
invalidated,  declared  to be  fraudulent  or  preferential,  set  aside  and/or
required  to be repaid to a  trustee,  receiver,  or any other  party  under the
United  States  Bankruptcy  Code,  as  amended,  or any other  federal  or state
bankruptcy,  reorganization,   moratorium  or  insolvency  law  relating  to  or
affecting  the  enforcement  of  creditors'  rights  generally,  common  law  or
equitable  doctrine,  then to the  extent  of any sum not  finally  retained  by
Collateral Agent,  Pledgor's obligations to Collateral Agent shall be reinstated
and this  Agreement  shall  remain in full force and  effect (or be  reinstated)
until payment shall have been made to Collateral  Agent,  which payment shall be
due on demand.

SECTION  26.  Subordination.
              -------------

              The pledge of the Pledged Stock  hereunder shall be subordinate to
the liens granted in connection with the Senior Debt pursuant to the terms of an
intercreditor  agreement among the Pledgor,  Collateral Agent and the holders of
the Senior Debt which shall be  requested  by the holders of the Senior Debt and
in form and substance  reasonably  satisfactory to the Collateral  Agent and the
other Investors.

SECTION 27.   Construction.
              ------------

              The  parties  acknowledge  that each  party and its  counsel  have
reviewed this Agreement and that the normal rule of  construction  to the effect
that any ambiguities are to be resolved  against the

                                      -10-
<PAGE>

drafting party shall not be employed in the  interpretation of this Agreement or
any amendments, schedules or exhibits hereto.

SECTION 28.   Costs and Expenses; Indemnification.
              -----------------------------------

              (a) The Pledgor shall pay all of the Collateral Agent's reasonable
out-of-pocket costs and expenses,  including without limitation  reasonable fees
and disbursements of counsel and appraisers, in connection with the preparation,
execution and delivery of this Agreement and in connection  with the prosecution
or defense of any action,  contest,  dispute,  suit or proceeding concerning any
matter in any way arising out of, related to or connected  with this  Agreement.
The  Pledgor  shall  also  pay  all  of  the   Collateral   Agent's   reasonable
out-of-pocket costs and expenses, including, without limitation, reasonable fees
and disbursements of counsel, in connection with (i) the preparation,  execution
and  delivery  of any  waiver,  any  amendment  thereto or consent  proposed  or
executed in connection  with the  transactions  contemplated  by this Agreement,
(ii) the Collateral Agent's obtaining  performance of the Pledgor's  obligations
under this Agreement,  including, but not limited to, the enforcement or defense
of the security interest in the Pledged Collateral  hereunder as valid perfected
security interests, (c) any attempt to inspect, verify, protect,  collect, sell,
liquidate  or  otherwise  dispose  of  any  Pledged  Collateral,   and  (d)  any
consultations in connection with any of the foregoing.

              (b) Any  such  amounts  payable  as  provided  hereunder  shall be
additional  Indebtedness  secured  hereby  and  by  the  other  Agreements.  The
provisions  of this  Section  28 shall  remain  operative  and in full force and
effect  regardless  of the  termination  of this  Agreement  or any of the other
Agreements,  the  consummation  of the  transactions  contemplated  hereby,  the
repayment of any of the Indebtedness,  the invalidity or unenforceability of any
term or  provision  of this  Agreement  or any of the other  Agreements,  or any
investigation  made by or on behalf of the  Collateral  Agent.  All  amounts due
under this Section 28 shall be payable on written demand therefor.

                         [SIGNATURES BEGIN ON NEXT PAGE]

                                      -11-
<PAGE>

      IN WITNESS  WHEREOF,  the parties have executed  this  Agreement or caused
their duly  authorized  officers to execute this  Agreement as of the date first
above written.

                               KROLL INC., as Pledgor

                               By: /s/
                                  ---------------------------------------
                                  Name:
                                  Title:

                               PALISADE CONCENTRATED EQUITY PARTNERSHIP, L.P.
                               By: Palisade Concentrate Holdings, LLC, its
                                   General Partner, as the Collateral
                                   Agent and an Investor

                               By: /s/
                                  ---------------------------------------
                                  Name:  Mark Hoffman
                                  Title: Member

                               PEGASUS PARTNERS II, L.P.,
                               By: Pegasus Investors II GP, LLC, its General
                                   Partner, as an Investor

                               By: /s/
                                  ---------------------------------------
                                  Name:
                                  Title:

                                      -12-SECURITY AGREEMENT
                               ------------------

      This Security Agreement (this "Agreement"), dated as of November 14, 2001,
by and among Palisade  Concentrated Equity Partnership,  L.P.  ("Palisade"),  as
collateral  agent for the Investors (as hereinafter  defined) (in such capacity,
the "Collateral Agent") and Kroll Inc., an Ohio corporation (the "Company").

                                   BACKGROUND

      Pursuant to the terms of a Securities  Purchase  Agreement dated as of the
date hereof (as amended,  modified,  restated or supplemented from time to time,
the "Purchase Agreement") by and among the Company, the Collateral Agent and the
investors  named  in the  Purchase  Agreement,  including,  without  limitation,
Palisade (collectively,  the "Investors"),  the Investors have agreed to acquire
from the Company an aggregate of $30,000,000  principal  amount of the Company's
6% Senior Secured  Subordinated  Convertible Notes due 2006  (collectively,  the
"Notes").  The Investors are willing to enter into the Purchase  Agreement  only
upon the condition,  among others, that the Company secure its obligations under
the Purchase Documents (as hereinafter defined) by executing and delivering this
Agreement to the Collateral Agent.

      NOW,  THEREFORE,  in  consideration of the premises and for other good and
valuable   consideration   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereby agree as follows:

                                    ARTICLE I

                                   Definitions
                                   -----------

      Section 1.1.      General   Definitions.   For   all   purposes   of  this
Agreement,  except  as  otherwise  expressly  provided  or  unless  the  context
otherwise requires:

            "Chattel  Paper" means all chattel  paper as such term is defined in
the UCC,  now  owned  or  hereafter  acquired,  including,  without  limitation,
electronic chattel paper, as such term is defined in the UCC.

            "Collateral"  means  and  includes  all now and  hereafter  acquired
assets of the Company including, without limitation:

            (A)   all Inventory;

            (B)   all Equipment;

            (C)   all General Intangibles;

            (D)   all Receivables;

            (E)   all Chattel Paper;

            (F)   all Letter-of-Credit Rights;
<PAGE>

            (G)   all Instruments;

            (H)   the commercial tort claims set forth on Schedule V;

            (I)   all  books,  records,   ledgercards,   files,  correspondence,
computer programs,  tapes, disks and related data processing  software (owned by
the  Company  or in which it has an  interest)  which  at any time  evidence  or
contain information  relating to any or all of (A), (B), (C), (D), (E), (F), (G)
and (H) above or are otherwise necessary or helpful in the collection thereof or
realization thereupon;

            (J)   documents of title,  policies and  certificates  of insurance,
securities,   Chattel  Paper,  other  documents  or  instruments  evidencing  or
pertaining to any or all of (A), (B), (C), (D) (E), (F), (G), (H) and (I) above;

            (K)   all Supporting  Obligations and guaranties,  including letters
of credit  and  guarantees  issued in  support of  Receivables,  Chattel  Paper,
General Intangibles and Investment Property, Liens on real or personal property,
leases,  and other  agreements and property which in any way secure or relate to
any or all of (A), (B), (C), (D), (E), (F), (G), (H), (I) and (J) above,  or are
acquired for the purpose of securing and enforcing any item thereof;

            (L)   (i) all  cash  held  as  cash  collateral  to the  extent  not
otherwise  constituting  Collateral,  all other cash or  property at any time on
deposit  with or held by the  Collateral  Agent for the  account of the  Company
(whether for safekeeping,  custody, pledge, transmission or otherwise), (ii) all
present  or future  deposit  accounts  (whether  time or demand or  interest  or
non-interest  bearing) of the  Company  with the  Collateral  Agent or any other
Person  including  those to which any such cash may at any time and from time to
time be  credited,  (iii) all  Payment  Intangibles,  (iv) all  letter of credit
obligations,  (v) all  investments  and  reinvestments  (however  evidenced)  of
amounts  from  time to  time  credited  to such  accounts,  (iv)  all  interest,
dividends,  distributions  and other proceeds  payable on or with respect to (x)
such investments and reinvestments and (y) such accounts, and (v) all Investment
Property; and

            (M)   all products and proceeds of (A),  (B),  (C),  (D),  (E), (F),
(G), (H), (I), (J), (K) and (L) above (including, but not limited to, all claims
to items  referred to in (A),  (B),  (C), (D), (E), (F), (G), (H), (I), (J), (K)
and (L) above) and all claims of the Company  against  third parties (x) for (i)
loss of,  damage to, or  destruction  of, and (ii) payments due or to become due
under  leases,  rentals and hires of any or all of (A), (B), (C), (D), (E), (F),
(G),  (H),  (I),  (J),  (K) and (L) above and (y)  proceeds  payable  under,  or
unearned premiums with respect to policies of insurance in whatever form.

            "Copyright License" means any written agreement, now or hereafter in
effect,  granting  any  right to any third  party  under  any  Copyright  now or
hereafter  owned by the Company or which the Company  otherwise has the right to
license,  or  granting  any  right to the  Company  under any  Copyright  now or
hereafter owned by any third party, and all rights of the Company under any such
agreement.

            "Copyrights"  means  all of the  following  now  owned or  hereafter
acquired by the  Company:  (a) all  copyright  rights in any work subject to the
copyright  laws of the United  States

                                      -2-
<PAGE>

or any other country, whether as author, assignee,  transferee or otherwise, and
(b) all registrations and applications for registration of any such copyright in
the United States or any other  country,  including  registrations,  recordings,
supplemental  registrations  and pending  applications  for  registration in the
United States Copyright Office,  including those used in the Company's  business
listed on Schedule II attached hereto.

            "Customer" means and includes the account debtor with respect to any
Receivable  and/or the  prospective  purchaser  of goods,  services or both with
respect to any contract or contract  right,  and/or any party who enters into or
proposes  to enter into any  contract  or other  arrangement  with the  Company,
pursuant to which the Company is to deliver any personal property or perform any
services.

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

            "Equipment"  means all equipment as such term is defined in the UCC,
now owned or  hereafter  acquired,  including,  without  limitation,  equipment,
machinery and goods (excluding Inventory), whether or not constituting fixtures,
including,  without limitation:  plant and office equipment, tools, dies, parts,
data  processing  equipment,  computer  equipment  with  embedded  software  and
peripheral equipment,  furniture and trade fixtures,  trucks, trailers,  loaders
and other  vehicles and all  replacements  and  substitutions  therefore and all
accessions thereto.

            "Event of  Default"  means the  occurrence  of any of the events set
forth in Section 6.1 hereof.

            "GAAP"  means  the  United  States  generally  accepted   accounting
principles,  applied on a basis consistent with the accounting practices applied
in the Company's financial statements included in the SEC Filings.

            "General  Intangibles" means all general intangibles as such term is
defined  in the  UCC,  now  owned  or  hereafter  acquired,  including,  without
limitation,   Payment   Intangibles,   Trademarks,   trade  secrets,   equipment
formulation,  manufacturing  procedures,  quality  control  procedures,  product
specifications,   Patents,  Patent  applications,   Copyrights,   registrations,
software,  contract  rights,  choses in action,  causes of action,  corporate or
other business records, inventions,  designs, goodwill, claims under guarantees,
licenses,  franchises,  tax  refunds,  tax  refund  claims,  computer  programs,
computer data bases, computer program flow diagrams,  source codes, object codes
and all other intangible property of every kind and nature.

            "Health-Care-Insurance  Receivables" means all health-care-insurance
receivables as such term is defined in the UCC, now owned or hereafter acquired,
including,  without  limitation,  an  interest  in or claim  under a  policy  of
insurance  which is a right to payment of a monetary  obligation for health-care
goods or services provided.

            "Instruments"  means all  instruments as such term is defined in the
UCC,  now  owned  or  hereafter  acquired,   including,  without  limitation,  a
negotiable  instrument  or a  certificated  security or any other  writing which
evidences a right to the payment of money.

                                      -3-
<PAGE>

            "Intellectual  Property" means all intellectual and similar property
of the Company of every kind and nature now owned or  hereafter  acquired by the
Company,   including  inventions,   designs,  Patents,   Copyrights,   Licenses,
Trademarks,  trade secrets,  confidential or proprietary  technical and business
information,  know-how,  show-how  or other data or  information,  software  and
databases and all  embodiments or fixations  thereof and related  documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records  describing  or used in the  connection  with,  any of the
foregoing.

            "Inventory"  means all inventory as such term is defined in the UCC,
now  owned  or  hereafter  acquired,   including,  without  limitation,   goods,
merchandise and other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease,  all raw  materials,  work in
process,  finished  goods and  materials  and  supplies  of any kind,  nature or
description  which  are or  might be used or  consumed  in  business  or used in
selling or furnishing such goods,  merchandise and other personal property,  and
all documents of title or other documents representing them.

            "Investment  Property" means all investment property as such term is
defined in the UCC.

            "Letter-of-Credit  Rights" means all letter-of-credit rights as such
term is defined in the UCC, now owned or hereafter acquired,  including, without
limitation,  rights to payment or performance under a letter of credit,  whether
or not the  beneficiary  has  demanded  or is  entitled  to  demand  payment  or
performance.

            "License" means any Patent  License,  Trademark  License,  Copyright
License or other license or sublicense to which the Company is a party.

            "Lien" means any mortgage,  security  deed,  deed of trust,  pledge,
hypothecation,   assignment,  security  interest,  lien  (whether  statutory  or
otherwise),  charge,  claim or  encumbrance,  or  preference,  priority or other
security  agreement or preferential  arrangement  held or asserted in respect of
any asset of any kind or nature whatsoever  including,  without limitation,  any
conditional  sale  or  other  title  retention   agreement,   any  lease  having
substantially  the same economic effect as any of the foregoing,  and the filing
of, or agreement to give,  any financing  statement  under the UCC or comparable
law of any jurisdiction.

            "Obligations"  means and includes all  obligations of the Company to
the  Collateral  Agent and the  Investors  under this  Agreement,  the  Purchase
Agreement, the Notes and all other agreements,  documents and instruments now or
at any time hereafter  executed  and/or  delivered by the Company to, with or in
favor of  Collateral  Agent  and/or the  Investors  in  connection  therewith or
related  thereto  including,   without   limitation,   all  reasonable  expenses
(including  reasonable  attorney  fees)  chargeable to the Company's  account or
incurred by the  Collateral  Agent and/or the Investors in  connection  with the
Company's  account  whether  provided  for  herein  or in any  other  agreement,
instrument,  or document  executed by or on behalf of the Company in  connection
with this Agreement or the Collateral.

                                      -4-
<PAGE>

            "Patent  License" means any written  agreement,  now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent,  now or  hereafter  owned by the Company or which the Company
otherwise has the right to license, is in existence,  or granting to the Company
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party,  is in existence,  and all rights of the Company under
any such agreement.

            "Patents" means all of the following now owned or hereafter acquired
by the Company (a) all letters patent of the United States or any other country,
all  registrations  and recordings  thereof,  and all  applications  for letters
patent  of the  United  States or any other  country,  including  registrations,
recordings  and pending  applications  in the United States Patent and Trademark
Office or any similar offices in any other country,  including those used in the
Company's business listed on Schedule III attached hereto, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions thereof,
and the inventions  disclosed or claimed  therein,  including the right to make,
use and/or sell the inventions disclosed or claimed therein.

            "Payment  Intangibles" means all payment intangibles as such term is
defined  in the  UCC,  now  owned  or  hereafter  acquired,  including,  without
limitation,  a General  Intangible  under which the account  debtor's  principle
obligation is a monetary obligation.

            "Permitted  Liens"  means  (a)  Liens  of  carriers,   warehousemen,
artisans,  bailees, mechanics and materialmen incurred in the ordinary course of
business securing sums not overdue; (b) Liens incurred in the ordinary course of
business in connection  with worker's  compensation,  unemployment  insurance or
other forms of  governmental  insurance  or  benefits,  relating  to  employees,
securing sums (i) not overdue or (ii) being  diligently  contested in good faith
provided that adequate reserves with respect thereto are maintained on the books
of the Company in  conformity  with GAAP,  (c) Liens in favor of the  Collateral
Agent for its benefit and for the ratable  benefit of the  Investors,  (d) Liens
for taxes (i) not yet due or (ii) being  diligently  contested  in good faith by
appropriate  proceedings,  provided that adequate  reserves with respect thereto
are  maintained  on the books of the Company in conformity  with GAAP  provided,
that,  the Lien  shall have no effect on the  priority  of Liens in favor of the
Collateral  Agent other than by operation  of law, and (e) zoning  restrictions,
easements,  licenses, or other restrictions on the use of real property or other
minor  irregularities  in title  thereto,  so long as the same do not materially
impair the use, value or marketability of such real estate.

            "Premises"  means  all  premises  where  the  Company  conducts  its
business and has any rights of possession,  including,  without limitation,  the
premises described in Schedule I attached hereto.

            "Purchase  Documents" means this Agreement,  the Registration Rights
Agreement, the Notes, the Pledge Agreement and all other documents, instruments,
agreements and  certificates at any time delivered  executed and/or delivered by
the Company to, with or in favor of  Collateral  Agent  and/or the  Investors in
connection herewith or therewith or related hereto or thereto.

                                      -5-
<PAGE>

            "Receivables" means all accounts as such term is defined in the UCC,
including,  without  limitation,  each and every  right to the payment of money,
whether such right to payment now exists or hereafter arises, whether such right
to payment  arises out of a sale,  lease or other  disposition of goods or other
property,  out of a rendering of services, out of a loan, out of the overpayment
of taxes or other  liabilities,  or  otherwise  arises  under  any  contract  or
agreement,  whether such right to payment is created, generated or earned by the
Company  or by some  other  Person  who  subsequently  transfers  such  Person's
interest  to the  Company,  whether  such right to payment is or is not  already
earned by  performance,  and  howsoever  such right to payment may be evidenced,
together  with all other rights and  interests  (including  all Liens) which the
Company may at any time have by law or agreement  against any account  debtor or
other obligor obligated to make any such payment or against any property of such
account  debtor or other  obligor;  all including but not limited to all present
and future accounts,  contract rights, loans and obligations receivable,  Health
Care  Insurance  Receivables,   Chattel  Paper,  bonds,  notes  and  other  debt
instruments,  tax  refunds  and  rights to  payment  in the  nature  of  General
Intangibles.

            "Security  Interest" shall have the meaning assigned to such term in
Section 2.1 hereof.

            "Senior  Debt" shall have the  meaning  assigned to such term in the
Notes.

            "Senior  Liens"  means the Liens  granted by the Company in favor of
the holders of the Senior Debt to secure the Senior Debt.

            "Supporting  Obligations"  means all supporting  obligations as such
term is defined in the UCC.

            "Trademark License" means any written agreement, now or hereafter in
effect,  granting  to any third  party any  right to use any  Trademark,  now or
hereafter  owned by the Company or which the Company  otherwise has the right to
license,  or  granting  to the  Company  any right to use any  Trademark  now or
hereafter  owned by any third party and all rights of the Company under any such
agreement.

            "Trademarks"  means  all of the  following  now  owned or  hereafter
acquired  by the  Company:  (a) all  trademarks,  service  marks,  trade  names,
corporate names, company names, business names, fictitious business names, trade
styles,  trade dress, logos, other source or business  identifiers,  designs and
general  intangibles  of like  nature,  now  existing  or  hereafter  adopted or
acquired,  all registrations and recordings  thereof,  and all registrations and
recording  applications filed in connection therewith,  including  registrations
and registration  applications in the United States Patent and Trademark Office,
any State of the United  States or any similar  offices in any other  country or
any political  subdivision  thereof,  and all  extensions  or renewals  thereof,
including  those used in the Company's  business  listed on Schedule IV attached
hereto and (b) all goodwill associated therewith or symbolized thereby.

            "UCC"  means the Uniform  Commercial  Code as in effect from time to
time in the state designated in Section 8.13 as the state whose laws govern this
Agreement or in any other state whose laws are held to govern this  Agreement or
any portion hereof.

                                      -6-
<PAGE>

      Section 1.2.   Other Terms.

            (a) All  capitalized  terms not otherwise  defined herein shall have
the meanings assigned to them in the Purchase Agreement.

            (b) All terms defined in the UCC (as defined herein) and not defined
in this Agreement shall have the meanings specified therein.

            (c) All accounting terms not otherwise defined herein shall have the
meanings assigned to them in accordance with GAAP.

      Section 1.3.   Cross References.

            (a)  All  references  in  this  Agreement  to  Articles,   Sections,
subsections,   Exhibits  and   Schedules,   shall  be  to  Articles,   Sections,
subsections,   Exhibits  and  Schedules  of  this  Agreement   unless  otherwise
explicitly specified.

            (b) All references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.

                                   ARTICLE II

                                Security Interest
                                -----------------

      Section 2.1.  Security Interest.

            (a) To secure the prompt and complete payment and performance to the
Collateral  Agent and the  Investors  of the  Obligations,  the  Company  hereby
collaterally assigns, pledges and grants to the Collateral Agent for its benefit
and for the ratable benefit of the Investors a continuing  security  interest in
and to the  Collateral,  whether now owned or existing or hereafter  acquired or
arising and wheresoever located, whether or not the same is subject to Article 9
of the UCC (the "Security Interest"). All of the Company's ledger sheets, files,
records,  books of  account,  business  papers  and  documents  relating  to the
Collateral shall, until delivered to or removed by the Collateral Agent, be kept
by the Company in trust for the Collateral Agent until all Obligations have been
paid in full.

            (b) The Company hereby  authorizes the Collateral  Agent to file one
or more financing statements  (including fixture filings),  amendments,  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 the  Company,  without  the
Company's  signature  appearing  thereon.  The Company  agrees to furnish to the
Collateral Agent promptly upon request any information  reasonably necessary for
the purpose of perfecting,  confirming,  continuing, enforcing or protecting the
Security  Interest  granted by the  Company.  The  parties  agree that a carbon,
photographic  or other  reproduction  of this Agreement shall be sufficient as a
financing statement. If any Receivable becomes evidenced by a promissory note or
any other  instrument  for the payment of money,  the Company  will  immediately
deliver such instrument to the Collateral Agent appropriately endorsed.

                                      -7-
<PAGE>

                                   ARTICLE III

                         Representations and Warranties
                         ------------------------------

      The Company represents and warrants to the Collateral Agent as follows:

      Section 3.1.  Title and Liens.  The  Collateral (a) is owned solely by the
Company  free and  clear of all  Liens  except  Permitted  Liens  and (b) is not
subject to any  agreement  prohibiting  the  granting of a security  interest or
requiring  notice of or consent to the  granting  of a  security  interest.  The
Company does not hold any commercial tort claims.

      Section  3.2.  Validity  of  Security  Interest.   The  Security  Interest
constitutes (a) a legal and valid Lien in all the Collateral, (b) subject to the
filing of the  financing  statements  described  in  Section  2.1(b)  hereof,  a
perfected  Lien in all Collateral in which a Lien may be perfected by the filing
of a financing  statement and (c) a perfected  Lien in all Collateral in which a
Lien may be perfected  upon the receipt and recording of this Agreement with the
United  States  Patent and  Trademark  Office and the  United  States  Copyright
Office, as applicable.

                                   ARTICLE IV

                                    Covenants
                                    ---------

      Section 4.1.  Change of Name;  Location of Collateral;  Records;  Place of
Business.  The  Company  shall not make any change  (a) in its name,  (b) in the
location of its chief executive  office,  its principal  place of business,  any
office in which it maintains books or records relating to Collateral owned by it
or any office facility at which  Collateral  owned by its is located  (including
the  establishment  of any such new office or facility)  from the  locations set
forth on Schedule I attached hereto, (c) in its identity or type of organization
or corporate  structure,  (d) in its Federal Taxpayer  Identification  Number or
organizational  identification number or (e) in its jurisdiction or organization
unless the Company provides the Collateral Agent at least twenty (20) days prior
written notice of such change.

      Section 4.2. Records.  The Company shall keep and maintain at its own cost
and expense,  satisfactory  and complete  records of the  Collateral  including,
without  limitation,  a record of any and all payments  received and any and all
credits  granted with respect to the  Collateral and all other dealings with the
Collateral.  Following  the  occurrence of an Event of Default,  the  Collateral
Agent  may at any time  verify  the  Company's  Receivables  utilizing  an audit
control company or any other agent of the Collateral Agent. The Collateral Agent
or the Collateral  Agent's designee may, following the occurrence of an Event of
Default,   notify  Customers  at  any  time,  at  the  Collateral  Agent's  sole
discretion,   of  the  Collateral   Agent's  security  interest  in  Receivables
(contracts,  instruments,  or chattel  paper as the case may be),  collect  them
directly  from the Customers or parties to  contracts,  instruments  and chattel
paper and charge the  collection  costs and expenses to the  Company's  account,
but,  unless and until the  Collateral  Agent does so or gives the Company other
instructions,  the Company  shall  collect all  Receivables  for the  Collateral
Agent,  receive all payments thereon for the Collateral Agent's benefit in trust
as the Collateral  Agent's  trustee and promptly  deliver them to the Collateral

                                      -8-
<PAGE>

Agent in their original form with all necessary  endorsements or, as directed by
the Collateral Agent, deposit such payments as directed by the Collateral Agent.
The Company shall place  notations  upon the Company's  books of account and any
financial  statement  prepared by the Company to disclose the Collateral Agent's
security  interest in the Collateral and shall provide the Collateral  Agent, as
requested by the Collateral Agent, such schedules,  documents and/or information
regarding the Collateral as the Collateral Agent may require.

      Section 4.3.  Protection of Collateral and Security Interest.  The Company
shall,  at its own  cost  and  expense,  take  any and  all  actions  reasonably
necessary to defend the Collateral against the claims and demands of all parties
and to defend the Security  Interest of the  Collateral  Agent in the Collateral
and the  priority  thereof  against any Lien other than a (a) Senior Lien or (b)
Permitted Lien.

      Section 4.4.  Further Assurances.

            (a) Any time and from time to time,  upon the written request of the
Collateral  Agent and at the sole  expense of the  Company,  the  Company  shall
promptly and duly execute and deliver any and all such further  instruments  and
documents and take such further  actions as the Collateral  Agent may reasonably
request to preserve,  protect and perfect the  Security  Interest and the rights
and remedies created hereby.

            (b) Without  limiting the generality of the  foregoing,  the Company
hereby   authorizes  the  Collateral  Agent  to  supplement  this  Agreement  by
supplementing  Schedule  II,  III or IV hereto or  adding  additional  schedules
hereto  to  specifically   identify  any  asset  or  item  that  may  constitute
Copyrights, Patents or Trademarks.

      Section  4.5.  Inspection  and  Examination.  At all times  during  normal
business  hours,  the  Collateral  Agent  shall  have the right to (a) visit and
inspect the Company's  properties and the Collateral and (b) inspect,  audit and
make  extracts  from the Company's  relevant  books and records  relating to the
Collateral.  The Company will  deliver to the  Collateral  Agent any  instrument
necessary for the  Collateral  Agent to obtain  records from any service  bureau
maintaining records for the Company.

      Section 4.6.  Liens.  The Company  shall not encumber,  mortgage,  pledge,
assign or grant any security  interest in any Collateral or any of the Company's
other assets to anyone other than the  Collateral  Agent for its benefit and for
the  ratable  benefit of the  Investors,  except  for (a)  Senior  Liens and (b)
Permitted Liens;

      Section 4.7.  Use and Disposition of Collateral. The Company shall (a) not
dispose of any of the Collateral  whether by sale, lease or otherwise except for
(i) the sale of  Inventory  in the  ordinary  course of  business,  and (ii) the
disposition  or transfer of obsolete  and  worn-out  Equipment  in the  ordinary
course of business  and (b) keep and maintain  the  Equipment in good  operating
condition,  except for  ordinary  wear and tear,  and shall make all  reasonably
necessary repairs and replacements thereof.

                                      -9-
<PAGE>

      Section 4.8. Risk of Loss; Insurance. The Company shall bear the full risk
of loss from any loss of any nature  whatsoever  with respect to the Collateral.
At it's own cost and expense in amounts and with carriers reasonably  acceptable
to the  Collateral  Agent,  it shall (a) keep all its insurable  properties  and
properties  in which it has an  interest  insured  against  the hazards of fire,
flood,  sprinkler leakage,  those hazards covered by extended coverage insurance
and such other  hazards,  and for such  amounts,  as is customary in the case of
companies  engaged in  businesses  similar to the Company's  including,  without
limitation,  public and  product  liability  insurance,  worker's  compensation,
insurance against larceny,  embezzlement or other criminal  misappropriation  of
insured's  officers and  employees  and  business  interruption  insurance;  (b)
furnish the Collateral Agent with (i) copies of all policies and evidence of the
maintenance  of such  policies at least  thirty (30) days before any  expiration
date,  and (ii)  appropriate  loss payable  endorsements  in form and  substance
satisfactory to the Collateral Agent,  naming the Collateral Agent as loss payee
and providing that as to the Collateral  Agent the insurance  coverage shall not
be impaired or  invalidated by any act or neglect of the Company and the insurer
will provide the Collateral Agent with at least thirty (30) days notice prior to
cancellation.  The Company  shall  instruct the  insurance  carriers that in the
event of any loss  thereunder,  the carriers shall make payment for such loss to
the Collateral Agent and not to the Company and the Collateral Agent jointly. If
any insurance losses are paid by check, draft or other instrument payable to the
Company and the Collateral  Agent jointly,  the Collateral Agent may endorse the
Company's name thereon and do such other things as the Collateral Agent may deem
advisable to reduce the same to cash.  Following  the  occurrence of an Event of
Default,  the  Collateral  Agent is hereby  authorized to adjust and  compromise
claims.  All loss  recoveries  received  by the  Collateral  Agent upon any such
insurance may be applied to the  Obligations,  in such order as the Investors in
their  sole  discretion  shall  determine.  Any  surplus  shall  be  paid by the
Collateral Agent to the Company or applied as may be otherwise  required by law.
Any deficiency  thereon shall be paid by the Company to the Collateral Agent, on
demand.

      Section  4.9. Covenants Regarding Patent, Trademark and Copyright
                    Collateral.

            (a) The Company  agrees that it will not,  nor will it permit any of
its licensees to, do any act, or omit to do any act, whereby any Patent material
to the Company's business may become invalidated or dedicated to the public, and
agrees that it shall continue to mark any products  covered by a Patent with the
relevant patent number as necessary and sufficient to establish and preserve its
maximum rights under applicable patent laws.

            (b) The  Company  (either  itself or through  its  licensees  or its
sublicensees) will, for each Trademark material to the Company's  business,  (i)
maintain  such  Trademark  in full force free from any claim of  abandonment  or
invalidity  for non-use unless the Company  decides in its  reasonable  business
judgment to abandon such  Trademark,  (ii)  maintain the quality of products and
services offered under such Trademark,  (iii) display such Trademark with notice
of federal or foreign  registration  to the extent  necessary and  sufficient to
establish  and preserve its maximum  rights  under  applicable  law and (iv) not
knowingly use or knowingly  permit the use of such Trademark in violation of any
third party rights.

            (c) The Company (either itself or through  licensees) will, for each
work covered by a Copyright,  continue to publish, reproduce, display, adopt and
distribute  the  work  with  appropriate   copyright  notice  as  necessary  and
sufficient  to  establish  and  preserve  its maximum  rights  under  applicable
copyright laws.

                                      -10-
<PAGE>

            (d) The Company  shall notify the  Collateral  Agent  promptly if it
knows or has reason to know that any Patent,  Trademark or Copyright material to
the Company's business may become abandoned, lost or dedicated to the public, or
of any adverse  determination  or development  (including the institution of, or
any such  determination  or development  in, any proceeding in the United States
Patent and  Trademark  Office,  United States  Copyright  Office or any court or
similar office of any country) regarding the Company's  ownership of any Patent,
Trademark or Copyright,  its right to register the same, or to keep and maintain
the same.

            (e) In no event  shall the  Company,  either  itself or through  any
agent,  employee,  licensee or  designee,  file an  application  for any Patent,
Trademark or Copyright (or for the  registration  of any Trademark or Copyright)
with the United  States  Patent and Trademark  Office,  United States  Copyright
Office (or any successor  thereof),  unless it promptly  informs the  Collateral
Agent, and, upon request of the Collateral Agent,  executes and delivers any and
all agreements,  instruments,  documents and papers as the Collateral  Agent may
request to evidence the  Collateral  Agent's  security  interest in such Patent,
Trademark or Copyright,  and the Company hereby appoints the Collateral Agent as
its  attorney-in-fact  to  execute  and file  such  writings  for the  foregoing
purposes,  all acts of such attorney being hereby  ratified and confirmed;  such
power, being coupled with an interest, is irrevocable.

            (f) The Company will take all  necessary  steps that are  consistent
with the  practice  in any  proceeding  before  the  United  States  Patent  and
Trademark Office,  United States Copyright Office (or any successor  thereof) to
maintain  and pursue each  material  application  relating to the United  States
Patents,  Trademarks  and/or  Copyrights  (and to obtain the  relevant  grant or
registration)  and to maintain  each issued United States Patent and each United
States  registration of the Trademarks and Copyrights  material to the Company's
business,  including timely filings of applications  for renewal,  affidavits of
use,  affidavits of  incontestability  and payment of maintenance  fees, and, if
consistent with good business judgment, to initiate opposition, interference and
cancellation proceedings against third parties.

            (g) In the event that the  Company  has  reason to believe  that any
Collateral  consisting  of a Patent,  Trademark  or  Copyright  material  to the
Company's  business has been or is about to be  infringed,  misappropriated,  or
diluted by a third party, the Company promptly shall notify the Collateral Agent
and shall promptly sue for infringement,  misappropriation or dilution, and take
such other actions as the Company in its reasonable  business judgment deems are
appropriate under the circumstances to protect such Collateral.

            (h) Upon and during the continuance of an Event of Default, upon the
request of the Collateral Agent, the Company shall obtain all requisite consents
or  approvals  by the  licensor of each  Copyright  License,  Patent  License or
Trademark License to effect the assignment of all the Company's right, title and
interest thereunder to the Collateral Agent or its designee.

      Section 4.10.  Other Actions.  In order to further insure the  attachment,
perfection and priority of, and the ability of the Collateral  Agent to enforce,
the Collateral Agent's security

                                      -11-
<PAGE>

interest in the Collateral,  the Company  agrees,  in each case at the Company's
own  expense,  to take the  following  actions  with  respect  to the  following
Collateral:

            (a) Deposit  Accounts.  For each Deposit Account that the Company at
any time opens or maintains and that is included in the Collateral,  the Company
shall, at the Collateral Agent's request and option, pursuant to an agreement in
form and substance  reasonably  satisfactory to the Collateral Agent, either (i)
cause the depositary bank to agree to comply at any time with  instructions from
the Collateral  Agent to such depositary bank directing the disposition of funds
from time to time credited to such Deposit  Account,  without further consent of
the Company,  or (ii) arrange for the Collateral Agent to become the customer of
the depositary bank with respect to the Deposit Account,  with the Company being
permitted,  only with the consent of the Collateral Agent, to exercise rights to
withdraw funds from such Deposit  Account.  The Collateral Agent agrees with the
Company  that the  Collateral  Agent  shall  not give any such  instructions  or
withhold any withdrawal rights from the Company,  unless an Event of Default has
occurred and is  continuing,  or, after giving  effect to any  withdrawal  would
occur.  The  provisions  of this  paragraph  shall not apply to (A) any  Deposit
Account for which the Company, the depositary bank and the Collateral Agent have
entered into a cash collateral agreement specially negotiated among the Company,
the depositary bank and the Collateral  Agent for the specific purpose set forth
therein  and  (B)  Deposit  Accounts  for  which  the  Collateral  Agent  is the
depositary bank.

            (b)  Investment  Property.  If the Company shall at any time hold or
acquire any certificated securities, the Company shall forthwith endorse, assign
and deliver the same to the Collateral Agent for its benefit and for the ratable
benefit  of the  Investors,  accompanied  by such  instruments  of  transfer  or
assignment duly executed in blank as the Collateral  Agent may from time to time
specify.  If any  securities  now or  hereafter  acquired  by  the  Company  are
uncertificated  and are issued to the  Company or its  nominee  directly  by the
issuer  thereof,  the Company  shall  immediately  notify the  Collateral  Agent
thereof  and, at the  Collateral  Agent's  request  and  option,  pursuant to an
agreement in form and substance satisfactory to the Collateral Agent, either (y)
cause the issuer to agree to comply with  instructions from the Collateral Agent
as to such  securities,  without further consent of the Company or such nominee,
or (z) arrange for the Collateral  Agent to become the  registered  owner of the
securities. If any securities, whether certificated or uncertificated,  or other
investment  property  now or  hereafter  acquired by the Company are held by the
Company  or  its  nominees  through  a  securities   intermediary  or  commodity
intermediary,  the Company shall immediately notify the Collateral Agent thereof
and, at the Collateral  Agent's request and option,  pursuant to an agreement in
form and substance  satisfactory to the Collateral Agent,  either (i) cause such
securities  intermediary or (as the case may be) commodity intermediary to agree
to comply with  entitlement  orders or other  instructions  from the  Collateral
Agent to such securities  intermediary as to such securities or other investment
property,  or (as the case may be) to apply any value  distributed on account of
any commodity  contract as directed by the  Collateral  Agent to such  commodity
intermediary,  in each case  without  further  consent  of the  Company  or such
nominee,  or (ii) in the case of financial assets or other  investment  property
held  through a securities  intermediary,  arrange for the  Collateral  Agent to
become the entitlement holder with respect to such investment property, with the
Company  being  permitted,  only with the consent of the  Collateral  Agent,  to
exercise rights to withdraw or otherwise deal with such investment property. The
Collateral  Agent  agrees

                                      -12-
<PAGE>

with the Company that the Collateral  Agent shall not give any such  entitlement
orders,  instructions or directions to any such issuer,  securities intermediary
or commodity intermediary, and shall not withhold its consent to the exercise of
any withdrawal or dealing rights by the Company,  unless an Event of Default has
occurred and is continuing,  or, after giving effect to any such  investment and
withdrawal  rights would occur. The provisions of this paragraph shall not apply
to  any  financial  assets  credited  to a  securities  account  for  which  the
Collateral Agent is the securities intermediary.

            (c)  Letter  of  Credit  Rights.  If the  Company  is at any  time a
beneficiary under a letter of credit (other than any letter credit  constituting
a Supporting  Obligation) now or hereafter  issued in favor of the Company,  the
Company shall promptly  notify the Collateral  Agent thereof and, at the request
and option of the Collateral Agent, the Company shall,  pursuant to an agreement
in form and substance  reasonably  satisfactory to the Collateral Agent,  either
(i) arrange for the issuer and any confirmer to such letter of credit to consent
to an  assignment to the  Collateral  Agent of the proceeds of any drawing under
the  letter of credit or (ii)  arrange  for the  Collateral  Agent to become the
transferee  beneficiary  of the  letter of  credit,  with the  Collateral  Agent
agreeing,  in each case,  that the  proceeds of any drawing  under the letter of
credit are to be applied to satisfy the Obligations.

            (d) Commercial Tort Claims. If the Company shall at any time hold or
acquire a  commercial  tort claim,  the  Company  shall  immediately  notify the
Collateral Agent in a writing signed by the Company of the brief details thereof
and grant to the Collateral  Agent in such writing a security  interest  therein
for its benefit and for the ratable benefit of the Investors and in the proceeds
thereof,  all upon the terms of this Agreement,  with such writing to be in form
and substance reasonably satisfactory to the Collateral Agent.

      Section  4.11.   Information.   The  Company  shall  promptly  inform  the
Collateral  Agent in writing of: (a) the  commencement  of all  proceedings  and
investigations  by or  before  and/or  the  receipt  of any  notices  from,  any
governmental  or  nongovernmental  body and all actions and  proceedings  in any
court or before  any  arbitrator  against  or in any way  concerning  any of the
Collateral;  (b) any Event of Default or Default; (c) any change in the location
of the  Company's  executive  offices;  (d) any  change in the  location  of the
Company's  Inventory  or  Equipment  from the  locations  listed on  Schedule  I
attached  hereto;  (h)  any  additional  Patents,   Copyrights,   Trademarks  or
commercial  tort  claims not listed on  Schedule  II,  III, IV or V; and (i) any
additional Licenses, tradenames, corporate names or company names.

                                    ARTICLE V

                                Power of Attorney
                                -----------------

      The Company hereby irrevocably  appoints the Collateral Agent or any other
Person   whom   the   Collateral   Agent   may   designate   as  the   Company's
attorney-in-fact,  with  full  power  and  authority  in place  and stead of the
Company and in the name of the Company or in its own name to: (a)  following the
occurrence  of an Event of Default,  endorse the  Company's  name on any checks,
notes,  acceptances,  money orders, drafts or other forms of payment or security
that  may  come  into the  Collateral  Agent's  possession;  (b)  following  the
occurrence  of an Event of

                                      -13-
<PAGE>

Default,  sign the Company's  name on any invoice or bill of lading  relating to
any  Receivables,   drafts  against  customers,  schedules  and  assignments  of
Receivables,  notices  of  assignment,  financing  statements  and other  public
records,  verifications  of  account  and  notices  to or  from  Customers;  (c)
following the occurrence of an Event of Default, verify the validity,  amount or
any other matter  relating to any  Receivable by mail,  telephone,  telegraph or
otherwise with  Customers;  (d) following the occurrence of an Event of Default,
execute  customs  declarations  and such other  documents  as may be required to
clear  Inventory  through United States  Customs;  (e) do all things  reasonably
necessary to carry out this  Agreement  and all other  Purchase  Documents;  (f)
continue any insurance  existing pursuant to the terms of this Agreement and pay
all or any part of the  premium  therefor  and the cost  thereof;  and (g) on or
after the occurrence and  continuation  of an Event of Default,  notify the post
office  authorities  to change the address for delivery of the Company's mail to
an address designated by the Collateral Agent, and to receive,  open and dispose
of all mail addressed to the Company.  The Company hereby  ratifies and approves
all acts taken by the attorney in accordance with the provisions of this Article
V. The powers  conferred on the Collateral Agent hereunder are solely to protect
its  interests  in the  Collateral  and  shall  not  impose  any duty upon it to
exercise any such powers.  In exercising any such powers,  the Collateral  Agent
shall act in a commercially  reasonable manner. Neither the Collateral Agent nor
the  attorney  will be  liable  for any acts or  omissions  or for any  error of
judgment  or mistake  of fact or law  unless  such  liability  results  from the
Collateral  Agent's or the  attorney's  gross (not mere)  negligence  or willful
misconduct.  This power, being coupled with an interest,  is irrevocable so long
as any  Receivable  which is  assigned to the  Collateral  Agent or in which the
Collateral  Agent  has  a  security   interest  remains  unpaid  and  until  the
Obligations have been fully satisfied.

                                   ARTICLE VI

                Events of Default, Rights and Remedies
                --------------------------------------

      Section 6.1.  Events of Default.  The occurrence of any one or more of the
following events shall constitute an "Event of Default":

            (a) the  occurrence of an "Event of Default" as such term is defined
in any of the Notes; or

            (b) the Security  Interest  for any reason  ceases to be or is not a
valid and perfected  Lien having a first priority  interest  except as expressly
permitted hereunder.

      Section 6.2. Rights and Remedies.  Upon the occurrence and continuation of
any  Event of  Default,  the  Collateral  Agent  shall  have the right to demand
repayment in full of all Obligations, whether or not otherwise due (in such case
the  Collateral  Agent may deposit any and all such  amounts  realized in a cash
collateral  deposit  account to be maintained as security for the  Obligations).
Until all  Obligations  have been fully  satisfied,  the Collateral  Agent shall
retain its security interest in all Collateral. The Collateral Agent shall have,
in addition to all other rights  provided  herein,  the rights and remedies of a
lender  under the UCC,  and under  other  applicable  law,  all other  legal and
equitable  rights  to which the  Collateral  Agent  may be  entitled,  including
without limitation, the right to take immediate possession of the Collateral, to
require the Company to assemble the Collateral, at the Company's expense, and to
make  it  available  to

                                      -14-
<PAGE>

the  Collateral  Agent at a place  designated by the  Collateral  Agent which is
reasonably  convenient  to both  parties and to enter any of the Premises of the
Company or wherever the  Collateral  shall be located,  with or without force or
process of law, and to keep and store the same any such premises until sold (and
in the case of any of the  Premises or any other  property of the  Company,  the
Company agrees not to charge the Collateral Agent for storage thereof). Further,
the Collateral  Agent may, at any time or times after the occurrence of an Event
of Default,  sell and deliver all Collateral held by or for the Collateral Agent
in one or more  parcels  at public or  private  sale for  cash,  upon  credit or
otherwise,  at such prices and upon such terms as the Collateral  Agent,  in the
Collateral Agent's sole discretion,  deems advisable or the Collateral Agent may
otherwise  recover upon the Collateral in any commercially  reasonable manner as
the Collateral Agent, in its sole discretion, deems advisable. Except as to that
part of the Collateral  which is perishable or threatens to decline  speedily in
nature or is of a type customarily sold on a recognized  market, the requirement
of reasonable  notice shall be met if such notice is mailed  postage  prepaid to
the Company at the Company's address as shown in the Collateral Agent's records,
at least ten (10)  days  before  the time of the event of which  notice is being
given.  The Collateral  Agent may be the purchaser at any sale, if it is public.
Until the Collateral Agent is able to effect a sale, lease, or other disposition
of  Collateral,  the  Collateral  Agent  shall  have the right to use or operate
Collateral, or any part thereof, to the extent that it deems appropriate for the
purpose of preserving  Collateral  or its value or for any other purpose  deemed
appropriate  by the  Collateral  Agent.  The  Collateral  Agent  shall  have  no
obligation  to the Company to maintain or preserve  the rights of the Company as
against  third  parties with respect to  Collateral  while  Collateral is in the
possession of the Collateral  Agent.  The Collateral Agent may, if it so elects,
seek the  appointment  of a receiver or keeper to take  possession of Collateral
and to enforce  any of the  Collateral  Agent's  remedies  with  respect to such
appointment  without prior notice or hearing. In connection with the exercise of
the foregoing  remedies,  the Collateral Agent is granted  permission to use (a)
all of the Company's  Intellectual  Property  which are used in connection  with
Inventory  for the purpose of disposing of such  Inventory and (b) any Equipment
for the purpose of completing the manufacture of unfinished  goods. The proceeds
of sale  shall be applied  first to all costs and  expenses  of sale,  including
attorneys'  fees,  and second to the payment (in  whatever  order the  Investors
elects) of all  Obligations.  The Collateral Agent will return any excess to the
Company and the Company shall remain liable to the Investors for any deficiency.

      Section  6.3.  Grant of  License  to Use  Intellectual  Property.  For the
purpose of enabling the Collateral  Agent to exercise  rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully  entitled to
exercise such rights and remedies,  the Company  hereby grants to the Collateral
Agent for its  benefit  and for the  benefit of the  Investors  an  irrevocable,
non-exclusive   license   (exercisable  without  payment  of  royalty  or  other
compensation to the Company) to use, license or sublicense any of the Collateral
consisting  of  Intellectual  Property  now owned or  hereafter  acquired by the
Company,  and  wherever the same may be located,  and  including in such license
reasonable  access  to all  media  in which  any of the  licensed  items  may be
recorded  or stored  and to all  computer  software  and  programs  used for the
compilation or printout thereof. The use of such license by the Collateral Agent
shall be exercised,  at the option of the Collateral  Agent, upon the occurrence
and during the  continuation of an Event of Default;  provided that any license,
sublicense  or  other  transaction  entered  into  by the  Collateral  Agent  in
accordance  herewith  shall be  binding  upon the  Company  notwithstanding  any
subsequent cure of an Event of Default.

                                      -15-
<PAGE>

                                   ARTICLE VII

                                  Subordination
                                  -------------

      The Security  Interest  granted  hereunder  upon the  Collateral  shall be
subordinate to the Liens granted in connection  with the Senior Debt pursuant to
the terms of an intercreditor  agreement among the Company, the Collateral Agent
and the holders of the Senior Debt which  shall be  requested  by the holders of
the Senior Debt and shall be in form and substance  reasonably  satisfactory  to
the Collateral Agent and the other Investors.

                                  ARTICLE VIII

                                  Miscellaneous
                                  -------------

      Section 8.1. No Waiver;  Cumulative  Remedies.  No failure or delay by the
Collateral  Agent in exercising any right,  power or remedy under this Agreement
shall operate as a waiver thereof;  nor shall any single or partial  exercise of
any such right,  power or remedy preclude any other or further  exercise thereof
or the exercise of any other right,  power or remedy under this  Agreement.  The
remedies  provided in this  Agreement  are  cumulative  and not exclusive of any
remedies provided by law.

      Section 8.2.  Waivers.  The Company waives  presentment and protest of any
instrument and notice thereof,  notice of default and all other notices to which
the Company might otherwise be entitled.

      Section 8.3.  Security  Interest  Absolute.  All rights of the  Collateral
Agent hereunder, the Security Interest and all the Obligations shall be absolute
and unconditional  irrespective of (a) any lack of validity or enforceability of
the Purchase Agreement,  any other Purchase Document, any agreement with respect
to any of the Obligations or any other  agreement or instrument  relating to any
of the foregoing,  (b) any change in the time, manner or place of payment of, or
in any other term of, all of any of the  Obligations,  or any other amendment or
waiver of or any consent to any departure from the Purchase Agreement, any other
Purchase  Document  or any other  agreement  or  instrument,  (c) any  exchange,
release or  non-perfection  of any Lien on other  collateral,  or any release or
amendment or waiver of or consent under or departure from any guarantee securing
or guaranteeing  all or any of the  Obligations,  or (d) any other  circumstance
that might otherwise  constitute a defense  available to, or a discharge of, the
Company in respect of the Obligations or this Agreement.

      Section 8.4.  Amendments,  Etc. Any term of this  Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular  instance and either  retroactively or  prospectively),  only
with the written consent of the Company and the Collateral Agent.

                                      -16-
<PAGE>

      Section 8.5. Notices.  Except as otherwise  expressly provided herein, any
notice or request  hereunder  shall be given in accordance with the terms of the
Purchase Agreement.

      Section 8.6.  Collateral.  This Agreement  does not  contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the Company
is  entitled  to any surplus and shall  remain  liable for any  deficiency.  The
Collateral Agent's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed  fulfilled  if it exercises  reasonable  care in
physically keeping such Collateral,  or in the case of Collateral in the custody
or possession of a bailee or other third Person,  exercises  reasonable  care in
the selection of the bailee or other third Person, and the Collateral Agent need
not  otherwise  preserve,  protect,  insure  or  care  for any  Collateral.  The
Collateral  Agent shall not be  obligated to preserve any rights the Company may
have  against  prior  parties,  to  realize on the  Collateral  at all or in any
particular  manner or order or to apply any cash  proceeds of the  Collateral in
any particular order of application.

      Section 8.7. Costs and Expenses; Indemnification.

            (a) The Company shall pay all of the Collateral  Agent's  reasonable
out-of-pocket costs and expenses,  including without limitation  reasonable fees
and disbursements of counsel and appraisers, in connection with the preparation,
execution and delivery of this Agreement and in connection  with the prosecution
or defense of any action,  contest,  dispute,  suit or proceeding concerning any
matter in any way arising out of, related to or connected  with this  Agreement.
The  Company  shall  also  pay  all  of  the   Collateral   Agent's   reasonable
out-of-pocket costs and expenses, including, without limitation, reasonable fees
and disbursements of counsel, in connection with (a) the preparation,  execution
and  delivery  of any  waiver,  any  amendment  thereto or consent  proposed  or
executed in connection with the transactions contemplated by this Agreement, (b)
the Collateral Agent's obtaining  performance of the Company's obligations under
this Agreement, including, but not limited to, the enforcement or defense of the
Security Interest,  assignments of rights and Liens hereunder as valid perfected
security interests, (c) any attempt to inspect, verify, protect,  collect, sell,
liquidate or otherwise  dispose of any Collateral,  and (d) any consultations in
connection with any of the foregoing.

            (b)  Any  such  amounts  payable  as  provided  hereunder  shall  be
additional  Obligations  secured  hereby  and  by  the  other  Agreements.   The
provisions  of this  Section 8.7 shall  remain  operative  and in full force and
effect  regardless  of the  termination  of this  Agreement  or any of the other
Agreements,  the  consummation  of the  transactions  contemplated  hereby,  the
repayment of any of the Obligations,  the invalidity or  unenforceability of any
term or  provision  of this  Agreement or any other  Purchase  Document,  or any
investigation  made by or on behalf of the  Collateral  Agent.  All  amounts due
under this Section 8.7 shall be payable on written demand therefor.

      Section 8.8. Regarding Collateral Agent.

            (a)  Each  Investor  hereby  designates   Palisade  to  act  as  the
Collateral  Agent for such Investor under this  Agreement.  Each Investor hereby
irrevocably  authorizes the  Collateral  Agent to take such action on its behalf
under the  provisions  of this  Agreement  and to  exercise  such  powers and to
perform such duties  hereunder as are  specifically  delegated to or required of

                                      -17-
<PAGE>

the Collateral Agent by the terms hereof and such other powers as are reasonably
incidental  thereto and the Collateral Agent shall hold all Collateral  received
pursuant  to this  Agreement,  for the  ratable  benefit of the  Investors.  The
Collateral  Agent may  perform  any of its duties  hereunder  by or through  its
agents or employees. As to matters not expressly provided for in this Agreement,
the  Collateral  Agent may exercise any  discretion  or take any action it deems
reasonable and necessary under the  circumstances and the Collateral Agent shall
be fully protected in so acting.

            (b) Nature of Duties.  The Collateral  Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement. Neither the
Collateral Agent nor any of its officers,  directors,  employees or agents shall
be (i) liable for any action  taken or omitted by them as such  hereunder  or in
connection  herewith,  unless  caused by their  gross (not mere)  negligence  or
willful  misconduct,  or  (ii)  responsible  in any  manner  for  any  recitals,
statements,  representations  or  warranties  made by the Company or any officer
thereof contained in this Agreement or in any certificate,  report, statement or
other  document  referred to or provided  for in, or received by the  Collateral
Agent under or in connection  with,  this Agreement or for the value,  validity,
effectiveness,  genuineness,  enforceability or sufficiency of this Agreement or
for any failure of the Company to perform its obligations hereunder.  Collateral
Agent  shall not be under any  obligation  to any  Investor to  ascertain  or to
inquire as to the observance or  performance of any of the agreements  contained
in, or conditions of, this  Agreement,  or to inspect the  properties,  books or
records of the Company.

            (c)  Indemnification.  To the  extent  the  Collateral  Agent is not
reimbursed  and  indemnified  by the Company,  the Investors  will reimburse and
indemnify Agent from and against any and all liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any kind or  nature  whatsoever  which  may be  imposed  on,  incurred  by or
asserted against the Collateral Agent in performing its duties hereunder,  or in
any way  relating  to or  arising  out of this  Agreement;  provided  that,  the
Investors shall not be liable for any portion of such liabilities,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements  resulting from the Collateral Agent's gross (not mere) negligence
or willful misconduct.

      Section 8.9. Counterparts; Faxes. This Agreement may be executed in two or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute one and the same  instrument.  This Agreement may also
be executed via facsimile, which shall be deemed an original.

      Section  8.10.  Binding  Effect;  Assignment;   Complete  Agreement.  This
Agreement  shall be binding upon and inure to the benefit of the Company and the
Collateral  Agent and their respective  successors and assigns,  except that the
Company shall not have the right to assign or transfer its rights or obligations
hereunder or any interest  herein or in the Collateral  (and any such assignment
or  transfer  shall be void).  Upon a  transfer  by the  Collateral  Agent,  the
Collateral Agent shall be released from all responsibility for the Collateral to
the extent same is assigned to any transferee.

                                      -18-
<PAGE>

      Section 8.11. Severability of Provisions.  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.

      Section 8.12. Titles and Subtitles.  The titles and subtitles used in this
Agreement  are  used  for  convenience  only  and  are not to be  considered  in
construing or interpreting this Agreement.

      Section  8.13.  Governing  Law. This  Agreement  shall be governed by, and
construed in accordance with, the internal laws of the State of New York without
regard to the  choice of law  principles  thereof.  Each of the  parties  hereto
irrevocably submits to the co-exclusive  jurisdiction of the courts of the State
of New York located in New York County and the United States  District Court for
the  Southern  District  of New  York  for  the  purpose  of any  suit,  action,
proceeding  or judgment  relating to or arising  out of this  Agreement  and the
transactions  contemplated  thereby.  Service of process in connection  with any
such suit,  action or proceeding may be served on each party hereto  anywhere in
the world by the same methods as are  specified  for the giving of notices under
this  Agreement.  Each  of  the  parties  hereto  irrevocably  consents  to  the
jurisdiction of any such court in any such suit, action or proceeding and to the
laying  of venue  in such  court.  Each  party  hereto  irrevocably  waives  any
objection to the laying of venue of any such suit, action or proceeding  brought
in such courts and  irrevocably  waives any claim that any such suit,  action or
proceeding brought in any such court has been brought in an inconvenient forum.

      Section 8.14.  Construction.  The parties  acknowledge that each party and
its  counsel  have  reviewed  this   Agreement  and  that  the  normal  rule  of
construction to the effect that any  ambiguities are to be resolved  against the
drafting party shall not be employed in the  interpretation of this Agreement or
any amendments, schedules or exhibits hereto.

      Section  8.15  Recapture.  Anything  in  this  Agreement  to the  contrary
notwithstanding,  if the  Collateral  Agent  receives any payment or payments on
account of the  Obligations,  which  payment or payments or any part thereof are
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
and/or  required to be repaid to a trustee,  receiver,  or any other party under
the United States  Bankruptcy  Code,  as amended,  or any other federal or state
bankruptcy,  reorganization,   moratorium  or  insolvency  law  relating  to  or
affecting  the  enforcement  of  creditors'  rights  generally,  common  law  or
equitable  doctrine,  then to the extent of any sum not finally  retained by the
Collateral  Agent,  the Company's  obligations to the Collateral  Agent shall be
reinstated  and this  Agreement  shall  remain in full  force and  effect (or be
reinstated)  until payment shall have been made to the Collateral  Agent,  which
payment shall be due on demand.

      Section  8.16  Termination.  This  Agreement  and the  Security  Interests
created hereby shall  terminate and the Company shall be entitled to the return,
at the Company's expense,  of such of the Collateral as has not theretofore been
sold or  otherwise  applied  pursuant  to  this  Agreement  which  may be in the
possession of the Collateral  Agent,  upon the earlier of (a) payment in full of
the Obligations and irrevocable  termination of the Purchase Agreement,  and (b)
such  time as all of the  following  claims  has  been  finally  and  completely
settled,  adjudicated,  dismissed or otherwise  resolved  with  prejudice to the
Company and all of its Subsidiaries

                                      -19-
<PAGE>

without  any  material  award,  cost,  penalty,  charge or other  expense  being
incurred  by, or  assessed  against  the  Company or any  Subsidiary:  (i) those
certain tax  assessments  pending in Brazil against  O'Gara-Hess & Eisenhardt do
Brasil LTDA;  (ii) that certain matter pending in the Ontario  Superior Court of
Justice,  encaptioned  HSBC Securities  (Canada) Inc. v. Davies,  Ward & Beck v.
Lindquist  Avey  Macdonald  Baskerville  Inc, et al.,  and (iii)  those  matters
identified  in Item 1 of the  Company's  Quarterly  Report  on Form 10-Q for the
period ending June 30, 2001.

                           [Signature Page to Follow]

                                      -20-
<PAGE>

      IN WITNESS  WHEREOF,  the parties have executed  this  Agreement or caused
their duly  authorized  officers to execute this  Agreement as of the date first
above written.

                               KROLL INC., as the Company

                               By: /s/
                                  ---------------------------------------
                                  Name:
                                  Title:

                               PALISADE CONCENTRATED EQUITY PARTNERSHIP, L.P.
                               By: Palisade Concentrate Holdings, LLC, its
                                   General Partner, as the Collateral
                                   Agent and an Investor

                               By: /s/
                                  ---------------------------------------
                                  Name:  Mark Hoffman
                                  Title: Member

                               PEGASUS PARTNERS II, L.P.,
                               By: Pegasus Investors II GP, LLC, its General
                                   Partner, as an Investor

                               By: /s/
                                  ---------------------------------------
                                  Name:
                                  Title:

                                      -21-

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