10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                         to                                         

Commission File Number 0-28000

PRG-Schultz International, Inc.

(Exact name of registrant as specified in its charter)

Georgia (State or other jurisdiction of incorporation or organization)	58-2213805 (I.R.S. Employer Identification No.)
600 Galleria Parkway Suite 100 Atlanta, Georgia (Address of principal executive offices)	30339-5986 (Zip Code)

Registrant’s telephone number, including area code: (770) 779-3900

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
Preferred Stock Purchase Rights

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

     Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

     o Large accelerated filer      þ Accelerated filer       o Non-accelerated filer

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

     The aggregate market value, as of June 30, 2005, of common shares of the registrant held by non-affiliates of the registrant was approximately $120.7 million, based upon the last sales price reported that date on The Nasdaq Stock Market of $2.82 per share. (Aggregate market value is estimated solely for the purposes of this report and shall not be construed as an admission for the purposes of determining affiliate status.)

     Common shares of the registrant outstanding as of February 28, 2006 were 62,112,307 including shares held by affiliates of the registrant.

Documents Incorporated by Reference

     Part III: Portions of Registrant’s Proxy Statement relating to the Company’s 2006 Annual Meeting of Shareholders.

PRG-SCHULTZ INTERNATIONAL, INC.

FORM 10-K
December 31, 2005

		Page
Part I
Item 1.	Business		1
Item 1A.	Risk Factors		10
Item 1B.	Unresolved Staff Comments		17
Item 2.	Properties		17
Item 3.	Legal Proceedings		17
Item 4.	Submission of Matters to a Vote of Security Holders		18
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
	Purchases of Equity Securities		19
Item 6.	Selected Consolidated Financial Data		19
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations		22
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		45
Item 8.	Financial Statements and Supplementary Data		46
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		79
Item 9A.	Controls and Procedures		79
Item 9B.	Other Information		83
Part III
Item 10.	Directors and Executive Officers of the Registrant		83
Item 11.	Executive Compensation		83
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related
	Stockholder Matters		83
Item 13.	Certain Relationships and Related Transactions		83
Item 14.	Principal Accountant Fees and Services		83
Part IV
Item 15.	Exhibits, Financial Statement Schedules		84
Signatures			89
EX-4.9 FIFTH AMENDMENT TO SHAREHOLDER PROTECTION RIGHTS
EX-10.37 CHANGE OF CONTROL AND RESTRICTIVE COVENANT AGREEMENT
EX-10.38 CHANGE OF CONTROL AND RESTRICTIVE COVENANT AGREEMENT
EX-10.39 CHANGE OF CONTROL AND RESTRICTIVE COVENANT AGREEMENT
EX-10.40 CHANGE OF CONTROL AND RESTRICTIVE COVENANT AGREEMENT
EX-10.41 SUMMARY OF COMPENSATION ARRANGEMENTS
EX-10.42 SUMMARY OF COMPENSATION ARRANGEMENTS
EX-10.59 AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.60 VESTING ON DECEMBER 15, 2005
EX-10.61 CREDIT AGREEMENT
EX-10.62 SECURITY AGREEMENT
EX-10.63 PLEDGE AGREEMENT
EX-10.64 FORBEARANCE AGREEMENT
EX-10.65 AMENDMENT TO FORBEARANCE AGREEMENT
EX-10.66 RESTRUCTURING SUPPORT AGREEMENT
EX-10.67 AMENDMENT TO RETAINER AGREEMENT
EX-10.68 FORM OF EMPLOYMENT AGREEMENT
EX-10.69 EMPLOYMENT AGREEMENT
EX-10.70 FORM OF EXPATRIATE ASSIGNMENT AGREEMENT
EX-10.71 HOULIHAN LOKEY AGREEMENT
EX-10.72 AMENDMENT LETTER WITH HOULIHAN LOKEY
EX-10.73 ROTHSCHILD INC. AGREEMENT
EX-10.74 LETTER AGREEMENT WITH ROTHSCHILD INC.
EX-21.1 SUBSIDIARIES OF THE REGISTRANT
EX-23.1 CONSENT OF KPMG LLP
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO
EX-32.1 SECTION 906, CERTIFICATION OF THE CEO AND CFO

PART I

ITEM 1. Business

     The following discussion includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are at times identified by words such as “plans,” “intends,” “expects,” or “anticipates” and words of similar effect and include statements regarding the Company’s financial and operating plans and goals. These forward-looking statements include any statements that cannot be assessed until the occurrence of a future event or events. Actual results may differ materially from those expressed in any forward-looking statements due to a variety of factors, including but not limited to those discussed herein and below under Item 1A. Risk Factors.

     PRG-Schultz International, Inc. and subsidiaries (collectively, the “Company”), a United States of America based company, incorporated in the State of Georgia in 1996, is the leading worldwide provider of recovery audit services to large and mid-size businesses having numerous payment transactions with many vendors. These businesses include, but are not limited to:

• retailers such as discount, department, specialty, grocery and drug stores;

• manufacturers of high-tech components, pharmaceuticals, consumer electronics, chemicals and aerospace and medical products;

• wholesale distributors of computer components, food products and pharmaceuticals; and

• service providers such as communications providers, transportation providers and financial institutions.

     In businesses with large purchase volumes and continuously fluctuating prices, some small percentage of erroneous overpayments to vendors is inevitable. Although these businesses process the vast majority of payment transactions correctly, a small number of errors occur. In the aggregate, these transaction errors can represent meaningful “lost profits” that can be particularly significant for businesses with relatively small profit margins. The Company’s trained, experienced industry specialists use sophisticated proprietary technology and advanced recovery techniques and methodologies to identify overpayments to vendors. Additionally, in conjunction with its recovery audit services, these specialists review clients’ current procurement and payment processes, and apply their expertise and knowledge of industry best practices to assist clients in improving those processes.

     Under virtually all of its client contracts, the Company receives a contractual percentage of overpayments and other savings it identifies and its clients recover or realize. In other instances, the Company receives a fee for specific services provided.

     The Company currently provides services to clients in over 30 countries. For financial reporting purposes, in 2005, the Company had two reportable operating segments, the Accounts Payable Services segment and the Meridian VAT Reclaim (“Meridian”) segment. See Note 5 of Notes to Consolidated Financial Statements included in Item 8. of this Form 10-K for worldwide operating segment disclosures.

Conclusion of Evaluation of Strategic Alternatives

     On June 7, 2005, the Company announced that its Board of Directors had concluded the evaluation of the Company’s strategic alternatives including the potential sale of the Company that was previously announced in October 2004. The Board, in consultation with its financial advisor, CIBC World Markets Corp., through a special committee established for that purpose, carefully evaluated the Company’s options and unanimously determined that, at that time, the best interests of its shareholders would not be served by continuing to pursue a strategic transaction.

Retirement of John M. Cook, Chairman, President and CEO, and John M. Toma, Vice Chairman, and Appointment of James B. McCurry as President and CEO and David A. Cole as Non-executive Chairman.

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     On June 7, 2005, the Company announced that John M. Cook, the Company’s Chairman, President and Chief Executive Officer, informed the Board of Directors of his decision to retire as Chairman, President and Chief Executive Officer, once a successor was found. Mr. Cook subsequently retired on July 31, 2005. The Company’s Vice Chairman, John M. Toma, also retired at that time.

     On July 20, 2005, the Company announced that its Board of Directors had unanimously elected James B. McCurry to succeed John M. Cook as President and Chief Executive Officer of the Company, effective July 25, 2005. The Company also announced the appointment of David A. Cole, a Director of the Company since February 2003, as non-executive Chairman of the Board, effective July 25, 2005.

Operational Restructuring

     On August 19, 2005, the Company announced that it had taken the initial step in implementing an expense restructuring plan, necessitated by the Company’s declining revenue trend over the previous two and one-half years. Revenues for the years 2003, 2004 and 2005 were $367.4 million, $350.6 million and $292.2 million, respectively. With revenues decreasing in 2003, 2004 and 2005, the Company’s selling, general and administrative expenses had increased as a percentage of revenue in each period (33.6%, 35.5% and 38.1% respectively). On September 30, 2005, the Company’s Board of Directors approved the completed restructuring plan and authorized implementation of the plan. Annualized savings from the restructuring plan are estimated to be approximately $42.2 million. The expense restructuring plan encompasses exit activities, including reducing the number of clients served, reducing the number of countries in which the Company operates, and terminating employees. Almost all of these savings are being realized in the area of selling, general and administrative expenses and only a small percentage of the Company’s auditor staff is being directly impacted by the reductions resulting from this plan. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operational Restructuring.

Financial Restructuring

     On October 19, 2005 the Board of Directors of the Company formed a Special Restructuring Committee to oversee the efforts of the Company, with the assistance of its financial advisor, Rothschild, Inc., to restructure the Company’s financial obligations, including its obligations under its then existing convertible notes, and to improve the Company’s liquidity. On March 17, 2006, the Company successfully completed the financial restructuring.

     Pursuant to the restructuring the Company exchanged for $124.5 million of its existing convertible notes due November 2006 (and $1.8 million of accrued interest thereon) the following new securities: $51.6 million of new senior notes, $59.8 million of new senior convertible notes that may be converted into shares of a new Series B convertible stock and /or common stock, upon satisfaction of certain conditions, and new series A convertible preferred stock having a liquidation preference of $14.9 million. For details with respect to the terms of these securities, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Restructuring. Concurrently with closing the exchange offer, the Company also refinanced its senior indebtedness. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

Other Developments

     During the fourth quarter of 2005, the Company declared its channel revenue business (“Channel Revenue”) and airline business (“Airline”), and the Accounts Payable Service segment’s business units in South Africa and Japan as discontinued operations. The Company’s Consolidated Financial Statements included in Item 8. of this Form 10-K have been reclassified to reflect these businesses as discontinued operations for all periods presented.

     On January 11, 2006, the Company consummated the sale of Channel Revenue. Channel Revenue was sold for $0.4 million in cash to Outsource Recovery, Inc. Outsource Recovery also undertook to pay the Company an amount equal to 12% of gross revenues received by Outsource Recovery during each of the calendar years 2006, 2007, 2008 and 2009 with respective to Channel Revenue. The Company recognized a gain on disposal of approximately $0.3 million.

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     Unless specifically stated, all financial and statistical information contained herein is presented with respect to continuing operations only.

The Recovery Audit Industry

     Businesses with substantial volumes of payment transactions involving multiple vendors, numerous discounts and allowances, fluctuating prices and complex pricing arrangements find it difficult to process every payment correctly. Although these businesses process the vast majority of payment transactions correctly, a small number of errors occur principally because of communication failures between the purchasing and accounts payable departments, complex pricing arrangements, personnel turnover and changes in information and accounting systems. These errors include, but are not limited to, missed or inaccurate discounts, allowances and rebates, vendor pricing errors and duplicate payments. In the aggregate, these transaction errors can represent meaningful lost profits that can be particularly significant for businesses with relatively small profit margins.

     Although some businesses (and most large retailers) maintain internal recovery audit departments to recover selected types of payment errors and identify opportunities to reduce costs, independent recovery audit firms are often retained as well due to their specialized knowledge and focused technologies.

     In the U.S., Canada, the United Kingdom and Mexico, large retailers routinely engage independent recovery audit firms as standard business practice. Outside the U.S., Canada, the United Kingdom and Mexico, the Company believes that large retailers and many other types of businesses are also engaging independent recovery audit firms.

     The domestic and international recovery audit industry for accounts payable services is comprised of the Company and numerous smaller competitors. Most smaller recovery audit firms do not possess multi-country service capabilities and lack the centralized resources or broad client base to support the technology investments required to provide comprehensive recovery audit services for large, complex accounts payable systems. These firms are less equipped to audit large, data intensive purchasing and accounts payable systems. In addition, many of these firms have limited resources, and may lack experience and the knowledge of national promotions, seasonal allowances and current recovery audit practices. As a result, the Company believes that it has competitive advantages based on its national and international presence, well-trained and experienced professionals, and advanced technology.

     As businesses have evolved, the Company and the recovery auditing industry have evolved with them, innovating processes, error identification tools, and claim types to maximize recoveries. The following are a number of the changes that have been driving the recovery audit industry in the recent past:

Data Capture and Availability. Businesses are increasingly using technology to manage complex procurement and accounts payable systems and realize greater operating efficiencies. Many businesses worldwide communicate with vendors electronically – whether by Electronic Data Interchange (“EDI”) or the Internet – to exchange inventory and sales data, transmit purchase orders, submit invoices, forward shipping and receiving information and remit payments. These systems capture more detailed data and enable the cost effective review of more transactions by recovery auditors.

Increasing Number of Auditable Claim Categories. Traditionally, the recovery audit industry identified simple, or “disbursement,” claim types such as the duplicate payment of invoices. Enhancements to accounts payable software, particularly large enterprise software solutions, used by many large companies have reduced the extent to which these companies make simple disbursement errors. However, the introduction of creative vendor discount programs, complex pricing arrangements and activity-based incentives has led to an increase in auditable transactions and potential sources of error. These transactions are complicated to audit as the underlying transaction data is difficult to access and recognizing mistakes is complex. Recovery audit firms with significant industry-specific expertise and sophisticated technology are best equipped to audit these complicated, or “contract compliance,” claim categories.

Globalization. As the operations of major retailers become increasingly global, they often seek service providers with a global reach.

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Consolidation in the Retail Industry. Retailer consolidation in the U.S. and internationally continues. As retailers grow larger, vendors become more reliant on a smaller number of customers and, as a result, the balance of power favors retailers rather than vendors. This dynamic creates an environment that allows retailers to assert valid claims more easily.

Significant Promotional Activity. Trade promotion spending is substantial within the retail trade and significant sums are being spent in categories with numerous transactions and a high potential for errors, such as scan downs, or discounts at the point of sale. Because of the high volume of trade promotion within retail, there are significant opportunities for mistakes and, therefore, auditable claims.

Move Toward Standard Auditing Practices. Increasingly, vendors are insisting on the satisfaction of certain conditions, such as clearer post-audit procedures, better documentation and electronic communication of claims, before accepting the validity of a claim. The Company, as the industry leader, has taken a leadership role in establishing standard recovery auditing practices for the industry and led the way to establishing the first ever Retail Summit and Post Audit Best Practices Forum in 2003. The purpose of the Summit was to begin providing a foundation for industry standards and norms with a goal of diminished ambiguity, greater efficiencies, lower costs and higher value for all stakeholders. In December 2004 the second Retail Summit and Best Practices Forum was held where academic professionals reported the preliminary results of ground-breaking Best Practices research specific to the post audit industry with the goal of furthering the establishment of standard practices. On January 10, 2006, the Company in conjunction with the Institute of Customer Relationship Management (iCRM) announced the release of the Best Practices in Post-Audit Recovery report. This study, administered by noted academics and researchers over an 18 month period, was based on extensive collaboration, exploratory discussions and descriptive research obtained from functional managers at leading U.S. retail and manufacturing companies representing nearly $1 trillion in combined revenues.

     The evolution of the recovery auditing industry is expected to continue. In particular, the Company expects that the industry will continue to move towards the electronic capture and presentation of data, more automated, centralized processing and faster approvals and deductions.

The PRG-Schultz Solution

     The Company provides its domestic and international clients with comprehensive recovery audit services by using sophisticated proprietary technology and advanced auditing techniques and methodologies, and by employing highly trained, experienced industry specialists. As a result, the Company believes it is able to identify significantly more payment errors than its clients are able to identify through their internal audit capabilities or than many of its competitors are able to identify.

     The Company is a leader in developing and utilizing sophisticated software audit tools and techniques that enhance the identification and recovery of payment errors. By leveraging its technology investment across a large client base, the Company is able to continue developing proprietary software tools and expanding its technology leadership in the recovery audit industry.

     The Company is also a leader in establishing new recovery audit practices to reflect evolving industry trends. The Company’s auditors are highly trained. Many have joined the Company from finance-related management positions in the industries the Company serves. To support its clients, the Company provides its auditors and audit teams with data processing services, software and software support, sales and marketing assistance, and training and administrative services.

The PRG-Schultz Strategy

     The Company’s objective is to build on its position as the leading worldwide provider of recovery audit services. The Company’s strategic plan to achieve these objectives focuses on a series of initiatives designed to maintain its dedicated focus on its clients. The Company has implemented a number of strategic business initiatives to significantly reduce costs stabilize revenue at existing clients and offer new services to new and existing clients. Some of these key initiatives include:

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• Centralize Claim Processing and Field Audit Work. The processing of certain claim types and certain client audits has been shifted to the Company’s Salt Lake City and Atlanta Shared Service Centers and its New Jersey and Texas Regional Audit Centers, resulting in cost savings and improved audit productivity.

• Flatten Management Structure and Focus on Existing Clients. The Company has reduced its number of management layers and has focused a greater portion of its resources on its existing client base.

• Improve Audit Software and Processes. The Company has developed proprietary software tools and algorithms that enable its auditors to identify trends, exceptions and claims quickly and efficiently and use the best auditing practices to increase recoveries.

• Expand Opportunities with Existing Clients. The Company intends to maximize the revenue opportunities with each of its existing clients by identifying and auditing new categories of potential errors (such as its new freight rate audit program and third-party pharmacy payment service offerings). The Company also intends to increase its emphasis on using its technology and professional experience to assist its clients in achieving objectives that are related to transaction accuracy and compliance, but do not directly involve recovery of past overpayments.

• Focus on International Opportunities. The Company believes that its best opportunities for international growth are related to major global clients and that it is the only recovery audit firm with the capability to serve these clients in multiple geographies. Some of the Company’s international operations have proved to be unprofitable. To improve profitability of its international business, the Company plans to exit some international markets in 2006 and redirect the Company’s resources to the profitable international markets and clients.

• Develop Medicare Audit. In 2005, the Centers for Medicare & Medicaid Services (“CMS”), the federal agency that administers the Medicare program, awarded the Company a contract to provide recovery audit services for the State of California’s Medicare spending. The three-year contract, effective March 28, 2005, was awarded as part of a demonstration program by CMS to recover overpayments on behalf of taxpayers through the use of recovery auditing. The Company expects to begin earning revenue from the California Medicare audit in 2006 and believes that Medicare audit has significant revenue and profit potential in future years.

PRG-Schultz Services

   Accounts Payable Services

     Through the use of proprietary technology, audit techniques and methodologies, the Company’s trained and experienced auditors examine procurement records on a post-payment basis to identify overpayments, including those resulting from situations such as missed or inaccurate discounts, allowances and rebates, vendor pricing errors, duplicate payments and erroneous application of sales tax laws and regulations.

     The Company’s Accounts Payable Services target two main client types, retail/wholesale and “commercial,” with each type typically served under a different service delivery model, as more particularly described below. “Commercial” clients are business entities other than retailers and wholesalers, such as manufacturers, distributors and service firms.

     Contract compliance audit services provided to retail/wholesale clients currently account for the substantial majority of the Company’s revenues. These audit services typically recur annually, but after the Company’s relationship with a given client matures, the dollar volume of client overpayments recovered begins to decline from year to year. Contract compliance audit services for retailers are the most comprehensive of the Company’s Accounts Payable Services, focusing on numerous recovery categories related to both procurement and payment activities. These audits typically entail comprehensive and customized data acquisition from the client with the aim of capturing individual line-item transaction detail. Contract compliance audits for larger clients often require year-round on-site work by multi-auditor teams. Many large retailers have internal recovery audit departments that audit payment data for errors before the data is released for audit by external recovery audit firms. Process and software improvements made by these internal recovery audit departments over time have increased their recoveries, thus

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reducing the number of compliance errors to be discovered by the external recovery audit firms. This trend is expected to continue, and the Company’s revenues from its core retail/wholesale accounts payable business are expected to continue to decline.

     The substantial majority of the Company’s domestic commercial Accounts Payable Services clients are currently served using a disbursement audit service model which typically entails obtaining limited data from the client and an audit focus on a select few recovery categories. Services to these types of clients to date have tended to be either periodic (typically, every two to three years) or rotational in nature with different divisions of a given client often audited in pre-arranged annual sequences. Accordingly, revenues derived from a given client may change markedly from year to year. Additionally, the duration of a disbursement audit is often measured in weeks or months, as opposed to years, and the number of auditors assigned per client is usually between one and five. Because accounts payable software increasingly used by many large companies significantly reduces the number of disbursement errors, the Company’s revenues from “commercial” audits have rapidly declined in recent years and are expected to continue to do so.

   Meridian VAT Reclaim

     Meridian is based in Ireland and specializes in the recovery of value-added taxes (“VAT”) paid on business expenses for corporate clients located throughout the world. Acting as an agent on behalf of its clients, Meridian submits claims for refunds of VAT paid on business expenses incurred primarily in European Union countries. Meridian provides a fully outsourced service dealing with all aspects of the VAT reclaim process, from the provision of audit and invoice retrieval services to the preparation and submission of VAT claims and the subsequent collection of refunds from the relevant VAT authorities. For this service, Meridian receives a contractual percentage of VAT recovered on behalf of its clients. These services provided to clients by Meridian are typically recurring in nature. Meridian has also developed new “fee-for-service” offerings providing accounts payable and employee expense reimbursement processing for third parties.

Client Contracts

     The Company’s typical client contract provides that the Company is entitled to a stipulated percentage of overpayments or other savings recovered for or realized by clients. Clients generally recover claims by either (a) taking credits against outstanding payables or future purchases from the involved vendors, or (b) receiving refund checks directly from those vendors. The manner in which a claim is recovered by a client is often dictated by industry practice. For some services, the client contract provides that the Company is entitled to a flat fee, or fee rate per hour, or per unit of usage for the rendering of that service. In addition to client contracts, many clients establish specific procedural guidelines that the Company must satisfy prior to submitting claims for client approval. These guidelines are unique to each client.

Technology

     Technology advancements, increasing volumes of business transactions and dynamic buying environments have resulted in the Company’s clients using complex financial systems to realize greater operating efficiencies and ensure transaction accuracy. Given this environment, the Company believes its proprietary technology and processes serve as important competitive advantages over both its principal competitors and its clients’ in-house internal recovery audit functions. To sustain these competitive advantages, the Company intends to continue investing in technology initiatives to deliver innovative, client-focused solutions, which enable the Company to provide its services in a timely, effective and profitable manner.

     The Company employs a variety of proprietary audit tools, proprietary databases and Company-owned and co-locational data processing facilities in its business. Each of the Company’s businesses employs custom technology.

   Accounts Payable Services Audit Technology

     The Company’s data acquisition, data processing and data management methodologies are aimed at maximizing efficiencies and productivity and maintaining the highest standards of transaction assurance.

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     At the beginning of a typical recovery audit engagement, the Company utilizes a dedicated staff of data acquisition specialists and proprietary tools to acquire a wide array of transaction data from its client for the time period under review. The Company typically receives this data by secured electronic transmissions, magnetic media or paper. The Company uses a custom, proprietary imaging technology to scan the paper into electronic format. Upon receipt, the data is secured, catalogued, backed up and converted into standard, readable formats using third party and proprietary tools.

     Massive volumes of client data are cleansed and mapped by the Company’s technology professionals, primarily using high performance database and storage technologies, into standardized layouts at one of the Company’s data processing facilities. Statistical reports are also generated to verify the completeness and accuracy of the data.

     The data is then processed using algorithms (business rules) leveraging over thirty years’ experience to help uncover patterns or potential problems in clients’ various transactional streams. The Company delivers these high probability transaction errors to its auditors who, using the Company’s proprietary audit software, sort, filter and search the data to validate and identify additional transaction errors. The Company also maintains a secure database of audit information with the ability to query on multiple variables, including claim categories, industry codes, vendors and audit years, to facilitate the identification of additional recovery opportunities and provide recommendations for process improvements to clients.

     Once errors are validated with the client’s internal documents and systems, the Company offers an Internet-based claim presentation and collaboration tool, which leverages its proprietary imaging technology to help the client view, approve and submit claims to vendors.

     The Company has implemented and manages several distinct technical and procedural controls to ensure the confidentiality of client data and intellectual property. The data security program encompasses compliance with applicable regulatory requirements with a framework based on International Standards Organization publications and industry best practices.

   Meridian VAT Reclaim Technology

     Meridian utilizes a proprietary software application that assists business clients in reclaiming value-added taxes (“VAT”). The functionality of the software includes paper flow monitoring, financial and managerial reporting and EDI. The paper flow monitoring captures all stages of the reclaim business process, from logging claims received to printing checks due to clients. The reporting system produces reports that measure the financial and managerial information for each stage of the business process.

Auditor Hiring and Training

     Many of the Company’s auditors and specialists formerly held finance-related management positions in the industries the Company serves. Training provided in the field by the Company’s experienced auditors enables newly hired auditors to develop and refine their auditing skills and improve productivity. Additionally, the Company provides training for auditors utilizing both classroom training and training via self-paced media such as specialized computer-based training modules. Training programs are periodically upgraded based on feedback from auditors and changing industry protocols.

Clients

     The Company provides its services principally to large and mid-sized businesses having numerous payment transactions with many vendors. Retailers/wholesalers continue to constitute the largest part of the Company’s client and revenue base. The Company’s five largest clients contributed approximately 22.3%, 22.6% and 21.0% of its revenues from continuing operations for the years ended December 31, 2005, 2004 and 2003, respectively. The Company did not have any clients who individually provided revenues in excess of 10.0% of total revenues from continuing operations during the years ended December 31, 2005, 2004 and 2003.

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Sales and Marketing

     Due to the highly confidential and proprietary nature of a business’ purchasing patterns and procurement practices combined with the typical desire to maximize the amount of funds recovered, most prospective clients conduct an extensive investigation prior to selecting a specific recovery audit firm. The Company has found that its service offerings that are the most annuity-like in nature such as a contract compliance audit typically require a relatively long sales cycle and a relatively high level of direct person-to-person contact.

Proprietary Rights

     From time to time the Company develops new recovery audit software and methodologies that enhance existing proprietary software and methodologies. The Company relies on trade secret and copyright protections for its proprietary software and other proprietary information. While the Company’s competitive position may be affected by its ability to protect its software and other proprietary information, the Company believes that the protection afforded by trade secret and copyright laws is generally less significant to the Company’s overall success than the continued pursuit and implementation of its operating strategies and other factors such as the knowledge, ability and experience of its personnel.

     The Company owns or has rights to various copyrights, trademarks and trade names used in the Company’s business, including but not limited to PRGSchultz^®, AuditPro^®, SureF!nd^® , Direct F!nd^®, ImDex^® and claimDex™.

Competition

     The Company has numerous existing contract compliance audit competitors that are believed to be substantially smaller than the Company. Barriers to effective entry and longevity as a viable contract compliance audit firm are believed to be high. The Company believes that these high barriers to entry result from numerous factors including, but not limited to, significant technology infrastructure requirements, the need to gather, summarize and examine volumes of client data at the line-item level of detail, the need to establish effective audit techniques and methodologies, and the need to hire and train audit professionals to work in a very specialized manner that requires technical proficiency with numerous recovery categories.

     The disbursement audit services business is also highly competitive, but barriers to entry are relatively low. The Company believes that the low barriers to entry result from limited technology infrastructure requirements, the need for relatively minimal high-level data, and an audit focus on a select few recovery categories.

     While the Company believes that it has the greatest depth and breadth of audit expertise, data and technology capabilities, scale and global presence in the industry, the Company faces competition from the following:

Client Internal Recovery Audit Departments. A number of larger retailers (particularly those in the grocery and drug sectors) have developed an internal recovery audit process to review transactions prior to turning them over to external post-audit providers. Regardless of the level of recoveries made by internal recovery audit departments, the Company has observed that virtually all large retail clients retain at least one (primary), and sometimes two (primary and secondary), external recovery audit firms to capture errors missed by their internal recovery audit departments.

Other Recovery Audit Firms. The competitive landscape in the recovery audit industry is comprised of:

• Full-service accounts payable recovery audit firms. The Company believes that only one other company also offers a full suite of recovery audit services outside the United States;

• A large number of smaller accounts payable recovery firms which have a limited client base and which use less sophisticated tools to mine disbursement claim categories at low contingency rates. These firms are most common in the U.S. market and the largest of these firms typically have approximately $10 – $15 million in annual revenue. Competition in most international markets, if any, typically comes from small niche providers;

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• Firms which offer a hybrid of audit software tools and training, and/or general accounts payable process improvement enablers; and

• Firms with specialized skills focused on recovery audit services for discrete sectors like airlines and healthcare.

Other Providers of Recovery Services. The “Big Four” accounting firms provide recovery audit services; however, the Company believes their practices tend to be focused on tax-related services.

Employees

     At February 28, 2006, the Company had approximately 2,300 employees, of whom approximately 1,100 were located in the U.S. The majority of the Company’s employees are involved in the audit function. The Company believes its employee relations are satisfactory.

Website

     The Company makes available free of charge on its website, www.prgx.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports. The Company makes all filings with the Securities and Exchange Commission available on its website no later than the close of business on the date the filing was made. In addition, investors can access the Company’s filings with the Securities and Exchange Commission at www.sec.gov/edgar.shtml.

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ITEM 1A. Risk Factors

In four of the five annual periods ended December 31, 2005, we have incurred significant losses and we have not generated enough cash from operations to finance our business.

     We have not been profitable in four of the five years in the five-year period ended December 31, 2005, and we have not generated enough cash from operations to finance our business. There is no guarantee that our cost reduction plan or attempts to increase our revenues will be successful. If we are not able to successfully reduce costs and/or increase revenues, we may not be able to operate profitability in the future or generate sufficient cash to fund our operations and pay our indebtedness.

Our current projections reflect that our core accounts payable recovery audit business will continue to decline. Therefore, we must successfully implement our cost reduction plan and grow our other business lines in order to stabilize and increase our revenues and improve our profitability.

     As our clients improve their systems and processes, fewer transactional errors occur. In addition, many of our clients have internal staffs that audit the same transactions before we do. As the skills, experience and resources of our clients’ internal recovery audit staffs improve, they will identify more overpayments themselves and reduce our audit recovery opportunities. Based on these and other factors, we currently believe that our core accounts payable recovery audit business will continue to experience revenue declines over the long-term. In order to stabilize and increase our revenues and improve our profitability, we must successfully implement our cost reduction plan, and grow our other lines of business such as our Medicare audit work, pharmacy payment service and motor carrier freight bill audits. These other lines of business are still in the early stages of development, and there can be no guarantee that they will ultimately succeed.

We depend on our largest clients for significant revenues, so losing a major client could adversely affect our revenues.

     We generate a significant portion of our revenues from our largest clients. For the years ended December 31, 2005, 2004, and 2003, our two largest clients accounted for approximately 13.8%, 13.8% and 12.7% of our revenues from continuing operations, respectively. If we lose any of our major clients, our results of operations could be materially and adversely affected by the loss of revenue unless we acquire new business to replace such clients.

Client and vendor bankruptcies and financial difficulties could reduce our earnings.

     Our clients generally operate in intensely competitive environments and, accordingly, bankruptcy filings by our clients are not uncommon. Bankruptcy filings by our large clients or the significant vendors who supply them, or unexpectedly large vendor claim chargebacks lodged against one or more of our larger clients, could have a materially adverse effect on our financial condition and results of operations. Similarly, our inability to collect our accounts receivable due to the financial difficulties of one or more of our large clients could adversely affect our financial condition and results of operations.

     If a client files for bankruptcy, we could be subject to an action to recover certain payments received in the 90 days prior to the bankruptcy filing as “preference payments.” If we are unsuccessful in defending against such claims, we would be required to make unbudgeted cash payments which could strain our financial liquidity and our earnings would be reduced.

     For example, on March 30, 2005, the Fleming Post-Confirmation Trust, PCT, sued us in the bankruptcy proceeding of the Fleming Companies, a former client, in the U.S. Bankruptcy Court for the District of Delaware to recover approximately $5.5 million of alleged preferential payments. PCT subsequently amended its claims to add a claim for alleged fraudulent transfers representing approximately $2.0 million in commissions paid to us with respect to claims deducted from vendors that the client subsequently re-credited to the vendors. In early December 2005, the PCT offered to settle the case for $2 million. We countered with an offer to waive our bankruptcy claim and pay the PCT $250,000. The PCT rejected our counteroffer and the litigation is ongoing.

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Our strategic business initiatives may not be successful.

     Our objective is to build on our position as the leading worldwide provider of recovery audit services. Our strategic plan to achieve these objectives focuses on a series of initiatives designed to maintain our dedicated focus on clients and rekindle our growth. Recently, we have implemented a number of strategic business initiatives that are designed to reduce costs and stabilize revenues.

     Although we have begun to implement these initiatives, we are still in the early stages of the process. Each of the initiatives requires sustained management focus, organization and coordination over time, as well as success in building relationships with third parties. The results of the strategy and implementation will not be known until some time in the future. If we are unable to implement the strategy successfully, our results of operations and cash flows could be adversely affected. Successful implementation of the strategy may require material increases in costs and expenses.

     As part of a pilot program to use recovery auditing to recover overpayments on behalf of taxpayers, the Centers for Medicare & Medicaid Services, CMS, the federal agency that administers the Medicare program, awarded us a three-year contract, effective March 28, 2005, to provide recovery audit services in connection with the State of California’s Medicare spending. We believe this contract is a significant opportunity for us, but we will have to expend substantial resources to prepare for and perform the CMS audit services and there is no guarantee that actual revenues will justify the required expenditures. Moreover, until the CMS pilot program is well underway, there will be no way to accurately predict the level of recoveries that will be achieved, and there is no guarantee that the level of recoveries will be significant. Even if CMS deems the pilot program sufficiently successful to justify further ventures, there is no guarantee that it, or any other medical claims client, will award future contracts to us.

We may be unable to protect and maintain the competitive advantage of our proprietary technology and intellectual property rights.

     Our operations could be materially and adversely affected if we are not able to protect our proprietary software, audit techniques and methodologies, and other proprietary intellectual property rights. We rely on a combination of trade secret and copyright laws, nondisclosure and other contractual arrangements and technical measures to protect our proprietary rights. Although we presently hold U.S. and foreign registered trademarks and U.S. registered copyrights on certain of our proprietary technology, we may be unable to obtain similar protection on our other intellectual property. In addition, our foreign registered trademarks may not receive the same enforcement protection as our U.S. registered trademarks.

     Additionally, we generally enter into nondisclosure agreements with our employees, consultants, clients and potential clients. We also limit access to, and distribution of, our proprietary information. Nevertheless, we may be unable to deter misappropriation or unauthorized dissemination of our proprietary information, detect unauthorized use and take appropriate steps to enforce our intellectual property rights. Even though we take care to protect our own intellectual property, there is no guarantee that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology. Moreover, although we believe that our services and products do not infringe on the intellectual property rights of others, we are also subject to the risk that someone else will assert a claim against us in the future for violating their intellectual property rights.

Our failure to retain the services of key members of management and highly skilled personnel could adversely impact our continued success.

     Our continued success depends largely on the efforts and skills of our executive officers and key employees. As such, we have entered into employment agreements with key members of management. While these employment agreements limit the ability of key employees to directly compete with us in the future, nothing prevents them from leaving our company.

     In addition, our current financial and operational condition, including, but not limited to our liquidity concerns, makes it especially challenging to attract and retain highly qualified skilled auditors in an industry where competition for skilled personnel is intense. Accordingly, our future performance also depends, in part, on the ability of our management team to work together effectively, manage our workforce, and retain highly qualified personnel.

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We rely on international operations for significant revenues.

     Approximately 47.2% of our revenues from continuing operations were generated from international operations in 2005. International operations are subject to numerous risks, including:

• political and economic instability in the international markets we serve,

• difficulties in staffing and managing foreign operations and in collecting accounts receivable,

• fluctuations in currency exchange rates, particularly weaknesses in the British pound, the Euro, the Canadian dollar, the Mexican peso, and the Brazilian real and other currencies of countries in which we transact business, which could result in currency translations that materially reduce our revenues and earnings,

• costs associated with adapting our services to our foreign clients’ needs,

• unexpected changes in regulatory requirements and laws,

• expenses and legal restrictions associated with transferring earnings from our foreign subsidiaries to us,

• burdens of complying with a wide variety of foreign laws and labor practices,

• business interruptions due to widespread disease, potential terrorist activities, or other catastrophes,

• reduced or limited protection of our intellectual property rights, and

• longer accounts receivable cycles.

     Because we expect a significant proportion of our revenues to continue to come from international operations, the occurrence of any of these events could materially and adversely affect our business, financial condition and results of operations.

The market for providing disbursement audit services to commercial clients in the U.S. is rapidly declining.

     We currently serve the substantial majority of our U.S. commercial accounts payable services clients using a disbursement audit service model that typically entails acquisition from the client of limited purchase data and an audit focus on a select few recovery categories. We believe that the market for providing disbursement audit services to commercial entities in the United States is rapidly declining.

Our U.S. commercial accounts payable services business is subject to price pressure.

     The substantial majority of our domestic commercial accounts payable services clients are currently served using a disbursement audit service model which typically entails obtaining limited purchase data from the client and an audit focus on a select few recovery categories. The disbursement audit business is highly competitive and barriers to entry are relatively low. We believe that the low barriers to entry result from limited technology infrastructure requirements, the minimal need for audit data that is difficult to extract from the client’s systems, and an audit focus on a select few recovery categories. As a result of the low barriers to entry, our domestic commercial accounts payable services business is subject to intense price pressure from our competition. Such price pressure could cause our profit margins to decline and have a materially adverse effect on our business, financial condition, and results of operations.

Proposed legislation by the European Union, if enacted as currently drafted, will have a materially adverse impact on Meridian’s operations.

     The European Union has currently proposed legislation that would remove the need for suppliers to charge value-added taxes on the supply of services to clients within the European Union. It is difficult to estimate whether and/or when the proposed legislation would be enacted and implemented. Management believes that the proposed legislation, if enacted as currently drafted, when implemented would have a materially adverse impact on the results of operations of our Meridian segment and would also negatively affect our consolidated results of operations.

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Meridian may be required to repay grants received from the Industrial Development Authority.

     During the period of May 1993 through September 1999, Meridian received grants from the Industrial Development Authority of Ireland, IDA, in the sum of 1.4 million Euro ($1.7 million at December 31, 2005 exchange rates). The grants were paid primarily to stimulate the creation of 145 permanent jobs in Ireland. As a condition of the grants, if the number of permanently employed Meridian staff in Ireland falls below 145, then the grants are repayable in full. This contingency expires on September 23, 2007. As of February 28, 2006, Meridian employed 204 permanent employees in Dublin, Ireland. As discussed above, proposed EU legislation could eventually have a materially adverse impact on Meridian’s results of operations. If Meridian’s results of operations were to decline as a result of the enactment of that legislation, it is possible that the number of permanent employees that Meridian employs in Ireland could fall below 145 prior to September 2007. Should such an event occur, Meridian will have to repay the full amount of the grants it previously received from IDA. Because of the lengthy approval process required for the legislative proposal to become law and the requirements for numerous systems changes before implementation, management currently estimates that any impact on employment levels related to a possible change in the EU legislation will not be realized until after September 2007, if ever.

     As any potential liability related to these grants is not currently determinable, we have not included any expenses related to this matter in our financial statements. Management is monitoring this situation and if it appears probable that Meridian’s permanent staff in Ireland will fall below 145 and that grants will need to be repaid to IDA, Meridian will recognize an expense at that time. Such expense could be material to Meridian’s results of operations.

Our revenues from certain clients and VAT authorities may change markedly from year to year.

     We examine merchandise procurements and other payments made by business entities such as manufacturers, distributors and service firms. To date, services to these types of clients have tended to be either periodic (typically, every two or three years) or rotational in nature with different divisions of a given client often audited in pre-arranged annual sequences. Accordingly, revenues derived from a given client may change markedly from year to year depending on factors such as the size and nature of the client division under audit.

     Meridian’s revenue recognition policy causes its revenues to vary markedly from period to period as well. Meridian defers recognition of revenues to the accounting period in which cash is both received from the foreign governmental agencies reimbursing VAT claims and transferred to Meridian’s clients. The timing of reimbursement of VAT claims by the various European tax authorities with which Meridian files claims can differ significantly by country.

Changes in the composition of our shareholder population, including those resulting from the issuance of new preferred stock in the exchange offer, are likely to limit our ability to use our net operating losses.

     We have substantial tax loss and credit carryforwards for U.S. federal income tax purposes. As a result of the implementation of the exchange offer or certain changes in the composition of our shareholder population (including purchases or sales of stock by certain 5% shareholders in sufficient amounts), it is likely that our ability to use such carryforwards (and certain other tax benefits) to offset future income or tax liability will be severely limited under section 382 of the Internal Revenue Code of 1986, as amended. Under such section, our ability to use our existing tax loss and credit carryforwards (and certain other tax benefits) following an “ownership change” would be limited to an annual amount generally equal to the product of the fair market value of our stock immediately before the ownership change (subject to certain reductions) and the “long-term tax-exempt rate” in effect for the month in which the ownership change occurs.

     For example, if (as is probable) an ownership change were to occur as a result of the conversion of new securities issued in the exchange, our ability to utilize our pre-change carryforwards and possibly certain future deductions to offset future income would be limited to roughly $1.5 million per year, based on a trading price of our common stock of $0.55 per share. Based on our current projections, such a limitation would significantly increase our projected future tax liability if combined with the elimination of interest deductions with respect to the new senior convertible notes issued in the exchange (whether due to the conversion of such notes into stock or, as discussed below, in the event of a determination that such interest was not deductible).

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Recognition of cancellation of debt income as a result of the exchange offer may increase our income tax liability and adversely impact our financial position.

     We expect to recognize cancellation of debt income for U.S. federal income tax purposes to the extent the outstanding balance (principal plus accrued but unpaid interest) of the Company’s notes due November 2006 exceeded the fair market value of the new securities delivered in the exchange offer. We believe that we will have sufficient consolidated tax loss carryforwards to offset all of the anticipated income for U.S. federal income tax purposes (although there may be some liability for federal alternative minimum tax and state income tax). However, if it were determined that the available tax loss carryforwards were significantly less than the amount estimated or were otherwise limited (such as by reason of an annual limitation under section 382, as discussed above), we could have a significantly greater income tax liability.

We may not be allowed to deduct interest with respect to the new senior convertible notes issued in the exchange offer.

     For U.S. federal income tax purposes, no deduction is allowed for interest paid or accrued with respect to convertible debt if it is substantially certain that the holders will voluntarily convert the debt into equity. The proper application of this provision in the case of the new senior convertible notes is subject to varying interpretations, depending in part on facts and circumstances existing on the exchange date. We currently intend to take the position that we are entitled to interest deductions in respect of the new senior convertible notes. Nevertheless, there is no assurance that the Internal Revenue Service, IRS, would not take a contrary position, or that any change in facts and circumstances would not result in us changing our position.

     In addition, even if not disallowed, any interest deductions with the respect to the new senior convertible notes would cease upon an actual conversion of the new senior convertible notes into stock.

Future impairment of goodwill, other intangible assets and long-lived assets would reduce our future earnings.

     During the fourth quarter of 2005, we recorded a goodwill impairment charge of $166.0 million and an impairment charge of $4.4 million relating to our intangible trade name value. Adverse future changes in the business environment or in our ability to perform audits successfully and compete effectively in our market could result in additional impairment of goodwill, other intangible assets or long-lived assets, which could materially adversely impact future earnings. We must perform annual assessments to determine whether some portion, or all, of our goodwill, intangible assets and other long-term assets are impaired. Annual impairment testing under SFAS No. 142 could result in a determination that our goodwill or other intangible assets have been further impaired, and annual impairment testing under SFAS No. 144 could result in a determination that our other long-lived assets have been impaired. Any future impairment of goodwill, other intangible assets or long-lived assets would reduce future earnings.

We may not be able to continue to compete successfully with other businesses offering recovery audit services, including client internal recovery audit departments.

     The recovery audit industry is highly competitive. Our principal competitors for accounts payable recovery audit services include numerous smaller firms. Because these firms tend to be privately owned, we do not have access to their financial statements, so we cannot be certain as to whether we can continue to compete successfully with our competitors. In recent years, revenues from our core accounts payable recovery audit business have declined, and are expected to continue to decline, due in part to our clients’ continuing development of their own internal recovery audit capabilities. In addition, the trend toward more effective internal recovery audit departments diminishes claims available for us to identify in our recovery audits and is likely to continue to negatively impact our future revenues.

Our articles of incorporation, bylaws, shareholder rights plan and Georgia law may inhibit a change of control that shareholders may favor.

     Our articles of incorporation and bylaws and Georgia law contain provisions that may delay, deter or inhibit a future acquisition not approved by our board of directors. This could occur even if our shareholders receive attractive offers for their shares or if a substantial number, or even a majority, of our shareholders believe the takeover is in their best interest. These provisions are intended to encourage any person interested in acquiring us to

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negotiate with and obtain the approval of our board of directors in connection with the transaction. Provisions that could delay, deter or inhibit a future acquisition include the following:

• a classified board of directors,

• the requirement that our shareholders may only remove directors for cause,

• specified requirements for calling special meetings of shareholders, and

• the ability of the board of directors to consider the interests of various constituencies, including our employees, clients and creditors and the local community, in making decisions.

     Our articles of incorporation also permit the board of directors to issue shares of preferred stock with such designations, powers, preferences and rights as it determines, without any further vote or action by our shareholders. In addition, we have in place a “poison pill” shareholders’ rights plan that could trigger a dilutive issuance of common stock upon substantial purchases of our common stock by a third party that are not approved by the board of directors. These provisions also could discourage bids for our shares of common stock at a premium and have a materially adverse effect on the market price of our common stock.

We have violated our debt covenants in the past and may do so in the future.

     We have violated the debt covenants of our prior senior credit facility on more than one occasion in the past. Our new senior secured credit facility requires us and our subsidiaries to comply with specified financial ratios and other performance covenants. No assurance can be provided that we will not violate the covenants of our new senior credit facility in the future. If we are unable to comply with our financial covenants in the future, our lenders could pursue their contractual remedies under the credit facility, including requiring the immediate repayment in full of all amounts outstanding, if any. Additionally, we cannot be certain that, if the lenders demanded immediate repayment of any amounts outstanding, we would be able to secure adequate or timely replacement financing on acceptable terms or at all. Additionally, if the lenders accelerated repayment demand is subsequently made and we are unable to honor it, cross-default language contained in the indentures underlying our separately-outstanding senior notes and senior convertible notes due March 2011, and any of our untendered convertible notes due November 2006, could also be triggered, potentially accelerating the required repayment of those notes as well. In such an instance, there can likewise be no assurance that we will be able to secure additional financing that would be required to make such a rapid repayment.

Our substantial leverage could materially adversely impact our financial health.

     We are highly leveraged. As of December 31, 2005, our total outstanding debt was approximately $140.9 million. As of that date, such total indebtedness was greater than our total capitalization by approximately $97.7 million. The instruments governing the new securities issued in the restructuring and the new senior credit facility allow the issuance of additional indebtedness under certain circumstances.

     Following closing of the financial restructuring transactions, we continue to be highly leveraged. On a pro forma basis, as of December 31, 2005, we would have had approximately $150.6 million of outstanding debt and redeemable preferred stock and a maximum of $15.0 million of additional available borrowings under the new senior secured credit facility.

     Our substantial indebtedness could adversely affect our financial health by, among other things:

• increasing our vulnerability to adverse economic conditions or increases in prevailing interest rates, particularly with respect to any of our borrowings at variable interest rates;

• limiting our ability to obtain any additional financing we may need to operate, develop and expand our business;

• requiring us to dedicate a substantial portion of any cash flow from operations to service our debt, which reduces the funds available for operations and future business opportunities; and

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• potentially making us more highly leveraged than our competitors, which could potentially decrease our ability to compete in our industry.

     We will have significant interest, dividend, principal and redemption payments under the new securities issued in the exchange offer coming due in the next five years. Our ability to make payments due on the new securities and on our debt will depend upon our future operating performance, which is subject to general economic and competitive conditions and to financial, business and other factors, many of which we cannot control. If the cash flow from our operating activities is insufficient, we may take actions such as delaying or reducing capital expenditures, attempting to restructure or refinance our debt, selling assets or operations or seeking additional equity capital. Some or all of these actions may not be sufficient to allow us to service our debt obligations and we could be required to file for bankruptcy. Further, we may be unable to take any of these actions on satisfactory terms, in a timely manner or at all. In addition, our credit agreements and indentures may limit our ability to take several of these actions. Our failure to generate sufficient funds to pay our debts or to undertake any of these actions successfully could, among other things, materially adversely affect the market price of our common stock.

Our stock price has been and may continue to be volatile.

     Our common stock is currently traded on The Nasdaq Stock Market. The trading price of our common stock has been and may continue to be subject to large fluctuations. Our stock price may increase or decrease in response to a number of events and factors, including:

• issuance of additional common stock on exercise of conversion rights of the new senior convertible notes or the new convertible preferred stock,

• future announcements concerning us, key clients or competitors,

• quarterly variations in operating results and liquidity,

• changes in financial estimates and recommendations by securities analysts,

• developments with respect to technology or litigation,

• the operating and stock price performance of other companies that investors may deem comparable to our company,

• acquisitions and financings, and

• sales of blocks of stock by insiders.

     Fluctuations in the stock market, generally, also impact the volatility of our stock price. General stock market movements may adversely affect the price of our common stock, regardless of our operating performance.

     We may fail to maintain our listing on The Nasdaq Stock Market, and the value of our stock may be adversely affected if we fail to maintain such listing.

     The closing bid price of our common stock, which is traded on The Nasdaq Stock Market, has been below $1.00 per share for more than 30 consecutive trading days. On December 12, 2005, we received notice from Nasdaq initiating a process to delist our stock. Such process provides for a 180-day period to cure the $1.00 minimum bid default. Our common stock would have to maintain a closing bid of at least $1.00 for 10 consecutive trading days during the 180-day period to cure such default. We cannot guarantee that we will be able to cure such default.

     In the event that our common stock is delisted from The Nasdaq Stock Market, shares of our common stock would likely trade in the over-the-counter market on the OTC Bulletin Board or the so-called “pink sheets.” Selling our common stock would be more difficult because smaller quantities of shares would likely be bought and sold and transactions could be delayed. In addition, securities analysts’ and news media coverage of us may be further reduced. These factors could result in lower prices and larger spreads in the bid and ask prices for shares of our common stock.

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If our common stock is deemed a “penny stock,” its liquidity will be adversely affected.

     The market price for our common stock is currently below $1.00 per share. If the market price for our common stock remains under $1.00 per share, our common stock may be deemed to be penny stock. If our common stock is considered penny stock, it would be subject to rules that impose additional sales practices on broker-dealers who sell our securities. For example, broker-dealers must make special suitability determinations for purchasers of penny stock and obtain the purchasers’ written consent to the transaction prior to the sale. Also, broker-dealers must deliver disclosure schedules disclosing sales commissions and current quotations for the securities to each purchaser of a penny stock. Broker-dealers must also send monthly statements disclosing recent price information for the penny stock held in the purchaser’s account as well as information regarding the limited market in penny stocks. These rules may cause some broker-dealers to choose not to deal in penny stocks, which could have an adverse effect on the price and liquidity of shares of our common stock.

Issuance of shares of our common stock upon conversion of our new preferred stock and new senior convertible notes and pursuant to our new management incentive plan will dilute our common stock.

     Our new convertible notes and new preferred stock, upon full conversion, would represent in excess of a majority of our outstanding common stock, based on the current number of shares of common stock outstanding. In addition, in order to retain key executive employees, we are adopting a new management incentive plan, pursuant to which certain senior management employees will receive phantom shares of stock that, subject to shareholder approval, will be payable in common stock. We will reserve 10% of our outstanding common stock on a fully-diluted basis, as measured on the dates of distribution, to settle phantom shares under the management incentive plan. In addition, we may need to issue additional equity securities in the future in order to execute our business plan or for other reasons, which could lead to further dilution to holders of our common stock. This dilution of our common stock could depress the price of our common stock.

ITEM 1B. Unresolved Staff Comments

None

ITEM 2. Properties

     The Company’s principal executive offices are located in approximately 132,000 square feet of office space in Atlanta, Georgia. The Company leases this space under an agreement expiring on December 31, 2014. The Company has subleased 3,000 square feet of its principal executive office space to a third party and is attempting to sublease an additional approximately 25,000 square feet of space at that location. The Company’s various operating units lease numerous other parcels of operating space in the various countries in which the Company currently conducts its business.

     Excluding the lease for the Company’s principal executive offices, the majority of the Company’s real property leases are individually less than five years in duration. See Note 9 of Notes to Consolidated Financial Statements included in Item 8. of this Form 10-K.

ITEM 3. Legal Proceedings

     On March 30, 2005, the Company was sued by the Fleming Post-Confirmation Trust (“PCT”) in the bankruptcy proceeding of the Fleming Companies, a former client, in the U.S. Bankruptcy Court for the District of Delaware to recover approximately $5.5 million of alleged preferential payments. The PCT’s claims were subsequently amended to add a claim for alleged fraudulent transfers representing approximately $2.0 million in commissions paid to the Company with respect to claims deducted from vendors that the client subsequently re-credited to the vendors. The Company believes that it has valid defenses to the PCT’s claims in the proceeding. In early December 2005, the PCT offered to settle the case for $2 million. The Company countered with an offer to waive its bankruptcy claim and to pay the PCT $250,000. The PCT rejected the Company’s settlement offer and the litigation is ongoing.

     In the normal course of business, the Company is involved in and subject to other claims, contractual disputes and other uncertainties. Management, after reviewing with legal counsel all of these actions and proceedings,

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believes that the aggregate losses, if any, will not have a material adverse effect on the Company’s financial position or results of operations.

ITEM 4. Submission of Matters to a Vote of Security Holders

     During the fourth quarter covered by this report, no matter was submitted to a vote of security holders of the Company.

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     The Company’s common stock is traded under the symbol “PRGX” on The Nasdaq Stock Market (Nasdaq). The Company has not paid cash dividends since its March 26, 1996 initial public offering and does not intend to pay cash dividends in the foreseeable future. Moreover, restrictive covenants included in the Company’s new senior credit facility specifically prohibit payment of cash dividends. As of February 28, 2006, there were approximately 6,300 beneficial holders of the Company’s common stock and 163 holders of record. The following table sets forth, for the quarters indicated, the range of high and low trading prices for the Company’s common stock as reported by Nasdaq during 2005 and 2004.

2005 Calendar Quarter	High		Low
1st Quarter	$	5.79	$	4.20
2nd Quarter		5.15		2.75
3rd Quarter		3.49		2.58
4th Quarter		3.30		0.24

2004 Calendar Quarter	High		Low
1st Quarter	$	5.05	$	3.87
2nd Quarter		5.57		4.21
3rd Quarter		6.21		4.77
4th Quarter		6.13		4.85

     The Company did not repurchase any of its outstanding common stock during 2005 as its prior senior credit facility prohibited stock repurchases.

ITEM 6. Selected Consolidated Financial Data

     The following table sets forth selected consolidated financial data for the Company as of and for the five years ended December 31, 2005. Such historical consolidated financial data have been derived from the Company’s Consolidated Financial Statements and Notes thereto, which have been audited by KPMG LLP, Independent Registered Public Accounting Firm. The Consolidated Balance Sheets as of December 31, 2005 and 2004, and the related Consolidated Statements of Operations, Shareholders’ Equity (Deficit) and Cash Flows for each of the years in the three-year period ended December 31, 2005 and the report of the Independent Registered Public Accounting Firm thereon are included in Item 8. of this Form 10-K. Management’s assessment of the Company’s internal control over financial reporting as of December 31, 2005 and the attestation report of the Independent Registered Public Accounting Firm thereon are included in Item 9A. of this Form 10-K. The Company disposed of its Logistics Management Services segment in October 2001 and closed a unit within the Communications Services business during the third quarter of 2001. In December 2001, the Company disposed of its French Taxation Services business which had been part of continuing operations until the time of its disposal. Additionally, in January 2004, the Company consummated the sale of the remaining Communications Services operations. During the fourth quarter of 2005, the Company declared its Channel Revenue, Airline, and the Accounts Payable Services business units in South Africa and Japan as discontinued operations.

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     The Company’s Consolidated Financial Statements have been reclassified to reflect Logistics Management Services, Communications Services, French Taxation Services, Channel Revenue, Airline, and the Accounts Payable Services business units in Japan and South Africa as discontinued operations for all periods presented.

     The data presented below should be read in conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K and other financial information appearing elsewhere in this Form 10-K including Management’s Discussion and Analysis of Financial Condition and Results of Operations.

	Years Ended December 31,
	2005 (1)			2004 (2)			2003 (1)			2002 (3) (4)			2001 (5)
	(In thousands, except per share data)
Statements of Operations Data:
Revenues	$	292,152		$	350,602		$	367,380		$	439,686		$	290,457
Cost of revenues		195,091			217,059			225,938			248,722			165,307
Gross margin		97,061			133,543			141,442			190,964			125,150
Selling, general and administrative expenses		111,439			124,365			123,424			141,151			112,001
Impairment charges		170,375			¾			206,923			¾			¾
Restructuring expense		11,550			¾			¾			¾			¾
Operating income (loss)		(196,303	)		9,178			(188,905	)		49,813			13,149
Interest expense		(8,936	)		(9,142	)		(9,520	)		(9,934	)		(9,403	)
Interest income		545			593			572			595			500
Earnings (loss) from continuing operations before income taxes, discontinued operations and cumulative effect of accounting changes		(204,694	)		629			(197,853	)		40,474			4,246
Income taxes		821			76,197			(35,362	)		14,883			2,773
Earnings (loss) from continuing operations before discontinued operations and cumulative effect of accounting changes		(205,515	)		(75,568	)		(162,491	)		25,591			1,473
Discontinued operations:
Earnings (loss) from discontinued operations, net of income taxes		(2,704	)		(1,411	)		1,143			(7,023	)		(2,429	)
Gain (loss) on disposal/retention of discontinued operations, including operating results for phase out period, net of income taxes		479			5,496			530			2,716			(82,755	)
Earnings (loss) from discontinued operations		(2,225	)		4085			1,673			(4,307	)		(85,184	)
Earnings (loss) before cumulative effect of accounting changes		(207,740	)		(71,483	)		(160,818	)		21,284			(83,711	)
Cumulative effect of accounting changes, net of income taxes		¾			¾			¾			(8,216	)		¾
Net earnings (loss)	$	(207,740	)	$	(71,483	)	$	(160,818	)	$	13,068		$	(83,711	)
Basic earnings (loss) per share:
Earnings (loss) from continuing operations before discontinued operations and cumulative effect of accounting changes	$	(3.31	)	$	(1.23	)	$	(2.63	)	$	0.41		$	0.03
Discontinued operations		(0.04	)		0.07			0.03			(0.07	)		(1.76	)
Cumulative effect of accounting changes		¾			¾			¾			(0.13	)		¾
Net earnings (loss)	$	(3.35	)	$	(1.16	)	$	(2.60	)	$	0.21		$	(1.73	)
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations before discontinued operations and cumulative effect of accounting changes	$	(3.31	)	$	(1.23	)	$	(2.63	)	$	0.32		$	0.03
Discontinued operations		(0.04	)		0.07			0.03			(0.06	)		(1.76	)
Cumulative effect of accounting changes		¾			¾			¾			(0.10	)		¾
Net earnings (loss)	$	(3.35	)	$	(1.16	)	$	(2.60	)	$	0.16		$	(1.73	)

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	December 31,
	2005 (1)			2004 (2)		2003 (1)		2002 (3)(4)(6)		2001 (5)
						(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	11,848		$	12,596	$	26,658	$	14,860	$	33,334
Working capital		(9,123	)		5,882		1,715		35,562		39,987
Total assets		162,062			358,593		429,257		590,270		379,260
Long-term debt, excluding current installments and loans from shareholders		16,800			¾		¾		26,363		¾
Convertible notes		124,067			123,286		122,395		121,491		121,166
Total shareholders’ equity (deficit)		(102,365	)		103,584		173,130		337,885		168,095

(1)	During 2005 and 2003, the Company recognized impairment charges related to goodwill and intangible assets. See Notes 1(j) and 7 of Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.
(2)	During 2004, the Company recognized an increase in the valuation allowance against its remaining net deferred tax assets. See Note 10 of Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.
(3)	During 2002, the Company completed the acquisitions of the businesses of HSA-Texas and affiliates accounted for as a purchase.
(4)	During 2002, the Company incurred a charge in connection with the initial implementation of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets recognized as a cumulative effect of an accounting change.
(5)	During 2001, the Company completed the sale of its French Taxation Services business and Logistics Management Services segment at net losses of $54.0 million and $19.1 million, respectively.
(6)	Reflects December 31, 2004 scheduled maturity of the Company’s line of credit, which was refinanced in November 2004, and its reclassification to current liabilities at December 31, 2003.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

     The Company’s revenues are based on specific contracts with its clients. Such contracts generally specify: (a) time periods covered by the audit; (b) nature and extent of audit services to be provided by the Company; (c) the client’s duties in assisting and cooperating with the Company; and (d) fees payable to the Company, generally expressed as a specified percentage of the amounts recovered by the client resulting from liability overpayment claims identified.

     In addition to contractual provisions, most clients also establish specific procedural guidelines that the Company must satisfy prior to submitting claims for client approval. These guidelines are unique to each client and impose specific requirements on the Company, such as adherence to vendor interaction protocols, provision of advance written notification to vendors of forthcoming claims, securing written claim validity concurrence from designated client personnel and, in limited cases, securing written claim validity concurrence from the involved vendors. Approved claims are processed by clients and are generally realized by a cash payment or by a reduction to the vendor’s accounts payable balance.

     The Company generally recognizes revenue on the accrual basis except with respect to its Meridian VAT refunds business (“Meridian”) and certain international Accounts Payable Services units where revenue is recognized on the cash basis in accordance with guidance issued by the Securities and Exchange Commission in Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition. Revenue is generally recognized for a contractually specified percentage of amounts recovered when it has been determined that the client has received economic value (generally through credits taken against existing accounts payable due to the involved vendors or refund checks received from those vendors), and when the following criteria are met: (a) persuasive evidence of an existing contractual arrangement between the Company and the client exists; (b) services have been rendered; (c) the fee billed to the client is fixed or determinable; and (d) collectability is reasonably assured. In certain limited circumstances, the Company will invoice a client prior to meeting all four of these criteria. In those instances, revenue is deferred until all of the criteria are met. Historically, there has been a certain amount of revenue that, even though meeting the requirements of the Company’s revenue recognition policy, relates to underlying claims ultimately rejected by the Company’s clients’ vendors. In that case, the Company’s clients may request a refund of such amount. The Company records such refunds as a reduction of revenue (See “Critical Accounting Policies – Refund Liabilities” as fully described in Note 1 of Notes of the Consolidated Financial Statements included in Item 8. of this Form 10-K ).

     The contingent fee based VAT Reclaim division of the Company’s Meridian business, along with certain other international Accounts Payable Services units, recognize revenue on the cash basis in accordance with guidance issued by the Securities and Exchange Commission in Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition. Based on the guidance in SAB No. 104, Meridian defers recognition of contingent fee revenues to the accounting period in which cash is both received from the foreign governmental agencies reimbursing the value-added tax (“VAT”) claims and transferred to Meridian’s clients.

     The Company derives an insignificant amount of revenues on a “fee-for-service” basis where revenue is based upon a flat fee, or fee per hour, or fee per unit of usage. The Company recognizes revenue for these types of services as they are provided and invoiced and when the revenue recognition criteria described above in clauses (a) through (d) have been satisfied.

Audit Contract for State of California Medicare

     On March 29, 2005, the Company announced that the Centers for Medicare & Medicaid Services (“CMS”), the federal agency that administers the Medicare program, awarded the Company a contract to provide recovery audit services for the State of California’s Medicare spending. The three-year contract was effective on March 28, 2005. To fully address the range of payment recovery opportunities, the Company has sub-contracted with Concentra Preferred Systems, the nation’s largest provider of specialized cost containment services for the healthcare industry, which will add its clinical experience to the Company’s expertise in recovery audit services.

     The contract was awarded as part of a demonstration program by CMS to recover overpayments through the use of recovery auditing. The Company began to incur capital expenditures and employee compensation costs related to

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this contract in 2005. Such capital expenditures and employee compensation costs will continue to be incurred in advance of the first revenues to be earned from the contract, expected later in 2006. The Company believes this contract represents a large opportunity in the healthcare recovery audit sector and will be beneficial to the Company’s future earnings.

Conclusion of Evaluation of Strategic Alternatives

     On June 7, 2005, the Company announced that its Board of Directors had concluded the evaluation of the Company’s strategic alternatives including the potential sale of the Company that was previously announced in October 2004. The Board, in consultation with its financial advisor, CIBC World Markets Corp., through a special committee established for that purpose, carefully evaluated the Company’s options and unanimously determined that, at that time, the best interests of its shareholders would not be served by continuing to pursue a strategic transaction.

Retirement of John M. Cook, Chairman, President and CEO, and John M. Toma, Vice Chairman, and Appointment of James B. McCurry as President and CEO and David A. Cole as Non-executive Chairman.

     On June 7, 2005, the Company announced that John M. Cook, the Company’s Chairman, President and Chief Executive Officer, informed the Board of Directors of his decision to retire as Chairman, President and Chief Executive Officer, once a successor was found. Mr. Cook subsequently retired on July 31, 2005. The Company’s Vice Chairman, John M. Toma, also retired at that time.

     On July 20, 2005, the Company announced that its Board of Directors had unanimously elected James B. McCurry to succeed John M. Cook as President and Chief Executive Officer of the Company, effective July 25, 2005. The Company also announced the appointment of David A. Cole, a Director of the Company since February 2003, as non-executive Chairman of the Board, effective July 25, 2005.

Operational Restructuring

     On August 19, 2005, the Company announced that it had taken the initial step in implementing an expense restructuring plan, necessitated by the Company’s declining revenue trend over the previous two and one-half years. Revenues for the years 2002, 2003, 2004 and 2005 were $439.7 million, $367.4 million, $350.6 million and $292.2 million, respectively. With revenues decreasing in 2003, 2004 and 2005, the Company’s selling, general and administrative expenses had increased as a percentage of revenue in each period (33.6%, 35.5% and 38.1% respectively).

     On September 30, 2005, the Company’s Board of Directors approved the completed restructuring plan and authorized implementation of the plan. The expense restructuring plan encompasses exit activities, including reducing the number of clients served, reducing the number of countries in which the Company operates, and terminating employees. Annualized savings from the restructuring plan are estimated to be approximately $42.2 million. Almost all of these savings are being realized in the area of selling, general and administrative expenses and only a small percentage of the Company’s auditor staff is being directly impacted by the reductions resulting from this plan. The Company successfully implemented the plan and for the year ended December 31, 2005 and recorded an $11.6 million charge related to the restructuring, $10 million of which was for severance pay and benefits costs and $1.6 million of which related to early termination of operating leases. Accordingly, pursuant to Statements of Financial Accounting Standards (“SFAS”) No. 112, Employers’ Accounting for Postemployment Benefits, and SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, the Company recorded expense for severance pay and benefits of $2.0 million and $10.0 million in the three and twelve months ended December 31, 2005, respectively. Severance amounting to $2.8 million had been paid as of December 31, 2005. As of February 28, 2006, additional severance of $1.2 million had been paid and the majority of the remaining severance is expected to be paid out during the remainder of 2006. The Company is presently evaluating which, if any, additional operating leases to exit as part of the restructuring plan.

Appointment of Peter Limeri as Chief Restructuring Officer and Subsequently Chief Financial Officer

     On November 7, 2005, Peter Limeri joined the Company’s executive team in the role of Chief Restructuring Officer. He was subsequently appointed the Company’s Chief Financial Officer on February 10, 2006.

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Settlement of Class Action Lawsuit

     On February 8, 2005, the Company entered into a Stipulation of Settlement of the Securities Class Action Litigation. On February 10, 2005, the United States District Court for the Northern District of Georgia, Atlanta Division preliminarily approved the terms of the Settlement. On May 26, 2005, the Court approved the Stipulation of Settlement (“Settlement”) entered into by the Company with the Plaintiff’s counsel, on behalf of all putative class members, pursuant to which it agreed to settle the consolidated class action for $6.75 million, which payment was made by the insurance carrier for the Company.

Forbearance Agreement

     As of December 31, 2005, the Company was not in compliance with all of its financial covenants under its prior senior credit facility. On November 8, 2005, the Company entered into a Forbearance Agreement with the Lender and each of the Company’s domestic subsidiaries. Pursuant to the Forbearance Agreement, the Lender agreed to forbear from exercising any right or remedy under the prior senior credit facility and related credit documents (including, without limitation, the right to cease making revolving loans) or applicable law, but only to the extent that such right or remedy arose exclusively as a result of the occurrence of certain acknowledged events of default; however, the Lender did retain its right to prohibit certain payments to the holders of the Company’s 4³/4% convertible notes (“Convertible Notes”) (see Note 8(c)). In addition to the financial covenant defaults discussed above, the acknowledged events of default included the failure to provide information and documentation regarding certain of the Company’s subsidiaries.

     In consideration of the Lender’s willingness to enter the Forbearance Agreement, the Company paid the Lender a nonrefundable fee in the amount of $0.1 million and agreed to reimburse certain expenses of the Lender and its counsel. The Company satisfied all of its obligations under the Forbearance Agreement, and replaced the prior senior credit facility with its new senior facility, discussed below, on March 17, 2006. In consideration of the willingness of the Lender to enter into the Forbearance Agreement, the Company and its domestic subsidiaries released the Lender and certain of its affiliates from any and all damages and liabilities of whatever kind or nature, known or unknown, relating to or arising under the prior senior credit facility, excluding any ongoing obligations the Lender had pursuant to the prior senior credit facility.

$10 Million Bridge Loan

     On December 23, 2005, the Company entered into a Credit Agreement, Security Agreement and Pledge Agreement with Petrus Securities L.P. and Parkcentral Global Hub Limited (collectively, the “Petrus Entities”) and Blum Strategic Partners II GmbH & Co. K.G. and Blum Strategic Partners II, L.P. (collectively, the “Blum Entities”). These agreements evidence a term loan to PRG-Schultz USA Inc., a wholly owned subsidiary of the Company (the “Borrower”), in an aggregate principal amount of $10 million. This loan was repaid upon closing of the new senior credit facility on March 17, 2006. See “—Liquidity and Capital Resources—$10 Million Bridge Loan.”

Financial Restructuring

     On October 19, 2005 the Board of Directors of the Company formed a Special Restructuring Committee to oversee the efforts of the Company, with the assistance of its financial advisor, Rothschild Inc., to restructure the Company’s financial obligations, including its obligations under its convertible notes due November 2006, and to improve the Company’s liquidity. The Company successfully completed the financial restructuring on March 17, 2006.

     Pursuant to the financial restructuring, the Company exchanged:

• $400 principal amount of its 11.0% Senior Notes Due 2011, plus an additional amount of principal equal to accrued and unpaid interest due on the existing notes held by the tendering holders;

• $480 principal amount of its 10.0% Senior Convertible Notes Due 2011 convertible into new 10.0% Senior Series B Convertible Participating Preferred Stock and/or common stock; and

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• one share, $120 liquidation preference, of its 9.0% Senior Series A Convertible Participating Preferred Stock convertible into common stock;

     for each $1,000 principal amount of outstanding 4.75% Convertible Subordinated Notes due November 2006.

     Approximately 99.6% of the aggregate $125 million outstanding convertible notes were tendered for exchange and accepted by the Company.

     The material terms of these new securities include:

• The new senior notes bear interest at 11%, payable semiannually in cash, and are callable at 104% of face in year 1, 102% in year 2, and at par in years 3 through 5.

• The new senior convertible notes bear interest at 10%, payable semiannually in cash or in kind, at the option of the Company. The new senior convertible notes are convertible at the option of the holders, upon satisfaction of certain conditions, (and in certain circumstances, at the option of the Company) into shares of new series B preferred stock having a 10% annual dividend and a liquidation preference equal to the principal amount of notes converted. Dividends on the new series B preferred stock may be paid in cash or in kind, at the option of the Company. Each $1,000 of face amount of such notes are convertible into approximately 2.083 shares of new series B convertible preferred stock; provided that upon the occurrence of certain events, including approval by the shareholders of an amendment to the Company’s Articles of Incorporation to allow sufficient additional shares of common stock to be issued for the conversion, they will be convertible only into common stock at a rate of approximately 1,538 shares per $1,000 principal amount. The new series B preferred stock is convertible at the option of the holders into shares of common stock at the rate of $0.65 of liquidation preference per share of common stock, subject to certain conditions, including approval by the shareholders of an amendment to the Company’s Articles of Incorporation to allow sufficient additional shares of common stock to be issued for the conversion.

• The new series A preferred stock has a 9% dividend, payable in cash or in kind, at the option of the Company. The new series A preferred stock is convertible at the option of the holders into shares of common stock at the rate of $0.28405 of liquidation preference per share of common stock.

• The series A and series B preferred stock have the right to vote with the Company’s common stock on most matters requiring shareholder votes. The Company has the right to redeem the new senior convertible notes at par at any time after repayment of the new senior notes. The Company also has the right to redeem the new series A and series B preferred stock at the stated liquidation preference at any time after repayment of the new senior notes and the new senior convertible notes.

• Both the new senior notes and the new senior convertible notes mature on the fifth anniversary of issuance. The new series A and series B preferred stock must be redeemed on the fifth anniversary of issuance.

     Immediately following the closing of the financial restructuring transactions, the existing common shareholders owned approximately 54% of the equity of the Company. If all the new senior convertible notes had converted into series B preferred stock immediately on completion of the financial restructuring, the existing common shareholders would have owned approximately 30% of the equity of the Company (excluding any potential future dilution from the Company’s management incentive plan).

     As a part of its financial restructuring, the Company also entered into a new senior secured credit facility with Ableco LLC (“Ableco”) and The CIT/Group/Business Credit, Inc., a portion of which is being syndicated to the Company’s prior bridge financing lenders, Petrus Securities L.P. and Parkcentral Global Hub Limited (collectively, the “Petrus Entities”) and Blum Strategic Partners II GmbH & Co. K.G. and Blum Strategic Partners II, L.P. (collectively, the “Blum Entities”). An affiliate of the Blum Entities was a member of the Ad Hoc Committee of holders of the Company’s convertible notes due November 2006, with the right to designate one member of the Company’s Board of Directors, and together with its affiliates, the Company’s largest shareholder. The new credit facility includes (1) a $25.0 million term loan, and (2) a revolving credit facility that provides for revolving loan borrowings of up to $20.0 million. No borrowings are currently outstanding under the revolving credit facility.

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     PRG-Schultz USA, Inc., a direct wholly-owned subsidiary (the “borrower”), is the primary borrower under the new senior secured credit facility, and the Company and each of its other existing and subsequent acquired or organized direct and indirect domestic wholly-owned subsidiaries have guaranteed the new facility. The borrower’s and all of the Company’s other subsidiaries’ obligations under the new senior secured credit facility are secured by liens on substantially all of the Company’s assets (including the stock of our domestic subsidiaries and two-thirds of the stock of certain of our foreign subsidiaries).

     The new senior secured credit facility will expire on the fourth anniversary of the closing of the exchange offering. The term loan under the new senior secured credit facility will amortize with quarterly payments beginning on the first anniversary of the closing date of $250,000 per quarter for the second year of the facility, and $500,000 per quarter for the third and fourth years of the facility, with the balance due at maturity on the fourth anniversary of closing.

     The term loan under the new senior secured credit facility may be repaid at the Company’s option at any time; provided that any such pre-payment in the first year shall be subject to a prepayment penalty of 3.0% of the principal amount pre-paid, and pre-payments in the second year shall be subject to a pre-payment penalty of 2.0% of the principal amount pre-paid. The term loan may be pre-paid at any time following the 2nd anniversary of the closing date without penalty. The new senior secured credit facility also provides for certain mandatory repayments, including a portion of our consolidated excess cash flow (which will be based on an adjusted EBITDA calculation), sales of assets and sales of certain debt and equity securities, in each case subject to certain exceptions and reinvestment rights.

     The Company’s ability to borrow revolving loans under the new senior secured credit facility is limited to a borrowing base of a percentage of eligible domestic receivables, subject to adjustments. Based on this borrowing base calculation, the Company had approximately $15.0 million of availability under the revolving credit facility at the closing of the exchange offer.

     The interest on the term loan is based on a floating rate equal to the reserve adjusted London inter-bank offered rate, or LIBOR, plus 8.5% (or, at our option, a published prime lending rate plus 5.5%). The interest rate on outstanding revolving credit loans is based on LIBOR plus 3.75% (or, at our option, a published prime lending rate plus 1.0%). The Company will also pay an unused commitment fee on our revolving credit facility of 0.5%. The new senior secured credit facility also required the payment of commitment fees, closing fees and additional expense reimbursements of approximately $1.0 million at closing.

     The new senior secured credit facility contains customary representations and warranties, covenants and conditions to borrowing. The new senior secured credit facility also contains a number of financial maintenance and restrictive covenants that are customary for a facility of this type, including without limitation (and subject to certain exceptions and qualifications): maximum capital expenditures (to be measured annually); maximum total debt to EBITDA (to be measured quarterly); minimum EBITDA (to be measured quarterly); minimum fixed charge coverage ratio (to be measured quarterly); provision of financial statements and other customary reporting; notices of litigation, defaults and un-matured defaults with respect to material agreements; compliance with laws, permits and licenses; inspection of properties, books and records; maintenance of insurance; limitations with respect to liens and encumbrances, dividends and retirement of capital stock, guarantees, sale and lease back transactions, consolidations and mergers, investments, capital expenditures, loans and advances, and indebtedness; compliance with pension, environmental and other laws, operating and capitalized leases, and limitations on transactions with affiliates and prepayment of other indebtedness.

     The new senior secured credit facility contains customary events of default, including non-payment of principal, interest or fees, inaccuracy of representations or warranties in any material respect, failure to comply with covenants, cross-default to certain other indebtedness, loss of lien perfection or priority, material judgments, bankruptcy events and change of ownership or control.

Critical Accounting Policies

     Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

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     The Company’s significant accounting policies are more fully described in Note 1 of Notes to Consolidated Financial Statements included in Item 8. of this Form 10-K. However, certain of the Company’s accounting policies are particularly important to the portrayal of its financial position and results of operations and require the application of significant judgment by management. As a result, they are subject to an inherent degree of uncertainty. Accounting policies that involve the use of estimates that meet both of the following criteria are considered by management to be “critical” accounting policies. First, the accounting estimate requires the Company to make assumptions about matters that are highly uncertain at the time that the accounting estimate is made. Second, alternate estimates in the current period, or changes in the estimate that are reasonably likely in future periods, would have a material impact on the presentation of the Company’s financial condition, changes in financial condition or results of operations.

     In addition to estimates that meet the “critical” estimate criteria, the Company also makes many other accounting estimates in preparing its consolidated financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, refund liabilities, accounts receivable allowance for doubtful accounts, goodwill and other intangible assets and income taxes. Management bases its estimates and judgments on historical experience, information available prior to the issuance of the consolidated financial statements and on various other factors that are believed to be reasonable under the circumstances. This information forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Materially different results can occur as circumstances change and additional information becomes known, including changes in those estimates not deemed “critical”.

     Management believes the following critical accounting policies, among others, involve its more significant estimates and judgments used in the preparation of its consolidated financial statements. The development and selection of accounting estimates, including those deemed “critical,” and the associated disclosures in this Form 10-K have been discussed with the audit committee of the Board of Directors.

• Revenue Recognition. The Company recognizes revenue on the accrual basis except with respect to its Meridian VAT refunds business, and certain international Accounts Payable Services units where revenue is recognized on the cash basis in accordance with guidance issued by the Securities and Exchange Commission in Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition. Revenue is generally recognized for a contractually specified percentage of amounts recovered when it has been determined that our clients have received economic value (generally through credits taken against existing accounts payable due to the involved vendors or refund checks received from those vendors), and when the following criteria are met: (a) persuasive evidence of an arrangement exists; (b) services have been rendered; (c) the fee billed to the client is fixed or determinable; and (d) collectibility is reasonably assured. The determination that each of the aforementioned criteria has been met, particularly the determination of the timing of economic benefit received by the client and the determination that collectibility is reasonably assured, requires the application of significant judgment by management and a misapplication of this judgment could result in inappropriate recognition of revenue.

• Refund Liabilities. Refund liabilities result from reductions in the economic value previously received by the Company’s clients with respect to vendor claims developed by the Company and for which the Company has previously recognized revenue. Such refund liabilities are recognized by either offsets to amounts otherwise due from clients or by cash refunds to clients. The Company computes the estimate of its refund liabilities based on historical refund data and records such refunds as a reduction of revenue. A hypothetical 0.1% change in refund liabilities would have an impact on operating income of approximately $0.1 million.

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• Accounts Receivable Allowance for Doubtful Accounts. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of its clients to make required payments. The Company evaluates the adequacy of these allowances on a periodic basis. This evaluation includes, but is not limited to, historical loss experience, the aging of current accounts receivable balances and provisions for adverse situations that may affect a client’s ability to pay. If the evaluation of allowance requirements differs from the actual aggregate allowance, adjustments are made to the allowance. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. If the financial condition of any of the Company’s clients were to deteriorate, or their operating climates were to change, resulting in an impairment of either their ability or willingness to make payments, additional allowances may be required. If the Company’s estimate of required allowances for doubtful accounts is determined to be insufficient, it could result in decreased operating income in the period such determination is made. Conversely, if a client subsequently remits cash for an accounts receivable balance which has previously been written off, it could result in increased operating income in the period in which the payment is received. A hypothetical 0.1% change in the allowance for doubtful accounts would have an impact on operating income of approximately $0.1 million.

• Goodwill and Other Intangible Assets. During the fourth quarter of 2005, as part of its annual intangible asset impairment testing, the Company, together with its independent valuation advisors, Deloitte Financial Advisory Services LLP, performed valuation analyses of its goodwill balances as well as other intangible assets. As a result of this process, the Company determined that non-cash, pre-tax intangible asset impairment charges totaling $170.4 million were required during the quarter and year-ended December 31, 2005, in accordance with U.S. generally accepted accounting principles. The Company’s Accounts Payable Services segment had experienced its third consecutive year of significant declines in revenues and gross profit. The continuing downward trend in this segment was the single most important factor leading to the necessity of the impairment charge. This trend is also what necessitated the initiation of the implementation of the Company’s operational restructuring plan in the third quarter of 2005. A similarly derived charge of $206.9 million was recorded in 2003.

During the fourth quarter of 2004, the Company, working with its independent valuation advisors, completed the required annual impairment testing of goodwill and other intangible assets in accordance with SFAS No. 142. As a result of this testing, the Company concluded that there was no impairment of goodwill and other intangible assets.

• Income Taxes. The Company’s reported effective tax rates on earnings (loss) from continuing operations before income taxes and discontinued operations approximated 0.4%, 12,114% and 17.9% for the years ended December 31, 2005, 2004 and 2003, respectively. The unusual 2005 rate is primarily attributable to the nondeductible portions of the impairment charges discussed above and the change in the deferred tax asset valuation allowance. The unusual 2004 rate is primarily attributable to the change in the deferred tax asset valuation allowance.

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The Company’s effective tax rate is based on historical and anticipated future taxable income, statutory tax rates and tax planning opportunities available to the Company in the various jurisdictions in which it operates. Significant judgment is required in determining the effective tax rate and in evaluating the Company’s tax positions. Tax regulations require items to be included in the tax returns at different times than the items are reflected in the financial statements. As a result, the Company’s effective tax rate reflected in its Consolidated Financial Statements included in Item 8. of this Form 10-K is different than that reported in its tax returns. Some of these differences are permanent, such as expenses that are not deductible on the Company’s tax returns, and some are temporary differences, such as depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in the Company’s tax returns in future years for which it has already recorded the tax benefit in the statement of operations. The Company establishes valuation allowances to reduce deferred tax assets to the amounts that it believes are more likely than not to be realized. These valuation allowances are adjusted in light of changing facts and circumstances. Deferred tax liabilities generally represent tax expense recognized in the Company’s consolidated financial statements for which payment has been deferred, or expense for which a deduction has already been taken on the Company’s tax returns but has not yet been recognized as an expense in its consolidated financial statements.

SFAS No. 109, Accounting for Income Taxes, requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, management considers all available positive and negative evidence affecting specific deferred tax assets, including the Company’s past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry-back and carry-forward periods, and the implementation of tax planning strategies.

Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of deferred tax assets when significant negative evidence exists. Cumulative losses in recent years are the most compelling form of negative evidence considered by management in this determination. In 2004 the Company recognized an increase in the valuation allowance against its remaining net deferred tax assets of $76.6 million. This increase was offset by the use of approximately $4.3 million of capital loss carry-forwards resulting in a net change in the valuation allowance of approximately $72.3 million.

During 2005 the Company recorded an additional valuation allowance adjustment of $48.5 million, bringing the total valuation allowance balance to $139.6 million. The Company’s Consolidated Balance Sheet as of December 31, 2005 included in Item 8. of this Form 10-K reflects a net current deferred income tax asset of $67 thousand and a net noncurrent deferred tax asset of $530 thousand. Such net deferred tax assets are primarily attributable to operating loss carryforwards available in Canada.

Results of Operations

     The following table sets forth the percentage of revenues represented by certain items in the Company’s Consolidated Statements of Operations for the periods indicated:

	Years Ended December 31,
	2005			2004			2003
Statements of Operations Data:
Revenues		100.0	%		100.0	%		100.0	%
Cost of revenues		66.8			61.9			61.5
Gross margin		33.2			38.1			38.5
Selling, general and administrative expenses		38.1			35.5			33.6
Impairment charges		58.3			—			56.3
Restructuring expense		4.0			—			—
Operating income (loss)		(67.2	)		2.6			(51.4	)
Interest expense		(3.1	)		(2.6	)		(2.6	)
Interest income		0.2			0.2			0.2

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	Years Ended December 31,
	2005			2004			2003
Earnings (loss) from continuing operations before income taxes and discontinued operations		(70.1	)		0.2			(53.8	)
Income taxes		0.3			21.7			(9.6	)
Earnings (loss) from continuing operations before discontinued operations		(70.4	)		(21.5	)		(44.2	)
Discontinued operations:
Earnings (loss) from discontinued operations, net of income taxes		(0.9	)		(0.4	)		0.3
Gain on disposal of discontinued operations , net of income taxes		0.2			1.5			0.1
Earnings (loss) from discontinued operations		(0.7	)		1.1			0.4
Net earnings (loss)		(71.1	)%		(20.4	)%		(43.8	)%

     The Company has two reportable operating segments, the Accounts Payable Services segment and Meridian VAT Reclaim (see Note 5 of Notes to Consolidated Financial Statements included in Item 8. of this Form 10-K).

Accounts Payable Services

     Revenues. Accounts Payable Services revenues for the years ended December 31, 2005, 2004 and 2003 were as follows (in millions):

	2005		2004		2003
Domestic Accounts Payable Services revenue:
Retail	$	137.3	$	167.8	$	169.1
Commercial		17.1		33.5		47.4
		154.4		201.3		216.5
International Accounts Payable Services revenue		97.2		107.9		110.5
Total Accounts Payable Services revenue	$	251.6	$	309.2	$	327.0

     For the year ended December 31, 2005 compared to the year ended December 31, 2004, the Company continued to experience a decline in revenues for domestic retail/wholesale Accounts Payable Services. The reduction in revenues was primarily attributable to a general reduction in revenue from certain large U.S. audits because fewer claims were processed as a result of improved client processes and the conclusion of several non-recurring audits that took place in 2004. Revenues decreased as the Company’s clients developed and strengthened their own internal audit capabilities as a substitute for the Company’s services. Further, the Company’s clients made fewer transaction errors as a result of the training and methodologies provided by the Company as part of the Company’s accounts payable recovery process. These trends are expected to continue for the foreseeable future, and as a result, revenues from domestic retail Accounts Payable Services are expected to continue to decline for the foreseeable future. Revenue in 2004 benefited from a $3.3 million increase in revenue from the Company’s sales and use tax operations as well as a $1.6 million settlement of past services rendered to an existing client but for which revenues had not been previously recognized.

     Revenues from the Company’s domestic commercial Accounts Payable Services clients also continued to decline in 2005 compared to the same period of 2004. The Company believes the market for providing disbursement audit services (which typically entail acquisition from the client of limited purchase data and an audit focus on a select few recovery categories) to commercial entities in the United States is reaching maturity with fewer audit starts and lower fee rates due to increasing pricing pressures. In response to the decline in performance for the commercial business, the Company has begun to intentionally reduce the number of commercial clients serviced based on profitability, and this trend is expected to continue. As a result of the foregoing, revenues from domestic commercial Accounts Payable Services are expected to continue to decline for the foreseeable future.

     For the year ended December 31, 2005 compared to the year ended December 31, 2004, the Company continued to experience a decline in revenues for the international portion of the Company’s Accounts Payable Services. The

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decrease in revenues from international operations was driven by a significant decline in the United Kingdom ($11.0 million) and a decline in Canada ($1.0 million) that was partially offset by increases in Latin America ($2.1 million). Similar to the U.S. market, lower fee rates and the maturity of the U.K. market resulted in a declining claim trend as clients improved their payment processes. The Company is facing this unfavorable claim trend in a number of other countries in which it transacts business, and expects this trend to continue for the foreseeable future.

     For the year ended December 31, 2004, compared to the year ended December 31, 2003, the Company experienced a decrease in revenues for domestic retail/wholesale Accounts Payable Services, primarily a decrease in base retail audit revenue. Management believes the decrease in base retail audit revenue was largely attributable to clients’ increased use of their own internal recovery audit functions and continuing changes in the claims approval and processing patterns in some of the Company’s largest retail accounts. The Company expects many clients to continue to use their own internal recovery audit functions as a substitute for its recovery audit services.

     Revenues from the Company’s domestic commercial Accounts Payable Services clients also declined during the year ended December 31, 2004 compared to the same period of 2003. The period-over-period decrease was largely due to fewer audit starts in the first six months of 2004. Disbursement audit services (which typically entail acquisition from the client of limited purchase data and an audit focus on a select few recovery categories) have tended to be either “one-time” with no subsequent repeat or rotational in nature with different divisions of a given client often audited in pre-arranged annual sequences.

     Partially offsetting the decreases in Accounts Payable Services revenue for the year ended December 31, 2004 compared to the year ended December 31, 2003 were a $3.3 million increase in the Company’s sales and use tax operations as well as a $1.6 million settlement for past services rendered to an existing client but for which revenues had not been previously recognized. These offsetting increases are not expected to be recurring items in future periods.

     The decrease in revenues from the international portion of Accounts Payable Services in the year ended December 31, 2004 compared to 2003 was primarily attributable to client-specific issues in the Company’s European operations and a lengthened approval process in the Company’s Canadian operations. Additionally, the Company experienced a decrease in revenues for the year ended December 31, 2004 from one large client acquired as part of the January 24, 2002 acquisition of the businesses of Howard Schultz & Associates International, Inc. and affiliates (“HSA-Texas”) for which the Company provided airline ticket revenue recovery audit services primarily due to a decrease in claims and an increase in refunds during the 2004 period when compared to the same period of the prior year. These decreases in revenues were partially offset by an increase in revenues attributable to strengthening of the local currencies of the Company’s international Accounts Payable Services operations, as a whole, relative to the U.S. dollar for the year ended December 31, 2004.

     Cost of Revenues (“COR”). COR consists principally of commissions paid or payable to the Company’s auditors based primarily upon the level of overpayment recoveries, and compensation paid to various types of hourly workers and salaried operational managers. Also included in COR are other direct costs incurred by these personnel, including rental of non-headquarters offices, travel and entertainment, telephone, utilities, maintenance and supplies and clerical assistance. A significant portion of the components comprising COR for the Company’s domestic Accounts Payable Services operations are variable compensation-related costs that will increase or decrease with increases and decreases in revenues. The COR support base for domestic retail and domestic commercial operations are not separately distinguishable and are not evaluated by management individually. The Company’s international Accounts Payable Services also have a portion of their COR, although less than domestic Accounts Payable Services, that will vary with revenues. The lower variability is due to the predominant use of salaried auditor compensation plans in most emerging-market countries.

     Accounts Payable Services COR for the years ended December 31, 2005, 2004 and 2003 was as follows (in millions):

	2005		2004		2003
Domestic Accounts Payable Services COR	$	99.8	$	120.2	$	133.7
International Accounts Payable Services COR		68.1		72.7		69.9
Total Accounts Payable Services COR	$	167.9	$	192.9	$	203.6

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     The dollar decrease in cost of revenues for 2005 compared to 2004 for domestic Accounts Payable Services was primarily due to lower revenues during 2005 when compared to 2004. COR as a percentage of revenues from domestic Accounts Payable services increased to 64.6% for the year ended December 31, 2005 compared to 59.7% for the prior year. While the Company’s revenues continued to decrease in 2005, the Company continues to incur certain fixed costs that are a component of COR. These fixed costs constitute a larger percentage of COR and result in a higher COR as a percentage of revenues on a comparable basis.

     On a dollar basis, cost of revenues for the Company’s international Accounts Payable Services decreased in 2005, compared to the prior year, primarily due to lower revenues in 2005 and currency fluctuations in the countries in which the Company operates. COR as a percentage of revenues for international Accounts Payable Services was 70.1% for the year ended December 31, 2005 and 67.4% for the prior year.

     During the year ended December 31, 2004, the decrease in COR for domestic Accounts Payable Services was primarily due to lower revenues and a lower COR as a percentage of revenues when compared to the same period of 2003. COR as a percentage of revenues from domestic Accounts Payable Services decreased to 59.7% for the year ended December 31, 2004 compared to 61.8% for the prior year. This improvement in COR as a percentage of revenues was largely driven by cost reductions in the Company’s U.S. Accounts Payable Services operations, where certain strategic business initiatives had been implemented. The Company reduced its headcount in its domestic Accounts Payable Services operations, year over year, by approximately 314 in connection with these initiatives.

     On a dollar basis, cost of revenues for the Company’s international Accounts Payable Services increased during the year ended December 31, 2004 compared to the same period of 2003 primarily due to increases attributable to currency fluctuations in the countries in which the Company operates.

     COR as a percentage of revenues from international Accounts Payable Services for the year ended December 31, 2004 was 67.4%, up from 63.3% in the comparable period of 2003. Although, as a result of decreased revenues, international Accounts Payable Services has experienced a decrease in the variable cost component of COR, international Accounts Payable Services continues to incur certain fixed costs that are a component of COR. As revenues decreased, these fixed costs constituted a larger percentage of COR and resulted in a higher COR as a percentage of revenues on a comparable basis.

     Selling, General, and Administrative Expenses (“SG&A”). SG&A expenses include the expenses of sales and marketing activities, information technology services and the corporate data center, human resources, legal, accounting, administration, currency translation, headquarters-related depreciation of property and equipment and amortization of intangibles with finite lives. The SG&A support base for domestic retail and domestic commercial operations are not separately distinguishable and are not evaluated by management individually. Due to the relatively fixed nature of the Company’s SG&A expenses, these expenses as a percentage of revenues can vary markedly from period to period based on fluctuations in revenues.

     Accounts Payable Services SG&A for the years ended December 31, 2005, 2004 and 2003 were as follows (in millions):

	2005		2004		2003
Domestic Accounts Payable Services SG&A	$	30.9	$	39.3	$	37.8
International Accounts Payable Services SG&A		28.5		29.4		26.4
Total Accounts Payable Services SG&A	$	59.4	$	68.7	$	64.2

     The decrease in SG&A expenses for the year ended December 31, 2005 for the Company’s domestic Accounts Payable Services operations, when compared to the same period of 2004, was primarily a result of the Company’s 2005 operational restructuring plan.

     The decrease in SG&A expenses, on a dollar basis, for the year ended December 31, 2005 compared to the same period of 2004, for the Company’s international Accounts Payable Services operations resulted primarily from the Company’s 2005 operational restructuring plan.

     On a dollar basis, the increase in SG&A expenses for the Company’s domestic Accounts Payable Services operations for the year ended December 31, 2004 when compared to the same period of 2003 was primarily due to a $2.3 million increase in depreciation expense relating to fixed assets acquired to support the business. This increase

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was partially offset by a $1.3 million settlement in the third quarter of 2004 for previous services rendered to an existing client that had previously been written-off, which reduced SG&A.

     The increase in SG&A expenses, on a local currency basis, for the year ended December 31, 2004 compared to the year ended December 31, 2003 for international Accounts Payable Services resulted primarily from increased expenses experienced by the Company’s Pacific and Asian operations, partially offset by lower expenses incurred by the Company’s Latin American operations.

Meridian VAT Reclaim

     Meridian’s operating income for the years ended December 31, 2005, 2004 and 2003 was as follows (in millions):

	2005		2004		2003
Revenues	$	40.6	$	41.4	$	40.4
Cost of revenues		27.2		24.2		22.3
Gross margin		13.4		17.2		18.1
Selling, general and administrative expenses		6.6		8.2		6.2
Restructuring expense		0.4		—		—
Operating income	$	6.4	$	9.0	$	11.9

     Revenues. Revenues generated by Meridian decreased by $0.8 million in 2005 when compared to the same period in 2004. Fee income on VAT refunds decreased by $0.6 million in 2005 when compared to 2004 due to the timing of refunds from local VAT authorities. For the year ended December 31, 2005, the exchange rate impact related to the strengthening of the Euro, Meridian’s functional currency, to the U.S. dollar, resulted in the increase in revenue of $0.2 million when compared to the similar period of 2004. Meridian has developed new service offerings on a “fee-for-service” basis providing accounts payable and employee expense reimbursement processing for third parties. Revenue from such new “fee-for-service” offerings, unlike revenue from Meridian’s VAT refunds business, is recognized on an accrual basis pursuant to the Company’s revenue recognition policy. The revenue for such fee-for-service business totaled $1.8 million and $1.0 million for the years ended December 31, 2005 and 2004, respectively. There were no revenues generated in 2005 from Transporters VAT Reclaim Limited (“TVR”), Meridian’s joint venture with an unrelated German concern named Deutscher Kraftverkehr Euro Service GmbH & Co. KG (“DKV”). Revenues generated from TVR in 2004 were $0.5 million.

     Revenue generated by Meridian increased $1.0 million for the year ended December 31, 2004 when compared to the same period of 2003. A $3.5 million benefit from exchange rate impact related to the strengthening of the Euro, Meridian’s functional currency, to the U.S. dollar and a $1.0 million increase in revenues from new clients attributed to initiatives to develop new service offerings were partially offset by decreases in fee income from VAT refunds and TVR fees. Fee income on VAT refunds decreased $1.6 million for the year ended December 31, 2004 when compared to the same period of 2003 because Meridian received an unusually high volume of refunds in the first six months of 2003 from certain European VAT authorities for claims that had been outstanding for an extended period of time. During the first six months of 2003, the tax authorities for various countries paid claims that, in some cases, had been outstanding in excess of two years. The timing of reimbursement of VAT claims by the various European tax authorities with which Meridian files claims can differ significantly by country.

     Also impacting Meridian’s revenues for the year ended December 31, 2004 was a decrease in revenues generated from TVR, Meridian’s joint venture with DKV, an unrelated German concern. Meridian experienced a decrease in TVR revenues of $1.8 million for the year ended December 31, 2004 compared to the year ended December 31, 2003. During 2004, Meridian agreed with DKV to commence an orderly and managed closeout of the TVR business. Therefore, Meridian’s future revenues from TVR for processing TVR’s VAT refunds, and the associated profits therefrom, ceased in October 2004. As TVR goes about the orderly wind-down of its business in future periods, it will be receiving VAT refunds from countries, and a portion of such refunds will be paid to Meridian in liquidation of its investment in TVR. (See Note 13(b) of Notes to Consolidated Financial Statements included in Item 8. of this Form 10-K).

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     Cost of Revenue (COR). COR consists principally of compensation paid to various types of hourly workers and salaried operational managers. Also included in COR are other direct costs incurred by these personnel, including rental of non-headquarters offices, travel and entertainment, telephone, utilities, maintenance and supplies and clerical assistance. COR for the Company’s Meridian operations is largely fixed and, for the most part, will not vary significantly with changes in revenue.

     For the year ended December 31, 2005 compared to the same period of the prior year, on a dollar basis, COR for the Company’s Meridian operations increased primarily due to increased payroll costs as a result of higher headcount related to new service offerings and an annual merit increase. COR as a percentage of revenues for the Company’s Meridian operations was 67.0% for the year ended December 31, 2005, compared to 58.5% of revenues for the same period of 2004. The increase in COR as a percentage of revenues for Meridian was due to increased payroll costs as a result of higher head count related to new service offerings.

     For the year ended December 31, 2004 compared to the year ended December 31, 2003, on a dollar basis, COR for the Company’s Meridian operations increased primarily due to increased payroll costs as a result of higher headcount related to new service offerings. For the years ended December 31, 2004 and 2003, Meridian’s COR as a percentage of revenues was 58.5% and 55.2%, respectively. The increase in COR as a percentage of revenues for Meridian was the result of the slight increase in revenues for the year ended December 31, 2004 compared to the same period of 2003 as discussed above combined with increased COR on a dollar basis.

     Selling, General & Administration (SG&A). Meridian’s SG&A expenses include the expenses of marketing activities, administration, professional services, property rentals and currency translation. Due to the relatively fixed nature of the Company’s SG&A expenses, these expenses as a percentage of revenues can vary markedly from period to period based on fluctuations in revenues.

     On a dollar basis, Meridian’s SG&A for the year ended December 31, 2005 compared to 2004, decreased primarily due to non-recurring professional services fees incurred in 2004 related to the Company’s Sarbanes-Oxley Act of 2002 compliance initiative.

     On a dollar basis, the increase in Meridian’s SG&A for the year ended December 31, 2004 compared to 2003 was primarily the result of increased payroll and professional fees incurred in 2004 relating to new business development and non-recurring professional services fees incurred in 2004 relating to the Company’s Sarbanes-Oxley Act of 2002 compliance initiative.

Corporate Support

     Selling General & Administration (SG&A). Corporate Support SG&A expenses include the expenses of sales and marketing activities, information technology services, the corporate data center, human resources, legal, accounting, treasury, administration, foreign currency translation, headquarters-related depreciation of property and equipment and amortization of intangibles with finite lives. Due to the relatively fixed nature of the Company’s SG&A expenses, these expenses as a percentage of revenues can vary markedly period to period based on fluctuations in revenues. Corporate support represents the unallocated portion of corporate SG&A expenses not specifically attributable to Accounts Payable Services or Meridian and totaled the following for the years ended December 31, 2005, 2004 and 2003 (in millions):

	2005		2004		2003
Selling, general and administrative expenses	$	45.4	$	47.5	$	53.0

     The decrease in SG&A for corporate support for the year ended December 31, 2005 compared to the same period in the prior year, on a dollar basis, was primarily the result of the Company’s 2005 operational restructuring plan. In addition, during fiscal year 2005 the Company recorded a $3.9 million severance charge for the departure of Messrs. Cook and Toma. This compares to a charge of $1.4 million recorded in 2004 for Messrs. Cook and Toma’s retirement benefits.

     The period-over-period improvement in SG&A for corporate support for the year ended December 31, 2004 compared to the same period of 2003, on a dollar basis, was primarily the result of a decrease in outside consultancy

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costs and expenditures for severance costs as compared to 2003. This period-over-period decrease was partially offset by an increase in expenses related to the Company’s strategic business initiatives and expenses related to an offer to settle a preference claim in a client bankruptcy, as well as costs relating to the Company’s Sarbanes-Oxley Act of 2002 compliance initiative. Also partially offsetting the year over year decrease was a severance payment made to the Company’s former chief financial officer during the first quarter of 2004.

Restructuring Expense

     On August 19, 2005, the Company announced that it had taken the initial step in implementing an expense restructuring plan, necessitated by the Company’s declining revenue trend over the previous two and one-half years. Revenues for the years 2002, 2003, 2004 and 2005 were $439.7 million, $367.4 million, $350.6 million and $292.2 million, respectively. With revenues decreasing in 2003, 2004 and 2005, the Company’s selling, general and administrative expenses had increased as a percentage of revenue in each period (33.6%, 35.5% and 38.1% respectively).

     The restructuring expense for the years ended December 31, 2005, 2004 and 2003 was as follows (in millions):

	2005		2004		2003
Restructuring expense	$	11.6		¾		¾

     On September 30, 2005, the Company’s Board of Directors approved the completed restructuring plan and authorized implementation of the plan. The expense restructuring plan encompasses exit activities, including reducing the number of clients served, reducing the number of countries in which the Company operates, and terminating employees. Annualized savings from the restructuring plan are estimated to be approximately $42.2 million. Almost all of these savings are being realized in the area of selling, general and administrative expenses and only a small percentage of the Company’s auditor staff is being directly impacted by the reductions resulting from this plan. The Company successfully implemented the plan and for the year ended December 31, 2005 recorded an $11.6 million charge related to the restructuring, $10 million of which was for severance pay and benefits costs and $1.6 million of which related to early termination of operating leases. Accordingly, pursuant to Statements of Financial Accounting Standards (“SFAS”) No. 112, Employers’ Accounting for Postemployment Benefits, and SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, the Company recorded expense for severance pay and benefits of $2.0 million and $10.0 million in the three and twelve months ended December 31, 2005, respectively. Severance amounting to $2.8 million had been paid as of December 31, 2005. As of February 28, 2006, additional severance of $1.2 million had been paid and the majority of the remaining severance is expected to be paid out during the remainder of 2006. The Company is presently evaluating which, if any, additional operating leases to exit as part of the restructuring plan.

Discontinued Operations

     During the fourth quarter of 2005, the Company declared its Channel Revenue and Airline businesses, and the Accounts Payable Service business units in South Africa and Japan, as discontinued operations. The Company’s Consolidated Financial Statements included in Item 8. of this Form 10-K have been reclassified to reflect these businesses as discontinued operations for all periods presented.

     On January 11, 2006, the Company consummated the sale of Channel Revenue. Channel Revenue was sold for $0.4 million in cash to Outsource Recovery, Inc. Outsource Recovery also undertook to pay the Company an amount equal to 12% of gross revenues received by Outsource Recovery during each of the calendar years 2006, 2007, 2008 and 2009 with respective to Channel Revenue. The Company recognized a gain on disposal of approximately $0.3 million.

     During 2005, 2004, and 2003 the Company recognized net earnings (loss) from discontinued operations of $(2.7) million, $(1.4) million and $1.1 million, respectively, net of income tax effects. During the fourth quarter of 2003, the Company declared its remaining Communications Services operations, formerly part of the Company’s then-existing Other Ancillary Services segment, as a discontinued operation. On January 16, 2004, the Company consummated the sale of the remaining Communications Services operations to TSL (DE) Corp., a newly formed company whose principal investor was One Equity Partners, the private equity division of Bank One. The operations were sold for

35

approximately $19.1 million in cash paid at closing, plus the assumption of certain liabilities of Communications Services. The Company recognized a gain on disposal of approximately $8.3 million, net of tax expense of approximately $5.5 million. The Company recognized an additional $0.5 million gain on sale during 2005 related to this transaction.

     On December 14, 2001, the Company consummated the sale of its French Taxation Services business (“ALMA”), as well as certain notes payable due to the Company, to Chequers Capital, a Paris-based private equity firm. In conjunction with this sale, the Company provided the buyer with certain warranties. Effective December 30, 2004, the Company, Meridian and ALMA (the “Parties”) entered into a Settlement Agreement pursuant to which the Company paid a total of 3.4 million Euros on January 3, 2005 ($4.7 million at January 3, 2005 exchange rates), to resolve the buyer’s warranty claims and a commission dispute with Meridian. During 2004, the Company recognized an expense of $3.1 million for amounts not previously accrued to provide for these claims. No tax benefit was recognized in relation to the expense. The Settlement Agreement terminates all contractual relationships between the Parties and specifies that the Parties will renounce all complaints, grievances and other actions.

     The Company also recognized a gain on the sale of discontinued operations during the year ended December 31, 2004 of approximately $0.3 million, net of tax expense of approximately $0.2 million. This gain represented the receipt of a portion of the revenue-based royalty from the sale of the Logistics Management Services segment in October 2001.

     During 2003, the Company recognized a gain on the sale of discontinued operations of approximately $0.5 million, net of tax expense of approximately $0.4 million. This gain represented the receipt of a portion of the revenue-based royalty from the sale of the Logistics Management Services segment in October 2001, as adjusted for certain expenses accrued as part of the estimated loss on the sale of the segment.

Other Items

     Debt Issuance Costs. In connection with the Company’s completed financial restructuring and related transactions, the Company expects to incur professional fees and other transaction costs of approximately $9 million which will be capitalized and then amortized over the term of the new indebtedness.

     Net Interest Expense. Net interest expense was $8.4 million, $8.5 million and $8.9 million for the years ended December 31, 2005, 2004 and 2003, respectively (net of interest income of $0.5 million, $0.6 million and $0.6 million, respectively). The Company’s interest expense for the years ended December 31, 2005 and 2004 was comprised of interest expense and amortization of the discount related to the convertible notes and interest on borrowings outstanding under the Company’s prior senior credit facility. The interest expense for 2005 as compared to 2004 was favorable by $0.1 million due to lower interest on borrowings outstanding under Company’s prior senior credit facility. The decrease in interest expense for 2004 compared to 2003 was also due to lower interest on borrowings outstanding under the Company’s prior senior credit facility.

     Net interest expense will increase significantly as a result of the Company’s recently completed financial restructuring. The exchange of the convertible notes due November 2006 for the new senior convertible notes and new senior secured notes will result in additional annual interest expense of approximately $5.8 million. The Company has the option to pay interest on the new senior convertible notes in cash or in kind. The Company also expects to incur additional interest expense on its new senior secured credit facility. See Note 8. to the Consolidated Financial Statements included in Item 8. to this Form 10-K.

     Income Tax Expense (Benefit). The Company’s reported effective tax rates on earnings (loss) from continuing operations before income taxes and discontinued operations approximated 0.4%, 12,114% and 17.9% for the years ended December 31, 2005, 2004 and 2003, respectively. The unusual 2005 rate is primarily attributable to the nondeductible portions the impairment charges discussed above and the change in the deferred tax asset valuation allowance. The unusual 2004 rate is primarily attributable to the change in the deferred tax asset valuation allowance.

     As of December 31, 2005, the Company had approximately $88 million of U.S. Federal loss carryforwards available to reduce future taxable income. The majority of the loss carryforwards expire through 2025. Additionally, as of December 31, 2005, the Company had foreign income tax credit carryforwards amounting to $14.3 million, which expire through 2015. If (as is probable) an ownership change were to occur as a result of the conversion of new securities issued in the Company’s recent financial restructuring, there would be a significant annual limitation

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on the amount of the carryforwards that can be utilized. The annual limitation is equal to the value of the Company at the time of the ownership change multiplied by a long-term tax-exempt rate published by the Internal Revenue Service.

     As a result of the enactment of The American Jobs Creation Act, the Company repatriated approximately $1.8 million of earnings in 2004 that were previously indefinitely reinvested. As a result of this repatriation, the Company recorded additional current income tax expense of approximately $0.7 million during 2004.

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Quarterly Results

     The following tables set forth certain unaudited quarterly financial data for each of the last eight quarters during the Company’s fiscal years ended December 31, 2005 and 2004. The information has been derived from unaudited Condensed Consolidated Financial Statements that, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of such quarterly information. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period.

	2005 Quarter Ended												2004 Quarter Ended
	Mar. 31			June 30			Sept. 30			Dec. 31			Mar. 31			June 30			Sept. 30			Dec. 31
										(In thousands, except per share data)
Revenues	$	75,147		$	78,162		$	66,415		$	72,428		$	86,249		$	88,742		$	83,958		$	91,653
Cost of revenues		48,595			50,997			48,057			47,442			55,736			54,536			52,457			54,330
Gross margin		26,552			27,165			18,358			24,986			30,513			34,206			31,501			37,323
Selling, general and administrative expenses		28,578			31,259			27,374			24,228			33,058			33,022			28,235			30,050
Impairment charges		—			—			—			170,375			—			—			—			—
Restructuring expense		—			—			7,922			3,628			—			—			—			—
Operating income (loss)		(2,026	)		(4,094	)		(16,938	)		(173,245	)		(2,545	)		1,184			3,266			7,273
Interest (expense)		(1,927	)		(2,193	)		(2,249	)		(2,567	)		(2,277	)		(2,263	)		(2,253	)		(2,349	)
Interest income		117			132			160			136			181			115			120			177
Earnings (loss) from continuing operations before income taxes and discontinued operations		(3,836	)		(6,155	)		(19,027	)		(175,676	)		(4,641	)		(964	)		1,133			5,101
Income tax expense (benefit)		687			412			715			(993	)		(1,727	)		(339	)		474			77,789
Earnings (loss) from continuing operations before discontinued operations		(4,523	)		(6,567	)		(19,742	)		(174,683	)		(2,914	)		(625	)		659			(72,688	)
Discontinued operations:
Earnings (loss) from discontinued operations		(592	)		275			(1,316	)		(1,071	)		(680	)		(292	)		(454	)		15
Gain (loss) on disposal of discontinued operations		219			—			260			—			8,441			(1,033	)		260			(2,172	)
Earnings (loss) from discontinued operations		(373	)		275			(1,056	)		(1,071	)		7,761			(1,325	)		(194	)		(2,157	)
Net earnings (loss)	$	(4,896	)	$	(6,292	)	$	(20,798	)	$	(175,754	)	$	4,847		$	(1,950	)	$	465		$	(74,845	)
Basic and diluted earnings (loss) per share:
Earnings (loss) from continuing operations before discontinued operations	$	(0.07	)	$	(0.11	)	$	(0.32	)	$	(2.81	)	$	(0.05	)	$	(0.01	)	$	0.01		$	(1.18	)
Discontinued operations		(0.01	)		0.01			(0.02	)		(0.02	)		0.13			(0.02	)		¾			(0.03	)
Net earnings (loss)	$	(0.08	)	$	(0.10	)	$	(0.34	)	$	(2.83	)	$	0.08		$	(0.03	)	$	0.01		$	(1.21	)

Liquidity and Capital Resources

     Net cash provided by (used in) operating activities was $(8.0) million, $10.8 million and $27.8 million during the years ended December 31, 2005, 2004 and 2003, respectively. Cash used in operating activities for the year ended December 31, 2005 was the result of a $(205.5) million loss from continuing operations largely offset by noncash impairment, depreciation and amortization charges of $186.8 million and a $17.7 million reduction in receivable balances. The overall reduction in accounts receivable balances in 2005 is consistent with the declining revenues trend. Cash provided by operations for the year ended December 31, 2004 was primarily attributable to the offset of a loss from continuing operations by a non-cash charge to provide a valuation allowance against the Company’s remaining deferred tax assets as of December 31, 2004, in addition to a release of restricted cash as a result of the Company’s prior senior credit facility. Cash provided by operating activities during the year ended December 31, 2003 was principally influenced by a loss from continuing operations combined with a reduction in accrued payroll and related expenses offset by non-cash impairment charges and an overall decline in accounts receivable balances. The overall change in accrued payroll and related expenses and accounts receivable balances was the result of normal operations.

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     Net cash provided by (used in) investing activities was $(5.4) million, $(11.5) million and $(11.7) million during the years ended December 31, 2005, 2004 and 2003, respectively. Cash used in investing activities for all three years was attributable to capital expenditures net of proceeds from sales.

     Net cash provided by (used in) in financing activities was $14.9 million, $(31.3) million and $(6.9) million for the years ended December 31, 2005, 2004 and 2003, respectively. The net cash provided by financing activities during the year ended December 31, 2005 related primarily to net borrowings on the Company’s revolving credit facility and $10 million bridge loan. Net cash used in financing activities during the year ended December 31, 2004 related primarily to repayment of amounts outstanding under the Company’s previous senior credit facility. Net cash used in financing activities during the year ended December 31, 2003 related primarily to the repurchase of treasury shares on the open market.

     Net cash provided by (used in) discontinued operations was $(1.9) million, $17.1 million and $0.9 million during the years ended December 31, 2005, 2004 and 2003, respectively. Cash used in discontinued operations during the year ended December 31, 2005 was primarily the result of net operating losses on the four business units classified as held for sale during the fourth quarter of 2005 offset by the receipt of a portion of the revenue-based royalty from the former Logistics Management Services segment that was sold in October 2001. Cash provided by discontinued operations during 2004 was the result of losses generated by the Communications Services operations prior to its sale on January 16, 2004 and net operating losses on the four business units classified as held for sale during the fourth quarter of 2005 offset by proceeds of $19.1 million from the sale of the remaining Communications Services business in January 2004. Cash provided by discontinued operations during 2003 was the result of earnings generated from discontinued operations combined with the receipt of a portion of the revenue-based royalty from the sale of the Logistics Management Services segment in October 2001.

     Contractual Obligations and Other Commitments

     As discussed in Notes to Consolidated Financial Statements included in Item 8. of this Form 10-K, the Company has certain contractual obligations and other commitments. A summary of those commitments as of December 31, 2005 is as follows:

	Payments Due by Period
			(in thousands)
			Less						More
			Than				3-5		Than
	Total		1 Year		1-3 Years		Years		5 Years
Leases	$	53,153	$	8,630	$	13,121	$	9,762	$	21,640
Convertible notes (1)		125,000		125,000		—		—		—
Interest on convertible notes (1)		5,938		5,938		—		—		—
Previous Senior Credit Facility (2)		6,800		6,800		—		—		—
Bridge Loan (2)		10,000		10,000		—		—		—
Restructuring severance		7,142		7,142		—		—		—
Payments to Messrs. Cook and Toma (3)		8,138		2,686		4,660		97		695
Total	$	216,171	$	166,196	$	17,781	$	9,859	$	22,335

(1)	On March 17, 2006, approximately 99.6% of the Company’s Convertible Notes due November 2006 and accrued interest thereon were exchanged for new securities – see Financial Restructuring below.
(2)	The Company’s previous senior credit facility and Bridge Loan were repaid on March 17, 2006 and replaced by the Company’s new Senior Secured Credit Facility – see Financial Restructuring and New Senior Indebtedness below.
(3)	In connection with the Company’s financial restructuring, required payments to Messrs. Cook and Toma were revised – see Executive Severance Payments below.

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Financial Restructuring

     On October 19, 2005 the Board of Directors of the Company formed a Special Restructuring Committee to oversee the efforts of the Company, with the assistance of its financial advisor, Rothschild, Inc., to restructure the Company’s financial obligations, including its obligations under its then existing convertible notes, and to improve the Company’s liquidity. The restructuring was successfully completed on March 17, 2006.

     Pursuant to the financial restructuring, the Company exchanged for $124.5 million of its existing convertible notes due November 2006 (and $1.8 million of accrued interest thereon) the following new securities: $51.6 million of new senior notes, $59.8 million of new senior convertible notes that may be converted into shares of a new Series B convertible stock and /or common stock, upon satisfaction of certain conditions, and new series A convertible preferred stock having a liquidation preference of $14.9 million. Concurrently with closing the exchange offer, the Company also refinanced its senior indebtedness.

     Transaction Costs of Financial Restructuring, Including Exchange Offer

     The Company’s financial advisor, Rothschild, was compensated with a monthly retainer of $0.1 million in addition to a fee of $1.6 million. In addition, the Company incurred significant legal fees as part of the financial restructuring. The Company paid certain expenses of the Ad Hoc Committee of noteholders, including a monthly retainer of $0.1 million to the Committee’s financial advisor. The Company is also obligated to pay the Ad Hoc Committee’s legal fees and financial advisory fees of approximately $1.0 million. In total, the Company incurred approximately $9.0 million of transaction costs, including legal and financial advisory fees, in connection with the exchange offer and the financial restructuring.

     $10 Million Bridge Loan

     On December 23, 2005, the Company entered into a Credit Agreement, Security Agreement and Pledge Agreement with Petrus Securities L.P. and Parkcentral Global Hub Limited (collectively, the “Petrus Entities”) and Blum Strategic Partners II GmbH & Co. K.G. and Blum Strategic Partners II, L.P. (collectively, the “Blum Entities”). These agreements provided for a term loan to PRG-Schultz USA Inc., a wholly owned subsidiary of the Company (the “Borrower”), in an aggregate principal amount of $10 million that matures on the earlier of the closing of the Company’s restructuring of its debt or August 15, 2006 (the “Bridge Loan”). This loan was also repaid and replaced by the new credit facility.

     The Blum Entities are beneficial owners of the Company’s common stock and the new securities issued in the Company’s recent financial restructuring, and they have the right to designate a member of the Company’s Board of Directors and to have an observer present at all Board meetings. The Petrus Entities are also beneficial owners of the Company’s common stock and the new securities issued in the restructuring. The Petrus Entities and Blum Capital Partners L.P. served on the Ad Hoc Committee of holders of the Company’s convertible notes due November 2006.

     New Senior Indebtedness

     The Company’s prior senior credit facility with Bank of America (the “Lender”) provided for revolving credit loans up to a maximum amount of $30.0 million, limited by the Company’s accounts receivable balances. The prior senior credit facility provided for the availability of letters of credit subject to a $10.0 million sub-limit. The prior senior credit facility was retired and replaced by a new senior secured credit facility on March 17, 2006, in connection with the closing of the exchange offer.

     As a part of its financial restructuring, the Company entered into a new senior secured credit facility with Ableco LLC (“Ableco”) and The CIT/Group/Business Credit, Inc., a portion of which is being syndicated to the Company’s prior bridge financing lenders, Petrus Securities L.P. and Parkcentral Global Hub Limited (collectively, the “Petrus Entities”) and Blum Strategic Partners II GmbH & Co. K.G. and Blum Strategic Partners II, L.P. (collectively, the “Blum Entities”). An affiliate of the Blum Entities was a member of the Ad Hoc Committee of holders of the Company’s convertible notes due November 2006, with the right to designate one member of the Company’s Board

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of Directors, and together with its affiliates, the Company’s largest shareholder. The new credit facility includes (1) a $25.0 million term loan, and (2) a revolving credit facility that provides for revolving loan borrowings of up to $20 million. No borrowings are currently outstanding under the revolving credit facility.

     PRG-Schultz USA, Inc., a direct wholly-owned subsidiary, is the primary borrower under the new senior secured credit facility, and it and each of the Company’s other existing and subsequent acquired or organized direct and indirect domestic wholly-owned subsidiaries have guaranteed the new facility. The Company’s, the borrower’s and all of the Company’s other subsidiaries’ obligations under the new senior secured credit facility are secured by liens on substantially all of the Company’s assets (including the stock of the Company’s domestic subsidiaries and two-thirds of the stock of certain of the Company’s foreign subsidiaries).

     The new senior secured credit facility will expire on the fourth anniversary of the closing of the exchange offering. The term loan under the new senior secured credit facility will amortize with quarterly payments beginning on the first anniversary of the closing date of $250,000 per quarter for the second year of the facility, and $500,000 per quarter for the third and fourth years of the facility, with the balance due at maturity on the fourth anniversary of closing.

     The term loan under the new senior secured credit facility may be repaid at our option at any time; provided that any such pre-payment in the first year shall be subject to a prepayment penalty of 3.0% of the principal amount pre-paid, and pre-payments in the second year shall be subject to a pre-payment penalty of 2.0% of the principal amount pre-paid. The term loan may be pre-paid at any time following the 2nd anniversary of the closing date without penalty. The new senior secured credit facility also provides for certain mandatory repayments, including a portion of our consolidated excess cash flow (which will be based on an adjusted EBITDA calculation), sales of assets and sales of certain debt and equity securities, in each case subject to certain exceptions and reinvestment rights.

     The Company’s ability to borrow revolving loans under the new senior secured credit facility is limited to a borrowing base of a percentage of its eligible domestic receivables, subject to adjustments. Based on this borrowing base calculation, the Company had approximately $15.0 million of availability under the revolving credit facility at the closing of the exchange offer.

     The interest on the term loan is based on a floating rate equal to the reserve adjusted London inter-bank offered rate, or LIBOR, plus 8.5% (or, at our option, a published prime lending rate plus 5.5%). The interest rate on outstanding revolving credit loans is based on LIBOR plus 3.75% (or, at our option, a published prime lending rate plus 1.0%). The Company will also pay an unused commitment fee on the revolving credit facility of 0.5%. The new senior secured credit facility also required the payment of the lenders’ commitment fees, closing fees and additional expense reimbursements of approximately $1.0 million at closing.

     The new senior secured credit facility contains customary representations and warranties, covenants and conditions to borrowing. The new senior secured credit facility also contains a number of financial maintenance and restrictive covenants that are customary for a facility of this type, including without limitation (and subject to certain exceptions and qualifications): maximum capital expenditures (to be measured annually); maximum total debt to EBITDA (to be measured quarterly); minimum EBITDA (to be measured quarterly); minimum fixed charge coverage ratio (to be measured quarterly); provision of financial statements and other customary reporting; notices of litigation, defaults and un-matured defaults with respect to material agreements; compliance with laws, permits and licenses; inspection of properties, books and records; maintenance of insurance; limitations with respect to liens and encumbrances, dividends and retirement of capital stock, guarantees, sale and lease back transactions, consolidations and mergers, investments, capital expenditures, loans and advances, and indebtedness; compliance with pension, environmental and other laws, operating and capitalized leases, and limitations on transactions with affiliates and prepayment of other indebtedness.

     The new senior secured credit facility contains customary events of default, including non-payment of principal, interest or fees, inaccuracy of representations or warranties in any material respect, failure to comply with covenants, cross-default to certain other indebtedness, loss of lien perfection or priority, material judgments, bankruptcy events and change of ownership or control.

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Executive Severance Payments

     The July 31, 2005 retirements of the Company’s former Chairman, President and CEO, John M. Cook, and the Company’s former Vice Chairman, John M. Toma, resulted in an obligation to pay retirement benefits of $7.6 million (present value basis) to be paid in monthly cash installments principally over a three-year period, beginning February 1, 2006. Charges of $3.9 million, $1.4 million and $2.3 million had been accrued in 2005, 2004 and 2003 and prior years, respectively, related to these retirement obligations. On March 16, 2006, the terms of the applicable severance agreements were amended in conjunction with the Company’s financial restructuring. Pursuant to the terms of the severance agreements, as amended (1) the Company’s obligations to pay monthly cash installments to Mr. Cook and Mr. Toma have been extended from 36 months to 58 months and from 24 months to 46 months, respectively; however, the total dollar amount of monthly cash payments to be made to each remains unchanged, and (2) the Company agreed to pay a fixed sum of $150,000 to CT Investments, LLC, to defray the fees and expenses of the legal counsel and financial advisors to Messrs. Cook and Toma. Both the original severance agreements, and the severance agreements, as amended, provide for an annual reimbursement, beginning on or about February 1, 2007, to Mr. Cook and Mr. Toma for the cost of health insurance for themselves and their respective spouses (not to exceed $25,000 and $20,000, respectively, subject to adjustment based on changes in the Consumer Price Index), continuing until each reaches the age of 80.

Bankruptcy Litigation

     On March 30, 2005, the Company was sued by the Fleming Post-Confirmation Trust (“PCT”) in a bankruptcy proceeding of the Fleming Companies in the U.S. Bankruptcy Court for the District of Delaware to recover approximately $5.5 million of alleged preferential payments. The PCT’s claims were subsequently amended to add a claim for alleged fraudulent transfers representing approximately $2.0 million in commissions paid to the Company with respect to claims deducted from vendors that the client subsequently re-credited to the vendors. The Company believes that it has valid defenses to the PCT’s claims in the proceeding. In early December 2005, the PCT offered to settle the case for $2 million. The Company countered with an offer to waive its bankruptcy claim and to pay the PCT $250,000. The PCT rejected the Company’s settlement offer and the litigation is ongoing.

Operational Restructuring

     On August 19, 2005, the Company announced that it had taken the initial step in implementing an operational restructuring plan, necessitated by the Company’s declining revenue trend during 2003, 2004, and 2005 as the Company’s selling, general and administrative expenses continued to increase as a percentage of revenue during those same periods (33.6%, 35.5% and 38.1%, respectively). The operational restructuring plan encompasses exit activities, including reducing the number of clients served, reducing the number of countries in which the Company operates, and terminating employees.

     On September 30, 2005, the Company’s Board of Directors approved the completed operational restructuring plan and authorized implementation of the plan. The Company expects the operational restructuring plan to be fully implemented by June 30, 2006, and the implementation of the operational restructuring plan will result in severance related and other charges of approximately $14.6 million. As of December 31, 2005, the Company recorded an $11.6 million charge related to the operational restructuring. Of this amount, $10.0 million was for severance pay and benefits costs pursuant to SFAS No. 112, Employers’ Accounting for Postemployment Benefits, and SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. Severance payments amounting to $2.8 million have been paid as of December 31, 2005, and the majority of the remaining severance is expected to be paid out in 2006. The remaining $1.6 million of the $11.6 million related to early termination of operating leases and impairment of leasehold improvements. Included in the $1.6 million was $1.2 million of early lease termination costs in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The Company also recorded leasehold improvement impairment charges of $0.4 million related to these leases. The $14.6 million estimate for the restructuring plan includes $3.0 million of operating lease exit costs that the Company expects to incur. The Company is presently evaluating which, if any, additional operating leases to exit as part of the restructuring plan.

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been paid and the majority of the remaining severance is expected to be paid out during the remainder of 2006. The Company is presently evaluating which, if any, additional operating leases to exit as part of the restructuring plan.

     French Taxation Services Settlement

     On December 14, 2001, the Company consummated the sale of its French Taxation Services business (“ALMA”), as well as certain notes payable due to the Company, to Chequers Capital, a Paris-based private equity firm. In conjunction with this sale, the Company provided the buyer with certain warranties. Effective December 30, 2004, the Company, Meridian and ALMA (the “Parties”) entered into a Settlement Agreement (the “Agreement”) pursuant to which the Company paid a total of 3.4 million Euros on January 3, 2005 ($4.7 million at January 3, 2005 exchange rates), to resolve the buyer’s warranty claims and a commission dispute with Meridian. During the fourth quarter of 2004, the Company recognized a loss on discontinued operations of $3.1 million for amounts not previously accrued to provide for those claims. No tax benefit was recognized in relation to the expense. The Agreement settles all remaining indemnification obligations and terminates all contractual relationships between the Parties and further specifies that the Parties will renounce all complaints, grievances and other actions.

     Contingent Obligation to Repay Industrial Development Authority of Ireland Grant

     During the period of May 1993 through September 1999, Meridian received grants from the Industrial Development Authority of Ireland (“IDA”) in the sum of 1.4 million Euros ($1.6 million at September 30, 2005 exchange rates). The grants were paid primarily to stimulate the creation of 145 permanent jobs in Ireland. As a condition of the grants, if the number of permanently employed Meridian staff in Ireland falls below 145 prior to September 23, 2007, the date the contingency expires, then the grants are repayable in full. Meridian currently employs 229 permanent employees in Dublin, Ireland. The European Union (“EU”) has currently proposed legislation that will remove the need for suppliers to charge VAT on the supply of goods and services to clients within the EU. The effective date of the proposed legislation is currently unknown. Management estimates that the proposed legislation, if enacted as currently drafted, would eventually have a material adverse impact on Meridian’s results of operations from its value-added tax business. If Meridian’s results of operations were to decline as a result of the enactment of the proposed legislation, it is possible that the number of permanent employees that Meridian employs in Ireland could fall below 145 prior to September 2007. Should such an event occur, the full amount of the grants previously received by Meridian will need to be repaid to IDA. However, management currently estimates that any impact on employment levels related to a possible change in the EU legislation will not be realized until after September 2007, if ever. As any potential liability related to these grants is not currently determinable, the Company’s Consolidated Statement of Operations for the year ended December 31, 2005 included in Item 8. of this Form 10-K does not include any expense related to this matter. Management is monitoring this situation and if it appears probable Meridian’s permanent staff in Ireland will fall below 145 and that grants will need to be repaid to IDA, the Company will recognize an expense at that time.

Possible Limitation on Tax Loss and Credit Carryforwards

     We have substantial tax loss and credit carryforwards for U.S. federal income tax purposes. As a result of the implementation of the exchange offer or certain changes in the composition of our shareholder population it is likely that our ability to use such carryforwards (and certain other tax benefits) to offset future income or tax liability will be severely limited. Based on our current projections, such a limitation would significantly increase our projected future tax liability if combined with the elimination of interest deductions with respect to the new senior convertible notes issued in the exchange offer.

Liquidity Position

     The Company had outstanding borrowings of $6.8 million under the prior senior credit facility and $10.0 million outstanding under the Bridge Loan at December 31, 2005. Additionally, the Company had letters of credit of $0.4 million outstanding at December 31, 2005. As of December 31, 2005, the Company had cash and cash equivalents of $11.8 million and approximately $14.2 million of calculated additional availability for borrowings under the prior senior credit facility for revolving loans, of which up to $9.6 million was available for letters of credit. As of March 17, 2006, there were borrowings of $25.0 million outstanding under the term loan portion of the new senior

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credit facility. As of March 17, 2006, the Company had $15.0 million available for revolving loans under the new senior credit facility and no borrowings under the revolver portion of the new credit facility.

     Management believes that the Company will have sufficient borrowing capacity and cash generated from operations to fund its capital and operational needs for at least the next twelve months; however, current projections reflect that the Company’s core accounts payable business will continue to decline and the Company’s new senior secured credit facility requires the Company to comply with specific financial ratios and other performance covenants. Therefore, the Company must successfully implement management’s cost reduction plan and grow its other business lines in order to stabilize and increase revenues and improve profitability.

New Accounting Standards

     SFAS No. 123(R). In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R) Share-Based Payment. This Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award — the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The provisions of SFAS No. 123(R) are effective for the Company as of January 1, 2006.

     For periods prior to January 1, 2006, the Company could elect to apply a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods by SFAS No. 123(R) (see Note 1(o) of Notes to Consolidated Financial Statements included in Item 8. of this Form 10-K for pro forma disclosures).

     On December 15, 2005, the Company’s Compensation Committee authorized the immediate vesting of all unvested time-vesting options that had option prices that were out of the money as of such date (the “underwater” stock options). This action accelerated the vesting of 2,367,616 options of the 10,874,418 options outstanding as of November 30, 2005. The accelerated options had option prices that ranged from $3.16 per share to $17.25 per share and a weighted average option price per share of $4.97. The optionees whose options were accelerated included, among others, David Cole, the non-executive Chairman of the Board (150,000 options) and the following executive officers: James McCurry (500,000 options), James Moylan (375,000 options) and James Benjamin (75,000 options).

     The Board’s decision to accelerate the vesting of these “underwater” stock options was made primarily to avoid recognizing compensation expense associated with these stock options in future financial statements upon the Company’s adoption of SFAS No. 123(R). The impact of this Statement on the Company based on currently outstanding stock option grants is not expected to be material. Any impact on the Company of this Statement with respect to any future equity awards cannot be estimated at this time.

     SFAS No. 154. In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements (“SFAS No. 154”). SFAS No. 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle (including voluntary changes). Previously, changes in accounting principles were generally required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS No. 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does not change the transition provisions of any existing accounting pronouncements. The Company will adopt this pronouncement beginning in fiscal year 2006 and does not believe adoption of SFAS No. 154 will have a material effect on its results of operations, financial position or cash flows.

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ITEM 7A.      Quantitative and Qualitative Disclosures About Market Risk

     Foreign Currency Market Risk. Our functional currency is the U.S. dollar although we transact business in various foreign locations and currencies. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates, or weak economic conditions in the foreign markets in which we provide services. Our operating results are exposed to changes in exchange rates between the U.S. dollar and the currencies of the other countries in which we operate. When the U.S. dollar strengthens against other currencies, the value of nonfunctional currency revenues decreases. When the U.S. dollar weakens, the functional currency amount of revenues increases. Overall, we are a net receiver of currencies other than the U.S. dollar and, as such, benefit from a weaker dollar. We are therefore adversely affected by a stronger dollar relative to major currencies worldwide.

     Interest Rate Risk. Our interest income and expense are most sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on our cash equivalents as well as interest paid on our debt. At December 31, 2005, we had fixed-rate convertible notes outstanding with a principal amount of $125.0 million which bore interest at 4³/4% per annum and a $10.0 million fixed-rate Bridge Loan which bore interest at 12% per annum. At December 31, 2005, we had $6.8 million of variable-rate debt outstanding. A hypothetical 100 basis point change in interest rates on variable-rate debt during the twelve months ended December 31, 2005 would have resulted in approximately a $0.1 million change in pre-tax income. As of March 17, 2006, there were borrowings of $25.0 million outstanding under the term loan portion of the Company’s new senior credit facility. As of March 17, 2006, the Company had $15.0 million available for revolving loans under the new senior credit facility and no borrowings under the revolver portion of the new credit facility. The interest on the term loan is based on a floating rate equal to the reserve adjusted London inter-bank offered rate, or LIBOR, plus 8.5% (or, at our option, a published prime lending rate plus 5.5%). The interest rate on outstanding revolving credit loans is based on LIBOR plus 3.75% (or, at our option, a published prime lending rate plus 1.0%). A hypothetical 100 basis point change in interest rates applicable to the term loan would result in an approximate $0.3 million change in pre-tax income. Assuming full utilization of the revolving credit facility, a hypothetical 100 basis point change in interest rates applicable to the revolver would result in an approximate $0.2 million change in pre-tax income.

     Derivative Instruments. As a multi-national company, the Company faces risks related to foreign currency fluctuations on its foreign-denominated cash flows, net earnings, new investments and large foreign currency denominated transactions. The Company uses derivative financial instruments from time to time to manage foreign currency risks. The use of financial instruments modifies the exposure of these risks with the intent to reduce the risk to the Company. The Company does not use financial instruments for trading purposes, nor does it use leveraged financial instruments. The Company did not have any derivative financial instruments outstanding as of December 31, 2005. See Note 1(f) of Notes to Consolidated Financial Statements included in Item 8. of this Form 10-K.

45

ITEM 8.      Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
	Number
Report of Independent Registered Public Accounting Firm	47
Consolidated Statements of Operations for the Years ended December 31, 2005, 2004 and 2003	48
Consolidated Balance Sheets as of December 31, 2005 and 2004	49
Consolidated Statements of Shareholders’ Equity (Deficit) for the Years ended December 31, 2005, 2004 and 2003	50
Consolidated Statements of Cash Flows for the Years ended December 31, 2005, 2004 and 2003	51
Notes to Consolidated Financial Statements	52

46

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
PRG-Schultz International, Inc.:

We have audited the accompanying consolidated balance sheets of PRG-Schultz International, Inc. and subsidiaries (the Company) as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2005. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in Item 15(a)(2). These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PRG-Schultz International, Inc. and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 1 and 8 to the consolidated financial statements, the Company has substantial debt obligations and, during 2005, it was required to enter into a forbearance agreement to obtain covenant relief. The Company has incurred significant losses in each of the years in the three-year period ended December 31, 2005 and has a shareholders' deficit of $102.4 million at December 31, 2005. Realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company's ability to return to profitability, to complete planned restructuring activities and to generate positive cash flows from operations, as well as maintaining credit facilities adequate to conduct its business. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 17, 2006 expressed an unqualified opinion on management’s assessment of, and an adverse opinion on the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

Atlanta, Georgia

March 17, 2006

47

PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

	Years Ended December 31,
	2005			2004			2003
Revenues	$	292,152		$	350,602		$	367,380
Cost of revenues		195,091			217,059			225,938
Gross margin		97,061			133,543			141,442
Selling, general and administrative expenses		111,439			124,365			123,424
Impairment charges (Notes 1(i) and 7)		170,375			—			206,923
Restructuring expense (Note 16)		11,550			—			—
Operating income (loss)		(196,303	)		9,178			(188,905	)
Interest expense		(8,936	)		(9,142	)		(9,520	)
Interest income		545			593			572
Earnings (loss) from continuing operations before income taxes and discontinued operations		(204,694	)		629			(197,853	)
Income taxes (Note 10)		821			76,197			(35,362	)
Earnings (loss) from continuing operations before discontinued operations		(205,515	)		(75,568	)		(162,491	)
Discontinued operations (Note 2):
Earnings (loss) from discontinued operations, net of income tax expense (benefit) of $(1,080) and $795 in 2004 and 2003, respectively		(2,704	)		(1,411	)		1,143
Gain on disposal of discontinued operations, net of income tax expense of $5,722 and $354 in 2004 and 2003, respectively		479			5,496			530
Earnings (loss) from discontinued operations		(2,225	)		4,085			1,673
Net earnings (loss)	$	(207,740	)	$	(71,483	)	$	(160,818	)
Basic and diluted earnings (loss) per share (Note 6):
Earnings (loss) from continuing operations before discontinued operations	$	(3.31	)	$	(1.23	)	$	(2.63	)
Discontinued operations		(0.04	)		0.07			0.03
Net earnings (loss)	$	(3.35	)	$	(1.16	)	$	(2.60	)
Weighted-average shares outstanding (Note 6):
Basic and diluted		62,012			61,760			61,751

See accompanying Notes to Consolidated Financial Statements.

48

PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

	December 31,
	2005			2004
ASSETS (Note 8)
Current assets:
Cash and cash equivalents	$	11,848		$	12,596
Restricted cash (Note 13(d))		3,096			120
Receivables:
Contract receivables, less allowances of $2,717 in 2005 and $2,254 in 2004:
Billed		43,591			58,775
Unbilled		9,608			11,932
		53,199			70,707
Employee advances and miscellaneous receivables, less allowances of $2,974 in 2005 and $3,333 in 2004		2,737			3,490
Total receivables		55,936			74,197
Funds held for client obligations		32,479			30,920
Prepaid expenses and other current assets		3,113			4,129
Deferred income taxes (Note 10)		67			1,951
Total current assets		106,539			123,913
Property and equipment:
Computer and other equipment		65,575			62,858
Furniture and fixtures		7,744			7,778
Leasehold improvements		8,460			9,312
		81,779			79,948
Less accumulated depreciation and amortization		64,326			53,475
Property and equipment, net		17,453			26,473
Goodwill (Note 7)		4,600			170,684
Intangible assets, less accumulated amortization of $5,453 in 2005 and $4,068 in 2004 (Note 7)		24,447			30,232
Unbilled receivables		2,789			3,464
Deferred income taxes (Note 10)		530			—
Other assets (Note 13(b))		5,704			3,827
	$	162,062		$	358,593
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Obligations for client payables		32,479			30,920
Accounts payable and accrued expenses		22,362			24,395
Accrued payroll and related expenses		44,031			41,791
Refund liabilities		11,741			14,459
Deferred revenue		4,583			6,466
Convertible notes, net of unamortized discount of $4 in 2005 (Note 8)		466			—
Total current liabilities		115,662			118,031
Convertible notes, net of unamortized discount of $929 in 2005 and $1,714 in 2004 (Note 8)		123,601			123,286
Other debt obligations (Note 8)		16,800			—
Deferred compensation (Note 11)		1,388			2,195
Deferred income taxes (Note 10)		—			4,201
Refund liabilities		1,785			2,198
Other long-term liabilities		5,191			5,098
Total liabilities		264,427			255,009
Shareholders’ equity (deficit) (Notes 8, 12 and 14):
Preferred stock, no par value. Authorized 500,000 shares; no shares issued or outstanding in 2005 and 2004		—			—
Participating preferred stock, no par value. Authorized 500,000 shares; no shares issued or outstanding in 2005 and 2004		—			—
Common stock, no par value; $.001 stated value per share. Authorized 200,000,000 shares; issued 67,876,832 shares in 2005 and 67,658,656 shares in 2004		68			68
Additional paid-in capital		494,826			493,532
Accumulated deficit		(550,719	)		(342,979	)
Accumulated other comprehensive income		2,400			1,740
Treasury stock at cost, 5,764,525 shares in 2005 and 2004		(48,710	)		(48,710	)
Unamortized portion of compensation expense		(230	)		(67	)
Total shareholders’ equity (deficit)		(102,365	)		103,584
Commitments and contingencies (Notes 2, 3, 8, 9, 12 and 13)
	$	162,062		$	358,593

See accompanying Notes to Consolidated Financial Statements.

     49

PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
Years Ended December 31, 2005, 2004 and 2003
(In thousands)

												Accumulated						Unamortized
						Additional						Other						of Portion			Total
	Common Stock					Paid-In			Accumulated			Comprehensive			Treasury			Compensation			Shareholders’			Comprehensive
	Shares			Amount		Capital			Deficit			Income (Loss)			Stock			Expense			Equity (Deficit)			Income (Loss)
Balance at December 31, 2002		67,282		$	67	$	491,894		$	(110,678	)	$	(1,601	)	$	(41,182	)	$	(615	)	$	337,885
Comprehensive loss:
Net loss		—			—		—			(160,818	)		—			—			—			(160,818	)	$	(160,818	)
Other comprehensive income-foreign currency translation adjustments		—			—		—			—			2,217			—			—			2,217			2,217
Comprehensive loss		—			—		—			—			—			—			—			—		$	(158,601	)
Issuances of common stock:
Issuances under employee stock plans (including tax benefits of $155)		223			—		1,128			—			—			—			—			1,128
Restricted share forfeitures		(15	)		—		(144	)		—			¾			¾			144			—
Amortization of expense		—			—		—			—			—			—			246			246
Treasury shares repurchased (1,074 shares)		—			—		—			—			—			(7,528	)		—			(7,528	)
Balance at December 31, 2003		67,490			67		492,878			(271,496	)		616			(48,710	)		(225	)		173,130
Comprehensive loss:
Net loss		—			—		—			(71,483	)		—			—			—			(71,483	)	$	(71,483	)
Other comprehensive income-foreign currency translation adjustments		—			—		—			—			1,124			—			—			1,124			1,124
Comprehensive loss		—			—		—			—			—			—			—			—		$	(70,359	)
Issuances of common stock:
Issuances under employee stock plans (including tax benefits of $17)		185			1		808			—			—			—			—			809
Restricted share forfeitures		(16	)		—		(154	)		—			¾			¾			154			—
Amortization of expense		—			—		—			—			—			—			4			4
Balance at December 31, 2004		67,659			68		493,532			(342,979	)		1,740			(48,710	)		(67	)		103,584
Comprehensive loss:
Net loss		—			—		—			(207,740	)		—			—			—			(207,740	)	$	(207,740	)
Other comprehensive income-foreign currency translation adjustments		—			—		—			—			660			—			—			660			660
Comprehensive loss		—			—		—			—			—			—			—			—		$	(207,080	)
Issuances of common stock:
Issuances under employee stock plans (including tax benefits of $1)		171			—		773			—			—			—			—			773
Restricted share forfeitures		(204	)		—		(1,029	)		—			—			—			1,029			—
Restricted shares retired for payroll taxes		(14	)		—		(42	)		—			—			—			—			(42	)
Restricted share and option awards		265			—		1,592			—			—			—			(1,592	)		—
Amortization of expense		—			—		—			—			—			—			400			400
Balance at December 31, 2005		67,877		$	68	$	494,826		$	(550,719	)	$	2,400		$	(48,710	)	$	(230	)	$	(102,365	)

See accompanying Notes to Consolidated Financial Statements.

     50

PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Years Ended December 31,
	2005			2004			2003
				Revised			Revised
				(Note 1(a))			(Note 1(a))
Cash flows from operating activities:
Net loss	$	(207,740	)	$	(71,483	)	$	(160,818	)
(Earnings) loss from discontinued operations		2,704			1,411			(1,143	)
Gain on disposal of discontinued operations		(479	)		(5,496	)		(530	)
Loss from continuing operations		(205,515	)		(75,568	)		(162,491	)
Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operating activities:
Impairment charges		170,375			¾			206,923
Impairment charges included in restructuring		372			¾			¾
Depreciation and amortization		15,676			17,613			17,278
Amortization of stock and stock option compensation expense		358			4			246
Loss on sale of property, plant and equipment		9			187			258
Deferred income taxes, net of cumulative effect of accounting change		(2,847	)		72,845			(38,255	)
Income tax benefit relating to stock option exercises		1			17			155
Changes in assets and liabilities, net of effects of acquisitions:
Restricted cash securing letter of credit obligation		(3,014	)		6,203			(5,758	)
Billed Receivables		14,718			(4,121	)		16,772
Unbilled Receivables		2,999			(2,188	)		1,282
Prepaid expenses and other current assets		908			(1,280	)		197
Other assets		(509	)		(411	)		699
Accounts payable and accrued expenses		(55	)		(7,438	)		(516	)
Accrued payroll and related expenses		3,577			735			(9,872	)
Refund liability		(3,131	)		3,449			(1,282	)
Deferred revenue		(1,195	)		1,682			2,111
Deferred compensation benefit		(807	)		(1,500	)		(316	)
Other long-term liabilities		93			587			396
Net cash provided by (used in) operating activities		(7,987	)		10,816			27,827
Cash flows from investing activities:
Purchases of property and equipment, net of sale proceeds		(5,374	)		(11,520	)		(11,672	)
Net cash used in investing activities		(5,374	)		(11,520	)		(11,672	)
Cash flows from financing activities:
Net short term borrowings (repayments)		16,800			(31,600	)		(290	)
Payments for issuance of convertible notes		¾			(21	)		(12	)
Payments for deferred loan costs		(2,648	)		(430	)		—
Net proceeds from common stock issuances		772			792			973
Purchase of treasury shares		¾			—			(7,528	)
Net cash provided by (used in) financing activities		14,924			(31,259	)		(6,857	)
Cash flows from discontinued operations:
Operating cash flows		(2,348	)		(1,978	)		874
Investing cash flows		473			19,104			(23	)
Net cash provided by (used in) discontinued operations		(1,875	)		17,126			851
Effect of exchange rates on cash and cash equivalents		(436	)		775			1,649
Net change in cash and cash equivalents		(748	)		(14,062	)		11,798
Cash and cash equivalents at beginning of year		12,596			26,658			14,860
Cash and cash equivalents at end of year	$	11,848		$	12,596		$	26,658
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	$	6,782		$	6,440		$	7,283
Cash paid during the year for income taxes, net of refunds received	$	2,298		$	3,210		$	3,409

See accompanying Notes to Consolidated Financial Statements.

     51

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   (a) Description of Business and Basis of Presentation

   Description of Business

     The principal business of PRG-Schultz International, Inc. and subsidiaries (the “Company”) is providing recovery audit services to large and mid-size businesses having numerous payment transactions with many vendors. These businesses include, but are not limited to:

• retailers such as discount, department, specialty, grocery and drug stores;

• manufacturers of high-tech components, pharmaceuticals, consumer electronics, chemicals and aerospace and medical products;

• wholesale distributors of computer components, food products and pharmaceuticals; and

• service providers such as communications providers, transportation providers and financial institutions.

     The Company currently provides services to clients in over 30 countries.

   Basis of Presentation

     Certain reclassifications have been made to 2004 and 2003 amounts to conform to the presentation in 2005. These reclassifications include the reclassification of the Company’s Channel Revenue, Airline, Japan and South Africa business units as discontinued operations (see Note 2) and the presentation of unbilled receivables and refund liabilities on a gross basis (see Note 1(d)). Also, in 2005 the Company has separately disclosed the operating, investing and financing portions, if any, of the cash flows attributable to its discontinued operations. The 2004 and 2003 consolidated statements of cash flows have been revised accordingly.

     These audited financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business. The ability of the Company to continue as a going concern depends upon, among other things, compliance with the provisions of current borrowing arrangements, the ability to generate cash flows from operations and where necessary, obtaining financing sources to satisfy the Company’s future obligations. Management’s plans with respect to this matter include reducing the Company’s operating expenses and restructuring the Company’s debt obligations. The Company began implementing a workforce reduction and operational restructuring in 2005 (see Note 16) and refinanced its debt obligations on March 17, 2006 (see Note 8).

   (b) Principles of Consolidation

     The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

     Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). Actual results could differ from those estimates.

   (c) Discontinued Operations

     Financial statements for all years presented have been reclassified to separately report results of discontinued operations from results of continuing operations (see Note 2). Disclosures included herein pertain to the Company’s continuing operations, unless otherwise noted.

52

   (d) Revenue Recognition

     The Company’s revenues are based on specific contracts with its clients. Such contracts generally specify: (a) time periods covered by the audit; (b) nature and extent of audit services to be provided by the Company; (c) the client’s duties in assisting and cooperating with the Company; and (d) fees payable to the Company, generally as a specified percentage of the amounts recovered by the client resulting from overpayment claims identified.

     In addition to contractual provisions, most clients also establish specific procedural guidelines that the Company must satisfy prior to submitting claims for client approval. These guidelines are unique to each client and impose specific requirements on the Company, such as adherence to vendor interaction protocols, provision of advance written notification to vendors of forthcoming claims, securing written claim validity concurrence from designated client personnel and, in limited cases, securing written claim validity concurrence from the involved vendors. Approved claims are processed by clients and generally taken as a recovery of cash from the vendor or a reduction to the vendor’s accounts payable balance.

     The Company generally recognizes revenue on the accrual basis except with respect to its Meridian VAT Reclaim business (“Meridian”) and certain international Accounts Payable Services units. Revenue is generally recognized for a contractually specified percentage of amounts recovered when it has been determined that the Company’s clients have received economic value (generally through credits taken against existing accounts payable due to the involved vendors or refund checks received from those vendors) and when the following criteria are met: (a) persuasive evidence of an arrangement exists; (b) services have been rendered; (c) the fee billed to the client is fixed or determinable and (d) collectibility is reasonably assured. In certain limited circumstances, the Company will invoice a client prior to meeting all four of these criteria; in such cases, revenue is deferred until all of the criteria are met. Historically, there has been a certain amount of revenue with respect to which, even though the requirements of the Company’s revenue recognition policy were met, the Company’s customers’ vendors have ultimately rejected the claims underlying the revenue. In that case, the Company’s customers, even though cash may have been collected by the Company, may request a refund of such amount. Such refunds are recognized by either offsets to amounts otherwise due from clients or by cash refunds. The Company computes the estimate of its refund liabilities primarily based on historical refund data and records such refunds as a reduction of revenue.

     Unbilled receivables are usually contractual and relate to claims for which clients have received economic value. Unbilled receivables arise when a portion of the Company’s fee is deferred at the time of the initial invoice. At a later date (which can be up to a year after original invoice, and at other times a year after completion of the audit period), the unbilled receivable amount is invoiced.

     The unbilled receivable amounts and refund liabilities had previously been reported on a net basis in the Company’s consolidated financial statements. As of December 31, 2005, the Company began to reflect unbilled receivable assets and refund liabilities separately in its consolidated financial statements. Amounts in the Company’s 2004 consolidated balance sheet have been reclassified accordingly. Such change in reporting had no impact on previously reported consolidated results of operations or on net operating cash flows.

     The Company’s Meridian unit along with certain international Accounts Payable Services units, recognize revenue on the cash basis in accordance with guidance issued by the Securities and Exchange Commission in Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition. Based on the guidance in SAB No. 104, Meridian defers recognition of revenues to the accounting period in which cash is both received from the foreign governmental agencies reimbursing value-added tax (“VAT”) claims and transferred to Meridian’s clients.

53

     The Company derives an insignificant amount of revenues on a “fee-for-service” basis whereby billing is based upon a flat fee, or fee per hour, or fee per unit of usage. The Company recognizes revenue for these types of services as they are provided and invoiced, and when criteria (a) through (d) as set forth above are met.

   (e) Cash and Cash Equivalents

     Cash and cash equivalents include all cash balances and highly liquid investments with an initial maturity of three months or less. The Company places its temporary cash investments with high credit quality financial institutions. At times, certain investments may be in excess of the Federal Deposit Insurance Corporation insurance limit.

     At December 31, 2005 and 2004, the Company had cash and cash equivalents of $11.8 million and $12.6 million, respectively, of which cash equivalents represented approximately $1.7 million and $1.6 million, respectively. The Company did not have any cash equivalents at U.S. banks at December 31, 2005. At December 31, 2004, the Company had $0.2 million in cash equivalents at U.S. banks. At December 31, 2005 and 2004, certain of the Company’s international subsidiaries held $1.7 million and $1.4 million, respectively, in temporary investments, the majority of which were at banks in Latin America and the United Kingdom, respectively.

   (f) Derivative Financial Instruments

     As a multi-national company, the Company faces risks related to foreign currency fluctuations on its foreign-denominated cash flows, net operating results, new investments and large foreign currency denominated transactions.

     The Company uses derivative financial instruments from time to time to manage foreign currency risks. The use of financial instruments modifies the exposure of these risks with the intent to reduce the risk to the Company. The Company does not use financial instruments for trading purposes, nor does it use leveraged financial instruments.

     Changes in fair value of derivative financial instruments are recorded as adjustments to the assets or liabilities being hedged in the statement of operations or in accumulated other comprehensive income (loss), depending on whether the derivative is designated and qualifies for hedge accounting, the type of hedge transaction represented and the effectiveness of the hedge. The Company did not have any derivative financial instruments outstanding as of December 31, 2005 and 2004.

   (g) Funds Held for Payment of Client Payables

     In connection with the Company’s Meridian unit that assists clients in obtaining refunds of VAT, the Company is often in possession of amounts refunded by the various VAT authorities but not yet processed for further payment to the clients involved. The Company functions as a fiduciary custodian in connection with these cash balances belonging to its clients. The Company reports these cash balances on its Consolidated Balance Sheets as a separate current asset and corresponding current liability.

   (h) Property and Equipment

     Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets (three years for computer and other equipment, five years for furniture and fixtures and three to seven years for purchased software). Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated life of the asset.

     The Company evaluates property and equipment for impairment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. In accordance with the provisions of SFAS No. 144, the Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss equal to an amount by which the carrying value exceeds the fair value of assets is recognized.

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   (i) Internally Developed Software

     The Company accounts for software developed for internal use in accordance with Statement of Position (“SOP”) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 provides guidance on a variety of issues relating to costs of internal use software, including which of these costs should be capitalized and which should be expensed as incurred. Internally developed software is amortized using the straight-line method over the expected useful lives of three years to seven years.

     In accordance with the provisions of SFAS No. 144, the Company reviews the carrying value of internally developed software for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss equal to an amount by which the carrying value exceeds the fair value of assets is recognized. During 2003, the Company recorded an impairment of internally developed software of $1.8 million, before income tax benefit of $0.7 million. This pre-tax charge has been included in impairment charges in the Company’s Consolidated Statement of Operations for the year ended December 31, 2003. The Company did not incur any impairment charges related to internally developed software during the years ended December 31, 2005 and 2004.

   (j) Goodwill and Other Intangible Assets

     Goodwill represents the excess of the purchase price over the estimated fair market value of net assets of acquired businesses. The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives not be amortized, but instead be tested for impairment at least annually. This Statement also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (see Note 7).

     Management evaluates the recoverability of goodwill and other intangible assets annually, or more frequently if events or changes in circumstances, such as declines in sales, earnings or cash flows or material adverse changes in the business climate indicate that the carrying value of an asset might be impaired. Goodwill is considered to be impaired when the net book value of a reporting unit exceeds its estimated fair value. Fair values are primarily established using a discounted cash flow methodology. The determination of discounted cash flows is based on the business’ strategic plan and long-range planning forecasts.

   (k) Direct Expenses

     Direct expenses incurred during the course of accounts payable audits and other recovery audit services are typically expensed as incurred. Commission costs related to deferred revenues (see Note 1(d)) are deferred until revenue is recognized.

   (l) Income Taxes

     Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

     SFAS No. 109, Accounting for Income Taxes, requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, management considers all available positive and negative

55

evidence affecting specific deferred tax assets, including the Company’s past and anticipated future performance, the reversal of deferred tax liabilities and the implementation of tax planning strategies. Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of the deferred tax assets when significant negative evidence exists.

   (m) Foreign Currency

     The local currency has been used as the functional currency in the majority of the countries in which the Company conducts business outside of the United States. The assets and liabilities denominated in foreign currency are translated into U.S. dollars at the current rates of exchange at the balance sheet date and revenues and expenses are translated at the average monthly exchange rates. The translation gains and losses are included as a separate component of shareholders’ equity (deficit). Revenues and expenses in foreign currencies are translated at the weighted average exchange rates for the period. All realized and unrealized foreign currency gains and losses are included in selling, general and administrative expenses. For the years ended December 31, 2005, 2004 and 2003, foreign currency gains (losses) included in results of operations were $(0.7) million, $0.5 million, $1.8 million, respectively.

   (n) Earnings Per Share

     The Company applies the provisions of SFAS No.128, Earnings Per Share. Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net earnings by the sum of (1) the weighted average number of shares of common stock outstanding during the period, (2) the dilutive effect of the assumed exercise of stock options using the treasury stock method, and (3) the dilutive effect of other potentially dilutive securities, including the Company’s convertible subordinated note obligations.

   (o) Stock Compensation Plans

     Prior to January 1, 2006, the Company had two stock compensation plans and an employee stock purchase plan (the “Plans”) (see Notes 12 and 14). The Company has also made inducement option grants outside of its stock compensation plans. Prior to January 1, 2006, the Company accounted for the Plans and the inducement option grants under the provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense is measured on the date of grant only if the current market price of the underlying stock exceeds the exercise price. The options granted under the stock compensation plans generally vest and become fully exercisable on a ratable basis over four or five years of continued employment. In accordance with APB Opinion No. 25 guidance, no compensation expense has been recognized for the Plans or inducement options in the accompanying Consolidated Statements of Operations except for compensation amounts relating to grants of certain restricted stock issued in 2000 and 2005 (see Note 12) and a 2005 stock option grant to a non-employee director (see Note 14). The Company recognizes compensation expense over the indicated vesting periods using the straight-line method for its restricted stock awards. The employee stock purchase plan was terminated as of December 31, 2005.

     Pro forma information regarding net earnings (loss) and earnings (loss) per share is required by SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. The following pro forma information has been determined as if the Company had accounted for its employee and director stock options as an operating expense under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	2005			2004			2003
Risk-free interest rates		4.05	%		2.94	%		2.73	%
Dividend yields		—			—			—
Volatility factor of expected market price		.714			.813			.846
Weighted-average expected life of option	5 years			5 years			5 years

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     The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, it is management’s opinion that existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options. For purposes of the pro forma disclosures below, the estimated fair value of the options is amortized to expense over the options’ vesting periods.

     The Company’s pro forma information for the years ended December 31, 2005, 2004 and 2003 for continuing and discontinued operations, combined, is as follows (in thousands, except for pro forma net earnings (loss) per share information):

	2005			2004			2003
Numerator for basic and diluted pro forma net earnings (loss) per share:
Net loss before pro forma effect of compensation expense recognition provisions of SFAS No. 123	$	(207,740	)	$	(71,483	)	$	(160,818	)
Stock-based compensation expense included in net loss reported		358			4			246
Pro forma effect of compensation expense recognition provisions of SFAS No. 123, net of income taxes of $(3,438), $(2,701) and $(4,890) in 2005, 2004 and 2003, respectively		(5,309	)		(4,170	)		(7,554	)
Pro forma net earnings (loss) for purposes of computing basic and diluted pro forma earnings (loss) per share	$	(212,691	)	$	(75,649	)	$	(168,126	)
Pro forma net earnings (loss) per share:
Basic and diluted – as reported	$	(3.35	)	$	(1.16	)	$	(2.60	)
Basic and diluted – pro forma	$	(3.43	)	$	(1.22	)	$	(2.72	)

     The number of employee and director stock options that are dilutive for pro forma purposes may vary from period to period from those under APB No. 25, due to the timing difference in recognition of compensation expense under APB No. 25 compared to SFAS No. 123.

     In applying the treasury stock method to determine the dilutive impact of common stock equivalents, the calculation is performed in steps with the impact of each type of dilutive security calculated separately. For the years ended December 31, 2005, 2004 and 2003, 16.1 million shares related to the convertible notes due November 2006 were excluded from the computation of pro forma diluted earnings (loss) per share calculated using the treasury stock method, due to their antidilutive effect (see Note 6).

   (p) Comprehensive Income (Loss)

     The Company applies the provisions of SFAS No. 130, Reporting Comprehensive Income. This Statement establishes items that are required to be recognized under accounting standards as components of comprehensive income (loss). Consolidated comprehensive income (loss) for the Company consists of consolidated net earnings (loss) and foreign currency translation adjustments, and is presented in the accompanying Consolidated Statements of Shareholders’ Equity (Deficit).

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   (q) New Accounting Standards

   In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), Share-Based Payment, which requires that all share-based payments to employees, including grants of employee stock options and restricted stock awards, are recognized in the financial statements based on their fair value as determined on the grant date. The cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). The provisions of SFAS No. 123(R) are effective for fiscal years beginning after June 15, 2005 and therefore will be implemented by the Company in the first quarter of 2006. The impact of SFAS No. 123(R) on the Company based on currently outstanding stock option grants is not expected to be material. Any impact on the Company of this Statement with respect to any future equity awards cannot be estimated at this time.

     In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle (including voluntary changes). Previously, changes in accounting principles were generally required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS No. 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does not change the transition provisions of any existing accounting pronouncements. The Company will adopt this pronouncement beginning in fiscal year 2006 and does not believe adoption of SFAS No. 154 will have a material effect on its results of operations, financial position or cash flows.

(2) DISCONTINUED OPERATIONS

     During the fourth quarter of 2005, the Company declared its Channel Revenue and Airline businesses, and the Accounts Payable Service business units in South Africa and Japan, as discontinued operations. The Company’s Consolidated Financial Statements have been reclassified to reflect the results of these businesses as discontinued operations for all periods presented. The carrying values of the assets and liabilities relating to these business units are considered insignificant for all periods presented.

     On January 11, 2006, the Company consummated the sale of Channel Revenue. Channel Revenue was sold for $0.4 million in cash to Outsource Recovery, Inc. Outsource Recovery also undertook to pay the Company an amount equal to 12% of gross revenues received by Outsource Recovery during each of the calendar years 2006, 2007, 2008 and 2009 with respective to Channel Revenue. The Company recognized a gain on disposal of approximately $0.3 million.

     The South Africa and Japan Accounts Payable Services business units were closed during 2005; the Airline business unit is being held for sale at December 31, 2005.

     During the fourth quarter of 2003, the Company declared its remaining Communications Services operations, formerly part of the Company’s then-existing Other Ancillary Services segment, as a discontinued operation. On January 16, 2004, the Company consummated the sale of the remaining Communications Services operations to TSL (DE) Corp., a newly formed company whose principal investor was One Equity Partners, the private equity division of Bank One. The operations were sold for approximately $19.1 million in cash paid at closing, plus the assumption of certain liabilities of Communications Services. The Company recognized a gain on disposal of approximately $8.3 million, net of tax expense of approximately $5.5 million.

     On December 14, 2001, the Company consummated the sale of its French Taxation Services business (“ALMA”), as well as certain notes payable due to the Company, to Chequers Capital, a Paris-based private equity firm. In conjunction with this sale, the Company provided the buyer with certain warranties. Effective December 30, 2004, the Company, Meridian and ALMA (the “Parties”) entered into a Settlement Agreement pursuant to which the Company paid a total of 3.4 million Euros on January 3, 2005 ($4.7 million at January 3, 2005 exchange rates), to resolve the buyer’s warranty claims and a commission dispute with Meridian. During 2004, the Company recognized an expense of $3.1 million for amounts not previously accrued to provide for these claims. No tax benefit was

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recognized in relation to the expense. The Settlement Agreement terminates all contractual relationships between the Parties and specifies that the Parties will renounce all complaints, grievances and other actions.

     During 2003, the Company recognized a gain on the sale of discontinued operations of approximately $0.5 million, net of tax expense of approximately $0.4 million. This gain represented the receipt of a portion of the revenue-based royalty from the sale of the Logistics Management Services segment in October 2001, as adjusted for certain expenses accrued as part of the estimated loss on the sale of the segment. The Company also recognized a gain on the sale of discontinued operations during the year ended December 31, 2004 of approximately $0.3 million, net of tax expense of approximately $0.2 million and $0.5 million in 2005 related to this transaction.

     Operating results of the discontinued operations are summarized below. The amounts exclude general corporate overhead previously allocated to Communications Services and rent expense allocated to the Airline unit.

     Summarized financial information for the discontinued operations is as follows:

	Years Ended December 31,
	2005			2004			2003
	(In thousands)
Revenues	$	5,893		$	6,386		$	25,288
Operating income (loss)		(2,704	)		(2,491	)		1,938

(3) RELATED PARTY TRANSACTIONS

     In November 2002, the Company relocated its principal executive offices. In conjunction with this relocation, the Company sublet approximately 3,300 square feet of office space to CT Investments, Inc. (“CT Investments”) at a pass through rate equal to the cash cost per square foot paid by the Company under the master lease and the tenant finish in excess of the landlord’s allowance. CT Investments is 90% owned by John M. Cook, the former Chairman of the Board and Chief Executive Officer of the Company, and 10% owned by John M. Toma, the former Vice Chairman of the Company. The Company received sublease payments of approximately $51,000, $44,000 and $39,000 from CT Investments during 2005, 2004 and 2003, respectively. On August 1, 2005, CT Investments vacated the office space, which was subsequently subleased to an independent third party.

     The Company’s Meridian unit and an unrelated German concern named Deutscher Kraftverkehr Euro Service GmbH & Co. KG (“DKV”) are each a 50% owner of a joint venture named Transporters VAT Reclaim Limited (“TVR”). Since neither owner, acting alone, has a majority control over TVR, Meridian accounts for its ownership using the equity method of accounting. DKV provides European truck drivers with a credit card that facilitates their fuel purchases. DKV distinguishes itself from its competitors, in part, by providing its customers with an immediate advance refund of the value-added taxes (“VAT”) paid on fuel purchases. DKV then recovers the VAT from the taxing authorities through the TVR joint venture. Meridian processes the VAT refund on behalf of TVR for which it receives a percentage fee. Revenues earned related to TVR were $0.5 million in 2004 and $2.3 million in 2003. During 2004, Meridian agreed with DKV to commence an orderly and managed closeout of the TVR business. Therefore, Meridian’s future revenues from TVR for processing TVR’s VAT refunds, and the associated profits therefrom, ceased in October 2004 (see Note 13(b)).

     Financial advisory and management services historically have been provided to the Company by one of the Company’s former directors, Mr. Jonathan Golden. Payments for such services to Mr. Golden aggregated $72,000 in 2005, 2004 and 2003, respectively. In addition to the foregoing, Mr. Golden is a senior partner in a law firm that serves as the Company’s principal outside legal counsel. Fees paid to this law firm aggregated $1.3 million in 2005, $1.1 million in 2004 and $0.5 million in 2003. Effective August 31, 2005, Mr. Golden resigned from the Company’s Board of Directors.

     During a portion of 2003, the Company used the services of Flightworks, Inc. (“Flightworks”), a company specializing in aviation charter transportation. Flightworks leased an aircraft used by the Company from CT Aviation Leasing LLC (“CT Aviation Leasing”), a company

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100% owned by Mr. Cook, the former Chairman of the Board and Chief Executive Officer of the Company. During 2003, the Company recorded expenses of approximately $0.5 million for the use of CT Aviation Leasing’s plane. Subsequent to October 29, 2003, neither CT Aviation Leasing nor Mr. Cook owned any aircraft utilized by the Company.

     The July 31, 2005 retirements of the Company’s former Chairman of the Board and Chief Executive Officer, John M. Cook, and the Company’s former Vice Chairman, John M. Toma, resulted in an obligation to pay retirement benefits of $7.6 million (present value basis) to be paid in monthly cash installments principally over a three-year period, beginning February 1, 2006. Charges of $3.9 million, $1.4 million and $2.3 million were recorded in 2005, 2004 and 2003 and prior years, respectively, related to these retirement obligations. On March 16, 2006, the terms of the applicable severance agreements were amended in conjunction with the Company’s financial restructuring. Pursuant to the terms of the severance agreements, as amended (1) the Company’s obligations to pay monthly cash installments to Mr. Cook and Mr. Toma have been extended from 36 months to 58 months and from 24 months to 46 months, respectively; however, the total dollar amount of monthly cash payments to be made to each remains unchanged, and (2) the Company agreed to pay a fixed sum of $150,000 to CT Investments, LLC, to defray the fees and expenses of the legal counsel and financial advisors to Messrs. Cook and Toma. Both the original severance agreements, and the severance agreements, as amended, provide for an annual reimbursement, beginning on or about February 1, 2007, to Mr. Cook and Mr. Toma for the cost of health insurance for themselves and their respective spouses (not to exceed $25,000 and $20,000, respectively, subject to adjustment based on changes in the Consumer Price Index), continuing until each reaches the age of 80.

(4) MAJOR CLIENTS

      For the years ended December 31, 2005, 2004, and 2003, the Company’s two largest clients accounted for approximately 13.8%, 13.8%, and 12.7% of total revenues from continuing operations. The Company did not have any clients that individually provided revenues in excess of 10.0% of total revenues from continuing operations during the years ended December 31, 2005, 2004 and 2003.

(5) OPERATING SEGMENTS AND RELATED INFORMATION

     The Company has two reportable operating segments, Accounts Payable Services and Meridian VAT Reclaim.

  Accounts Payable Services

     The Accounts Payable Services segment consists of services that entail the review of client accounts payable disbursements to identify and recover overpayments. This operating segment includes accounts payable services provided to retailers and wholesale distributors (the Company’s historical client base) and accounts payable services provided to various other types of business entities. The Accounts Payable Services segment conducts business in North America, South America, Europe, Australia and Asia.

  Meridian VAT Reclaim

     Meridian is based in Ireland and specializes in the recovery of value-added taxes (“VAT”) paid on business expenses for corporate clients located throughout the world. Acting as an agent on behalf of its clients, Meridian submits claims for refunds of VAT paid on business expenses incurred primarily in European Union countries. Meridian provides a fully outsourced service dealing with all aspects of the VAT reclaim process, from the provision of audit and invoice retrieval services to the preparation and submission of VAT claims and the subsequent collection of refunds from the relevant VAT authorities.

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  Corporate Support

     In addition to the segments noted above, the Company includes the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to Accounts Payable Services or Meridian in the category referred to as corporate support.

     The Company evaluates the performance of its operating segments based upon revenues and operating income (loss). The Company does not have any inter-segment revenues. Segment information for continuing operations for the years ended December 31, 2005, 2004 and 2003 follows (in thousands):

	Accounts			Meridian
	Payable			VAT		Corporate
	Services			Reclaim		Support			Total
2005
Revenues	$	251,527		$	40,625	$	¾		$	292,152
Impairment charges		170,375			¾		¾			170,375
Restructuring expense		4,764			383		6,403			11,550
Operating income (loss)		(150,907	)		6,358		(51,754	)		(196,303	)
Total assets		113,330			44,910		3,822			162,062
Capital expenditures		892			492		3,990			5,374
Depreciation and amortization		4,981			864		9,831			15,676
2004
Revenues	$	309,234		$	41,368	$	¾		$	350,602
Operating income (loss)		47,612			8,987		(47,421	)		9,178
Total assets		310,177			41,492		6,924			358,593
Capital expenditures		3,855			462		7,203			11,520
Depreciation and amortization		10,854			889		5,870			17,613
2003
Revenues	$	327,007		$	40,373	$	¾		$	367,380
Impairment charges		196,900			8,246		1,777			206,923
Operating income (loss)		(137,731	)		3,702		(54,876	)		(188,905	)
Total assets		368,827			45,685		9,774			424,286
Capital expenditures		5,149			396		6,127			11,672
Depreciation and amortization		9,096			1,012		7,170			17,278

     The following table presents revenues by country based on the location of clients served (in thousands):

	2005		2004		2003
United States	$	154,279	$	204,985	$	222,334
United Kingdom		44,082		51,036		52,597
Canada		20,093		21,221		22,250
Ireland		13,084		14,618		15,566
France		13,914		13,674		11,805
Germany		8,375		8,343		10,791
Japan		5,966		5,145		4,218
Mexico		5,722		4,786		4,697
Spain		2,582		3,812		2,932
Brazil		4,674		3,707		3,973
Australia		3,012		2,812		3,974
Other		16,369		16,463		12,243
	$	292,152	$	350,602	$	367,380

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     The following table presents long-lived assets by country based on the location of the asset (in thousands):

	2005		2004
United States	$	43,943	$	219,604
Ireland		3,788		4,294
United Kingdom		2,066		2,915
Australia		281		2,071
Other		2,126		2,332
	$	52,204	$	231,216

(6) DILUTED EARNINGS (LOSS) PER SHARE

     Due to the antidilutive impact of all potentially dilutive securities, diluted weighted average shares and diluted earnings (loss) per share for all periods presented are the same as basic weighted average shares and basic earnings (loss) per share.

     In 2005, 2004 and 2003, 0.1 million, 5.0 million and 3.9 million stock options, respectively, were excluded from the computation of diluted earnings (loss) per share, due to their antidilutive effect. Additionally, in 2005, 2004 and 2003, 16.1 million shares related to the convertible notes due November 2006 were excluded from the computation of diluted earnings (loss) per share, due to their antidilutive effect.

(7) ACCOUNTING FOR GOODWILL AND OTHER INTANGIBLE ASSETS

  (a) Goodwill

     SFAS No. 142, Goodwill and Other Intangible Assets, requires that goodwill and intangible assets with indefinite useful lives not be amortized, but instead be tested for impairment at least annually. The Company has selected October 1, the first day of its fourth quarter, as its annual assessment date. SFAS No. 142 requires that the Company perform goodwill impairment testing using a prescribed two-step, fair value approach.

     During the fourth quarter of 2003, the Company conducted its long-term strategic planning process for 2004 and future years. This process supported the conclusion that the Company’s 2003 reductions in domestic revenues were not anticipated to reverse during 2004. The completion of the Company’s strategic planning process provided the first clear indication that previous near-term domestic growth projections for Accounts Payable Services were no longer achievable.

     The Company, working with its independent valuation advisors, performed the required annual impairment testing of goodwill in accordance with SFAS No. 142 during the fourth quarter of 2003. The valuation required an estimation of the fair value of the asset being tested. The fair value of the asset being tested was determined, in part, based on the sum of the discounted future cash flows expected to result from its use and eventual disposition. This analysis required the Company to provide its advisors with various financial information including, but not limited to, projected financial results for the next several years. The Company’s revised 2004 and subsequent years’ projections for financial performance, mentioned in the previous paragraph, were incorporated into the calculation of discounted cash flows required for the valuation under SFAS No. 142.

     Based upon the valuation analysis of the Company’s goodwill assets and the recommendation of the advisors, the Company concluded that all net goodwill balances relating to its Meridian reporting unit and a significant portion of the goodwill associated with the Company’s Accounts Payable Services business were impaired. The Company recorded a charge of $8.2 million related to the write-off of Meridian’s goodwill. Additionally, the Company recognized a charge of $193.9 million for the partial write-off of goodwill related to Accounts Payable Services.

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     During the fourth quarter of 2004, the Company, working with its independent valuation advisors, performed the required annual impairment testing of goodwill in accordance with SFAS No. 142. As a result of this testing, the Company concluded that there was no impairment of goodwill.

     During the fourth quarter of 2005, the Company, working with its independent valuation advisors, performed the required annual impairment testing of goodwill in accordance with SFAS No. 142. The valuation required an estimation of the fair value of the asset being tested. The fair value of the asset being tested was determined, in part, based on the sum of the discounted future cash flows expected to result from its use and eventual disposition. This analysis required the Company to provide its advisors with various financial information including, but not limited to, projected financial results for the next several years. As a result of this testing, the Company concluded that there was a significant impairment of goodwill. The Company recognized a fourth quarter charge of $166.0 million related to the write-down of the Accounts Payable Services segment’s goodwill. The Company’s Accounts Payable Services segment had experienced its third straight year of declines in revenues and gross profit. The continuing downward trend in this segment was the single most important factor leading to the necessity of the impairment charge. This is also what necessitated the initiation of the implementation of the Company’s workforce reduction and restructuring plan in the third quarter of 2005 (see Note 16).

     The following table reconciles goodwill balances by reportable operating segment (in thousands):

	Accounts			Meridian
	Payable			VAT
	Services			Reclaim			Total
Balance at December 31, 2002	$	363,587		$	8,246		$	371,833
Foreign currency translation		932			¾			932
SFAS No. 142 goodwill impairment losses		(193,900	)		(8,246	)		(202,146	)
Balance at December 31, 2003		170,619			¾			170,619
Foreign currency translation		65			¾			65
Balance at December 31, 2004		170,684			¾			170,684
Foreign currency translation		(109	)		¾			(109	)
SFAS No. 142 goodwill impairment losses		(165,975	)		¾			(165,975	)
Balance at December 31, 2005	$	4,600		$	¾		$	4,600

  (b) Other Intangible Assets

     The Company’s other intangible assets were acquired as part of the January 24, 2002 acquisitions of the businesses of Howard Schultz & Associates International, Inc. and affiliates (“HSA-Texas”). Intangible assets consist of the following at December 31, 2005 and 2004 (in thousands):

Balances at December 31, 2005
		Gross				Net
	Estimated	Carrying		Accumulated		Carrying
	Useful Life	Amount		Amortization		Amount
Amortized intangible assets:
Customer relationships	20 years	$	27,700	$	5,453	$	22,247
Unamortized intangible assets:
Trade name	Indefinite	$	2,200				2,200
Total intangible assets						$	24,447

Balances at December 31, 2004
		Gross				Net
	Estimated	Carrying		Accumulated		Carrying
	Useful Life	Amount		Amortization		Amount
Amortized intangible assets:
Customer relationships	20 years	$	27,700	$	4,068	$	23,632
Unamortized intangible assets:
Trade name	Indefinite	$	6,600				6,600
Total intangible assets						$	30,232

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     The provisions of SFAS No. 142 require that the Company review the carrying value of intangible assets with indefinite useful lives for impairment annually or whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated discounted future cash flows expected to result from its use and eventual disposition. At the time of adoption, the Company selected October 1, the first day of its fourth quarter, as its annual assessment date. During the fourth quarter of 2003, the Company worked with its independent valuation advisors and performed the analysis of its trade name. In relation to the 2003 impairment testing, since the discounted expected future cash flows were determined to be less than the carrying value of the Company’s trade name, an impairment loss of $3.0 million was recognized. This pre-tax charge is equal to the amount by which the carrying value exceeded the fair value of the asset.

     During the fourth quarter of 2004, the Company, working with its independent valuation advisors, performed the required annual impairment testing of its trade name in accordance with SFAS No. 142. As a result of this testing, the Company concluded that there was no impairment of its trade name.

     During the fourth quarter of 2005, the Company, working with its independent valuation advisors, performed the required annual impairment testing of its trade name in accordance with SFAS No. 142. As a result of this testing, the Company concluded that there was an additional $4.4 million impairment of its trade name. Such impairment was attributable to the same factors that necessitated the recognition of the 2005 goodwill impairment charge.

     Intangible assets with definite useful lives are being amortized on a straight-line basis over their estimated useful lives and are reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Amortization of intangible assets amounted to $1.4 million, $1.4 million and $1.6 million for the years ended December 31, 2005, 2004 and 2003, respectively. Amortization expense for each of the next five years is expected to approximate $1.4 million per year.

(8) DEBT AND CONVERTIBLE NOTES

  (a) Senior Credit Facility and Forbearance Agreement

     On November 30, 2004, the Company entered into an amended and restated credit agreement (the “prior senior credit facility”) with Bank of America, N.A. (the “Lender”). The prior senior credit facility provided for revolving credit loans up to a maximum amount of $30.0 million, limited by the Company’s accounts receivable balances and outstanding letters of credit. The prior senior credit facility provided for the availability of letters of credit subject to a $10.0 million sub-limit.

     The Company had $7.2 million of borrowings and letters of credit outstanding under the prior senior credit facility at December 31, 2005. The Company’s borrowing base capacity was $21.4 million at December 31, 2005, which therefore permitted up to $14.6 million of additional borrowings as of that date, of which $9.6 million was available for letters of credit. At December 31, 2005, the Company had three outstanding standby letters of credit totaling $0.4 million (see Note 13(c)). The Company pays a 3.0% per annum fee on the amount of the standby letters of credit. The Company’s weighted average interest rate for 2005 was 6.87% per annum. At December 31, 2004, the Company had no borrowings outstanding, under its then-existing credit facility, with a weighted average interest rate of 4.0% per annum.

     The occurrence of certain stipulated events, as defined in the prior senior credit facility, including but not limited to the Company’s outstanding borrowings exceeding the prescribed borrowing base, or other covenant violations, would have given the Lender the right to require accelerated principal payments. Otherwise, so long as there was no violation of any of the covenants (or any such violations were waived), no principal payments were due until the maturity date on May 26, 2006. The prior senior credit facility was secured by substantially all assets of the

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Company. Revolving loans under the prior senior credit facility bore interest at either (1) the Lender’s prime rate plus 0.5%, or (2) the London Interbank Offered Rate (“LIBOR”) plus 3.0%. The prior senior credit facility required a fee for committed but unused credit capacity of 0.5% per annum. The prior senior credit facility contained customary financial covenants relating to the maintenance of a maximum leverage ratio and minimum consolidated earnings before interest, taxes, depreciation and amortization as those terms were defined in the prior senior credit facility. These were subsequently replaced with the covenants contained within the Forbearance Agreement, as described in the following paragraph.

     As of December 31, 2005, the Company was not in compliance with all of its financial covenants under the prior senior credit facility. On November 8, 2005, the Company entered into a Forbearance Agreement with the Lender and each of the Company’s domestic subsidiaries. Pursuant to the Forbearance Agreement, the Lender agreed to forbear from exercising any right or remedy under the prior senior credit facility and related credit documents (including, without limitation, the right to cease making revolving loans) or applicable law, but only to the extent that such right or remedy arose exclusively as a result of the occurrence of certain acknowledged events of default; however, the Lender did retain its right to prohibit certain payments to the holders of the Company’s 4³/4% convertible notes (“Convertible Notes”)(see Note 8(c)). In addition to the financial covenant defaults discussed above, the acknowledged events of default included the failure to provide information and documentation regarding certain of the Company’s subsidiaries.

     The Lender also agreed pursuant to the Forbearance Agreement that it would, on any one occasion prior to the termination of the Forbearance Agreement, make a revolving loan under the prior senior credit facility in an amount up to $0.6 million in excess of the borrowing base under the prior senior credit facility, but only to the extent such funds were necessary for general working capital purposes (an “Overadvance”). The Company was required to repay such Overadvance within thirty (30) days thereafter, to the extent that total borrowing under the prior senior credit facility exceeded the borrowing base at that time. The failure of the Company to repay such Overadvance as and when required would constitute an immediate event of default under the prior senior credit facility irrespective of any otherwise applicable grace period.

     In consideration of the Lender’s willingness to enter the Forbearance Agreement, the Company paid the Lender a nonrefundable fee in the amount of $0.1 million and agreed to reimburse certain expenses of the Lender and its counsel. The Company satisfied all of its obligations under the Forbearance Agreement, and replaced the prior senior credit facility with its new senior secured credit facility on March 17, 2006 (see Note 8(e)). In consideration of the willingness of the Lender to enter into the Forbearance Agreement, the Company and its domestic subsidiaries released the Lender and certain of its affiliates from any and all damages and liabilities of whatever kind or nature, known or unknown, relating to or arising under the prior senior credit facility, excluding any ongoing obligations the Lender had pursuant to the prior senior credit facility.

     Any additional defaults under the prior senior credit facility would have allowed the Lender to accelerate payments of any amounts due thereunder. If the Lender accelerated the payment of the outstanding indebtedness under the prior senior credit facility, cross default provisions contained in the indenture governing the Company’s $125 million Convertible Notes, due November 26, 2006, would have allowed either the trustee or holders of 25% in interest of the aggregate outstanding principal amount of the notes to provide the Company with notice of a default under the notes. Failure of the Company to repay the amounts outstanding under the prior senior credit facility within thirty days of the receipt of such notice would have resulted in an event of default under the Convertible Notes. In that event, either the trustee or holders of 25% in interest of the aggregate outstanding principal amount of the notes could have accelerated the payment of all $125 million of the outstanding notes.

     (b) $10 Million Bridge Loan Agreements

     On December 23, 2005, the Company entered into a Credit Agreement, Security Agreement and Pledge Agreement with Petrus Securities L.P. and Parkcentral Global Hub Limited (collectively, the “Petrus Entities”) and Blum Strategic Partners II GmbH & Co. KG. and Blum Strategic Partners II, L.P. (collectively, the “Blum Entities”). These agreements provided for a term loan to a subsidiary of the Company (the “Borrower”) in an aggregate principal amount of $10 million that matured on the earlier of the closing of the Company’s

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restructuring of its debt or August 15, 2006 (the “Bridge Loan”). The Company guaranteed the repayment of the Bridge Loan and provided collateral to secure such guarantee. The proceeds of the Bridge Loan could be used to finance working capital needs and to pay fees and expenses relating to the Bridge Loan transaction. The Bridge Loan had no scheduled payments, bore interest at 12% per annum, payable monthly, and was secured by a lien on all or substantially all of the assets of the Company, the Borrower and certain of their subsidiaries. The Bridge Loan and the liens securing the Bridge Loan were subordinated to the prior senior credit facility. The Bridge Loan was repaid on March 17, 2006.

     (c) Convertible Notes

     In December 2001, the Company completed a $125.0 million offering of its 4³/4% Convertible Notes due November 2006. The Company received net proceeds from the offering of approximately $121.1 million, which were used to pay down the Company’s outstanding balance under its then-existing $200.0 million senior bank credit facility.

     The notes were convertible into the Company’s common stock at a conversion price of $7.74 per share which is equal to a conversion rate of 129.1990 shares per $1,000 principal amount of notes, subject to adjustment. The Company could redeem some or all of the notes at any time on or after November 26, 2004 at a redemption price of $1,000 per $1,000 principal amount of notes, plus accrued and unpaid interest, if prior to the redemption date the closing price of the Company’s common stock exceeded 140% of the then conversion price for at least 20 trading days within a period of 30 consecutive days ending on the trading date before the date of mailing of the optional redemption notice.

     At December 31, 2005 and 2004, the Company had convertible notes outstanding of $124.1 million and $123.3 million, net of unamortized discount of $0.9 million and $1.7 million, respectively. Amortization of the discount on convertible notes is included as a component of interest expense as presented in the accompanying Consolidated Statements of Operations.

     On October 19, 2005, the Board of Directors of the Company formed a Special Restructuring Committee to oversee the efforts of the Company, with the assistance of its financial advisor, Rothschild Inc., to restructure the Company’s financial obligations, including its obligations under its Convertible Notes, and to improve the Company’s liquidity.

     On December 23, 2005, the Company entered into a Restructuring Support Agreement (the “RSA”) with the then current members of the Ad Hoc Committee of the holders of the Convertible Notes. The five members of the Ad Hoc Committee were Blum Capital Partners L.P., Parkcentral Global Hub Limited, Petrus Securities L.P., Tenor Opportunity Master Fund, Ltd. and Thales Fund Management, LLC (the “Noteholders”).

     The RSA provided that (i) the parties will participate in and support the restructuring transactions described in or contemplated by the Term Sheet including the exchange offer (the “Exchange Offer”); (ii) the Company intends to commence the Exchange Offer as soon as practicable; (iii) the parties will not pursue alternative restructuring transactions, except that the Company may terminate the RSA in the event it receives an unsolicited proposal that is superior to the Exchange Offer and repays the Bridge Loan prior to such termination; (iv) the Company is restricted from selling any of its assets prior to the closing of the Exchange Offer without the prior consent of the Noteholders; and (v) the Noteholders are restricted from selling any of their Convertible Notes to entities that are not parties to the RSA.

     The RSA incorporates the Term Sheet reflecting the terms of the restructuring. The Term Sheet provided that in exchange for the Convertible Notes, the Company would offer the following new securities: $50 million of new senior notes, $60 million of new senior convertible notes, and new series A convertible preferred stock having a liquidation preference of $15 million. In 2011, all the new notes will mature and any shares of the preferred stock remaining outstanding will be redeemed by the Company.

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     The material terms of these new securities include:

• The new senior notes bear interest at 11%, payable semiannually in cash, and are callable at 104% of face in year 1, 102% in year 2, and at par in years 3 through 5.

• The new senior convertible notes bear interest at 10%, payable semiannually in cash or in kind, at the option of the Company. The new senior convertible notes are convertible at the option of the holders, upon satisfaction of certain conditions, (and in certain circumstances, at the option of the Company) into shares of new series B preferred stock having a 10% annual dividend and a liquidation preference equal to the principal amount of notes converted. Dividends on the new series B preferred stock may be paid in cash or in kind, at the option of the Company. Each $1,000 of face amount of such notes is convertible into approximately 2.083 shares of new series B convertible preferred stock; provided that upon the occurrence of certain events, including approval by the shareholders of an amendment to the Company’s Articles of Incorporation to allow sufficient additional shares of common stock to be issued for the conversion, they will be convertible only into common stock at a rate of approximately 1,538 shares per $1,000 principal amount. The new series B preferred stock will be convertible at the option of the holders into shares of common stock at the rate of $0.65 of liquidation preference per share of common stock, subject to certain conditions, including approval by the shareholders of an amendment to the Company’s Articles of Incorporation to allow sufficient additional shares of common stock to be issued for the conversion.

• The new series A preferred stock has a 9% dividend, payable in cash or in kind, at the option of the Company. The new series A preferred stock is convertible at the option of the holders into shares of common stock at the rate of $0.28405 of liquidation preference per share of common stock.

• The series A and series B preferred stock votes with the Company’s common stock on most matters requiring shareholder votes. The Company has the right to redeem the new senior convertible notes at par at any time after repayment of the new senior notes. The Company also has the right to redeem the new series A and series B preferred stock at the stated liquidation preference at any time after repayment of the new senior notes and the new senior convertible notes.

• Both the new senior notes and the new senior convertible notes will mature on the fifth anniversary of issuance. The new series A and series B preferred stock must be redeemed on the fifth anniversary of issuance.

     (d) Financial Restructuring

     The Company successfully completed its financial restructuring on March 17, 2006, on substantially the terms described above in Note 8(c).

     (e) New Senior Indebtedness

     The prior senior credit facility and the Bridge Loan were retired and replaced by a new senior secured credit facility on March 17, 2006, in connection with the closing of the Company’s Exchange Offer for its Convertible Notes due November 2006.

     As a part of its financial restructuring, the Company entered into a new senior secured credit facility with Ableco LLC (“Ableco”) and The CIT/Group/Business Credit, Inc., a portion of which is being syndicated to the Company’s prior bridge financing lenders, Petrus Securities L.P. and Parkcentral Global Hub Limited (collectively, the “Petrus Entities”) and Blum Strategic Partners II GmbH & Co. K.G. and Blum Strategic Partners II, L.P. (collectively, the “Blum Entities”). An affiliate of the Blum Entities was a member of the Ad Hoc Committee of holders of the Company’s convertible notes due November 2006, with the right to designate one member of the Company’s Board of Directors, and together with its affiliates, the Company’s largest shareholder. The new credit facility includes (1) a $25.0 million term loan, and (2) a revolving credit facility that provides for revolving loan borrowings of up to $20.0 million. No borrowings are currently outstanding under the revolving credit facility.

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     PRG-Schultz USA, Inc. (the “borrower”), a wholly-owned subsidiary, is the primary borrower under the new senior secured credit facility, and the Company and each of its other existing and subsequent acquired or organized direct and indirect domestic wholly-owned subsidiaries have guaranteed the new facility. The Company’s, the borrower’s and all of the Company’s other subsidiaries’ obligations under the new senior secured credit facility are secured by liens on substantially all of its assets (including the stock of the Company’s domestic subsidiaries and two-thirds of the stock of certain of the Company’s foreign subsidiaries).

     The new senior secured credit facility will expire on the fourth anniversary of the closing of the Exchange Offer. The term loan under the new senior secured credit facility will amortize with quarterly payments beginning on the first anniversary of the closing date of $250,000 per quarter for the second year of the facility, and $500,000 per quarter for the third and fourth years of the facility, with the balance due at maturity on the fourth anniversary of closing.

     The term loan under the new senior secured credit facility may be repaid at the Company’s option at any time; provided, that any such pre-payment in the first year shall be subject to a prepayment penalty of 3.0% of the principal amount pre-paid, and pre-payments in the second year shall be subject to a pre-payment penalty of 2.0% of the principal amount pre-paid. The term loan may be pre-paid at any time following the 2nd anniversary of the closing date without penalty. The new senior secured credit facility also provides for certain mandatory repayments, including a portion of the Company’s consolidated excess cash flow (which will be based on an adjusted EBITDA calculation), sales of assets and sales of certain debt and equity securities, in each case subject to certain exceptions and reinvestment rights.

     The Company’s ability to borrow under the revolving credit portion of the new senior secured credit facility is limited to a borrowing base of a percentage of its eligible domestic receivables, subject to adjustments. Based on this borrowing base calculation, the Company had approximately $15.0 million of availability under the revolving credit facility at the closing of the Exchange Offer.

     The interest on the term loan is based on a floating rate equal to the reserve adjusted London inter-bank offered rate, or LIBOR, plus 8.5% (or, at the Company’s option, a published prime lending rate plus 5.5%). The interest rate on outstanding revolving credit loans is based on LIBOR plus 3.75% (or, at the Company’s option, a published prime lending rate plus 1.0%). The Company will also pay an unused commitment fee on the revolving credit facility of 0.5%. The new senior secured credit facility also required the payment of commitment fees, closing fees and additional expense reimbursements of approximately $1.0 million at closing.

     The new senior secured credit facility contains customary representations and warranties, covenants and conditions to borrowing. The new senior secured credit facility also contains a number of financial maintenance and restrictive covenants that are customary for a facility of this type, including without limitation (and subject to certain exceptions and qualifications): maximum capital expenditures (to be measured annually); maximum total debt to EBITDA (to be measured quarterly); minimum EBITDA (to be measured quarterly); minimum fixed charge coverage ratio (to be measured quarterly); provision of financial statements and other customary reporting; notices of litigation, defaults and un-matured defaults with respect to material agreements; compliance with laws, permits and licenses; inspection of properties, books and records; maintenance of insurance; limitations with respect to liens and encumbrances, dividends and retirement of capital stock, guarantees, sale and lease back transactions, consolidations and mergers, investments, capital expenditures, loans and advances, and indebtedness; compliance with pension, environmental and other laws, operating and capitalized leases, and limitations on transactions with affiliates and prepayment of other indebtedness.

     The new senior secured credit facility contains customary events of default, including non-payment of principal, interest or fees, inaccuracy of representations or warranties in any material respect, failure to comply with covenants, cross-default to certain other indebtedness, loss of lien perfection or priority, material judgments, bankruptcy events and change of ownership or control.

     The Company’s Convertible Notes, prior senior credit facility and Bridge Loan were all due in 2006. The Company completed its financial restructuring on March 17, 2006. In accordance with SFAS No. 6, Classification of Short-Term Obligations Expected to be Refinanced, all debt obligations except for $0.5 million of un-exchanged Convertible Notes have been excluded from current liabilities in the accompanying December 31, 2005 Consolidated Balance Sheet and are reported as noncurrent liabilities. Minimum debt payments on the Company’s restructured debt obligations for each of the next five years and thereafter are as follows:

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Year Ending December 31,
2006	$	470
2007		1,000
2008		2,000
2009		2,000
2010		20,000
Thereafter		110,000
	$	135,470

(9) LEASE COMMITMENTS

     The Company is committed under noncancelable lease arrangements for facilities and equipment. Rent expense, excluding costs associated with the termination of noncancelable lease arrangements, for 2005, 2004 and 2003, was $11.4 million, $12.5 million and $13.3 million, respectively.

     SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, requires that a liability for costs to terminate a contract before the end of its term be recognized and measured at its fair value when the entity terminates the contract in accordance with the contract terms. The Company incurred approximately $1.2 million, $0.3 million and $1.0 million in 2005, 2004 and 2003, respectively, in termination costs of noncancelable lease arrangements. The Company recognized a corresponding liability for the fair value of the remaining lease rentals, reduced by any estimable sublease rentals that could be reasonably obtained for the properties. This liability is reduced ratably over the remaining term of the cancelled lease arrangements as cash payments are made.

     The Company has entered into several operating lease agreements that contain provisions for future rent increases, free rent periods or periods in which rent payments are reduced (abated). In accordance with FASB Technical Bulletin No. 85-3, Accounting for Operating Leases with Scheduled Rent Increases, the total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the lease terms.

     The future minimum lease payments under noncancelable leases are summarized as follows (in thousands):

Year Ending December 31,
2006	$	8,630
2007		7,082
2008		6,039
2009		5,039
2010		4,723
Thereafter		21,640
	$	53,153

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(10) INCOME TAXES

     Income taxes have been provided in accordance with SFAS No. 109, Accounting for Income Taxes. Total income tax expense (benefit) for the years ended December 31, 2005, 2004 and 2003 was allocated as follows (in thousands):

	2005		2004			2003
Earnings (loss) from continuing operations	$	821	$	76,197		$	(35,362	)
Earnings (loss) from discontinued operations		—		(1,080	)		795
Gain on disposal of discontinued operations		—		5,722			354
Shareholders’ equity, compensation expense for tax purposes in excess of financial purposes		1		(17	)		(155	)
Effect of cumulative translation adjustment		2		3			—
	$	824	$	80,825		$	(34,368	)

     Earnings (loss) before income taxes from continuing operations for the years ended December 31, 2005, 2004 and 2003 relate to the following jurisdictions (in thousands):

	2005			2004			2003
United States	$	(190,095	)	$	5,910		$	(201,777	)
Foreign		(14,599	)		(5,281	)		3,924
		(204,694	)	$	629		$	(197,853	)

     The provision for income taxes attributable to continuing operations for the years ended December 31, 2005, 2004 and 2003 consists of the following (in thousands):

	2005			2004		2003
Current:
Federal	$	58		$	104	$	31
State		166			10		3
Foreign		3,444			3,389		4,750
		3,668			3,503		4,784
Deferred:
Federal		(1,553	)		42,210		(35,199	)
State		(178	)		7,976		(4,361	)
Foreign		(1,116	)		22,508		(586	)
		(2,847	)		72,694		(40,146	)
Total	$	821		$	76,197	$	(35,362	)

     The following table summarizes the significant differences between the U.S. federal statutory tax rate and the Company’s effective tax expense (benefit) for earnings (loss) from continuing operations (in thousands):

	2005			2004			2003
Statutory federal income tax rate	$	(71,643	)	$	220		$	(69,249	)
State income taxes, net of federal benefit		(8	)		(506	)		(9,905	)
Nondeductible goodwill		28,215			—			41,601
Job Creation Act dividend		—			700			—
Change in deferred tax asset valuation allowance		42,358			76,747			4,593
Other, net		1,899			(964	)		(2,402	)
	$	821		$	76,197		$	(35,362	)

     The tax effects of temporary differences and carryforwards that give rise to deferred tax assets and liabilities consist of the following (in thousands):

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	2005		2004
Deferred income tax assets:
Accounts payable and accrued expenses	$	7,175	$	2,306
Accrued payroll and related expenses		8,751		7,637
Deferred compensation		540		864
Depreciation		5,375		4,225
Noncompete agreements		997		1,139
Bad debts		752		953
Foreign operating loss carryforward of foreign subsidiary		4,770		9,576
Foreign tax credit carryforwards		14,347		13,282
Federal operating loss carryforward		30,935		20,047
Intangible assets		52,356		27,241
State operating loss carryforwards		7,556		6,837
Capital loss carryforwards		13,263		12,910
Other		7,913		5,072
Gross deferred tax assets		154,730		112,089
Less valuation allowance		139,612		97,254
Gross deferred tax assets net of valuation allowance		15,118		14,835
Deferred income tax liabilities:
Intangible assets		9,424		12,091
Capitalized software		1,949		2,149
Other		3,148		2,845
Gross deferred tax liabilities		14,521		17,085
Net deferred tax assets (liabilities)	$	597	$	(2,250	)

     SFAS No. 109 requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, management considers all available positive and negative evidence affecting specific deferred tax assets, including the Company’s past and anticipated future performance, the reversal of deferred tax liabilities, the length of carryback and carryforward periods and the implementation of tax planning strategies.

     Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of deferred tax assets when significant negative evidence exists. Cumulative losses in recent years are the most compelling form of negative evidence considered by management in this determination. For the year ended December 31, 2005, management has determined that based on all available evidence, a valuation allowance of $139.6 million is appropriate.

     As of December 31, 2005, the Company had approximately $88.4 million of U.S. Federal loss carryforwards available to reduce future taxable income. The majority of the loss carryforwards expire through 2025. Additionally, as of December 31, 2005, the Company had foreign income tax credit carryforwards amounting to $14.3 million, which expire through 2015. If substantial changes in the Company’s ownership should occur, there would be a significant annual limitation on the amount of the carryforwards that can be utilized. The annual limitation is equal to the value of the corporation at the time of the ownership change multiplied by a long-term tax-exempt rate published by the Internal Revenue Service. The Company’s Exchange Offer (see Note 8) will likely cause such a limitation to occur.

     As a result of the enactment of The American Jobs Creation Act, the Company repatriated approximately $1.8 million of earnings in 2004 that were previously indefinitely reinvested. As a result of this repatriation, the Company recorded additional current income tax expense of approximately $0.7 million in 2004.

(11) EMPLOYEE BENEFIT PLANS

     The Company maintains a 401(k) Plan in accordance with Section 401(k) of the Internal Revenue Code, which allows eligible participating employees to defer receipt of up to 25% of their compensation, subject to regulatory limitation, and contribute such amount to one or more investment funds. Employee contributions are matched by the Company in a discretionary amount to be determined by the Company

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each plan year up to $1,750 per participant. The Company may also make additional discretionary contributions to the Plan as determined by the Company each plan year. Company matching funds and discretionary contributions vest at the rate of 20% each year beginning after the participants’ first year of service. Company contributions for continuing and discontinued operations were approximately $1.0 million in 2005, $1.1 million in 2004 and $1.4 million in 2003.

     The Company also maintains deferred compensation arrangements for certain key officers and executives. Total expense related to these deferred compensation arrangements was approximately $0.1 million, $0.2 million and $0.3 million in 2005, 2004 and 2003, respectively. Net payments related to these deferred compensation arrangements were approximately $1.2 million, $1.5 million and $0.3 million in 2005, 2004 and 2003, respectively.

(12) SHAREHOLDERS’ EQUITY (DEFICIT)

     On September 20, 2002, the Company exercised an option to purchase approximately 1.45 million shares of its common stock from an affiliate of Howard Schultz, a former director of the Company, for approximately $12.68 million.

     On October 24, 2002, the Board authorized the repurchase of up to $50.0 million of the Company’s common shares. During 2003 and 2002, the Company repurchased 1.1 million and 0.8 million shares, respectively, of its outstanding common stock on the open market at a cost of $7.53 million and $7.48 million, respectively. The Company did not purchase any of its outstanding common shares during 2005 or 2004 and does not currently anticipate a resumption of such purchases in the foreseeable future.

     On August 1, 2000, the Board authorized a shareholder protection rights plan designed to protect Company shareholders from coercive or unfair takeover techniques through the use of a Shareholder Protection Rights Agreement approved by the Board (the “Rights Plan”). The terms of the Rights Plan provide for a dividend of one right (collectively, the “Rights”) to purchase a fraction of a share of participating preferred stock for each share owned. This dividend was declared for each share of common stock outstanding at the close of business on August 14, 2000. The Rights, which expire on August 14, 2010, may be exercised only if certain conditions are met, such as the acquisition (or the announcement of a tender offer, the consummation of which would result in the acquisition) of 15% or more of the Company’s common stock by a person or affiliated group in a transaction that is not approved by the Board. Issuance of the Rights does not affect the finances of the Company, interfere with the Company’s operations or business plans, or affect earnings per share. The dividend was not taxable to the Company or its shareholders and did not change the way in which the Company’s shares may be traded. At the 2001 annual meeting, the Company’s shareholders approved a resolution recommending redemption of the Rights, as the Rights Plan contained a “continuing directors” provision. In March 2002, a special committee, appointed to consider the matter, recommended to the Board that the Rights Plan be amended to remove the continuing directors provision contingent upon the shareholders approving an amendment to the Company’s Articles of Incorporation providing that directors can only be removed for cause. At the 2002 annual meeting, the shareholders approved the amendment to the Company’s Articles of Incorporation to provide that directors can only be removed for cause, and the Rights Plan was therefore automatically amended to remove the continuing directors provision. Additionally, the shareholders voted against a second proposal to redeem the Rights Plan. During August 2002, the Board approved a one-time and limited exemption to the 15% ownership clause under the Rights Plan to Blum Capital Partners L.P. The Board has amended the Rights Plan to provide that the acquisition of securities in the Exchange Offer will not trigger its provisions.

     Effective July 31, 2000, in connection with the Rights Plan, the Board amended the Company’s Articles of Incorporation to establish a new class of stock, the participating preferred stock. The Company issued no preferred stock through December 31, 2005, and has no present intentions to issue any preferred stock, except as discussed below. The Company’s remaining, undesignated preferred stock may be issued at any time or from time to time in one or more series with such designations, powers, preferences, rights, qualifications, limitations and restrictions (including dividend, conversion and voting rights) as may be determined by the Board, without any further votes or action by the shareholders.

     On August 14, 2000, the Company issued 286,000 restricted shares of its common stock to certain employees (the “Stock Awards”).

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Of the total restricted shares issued, 135,000 restricted shares were structured to vest on a ratable basis over five years of continued employment. The remaining 151,000 restricted shares were structured to vest at the end of five years of continued employment.

     On August 14, 2005, the remaining unvested and outstanding 52,000 shares of these Stock Awards vested. For the U.S. employees of the Company, 13,582 shares were withheld to cover payroll tax obligations and the balances of the shares were issued to the recipients. For international employees, the full balances of shares were issued to the recipients. International employees are responsible for any tax liability with their respective government.

     At December 31, 2005, of the total number of shares granted under the Stock Awards, there were 92,500 shares of this common stock which were no longer forfeitable and for which all restrictions had accordingly been removed and 193,500 shares that had been forfeited. For the years ended December 31, 2005, 2004 and 2003, respectively, the Company recognized $28 thousand, $4 thousand and $246 thousand of compensation expense related to these Stock Awards. Additionally, the Company reduced unamortized compensation expense for forfeitures of the Stock Awards by $39 thousand, $154 thousand and $144 thousand for the years ended December 31, 2005, 2004 and 2003, respectively.

     To promote retention of key employees during the Company’s exploration of strategic alternatives, among other goals, on October 19, 2004, the Company’s Compensation Committee approved a program under which the Company modified employment and compensation arrangements with certain management employees as disclosed in the Company’s Reports on Form 8-K filed on October 26, 2004 and February 11, 2005. Under the program, the officers were offered additional benefits related to certain termination and change of control events when they agreed to revised restrictive covenants.

     Among the additional benefits, restricted stock awards representing 240,000 shares in the aggregate of the Company’s common stock were granted to six of the Company’s officers in February 2005 and 25,000 shares were granted to a senior management employee in March 2005. The total 265,000 restricted shares granted are subject to service-based cliff vesting. The restricted awards vest three years following the date of the grant, subject to early vesting upon occurrence of certain events including a change of control, death, disability or involuntary termination of employment without cause. The restricted awards will be forfeited if the recipient voluntarily terminates his or her employment with the Company (or a subsidiary, affiliate or successor thereof) prior to vesting. The shares are generally nontransferable until vesting. During the vesting period, the award recipients will be entitled to receive dividends with respect to the escrowed shares and to vote the shares. As of December 31, 2005, former employees had cumulatively forfeited 200,000 shares of the restricted common stock. Over the remaining life of the restricted stock awards, the Company will recognize $230 thousand in compensation expense before any future forfeitures. The Company recognized $92 thousand of compensation expense related to these Stock Awards in 2005.

(13) COMMITMENTS AND CONTINGENCIES

     (a) Legal Proceedings

     Beginning on June 6, 2000, three putative class action lawsuits were filed against the Company and certain of its present and former officers in the United States District Court for the Northern District of Georgia, Atlanta Division. These cases were subsequently consolidated into one proceeding styled: In re Profit Recovery Group International, Inc. Sec. Litig., Civil Action File No. 1:00-CV-1416-CC (the “Securities Class Action Litigation”). On November 13, 2000, the Plaintiffs in these cases filed a Consolidated and Amended Complaint (the “Complaint”). In that Complaint, Plaintiffs allege that the Company, John M. Cook, the Company’s former Chairman and Chief Executive Officer, Scott L. Colabuono, the Company’s former Chief Financial Officer, and Michael A. Lustig, the Company’s former Chief Operating Officer, (the “Defendants”) violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by allegedly disseminating false and misleading information about a change in the Company’s method of recognizing revenue and in connection with revenue reported for a division. Plaintiffs purported to bring this action on behalf of a class of persons who purchased the Company’s stock between July 19, 1999 and July 26, 2000. Plaintiffs sought an unspecified amount of compensatory damages, payment of litigation fees and expenses, and equitable and/or injunctive relief. On January 24, 2001, Defendants filed a Motion to Dismiss the Complaint for failure to state a claim under the Private Securities Litigation Reform Act, 15 U.S.C. § 78u-4 et seq. The Court denied Defendant’s

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Motion to Dismiss on June 5, 2001. Defendants served their Answer to Plaintiffs’ Complaint on June 19, 2001. The Court granted Plaintiffs’ Motion for Class Certification on December 3, 2002.

     On February 8, 2005, the Company entered into a Stipulation of Settlement of the Securities Class Action Litigation. On February 10, 2005, the United States District Court for the Northern District of Georgia, Atlanta Division preliminarily approved the terms of the Settlement. On May 26, 2005, the Court approved the Stipulation of Settlement (“Settlement”) entered into by the Company with the Plaintiff’s counsel, on behalf of all putative class members, pursuant to which it agreed to settle the consolidated class action for $6.75 million, which payment was made by the insurance carrier for the Company.

     On April 1, 2003, Fleming Companies, one of the Company’s larger U.S. Accounts Payable Services clients at that time, filed for Chapter 11 Bankruptcy Reorganization. During the quarter ended March 31, 2003, the Company received $5.5 million in payments on account from this client. On January 24, 2005, the Company received a demand for preference payments due from the trust representing the client. The demand stated that the trust’s calculation of the Company’s preferential payments was approximately $2.9 million. The Company disputed the claim.

     On March 30, 2005, the Company was sued by the Fleming Post-Confirmation Trust (“PCT”) in a bankruptcy proceeding of the Fleming Companies in the U.S. Bankruptcy Court for the District of Delaware to recover approximately $5.5 million of alleged preferential payments. The PCT’s claims were subsequently amended to add a claim for alleged fraudulent transfers representing approximately $2.0 million in commissions paid to the Company with respect to claims deducted from vendors that the client subsequently re-credited to the vendors. The Company believes that it has valid defenses to the PCT’s claims in the proceeding. In December 2005, the PCT offered to settle the case for $2 million. The Company countered with an offer to waive its bankruptcy claim and to pay the PCT $250,000. The PCT rejected the Company’s settlement offer, and the litigation is ongoing.

     In the normal course of business, the Company is involved in and subject to other claims, contractual disputes and other uncertainties. Management, after reviewing with legal counsel all of these actions and proceedings, believes that the aggregate losses, if any, will not have a material adverse effect on the Company’s financial position or results of operations.

     (b) Indemnification and Consideration Concerning Certain Future Asset Impairment Assessments

     The Company’s Meridian unit and an unrelated German concern named Deutscher Kraftverkehr Euro Service GmbH & Co. KG (“DKV”) are each a 50% owner of a joint venture named Transporters VAT Reclaim Limited (“TVR”). Since neither owner, acting alone, has majority control over TVR, Meridian accounts for its ownership using the equity method of accounting. DKV provides European truck drivers with a credit card that facilitates their fuel purchases. DKV distinguishes itself from its competitors, in part, by providing its customers with an immediate advance refund of the value-added taxes (“VAT”) they pay on their fuel purchases. DKV then recovers the VAT from the taxing authorities through the TVR joint venture. Meridian processes the VAT refund on behalf of TVR for which it receives a percentage fee. In April 2000, TVR entered into a financing facility with Barclays Bank plc (“Barclays”), whereby it sold the VAT refund claims to Barclays with full recourse. Effective August 2003, Barclays exercised its contractual rights and unilaterally imposed significantly stricter terms for the facility, including markedly higher costs and a series of stipulated cumulative reductions to the facility’s aggregate capacity. TVR repaid all amounts owing to Barclays during March 2004 and terminated the facility during June 2004. As a result of changes to the facility occurring during the second half of 2003, Meridian began experiencing a reduction in the processing fee revenues it derives from TVR as DKV previously transferred certain TVR clients to another VAT service provider. As of December 31, 2004, the transfer of all DKV customer contracts from TVR to another VAT service provider was completed. TVR will continue to process existing claims and collect receivables and pay these to Meridian and DKV in the manner agreed between the parties.

     Meridian agreed with DKV to commence an orderly and managed closeout of the TVR business. Therefore, Meridian’s future revenues from TVR for processing TVR’s VAT refunds, and the associated profits therefrom, ceased in October 2004. (Meridian’s revenues from TVR were $0.5 million and $2.3 million for the years ended December 31, 2004 and 2003, respectively.) As TVR goes about the orderly wind-down of its business in future periods, it will be receiving VAT refunds from countries, and a portion of such refunds will be paid to Meridian

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in liquidation of its investment in TVR. If there is a marked deterioration in TVR’s future financial condition from its inability to collect refunds from countries, Meridian may be unable to recover some or all of its long-term investment in TVR, which totaled $1.9 million at December 31, 2005 exchange rates and $2.2 million at December 31, 2004 exchange rates. This investment is included in Other Assets on the Company’s accompanying Consolidated Balance Sheets.

     (c) Bank Guarantee and Standby Letters of Credit

     In July 2003, Meridian entered into a deposit guarantee (the “Guarantee”) with Credit Commercial de France (“CCF”) in the amount of 4.5 million Euros ($5.7 million at December 31, 2003 exchange rates). The Guarantee served as assurance to VAT authorities in France that Meridian will properly and expeditiously remit all French VAT refunds it receives in its capacity as intermediary and custodian to the appropriate client recipients. The Guarantee was secured by amounts on deposit with CCF equal to the amount of the Guarantee. The annual interest rate earned on this money was 1.0% for 2004. On November 30, 2004, the Guarantee was replaced with a standby letter of credit under its prior senior credit facility (see Note 8(a)) in the face amount of 3.5 million Euros ($4.7 million at December 31, 2004 exchange rates).

     On November 30, 2004, the Company also entered into a letter of credit under its prior senior credit facility in the face amount of $0.2 million, bringing the total outstanding to $4.9 million as of December 31, 2004. The current annual interest rate of the letter of credit was 3.0% at December 31, 2005. There were $0.4 million of borrowings outstanding under the letter of credit facility at December 31, 2005. These letters of credit are required by insurers with which the Company maintains policies to provide workers’ compensation and employers’ liability insurance.

     The Guarantee was reduced to 2.5 million Euros and on September 30, 2005 the standby letter of credit was replaced with a 2.5 million Euro ($3.1 million at December 31, 2005 exchange rates) cash deposit with CCF. The annual interest rate earned on this money was 3.0% for 2005.

     (d) Industrial Development Authority Grants

     During the period of May 1993 through September 1999, Meridian received grants from the Industrial Development Authority of Ireland (“IDA”) in the sum of 1.4 million Euros ($1.6 million at December 31, 2005 exchange rates). The grants were paid primarily to stimulate the creation of 145 permanent jobs in Ireland. As a condition of the grants, if the number of permanently employed Meridian staff in Ireland falls below 145, then the grants are repayable in full. This contingency expires on September 23, 2007. Meridian currently employs 205 permanent employees in Dublin, Ireland. The European Union (“EU”) has currently proposed legislation that will remove the need for suppliers to charge VAT on the supply of services to clients within the EU. The effective date of the proposed legislation is currently unknown. Management estimates that the proposed legislation, if enacted as currently drafted, would eventually have a material adverse impact on Meridian’s results of operations from its value-added tax business. If Meridian’s results of operations were to decline as a result of the enactment of the proposed legislation, it is possible that the number of permanent employees that Meridian employs in Ireland could fall below 145 prior to September 2007. Should such an event occur, the full amount of the grants previously received by Meridian will need to be repaid to IDA. However, management currently estimates that any impact on employment levels related to a possible change in the EU legislation will not be realized until after September 2007, if ever. As any potential liability related to these grants is not currently determinable, the Company’s accompanying Consolidated Statements of Operations do not include any expense related to this matter. Management is monitoring this situation and if it appears probable Meridian’s permanent staff in Ireland will fall below 145 and that grants will need to be repaid to IDA, Meridian will be required to recognize an expense at that time. This expense could be material to Meridian’s results of operations.

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     (e) Retirement Obligations

     The July 31, 2005 retirements of the Company’s former Chairman, President and CEO, John M. Cook, and the Company’s former Vice Chairman, John M. Toma, resulted in an obligation to pay retirement benefits of $7.6 million (present value basis) to be paid in monthly cash installments principally over a three-year period, beginning February 1, 2006. Charges of $3.9 million, $1.4 million and $2.3 million had been accrued in 2005, 2004 and 2003 and prior years, respectively, related to these retirement obligations. On March 16, 2006, the terms of the applicable severance agreements were amended in conjunction with the Company’s financial restructuring. Pursuant to the terms of the severance agreements, as amended (1) the Company’s obligations to pay monthly cash installments to Mr. Cook and Mr. Toma have been extended from 36 months to 58 months and from 24 months to 46 months, respectively; however, the total dollar amount of monthly cash payments to be made to each remains unchanged, and (2) the Company agreed to pay a fixed sum of $150,000 to CT Investments, LLC, to defray the fees and expenses of the legal counsel and financial advisors to Messrs. Cook and Toma. The original severance agreements, and the severance agreements, as amended, provide for an annual reimbursement, beginning on or about February 1, 2007, to Mr. Cook and Mr. Toma for the cost of health insurance for themselves and their respective spouses (not to exceed $25,000 and $20,000, respectively, subject to adjustment based on changes in the Consumer Price Index), continuing until each reaches the age of 80.

     (f) Restructuring Obligations

     The Company is obligated to pay $8.2 million of severance and other costs related to its workforce reduction and restructuring plan (see Note 16).

(14) STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLAN

     Prior to January 1, 2006, the Company had an employee stock purchase plan and two stock compensation plans: (1) the Stock Incentive Plan and (2) the HSA Acquisition Stock Option Plan.

     The Company’s Stock Incentive Plan, as amended, has authorized the grant of options or other stock based awards, with respect to up to 12,375,000 shares of the Company’s common stock to key employees, directors, consultants and advisors. The majority of options granted through December 31, 2005 have 5-year terms and vest and become fully exercisable on a ratable basis over four or five years of continued employment.

     The Company’s HSA Acquisition Stock Option Plan, as amended, authorized the grant of options to purchase 1,083,846 shares of the Company’s common stock to former key employees and advisors of HSA-Texas who were hired or elected to the Board of Directors in connection with the acquisitions of the businesses of HSA-Texas and affiliates and who were participants in the 1999 Howard Schultz & Associates International Stock Option Plan. The options have 5-year terms and vested upon and became fully exercisable upon issuance. No additional options can be issued under this plan.

     A summary of the Company’s stock option activity and related information for the years ended December 31, 2005, 2004 and 2003 is as follows:

	2005					2004					2003
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
	Options			Price		Options			Price		Options			Price
Outstanding at beginning of year		7,894,691		$	9.27		8,080,175		$	10.70		8,071,222		$	11.31
Granted		1,368,000			3.66		1,541,000			4.35		1,368,500			7.40
Exercised		(24,900	)		3.55		(19,090	)		3.59		(223,023	)		4.37
Forfeited		(831,998	)		7.42		(1,707,394	)		11.68		(1,136,524	)		12.26
Outstanding at end of year		8,405,793			8.41		7,894,691			9.27		8,080,175			10.70
Exercisable at end of year		8,280,793			8.53		5,296,247			10.44		5,202,996			11.01
Weighted average fair value of options granted during year	$	2.24				$	2.89				$	5.02

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     The following table summarizes information about stock options outstanding at December 31, 2005:

	Number		Weighted-	Weighted-		Exercisable
	of Shares		Average	Average		Number		Weighted-
	Subject		Remaining	Exercise		of		Average
Range of Exercise Prices	to Option		Life	Price		Shares		Exercise Price
$0.28 — $3.16		787,500	4.62 years	$	2.70		662,500	$	3.16
$4.06 — $4.31		979,270	2.37 years		4.20		979,270		4.20
$4.43 — $7.41		3,159,856	2.05 years		6.23		3,159,856		6.23
$8.50 — $11.83		2,628,717	1.08 years		9.65		2,628,717		9.65
$12.00 — $18.88		296,725	2.21 years		15.82		296,725		15.82
$19.16 — $43.69		553,725	3.57 years		26.58		553,725		26.58
		8,405,793	2.13 years	$	8.41		8,280,793	$	8.53

     The weighted-average remaining contract life of options outstanding at December 31, 2005 was 2.13 years.

     On December 15, 2005, the Company’s Compensation Committee authorized the immediate vesting of all outstanding unvested time-vesting options that have option prices that are out of the money as of such date (the “underwater” stock options). This action accelerated the vesting of 2,412,116 options of the 8,481,418 options outstanding as of November 30, 2005. The accelerated options have option prices that range from $3.16 per share to $17.25 per share and a weighted average option price per share of $4.97. The optionees whose options were accelerated included, among others, David Cole, the non-executive Chairman of the Board (150,000 options) and the following executive officers: James McCurry (500,000 options), James Moylan (375,000 options) and James Benjamin (75,000 options). In accordance with SFAS No. 123, the grant and subsequent vesting of options to Mr. Cole, a non-employee director, resulted in the recognition of 2005 compensation expense of approximately $280 thousand.

     The Board’s decision to accelerate the vesting of these “underwater” stock options was made primarily to avoid recognizing compensation expense associated with these stock options in future financial statements upon the Company’s adoption of SFAS No. 123(R), Share-Based Payment.

     Effective May 15, 1997, the Company established an employee stock purchase plan (the “Plan”) pursuant to Section 423 of the Internal Revenue Code of 1986, as amended. The Plan covered 2,625,000 shares of the Company’s common stock, which could be authorized unissued shares, or shares reacquired through private purchase or purchases on the open market. Under the Plan, employees could contribute up to 10% of their compensation towards the semiannual purchase of stock. The employee’s purchase price was 85 percent of the fair market price on the first business day of the purchase period. The Company was not required to recognize compensation expense related to this Plan. No shares were issued under the plan in 2003. During 2005 and 2004, approximately 146,000 shares and 166,000 shares were issued under the Plan, respectively. Effective December 31, 2005, the Company terminated the Plan.

(15) FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts for cash and cash equivalents, receivables, funds held for client obligations, notes payable, short term borrowings, obligations for client payables, accounts payable and accrued expenses, and accrued payroll and related expenses approximate fair value because of the short maturity of these instruments.

     At December 31, 2004, the fair value of the Company’s Convertible Notes was calculated as the discounted present value of future cash flows related to the Convertible Notes using the stated interest rate, which management believed was the approximate rate at which the notes could be refinanced. The estimated fair value of the Company’s Convertible Notes at December 31, 2004 was $124.1 million and the carrying value of the Company’s Convertible Notes at December 31, 2005 and 2004 was $124.1 million and $123.3 million, respectively. Due to the Company’s financial condition and financial restructuring (see Note 8), management determined that it was not practicable to determine the fair value of the Convertible Notes as of December 31, 2005.

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     Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Accordingly, the estimates presented are not necessarily indicative of the amounts that could be realized in a current market exchange.

(16) WORKFORCE REDUCTION AND RESTRUCTURING

     On August 19, 2005, the Company announced that it had taken the initial step in implementing an operational restructuring plan, necessitated by the Company’s declining revenue trend during 2003, 2004, and 2005 as the Company’s selling, general and administrative expenses continued to increase as a percentage of revenue during those same periods (33.6%, 35.5% and 38.1%, respectively). The operational restructuring plan encompasses exit activities, including reducing the number of clients served, reducing the number of countries in which the Company operates, and terminating employees.

     On September 30, 2005, the Company’s Board of Directors approved the completed operational restructuring plan and authorized implementation of the plan. The Company expects the operational restructuring plan to be fully implemented by June 30, 2006, and the implementation of the operational restructuring plan will result in severance related and other charges of approximately $14.6 million. As of December 31, 2005, the Company recorded an $11.6 million charge related to the operational restructuring. Of this amount, $10.0 million was for severance pay and benefits costs pursuant to SFAS No. 112, Employers’ Accounting for Postemployment Benefits, and SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. Severance payments amounting to $2.8 million have been paid as of December 31, 2005, and the majority of the remaining severance is expected to be paid out in 2006. The remaining $1.6 million of the $11.6 million related to early termination of operating leases and impairment of leasehold improvements. Included in the $1.6 million was $1.2 million of early lease termination costs in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The Company also recorded leasehold improvement impairment charges of $0.4 million related to these leases. The $14.6 million estimate for the restructuring plan includes $3.0 million of operating lease exit costs that the Company expects to incur. The Company is presently evaluating which, if any, additional operating leases to exit as part of the restructuring plan.

     The following table summarizes activity associated with the workforce reduction and restructuring liabilities (in thousands) as of December 31, 2005:

	Accounts					Corporate
	Payable			Meridian		Support			Total
Balance as of January 1, 2005	$	—		$	—	$	—		$	—
Accruals		4,763			383		6,403			11,549
Cash payments		(1,961	)		—		(1,000	)		(2,961	)
Non cash impairment charges		(235	)		—		(137	)		(372	)
Balance as of December 31, 2005	$	2,567		$	383	$	5,266		$	8,216

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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     None

ITEM 9A. Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures

     The Company’s management conducted an evaluation, with the participation of its President and Chief Executive Officer (CEO) and its Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation the CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective in reporting, on a timely basis, information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act, because of material weaknesses in its internal control over financial reporting as of December 31, 2005, as described below.

b) Management’s Annual Report on Internal Control over Financial Reporting

     The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     A material weakness in internal control over financial reporting is defined by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 2 as a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

     As of December 31, 2005, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based upon the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), Internal Control-Integrated Framework. Based on this assessment, management concluded that, as of December 31, 2005, the Company did not maintain effective internal control over financial reporting, because of the existence of material weaknesses, as described below.

Company Level Controls

     The Company identified the following material weaknesses relating to company level controls:

• The Company’s accounting function lacked personnel with adequate expertise related to accounting for and reporting of the Company’s non-routine transactions and complex accounting matters. This deficiency resulted in material errors in the accounting for the impairment of goodwill and other long-lived assets and in the recognition of employee severance costs. This deficiency also resulted in errors in the recognition of revenue and the recognition of stock compensation expense.

• The Company had inadequate review controls over account reconciliations and account analyses. This deficiency resulted in errors in the accounting for (i) property and equipment; (ii) current income tax receivables and payables; and (iii) accrued liabilities.

• The Company’s policies and procedures relating to the financial reporting process did not ensure that financial statements were prepared and reviewed in a timely manner. Specifically, the Company had insufficient (i) review and supervision within the accounting department, and (ii) preparation and review procedures for footnote disclosures accompanying the Company’s financial statements. These deficiencies resulted in misclassifications and insufficient disclosures during the preparation of the Company’s interim and annual financial statements.

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• The Company did not have adequately designed processes and controls regarding communication among the accounting, finance, operations and human resource departments with respect to matters affecting the Company’s financial reporting. This deficiency resulted in errors in the accounting for lease payments, severance, and employee compensation.

     The Company adjusted the financial statements for the errors described above prior to the issuance of the 2005 interim and annual consolidated financial statements.

Revenue Recognition

     The Company identified the following material weaknesses relating to internal controls over revenue recognition:

• The Company’s review controls were not adequate to ensure consistent application of the Company’s revenue recognition policy. Specifically, review controls over the determination of when our services are considered performed were not designed effectively.

• The Company’s review procedures to ensure that non-standard terms included in customer agreements are identified and accounted for correctly were not operating effectively.

     These deficiencies resulted in improper revenue recognition, which required adjustments to the interim and annual financial statements.

     The Company adjusted the financial statements for the errors described above prior to the issuance of the 2005 interim and annual consolidated financial statements.

     The Company’s independent registered public accounting firm, KPMG LLP, has issued its attestation report on management’s assessment of the Company’s internal control over financial reporting. The report of KPMG LLP appears in paragraph c) of this Item 9A.

c) Attestation Report of the Registered Public Accounting Firm

The Board of Directors and Shareholders
PRG-Schultz International, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting (Item 9A(b)), that PRG-Schultz International, Inc. (the Company) did not maintain effective internal control over financial reporting as of December 31, 2005, because of the effect of material weaknesses identified in management’s assessment, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable

          80

assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weaknesses have been identified and included in management’s assessment as of December 31, 2005:

The Company identified the following material weaknesses relating to company level controls:

• The Company’s accounting function lacked personnel with adequate expertise related to accounting for and reporting of the Company’s non-routine transactions and complex accounting matters. This deficiency resulted in material errors in the accounting for the impairment of goodwill and other long-lived assets and in the recognition of employee severance costs. This deficiency also resulted in errors in the recognition of revenue and the recognition of stock compensation expense.

• The Company had inadequate review controls over account reconciliations and account analyses. This deficiency resulted in errors in the accounting for (i) property and equipment; (ii) current income tax receivables and payables; and (iii) accrued liabilities.

• The Company’s policies and procedures relating to the financial reporting process did not ensure that financial statements were prepared and reviewed in a timely manner. Specifically, the Company had insufficient (i) review and supervision within the accounting department, and (ii) preparation and review procedures for footnote disclosures accompanying the Company’s financial statements. These deficiencies resulted in misclassifications and insufficient disclosures during the preparation of the Company’s interim and annual financial statements.

• The Company did not have adequately designed processes and controls regarding communication among the accounting, finance, operations and human resource departments with respect to matters affecting the Company’s financial reporting. This deficiency resulted in errors in the accounting for lease payments, severance, and employee compensation.

The Company identified the following material weaknesses relating to internal controls over revenue recognition:

• The Company’s review controls were not adequate to ensure consistent application of the Company’s revenue recognition policy. Specifically, review controls over the determination of when the Company’s services are considered performed were not designed effectively.

• The Company’s review procedures to ensure non-standard terms included in customer agreements are identified and accounted for correctly were not operating effectively.

These deficiencies resulted in improper revenue recognition.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of PRG-Schultz International, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2005. The aforementioned material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2005 consolidated financial statements, and this report does not affect our report dated March 17, 2006, which expressed an unqualified

          81

opinion on those consolidated financial statements and included an explanatory paragraph describing an uncertainty about the Company’s ability to continue as a going concern for a reasonable period of time.

In our opinion, management’s assessment that the Company did not maintain effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by COSO. Also, in our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by COSO.

/s/ KPMG LLP

Atlanta, Georgia
March 17, 2006

d) Changes in Internal Control Over Financial Reporting

     There were no changes in internal control over financial reporting during the quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

e) Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting

     As noted in Management’s Report on Internal Control over Financial Reporting, management has concluded that the Company lacked a sufficient complement of key senior and staff level accounting and financial personnel possessing competencies commensurate with the Company’s financial reporting requirements. During 2005, primarily related to the potential sale of the Company during the latter part of 2004 and the first seven months of 2005, the Company experienced high levels of employee turnover in key management and staff positions, including certain positions supporting accounting and financial reporting roles. As of December 31, 2005, approximately 35% of the finance staff had been with the Company for less than six months. Management believes the following steps will remedy this material weakness:

• The Company’s hiring initiative efforts have resulted in the addition of key accounting and finance personnel since December 31, 2005, including, as previously announced, a new Controller and principal accounting officer.

• The Company plans to establish a formal process for periodic training of accounting and finance personnel.

• The Company plans to hire accounting and finance personnel who have the demonstrative background and experience appropriate for the respective positions to be filled.

• Management has implemented regular interdepartmental reviews involving key management to ensure communication of issues with an accounting impact are appropriate and timely communicated.

     Management has also concluded that the Company lacked sufficient controls over ensuring proper revenue recognition. The Company is in the process of reviewing the entire revenue recognition process to determine the cause of the areas of continuing control breakdowns and develop viable long-term solutions. The Company is also reviewing various operational and financial responsibilities in an effort to make this process more efficient and create more preventive controls through out the process. Additionally, the Company has performed a review of all significant customer contracts to ensure that the revenue recognition criteria have been applied correctly. The Company has further instituted new controls by which all new customer contracts or contract amendments are carefully reviewed by qualified finance personnel to ensure proper revenue recognition.

     The aforementioned material weaknesses will not be considered remediated until new processes are fully implemented, operate for a sufficient period of time, and we are confident they are operating effectively.

82

Management anticipates that the Company will report in our Quarterly Report on Form 10-Q for the first quarter of 2006 that material weaknesses in our internal control over financial reporting continue to exist and that the disclosure controls and procedures are not effective as of March 31, 2006. Management is committed to finalizing its remediation action plan and implementing the necessary enhancements to its accounting department and its policies and procedures to fully remediate the material weaknesses discussed above.

ITEM 9B. Other Information.

     None.

PART III

ITEM 10. Directors and Executive Officers of the Registrant

     The information required with respect to directors is incorporated herein by reference to the information contained in the section captioned “Election of Directors” of our definitive proxy statement (the “Proxy Statement”) for the 2006 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). The information with respect to our audit committee financial expert is incorporated herein by reference to the information contained in the section captioned “Audit Committee” of the Proxy Statement. We have undertaken to provide to any person without charge, upon request, a copy of our code of ethics applicable to our chief executive officer and senior financial officers. You may obtain a copy of this code of ethics free of charge from our website, www.prgx.com. The information required with respect to our executive officers is incorporated herein by reference to the information contained in the section captioned “Executive Officers” of the Proxy Statement.

     The information regarding filings under Section 16(a) of the Exchange Act is incorporated herein by reference to the section captioned “Section 16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement.

ITEM 11. Executive Compensation

     The information required by Item 11 of this Form 10-K is incorporated by reference to the information contained in the section captioned “Executive Compensation” of the Proxy Statement.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     The information required by Item 12 of this Form 10-K is incorporated by reference to the information contained in the section captioned “Ownership of Directors, Principal Shareholders and Certain Executive Officers” and the Equity Compensation Plan Information contained in the section captioned “Executive Compensation” of the Proxy Statement.

ITEM 13. Certain Relationships and Related Transactions

     The information required by Item 13 of this Form 10-K is incorporated by reference to the information contained in the sections captioned “Executive Compensation - Employment Agreements” and “Certain Transactions” of the Proxy Statement.

ITEM 14. Principal Accountant Fees and Services

     The information required by Item 14 of this Form 10-K is incorporated by reference to the information contained in the sections captioned “Principal Accountants’ Fees and Services” of the Proxy Statement.

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PART IV

ITEM 15. Exhibits, Financial Statement Schedules

     (a) Documents filed as part of the report

     (1) Consolidated Financial Statements:

          For the following consolidated financial information included herein, see Index on Page 46.

	Page
Report of Independent Registered Public Accounting Firm		47
Consolidated Statements of Operations for the Years ended December 31, 2005, 2004 and 2003		48
Consolidated Balance Sheets as of December 31, 2005 and 2004		49
Consolidated Statements of Shareholders’ Equity (Deficit) for the Years ended December 31, 2005, 2004 and 2003		50
Consolidated Statements of Cash Flows for the Years ended December 31, 2005, 2004 and 2003		51
Notes to Consolidated Financial Statements		52

     (2) Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts S-1

     (3) Exhibits

Exhibit
Number		Description
3.1	¾	Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2002).
3.2		Amendment to Articles of Incorporation, effective March 16, 2006, as corrected (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on March 21, 2006).
3.3		Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-Q for the quarter ended September 30, 2005).
4.1	¾	Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-K for the year ended December 31, 2001).
4.2	¾	See Restated Articles of Incorporation and Bylaws of the Registrant, filed as Exhibits 3.1 and 3.2, respectively.
4.3	¾	Shareholder Protection Rights Agreement, dated as of August 9, 2000, between the Registrant and Rights Agent, effective May 1, 2002 (incorporated by reference to Exhibit 4.3 to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2002.
4.4	¾	Indenture dated November 26, 2001 by and between Registrant and Sun Trust Bank (incorporated by reference to Exhibit 4.3 to Registrant’s Registration Statement No. 333-76018 on Form S-3 filed December 27, 2001).
4.5	¾	First Amendment to Shareholder Protection Rights Agreement, dated as of March 12, 2002, between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.3 to the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
4.6	¾	Second Amendment to Shareholder Protection Rights Agreement, dated as of August 16, 2002, between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.3 to the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
4.7		Third Amendment to Shareholder Protection Rights Agreement, dated as of November 7, 2006, between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed on November 14, 2005).
4.8		Fourth Amendment to Shareholder Protection Rights Agreement, dated as of November 14, 2006, between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed on November 30, 2005).

84

Exhibit
Number		Description
4.9		Fifth Amendment to Shareholder Protection Rights Agreement, dated as of March 9, 2006, between the Registrant and Rights Agent.
10.1	¾	Employment Agreement dated March 20, 1996 between Registrant and John M. Cook (incorporated by reference to Exhibit 10.4 to Registrant’s March 26, 1996 registration statement number 333-1086 on Form S-1).
10.2	¾	1996 Stock Option Plan, dated as of January 25, 1996, together with Forms of Non-qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s March 26, 1996 Registration Statement No. 333-1086 on Form S-1).
10.3	¾	Form of Indemnification Agreement between the Registrant and Directors and certain officers, including named executive officers, of the Registrant (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-K for the year ended December 31, 2003).
10.4	¾	First Amendment, dated March 7, 1997, to Employment Agreement between Registrant and Mr. John M. Cook (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 10-K for the year ended December 31, 1996).
10.5	¾	Second Amendment to Employment Agreement, dated September 17, 1997, between The Profit Recovery Group International, I, Inc. and Mr. John M. Cook (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarterly period ended September 30, 1997).
10.6	¾	Discussion of Management and Professional Incentive Plan (incorporated by reference to Exhibit 10.27 to the Registrant’s Form 10-K for the year ended December 31, 2000).
10.7	¾	Non-qualified Stock Option Agreement between Mr. John M. Cook and the Registrant, dated March 26, 2001 (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarterly period ended March 31, 2001).
10.8	¾	Non-qualified Stock Option Agreement between Mr. John M. Toma and the Registrant, dated March 26, 2001 (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarterly period ended March 31, 2001).
10.9	¾	Form of the Registrant’s Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2001).
10.10	¾	Noncompetition, Nonsolicitation and Confidentiality Agreement among The Profit Recovery Group International, Inc., Howard Schultz & Associates International, Inc., Howard Schultz, Andrew Schultz and certain trusts, dated January 24, 2002 (incorporated by reference to Exhibit 10.34 to the Registrant’s Form 10-K for the year ended December 31, 2001).
10.11	¾	Credit Agreement among The Profit Recovery Group USA, Inc., The Profit Recovery Group International, Inc. and certain subsidiaries of the Registrant, the several lenders and Bank of America, N.A., dated as of December 31, 2001 (incorporated by reference to Exhibit 99.1 to the Registrant’s Registration Statement No. 333-76018 on Form S-3 filed January 23, 2002).
10.12	¾	Pledge Agreement among The Profit Recovery Group USA, Inc., The Profit Recovery Group International, Inc., certain of the domestic subsidiaries of the Registrant and Bank of America, N.A., dated December 31, 2001 (incorporated by reference to Exhibit 10.41 to the Registrant’s Form 10-K for the year ended December 31, 2001).
10.13	¾	Security Agreement among The Profit Recovery Group USA, Inc., The Profit Recovery Group International, Inc., certain of the domestic subsidiaries of the Registrant and Bank of America, N.A., dated December 31, 2001 (incorporated by reference to Exhibit 10.44 to the Registrant’s Form 10-K for the year ended December 31, 2001).
10.14	¾	First Amendment to Credit Agreement among PRG-Schultz USA, Inc., PRG-Schultz International, Inc., each of the domestic subsidiaries of the Registrant, the several lenders and Bank of America, N.A., dated as of February 7, 2002 (incorporated by reference to Exhibit 10.42 to the Registrant’s Form 10-K for the year ended December 31, 2001).
10.15	¾	Office Lease Agreement between Galleria 600, LLC and PRG-Schultz International, Inc. (incorporated by reference to Exhibit 10.43 to the Registrant’s Form 10-K for the year ended December 31, 2001).
10.16	¾	Amendment to Employment Agreement, as amended, between Mr. John M. Cook and Registrant, dated May 1, 2002 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2002).

85

Exhibit
Number		Description
10.17	¾	Amended Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2002).
10.18	¾	Amended HSA-Texas Stock Option Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2002).
10.19	¾	Investor Rights Agreement, dated as of August 27, 2002, among PRG-Schultz International, Inc., Berkshire Fund V, LP, Berkshire Investors LLC and Blum Strategic Partners II, L.P. (incorporated by reference to Exhibit 10.7 to the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
10.20	¾	Registration Rights Agreement, dated as of August 27, 2002, by and between PRG-Schultz International, Inc., Blum Strategic Partners II, L.P. and other affiliates of Blum Capital Partners, LP (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
10.21	¾	Registration Rights Agreement, dated as of August 27, 2002, by and between PRG-Schultz International, Inc., Berkshire Fund V, LP and Berkshire Investors LLC (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
10.22	¾	Second Amendment to Credit Agreement among PRG-Schultz USA, Inc., PRG-Schultz International, Inc., each of the domestic subsidiaries of the Registrant, the several lenders and Bank of America, N.A., dated as of August 19, 2002 (incorporated by reference to Exhibit 10.10 to the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
10.23	¾	Third Amendment to Credit Agreement among PRG-Schultz USA, Inc., PRG-Schultz International, Inc., each of the domestic subsidiaries of the Registrant, the several lenders and Bank of America, N.A., dated as of September 12, 2002 (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 10-Q for the quarterly period ended September 30, 2002).
10.24	¾	First Amendment to Office Lease Agreement between Galleria 600, LLC and PRG-Schultz International, Inc. (incorporated by reference to Exhibit 10.65 to the Registrant’s Form 10-K for the year ended December 31, 2002).
10.25	¾	Amendment to Employment Agreement, as amended, between Mr. John M. Cook and Registrant, dated March 7, 2003 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarterly period ended March 31, 2003).
10.26	¾	Fourth Amendment to Credit Agreement among PRG-Schultz USA, Inc., PRG-Schultz International, Inc., each of the domestic subsidiaries of the Registrant, the several lenders and Bank of America, N.A., dated as of November 12, 2003 (incorporated by reference to Exhibit 10.63 to the Registrant’s Form 10-K for the year ended December 31, 2003).
10.27	¾	Employment Agreement between Registrant and Mr. James L. Benjamin, dated as of October 28, 2002 (incorporated by reference to Exhibit 10.64 to the Registrant’s Form 10-K for the year ended December 31, 2003).
10.28	¾	Form of Employment Agreement between Mr. James E. Moylan, Jr. and Registrant, dated as of March 5, 2004 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarterly period ended March 31, 2004).
10.29	¾	Fifth Amendment to Credit Agreement among PRG-Schultz USA, Inc., PRG-Schultz International, Inc., each of the domestic subsidiaries of the Registrant, the Lenders party thereto and Bank of America, N.A., dated as of March 4, 2004 (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarterly period ended March 31, 2004).
10.30	¾	Sixth Amendment to Credit Agreement among PRG-Schultz USA, Inc., PRG-Schultz International, Inc., each of the domestic subsidiaries of the Registrant, the Lenders party thereto and Bank of America, N.A., dated as of March 25, 2004 (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarterly period ended March 31, 2004).
10.31	¾	PRG Schultz International, Inc. 2004 Executive Incentive Plan as approved by shareholders on May 18, 2004 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarterly period ended June 30, 2004).

86

Exhibit
Number		Description
10.32	¾	Waiver to the covenant violations to the Credit Agreement, as amended, dated October 25, 2004 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarterly period ended September 30, 2004).
10.33	¾	Amended and Restated Credit Agreement among PRG-Schultz USA, Inc., PRG-Schultz International, Inc. (“PRGX”), Certain Subsidiaries of PRGX from Time to Time Party Thereto, and Bank of America, N.A., dated as of November 30, 2004 (incorporated by reference to Exhibit 99.1 to the Registrant’s Report on Form 8-K filed on December 6, 2004).
10.34	¾	Amended and Restated Credit Agreement among PRG-Schultz USA, Inc., PRG-Schultz International, Inc. (“PRGX”), Certain Subsidiaries of PRGX from Time to Time Party Thereto, and Bank of America, N.A., dated as of November 30, 2004 (as modified on December 7, 2004) (incorporated by reference to Exhibit 10(a) to the Registrant’s Report on Form 8-K filed on December 13, 2004).
10.35	¾	Form of Non-employee Director Option Agreement (incorporated by reference to Exhibit 99.1 to the Registrant’s Report on Form 8-K filed on February 11, 2005).
10.36	¾	Amendment to Employment Agreement and Restrictive Covenant Agreement between Mr. John M. Cook and Registrant dated March 7, 2005. (Incorporated by reference to Exhibit 10.43 to the Registrant’s Form 10-K for the quarterly period ended September 30, 2005).
10.37	¾	Change of Control and Restrictive Covenant Agreement between Mr. James E. Moylan, Jr. and Registrant dated February 14, 2005.
10.38	¾	Change of Control and Restrictive Covenant Agreement between Mr. John M. Toma and Registrant dated February 14, 2005.
10.39	¾	Change of Control and Restrictive Covenant Agreement between Mr. Richard J. Bacon and Registrant dated February 14, 2005.
10.40	¾	Change of Control and Restrictive Covenant Agreement between Mr. James L. Benjamin and Registrant dated February 14, 2005.
10.41	¾	Summary of compensation arrangements with non-employee directors of the Registrant.
10.42	¾	Summary of compensation arrangements with named executive officers of Registrant.
10.43	¾	Employment Agreement between Registrant and Mr. Richard J. Bacon, dated as of July 15, 2003 (Incorporated by reference to Exhibit 10.50 to the Registrant’s Form 10-K for the year ended December 31, 2005).
10.44	¾	September 11, 2003 Addendum to Employment Agreement with Mr. Richard J. Bacon (Incorporated by reference to Exhibit 10.51 to the Registrant’s Form 10-K for the year ended December 31, 2005).
10.45	¾	December 2, 2003 Addendum to Employment Agreement with Mr. Richard J. Bacon (Incorporated by reference to Exhibit 10.52 to the Registrant’s Form 10-K for the year ended December 31, 2005).
10.46	¾	May 1, 2004 Amendment to Employment Agreement with Mr. Richard J. Bacon (Incorporated by reference to Exhibit 10.53 to the Registrant’s Form 10-K for the year ended December 31, 2005).
10.47	¾	February 2005 Addendum to Employment Agreement with Mr. Richard J. Bacon (Incorporated by reference to Exhibit 10.54 to the Registrant’s Form 10-K for the year ended December 31, 2005).
*10.48		Medicare & Medicaid Services Contract dated March 7, 2005 (Incorporated by reference to Exhibit 10.8 to the Registrant’s Form 10-Q for the quarter ended March 31, 2005).
*10.49		Stipulation of Settlement dated as of February 8, 2005 (Incorporated by reference to Exhibit 10.9 to the Registrant’s Form 10-Q for the quarter ended March 31, 2005).
10.50		Supplement to Settlement Agreement dated as of February 8, 2005 (Incorporated by reference to Exhibit 10.6 to the Registrant’s Form 10-Q for the quarter ended September 30, 2005).
10.51		Correction to Change of Control and Restrictive Covenant Agreement between Mr. John M. Toma and Registrant dated February 14, 2005 (Incorporated by reference to the Registrant’s Form 10-Q for the quarter ended March, 31, 2005).
10.52		Employment Agreement between Registrant and Mr. James B. McCurry, dated as of July 25, 2005 (Incorporated by reference to Exhibit 99.3 to the Registrant’s Form 8-K filed on July 25, 2005).
10.53		Retainer Agreement between Registrant and Mr. David A. Cole, dated as of July 20, 2005 (Incorporated by reference to Exhibit 99.2 to the Registrant’s Form 8-K filed on July 25, 2005).
10.54		Separation and Release Agreement between Registrant and Mr. John M. Cook, dated as of August 2, 2005 (Incorporated by reference to Exhibit 99.1 to Registrant’s Form 8-K filed on August 8, 2005).

87

Exhibit
Number		Description
10.55		Separation and Release Agreement between Registrant and Mr. John M. Toma, dated as of August 2, 2005 (Incorporated by reference to Exhibit 99.2 to Registrant’s Form 8-K filed on August 8, 2005).
10.56		Separation and Release Agreement between Registrant and Mr. Richard J. Bacon, dated as of October 25, 2005 (Incorporated by reference to Exhibit 10.5 to the Registrant’s Form 10-Q for the quarter ended September 30, 2005).
10.57		Employment Agreement between the Registrant and Peter Limeri entered into on November 11, 2005 (Incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K filed on November 17, 2005).
10.58		Amended and Restated Standstill Agreement, dated as of November 14, 2005, between Registrant and Blum Capital Partners, L.P. and certain of its affiliates, entered into on November 23, 2005 (Incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K filed on November 30, 2005).
10.59		Amendment to Employment Agreement with James B. McCurry dated December 8, 2005.
10.60		Vesting on December 15, 2005 of certain employee stock options outstanding as of November 30, 2005.
10.61		Credit Agreement dated December 23, 2005 among the Registrant, certain of its U.S. subsidiaries, Petrus Securities L.P., ParkCentral Global Hub Limited, Blum Strategic Partners II GmbH & Co. Kg. and Blum Strategic Partners II, L.P.
10.62		Security Agreement dated December 23, 2005 among the Registrant, certain of its U.S. subsidiaries, Petrus Securities L.P., ParkCentral Global Hub Limited, Blum Strategic Partners II GmbH & Co. Kg. and Blum Strategic Partners II, L.P.
10.63		Pledge Agreement dated December 23, 2005 among the Registrant, certain of its U.S. subsidiaries, Petrus Securities L.P., ParkCentral Global Hub Limited, Blum Strategic Partners II GmbH & Co. Kg. and Blum Strategic Partners II, L.P.
10.64		Forbearance Agreement dated December 23, 2005 between Registrant and Bank of America, N.A.
10.65		Amendment to Forbearance Agreement and Credit Agreement with Bank of America, N.A. dated December 23, 2005.
10.66		Restructuring Support Agreement dated December 23, 2005.
10.67		Amendment to Retainer Agreement with David A. Cole dated October 19, 2005.
10.68		Form of Employment Agreement with Larry Robinson dated January 1, 2006.
10.69		Employment Agreement with Brad Roos dated June 1, 2001.
10.70		Form of Expatriate Assignment Agreement with Brad Roos
10.71		Houlihan Lokey Agreement dated October 21, 2005.
10.72		Amendment Letter with Houlihan Lokey dated February 1, 2006.
10.73		Rothschild Inc. Agreement dated as of September 14, 2005.
10.74		Letter Agreement with Rothschild Inc. dated February 1, 2006.
14.1	¾	Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14.1 to the Registrant’s Form 10-K for the year ended December 31, 2003).
21.1	¾	Subsidiaries of the Registrant.
23.1	¾	Consent of KPMG LLP.
31.1	¾	Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the year ended December 31, 2005.
31.2	¾	Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the year ended December 31, 2005.
32.1	¾	Certification of the Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for the year ended December 31, 2005.

* Confidential treatment, pursuant to 17 CFR Secs. §§ 200.80 and 240.24b-2, has been granted regarding certain portions of the indicated Exhibit, which portions have been filed separately with the Commission.

88

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PRG-SCHULTZ INTERNATIONAL, INC.
Date: March 23, 2006	By:	/s/ JAMES B. MCCURRY James B. McCurry
		President and Chief Executive Officer
		(Principal Executive Officer)

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Title	Date
/s/ JAMES B. MCCURRY James B. McCurry	President, Chief Executive Officer and Director (Principal Executive Officer)	March 23, 2006
/s/ PETER LIMERI Peter Limeri	Executive Vice President – Finance,  Chief Financial Officer and Treasurer (Principal Financial Officer)	March 23, 2006
/s/ ROBERT B. LEE Robert B. Lee	Senior Vice President – Finance and Controller  (Principal Accounting Officer)	March 23, 2006
/s/ DAVID A. COLE David A. Cole	Director	March 23, 2006
/s/ GERALD E. DANIELS Gerald E. Daniels	Director	March 23, 2006
/s/ GARTH H. GREIMANN Garth H. Greimann	Director	March 23, 2006
/s/ THOMAS S. ROBERTSON Thomas S. Robertson	Director	March 23, 2006
/s/ JIMMY M. WOODWARD Jimmy M. Woodward	Director	March 23, 2006

89

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(In thousands)

			Additions		Deductions
	Balance at		Charge to		Credited to			Balance at
	Beginning		Costs and		Accounts			End of
Description	of Year		Expenses		Receivable (1)			Year
2005
Allowance for doubtful accounts receivable	$	2,254		1,207		(744	)	$	2,717
Allowance for doubtful employee advances and miscellaneous receivables	$	3,333		540		(899	)	$	2,974
Deferred tax valuation allowance	$	97,254		42,358		—		$	139,612
2004
Allowance for doubtful accounts receivable	$	3,236		1,312		(2,294	)	$	2,254
Allowance for doubtful employee advances and miscellaneous receivables	$	4,760		2,590		(4,017	)	$	3,333
Deferred tax valuation allowance	$	24,967		72,287		¾		$	97,254
2003
Allowance for doubtful accounts receivable	$	4,937		525		(2,226	)	$	3,236
Allowance for doubtful employee advances and miscellaneous receivables	$	4,188		4,174		(3,602	)	$	4,760
Deferred tax valuation allowance	$	20,374		4,593		¾		$	24,967

(1) Write-offs, net of recoveries

S-1

EX-4.9

                                                                     EXHIBIT 4.9

                               FIFTH AMENDMENT TO
                    SHAREHOLDER PROTECTION RIGHTS AGREEMENT

      THIS FIFTH AMENDMENT (this "Amendment"), effective as of March 15, 2006,
is between PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation (the
"Company"), and WACHOVIA BANK, NATIONAL ASSOCIATION f/k/a FIRST UNION NATIONAL
BANK, as Rights Agent (the "Rights Agent").

                              W I T N E S S E T H

      WHEREAS, in connection with that certain Shareholder Protection Rights
Agreement dated as of August 9, 2000, as amended effective May 15, 2002, August
16, 2002, November 7, 2005 and November 14, 2005, between the Company and the
Rights Agent (the "Agreement"), the Board of Directors of the Company deems it
advisable and in the best interest of the Company and its shareholders to amend
the Agreement in accordance with Section 5.4 of the Agreement;

      WHEREAS, pursuant to its authority under Section 5.4 of the Agreement, the
Board of Directors of the Company has authorized and approved this Amendment to
the Agreement set forth herein as of the date hereof.

      NOW, THEREFORE, in consideration of the premises and the respective
agreements set forth herein, the parties hereby agree as follows:

      1. Definitions. Capitalized terms used in this Amendment, which are not
otherwise defined herein, are used with the same meaning ascribed to such terms
in the Agreement.

      2. Amendments.

            (a)   The definition of "Acquiring Person" in Section 1.1 is hereby
                  deleted in its entirety and replaced to read as follows:

                  "Acquiring Person" shall mean any Person who is a Beneficial
                  Owner of 15% or more of the outstanding shares of Common
                  Stock; provided, however, that the term "Acquiring Person"
                  shall not include any Person (i) who shall become the
                  Beneficial Owner of 15% or more of the outstanding shares of
                  Common Stock solely as a result of an acquisition by the
                  Company of shares of Common Stock, until such time thereafter
                  as such Person shall become the Beneficial Owner (other than
                  by means of a stock dividend or stock split) of any additional
                  shares of Common Stock, (ii) who is the Beneficial Owner of
                  15% or more of the outstanding shares of Common Stock but who
                  acquired Beneficial Ownership of shares of Common Stock
                  without any plan or intention to seek or affect control of the
                  Company, if such Person promptly enters into an irrevocable
                  commitment promptly to divest, and thereafter promptly divests
                  (without exercising or retaining any power,



                  including voting, with respect to such shares), sufficient
                  shares of Common Stock (or securities convertible into,
                  exchangeable into or exercisable for Common Stock) so that
                  such Person ceases to be the Beneficial Owner of 15% or more
                  of the outstanding shares of Common Stock, (iii) who is the
                  Beneficial Owner of shares of Common Stock consisting solely
                  of shares of Common Stock, the Beneficial Ownership of which
                  was acquired by such Person pursuant to any action or
                  transaction or series of related actions or transactions
                  approved by the Company's Board of Directors before such
                  person otherwise became an Acquiring Person, (iv) who was the
                  Beneficial Owner of 15% or more of the outstanding shares of
                  Common Stock on August 9, 2000 and does not thereafter acquire
                  Beneficial Ownership of additional shares of Common Stock that
                  in the aggregate exceed 2% of the outstanding shares of Common
                  Stock, or (v) who is a member of the Ad Hoc Committee of the
                  Company's 4 3/4% Convertible Subordinated Note holders formed
                  in October 2005 (including without limitation the Blum
                  Investors, Parkcentral Global Hub, Limited and Petrus
                  Securities, L.P. and any affiliates or associates of those
                  Persons named as reporting persons on a Schedule 13D or
                  amendment thereto filed by such Persons with the Securities
                  and Exchange Commission with respect to the Company's
                  securities and as a direct result of the formation and/or
                  activities of the Ad Hoc Committee) and who may be deemed to
                  be an Acquiring Person solely due to such Person's membership
                  or participation in the activity of the Ad Hoc Committee (as a
                  point of clarification of this clause (v), in no event shall
                  any acquisition of shares of Common Stock of the Company or
                  securities convertible into shares of Common Stock of the
                  Company by any such Person be exempted hereunder); provided,
                  however, that the terms of this clause (v) shall automatically
                  expire and have no further effect upon the dissolution of the
                  Ad Hoc Committee by the members of the Committee. In addition,
                  notwithstanding any provision of this Agreement to the
                  contrary, (A) no Blum Investor or Investors shall be deemed an
                  Acquiring Person for any purpose under this Agreement for so
                  long as that certain standstill agreement (the "Standstill
                  Agreement") between the Company and the Blum Investors dated
                  August 16, 2002, as amended and restated on November 14, 2005,
                  is in effect and so long as the Blum Investors have increased
                  their Beneficial Ownership of Common Stock above that shown in
                  the Blum Investors' amendment to Schedule 13D filed with the
                  Securities and Exchange Commission on June 17, 2002 by no more
                  than 5,784,675 shares in the aggregate (without giving effect
                  to (i) any stock split, share dividend, recapitalization,
                  reclassification or similar transactions effected by or with
                  the approval of the Board of Directors of the Company after
                  the date hereof, (ii) any shares that they may be deemed to
                  own beneficially of any member of the Ad Hoc Committee solely
                  by reason of their membership or participation in the
                  activities of that



                  Committee, (iii) any shares that they may be deemed to own
                  beneficially as the result of the acquisition after the date
                  hereof, but prior to the expiration of the exchange offer
                  described in (B) below, of any of the Company's 4 3/4%
                  Convertible Subordinated Notes and any shares of Common Stock
                  acquired upon conversion thereof, and (iv) any increase in the
                  Blum Investors' beneficial ownership as a result of the
                  consummation of the transactions described in (B) below, but
                  only to the extent set forth therein) (the "Limit"); provided,
                  however, that the Limit shall be reduced, on a share for share
                  basis, by any shares sold or otherwise disposed of by any Blum
                  Investor otherwise than to another Blum Investor and by that
                  number of shares that are acquired by the Company under an
                  Option Agreement in the form attached hereto as Annex A
                  between the Company and Schultz PRG Liquidating Investments
                  Ltd.; provided, further, however, that any termination of the
                  Standstill Agreement by the Company or delivery of any notice
                  of termination by the Blum Investors, in each case pursuant to
                  Section 16 of the Standstill Agreement, shall rescind this
                  sentence and cause the Blum Investors' full Beneficial
                  Ownership of Common Stock to be considered for purposes of
                  determining whether or not the Blum Investors are an Acquiring
                  Person, and (B) no increase in any Person's Beneficial
                  Ownership of Company Common Stock resulting solely from the
                  consummation of, or the acceptance of securities by the
                  Company in, its contemplated exchange of securities for its 4
                  3/4% Convertible Subordinated Notes, as described more fully
                  in the Company's Schedule TO filed with the Securities and
                  Exchange Commission on February 1, 2006, as amended, shall be
                  considered in determining whether or not such Person
                  Beneficially Owns 15% or more of the Company's Common Stock;
                  provided that this subsection (B) shall have no force or
                  effect if any such Person shall have increased his, her or its
                  Beneficial Ownership of Company Common Stock subsequent to the
                  consummation of such exchange offer (other than an increase
                  due solely to a decrease in the number of shares of Common
                  Stock outstanding) without the prior approval of the Company's
                  Board of Directors or a committee thereof composed of
                  independent directors, determined in accordance with the
                  standards of the Nasdaq National Market. Additionally, the
                  Company, any wholly-owned Subsidiary of the Company and any
                  employee stock ownership or other employee benefit plan of the
                  Company or a wholly-owned Subsidiary of the Company shall not
                  be an Acquiring Person.

      3. Counterparts. This Amendment may be executed in any one or more
counterparts, each of which shall be deemed an original and all of which shall
together constitute the same Amendment.



      4. Ratification. Except as modified and amended as set forth herein, the
Agreement is hereby ratified and confirmed without further modification or
amendment.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed effective as of the date first above written.

                                             PRG-SCHULTZ INTERNATIONAL, INC.

                                             By:    /s/ James McCurry
                                             Name:  James McCurry.
                                             Title: Chief Executive Officer and
                                                    President

WACHOVIA BANK, NATIONAL ASSOCIATION
f/k/a FIRST UNION NATIONAL BANK

By:     /s/ Patrick J. Edwards
Name:   Patrick J. Edwards
Title:  Vice President

EX-10.37

                        CHANGE OF CONTROL AND RESTRICTIVE
                               COVENANT AGREEMENT

     This Change of Control and Restrictive Covenant Agreement ("Agreement") is
entered into this 14th day of February, 2005 between James E. Moylan, Jr.
("Executive") and PRG-Schultz USA, Inc., a Georgia corporation ("USA").

     WHEREAS, Executive and USA entered into that certain offer letter agreement
("Offer Letter") dated March 10, 2004, which set forth the terms of employment
under which USA employed Executive as the Executive Vice President, Chief
Financial Officer, for USA;

     WHEREAS, in connection with Executive's employment, Executive executed that
certain Employee Agreement (the "Employee Agreement") dated March 8, 2004, which
contained certain restrictive covenants;

     WHEREAS, Executive is a senior executive of USA whose services are
extremely valuable to USA;

     WHEREAS, Executive has had and will have access to the valuable and
proprietary trade secrets of USA and its customers, and Executive has had and
will have close contact with the customers and employees of USA;

     WHEREAS, Executive and USA desire to enter into this Change of Control and
Restrictive Covenant Agreement to (a) amend certain provisions of the Offer
Letter regarding termination of employment and severance in the manner set forth
herein, (b) provide Executive additional security and benefits in the event of
any actual or threatened change of control of PRG-Schultz International, Inc., a
Georgia corporation that owns all of the capital stock of USA ("PRGS"), (c)
provide incentives to Executive to remain employed with USA, (d) provide PRGS
with reasonable protection of the valuable trade secrets and confidential
information of USA and its customers, as well as the relationships between USA
and its customers and employees, and (e) preserve the goodwill of PRGS for the
benefit of the shareholders in the event a change of control occurs;

     WHEREAS, USA provides services to all of the subsidiaries and affiliates of
PRGS.

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

     1. Definitions. As used in this Agreement, the following terms shall have
the meaning specified:

     "Business of USA" shall mean (a) audit services (i) to identify and recover
lost profits from any source, including, without limitation, payment errors,
missed or inaccurate discounts, allowances, or rebates, vendor pricing errors,
or duplicate payments and (ii) to identify expense



containment opportunities; (b) development and use of technology to provide such
services; and (c) provision of related consulting services.

     "Cause" shall mean, as determined by the Board of Directors of PRGS (the
"Board") in good faith: (1) a material breach by Executive of the duties and
responsibilities of Executive or any written policies or directives of USA
(other than as a result of incapacity due to physical or mental illness) which
is (i) willful or involves gross negligence, and (ii) not remedied within thirty
(30) days after receipt of written notice from USA which specifically identifies
the manner in which such breach has occurred; (2) Executive commits any felony
or any misdemeanor involving willful misconduct (other than minor violations
such as traffic violations) that causes damage to the property, business or
reputation of USA, as determined in good faith by the Board; (3) Executive
engages in a fraudulent or dishonest act, as determined in good faith by the
Board; (4) Executive engages in habitual insobriety or the use of illegal drugs
or substances; (5) Executive breaches his fiduciary duties to the Company, as
determined in good faith by the Board; or (6) Executive engages in activities
prohibited by Section 8 through 14 hereof.

     "Change of Control" shall mean the occurrence, on or before December 31,
2005, of any of the following events: (i) a majority of the outstanding voting
stock of PRGS shall have been acquired or beneficially owned by any person
(other than PRGS or a subsidiary of PRGS) or any two or more persons acting as a
partnership, limited partnership, syndicate or other group, entity or
association acting in concert for the purpose of voting, acquiring, holding, or
disposing of voting stock of PRGS; or (ii) a merger or a consolidation of PRGS
with or into another corporation, other than (A) a merger or consolidation with
a subsidiary of PRGS, or (B) a merger or consolidation in which the holders of
voting stock of PRGS immediately prior to the merger as a class hold immediately
after the merger at least a majority of all outstanding voting power of the
surviving or resulting corporation or its parent; or (iii) a statutory exchange
of shares of one or more classes or series of outstanding voting stock of PRGS
for cash, securities, or other property, other than an exchange in which the
holders of voting stock of PRGS immediately prior to the exchange as a class
hold immediately after the exchange at least a majority of all outstanding
voting power of the entity with which PRGS stock is being exchanged; or (iv) the
sale or other disposition of all or substantially all of the assets of PRGS, in
one transaction or a series of transactions, other than a sale or disposition in
which the holders of voting stock of PRGS immediately prior to the sale or
disposition as a class hold immediately after the exchange at least a majority
of all outstanding voting power of the entity to which the assets of PRGS are
being sold; or (v) the liquidation or dissolution of PRGS; or (vi) the entry
into a definitive agreement with respect to any of the events specified in the
foregoing clauses (i) through (v) on or prior to December 31, 2005 if the
transactions contemplated by such agreement shall thereafter be consummated on
or before March 31, 2006. In the event of the occurrence of a Change of Control
under clause (vi) above, for all purposes hereof, other than the determination
under this Agreement that a Change of Control has occurred on or before December
31, 2005, the date the transactions contemplated by such agreement are
consummated shall be deemed to be the date of such Change of Control.

     "Code" shall mean the Internal Revenue Code of 1986, as amended.


                                       -2-



     "Competing Business" shall mean any business engaging in the same or
substantially similar business as the Business of USA.

     "Confidential Information" shall mean any confidential or proprietary
information relating to USA or its customers or affiliates that is not a Trade
Secret.

     "Good Reason" shall mean any one of the following: (i) USA's demotion of
the Executive to a lesser position than the position in which he is serving
prior to such demotion; (ii) the assignment to Executive of duties materially
inconsistent with his position or material reduction of the Executive's duties,
responsibilities or authority, all of which, as of the date hereof, are as set
forth on Exhibit A attached hereto and incorporated herein, in either case
without the Executive's prior written consent; (iii) PRGS ceases to be a public
company with reporting obligations under the Securities Exchange Act of 1934;
(iv) any reduction in Executive's base salary, target bonus or target bonus plan
without the Executive's prior consent unless other executives who are parties to
agreements similar to this one also suffer a comparable reduction in their base
salaries, target bonus or target bonus plan (for purposes of this subsection
(iv) "other executives" shall refer to James Benjamin, Marie Neff, James Moylan,
Richard Bacon, Eric Goldfarb, Paul van Leeuwen or John Toma); or (v) unless
agreed to by Executive, the relocation of Executive's principal place of
business outside of the metropolitan area of Atlanta, Georgia, in each case not
remedied by USA within thirty (30) days after receipt by USA of written
notification from Executive as provided in Section 17 of this Agreement to USA
that specifically identifies the Good Reason. The Executive must notify USA of
any event that constitutes Good Reason within ninety (90) days following the
Executive's knowledge of its occurrence or existence or such event shall not
constitute Good Reason under this Agreement.

     "Per Share Price" shall mean the value of the consideration received by a
shareholder of PRGS in exchange for one share of the Common Stock of PRGS in
connection with a transaction which constitutes a Change of Control.

     "Secret Information" means Confidential Information and Trade Secrets.

     "Trade Secrets" shall mean information of USA, its affiliates or customers,
without regard to form, including, but not limited to, technical or nontechnical
data, a formula, a pattern, a compilation, a program, a device, a method, a
technique, a drawing, a design, a process, financial data, financial plans,
product plans, or a list of actual or potential customers or suppliers which is
not commonly known by or available to the public and which information: (a)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.

     "Works" shall mean any work of authorship, code, invention, improvement,
discovery, process, formula, code algorithm, program, system, method, visual
work, or work product, whether or not patentable or eligible for copyright, and
in whatever form or medium and all derivative works thereof, which are, have
been or will be created, made, developed, or conceived by Executive in the
course of employment with USA, with USA's time, on USA's premises, using USA's
resources or equipment, or relating to the Business of USA.


                                       -3-



     2. Transaction Success Fee.

          (a) Amount of Transaction Success Fee. Subject to the conditions set
forth in Section 2(b) below, USA shall pay to Executive an amount (the
"Transaction Success Fee") in the event a Change of Control occurs on or before
December 31, 2005 as follows:

               (i) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is equal to or less than $7.00 per share,
the amount of the Transaction Success Fee shall be equal to $187,500.00.

               (ii) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is $7.01 or more, but equal to or less
than $11.00, the amount of the Transaction Success Fee shall be calculated in
accordance with the following formula:

          (1)  Per Share Price minus $7.00 = Increase Dollar Amount;

          (2)  Increase Dollar Amount divided by $4.00 = Increase Percentage
               Amount;

          (3)  Increase Percentage Amount plus 50% = Aggregate Increase
               Percentage;

          (4)  Multiply Aggregate Increase Percentage by $375,000.00

For example, if the Per Share Price is $9.00, the Increase Dollar Amount will
equal $2.00, the Increase Percentage Amount will equal 50% (or .50) and the
Aggregate Increase Percentage will equal 100% (or 1). Accordingly, in such case,
the Transaction Success Fee would be $375,000.00.

               (iii) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is $11.01 or greater, the amount of the
Transaction Success Fee shall be equal to $562,500.00.

     If any written agreement with any "other executive" as defined in the Good
Reason definition in Section 1 hereof, similar to this Agreement, is amended to
reduce to a lower number the $7.00 amount in Section 2(a) of such agreement,
then the $7.00 in this Section 2(a) shall be automatically reduced to such lower
dollar amount. In the event of any stock split, stock dividend, or similar
adjustment in the number of outstanding shares of Common Stock of PRGS, then the
base prices of $7.00 to $11.00 that are set forth above and that are used to
determine the amount of the Transaction Success Fee shall be equitably adjusted
to reflect such split, dividend, or similar adjustment and the base numbers of
$7.00 and $4.00 set forth in (ii)(1)-(2) above shall also be equitably adjusted.

          (b) Conditions. In order for Executive to be eligible to receive the
Transaction Success Fee, the Change of Control must occur on or before December
31, 2005, and one of the following conditions must be met:

               (i) Executive is employed by USA or its affiliates on the date of
a Change of Control, but Executive is not offered a job after the Change of
Control with USA or


                                       -4-



its successor or affiliates, or Executive is offered employment after the Change
of Control, but the terms of such employment are such that Executive would be
entitled to resign from employment for Good Reason; or

               (ii) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates during the period beginning with the Change of Control and continuing
through the date that the Transaction Success Fee (or portion thereof) is earned
and due for payment in accordance with Section 2(c)(i) and (ii) below; or

               (iii) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates after the date of the Change of Control, but Executive voluntarily
terminates such employment for Good Reason during the 12-month period following
the Change of Control;

               (iv) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates after the date of the Change of Control, but such employment is
terminated by USA (or its successor or an affiliate) without Cause during the
12-month period following the Change of Control; or

               (v) Executive's employment with USA or its affiliates is
terminated prior to the date of a Change of Control without Cause or for Good
Reason, either in contemplation of a Change of Control or at the insistence of
the prospective purchaser of PRGS; provided, however, that, notwithstanding
anything to the contrary contained herein, Executive shall have no right to
receive any portion of a Transaction Success Fee, until the actual occurrence of
a Change of Control that occurs on or before December 31, 2005, and in the event
a Change of Control does not occur on or before December 31, 2005, Executive
shall have no right to receive a Transaction Success Fee.

          (c) Payment Terms. The Transaction Success Fee shall be due and
payable as follows:

               (i) If Executive is employed by USA or its successor or
affiliates on the six-month anniversary of the Change of Control, one-third of
the Transaction Success Fee shall be due and payable by USA to Executive within
30 days after such six-month anniversary.

               (ii) If Executive is employed by USA or its successor or
affiliates on the one-year anniversary of the Change of Control, two-thirds of
the Transaction Success Fee shall be due and payable by USA to Executive within
30 days after such one-year anniversary.

               (iii) Upon the occurrence of the events described in Section
2(b)(i) through (iv) above, the entire Transaction Success Fee (less any amounts
previously paid hereunder) shall be due and payable in a lump sum within 30 days
after the occurrence of such event.


                                       -5-



               (iv) Upon the occurrence of the event described in Section
2(b)(v) above, the entire Transaction Success Fee shall be due and payable 30
days after the later to occur of termination of employment or the date of the
Change of Control.

     Notwithstanding the foregoing, if a portion of the Per Share Price to be
received by the PRGS shareholders is placed in escrow, paid in installments or
over time, or otherwise deferred for any reason, including in order to fund
potential claims in connection with a breach of any representation or warranty
given in connection with a Change of Control transaction or to be earned and
paid based on conditions to be determined after the closing of the Change of
Control transaction, the Transaction Success Fee shall be based on the Per Share
Price amount actually received by the PRGS shareholders and any increase in the
Transaction Success Fee caused by any post-closing payments shall be paid on the
later of the date set forth above or 30 days after the date of such post-closing
payment to the PRGS shareholders.

          (d) Termination for Cause. If Executive's employment is terminated by
USA (or a successor or affiliate) for Cause prior to the six-month anniversary
of the Change of Control, Executive shall not be entitled to receive any portion
of the Transaction Success Fee. If Executive's employment is terminated by USA
(or its successor or an affiliate) for Cause after the six-month anniversary of
the Change of Control, USA shall pay the portion of the Transaction Success Fee
due under Section 2(c)(i), but Executive shall not be entitled to receive the
amount described in Section 2(c)(ii). To the extent the amount due under 2(c)(i)
has been paid by USA prior to a termination under the condition described in the
foregoing sentence, Executive shall not be required to refund such portion of
the Transaction Success Fee.

     3. Additional Payments. Upon a Change of Control that occurs on or prior to
December 31, 2005, Executive shall be entitled to an additional payment
("Additional Payment") as follows:

          (a) No Post-Closing Service. (i) Executive shall be entitled to an
additional payment of $750,000.00, payable in equal bi-weekly installments, over
the two-year period beginning six months following the Change of Control if
Executive is employed by USA or its affiliates on the date of a Change of
Control, but Executive is not offered a job following the Change of Control with
USA or its successor or affiliates or Executive is offered employment after the
Change of Control, but the terms of such employment are such that Executive
would be entitled to resign from employment for Good Reason.

               (ii) If Executive's employment with USA or its affiliates is
terminated prior to the date of a Change of Control without Cause or for Good
Reason, either in contemplation of a Change of Control or at the insistence of
the prospective purchaser of PRGS, Executive shall be deemed to have met the
requirements of this Section 3(a); provided, however, that, notwithstanding
anything to the contrary contained herein, Executive shall have no right to
receive any portion of an Additional Payment, until the actual occurrence of a
Change of Control that occurs on or before December 31, 2005, and in the event a
Change of Control does not occur on or before December 31, 2005, Executive shall
have no right to receive an Additional Payment.


                                       -6-



          (b) Termination in First Six Months. Executive shall be entitled to an
additional payment of $750,000.00, payable in equal bi-weekly installments, over
the two-year period beginning six months following termination of employment if
Executive is employed by USA or its affiliates on the date of the Change of
Control, but (i) Executive terminates his employment with USA or its successor
or affiliates for Good Reason during the six-month period following the Change
of Control, or (ii) Executive's employment is terminated by USA or its successor
or affiliates without Cause during the six-month period following the Change of
Control; or

          (c) Termination in Second Six Months. Executive shall be entitled to
an additional payment of $562,500.00, payable in equal bi-weekly installments,
over the 18-month period beginning six months following termination of his
employment if Executive is employed by USA or its affiliates on the date of a
Change of Control, but (i) Executive terminates his employment with USA or its
successor or affiliates for Good Reason after the six-month anniversary of the
Change of Control but on or before the one-year anniversary of the Change of
Control (the "Second Period"), or (ii) Executive's employment is terminated by
USA or its successor or affiliates without Cause during the Second Period.

          (d) Limitation on Payments. The payments described in Section 3(a)
through (c) shall be paid in lieu of any "severance" amount to which Executive
would be entitled under Section 6 of the Offer Letter (as such Section is
amended by Section 4 hereof) should the events described above occur. If a
Change of Control does not occur on or before December 31, 2005, Executive shall
not be entitled to any Additional Payments pursuant to Section 3 of this
Agreement, and Executive shall be entitled to only those severance benefits, if
any, payable under Section 6 of the Offer Letter (as such Section is amended by
Section 4 hereof). If Executive terminates his employment with USA or its
successor or affiliates for Good Reason after the one-year anniversary of the
Change of Control or Executive's employment is terminated by USA or its
successor or affiliates without Cause after the one-year anniversary following
the Change of Control, Executive shall not be entitled to receive any Additional
Payment under Section 3 of this Agreement, and Executive shall be entitled to
only those severance benefits, if any, payable under Section 6 of the Offer
Letter (as such Section is amended by Section 4 hereof). Executive shall not be
entitled to any payment under this Section 3 if Executive is terminated for
Cause. If Executive receives the Additional Payments pursuant to this Section 3,
he shall not be entitled to receive any severance benefits under Section 6 of
the Offer Letter.

          (e) Acceleration. To the extent that the American Jobs Creation Act of
2004 (the "Act") is interpreted to allow earlier payment of the Additional
Payments contemplated under Sections 3(a) through (c), then Sections 3(a), (b),
and (c) shall be automatically amended to delete the phrase "beginning six
months" which appears in each such Section and such Additional Payment under
Section 3(a) shall be made as early as the Act permits.

          (f) Execution of General Release. Executive acknowledges and agrees
that he is not eligible to receive any Additional Payments unless and until he
executes a general release agreement and covenant not to sue, in the form
attached hereto at Exhibit B.


                                       -7-



          (g) No Double Benefits. The Additional Payments contemplated under
this Section 3 are intended to replace and supersede any benefits Executive may
be entitled to under Section 6 of the Offer Letter (as amended by Section 4 of
this Agreement) if a Change of Control occurs. If a Change of Control does not
occur, Executive shall be entitled to only those severance benefits, if any,
payable under Section 6 of the Offer Letter (as such Section is amended by
Section 4 hereof). Under no circumstances will Executive ever be entitled to
receive both the Additional Payments pursuant to this Section 3 and the
severance benefits pursuant to Section 6 of the Offer Letter (as amended by
Section 4 of this Agreement).

     4.   Amendments to Offer Letter.

          (a) Section 3 of the Offer Letter is hereby amended to delete the
portion of such section, commencing with the third paragraph, which begins with
"For purposes of this Agreement, a "Change of Control..." and continuing until
the end of such section. Such deleted language is hereby replaced with the
following:

     "For purposes of this Section 3, "Change of Control" shall have the meaning
ascribed to such term in that certain Change of Control and Restrictive Covenant
Agreement by and between you and PRG-Schultz USA, Inc., dated February 14, 2005
("Change of Control Agreement")."

          (b) Section 6 of the Offer Letter is hereby deleted in its entirety
and replaced by the following:

     "(a) If your employment with PRGS is terminated for Cause (as such term is
defined in the Change of Control Agreement) or if you voluntarily resign without
Good reason (as such term is defined in the Change of Control Agreement), you
will receive your base salary prorated through the date of termination, payable
in accordance with PRGS's normal payroll procedure, and you will not receive any
bonus or any other amount in respect of the year in which termination occurs or
in respect of any subsequent years.

     (b) If your employment with PRGS is terminated by PRGS without Cause or by
you for Good Reason, you will receive your base salary and earned bonus for the
year in which such termination occurs prorated through the date of such
termination, plus a severance payment equal to continuation of your base salary
for twelve (12) months payable bi-weekly conditioned upon signing a release and
covenant not to sue. Except as provided in the immediately preceding sentence,
you will not receive any other amount in respect of the year in which
termination occurs or in respect of any subsequent years. You will not be
entitled to any amounts under the Change of Control Agreement, except for any
unpaid Transaction Success Fee earned prior to your termination. The prorated
base salary and severance payments will be paid in accordance with PRGS' normal
payroll procedures.

     (c) If your employment with PRGS is terminated by your death or retirement,
you (or your legal representative in the case of death) will receive base salary
and bonus for the year in which such termination occurs prorated through the
date of such termination and will not receive any other amount in respect of the
year in which termination occurs or in respect of any subsequent years. The
prorated base salary will be paid in accordance with PRGS' normal payroll
procedure


                                       -8-



and the prorated bonus will be paid in a lump sum within ninety (90) days after
the end of the year to which it relates. You will not be entitled to any amounts
under the Change of Control Agreement, except of any unpaid Transaction Success
Fee earned prior to your termination.

          (d) If your employment with PRGS is terminated for Disability (as
defined herein), you or your legal representative will receive all unpaid base
salary and bonus for the year in which such termination occurs prorated through
the date of termination with such prorated base salary payable in accordance
with PRGS's normal payroll procedure and the prorated bonus payable in a lump
sum within ninety (90) days after the end of the year to which it relates. You
will not be entitled to any amounts under the Change of Control Agreement,
except of any unpaid Transaction Success Fee earned prior to your termination."

               (c) The Offer Letter is hereby amended to add new Section 11 as
follows:

     "(a) This Agreement may be terminated by PRGS for Cause upon delivery to
          you of a thirty (30) days notice of termination. "Cause" shall have
          the meaning ascribed to such term in the Change of Control Agreement.

     (b)  Either party, without Cause, may terminate this Agreement by giving
          thirty (30) days written notice. Additionally, your employment may be
          terminated by you for "Good Reason". "Good Reason" shall have the
          meaning ascribed to such term in the Change of Control Agreement.

     (c)  In the event of your Disability, physical or mental, PRGS will have
          the right, subject to all applicable laws, including without
          limitation, the Americans with Disabilities Act ("ADA"), to terminate
          your employment immediately. For purposes of this Agreement, the term
          "Disability" shall mean your inability or expected inability (or a
          combination of both) to perform the services required of you hereunder
          due to illness, accident or any other physical or mental incapacity
          for an aggregate of ninety (90) days within any period of one hundred
          eighty (180) consecutive days during which this Agreement is in
          effect, as agreed by the parties or as determined pursuant to the next
          sentence. If there is a dispute between you and PRGS as to whether a
          Disability exists, then such issue shall be decided by a medical
          doctor selected by PRGS and a medical doctor selected by you and your
          legal representative (or, in the event that such doctors fail to
          agree, then in the majority opinion of such doctors and a third
          medical doctor chosen by such doctors). Each party shall pay all costs
          associated with engaging the medical doctor selected by such party and
          the parties shall each pay one-half (1/2) of the costs associated with
          engaging any third medical doctor.

     (d)  In the event this Agreement is terminated, all provisions in this
          Agreement or the Change of Control Agreement relating to any actions,
          including those of payment or compliance with covenants, subsequent to
          termination shall survive such termination."


                                       -9-



     5. Acknowledgement of Restrictive Covenant Consideration. Executive
acknowledges and agrees that $562,500.00 (the "Restrictive Covenant
Consideration") of the aggregate value of all amounts that USA has agreed to pay
under Section 2 and 3 hereof, respectively, and any amounts that USA has agreed
to pay Executive under the Offer Letter as a result of termination of his
employment, is being paid in consideration of Executive's agreement to Sections
12, 13 and 14 below. Moreover, Executive acknowledges and agrees that the
Restrictive Covenant Consideration is subject to forfeiture in accordance with
Section 15(b) hereof in the event Executive breaches any of the covenants set
forth in Section 12, 13 or 14 hereof.

     6. Taxes. PRG shall deduct or withhold such amounts as may be required
pursuant to applicable federal, state, local, or other laws from all amounts
payable to Executive or awards to be made to Executive pursuant to this
Agreement.

     7. Excess Payments. In the event that any payment or award to be received
by Executive pursuant to Sections 2 and 3 hereof or the value of any
acceleration right occurring pursuant to this Agreement in connection with a
Change of Control would be subject to an excise tax pursuant to Section 4999 of
the Code (or any successor provision), whether in whole or in part, as a result
of being an "excess parachute payment," within the meaning of such term in
Section 280G(b) of the Code (or any successor provision), the amount payable
under Sections 2 and 3 shall be reduced so that no portion of such payment or
the value of such acceleration rights is subject to the excise tax pursuant to
Section 4999 of the Code. If the amount necessary to eliminate such excise tax
exceeds the amount otherwise payable under Section 2 and 3, no payment shall be
made under these Sections and no further adjustments shall be made.
Notwithstanding the previous sentence, no portion of such payment or any
acceleration right which tax counsel, selected by USA's accountant and
acceptable to Executive, determines not to constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code will be taken into account.

     8. Confidentiality. Executive covenants and agrees that, during and after
his employment by USA, he will treat as confidential and will not, without the
prior written approval of USA, use (other than in the performance of his
designated duties for USA) or disclose the Trade Secrets or Confidential
Information to any party, including, without limitation APEX Analytix, Inc.
("Apex"), Connolly Consulting Associates, Inc. ("Connolly") and Deloitte Touche
Tohmatsu ("Deloitte"). (Deloitte, Conley and Apex are referred to herein,
collectively, as the "Competitive Organizations"). The foregoing obligation with
respect to Confidential Information shall expire five years after termination of
Executive's employment by USA. Executive acknowledges and agrees that the
Competitive Organizations engage in the same or substantially similar business
as the Business of USA. Executive further acknowledges and agrees that if he,
directly or indirectly, goes to work for any of the Competitive Organizations
and provides services that are the same or substantially similar to the services
he provides to USA, such action on his part will lead to the inevitable
disclosure of Trade Secrets or Confidential Information.

     9. Records. All records, notes, files, recordings, tapes, disks, memoranda,
reports, price lists, client lists, drawings, plans, sketches, documents,
equipment, apparatus, and like items, and all copies thereof, relating to the
business of USA or its affiliates or the Secret Information, which shall be
prepared by Executive or which shall be disclosed to or which shall come into
the


                                      -10-



possession of Executive, shall be and remain the sole and exclusive property of
USA. Executive agrees that at any time upon request from USA, to promptly
deliver to USA the originals and all copies of any of the foregoing that are in
the Executive's possession, custody or control.

     10.  Executive Inventions.

          (a) Ownership of Works. All Works shall be the sole and absolute
property of Company, including all patent, copyright, trade secret, or other
rights in respect thereof. Executive agrees to and hereby does assign to Company
all right, title, and interest in and to any and all Works, including all
worldwide copyrights, patent rights, and all trade secret information embodied
therein, in all media and including all rights to create derivative works
thereof. Executive waives any and all rights Executive may have in any Works,
including but not limited to the right to acknowledgement as author or moral
rights. Executive agrees not to use or include in Works any patented,
copyrighted, restricted or protected code, specifications, concepts, or trade
secrets of any third party or any other information that Executive would be
prohibited from using by any confidentiality, non-disclosure or other agreement
with any third party. Executive agrees to fully and promptly disclose in writing
to USA any such Works as such Works from time to time may arise.

          (b) Further Assurances. Executive shall, without charge to USA other
than reimbursement of Executive's reasonable out-of-pocket expenses, execute and
deliver all such further documents and instruments, including applications for
patents and copyrights, and perform such acts, at any time during or after the
term of this Agreement as may be necessary or desirable, to obtain, maintain,
and defend patents, copyrights, or other proprietary rights in respect of the
Works or to vest title to such Works in USA, its successors, assigns, or
designees. Without limiting the generality of the foregoing, Executive further
agrees to give all lawful testimony, during or after the term of Executive's
employment, which may be required in connection with any proceedings involving
any Works so assigned by Executive. Executive agrees to keep and maintain
adequate and complete records (in the form of notes, laboratory notebooks,
sketches, drawings, optical drives, hard drives and as may otherwise be
specified by USA) of all inventions and original works of authorship made by
Executive (solely or jointly with others) in the course of employment with
Company, with USA's time, on USA's premises, or using USA's resources or
equipment, which records shall be available to and remain the sole property of
USA at all times.

          (c) No Obligations to Third Parties. Executive represents and warrants
to USA that Executive is not subject to any employment, non-disclosure,
confidentiality, non-compete, or other agreement with any third party which
would prevent or prohibit Executive from fulfilling Executive's duties for USA.
If Executive is the subject of any such agreement, and has any doubt as to its
applicability to Executive's position with USA, Executive will provide a copy of
such agreement to USA so that USA can make a determination as to its effect on
Executive's ability to work for USA. Executive agrees to notify the company in
writing before making any disclosure or perform any work on behalf of USA which
appears to threaten or conflict with any proprietary rights Executive claims or
intends to claim in any invention or original work of authorship. In the event
Executive fails to give such notice, Executive agrees that he will make no claim
against USA with respect to any such invention or work of authorship.


                                      -11-



     11. Cooperation. Executive agrees to cooperate at any time to the extent
and in the manner requested by USA and at USA's expense, in the prosecution or
defense of any claims, litigation or other proceeding involving the Works, the
property of USA or the Secret Information. Executive agrees to diligently
protect any and all Secret Information against loss by inadvertent or
unauthorized disclosure. Executive will comply with regulations, policies, and
procedures established by USA, including, without limitation, all regulations,
policies, and procedures established for the purpose of protecting Secret
Information.

     12. Agreement Not to Compete. Executive covenants and agrees that during
his employment by USA and for a period of two years after termination, for any
reason, of such employment, he will not, without the prior written consent of
USA, within Fulton County, Georgia, for himself or on behalf of another,
directly or indirectly, engage in any business for which he provides services
which are the same or substantially similar to his services for USA (as
described in the Offer Letter) to or on behalf of a Competing Business;
provided, however, if the termination occurs on or after the second anniversary
of the date of the Change of Control, the two year non-compete period set forth
herein shall reduce to a one year non-compete period. Executive acknowledges and
agrees that Fulton County, Georgia is the geographic area within which the
Executive performs services for the Company.

     13. Agreement Not to Solicit Customers. During Executive's employment by
USA and for a period of two years after the termination of such employment for
any reason, whether by USA or by Executive, with or without Cause or Good
Reason, Executive will not, without the prior written consent of USA, directly
or indirectly, on Executive's own behalf or in the service or on behalf of
others, solicit or attempt to divert or appropriate to a Competing Business, any
customer or actual prospect of USA with whom Executive dealt on behalf of USA or
on behalf of USA's affiliates at any time during the 12-month period immediately
preceding the termination of employment; provided, however, if the termination
occurs on or after the second anniversary of the date of the Change of Control,
the two year customer non-solicit period set forth herein shall reduce to a one
year customer non-solicit period.

     14. Agreement Not to Solicit Employees. During Executive's employment by
USA and for a period of two years after the termination of such employment for
any reason, whether by USA or by Executive, with or without Cause or Good
Reason, Executive will not, without the prior consent of USA, directly or
indirectly, on Executive's own behalf or in the service or on behalf of others,
solicit, divert or recruit any employee of USA to leave such employment, whether
such employment is by written contract or at will; provided, however, if the
termination occurs on or after the second anniversary of the date of the Change
of Control, the two year employee non-solicit period set forth herein shall
reduce to a one year employee non-solicit period.

     15. Consideration; Remedies.

          (a) Injunctive Relief. Executive acknowledges and agrees that, by
virtue of the duties and responsibilities attendant to his employment by USA and
the special knowledge of USA's affairs, business, clients, and operations that
he has and will have as a consequence of such employment, irreparable loss and
damage will be suffered by USA if Executive should breach or


                                      -12-



violate any of the covenants and agreements contained in Sections 7 through 13.
Executive further acknowledges and agrees that each of such covenants is
reasonably necessary to protect and preserve the business of USA. Executive,
therefore, agrees and consents that, in addition to any other remedies available
to it, USA shall be entitled to an injunction to prevent a breach or
contemplated breach by the Executive of any of the covenants or agreements
contained in such Sections.

          (b) Forfeiture. Executive acknowledges that USA intends to enforce the
terms of the restrictive covenants of this Agreement contained in Sections 12,
13, and 14. In the event Executive breaches the provisions of Sections 12, 13,
or 14, Executive shall immediately forfeit his right to receive (or shall refund
to USA or its successor to the extent Executive has been previously paid) the
value of the portion of the Restrictive Covenant Consideration allocable to the
portion of the two year time period ($770.54 per day of violation, capped at
amounts actually received by Executive) during which Executive is in violation
of any of such Sections 12, 13, or 14. Executive acknowledges that the actual
damages for any such breach are costly and difficult to estimate and the amount
required to be refunded or forfeited by this Section 15(b) is a reasonable
estimation of such damages. The parties agree that such forfeited or refunded
amount is intended as liquidated damages and not as a penalty. The parties also
agree that the remedies set forth in this Section 15(b) are in addition to other
remedies, including equitable remedies.

          (c) No Defense; Remedies. The existence of any claim, demand, action
or cause of action of Executive against USA or its affiliates, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by USA of any of the covenants contained herein. The rights of
USA under this Agreement are in addition to, and not in lieu of, all other
rights USA may have at law or in equity to protect its confidential information,
trade secrets and other proprietary interests.

     16. Severability; Construction. Each covenant of this Agreement shall be
deemed and shall be construed as a separate and independent covenant, and should
any part or provision of any such covenants be declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other separate covenant
of Executive not declared invalid. Whenever there is a conflict between an
applicable law of a jurisdiction which governs the subject matter of this
Agreement and any provision of this Agreement, the affected portions of this
Agreement shall be deemed revised, as to such jurisdiction only, in a manner
which (i) eliminates any invalid, illegal or completely unenforceable provision,
and (ii) as to any provision which is held to be excessively broad as to time
duration, scope, activity or subject, limits or reduces such provision so as to
be enforceable to the extent compatible with the applicable law.

     17. Notices. Any notice required or permitted to be given to one party by
the other party hereto pursuant to this Agreement shall be in writing and shall
be personally delivered (including delivery by overnight or express courier), or
sent by United States Mail, certified or registered, return receipt requested,
first class postage and charges prepaid, in envelopes addressed to the parties
as set forth below their signatures or at such other addresses as shall be
designated in writing by either party to the other party in accordance with this
Section. Notices delivered in person shall


                                      -13-



be effective on the date of delivery. Notices sent by United States Mail shall
be effective on the third day following deposit.

     18. Amendment. No amendment or modification of this Agreement shall be
valid or binding upon either party unless made in writing.

     19. Waiver. The waiver by one party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach of the same or any other provision by the other party.

     20. Employee-At-Will. Nothing in this Agreement affects the fact that
Executive's employment with USA is terminable at will by either party, subject
to any notice requirements set forth in the Offer Letter, as hereby amended..

     21. Attorneys' Fees. If any action at law or in equity is necessary to
enforce the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and expenses in addition to any other relief
to which such prevailing party may be entitled.

     22. Gender. All references included herein to the male gender shall be
construed to include the female gender, if and as appropriate.

     23. Assignment; Benefit; Payment to Estate. This Agreement may not be
assigned by Executive and shall be binding upon Executive's devisees, heirs,
legatees, beneficiaries, executors, administrators, or other legal
representatives. This Agreement may be assigned by USA, and the right, remedies,
and obligations of USA shall inure to the benefit of and be binding upon its
successors and assigns. In the event of Executive's death, any payment that
Executive has earned and to which Executive is entitled under this Agreement,
but which has not been paid at the time of Executive's death, shall be paid to
Executive's estate.

     24. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.

     25. Costs Associated with IRS Audit. In the event there is an Internal
Revenue Service audit of Executive's tax returns related to the tax treatment of
Executive's compensation under this Agreement, USA shall reimburse Executive for
one-half (1/2) of the professional fees and expenses (accounting, legal,
appraisal or other consultant) incurred by Executive contesting, disputing,
complying with or otherwise responding to such audit, up to a maximum of
$10,000.

     26. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the matters contained herein and, subject to
the following sentence, supersedes and terminates all previous agreements with
respect to the matters contained herein. Except as specifically set forth in
Section 4 hereof, the terms of this Agreement (a) are in addition to, and not in
lieu of, the benefits to which Executive is entitled under the Offer Letter and
(b) shall not be deemed to supersede, amend, or terminate any other parts of the
Offer Letter. For the avoidance of doubt, the parties acknowledge and agree that
except as expressly set forth herein, no other aspects of Executive's Offer
Letter are, or shall be deemed for any purposes


                                      -14-



modified. The Employee Agreement shall be superseded and terminated by the
provisions of this Agreement.

                         [SIGNATURES ON FOLLOWING PAGE]


                                      -15-


     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.

EXECUTIVE:


James E. Moylan, Jr.                    Date: 2/14/05
- -------------------------------------
James E. Moylan, Jr.

Address: 2804 Andrews Drive
         Atlanta, GA 30305


"USA":

PRG-SCHULTZ USA, Inc.


By: John M. Cook                        Date: 2/14/05
    ---------------------------------
Title: Chairman & CEO

Address: 600 Galleria Parkway
         Suite 100
         Atlanta, Georgia 30339
Attention: Marie Neff, Executive Vice
           President-Human Resources


                                      -16-



                                    EXHIBIT A

                                 JOB DESCRIPTION


                                      -17-



                                    EXHIBIT A
                                       TO
              CHANGE OF CONTROL AND RESTRICTIVE COVENANT AGREEMENT
                                       OF
                              JAMES E. MOYLAN, JR.

Position: Executive Vice President and Chief Financial Officer

Duties, Responsibilities and Authority:

- -    Reports to Chairman/CEO or other senior-most executive.

- -    Chief Financial Officer of a public company.

- -    Member of Executive Committee.


                                      -18-



                                    EXHIBIT B

                                 FORM OF RELEASE


                                      -19-



                                 FORM OF RELEASE

     THIS RELEASE AGREEMENT AND COVENANT NOT TO SUE (the "Agreement") is entered
into by and between PRG-Schultz USA, Inc., a Georgia corporation (the "Company")
and _________________, a resident of the state of ________________
("Executive"), as of the Effective Date of the Agreement, as defined below.

                                   WITNESSETH

     Executive and Company are parties to that certain [offer letter
agreement/employment agreement], dated ______________________ ("Employment
Agreement").

     Executive and Company are parties to that certain Change of Control and
Restrictive Covenant Agreement, dated ________________ ("Change of Control
Agreement").

     Executive and Company are terminating their employment relationship,
subject to the terms hereof; and

     NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein and other good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:

     1. Termination of Employment. The parties hereto hereby acknowledge and
agree that Executive's employment with Company will automatically terminate as
of the close of business on _____________________________.

     2. General Release of Claims. In consideration of the covenants from
Company to Executive set forth herein and in the Employment Agreement and Change
of Control Agreement, the receipt and sufficiency of which is hereby
acknowledged, Executive, on his behalf and on behalf of his heirs, devisees,
legatees, executors, administrators, personal and legal representatives, assigns
and successors in interest (collectively, the "Derivative Claimants" and each a
"Derivative Claimant"), hereby IRREVOCABLY, UNCONDITIONALLY AND GENERALLY
RELEASES, ACQUITS, AND FOREVER DISCHARGES, to the fullest extent permitted by
law, Company and each of Company's directors, officers, employees,
representatives, stockholders, predecessors, successors, assigns, agents,
attorneys, divisions, subsidiaries and affiliates (and agents, directors,
officers, employees, representatives and attorneys of such stockholders,
predecessors, successors, assigns, divisions, subsidiaries and affiliates), and
all persons acting by, through, under or in concert with any of them
(collectively, the "Releasees" and each a "Releasee"), or any of them, from any
and all charges, complaints, claims, damages, actions, causes of action, suits,
rights, demands, grievances, costs, losses, debts, and expenses (including
attorneys' fees and costs incurred), of any nature whatsoever, known or unknown,
that Executive now has, owns, or holds, or claims to have, own, or hold, or
which Executive at any time heretofore had, owned, or held, or claimed to have,
own, or hold from the beginning of time to the date that Executive signs this
Agreement, including, but not limited to, those claims arising out of or
relating to (i) any agreement, commitment, contract, mortgage, deed of trust,
bond, indenture, lease, license, note, franchise, certificate, option, warrant,
right or other instrument, document, obligation or arrangement, whether written
or oral, or any other relationship, involving Executive and/or any Releasee,
(ii) breach of any express or


                                      -20-



implied contract, breach of implied covenant of good faith and fair dealing,
misrepresentation, interference with contractual or business relations, personal
injury, slander, libel, assault, battery, negligence, negligent or intentional
infliction of emotional distress or mental suffering, false imprisonment,
wrongful termination, wrongful demotion, wrongful failure to promote, wrongful
deprivation of a career opportunity, discrimination (including disparate
treatment and disparate impact), hostile work environment, sexual harassment,
retaliation, any request to submit to a drug or polygraph test, and/or
whistleblowing, whether said claim(s) are brought pursuant to the AGE
DISCRIMINATION IN EMPLOYMENT ACT, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS
AMENDED, THE EQUAL PAY ACT, 42 U.S.C. SECTIONS 1981, 1983, OR 1985, THE
VOCATIONAL REHABILITATION ACT OF 1977, THE AMERICANS WITH DISABILITIES ACT, THE
FAMILY AND MEDICAL LEAVE ACT OR THE FAIR CREDIT REPORTING ACT or any other
constitutional, federal, regulatory, state or local law, or under the common law
or in equity, and (iii) any other matter (each of which is referred to herein as
a "Claim"); provided, however, that nothing contained herein shall operate to
release any obligations of Company, its successors or assigns arising under any
claims under the Employment Agreement, the Change of Control Agreement or under
any written Company benefit plans, any 401(k) plan, any pension plan and any
similar plan, to the extent Executive is entitled to benefits under the
respective terms thereof.

     3. Release of Unknown Claims. Executive recognizes that he may have some
claim, demand, or cause of action against the Releasees relating to any Claim of
which he is totally unaware and unsuspecting and which is given up by the
execution of this Agreement. It is Executive's intention in executing this
Agreement with the advice of legal counsel that this Agreement will deprive him
of any such Claim and prevent Executive or any Derivative Claimant from
asserting the same. The provisions of any local, state, federal, or foreign law,
statute, or judicial decision providing in substance that this Agreement shall
not extend to such unknown or unsuspecting claims, demands, or damages, are
hereby expressly waived.

     4. Acknowledgment. Executive acknowledges that he has thoroughly discussed
all aspects of this Agreement with his attorney, that he has carefully read and
fully understands all of the provisions of this Agreement, and that he is
voluntarily entering into this Agreement. Executive hereby waives the
requirement under the Age Discrimination in Employment Act that Executive has
twenty-one (21) days to review and consider this Agreement before executing it.
Executive acknowledges and understands that he shall have seven (7) days after
signing this Agreement during which he may revoke this Agreement by providing
written notice to Company within seven (7) days following its execution. Any
notice of revocation of this Agreement shall not be effective unless given in
writing and received by Company within the seven-day revocation period via
personal delivery, overnight courier, or certified U.S. mail, return receipt
requested, to PRG-SCHULTZ USA, INC., 600 Galleria Parkway, Suite 100, Atlanta,
Georgia 30339, Attention: General Counsel. THIS AGREEMENT SHALL NOT BECOME
EFFECTIVE AND ENFORCEABLE UNTIL SUCH SEVEN (7) DAY PERIOD HAS EXPIRED. IF
EMPLOYEE REVOKES THIS AGREEMENT WITHIN SUCH SEVEN (7) DAY PERIOD, EMPLOYEE WILL
NOT BE ENTITLED TO RECEIVE ANY OF THE RIGHTS AND BENEFITS DESCRIBED HEREIN OR
UNDER THE EMPLOYMENT AGREEMENT OR CHANGE OF CONTROL AGREEMENT.

     5. No Assignment. Executive represents and warrants that he has not
assigned or transferred, or purported to assign or transfer, to any person,
entity, or individual whatsoever,


                                      -21-



any of the Claims released herein. Executive agrees to indemnify and hold
harmless the Releasees against any Claim based on, arising out of, or due to any
such assignment or transfer.

     6. Indemnification. In furtherance of the foregoing, Executive agrees on
behalf of himself and the Derivative Claimants not to sue or prosecute any
matter against any Releasee with respect to any Claim and agrees to hold each
Releasee harmless with respect to any such suit or prosecution in contravention
of this Section 6. Executive understands that if this Agreement were not signed,
he would have the right voluntarily to assist other individuals or entities in
bringing Claims against the Releasees. Executive hereby waives that right and
hereby agree that he will not voluntarily provide any such assistance. To the
extent that applicable law prohibits Executive from waiving his right to bring
and/or participate in the investigation of a Claim, Executive nevertheless
waives his right to seek or accept any damages or relief in any such proceeding.

     7. Representation Regarding Knowledge of Trade Secrets and/or Inventions.
Executive hereby acknowledges and confirms that he has no right, claim or
interest to any property, invention, trade secret, information or other asset
used in the business of Company and that all such property, inventions, trade
secrets, information and other assets used in the business of Company are owned
by Company or its affiliates or licensed to Company or its affiliates by third
parties not affiliated with Executive.

     8. Return of Company Property and Proprietary Information. (a) Executive
further promises, represents and warrants that Executive has returned or will
return to _______________ [IDENTIFY DESIGNEE] by no later than upon the
execution of this Agreement by Executive: (a) all property of Company,
including, but not limited to, any and all files, records, credit cards, keys,
identification cards/badges, computer access codes, computer programs,
instruction manuals, equipment (including computers) and business plans; (b) any
other property which Executive prepared or helped to prepare in connection with
Executive's employment with Company; and (c) all documents, including logs or
diaries, all tangible materials, including audio and video tapes, all intangible
materials (including computer files), and any and all copies or duplicates of
any such tangible or intangible materials, including any duplicates, copies, or
transcriptions made of audio or video tapes, whether in handwriting or
typewritten, that are in the possession, custody or control of Executive or his
attorneys, agents, family members, or other representatives, which are alleged
to support in any way any of the claims Executive has released under this
Agreement.

     (b) The foregoing representation shall include all Proprietary Information
of Company and Company. With respect to Proprietary Information, Executive
warrants, represents, and covenants to return such Proprietary Information on or
before the close of business on ____________________. As used herein,
"Proprietary Information" means information in written form or electronic media,
including but not limited to technical and non-technical data, lists, training
manuals, training systems, computer based training modules, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes and
plans regarding Company or its affiliates, clients, prospective clients, methods
of operation, billing rates, billing procedures, suppliers, business methods,
finances, management, or any other business information relating to Company or
its affiliates (whether constituting a trade secret or proprietary or otherwise)
which has value to Company or its affiliates and is treated by Company


                                      -22-



or its affiliates as being confidential; provided; however, that Proprietary
Information shall not include any information that has been voluntarily
disclosed to the public by Company or its affiliates (except where such public
disclosure has been made without authorization) or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means. Proprietary Information does include information which has
been disclosed to Company or its affiliates by a third party and which Company
or its affiliates are obligated to treat as confidential. Proprietary
Information may or may not be marked by Company or its affiliates as
"proprietary" or "secret" or with other words or markings of similar meaning,
and the failure of Company to make such notations upon the physical embodiments
of any Proprietary Information shall not affect the status of such information
as Proprietary Information.

     9. General Provisions.

     (a) This Agreement and the covenants, representations, warranties and
releases contained herein shall inure to the benefit of and be binding upon
Executive and Company and each of their respective successors, heirs, assigns,
agents, affiliates, parents, subsidiaries and representatives.

     (b) Each party acknowledges that no one has made any representation
whatsoever not contained herein concerning the subject matter hereof to induce
the execution of this Agreement. Executive acknowledges that the consideration
for signing this Agreement is a benefit to which Executive would not have been
entitled had Executive not signed this Agreement.

     (c) Executive agrees that the terms and conditions of this Agreement,
including the consideration hereunder shall not be disclosed to anyone and shall
remain confidential and not disseminated to any person or entity not a party to
this Agreement except to family members, legal counsel, an accountant for
purposes of securing tax advice; the Internal Revenue Service, or the state
taxing agencies.

     (d) The "Effective Date" of this Agreement shall be the eighth (8th) day
after the execution of the Agreement by Executive.

     (e) This Agreement does not constitute an admission of any liability.

     (f) The parties hereto and each of them agrees and acknowledges that if any
portion of this Agreement is declared invalid or unenforceable by a final
judgment of any court of competent jurisdiction, such determination shall not
affect the balance of this Agreement, which shall remain in full force and
effect. Any such invalid portion shall be deemed severable.

     (g) Neither this Agreement nor any provision hereof may be modified or
waived in any way except by an agreement in writing signed by each of the
parties hereto consenting to such modification or waiver.

This Agreement shall in all respects be interpreted, enforced and governed under
the internal laws (and not the conflicts of laws and rules) of Georgia.


                                      -23-



     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.

EXECUTIVE ATTESTS THAT HE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF
ALL KNOWN AND UNKNOWN CLAIMS.

NOTICE - THIS AGREEMENT CONTAINS A WAIVER OF RIGHTS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT. EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE
SIGNING THIS AGREEMENT

EXECUTED THIS __________ DAY OF _________________, 200__.

EXECUTIVE: __________________________

           PRINT NAME: _______________

Sworn to and subscribed before me this ______ day of ______________, 200__.


- -------------------------------------
Notary Public

EXECUTED THIS __________ DAY OF ________________, 200__.

COMPANY: PRG-SCHULTZ USA, INC.


By:
    ---------------------------------
Its:
     --------------------------------


                                      -24-

EX-10.38

                        CHANGE OF CONTROL AND RESTRICTIVE
                               COVENANT AGREEMENT

     This Change of Control and Restrictive Covenant Agreement ("Agreement") is
entered into this 14th day of February, 2005 by and among John M. Toma
("Executive"), PRG-Schultz USA, Inc., a Georgia corporation ("USA"), and
PRG-Schultz International, Inc., a Georgia corporation that owns all of the
capital stock of USA ("PRGS").

     WHEREAS, Executive and USA entered into that certain Employment Agreement,
dated March 20, 1996, as amended on May 14, 2002 ("Employment Agreement"), which
sets forth the terms of employment under which USA employed Executive as the
Vice Chairman, for USA;

     WHEREAS, Executive is a senior executive of USA whose services are
extremely valuable to USA;

     WHEREAS, Executive has had and will have access to the valuable and
proprietary trade secrets of USA and its customers, and Executive has had and
will have close contact with the customers and employees of USA;

     WHEREAS, Executive and USA desire to enter into this Change of Control and
Restrictive Covenant Agreement to (a) amend certain provisions of the Employment
Agreement regarding termination of employment and severance in the manner set
forth herein, (b) provide Executive additional security and benefits in the
event of any actual or threatened change of control of PRGS, (c) provide
incentives to Executive to remain employed with USA, (d) provide PRGS with
reasonable protection of the valuable trade secrets and confidential information
of USA and its customers, as well as the relationships between USA and its
customers and employees, and (e) preserve the goodwill of PRGS for the benefit
of the shareholders in the event a change of control occurs;

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

     1. Definitions. As used in this Agreement, the following terms shall have
the meaning specified:

     "Business of USA" shall mean (a) audit services (i) to identify and recover
lost profits from any source, including, without limitation, payment errors,
missed or inaccurate discounts, allowances, or rebates, vendor pricing errors,
or duplicate payments and (ii) to identify expense containment opportunities;
(b) development and use of technology to provide such services; and (c)
provision of related consulting services.

     "Cause" shall have the meaning ascribed to such term in the Employment
Agreement.

     "Change of Control" shall mean the occurrence of any of the following
events: (i) a majority of the outstanding voting stock of PRGS shall have been
acquired or beneficially owned



by any person (other than PRGS or a subsidiary of PRGS) or any two or more
persons acting as a partnership, limited partnership, syndicate or other group,
entity or association acting in concert for the purpose of voting, acquiring,
holding, or disposing of voting stock of PRGS; or (ii) a merger or a
consolidation of PRGS with or into another corporation, other than (A) a merger
or consolidation with a subsidiary of PRGS, or (B) a merger or consolidation in
which the holders of voting stock of PRGS immediately prior to the merger as a
class hold immediately after the merger at least a majority of all outstanding
voting power of the surviving or resulting corporation or its parent; or (iii) a
statutory exchange of shares of one or more classes or series of outstanding
voting stock of PRGS for cash, securities, or other property, other than an
exchange in which the holders of voting stock of PRGS immediately prior to the
exchange as a class hold immediately after the exchange at least a majority of
all outstanding voting power of the entity with which PRGS stock is being
exchanged; or (iv) the sale or other disposition of all or substantially all of
the assets of PRGS, in one transaction or a series of transactions, other than a
sale or disposition in which the holders of voting stock of PRGS immediately
prior to the sale or disposition as a class hold immediately after the exchange
at least a majority of all outstanding voting power of the entity to which the
assets of PRGS are being sold; or (v) the liquidation or dissolution of PRGS; or
(vi) the entry into a definitive agreement with respect to any of the events
specified in the foregoing clauses (i) through (v) on or prior to December 31,
2005 if the transactions contemplated by such agreement shall thereafter be
consummated on or before March 31, 2006. In the event of the occurrence of a
Change of Control under clause (vi) above, for all purposes hereof, other than
the determination under this Agreement that a Change of Control has occurred on
or before December 31, 2005, the date the transactions contemplated by such
agreement are consummated shall be deemed to be the date of such Change of
Control.

     "Code" shall mean the Internal Revenue Code of 1986, as amended.

     "Competing Business" shall mean any business engaging in the same or
substantially similar business as the Business of USA.

     "Confidential Information" shall mean any confidential or proprietary
information relating to USA or its customers or affiliates that is not a Trade
Secret.

     "Good Reason" shall mean any one of the following: (i) USA's demotion of
the Executive to a lesser position than the position in which he is serving
prior to such demotion; (ii) the assignment to Executive of duties materially
inconsistent with his position or material reduction of the Executive's duties,
responsibilities or authority, all of which, as of the date hereof, are as set
forth on Exhibit A attached hereto and incorporated herein, in either case
without the Executive's prior written consent; provided, however, that a change
in the foregoing that results solely from PRGS ceasing to be a publicly traded
entity or from PRGS becoming a wholly owned subsidiary of a publicly traded
entity shall not, in either event and standing alone, constitute grounds for
"Good Reason"; (iii) any reduction in Executive's base salary, target bonus or
target bonus plan without the Executive's prior consent unless other executives
who are parties to agreements similar to this one also suffer a comparable
reduction in their base salaries, target bonus, or target bonus plan (for
purposes of this subsection (iii) "other executives" shall refer to James
Benjamin, Marie Neff, James Moylan, Richard Bacon, Eric Goldfarb, Paul van
Leeuwen or John Toma); or (iv) unless agreed to by Executive, the relocation of
Executive's


                                       -2-



principal place of business outside of the metropolitan area of Atlanta,
Georgia, in each case not remedied by USA within thirty (30) days after receipt
by USA of written notification from Executive as provided in Section 18 of this
Agreement to USA that specifically identifies the Good Reason. The Executive
must notify USA of any event that constitutes Good Reason within ninety (90)
days following the Executive's knowledge of its occurrence or existence or such
event shall not constitute Good Reason under this Agreement.

     "Per Share Price" shall mean the value of the consideration received by a
shareholder of PRGS in exchange for one share of the Common Stock of PRGS in
connection with a transaction which constitutes a Change of Control.

     "Secret Information" means Confidential Information and Trade Secrets.

     "Trade Secrets" shall mean information of USA, its affiliates or customers,
without regard to form, including, but not limited to, technical or nontechnical
data, a formula, a pattern, a compilation, a program, a device, a method, a
technique, a drawing, a design, a process, financial data, financial plans,
product plans, or a list of actual or potential customers or suppliers which is
not commonly known by or available to the public and which information: (a)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.

     "Works" shall mean any work of authorship, code, invention, improvement,
discovery, process, formula, code algorithm, program, system, method, visual
work, or work product, whether or not patentable or eligible for copyright, and
in whatever form or medium and all derivative works thereof, which are, have
been or will be created, made, developed, or conceived by Executive in the
course of employment with USA, with USA's time, on USA's premises, using USA's
resources or equipment, or relating to the Business of USA.

     2. Transaction Success Fee.

          (a) Amount of Transaction Success Fee. Subject to the conditions set
forth in Section 2(b) below, USA shall pay to Executive an amount (the
"Transaction Success Fee") in the event a Change of Control occurs on or before
December 31, 2005, as follows:

               (i) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is equal to or less than $7.00 per share,
the amount of the Transaction Success Fee shall be equal to $200,000.00.

               (ii) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is $7.01 or more, but equal to or less
than $11.00, the amount of the Transaction Success Fee shall be calculated in
accordance with the following formula:

          (1)  Per Share Price minus $7.00 = Increase Dollar Amount;

          (2)  Increase Dollar Amount divided by $4.00 = Increase Percentage
               Amount;


                                       -3-



          (3)  Increase Percentage Amount plus 50% = Aggregate Increase
               Percentage;

          (4)  Multiply Aggregate Increase Percentage by $400,000.00

For example, if the Per Share Price is $9.00, the Increase Dollar Amount will
equal $2.00, the Increase Percentage Amount will equal 50% (or .50) and the
Aggregate Increase Percentage will equal 100% (or 1). Accordingly, in such case,
the Transaction Success Fee would be $400,000.00.

               (iii) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is $11.01 or greater, the amount of the
Transaction Success Fee shall be equal to $600,000.00.

     If any written agreement with any "other executive" as defined in the Good
Reason definition in Section 1 hereof, similar to this Agreement, is amended to
reduce to a lower number the $7.00 amount in Section 2(a) of such agreement,
then the $7.00 in this Section 2(a) shall be automatically reduced to such lower
dollar amount. In the event of any stock split, stock dividend, or similar
adjustment in the number of outstanding shares of Common Stock of PRGS, then the
base prices of $7.00 to $11.00 that are set forth above and that are used to
determine the amount of the Transaction Success Fee shall be equitably adjusted
to reflect such split, dividend, or similar adjustment and the base numbers of
$7.00 and $4.00 set forth in (ii)(1)-(2) above shall also be equitably adjusted.

          (b) Conditions. In order for Executive to be eligible to receive the
Transaction Success Fee, the Change of Control must occur on or before December
31, 2005, and one of the following conditions must be met:

               (i) Executive is employed by USA or its affiliates on the date of
a Change of Control, but Executive is not offered a job after the Change of
Control with USA or its successor or affiliates, or Executive is offered
employment after the Change of Control, but the terms of such employment are
such that Executive would be entitled to resign from employment for Good Reason;
or

               (ii) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates during the period beginning with the Change of Control and continuing
through the date that the Transaction Success Fee (or portion thereof) is earned
and due for payment in accordance with Section 2(c)(i) and (ii) below; or

               (iii) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates after the date of the Change of Control, but Executive voluntarily
terminates such employment for Good Reason during the 12-month period following
the Change of Control;

               (iv) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates after


                                       -4-



the date of the Change of Control, but such employment is terminated by USA (or
its successor or an affiliate) without Cause during the 12-month period
following the Change of Control; or

               (v) Executive's employment with USA or its affiliates is
terminated prior to the date of a Change of Control without Cause or for Good
Reason, either in contemplation of a Change of Control or at the insistence of
the prospective purchaser of PRGS; provided, however, that, notwithstanding
anything to the contrary contained herein, Executive shall have no right to
receive any portion of a Transaction Success Fee, until the actual occurrence of
a Change of Control that occurs on or before December 31, 2005, and in the event
a Change of Control does not occur on or before December 31, 2005, Executive
shall have no right to receive a Transaction Success Fee.

          (c) Payment Terms. The Transaction Success Fee shall be due and
payable as follows:

               (i) If Executive is employed by USA or its successor or
affiliates on the six-month anniversary of the Change of Control, one-third of
the Transaction Success Fee shall be due and payable by USA to Executive within
30 days after such six-month anniversary.

               (ii) If Executive is employed by USA or its successor or
affiliates on the one-year anniversary of the Change of Control, two-thirds of
the Transaction Success Fee shall be due and payable by USA to Executive within
30 days after such one-year anniversary.

               (iii) Upon the occurrence of the events described in Section
2(b)(i) through (iv) above, the entire Transaction Success Fee (less any amounts
previously paid hereunder) shall be due and payable in a lump sum within 30 days
after the occurrence of such event.

               (iv) Upon the occurrence of the event described in Section
2(b)(v) above, the entire Transaction Success Fee shall be due and payable 30
days after the later to occur of termination of employment or the date of the
Change of Control.

     Notwithstanding the foregoing, if a portion of the Per Share Price to be
received by the PRGS shareholders is placed in escrow, paid in installments or
over time, or otherwise deferred for any reason, including in order to fund
potential claims in connection with a breach of any representation or warranty
given in connection with a Change of Control transaction or to be earned and
paid based on conditions to be determined after the closing of the Change of
Control transaction, the Transaction Success Fee shall be based on the Per Share
Price amount actually received by the PRGS shareholders and any increase in the
Transaction Success Fee caused by any post-closing payments shall be paid on the
later of the date set forth above or 30 days after the date of such post-closing
payment to the PRGS shareholders.

          (d) Termination for Cause. If Executive's employment is terminated by
USA (or a successor or affiliate) for Cause prior to the six-month anniversary
of a Change of Control, Executive shall not be entitled to receive any portion
of the Transaction Success Fee. If Executive's employment is terminated by USA
(or its successor or an affiliate) for Cause after


                                       -5-



the six-month anniversary of a Change of Control, USA shall pay the portion of
the Transaction Success Fee due under Section 2(c)(i), but Executive shall not
be entitled to receive the amount described in Section 2(c)(ii). To the extent
the amount due under 2(c)(i) has been paid by USA prior to a termination under
the condition described in the foregoing sentence, Executive shall not be
required to refund such portion of the Transaction Success Fee.

     3. Restricted Stock Award. Executive acknowledges and agrees that execution
of this Agreement will also constitute Executive's acceptance of a restricted
stock award of 40,000 shares of the Common Stock of PRGS, the terms and
conditions of which are set forth on Exhibit B attached hereto and incorporated
herein. This Agreement will not be deemed accepted until Executive has delivered
an executed copy hereof to USA's Human Resources Department at the address set
forth on the signature page hereto.

     4. Amendments to Employment Agreement.

          (a) The second sentence of Section 11(a) of the Employment Agreement
is hereby amended by striking the phrase "or engaging in activities prohibited
by Sections 6, 7, 8, or 9 hereof" and replacing such language with the phrase
"or engaging in activities prohibited by Sections 8 through 14 of that certain
Change of Control and Restrictive Covenant Agreement by and between Executive
and USA, dated February 14, 2005 ("Change of Control Agreement")."

          (b) Section 11(c) of the Employment Agreement is hereby deleted in its
entirety and replaced by the following:

     "(c) This Agreement may be terminated by Employee for "Good Reason" upon
thirty (30) days prior written notice of termination served personally in
accordance with Section 15 hereof, such "Good Reason" being specified in the
notice; provided that at the time of such notice to the Company, there is no
basis for termination by the Company of Employee's employment for cause. For
purposes of this Agreement, "Good Reason" shall have the meaning ascribed to
such term in the Change of Control Agreement."

          (c) Section 3(b) of Exhibit C of the Employment Agreement is hereby
amended by inserting the following sentence at the end of the paragraph:

               "Subject to the proviso below, if John Cook ceases to be Chief
Executive Officer of PRGX for any reason, it shall be deemed a termination of
Employee's employment without cause solely for purposes of entitlement to
compensation pursuant to this Section 3(b) and pursuant to Section 4(b)(iii)
hereof, and Employee shall be entitled to compensation pursuant to this Section
3(b) and pursuant to Section 4(b)(iii) hereof. In no event shall this provision
be deemed applicable to the interpretation of any of the terms of any of
Employee's awards of equity compensation from PRGX, it being hereby acknowledged
by both parties hereto that the terms of all such awards, including the
Restricted Stock Award granted hereunder, must be interpreted in accordance with
the PRGX Stock Incentive Plan."

          (d) Sections 3, 6, 7, 8, 9 and 10 of the Employment Agreement are
hereby deleted in their entirety.


                                       -6-



          (e) Section 3(h) of Exhibit C to the Employment Agreement is hereby
deleted in its entirety.

     5. Acknowledgement of Restrictive Covenant Consideration. Executive
acknowledges and agrees that $1,020,000.00 (the "Restrictive Covenant
Consideration") of the aggregate value of amounts that USA has agreed to pay
under Section 3 hereof and any amounts that USA has agreed to pay Executive
under the Employment Agreement as a result of termination of his employment, is
being paid in consideration of Executive's agreement to Sections 12, 13 and 14
below. Moreover, Executive acknowledges and agrees that the Restrictive Covenant
Consideration is subject to forfeiture in accordance with Section 15(b) hereof
in the event Executive breaches any of the covenants set forth in Section 12, 13
or 14 hereof.

     6. Taxes. PRG shall deduct or withhold such amounts as may be required
pursuant to applicable federal, state, local, or other laws from all amounts
payable to Executive or awards to be made to Executive pursuant to this
Agreement.

     7. Excess Payments. In the event that any payment or award to be received
by Executive pursuant to Sections 2 or 3 hereof or the value of any acceleration
right occurring pursuant to this Agreement in connection with a Change of
Control would be subject to an excise tax pursuant to Section 4999 of the Code
(or any successor provision), whether in whole or in part, as a result of being
an "excess parachute payment," within the meaning of such term in Section
280G(b) of the Code (or any successor provision), the amount payable under
Sections 2 or 3 shall be reduced so that no portion of such payment or the value
of such acceleration rights is subject to the excise tax pursuant to Section
4999 of the Code. If the amount necessary to eliminate such excise tax exceeds
the amount otherwise payable under Sections 2 or 3, no payment shall be made
under these Sections and no further adjustments shall be made. Notwithstanding
the previous sentence, no portion of such payment or any acceleration right
which tax counsel, selected by USA's accountant and acceptable to Executive,
determines not to constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code will be taken into account.

     8. Confidentiality. Executive covenants and agrees that, during and after
his employment by USA, he will treat as confidential and will not, without the
prior written approval of USA, use (other than in the performance of his
designated duties for USA) or disclose the Trade Secrets or Confidential
Information; provided, the foregoing obligation with respect to Confidential
Information shall expire five years after termination of Executive's employment
by USA.

     9. Records. All records, notes, files, recordings, tapes, disks, memoranda,
reports, price lists, client lists, drawings, plans, sketches, documents,
equipment, apparatus, and like items, and all copies thereof, relating to the
business of USA or its affiliates or the Secret Information, which shall be
prepared by Executive or which shall be disclosed to or which shall come into
the possession of Executive, shall be and remain the sole and exclusive property
of USA. Executive agrees that at any time upon request from USA, to promptly
deliver to USA the originals and all copies of any of the foregoing that are in
the Executive's possession, custody or control


                                       -7-



     10. Executive Inventions.

          (a) Ownership of Works. All Works shall be the sole and absolute
property of Company, including all patent, copyright, trade secret, or other
rights in respect thereof. Executive agrees to and hereby does assign to Company
all right, title, and interest in and to any and all Works, including all
worldwide copyrights, patent rights, and all trade secret information embodied
therein, in all media and including all rights to create derivative works
thereof. Executive waives any and all rights Executive may have in any Works,
including but not limited to the right to acknowledgement as author or moral
rights. Executive agrees not to use or include in Works any patented,
copyrighted, restricted or protected code, specifications, concepts, or trade
secrets of any third party or any other information that Executive would be
prohibited from using by any confidentiality, non-disclosure or other agreement
with any third party. Executive agrees to fully and promptly disclose in writing
to USA any such Works as such Works from time to time may arise.

          (b) Further Assurances. Executive shall, without charge to USA other
than reimbursement of Executive's reasonable out-of-pocket expenses, execute and
deliver all such further documents and instruments, including applications for
patents and copyrights, and perform such acts, at any time during or after the
term of this Agreement as may be necessary or desirable, to obtain, maintain,
and defend patents, copyrights, or other proprietary rights in respect of the
Works or to vest title to such Works in USA, its successors, assigns, or
designees. Without limiting the generality of the foregoing, Executive further
agrees to give all lawful testimony, during or after the term of Executive's
employment, which may be required in connection with any proceedings involving
any Works so assigned by Executive. Executive agrees to keep and maintain
adequate and complete records (in the form of notes, laboratory notebooks,
sketches, drawings, optical drives, hard drives and as may otherwise be
specified by USA) of all inventions and original works of authorship made by
Executive (solely or jointly with others) in the course of employment with
Company, with USA's time, on USA's premises, or using USA's resources or
equipment, which records shall be available to and remain the sole property of
USA at all times.

          (c) No Obligations to Third Parties. Executive represents and warrants
to USA that Executive is not subject to any employment, non-disclosure,
confidentiality, non-compete, or other agreement with any third party which
would prevent or prohibit Executive from fulfilling Executive's duties for USA.
If Executive is the subject of any such agreement, and has any doubt as to its
applicability to Executive's position with USA, Executive will provide a copy of
such agreement to USA so that USA can make a determination as to its effect on
Executive's ability to work for USA. Executive agrees to notify the company in
writing before making any disclosure or perform any work on behalf of USA which
appears to threaten or conflict with any proprietary rights Executive claims or
intends to claim in any invention or original work of authorship. In the event
Executive fails to give such notice, Executive agrees that he will make no claim
against USA with respect to any such invention or work of authorship.

     11. Cooperation. Executive agrees to cooperate at any time to the extent
and in the manner requested by USA and at USA's expense, in the prosecution or
defense of any claims, litigation or other proceeding involving the Works, the
property of USA or the Secret Information.


                                       -8-



Executive agrees to diligently protect any and all Secret Information against
loss by inadvertent or unauthorized disclosure. Executive will comply with
regulations, policies, and procedures established by USA, including, without
limitation, all regulations, policies, and procedures established for the
purpose of protecting Secret Information.

     12. Agreement Not to Compete. Executive covenants and agrees that during
his employment by USA and for a period of two years after termination, for any
reason, of such employment, he will not, without the prior written consent of
USA, within Fulton County, Georgia, for himself or on behalf of another,
directly or indirectly, engage in any business for which he provides services
which are the same or substantially similar to his services for USA (as
described in the Employment Agreement) to or on behalf of a Competing Business;
provided, however, if the termination occurs on or after the second anniversary
of the date of the Change of Control, the two year non-compete period set forth
herein shall reduce to a one year non-compete period. Executive acknowledges and
agrees that Fulton County, Georgia is the geographic area within which the
Executive performs services for the Company.

     13. Agreement Not to Solicit Customers. During Executive's employment by
USA and for a period of two years after the termination of such employment for
any reason, whether by USA or by Executive, with or without Cause or Good
Reason, Executive will not, without the prior written consent of USA, directly
or indirectly, on Executive's own behalf or in the service or on behalf of
others, solicit or attempt to divert or appropriate to a Competing Business, any
customer or actual prospect of USA, in either case, with whom Executive dealt on
behalf of USA at any time during the 12-month period immediately preceding the
termination of employment; provided, however, if the termination occurs on or
after the second anniversary of the date of the Change of Control, the two year
customer non-solicit period set forth herein shall reduce to a one year customer
non-solicit period.

     14. Agreement Not to Solicit Employees. During Executive's employment by
USA and for a period of two years after the termination of such employment for
any reason, whether by USA or by Executive, with or without Cause or Good
Reason, Executive will not, without the prior consent of USA, directly or
indirectly, on Executive's own behalf or in the service or on behalf of others,
solicit, divert or recruit any employee of USA, or of USA's affiliates, to leave
such employment, whether such employment is by written contract or at will;
provided, however, if the termination occurs on or after the second anniversary
of the date of the Change of Control, the two year employee non-solicit period
set forth herein shall reduce to a one year employee non-solicit period.

     15. Consideration; Remedies.

          (a) Injunctive Relief. Executive acknowledges and agrees that, by
virtue of the duties and responsibilities attendant to his employment by USA and
the special knowledge of USA's affairs, business, clients, and operations that
he has and will have as a consequence of such employment, irreparable loss and
damage will be suffered by USA if Executive should breach or violate any of the
covenants and agreements contained in Sections 8 through 14. Executive further
acknowledges and agrees that each of such covenants is reasonably necessary to
protect and preserve the business of USA. Executive, therefore, agrees and
consents that, in addition to any


                                       -9-



other remedies available to it, USA shall be entitled to an injunction to
prevent a breach or contemplated breach by the Executive of any of the covenants
or agreements contained in such Sections.

          (b) Forfeiture. Executive acknowledges that USA intends to enforce the
terms of the restrictive covenants of this Agreement contained in Sections 12,
13, and 14. In the event Executive breaches the provisions of Sections 12, 13,
or 14, Executive shall immediately forfeit his right to receive (or shall refund
to USA or its successor to the extent Executive has been previously paid) the
value of the portion of the Restrictive Covenant Consideration allocable to the
portion of the two year time period ($1,397.26 per day of violation, capped at
amounts actually received by Executive) during which Executive is in violation
of any of such Sections 12, 13, or 14. Executive acknowledges that the actual
damages for any such breach are costly and difficult to estimate and the amount
required to be refunded or forfeited by this Section 15(b) is a reasonable
estimation of such damages. The parties agree that such forfeited or refunded
amount is intended as liquidated damages and not as a penalty. The parties also
agree that the remedies set forth in this Section 15(b) are in addition to other
remedies, including equitable remedies.

          (c) No Defense; Remedies. The existence of any claim, demand, action
or cause of action of Executive against USA or its affiliates, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by USA of any of the covenants contained herein. The rights of
USA under this Agreement are in addition to, and not in lieu of, all other
rights USA may have at law or in equity to protect its confidential information,
trade secrets and other proprietary interests.

     16. Severability; Construction. Each covenant of this Agreement shall be
deemed and shall be construed as a separate and independent covenant, and should
any part or provision of any such covenants be declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other separate covenant
of Executive not declared invalid. Whenever there is a conflict between an
applicable law of a jurisdiction which governs the subject matter of this
Agreement and any provision of this Agreement, the affected portions of this
Agreement shall be deemed revised, as to such jurisdiction only, in a manner
which (i) eliminates any invalid, illegal or completely unenforceable provision,
and (ii) as to any provision which is held to be excessively broad as to time
duration, scope, activity or subject, limits or reduces such provision so as to
be enforceable to the extent compatible with the applicable law.

     17. Notices. Any notice required or permitted to be given to one party by
the other party hereto pursuant to this Agreement shall be in writing and shall
be personally delivered (including delivery by overnight or express courier), or
sent by United States Mail, certified or registered, return receipt requested,
first class postage and charges prepaid, in envelopes addressed to the parties
as set forth below their signatures or at such other addresses as shall be
designated in writing by either party to the other party in accordance with this
Section. Notices delivered in person shall be effective on the date of delivery.
Notices sent by United States Mail shall be effective on the third day following
deposit.


                                      -10-



     18. Amendment. No amendment or modification of this Agreement shall be
valid or binding upon either party unless made in writing.

     19. Waiver. The waiver by one party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach of the same or any other provision by the other party.

     20. Execution of Release. Executive acknowledges and agrees that he is not
eligible to receive any severance payments under the Employment Agreement unless
and until he executes a general release agreement and covenant not to sue, in
the form attached hereto at Exhibit

     21. Attorneys' Fees. If any action at law or in equity is necessary to
enforce the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and expenses in addition to any other relief
to which such prevailing party may be entitled.

     22. Gender. All references included herein to the male gender shall be
construed to include the female gender, if and as appropriate.

     23. Assignment; Benefit; Payment to Estate. This Agreement may not be
assigned by Executive and shall be binding upon Executive's devisees, heirs,
legatees, beneficiaries, executors, administrators, or other legal
representatives. This Agreement may be assigned by USA, and the right, remedies,
and obligations of USA shall inure to the benefit of and be binding upon its
successors and assigns. In the event of Executive's death, any payment that
Executive has earned and to which Executive is entitled under this Agreement,
but which has not been paid at the time of Executive's death, shall be paid to
Executive's estate.

     24. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.

     25. Costs Associated with IRS Audit. In the event there is an Internal
Revenue Service audit of Executive's tax returns related to the tax treatment of
Executive's compensation under this Agreement, USA shall reimburse Executive for
one-half (1/2) of the professional fees and expenses (accounting, legal,
appraisal or other consultant) incurred by Executive contesting, disputing,
complying with or otherwise responding to such audit, up to a maximum of
$10,000.

     26. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the matters contained herein and, subject to
the following sentence, supersedes and terminates all previous agreements with
respect to the matters contained herein. Except as specifically set forth in
Section 4 hereof, the terms of this Agreement (a) are in addition to, and not in
lieu of, the benefits to which Executive is entitled under the Employment
Agreement and (b) shall not be deemed to supersede, amend, or terminate the any
other parts of the Employment Agreement. For the avoidance of doubt, the parties
acknowledge and agree that except as expressly set forth herein, no other
aspects of Executive's Employment Agreement are, or shall be deemed for any
purposes modified.

                         [SIGNATURES ON FOLLOWING PAGE]


                                      -11-



     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.

EXECUTIVE:


John M. Toma                            Date: 2/14/05
- -------------------------------------
John M. Toma

Address:
         ----------------------------

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


"USA":

PRG-SCHULTZ USA, Inc.


By: John M. Cook                        Date: 2/14/05
    ---------------------------------
Title: Chairman & CEO

Address: 600 Galleria Parkway
         Suite 100
         Atlanta, Georgia 30339
Attention: Marie Neff, Executive Vice
           President-Human Resources


"PRGS":

PRG-SCHULTZ INTERNATIONAL, Inc.


By: John M. Cook                        Date: 2/14/05
- -------------------------------------
Title: Chairman & CEO

Address: 600 Galleria Parkway
         Suite 100
         Atlanta, Georgia 30339
Attention: Marie Neff, Executive Vice
           President-Human Resources


                                      -12-



                                    EXHIBIT A

                                 JOB DESCRIPTION


                                      -13-



                                    EXHIBIT A
                                       TO
              CHANGE OF CONTROL AND RESTRICTIVE COVENANT AGREEMENT
                                       OF
                                  JOHN M. TOMA

Position: Vice Chairman

Duties, Responsibilities and Authority:

     -    Provide ongoing managerial assistance and advice to the Chairman and
          CEO on both tactical items and strategic direction

     -    Reports to Chairman/CEO or other senior-most executive.

     -    Set policies and procedures for the company

     -    Directly responsible for International Audit development, legal,
          facilities, purchasing and the evolution of our business model

     -    Member of the Executive Committee.


                                      -14-


                                    EXHIBIT B

                                   STOCK AWARD


                                      -15-


                                                     YOUR NAME: John M. Toma
                                                     TOTAL NO. OF SHARES: 40,000

             PRGX RESTRICTED STOCK AWARD AGREEMENT (THE "AGREEMENT")

PRG-SCHULTZ INTERNATIONAL, INC. ("PRGX") is pleased to grant to the person named
above (referred to as "you" or "Grantee") the restricted stock award described
below ("Stock Award"), pursuant to this Agreement, the PRG-Schultz
International, Inc. Stock Incentive Plan (the "Plan"), and the Change of Control
and Restrictive Covenant Agreement between PRG-Schultz USA, Inc. ("USA"), a
wholly owned subsidiary of PRGX, and you, and of which this Agreement is a part
(the "2005 Restrictive Covenant Agreement").

GRANT DATE:                      FEBRUARY 14, 2005
MARKET PRICE ON GRANT DATE:                $  4.95
TOTAL NUMBER OF SHARES GRANTED:             40,000
START DATE FOR VESTING SCHEDULE: FEBRUARY 14, 2005

VESTING SCHEDULE: Subject to the terms of the Plan and the 2005 Restrictive
Covenant Agreement, the Stock Award shall vest in accordance with the following
schedule:

A. Normal Vesting. Unless the vesting of the Stock Award has been accelerated
pursuant to Section B below, all of the shares granted by this Stock Award shall
vest on February 14, 2008 (which is three years from the Grant Date specified
above), except as otherwise provided in the Additional Terms and Conditions
(attached and incorporated herein), including certain provisions related to
termination of employment, breach of the 2005 Restrictive Covenant Agreement,
and reduction in the number of shares issuable hereunder due to the application
of the excise tax on excess parachute payments (the "Parachute Cutback").

B. Accelerated Vesting. Subject to the provisions of the Additional Terms and
Conditions regarding termination of employment, breach of the 2005 Restrictive
Covenant Agreement, and the Parachute Cutback, but only to the extent consistent
with the Plan, vesting of the Stock Award will accelerate upon any of the
following events: (i) Change of Control (as defined below); (ii) your death;
(iii) your Disability, as that term is defined in your Employment Agreement, as
it may be amended from time to time; and (iv) an involuntary termination of your
employment without Cause, as that term is defined in your 2005 Restrictive
Covenant Agreement, that occurs on or before December 31, 2005 (or March 31,
2006, solely in the case of the entry into a definitive agreement on or before
December 31, 2005 with respect to a Change of Control as hereafter provided by
this subsection (iv)) and is either in contemplation of a Change of Control
(which shall include, for purposes of this subsection


                                      -16-



(iv) only, the entry into a definitive agreement on or before December 31, 2005
with respect to a Change of Control where such Change of Control is actually
consummated on or before March 31, 2006) or at the insistence of the prospective
purchaser of PRGX; provided, however, that with respect to an acceleration under
this subsection (iv), notwithstanding anything to the contrary contained herein,
you shall have no right to have your Stock Award released from escrow or to have
certificates for your Stock Award issued to you, and you may not transfer all or
any portion of your Stock Award, until the actual occurrence of a Change of
Control (which shall include, for purposes of this subsection (iv) only, the
entry into a definitive agreement on or before December 31, 2005 with respect to
a Change of Control where such Change of Control is actually consummated on or
before March 31, 2006) or sale of PRGX on or before December 31, 2005, and in
the event such a Change of Control or sale does not occur on or before December
31, 2005, your entire Stock Award shall be forfeited back to the Company. For
purposes of this Agreement, the term "Change of Control" shall mean shall mean
the occurrence of any of the following events: (i) a majority of the outstanding
voting stock of PRGX shall have been acquired or beneficially owned by any
person (other than PRGX or a subsidiary of PRGX) or any two or more persons
acting as a partnership, limited partnership, syndicate or other group, entity
or association acting in concert for the purpose of voting, acquiring, holding,
or disposing of voting stock of PRGX; or (ii) a merger or a consolidation of
PRGX with or into another corporation, other than (A) a merger or consolidation
with a subsidiary of PRGX, or (B) a merger or consolidation in which the holders
of voting stock of PRGX immediately prior to the merger as a class hold
immediately after the merger at least a majority of all outstanding voting power
of the surviving or resulting corporation or its parent; or (iii) a statutory
exchange of shares of one or more classes or series of outstanding voting stock
of PRGX for cash, securities, or other property, other than an exchange in which
the holders of voting stock of PRGX immediately prior to the exchange as a class
hold immediately after the exchange at least a majority of all outstanding
voting power of the entity with which PRGX stock is being exchanged; or (iv) the
sale or other disposition of all or substantially all of the assets of PRGX, in
one transaction or a series of transactions, other than a sale or disposition in
which the holders of voting stock of PRGX immediately prior to the sale or
disposition as a class hold immediately after the exchange at least a majority
of all outstanding voting power of the entity to which the assets of PRGX are
being sold; or (v) the liquidation or dissolution of PRGX.

ATTACHED ARE THE FOLLOWING DOCUMENTS (INCORPORATED INTO THIS AGREEMENT BY
REFERENCE), WHICH CONTAIN IMPORTANT INFORMATION ABOUT YOUR STOCK AWARD. PLEASE
REVIEW THEM CAREFULLY AND CONTACT PRGX HUMAN RESOURCES IF YOU HAVE ANY
QUESTIONS:

Additional Terms and Conditions describes what happens if you cease to be
employed by PRGX before your Stock Award vests, certain events that could cause
forfeiture of the stock granted under this Agreement, where to send notices and
other matters.

The Plan contains detailed terms that govern your Stock Award. If anything in
this Agreement, the 2005 Restrictive Covenant Agreement, your Employee
Agreement, or any of the other attachments hereto is inconsistent with the Plan,
the terms of the Plan, as amended from time to time, will control.

The Plan Prospectus Document covering the Stock Award contains important
information, including federal income tax consequences.

2003 Annual Report of PRGX (not attached if you previously received the 2003
Annual Report).


                                      -17-



The terms of your 2005 Restrictive Covenant Agreement, of which this Agreement
is a part, are also incorporated herein.

BY SIGNING THE 2005 RESTRICTIVE COVENANT AGREEMENT, YOU AFFIRM AND ACKNOWLEDGE
THAT YOU HAVE ACCEPTED ALL OF THE TERMS OF THIS STOCK AWARD AFTER REVIEWING THE
ABOVE DOCUMENTS.

THE STOCK OFFERED HEREBY WILL NOT BE ISSUED AND YOU WILL HAVE NO RIGHTS
HEREUNDER UNTIL YOU HAVE COMMUNICATED YOUR ACCEPTANCE OF THE TERMS OF THIS
AGREEMENT BY RETURNING A SIGNED ORIGINAL OF THE 2005 RESTRICTIVE COVENANT
AGREEMENT AS PROVIDED THEREIN. PRGX MAY WITHDRAW THIS OFFER AT ANY TIME UNTIL
SUCH ACCEPTANCE.


                                      -18-



                       ADDITIONAL TERMS AND CONDITIONS OF
                           YOUR RESTRICTED STOCK AWARD

EFFECT OF TERMINATION OF EMPLOYMENT. You must be employed by PRGX or one of its
subsidiaries or affiliates on the applicable vesting date to be entitled to the
vesting of your Stock Award on such date, except as provided in Section B of
your Restricted Stock Award Agreement (the "Agreement"), which provides for
accelerated vesting upon certain events. If you cease to be employed by any of
PRGX, its subsidiaries or affiliates for any reason, except as provided in
Section B of the Agreement, then any portion of your Stock Award which has not
vested as of the date of termination of employment shall automatically be
forfeited and cancelled as of the date of such termination of employment.

EFFECT OF BREACH OF RESTRICTIVE COVENANTS. If you breach Section 12, 13 OR 14 of
the 2005 Restrictive Covenant Agreement, your Stock Award, regardless of whether
or not vested, will be forfeited, in accordance with Section 15(B) of the 2005
Restrictive Covenant Agreement, in an amount equal to the Forfeited Share Value,
calculated as set forth below.

The number of shares forfeited upon breach of one of the above-listed
restrictive covenants will equal:

     -    The Forfeited Share Value;

          DIVIDED BY

     -    the "Fair Market Value" of the shares of common stock in PRGX on the
          date of forfeiture. "Fair Market Value" shall be determined in
          accordance with the Plan.

"Forfeited Share Value" means:

     -    The dollar amount ("Total Liquidated Damages") of benefits to be
          forfeited and/or refunded under Section 15(B) of the 2005 Restrictive
          Covenant Agreement, calculated as provided in Section 15(B);

          MINUS

     -    The total amount of other benefits owing to you under the 2005
          Restrictive Covenant Agreement and payable in cash (the "Cash
          Benefits").

In addition, you will be required under Section 15(B) of the 2005 Restrictive
Covenant Agreement to make a cash payment to the extent the sum of the Fair
Market Value of the shares forfeited hereunder, plus the Cash Benefits, is less
than Total Liquidated Damages.

ESCROW OF STOCK AWARD SHARES. Shares of common stock granted pursuant to this
Stock Award shall be issued in your name and held in escrow by PRGX, in
book-entry form on the books maintained by the transfer agent for PRGX's common
stock, until the Stock Award is vested


                                      -19-



or forfeited as provided herein. Upon vesting of your Stock Award, the shares
will be released from escrow, and PRGX will deliver to you a certificate or
certificates representing the vested shares. However, transferability will
remain subject to relevant provisions of the federal securities laws
post-vesting, including (for so long as you remain an affiliate of PRGX) certain
limitations set forth in SEC Rule 144 promulgated under the Securities Act of
1933.

RIGHTS WITH RESPECT TO SHARES PRIOR TO VESTING. You may not transfer your Stock
Award or the shares to be issued hereunder prior to vesting. Once all or any
portion of this Stock Award vests, you will receive a transferable certificate
or certificates representing the shares, as described above. Prior to vesting,
you are entitled to all of the rights (other than transferability) of a
shareholder with respect to all unforfeited shares underlying the Stock Award,
including the right to vote such shares and to receive dividends and other
distributions payable with respect to such shares after the Grant Date.

WITHHOLDING. Whenever PRGX proposes, or is required, to distribute vested shares
to you or pay you dividends with respect to the unvested portion of your Stock
Award, PRGX may either: (a) require you to satisfy any local, state, Federal and
foreign income tax, employment tax and insurance withholding requirements prior
to the delivery of any payment or stock certificate owing to you pursuant to the
Stock Award; or, in its discretion, (b) reduce the number of shares to be
delivered to you by a number of shares sufficient to satisfy all or a portion of
such tax withholding requirements, based on the fair market value of PRGX's
shares of common stock on the date of withholding as determined under the Plan.
In furtherance of the foregoing, PRGX may, at the discretion of the Committee,
and subject to such requirements as the Committee may impose prior to the
occurrence of such withholding, permit you to satisfy such withholding or other
tax obligations through cash payment or the surrender of vested shares of Stock
which you already own.

REDUCTION OF CHANGE IN CONTROL PAYMENTS. As provided in your 2005 Restrictive
Covenant Agreement, the number of vested shares distributable to you is subject
to reduction to the extent necessary to avoid the imposition of any excise taxes
under certain "golden parachute" tax laws. All or a portion of any unvested
shares underlying this Award may be forfeited if certain benefits owing to you
under Sections 2 and 3 of the 2005 Restrictive Covenant Agreement and other
amounts treated as received by you which are treated as contingent upon a change
of control reach the "Golden Parachute Threshold."

The "Golden Parachute Threshold" is the point at which the aggregate value of
the above benefits, to the extent they are treated as contingent upon a change
of control, would (absent the operation of Section 7 of the 2005 Restrictive
Covenant Agreement) result in the excise tax pursuant to Section 4999 of the
Internal Revenue Code of 1986 (or any successor provision), being applicable to
the portion of each payment which is treated as an excess parachute payment.

If the Golden Parachute Threshold would otherwise be reached, the amounts
payable under Sections 2 OR 3, of the 2005 Restrictive Covenant Agreement,
including the number of shares to vest and be delivered hereunder, will be
reduced to the extent necessary so that none of the amounts payable under
Section 2 OR 3 of the 2005 Restrictive Covenant Agreement will be subject to the
excise tax. The number of shares that will be forfeited hereunder will equal:


                                      -20-



     -    the Cutback Share Value;

          DIVIDED BY

     -    the Fair Market Value of the shares of common stock in PRGX on the
          date of the Change of Control.

"Cutback Share Value" means:

     -    the total dollar amount ("Cutback Amount") of the reduction in
          benefits necessary to avoid reaching the Golden Parachute Threshold,
          computed in accordance with Section 7 of the 2005 Restrictive Covenant
          Agreement;

          TIMES

     -    a percentage (which may be anywhere from 0% to 100%) to be designated
          by the Committee, reflecting an allocation of the Cutback Amount to
          this Stock Award;

provided that the Cutback Share Value cannot exceed the total fair market value
of the shares which would otherwise vest hereunder, without further risk of
forfeiture; and the balance of the Cutback Amount cannot exceed the amount of
benefits otherwise payable under Sections 2 OR 3 of the 2004 Restricted Covenant
Agreement.

NOTICES. All notices delivered pursuant to this Agreement shall be in writing
and shall be delivered or sent in accordance with the provisions of the 2005
Restrictive Covenant Agreement.

MISCELLANEOUS. Failure by you or PRGX at any time or times to require
performance by the other of any provisions in this Agreement will not affect the
right to enforce those provisions. Any waiver by you or PRGX of any condition or
of any breach of any term or provision in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall apply only to that instance and
will not be deemed to waive conditions or breaches in the future. If any court
of competent jurisdiction holds that any term or provision of this Agreement is
invalid or unenforceable, the remaining terms and provisions will continue in
full force and effect, and this Agreement shall be deemed to be amended
automatically to exclude the offending provision. This Agreement shall be
subject to and governed by the laws of the State of Georgia. No change or
modification of this Agreement shall be valid unless it is in writing and signed
by the party against which enforcement is sought, except where specifically
provided to the contrary herein. This Agreement shall be binding upon, and inure
to the benefit of, the permitted successors, assigns, heirs, executors and legal
representatives of the parties hereto. The headings of each section of this
Agreement are for convenience only. This Agreement (including the portions
incorporated by reference) contains the entire Agreement of the parties hereto,
and no representation, inducement, promise, or agreement or other similar
understanding between the parties not embodied herein shall be of any force or
effect, and no party will be liable or bound in any manner for any warranty,
representation, or covenant except as specifically set forth herein.


                                      -21-



                                    EXHIBIT C

                                 FORM OF RELEASE




                                 FORM OF RELEASE

     THIS RELEASE AGREEMENT AND COVENANT NOT TO SUE (the "Agreement") is entered
into by and between PRG-Schultz USA, Inc., a Georgia corporation (the "Company")
and _________________, a resident of the state of ________________
("Executive"), as of the Effective Date of the Agreement, as defined below.

                                   WITNESSETH

     Executive and Company are parties to that certain [offer letter
agreement/employment agreement], dated ______________________ ("Employment
Agreement").

     Executive and Company are parties to that certain Change of Control and
Restrictive Covenant Agreement, dated ________________ ("Change of Control
Agreement").

     Executive and Company are terminating their employment relationship,
subject to the terms hereof; and

     NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein and other good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:

     1. Termination of Employment. The parties hereto hereby acknowledge and
agree that Executive's employment with Company will automatically terminate as
of the close of business on _____________________________.

     2. General Release of Claims. In consideration of the covenants from
Company to Executive set forth herein and in the Employment Agreement and Change
of Control Agreement, the receipt and sufficiency of which is hereby
acknowledged, Executive, on his behalf and on behalf of his heirs, devisees,
legatees, executors, administrators, personal and legal representatives, assigns
and successors in interest (collectively, the "Derivative Claimants" and each a
"Derivative Claimant"), hereby IRREVOCABLY, UNCONDITIONALLY AND GENERALLY
RELEASES, ACQUITS, AND FOREVER DISCHARGES, to the fullest extent permitted by
law, Company and each of Company's directors, officers, employees,
representatives, stockholders, predecessors, successors, assigns, agents,
attorneys, divisions, subsidiaries and affiliates (and agents, directors,
officers, employees, representatives and attorneys of such stockholders,
predecessors, successors, assigns, divisions, subsidiaries and affiliates), and
all persons acting by, through, under or in concert with any of them
(collectively, the "Releasees" and each a "Releasee"), or any of them, from any
and all charges, complaints, claims, damages, actions, causes of action, suits,
rights, demands, grievances, costs, losses, debts, and expenses (including
attorneys' fees and costs incurred), of any nature whatsoever, known or unknown,
that Executive now has, owns, or holds, or claims to have, own, or hold, or
which Executive at any time heretofore had, owned, or held, or claimed to have,
own, or hold from the beginning of time to the date that Executive signs this
Agreement, including, but not limited to, those claims arising out of or
relating to (i) any agreement, commitment, contract, mortgage, deed of trust,
bond, indenture, lease, license, note, franchise, certificate, option, warrant,
right or other instrument, document, obligation or arrangement, whether written
or oral, or any other relationship, involving Executive and/or any Releasee,
(ii) breach of any express or


                                      -23-



implied contract, breach of implied covenant of good faith and fair dealing,
misrepresentation, interference with contractual or business relations, personal
injury, slander, libel, assault, battery, negligence, negligent or intentional
infliction of emotional distress or mental suffering, false imprisonment,
wrongful termination, wrongful demotion, wrongful failure to promote, wrongful
deprivation of a career opportunity, discrimination (including disparate
treatment and disparate impact), hostile work environment, sexual harassment,
retaliation, any request to submit to a drug or polygraph test, and/or
whistleblowing, whether said claim(s) are brought pursuant to the AGE
DISCRIMINATION IN EMPLOYMENT ACT, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS
AMENDED, THE EQUAL PAY ACT, 42 U.S.C. SECTIONS 1981, 1983, OR 1985, THE
VOCATIONAL REHABILITATION ACT OF 1977, THE AMERICANS WITH DISABILITIES ACT, THE
FAMILY AND MEDICAL LEAVE ACT OR THE FAIR CREDIT REPORTING ACT or any other
constitutional, federal, regulatory, state or local law, or under the common law
or in equity, and (iii) any other matter (each of which is referred to herein as
a "Claim"); provided, however, that nothing contained herein shall operate to
release any obligations of Company, its successors or assigns arising under any
claims under the Employment Agreement, the Change of Control Agreement or under
any written Company benefit plans, any 401(k) plan, any pension plan and any
similar plan, to the extent Executive is entitled to benefits under the
respective terms thereof.

     3. Release of Unknown Claims. Executive recognizes that he may have some
claim, demand, or cause of action against the Releasees relating to any Claim of
which he is totally unaware and unsuspecting and which is given up by the
execution of this Agreement. It is Executive's intention in executing this
Agreement with the advice of legal counsel that this Agreement will deprive him
of any such Claim and prevent Executive or any Derivative Claimant from
asserting the same. The provisions of any local, state, federal, or foreign law,
statute, or judicial decision providing in substance that this Agreement shall
not extend to such unknown or unsuspecting claims, demands, or damages, are
hereby expressly waived.

     4. Acknowledgment. Executive acknowledges that he has thoroughly discussed
all aspects of this Agreement with his attorney, that he has carefully read and
fully understands all of the provisions of this Agreement, and that he is
voluntarily entering into this Agreement. Executive hereby waives the
requirement under the Age Discrimination in Employment Act that Executive has
twenty-one (21) days to review and consider this Agreement before executing it.
Executive acknowledges and understands that he shall have seven (7) days after
signing this Agreement during which he may revoke this Agreement by providing
written notice to Company within seven (7) days following its execution. Any
notice of revocation of this Agreement shall not be effective unless given in
writing and received by Company within the seven-day revocation period via
personal delivery, overnight courier, or certified U.S. mail, return receipt
requested, to PRG-SCHULTZ USA, INC., 600 Galleria Parkway, Suite 100, Atlanta,
Georgia 30339, Attention: General Counsel. THIS AGREEMENT SHALL NOT BECOME
EFFECTIVE AND ENFORCEABLE UNTIL SUCH SEVEN (7) DAY PERIOD HAS EXPIRED. IF
EMPLOYEE REVOKES THIS AGREEMENT WITHIN SUCH SEVEN (7) DAY PERIOD, EMPLOYEE WILL
NOT BE ENTITLED TO RECEIVE ANY OF THE RIGHTS AND BENEFITS DESCRIBED HEREIN OR
UNDER THE EMPLOYMENT AGREEMENT OR CHANGE OF CONTROL AGREEMENT.

     5. No Assignment. Executive represents and warrants that he has not
assigned or transferred, or purported to assign or transfer, to any person,
entity, or individual whatsoever,


                                      -24-



any of the Claims released herein. Executive agrees to indemnify and hold
harmless the Releasees against any Claim based on, arising out of, or due to any
such assignment or transfer.

     6. Indemnification. In furtherance of the foregoing, Executive agrees on
behalf of himself and the Derivative Claimants not to sue or prosecute any
matter against any Releasee with respect to any Claim and agrees to hold each
Releasee harmless with respect to any such suit or prosecution in contravention
of this Section 6. Executive understands that if this Agreement were not signed,
he would have the right voluntarily to assist other individuals or entities in
bringing Claims against the Releasees. Executive hereby waives that right and
hereby agree that he will not voluntarily provide any such assistance. To the
extent that applicable law prohibits Executive from waiving his right to bring
and/or participate in the investigation of a Claim, Executive nevertheless
waives his right to seek or accept any damages or relief in any such proceeding.

     7. Representation Regarding Knowledge of Trade Secrets and/or Inventions.
Executive hereby acknowledges and confirms that he has no right, claim or
interest to any property, invention, trade secret, information or other asset
used in the business of Company and that all such property, inventions, trade
secrets, information and other assets used in the business of Company are owned
by Company or its affiliates or licensed to Company or its affiliates by third
parties not affiliated with Executive.

     8. Return of Company Property and Proprietary Information. (a) Executive
further promises, represents and warrants that Executive has returned or will
return to _______________ [IDENTIFY DESIGNEE] by no later than upon the
execution of this Agreement by Executive: (a) all property of Company,
including, but not limited to, any and all files, records, credit cards, keys,
identification cards/badges, computer access codes, computer programs,
instruction manuals, equipment (including computers) and business plans; (b) any
other property which Executive prepared or helped to prepare in connection with
Executive's employment with Company; and (c) all documents, including logs or
diaries, all tangible materials, including audio and video tapes, all intangible
materials (including computer files), and any and all copies or duplicates of
any such tangible or intangible materials, including any duplicates, copies, or
transcriptions made of audio or video tapes, whether in handwriting or
typewritten, that are in the possession, custody or control of Executive or his
attorneys, agents, family members, or other representatives, which are alleged
to support in any way any of the claims Executive has released under this
Agreement.

     (b) The foregoing representation shall include all Proprietary Information
of Company and Company. With respect to Proprietary Information, Executive
warrants, represents, and covenants to return such Proprietary Information on or
before the close of business on ____________________. As used herein,
"Proprietary Information" means information in written form or electronic media,
including but not limited to technical and non-technical data, lists, training
manuals, training systems, computer based training modules, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes and
plans regarding Company or its affiliates, clients, prospective clients, methods
of operation, billing rates, billing procedures, suppliers, business methods,
finances, management, or any other business information relating to Company or
its affiliates (whether constituting a trade secret or proprietary or otherwise)
which has value to Company or its affiliates and is treated by Company


                                      -25-



or its affiliates as being confidential; provided; however, that Proprietary
Information shall not include any information that has been voluntarily
disclosed to the public by Company or its affiliates (except where such public
disclosure has been made without authorization) or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means. Proprietary Information does include information which has
been disclosed to Company or its affiliates by a third party and which Company
or its affiliates are obligated to treat as confidential. Proprietary
Information may or may not be marked by Company or its affiliates as
"proprietary" or "secret" or with other words or markings of similar meaning,
and the failure of Company to make such notations upon the physical embodiments
of any Proprietary Information shall not affect the status of such information
as Proprietary Information.

     9. General Provisions.

     (a) This Agreement and the covenants, representations, warranties and
releases contained herein shall inure to the benefit of and be binding upon
Executive and Company and each of their respective successors, heirs, assigns,
agents, affiliates, parents, subsidiaries and representatives.

     (b) Each party acknowledges that no one has made any representation
whatsoever not contained herein concerning the subject matter hereof to induce
the execution of this Agreement. Executive acknowledges that the consideration
for signing this Agreement is a benefit to which Executive would not have been
entitled had Executive not signed this Agreement.

     (c) Executive agrees that the terms and conditions of this Agreement,
including the consideration hereunder shall not be disclosed to anyone and shall
remain confidential and not disseminated to any person or entity not a party to
this Agreement except to family members, legal counsel, an accountant for
purposes of securing tax advice; the Internal Revenue Service, or the state
taxing agencies.

     (d) The "Effective Date" of this Agreement shall be the eighth (8th) day
after the execution of the Agreement by Executive.

     (e) This Agreement does not constitute an admission of any liability.

     (f) The parties hereto and each of them agrees and acknowledges that if any
portion of this Agreement is declared invalid or unenforceable by a final
judgment of any court of competent jurisdiction, such determination shall not
affect the balance of this Agreement, which shall remain in full force and
effect. Any such invalid portion shall be deemed severable.

     (g) Neither this Agreement nor any provision hereof may be modified or
waived in any way except by an agreement in writing signed by each of the
parties hereto consenting to such modification or waiver.

This Agreement shall in all respects be interpreted, enforced and governed under
the internal laws (and not the conflicts of laws and rules) of Georgia.


                                      -26-



     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.

EXECUTIVE ATTESTS THAT HE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF
ALL KNOWN AND UNKNOWN CLAIMS.

NOTICE - THIS AGREEMENT CONTAINS A WAIVER OF RIGHTS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT. EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE
SIGNING THIS AGREEMENT

EXECUTED THIS __________ DAY OF _________________, 200__.

EXECUTIVE: __________________________

           PRINT NAME: ______________

Sworn to and subscribed before me this __________ day of _________________,
200__.


- -------------------------------------
Notary Public

EXECUTED THIS __________ DAY OF _________________, 200__.

COMPANY: PRG-SCHULTZ USA, INC.


By:
    ---------------------------------
Its:
     --------------------------------


                                      -27-

EX-10.39

                        CHANGE OF CONTROL AND RESTRICTIVE
                               COVENANT AGREEMENT

     This Change of Control and Restrictive Covenant Agreement ("Agreement") is
entered into this 14 day of February, 2005 by and among Richard J. Bacon
("Executive"), PRG-Schultz USA, Inc., a Georgia corporation ("USA") and
PRG-Schultz International, Inc., a Georgia corporation that owns all of the
capital stock of USA ("PRGS").

     WHEREAS, Executive and USA entered into that certain offer letter agreement
("Offer Letter") dated September 1, 2003 which set forth the terms of employment
under which USA employed Executive as the Executive Vice President,
International, for USA;

     WHEREAS, in connection with Executive's employment, Executive executed that
certain Employee Agreement (the "Employee Agreement") dated [2/14/05], which
contained certain restrictive covenants;

     WHEREAS, Executive is a senior executive of USA whose services are
extremely valuable to USA, and whose services include responsibilities for
international sales for PRGS, and PRGS' affiliates and subsidiaries;

     WHEREAS, Executive has had and will have access to the valuable and
proprietary trade secrets of USA and its customers, and Executive has had and
will have close contact with the customers and employees of USA;

     WHEREAS, Executive and USA desire to enter into this Change of Control and
Restrictive Covenant Agreement to (a) amend certain provisions of the Offer
Letter regarding termination of employment and severance in the manner set forth
herein, (b) provide Executive additional security and benefits in the event of
any actual or threatened change of control of PRGS, (c) provide incentives to
Executive to remain employed with USA, (d) provide PRGS with reasonable
protection of the valuable trade secrets and confidential information of USA and
its customers, as well as the relationships between USA and its customers and
employees, and (e) preserve the goodwill of PRGS for the benefit of the
shareholders in the event a change of control occurs;

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

     1. Definitions. As used in this Agreement, the following terms shall have
the meaning specified:

     "Business of USA" shall mean (a) audit services (i) to identify and recover
lost profits from any source, including, without limitation, payment errors,
missed or inaccurate discounts, allowances, or rebates, vendor pricing errors,
or duplicate payments and (ii) to identify expense containment opportunities;
(b) development and use of technology to provide such services; and (c)
provision of related consulting services.



     "Cause" shall mean, as determined by the Board of Directors of PRGS (the
"Board") in good faith: (1) a material breach by Executive of the duties and
responsibilities of Executive or any written policies or directives of USA
(other than as a result of incapacity due to physical or mental illness) which
is (i) willful or involves gross negligence, and (ii) not remedied within thirty
(30) days after receipt of written notice from USA which specifically identifies
the manner in which such breach has occurred; (2) Executive commits any felony
or any misdemeanor involving willful misconduct (other than minor violations
such as traffic violations) that causes damage to the property, business or
reputation of USA, as determined in good faith by the Board; (3) Executive
engages in a fraudulent or dishonest act, as determined in good faith by the
Board; (4) Executive engages in habitual insobriety or the use of illegal drugs
or substances; (5) Executive breaches his fiduciary duties to the Company, as
determined in good faith by the Board; or (6) Executive engages in activities
prohibited by Sections 9 through 15 hereof.

     "Change of Control" shall mean the occurrence, on or before December 31,
2005, of any of the following events: (i) a majority of the outstanding voting
stock of PRGS shall have been acquired or beneficially owned by any person
(other than PRGS or a subsidiary of PRGS) or any two or more persons acting as a
partnership, limited partnership, syndicate or other group, entity or
association acting in concert for the purpose of voting, acquiring, holding, or
disposing of voting stock of PRGS; or (ii) a merger or a consolidation of PRGS
with or into another corporation, other than (A) a merger or consolidation with
a subsidiary of PRGS, or (B) a merger or consolidation in which the holders of
voting stock of PRGS immediately prior to the merger as a class hold immediately
after the merger at least a majority of all outstanding voting power of the
surviving or resulting corporation or its parent; or (iii) a statutory exchange
of shares of one or more classes or series of outstanding voting stock of PRGS
for cash, securities, or other property, other than an exchange in which the
holders of voting stock of PRGS immediately prior to the exchange as a class
hold immediately after the exchange at least a majority of all outstanding
voting power of the entity with which PRGS stock is being exchanged; or (iv) the
sale or other disposition of all or substantially all of the assets of PRGS, in
one transaction or a series of transactions, other than a sale or disposition in
which the holders of voting stock of PRGS immediately prior to the sale or
disposition as a class hold immediately after the exchange at least a majority
of all outstanding voting power of the entity to which the assets of PRGS are
being sold; or (v) the liquidation or dissolution of PRGS; ; or (vi) the entry
into a definitive agreement with respect to any of the events specified in the
foregoing clauses (i) through (v) on or prior to December 31, 2005 if the
transactions contemplated by such agreement shall thereafter be consummated on
or before March 31, 2006. In the event of the occurrence of a Change of Control
under clause (vi) above, for all purposes hereof, other than the determination
under this Agreement that a Change of Control has occurred on or before December
31, 2005, the date the transactions contemplated by such agreement are
consummated shall be deemed to be the date of such Change of Control.

     "Code" shall mean the Internal Revenue Code of 1986, as amended.

     "Competing Business" shall mean any business engaging in the same or
substantially similar business as the Business of USA.


                                      -2-



     "Confidential Information" shall mean any confidential or proprietary
information relating to USA or its customers or affiliates that is not a Trade
Secret.

     "Good Reason" shall mean any one of the following: (i) USA's demotion of
the Executive to a lesser position than the position in which he is serving
prior to such demotion; (ii) the assignment to Executive of duties materially
inconsistent with his position or material reduction of the Executive's duties,
responsibilities or authority, all of which, as of the date hereof, are as set
forth on Exhibit A attached hereto and incorporated herein, in either case
without the Executive's prior written consent; provided, however, that a change
in the foregoing a that results solely from PRGS ceasing to be a publicly traded
entity or from PRGS becoming a wholly owned subsidiary of a publicly traded
entity shall not, in either event and standing alone, constitute grounds for
"Good Reason"; (iii) any reduction in Executive's base salary, target bonus or
target bonus plan without the Executive's prior consent unless other executives
who are parties to agreements similar to this one also suffer a comparable
reduction in their base salaries, target bonus or target bonus plan (for
purposes of this subsection (iii) "other executives" shall refer to James
Benjamin, Marie Neff, James Moylan, Richard Bacon, Eric Goldfarb, Paul van
Leeuwen or John Toma); or (iv) unless agreed to by Executive, the relocation of
Executive's principal place of business outside of the metropolitan area of
Atlanta, Georgia, in each case not remedied by USA within thirty (30) days after
receipt by USA of written notification from Executive as provided in Section 18
of this Agreement to USA that specifically identifies the Good Reason. The
Executive must notify USA of any event that constitutes Good Reason within
ninety (90) days following the Executive's knowledge of its occurrence or
existence or such event shall not constitute Good Reason under this Agreement.

     "Per Share Price" shall mean the value of the consideration received by a
shareholder of PRGS in exchange for one share of the Common Stock of PRGS in
connection with a transaction which constitutes a Change of Control.

     "Secret Information" means Confidential Information and Trade Secrets.

     "Trade Secrets" shall mean information of USA, its affiliates or customers,
without regard to form, including, but not limited to, technical or nontechnical
data, a formula, a pattern, a compilation, a program, a device, a method, a
technique, a drawing, a design, a process, financial data, financial plans,
product plans, or a list of actual or potential customers or suppliers which is
not commonly known by or available to the public and which information: (a)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.

     "Works" shall mean any work of authorship, code, invention, improvement,
discovery, process, formula, code algorithm, program, system, method, visual
work, or work product, whether or not patentable or eligible for copyright, and
in whatever form or medium and all derivative works thereof, which are, have
been or will be created, made, developed, or conceived by Executive in the
course of employment with USA, with USA's time, on USA's premises, using USA's
resources or equipment, or relating to the Business of USA.


                                      -3-



     2. Transaction Success Fee.

          (a) Amount of Transaction Success Fee. Subject to the conditions set
forth in Section 2(b) below, USA shall pay to Executive an amount (the
"Transaction Success Fee") in the event a Change of Control occurs on or before
December 31, 2005 as follows:

               (i) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is equal to or less than $7.00 per share,
the amount of the Transaction Success Fee shall be equal to $162,500.00.

               (ii) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is $7.01 or more, but equal to or less
than $11.00, the amount of the Transaction Success Fee shall be calculated in
accordance with the following formula:

          (1)  Per Share Price minus $7.00 = Increase Dollar Amount;

          (2)  Increase Dollar Amount divided by $4.00 = Increase Percentage
               Amount;

          (3)  Increase Percentage Amount plus 50% = Aggregate Increase
               Percentage;

          (4)  Multiply Aggregate Increase Percentage by $325,000.00

For example, if the Per Share Price is $9.00, the Increase Dollar Amount will
equal $2.00, the Increase Percentage Amount will equal 50% (or .50) and the
Aggregate Increase Percentage will equal 100% (or 1). Accordingly, in such case,
the Transaction Success Fee would be $325,000.00.

               (iii) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is $11.01 or greater, the amount of the
Transaction Success Fee shall be equal to $487,500.00.

     If any written agreement with any "other executive" as defined in the Good
Reason definition in Section 1 hereof, similar to this Agreement, is amended to
reduce to a lower number the $7.00 amount in Section 2(a) of such agreement,
then the $7.00 in this Section 2(a) shall be automatically reduced to such lower
dollar amount. In the event of any stock split, stock dividend, or similar
adjustment in the number of outstanding shares of Common Stock of PRGS, then the
base prices of $7.00 to $11.00 that are set forth above and that are used to
determine the amount of the Transaction Success Fee shall be equitably adjusted
to reflect such split, dividend, or similar adjustment and the base numbers of
$7.00 and $4.00 set forth in (ii)(1)-(2) above shall also be equitably adjusted.

          (b) Conditions. In order for Executive to be eligible to receive the
Transaction Success Fee, the Change of Control must occur on or before December
31, 2005, and one of the following conditions must be met:

               (i) Executive is employed by USA or its affiliates on the date of
a Change of Control, but Executive is not offered a job after the Change of
Control with USA or its successor or affiliates, or Executive is offered
employment after the Change of Control, but


                                      -4-



the terms of such employment are such that Executive would be entitled to resign
from employment for Good Reason; or

               (ii) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates during the period beginning with the Change of Control and continuing
through the date that the Transaction Success Fee (or portion thereof) is earned
and due for payment in accordance with Section 2(c)(i) and (ii) below; or

               (iii) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates after the date of the Change of Control, but Executive voluntarily
terminates such employment for Good Reason during the 12-month period following
the Change of Control;

               (iv) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates after the date of the Change of Control, but such employment is
terminated by USA (or its successor or an affiliate) without Cause during the
12-month period following the Change of Control; or

               (v) Executive's employment with USA or its affiliates is
terminated prior to the date of a Change of Control without Cause or for Good
Reason, either in contemplation of a Change of Control or at the insistence of
the prospective purchaser of PRGS; provided, however, that, notwithstanding
anything to the contrary contained herein, Executive shall have no right to
receive any portion of a Transaction Success Fee, until the actual occurrence of
a Change of Control that occurs on or before December 31, 2005, and in the event
a Change of Control does not occur on or before December 31, 2005, Executive
shall have no right to receive a Transaction Success Fee.

          (c) Payment Terms. The Transaction Success Fee shall be due and
payable as follows:

               (i) If Executive is employed by USA or its successor or
affiliates on the six-month anniversary of the Change of Control, one-third of
the Transaction Success Fee shall be due and payable by USA to Executive within
30 days after such six-month anniversary.

               (ii) If Executive is employed by USA or its successor or
affiliates on the one-year anniversary of the Change of Control, two-thirds of
the Transaction Success Fee shall be due and payable by USA to Executive within
30 days after such one-year anniversary.

               (iii) Upon the occurrence of the events described in Section
2(b)(i) through (iv) above, the entire Transaction Success Fee (less any amounts
previously paid hereunder) shall be due and payable in a lump sum within 30 days
after the occurrence of such event.


                                      -5-



               (iv) Upon the occurrence of the event described in Section
2(b)(v) above, the entire Transaction Success Fee shall be due and payable 30
days after the later to occur of termination of employment or the date of the
Change of Control.

     Notwithstanding the foregoing, if a portion of the Per Share Price to be
received by the PRGS shareholders is placed in escrow, paid in installments or
over time, or otherwise deferred for any reason, including in order to fund
potential claims in connection with a breach of any representation or warranty
given in connection with a Change of Control transaction or to be earned and
paid based on conditions to be determined after the closing of the Change of
Control transaction, the Transaction Success Fee shall be based on the Per Share
Price amount actually received by the PRGS shareholders and any increase in the
Transaction Success Fee caused by any post-closing payments shall be paid on the
later of the date set forth above or 30 days after the date of such post-closing
payment to the PRGS shareholders.

          (d) Termination for Cause. If Executive's employment is terminated by
USA (or a successor or affiliate) for Cause prior to the six-month anniversary
of the Change of Control, Executive shall not be entitled to receive any portion
of the Transaction Success Fee. If Executive's employment is terminated by USA
(or its successor or an affiliate) for Cause after the six-month anniversary of
the Change of Control, USA shall pay the portion of the Transaction Success Fee
due under Section 2(c)(i), but Executive shall not be entitled to receive the
amount described in Section 2(c)(ii). To the extent the amount due under 2(c)(i)
has been paid by USA prior to a termination under the condition described in the
foregoing sentence, Executive shall not be required to refund such portion of
the Transaction Success Fee.

     3. Restricted Stock Award. Executive acknowledges and agrees that execution
of this Agreement will also constitute Executive's acceptance of a restricted
stock award of 40,000 shares of the Common Stock of PRGS, the terms and
conditions of which are set forth on Exhibit B attached hereto and incorporated
herein. This Agreement will not be deemed accepted until Executive has delivered
an executed copy hereof to USA's Human Resources Department at the address set
forth on the signature page hereto.

     4. Additional Payments. Upon a Change of Control that occurs on or prior to
December 31, 2005, Executive shall be entitled to an additional payment
("Additional Payment") as follows:

          (a) No Post-Closing Service. (i) Executive shall be entitled to an
additional payment of $650,000.00, payable in equal bi-weekly installments, over
the two-year period beginning six months following the Change of Control if
Executive is employed by USA or its affiliates on the date of a Change of
Control, but Executive is not offered a job following the Change of Control with
USA or its successor or affiliates or Executive is offered employment after the
Change of Control, but the terms of such employment are such that Executive
would be entitled to resign from employment for Good Reason.

               (ii) If Executive's employment with USA or its affiliates is
terminated prior to the date of a Change of Control without Cause or for Good
Reason, either in contemplation of a Change of Control or at the insistence of
the prospective purchaser of PRGS,


                                      -6-



Executive shall be deemed to have met the requirements of this Section 4(a);
provided, however, that, notwithstanding anything to the contrary contained
herein, Executive shall have no right to receive any portion of an Additional
Payment, until the actual occurrence of a Change of Control that occurs on or
before December 31, 2005, and in the event a Change of Control does not occur on
or before December 31, 2005, Executive shall have no right to receive an
Additional Payment.

          (b) Termination in First Six Months. Executive shall be entitled to an
additional payment of $650,000.00, payable in equal bi-weekly installments, over
the two-year period beginning six months following termination of employment if
Executive is employed by USA or its affiliates on the date of the Change of
Control, but (i) Executive terminates his employment with USA or its successor
or affiliates for Good Reason during the six-month period following the Change
of Control, or (ii) Executive's employment is terminated by USA or its successor
or affiliates without Cause during the six-month period following the Change of
Control; or

          (c) Termination in Second Six Months. Executive shall be entitled to
an additional payment of $487,500.00, payable in equal bi-weekly installments,
over the 18-month period beginning six months following termination of his
employment if Executive is employed by USA or its affiliates on the date of a
Change of Control, but (i) Executive terminates his employment with USA or its
successor or affiliates for Good Reason after the six-month anniversary of the
Change of Control but on or before the one-year anniversary of the Change of
Control (the "Second Period"), or (ii) Executive's employment is terminated by
USA or its successor or affiliates without Cause during the Second Period.

          (d) Limitation on Payments. The payments described in Section 4(a)
through (c) shall be paid in lieu of any "severance" amount to which Executive
would be entitled under Section 8 of the Offer Letter (as such Section is
amended by Section 5 hereof) should the events described above occur. If a
Change of Control does not occur on or before December 31, 2005, Executive shall
not be entitled to any Additional Payments pursuant to Section 4 of this
Agreement, and Executive shall be entitled to only those severance benefits, if
any, payable under Section 8 of the Offer Letter (as such Section is amended by
Section 5 hereof). If Executive terminates his employment with USA or its
successor or affiliates for Good Reason after the one-year anniversary of the
Change of Control or Executive's employment is terminated by USA or its
successor or affiliates without Cause after the one-year anniversary following
the Change of Control, Executive shall not be entitled to receive any Additional
Payment under Section 4 of this Agreement, and Executive shall be entitled to
only those severance benefits, if any, payable under Section 8 of the Offer
Letter (as such Section is amended by Section 5 hereof). Executive shall not be
entitled to any payment under this Section 4 if Executive is terminated for
Cause. If Executive receives the Additional Payments pursuant to this Section 4,
he shall not be entitled to receive any severance benefits under Section 8 of
the Offer Letter

          (e) Acceleration. To the extent that the American Jobs Creation Act of
2004 (the "Act") is interpreted to allow earlier payment of the Additional
Payments contemplated under Sections 4(a) through (c), then Sections 4(a), (b),
and (c) shall be automatically amended


                                      -7-



to delete the phrase "beginning six months" which appears in each such Section
and such Additional Payment under Section 4(a) shall be made as early as the Act
permits.

          (f) Execution of General Release. Executive acknowledges and agrees
that he is not eligible to receive any Additional Payments unless and until he
executes a general release agreement and covenant not to sue, in the form
attached hereto at Exhibit C.

          (g) No Double Benefits. The Additional Payments contemplated under
this Section 4 are intended to replace and supersede any benefits Executive may
be entitled to under Section 8 of the Offer Letter (as amended by Section 5 of
this Agreement) if a Change of Control occurs. If a Change of Control does not
occur, Executive shall be entitled to only those severance benefits, if any,
payable under Section 8 of the Offer Letter (as such Section is amended by
Section 5 hereof). Under no circumstances will Executive ever be entitled to
receive both the Additional Payments pursuant to this Section 4 and the
severance benefits pursuant to Section 8 of the Offer Letter (as amended by
Section 5 of this Agreement).

     5. Amendments to Offer Letter.

          (a) Section 8 of the Offer Letter is hereby deleted in its entirety
and replaced by the following:

     "(a) If your employment with PRGS is terminated for Cause (as such term is
defined in that certain Change of Control and Restrictive Covenant Agreement by
and between you and PRG-Schultz USA, Inc., dated February 14, 2005 ("Change of
Control Agreement") or if you voluntarily resign without Good Reason (as such
term is defined in the Change of Control Agreement), you will receive your base
salary prorated through the date of termination, payable in accordance with
PRGS's normal payroll procedure, and you will not receive any bonus or any other
amount in respect of the year in which termination occurs or in respect of any
subsequent years.

     (b) If your employment with PRGS is terminated by PRGS without Cause or by
you for Good Reason, you will receive your base salary and earned bonus for the
year in which such termination occurs prorated through the date of such
termination, plus a severance payment equal to continuation of your base salary
for twelve (12) months payable bi-weekly conditioned upon signing release and
covenant not to sue. Except as provided in the immediately preceding sentence,
you will not receive any other amount in respect of the year in which
termination occurs or in respect of any subsequent years. You will not be
entitled to any amounts under the Change of Control Agreement, except for any
unpaid Transaction Success Fee earned prior to your termination. The prorated
base salary and severance payments will be paid in accordance with PRGS' normal
payroll procedures.

     (c) If your employment with PRGS is terminated by your death or retirement,
you (or your legal representative in the case of death) will receive base salary
and bonus for the year in which such termination occurs prorated through the
date of such termination and will not receive any other amount in respect of the
year in which termination occurs or in respect of any subsequent years. The
prorated base salary will be paid in accordance with PRGS' normal payroll
procedure and the prorated bonus will be paid in a lump sum within ninety (90)
days after the end of the year


                                      -8-



to which it relates. You will not be entitled to any amounts under the Change of
Control Agreement, except for any unpaid Transaction Success Fee earned prior to
your termination.

     (d) If your employment with PRGS is terminated for Disability (as defined
above), you or your legal representative will receive all unpaid base salary and
bonus for the year in which such termination occurs prorated through the date of
termination with such prorated base salary payable in accordance with PRGS's
normal payroll procedure and the prorated bonus payable in a lump sum within
ninety (90) days after the end of the year to which it relates. You will not be
entitled to any amounts under the Change of Control Agreement, except for any
unpaid Transaction Success Fee earned prior to your termination."

          (b) Section 7 of the Offer Letter is hereby deleted in its entirety
and replaced by the following:

     "(a) This Agreement may be terminated by PRGS for Cause upon delivery to
          you of a thirty (30) days notice of termination. "Cause" shall have
          the meaning ascribed to such term in the Change of Control Agreement.

     (b)  Either party, without Cause, may terminate this Agreement by giving
          thirty (30) days written notice. Additionally, your employment may be
          terminated by you for "Good Reason". "Good Reason" shall have the
          meaning ascribed to such term in the Change of Control Agreement.

     (c)  In the event of your Disability, physical or mental, PRGS will have
          the right, subject to all applicable laws, including without
          limitation, the Americans with Disabilities Act ("ADA"), to terminate
          your employment immediately. For purposes of this Agreement, the term
          "Disability" shall mean your inability or expected inability (or a
          combination of both) to perform the services required of you hereunder
          due to illness, accident or any other physical or mental incapacity
          for an aggregate of ninety (90) days within any period of one hundred
          eighty (180) consecutive days during which this Agreement is in
          effect, as agreed by the parties or as determined pursuant to the next
          sentence. If there is a dispute between you and PRGS as to whether a
          Disability exists, then such issue shall be decided by a medical
          doctor selected by PRGS and a medical doctor selected by you and your
          legal representative (or, in the event that such doctors fail to
          agree, then in the majority opinion of such doctors and a third
          medical doctor chosen by such doctors). Each party shall pay all costs
          associated with engaging the medical doctor selected by such party and
          the parties shall each pay one-half (1/2) of the costs associated with
          engaging any third medical doctor.

     (d)  In the event this Agreement is terminated, all provisions in this
          Agreement or the Change of Control Agreement relating to any actions,
          including those of payment or compliance with covenants, subsequent to
          termination shall survive such termination."


                                      -9-



     6. Acknowledgement of Restrictive Covenant Consideration. Executive
acknowledges and agrees that $707,500.00 (the "Restrictive Covenant
Consideration") of the aggregate value of amounts that USA has agreed to pay
under Sections 3 and 4 hereof, respectively, and any amounts that USA has agreed
to pay Executive under the Offer Letter as a result of termination of his
employment, is being paid in consideration of Executive's agreement to Sections
13, 14 and 15 below. Moreover, Executive acknowledges and agrees that the
Restrictive Covenant Consideration is subject to forfeiture in accordance with
Section 16(b) hereof in the event Executive breaches any of the covenants set
forth in Section 13, 14 or 15 hereof.

     7. Taxes. PRG shall deduct or withhold such amounts as may be required
pursuant to applicable federal, state, local, or other laws from all amounts
payable to Executive or awards to be made to Executive pursuant to this
Agreement.

     8. Excess Payments. In the event that any payment or award to be received
by Executive pursuant to Sections 2, 3, or 4 hereof or the value of any
acceleration right occurring pursuant to this Agreement in connection with a
Change of Control would be subject to an excise tax pursuant to Section 4999 of
the Code (or any successor provision), whether in whole or in part, as a result
of being an "excess parachute payment," within the meaning of such term in
Section 280G(b) of the Code (or any successor provision), the amount payable
under Sections 2, 3, and 4 shall be reduced so that no portion of such payment
or the value of such acceleration rights is subject to the excise tax pursuant
to Section 4999 of the Code. If the amount necessary to eliminate such excise
tax exceeds the amount otherwise payable under Sections 2, 3, and 4, no payment
shall be made under these Sections and no further adjustments shall be made.
Notwithstanding the previous sentence, no portion of such payment or any
acceleration right which tax counsel, selected by USA's accountant and
acceptable to Executive, determines not to constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code will be taken into account.

     9. Confidentiality. Executive covenants and agrees that, during and after
his employment by USA, he will treat as confidential and will not, without the
prior written approval of USA, use (other than in the performance of his
designated duties for USA) or disclose the Trade Secrets or Confidential
Information; provided, the foregoing obligation with respect to Confidential
Information shall expire five years after termination of Executive's employment
by USA.

     10. Records. All records, notes, files, recordings, tapes, disks,
memoranda, reports, price lists, client lists, drawings, plans, sketches,
documents, equipment, apparatus, and like items, and all copies thereof,
relating to the business of USA or its affiliates or the Secret Information,
which shall be prepared by Executive or which shall be disclosed to or which
shall come into the possession of Executive, shall be and remain the sole and
exclusive property of USA. Executive agrees that at any time upon request from
USA, to promptly deliver to USA the originals and all copies of any of the
foregoing that are in the Executive's possession, custody or control.

     11. Executive Inventions.

          (a) Ownership of Works. All Works shall be the sole and absolute
property of Company, including all patent, copyright, trade secret, or other
rights in respect thereof.


                                      -10-



Executive agrees to and hereby does assign to Company all right, title, and
interest in and to any and all Works, including all worldwide copyrights, patent
rights, and all trade secret information embodied therein, in all media and
including all rights to create derivative works thereof. Executive waives any
and all rights Executive may have in any Works, including but not limited to the
right to acknowledgement as author or moral rights. Executive agrees not to use
or include in Works any patented, copyrighted, restricted or protected code,
specifications, concepts, or trade secrets of any third party or any other
information that Executive would be prohibited from using by any
confidentiality, non-disclosure or other agreement with any third party.
Executive agrees to fully and promptly disclose in writing to USA any such Works
as such Works from time to time may arise.

          (b) Further Assurances. Executive shall, without charge to USA other
than reimbursement of Executive's reasonable out-of-pocket expenses, execute and
deliver all such further documents and instruments, including applications for
patents and copyrights, and perform such acts, at any time during or after the
term of this Agreement as may be necessary or desirable, to obtain, maintain,
and defend patents, copyrights, or other proprietary rights in respect of the
Works or to vest title to such Works in USA, its successors, assigns, or
designees. Without limiting the generality of the foregoing, Executive further
agrees to give all lawful testimony, during or after the term of Executive's
employment, which may be required in connection with any proceedings involving
any Works so assigned by Executive. Executive agrees to keep and maintain
adequate and complete records (in the form of notes, laboratory notebooks,
sketches, drawings, optical drives, hard drives and as may otherwise be
specified by USA) of all inventions and original works of authorship made by
Executive (solely or jointly with others) in the course of employment with
Company, with USA's time, on USA's premises, or using USA's resources or
equipment, which records shall be available to and remain the sole property of
USA at all times.

          (c) No Obligations to Third Parties. Executive represents and warrants
to USA that Executive is not subject to any employment, non-disclosure,
confidentiality, non-compete, or other agreement with any third party which
would prevent or prohibit Executive from fulfilling Executive's duties for USA.
If Executive is the subject of any such agreement, and has any doubt as to its
applicability to Executive's position with USA, Executive will provide a copy of
such agreement to USA so that USA can make a determination as to its effect on
Executive's ability to work for USA. Executive agrees to notify the company in
writing before making any disclosure or perform any work on behalf of USA which
appears to threaten or conflict with any proprietary rights Executive claims or
intends to claim in any invention or original work of authorship. In the event
Executive fails to give such notice, Executive agrees that he will make no claim
against USA with respect to any such invention or work of authorship.

     12. Cooperation. Executive agrees to cooperate at any time to the extent
and in the manner requested by USA and at USA's expense, in the prosecution or
defense of any claims, litigation or other proceeding involving the Works, the
property of USA or the Secret Information. Executive agrees to diligently
protect any and all Secret Information against loss by inadvertent or
unauthorized disclosure. Executive will comply with regulations, policies, and
procedures established by USA, including, without limitation, all regulations,
policies, and procedures established for the purpose of protecting Secret
Information.


                                      -11-



     13. Agreement Not to Compete. Executive covenants and agrees that during
his employment by USA and for a period of two years after termination, for any
reason, of such employment, he will not, without the prior written consent of
USA, within Fulton County, Georgia, for himself or on behalf of another,
directly or indirectly, engage in any business for which he provides services
which are the same or substantially similar to his services for USA (as
described in the Offer Letter) to or on behalf of a Competing Business;
provided, however, if the termination occurs on or after the second anniversary
of the date of the Change of Control, the two year non-compete period set forth
herein shall reduce to a one year non-compete period. Executive acknowledges and
agrees that Fulton County, Georgia is the geographic area within which the
Executive performs services for the Company.

     14. Agreement Not to Solicit Customers. During Executive's employment by
USA and for a period of two years after the termination of such employment for
any reason, whether by USA or by Executive, with or without Cause or Good
Reason, Executive will not, without the prior written consent of USA, directly
or indirectly, on Executive's own behalf or in the service or on behalf of
others, (i) solicit or attempt to divert or appropriate to a Competing Business,
any customer or actual prospect of USA, PRGS, or PRGS' affiliates or
subsidiaries, as the case may be, with whom Executive dealt on behalf of USA,
PRGS, or PRGS' affiliates or subsidiaries, as the case may be, at any time
during the 12-month period immediately preceding the termination of employment,
or (ii) solicit or attempt to divert or appropriate to a Competing Business, any
customer or actual prospect of USA, PRGS, PRGS' affiliates or subsidiaries, as
the case may be, with whom an employee that was directly supervised by Executive
dealt on behalf of USA, PRGS, PRGS' affiliates or subsidiaries, as the case may
be, at any time during the 12-month period immediately preceding the termination
of employment; provided, however, if the termination occurs on or after the
second anniversary of the date of the Change of Control, the two year customer
non-solicit period set forth herein shall reduce to a one year customer
non-solicit period.

     15. Agreement Not to Solicit Employees. During Executive's employment by
USA and for a period of two years after the termination of such employment for
any reason, whether by USA or by Executive, with or without Cause or Good
Reason, Executive will not, without the prior consent of USA, directly or
indirectly, on Executive's own behalf or in the service or on behalf of others,
solicit, divert or recruit any employee of USA to leave such employment, whether
such employment is by written contract or at will; provided, however, if the
termination occurs on or after the second anniversary of the date of the Change
of Control, the two year employee non-solicit period set forth herein shall
reduce to a one year employee non-solicit period.

     16. Consideration; Remedies.

          (a) Injunctive Relief. Executive acknowledges and agrees that, by
virtue of the duties and responsibilities attendant to his employment by USA and
the special knowledge of USA's affairs, business, clients, and operations that
he has and will have as a consequence of such employment, irreparable loss and
damage will be suffered by USA if Executive should breach or violate any of the
covenants and agreements contained in Sections 9 through 15. Executive further
acknowledges and agrees that each of such covenants is reasonably necessary to
protect and preserve the business of USA. Executive, therefore, agrees and
consents that, in addition to any


                                      -12-



other remedies available to it, USA shall be entitled to an injunction to
prevent a breach or contemplated breach by the Executive of any of the covenants
or agreements contained in such Sections.

          (b) Forfeiture. Executive acknowledges that USA intends to enforce the
terms of the restrictive covenants of this Agreement contained in Sections 13,
14, and 15. In the event Executive breaches the provisions of Sections 13, 14,
or 15, Executive shall immediately forfeit his right to receive (or shall refund
to USA or its successor to the extent Executive has been previously paid) the
value of the portion of the Restrictive Covenant Consideration allocable to the
portion of the two year time period ($969.17 per day of violation, capped at
amounts actually received by Executive) during which Executive is in violation
of any of such Sections 13, 14, or 15. Executive acknowledges that the actual
damages for any such breach are costly and difficult to estimate and the amount
required to be refunded or forfeited by this Section 16(b) is a reasonable
estimation of such damages. The parties agree that such forfeited or refunded
amount is intended as liquidated damages and not as a penalty. The parties also
agree that the remedies set forth in this Section 16(b) are in addition to other
remedies, including equitable remedies.

          (c) No Defense; Remedies. The existence of any claim, demand, action
or cause of action of Executive against USA or its affiliates, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by USA of any of the covenants contained herein. The rights of
USA under this Agreement are in addition to, and not in lieu of, all other
rights USA may have at law or in equity to protect its confidential information,
trade secrets and other proprietary interests.

     17. Severability; Construction. Each covenant of this Agreement shall be
deemed and shall be construed as a separate and independent covenant, and should
any part or provision of any such covenants be declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other separate covenant
of Executive not declared invalid. Whenever there is a conflict between an
applicable law of a jurisdiction which governs the subject matter of this
Agreement and any provision of this Agreement, the affected portions of this
Agreement shall be deemed revised, as to such jurisdiction only, in a manner
which (i) eliminates any invalid, illegal or completely unenforceable provision,
and (ii) as to any provision which is held to be excessively broad as to time
duration, scope, activity or subject, limits or reduces such provision so as to
be enforceable to the extent compatible with the applicable law.

     18. Notices. Any notice required or permitted to be given to one party by
the other party hereto pursuant to this Agreement shall be in writing and shall
be personally delivered (including delivery by overnight or express courier), or
sent by United States Mail, certified or registered, return receipt requested,
first class postage and charges prepaid, in envelopes addressed to the parties
as set forth below their signatures or at such other addresses as shall be
designated in writing by either party to the other party in accordance with this
Section. Notices delivered in person shall be effective on the date of delivery.
Notices sent by United States Mail shall be effective on the third day following
deposit.


                                      -13-



     19. Amendment. No amendment or modification of this Agreement shall be
valid or binding upon either party unless made in writing.

     20. Waiver. The waiver by one party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach of the same or any other provision by the other party.

     21. Employee-At-Will. Nothing in this Agreement affects the fact that
Executive's employment with USA is terminable at will by either party, subject
to any notice requirements set forth in the Offer Letter, as hereby amended.

     22. Attorneys' Fees. If any action at law or in equity is necessary to
enforce the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and expenses in addition to any other relief
to which such prevailing party may be entitled.

     23. Gender. All references included herein to the male gender shall be
construed to include the female gender, if and as appropriate.

     24. Assignment; Benefit; Payment to Estate. This Agreement may not be
assigned by Executive and shall be binding upon Executive's devisees, heirs,
legatees, beneficiaries, executors, administrators, or other legal
representatives. This Agreement may be assigned by USA, and the right, remedies,
and obligations of USA shall inure to the benefit of and be binding upon its
successors and assigns. In the event of Executive's death, any payment that
Executive has earned and to which Executive is entitled under this Agreement,
but which has not been paid at the time of Executive's death, shall be paid to
Executive's estate.

     25. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.

     26. Costs Associated with IRS Audit. In the event there is an Internal
Revenue Service audit of Executive's tax returns related to the tax treatment of
Executive's compensation under this Agreement, USA shall reimburse Executive for
one-half (1/2) of the professional fees and expenses (accounting, legal,
appraisal or other consultant) incurred by Executive contesting, disputing,
complying with or otherwise responding to such audit, up to a maximum of
$10,000.

     27. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the matters contained herein and, subject to
the following sentence, supersedes and terminates all previous agreements with
respect to the matters contained herein. Except as specifically set forth in
Section 4(d) and Section 5 hereof, the terms of this Agreement (a) are in
addition to, and not in lieu of, the benefits to which Executive is entitled
under the Offer Letter and (b) shall not be deemed to supersede, amend, or
terminate the any other parts of the Offer Letter. For the avoidance of doubt,
the parties acknowledge and agree that except as expressly set forth herein, no
other aspects of Executive's Offer Letter are, or shall be deemed for any
purposes modified. The Employee Agreement shall be superseded and terminated by
the provisions of this Agreement.

                         [SIGNATURES ON FOLLOWING PAGE]


                                      -14-



     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.

EXECUTIVE:


/s/ Richard J. Bacon                    Date: 2/8/05
- -------------------------------------
Richard J. Bacon

Address: 3286 Northside Parkway,
         Apt. 903 Atlanta, GA 303027


"USA":

PRG-SCHULTZ USA, Inc.


By: John M. Cook                        Date: 2/14/05
    ---------------------------------
Title: Chairman & CEO

Address:   600 Galleria Parkway
           Suite 100
           Atlanta, Georgia 30339
Attention: Marie Neff, Executive
           Vice President-Human
           Resources


"PRGS":

PRG-SCHULTZ INTERNATIONAL, Inc.


By: John M. Cook                        Date: 2/14/05
    ---------------------------------
Title: Chairman & CEO

Address:   600 Galleria Parkway
           Suite 100
           Atlanta, Georgia 30339
Attention: Marie Neff, Executive
           Vice President-Human
           Resources


                                      -15-


                                    EXHIBIT A

                                 JOB DESCRIPTION



                                    EXHIBIT A
                                       TO
              CHANGE OF CONTROL AND RESTRICTIVE COVENANT AGREEMENT
                                       OF
                                RICHARD J. BACON

Position: Executive Vice President, International

Duties, Responsibilities and Authority:

Reports to Chairman/CEO or other senior-most executive.

Overall responsibility for international accounts payable and Meridian business.

Member of the Executive Committee.


                                      -17-



                                    EXHIBIT B

                                   STOCK AWARD


                                      -18-



                                                     YOUR NAME: Richard J. Bacon
                                                     TOTAL NO. OF SHARES: 40,000

             PRGX RESTRICTED STOCK AWARD AGREEMENT (THE "AGREEMENT")

PRG-SCHULTZ INTERNATIONAL, INC. ("PRGX") is pleased to grant to the person named
above (referred to as "you" or "Grantee") the restricted stock award described
below ("Stock Award"), pursuant to this Agreement, the PRG-Schultz
International, Inc. Stock Incentive Plan (the "Plan"), and the Change of Control
and Restrictive Covenant Agreement between PRG-Schultz USA, Inc. ("USA"), a
wholly owned subsidiary of PRGX, and you, and of which this Agreement is a part
(the "2005 Restrictive Covenant Agreement").

GRANT DATE:                      FEBRUARY 14, 2005
MARKET PRICE ON GRANT DATE:                $  4.95
TOTAL NUMBER OF SHARES GRANTED:             40,000
START DATE FOR VESTING SCHEDULE: FEBRUARY 14, 2005

VESTING SCHEDULE: Subject to the terms of the Plan and the 2005 Restrictive
Covenant Agreement, the Stock Award shall vest in accordance with the following
schedule:

A. Normal Vesting. Unless the vesting of the Stock Award has been accelerated
pursuant to Section B below, all of the shares granted by this Stock Award shall
vest on February 14, 2008 (which is three years from the Grant Date specified
above), except as otherwise provided in the Additional Terms and Conditions
(attached and incorporated herein), including certain provisions related to
termination of employment, breach of the 2005 Restrictive Covenant Agreement,
and reduction in the number of shares issuable hereunder due to the application
of the excise tax on excess parachute payments (the "Parachute Cutback").

B. Accelerated Vesting. Subject to the provisions of the Additional Terms and
Conditions regarding termination of employment, breach of the 2005 Restrictive
Covenant Agreement, and the Parachute Cutback, but only to the extent consistent
with the Plan, vesting of the Stock Award will accelerate upon any of the
following events: (i) Change of Control (as defined below); (ii) your death;
(iii) your Disability, as that term is defined in your 2005 Restrictive Covenant
Agreement; and (iv) an involuntary termination of your employment without Cause,
as that term is defined in your 2005 Restrictive Covenant Agreement, that occurs
on or before December 31, 2005 (or March 31, 2006, solely in the case of the
entry into a definitive agreement on or before December 31, 2005 with respect to
a Change of Control as hereafter provided by this subsection (iv)) and is either
in contemplation of a Change of Control (which shall include, for purposes of
this subsection (iv) only, the entry into a definitive agreement on or before
December 31, 2005 with respect to a Change of Control where such Change of
Control is actually consummated on or before March 31, 2006) or at the
insistence of the prospective purchaser of PRGX; provided, however, that with
respect to an acceleration under this subsection (iv), notwithstanding anything
to the contrary contained herein, you shall have no right to have your Stock
Award released from escrow or to have certificates for your Stock Award issued
to you, and you may not transfer all or any portion of your Stock Award, until
the actual occurrence of a Change of Control (which shall include, for purposes
of this subsection (iv) only, the entry into a definitive agreement on or


                                      -19-



before December 31, 2005 with respect to a Change of Control where such Change
of Control is actually consummated on or before March 31, 2006) or sale of PRGX
on or before December 31, 2005, and in the event such a Change of Control or
sale does not occur on or before December 31, 2005, your entire Stock Award
shall be forfeited back to the Company. For purposes of this Agreement, the term
"Change of Control" shall mean shall mean the occurrence of any of the following
events: (i) a majority of the outstanding voting stock of PRGX shall have been
acquired or beneficially owned by any person (other than PRGX or a subsidiary of
PRGX) or any two or more persons acting as a partnership, limited partnership,
syndicate or other group, entity or association acting in concert for the
purpose of voting, acquiring, holding, or disposing of voting stock of PRGX; or
(ii) a merger or a consolidation of PRGX with or into another corporation, other
than (A) a merger or consolidation with a subsidiary of PRGX, or (B) a merger or
consolidation in which the holders of voting stock of PRGX immediately prior to
the merger as a class hold immediately after the merger at least a majority of
all outstanding voting power of the surviving or resulting corporation or its
parent; or (iii) a statutory exchange of shares of one or more classes or series
of outstanding voting stock of PRGX for cash, securities, or other property,
other than an exchange in which the holders of voting stock of PRGX immediately
prior to the exchange as a class hold immediately after the exchange at least a
majority of all outstanding voting power of the entity with which PRGX stock is
being exchanged; or (iv) the sale or other disposition of all or substantially
all of the assets of PRGX, in one transaction or a series of transactions, other
than a sale or disposition in which the holders of voting stock of PRGX
immediately prior to the sale or disposition as a class hold immediately after
the exchange at least a majority of all outstanding voting power of the entity
to which the assets of PRGX are being sold; or (v) the liquidation or
dissolution of PRGX.

ATTACHED ARE THE FOLLOWING DOCUMENTS (INCORPORATED INTO THIS AGREEMENT BY
REFERENCE), WHICH CONTAIN IMPORTANT INFORMATION ABOUT YOUR STOCK AWARD. PLEASE
REVIEW THEM CAREFULLY AND CONTACT PRGX HUMAN RESOURCES IF YOU HAVE ANY
QUESTIONS:

Additional Terms and Conditions describes what happens if you cease to be
employed by PRGX before your Stock Award vests, certain events that could cause
forfeiture of the stock granted under this Agreement, where to send notices and
other matters.

The Plan contains detailed terms that govern your Stock Award. If anything in
this Agreement, the 2005 Restrictive Covenant Agreement, your Offer Letter] or
any of the other attachments hereto is inconsistent with the Plan, the terms of
the Plan, as amended from time to time, will control.

The Plan Prospectus Document covering the Stock Award contains important
information, including federal income tax consequences.

2003 Annual Report of PRGX (not attached if you previously received the 2003
Annual Report).

The terms of your 2005 Restrictive Covenant Agreement, of which this Agreement
is a part, are also incorporated herein.


                                      -20-



BY SIGNING THE 2005 RESTRICTIVE COVENANT AGREEMENT, YOU AFFIRM AND ACKNOWLEDGE
THAT YOU HAVE ACCEPTED ALL OF THE TERMS OF THIS STOCK AWARD AFTER REVIEWING THE
ABOVE DOCUMENTS.

THE STOCK OFFERED HEREBY WILL NOT BE ISSUED AND YOU WILL HAVE NO RIGHTS
HEREUNDER UNTIL YOU HAVE COMMUNICATED YOUR ACCEPTANCE OF THE TERMS OF THIS
AGREEMENT BY RETURNING A SIGNED ORIGINAL OF THE 2005 RESTRICTIVE COVENANT
AGREEMENT AS PROVIDED THEREIN. PRGX MAY WITHDRAW THIS OFFER AT ANY TIME UNTIL
SUCH ACCEPTANCE.


                                      -21-



                       ADDITIONAL TERMS AND CONDITIONS OF
                           YOUR RESTRICTED STOCK AWARD

EFFECT OF TERMINATION OF EMPLOYMENT. You must be employed by PRGX or one of its
subsidiaries or affiliates on the applicable vesting date to be entitled to the
vesting of your Stock Award on such date, except as provided in Section B of
your Restricted Stock Award Agreement (the "Agreement"), which provides for
accelerated vesting upon certain events. If you cease to be employed by any of
PRGX, its subsidiaries or affiliates for any reason, except as provided in
Section B of the Agreement, then any portion of your Stock Award which has not
vested as of the date of termination of employment shall automatically be
forfeited and cancelled as of the date of such termination of employment.

EFFECT OF BREACH OF RESTRICTIVE COVENANTS. If you breach Section 13, 14, OR 15
of the 2005 Restrictive Covenant Agreement, your Stock Award, regardless of
whether or not vested, will be forfeited, in accordance with Section 16(B) of
the 2005 Restrictive Covenant Agreement, in an amount equal to the Forfeited
Share Value, calculated as set forth below.

The number of shares forfeited upon breach of one of the above-listed
restrictive covenants will equal:

     -    The Forfeited Share Value;

          DIVIDED BY

     -    the "Fair Market Value" of the shares of common stock in PRGX on the
          date of forfeiture. "Fair Market Value" shall be determined in
          accordance with the Plan.

"Forfeited Share Value" means:

     -    The dollar amount ("Total Liquidated Damages") of benefits to be
          forfeited and/or refunded under Section 16(B) of the 2005 Restrictive
          Covenant Agreement, calculated as provided in Section 16(B);

          MINUS

     -    The total amount of other benefits owing to you under the 2005
          Restrictive Covenant Agreement and payable in cash (the "Cash
          Benefits").

In addition, you will be required under Section 16(B) of the 2005 Restrictive
Covenant Agreement to make a cash payment to the extent the sum of the Fair
Market Value of the shares forfeited hereunder, plus the Cash Benefits, is less
than Total Liquidated Damages.

ESCROW OF STOCK AWARD SHARES. Shares of common stock granted pursuant to this
Stock Award shall be issued in your name and held in escrow by PRGX, in
book-entry form on the books maintained by the transfer agent for PRGX's common
stock, until the Stock Award is vested


                                      -22-



or forfeited as provided herein. Upon vesting of your Stock Award, the shares
will be released from escrow, and PRGX will deliver to you a certificate or
certificates representing the vested shares. However, transferability will
remain subject to relevant provisions of the federal securities laws
post-vesting, including (for so long as you remain an affiliate of PRGX) certain
limitations set forth in SEC Rule 144 promulgated under the Securities Act of
1933.

RIGHTS WITH RESPECT TO SHARES PRIOR TO VESTING. You may not transfer your Stock
Award or the shares to be issued hereunder prior to vesting. Once all or any
portion of this Stock Award vests, you will receive a transferable certificate
or certificates representing the shares, as described above. Prior to vesting,
you are entitled to all of the rights (other than transferability) of a
shareholder with respect to all unforfeited shares underlying the Stock Award,
including the right to vote such shares and to receive dividends and other
distributions payable with respect to such shares after the Grant Date.

WITHHOLDING. Whenever PRGX proposes, or is required, to distribute vested shares
to you or pay you dividends with respect to the unvested portion of your Stock
Award, PRGX may either: (a) require you to satisfy any local, state, Federal and
foreign income tax, employment tax and insurance withholding requirements prior
to the delivery of any payment or stock certificate owing to you pursuant to the
Stock Award; or, in its discretion, (b) reduce the number of shares to be
delivered to you by a number of shares sufficient to satisfy all or a portion of
such tax withholding requirements, based on the fair market value of PRGX's
shares of common stock on the date of withholding as determined under the Plan.
In furtherance of the foregoing, PRGX may, at the discretion of the Committee,
and subject to such requirements as the Committee may impose prior to the
occurrence of such withholding, permit you to satisfy such withholding or other
tax obligations through cash payment or the surrender of vested shares of Stock
which you already own.

REDUCTION OF CHANGE IN CONTROL PAYMENTS. As provided in your 2005 Restrictive
Covenant Agreement, the number of vested shares distributable to you is subject
to reduction to the extent necessary to avoid the imposition of any excise taxes
under certain "golden parachute" tax laws. All or a portion of any unvested
shares underlying this Award may be forfeited if certain benefits owing to you
under Sections 2, 3 AND 4 of the 2005 Restrictive Covenant Agreement and other
amounts treated as received by you which are treated as contingent upon a change
of control reach the "Golden Parachute Threshold."

The "Golden Parachute Threshold" is the point at which the aggregate value of
the above benefits, to the extent they are treated as contingent upon a change
of control, would (absent the operation of Section 8 of the 2005 Restrictive
Covenant Agreement) result in the excise tax pursuant to Section 4999 of the
Internal Revenue Code of 1986 (or any successor provision), being applicable to
the portion of each payment which is treated as an excess parachute payment.

If the Golden Parachute Threshold would otherwise be reached, the amounts
payable under Sections 2, 3 AND 4, of the 2005 Restrictive Covenant Agreement,
including the number of shares to vest and be delivered hereunder, will be
reduced to the extent necessary so that none of the amounts payable under
Section 2, 3 OR 4 of the 2005 Restrictive Covenant Agreement will be subject to
the excise tax. The number of shares that will be forfeited hereunder will
equal:


                                      -23-



     -    the Cutback Share Value;

          DIVIDED BY

     -    the Fair Market Value of the shares of common stock in PRGX on the
          date of the Change of Control.

"Cutback Share Value" means:

     -    the total dollar amount ("Cutback Amount") of the reduction in
          benefits necessary to avoid reaching the Golden Parachute Threshold,
          computed in accordance with Section 8 of the 2005 Restrictive Covenant
          Agreement;

          TIMES

     -    a percentage (which may be anywhere from 0% to 100%) to be designated
          by the Committee, reflecting an allocation of the Cutback Amount to
          this Stock Award;

provided that the Cutback Share Value cannot exceed the total fair market value
of the shares which would otherwise vest hereunder, without further risk of
forfeiture; and the balance of the Cutback Amount cannot exceed the amount of
benefits otherwise payable under Sections 2, 3 AND 4 of the 2004 Restricted
Covenant Agreement.

NOTICES. All notices delivered pursuant to this Agreement shall be in writing
and shall be delivered or sent in accordance with the provisions of the 2005
Restrictive Covenant Agreement.

MISCELLANEOUS. Failure by you or PRGX at any time or times to require
performance by the other of any provisions in this Agreement will not affect the
right to enforce those provisions. Any waiver by you or PRGX of any condition or
of any breach of any term or provision in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall apply only to that instance and
will not be deemed to waive conditions or breaches in the future. If any court
of competent jurisdiction holds that any term or provision of this Agreement is
invalid or unenforceable, the remaining terms and provisions will continue in
full force and effect, and this Agreement shall be deemed to be amended
automatically to exclude the offending provision. This Agreement shall be
subject to and governed by the laws of the State of Georgia. No change or
modification of this Agreement shall be valid unless it is in writing and signed
by the party against which enforcement is sought, except where specifically
provided to the contrary herein. This Agreement shall be binding upon, and inure
to the benefit of, the permitted successors, assigns, heirs, executors and legal
representatives of the parties hereto. The headings of each section of this
Agreement are for convenience only. This Agreement (including the portions
incorporated by reference) contains the entire Agreement of the parties hereto,
and no representation, inducement, promise, or agreement or other similar
understanding between the parties not embodied herein shall be of any force or
effect, and no party will be liable or bound in any manner for any warranty,
representation, or covenant except as specifically set forth herein.


                                      -24-



                                    EXHIBIT C

                                 FORM OF RELEASE


                                      -25-



                                 FORM OF RELEASE

     THIS RELEASE AGREEMENT AND COVENANT NOT TO SUE (the "Agreement") is entered
into by and between PRG-Schultz USA, Inc., a Georgia corporation (the "Company")
and _________________, a resident of the state of ________________
("Executive"), as of the Effective Date of the Agreement, as defined below.

                                   WITNESSETH

     Executive and Company are parties to that certain [offer letter
agreement/employment agreement], dated ______________________ ("Employment
Agreement").

     Executive and Company are parties to that certain Change of Control and
Restrictive Covenant Agreement, dated ________________ ("Change of Control
Agreement").

     Executive and Company are terminating their employment relationship,
subject to the terms hereof; and

     NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein and other good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:

     1. Termination of Employment. The parties hereto hereby acknowledge and
agree that Executive's employment with Company will automatically terminate as
of the close of business on _____________________________.

     2. General Release of Claims. In consideration of the covenants from
Company to Executive set forth herein and in the Employment Agreement and Change
of Control Agreement, the receipt and sufficiency of which is hereby
acknowledged, Executive, on his behalf and on behalf of his heirs, devisees,
legatees, executors, administrators, personal and legal representatives, assigns
and successors in interest (collectively, the "Derivative Claimants" and each a
"Derivative Claimant"), hereby IRREVOCABLY, UNCONDITIONALLY AND GENERALLY
RELEASES, ACQUITS, AND FOREVER DISCHARGES, to the fullest extent permitted by
law, Company and each of Company's directors, officers, employees,
representatives, stockholders, predecessors, successors, assigns, agents,
attorneys, divisions, subsidiaries and affiliates (and agents, directors,
officers, employees, representatives and attorneys of such stockholders,
predecessors, successors, assigns, divisions, subsidiaries and affiliates), and
all persons acting by, through, under or in concert with any of them
(collectively, the "Releasees" and each a "Releasee"), or any of them, from any
and all charges, complaints, claims, damages, actions, causes of action, suits,
rights, demands, grievances, costs, losses, debts, and expenses (including
attorneys' fees and costs incurred), of any nature whatsoever, known or unknown,
that Executive now has, owns, or holds, or claims to have, own, or hold, or
which Executive at any time heretofore had, owned, or held, or claimed to have,
own, or hold from the beginning of time to the date that Executive signs this
Agreement, including, but not limited to, those claims arising out of or
relating to (i) any agreement, commitment, contract, mortgage, deed of trust,
bond, indenture, lease, license, note, franchise, certificate, option, warrant,
right or other instrument, document, obligation or arrangement, whether written
or oral, or any other relationship, involving Executive and/or any Releasee,
(ii) breach of any express or


                                      -26-



implied contract, breach of implied covenant of good faith and fair dealing,
misrepresentation, interference with contractual or business relations, personal
injury, slander, libel, assault, battery, negligence, negligent or intentional
infliction of emotional distress or mental suffering, false imprisonment,
wrongful termination, wrongful demotion, wrongful failure to promote, wrongful
deprivation of a career opportunity, discrimination (including disparate
treatment and disparate impact), hostile work environment, sexual harassment,
retaliation, any request to submit to a drug or polygraph test, and/or
whistleblowing, whether said claim(s) are brought pursuant to the AGE
DISCRIMINATION IN EMPLOYMENT ACT, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS
AMENDED, THE EQUAL PAY ACT, 42 U.S.C. SECTIONS 1981, 1983, OR 1985, THE
VOCATIONAL REHABILITATION ACT OF 1977, THE AMERICANS WITH DISABILITIES ACT, THE
FAMILY AND MEDICAL LEAVE ACT OR THE FAIR CREDIT REPORTING ACT or any other
constitutional, federal, regulatory, state or local law, or under the common law
or in equity, and (iii) any other matter (each of which is referred to herein as
a "Claim"); provided, however, that nothing contained herein shall operate to
release any obligations of Company, its successors or assigns arising under any
claims under the Employment Agreement, the Change of Control Agreement or under
any written Company benefit plans, any 401(k) plan, any pension plan and any
similar plan, to the extent Executive is entitled to benefits under the
respective terms thereof.

     3. Release of Unknown Claims. Executive recognizes that he may have some
claim, demand, or cause of action against the Releasees relating to any Claim of
which he is totally unaware and unsuspecting and which is given up by the
execution of this Agreement. It is Executive's intention in executing this
Agreement with the advice of legal counsel that this Agreement will deprive him
of any such Claim and prevent Executive or any Derivative Claimant from
asserting the same. The provisions of any local, state, federal, or foreign law,
statute, or judicial decision providing in substance that this Agreement shall
not extend to such unknown or unsuspecting claims, demands, or damages, are
hereby expressly waived.

     4. Acknowledgment. Executive acknowledges that he has thoroughly discussed
all aspects of this Agreement with his attorney, that he has carefully read and
fully understands all of the provisions of this Agreement, and that he is
voluntarily entering into this Agreement. Executive hereby waives the
requirement under the Age Discrimination in Employment Act that Executive has
twenty-one (21) days to review and consider this Agreement before executing it.
Executive acknowledges and understands that he shall have seven (7) days after
signing this Agreement during which he may revoke this Agreement by providing
written notice to Company within seven (7) days following its execution. Any
notice of revocation of this Agreement shall not be effective unless given in
writing and received by Company within the seven-day revocation period via
personal delivery, overnight courier, or certified U.S. mail, return receipt
requested, to PRG-SCHULTZ USA, INC., 600 Galleria Parkway, Suite 100, Atlanta,
Georgia 30339, Attention: General Counsel. THIS AGREEMENT SHALL NOT BECOME
EFFECTIVE AND ENFORCEABLE UNTIL SUCH SEVEN (7) DAY PERIOD HAS EXPIRED. IF
EMPLOYEE REVOKES THIS AGREEMENT WITHIN SUCH SEVEN (7) DAY PERIOD, EMPLOYEE WILL
NOT BE ENTITLED TO RECEIVE ANY OF THE RIGHTS AND BENEFITS DESCRIBED HEREIN OR
UNDER THE EMPLOYMENT AGREEMENT OR CHANGE OF CONTROL AGREEMENT.

     5. No Assignment. Executive represents and warrants that he has not
assigned or transferred, or purported to assign or transfer, to any person,
entity, or individual whatsoever,


                                      -27-



any of the Claims released herein. Executive agrees to indemnify and hold
harmless the Releasees against any Claim based on, arising out of, or due to any
such assignment or transfer.

     6. Indemnification. In furtherance of the foregoing, Executive agrees on
behalf of himself and the Derivative Claimants not to sue or prosecute any
matter against any Releasee with respect to any Claim and agrees to hold each
Releasee harmless with respect to any such suit or prosecution in contravention
of this Section 6. Executive understands that if this Agreement were not signed,
he would have the right voluntarily to assist other individuals or entities in
bringing Claims against the Releasees. Executive hereby waives that right and
hereby agree that he will not voluntarily provide any such assistance. To the
extent that applicable law prohibits Executive from waiving his right to bring
and/or participate in the investigation of a Claim, Executive nevertheless
waives his right to seek or accept any damages or relief in any such proceeding.

     7. Representation Regarding Knowledge of Trade Secrets and/or Inventions.
Executive hereby acknowledges and confirms that he has no right, claim or
interest to any property, invention, trade secret, information or other asset
used in the business of Company and that all such property, inventions, trade
secrets, information and other assets used in the business of Company are owned
by Company or its affiliates or licensed to Company or its affiliates by third
parties not affiliated with Executive.

     8. Return of Company Property and Proprietary Information. (a) Executive
further promises, represents and warrants that Executive has returned or will
return to _______________ [IDENTIFY DESIGNEE] by no later than upon the
execution of this Agreement by Executive: (a) all property of Company,
including, but not limited to, any and all files, records, credit cards, keys,
identification cards/badges, computer access codes, computer programs,
instruction manuals, equipment (including computers) and business plans; (b) any
other property which Executive prepared or helped to prepare in connection with
Executive's employment with Company; and (c) all documents, including logs or
diaries, all tangible materials, including audio and video tapes, all intangible
materials (including computer files), and any and all copies or duplicates of
any such tangible or intangible materials, including any duplicates, copies, or
transcriptions made of audio or video tapes, whether in handwriting or
typewritten, that are in the possession, custody or control of Executive or his
attorneys, agents, family members, or other representatives, which are alleged
to support in any way any of the claims Executive has released under this
Agreement.

     (b) The foregoing representation shall include all Proprietary Information
of Company and Company. With respect to Proprietary Information, Executive
warrants, represents, and covenants to return such Proprietary Information on or
before the close of business on ____________________. As used herein,
"Proprietary Information" means information in written form or electronic media,
including but not limited to technical and non-technical data, lists, training
manuals, training systems, computer based training modules, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes and
plans regarding Company or its affiliates, clients, prospective clients, methods
of operation, billing rates, billing procedures, suppliers, business methods,
finances, management, or any other business information relating to Company or
its affiliates (whether constituting a trade secret or proprietary or otherwise)
which has value to Company or its affiliates and is treated by Company


                                      -28-



or its affiliates as being confidential; provided; however, that Proprietary
Information shall not include any information that has been voluntarily
disclosed to the public by Company or its affiliates (except where such public
disclosure has been made without authorization) or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means. Proprietary Information does include information which has
been disclosed to Company or its affiliates by a third party and which Company
or its affiliates are obligated to treat as confidential. Proprietary
Information may or may not be marked by Company or its affiliates as
"proprietary" or "secret" or with other words or markings of similar meaning,
and the failure of Company to make such notations upon the physical embodiments
of any Proprietary Information shall not affect the status of such information
as Proprietary Information.

     9. General Provisions.

     (a) This Agreement and the covenants, representations, warranties and
releases contained herein shall inure to the benefit of and be binding upon
Executive and Company and each of their respective successors, heirs, assigns,
agents, affiliates, parents, subsidiaries and representatives.

     (b) Each party acknowledges that no one has made any representation
whatsoever not contained herein concerning the subject matter hereof to induce
the execution of this Agreement. Executive acknowledges that the consideration
for signing this Agreement is a benefit to which Executive would not have been
entitled had Executive not signed this Agreement.

     (c) Executive agrees that the terms and conditions of this Agreement,
including the consideration hereunder shall not be disclosed to anyone and shall
remain confidential and not disseminated to any person or entity not a party to
this Agreement except to family members, legal counsel, an accountant for
purposes of securing tax advice; the Internal Revenue Service, or the state
taxing agencies.

     (d) The "Effective Date" of this Agreement shall be the eighth (8th) day
after the execution of the Agreement by Executive.

     (e) This Agreement does not constitute an admission of any liability.

     (f) The parties hereto and each of them agrees and acknowledges that if any
portion of this Agreement is declared invalid or unenforceable by a final
judgment of any court of competent jurisdiction, such determination shall not
affect the balance of this Agreement, which shall remain in full force and
effect. Any such invalid portion shall be deemed severable.

     (g) Neither this Agreement nor any provision hereof may be modified or
waived in any way except by an agreement in writing signed by each of the
parties hereto consenting to such modification or waiver.

This Agreement shall in all respects be interpreted, enforced and governed under
the internal laws (and not the conflicts of laws and rules) of Georgia.


                                      -29-



     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.

EXECUTIVE ATTESTS THAT HE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF
ALL KNOWN AND UNKNOWN CLAIMS.

NOTICE - THIS AGREEMENT CONTAINS A WAIVER OF RIGHTS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT. EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE
SIGNING THIS AGREEMENT

EXECUTED THIS __________ DAY OF _________________, 200__.

EXECUTIVE: __________________________

           PRINT NAME:_______________

Sworn to and subscribed before me this __________ day of _________________,
200__.


- -------------------------------------
Notary Public

EXECUTED THIS __________ DAY OF _________________, 200__.

COMPANY: PRG-SCHULTZ USA, INC.


By:
    ---------------------------------
Its:
     --------------------------------


                                      -30-

EX-10.40

                        CHANGE OF CONTROL AND RESTRICTIVE
                               COVENANT AGREEMENT

     This Change of Control and Restrictive Covenant Agreement ("Agreement") is
entered into this 14th day of February, 2005, by and among James L. Benjamin
("Executive") and PRG-Schultz USA, Inc., a Georgia corporation ("USA"), and
PRG-Schultz International, Inc., a Georgia corporation that owns all of the
capital stock of USA ("PRGS").

     WHEREAS, Executive and USA entered into that certain offer letter agreement
("Offer Letter") dated October 28, 2002 which set forth the terms of employment
under which USA employed Executive as the Executive Vice President, U.S.
Operations, for USA;

     WHEREAS, in connection with Executive's employment, Executive executed that
certain Employee Agreement (the "Employee Agreement") dated October 28, 2002,
which contained certain restrictive covenants;

     WHEREAS, Executive is a senior executive of USA whose services are
extremely valuable to USA;

     WHEREAS, Executive has had and will have access to the valuable and
proprietary trade secrets of USA and its customers, and Executive has had and
will have close contact with the customers and employees of USA;

     WHEREAS, Executive and USA desire to enter into this Change of Control and
Restrictive Covenant Agreement to (a) amend certain provisions of the Offer
Letter regarding termination of employment and severance in the manner set forth
herein, (b) provide Executive additional security and benefits in the event of
any actual or threatened change of control of PRGS, (c) provide incentives to
Executive to remain employed with USA, (d) provide PRGS with reasonable
protection of the valuable trade secrets and confidential information of USA and
its customers, as well as the relationships between USA and its customers and
employees, and (e) preserve the goodwill of PRGS for the benefit of the
shareholders in the event a change of control occurs;

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

     1. Definitions. As used in this Agreement, the following terms shall have
the meaning specified:

     "Business of USA" shall mean (a) audit services (i) to identify and recover
lost profits from any source, including, without limitation, payment errors,
missed or inaccurate discounts, allowances, or rebates, vendor pricing errors,
or duplicate payments and (ii) to identify expense containment opportunities;
(b) development and use of technology to provide such services; and (c)
provision of related consulting services.



     "Cause" shall mean, as determined by the Board of Directors of PRGS (the
"Board") in good faith: (1) a material breach by Executive of the duties and
responsibilities of Executive or any written policies or directives of USA
(other than as a result of incapacity due to physical or mental illness) which
is (i) willful or involves gross negligence, and (ii) not remedied within thirty
(30) days after receipt of written notice from USA which specifically identifies
the manner in which such breach has occurred; (2) Executive commits any felony
or any misdemeanor involving willful misconduct (other than minor violations
such as traffic violations) that causes damage to the property, business or
reputation of USA, as determined in good faith by the Board; (3) Executive
engages in a fraudulent or dishonest act, as determined in good faith by the
Board; (4) Executive engages in habitual insobriety or the use of illegal drugs
or substances; (5) Executive breaches his fiduciary duties to the Company, as
determined in good faith by the Board; or (6) Executive engages in activities
prohibited by Sections 9 through 15 hereof.

     "Change of Control" shall mean the occurrence, on or before December 31,
2005, of any of the following events: (i) a majority of the outstanding voting
stock of PRGS shall have been acquired or beneficially owned by any person
(other than PRGS or a subsidiary of PRGS) or any two or more persons acting as a
partnership, limited partnership, syndicate or other group, entity or
association acting in concert for the purpose of voting, acquiring, holding, or
disposing of voting stock of PRGS; or (ii) a merger or a consolidation of PRGS
with or into another corporation, other than (A) a merger or consolidation with
a subsidiary of PRGS, or (B) a merger or consolidation in which the holders of
voting stock of PRGS immediately prior to the merger as a class hold immediately
after the merger at least a majority of all outstanding voting power of the
surviving or resulting corporation or its parent; or (iii) a statutory exchange
of shares of one or more classes or series of outstanding voting stock of PRGS
for cash, securities, or other property, other than an exchange in which the
holders of voting stock of PRGS immediately prior to the exchange as a class
hold immediately after the exchange at least a majority of all outstanding
voting power of the entity with which PRGS stock is being exchanged; or (iv) the
sale or other disposition of all or substantially all of the assets of PRGS, in
one transaction or a series of transactions, other than a sale or disposition in
which the holders of voting stock of PRGS immediately prior to the sale or
disposition as a class hold immediately after the exchange at least a majority
of all outstanding voting power of the entity to which the assets of PRGS are
being sold; or (v) the liquidation or dissolution of PRGS; or (vi) the entry
into a definitive agreement with respect to any of the events specified in the
foregoing clauses (i) through (v) on or prior to December 31, 2005 if the
transactions contemplated by such agreement shall thereafter be consummated on
or before March 31, 2006. In the event of the occurrence of a Change of Control
under clause (vi) above, for all purposes hereof, other than the determination
under this Agreement that a Change of Control has occurred on or before December
31, 2005, the date the transactions contemplated by such agreement are
consummated shall be deemed to be the date of such Change of Control.

     "Code" shall mean the Internal Revenue Code of 1986, as amended.

     "Competing Business" shall mean any business engaging in the same or
substantially similar business as the Business of USA.


                                      -2-



     "Confidential Information" shall mean any confidential or proprietary
information relating to USA or its customers or affiliates that is not a Trade
Secret.

     "Good Reason" shall mean any one of the following: (i) USA's demotion of
the Executive to a lesser position than the position in which he is serving
prior to such demotion; (ii) the assignment to Executive of duties materially
inconsistent with his position or material reduction of the Executive's duties,
responsibilities or authority, all of which, as of the date hereof, are as set
forth on Exhibit A attached hereto and incorporated herein, in either case
without the Executive's prior written consent; provided, however, that a change
in the foregoing that results solely from PRGS ceasing to be a publicly traded
entity or from PRGS becoming a wholly owned subsidiary of a publicly traded
entity shall not, in either event and standing alone, constitute grounds for
"Good Reason"; (iii) any reduction in Executive's base salary, target bonus or
target bonus plan without the Executive's prior consent unless other executives
who are parties to agreements similar to this one also suffer a comparable
reduction in their base salaries, target bonus or target bonus plan (for
purposes of this subsection (iii) "other executives" shall refer to James
Benjamin, Marie Neff, James Moylan, Richard Bacon, Eric Goldfarb, Paul van
Leeuwen, or John Toma); or (iv) unless agreed to by Executive, the relocation of
Executive's principal place of business outside of the metropolitan area of
Atlanta, Georgia, in each case not remedied by USA within thirty (30) days after
receipt by USA of written notification from Executive as provided in Section 18
of this Agreement to USA that specifically identifies the Good Reason. The
Executive must notify USA of any event that constitutes Good Reason within
ninety (90) days following the Executive's knowledge of its occurrence or
existence or such event shall not constitute Good Reason under this Agreement.

     "Per Share Price" shall mean the value of the consideration received by a
shareholder of PRGS in exchange for one share of the Common Stock of PRGS in
connection with a transaction which constitutes a Change of Control.

     "Secret Information" means Confidential Information and Trade Secrets.

     "Trade Secrets" shall mean information of USA, its affiliates or customers,
without regard to form, including, but not limited to, technical or nontechnical
data, a formula, a pattern, a compilation, a program, a device, a method, a
technique, a drawing, a design, a process, financial data, financial plans,
product plans, or a list of actual or potential customers or suppliers which is
not commonly known by or available to the public and which information: (a)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.

     "Works" shall mean any work of authorship, code, invention, improvement,
discovery, process, formula, code algorithm, program, system, method, visual
work, or work product, whether or not patentable or eligible for copyright, and
in whatever form or medium and all derivative works thereof, which are, have
been or will be created, made, developed, or conceived by Executive in the
course of employment with USA, with USA's time, on USA's premises, using USA's
resources or equipment, or relating to the Business of USA.


                                      -3-



     2. Transaction Success Fee.

          (a) Amount of Transaction Success Fee. Subject to the conditions set
forth in Section 2(b) below, USA shall pay to Executive an amount (the
"Transaction Success Fee") in the event a Change of Control occurs on or before
December 31, 2005 as follows:

               (i) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is equal to or less than $7.00 per share,
the amount of the Transaction Success Fee shall be equal to $150,000.00.

               (ii) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is $7.01 or more, but equal to or less
than $11.00, the amount of the Transaction Success Fee shall be calculated in
accordance with the following formula:

          (1)  Per Share Price minus $7.00 = Increase Dollar Amount;

          (2)  Increase Dollar Amount divided by $4.00 = Increase Percentage
               Amount;

          (3)  Increase Percentage Amount plus 50% = Aggregate Increase
               Percentage;

          (4)  Multiply Aggregate Increase Percentage by $300,000.00

For example, if the Per Share Price is $9.00, the Increase Dollar Amount will
equal $2.00, the Increase Percentage Amount will equal 50% (or .50) and the
Aggregate Increase Percentage will equal 100% (or 1). Accordingly, in such case,
the Transaction Success Fee would be $300,000.00.

               (iii) If the Per Share Price received by the PRGS shareholders in
connection with the Change of Control is $11.01 or greater, the amount of the
Transaction Success Fee shall be equal to $450,000.00.

     If any written agreement with any "other executive" as defined in the Good
Reason definition in Section 1 hereof, similar to this Agreement, is amended to
reduce to a lower number the $7 amount in Section 2(a) of such agreement, then
the $7 in this Section 2(a) shall be automatically reduced to such lower dollar
amount. In the event of any stock split, stock dividend, or similar adjustment
in the number of outstanding shares of Common Stock of PRGS, then the base
prices of $7.00 to $11.00 that are set forth above and that are used to
determine the amount of the Transaction Success Fee shall be equitably adjusted
to reflect such split, dividend, or similar adjustment and the base numbers of
$7.00 and $4.00 set forth in (ii)(1)-(2) above shall also be equitably adjusted.

          (b) Conditions. In order for Executive to be eligible to receive the
Transaction Success Fee, the Change of Control must occur on or before December
31, 2005, and one of the following conditions must be met:

               (i) Executive is employed by USA or its affiliates on the date of
a Change of Control, but Executive is not offered a job after the Change of
Control with USA or its successor or affiliates, or Executive is offered
employment after the Change of Control, but


                                      -4-



the terms of such employment are such that Executive would be entitled to resign
from employment for Good Reason; or

               (ii) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates during the period beginning with the Change of Control and continuing
through the date that the Transaction Success Fee (or portion thereof) is earned
and due for payment in accordance with Section 2(c)(i) and (ii) below; or

               (iii) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates after the date of the Change of Control, but Executive voluntarily
terminates such employment for Good Reason during the 12-month period following
the Change of Control; or

               (iv) Executive is employed by USA or its affiliates on the date
of a Change of Control and Executive remains employed by USA or its successor or
affiliates after the date of the Change of Control, but such employment is
terminated by USA (or its successor or an affiliate) without Cause during the
12-month period following the Change of Control; or

               (v) Executive's employment with USA or its affiliates is
terminated prior to the date of a Change of Control without Cause or for Good
Reason, either in contemplation of a Change of Control or at the insistence of
the prospective purchaser of PRGS; provided, however, that, notwithstanding
anything to the contrary contained herein, Executive shall have no right to
receive any portion of a Transaction Success Fee, until the actual occurrence of
a Change of Control that occurs on or before December 31, 2005, and in the event
a Change of Control does not occur on or before December 31, 2005, Executive
shall have no right to receive a Transaction Success Fee.

          (c) Payment Terms. The Transaction Success Fee shall be due and
payable as follows:

               (i) If Executive is employed by USA or its successor or
affiliates on the six-month anniversary of the Change of Control, one-third of
the Transaction Success Fee shall be due and payable by USA to Executive within
30 days after such six-month anniversary.

               (ii) If Executive is employed by USA or its successor or
affiliates on the one-year anniversary of the Change of Control, two-thirds of
the Transaction Success Fee shall be due and payable by USA to Executive within
30 days after such one-year anniversary.

               (iii) Upon the occurrence of the events described in Section
2(b)(i) through (iv) above, the entire Transaction Success Fee (less any amounts
previously paid hereunder) shall be due and payable in a lump sum within 30 days
after the occurrence of such event.


                                      -5-



               (iv) Upon the occurrence of the event described in Section
2(b)(v) above, the entire Transaction Success Fee shall be due and payable 30
days after the later to occur of termination of employment or the date of the
Change of Control.

     Notwithstanding the foregoing, if a portion of the Per Share Price to be
received by the PRGS shareholders is placed in escrow, paid in installments or
over time, or otherwise deferred for any reason, including in order to fund
potential claims in connection with a breach of any representation or warranty
given in connection with a Change of Control transaction or to be earned and
paid based on conditions to be determined after the closing of the Change of
Control transaction, the Transaction Success Fee shall be based on the Per Share
Price amount actually received by the PRGS shareholders and any increase in the
Transaction Success Fee caused by any post-closing payments shall be paid on the
later of the date set forth above or 30 days after the date of such post-closing
payment to the PRGS shareholders.

          (d) Termination for Cause. If Executive's employment is terminated by
USA (or a successor or affiliate) for Cause prior to the six-month anniversary
of the Change of Control, Executive shall not be entitled to receive any portion
of the Transaction Success Fee. If Executive's employment is terminated by USA
(or its successor or an affiliate) for Cause after the six-month anniversary of
the Change of Control, USA shall pay the portion of the Transaction Success Fee
due under Section 2(c)(i), but Executive shall not be entitled to receive the
amount described in Section 2(c)(ii). To the extent the amount due under 2(c)(i)
has been paid by USA prior to a termination under the condition described in the
foregoing sentence, Executive shall not be required to refund such portion of
the Transaction Success Fee.

     3. Restricted Stock Award. Executive acknowledges and agrees that execution
of this Agreement will also constitute Executive's acceptance of a restricted
stock award of 40,000 shares of the Common Stock of PRGS, the terms and
conditions of which are set forth on Exhibit B attached hereto and incorporated
herein. This Agreement will not be deemed accepted until Executive has delivered
an executed copy hereof to USA's Human Resources Department at the address set
forth on the signature page hereto.

     4. Additional Payments. Upon a Change of Control that occurs on or prior to
December 31, 2005, Executive shall be entitled to an additional payment
("Additional Payment") as follows:

          (a) No Post-Closing Service. (i) Executive shall be entitled to an
additional payment of $600,000.00, payable in equal bi-weekly installments, over
the two-year period beginning six months following the Change of Control if
Executive is employed by USA or its affiliates on the date of a Change of
Control, but Executive is not offered a job following the Change of Control with
USA or its successor or affiliates or Executive is offered employment after the
Change of Control, but the terms of such employment are such that Executive
would be entitled to resign from employment for Good Reason.

               (ii) If Executive's employment with USA or its affiliates is
terminated prior to the date of a Change of Control without Cause or for Good
Reason, either in contemplation of a Change of Control or at the insistence of
the prospective purchaser of PRGS,


                                      -6-



Executive shall be deemed to have met the requirements of this Section 4(a)
provided, however, that, notwithstanding anything to the contrary contained
herein, Executive shall have no right to receive any portion of an Additional
Payment, until the actual occurrence of a Change of Control that occurs on or
before December 31, 2005, and in the event a Change of Control does not occur on
or before December 31, 2005, Executive shall have no right to receive an
Additional Payment; or

          (b) Termination in First Six Months. Executive shall be entitled to an
additional payment of $600,000.00, payable in equal bi-weekly installments, over
the two-year period beginning six months following termination of employment if
Executive is employed by USA or its affiliates on the date of the Change of
Control, but (i) Executive terminates his employment with USA or its successor
or affiliates for Good Reason during the six-month period following the Change
of Control, or (ii) Executive's employment is terminated by USA or its successor
or affiliates without Cause during the six-month period following the Change of
Control; or

          (c) Termination in Second Six Months. Executive shall be entitled to
an additional payment of $450,000.00, payable in equal bi-weekly installments,
over the 18-month period beginning six months following termination of his
employment if Executive is employed by USA or its affiliates on the date of a
Change of Control, but (i) Executive terminates his employment with USA or its
successor or affiliates for Good Reason after the six-month anniversary of the
Change of Control but on or before the one-year anniversary of the Change of
Control (the "Second Period"), or (ii) Executive's employment is terminated by
USA or its successor or affiliates without Cause during the Second Period.

          (d) Limitation on Payments. The payments described in Section 4(a)
through (c) shall be paid in lieu of any "severance" amounts to which Executive
would be entitled under Section 8 of the Offer Letter (as such Section is
amended by Section 5 hereof) should the events described above occur. If a
Change of Control does not occur on or before December 31, 2005, Executive shall
not be entitled to any Additional Payments pursuant to Section 4 of this
Agreement, and Executive shall be entitled to only those severance benefits, if
any, payable under Section 8 of the Offer Letter (as such Section is amended by
Section 5 hereof). If Executive terminates his employment with USA or its
successor or affiliates for Good Reason after the one-year anniversary of the
Change of Control or Executive's employment is terminated by USA or its
successor or affiliates without Cause after the one-year anniversary following
the Change of Control, Executive shall not be entitled to receive any Additional
Payment under Section 4 of this Agreement, and Executive shall be entitled to
only those severance benefits, if any, payable under Section 8 of the Offer
Letter (as such Section is amended by Section 5 hereof). Executive shall not be
entitled to any payment under this Section 4 if Executive is terminated for
Cause. If Executive receives the Additional Payments pursuant to this Section 4,
he shall not be entitled to receive any severance benefits under Section 8 of
the Offer Letter.

          (e) Acceleration. To the extent that the American Jobs Creation Act of
2004 (the "Act") is interpreted to allow earlier payment of the Additional
Payments contemplated under Sections 4(a) through (c), then Sections 4(a), (b)
and (c) shall be automatically amended to


                                      -7-



delete the phrase "beginning six months" which appears in each such Section and
such Additional Payment under Section 4(a) shall be made as early as the Act
permits.

          (f) Execution of General Release. Executive acknowledges and agrees
that he is not eligible to receive any Additional Payments unless and until he
executes a general release agreement and covenant not to sue, in the form
attached hereto at Exhibit C.

          (g) No Double Benefits. The Additional Payments contemplated under
this Section 4 are intended to replace and supersede any benefits Executive may
be entitled to under Section 8 of the Offer Letter (as amended by Section 5 of
this Agreement) if a Change of Control occurs. If a Change of Control does not
occur, Executive shall be entitled to only those severance benefits, if any,
payable under Section 8 of the Offer Letter (as such Section is amended by
Section 5 hereof). Under no circumstances will Executive ever be entitled to
receive both the Additional Payments pursuant to this Section 4 and the
severance benefits pursuant to Section 8 of the Offer Letter (as amended by
Section 5 of this Agreement).

     5. Amendments to Offer Letter.

          (a) Section 8 of the Offer Letter is hereby deleted in its entirety
and replaced by the following:

     "(a) If your employment with PRGS is terminated for Cause (as such term is
defined in that certain Change of Control and Restrictive Covenant Agreement by
and between you and PRG-Schultz USA, Inc., dated February 14, 2005 ("Change of
Control Agreement") or if you voluntarily resign without Good Reason (as such
term is defined in the Change of Control Agreement), you will receive your base
salary prorated through the date of termination, payable in accordance with
PRGS's normal payroll procedure, and you will not receive any bonus or any other
amount in respect of the year in which termination occurs or in respect of any
subsequent years.

     (b) If your employment with PRGS is terminated by PRGS without Cause or by
you for Good Reason, you will receive your base salary and earned bonus for the
year in which such termination occurs prorated through the date of such
termination, plus a severance payment equal to continuation of your base salary
for twelve (12) months payable bi-weekly and PRGS will pay the difference
between the current cost of your medical benefits and the cost of COBRA for a
period of twelve (12) months following termination both conditioned upon signing
a release and covenant not to sue. Except as provided in the immediately
preceding sentence, you will not receive any other amount in respect of the year
in which termination occurs or in respect of any subsequent years. You will not
be entitled to any amounts under the Change of Control Agreement, except for any
unpaid Transaction Success Fee earned prior to your termination. The prorated
base salary and severance payments will be paid in accordance with PRGS' normal
payroll procedures.

     (c) If your employment with PRGS is terminated by your death or retirement,
you (or your legal representative in the case of death) will receive base salary
and bonus for the year in which such termination occurs prorated through the
date of such termination and will not receive any other amount in respect of the
year in which termination occurs or in respect of any subsequent years. The
prorated base salary will be paid in accordance with PRGS' normal payroll
procedure


                                      -8-



and the prorated bonus will be paid in a lump sum within ninety (90) days after
the end of the year to which it relates. You will not be entitled to any amounts
under the Change of Control Agreement, except for any unpaid Transaction Success
Fee earned prior to your termination.

     (d) If your employment with PRGS is terminated for Disability (as defined
above), you or your legal representative will receive all unpaid base salary and
bonus for the year in which such termination occurs prorated through the date of
termination with such prorated base salary payable in accordance with PRGS'
normal payroll procedure and the prorated bonus payable in a lump sum within
ninety (90) days after the end of the year to which it relates. You will not be
entitled to any amounts under the Change of Control Agreement, except for any
unpaid Transaction Success Fee earned prior to your termination."

          (b) Section 6 of the Offer Letter is hereby deleted in its entirety
and replaced by the following:

     "(a) This Agreement may be terminated by PRGS for Cause upon delivery to
          you of a thirty (30) days notice of termination. "Cause" shall have
          the meaning ascribed to such term in the Change of Control Agreement.

     (b)  Either party, without Cause, may terminate this Agreement by giving
          thirty (30) days written notice. Additionally, your employment may be
          terminated by you for "Good Reason". "Good Reason" shall have the
          meaning ascribed to such term in the Change of Control Agreement.

     (c)  In the event of your Disability, physical or mental, PRGS will have
          the right, subject to all applicable laws, including without
          limitation, the Americans with Disabilities Act ("ADA"), to terminate
          your employment immediately. For purposes of this Agreement, the term
          "Disability" shall mean your inability or expected inability (or a
          combination of both) to perform the services required of you hereunder
          due to illness, accident or any other physical or mental incapacity
          for an aggregate of ninety (90) days within any period of one hundred
          eighty (180) consecutive days during which this Agreement is in
          effect, as agreed by the parties or as determined pursuant to the next
          sentence. If there is a dispute between you and PRGS as to whether a
          Disability exists, then such issue shall be decided by a medical
          doctor selected by PRGS and a medical doctor selected by you and your
          legal representative (or, in the event that such doctors fail to
          agree, then in the majority opinion of such doctors and a third
          medical doctor chosen by such doctors). Each party shall pay all costs
          associated with engaging the medical doctor selected by such party and
          the parties shall each pay one-half (1/2) of the costs associated with
          engaging any third medical doctor.

     (d)  In the event this Agreement is terminated, all provisions in this
          Agreement or the Change of Control Agreement relating to any actions,
          including those of payment or compliance with covenants, subsequent to
          termination shall survive such termination."


                                      -9-



     6. Acknowledgement of Restrictive Covenant Consideration. Executive
acknowledges and agrees that $670,000.00 (the "Restrictive Covenant
Consideration") of the aggregate value of amounts that USA has agreed to pay
under Sections 3 and 4 hereof, respectively, and any amounts that USA has agreed
to pay Executive under the Offer Letter as a result of termination of his
employment, is being paid in consideration of Executive's agreement to Sections
13, 14 and 15 below. Moreover, Executive acknowledges and agrees that the
Restrictive Covenant Consideration is subject to forfeiture in accordance with
Section 16(b) hereof in the event Executive breaches any of the covenants set
forth in Section 13, 14 or 15 hereof.

     7. Taxes. PRG shall deduct or withhold such amounts as may be required
pursuant to applicable federal, state, local, or other laws from all amounts
payable to Executive or awards to be made to Executive pursuant to this
Agreement.

     8. Excess Payments. In the event that any payment or award to be received
by Executive pursuant to Sections 2, 3, or 4 hereof or the value of any
acceleration right occurring pursuant to this Agreement in connection with a
Change of Control would be subject to an excise tax pursuant to Section 4999 of
the Code (or any successor provision), whether in whole or in part, as a result
of being an "excess parachute payment," within the meaning of such term in
Section 280G(b) of the Code (or any successor provision), the amount payable
under Sections 2, 3, and 4 shall be reduced so that no portion of such payment
or the value of such acceleration rights is subject to the excise tax pursuant
to Section 4999 of the Code. If the amount necessary to eliminate such excise
tax exceeds the amount otherwise payable under Sections 2, 3, and 4, no payment
shall be made under these Sections and no further adjustments shall be made.
Notwithstanding the previous sentence, no portion of such payment or any
acceleration right which tax counsel, selected by USA's accountant and
acceptable to Executive, determines not to constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code will be taken into account.

     9. Confidentiality. Executive covenants and agrees that, during and after
his employment by USA, he will treat as confidential and will not, without the
prior written approval of USA, use (other than in the performance of his
designated duties for USA) or disclose the Trade Secrets or Confidential
Information; provided, the foregoing obligation with respect to Confidential
Information shall expire five years after termination of Executive's employment
by USA.

     10. Records. All records, notes, files, recordings, tapes, disks,
memoranda, reports, price lists, client lists, drawings, plans, sketches,
documents, equipment, apparatus, and like items, and all copies thereof,
relating to the business of USA or its affiliates or the Secret Information,
which shall be prepared by Executive or which shall be disclosed to or which
shall come into the possession of Executive, shall be and remain the sole and
exclusive property of USA. Executive agrees that at any time upon request from
USA, to promptly deliver to USA the originals and all copies of any of the
foregoing that are in the Executive's possession, custody or control

     11. Executive Inventions.

          (a) Ownership of Works. All Works shall be the sole and absolute
property of Company, including all patent, copyright, trade secret, or other
rights in respect thereof.


                                      -10-



Executive agrees to and hereby does assign to Company all right, title, and
interest in and to any and all Works, including all worldwide copyrights, patent
rights, and all trade secret information embodied therein, in all media and
including all rights to create derivative works thereof. Executive waives any
and all rights Executive may have in any Works, including but not limited to the
right to acknowledgement as author or moral rights. Executive agrees not to use
or include in Works any patented, copyrighted, restricted or protected code,
specifications, concepts, or trade secrets of any third party or any other
information that Executive would be prohibited from using by any
confidentiality, non-disclosure or other agreement with any third party.
Executive agrees to fully and promptly disclose in writing to USA any such Works
as such Works from time to time may arise.

          (b) Further Assurances. Executive shall, without charge to USA other
than reimbursement of Executive's reasonable out-of-pocket expenses, execute and
deliver all such further documents and instruments, including applications for
patents and copyrights, and perform such acts, at any time during or after the
term of this Agreement as may be necessary or desirable, to obtain, maintain,
and defend patents, copyrights, or other proprietary rights in respect of the
Works or to vest title to such Works in USA, its successors, assigns, or
designees. Without limiting the generality of the foregoing, Executive further
agrees to give all lawful testimony, during or after the term of Executive's
employment, which may be required in connection with any proceedings involving
any Works so assigned by Executive. Executive agrees to keep and maintain
adequate and complete records (in the form of notes, laboratory notebooks,
sketches, drawings, optical drives, hard drives and as may otherwise be
specified by USA) of all inventions and original works of authorship made by
Executive (solely or jointly with others) in the course of employment with
Company, with USA's time, on USA's premises, or using USA's resources or
equipment, which records shall be available to and remain the sole property of
USA at all times.

          (c) No Obligations to Third Parties. Executive represents and warrants
to USA that Executive is not subject to any employment, non-disclosure,
confidentiality, non-compete, or other agreement with any third party which
would prevent or prohibit Executive from fulfilling Executive's duties for USA.
If Executive is the subject of any such agreement, and has any doubt as to its
applicability to Executive's position with USA, Executive will provide a copy of
such agreement to USA so that USA can make a determination as to its effect on
Executive's ability to work for USA. Executive agrees to notify the company in
writing before making any disclosure or perform any work on behalf of USA which
appears to threaten or conflict with any proprietary rights Executive claims or
intends to claim in any invention or original work of authorship. In the event
Executive fails to give such notice, Executive agrees that he will make no claim
against USA with respect to any such invention or work of authorship.

     12. Cooperation. Executive agrees to cooperate at any time to the extent
and in the manner requested by USA and at USA's expense, in the prosecution or
defense of any claims, litigation or other proceeding involving the Works, the
property of USA or the Secret Information. Executive agrees to diligently
protect any and all Secret Information against loss by inadvertent or
unauthorized disclosure. Executive will comply with regulations, policies, and
procedures established by USA, including, without limitation, all regulations,
policies, and procedures established for the purpose of protecting Secret
Information.


                                      -11-



     13. Agreement Not to Compete. Executive covenants and agrees that during
his employment by USA and for a period of two years after termination, for any
reason, of such employment, he will not, without the prior written consent of
USA, within Fulton County, Georgia, for himself or on behalf of another,
directly or indirectly, engage in any business for which he provides services
which are the same or substantially similar to his services for USA (as
described in the Offer Letter) to or on behalf of a Competing Business;
provided, however, if the termination occurs on or after the second anniversary
of the date of the Change of Control, the two year non-compete period set forth
herein shall reduce to a one year non-compete period. Executive acknowledges and
agrees that Fulton County, Georgia is the geographic area within which the
Executive performs services for the Company.

     14. Agreement Not to Solicit Customers. During Executive's employment by
USA and for a period of two years after the termination of such employment for
any reason, whether by USA or by Executive, with or without Cause or Good
Reason, Executive will not, without the prior written consent of USA, directly
or indirectly, on Executive's own behalf or in the service or on behalf of
others, solicit or attempt to divert or appropriate to a Competing Business, any
customer or actual prospect of USA, in either case, with whom Executive dealt on
behalf of USA at any time during the 12-month period immediately preceding the
termination of employment; provided, however, if the termination occurs on or
after the second anniversary of the date of the Change of Control, the two year
customer non-solicit period set forth herein shall reduce to a one year customer
non-solicit period.

     15. Agreement Not to Solicit Employees. During Executive's employment by
USA and for a period of two years after the termination of such employment for
any reason, whether by USA or by Executive, with or without Cause or Good
Reason, Executive will not, without the prior consent of USA, directly or
indirectly, on Executive's own behalf or in the service or on behalf of others,
solicit, divert or recruit any employee of USA to leave such employment, whether
such employment is by written contract or at will; provided, however, if the
termination occurs on or after the second anniversary of the date of the Change
of Control, the two year employee non-solicit period set forth herein shall
reduce to a one year employee non-solicit period.

     16. Consideration; Remedies.

          (a) Injunctive Relief. Executive acknowledges and agrees that, by
virtue of the duties and responsibilities attendant to his employment by USA and
the special knowledge of USA's affairs, business, clients, and operations that
he has and will have as a consequence of such employment, irreparable loss and
damage will be suffered by USA if Executive should breach or violate any of the
covenants and agreements contained in Sections 9 through 15. Executive further
acknowledges and agrees that each of such covenants is reasonably necessary to
protect and preserve the business of USA. Executive, therefore, agrees and
consents that, in addition to any other remedies available to it, USA shall be
entitled to an injunction to prevent a breach or contemplated breach by the
Executive of any of the covenants or agreements contained in such Sections.


                                      -12-



          (b) Forfeiture. Executive acknowledges that USA intends to enforce the
terms of the restrictive covenants of this Agreement contained in Sections 13,
14, and 15. In the event Executive breaches the provisions of Sections 13, 14,
or 15, Executive shall immediately forfeit his right to receive (or shall refund
to USA or its successor to the extent Executive has been previously paid) the
value of the portion of the Restrictive Covenant Consideration allocable to the
portion of the two year time period ($917.80 per day of violation, capped at
amounts actually received by Executive) during which Executive is in violation
of any of such Sections 13, 14, or 15. Executive acknowledges that the actual
damages for any such breach are costly and difficult to estimate and the amount
required to be refunded or forfeited by this Section 16(b) is a reasonable
estimation of such damages. The parties agree that such forfeited or refunded
amount is intended as liquidated damages and not as a penalty. The parties also
agree that the remedies set forth in this Section 16(b) are in addition to other
remedies, including equitable remedies.

          (c) No Defense; Remedies. The existence of any claim, demand, action
or cause of action of Executive against USA or its affiliates, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by USA of any of the covenants contained herein. The rights of
USA under this Agreement are in addition to, and not in lieu of, all other
rights USA may have at law or in equity to protect its confidential information,
trade secrets and other proprietary interests.

     17. Severability; Construction. Each covenant of this Agreement shall be
deemed and shall be construed as a separate and independent covenant, and should
any part or provision of any such covenants be declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other separate covenant
of Executive not declared invalid. Whenever there is a conflict between an
applicable law of a jurisdiction which governs the subject matter of this
Agreement and any provision of this Agreement, the affected portions of this
Agreement shall be deemed revised, as to such jurisdiction only, in a manner
which (i) eliminates any invalid, illegal or completely unenforceable provision,
and (ii) as to any provision which is held to be excessively broad as to time
duration, scope, activity or subject, limits or reduces such provision so as to
be enforceable to the extent compatible with the applicable law.

     18. Notices. Any notice required or permitted to be given to one party by
the other party hereto pursuant to this Agreement shall be in writing and shall
be personally delivered (including delivery by overnight or express courier), or
sent by United States Mail, certified or registered, return receipt requested,
first class postage and charges prepaid, in envelopes addressed to the parties
as set forth below their signatures or at such other addresses as shall be
designated in writing by either party to the other party in accordance with this
Section. Notices delivered in person shall be effective on the date of delivery.
Notices sent by United States Mail shall be effective on the third day following
deposit.

     19. Amendment. No amendment or modification of this Agreement shall be
valid or binding upon either party unless made in writing.


                                      -13-



     20. Waiver. The waiver by one party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach of the same or any other provision by the other party.

     21. Employee-At-Will. Nothing in this Agreement affects the fact that
Executive's employment with USA is terminable at will by either party, subject
to any notice requirements set forth in the Offer Letter, as hereby amended.

     22. Attorneys' Fees. If any action at law or in equity is necessary to
enforce the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and expenses in addition to any other relief
to which such prevailing party may be entitled.

     23. Gender. All references included herein to the male gender shall be
construed to include the female gender, if and as appropriate.

     24. Assignment; Benefit; Payment to Estate. This Agreement may not be
assigned by Executive and shall be binding upon Executive's devisees, heirs,
legatees, beneficiaries, executors, administrators, or other legal
representatives. This Agreement may be assigned by USA, and the right, remedies,
and obligations of USA shall inure to the benefit of and be binding upon its
successors and assigns. In the event of Executive's death, any payment that
Executive has earned and to which Executive is entitled under this Agreement,
but which has not been paid at the time of Executive's death, shall be paid to
Executive's estate.

     25. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.

     26. Costs Associated with IRS Audit. In the event there is an Internal
Revenue Service audit of Executive's tax returns related to the tax treatment of
Executive's compensation under this Agreement, USA shall reimburse Executive for
one-half (1/2) of the professional fees and expenses (accounting, legal,
appraisal or other consultant) incurred by Executive contesting, disputing,
complying with or otherwise responding to such audit, up to a maximum of
$10,000.

     27. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the matters contained herein and, subject to
the following sentence, supersedes and terminates all previous agreements with
respect to the matters contained herein. Except as specifically set forth in
Section 4(d) and Section 5 hereof, the terms of this Agreement (a) are in
addition to, and not in lieu of, the benefits to which Executive is entitled
under the Offer Letter and (b) shall not be deemed to supersede, amend, or
terminate the any other parts of the Offer Letter. For the avoidance of doubt,
the parties acknowledge and agree that except as expressly set forth herein, no
other aspects of Executive's Offer Letter are, or shall be deemed for any
purposes to be modified. The Employee Agreement shall be superseded and
terminated by the provisions of this Agreement.

                         [SIGNATURES ON FOLLOWING PAGE]


                                      -14-



     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.

EXECUTIVE:


James L. Benjamin                       Date: 2/8/05
- -------------------------------------
James L. Benjamin

Address: 30 Brookside Walk
         Atlanta, GA 30342


"USA":

PRG-SCHULTZ USA, Inc.


By: John M. Cook                        Date: 2/14/05
    ---------------------------------
Title: Chairman & CEO

Address: 600 Galleria Parkway
         Suite 100
         Atlanta, Georgia 30339
Attention: Marie Neff, Executive Vice
           President-Human Resources


"PRGS":

PRG-SCHULTZ INTERNATIONAL, INC.,


By: John M. Cook                        Date: 2/14/05
    ---------------------------------
Title: Chairman & CEO

Address: 600 Galleria Parkway
         Suite 100
         Atlanta, Georgia 30339
Attention: Marie Neff, Executive Vice
           President-Human Resources


                                      -15-


                                    EXHIBIT A

                                 JOB DESCRIPTION



                                    EXHIBIT A
                                       TO
              CHANGE OF CONTROL AND RESTRICTIVE COVENANT AGREEMENT
                                       OF
                                JAMES L. BENJAMIN

Position: Executive Vice President, U. S. Operations

Duties, Responsibilities and Authority:

- -    Reports to Chairman/CEO or other senior-most executive.

- -    Overall responsibility for domestic (U.S.) accounts payable businesses.

- -    Member of Executive Committee.


                                      -17-



                                    EXHIBIT B

                                   STOCK AWARD


                                      -18-



                                                    YOUR NAME: James L. Benjamin
                                                    TOTAL NO. OF SHARES: 40,000

             PRGX RESTRICTED STOCK AWARD AGREEMENT (THE "AGREEMENT")

PRG-SCHULTZ INTERNATIONAL, INC. ("PRGX") is pleased to grant to the person named
above (referred to as "you" or "Grantee") the restricted stock award described
below ("Stock Award"), pursuant to this Agreement, the PRG-Schultz
International, Inc. Stock Incentive Plan (the "Plan"), and the Change of Control
and Restrictive Covenant Agreement between PRG-Schultz USA, Inc. ("USA"), a
wholly owned subsidiary of PRGX, and you, and of which this Agreement is a part
(the "2005 Restrictive Covenant Agreement").

GRANT DATE:                      FEBRUARY 14, 2005
MARKET PRICE ON GRANT DATE:                $  4.95
TOTAL NUMBER OF SHARES GRANTED:             40,000
START DATE FOR VESTING SCHEDULE: FEBRUARY 14, 2005

VESTING SCHEDULE: Subject to the terms of the Plan and the 2005 Restrictive
Covenant Agreement, the Stock Award shall vest in accordance with the following
schedule:

A. Normal Vesting. Unless the vesting of the Stock Award has been accelerated
pursuant to Section B below, all of the shares granted by this Stock Award shall
vest on February 14, 2008 (which is three years from the Grant Date specified
above), except as otherwise provided in the Additional Terms and Conditions
(attached and incorporated herein), including certain provisions related to
termination of employment, breach of the 2005 Restrictive Covenant Agreement,
and reduction in the number of shares issuable hereunder due to the application
of the excise tax on excess parachute payments (the "Parachute Cutback").

B. Accelerated Vesting. Subject to the provisions of the Additional Terms and
Conditions regarding termination of employment, breach of the 2005 Restrictive
Covenant Agreement, and the Parachute Cutback, but only to the extent consistent
with the Plan, vesting of the Stock Award will accelerate upon any of the
following events: (i) Change of Control (as defined below); (ii) your death;
(iii) your Disability, as that term is defined in your 2005 Restrictive Covenant
Agreement; and (iv) an involuntary termination of your employment without Cause,
as that term is defined in your 2005 Restrictive Covenant Agreement, that occurs
on or before December 31, 2005 (or March 31, 2006, solely in the case of the
entry into a definitive agreement on or before December 31, 2005 with respect to
a Change of Control as hereafter provided by this subsection (iv)) and is either
in contemplation of a Change of Control (which shall include, for purposes of
this subsection (iv) only, the entry into a definitive agreement on or before
December 31, 2005 with respect to a Change of Control where such Change of
Control is actually consummated on or before March 31, 2006) or at the
insistence of the prospective purchaser of PRGX; provided, however, that with
respect to an acceleration under this subsection (iv), notwithstanding anything
to the contrary contained herein, you shall have no right to have your Stock
Award released from escrow or to have certificates for your Stock Award issued
to you, and you may not transfer all or any portion of your Stock Award, until
the actual occurrence of a Change of Control (which shall include, for purposes
of this subsection (iv) only, the entry into a definitive agreement on or


                                      -19-



before December 31, 2005 with respect to a Change of Control where such Change
of Control is actually consummated on or before March 31, 2006) or sale of PRGX
on or before December 31, 2005, and in the event such a Change of Control or
sale does not occur on or before December 31, 2005, your entire Stock Award
shall be forfeited back to the Company. For purposes of this Agreement, the term
"Change of Control" shall mean shall mean the occurrence of any of the following
events: (i) a majority of the outstanding voting stock of PRGX shall have been
acquired or beneficially owned by any person (other than PRGX or a subsidiary of
PRGX) or any two or more persons acting as a partnership, limited partnership,
syndicate or other group, entity or association acting in concert for the
purpose of voting, acquiring, holding, or disposing of voting stock of PRGX; or
(ii) a merger or a consolidation of PRGX with or into another corporation, other
than (A) a merger or consolidation with a subsidiary of PRGX, or (B) a merger or
consolidation in which the holders of voting stock of PRGX immediately prior to
the merger as a class hold immediately after the merger at least a majority of
all outstanding voting power of the surviving or resulting corporation or its
parent; or (iii) a statutory exchange of shares of one or more classes or series
of outstanding voting stock of PRGX for cash, securities, or other property,
other than an exchange in which the holders of voting stock of PRGX immediately
prior to the exchange as a class hold immediately after the exchange at least a
majority of all outstanding voting power of the entity with which PRGX stock is
being exchanged; or (iv) the sale or other disposition of all or substantially
all of the assets of PRGX, in one transaction or a series of transactions, other
than a sale or disposition in which the holders of voting stock of PRGX
immediately prior to the sale or disposition as a class hold immediately after
the exchange at least a majority of all outstanding voting power of the entity
to which the assets of PRGX are being sold; or (v) the liquidation or
dissolution of PRGX.

ATTACHED ARE THE FOLLOWING DOCUMENTS (INCORPORATED INTO THIS AGREEMENT BY
REFERENCE), WHICH CONTAIN IMPORTANT INFORMATION ABOUT YOUR STOCK AWARD. PLEASE
REVIEW THEM CAREFULLY AND CONTACT PRGX HUMAN RESOURCES IF YOU HAVE ANY
QUESTIONS:

Additional Terms and Conditions describes what happens if you cease to be
employed by PRGX before your Stock Award vests, certain events that could cause
forfeiture of the stock granted under this Agreement, where to send notices and
other matters.

The Plan contains detailed terms that govern your Stock Award. If anything in
this Agreement, the 2005 Restrictive Covenant Agreement, your Offer Letter] or
any of the other attachments hereto is inconsistent with the Plan, the terms of
the Plan, as amended from time to time, will control.

The Plan Prospectus Document covering the Stock Award contains important
information, including federal income tax consequences.

2003 Annual Report of PRGX (not attached if you previously received the 2003
Annual Report).

The terms of your 2005 Restrictive Covenant Agreement, of which this Agreement
is a part, are also incorporated herein.


                                      -20-



BY SIGNING THE 2005 RESTRICTIVE COVENANT AGREEMENT, YOU AFFIRM AND ACKNOWLEDGE
THAT YOU HAVE ACCEPTED ALL OF THE TERMS OF THIS STOCK AWARD AFTER REVIEWING THE
ABOVE DOCUMENTS.

THE STOCK OFFERED HEREBY WILL NOT BE ISSUED AND YOU WILL HAVE NO RIGHTS
HEREUNDER UNTIL YOU HAVE COMMUNICATED YOUR ACCEPTANCE OF THE TERMS OF THIS
AGREEMENT BY RETURNING A SIGNED ORIGINAL OF THE 2005 RESTRICTIVE COVENANT
AGREEMENT AS PROVIDED THEREIN. PRGX MAY WITHDRAW THIS OFFER AT ANY TIME UNTIL
SUCH ACCEPTANCE.


                                      -21-



                       ADDITIONAL TERMS AND CONDITIONS OF
                           YOUR RESTRICTED STOCK AWARD

EFFECT OF TERMINATION OF EMPLOYMENT. You must be employed by PRGX or one of its
subsidiaries or affiliates on the applicable vesting date to be entitled to the
vesting of your Stock Award on such date, except as provided in Section B of
your Restricted Stock Award Agreement (the "Agreement"), which provides for
accelerated vesting upon certain events. If you cease to be employed by any of
PRGX, its subsidiaries or affiliates for any reason, except as provided in
Section B of the Agreement, then any portion of your Stock Award which has not
vested as of the date of termination of employment shall automatically be
forfeited and cancelled as of the date of such termination of employment.

EFFECT OF BREACH OF RESTRICTIVE COVENANTS. If you breach Section 13, 14, OR 15
of the 2005 Restrictive Covenant Agreement, your Stock Award, regardless of
whether or not vested, will be forfeited, in accordance with Section 16(B) of
the 2005 Restrictive Covenant Agreement, in an amount equal to the Forfeited
Share Value, calculated as set forth below.

The number of shares forfeited upon breach of one of the above-listed
restrictive covenants will equal:

     -    The Forfeited Share Value;

          DIVIDED BY

     -    the "Fair Market Value" of the shares of common stock in PRGX on the
          date of forfeiture. "Fair Market Value" shall be determined in
          accordance with the Plan.

"Forfeited Share Value" means:

     -    The dollar amount ("Total Liquidated Damages") of benefits to be
          forfeited and/or refunded under Section 16(B) of the 2005 Restrictive
          Covenant Agreement, calculated as provided in Section 16(B);

          MINUS

     -    The total amount of other benefits owing to you under the 2005
          Restrictive Covenant Agreement and payable in cash (the "Cash
          Benefits").

In addition, you will be required under Section 16(B) of the 2005 Restrictive
Covenant Agreement to make a cash payment to the extent the sum of the Fair
Market Value of the shares forfeited hereunder, plus the Cash Benefits, is less
than Total Liquidated Damages.

ESCROW OF STOCK AWARD SHARES. Shares of common stock granted pursuant to this
Stock Award shall be issued in your name and held in escrow by PRGX, in
book-entry form on the books maintained by the transfer agent for PRGX's common
stock, until the Stock Award is vested


                                      -22-



or forfeited as provided herein. Upon vesting of your Stock Award, the shares
will be released from escrow, and PRGX will deliver to you a certificate or
certificates representing the vested shares. However, transferability will
remain subject to relevant provisions of the federal securities laws
post-vesting, including (for so long as you remain an affiliate of PRGX) certain
limitations set forth in SEC Rule 144 promulgated under the Securities Act of
1933.

RIGHTS WITH RESPECT TO SHARES PRIOR TO VESTING. You may not transfer your Stock
Award or the shares to be issued hereunder prior to vesting. Once all or any
portion of this Stock Award vests, you will receive a transferable certificate
or certificates representing the shares, as described above. Prior to vesting,
you are entitled to all of the rights (other than transferability) of a
shareholder with respect to all unforfeited shares underlying the Stock Award,
including the right to vote such shares and to receive dividends and other
distributions payable with respect to such shares after the Grant Date.

WITHHOLDING. Whenever PRGX proposes, or is required, to distribute vested shares
to you or pay you dividends with respect to the unvested portion of your Stock
Award, PRGX may either: (a) require you to satisfy any local, state, Federal and
foreign income tax, employment tax and insurance withholding requirements prior
to the delivery of any payment or stock certificate owing to you pursuant to the
Stock Award; or, in its discretion, (b) reduce the number of shares to be
delivered to you by a number of shares sufficient to satisfy all or a portion of
such tax withholding requirements, based on the fair market value of PRGX's
shares of common stock on the date of withholding as determined under the Plan.
In furtherance of the foregoing, PRGX may, at the discretion of the Committee,
and subject to such requirements as the Committee may impose prior to the
occurrence of such withholding, permit you to satisfy such withholding or other
tax obligations through cash payment or the surrender of vested shares of Stock
which you already own.

REDUCTION OF CHANGE IN CONTROL PAYMENTS. As provided in your 2005 Restrictive
Covenant Agreement, the number of vested shares distributable to you is subject
to reduction to the extent necessary to avoid the imposition of any excise taxes
under certain "golden parachute" tax laws. All or a portion of any unvested
shares underlying this Award may be forfeited if certain benefits owing to you
under Sections 2, 3 AND 4 of the 2005 Restrictive Covenant Agreement and other
amounts treated as received by you which are treated as contingent upon a change
of control reach the "Golden Parachute Threshold."

The "Golden Parachute Threshold" is the point at which the aggregate value of
the above benefits, to the extent they are treated as contingent upon a change
of control, would (absent the operation of Section 8 of the 2005 Restrictive
Covenant Agreement) result in the excise tax pursuant to Section 4999 of the
Internal Revenue Code of 1986 (or any successor provision), being applicable to
the portion of each payment which is treated as an excess parachute payment.

If the Golden Parachute Threshold would otherwise be reached, the amounts
payable under Sections 2, 3 AND 4, of the 2005 Restrictive Covenant Agreement,
including the number of shares to vest and be delivered hereunder, will be
reduced to the extent necessary so that none of the amounts payable under
Section 2, 3 OR 4 of the 2005 Restrictive Covenant Agreement will be subject to
the excise tax. The number of shares that will be forfeited hereunder will
equal:


                                      -23-



     -    the Cutback Share Value;

          DIVIDED BY

     -    the Fair Market Value of the shares of common stock in PRGX on the
          date of the Change of Control.

"Cutback Share Value" means:

     -    the total dollar amount ("Cutback Amount") of the reduction in
          benefits necessary to avoid reaching the Golden Parachute Threshold,
          computed in accordance with Section 8 of the 2005 Restrictive Covenant
          Agreement;

          TIMES

     -    a percentage (which may be anywhere from 0% to 100%) to be designated
          by the Committee, reflecting an allocation of the Cutback Amount to
          this Stock Award;

provided that the Cutback Share Value cannot exceed the total fair market value
of the shares which would otherwise vest hereunder, without further risk of
forfeiture; and the balance of the Cutback Amount cannot exceed the amount of
benefits otherwise payable under Sections 2, 3 AND 4 of the 2004 Restricted
Covenant Agreement.

NOTICES. All notices delivered pursuant to this Agreement shall be in writing
and shall be delivered or sent in accordance with the provisions of the 2005
Restrictive Covenant Agreement.

MISCELLANEOUS. Failure by you or PRGX at any time or times to require
performance by the other of any provisions in this Agreement will not affect the
right to enforce those provisions. Any waiver by you or PRGX of any condition or
of any breach of any term or provision in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall apply only to that instance and
will not be deemed to waive conditions or breaches in the future. If any court
of competent jurisdiction holds that any term or provision of this Agreement is
invalid or unenforceable, the remaining terms and provisions will continue in
full force and effect, and this Agreement shall be deemed to be amended
automatically to exclude the offending provision. This Agreement shall be
subject to and governed by the laws of the State of Georgia. No change or
modification of this Agreement shall be valid unless it is in writing and signed
by the party against which enforcement is sought, except where specifically
provided to the contrary herein. This Agreement shall be binding upon, and inure
to the benefit of, the permitted successors, assigns, heirs, executors and legal
representatives of the parties hereto. The headings of each section of this
Agreement are for convenience ONLY. This Agreement (including the portions
incorporated by reference) contains the entire Agreement of the parties hereto,
and no representation, inducement, promise, or agreement or other similar
understanding between the parties not embodied herein shall be of any force or
effect, and no party will be liable or bound in any manner for any warranty,
representation, or covenant except as specifically set forth herein.


                                      -24-



                                    EXHIBIT C

                                 FORM OF RELEASE


                                      -25-



                                 FORM OF RELEASE

     THIS RELEASE AGREEMENT AND COVENANT NOT TO SUE (the "Agreement") is entered
into by and between PRG-Schultz USA, Inc., a Georgia corporation (the "Company")
and _________________, a resident of the state of ________________
("Executive"), as of the Effective Date of the Agreement, as defined below.

                                   WITNESSETH

     Executive and Company are parties to that certain [offer letter
agreement/employment agreement], dated ______________________ ("Employment
Agreement").

     Executive and Company are parties to that certain Change of Control and
Restrictive Covenant Agreement, dated ________________ ("Change of Control
Agreement").

     Executive and Company are terminating their employment relationship,
subject to the terms hereof; and

     NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein and other good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:

     1. Termination of Employment. The parties hereto hereby acknowledge and
agree that Executive's employment with Company will automatically terminate as
of the close of business on _____________________________.

     2. General Release of Claims. In consideration of the covenants from
Company to Executive set forth herein and in the Employment Agreement and Change
of Control Agreement, the receipt and sufficiency of which is hereby
acknowledged, Executive, on his behalf and on behalf of his heirs, devisees,
legatees, executors, administrators, personal and legal representatives, assigns
and successors in interest (collectively, the "Derivative Claimants" and each a
"Derivative Claimant"), hereby IRREVOCABLY, UNCONDITIONALLY AND GENERALLY
RELEASES, ACQUITS, AND FOREVER DISCHARGES, to the fullest extent permitted by
law, Company and each of Company's directors, officers, employees,
representatives, stockholders, predecessors, successors, assigns, agents,
attorneys, divisions, subsidiaries and affiliates (and agents, directors,
officers, employees, representatives and attorneys of such stockholders,
predecessors, successors, assigns, divisions, subsidiaries and affiliates), and
all persons acting by, through, under or in concert with any of them
(collectively, the "Releasees" and each a "Releasee"), or any of them, from any
and all charges, complaints, claims, damages, actions, causes of action, suits,
rights, demands, grievances, costs, losses, debts, and expenses (including
attorneys' fees and costs incurred), of any nature whatsoever, known or unknown,
that Executive now has, owns, or holds, or claims to have, own, or hold, or
which Executive at any time heretofore had, owned, or held, or claimed to have,
own, or hold from the beginning of time to the date that Executive signs this
Agreement, including, but not limited to, those claims arising out of or
relating to (i) any agreement, commitment, contract, mortgage, deed of trust,
bond, indenture, lease, license, note, franchise, certificate, option, warrant,
right or other instrument, document, obligation or arrangement, whether written
or oral, or any other relationship, involving Executive and/or any Releasee,
(ii) breach of any express or


                                      -26-



implied contract, breach of implied covenant of good faith and fair dealing,
misrepresentation, interference with contractual or business relations, personal
injury, slander, libel, assault, battery, negligence, negligent or intentional
infliction of emotional distress or mental suffering, false imprisonment,
wrongful termination, wrongful demotion, wrongful failure to promote, wrongful
deprivation of a career opportunity, discrimination (including disparate
treatment and disparate impact), hostile work environment, sexual harassment,
retaliation, any request to submit to a drug or polygraph test, and/or
whistleblowing, whether said claim(s) are brought pursuant to the AGE
DISCRIMINATION IN EMPLOYMENT ACT, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS
AMENDED, THE EQUAL PAY ACT, 42 U.S.C. SECTIONS 1981, 1983, OR 1985, THE
VOCATIONAL REHABILITATION ACT OF 1977, THE AMERICANS WITH DISABILITIES ACT, THE
FAMILY AND MEDICAL LEAVE ACT OR THE FAIR CREDIT REPORTING ACT or any other
constitutional, federal, regulatory, state or local law, or under the common law
or in equity, and (iii) any other matter (each of which is referred to herein as
a "Claim"); provided, however, that nothing contained herein shall operate to
release any obligations of Company, its successors or assigns arising under any
claims under the Employment Agreement, the Change of Control Agreement or under
any written Company benefit plans, any 401(k) plan, any pension plan and any
similar plan, to the extent Executive is entitled to benefits under the
respective terms thereof.

     3. Release of Unknown Claims. Executive recognizes that he may have some
claim, demand, or cause of action against the Releasees relating to any Claim of
which he is totally unaware and unsuspecting and which is given up by the
execution of this Agreement. It is Executive's intention in executing this
Agreement with the advice of legal counsel that this Agreement will deprive him
of any such Claim and prevent Executive or any Derivative Claimant from
asserting the same. The provisions of any local, state, federal, or foreign law,
statute, or judicial decision providing in substance that this Agreement shall
not extend to such unknown or unsuspecting claims, demands, or damages, are
hereby expressly waived.

     4. Acknowledgment. Executive acknowledges that he has thoroughly discussed
all aspects of this Agreement with his attorney, that he has carefully read and
fully understands all of the provisions of this Agreement, and that he is
voluntarily entering into this Agreement. Executive hereby waives the
requirement under the Age Discrimination in Employment Act that Executive has
twenty-one (21) days to review and consider this Agreement before executing it.
Executive acknowledges and understands that he shall have seven (7) days after
signing this Agreement during which he may revoke this Agreement by providing
written notice to Company within seven (7) days following its execution. Any
notice of revocation of this Agreement shall not be effective unless given in
writing and received by Company within the seven-day revocation period via
personal delivery, overnight courier, or certified U.S. mail, return receipt
requested, to PRG-SCHULTZ USA, INC., 600 Galleria Parkway, Suite 100, Atlanta,
Georgia 30339, Attention: General Counsel. THIS AGREEMENT SHALL NOT BECOME
EFFECTIVE AND ENFORCEABLE UNTIL SUCH SEVEN (7) DAY PERIOD HAS EXPIRED. IF
EMPLOYEE REVOKES THIS AGREEMENT WITHIN SUCH SEVEN (7) DAY PERIOD, EMPLOYEE WILL
NOT BE ENTITLED TO RECEIVE ANY OF THE RIGHTS AND BENEFITS DESCRIBED HEREIN OR
UNDER THE EMPLOYMENT AGREEMENT OR CHANGE OF CONTROL AGREEMENT.

     5. No Assignment. Executive represents and warrants that he has not
assigned or transferred, or purported to assign or transfer, to any person,
entity, or individual whatsoever,


                                      -27-



any of the Claims released herein. Executive agrees to indemnify and hold
harmless the Releasees against any Claim based on, arising out of, or due to any
such assignment or transfer.

     6. Indemnification. In furtherance of the foregoing, Executive agrees on
behalf of himself and the Derivative Claimants not to sue or prosecute any
matter against any Releasee with respect to any Claim and agrees to hold each
Releasee harmless with respect to any such suit or prosecution in contravention
of this Section 6. Executive understands that if this Agreement were not signed,
he would have the right voluntarily to assist other individuals or entities in
bringing Claims against the Releasees. Executive hereby waives that right and
hereby agree that he will not voluntarily provide any such assistance. To the
extent that applicable law prohibits Executive from waiving his right to bring
and/or participate in the investigation of a Claim, Executive nevertheless
waives his right to seek or accept any damages or relief in any such proceeding.

     7. Representation Regarding Knowledge of Trade Secrets and/or Inventions.
Executive hereby acknowledges and confirms that he has no right, claim or
interest to any property, invention, trade secret, information or other asset
used in the business of Company and that all such property, inventions, trade
secrets, information and other assets used in the business of Company are owned
by Company or its affiliates or licensed to Company or its affiliates by third
parties not affiliated with Executive.

     8. Return of Company Property and Proprietary Information. (a) Executive
further promises, represents and warrants that Executive has returned or will
return to _______________ [IDENTIFY DESIGNEE] by no later than upon the
execution of this Agreement by Executive: (a) all property of Company,
including, but not limited to, any and all files, records, credit cards, keys,
identification cards/badges, computer access codes, computer programs,
instruction manuals, equipment (including computers) and business plans; (b) any
other property which Executive prepared or helped to prepare in connection with
Executive's employment with Company; and (c) all documents, including logs or
diaries, all tangible materials, including audio and video tapes, all intangible
materials (including computer files), and any and all copies or duplicates of
any such tangible or intangible materials, including any duplicates, copies, or
transcriptions made of audio or video tapes, whether in handwriting or
typewritten, that are in the possession, custody or control of Executive or his
attorneys, agents, family members, or other representatives, which are alleged
to support in any way any of the claims Executive has released under this
Agreement.

     (b) The foregoing representation shall include all Proprietary Information
of Company and Company. With respect to Proprietary Information, Executive
warrants, represents, and covenants to return such Proprietary Information on or
before the close of business on ____________________. As used herein,
"Proprietary Information" means information in written form or electronic media,
including but not limited to technical and non-technical data, lists, training
manuals, training systems, computer based training modules, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes and
plans regarding Company or its affiliates, clients, prospective clients, methods
of operation, billing rates, billing procedures, suppliers, business methods,
finances, management, or any other business information relating to Company or
its affiliates (whether constituting a trade secret or proprietary or otherwise)
which has value to Company or its affiliates and is treated by Company


                                      -28-



or its affiliates as being confidential; provided; however, that Proprietary
Information shall not include any information that has been voluntarily
disclosed to the public by Company or its affiliates (except where such public
disclosure has been made without authorization) or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means. Proprietary Information does include information which has
been disclosed to Company or its affiliates by a third party and which Company
or its affiliates are obligated to treat as confidential. Proprietary
Information may or may not be marked by Company or its affiliates as
"proprietary" or "secret" or with other words or markings of similar meaning,
and the failure of Company to make such notations upon the physical embodiments
of any Proprietary Information shall not affect the status of such information
as Proprietary Information.

     9. General Provisions.

     (a) This Agreement and the covenants, representations, warranties and
releases contained herein shall inure to the benefit of and be binding upon
Executive and Company and each of their respective successors, heirs, assigns,
agents, affiliates, parents, subsidiaries and representatives.

     (b) Each party acknowledges that no one has made any representation
whatsoever not contained herein concerning the subject matter hereof to induce
the execution of this Agreement. Executive acknowledges that the consideration
for signing this Agreement is a benefit to which Executive would not have been
entitled had Executive not signed this Agreement.

     (c) Executive agrees that the terms and conditions of this Agreement,
including the consideration hereunder shall not be disclosed to anyone and shall
remain confidential and not disseminated to any person or entity not a party to
this Agreement except to family members, legal counsel, an accountant for
purposes of securing tax advice; the Internal Revenue Service, or the state
taxing agencies.

     (d) The "Effective Date" of this Agreement shall be the eighth (8th) day
after the execution of the Agreement by Executive.

     (e) This Agreement does not constitute an admission of any liability.

     (f) The parties hereto and each of them agrees and acknowledges that if any
portion of this Agreement is declared invalid or unenforceable by a final
judgment of any court of competent jurisdiction, such determination shall not
affect the balance of this Agreement, which shall remain in full force and
effect. Any such invalid portion shall be deemed severable.

     (g) Neither this Agreement nor any provision hereof may be modified or
waived in any way except by an agreement in writing signed by each of the
parties hereto consenting to such modification or waiver.

This Agreement shall in all respects be interpreted, enforced and governed under
the internal laws (and not the conflicts of laws and rules) of Georgia.


                                      -29-



     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.

EXECUTIVE ATTESTS THAT HE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF
ALL KNOWN AND UNKNOWN CLAIMS.

NOTICE - THIS AGREEMENT CONTAINS A WAIVER OF RIGHTS UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT. EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE
SIGNING THIS AGREEMENT

EXECUTED THIS __________ DAY OF _________________, 200__.

EXECUTIVE: __________________________

           PRINT NAME: ______________

Sworn to and subscribed before me this _______________ day of ______________,
200__.


- -------------------------------------
Notary Public

EXECUTED THIS __________ DAY OF _________________, 200__.

COMPANY: PRG-SCHULTZ USA, INC.


By:
    ---------------------------------
Its:
     --------------------------------


                                      -30-

EX-10.41

                                                                   Exhibit 10.41

Summary of Compensation Arrangements with Non-Employee Directors

The following summarizes the current compensation and benefits received by the
Company's non-employee directors. It is intended to be a summary of existing
arrangements, and in no way is intended to provide any additional rights to any
non-employee director.

Retainer Fees

During 2006, non-employee directors receive a $30,000 annual retainer, except
that the Chairman of the Board is compensated pursuant to a Retainer Agreement,
a copy of which is filed as an exhibit to this Form 10-K. In addition, the
chairpersons of the Compensation Committee and the Nominating and Corporate
Governance Committee each receive a supplemental retainer of $6,000 per year,
and the chairperson of the audit committee a supplemental retainer of $12,000
per year.

Meeting Fees

Per meeting fees for non-employee directors are as follows:

*    A $1,500 daily attendance fee for attendance at Board meetings and the
     annual meeting of shareholders;

*    A $1,000 daily attendance fee for attendance at meetings of committees of
     which they are a member, except that no attendance fee is payable with
     respect to the Special Committee.

Equity Compensation

Under the terms of the Company's stock incentive plan, directors are eligible to
receive stock options, stock awards, and other types of equity-based
compensation awards. Non-employee directors receive an annual grant of an option
to purchase 10,000 shares, subject to the terms of the Company's standard form
of non-employee director option agreement, a copy of which is filed as an
exhibit to this Form 10-K.



Special Restructuring Committee

On October 19, 2005 the Board of Directors of the Company formed a Special
Restructuring Committee to oversee the efforts of the Company to restructure the
Registrant's financial obligations and to improve the Registrant's liquidity.
The members of the special committee were David A. Cole, Garth H. Greimann,
Gerald E. Daniels and Jimmy M. Woodward.

The Board of Directors also approved a one time special retainer of $15,000 for
each member of the Special Restructuring Committee, which was paid in three
monthly installments commencing November 1, 2005.

Reimbursement of Insurance Premiums

During 2005, Messrs. Cole and Robertson were reimbursed for the cost of their
individual directors' and officers' liability insurance policies.

Reimbursement of Expenses

All non-employee directors are entitled to reimbursement of expenses for all
services as a director, including committee participation or special
assignments.

EX-10.42

                                                                   EXHIBIT 10.42

Summary of Compensation Arrangements with Executive Officers

The following summarizes the compensation and benefits received by the Chief
Executive Officer of PRG-Schultz International, Inc. ("the Company") and the
Company's other four most highly compensated executive officers (the "Named
Executive Officers") as of December 31, 2005.

The Named Executive Officers of the Company all have written Employment
Agreements with the Company which are filed as exhibits to this Form 10-K. This
summary includes only certain portions of the compensation provisions of the
Employment Agreements, which set forth other important terms and conditions of
the officers' employment arrangements including certain restrictive covenants
and tax provisions. The Named Executive Officers are also party to the Company's
standard form of Indemnification Agreement, a copy of which is filed as an
exhibit to this 10-K.

This summary is intended to be a summary of existing arrangements, and in no way
is intended to provide any additional rights to any of the Named Executive
Officers.

Base Salaries

The 2005 annual base salaries for the Company's Named Executive Officers were as
follows:

                                                              
James B. McCurry, President and Chief Executive Officer          $500,000

James E. Moylan, Jr.,
Executive Vice President, Finance, Chief Financial Officer and
Treasurer                                                        $375,000

Larry Robinson,
Senior Vice President, Asia-Pacific, Latin America and Canada
Operations                                                       $355,252

Bradley T. Roos, Senior Vice President, Europe Operations        $308,000

James L. Benjamin, Executive Vice President, U.S. Operations     $300,000



Annual Incentive Compensation

2005 Management Incentive Plan.

All of the Named Executive Officers were eligible to participate in the
Company's 2005 Management Incentive Plan, which provides annual incentives for
executive management by giving them an opportunity to earn bonuses based upon
performance criteria selected by the Compensation Committee, which may include
Company EBIT, Company revenues, Company operating income, and specific business
performance objectives. The Compensation Committee



reserves discretion to adjust bonuses upwards or downwards under the Management
Incentive Plan, and may award discretionary bonuses outside of the Management
Incentive Plan.

2005 bonuses.

The following Named Executive Officers received bonuses during the first
quarter of 2006 with respect to 2005 as follows:

                
James B. McCurry   $154,808*

Larry Robinson     $ 55,095



*    Pursuant to employment agreement

2006 Bonus Plan.

The Named Executive Officers, other than Mr. Moylan, whose employment by the
Company terminated on February 10, 2006, have all been granted an opportunity to
earn bonuses based on the Company's 2006 Bonus Plan. Under the 2006 Bonus Plan
bonuses are earned only after the Company's consolidated 2006 EBITDA before
certain one time charges reaches a specified minimum level. Bonuses are paid
annually.


Termination Benefits

All of the Named Executive Officers currently employed by the Company are
entitled to certain termination benefits upon termination of employment with the
Company under certain circumstances. The terms of their termination benefits are
specified in their Employment Agreements, as amended by the Change of Control
and Restrictive Covenant Agreements, copies of which are filed as exhibits to
this Form 10-K.

Stock Options and Other Equity Awards

The Named Executive Officers currently employed by the Company are eligible to
receive options and restricted stock under the Company's stock incentive plan,
in such amounts and with such terms and conditions as determined by the
Committee at the time of grant. The Company's incentive plans and standard forms
of option agreements are filed as exhibits with this Form 10-K.

Automobile Allowance

The Named Executive Officers received annual automobile allowances in 2005 in
the amounts set forth below, as provided in their Employment Agreements, copies
of which are filed as exhibits to this 10-K:

              
Jim Moylan       $20,000

Larry Robinson   $16,015






              
Brad Roos        $15,000

Jim Benjamin     $15,000



NOTE: The annual auto allowance is being added into the base salary as of
January 1, 2006 effected by oral amendment to Mr. Benjamin's and Mr. Roos'
written Executive Agreement.

Other Benefits

The Named Executive Officers currently employed by the Company are also entitled
to participate in the Company's regular employee benefit programs, including a
401(k) plan, group medical and dental coverage and other group benefit plans.
Mr. Robinson is also entitled to additional life insurance benefits.

EX-10.59

                     FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

     This First Amendment to Employment Agreement (this "Amendment") is entered
into as of December 9, 2005, among PRG-SCHULTZ USA, INC., a Georgia corporation
(the "Company"), PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation that
owns all of the capital stock of the Company ("PRGX"), and JAMES B. MCCURRY
("Executive").

     The parties to this Amendment hereby agree to amend the Employment
Agreement by and among the Company, PRGX, and Executive, dated July 25, 2005
(the "Agreement"), as set forth herein.

     1. Section 6(c)(1) is hereby deleted and the following new Section 6(c)(1)
is inserted in lieu thereof:

     "(1) a lump sum payment equal to either (i) in the event the Employment
Period ends prior to the date that is 16 months after the Effective Date, 0.125
times the number of months in the Employment Period multiplied by Executive's
Average Annual Compensation (as defined below) (provided, however, that if the
Termination without Cause or Termination for Good Reason occurs after a Change
in Control, then the amount of the lump sum payment shall be equal to the amount
provided in subclause (ii) of this subparagraph (c)(1) notwithstanding the date
the Employment Period ends), or (ii) in the event the Employment Period ends on
or after the date that is 16 months after the Effective Date, two times
Executive's Average Annual Compensation (for purposes hereof, "Average Annual
Compensation" means (x) Executive's Base Salary for fiscal year 2005, if the
Date of Termination occurs in fiscal year 2005, or the average of Executive's
Base Salary in effect for the final two fiscal years in the Employment Period
(including the fiscal year in which the Date of Termination occurs), if the Date
of Termination occurs after December 31, 2005; plus (y) (A) if the Date of
Termination occurs prior to January 1, 2006, 70% of Executive's Base Salary,
prorated based on the number of days actually employed during fiscal year 2005;
(B) if the Date of Termination occurs after December 31, 2005 but prior to prior
to January 1, 2007, 70% of Executive's Base Salary for fiscal year 2005; (C) if
the Date of Termination occurs during fiscal year 2007, the actual annual bonus
paid in respect of fiscal year 2006; or (D) if the Date of Termination occurs
after December 31, 2007, the average of the actual annual bonuses paid or
payable in respect of the two full fiscal years immediately preceding the fiscal
year in which the Date of Termination occurs); and"



     2. Counterparts. This Amendment may be executed in separate counterparts,
each of which are to be deemed to be an original and both of which taken
together are to constitute one and the same agreement.

     3. Effect of Amendment. As expressly modified by this Amendment, all terms
and conditions of the Agreement are hereby ratified.

     The parties are signing this First Amendment as of the date first stated
     above.

                                        PRG-SCHULTZ USA, INC.


                                        By: /s/ Clinton McKellar, Jr.
                                            ------------------------------------
                                        Name: Clinton McKellar, Jr.
                                        Title: SVP, General Counsel & Secretary


                                        PRG-SCHULTZ INTERNATIONAL, INC.


                                        By: /s/ Clinton McKellar, Jr.
                                            ------------------------------------
                                        Name: Clinton McKellar, Jr.
                                        Title: SVP, General Counsel & Secretary


                                        /s/
                                        ----------------------------------------
                                        James B. McCurry

EX-10.60

                              STOCK OPTION VESTING

On December 15, 2005 the Compensation Committee of the Board of Directors of
PRG-Schultz International, Inc. authorized the immediate vesting of all
outstanding unvested time vesting options that have option prices that are out
of the money as of such date. This action accelerated the vesting of 2,355,116
options of the 10,861,918 options outstanding as November 30, 2005. The
accelerated options have option prices that range from $3.16 per share to $17.25
per share and a weighted average option price per share of $4.97.

EX-10.61

                                                                       EXECUTION
                                                                         VERSION

                                CREDIT AGREEMENT

                                      among

                             PRG-SCHULTZ USA, INC.,
                                  as Borrower,

                        PRG-SCHULTZ INTERNATIONAL, INC.,
                                   as Parent,

                       CERTAIN SUBSIDIARIES OF THE PARENT
                         FROM TIME TO TIME PARTY HERETO,
                                 as Guarantors,

                                       AND

              THE LENDERS IDENTIFIED ON THE SIGNATURE PAGES HERETO,
                                   as Lenders

                                       AND

                        BLUM STRATEGIC PARTNERS II, L.P.,
                             as the Collateral Agent

                          DATED AS OF DECEMBER 23, 2005



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
SECTION 1 DEFINITIONS....................................................     1
   1.1   Definitions.....................................................     1
   1.2   Computation of Time Periods.....................................    17
   1.3   Accounting Terms................................................    17

SECTION 2 CREDIT FACILITIES..............................................    18
   2.1   Term Loan.......................................................    18
   2.2   [Intentionally Omitted].........................................    19

SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES.................    19
   3.1   Default Rate....................................................    19
   3.2   [Intentionally Omitted].........................................    19
   3.3   Prepayments.....................................................    19
   3.4   Termination the Commitment......................................    20
   3.5   Fees............................................................    20
   3.6   [Intentionally Omitted].........................................    20
   3.7   [Intentionally Omitted].........................................    20
   3.8   [Intentionally Omitted].........................................    20
   3.9   Taxes...........................................................    20
   3.10  [Intentionally Omitted].........................................    21
   3.11  Payments Computations, Etc......................................    21
   3.12  Evidence of Debt................................................    22

SECTION 4 GUARANTY.......................................................    22
   4.1   The Guaranty....................................................    22
   4.2   Obligations Unconditional.......................................    22
   4.3   Reinstatement...................................................    23
   4.4   Certain Additional Waivers......................................    24
   4.5   Remedies........................................................    24
   4.6   Rights of Contribution..........................................    24
   4.7   Guarantee of Payment; Continuing Guarantee......................    24

SECTION 5 CONDITIONS.....................................................    25
   5.1   Closing Conditions..............................................    25

SECTION 6 REPRESENTATIONS AND WARRANTIES.................................    28
   6.1   Financial Condition.............................................    28
   6.2   No Material Change..............................................    29
   6.3   Organization and Good Standing..................................    29
   6.4   Power; Authorization; Enforceable Obligations...................    29
   6.5   No Conflicts....................................................    30
   6.6   No Default......................................................    30



                                        i



                                                                         
   6.7   Ownership.......................................................    30
   6.8   Indebtedness....................................................    30
   6.9   Litigation......................................................    30
   6.10  Taxes...........................................................    30
   6.11  Compliance with Law.............................................    31
   6.12  ERISA...........................................................    31
   6.13  Subsidiaries....................................................    32
   6.14  Governmental Regulations, Etc...................................    33
   6.15  Purpose of Loans and Letters of Credit..........................    34
   6.16  Environmental Matters...........................................    34
   6.17  Intellectual Property...........................................    35
   6.18  Solvency........................................................    35
   6.19  Investments.....................................................    35
   6.20  Location of Collateral..........................................    35
   6.21  Disclosure......................................................    35
   6.22  Brokers' Fees...................................................    36
   6.23  Labor Matters...................................................    36

SECTION 7 AFFIRMATIVE COVENANTS..........................................    36
   7.1   Information Covenants...........................................    36
   7.2   Preservation of Existence and Franchises........................    39
   7.3   Books and Records...............................................    40
   7.4   Compliance with Law.............................................    40
   7.5   Payment of Taxes and Other Indebtedness.........................    40
   7.6   Insurance.......................................................    40
   7.7   Maintenance of Property.........................................    41
   7.8   Performance of Obligations......................................    41
   7.9   Use of Proceeds.................................................    41
   7.10  Audits/Inspections..............................................    41
   7.11  [Intentionally Omitted].........................................    42
   7.12  Additional Credit Parties.......................................    42
   7.13  Environmental Laws..............................................    43
   7.14  Collateral......................................................    43
   7.15  Working Capital Borrowing Base..................................    44
   7.16  Post-Closing Deliveries.........................................    44

SECTION 8 NEGATIVE COVENANTS.............................................    44
   8.1   Indebtedness....................................................    44
   8.2   Liens...........................................................    45
   8.3   Nature of Business..............................................    45
   8.4   Consolidation, Merger, Dissolution, etc.........................    45
   8.5   Asset Dispositions..............................................    46
   8.6   Investments.....................................................    47
   8.7   Restricted Payments.............................................    47
   8.8   Transactions with Affiliates....................................    47
   8.9   Fiscal Year; Organizational Documents...........................    47
   8.10  Limitation on Restricted Actions................................    47




                                       ii



                                                                         
   8.11  Ownership of Subsidiaries.......................................    48
   8.12  Sale Leasebacks.................................................    48
   8.13  Capital Expenditures............................................    48
   8.14  No Further Negative Pledges.....................................    48
   8.15  Limitation on Foreign EBITDA....................................    49
   8.16  Subordinated Debt...............................................    49
   8.17  Notice under the Indenture......................................    49
   8.18  Working Capital Loan Documents..................................    49

SECTION 9 EVENTS OF DEFAULT..............................................    49
   9.1   Events of Default...............................................    49
   9.2   Acceleration; Remedies..........................................    52
   9.3   Application of Funds............................................    52

SECTION 10 MISCELLANEOUS.................................................    53
   10.1  Notices.........................................................    53
   10.2  Right of Set-Off; Adjustments...................................    55
   10.3  Successors and Assigns..........................................    55
   10.4  Expenses; Indemnification.......................................    56
   10.5  Amendments, Waivers and Consents................................    57
   10.6  Counterparts....................................................    58
   10.7  Headings........................................................    58
   10.8  Survival........................................................    58
   10.9  Governing Law; Submission to Jurisdiction; Venue................    58
   10.10 Waiver of Jury Trial............................................    59
   10.11 Survival of Representations and Warranties......................    59
   10.12 Severability....................................................    59
   10.13 Entirety........................................................    59
   10.14 Binding Effect; Termination.....................................    59
   10.15 Confidentiality.................................................    60
   10.16 Conflict........................................................    61
   10.17 USA Patriot Act Notice..........................................    61

SECTION 11 COLLATERAL AGENT..............................................    61
   11.1  Appointment.....................................................    61
   11.2  Nature of Duties................................................    62
   11.3  Rights, Exculpation, Etc........................................    62
   11.4  Reliance........................................................    63
   11.5  Indemnification.................................................    63
   11.6  Collateral Agent Individually...................................    63
   11.7  Successor Collateral Agent......................................    64
   11.8  Collateral Matters..............................................    64
   11.9  Agency for Perfection...........................................    65




                                       iii



                                    SCHEDULES

               
Schedule 1.1(a)   Commitments
Schedule 1.1(b)   Investments
Schedule 1.1(c)   Liens
Schedule 6.9      Litigation
Schedule 6.10     Tax Returns
Schedule 6.13     Subsidiaries
Schedule 6.17     Intellectual Property
Schedule 6.20     Chief Executive Office/Exact Legal Name/State of Incorporation
Schedule 6.22     Broker's Fees
Schedule 7.6      Insurance
Schedule 8.1      Indebtedness

                                    EXHIBITS

Exhibit A         Form of Borrowing Notice
Exhibit B         Form of Note
Exhibit C         Form of Officer's Compliance Certificate
Exhibit D         [Intentionally Omitted]
Exhibit E         Form of Joinder Agreement




                                       iv


                                CREDIT AGREEMENT

     THIS CREDIT AGREEMENT (this "Credit Agreement"), dated as of December 23,
2005, is by and among PRG-SCHULTZ USA, INC., a Georgia corporation (the
"Borrower"), PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation (the
"Parent"), each of the Domestic Subsidiaries of the Parent (such Domestic
Subsidiaries, together with the Parent, individually a "Guarantor" and
collectively the "Guarantors") and each of the Lenders identified on the
signature pages hereto (each a "Lender" and collectively, the "Lenders") and
Blum Strategic Partners II, L.P., as the collateral agent for the Lenders (in
such capacity, the "Collateral Agent").

                                   W1TNESSETH:

     The Borrower has asked the Lenders to extend credit to the Borrower
consisting of a term loan in the aggregate principal amount of $10,000,000, the
proceeds of which shall be used (i) to fund certain of the Borrower's working
capital needs, provided, that in no event shall the proceeds of the Term Loan be
used to make any severance payments or other similar payments to John Cook or
Jack Toma and (ii) to pay transaction fees and expenses related to this Credit
Agreement and the other transactions contemplated hereby. The Lenders are
severally, and not jointly, willing to extend such credit to the Borrower
subject to the terms and conditions hereinafter set forth.

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

                                   SECTION 1

                                  DEFINITIONS

     1.1  DEFINITIONS.

     As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:

          "Additional Credit Party" means each Person that becomes a Guarantor
     after the Closing Date by execution of a Joinder Agreement.

          "Affiliate" means, with respect to any Person, any other Person (i)
     directly or indirectly controlling or controlled by or under direct or
     indirect common control with such Person or (ii) directly or indirectly
     owning or holding five percent (5%) or more of the Capital Stock in such
     Person. For purposes of this definition, "control" when used with respect
     to any Person means the power to direct the management and policies of such
     Person, directly or indirectly, whether through the ownership of voting
     securities, by contract or otherwise; and the terms "controlling" and
     "controlled" have meanings correlative to the foregoing. Notwithstanding
     the foregoing, in no event shall any Lender or any Affiliate of a Lender be
     deemed an Affiliate of any Consolidated Party.



          "Asset Disposition" means the disposition of any or all of the assets
     (including without limitation the Capital Stock of a Subsidiary) of any
     Consolidated Party whether by sale, lease, transfer or otherwise (including
     pursuant to any casualty or condemnation event).

          "Attorney Costs" means and includes all reasonable and documented
     fees, expenses and disbursements of any law firm or other external counsel.

          "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
     States Code, as amended, modified, succeeded or replaced from time to time.

          "Bankruptcy Event" means, with respect to any Person, the occurrence
     of any of the following with respect to such Person: (i) a court or
     governmental agency having jurisdiction in the premises shall enter a
     decree or order for relief in respect of such Person in an involuntary case
     under any applicable bankruptcy, insolvency or other similar law now or
     hereafter in effect, or appointing a receiver, liquidator, assignee,
     custodian, trustee, sequestrator (or similar official) of such Person or
     for any substantial part of its Property or ordering the winding up or
     liquidation of its affairs; or (ii) there shall be commenced against such
     Person an involuntary case under any applicable bankruptcy, insolvency or
     other similar law now or hereafter in effect, or any case, proceeding or
     other action for the appointment of a receiver, liquidator, assignee,
     custodian, trustee, sequestrator (or similar official) of such Person or
     for any substantial part of its Property or for the winding up or
     liquidation of its affairs, and such involuntary case or other case,
     proceeding or other action shall remain undismissed, undischarged or
     unbonded for a period of sixty (60) consecutive days; or (iii) such Person
     shall commence a voluntary case under any applicable bankruptcy, insolvency
     or other similar law now or hereafter in effect, or consent to the entry of
     an order for relief in an involuntary case under any such law, or consent
     to the appointment or taking possession by a receiver, liquidator,
     assignee, custodian, trustee, sequestrator (or similar official) of such
     Person or for any substantial part of its Property or make any general
     assignment for the benefit of creditors; or (iv) such Person shall be
     unable to, or shall admit in writing its inability to, pay its debts
     generally as they become due.

          "Borrower" means the Person identified as such in the Preamble,
     together with any permitted successors and assigns.

          "Business Day" means a day other than a Saturday, Sunday or other day
     on which commercial banks in New York, New York are authorized or required
     by law to close.

          "Capital Lease" means, as applied to any Person, any lease of any
     Property (whether real, personal or mixed) by that Person as lessee which,
     in accordance with GAAP, is or should be accounted for as a capital lease
     on the balance sheet of that Person.

          "Capital Stock" means (i) in the case of a corporation, capital stock,
     (ii) in the case of an association or business entity, any and all shares,
     interests, participations, rights or other equivalents (however designated)
     of capital stock, (iii) in the case of a


                                        2



     partnership, partnership interests (whether general or limited), (iv) in
     the case of a limited liability company, membership interests and (v) any
     other interest or participation that confers on a Person the right to
     receive a share of the profits and losses of, or distributions of assets
     of, the issuing Person.

          "Cash Equivalents" means (a) securities issued or directly and fully
     guaranteed or insured by the United States of America or any agency or
     instrumentality thereof (provided that the full faith and credit of the
     United States of America is pledged in support thereof) having maturities
     of not more than twelve months from the date of acquisition, (b) U.S.
     dollar denominated time deposits and certificates of deposit of (i) any
     Lender, (ii) any domestic commercial bank of recognized standing having
     capital and surplus in excess of $500,000,000 or (iii) any bank whose
     short-term commercial paper rating from S&P is at least A-1 or the
     equivalent thereof or from Moody's is at least P-1 or the equivalent
     thereof (any such bank being an "Approved Bank"), in each case with
     maturities of not more than 270 days from the date of acquisition, (c)
     commercial paper and variable or fixed rate notes issued by any Approved
     Bank (or by the parent company thereof) or any variable rate notes issued
     by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent
     thereof) or better by S&P or P-1 (or the equivalent thereof) or better by
     Moody's and maturing within six months of the date of acquisition, (d)
     repurchase agreements entered into by any Person with a bank or trust
     company or recognized securities dealer having capital and surplus in
     excess of $500,000,000 for direct obligations issued by or fully guaranteed
     by the United States of America in which such Person shall have a perfected
     first priority security interest (subject to no other Liens) and having, on
     the date of purchase thereof, a fair market value of at least 100% of the
     amount of the repurchase obligations and (e) Investments, classified in
     accordance with GAAP as current assets, in money market investment programs
     registered under the Investment Company Act of 1940, as amended, which are
     administered by reputable financial institutions having capital of at least
     $500,000,000 and the portfolios of which are limited to Investments of the
     character described in the foregoing subdivisions (a) through (d).

          "Change of Control" means the occurrence of any of the following
     events: (i) any Person or two or more Persons acting in concert shall have
     acquired "beneficial ownership," directly or indirectly, of, or shall have
     acquired by contract or otherwise, or shall have entered into a contract or
     arrangement that, upon consummation, will result in its or their
     acquisition of, control over, Voting Stock of the Parent (or other
     securities convertible into such Voting Stock) representing 35% or more of
     the combined voting power of all Voting Stock of the Parent, (ii) during
     any period of up to 24 consecutive months, commencing after the Closing
     Date, individuals who at the beginning of such 24 month period were
     directors of the Parent (together with any new director whose election by
     the Parent's Board of Directors or whose nomination for election by the
     Parent's shareholders was approved by a vote of at least two-thirds of the
     directors then still in office who either were directors at the beginning
     of such period or whose election or nomination for election was previously
     so approved) cease for any reason to constitute a majority of the directors
     of the Parent then in office, or (iii) the Parent shall fail to own
     directly 100% of the outstanding Capital Stock of the Borrower. As used
     herein,


                                        3



     "beneficial ownership" shall have the meaning provided in Rule 13d-3 of the
     Securities and Exchange Commission under the Securities Act of 1934.

          "Closing Date" means the date hereof.

          "Closing Fee" shall have the meaning assigned to such term in Section
     3.5.

          "Code" means the Internal Revenue Code of 1986, as amended, and any
     successor statute thereto, as interpreted by the rules and regulations
     issued thereunder, in each case as in effect from time to time. References
     to sections of the Code shall be construed also to refer to any successor
     sections.

          "Collateral" means a collective reference to the collateral which is
     identified in, and at any time will be covered by, the Collateral
     Documents.

          "Collateral Agent" shall have the meaning assigned to such term in the
     Preamble.

          "Collateral Documents" means a collective reference to the Security
     Agreement, the Pledge Agreement, the Foreign Pledge Agreements and such
     other documents executed and delivered in connection with the attachment
     and perfection of the Lenders' security interests and liens arising
     thereunder, including without limitation, UCC financing statements and
     patent and trademark filings.

          "Commitment" means, with respect to each Lender, the commitment of
     such Lender to make a portion of the Term Loan to the Borrower in the
     amount set forth in Schedule 1.1(a) hereto, as the same may be terminated
     or reduced from time to time in accordance with the terms of this Credit
     Agreement.

          "Compliance Certificate" means a certificate substantially in the form
     of Exhibit C.

          "Consolidated Capital Expenditures" means, for any period, all capital
     expenditures of the Consolidated Parties on a consolidated basis for such
     period, as determined in accordance with GAAP.

          "Consolidated EBITDA" shall have the meaning specified therefor in the
     Working Capital Loan Agreement.

          "Consolidated Parties" means a collective reference to the Parent and
     its Subsidiaries, and "Consolidated Party" means any one of them.

          "Credit Agreement" shall have the meaning assigned to such term in the
     Preamble.

          "Credit Documents" means a collective reference to this Credit
     Agreement, any Notes, each Joinder Agreement, the Collateral Documents and
     all other related agreements and documents issued or delivered hereunder or
     thereunder or pursuant hereto or thereto (in each ease as the same may be
     amended, modified, restated,


                                        4



     supplemented, extended, renewed or replaced from time to time), and "Credit
     Document" means any one of them.

          "Credit Parties" means a collective reference to the Borrower and the
     Guarantors, and "Credit Party" means any one of them.

          "Credit Party Obligations" means, without duplication, all of the
     obligations of the Credit Parties to the Lenders and the Collateral Agent,
     the Notes, the Collateral Documents or any of the other Credit Documents
     (including, but not limited to, any interest accruing after the
     commencement by or against any Credit Party or any Affiliate thereof of any
     proceeding under any Debtor Relief Laws naming such Person as the debtor in
     such proceeding, regardless of whether such interest and fees are allowed
     claims in such proceeding).

          "Debt Issuance" means the issuance of any Indebtedness for borrowed
     money by any Consolidated Party other than Indebtedness permitted by
     Section 8.1.

          "Debtor Relief Laws" means the Bankruptcy Code of the United States,
     and all other liquidation, conservatorship, bankruptcy, assignment for the
     benefit of creditors, moratorium, rearrangement, receivership, insolvency,
     reorganization, or similar debtor relief Laws of the United States or other
     applicable jurisdictions from time to time in effect and affecting the
     rights of creditors generally.

          "Default" means any event, act or condition which with notice or lapse
     of time, or both, would constitute an Event of Default.

          "Disclosure Document" means the quarterly report of the Parent on Form
     10-Q filed with the Securities and Exchange Commission for the quarterly
     period ended September 30, 2005.

          "Dollars" and "$" means dollars in lawful currency of the United
     States of America.

          "Domestic Subsidiary" means, with respect to any Person, any
     Subsidiary of such Person which is incorporated or organized under the laws
     of any State of the United States or the District of Columbia.

          "Environmental Laws" means any and all lawful and applicable Federal,
     state, local and foreign statutes, laws, regulations, ordinances, rules,
     judgments, orders, decrees, permits, concessions, grants, franchises,
     licenses, agreements or other governmental restrictions relating to the
     environment or to emissions, discharges, releases or threatened releases of
     pollutants, contaminants, chemicals, or industrial, toxic or hazardous
     substances or wastes into the environment including, without limitation,
     ambient air, surface water, ground water, or land, or otherwise relating to
     the manufacture, processing, distribution, use, treatment, storage,
     disposal, transport, or handling of pollutants, contaminants, chemicals, or
     industrial, toxic or hazardous substances or wastes.


                                        5



          "Environmental Liability" means any liability, contingent or otherwise
     (including any liability for damages, costs of environmental remediation,
     fines, penalties or indemnities), of the Borrower or any Subsidiary of the
     Parent directly or indirectly resulting from or based upon (a) violation of
     any Environmental Law, (b) the generation, use, handling, transportation,
     storage, treatment or disposal of any Hazardous Materials, (c) exposure to
     any Hazardous Materials, (d) the release or threatened release of any
     Hazardous Materials into the environment or (e) any contract, agreement or
     other consensual arrangement pursuant to which liability is assumed or
     imposed with respect to any of the foregoing.

          "Equity Issuance" means any issuance by any Consolidated Party to any
     Person which is not a Credit Party of (a) shares of its Capital Stock, (b)
     any shares of its Capital Stock pursuant to the exercise of options or
     warrants or (c) any shares of its Capital Stock pursuant to the conversion
     of any debt securities to equity.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
     amended, and any successor statute thereto, as interpreted by the rules and
     regulations thereunder, all as the same may be in effect from time to time.
     References to sections of ERISA shall be construed also to refer to any
     successor sections.

          "ERISA Affiliate" means an entity which is under common control with
     any Consolidated Party within the meaning of Section 4001(a)(14) of ERISA,
     or is a member of a group which includes any Consolidated Party and which
     is treated as a single employer under Sections 414(b) or (c) of the Code.

          "ERISA Event" means (i) with respect to any Plan, the occurrence of a
     Reportable Event or the substantial cessation of operations (within the
     meaning of Section 4062(e) of ERISA); (ii) the withdrawal by any
     Consolidated Party or any ERISA Affiliate from a Multiple Employer Plan
     during a plan year in which it was a substantial employer (as such term is
     defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple
     Employer Plan; (iii) the distribution of a notice of intent to terminate or
     the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of
     ERISA; (iv) the institution of proceedings to terminate or the actual
     termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any
     event or condition which might constitute grounds under Section 4042 of
     ERISA for the termination of, or the appointment of a trustee to
     administer, any Plan; (vi) the complete or partial withdrawal of any
     Consolidated Party or any ERISA Affiliate from a Multiemployer Plan; (vii)
     the conditions for imposition of a lien under Section 302(f) of ERISA exist
     with respect to any Plan; or (viii) the adoption of an amendment to any
     Plan requiring the provision of security to such Plan pursuant to Section
     307 of ERISA.

          "Event of Default" shall have the meaning as defined in Section 9.1.

          "Executive Officer" of any Person means any of the chief executive
     officer, chief operating officer, president, senior vice president, chief
     financial officer or treasurer of such Person.


                                        6



          "Extraordinary Receipts" means any cash received by the Parent or any
     of its Subsidiaries not in the ordinary course of business (and not
     consisting of proceeds described in Sections 3.3(b)(ii) and (iii) hereof),
     including, without limitation, (i) foreign, United States, state or local
     tax refunds, (ii) pension plan reversions, (iii) proceeds of insurance,
     (iv) judgments, proceeds of settlements or other consideration of any kind
     in connection with any cause of action, (v) condemnation awards (and
     payments in lieu thereof), (vi) indemnity payments and (vii) any purchase
     price adjustment received in connection with any purchase agreement.

          "Facilities" shall have the meaning assigned to such term in Section
     6.16.

          "First Tier Foreign Subsidiary" means each Foreign Subsidiary which is
     owned directly by a Credit Party.

          "Financial Statements" means the unaudited consolidated balance sheet
     of the Parent and its Subsidiaries as at September 30, 2005.

          "Foreign Pledge Agreement" means any pledge agreement or similar
     document governed by laws other than the laws of the state of New York
     entered into by any Credit Party in favor of the Lenders, in accordance
     with the terms hereof, as amended, modified, restated or supplemented from
     time to time.

          "Foreign Subsidiary" means, with respect to any Person, any Subsidiary
     of such Person which is not a Domestic Subsidiary of such Person.

          "GAAP" means generally accepted accounting principles in the United
     States applied on a consistent basis and subject to the terms of Section
     1.3.

          "Governmental Authority" means the government of the United States or
     any other nation, or of any political subdivision thereof, whether state or
     local, and any agency, authority, instrumentality, regulatory body, court,
     central bank or other entity exercising executive, legislative, judicial,
     taxing, regulatory or administrative powers or functions of or pertaining
     to government (including any supra-national bodies such as the European
     Union or the European Central Bank).

          "Guarantors" means the Parent, each of the Domestic Subsidiaries of
     the Parent (other than the Borrower), each of the Domestic Subsidiaries of
     the Borrower, each Additional Credit Party which has executed a Joinder
     Agreement, and any other Person who becomes a Guarantor, together with
     their successors and permitted assigns, and "Guarantor" means any one of
     them.

          "Guaranty Obligations" means, with respect to any Person, without
     duplication, any obligations of such Person (other than endorsements in the
     ordinary course of business of negotiable instruments for deposit or
     collection) guaranteeing or intended to guarantee any Indebtedness of any
     other Person in any manner, whether direct or indirect, and including
     without limitation any obligation, whether or not contingent, (i) to
     purchase any such Indebtedness or any Property constituting security
     therefor, (ii) to advance or provide funds or other support for the payment
     or purchase of any such indebtedness or


                                        7



     to maintain working capital, solvency or other balance sheet condition of
     such other Person (including without limitation keep well agreements,
     maintenance agreements, comfort letters or similar agreements or
     arrangements) for the benefit of any holder of Indebtedness of such other
     Person, (iii) to lease or purchase Property, securities or services
     primarily for the purpose of assuring the holder of such Indebtedness, or
     (iv) to otherwise assure or hold harmless the holder of such Indebtedness
     against loss in respect thereof. The amount of any Guaranty Obligation
     hereunder shall (subject to any limitations set forth therein) be deemed to
     be an amount equal to the outstanding principal amount (or maximum
     principal amount, if larger) of the Indebtedness in respect of which such
     Guaranty Obligation is made.

          "Hazardous Materials" means all explosive or radioactive substances or
     wastes and all hazardous or toxic substances, wastes or other pollutants,
     including petroleum or petroleum distillates, asbestos or
     asbestos-containing materials, polychlorinated biphenyls, radon gas,
     infectious or medical wastes and all other substances or wastes of any
     nature regulated pursuant to any Environmental Law.

          "Hedging Agreements" means any interest rate protection agreement or
     foreign currency exchange agreement.

          "Immaterial Foreign Subsidiary" means, at any time, any First Tier
     Foreign Subsidiary (i) for which the portion of Consolidated EBITDA
     attributable to such First Tier Foreign Subsidiary does not exceed 5% of
     Consolidated EBITDA for the most recently ended four fiscal quarter period
     and (ii) for which the portion of Consolidated EBITDA attributable to such
     First Tier Foreign Subsidiary, together with the portion of Consolidated
     EBITDA attributable to all other First Tier Foreign Subsidiaries with
     respect to which the Collateral Agent has not received a pledge of 66% of
     Capital Stock of such First Tier Foreign Subsidiaries, does not exceed 10%
     of Consolidated EBITDA for the most recently ended four fiscal quarter
     period.

          "Indebtedness" means, with respect to any Person, without duplication,
     (a) all obligations of such Person for borrowed money, (b) all obligations
     of such Person evidenced by bonds, debentures, notes or similar
     instruments, or upon which interest payments are customarily made, (c) all
     obligations of such Person under conditional sale or other title retention
     agreements relating to Property purchased by such Person (other than
     customary reservations or retentions of title under agreements with
     suppliers entered into in the ordinary course of business), (d) all
     obligations of such Person issued or assumed as the deferred purchase price
     of Property or services purchased by such Person (other than trade debt
     incurred in the ordinary course of business and due within six months of
     the incurrence thereof) which would appear as liabilities on a balance
     sheet of such Person, (e) all obligations of such Person under take-or-pay
     or similar arrangements or under commodities agreements, (f) all
     Indebtedness of others secured by (or for which the holder of such
     Indebtedness has an existing right, contingent or otherwise, to be secured
     by) any Lien on, or payable out of the proceeds of production from,
     Property owned or acquired by such Person, whether or not the obligations
     secured thereby have been assumed, (g) all Guaranty Obligations of such
     Person, (h) the principal portion of all obligations of such Person under
     Capital Leases, (i) all obligations of such Person under


                                        8



     Hedging Agreements, (j) commercial letters of credit and the maximum amount
     of all standby letters of credit issued or bankers' acceptances facilities
     created for the account of such Person and, without duplication, all drafts
     drawn thereunder (to the extent unreimbursed), (k) the principal portion of
     all obligations of such Person under Synthetic Leases, (l) all preferred
     Capital Stock issued by such Person and which by the terms thereof could be
     (at the request of the holders thereof or otherwise) be subject to
     mandatory sinking fund payments, redemption or other acceleration by a
     fixed date, (m) all obligations of such Person to repurchase any securities
     issued by such Person at any time on or prior to the Maturity Date which
     repurchase obligations are related to the issuance thereof, including,
     without limitation, obligations commonly known as residual equity
     appreciation potential shares, (n) the Indebtedness of any partnership or
     unincorporated joint venture in which such Person is a general partner or a
     joint venturer to the extent such Indebtedness is recourse to such Person
     and (o) the aggregate amount of uncollected accounts receivable of such
     Person subject at such time to a sale of receivables (or similar
     transaction) to the extent such transaction is effected with recourse to
     such Person (whether or not such transaction would be reflected on the
     balance sheet of such Person in accordance with GAAP).

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

          "Intercreditor Agreement" means the Intercreditor and Subordination
     Agreement dated as of the date hereof, by and among the Lenders, and the
     Working Capital Lender in form and substance satisfactory to the Lenders,
     as amended, restated, supplemented, modified or otherwise changed from time
     to time in accordance with the terms thereof.

          "Investment" means (a) the acquisition (whether for cash, property,
     services, assumption of indebtedness, securities or otherwise) of assets,
     Capital Stock, bonds, notes, debentures, partnership, joint ventures or
     other ownership interests or other securities of any Person or (b) any
     deposit with, or advance, loan or other extension of credit to, any Person
     (other than deposits made in connection with the purchase or lease of
     equipment or other assets in the ordinary course of business or the leasing
     of real property in the ordinary course of business) or (c) any other
     capital contribution to or investment in any Person, including, without
     limitation, any Guaranty Obligations (including any support for a letter of
     credit issued on behalf of such Person) incurred for the benefit of such
     Person.

          "Joinder Agreement" means a Joinder Agreement substantially in the
     form of Exhibit E hereto, executed and delivered by an Additional Credit
     Party in accordance with the provisions of Section 7.12.

          "Laws" means, collectively, all international, foreign, Federal, state
     and local statutes, treaties, rules, guidelines, regulations, ordinances,
     codes and administrative or judicial precedents or authorities, including
     the interpretation or administration thereof by any Governmental Authority
     charged with the enforcement, interpretation or administration thereof, and
     all applicable administrative orders, directed duties, requests,


                                        9



     licenses, authorizations and permits of, and agreements with, any
     Governmental Authority.

          "Lender" or "Lenders" shall have the meanings assigned to such terms
     in the Preamble.

          "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
     arrangement, security interest, encumbrance, lien (statutory or otherwise),
     preference, priority or charge of any kind (including any agreement to give
     any of the foregoing, any conditional sale or other title retention
     agreement, any financing or similar statement or notice filed under the
     Uniform Commercial Code as adopted and in effect in the relevant
     jurisdiction or other similar recording or notice statute, and any lease in
     the nature thereof).

          "Loan" or "Loans" means the Term Loan or any portion thereof made by
     the Lenders to the Borrower pursuant to this Credit Agreement.

          "Material Adverse Effect" means, other than the Working Capital
     Acknowledged Defaults and matters disclosed in the Disclosure Document, a
     material adverse effect on (i) the condition (financial or otherwise),
     operations, business, assets, liabilities or prospects of the Parent and
     its Subsidiaries taken as a whole, (ii) the ability of any Credit Party to
     perform any material obligation under the Credit Documents to which it is a
     party or (iii) the material rights and remedies of the Collateral Agent or
     any Lender under the Credit Documents.

          "Material Foreign Subsidiary" means, at any time, any First Tier
     Foreign Subsidiary of a Credit Party that is not an Immaterial Foreign
     Subsidiary.

          "Maturity Date" means the earlier of (i) August 15, 2006, and (ii) the
     date on which the "Transactions" as defined in the Restructuring Term Sheet
     shall have been substantially consummated.

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

          "Meridian International" means Meridian VAT Processing (International)
     Limited, a company incorporated in Jersey.

          "Meridian Loan" means the loan by Meridian International to Meridian
     in an aggregate amount not to exceed approximately 12,700,000 Euros.

          "Moody's" means Moody's Investors Service, Inc., or any successor or
     assignee of the business of such company in the business of rating
     securities.

          "Multiemployer Plan" means a Plan which is a multiemployer plan as
     defined in Sections 3(37) or 4001(a)(3) of ERISA


                                       10



          "Multiple Employer Plan" means a Plan which any Consolidated Party or
     any ERISA Affiliate and at least one employer other than the Consolidated
     Parties or any ERISA Affiliate are contributing sponsors.

          "Net Cash Proceeds" means the aggregate cash proceeds received by the
     Consolidated Parties in respect of any Asset Disposition, Equity Issuance
     or Debt Issuance, net of (a) direct costs (including, without limitation,
     legal, accounting and investment banking fees, sales commissions and
     compensation related expenses) and (b) taxes paid or payable as a result
     thereof; it being understood that "Net Cash Proceeds" shall include,
     without limitation, cash received upon the sale or other disposition of any
     non-cash consideration received by the Consolidated Parties in any Asset
     Disposition, Equity Issuance or Debt Issuance.

          "Note" shall have the meaning specified therefor in Section 3.12.

          "Notice of Borrowing" shall have the meaning specified therefor in
     Section 2.1(b).

          "Operating Lease" means, as applied to any Person, any lease
     (including, without limitation, leases which may be terminated by the
     lessee at any time) of any Property (whether real, personal or mixed) which
     is not a Capital Lease other than any such lease in which that Person is
     the lessor.

          "Other Taxes" shall have the meaning assigned to such term in Section
     3.9.

          "Parent" means PRG-Schultz International, Inc., a Georgia corporation,
     together with any successors and permitted assigns.

          "PBGC" means the Pension Benefit Guaranty Corporation established
     pursuant to Subtitle A of Title IV of ERISA and any successor thereof.

          "Permitted Investments" means Investments which are either (i) cash
     and Cash Equivalents; (ii) accounts receivable created, acquired or made by
     any Consolidated Party in the ordinary course of business and payable or
     dischargeable in accordance with customary trade terms; (iii) Investments
     consisting of Capital Stock, obligations, securities or other property
     received by any Consolidated Party in settlement of accounts receivable
     (created in the ordinary course of business) from bankrupt obligors; (iv)
     Investments existing as of the Closing Date and set forth in Schedule
     1.1(b); (v) Guaranty Obligations permitted by Section 8.1; (vi) advances or
     loans to directors, officers, employees, agents, customers or suppliers
     that do not exceed $500,000 in the aggregate at any one time outstanding
     for all of the Consolidated Parties; (vii) Investments by one Credit Party
     in another Credit Party (other than the Parent); (viii) Investments by the
     Borrower in the Parent in an amount necessary to allow the Parent to pay
     regularly scheduled interest payments on the Subordinated Debt; (ix)
     Investments in Foreign Subsidiaries of the Parent in an amount not to
     exceed $4,000,000 in the aggregate during the term of this Credit
     Agreement; provided, however, that for purposes of calculating Investments
     in Foreign Subsidiaries for purposes of this clause (ix), the actual
     aggregate Investments in Foreign Subsidiaries


                                       11



     shall be reduced by an amount equal to cash repatriated to the United
     States from Meridian; (x) compensation advances to commissioned auditors
     made in the ordinary course of business; (xi) Investment by Meridian
     International in Meridian in the form of the Meridian Loan; and (xii) other
     loans, advances and Investments of a nature not contemplated in the
     foregoing subsections in an amount not to exceed $1,000,000 in the
     aggregate at any time outstanding.

          "Permitted Liens" means:

          (i) Liens in favor of the Lender to secure the Credit Party
     Obligations;

          (ii) Liens (other than Liens created or imposed under ERISA) for
     taxes, assessments or governmental charges or levies not yet due or Liens
     for taxes being contested in good faith by appropriate proceedings for
     which adequate reserves determined in accordance with GAAP have been
     established (and as to which the Property subject to any such Lien is not
     yet subject to foreclosure, sale or loss on account thereof);

          (iii) statutory Liens of landlords and Liens of carriers,
     warehousemen, mechanics, materialmen and suppliers and other Liens imposed
     by law or pursuant to customary reservations or retentions of title arising
     in the ordinary course of business, provided that such Liens secure only
     amounts not yet due and payable or, if due and payable, are unfiled and no
     other action has been taken to enforce the same or are being contested in
     good faith by appropriate proceedings for which adequate reserves
     determined in accordance with GAAP have been established (and as to which
     the Property subject to any such Lien is not yet subject to foreclosure,
     sale or loss on account thereof);

          (iv) Liens (other than Liens created or imposed under ERISA) incurred
     or deposits made by any Consolidated Party in the ordinary course of
     business in connection with workers' compensation, unemployment insurance
     and other types of social security, or to secure the performance of
     tenders, statutory obligations, bids, leases, government contracts,
     performance and return-of-money bonds and other similar obligations
     (exclusive of obligations for the payment of borrowed money);

          (v) Liens in connection with attachments or judgments (including
     judgment or appeal bonds) provided that the judgments secured shall, within
     30 days after the entry thereof, have been discharged or execution thereof
     stayed pending appeal, or shall have been discharged within 30 days after
     the expiration of any such stay;

          (vi) easements, rights-of-way, restrictions (including zoning
     restrictions), minor defects or irregularities in title and other similar
     charges or encumbrances not, in any material respect, impairing the use of
     the encumbered Property for its intended purposes;

          (vii) Liens on Property of any Person securing purchase money
     Indebtedness (including Capital Leases and Synthetic Leases) of such Person
     to the extent permitted


                                       12



     under Section 8.1(c), provided that any such Lien attaches to such Property
     concurrently with or within 90 days after the acquisition thereof;

          (viii) leases or subleases granted to others not interfering in any
     material respect with the business of any Consolidated Party;

          (ix) normal and customary rights of setoff upon deposits of cash in
     favor of banks or other depository institutions;

          (x) Liens existing as of the Closing Date and set forth on Schedule
     1.1(c); provided that (a) no such Lien shall at any time be extended to or
     cover any Property other than the Property subject thereto on the Closing
     Date and (b) the principal amount of the Indebtedness secured by such Liens
     shall not be extended, renewed, refunded or refinanced;

          (xi) Lien in favor of Meridian International on the Capital Stock of
     PRG-Schultz UK Ltd. owned by Tamebond which Lien secures the Meridian Loan;

          (xii) Liens on Property of Meridian or any of its Subsidiaries
     securing those obligations of Meridian or any of its Subsidiaries permitted
     under Section 8.1(h); and

          (xiii) Liens granted in favor of the Working Capital Lender to secure
     the obligations of the Credit Parties under the Working Capital Loan
     Documents, provided that such Liens are subject to the terms of
     Intercreditor Agreement or a replacement intercreditor agreement in form
     and substance acceptable to the Lenders.

          "Person" means any individual, partnership, joint venture, firm,
     corporation, limited liability company, association, trust or other
     enterprise (whether or not incorporated) or any Governmental Authority.

          "Plan" means any employee benefit plan (as defined in Section 3(3) of
     ERISA) which is covered by ERISA and with respect to which any Consolidated
     Party or any ERISA Affiliate is (or, if such plan were terminated at such
     time would under Section 4069 of ERISA be deemed to be) an "employer"
     within the meaning of Section 3(5) of ERISA.

          "Pledge Agreement" means the pledge agreement dated as of the Closing
     Date executed in favor of the Collateral Agent by each of the Credit
     Parties, as amended, modified, restated or supplemented from time to time.

          "Property" means any interest in any kind of property or asset,
     whether real, personal or mixed, or tangible or intangible.

          "Pro Rata Share" means with respect to all matters (including, without
     limitation, the indemnification obligations arising under Section 10.5),
     including a Lender's obligation to make a Loan constituting a portion of
     the Term Loan and receive payments of interest, fees, and principal with
     respect thereto, the percentage obtained by dividing (i) such Lender's
     Commitment, by (ii) the Total Commitment, provided that if the Total


                                       13



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

          "Regulation T, U, or X" means Regulation T, U or X, respectively, of
     the Board of Governors of the Federal Reserve System as from time to time
     in effect and any successor to all or a portion thereof.

          "Related Parties" means, with respect to any Person, such Person's
     Affiliates and the partners, directors, officers, employees, agents and
     advisors of such Person and of such Person's Affiliates.

          "Reportable Event" means any of the events set forth in Section
     4043(c) of ERISA, other than those events as to which the notice
     requirement has been waived by regulation.

          "Requirement of Law" means, as to any Person, the certificate of
     incorporation and by-laws or other organizational or governing documents of
     such Person, and any law, treaty, rule or regulation or determination of an
     arbitrator or a court or other Governmental Authority, in each case
     applicable to or binding upon such Person or any of its material property
     is subject.

          "Required Lenders" means Lenders whose Pro Rata Share of the Term Loan
     aggregate at least 65% of the aggregate outstanding principal amount of the
     Term Loan.

          "Restricted Payment" means (i) any dividend or other payment or
     distribution, direct or indirect, on account of any shares of any class of
     Capital Stock of any Consolidated Party, now or hereafter outstanding
     (including without limitation any payment in connection with any merger or
     consolidation involving any Consolidated Party), or to the direct or
     indirect holders of any shares of any class of Capital Stock of any
     Consolidated Party, now or hereafter outstanding, in their capacity as such
     (other than dividends or distributions payable in the same class of Capital
     Stock of the applicable Person to any Credit Party (directly or indirectly
     through Subsidiaries), (ii) any redemption, retirement, sinking fund or
     similar payment, purchase or other acquisition for value, direct or
     indirect, of any shares of any class of Capital Stock of any Consolidated
     Party, now or hereafter outstanding and (iii) any payment made to retire,
     or to obtain the surrender of, any outstanding warrants, options or other
     rights to acquire shares of any class of Capital Stock of any Consolidated
     Party, now or hereafter outstanding.

          "Restructuring Term Sheet" means the Summary of Financial
     Restructuring Term Sheet, dated December 23, 2005, describing an agreement
     in principal between the Credit Parties and a committee of holders of the
     notes issued by the Parent under the Indenture.

          "S&P" means Standard & Poor's Ratings Group, a division of McGraw
     Hill, Inc., or any successor or assignee of the business of such division
     in the business of rating securities.


                                       14



          "Sale and Leaseback Transaction" means any direct or indirect
     arrangement with any Person or to which any such Person is a party,
     providing for the leasing to any Consolidated Party of any Property,
     whether owned by such Consolidated Party as of the Closing Date or later
     acquired, which has been or is to be sold or transferred by such
     Consolidated Party to such Person or to any other Person from whom funds
     have been, or are to be, advanced by such Person on the security of such
     Property.

          "Security Agreement" means the security agreement dated as of the
     Closing Date executed in favor of the Collateral Agent by each of the
     Credit Parties, as amended, modified, restated or supplemented from time to
     time.

          "Ship & Debit Division" means the discrete unit within the Borrower
     responsible for providing revenue recovery services to electronic
     manufacturers and similar businesses.

          "Single Employer Plan" means any Plan which is covered by Title IV of
     ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.

          "Solvent" means, with respect to the Parent and its Subsidiaries on a
     consolidated basis as of a particular date, that on such date the Parent
     and its Subsidiaries have on a consolidated basis an enterprise value (as a
     going concern) in excess of their consolidated liabilities.

          "Subordinated Debt" means the Indebtedness of the Parent evidenced by
     the Indenture in an aggregate principal amount not to exceed $125,000,000.

          "Subsidiary" means, as to any Person at any time, (a) any corporation
     more than 50% of whose Capital Stock of any class or classes having by the
     terms thereof ordinary voting power to elect a majority of the directors of
     such corporation (irrespective of whether or not at such time, any class or
     classes of such corporation shall have or might have voting power by reason
     of the happening of any contingency) is at such time owned by such Person
     directly or indirectly through Subsidiaries, and (b) any partnership,
     association, joint venture or other entity of which such Person directly or
     indirectly through Subsidiaries owns at such time more than 50% of the
     Capital Stock.

          "Synthetic Lease" means any synthetic lease, tax retention operating
     lease, off-balance sheet loan or similar off-balance sheet financing
     product where such transaction is considered borrowed money indebtedness
     for tax purposes but is classified as an Operating Lease.

          "Tamebond" means Tamebond Limited, a U.K. corporation.

          "Taxes" shall have the meaning assigned to such term in Section 3.9.

          "Term Loan" means, collectively, the term loans made by the Lenders to
     the Borrower on the Closing Date pursuant to Section 2.1. The aggregate
     principal amount of the Term Loan as of the Closing Date is $10,000,000.


                                       15


          "Total Commitment" means the sum of the Commitments of all the
     Lenders.

          "Voting Stock" means, with respect to any Person, Capital Stock issued
     by such Person the holders of which are ordinarily, in the absence of
     contingencies, entitled to vote for the election of directors (or persons
     performing similar functions) of such Person, even though the right so to
     vote has been suspended by the happening of such a contingency.

          "Wholly Owned Subsidiary" of any Person means any Subsidiary 100% of
     whose Voting Stock is at the time owned by such Person directly or
     indirectly through other Wholly Owned Subsidiaries.

          "Working Capital Acknowledged Defaults" means "Acknowledged Events of
     Defaults", as such term is defined in the Working Capital Forbearance
     Agreement, amended by the Working Capital Amendment, solely to the extent
     such defaults are not cured or waived or the applicable provisions are not
     amended or otherwise changed.

          "Working Capital Amendment" shall have the meaning assigned to such
     term in Section 5.1(m).

          "Working Capital Borrowing Base" means the "Borrowing Base", as such
     term is defined in and calculated under the Working Capital Loan Agreement
     as in effect on the date hereof, including the applicable percentage (as in
     effect on the Closing Date) of "Eligible Receivables" and "Eligible
     Backlog" (as such terms are defined in the Working Capital Loan Agreement
     as in effect on the Closing Date) set forth in such definition of
     "Borrowing Base", and giving effect to any reserves (including, without
     limitation, the reserve for Working Capital LC Obligations) from time to
     time established by the Working Capital Lender against such Borrowing Base
     in accordance with the Working Capital Loan Agreement.

          "Working Capital Commitment" means the aggregate "Commitments", as
     such term is defined in the Working Capital Loan Agreement.

          "Working Capital Event of Default" means an "Event of Default", as
     such term is defined in the Working Capital Loan Agreement.

          "Working Capital Facility" means the credit facility provided to the
     Borrower by the Working Capital Lender pursuant to the Working Capital Loan
     Documents consisting of the Working Capital Revolving Loans and the Working
     Capital LCs.

          "Working Capital Forbearance Agreement" means the Forbearance
     Agreement, dated as of November 8, 2005, by and among the Borrower, the
     Parent and the Working Capital Lender, as amended by the Working Capital
     Amendment.

          "Working Capital LC Obligations" means, at any time and without
     duplication, the sum of (i) the aggregate stated amount of all issued and
     outstanding Working Capital LCs plus (ii) the aggregate amount of any
     drawing under the Working Capital LCs for which the Working Capital Lender
     has not been reimbursed.


                                       16



          "Working Capital LCs" means the letters of credit, or guaranties by
     the Working Capital Lender in respect of letters of credit, issuable under
     the Working Capital Loan Agreement in a maximum aggregate stated amount of
     $10,000,000.

          "Working Capital Lender" means Bank of America, N.A. and/or any other
     lender from time to time party to the Working Capital Loan Agreement.

          "Working Capital Loan Agreement" means the Amended and Restated Credit
     Agreement, dated as of November 30, 2004, as supplemented by the Working
     Capital Forbearance Agreement, and as amended by the Working Capital
     Amendment, by and among the Credit Parties and the Working Capital Lender,
     as amended, restated, modified, supplemented, renewed, replaced or
     otherwise changed from time to time.

          "Working Capital Loan Documents" means the "Credit Documents", as such
     term is defined in the Working Capital Loan Agreement, as amended,
     restated, modified, supplemented, renewed, replaced or otherwise changed
     from time to time pursuant to the terms of this Credit Agreement.

          "Working Capital Loans" means the revolving credit loans made or to be
     made to the Borrower by the Working Capital Lender pursuant to the Working
     Capital Loan Agreement.

          "Working Capital Revolving Commitment" means the commitment of certain
     Working Capital Lender to make Working Capital Loans to the Borrower and
     assist the Borrower with the issuance of Working Capital LCs pursuant to
     the Working Capital Loan Agreement in the aggregate principal amount of
     $30,000,000, as the same may be reduced or terminated pursuant to the
     Working Capital Loan Agreement.

     1.2 COMPUTATION OF TIME PERIODS.

     For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."

     1.3 ACCOUNTING TERMS.

     Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1;
provided, however, if (a) the Credit Parties shall object to determining such
compliance on such basis at the time of delivery of such financial statements
due to any change in GAAP or the rules promulgated with respect thereto or (b)
the Required Lenders shall so object in writing within 60 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Credit
Parties to the Lenders as to which no such objection shall have been made.


                                       17



                                   SECTION 2

                                CREDIT FACILITIES

     2.1 TERM LOAN.

          (a) Term Loan. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties set forth herein, each Lender
severally agrees to make such Lender's Pro Rata Share of the Term Loan to the
Borrower on the Closing Date, in an aggregate principal amount not to exceed the
amount of such Lender's Commitment. The aggregate principal amount of the Term
Loan made by all Lenders on the Closing Date shall not exceed the Total
Commitment. Any principal amount of the Term Loan which is repaid or prepaid may
not be reborrowed.

          (b) TErm Loan Borrowing. (i) The Borrower shall give the Lenders prior
telephonic notice (immediately confirmed in writing, in substantially the form
of Exhibit A hereto (the "Notice of Borrowing")), not later than 1:00 p.m. (New
York City time) on the date which is three (3) Business Days prior to the date
of the proposed Term Loan (or such shorter period to the extent agreed to by all
of the Lenders). The Notice of Borrowing shall be irrevocable and shall specify
(i) the principal amount of the proposed Term Loan, and (ii) the proposed
borrowing date, which must be a Business Day, and must be the Closing Date. The
Lenders may act without liability upon the basis of written, telecopied or
telephonic notice believed by the Lenders in good faith to be from the Borrower
(or from any Executive Officer thereof designated in writing purportedly from
the Borrower to the Lenders). The Borrower hereby waives the right to dispute
the Lenders' record of the terms of any such telephonic Notice of Borrowing.
Each Lender shall be entitled to rely conclusively on any Executive Officer's
authority to request the Term Loan on behalf of the Borrower until the Lenders
receive written notice to the contrary. The Lenders shall have no duty to verify
the authenticity of the signature appearing on any written Notice of Borrowing.

          (ii) The Notice of Borrowing pursuant to this Section 2.1(b) shall be
     irrevocable and the Borrower shall be bound to make a borrowing in
     accordance therewith.

          (iii) All Loans under this Credit Agreement shall be made by the
     Lenders simultaneously and proportionately to their Pro Rata Shares of the
     Total Commitment, it being understood that no Lender shall be responsible
     for any default by any other Lender in that other Lender's obligations to
     make a Loan requested hereunder, nor shall the Commitment of any Lender be
     increased or decreased as a result of the default by any other Lender in
     that other Lender's obligation to make any Loan requested hereunder, and
     each Lender shall be obligated to make the Loans required to be made by it
     by the terms of this Credit Agreement regardless of the failure by any
     other Lender.

          (c) Repayment. The principal amount of the Term Loan shall be due and
payable in full on the Maturity Date, unless accelerated sooner pursuant to
Section 9.2.


                                       18



          (d) Interest. Subject to the provisions of Section 3.1, the Term Loan
shall bear interest at a per annum rate equal to twelve percent (12%). Interest
on the Term Loan shall be payable monthly in arrears on the last Business Day of
each calendar month (or at such other times as may be specified herein).

     2.2 [INTENTIONALLY OMITTED]

                                   SECTION 3

                 OTHER PROVISIONS RELATING TO CREDIT FACILITIES

     3.1 DEFAULT RATE.

     Upon the occurrence, and during the continuance, of an Event of Default,
the principal of and, to the extent permitted by law, interest on the Loans and
any other amounts owing hereunder or under the other Credit Documents shall bear
interest, payable on demand, at a per annum rate equal to 14%.

     3.2 [INTENTIONALLY OMITTED]

     3.3 PREPAYMENTS.

          (a) Voluntary Prepayments. Subject to the terms of the Intercreditor
Agreement, the Borrower shall have the right to prepay the Term Loan in whole or
in part from time to time; provided, that (i) the Term Loan may be prepaid by
the Borrower giving notice to the Lender (which may be given by telephone) no
later than 11:00 a.m. (New York City time) on the date of the requested
prepayment and (ii) each partial prepayment of the Term Loan shall be in a
minimum principal amount of $1,000,000 and integral multiples of $1,000,000
(unless the amount of Term Loan outstanding immediately prior to such prepayment
is less than $1,000,000). All prepayments under this Section 3.3(a), shall be
made without premium or penalty and shall be applied to the Term Loan ratably.

          (b) Mandatory Prepayments.

               (i) Extraordinary Receipts. Subject to the terms of Intercreditor
          Agreement, upon the receipt by any Credit Party or any of its
          Subsidiaries of any Extraordinary Receipts, the Borrower shall prepay
          the outstanding principal of the Term Loan in an amount equal to 100%
          of such Extraordinary Receipts, net of any reasonable expenses
          incurred in collecting such Extraordinary Receipts.

               (ii) Asset Disposition. Subject to the terms of the Intercreditor
          Agreement, the Borrower shall immediately prepay the Term Loan in an
          aggregate amount equal to one hundred percent (100%) of the Net Cash
          Proceeds of any Asset Disposition (other than any Asset Disposition
          permitted by Section 8.5(i), (ii), (iii), (iv) or (v)) (to be applied
          as set forth in Section 3.3(c) below).

               (iii) Equity Issuance. Subject to the terms of the Intercreditor
          Agreement, immediately upon receipt by a Credit Party or any of its
          Subsidiaries


                                       19



          (other than the Parent) of proceeds from any Equity Issuance, the
          Borrower shall prepay the Term Loan in an aggregate amount equal to
          100% of the Net Cash Proceeds of such Equity Issuance to the Lenders
          (such prepayment to be applied as set forth in Section 3.3(c) below).

               (iv) Debt Issuance. Subject to the terms of the Intercreditor
          Agreement, immediately upon receipt by a Credit Party or any of its
          Subsidiaries of proceeds from any Debt Issuance, the Borrower shall
          prepay the Term Loan in an aggregate amount equal to 100% of the Net
          Cash Proceeds of such Debt Issuance to the Lenders (such prepayment to
          be applied as set forth in Section 3.3(c) below).

               (v) Working Capital Acceleration. The Borrower will immediately
          prepay the outstanding principal amount of the Term Loan in the event
          that the Working Capital Commitment or the Working Capital Loan
          Documents are terminated as a result of an acceleration of the
          indebtedness thereunder (it being agreed that the maturity of the
          Working Capital Facility solely in accordance with its terms and
          without further action by the Working Capital Lender (e.g., upon its
          scheduled maturity date) shall not constitute an acceleration).

          (c) Application of Mandatory Prepayments. All amounts required to be
paid pursuant to Section 3.3(b) shall be applied to repay the Term Loan ratably.
All prepayments under this Section 3.3(c) shall be subject to Section 3.11.

     3.4 TERMINATION THE COMMITMENT. The Total Commitment shall terminate at
5:00 p.m. (New York City time) on the Closing Date.

     3.5 FEES. On or prior to the Closing Date, the Borrower shall pay to the
Lenders, in accordance with their respective Pro Rata Shares, a non-refundable
closing fee (the "Closing Fee") equal to $225,000, which shall be deemed fully
earned when paid.

     3.6 [INTENTIONALLY OMITTED]

     3.7 [INTENTIONALLY OMITTED]

     3.8 [INTENTIONALLY OMITTED]

     3.9 TAXES.

          (a) Any and all payments by any Credit Party to or for the account of
any Lender hereunder or under any other Credit Document shall be made free and
clear of and without deduction for any and all present or future taxes, duties,
levies, imposts, deductions, assessments, fees, withholdings or similar charges,
and all liabilities with respect thereto, excluding taxes imposed on or measured
by such Lender's overall net income, and franchise or similar taxes imposed on
such Lender (in lieu of, or in addition to, net income taxes), by the
jurisdiction (or any political subdivision thereof) under the Laws of which such
Lender is organized or maintains a lending office (all such non-excluded taxes,
duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and liabilities being hereinafter


                                       20



referred to as "Taxes"). If any Credit Party shall be required by any Laws to
deduct any Taxes from or in respect of any sum payable under any Credit Document
to any Lender, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section), such Lender receives an amount equal to the
sum it would have received had no such deductions been made, (ii) such Credit
Party shall make such deductions, (iii) such Credit Party shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable Laws, and (iv) within thirty days after the date of
such payment, such Credit Party shall finish to such Lender the original or a
certified copy of a receipt evidencing payment thereof or, if no such receipt is
available, other evidence of payment reasonably satisfactory to such Lender.

          (b) In addition, the Borrower agrees to pay any and all present or
future stamp, count or documentary taxes and any other excise or property taxes
or charges or similar levies which arise from any payment made under any Credit
Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, any Credit Document (hereinafter
referred to as "Other Taxes").

          (c) The Borrower agrees to indemnify each Lender for (i) the full
amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section) paid by such
Lender, and (ii) any liability (including additions to tax, penalties, interest
and expenses) arising therefrom or with respect thereto, in each ease whether or
not such Taxes or Other Taxes were correctly or legally imposed or asserted by
the relevant Governmental Authority. Payment under this subsection (c) shall be
made within thirty days after the date such Lender makes a demand therefor.

     3.10 [INTENTIONALLY OMITTED]

     3.11 PAYMENTS COMPUTATIONS, ETC.

     Except as otherwise specifically provided herein, all payments hereunder
shall be made to the Lenders in Dollars in immediately available funds, without
condition or deduction for any counterclaim, defense, recoupment or setoff not
later than 2:00 p.m. (New York City time) on the date when due. Payments
received after such time shall be deemed to have been received on the next
succeeding Business Day. Each Lender may (but shall not be obligated to) debit
the amount of any such payment which is not made by such time to any ordinary
deposit account of the Borrower or any other Credit Party maintained with such
Lender (with notice to the Borrower or such other Credit Party). The Borrower
shall, at the time it makes any payment under this Credit Agreement, specify to
the Lenders the Loans, the Closing Fee, interest or other amounts payable by the
Borrower hereunder to which such payment is to be applied. Whenever any payment
hereunder shall be stated to be due on a day which is not a Business Day, the
due date thereof shall be extended to the next succeeding Business Day (subject
to accrual of interest and the Closing Fee for the period of such extension).
All computations of interest and fees shall be made on the basis of actual
number of days elapsed over a year of 360 days. Interest shall accrue from and
include the date of borrowing, but exclude the date of payment.


                                       21



     3.12 EVIDENCE OF DEBT.

     The Loans made by each Lender shall be evidenced by one or more accounts or
records maintained by such Lender in the ordinary course of business. The
accounts or records maintained by such Lender shall be prima fade evidence of
the existence of the amount of the Loans made by such Lender to the Borrower and
the interest and payments thereon. Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligation of the
Borrower hereunder to pay any amount owing with respect to the Credit Party
Obligations. The Borrower shall execute and deliver to such Lender a promissory
note, which shall evidence such Lender's Pro Rata Share of the Term Loan in
addition to such accounts or records. Each promissory note shall be in the form
of Exhibit B (each a "Note" and, collectively, the "Notes"). The Lenders may
attach schedules to the Note and endorse thereon the date, amount and maturity
of its Loans and payments with respect thereto.

                                   SECTION 4

                                    GUARANTY

     4.1 THE GUARANTY.

     Each of the Guarantors hereby jointly and severally guarantees to each
Lender, as primary obligor and not as surety, the prompt payment of the Credit
Party Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Credit Party Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Credit Party Obligations, the same will be promptly paid in full when due
(whether at extended maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) in accordance with the terms of
such extension or renewal.

     Notwithstanding any provision to the contrary contained herein or in any
other Credit Documents, the obligations of each Guarantor under this Credit
Agreement and the other Credit Documents shall be limited to an aggregate amount
equal to the largest amount that would not render such obligations subject to
avoidance under the Debtor Relief Laws or any comparable provisions of any
applicable state law.

     4.2 OBLIGATIONS UNCONDITIONAL.

     The obligations of the Guarantors under Section 4.1 are joint and several,
absolute and unconditional, irrespective of the value, genuineness, validity,
regularity or enforceability of any of the Credit Documents or any other
agreement or instrument referred to therein, or any substitution, release,
impairment or exchange of any other guarantee of or security for any of the
Credit Party Obligations, and, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable


                                       22



discharge or defense of a surety or guarantor, it being the intent of this
Section 4.2 that the obligations of the Guarantors hereunder shall be absolute
and unconditional under any and all circumstances. Each Guarantor agrees that
such Guarantor shall have no right of subrogation, indemnity, reimbursement or
contribution against the Borrower or any other Guarantor for amounts paid under
this Section 4 until such time as all Lenders have been paid in full and the
Credit Agreement shall have been terminated and no Person or Governmental
Authority shall have any right to request any return or reimbursement of funds
from the Lenders in connection with monies received under the Credit Documents.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute and unconditional as described above:

          (a) at any time or from time to time without notice to any Guarantor,
the time for any performance of or compliance with any of the Credit Party
Obligations shall be extended, or such performance or compliance shall be
waived;

          (b) any of the acts mentioned in any of the provisions of any of the
Credit Documents or any other agreement or instrument referred to in the Credit
Documents shall be done or omitted;

          (c) the maturity of any of the Credit Party Obligations shall be
accelerated, or any of the Credit Party Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the Credit
Documents or any other agreement or instrument referred to in the Credit
Documents shall be waived or any other guarantee of any of the Credit Party
Obligations or any security therefor shall be released, impaired or exchanged in
whole or in part or otherwise dealt with;

          (d) any Lien granted to, or in favor of, the Lenders as security for
any of the Credit Party Obligations shall fail to attach or be perfected; or

          (e) any of the Credit Party Obligations shall be determined to be void
or voidable (including, without limitation, for the benefit of any creditor of
any Guarantor) or shall be subordinated to the claims of any Person (including,
without limitation, any creditor of any Guarantor).

With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Lenders exhaust any right, power or
remedy or proceed against any Person under any of the Credit Documents or any
other agreement or instrument referred to in the Credit Documents, or against
any other Person under any other guarantee of, or security for, any of the
Credit Party Obligations.

     4.3 REINSTATEMENT.

     The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization


                                       23



or otherwise, and each Guarantor agrees that it will indemnify each Lender and
the Collateral Agent on demand for all reasonable costs and expenses (including,
without limitation, reasonable fees and expenses of counsel) incurred by such
Lender and the Collateral Agent in connection with such rescission or
restoration, including any such reasonable costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.

     4.4 CERTAIN ADDITIONAL WAIVERS.

     Each Guarantor agrees that such Guarantor shall have no right of recourse
to security for the Credit Party Obligations, except through the exercise of
rights of subrogation pursuant to Section 4.2 and through the exercise of rights
of contribution pursuant to Section 4.6.

     4.5 REMEDIES.

     The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Lenders, on the other hand, the
Credit Party Obligations may be declared to be forthwith due and payable as
provided in Section 9.2 (and shall be deemed to have become automatically due
and payable in the circumstances provided in said Section 9.2) for purposes of
Section 4.1 notwithstanding any stay, injunction or other prohibition preventing
such declaration (or preventing the Credit Party Obligations from becoming
automatically due and payable) as against any other Person and that, in the
event of such declaration (or the Credit Party Obligations being deemed to have
become automatically due and payable), the Credit Party Obligations (whether or
not due and payable by any other Person) shall forthwith become due and payable
by the Guarantors for purposes of Section 4.1. The Guarantors acknowledge and
agree that their obligations hereunder are secured in accordance with the terms
of the Security Agreement, the Pledge Agreement and the other Collateral
Documents and that each Lender may exercise its remedies thereunder in
accordance with the terms thereof.

     4.6 RIGHTS OF CONTRIBUTION.

     The Guarantors hereby agree as among themselves that, in connection with
payments made hereunder, each Guarantor shall have a right of contribution from
each other Guarantor in accordance with applicable Law. Such contribution rights
shall be subordinate and subject in right of payment to the Credit Party
Obligations until such time as the Credit Party Obligations have been
irrevocably paid in full and the commitments relating thereto shall have expired
or been terminated, and none of the Guarantors shall exercise any such
contribution rights until the Credit Party Obligations have been irrevocably
paid in full and the commitments relating thereto shall have expired or been
terminated.

     4.7 GUARANTEE OF PAYMENT; CONTINUING GUARANTEE.

     The guarantee in this Section 4 is a guaranty of payment and not of
collection, is a continuing guarantee, and shall apply to all Credit Party
Obligations whenever arising.


                                       24



                                   SECTION 5

                                   CONDITIONS

     5.1 CLOSING CONDITIONS.

     The obligation of each Lender to enter into this Credit Agreement and to
make its Pro Rata Share of the Term Loan, shall be subject to satisfaction or
waiver of the following conditions (in form and substance acceptable to such
Lender in its reasonable discretion):

          (a) Executed Credit Documents. Receipt by the Lenders of duly executed
copies of: (i) this Credit Agreement, (ii) the Notes, (iii) the Collateral
Documents (other than the Foreign Pledge Agreements), (iv) the Intercreditor
Agreement and (v) all other Credit Documents, each in form and substance
acceptable to each Lender in its reasonable discretion.

          (b) Corporate Documents. Receipt by the Lenders of the following:

               (i) Charter Documents. Copies of the articles or certificates of
          incorporation or other charter documents (collectively,
          "Organizational Documents") of the Borrower and the Parent certified
          to be true and complete as of a recent date by the appropriate
          Governmental Authority of the state or other jurisdiction of its
          incorporation and copies of all Organizational Documents of all Credit
          Parties certified by a secretary or assistant secretary of such Credit
          Party to be true and correct as of the Closing Date.

               (ii) Bylaws. A copy of the bylaws of each Credit Party certified
          by a secretary or assistant secretary of such Credit Party to be true
          and correct as of the Closing Date.

               (iii) Resolutions. Copies of resolutions of the Board of
          Directors of each Credit Party approving and adopting the Credit
          Documents to which it is a party, the transactions contemplated
          therein and authorizing execution and delivery thereof, certified by a
          secretary or assistant secretary of such Credit Party to be true and
          correct and in force and effect as of the Closing Date.

               (iv) Good Standing. Copies of certificates of good standing,
          existence or its equivalent with respect to the Borrower and the
          Parent certified as of a recent date by the appropriate Governmental
          Authorities of the state or other jurisdiction of incorporation.

               (v) Incumbency. An incumbency certificate of each Credit Party
          certified by a secretary or assistant secretary to be true and correct
          as of the Closing Date.

          (c) [Intentionally Omitted]


                                       25



          (d) Opinions of Counsel. The Lenders shall have received a legal
opinion in form and substance reasonably satisfactory to the Lenders dated as of
the Closing Date from counsel to the Credit Parties.

          (e) Personal Property Collateral. The Lenders shall have received:

               (i) searches of Uniform Commercial Code filings in the
          jurisdiction of the chief executive office of each Credit Party and,
          if requested, each jurisdiction where any Collateral is located or
          where a filing would need to be made in order to perfect the Lenders'
          security interest in the Collateral (it being understood and agreed
          that liens are not to be perfected with respect to personal property
          located in certain field offices), copies of the financing statements
          on file in such jurisdictions and evidence that no Liens exist other
          than Permitted Liens;

               (ii) duly authorized UCC financing statements for each
          appropriate jurisdiction as is necessary, in the Lenders' reasonable
          discretion, to perfect the Collateral Agent's security interest in the
          Collateral;

               (iii) searches of ownership of intellectual property in the
          appropriate governmental offices and such patent/trademark/copyright
          filings as requested by the Lenders in order to perfect the Collateral
          Agent's security interest in the Collateral;

               (iv) copies of all stock certificates evidencing the Capital
          Stock pledged to the Collateral Agent pursuant to the Pledge
          Agreement, together with copies of the duly executed in blank, undated
          stock powers and other instruments of transfer attached thereto
          (unless, with respect to the pledged Capital Stock of any Foreign
          Subsidiary, such stock powers are deemed unnecessary by the Lenders in
          their reasonable discretion under the law of the jurisdiction of
          incorporation of such Person), provided that the originals of such
          promissory notes, stock certificates, stock powers and other
          instruments of transfer shall have been delivered to the Working
          Capital Lender and held by it as bailee for the Lenders, subject to
          the terms of Intercreditor Agreement;

               (v) such patent/trademark/copyright filings as requested by the
          Lenders in order to perfect the Collateral Agent's security interest
          in the Collateral; and

               (vi) duly executed consents as are necessary, in the Lenders'
          sole discretion, to perfect the Collateral Agent's security interest
          in the Collateral.

          (f) Priority of Liens. The Lenders shall have received satisfactory
evidence that (i) the Collateral Agent holds a perfected, first priority Lien on
all Collateral (subject in priority solely to the Liens in favor of the Working
Capital Lender) and (ii) none of the Collateral is subject to any other Liens
other than Permitted Liens.

          (g) [Intentionally Omitted]


                                       26



          (h) Material Adverse Effect. Except for the Working Capital
Acknowledged Defaults and as otherwise disclosed in the Disclosure Documents, no
material adverse change shall have occurred since September 30, 2005 in the
condition (financial or otherwise), business, assets, operations, management or
prospects of the Consolidated Parties taken as a whole.

          (i) Litigation. There shall not exist any pending or threatened
action, suit, investigation or proceeding against a Consolidated Party that
could reasonably be expected to have a Material Adverse Effect.

          (j) Officer's Certificates. The Lenders shall have received a
certificate or certificates executed by an Executive Officer of the Borrower as
of the Closing Date stating that (A) each Credit Party is in compliance with all
existing financial obligations (other than the Working Capital Acknowledged
Events of Default), (B) all material governmental, shareholder and third party
consents and approvals, if any, necessary in connection with respect to the
Credit Documents and the transactions contemplated thereby have been obtained,
(C) no action, suit, investigation or proceeding is pending or, to the knowledge
of such Executive Officer, threatened in any court or before any arbitrator or
governmental instrumentality that purports to affect any Credit Party or any
transaction contemplated by the Credit Documents, if such action, suit,
investigation or proceeding could reasonably be expected to have a Material
Adverse Effect, and (D) immediately after giving effect to this Credit
Agreement, the other Credit Documents and all the transactions contemplated
therein to occur on such date, (1) the Parent and its Subsidiaries, taken as a
whole, are Solvent, (2) no Default or Event of Default exists, (3) all
representations and warranties contained herein and in the other Credit
Documents are true and correct in all material respects (unless such
representation or warranty was made as of a specified date, in which case such
representation or warranty shall be true and correct only as of such specified
date), (4) the Credit Parties are in compliance with each of the financial
covenants set forth in Section 7.11 of the Working Capital Loan Agreement, and
(5) except for the Working Capital Acknowledged Defaults, no Working Capital
Event of Default exists.

          (k) Fees and Expenses. Payment by the Credit Parties of all fees and
expenses owed by them to the Lenders.

          (l) Representations and Warranties; No Event of Default. The following
statements shall be true and correct: (i) the representations and warranties
contained in Section 6 and in each other Credit Document, certificate or other
writing delivered to the Collateral Agent and the Lenders or pursuant hereto or
thereto on or prior to the Closing Date are true and correct on and as of the
Closing Date as though made on and as of such date (unless such representation
or warranty was made as of a specified date, in which case such representation
or warranty shall be true and correct only as of such specified date), (ii) no
Default or Event of Default shall have occurred and be continuing on the Closing
Date or would result from this Credit Agreement or the other Credit Documents
becoming effective in accordance with its or their respective terms and (iii)
except for the Working Capital Acknowledged Defaults, no "default", "event of
default' or similar event shall have occurred and be continuing, and no
forbearance from exercising remedies in respect thereof shall exist, on the
Closing Date under any Working Capital Loan Document or the Indenture or would
result from this Credit Agreement or the other Credit Documents becoming
effective in accordance with its or their respective terms.


                                       27



          (m) Amendment to Working Capital Loan Agreement. The Lenders shall
have been satisfied with the amendment to Working Capital Loan Agreement and the
Working Capital Forbearance Agreement permitting the transactions contemplated
under this Credit Agreement and a copy of such amendment shall be certified on
behalf of the Borrower by an Executive Officer (the "Working Capital
Amendment").

          (n) Working Capital Loan Documents; Indenture. The Lenders shall have
received copies of the Working Capital Loan Documents, the Indenture and the
other documents related thereto, in each case, as in effect on the Closing Date,
certified as true, complete and correct copies thereof by an Executive Officer
of the Borrower, together with a certificate of an Executive Officer of the
Borrower stating that such agreements remain in full force and effect.

          (o) Due Diligence. Each Lender shall have completed its legal due
diligence with respect to each Credit Party and the Collateral and the results
thereof shall be reasonably acceptable to each Lender in its sole discretion.
Without limiting the foregoing, each Lender and its counsel shall have (i)
completed a review of all ERISA, environmental, tax, regulatory, material
permits, accounting, litigation, material contracts and labor matters, (ii)
completed a review of all Working Capital Loan Documents, in each case of
clauses (i) and (ii) above, the results of which shall be reasonably
satisfactory to such Lender.

          (p) Restructuring Term Sheet. The Lenders shall been satisfied in
their sole reasonable discretion with the terms of the Restructuring Term Sheet.

          (q) Interest Payment under the Indenture. The Lenders shall have
received satisfactory evidence that the interest payment due under the Indenture
shall have been made.

          (r) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by the Lenders,
including, but not limited to, information regarding litigation, tax,
accounting, labor, insurance, pension liabilities (actual or contingent), real
estate leases, material contracts, debt agreements, property ownership and
contingent liabilities of the Consolidated Parties.

                                   SECTION 6

                         REPRESENTATIONS AND WARRANTIES

     The Credit Parties hereby represent to the Lenders that:

     6.1 FINANCIAL CONDITION.

     The Financial Statements delivered to the Lenders (i) have been prepared in
accordance with GAAP and (ii) present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of such date
and for such periods.


                                       28



     6.2 NO MATERIAL CHANGE.

     Since September 30, 2005 (a) there has been no development or event
relating to or affecting a Consolidated Party which has had or could reasonably
be expected to have a Material Adverse Effect and (b) except as otherwise
permitted under this Credit Agreement, no dividends or other distributions have
been declared, paid or made upon the Capital Stock in a Consolidated Party nor
has any of the Capital Stock in a Consolidated Party been redeemed, retired,
purchased or otherwise acquired for value.

     6.3 ORGANIZATION AND GOOD STANDING.

     Each of the Consolidated Parties (a) is duly organized, validly existing
and is in good standing under the Laws of the jurisdiction of its incorporation
or organization, (b) has the corporate or other necessary power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged
and (c) is duly qualified as a foreign entity and in good standing under the
Laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, other than in the case
of clauses (a) (other than with respect to the Borrower) (b) and (c) where such
failures could not be reasonably expected to have a Material Adverse Effect.

     6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.

     Each of the Credit Parties has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrower, to obtain
extensions of credit hereunder, and has taken all necessary corporate action to
authorize the borrowings and other extensions of credit on the terms and
conditions of this Credit Agreement and to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. No consent or
authorization of, filing with, notice to or other similar act by or in respect
of, any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of any Credit Party in connection with the borrowings or
other extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which such
Credit Party is a party, except (i) for filings to perfect the Liens created by
the Collateral Documents, (ii) for consents, authorizations, notices or similar
acts which will be obtained on or before, and are in full force and effect as
of, the Closing Date or (iii) where the failure to obtain such consents,
authorizations or notices or make such similar acts is immaterial. This Credit
Agreement has been, and each other Credit Document to which any Credit Party is
a party will be, duly executed and delivered on behalf of the Credit Parties.
This Credit Agreement constitutes, and each other Credit Document to which any
Credit Party is a party when executed and delivered will constitute, a legal,
valid and binding obligation of such Credit Party enforceable against such party
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).


                                       29



     6.5 NO CONFLICTS.

     Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws or other organizational or governing documents of such
Person, (b) violate, contravene or materially conflict with any Requirement of
Law or any other law, regulation (including, without limitation, Regulation U or
Regulation X), order, writ, judgment, injunction, decree or permit applicable to
it, (c) violate, contravene or conflict with contractual provisions of, or cause
an event of default under, any Working Capital Loan Documents, any indenture
(including, to the extent applicable, the Indenture), loan agreement, mortgage,
deed of trust, contract or other agreement or instrument to which it is a party
or by which it may be bound, the violation of which could reasonably be expected
to have a Material Adverse Effect, or (d) result in or require the creation of
any Lien (other than those contemplated in or created in connection with the
Credit Documents) upon or with respect to its properties.

     6.6 NO DEFAULT.

     No Consolidated Party is in default in any respect under any contract,
lease, loan agreement, indenture (including, to the extent applicable, the
Indenture after giving effect to the interest payment with the proceeds of the
Term Loan), mortgage, security agreement, Working Capital Loan Document (other
than the Working Capital Acknowledged Defaults) or other agreement or obligation
to which it is a party or by which any of its properties is bound which default
could have a Material Adverse Effect. No Default or Event of Default has
occurred or exists except as previously disclosed in writing to the Lenders.

     6.7 OWNERSHIP.

     Each Consolidated Party is the owner of, and has good and marketable title
to, all of its respective assets material to the conduct of its business and
none of such assets is subject to any Lien other than Permitted Liens.

     6.8 INDEBTEDNESS.

     Except as otherwise permitted under Section 8.1, the Consolidated Parties
have no Indebtedness.

     6.9 LITIGATION.

     Except as provided on Schedule 6.9, there are no actions, suits or legal,
equitable, arbitration or administrative proceedings, pending or, to the
knowledge of any Credit Party, threatened against any Consolidated Party which
could reasonably be expected to have a Material Adverse Effect.

     6.10 TAXES.

     Each Consolidated Party has filed, or caused to be filed (except for those
tax returns identified on Schedule 6.10), all tax returns (federal, state, local
and foreign) required to be filed


                                       30


and paid (a) all amounts of taxes shown thereon to be due (including interest
and penalties) and (b) all other taxes, fees, assessments and other governmental
charges (including mortgage recording taxes, documentary stamp taxes and
intangibles taxes) owing by it, except for such taxes (i) which are not yet
delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. No Credit Party is aware as of the Closing Date of any
proposed tax assessments against it or any other Consolidated Party.

     6.11 COMPLIANCE WITH LAW.

     Each Consolidated Party is in compliance with all Requirements of Law and
all other laws, rules, regulations, orders and decrees (including without
limitation Environmental Laws) applicable to it, or to its properties, unless
such failure to comply could reasonably be expected to have a Material Adverse
Effect.

     6.12 ERISA.

          (a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred, and, to
the best knowledge of the Credit Parties, no event or condition has occurred or
exists as a result of which any ERISA Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the Code,
whether or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in material compliance with its own
terms and in material compliance with the provisions of ERISA, the Code, and any
other applicable federal or state laws; and (iv) no Lien in favor of the PBGC or
a Plan has arisen or is reasonably likely to arise on account of any Plan.

          (b) The actuarial present value of all "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA), whether or not vested, under each
Single Employer Plan, as of the last annual valuation date prior to the date on
which this representation is made or deemed made (determined, in each case, in
accordance with Financial Accounting Standards Board Statement 87, utilizing the
actuarial assumptions used in such Plan's most recent actuarial valuation
report), did not exceed as of such valuation date the fair market value of the
assets of such Plan.

          (c) Neither any Consolidated Party nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be reasonably
expected to incur, any withdrawal liability under ERISA to any Multiemployer
Plan or Multiple Employer Plan. Neither any Consolidated Party nor any ERISA
Affiliate would become subject to any withdrawal liability under ERISA if any
Consolidated Party or any ERISA Affiliate were to withdraw completely from all
Multiemployer Plans and Multiple Employer Plans as of the valuation date most
closely preceding the date on which this representation is made or deemed made.
Neither any Consolidated Party nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization (within the
meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section
4245 of ERISA), or has been terminated (within the meaning of Title IV of
ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit
Parties, reasonably expected to be in reorganization, insolvent, or terminated.


                                       31



          (d) No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has
occurred with respect to a Plan which has subjected or may subject any
Consolidated Party or any ERISA Affiliate to any material liability under
Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or
under any agreement or other instrument pursuant to which any Consolidated Party
or any ERISA Affiliate has agreed or is required to indemnify any Person against
any such material liability.

          (e) Neither any Consolidated Party nor any ERISA Affiliates has any
material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards Board
Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of
ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply
has been administered in compliance in all material respects of such sections.

          (f) Neither the execution and delivery of this Credit Agreement nor
the consummation of the financing transactions contemplated thereunder will
involve any transaction which is subject to the prohibitions of Sections 404,
406 or 407 of ERISA or in connection with which a tax could be imposed pursuant
to Section 4975 of the Code. The representation by the Credit Parties in the
preceding sentence is made in reliance upon and subject to the accuracy of the
Lenders' representation in Section 10.16 with respect to its source of funds and
is subject, in the event that the source of the funds used by the Lenders in
connection with this transaction is an insurance company's general asset
account, to the application of Prohibited Transaction Class Exemption 95-60, 60
Fed. Reg. 35,925 (1995), compliance with the regulations issued under Section
401(c)(1)(A) of ERISA, or the issuance of any other prohibited transaction
exemption or similar relief, to the effect that assets in an insurance company's
general asset account do not constitute assets of an "employee benefit plan"
within the meaning of Section 3(3) of ERISA of a "plan" within the meaning of
Section 4975(e)(1) of the Code.

     6.13 SUBSIDIARIES.

     Set forth on Schedule 6.13 is a complete and accurate list of all
Subsidiaries of each Consolidated Party. Information on Schedule 6.13 includes
jurisdiction of incorporation or organization, the number of shares of each
class of Capital Stock outstanding, the number and percentage of outstanding
shares of each class owned (directly or indirectly) by such Consolidated Party;
and the number and effect, if exercised, of all outstanding options, warrants,
rights of conversion or purchase and all other similar rights with respect
thereto. The outstanding Capital Stock of all such Subsidiaries is validly
issued, fully paid and non-assessable and is owned by each such Consolidated
Party, directly or indirectly, free and clear of all Liens (other than those
arising under or contemplated in connection with the Credit Documents). Other
than as set forth in Schedule 6.13, no Consolidated Party has outstanding any
securities convertible into or exchangeable for its Capital Stock nor does any
such Person have outstanding any rights to subscribe for or to purchase or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to its Capital Stock. Schedule 6.13 may be updated from time
to time by the Borrower by giving written notice thereof to the Lenders as to
any changes after the Closing Date.


                                       32



     6.14 GOVERNMENTAL REGULATIONS, ETC.

          (a) No proceeds of the Loans will be used, directly or indirectly, in
any manner that would constitute a violation of Regulation T, Regulation U or
Regulation X. "Margin stock" within the meaning of Regulation U does not
constitute more than 25% of the value of the consolidated assets of the
Consolidated Parties. None of the transactions contemplated by this Credit
Agreement (including, without limitation, the direct or indirect use of the
proceeds of the Loans) will violate or result in a violation of the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or
regulations issued pursuant thereto, or Regulation T, U or X. If requested by a
Lender, the Borrower will furnish to such Lender a statement to the effect of
the foregoing sentences in conformity with the requirements of FR Form U-1
referred to in Regulation U or any other comparable form.

          (b) No Consolidated Party is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or the Investment
Company Act of 1940, each as amended. In addition, no Consolidated Party is (i)
an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, or controlled by such a company, or
(ii) a "holding company", or a "subsidiary company" of a "holding company", or
an "affiliate" of a "holding company" or of a "subsidiary" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.

          (c) No director, executive officer or principal shareholder of any
Consolidated Party is a director, executive officer or principal shareholder of
any Lender. For the purposes hereof the terms "director", "executive officer"
and "principal shareholder" (when used with reference to a Lender) have the
respective meanings assigned thereto in Regulation O issued by the Board of
Governors of the Federal Reserve System.

          (d) Except where the failure to have or hold any such item would not
have a Material Adverse Effect, each Consolidated Party has obtained and holds
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the ownership of
its respective Property and to the conduct of its respective businesses as
presently conducted.

          (e) No Consolidated Party is in violation of any applicable statute,
regulation or ordinance of the United States of America, or of any state, city,
town, municipality, county or any other jurisdiction, or of any agency thereof
(including without limitation, environmental laws and regulations), which
violation could reasonably be expected to have a Material Adverse Effect.

          (f) Each Consolidated Party is current with all material reports and
documents, if any, required to be filed with any state or federal securities
commission or similar agency and is in full compliance in all material respects
with all applicable rules and regulations of such commissions.


                                       33



     6.15 PURPOSE OF LOANS AND LETTERS OF CREDIT.

     The proceeds of the Loans hereunder shall be used solely by the Borrower
(i) to fund certain of the Borrower's working capital needs, provided, that in
no event shall the proceeds of the Term Loan be used to make any severance
payments or other similar payments to John Cook or Jack Toma and (ii) to pay
transaction fees and expenses related to the Credit Agreement and other
transactions contemplated hereby, including the proposed recapitalization of its
outstanding debt.

     6.16 ENVIRONMENTAL MATTERS.

     Except where failure to comply could not reasonably be expected to have a
Material Adverse Effect;

          (a) Each of the facilities and properties owned, leased or operated by
the Consolidated Parties (the "Facilities") and all operations at the Facilities
are in compliance with all applicable Environmental Laws, and there is no
violation of any Environmental Law with respect to the Facilities or the
businesses operated by the Consolidated Parties (the "Businesses"), and there
are no conditions relating to the Businesses or Facilities that would be
reasonably likely to give rise to liability under any applicable Environmental
Laws.

          (b) None of the Facilities contains, or has previously contained, any
Hazardous Materials at, on or under the Facilities in amounts or concentrations
that constitute or constituted a violation of, or would be reasonably likely to
give rise to liability under, Environmental Laws.

          (c) No Consolidated Party has received any written or verbal notice
of, or inquiry from any Governmental Authority regarding, any violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to any
of the Facilities or the Businesses, nor does any Consolidated Party have
knowledge or reason to believe that any such notice will be received or is being
threatened.

          (d) Hazardous Materials have not been transported or disposed of from
the Facilities, or generated, treated, stored or disposed of at, on or under any
of the Facilities or any other location, in each case by or on behalf of the
Borrower or any Subsidiary of the Parent in violation of, or in a manner that
would be reasonably likely to give rise to liability under, any applicable
Environmental Law.

          (e) No judicial proceeding or governmental or administrative action is
pending or, to the best knowledge of any Credit Party, threatened, under any
Environmental Law to which any Consolidated Party is or will be named as a
party, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the
Consolidated Parties, the Facilities or the Businesses.

          (f) There has been no release or, threat of release of Hazardous
Materials by the Borrower or its Subsidiaries at or from the Facilities, or
arising from or related to the


                                       34



operations (including, without limitation, disposal) of the Borrower or any
Subsidiary of the Parent in connection with the Facilities or otherwise in
connection with the Businesses, in violation of or in amounts or in a manner
that would be reasonably likely to give rise to liability under Environmental
Laws.

     6.17 INTELLECTUAL PROPERTY.

     Each Consolidated Party owns, or has the legal right to use, all
trademarks, tradenames, copyrights, technology, know-how and processes (the
"Intellectual Property") necessary for each of them to conduct its business as
currently conducted except for those the failure to own or have such legal right
to use could not reasonably be expected to result in a Material Adverse Effect.
Set forth on Schedule 6.17 is a list of all Intellectual Property owned by each
Consolidated Party or that any Consolidated Party has the right to use. Except
as provided on Schedule 6.17, no claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does any
Credit Party know of any such claim, and to the Credit Parties' knowledge the
use of such Intellectual Property by any Consolidated Party does not infringe on
the rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. Schedule 6.17 may be updated from time to time by the Borrower by giving
written notice to the Lenders as to any changes after the Closing Date.

     6.18 SOLVENCY.

     The Parent and its Subsidiaries, taken as a whole, are and, after
consummation of the transactions contemplated by this Credit Agreement, will be
Solvent.

     6.19 INVESTMENTS.

     All Investments of each Consolidated Party are Permitted Investments.

     6.20 LOCATION OF COLLATERAL.

     Set forth on Schedule 6.20 is the exact legal name, jurisdiction of
incorporation or organization and chief executive office of each Credit Party.
Schedule 6.20 may be updated from time to time by the Borrower by written notice
to the Lenders.

     6.21 DISCLOSURE.

     Neither this Credit Agreement nor any financial statements delivered to the
Lenders nor any other document, certificate or statement furnished to the
Collateral Agent or the Lenders by or on behalf of any Consolidated Party in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein or herein not misleading.


                                       35



     6.22 BROKERS' FEES.

     Except as disclosed on Schedule 6.22, Consolidated Party has any obligation
to any Person in respect of any finder's, broker's, investment banking or other
similar fee in connection with any of the transactions contemplated under the
Credit Documents.

     6.23 LABOR MATTERS.

     There are no collective bargaining agreements or Multiemployer Plans
covering the employees of a Consolidated Party as of the Closing Date and none
of the Consolidated Parties has suffered any strikes, walkouts, work stoppages
or other material labor difficulty within the last five years.

                                   SECTION 7

                              AFFIRMATIVE COVENANTS

     Each Credit Party hereby covenants and agrees that, so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document (other than indemnification claims not yet asserted) shall
remain outstanding and until all the Credit Documents shall have terminated:

     7.1  INFORMATION COVENANTS.

     The Credit Parties will furnish, or cause to be furnished, to each Lender:

          (a) Annual Financial Statements. As soon as available, and in any
event within 90 days after the close of each fiscal year of the Consolidated
Parties, a consolidated balance sheet and income statement of the Consolidated
Parties, as of the end of such fiscal year, together with related consolidated
statements of operations and retained earnings and of cash flows for such fiscal
year, setting forth in comparative form consolidated figures for the preceding
fiscal year, all such financial information described above to be in reasonable
form and detail and audited by independent certified public accountants of
recognized national standing reasonably acceptable to the Required Lenders and
whose opinion shall be to the effect that such financial statements have been
prepared in accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or qualified as to
the status of the Consolidated Parties as a going concern.

          (b) Quarterly Financial Statements. As soon as available, and in any
event within 45 days after the close of each of the three fiscal quarters of the
Consolidated Parties (other than the fourth fiscal quarter, in which case 90
days after the end thereof) a consolidated balance sheet and income statement of
the Consolidated Parties, as of the end of such fiscal quarter, together with
related consolidated statements of operations for such fiscal quarter and cash
flows for such year to date, in each case setting forth in comparative form
consolidated figures for the corresponding period of the preceding fiscal year,
all such financial information described above to be in a form satisfying the
Securities and Exchange Commission requirements for a 10-Q filing or otherwise
in reasonable form and detail and reasonably acceptable to the Required Lenders,
and accompanied by a certificate of the chief financial


                                       36



officer of the Borrower to the effect that such quarterly financial statements
fairly present in all material respects the financial condition of the
Consolidated Parties and have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end audit adjustments.

          (c) Monthly Financial Statements. As soon as available, and in any
event within 30 days after the end of each fiscal month of the Consolidated
Parties commencing with the first fiscal month of the Consolidated Parties
ending after the Closing Date, an internally prepared consolidated balance
sheets and income statements of the various geographic segments of the
Consolidated Parties, as at the end of such fiscal month, and for the period
commencing at the end of the immediately preceding fiscal year and ending with
the end of such fiscal month, together with related consolidated statements of
cash flows for such month, all in reasonable detail and certified by the chief
financial officer of the Borrower to the effect that such financial statements
fairly present in all material respects the financial condition of the
Consolidated Parties and have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end adjustments.

          (d) Officer's Certificate. At the time of delivery of the financial
statements provided for in Sections 7.1(a), 7.1(b) and 7.1(c) above, a
certificate of the chief financial officer of the Borrower substantially in the
form of Exhibit C, stating that no Default or Event of Default exists, or if any
Default or Event of Default does exist, specifying the nature and extent thereof
and what action the Credit Parties propose to take with respect thereto.

          (e) Accountant's Certificate. Within the period for delivery of the
annual financial statements provided in Section 7.1(a), a certificate of the
accountants conducting the annual audit stating that they have reviewed this
Credit Agreement and stating further whether, in the course of their audit, they
have become aware of any Default or Event of Default and, if any such Default or
Event of Default exists, specifying the nature and extent thereof.

          (f) Auditor's Reports. Promptly upon receipt thereof, a copy of any
other report or "management letter" submitted by independent accountants to any
Consolidated Party in connection with any annual, interim or special audit of
the books of such Person.

          (g) Reports. Promptly upon transmission or receipt thereof, (i) copies
of any filings and registrations with, and reports to or from, the Securities
and Exchange Commission, or any successor agency, and copies of all financial
statements, proxy statements, notices and reports as any Consolidated Party
shall send to its shareholders or to a holder of any Indebtedness owed by any
Consolidated Party in its capacity as such a holder and (ii) upon the request of
any Lender, all reports and written information to and from the United States
Environmental Protection Agency, or any state or local agency responsible for
environmental matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and safety
matters, or any successor agencies or authorities concerning environmental,
health or safety matters.

          (h) Notices. Upon obtaining knowledge thereof, the Credit Parties will
give written notice to each Lender promptly of (i) the occurrence of an event or
condition consisting of a Default or Event of Default, specifying the nature and
existence thereof and what action the


                                       37



Credit Parties propose to take with respect thereto, and (ii) the occurrence of
any of the following with respect to any Consolidated Party (A) the pendency or
commencement of any litigation, arbitral or governmental proceeding against such
Person which if adversely determined is likely to have a Material Adverse
Effect, (B) the institution of any proceedings against such Person with respect
to, or the receipt of notice by such Person of potential liability or
responsibility for violation, or alleged violation of any federal, state or
local law, rule or regulation, including but not limited to, Environmental Laws,
the violation of which could be reasonably expected to have a Material Adverse
Effect, or (C) any notice or determination concerning the imposition of any
withdrawal liability by a Multiemployer Plan against such Person or any ERISA
Affiliate, the determination that a Multiemployer Plan is, or is expected to be,
in reorganization within the meaning of Title IV of ERISA or the termination of
any Plan.

          (i) ERISA. Upon obtaining knowledge thereof, the Credit Parties will
give written notice to each Lender promptly (and in any event within five
business days) of: (i) of any event or condition, including, but not limited to,
any Reportable Event, that constitutes, or might reasonably lead to, an ERISA
Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as
prescribed in ERISA or otherwise of any withdrawal liability assessed against
the Credit Parties or any ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the meaning of
Title IV of ERISA); (iii) the failures to make full payment on or before the due
date (including extensions) thereof of all amounts which any Consolidated Party
or any ERISA Affiliate is required to contribute to each Plan pursuant to its
terms and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect thereto; or (iv) any change in the funding status of
any Plan that could have a Material Adverse Effect, together with a description
of any such event or condition or a copy of any such notice and a statement by
the chief financial officer of the Borrower briefly setting forth the details
regarding such event, condition, or notice, and the action, if any, which has
been or is being taken or is proposed to be taken by the Credit Parties with
respect thereto. Promptly upon request, the Credit Parties shall furnish each
Lender with such additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual report/return
(Form 5500 series), as well as all schedules and attachments thereto required to
be filed with the Department of Labor and/or the Internal Revenue Service
pursuant to ERISA and the Code, respectively, for each "plan year" (within the
meaning of Section 3(39) of ERISA).

          (j) Environmental.

               (i) Upon the reasonable written request of any Lender, the Credit
          Parties will furnish or cause to be furnished to each Lender, at the
          Credit Parties' expense, a report of an environmental assessment of
          reasonable scope, form and depth, (including, where appropriate,
          invasive soil or groundwater sampling) by a consultant reasonably
          acceptable to the Lenders as to the nature and extent of the presence
          of any Hazardous Materials on any Facilities that are either owned by
          a Credit Party or for which the Credit Party is the tenant for a
          majority of the usable space, and as to the compliance by any
          Consolidated Party with Environmental Laws at such Facilities. If the
          Credit Parties fail to deliver such an environmental report within
          seventy-five (75) days after receipt of such written request then the
          Lender may arrange for same, and the Consolidated Parties hereby grant
          to the Lender and their representatives access to the Facilities to
          reasonably undertake


                                       38



          such an assessment (including, where appropriate, invasive soil or
          groundwater sampling). The reasonable cost of any assessment arranged
          for by the Lender pursuant to this provision will be payable by the
          Credit Parties on demand and added to the obligations secured by the
          Collateral Documents.

               (ii) The Consolidated Parties will conduct and complete all
          investigations, studies, sampling, and testing and all remedial,
          removal, and other actions necessary to address all Hazardous
          Materials on, from or affecting any of the Facilities referred to in
          the preceding clause (i) to the extent necessary to be in compliance
          with all Environmental Laws and with the validly issued orders and
          directives of all Governmental Authorities with jurisdiction over such
          Facilities to the extent any failure could have a Material Adverse
          Effect.

          (k) Additional Patents and Trademarks. At the time of delivery of the
financial statements and reports provided for in Section 7.1(a), a report signed
by the chief financial officer or treasurer of the Borrower setting forth (i) a
list of registration numbers for all patents and copyrights awarded to any
Consolidated Party since the last day of the immediately preceding fiscal year
and (ii) a list of all patent applications and copyright applications submitted
by any Consolidated Party since the last day of the immediately preceding fiscal
year and the status of each such application, all in such form as shall be
reasonably satisfactory to the Lenders.

          (l) Working Capital Loan Documents. As soon as possible and in any
event within three (3) Business Days after execution, receipt or delivery
thereof, copies of any material formal notices, statements, reports or other
information that any Credit Party executes or receives from the Working Capital
Lender in connection with any Working Capital Loan Documents. For the avoidance
of doubt, this Section 7.1(l) shall not require delivery of any notice,
statement, report or other information executed by the Credit Parties or
received from the Working Capital Lender that is executed or received in the
ordinary course of business and that are immaterial, but shall include the
Borrowing Base Certificate.

          (m) Other Information. With reasonable promptness upon any such
request, such other information regarding the business, properties or financial
condition of any Consolidated Party as any Lender may reasonably request.

          (n) Indenture. As soon as possible and in any event within three (3)
Business Days after execution, receipt or delivery thereof, copies of any
material notices, statements, reports or other information that any Credit Party
executes or receives from the Trustee (as defined in the Indenture) in
connection with the Indenture. For the avoidance of doubt, this Section 7.1(n)
shall not require delivery of any notice, statement, report or other information
executed by the Credit Parties or received from the Trustee (as defined in the
Indenture) that is executed or received in the ordinary course of business and
that are immaterial.

     7.2  PRESERVATION OF EXISTENCE AND FRANCHISES.

     Except as a result of or in connection with a merger of a Subsidiary
permitted under Section 8.4, each Credit Party will, and will cause each of its
Subsidiaries to, do all things


                                       39



necessary to preserve and keep in full force and effect its existence, rights,
franchises and authority.

     7.3  BOOKS AND RECORDS.

     Each Credit Party will, and will cause each of its Subsidiaries to, keep
complete and accurate books and records of its transactions in accordance with
good accounting practices on the basis of GAAP (including the establishment and
maintenance of appropriate reserves).

     7.4  COMPLIANCE WITH LAW.

     Each Credit Party will, and will cause each of its Subsidiaries to, comply
with all Laws and all orders, writs, injunctions and decrees applicable to it
and its Property if noncompliance with any such law, rule, regulation, order or
restriction could be reasonably expected to have a Material Adverse Effect.

     7.5  PAYMENT OF TAXES AND OTHER INDEBTEDNESS.

     Each Credit Party will, and will cause each of its Subsidiaries to, pay and
discharge (a) all taxes, assessments and governmental charges or levies imposed
upon it, or upon its income or profits, or upon any of its properties, before
they shall become delinquent, (b) all lawful claims (including claims for labor,
materials and supplies) which, if unpaid, might give rise to a Lien upon any of
its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that no Consolidated
Party shall be required to pay any such tax, assessment, charge, levy, claim or
Indebtedness which is being contested in good faith by appropriate proceedings
and as to which adequate reserves therefor have been established in accordance
with GAAP, unless the failure to make any such payment (i) could give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) could be
reasonably expected to have a Material Adverse Effect.

     7.6  INSURANCE.

          (a) Each Credit Party will, and will cause each of its Subsidiaries
to, at all times maintain in full force and effect insurance (including worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice (or as otherwise required by the Collateral Documents).
The Collateral Agent shall be named as loss payee or mortgagee, as its interest
may appear, and/or additional insured with respect to any such insurance
providing coverage in respect of any Collateral, and each provider of any such
insurance shall agree, by endorsement upon the policy or policies issued by it
or by independent instruments furnished to the Collateral Agent, that it will
give the Collateral Agent thirty (30) days prior written notice before any such
policy or policies shall be altered or canceled, and that no act or default of
any Consolidated Party or any other Person shall affect the rights of the
Collateral Agent under such policy or policies. The present insurance coverage
of the Consolidated Parties is outlined as to carrier, policy number, expiration
date, type and amount on Schedule 7.6.


                                       40



          (b) In case of any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to the Lenders generally describing the
nature and extent of such damage or destruction. In case of any loss, damage to
or destruction of the Collateral of any Credit Party or any part thereof, such
Credit Party, whether or not the insurance proceeds, if any, received on account
of such damage or destruction shall be sufficient for that purpose, at such
Credit Party's cost and expense, will promptly repair or replace the Collateral
of such Credit Party so lost, damaged or destroyed; provided, however, that such
Credit Party need not repair or replace the Collateral of such Credit Party so
lost, damaged or destroyed to the extent the failure to make such repair or
replacement (i) is desirable to the proper conduct of the business of such
Credit Party in the ordinary course and otherwise in the best interest of such
Credit Party; and (ii) would not materially impair the rights and benefits of
the Lenders under the Collateral Documents or any other Credit Document. In the
event a Credit Party shall receive any proceeds of such insurance in a net
amount in excess of $100,000, such Credit Party will immediately pay over such
proceeds to the Lenders, for payment on the Credit Party Obligations; provided,
however, that the Lenders agree to release such insurance proceeds to such
Credit Party for replacement or restoration of the portion of the Collateral of
such Credit Party lost damaged or destroyed if, but only if, (A) no Default or
Event of Default shall have occurred and be continuing at the time of release,
(B) written application for such release is received by the Lenders from such
Credit Party within 30 days of receipt of such proceeds, and (C) the Lenders
have received evidence reasonably satisfactory to them that the Collateral lost,
damaged or destroyed has been or will be replaced or restored to its condition
immediately prior to the loss, destruction or other event giving rise to the
payment of such insurance proceeds.

     7.7  MAINTENANCE OF PROPERTY.

     Each Credit Party will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
and casualty and condemnation excepted, and will make, or cause to be made, in
such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.

     7.8  PERFORMANCE OF OBLIGATIONS.

     Each Credit Party will, and will cause each of its Subsidiaries to, perform
in all material respects all of its obligations under the terms of all material
agreements, indentures, mortgages, security agreements or other debt instruments
to which it is a party or by which it is bound.

     7.9  USE OF PROCEEDS.

     The Borrower will use the proceeds of the Loans solely for the purposes set
forth in Section 6.15.

     7.10 AUDITS/INSPECTIONS.

     Upon reasonable notice and during normal business hours, each Credit Party
will, and will cause each of its Subsidiaries to, permit representatives
appointed by the Required Lenders,


                                       41



including, without limitation, independent accountants, agents, attorneys, and
appraisers to visit and inspect its property, including its books and records,
its accounts receivable and inventory, its facilities and its other business
assets, and to make photocopies or photographs thereof and to write down and
record any information such representative obtains and shall permit any Lender
or its representatives to investigate and verify the accuracy of information and
to discuss all such matters with the officers, employees and representatives of
such Person.

     7.11 [INTENTIONALLY OMITTED]

     7.12 ADDITIONAL CREDIT PARTIES.

          (a) As soon as practicable and in any event within 45 days after any
Person becomes a Domestic Subsidiary of any Credit Party, the Borrower shall
provide the Lenders with written notice thereof setting forth information in
reasonable detail describing all of the assets of such Person and shall cause
such Person to execute a Joinder Agreement in substantially the same form as
Exhibit E, (b) subject to the terms of the Intercreditor Agreement, cause 100%
of the Capital Stock of such Person to be delivered to the Collateral Agent
(together with undated stock powers or copies thereof, as applicable, signed in
blank) and pledged to the Collateral Agent pursuant to an appropriate pledge
agreement(s) in form acceptable to the Collateral Agent in its reasonable
discretion and cause such Person to deliver such other documentation as the
Collateral Agent may reasonably request in connection with the foregoing,
including, without limitation, appropriate UCC-1 financing statements, real
estate title insurance policies, environmental reports, landlord's waivers,
certified resolutions and other organizational and authorizing documents of such
Person, and favorable opinions of counsel to such Person all in form, content
and scope reasonably satisfactory to the Collateral Agent.

          (b) As soon as practicable and in any event within 180 days after any
Person becomes a Material Foreign Subsidiary of any Credit Party, the Borrower
shall provide the Lenders with written notice thereof setting forth information
in reasonable detail describing all of the assets of such Person and shall,
subject to the terms of the Intercreditor Agreement, cause 66% of the Capital
Stock of such Person to be delivered to the Collateral Agent (together with
undated stock powers or copies thereof, as applicable, signed in blank (unless,
such stock powers are deemed unnecessary by the Collateral Agent in its
reasonable discretion under the law of the jurisdiction of incorporation of such
Person)) and pledged to the Collateral Agent pursuant to an appropriate pledge
agreement(s) in form acceptable to the Collateral Agent in its reasonable
discretion and cause such Person to deliver such other documentation as the
Collateral Agent may reasonably request in connection with the foregoing,
including, without limitation, appropriate UCC-1 financing statements, certified
resolutions and other organizational and authorizing documents of such Person,
and favorable opinions of counsel to such Person all in form, content and scope
reasonably satisfactory to the Collateral Agent. It is specifically understood
and agreed that no Material Foreign Subsidiary shall be required to pledge any
of the Capital Stock of any Foreign Subsidiary owned by such Material Foreign
Subsidiary.

          (c) (A) If the Working Capital Lender is granted a Lien in any
property of any Credit Party or any guarantor or any other person or entity as
security for the Working Capital Facility, as in effect from time to time, the
Lenders, shall also promptly receive a Lien in such property, subject to the
terms of Intercreditor Agreement, pursuant to documentation reasonably


                                       42



satisfactory to the Required Lenders and the Collateral Agent (including,
without limitation, the additional collateral required by the Working Capital
Lender pursuant to the Working Capital Amendment) and (B) if any Person
guarantees, or otherwise becomes an obligor on, all or any portion of the
Working Capital Facility, as in effect from time to time, a comparable guaranty
or other instruments is promptly obtained in favor of the Lenders in connection
with the obligations hereunder, pursuant to documentation reasonably
satisfactory to the Lenders.

     7.13 ENVIRONMENTAL LAWS.

          (a) The Consolidated Parties shall comply in all material respects
with, and take reasonable actions to ensure compliance in all material respects
by all tenants and subtenants, if any, with, all applicable Environmental Laws
and obtain and comply in all material respects with and maintain, and take
reasonable actions to ensure that all tenants and subtenants obtain and comply
in all material respects with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws except to the extent that failure to do so would not reasonably be expected
to have a Material Adverse Effect;

          (b) The Consolidated Parties shall conduct and complete all
investigations, studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws and promptly comply in all
material respects with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws except to the extent that the same are
being contested in good faith by appropriate proceedings and the failure to do
or the pendency of such proceedings would not reasonably be expected to have a
Material Adverse Effect; and

          (c) The Consolidated Parties shall defend, indemnify and hold harmless
the Lender, and its employees, agents, officers and directors, from and against
any and all claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Borrower or any of its Subsidiaries or the Facilities, or
any orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
The agreements in this paragraph shall survive repayment of the Loans and all
other amounts payable hereunder, and termination of the Commitments.

     7.14 COLLATERAL.

     If, subsequent to the Closing Date, a Credit Party shall acquire any real
property, intellectual property, securities instruments, chattel paper or other
personal property required to be delivered to the Collateral Agent as Collateral
hereunder or under any of the Collateral Documents, the Borrower shall notify
the Lenders of same in each case as soon as practicable after the acquisition
thereof or execution of such lease agreement, as appropriate. Each Credit Party
shall take such action as reasonably requested by the Lenders or the Collateral
Agent and at its own expense, to ensure that the Collateral Agent shall have a
first priority perfected Lien in


                                       43



all real property and personal property of the Credit Parties (whether now owned
or hereafter acquired), subject only to Permitted Liens. To the extent
reasonably requested by the Collateral Agent, the Credit Parties shall execute
an intercompany note and pledge and deliver such intercompany note to the
Collateral Agent (or its designee) to be held (or delivered to the Working
Capital Lender) subject to the terms of the Intercreditor Agreement.

     7.15 WORKING CAPITAL BORROWING BASE.

     The Credit Parties shall maintain all Working Capital Loans and Working
Capital LC Obligations (i) so as not to incur obligations in excess of the
amount of the Senior Debt (as defined in the Intercreditor Agreement) and (ii)
in compliance with the Intercreditor Agreement.

     7.16 POST-CLOSING DELIVERIES.

          (a) On or prior to December 31, 2005, deliver to the Lenders copies of
certificates of insurance of the Consolidated Parties evidencing liability and
casualty insurance meeting the requirements set forth in the Credit Documents.

                                   SECTION 8

                               NEGATIVE COVENANTS

     Each Credit Party hereby covenants and agrees that, so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding (other than indemnification claims not
yet asserted), and until all of the Credit Document shall have terminated:

     8.1  INDEBTEDNESS.

     The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Indebtedness, except:

          (a) Indebtedness arising under this Credit Agreement and the other
Credit Documents;

          (b) Indebtedness of the Consolidated Parties set forth in Schedule 8.1
(and renewals, refinancings and extensions thereof);

          (c) purchase money Indebtedness (including obligations in respect of
Capital Leases or Synthetic Leases) hereafter incurred by any Consolidated Party
to finance the purchase of fixed assets provided that (i) the total of all such
purchase money Indebtedness (including any such purchase money Indebtedness
referred to in subsection (b) above) shall not exceed an aggregate principal
amount of $10,000,000 at any one time outstanding; (ii) such purchase money
Indebtedness when incurred shall not exceed the purchase price of the asset(s)
financed; and (iii) no such purchase money Indebtedness shall be refinanced for
a principal amount in excess of the principal balance outstanding thereon at the
time of such refinancing;


                                       44



          (d) obligations of the Consolidated Parties in respect of Hedging
Agreements entered into in order to manage existing or anticipated interest rate
or exchange rate risks and not for speculative purposes;

          (e) other unsecured Indebtedness of the Consolidated Parties in an
amount not to exceed $5,000,000 in the aggregate at any one time;

          (f) the Subordinated Debt;

          (g) unsecured intercompany Indebtedness owing by a Consolidated Party
to a Credit Party (permitted under Section 8.6);

          (h) obligations of Meridian or any of its Subsidiaries with respect to
any letter of credit, bond or other surety provided for the account of Meridian
or any of its Subsidiaries to support Meridian's or any of its Subsidiaries'
obligations to the French VAT authorities; provided, that (i) the aggregate
amount of such obligations shall not exceed $6,000,000 in the aggregate and (ii)
such Indebtedness shall not have a cross-default to the Indebtedness arising
under this Credit Agreement and the other Credit Documents;

          (i) the Meridian Loan; and

          (j) Indebtedness owing to the Working Capital Lender under the Working
Capital Loan Documents in an aggregate principal amount not to exceed the amount
of Senior Debt (as defined in the Intercreditor Agreement) permitted under the
Intercreditor Agreement, less the amount of each principal payment made in
respect of the Working Capital Loans but only to the extent that the Working
Capital Revolving Commitment is permanently reduced by the amount of such
payment.

     8.2  LIENS.

     The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Lien with respect to any of its
Property (other than any "margin stock" within the meaning of Regulation U),
whether now owned or after acquired, except for Permitted Liens.

     8.3  NATURE OF BUSINESS.

     The Credit Parties will not permit any Consolidated Party to materially
alter the nature of the business conducted by such Person as of the Closing
Date.

     8.4  CONSOLIDATION, MERGER, DISSOLUTION, ETC.

     The Credit Parties will not permit any Consolidated Party to enter into any
transaction of merger or consolidation or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution); provided that, notwithstanding the
foregoing provisions of this Section 8.4, (a) the Parent or the Borrower may
merge or consolidate with any of its Subsidiaries provided that (i) the Parent
or the Borrower shall be the continuing or surviving corporation, (ii) the
Parent shall not merge or consolidate with the Borrower, (iii) the Credit
Parties shall cause to be


                                       45


executed and delivered such documents, instruments and certificates as the
Required Lenders or the Collateral Agent may reasonably request in order to
maintain the perfection and priority of the Collateral Agent's liens on the
assets of the Credit Parties as required by Section 7.14 after giving effect to
such transaction and (iv) after giving effect to such transaction, no Default or
Event of Default exists, (b) any Credit Party other than the Borrower and the
Parent may merge or consolidate with any other Credit Party other than the
Borrower or the Parent; provided that (i) the Credit Parties shall cause to be
executed and delivered such documents, instruments and certificates as the
Required Lenders or the Collateral Agent may reasonably request in order to
maintain the perfection and priority of the Collateral Agent's liens on the
assets of the Credit Parties as required by Section 7.14 after giving effect to
such transaction and (ii) after giving effect to such transaction, no Default or
Event of Default exists, (c) any Consolidated Party which is not a Credit Party
may be merged or consolidated with or into any Credit Party; provided that (i)
such Credit Party shall be the continuing or surviving corporation, (ii) the
Credit Parties shall cause to be executed and delivered such documents,
instruments and certificates as the Required Lenders or the Collateral Agent may
reasonably request in order to maintain the perfection and priority of the
Collateral Agent's liens on the assets of the Credit Parties as required by
Section 7.14 after giving effect to such transaction and (iii) after giving
effect to such transaction, no Default or Event of Default exists, and (d) any
Consolidated Party which is not a Credit Party may be merged or consolidated
with or into any other Consolidated Party which is not a Credit Party; provided
that, after giving effect to such transaction, no Default or Event of Default
exists.

     8.5  ASSET DISPOSITIONS.

     The Credit Parties will not permit any Consolidated Party to make any Asset
Disposition (including, without limitation, any Sale and Leaseback Transaction)
other than:

          (i) the sale of inventory in the ordinary course of business for fair
     consideration;

          (ii) the sale or disposition of machinery and equipment no longer used
     or useful in the conduct of such Person's business;

          (iii) the sale, transfer or other disposition of "margin stock" within
     the meaning of Regulation U;

          (iv) other sales of assets in an aggregate amount not to exceed
     $1,000,000 in any fiscal year; and

          (v) the sale of the Ship & Debit Division; provided that (A) the
     Borrower receives at least $1,000,000 in Net Cash Proceeds from the sale of
     such division and (B) the Borrower immediately prepays the Loans with such
     Net Cash Proceeds in accordance with the terms of Section 3.3(b)(ii) and
     the Intercreditor Agreement.

     Upon a sale of assets permitted by this Section 8.5, the Lenders and/or the
Collateral Agent shall deliver to the Borrower, upon the Borrower's request and
at the Borrower's expense, such documentation as is reasonably necessary to
evidence the release of the Collateral Agent's security interest in such assets.


                                       46



     8.6  INVESTMENTS.

     The Credit Parties will not permit any Consolidated Party to make
Investments in or to any Person, except for Permitted Investments.

     8.7  RESTRICTED PAYMENTS.

     The Credit Parties will not permit any Consolidated Party to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment, except (a) to make dividends payable solely in the same class of
Capital Stock of such Person, (b) to make dividends or other distributions
payable to the Borrower (directly or indirectly through Subsidiaries) and (c)
the Borrower may make distributions to the Parent in an amount necessary to pay
interest on the Subordinated Debt.

     8.8  TRANSACTIONS WITH AFFILIATES.

     The Credit Parties will not permit any Consolidated Party to enter into or
permit to exist any transaction or series of transactions with any officer,
director, shareholder, Subsidiary or Affiliate of such Consolidated Party other
than (a) normal compensation and reimbursement of expenses of officers and
directors and (b) except as otherwise specifically limited in this Credit
Agreement, other transactions which are entered into in the ordinary course of
such Person's business on terms and conditions substantially as favorable to
such Person as would be obtainable by it in a comparable arms-length transaction
with a Person other than an officer, director, shareholder, Subsidiary or
Affiliate of such Consolidated Party. Notwithstanding the foregoing, Meridian
International is permitted to make the Meridian Loan.

     8.9  FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.

     The Credit Parties will not permit any Consolidated Party to (a) amend,
modify or change its articles of incorporation (or corporate charter or other
similar organizational document) or bylaws (or other similar document) in a
manner materially adverse to the Lenders or (b) change its fiscal year; it being
understood and agreed that any amendment to the articles of incorporation of
PRGRS, Inc. that provides the books and records of such Credit Party will be
maintained in the Cayman Islands or Bermuda shall not be deemed to be materially
adverse to the Lenders. The Credit Parties will promptly deliver to the Lenders
copies of any amendments, modifications and changes to the articles of
incorporation (or corporate charter or other similar organizational document) or
bylaws (or other similar document) of any Consolidated Party.

     8.10 LIMITATION ON RESTRICTED ACTIONS.

     The Credit Parties will not permit any Consolidated Party to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other distributions to any Credit Party on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits, (b) pay any Indebtedness or other obligation owed to any Credit
Party, (c) make loans or advances to any Credit Party, (d) sell, lease or
transfer any of its properties or assets to any Credit Party, or (e) act as a
Guarantor and pledge its assets pursuant to the Credit Documents or any
renewals, refinancings, exchanges, refundings or extension thereof, except (in
respect of any


                                       47



of the matters referred to in clauses (a)-(d) above) for such encumbrances or
restrictions existing under or by reason of (i) this Credit Agreement and the
other Credit Documents, (ii) the Working Capital Loan Documents, (iii)
applicable law, (iv) the Indenture or (v) any document or instrument governing
Indebtedness incurred pursuant to Section 8.1(c), provided that any such
restriction contained therein relates only to the asset or assets constructed or
acquired in connection therewith.

     8.11 OWNERSHIP OF SUBSIDIARIES.

     Notwithstanding any other provisions of this Credit Agreement to the
contrary, the Credit Parties will not permit any Consolidated Party to (i)
permit any Person (other than the Parent or any Wholly-Owned Subsidiary of the
Parent) to own any Capital Stock of any Subsidiary of the Parent, (ii) permit
any Subsidiary of the Parent to issue Capital Stock (except to the Parent or to
a Wholly-Owned Subsidiary of the Parent), (iii) permit, create, incur, assume or
suffer to exist any Lien thereon, in each case except (A) to qualify directors
where required by applicable law or to satisfy other requirements of applicable
law with respect to the ownership of Capital Stock of Foreign Subsidiaries or
(B) for Permitted Liens and (iv) notwithstanding anything to the contrary
contained in clause (ii) above, permit any Subsidiary of the Parent to issue any
shares of preferred Capital Stock.

     8.12 SALE LEASEBACKS.

     Except for transactions permitted by Section 8.1(c) hereof, the Credit
Parties will not permit any Consolidated Party to, directly or indirectly,
become or remain liable as lessee or as guarantor or other surety with respect
to any lease, whether an Operating Lease or a Capital Lease, of any Property
(whether real, personal or mixed), whether now owned or hereafter acquired, (a)
which such Consolidated Party has sold or transferred or is to sell or transfer
to a Person which is not a Consolidated Party or (b) which such Consolidated
Party intends to use for substantially the same purpose as any other Property
which has been sold or is to be sold or transferred by such Consolidated Party
to another Person which is not a Consolidated Party in connection with such
lease.

     8.13 CAPITAL EXPENDITURES.

     The Credit Parties will not permit aggregate Consolidated Capital
Expenditures to exceed $6,000,000 at any time during the term of this Credit
Agreement.

     8.14 NO FURTHER NEGATIVE PLEDGES.

     The Credit Parties will not permit any Consolidated Party to enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation, except (a) pursuant
to this Credit Agreement and the other Credit Documents, (b) pursuant to the
Indenture, (c) pursuant to the Working Capital Loan Documents or (d) pursuant to
any document or instrument governing Indebtedness incurred pursuant to Section
8.1(c), provided that any such restriction contained therein relates only to the
asset or assets constructed or acquired in connection therewith.


                                       48



     8.15 LIMITATION ON FOREIGN EBITDA.

     The Credit Parties will not permit the aggregate portion of Consolidated
EBITDA for any period attributable to First Tier Foreign Subsidiaries which are
not Material Foreign Subsidiaries to exceed 10% of Consolidated EBITDA for such
period.

     8.16 SUBORDINATED DEBT.

     No Credit Party will, nor will it permit any of its Subsidiaries to (a)
make or offer to make any principal payments with respect to the Subordinated
Debt, (b) redeem or offer to redeem any of the Subordinated Debt, (c) deposit
any funds intended to discharge the Subordinated Debt or (d) amend, restate,
supplement, modify or otherwise change the Subordinated Debt in any manner that
would adversely affect the Lenders without the prior written consent of the
Required Lenders.

     8.17 NOTICE UNDER THE INDENTURE.

     The Parent covenants and agrees that it will give the written notice
pursuant to Section 11.11 of the Indenture to the Trustee (as defined in the
Indenture) immediately upon the request of the Required Lenders.

     8.18 WORKING CAPITAL LOAN DOCUMENTS.

     No Credit Party will, nor will it permit any of its Subsidiaries to amend,
restate, supplement, modify or otherwise change the Working Capital Loan
Agreement or any other Working Capital Loan Documents except as otherwise
permitted under the terms of the Intercreditor Agreement.

                                   SECTION 9

                                EVENTS OF DEFAULT

     9.1  EVENTS OF DEFAULT.

     An Event of Default shall exist upon the occurrence and during the
continuance of any of the following specified events other than any Event of
Default arising solely as a result of a Working Capital Acknowledged Event of
Default (except with respect to clauses (h) and (l) below) (each an "Event of
Default"):

          (a) Payment. Any Credit Party shall default, and such default shall
continue for five (5) or more Business Days, in the payment when due of any
principal of or interest on the Loans, or of any fees or other amounts owing
hereunder, under any of the other Credit Documents or in connection herewith or
therewith; or

          (b) Representations. Any representation, warranty or statement made or
deemed to be made by any Credit Party herein, in any of the other Credit
Documents, or in any


                                       49



statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove untrue in any material respect on the date as of which it
was deemed to have been made; or

          (c) Covenants. Any Credit Party shall

               (i) default in the due performance or observance of any term,
          covenant or agreement contained in Sections 7.2, 7.4, 7.9, 7.12 or
          7.14 or Section 8;

               (ii) default in the due performance or observance of any term,
          covenant or agreement contained in Sections 7.1(a), (b), (c), (d), (e)
          or (f) and such default shall continue unremedied for a period of at
          least 5 days after the earlier of a responsible officer of a Credit
          Party becoming aware of such default or notice thereof by the Lender;
          or

               (iii) default in the due performance or observance by it of any
          term, covenant or agreement (other than those referred to in
          subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1) contained
          in this Credit Agreement and such default shall continue unremedied
          for a period of at least 30 days after the earlier of a responsible
          officer of a Credit Party becoming aware of such default or notice
          thereof by the Lenders; or

          (d) Credit Documents. (i) Any Credit Party shall default in the due
performance or observance of any term, covenant or agreement in any of the other
Credit Documents (subject to applicable grace or cure periods, if any) or (ii)
except as a result of or in connection with a merger of a Subsidiary permitted
under Section 8.4, any Credit Document shall fail to be in full force and effect
or to give the Collateral Agent the Liens, rights, powers and privileges
purported to be created thereby, or any Credit Party shall so state in writing;
or

          (e) Guaranties. Except as the result of or in connection with a merger
of a Subsidiary permitted under Section 8.4, the guaranty given by any Guarantor
hereunder (including any Additional Credit Party) or any provision thereof shall
cease to be in full force and effect, or any Guarantor (including any Additional
Credit Party) hereunder or any Person acting by or on behalf of such Guarantor
shall deny or disaffirm such Guarantor's obligations under such guaranty, or any
Guarantor shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to any
guaranty (subject to applicable grace and cure periods, if any); or

          (f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to
any Consolidated Party; or

          (g) Defaults under Other Agreements.

               (i) Any Consolidated Party shall default in the performance or
          observance (beyond the applicable grace period with respect thereto,
          if any) of any material obligation or condition of any contract or
          lease material to the Consolidated Parties, taken as a whole, other
          than any defaults under the Working Capital Loan Documents; or


                                       50



               (ii) With respect to any Indebtedness (other than Indebtedness
          outstanding under this Credit Agreement or under the Working Capital
          Loan Documents) in excess of $1,000,000 in the aggregate for the
          Consolidated Parties taken as a whole, (A) any Consolidated Party
          shall (1) default in any payment (beyond the applicable grace period
          with respect thereto, if any) with respect to any such Indebtedness,
          or (2) the occurrence and continuance of a default in the observance
          or performance relating to such Indebtedness or contained in any
          instrument or agreement evidencing, securing or relating thereto, or
          any other event or condition shall occur or condition exist, the
          effect of which default or other event or condition is to cause, or
          permit, the holder or holders of such Indebtedness (or trustee or
          agent on behalf of such holders) to cause (determined without regard
          to whether any notice or lapse of time is required), any such
          Indebtedness to become due prior to its stated maturity, or (B) any
          such Indebtedness shall be declared due and payable, or required to be
          prepaid other than by a regularly scheduled required prepayment, prior
          to the stated maturity thereof; or

          (h) Judgments. One or more judgments or decrees shall be entered
against one or more of the Consolidated Parties involving a liability of
$1,000,000 or more in the aggregate (to the extent not paid or fully covered by
insurance provided by a carrier who has acknowledged coverage and has the
ability to perform) and any such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 30 days from the
entry thereof; or

          (i) ERISA. Any of the following events or conditions, if such event or
condition could have a Material Adverse Effect: (i) any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA and Section 412 of
the Code, whether or not waived, shall exist with respect to any Plan, or any
lien shall arise on the assets of any Consolidated Party or any ERISA Affiliate
in favor of the PBGC or a Plan; (ii) an ERISA Event shall occur with respect to
a Single Employer Plan, which is, in the reasonable opinion of the Lender,
likely to result in the termination of such Plan for purposes of Title IV of
ERISA; (iii) an ERISA Event shall occur with respect to a Multiemployer Plan or
Multiple Employer Plan, which is, in the reasonable opinion of the Required
Lenders, likely to result in (A) the termination of such Plan for purposes of
Title IV of ERISA, or (B) any Consolidated Party or any ERISA Affiliate
incurring any liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency or (within the
meaning of Section 4245 of ERISA) such Plan; or (iv) any prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) or
breach of fiduciary responsibility shall occur which may subject any
Consolidated Party or any ERISA Affiliate to any liability under Sections 406,
409, 502(i), or 502(1) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which any Consolidated Party or any
ERISA Affiliate has agreed or is required to indemnify any person against any
such liability; or

          (j) Ownership. There shall occur a Change of Control; or


                                       51



          (k) Subordinated Debt. There shall occur (a) an "Event of Default"
under, and as defined in, the Indenture or (b) a "Change in Control" (or any
comparable term) under and as defined in the Indenture; or

          (l) Working Capital Facility. There shall occur a Working Capital
Event of Default under any Working Capital Loan Document and the Working Capital
Lender shall have accelerated the indebtedness thereunder (whether as a result
of the Working Capital Acknowledged Events of Default or otherwise), it being
agreed that the maturity of the Working Capital Facility solely in accordance
with its terms and without further action by the Working Capital Lender (e.g.,
upon its scheduled maturity date) shall not constitute an acceleration.

     9.2  ACCELERATION; REMEDIES.

     Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Required Lenders
or cured to the satisfaction of the Lenders in their reasonable discretion, the
Required Lenders shall, by written notice to the Credit Parties, take any of the
following actions:

          (a) [Intentionally Omitted]

          (b) Acceleration. Declare the unpaid principal of and any accrued
interest in respect of all Loans and any and all other indebtedness or
obligations of any and every kind owing by the Credit Parties to the Lenders and
the Collateral Agent hereunder to be due whereupon the same shall be immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Credit Parties.

          (c) [Intentionally Omitted]

          (d) Enforcement of Right. Enforce any and all rights and interests
created and existing under the Credit Documents including, without limitation,
all rights and remedies existing under the Collateral Documents, all rights and
remedies against a Guarantor and all rights of set-off.

     Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur with respect to the Borrower, then all Loans, all accrued
interest in respect thereof, all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders and the Collateral Agent hereunder
automatically shall immediately become due and payable without the giving of any
notice or other action by the Lenders or the Collateral Agent.

     9.3  APPLICATION OF FUNDS.

     After the exercise of remedies provided for in Section 9.2 (or after the
Loans have automatically become immediately due and payable as set forth in the
proviso to Section 9.2), any amounts received on account of the Credit Party
Obligations shall be applied, first, to pay any fees, expenses or indemnities of
the Collateral Agent, and, second, by the Lenders in the manner determined by
the Lenders in their sole discretion. Any surplus remaining after payment in
full of the Credit Party Obligations shall be returned to the Borrower or
whomsoever a court of competent jurisdiction shall determine to be entitled
thereto.


                                       52



                                   SECTION 10

                                  MISCELLANEOUS

     10.1 NOTICES.

          (a) Notices Generally. Except as otherwise expressly provided herein,
all notices and other communications shall have been duly given and shall be
effective (i) when delivered, (ii) when transmitted via telecopy (or other
facsimile device) to the number set out below, (iii) the Business Day following
the day on which the same has been delivered prepaid to a reputable national
overnight air courier service, or (iv) the third Business Day following the day
on which the same is sent by certified or registered mail, postage prepaid, in
each case to the respective parties at the address, in the case of the Credit
Parties and the Lender, set forth below, or at such other address as such party
may specify by written notice to the other parties hereto:

          if to any Credit Party:

               PRG-Schultz USA, Inc.
               600 Galleria Parkway, Suite 100
               Atlanta, Georgia 30339
               Attn: Chief Financial Officer
               Telephone: (770) 779-3230
               Telecopy: (770) 779-3042

          with a copy to:

               PRG-Schultz USA, Inc.
               600 Galleria Parkway, Suite 100
               Atlanta, Georgia 30339
               Attn: General Counsel
               Telephone: (770) 779-3051
               Telecopy: (770) 779-3034

          if to any Lender:

               to its address set forth on its signature page,

          with a copy to:

               Schulte Roth & Zabel LLP
               919 Third Avenue
               New York, NY 10022
               Attn: Jeffrey S. Sabin
               Telephone: (212) 756-2000
               Telecopy: (212) 593-5955


                                       53



          if to the Collateral Agent:

               Blum Strategic Partners II, L.P.
               909 Montgomery Street, Suite 400
               San Francisco, CA 94133:
               Attn: Jose S. Medeiros
               Telephone: 415-288-7201
               Telecopy: 415-283-0601

          with a copy to:

               Schulte Roth & Zabel LLP
               919 Third Avenue
               New York, NY 10022
               Attn: Jeffrey S. Sabin
               Telephone: (212) 756-2000
               Telecopy: (212) 593-5955

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient). Notices delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).

          (b) Electronic Communications. Notices and other communications to a
Lender hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by such Lender. Any Lender or the Borrower may, in its discretion,
agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it, provided that approval of
such procedures may be limited to particular notices or communications.

Unless the Required Lenders otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender's receipt of an acknowledgement from the intended recipient (such as by
the "return receipt requested" function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

          (c) Change of Address, Etc. Each of the Borrower, each Lender and the
Collateral Agent may change its address, telecopier or telephone number for
notices and other communications hereunder by notice to the other parties
hereto.


                                       54



          (d) Reliance by Lender. Each Lender and the Collateral Agent shall be
entitled to rely and act upon any notices (including telephonic Notice of
Borrowing) purportedly given by an executive officer of the Borrower on behalf
of the Borrower even if (i) such notices were not made in a manner specified
herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. The Borrower shall indemnify
each Lender, the Collateral Agent and its Related Parties from all losses,
costs, expenses and liabilities resulting from the reliance by such Person on
each notice purportedly given by or on behalf of the Borrower. All telephonic
notices to and other telephonic communications with each Lender or the
Collateral Agent may be recorded by such Lender or the Collateral Agent, and
each of the parties hereto hereby consents to such recording.

     10.2 RIGHT OF SET-OFF; ADJUSTMENTS.

     Upon the occurrence and during the continuance of any Event of Default,
each of the Lenders and the Collateral Agent (and each of its Affiliates) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender (or any of its Affiliates) to or for the credit or
the account of any Credit Party against any and all of the obligations of such
Person now or hereafter existing under this Credit Agreement, under the Notes,
under any other Credit Document or otherwise, irrespective of whether such
Lender or Collateral Agent shall have made any demand under hereunder or
thereunder and although such obligations may be unmatured. Each of the Lenders
and the Collateral Agent agrees promptly to notify any affected Credit Party
after any such set-off and application made by such Lender or the Collateral
Agent; provided, however, that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of each of the Lenders
and the Collateral Agent under this Section 10.2 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) that such
Lender or the Collateral Agent may have.

     10.3 SUCCESSORS AND ASSIGNS.

          (a) The provisions of this Credit Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that the Credit Parties may not assign or
otherwise transfer any of their rights or obligations hereunder without the
prior written consent of each Lender (and any attempted assignment or transfer
by any Credit Party without such consent shall be null and void). Nothing in
this Credit Agreement, expressed or implied, shall be construed to confer upon
any Person (other than the parties hereto, their respective successors and
assigns permitted hereby and, to the extent expressly contemplated hereby, the
Indemnitees) any legal or equitable right, remedy or claim under or by reason of
this Credit Agreement.

          (b) Each Lender may assign all or a portion of its rights and
obligations under this Credit Agreement (including all or any portion of the
Loans). From and after the effective date of such assignment, the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such assignment, have the rights and obligations of the assigning Lender
under this Credit Agreement, and the assigning Lender thereunder shall, to the
extent of the


                                       55



interest assigned by such assignment, be released from its obligations under
this Credit Agreement (and, in the case of an assignment covering all of the
assigning Lender's rights and obligations under this Credit Agreement, the
assigning Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 10.4, 10.8 and 10.12). Upon request by the
assigning Lender and/or the assignee Lender, the Borrower shall execute and
deliver new or replacement Note to the assigning Lender and the assignee Lender.

          (c) Notwithstanding anything herein to the contrary, each Lender may
at any time, without the consent of the Borrower, pledge or assign a security
interest in all or any portion of its rights under this Credit Agreement
(including under each Note) to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided
that no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

     10.4 EXPENSES; INDEMNIFICATION.

          (a) The Credit Parties jointly and severally agree to pay on demand
all reasonable costs and expenses of each Lender in connection with the
preparation, execution, delivery, administration, modification, and amendment of
this Credit Agreement, the other Credit Documents, and the other documents to be
delivered hereunder, including, without limitation, the reasonable fees and
expenses of counsel for the Lenders and the Collateral Agent with respect
thereto and with respect to advising such Lender and the Collateral Agent as to
their rights and responsibilities under the Credit Documents. The Credit Parties
further jointly and severally agree to pay on demand all reasonable costs and
expenses of the Lenders and the Collateral Agent, if any (including, without
limitation, reasonable attorneys' fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings, or otherwise) of
the Credit Documents and the other documents to be delivered hereunder.

          (b) Whether or not the transactions contemplated hereby are
consummated, the Borrower agrees to indemnify, save and hold harmless each
Lender, the Collateral Agent and its respective Affiliates, directors, officers,
employees, counsel, agents and attorneys-in-fact (collectively the
"Indemnitees") from and against: (a) any and all claims, demands, actions or
causes of action that are asserted against any Indemnitee by any Person (other
than such Lender or the Collateral Agent) relating directly or indirectly to a
claim, demand, action or cause of action that such Person asserts or may assert
against any Credit Party, any Affiliate of any Credit Party or any of their
respective officers or directors; (b) any and all claims, demands, actions or
causes of action that may at any time (including at any time following repayment
of the Credit Party Obligations) be asserted or imposed against any Indemnitee,
arising out of or relating to, the Credit Documents, any predecessor Credit
Documents, the Commitments, the use or contemplated use of the proceeds of any
extension of credit, or the relationship of any Credit Party and such Lender or
the Collateral Agent under this Credit Agreement or any other Credit Document;
(c) any actual or alleged presence or release of Hazardous Materials on or from
any property currently or formerly owned or operated by the Borrower or any
Subsidiary of the Parent, or any Environmental Liability related in any way to
the Borrower or any Subsidiary of the Parent; (d) any administrative or
investigative proceeding by any Governmental Authority arising out of or related
to a claim, demand, action or cause of action described in subsection (a)


                                       56



or (b) above; and (e) any and all liabilities (including liabilities under
indemnities), losses, costs or expenses (including reasonable fees and costs of
counsel) that any Indemnitee suffers or incurs as a result of the assertion of
any foregoing claim, demand, action, cause of action or proceeding, or as a
result of the preparation of any defense in connection with any foregoing claim,
demand, action, cause of action or proceeding, in all cases, whether or not
arising out of the negligence of an Indemnitee, and whether or not an Indemnitee
is a party to such claim, demand, action, cause of action or proceeding (all the
foregoing, collectively, the "Indemnified Liabilities"); provided that no
Indemnitee shall be entitled to indemnification for any claim caused by its own
gross negligence or willful misconduct or for any loss asserted against it by
another Indemnitee. The agreements in this Section shall survive the termination
of the Commitments and repayment of all the other Credit Party Obligations.

          (c) Without prejudice to the survival of any other agreement of the
Credit Parties hereunder, the agreements and obligations of the Credit Parties
contained in this Section 10.4 shall survive the repayment of the Loans and
other obligations under the Credit Documents and the termination of the
Commitments hereunder.

     10.5 AMENDMENTS, WAIVERS AND CONSENTS.

     Except for actions expressly permitted to be taken by the Collateral Agent,
neither this Credit Agreement nor any other Credit Document nor any of the terms
hereof or thereof may be amended, changed, waived, discharged or terminated
unless such amendment, change, waiver, discharge or termination is in writing
entered into by, or approved in writing by, the Borrower and the Required
Lenders or by the Collateral Agent with the consent of the Required Lenders, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given, provided, however, that no amendment,
change, waiver, discharge, termination or consent shall (i) increase the
Commitment of any Lender, reduce the principal of, or interest on, the Loans
payable to any Lender, reduce the amount of any fee payable for the account of
any Lender, or postpone or extend any date fixed for any payment of principal
of, or interest or, fees on, the Loans payable to any Lender, in each case
without the written consent of each Lender affected thereby, (ii) increase the
Total Commitment without the written consent of each Lender affected thereby,
(iii) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans that is required for the Lenders or any of them to
take any action hereunder without the written consent of each Lender affected
thereby, (iv) amend the definition of "Required Lenders" or "Pro Rata Share"
without the written consent of each Lender or (v) release all or a substantial
portion of the Collateral (except as otherwise provided in this Credit Agreement
and the other Credit Documents), subordinate any Lien granted in favor of the
Collateral Agent for the benefit of the Lenders, or release any Credit Party
without the written consent of each Lender, (vi) amend, change or waive this
Section 10.5 without the written consent of each Lender. Notwithstanding the
foregoing, no amendment, change, waiver, discharge, termination or consent
shall, unless in writing and signed by the Collateral Agent, affect the rights
or duties of the Collateral Agent (but not in its capacity as a Lender) under
this Credit Agreement or the other Credit Documents.


                                       57



     10.6 COUNTERPARTS.

     This Credit Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.

     10.7 HEADINGS.

     The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.

     10.8 SURVIVAL.

     All indemnities set forth herein, including, without limitation, in Section
3.11, 3.12 or 10.5 shall survive the execution and delivery of this Credit
Agreement, the making of the Loans, the repayment of the Loans and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Notes and the making of the Loans
hereunder.

     10.9 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.

          (a) THIS CREDIT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE LENDERS AND
THE COLLATERAL AGENT SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

          (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS CREDIT
AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK SITTING IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF
THIS CREDIT AGREEMENT, EACH CREDIT PARTY, EACH LENDER AND THE COLLATERAL AGENT
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH CREDIT PARTY, EACH LENDER AND THE COLLATERAL
AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF ANY CREDIT DOCUMENT OR OTHER DOCUMENT RELATED THERETO. EACH CREDIT
PARTY, EACH LENDER AND THE COLLATERAL AGENT WAIVES PERSONAL SERVICE OF ANY
SUMMONS,


                                       58



COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
THE LAW OF SUCH STATE.

     10.10 WAIVER OF JURY TRIAL.

     EACH PARTY TO THIS CREDIT AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY
CREDIT DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY CREDIT
DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS CREDIT AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     10.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

     All representations and warranties made hereunder and in any other Credit
Document or other document delivered pursuant hereto or thereto or in connection
herewith or therewith shall survive the execution and delivery hereof and
thereof. Such representations and warranties have been or will be relied upon by
the Lenders and the Collateral Agent, regardless of any investigation made by
the Lenders, the Collateral Agent or on its behalf and notwithstanding that the
Lender or the Collateral Agent may have had notice or knowledge of any Default
at the time of any Loans, and shall continue in full force and effect as long as
any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.

     10.12 SEVERABILITY.

     If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

     10.13 ENTIRETY.

     This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.

     10.14 BINDING EFFECT; TERMINATION.

          (a) This Credit Agreement shall become effective at such time when all
of the conditions set forth in Section 5.1 have been satisfied or waived by the
Lenders and it shall have


                                       59



been executed by each Credit Party and each Lender and the Collateral Agent, and
thereafter this Credit Agreement shall be binding upon and inure to the benefit
of each Credit Party, each Lender, the Collateral Agent and its respective
successors and assigns.

          (b) The term of this Credit Agreement shall be until no Loans, or any
other amounts payable hereunder or under any of the other Credit Documents shall
remain outstanding, all of the Credit Party Obligations (other than
indemnification claims not yet asserted) have been irrevocably satisfied in full
and this Credit Agreement and the other Credit Documents shall have been
terminated.

     10.15 CONFIDENTIALITY.

     Each of the Lenders and the Collateral Agent agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and must agree to keep such
Information confidential); (b) to the extent requested by any regulatory
authority; (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process (each of the Lenders and the Collateral
Agent agrees to provide notice of any such requirement to the Borrower and, to
the extent reasonably requested by the Borrower, cooperate with the Borrower and
its Subsidiaries if the Borrower or any of its Subsidiaries seeks to have such
Information subject to a protective order); (d) to any other party to this
Credit Agreement; (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Credit Agreement or the
enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or participant in, or any prospective assignee of or participant in, any of
its rights or obligations under this Credit Agreement, provided that such
assignee or participant or prospective assignee or participant agrees to keep
the Information confidential or (ii) any direct or indirect contractual
counterparty or prospective counterparty (or such contractual counterparty's or
prospective counterparty's professional advisor) to any credit derivative
transaction relating to obligations of the Credit Parties, provided that such
contractual counterparty or prospective counterparty agrees to keep the
Information confidential; (g) with the consent of the Borrower; (h) to the
extent such Information (i) becomes publicly available other than as a result of
a breach of this Section or (ii) becomes available to such Lender or the
Collateral Agent on a non-confidential basis from a source other than the Credit
Parties; or (i) to the National Association of Insurance Commissioners or any
other similar organization or any nationally recognized rating agency that
requires access to information about such Lender's or its Affiliates' investment
portfolio in connection with ratings issued with respect to such Lender or its
Affiliates. In addition, each of the Lenders and the Collateral Agent may
disclose the existence of this Credit Agreement and information about this
Credit Agreement to market data collectors, similar service providers to the
lending industry, and service providers to such Lender or the Collateral Agent
in connection with the administration and management of this Credit Agreement,
the other Credit Documents, the Commitment, and the Loans. For the purposes of
this Section, "Information" means all information received from any Credit Party
or any Subsidiary of the Parent relating to any Credit Party or any Subsidiary
of the Parent or its business, other than any such information that is available
to any Lender or the Collateral Agent on a non-confidential basis prior to
disclosure by


                                       60


any Credit Party or any Subsidiary of the Parent. Any Person required to
maintain the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
Each of the Lenders and the Collateral Agent acknowledges that it is aware that
the Borrower is a public company with securities that are publicly traded and
that the Information includes material non-public Information.

     10.16 CONFLICT.

     To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.

     10.17 USA PATRIOT ACT NOTICE.

     Each Lender and the Collateral Agent hereby notifies the Borrower that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the "Act"), it may be required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Lender to identify the Borrower in accordance with the Act.

                                   SECTION 11

                                COLLATERAL AGENT

     11.1 APPOINTMENT.

     Each Lender hereby irrevocably appoints and authorizes the Collateral Agent
to perform the duties of the Collateral Agent as set forth in this Credit
Agreement and the other Credit Documents including: (i) to execute or file any
and all financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim, notices and other written
agreements with respect to this Credit Agreement or any other Credit Document;
(ii) to perform, exercise, and enforce any and all other rights and remedies of
the Lenders with respect to the Credit Parties, the Credit Party Obligations, or
otherwise related to any of same to the extent reasonably incidental to the
exercise by the Collateral Agent of the rights and remedies specifically
authorized to be exercised by the Collateral Agent by the terms of this Credit
Agreement or any other Credit Document; (iii) to incur and pay such fees
necessary or appropriate for the performance and fulfillment of its functions
and powers pursuant to this Credit Agreement or any other Credit Document; and
(iv) subject to Section 11.3 of this Credit Agreement, to take such action as
the Collateral Agent deems appropriate on its behalf to exercise the powers
delegated to the Collateral Agent by the terms hereof or the other Credit
Documents together with such powers as are reasonably incidental thereto to
carry out the purposes hereof and thereof. As to any matters not expressly
provided for by this Credit Agreement and the other Credit Documents (including,
without limitation, enforcement or collection of the Loans), the Collateral
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected


                                       61



in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions of the Lenders shall be binding upon all Lenders
and all makers of Loans.

     11.2 NATURE OF DUTIES.

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

     11.3 RIGHTS, EXCULPATION, ETC.

     The Collateral Agent and its directors, officers, agents or employees shall
not be liable for any action taken or omitted to be taken by them under or in
connection with this Credit Agreement or the other Credit Documents, except for
their own gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. Without limiting the generality
of the foregoing, the Collateral Agent (i) may treat the payee of any Loan as
the owner thereof until the Collateral Agent receives written notice of the
assignment or transfer thereof, pursuant to Section 10.3 hereof, signed by such
payee and in form satisfactory to the Collateral Agent; (ii) may consult with
legal counsel (including, without limitation, counsel to the Collateral Agent or
counsel to the Credit Parties), independent public accountants, and other
experts selected by any of them and shall not be liable for any action taken or
omitted to be taken in good faith by any of them in accordance with the advice
of such counsel or experts; (iii) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements,
certificates, warranties or representations made in or in connection with this
Credit Agreement or the other Credit Documents; (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Credit Agreement or the other Credit Documents
on the part of any Person, the existence or possible existence of any Default or
Event of Default, or to inspect the Collateral or other property (including,
without limitation, the books and records) of any Person; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit Agreement or
the other Credit Documents or any


                                       62



other instrument or document furnished pursuant hereto or thereto; and (vi)
shall not be deemed to have made any representation or warranty regarding the
existence, value or collectibility of the Collateral, the existence, priority or
perfection of the Collateral Agent's Lien thereon, or any certificate prepared
by any Credit Party in connection therewith, nor shall the Collateral Agent be
responsible or liable to the Lenders for any failure to monitor or maintain any
portion of the Collateral. The Collateral Agent may at any time request
instructions from the Lenders with respect to any actions or approvals which by
the terms of this Credit Agreement or of any of the other Credit Documents the
Collateral Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, the Collateral Agent shall be absolutely
entitled to refrain from taking any action or to withhold any approval under any
of the Credit Documents until it shall have received such instructions from the
Lenders. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Collateral Agent as a result of the Collateral
Agent acting or refraining from acting under this Credit Agreement or any of the
other Credit Documents in accordance with the instructions of the Required
Lenders.

     11.4 RELIANCE.

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

     11.5 INDEMNIFICATION.

     To the extent that the Collateral Agent is not reimbursed and indemnified
by any Credit Party, the Lenders will reimburse and indemnify the Collateral
Agent from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, advances or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Collateral Agent in any way relating to or arising out of
this Credit Agreement or any of the other Credit Documents or any action taken
or omitted by the Collateral Agent under this Credit Agreement or any of the
other Credit Documents, in proportion to each Lender's Pro Rata Share,
including, without limitation, advances and disbursements made pursuant to
Section 11.5; provided, however, that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements for which there has
been a final judicial determination that such liability resulted from the
Collateral Agent's gross negligence or willful misconduct. The obligations of
the Lenders under this Section 11.5 shall survive the payment in full of the
Loans and the termination of this Credit Agreement and of the other Credit
Documents.

     11.6 COLLATERAL AGENT INDIVIDUALLY.

     With respect to its Pro Rata Share of the Total Commitment hereunder and
the Loans made by it, the Collateral Agent shall have and may exercise the same
rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender or maker
of a Loan. The terms "Lenders" or "Required Lenders" any similar terms shall,
unless the context clearly otherwise indicates, include the Collateral Agent in


                                       63



its individual capacity as a Lender or one of the "Required Lenders." The
Collateral Agent and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with the
Borrower as if it were not acting as the Collateral Agent pursuant hereto
without any duty to account to the other Lenders.

     11.7 SUCCESSOR COLLATERAL AGENT.

          (a) The Collateral Agent may resign from the performance of all its
functions and duties hereunder and under the other Credit Documents at any time
by giving at least thirty (30) Business Days' prior written notice to the
Borrower and each Lender. Such resignation shall take effect upon the acceptance
by a successor Collateral Agent of appointment pursuant to clauses (b) and (c)
below or as otherwise provided below.

          (b) Upon any such notice of resignation, the Required Lenders shall
appoint a successor Collateral Agent. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, such successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the Collateral Agent, and the
Collateral Agent shall be discharged from its duties and obligations under this
Credit Agreement and the other Credit Documents. After the Collateral Agent's
resignation hereunder as the Collateral Agent, the provisions of this Section 11
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Collateral Agent under this Credit Agreement and the other
Credit Documents.

          (c) If a successor Collateral Agent shall not have been so appointed
within said thirty (30) Business Day period, the Collateral Agent shall then
appoint a successor Collateral Agent who shall serve as the Collateral Agent
until such time, if any, as the Required Lenders appoint a successor Collateral
Agent as provided above.

     11.8 COLLATERAL MATTERS.

          (a) [intentionally omitted]

          (b) The Lenders hereby irrevocably authorize the Collateral Agent, at
its option and in its discretion, to release any Lien granted to or held by the
Collateral Agent upon any Collateral upon termination of the Total Commitment
and payment and satisfaction of all Loans and all other Credit Party Obligations
in accordance with the terms hereof; or constituting property being sold or
disposed of in compliance with the terms of this Credit Agreement and the other
Credit Documents; or constituting property in which the Credit Parties owned no
interest at the time the Lien was granted or at any time thereafter; or if
approved, authorized or ratified in writing by the requisite Lenders. Upon
request by the Collateral Agent at any time, the Lenders will confirm in writing
the Collateral Agent's authority to release particular types or items of
Collateral pursuant to this Section 11.8(b).

          (c) Without in any manner limiting the Collateral Agent's authority to
act without any specific or further authorization or consent by the Lenders (as
set forth in Section 11.8(b), each Lender agrees to confirm in writing, upon
request by the Collateral Agent, the authority to release Collateral conferred
upon the Collateral Agent under Section 11.8. Upon receipt by the Collateral
Agent of confirmation from the requisite Lenders of its authority to


                                       64



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

          (d) The Collateral Agent shall have no obligation whatsoever to any
Lender to assure that the Collateral exists or is owned by the Credit Parties or
is cared for, protected or insured or has been encumbered or that the Lien
granted to the Collateral Agent pursuant to this Credit Agreement or any other
Credit Document has been properly or sufficiently or lawfully created,
perfected, protected or enforced or is entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Collateral Agent in this 11.8
or in any other Credit Document, it being understood and agreed that in respect
of the Collateral, or any act, omission or event related thereto, the Collateral
Agent may act in any manner it may deem appropriate, in its sole discretion,
given the Collateral Agent's own interest in the Collateral as one of the
Lenders and that the Collateral Agent shall have no duty or liability whatsoever
to any other Lender, except as otherwise provided herein.

     11.9 AGENCY FOR PERFECTION. Each Lender hereby appoints the Collateral
Agent and each other Lender as agent and bailee for the purpose of perfecting
the security interests in and liens upon the Collateral in assets which, in
accordance with Article 9 of the Uniform Commercial Code, can be perfected only
by possession or control (or where the security interest of a secured party with
possession or control has priority over the security interest of another secured
party) and the Collateral Agent and each Lender hereby acknowledges that it
holds possession of or otherwise controls any such Collateral for the benefit of
the Collateral Agent and the Lenders as secured party. Should any Lender obtain
possession or control of any such Collateral, such Lender shall notify the
Collateral Agent thereof, and, promptly upon the Collateral Agent's request
therefor shall deliver such Collateral to the Collateral Agent or in accordance
with the Collateral Agent's instructions. In addition, the Collateral Agent
shall also have the power and authority hereunder to appoint such other
sub-agents as may be necessary or required under applicable state law or
otherwise to perform its duties and enforce its rights with respect to the
Collateral and under the Credit Documents. Each Credit Party by its execution
and delivery of this Credit Agreement hereby consents to the foregoing.

                           [Signature Pages to Follow]


                                       65



     Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.

BORROWER:                               PRG-SCHULTZ USA, INC.,
                                        a Georgia corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance, Chief Financial Officer
                                               and Treasurer


GUARANTORS:                             PRG-SCHULTZ INTERNATIONAL, INC.,
                                        a Georgia corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance, Chief Financial Officer
                                               and Treasurer


                                        PRGFS, INC.,
                                        PRGLS, INC.,
                                        each a Delaware corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance


                                        PRGRS, INC., a Delaware corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James B. McCurry
                                        Title: President


                                       66


GUARANTORS:                             THE PROFIT RECOVERY GROUP ASIA, INC.,
                                        PRG-SCHULTZ CANADA, INC.,
                                        THE PROFIT RECOVERY GROUP NEW ZEALAND,
                                           INC.,
                                        THE PROFIT RECOVERY GROUP NETHERLANDS,
                                           INC.,
                                        THE PROFIT RECOVERY GROUP MEXICO, INC.
                                        PRG-SCHULTZ FRANCE, INC.,
                                        PRG-SCHULTZ AUSTRALIA, INC.,
                                        PRG-SCHULTZ BELGIUM, INC.,
                                        PRG-SCHULTZ CHILE, INC.,
                                        THE PROFIT RECOVERY GROUP GERMANY, INC.,
                                        PRG INTERNATIONAL, INC.,
                                        PRG-SCHULTZ SWITZERLAND, INC.,
                                        THE PROFIT RECOVERY GROUP SOUTH AFRICA,
                                           INC.,
                                        THE PROFIT RECOVERY GROUP SPAIN, INC.,
                                        THE PROFIT RECOVERY GROUP ITALY, INC.,
                                        PRG-SCHULTZ SCANDINAVIA, INC.,
                                        PRG-SCHULTZ PORTUGAL, INC.,
                                        PRG-SCHULTZ JAPAN, INC.,
                                        THE PROFIT RECOVERY GROUP COSTA RICA,
                                           INC.,
                                        PRG-SCHULTZ PUERTO RICO, INC.,
                                        PRG USA, INC.,
                                        PRG-SCHULTZ EUROPE, INC.,
                                        EACH A GEORGIA CORPORATION


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance, Chief Financial Officer
                                               and Treasurer


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


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance, Chief Financial Officer
                                               and Treasurer


                                       67



LENDERS:                                BLUM STRATEGIC PARTNERS II, L.P.


                                        By: s/
                                            ------------------------------------
                                        Name: Jose Medeiros
                                        Title: Partner

                                        909 Montgomery Street, Suite 400
                                        San Francisco, CA 94133
                                        Attention: Jose S. Medeiros
                                        Telephone: 415-288-7201
                                        Facsimile: 415-283-0601


                                       68



LENDERS:                                BLUM STRATEGIC PARTNERS II
                                        GMBH & CO. KG.


                                        By: s/
                                            ------------------------------------
                                        Name: Jose Medeiros
                                        Title: Partner

                                        909 Montgomery Street, Suite 400
                                        San Francisco, CA 94133
                                        Attention: Jose S. Medeiros
                                        Telephone: 415-288-7201
                                        Facsimile: 415-283-0601


                                       69



LENDERS:                                PARKCENTRAL GLOBAL HUB LIMITED


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

                                        2300 West Plano Parkway
                                        Plano, TX 75075
                                        Attention: Steve Blasnik
                                        Telephone: 972-535-1919
                                        Facsimile: 972-535-1997


                                       70



LENDERS:                                PETRUS SECURITIES L.P.


                                        By: s/
                                            ------------------------------------
                                        Name: Steven Blasnik
                                        Title: President of General Partner

                                        2300 West Plano Parkway
                                        Plano, TX 75075
                                        Attention: Steve Blasnik
                                        Telephone: 972-535-1919
                                        Facsimile: 972-535-1997


                                       71



COLLATERAL AGENT:                       BLUM STRATEGIC PARTNERS II, L.P.


                                        By: s/
                                            ------------------------------------
                                        Name: Jose Medeiros
                                        Title: Partner


                                       72

EX-10.62

                               SECURITY AGREEMENT

     THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as of
December 23, 2005 among PRG-SCHULTZ USA, INC., a Georgia corporation (the
"Borrower"), PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation (the
"Parent"), certain of the Domestic Subsidiaries of the Parent (such Domestic
Subsidiaries, together with the Parent, individually a "Guarantor" and
collectively the "Guarantors"; the Guarantors together with the Borrower,
individually an "Obligor", and collectively the "Obligors") and Blum Strategic
Partners II, L.P., as the collateral agent for the Lenders referred to below (in
such capacity together with its successors and permitted assigns, the
"Collateral Agent").

                                    RECITALS

     WHEREAS, pursuant to that certain Credit Agreement, dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "Credit Agreement"), among the Borrower, the Guarantors, the lenders from
time to time party thereto (each a "Lender" and collectively, the "Lenders") and
the Collateral Agent, each of the Lenders, severally and not jointly or jointly
and severally, has agreed to make the Loans upon the terms and subject to the
conditions set forth therein; and

     WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make the Loans under the Credit
Agreement that the Obligors shall have executed and delivered this Security
Agreement in favor of the Collateral Agent, for the benefit of the Lenders.

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

     1. Definitions.

          (a) Unless otherwise defined herein, capitalized terms used herein
     shall have the meanings ascribed to such terms in the Credit Agreement, and
     the following terms which are defined in the Uniform Commercial Code in
     effect in the State of New York on the date hereof (the "UCC") are used
     herein as so defined: Accession, Account, As-Extracted Collateral, Chattel
     Paper, Commercial Tort Claim, Commingled Goods, Consumer Goods, Deposit
     Account, Document, Equipment, Farm Products, Fixtures, General Intangible,
     Goods, Instrument, Inventory, Investment Property, Letter-of-Credit Right,
     Manufactured Home, Proceeds, Software, Standing Timber, Supporting
     Obligation and Tangible Chattel Paper.

          (b) In addition, the following terms shall have the following
     meanings:

          "Collateral" has the meaning provided in Section 2 hereof.



          "Copyright Licenses": any written agreement, naming any Obligor as
     licensor, granting any right under any Copyright including, without
     limitation, any thereof referred to in Schedule 6.17 to the Credit
     Agreement.

          "Copyrights": (a) all copyrights registered in the United States or
     any other country in all Works, now existing or hereafter created or
     acquired, all registrations and recordings thereof, and all applications in
     connection therewith, including, without limitation, registrations,
     recordings and applications in the United States Copyright office
     including, without limitation, any thereof referred to in Schedule 6.17 to
     the Credit Agreement, and (b) all renewals thereof including, without
     limitation, any thereof referred to in Schedule 6.17 of the Credit
     Agreement.

          "Indemnified Party": has the meaning provided in Section 8(b) hereof.

          "Patent License": all agreements, whether written or oral, providing
     for the grant by or to an Obligor of any right to manufacture, use or sell
     any invention covered by a Patent, including, without limitation, any
     thereof referred to in Schedule 6.17 of the Credit Agreement.

          "Patents": (a) all letters patent of the United States or any other
     country and all reissues and extensions thereof, including, without
     limitation, any thereof referred to in Schedule 6.17 of the Credit
     Agreement, and (b) all applications for letters patent of the United States
     or any other country and all divisions, continuations and
     continuations-in-part thereof, including, without limitation, any thereof
     referred to in Schedule 6.17 of the Credit Agreement.

          "Secured Obligations": means, without duplication, (i) all of the
     obligations of the Credit Parties to the Collateral Agent and the Lenders,
     under the Credit Agreement or any other Credit Document (including, but not
     limited to, any interest accruing after the commencement of a proceeding by
     or against any Credit Party under any Debtor Relief Laws, regardless of
     whether such interest is an allowed claim under such proceeding), whether
     now existing or hereafter arising, due or to become due, direct or
     indirect, absolute or contingent, howsoever evidenced, created, held or
     acquired, whether primary, secondary, direct, contingent, or joint and
     several, as such obligations may be amended, modified, increased, extended,
     renewed or replaced from time to time and (ii) all costs and expenses
     incurred in connection with enforcement and collection of the obligations
     described in the foregoing clause (i), including Attorney Costs.

          "Trademark License": means any agreement, written or oral, providing
     for the grant by or to an Obligor of any right to use any Trademark,
     including, without limitation, any thereof referred to in Schedule 6.17 of
     the Credit Agreement.

          "Trademarks": (a) all trademarks, trade names, corporate names,
     company names, business names, fictitious business names, trade styles,
     service marks, logos and other


                                      -2-



     source or business identifiers, and the goodwill associated therewith, now
     existing or hereafter adopted or acquired, all registrations and recordings
     thereof, and all applications in connection therewith, whether in the
     United States Patent and Trademark Office or in any similar office or
     agency of the United States, any State thereof or any other country or any
     political subdivision thereof, or otherwise, including, without limitation,
     any thereof referred to in Schedule 6.17 to the Credit Agreement, and (b)
     all renewals thereof.

          "Work": any work which is subject to copyright protection pursuant to
     Title 17 of the United States Code.

     2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Obligor hereby grants to the Collateral Agent, for the benefit of the
Lenders, a continuing security interest in, and a right to set off against, any
and all right, title and interest of such Obligor in and to all personal
property of such Obligor of whatever type or description, whether now owned or
existing or owned, acquired, or arising hereafter, including, without
limitation, the following (collectively, the "Collateral"):

          (a) all Accounts;

          (b) all cash and currency;

          (c) all Chattel Paper;

          (d) all Commercial Tort Claims identified on Schedule 2(d) attached
     hereto;

          (e) all Copyrights;

          (f) all Copyright Licenses;

          (g) all Deposit Accounts;

          (h) all Documents;

          (i) all Equipment;

          (j) all Fixtures;

          (k) all General Intangibles;

          (l) all Goods;

          (m) all Instruments;

          (n) all Inventory;


                                      -3-



          (o) all Investment Property;

          (p) all Letter-of-Credit Rights;

          (q) all Patents;

          (r) all Patent Licenses;

          (s) all Software;

          (t) all Supporting Obligations;

          (u) all Trademarks;

          (v) all Trademark Licenses; and

          (w) to the extent not otherwise included, all Accessions and all
     Proceeds of any and all of the foregoing.

     The Obligors and the Collateral Agent, hereby acknowledge and agree that
the security interest created hereby in the Collateral (i) constitutes
continuing collateral security for all of the Secured Obligations, whether now
existing or hereafter arising and (ii) is not to be construed as an assignment
of any Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks or
Trademark Licenses.

     3. Provisions Relating to Accounts.

          (a) Anything herein to the contrary notwithstanding, each of the
     Obligors shall remain liable under each of the Accounts to observe and
     perform all the conditions and obligations to be observed and performed by
     it thereunder, all in accordance with the terms of any agreement giving
     rise to each such Account. Neither the Collateral Agent nor any of the
     Lenders shall have any obligation or liability under any Account (or any
     agreement giving rise thereto) by reason of or arising out of this Security
     Agreement or the receipt by the Collateral Agent or any Lender of any
     payment relating to such Account pursuant hereto, nor shall the Collateral
     Agent nor any Lender be obligated in any manner to perform any of the
     obligations of an Obligor under or pursuant to any Account (or any
     agreement giving rise thereto), to make any payment, to make any inquiry as
     to the nature or the sufficiency of any payment received by it or as to the
     sufficiency of any performance by any party under any Account (or any
     agreement giving rise thereto), to present or file any claim, to take any
     action to enforce any performance or to collect the payment of any amounts
     which may have been assigned to it or to which it may be entitled at any
     time or times.

          (b) Once during each calendar year or at any time after the occurrence
     and during the continuation of an Event of Default, the Collateral Agent
     shall have the right, but


                                      -4-



     not the obligation, to make test verifications of the Accounts in any
     manner and through any medium that it reasonably considers advisable, and
     the Obligors shall furnish all such assistance and information as the
     Collateral Agent may require in connection with such test verifications. At
     any time and from time to time, upon the Collateral Agent's reasonable
     request and at the expense of the Obligors, the Obligors shall cause
     independent public accountants or others satisfactory to the Collateral
     Agent to furnish to the Collateral Agent reports showing reconciliations,
     aging and test verifications of, and trial balances for, the Accounts. The
     Collateral Agent in its own name or in the name of others may communicate
     with account debtors on the Accounts to verify with them to the Collateral
     Agent's reasonable satisfaction the existence, amount and terms of any
     Accounts.

     4. Representations and Warranties. Each Obligor hereby represents and
warrants to the Collateral Agent and each of the Lenders that so long as any of
the Secured Obligations remain outstanding or any Credit Document is in effect:

          (a) Legal Name; Chief Executive Office.

               (i) Each Obligor's exact legal name, taxpayer identification
          number, organization identification number, state of incorporation or
          formation, principal place of business and chief executive office are
          (and for the four months prior to the date hereof has been) as set
          forth on Schedule 4(a)(i) attached hereto.

               (ii) Other than as set forth on Schedule 4(a)(ii) attached
          hereto, no Obligor has been party to a merger, consolidation or other
          change in structure or used any tradename in the four months prior to
          the date hereof.

          (b) Ownership. Each Obligor is the legal and beneficial owner of its
     Collateral and has the right to pledge, sell, assign or transfer the same.

          (c) Security Interest/Priority. This Security Agreement creates a
     valid security interest in favor of the Collateral Agent, for the benefit
     of the Lenders, in the Collateral of such Obligor and, when properly
     perfected by filing, shall constitute a valid perfected security interest
     in such Collateral, to the extent such security interest can be perfected
     by filing under the UCC, free and clear of all Liens except for Permitted
     Liens.

          (d) Types of Collateral. None of the Collateral consists of, or is the
     Accessions or the Proceeds of, As-Extracted Collateral, Consumer Goods,
     Farm Products, Manufactured Homes or Standing Timber.

          (e) Accounts. (i) Each Account of the Obligors and the papers and
     documents relating thereto are genuine and in all material respects what
     they purport to be, (ii) each Account arises out of (A) a bona fide sale of
     goods sold and delivered by such Obligor (or is in the process of being
     delivered) or (B) services theretofore actually rendered by such Obligor
     to, the account debtor named therein, (iii) no Account of an Obligor is
     evidenced by any Instrument or Chattel Paper unless such Instrument or
     Chattel Paper has been


                                      -5-



     theretofore endorsed over and delivered to, or submitted to the control of,
     the Collateral Agent or its designee and (iv) no surety bond was required
     or given in connection with any Account of an Obligor or the contracts or
     purchase orders out of which they arose.

          (f) Inventory. No Inventory is held by an Obligor pursuant to
     consignment, sale or return, sale on approval or similar arrangement.

          (g) Copyrights, Patents and Trademarks.

               (i) Schedule 6.17 to the Credit Agreement includes all
          Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks
          and Trademark Licenses owned by any Obligor in its own name, or to
          which any Obligor is party, as of the date hereof.

               (ii) To the best of each Obligor's knowledge, each Copyright,
          Patent and Trademark of such Obligor is valid, subsisting, unexpired,
          enforceable and has not been abandoned.

               (iii) Except as set forth in Schedule 6.17 to the Credit
          Agreement, none of such Copyrights, Patents and Trademarks is the
          subject of any licensing or franchise agreement.

               (iv) No holding, decision or judgment has been rendered by any
          Governmental Authority which would limit, cancel or question the
          validity of any Copyright, Patent or Trademark.

               (v) No action or proceeding is pending seeking to limit, cancel
          or question the validity of any Copyright, Patent or Trademark, or
          which would have a material adverse effect on the value of any
          Copyright, Patent or Trademark.

               (vi) All applications pertaining to the Copyrights, Patents and
          Trademarks of each Obligor have been duly and properly filed, and all
          registrations or letters pertaining to such Copyrights, Patents and
          Trademarks have been duly and properly filed and issued, and all of
          such Copyrights, Patents and Trademarks are valid and enforceable.

               (vii) No Obligor has made any assignment or agreement in conflict
          with the security interest in the Copyrights, Patents or Trademarks of
          each Obligor hereunder.

     5. Covenants. Each Obligor covenants that, so long as any of the Secured
Obligations remain outstanding or any Credit Document is in effect, such Obligor
shall:

          (a) Other Liens. Defend the Collateral against the claims and demands
     of all other parties claiming an interest therein, keep the Collateral free
     from all Liens, except for


                                      -6-



     Permitted Liens, and not sell, exchange, transfer, assign, lease or
     otherwise dispose of the Collateral or any interest therein, except as
     permitted under the Credit Agreement.

          (b) Preservation of Collateral. Keep the Collateral in good order,
     condition and repair and not use the Collateral in violation of the
     provisions of this Security Agreement or any other agreement relating to
     the Collateral or any policy insuring the Collateral or any applicable
     statute, law, bylaw, rule, regulation or ordinance.

          (c) Instruments/Tangible Chattel Paper/Documents. If any amount
     payable under or in connection with any of the Collateral shall be or
     become evidenced by any Instrument or Tangible Chattel Paper, or if any
     property constituting Collateral shall be stored or shipped subject to a
     Document, such Obligor shall ensure that (i) such Instrument, Tangible
     Chattel Paper or Document is either in the possession of such Obligor at
     all times or, if requested by the Collateral Agent, is immediately
     delivered to the Collateral Agent or its designee, duly endorsed in a
     manner satisfactory to the Collateral Agent and (ii) any Collateral
     consisting of Tangible Chattel Paper is marked with a legend acceptable to
     the Collateral Agent indicating the Collateral Agent's security interest in
     such Tangible Chattel Paper.

          (d) Change in Structure, Location or Type. Not, without providing 10
     days prior written notice to the Collateral Agent and without authorizing
     the Collateral Agent to file such financing statements and amendments to
     any previously filed financing statements as the Collateral Agent may
     require, change its name or state of formation or be party to a merger,
     consolidation or other change in structure or use any tradename.

          (e) Inspection. Upon reasonable notice, and during reasonable hours,
     at all times allow the Collateral Agent or its representatives to visit and
     inspect the Collateral as set forth in Section 7.10 of the Credit
     Agreement.

          (f) Authorization. Authorize the Collateral Agent to file one or more
     financing statements disclosing the Collateral Agent's security interest in
     the Collateral. Each Obligor agrees to execute and deliver to the
     Collateral Agent such financing statements and other applicable financing
     statements as may be reasonably requested by the Collateral Agent in order
     to perfect and protect the security interest created hereby in the
     Collateral of such Obligor.

          (g) Perfection of Security Interest. Execute and deliver to the
     Collateral Agent or its designee such agreements, assignments or
     instruments (including affidavits, notices, reaffirmations and amendments
     and restatements of existing documents, as the Collateral Agent may
     reasonably request) and do all such other things as the Collateral Agent
     may reasonably deem necessary or appropriate (i) to assure to the
     Collateral Agent the effectiveness and priority of its security interests
     hereunder, including (A) such financing statements (including renewal
     statements) or amendments thereof or supplements thereto or other
     instruments as the Collateral Agent may from time to time reasonably
     request in order to perfect and maintain the security interests granted
     hereunder in accordance with the


                                      -7-



     UCC, (B) with regard to Copyrights, a Notice of Grant of Security Interest
     in Copyrights for filing with the United States Copyright Office in the
     form of Schedule 5(f)(i) attached hereto, (C) with regard to Patents, a
     Notice of Grant of Security Interest in Patents for filing with the United
     States Patent and Trademark Office in the form of Schedule 5(f)(ii)
     attached hereto and (D) with regard to Trademarks, a Notice of Grant of
     Security Interest in Trademarks for filing with the United States Patent
     and Trademark Office in the form of Schedule 5(f)(iii) attached hereto,
     (ii) to consummate the transactions contemplated hereby and (iii) to
     otherwise protect and reasonably assure the Collateral Agent of its rights
     and interests hereunder. To that end, each Obligor agrees that the
     Collateral Agent may file one or more financing statements (with collateral
     descriptions broader, including without limitation, "all assets" and/or
     "all personal property" collateral descriptions, and/or less specific than
     the description of the Collateral contained herein) disclosing the
     Collateral Agent's security interest in any or all of the Collateral of
     such Obligor without, to the extent permitted by law, such Obligor's
     signature thereon, and further each Obligor also hereby irrevocably makes,
     constitutes and appoints the Collateral Agent, its nominee or any other
     Person whom the Collateral Agent may designate, as such Obligor's
     attorney-in-fact with full power and for the limited purpose to sign in the
     name of such Obligor any such financing statements (including renewal
     statements), amendments and supplements to financing statements, renewal
     financing statements, notices or any similar documents which in the
     Collateral Agent's reasonable discretion would be necessary, appropriate or
     convenient in order to perfect and maintain perfection of the security
     interests granted hereunder, such power, being coupled with an interest,
     being and remaining irrevocable and in effect so long as the Credit
     Agreement is in effect or any amounts payable thereunder or under any other
     Credit Document is in effect. Each Obligor hereby agrees that a carbon,
     photographic or other reproduction of this Security Agreement or any such
     financing statement is sufficient for filing as a financing statement by
     the Collateral Agent without notice thereof to such Obligor wherever the
     Collateral Agent may in its reasonable discretion desire to file the same.
     In the event for any reason the law of any jurisdiction other than New York
     becomes or is applicable to the Collateral of any Obligor or any part
     thereof, or to any of the Secured Obligations, such Obligor agrees to
     execute and deliver all such instruments and to do all such other things as
     the Collateral Agent in its sole discretion reasonably deems necessary or
     appropriate to preserve, protect and enforce the security interests of the
     Collateral Agent under the law of such other jurisdiction (and, if an
     Obligor shall fail to do so promptly upon the request of the Collateral
     Agent, then the Collateral Agent or its designee may execute any and all
     such requested documents on behalf of such Obligor pursuant to the power of
     attorney granted hereinabove). If any Collateral is in the possession or
     control of an Obligor's agents and the Collateral Agent so requests, such
     Obligor agrees to notify such agents in writing of the Collateral Agent's
     security interest therein and, upon the Collateral Agent's request,
     instruct them to hold all such Collateral for the Collateral Agent's (or
     its designee's) account and subject to the Collateral Agent's (or its
     designee's) instructions. Each Obligor agrees to mark its books and records
     to reflect the security interest of the Collateral Agent in the Collateral.

          (h) Control. Execute and deliver all agreements, assignments,
     instruments or other documents as the Collateral Agent shall reasonably
     request for the purpose of


                                      -8-



     obtaining and maintaining control within the meaning of the UCC with
     respect to any Collateral consisting of Deposit Accounts, Investment
     Property, Letter-of-Credit Rights and Electronic Chattel Paper.

          (i) Collateral held by Warehouseman, Bailee, etc. If any Collateral is
     at any time in the possession or control of a warehouseman, bailee, agent
     or processor of such Obligor, (i) notify the Collateral Agent of such
     possession or control, (ii) notify such Person of the Collateral Agent's
     security interest in such Collateral, (iii) instruct such Person to hold
     all such Collateral for the Collateral Agent's (or its designee's) account
     and subject to the Collateral Agent's (or its designee's) instructions and
     (iv) use its best efforts to obtain an acknowledgment from such Person that
     it is holding such Collateral for the benefit of the Collateral Agent and
     the Lenders.

          (j) Treatment of Accounts. Not grant or extend the time for payment of
     any Account, or compromise or settle any Account for less than the full
     amount thereof, or release any Person or property, in whole or in part,
     from payment thereof, or allow any credit or discount thereon, other than
     as normal and customary in the ordinary course of an Obligor's business.

          (k) Covenants Relating to Copyrights.

               (i) Employ the Copyright for each Work with such notice of
          copyright as may be required by law to secure copyright protection.

               (ii) Not do any act or knowingly omit to do any act whereby any
          material Copyright may become invalidated and (A) not do any act, or
          knowingly omit to do any act, whereby any material Copyright may
          become injected into the public domain; (B) notify the Collateral
          Agent immediately if it knows that any material Copyright may become
          injected into the public domain or of any adverse determination or
          development (including, without limitation, the institution of, or any
          such determination or development in, any court or tribunal in the
          United States or any other country) regarding an Obligor's ownership
          of any such Copyright or its validity; (C) take all necessary steps as
          it shall deem appropriate under the circumstances, to maintain and
          pursue each application (and to obtain the relevant registration) and
          to maintain each registration of each material Copyright owned by an
          Obligor including, without limitation, filing of applications for
          renewal where necessary; and (D) promptly notify the Collateral Agent
          of any material infringement of any material Copyright of an Obligor
          of which it becomes aware and take such actions as it shall reasonably
          deem appropriate under the circumstances to protect such Copyright,
          including, where appropriate, the bringing of suit for infringement,
          seeking injunctive relief and seeking to recover any and all damages
          for such infringement.


                                      -9-




               (iii) Not make any assignment or agreement in conflict with the
          security interest in the Copyrights of each Obligor hereunder.

          (l) Covenants Relating to Patents and Trademarks.

               (i) (A) Continue to use each Trademark on each and every
          trademark class of goods applicable to its current line as reflected
          in its current catalogs, brochures and price lists in order to
          maintain such Trademark in full force free from any claim of
          abandonment for non-use, (B) maintain as in the past the quality of
          products and services offered under such Trademark, (C) employ such
          Trademark with the appropriate notice of registration, (D) not adopt
          or use any mark which is confusingly similar or a colorable imitation
          of such Trademark unless the Collateral Agent shall obtain a perfected
          security interest in such mark pursuant to this Security Agreement,
          and (E) not (and not permit any licensee or sublicensee thereof to) do
          any act or knowingly omit to do any act whereby any Trademark may
          become invalidated.

               (ii) Not do any act, or omit to do any act, whereby any Patent
          may become abandoned or dedicated.

               (iii) Notify the Collateral Agent immediately if it knows that
          any application or registration relating to any Patent or Trademark
          may become abandoned or dedicated, or of any adverse determination or
          development (including, without limitation, the institution of, or any
          such determination or development in, any proceeding in the United
          States Patent and Trademark Office or any court or tribunal in any
          country) regarding an Obligor's ownership of any Patent or Trademark
          or its right to register the same or to keep and maintain the same.

               (iv) Whenever an Obligor, either by itself or through an agent,
          employee, licensee or designee, shall file an application for the
          registration of any Patent or Trademark with the United States Patent
          and Trademark Office or any similar office or agency in any other
          country or any political subdivision thereof, such Obligor shall
          report such filing to the Collateral Agent within five Business Days
          after the last day of the fiscal quarter in which such filing occurs.
          Upon request of the Collateral Agent, an Obligor shall execute and
          deliver any and all agreements, instruments, documents and papers as
          the Collateral Agent may reasonably request to evidence the Collateral
          Agent's security interest in any Patent or Trademark and the goodwill
          and general intangibles of an Obligor relating thereto or represented
          thereby.


                                      -10-



               (v) Take all reasonable and necessary steps, including, without
          limitation, in any proceeding before the United States Patent and
          Trademark Office, or any similar office or agency in any other country
          or any political subdivision thereof, to maintain and pursue each
          application (and to obtain the relevant registration) and to maintain
          each registration of the Patents and Trademarks, including, without
          limitation, filing of applications for renewal, affidavits of use and
          affidavits of incontestability.

               (vi) Promptly notify the Collateral Agent after it learns that
          any Patent or Trademark included in the Collateral is infringed,
          misappropriated or diluted by a third party and promptly sue for
          infringement, misappropriation or dilution, to seek injunctive relief
          where appropriate and to recover any and all damages for such
          infringement, misappropriation or dilution, or take such other actions
          as it shall reasonably deem appropriate under the circumstances to
          protect such Patent or Trademark.

               (vii) Not make any assignment or agreement in conflict with the
          security interest in the Patents or Trademarks of each Obligor
          hereunder.

          (m) New Patents, Copyrights and Trademarks. Promptly provide the
     Collateral Agent with (i) a listing of all applications, if any, for new
     Copyrights, Patents or Trademarks (together with a listing of the issuance
     of registrations or letters on present applications), which new
     applications and issued registrations or letters shall be subject to the
     terms and conditions hereunder, and (ii) (A) with respect to Copyrights, a
     duly executed Notice of Security Interest in Copyrights, (B) with respect
     to Patents, a duly executed Notice of Security Interest in Patents, (C)
     with respect to Trademarks, a duly executed Notice of Security Interest in
     Trademarks or (D) such other duly executed documents as the Collateral
     Agent may reasonably request in a form acceptable to counsel for the
     Collateral Agent and suitable for recording to evidence the security
     interest in the Copyright, Patent or Trademark which is the subject of such
     new application.

          (n) Insurance. Insure, repair and replace the Collateral of such
     Obligor as set forth in the Credit Agreement. All insurance proceeds shall
     be subject to the security interest of the Collateral Agent hereunder.

          (o) Commercial Tort Claims.

               (i) Promptly notify the Collateral Agent in writing of the
          initiation of any Commercial Tort Claim before any Governmental
          Authority by or in favor of such Obligor or any of its Subsidiaries.

               (ii) Execute and deliver such statements, documents and notices
          and do and cause to be done all such things as the Collateral Agent
          may reasonably deem necessary, appropriate or convenient, or as are
          required by law, to create, perfect and maintain the Collateral
          Agent's security interest in any Commercial Tort Claim.


                                      -11-



     6. Advances by the Collateral Agent. On failure of any Obligor to perform
any of the covenants and agreements contained herein, the Collateral Agent may,
at its sole option and in its sole discretion, perform the same and in so doing
may expend such sums as the Collateral Agent may reasonably deem advisable in
the performance thereof, including, without limitation, the payment of any
insurance premiums, the payment of any taxes, a payment to obtain a release of a
Lien or potential Lien, expenditures made in defending against any adverse claim
and all other expenditures which the Collateral Agent may make for the
protection of the security hereof or which may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Obligors
on a joint and several basis promptly upon timely notice thereof and demand
therefor, shall constitute additional Secured Obligations and shall bear
interest from the date said amounts are expended at the Default Rate specified
in Section 3.1 of the Credit Agreement. No such performance of any covenant or
agreement by the Collateral Agent on behalf of any Obligor, and no such advance
or expenditure therefor, shall relieve the Obligors of any default under the
terms of this Security Agreement, the other Credit Documents or any other
documents relating to the Secured Obligations. The Collateral Agent may make any
payment hereby authorized in accordance with any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax lien, title or
claim except to the extent such payment is being contested in good faith by an
Obligor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.

     7. Events of Default.

     The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an "Event
of Default").

     8. Remedies.

          (a) General Remedies. Upon the occurrence of an Event of Default and
     during continuation thereof, the Collateral Agent shall have, in addition
     to the rights and remedies provided herein, in the Credit Documents, in any
     other documents relating to the Secured Obligations or by law (including,
     but not limited to, levy of attachment, garnishment, and the rights and
     remedies set forth in the Uniform Commercial Code of the jurisdiction
     applicable to the affected Collateral), the rights and remedies of a
     secured party under the UCC (regardless of whether the UCC is the law of
     the jurisdiction where the rights and remedies are asserted and regardless
     of whether the UCC applies to the affected Collateral), and further, the
     Collateral Agent may, with or without judicial process or the aid and
     assistance of others, (i) enter on any premises on which any of the
     Collateral may be located and, without resistance or interference by the
     Obligors, take possession of the Collateral, (ii) dispose of any Collateral
     on any such premises, (iii) require the Obligors to assemble and make
     available to the Collateral Agent at the expense of the Obligors any
     Collateral at any place and time designated by the Collateral Agent which
     is reasonably convenient to both parties, (iv) remove any Collateral from
     any such premises for the purpose of effecting sale


                                      -12-



     or other disposition thereof, and/or (v) without demand and without
     advertisement, notice, hearing or process of law, all of which each of the
     Obligors hereby waives to the fullest extent permitted by law, at any place
     and time or times, sell and deliver any or all Collateral held by or for it
     at public or private sale, by one or more contracts, in one or more
     parcels, for cash, upon credit or otherwise, at such prices and upon such
     terms as the Collateral Agent deems advisable, in its sole discretion
     (subject to any and all mandatory legal requirements). Each of the Obligors
     acknowledges that any private sale referenced above may be at prices and on
     terms less favorable to the seller than the prices and terms that might
     have been obtained at a public sale and agrees that such private sale shall
     be deemed to have been made in a commercially reasonable manner. Neither
     the Collateral Agent's compliance with applicable law nor its disclaimer of
     warranties relating to the Collateral shall be considered to adversely
     affect the commercial reasonableness of any sale. In addition to all other
     sums due to the Collateral Agent and the Lenders with respect to the
     Secured Obligations, the Obligors shall pay the Collateral Agent and the
     Lenders all reasonable documented costs and expenses incurred by the
     Collateral Agent and the Lenders, including, but not limited to, reasonable
     attorneys' fees and court costs, in obtaining or liquidating the
     Collateral, in enforcing payment of the Secured Obligations, or in the
     prosecution or defense of any action or proceeding by or against the
     Collateral Agent, any Lender or the Obligors concerning any matter arising
     out of or connected with this Security Agreement, any Collateral or the
     Secured Obligations, including, without limitation, any of the foregoing
     arising in, arising under or related to a case under the Debtor Relief
     Laws. To the extent the rights of notice cannot be legally waived
     hereunder, each Obligor agrees that any requirement of reasonable notice
     shall be met if such notice is personally served on or mailed, postage
     prepaid, to the Borrower in accordance with the notice provisions of
     Section 10.1 of the Credit Agreement at least 10 days before the time of
     sale or other event giving rise to the requirement of such notice. The
     Collateral Agent shall not be obligated to make any sale or other
     disposition of the Collateral regardless of notice having been given. To
     the extent permitted by law, the Collateral Agent and any Lender may be a
     purchaser at any such sale. To the extent permitted by applicable law, each
     of the Obligors hereby waives all of its rights of redemption with respect
     to any such sale. Subject to the provisions of applicable law, the
     Collateral Agent may postpone or cause the postponement of the sale of all
     or any portion of the Collateral by announcement at the time and place of
     such sale, and such sale may, without further notice, to the extent
     permitted by law, be made at the time and place to which the sale was
     postponed, or the Collateral Agent may further postpone such sale by
     announcement made at such time and place.

          (b) Remedies Relating to Accounts. Upon the occurrence of an Event of
     Default and during the continuation thereof, whether or not the Collateral
     Agent has exercised any or all of its rights and remedies hereunder, each
     Obligor will, promptly upon request of the Collateral Agent, instruct all
     account debtors to remit all payments in respect of Accounts to a mailing
     location selected by the Collateral Agent (or its designee). In addition,
     the Collateral Agent or its designee shall have the right to enforce any
     Obligor's rights against its customers and account debtors and may notify
     any of Obligor's customers and account debtors that the Accounts of such
     Obligor have been assigned to the Collateral Agent or of the Collateral
     Agent's security interest therein, and may (either in its own name


                                      -13-



     or in the name of an Obligor or both) demand, collect (including without
     limitation by way of a lockbox arrangement), receive, take receipt for,
     sell, sue for, compound, settle, compromise and give acquittance for any
     and all amounts due or to become due on any Account, and, in the Collateral
     Agent's discretion, file any claim or take any other action or proceeding
     to protect and realize upon the security interest of the Collateral Agent
     in the Accounts. Each Obligor acknowledges and agrees that the Proceeds of
     its Accounts remitted to or on behalf of the Collateral Agent in accordance
     with the provisions hereof shall be solely for the Collateral Agent's own
     convenience and that such Obligor shall not have any right, title or
     interest in such Accounts or in any such other amounts except as expressly
     provided herein. The Collateral Agent shall have no liability or
     responsibility to any Obligor for acceptance in good faith of a check,
     draft or other order for payment of money bearing the legend "payment in
     full" or words of similar import or any other restrictive legend or
     endorsement or be responsible for determining the correctness of any
     remittance. Each Obligor hereby agrees to indemnify the Collateral Agent
     and each Lender from and against all liabilities, damages, losses, actions,
     claims, judgments, costs, expenses, charges and reasonable attorneys' fees
     suffered or incurred by the Collateral Agent or such Lender (each, an
     "Indemnified Party") because of the maintenance of the foregoing
     arrangements except as relating to or arising out of the gross negligence
     or willful misconduct of an Indemnified Party or its officers, employees or
     agents. In the case of any investigation, litigation or other proceeding,
     the foregoing indemnity shall be effective whether or not such
     investigation, litigation or proceeding is brought by an Obligor, its
     directors, shareholders or creditors or an Indemnified Party or any other
     Person or any other Indemnified Party is otherwise a party thereto.

          (c) Access. In addition to the rights and remedies hereunder, upon the
     occurrence of an Event of Default and during the continuance thereof, the
     Collateral Agent shall have the right to enter and remain upon the various
     premises of the Obligors without cost or charge to the Collateral Agent,
     and use the same, together with materials, supplies, books and records of
     the Obligors for the purpose of collecting and liquidating the Collateral,
     or for preparing for sale and conducting the sale of the Collateral,
     whether by foreclosure, auction or otherwise. In addition, the Collateral
     Agent may remove Collateral, or any part thereof, from such premises and/or
     any records with respect thereto, in order to effectively collect or
     liquidate such Collateral.

          (d) Nonexclusive Nature of Remedies. Failure by the Collateral Agent
     or any Lender to exercise any right, remedy or option under this Security
     Agreement, any other Credit Document, any other document relating to the
     Secured Obligations or as provided by law, or any delay by the Collateral
     Agent or any Lender in exercising the same, shall not operate as a waiver
     of any such right, remedy or option. No waiver hereunder shall be effective
     unless it is in writing, signed by the party against whom such waiver is
     sought to be enforced and then only to the extent specifically stated,
     which in the case of the Collateral Agent shall only be granted as provided
     herein. To the extent permitted by law, neither the Collateral Agent, any
     Lender nor any party acting as attorney for the Collateral Agent or any
     Lender, shall be liable hereunder for any acts or omissions or for any
     error of judgment or mistake of fact or law other than their gross
     negligence or willful misconduct


                                      -14-



     hereunder. The rights and remedies of the Collateral Agent and the Lenders
     under this Security Agreement shall be cumulative and not exclusive of any
     other right or remedy which the Collateral Agent or any Lender may have.

          (e) Retention of Collateral. The Collateral Agent (for the ratable
     benefit of the Lenders) may, after providing the notices required by
     Sections 9-620 and 9-621 of the UCC or otherwise complying with the
     requirements of applicable law of the relevant jurisdiction, accept or
     retain all or any portion of the Collateral in satisfaction of the Secured
     Obligations. Unless and until the Collateral Agent shall have provided such
     notices, however, the Collateral Agent shall not be deemed to have accepted
     or retained any Collateral in satisfaction of any Secured Obligations for
     any reason.

          (f) Deficiency. In the event that the proceeds of any sale, collection
     or realization are insufficient to pay all amounts to which the Collateral
     Agent and each Lender is legally entitled, the Obligors shall be jointly
     and severally liable for the deficiency, together with interest thereon at
     the Default Rate specified in Section 3.1 of the Credit Agreement, together
     with the costs of collection and the reasonable fees of any attorneys
     employed by the Collateral Agent or any Lender to collect such deficiency.
     Any surplus remaining after the full payment and satisfaction of the
     Secured Obligations shall be returned to the Obligors or to whomsoever a
     court of competent jurisdiction shall determine to be entitled thereto.

     9. Rights of the Collateral Agent.

          (a) Power of Attorney. In addition to other powers of attorney
     contained herein, each Obligor hereby designates and appoints the
     Collateral Agent and each of its designees or agents, as attorney-in-fact
     of such Obligor, irrevocably and with power of substitution, with authority
     to take any or all of the following actions upon the occurrence and during
     the continuance of an Event of Default:

               (i) to demand, collect, settle, compromise, adjust, give
          discharges and releases, all as the Collateral Agent may reasonably
          determine;

               (ii) to commence and prosecute any actions at any court for the
          purposes of collecting any Collateral and enforcing any other right in
          respect thereof;

               (iii) to defend, settle or compromise any action brought and, in
          connection therewith, give such discharge or release as the Collateral
          Agent may deem reasonably appropriate;

               (iv) to receive, open and dispose of mail addressed to an Obligor
          and endorse checks, notes, drafts, acceptances, money orders, bills of
          lading, warehouse receipts or other instruments or documents
          evidencing payment,


                                      -15-


          shipment or storage of the goods giving rise to the Collateral of such
          Obligor on behalf of and in the name of such Obligor, or securing, or
          relating to such Collateral;

               (iii) to pay or discharge taxes, liens, security interests or
          other encumbrances levied or placed on or threatened against the
          Collateral;

               (iv) to direct any parties liable for any payment in connection
          with any of the Collateral to make payment of any and all monies due
          and to become due thereunder directly to the Collateral Agent or as
          the Collateral Agent shall direct;

               (v) to receive payment of and receipt for any and all monies,
          claims, and other amounts due and to become due at any time in respect
          of or arising out of any Collateral;

               (viii) to sell, assign, transfer, make any agreement in respect
          of, or otherwise deal with or exercise rights in respect of, any
          Collateral or the goods or services which have given rise thereto, as
          fully and completely as though the Collateral Agent were the absolute
          owner thereof for all purposes;

               (ix) to adjust and settle claims under any insurance policy
          relating to the Collateral;

               (x) to execute and deliver all assignments, conveyances,
          statements, financing statements, renewal financing statements,
          security and pledge agreements, affidavits, notices and other
          agreements, instruments and documents that the Collateral Agent may
          reasonably determine necessary in order to perfect and maintain the
          security interests and liens granted in this Security Agreement and in
          order to fully consummate all of the transactions contemplated
          therein;

               (xi) to institute any foreclosure proceedings that the Collateral
          Agent may deem appropriate; and

               (xii) to do and perform all such other acts and things as the
          Collateral Agent may reasonably deem to be necessary, proper or
          convenient in connection with the Collateral.

     This power of attorney is a power coupled with an interest and shall be
     irrevocable for so long as any of the Secured Obligations remain
     outstanding or any Credit Document is in effect. The Collateral Agent shall
     be under no duty to exercise or withhold the exercise of any of the rights,
     powers, privileges and options expressly or implicitly granted to the
     Collateral Agent in this Security Agreement, and shall not be liable for
     any failure to do so


                                      -16-



     or any delay in doing so. The Collateral Agent shall not be liable for any
     act or omission or for any error of judgment or any mistake of fact or law
     in its individual capacity or its capacity as attorney-in-fact except acts
     or omissions resulting from its gross negligence or willful misconduct.
     This power of attorney is conferred on the Collateral Agent solely to
     protect, preserve and realize upon its security interest in the Collateral.

          (b) Performance by the Collateral Agent of Obligations. If any Obligor
     fails to perform any agreement or obligation contained herein, the
     Collateral Agent itself may perform, or cause performance of, such
     agreement or obligation, and the reasonable expenses of the Collateral
     Agent incurred in connection therewith shall be payable by the Obligors on
     a joint and several basis pursuant to Section 24 hereof.

          (c) Assignment by the Collateral Agent and the Lenders. The Collateral
     Agent and each Lender may from time to time assign the Secured Obligations
     and any portion thereof and/or the Collateral and any portion thereof, and
     the assignee shall be entitled to all of the rights and remedies of the
     Collateral Agent or such Lender under this Security Agreement in relation
     thereto.

          (d) The Collateral Agent's Duty of Care. Other than the exercise of
     reasonable care to assure the safe custody of the Collateral while being
     held by the Collateral Agent hereunder, the Collateral Agent shall have no
     duty or liability to preserve rights pertaining thereto, it being
     understood and agreed that the Obligors shall be responsible for
     preservation of all rights in the Collateral, and the Collateral Agent
     shall be relieved of all responsibility for the Collateral upon
     surrendering it or tendering the surrender of it to the Obligors. The
     Collateral Agent shall be deemed to have exercised reasonable care in the
     custody and preservation of the Collateral in its possession if the
     Collateral is accorded treatment substantially equal to that which the
     Collateral Agent accords its own property, which shall be no less than the
     treatment employed by a reasonable and prudent agent in the industry, it
     being understood that the Collateral Agent shall not have responsibility
     for taking any necessary steps to preserve rights against any parties with
     respect to any of the Collateral.

     10. Application of Proceeds. Upon the occurrence and during the continuance
of an Event of Default, any payments in respect of the Secured Obligations and
any proceeds of the Collateral, when received by the Collateral Agent or the
Lenders in cash or its equivalent, will be applied in reduction of the Secured
Obligations in the order set forth in Section 9.3 of the Credit Agreement or
other document relating to the Secured Obligations, and each Obligor irrevocably
waives the right to direct the application of such payments and proceeds and
acknowledges and agrees that the Collateral Agent and the Lenders shall have the
continuing and exclusive right to apply and reapply any and all such payments
and proceeds in the Collateral Agent's and the Lenders' sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.


                                      -17-



     11. Costs of Counsel. If at any time hereafter, whether upon the occurrence
of an Event of Default or not, the Collateral Agent [or any Lender employs](1)
[and Lenders employ](1) counsel to prepare or consider amendments, waivers or
consents with respect to this Security Agreement, or to take action or make a
response in or with respect to any legal or arbitral proceeding relating to this
Security Agreement or relating to the Collateral, or to protect the Collateral
or exercise any rights or remedies under this Security Agreement or with respect
to the Collateral, then the Obligors agree to promptly pay upon demand any and
all such reasonable documented costs and expenses of such Person, all of which
costs and expenses shall constitute Secured Obligations hereunder.

     12. Continuing Agreement.

          (a) This Security Agreement shall be a continuing agreement in every
     respect and shall remain in full force and effect so long as any of the
     Secured Obligations remain outstanding and the Credit Document shall have
     not been terminated (other than any obligations with respect to the
     indemnities and the representations and warranties set forth in the Credit
     Documents). Upon such payment and termination, this Security Agreement
     shall be automatically terminated and the Collateral Agent shall, upon the
     request and at the expense of the Obligors, forthwith release all of its
     liens and security interests hereunder and shall execute and deliver all
     UCC termination statements and/or other documents reasonably requested by
     the Obligors evidencing such termination. Notwithstanding the foregoing all
     releases and indemnities provided hereunder shall survive termination of
     this Security Agreement.

          (b) This Security Agreement shall continue to be effective or be
     automatically reinstated, as the case may be, if at any time payment, in
     whole or in part, of any of the Secured Obligations is rescinded or must
     otherwise be restored or returned by the Collateral Agent or any Lender as
     a preference, fraudulent conveyance or otherwise under any bankruptcy,
     insolvency or similar law, all as though such payment had not been made;
     provided that in the event payment of all or any part of the Secured
     Obligations is rescinded or must be restored or returned, all reasonable
     costs and expenses (including without limitation any reasonable legal fees
     and disbursements) incurred by the Collateral Agent or any lender in
     defending and enforcing such reinstatement shall be deemed to be included
     as a part of the Secured Obligations.

     13. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Collateral Agent and
each of the Obligors.

     14. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Collateral Agent hereunder, to the Collateral Agent, for the
ratable benefit of the Lenders and each of their successors and permitted

- ----------
(1)  To be confirmed.


                                      -18-



assigns; provided, however, that none of the Obligors may assign its rights or
delegate its duties hereunder without the prior written consent of the Required
Lenders. To the fullest extent permitted by law, each Obligor hereby releases
the Collateral Agent and each Lender, and their respective successors and
assigns and their respective officers, attorneys, employees and agents, from any
liability for any act or omission or any error of judgment or mistake of fact or
of law relating to this Security Agreement or the Collateral, except as set
forth in Section 8(d) hereof and except for any liability arising from the gross
negligence or willful misconduct of the Collateral Agent or any Lender,
respectively, or its officers, employees or agents.

     15. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 10.1 of the Credit
Agreement.

     16. Counterparts. This Security Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.

     17. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.

     18. Governing Law; Submission to Jurisdiction; Venue.

          (a) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
     ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
     MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE
     COLLATERAL AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
     FEDERAL LAW.

          (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY
     AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
     STATE OF NEW YORK SITTING IN NEW YORK COUNTY, NEW YORK OR OF THE UNITED
     STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND
     DELIVERY OF THIS SECURITY AGREEMENT, EACH CREDIT PARTY, EACH LENDER AND THE
     COLLATERAL AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
     THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH CREDIT PARTY, EACH
     LENDER AND THE COLLATERAL AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
     ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
     CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
     ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY CREDIT DOCUMENT
     OR OTHER DOCUMENT RELATED THERETO. EACH CREDIT PARTY, EACH LENDER AND THE
     COLLATERAL AGENT


                                      -19-



     WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
     MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

     19. Waiver of Jury Trial. EACH PARTY TO THIS SECURITY AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER THIS SECURITY AGREEMENT OR ANY OTHER CREDIT
DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS SECURITY AGREEMENT OR
ANY OTHER CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS SECURITY AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     20. Severability. If any provision of this Security Agreement is determined
to be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

     21. Entirety. This Security Agreement, the other Credit Documents and the
other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations or the transactions contemplated herein and therein.

     22. Survival. All representations and warranties of the Obligors hereunder
shall survive the execution and delivery of this Security Agreement, the other
Credit Documents and the other documents relating to the Secured Obligations,
the delivery of the Notes and the making of the Loans under the Credit
Agreement.

     23. Other Security. To the extent that any of the Secured Obligations are
now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Collateral
Agent shall have the right to proceed against such other property, guarantee or
endorsement upon the occurrence of any Event of Default, and the Collateral
Agent has the right, in its sole discretion, to determine which rights,
security, liens, security interests or remedies the Collateral Agent shall at
any time pursue, relinquish, subordinate, modify or take with respect thereto,
without in any way modifying or affecting any of them or any of the Collateral


                                      -20-



Agent's rights or the Secured Obligations under this Security Agreement, under
any other of the Credit Documents or under any other documents relating to the
Secured Obligations.

     24. Joint and Several Obligations of Obligors.

          (a) Each of the Obligors is accepting joint and several liability
     hereunder in consideration of the financial accommodation to be provided by
     the Collateral Agent and the Lenders under the Credit Agreement, for the
     mutual benefit, directly and indirectly, of each of the Obligors and in
     consideration of the undertakings of each of the Obligors to accept joint
     and several liability for the obligations of each of them.

          (b) Each of the Obligors jointly and severally hereby irrevocably and
     unconditionally accepts, not merely as a surety but also as a co-debtor,
     joint and several liability with the other Obligors with respect to the
     payment and performance of all of the Secured Obligations arising under
     this Security Agreement and the other Credit Documents and any other
     documents relating to the Secured Obligations, it being the intention of
     the parties hereto that all the Secured Obligations shall be the joint and
     several obligations of each of the Obligors without preferences or
     distinction among them.

          (c) Notwithstanding any provision to the contrary contained herein, in
     any other of the Credit Documents or in any other documents relating to the
     Secured Obligations, the obligations of each Guarantor under the Credit
     Agreement, the other Credit Documents and the other documents relating to
     the Secured Obligations shall be limited to an aggregate amount equal to
     the largest amount that would not render such obligations subject to
     avoidance under Section 548 of the United States Bankruptcy Code or any
     comparable provisions of any applicable state law.

     25. Intercreditor Agreement. Notwithstanding anything to the contrary in
this Security Agreement, (i) the rights of the Obligors, the Collateral Agent
and the Lenders under this Security Agreement are subject to the terms of the
Intercreditor Agreement, (ii) any obligation of the Obligors in this Security
Agreement that requires delivery of Collateral to, possession or control of
Collateral with, the pledge, assignment, endorsement or transfer of Collateral
to or the registration of Collateral in the name of, the Collateral Agent shall
be deemed complied with and satisfied if such delivery of Collateral is made to,
such possession or control of Collateral is with, or such Collateral be
assigned, endorsed or transferred to or registered in the name of, the Working
Capital Lender, and (iii) in the event of a direct conflict between the terms
and provisions of this Security Agreement and the terms and provisions of the
Intercreditor Agreement, it is the intention of the Obligors, the Collateral
Agent and the Lenders that such provisions shall be read together and construed,
to the fullest extent possible, to be in concert with each other; however, in
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of the Intercreditor Agreement shall control
and, in such case, the Obligors shall not be in breach of their obligations
under this Security Agreement as a result of complying with the terms and
provisions of the Intercreditor Agreement; provided that, notwithstanding the
foregoing, nothing contained in this Section 25


                                      -21-



shall limit or otherwise adversely effect the grant of a lien on or a security
interest in any Collateral under Section 2 of this Security Agreement.

                  [remainder of page intentionally left blank]


                                      -22-



     Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.

OBLIGORS:                               PRG-SCHULTZ USA, INC.,
                                        a Georgia corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance, Chief Financial Officer
                                               and Treasurer


                                        PRG-SCHULTZ INTERNATIONAL, INC.,
                                        a Georgia corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance, Chief Financial Officer
                                               and Treasurer


                                        PRGFS, INC.,
                                        PRGLS, INC.,
                                        each a Delaware corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance


                                        PRGRS, INC., a Delaware corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James B. McCurry
                                        Title: President



                                        PRG HOLDING CO. (FRANCE) NO. 1, LLC,
                                        PRG HOLDING CO. (FRANCE) NO. 2, LLC,
                                        each a Delaware limited liability
                                        company


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance, Chief Financial Officer
                                               and Treasurer



OBLIGORS:                               THE PROFIT RECOVERY GROUP ASIA, INC.,
                                        PRG-SCHULTZ CANADA, INC.,
                                        THE PROFIT RECOVERY GROUP NEW ZEALAND,
                                           INC.,
                                        THE PROFIT RECOVERY GROUP NETHERLANDS,
                                           INC.,
                                        THE PROFIT RECOVERY GROUP MEXICO, INC.
                                        PRG-SCHULTZ FRANCE, INC.,
                                        PRG-SCHULTZ AUSTRALIA, INC.,
                                        PRG-SCHULTZ BELGIUM, INC.,
                                        PRG-SCHULTZ CHILE, INC.,
                                        THE PROFIT RECOVERY GROUP GERMANY, INC.,
                                        PRG INTERNATIONAL, INC.,
                                        PRG-SCHULTZ SWITZERLAND, INC.,
                                        THE PROFIT RECOVERY GROUP SOUTH AFRICA,
                                           INC.,
                                        THE PROFIT RECOVERY GROUP SPAIN, INC.,
                                        THE PROFIT RECOVERY GROUP ITALY, INC.,
                                        PRG-SCHULTZ SCANDINAVIA, INC.,
                                        PRG-SCHULTZ PORTUGAL, INC.,
                                        PRG-SCHULTZ JAPAN, INC.,
                                        THE PROFIT RECOVERY GROUP COSTA RICA,
                                           INC.,
                                        PRG-SCHULTZ PUERTO RICO, INC.,
                                        PRG USA, INC.,
                                        PRG-SCHULTZ EUROPE, INC.,
                                        EACH A GEORGIA CORPORATION


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance, Chief Financial Officer
                                               and Treasurer


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


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance, Chief Financial Officer
                                               and Treasurer



COLLATERAL AGENT:                       BLUM STRATEGIC PARTNERS II, L.P.


                                        By: s/
                                            ------------------------------------
                                        Name: Jose Medeiros
                                        Title: Partner



                                    SCHEDULES

                  
Schedule 2(d)        Commercial Tort Claims

Schedule 4(a)        Mergers, Consolidations, Changes in Structure, Use of
                     Tradenames

Schedule 5(f)(i)     Notice of Grant of Security Interest in Copyrights

Schedule 5(f)(ii)    Notice of Grant of Security Interest in Patents

Schedule 5(f)(iii)   Notice of Grant of Security Interest in Trademarks





                                SCHEDULE 5(f)(i)

                                     NOTICE

                                       OF

                           GRANT OF SECURITY INTEREST

                                       IN

                                   COPYRIGHTS

United States Copyright Office

Ladies and Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of
December ___, 2005 (as the same may be amended, modified, extended or restated
from time to time, the "Security Agreement") by and among the Obligors party
thereto (each an "Obligor" and collectively, the "Obligors") and Blum Strategic
Partners II, L.P. (the "Collateral Agent"), the undersigned Obligor has granted
a continuing security interest in and continuing lien upon, the copyrights and
copyright applications shown below to the Collateral Agent, for the benefit of
the Lenders:

                                   COPYRIGHTS



                                            Date of
Copyright No.   Description of Copyright   Copyright
- -------------   ------------------------   ---------
                                     



                             Copyright Applications



    Copyright      Description of Copyright   Date of Copyright
Applications No.          Applied For            Applications
- ----------------   ------------------------   -----------------
                                        





     The Obligors and the Collateral Agent hereby acknowledge and agree that the
security interest in the foregoing copyrights and copyright applications (i) may
only be terminated in accordance with the terms of the Security Agreement and
(ii) is not to be construed as an assignment of any copyright or copyright
application.

                                        Very truly yours,

                                        _______________________________________,

                                        a _________________ corporation


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

                                        Obligor's Address:


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

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

Acknowledged and Accepted:

Blum Strategic Partners II, L.P., as Collateral Agent


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



                                SCHEDULE 5(f)(ii)

                                     NOTICE

                                       OF

                           GRANT OF SECURITY INTEREST

                                       IN

                                     PATENTS

United States Patent and Trademark Office

Ladies and Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of
December ___, 2005 (the "Security Agreement") by and among the Obligors party
thereto (each an "Obligor" and collectively, the "Obligors") and Blum Strategic
Partners II, L.P. (the "Collateral Agent"), the undersigned Obligor has granted
a continuing security interest in and continuing lien upon, the patents and
patent applications shown below to the Collateral Agent, for the benefit of the
Lenders:

                                     PATENTS



             Description of Patent   Date of
Patent No.            Item            Patent
- ----------   ---------------------   -------
                               



                               Patent Applications



    Patent         Description of Patent   Date of Patent
Applications No.        Applied For         Applications
- ----------------   ---------------------   --------------
                                     





     The Obligors and the Collateral Agent hereby acknowledge and agree that the
security interest in the foregoing patents and patent applications (i) may only
be terminated in accordance with the terms of the Security Agreement and (ii) is
not to be construed as an assignment of any patent or patent application.

                                        Very truly yours,

                                        _______________________________________,

                                        a _________________ corporation


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

                                        Obligor's Address:

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

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

Acknowledged and Accepted:

Blum Strategic Partners II, L.P., as Collateral Agent


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



                               SCHEDULE 5(f)(iii)

                                     NOTICE

                                       OF

                           GRANT OF SECURITY INTEREST

                                       IN

                                   TRADEMARKS

United States Patent and Trademark Office

Ladies and Gentlemen:

     Please be advised that pursuant to the Security Agreement dated as of
December ___, 2005 (the "Security Agreement") by and among the Obligors party
thereto (each an "Obligor" and collectively, the "Obligors") and Blum Strategic
Partners II, L.P. (the "Collateral Agent"), the undersigned Obligor has granted
a continuing security interest in and continuing lien upon, the trademarks and
trademark applications shown below to the Collateral Agent, for the benefit of
the Lenders:

                          TRADEMARKS



                Description of Trademark    Date of
Trademark No.             Item             Trademark
- -------------   ------------------------   ---------
                                     



                             Trademark Applications



   Trademark       Description of Trademark   Date of Trademark
Applications No.         Applied For             Applications
- ----------------   ------------------------   -----------------
                                        





     The Obligors and the Collateral Agent hereby acknowledge and agree that the
security interest in the foregoing trademarks and trademark applications (i) may
only be terminated in accordance with the terms of the Security Agreement and
(ii) is not to be construed as an assignment of any trademark or trademark
application.

                                        Very truly yours,

                                        _______________________________________,

                                        a ___________ corporation


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

                                        Obligor's Address:

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

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

Acknowledged and Accepted:

Blum Strategic Partners II, L.P., as
Collateral Agent


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

EX-10.63

                                PLEDGE AGREEMENT

          THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as of
December 23, 2005 among PRG-SCHULTZ USA, INC., a Georgia corporation (the
"Borrower"), PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation (the
"Parent"), certain of the Domestic Subsidiaries of the Parent (such Domestic
Subsidiaries, together with the Parent, individually a "Guarantor", and
collectively the "Guarantors"; the Guarantors together with the Borrower,
individually a "Pledgor", and collectively the 'Pledgors") and Blum Strategic
Partners II, L.P., as the collateral agent for the Lenders referred to below (in
such capacity together with its successors and permitted assigns, the
"Collateral Agent").

                                    RECITALS

          WHEREAS, pursuant to that certain Credit Agreement dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, the Guarantors, the lenders
from time to time party thereto (each a "Lender" and collectively, the
"Lenders") and the Collateral Agent, each of the Lenders, severally and not
jointly or jointly and severally, has agreed to make the Loans upon the terms
and subject to the conditions set forth therein; and

          WHEREAS, it is a condition precedent to the effectiveness of the
Credit Agreement and the obligations of the Lenders to make the Loans under the
Credit Agreement that the Pledgors shall have executed and delivered this Pledge
Agreement to the Collateral Agent for the benefit of the Lenders.

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

          1. Definitions.

               (a) Unless otherwise defined herein, capitalized terms used
          herein shall have the meanings ascribed to such terms in the Credit
          Agreement, and the following terms which are defined in the Uniform
          Commercial Code as in effect in the State of New York on the date
          hereof (the "UCC"), are used herein as so defined: Accession,
          Financial Asset, Proceeds and Security.

               (b) In addition, the following term shall have the following
          meaning:

          "Secured Obligations": means, without duplication, (i) all of the
obligations of the Credit Parties to the Collateral Agent and the Lenders, under
the Credit Agreement or any other Credit Document (including, but not limited
to, any interest accruing after the commencement of a proceeding by or against
any Credit Party under any Debtor Relief Laws, regardless of whether such
interest is an allowed claim under such proceeding), whether now existing or
hereafter arising, due or to become due, direct or indirect, absolute or
contingent, howsoever evidenced, created, held or acquired, whether primary,
secondary, direct, contingent,



or joint and several, as such obligations may be amended, modified, increased,
extended, renewed or replaced from time to time and (ii) all costs and expenses
incurred in connection with enforcement and collection of the obligations
described in the foregoing clause (i), including Attorney Costs.

          2. Pledge and Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time, acceleration,
mandatory prepayment or otherwise, of the Secured Obligations, each Pledgor
hereby pledges and assigns to the Collateral Agent, and grants to the Collateral
Agent, in each case, for the benefit of the Lenders, a continuing security
interest in, and a right to set-off against, any and all right, title and
interest of such Pledgor in and to the following, whether now owned or existing
or owned, acquired, or arising hereafter (collectively, the "Pledged
Collateral"):

               (a) Pledged Shares. (i) 100% (or, if less, the full amount owned
          by such Pledgor) of the issued and outstanding Capital Stock owned by
          such Pledgor of each Domestic Subsidiary of such Pledgor set forth on
          Schedule 2(a) attached hereto and (ii) 66% of the issued and
          outstanding shares of Capital Stock entitled to vote (within the
          meaning of Treas. Reg. Section 1.956-2(c)(2)) ("Voting Equity") and
          100% (or, if less, the full amount owned by such Pledgor) of the
          issued and outstanding Capital Stock not entitled to vote (within the
          meaning of Treas. Reg. Section 1.956-2(c)(2)) ("Non-Voting Equity")
          owned by such Pledgor of each Material Foreign Subsidiary set forth on
          Schedule 2(a) attached hereto, in each case together with the
          certificates (or other agreements or instruments), if any,
          representing such Capital Stock, and all options and other rights,
          contractual or otherwise, with respect thereto (collectively, together
          with the Capital Stock described in Section 2(b) and 2(c) below, the
          "Pledged Shares"), including, but not limited to, the following:

                    (A) all shares, securities, membership interests or other
               equity interests representing a dividend on any of the Pledged
               Shares, or representing a distribution or return of capital upon
               or in respect of the Pledged Shares, or resulting from a stock
               split, revision, reclassification or other exchange therefor, and
               any subscriptions, warrants, rights or options issued to the
               holder of, or otherwise in respect of, the Pledged Shares; and

                    (B) without affecting the obligations of the Pledgors under
               any provision prohibiting such action hereunder or under the
               Credit Agreement, in the event of any consolidation or merger
               involving the issuer of any Pledged Shares and in which such
               issuer is not the surviving entity, all Capital Stock of the
               successor entity formed by or resulting from such consolidation
               or merger.

               (b) Additional Shares. 100% (or, if less, the full amount owned
          by such Pledgor) of the issued and outstanding Capital Stock owned by
          such Pledgor of any Person which hereafter becomes a Domestic
          Subsidiary of such Pledgor and 66% of the Voting Equity and 100% (or,
          if less, the full amount owned by such Pledgor) of the Non-Voting
          Equity owned by such Pledgor of any Person which hereafter becomes a
          Material Foreign Subsidiary of such Pledgor,


                                        2



          including, without limitation, the certificates (or other agreements
          or instruments) representing such Capital Stock.

               (c) Accessions and Proceeds. All Accessions and Proceeds of the
          foregoing, however and whenever acquired and in whatever form.

          Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional Capital Stock to the Collateral Agent (or its
designee) as collateral security for the Secured Obligations. Upon delivery to
the Collateral Agent (or its designee), such additional Capital Stock shall be
deemed to be part of the Pledged Collateral of such Pledgor and shall be subject
to the terms of this Pledge Agreement whether or not Schedule 2(a) is amended to
refer to such additional Capital Stock.

          3. Security for Secured Obligations. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the Secured Obligations.

          4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees
that:

               (a) Delivery of Certificates. Each Pledgor shall, deliver to the
          Collateral Agent (or its designee) (i) simultaneously with or prior to
          the execution and delivery of this Pledge Agreement, all certificates
          representing the Pledged Shares of such Pledgor and (ii) promptly upon
          the receipt thereof by or on behalf of a Pledgor, all other
          certificates and instruments constituting Pledged Collateral of a
          Pledgor. Prior to delivery to the Collateral Agent (or its designee),
          all such certificates and instruments constituting Pledged Collateral
          of a Pledgor shall be held in trust by such Pledgor for the benefit of
          the Collateral Agent pursuant hereto. All such certificates shall be
          delivered in suitable form for transfer by delivery or shall be
          accompanied by duly executed instruments of transfer or assignment in
          blank, substantially in the form provided in Exhibit 4(a) attached
          hereto.

               (b) Additional Securities. If such Pledgor shall receive by
          virtue of its being or having been the owner of any Pledged
          Collateral, any (i) certificate, including without limitation, any
          certificate representing a dividend or distribution in connection with
          any increase or reduction of capital, reclassification, merger,
          consolidation, sale of assets, combination of shares, or other equity
          interests, stock splits, spin-off or split-off, promissory notes or
          other instruments; (ii) option or right, whether as an addition to,
          substitution for, or an exchange for, any Pledged Collateral or
          otherwise; (iii) dividends payable in securities; or (iv)
          distributions of securities in connection with a partial or total
          liquidation, dissolution or reduction of capital, capital surplus or
          paid-in surplus, then such Pledgor shall receive such certificate,
          instrument, option, right or distribution in trust for the benefit of
          the Collateral Agent, shall segregate it from such Pledgor's other
          property and shall deliver it forthwith to the Collateral Agent (or
          its designee) in the exact form received together with any necessary
          endorsement and/or appropriate stock power duly executed in blank,
          substantially in the form provided in Exhibit 4(a), to be held by the
          Collateral


                                        3



          Agent (or its designee) as Pledged Collateral and as further
          collateral security for the Secured Obligations.

               (c) Financing Statements. Each Pledgor authorizes the Collateral
          Agent to file one or more financing statements disclosing the
          Collateral Agent's security interest in the Pledged Collateral
          (including any financing statement indicating that the Collateral is
          "all assets" or "all personal property" or words of similar effect or
          describing or identifying the Collateral by type or in any manner as
          the Collateral Agent may determine). Each Pledgor agrees to execute
          and deliver to the Collateral Agent such financing statements and
          other applicable financing statements as may be reasonably requested
          by the Collateral Agent in order to perfect and protect the security
          interest created hereby in the Pledged Collateral of such Pledgor.

          5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Collateral Agent and each Lender, that so long as any of the
Secured Obligations remain outstanding or any Credit Document is in effect:

               (a) Authorization of Pledged Shares. The Pledged Shares are duly
          authorized and validly issued, are fully paid and, except for Pledged
          Shares which are shares (the "ULC Shares") in PRG-Schultz Canada Corp.
          ("PRG-Schultz Canada"), a Nova Scotia unlimited liability company (the
          "ULC"), nonassessable and are not subject to the preemptive rights of
          any Person. All other Capital Stock constituting Pledged Collateral
          will be duly authorized and validly issued, fully paid and, except for
          Pledged Shares which are ULC Shares, nonassessable and not subject to
          the preemptive rights of any Person.

               (b) Title. Each Pledgor has good and indefeasible title to the
          Pledged Collateral of such Pledgor and will at all times be the legal
          and beneficial owner of such Pledged Collateral free and clear of any
          Lien, other than Permitted Liens. There exists no "adverse claim"
          within the meaning of Section 8-102 of the Uniform Commercial Code as
          in effect in the State of New York (the "UCC") with respect to the
          Pledged Shares of such Pledgor.

               (c) Exercising of Rights. Neither the exercise by the Collateral
          Agent or any Lender of its rights and remedies hereunder nor the
          execution, delivery or performance of this Agreement by the Pledgor
          will violate any law or governmental regulation or any material
          contractual restriction binding on or affecting a Pledgor or any of
          its property.

               (d) Pledgor's Authority. No authorization, approval or action by,
          and no notice or filing with any Governmental Authority or with the
          issuer of any Pledged Shares is required either (i) for the pledge
          made by a Pledgor or for the granting of the security interest by a
          Pledgor pursuant to this Pledge Agreement (except as have already been
          obtained) or (ii) for the exercise by the Collateral Agent or any
          Lender of its rights and remedies hereunder (except as may be required
          by laws affecting the offering and sale of securities).


                                        4



               (e) Security Interest/Priority. This Pledge Agreement creates a
          valid security interest in favor of the Collateral Agent, for the
          benefit of the Lenders, in the Pledged Collateral. The delivery to the
          Collateral Agent (or its designee) of certificates evidencing the
          Pledged Collateral, together with duly executed stock powers in
          respect thereof, will perfect and establish the first priority
          (subject in priority solely to the Liens in favor of the Working
          Capital Lender) of the Collateral Agent's security interest in any
          certificated Pledged Collateral that constitutes a Security. The
          filing of appropriate UCC financing statements in the appropriate
          filing offices in the jurisdiction of organization of the applicable
          Pledgor or obtaining "control" over such interests in accordance with
          the provisions of Section 8-106 of the UCC will perfect and establish
          the first priority (subject in priority solely to the Liens in favor
          of the Working Capital Lender) of the Collateral Agent's security
          interest in any uncertificated Pledged Collateral that constitutes a
          Security. The filing of appropriate UCC financing statements in the
          appropriate filing offices in the jurisdiction of organization of the
          applicable Pledgor will perfect and establish the first priority
          (subject in priority solely to the Liens in favor of the Working
          Capital Lender) of the Collateral Agent's security interest in any
          Pledged Collateral that does not constitute a Security. Except as set
          forth in this Section 5(e), no action is necessary to perfect or
          otherwise protect such security interest.

               (f) Partnership and Membership Interests. Except as previously
          disclosed to the Lenders, none of the Pledged Shares consisting of
          partnership or limited liability company interests (i) is dealt in or
          traded on a securities exchange or in a securities market, (ii) by its
          terms expressly provides that it is a security governed by Article 8
          of the UCC, (iii) is an investment company security, (iv) is held in a
          securities account or (v) constitutes a Security or a Financial Asset.

               (g) No Other Interests. No Pledgor owns any Capital Stock in any
          Subsidiary other than as set forth on Schedule 2(a) attached hereto.

          6. Covenants. Each Pledgor hereby covenants, that so long as any of
the Secured Obligations remain outstanding or any Credit Document is in effect,
such Pledgor shall:

               (a) Books and Records. Mark its books and records (and shall
          cause the issuer of the Pledged Shares of such Pledgor to mark its
          books and records) to reflect the security interest granted to the
          Collateral Agent pursuant to this Pledge Agreement.

               (b) Defense of Title. Warrant and defend title to and ownership
          of the Pledged Collateral of such Pledgor at its own expense against
          the claims and demands of all other parties claiming an interest
          therein, keep the Pledged Collateral free from all Liens, except for
          Permitted Liens, and not sell, exchange, transfer, assign, lease or
          otherwise dispose of Pledged Collateral of such Pledgor or any
          interest therein, except as permitted under the Credit Agreement and
          the other Credit Documents.


                                        5



               (c) Further Assurances. Promptly execute and deliver at its
          expense all further instruments and documents and take all further
          action that may be reasonably necessary and desirable or that the
          Collateral Agent may reasonably request in order to (i) perfect and
          protect the security interest created hereby in the Pledged Collateral
          of such Pledgor (including without limitation any and all action
          necessary to reasonably satisfy the Collateral Agent that the
          Collateral Agent has obtained a first priority (subject in priority
          solely to the Liens in favor of the Working Capital Lender) perfected
          security interest in any Capital Stock); (ii) enable the Collateral
          Agent or any Lender to exercise and enforce its rights and remedies
          hereunder in respect of the Pledged Collateral of such Pledgor; and
          (iii) otherwise effect the purposes of this Pledge Agreement,
          including, without limitation, and if requested by the Collateral
          Agent, delivering to the Collateral Agent (or its designees)
          irrevocable proxies in respect of the Pledged Collateral of such
          Pledgor upon the occurrence of and during the continuation of an Event
          of Default.

               (d) Amendments. Not make or consent to any amendment or other
          modification or waiver with respect to any of the Pledged Collateral
          of such Pledgor or enter into any agreement or allow to exist any
          restriction with respect to any of the Pledged Collateral of such
          Pledgor other than pursuant hereto.

               (e) Compliance with Securities Laws. File all reports and other
          information now or hereafter required to be filed by such Pledgor with
          the United States Securities and Exchange Commission and any other
          state, federal or foreign agency in connection with the ownership of
          the Pledged Collateral of such Pledgor.

               (f) Issuance or Acquisition of Capital Stock. Not, without
          executing and delivering, or causing to be executed and delivered, to
          the Collateral Agent (or its designees) such agreements, documents and
          instruments as the Collateral Agent may reasonably require, issue or
          acquire any Capital Stock consisting of an interest in a partnership
          or a limited liability company that (i) is dealt in or traded on a
          securities exchange or in a securities market, (ii) by its terms
          expressly provides that it is a security governed by Article 8 of the
          UCC, (iii) is an investment company security, (iv) is held in a
          securities account or (v) constitutes a Security or a Financial Asset.

               (g) Authorization. Authorize the Collateral Agent to prepare and
          file such financing statements (including renewal statements),
          amendments and supplements or such other instruments as the Collateral
          Agent may from time to time reasonably deem necessary, appropriate or
          convenient in order to perfect and maintain the security interests
          granted hereunder in accordance with the UCC.

          7. Advances by Collateral Agent. On failure of any Pledgor to perform
any of the covenants and agreements contained herein, the Collateral Agent may,
at its sole option and in its sole discretion, perform the same and in so doing
may expend such sums as the Collateral Agent may reasonably deem advisable in
the performance thereof, including, without limitation, the payment of any
insurance premiums, the payment of any taxes, a payment to obtain a release


                                        6



of a Lien or potential Lien, expenditures made in defending against any adverse
claim and all other expenditures which the Collateral Agent may make for the
protection of the security hereof or which may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Pledgors
on a joint and several basis promptly upon timely notice thereof and demand
therefor, shall constitute additional Secured Obligations and shall bear
interest from the date said amounts are expended at the Default Rate specified
in Section 3.1 of the Credit Agreement. No such performance of any covenant or
agreement by the Collateral Agent on behalf of any Pledgor, and no such advance
or expenditure therefor, shall relieve the Pledgors of any default under the
terms of this Pledge Agreement, the other Credit Documents or any other
documents relating to the Secured Obligations. The Collateral Agent may make any
payment hereby authorized in accordance with any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax lien, title or
claim except to the extent such payment is being contested in good faith by a
Pledgor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.

          8. Events of Default. The occurrence of an event which under the
Credit Agreement would constitute an Event of Default shall be an Event of
Default hereunder (an "Event of Default").

          9. Remedies.

               (a) General Remedies. Upon the occurrence of an Event of Default
          and during the continuation thereof, the Collateral Agent shall have,
          (i) in respect of the Pledged Collateral of any Pledgor, except for
          Pledged Collateral consisting of ULC Shares, in addition to the rights
          and remedies provided herein, in any other documents relating to the
          Secured Obligations, in the Credit Documents or by law, the rights and
          remedies of a secured party under the UCC or any other applicable law
          and (ii) in respect of any PRG-Schultz Canada's Pledged Collateral
          consisting of ULC Shares, the rights and remedies described in this
          Section 9.

               (b) Sale of Pledged Collateral. Upon the occurrence of an Event
          of Default and during the continuation thereof, without limiting the
          generality of this Section 9 and without notice, the Collateral Agent
          may, in its sole discretion, sell or otherwise dispose of or realize
          upon the Pledged Collateral, or any part thereof, in one or more
          parcels, at public or private sale, at any exchange or broker's board
          or elsewhere, at such price or prices and on such other terms as the
          Collateral Agent may deem commercially reasonable, for cash, credit or
          for future delivery or otherwise in accordance with applicable law. To
          the extent permitted by law, the Collateral Agent and any Lender may
          in such event, bid for the purchase of such securities. Each Pledgor
          agrees that, to the extent notice of sale shall be required by law and
          has not been waived by such Pledgor, any requirement of reasonable
          notice shall be met if notice, specifying the place of any public sale
          or the time after which any private sale is to be made, is personally
          served on or mailed, postage prepaid, to such Pledgor, in accordance
          with the notice provisions of Section 10.1 of the Credit Agreement at
          least 10


                                        7



          days before the time of such sale. The Collateral Agent shall not be
          obligated to make any sale of Pledged Collateral of such Pledgor
          regardless of notice of sale having been given. The Collateral Agent
          may adjourn any public or private sale from time to time by
          announcement at the time and place fixed therefor, and such sale may,
          without further notice, be made at the time and place to which it was
          so adjourned.

               (c) Private Sale. Upon the occurrence of an Event of Default and
          during the continuation thereof, the Pledgors recognize that the
          Collateral Agent may deem it impracticable to effect a public sale of
          all or any part of the Pledged Shares or any of the securities
          constituting Pledged Collateral and that the Collateral Agent may,
          therefore, determine to make one or more private sales of any such
          securities to a restricted group of purchasers who will be obligated
          to agree, among other things, to acquire such securities for their own
          account, for investment and not with a view to the distribution or
          resale thereof. Each Pledgor acknowledges that any such private sale
          may be at prices and on terms less favorable to the seller than the
          prices and other terms which might have been obtained at a public sale
          and, notwithstanding the foregoing, agrees that such private sale
          shall be deemed to have been made in a commercially reasonable manner
          and that the Collateral Agent shall have no obligation to delay sale
          of any such securities for the period of time necessary to permit the
          issuer of such securities to register such securities for public sale
          under the Securities Act of 1933. Each Pledgor further acknowledges
          and agrees that any offer to sell such securities which has been (i)
          publicly advertised on a bona fide basis in a newspaper or other
          publication of general circulation in the financial community of New
          York, New York (to the extent that such offer may be advertised
          without prior registration under the Securities Act of 1933), or (ii)
          made privately in the manner described above shall be deemed to
          involve a "public sale" under the UCC, notwithstanding that such sale
          may not constitute a "public offering" under the Securities Act of
          1933, and the Collateral Agent may, in such event, bid for the
          purchase of such securities.

               (d) Retention of Pledged Collateral. In addition to the rights
          and remedies hereunder, upon the occurrence of an Event of Default,
          the Collateral Agent (for the ratable benefit of the Lenders) may,
          after providing the notices required by Sections 9-620 and 9-621 of
          the UCC or otherwise complying with the requirements of applicable law
          of the relevant jurisdiction, accept or retain all or any portion of
          the Pledged Collateral in satisfaction of the Secured Obligations.
          Unless and until the Collateral Agent shall have provided such
          notices, however, the Collateral Agent shall not be deemed to have
          accepted or retained any Pledged Collateral in satisfaction of any
          Secured Obligations for any reason.

               (e) Deficiency. In the event that the proceeds of any sale,
          collection or realization are insufficient to pay all amounts to which
          the Collateral Agent and the Lenders are legally entitled, the
          Pledgors shall be jointly and severally liable for the deficiency,
          together with interest thereon at the Default Rate specified in
          Section 3.1 of the Credit Agreement, together with the costs of


                                        8



          collection and the reasonable fees of any attorneys employed by the
          Collateral Agent or any Lender to collect such deficiency. Any surplus
          remaining after the full payment and satisfaction of the Secured
          Obligations shall be returned to the Pledgors or to whomsoever a court
          of competent jurisdiction shall determine to be entitled thereto.

          10. Rights of the Collateral Agent.

               (a) Power of Attorney. In addition to other powers of attorney
          contained herein, each Pledgor hereby designates and appoints the
          Collateral Agent and each of its designees or agents as
          attorney-in-fact of such Pledgor, irrevocably and with power of
          substitution, with authority to take any or all of the following
          actions (in the case of PRG-Schultz Canada's Pledged Collateral
          consisting of ULC Shares, such actions to be taken in the name of
          PRG-Schultz Canada and not in the Collateral Agent's own behalf) upon
          the occurrence and during the continuance of an Event of Default:

                         (i) to demand, collect, settle, compromise, adjust and
                    give discharges and releases concerning the Pledged
                    Collateral of such Pledgor, all as the Collateral Agent may
                    reasonably determine;

                         (ii) to commence and prosecute any actions at any court
                    for the purposes of collecting any of the Pledged Collateral
                    of such Pledgor and enforcing any other right in respect
                    thereof;

                         (iii) to defend, settle or compromise any action
                    brought and, in connection therewith, give such discharge or
                    release as the Collateral Agent may deem reasonably
                    appropriate;

                         (iv) to pay or discharge taxes, liens, security
                    interests, or other encumbrances levied or placed on or
                    threatened against the Pledged Collateral of such Pledgor;

                         (v) to direct any parties liable for any payment under
                    any of the Pledged Collateral to make payment of any and all
                    monies due and to become due thereunder directly to the
                    Collateral Agent or as the Collateral Agent shall direct;

                         (vi) to receive payment of and receipt for any and all
                    monies, claims, and other amounts due and to become due at
                    any time in respect of or arising out of any Pledged
                    Collateral of such Pledgor;

                         (vii) to sign and endorse any drafts, assignments,
                    proxies, stock powers, verifications, notices and other
                    documents relating to the Pledged Collateral of such
                    Pledgor;


                                        9



                    (viii) to settle, compromise or adjust any suit, action or
               proceeding described above and, in connection therewith, to give
               such discharges or releases as the Collateral Agent may deem
               reasonably appropriate;

                    (ix) to execute and deliver all assignments, conveyances,
               statements, financing statements, renewal financing statements,
               pledge agreements, affidavits, notices and other agreements,
               instruments and documents that the Collateral Agent may
               reasonably determine necessary in order to perfect and maintain
               the security interests and liens granted in this Pledge Agreement
               and in order to fully consummate all of the transactions
               contemplated therein;

                    (x) to exchange any of the Pledged Collateral of such
               Pledgor or other property upon any merger, consolidation,
               reorganization, recapitalization or other readjustment of the
               issuer thereof and, in connection therewith, deposit any of the
               Pledged Collateral of such Pledgor with any committee,
               depository, transfer agent, registrar or other designated agency
               upon such terms as the Collateral Agent may reasonably determine;

                    (xi) to vote for a shareholder resolution, or to sign an
               instrument in writing, sanctioning the transfer of any or all of
               the Pledged Collateral of such Pledgor into the name of the
               Collateral Agent into the name of any transferee to whom the
               Pledged Collateral of such Pledgor or any part thereof may be
               sold pursuant to Section 9 hereof; and

                    (xii) to do and perform all such other acts and things as
               the Collateral Agent may reasonably deem to be necessary or
               proper in connection with the Pledged Collateral of such Pledgor.

          This power of attorney is a power coupled with an interest and shall
be irrevocable for so long as any of the Secured Obligations remain outstanding
or any Credit Document is in effect. The Collateral Agent shall be under no duty
to exercise or withhold the exercise of any of the rights, powers, privileges
and options expressly or implicitly granted to the Collateral Agent in this
Pledge Agreement, and shall not be liable for any failure to do so or any delay
in doing so. The Collateral Agent shall not be liable for any act or omission or
for any error of judgment or any mistake of fact or law in its individual
capacity or its capacity as attorney-in-fact except acts or omissions resulting
from its gross negligence or willful misconduct. This power of attorney is
conferred on the Collateral Agent solely to protect, preserve and realize upon
its security interest in Pledged Collateral.

               (b) Performance by the Collateral Agent of Pledgor's Obligations.
          If any Pledgor fails to perform any agreement or obligation contained
          herein, the Collateral Agent itself may perform, or cause performance
          of, such agreement or obligation, and the expenses of the Collateral
          Agent incurred in connection


                                       10



          therewith shall be payable by the Pledgors on a joint and several
          basis pursuant to Section 26 hereof.

               (c) Assignment by the Collateral Agent and the Lenders. The
          Collateral Agent and each Lender may from time to time assign the
          Secured Obligations and any portion thereof in accordance with the
          Credit Agreement and/or the Pledged Collateral and any portion
          thereof, and the assignee shall be entitled to all of the rights and
          remedies of the Collateral Agent or such Lender, as applicable, under
          this Pledge Agreement in relation thereto.

               (d) The Collateral Agent's Duty of Care. Other than the exercise
          of reasonable care to assure the safe custody of the Pledged
          Collateral while being held by the Collateral Agent hereunder, the
          Collateral Agent shall have no duty or liability to preserve rights
          pertaining thereto, it being understood and agreed that the Pledgors
          shall be responsible for preservation of all rights in the Pledged
          Collateral of such Pledgor, and the Collateral Agent shall be relieved
          of all responsibility for Pledged Collateral upon surrendering it or
          tendering the surrender of it to the Pledgors. The Collateral Agent
          shall be deemed to have exercised reasonable care in the custody and
          preservation of the Pledged Collateral in its possession if such
          Pledged Collateral is accorded treatment substantially equal to that
          which the Collateral Agent accords its own property, which shall be no
          less than the treatment employed by a reasonable and prudent agent in
          the industry, it being understood that the Collateral Agent shall not
          have responsibility for (i) ascertaining or taking action with respect
          to calls, conversions, exchanges, maturities, tenders or other matters
          relating to any Pledged Collateral, whether or not the Collateral
          Agent has or is deemed to have knowledge of such matters; or (ii)
          taking any necessary steps to preserve rights against any parties with
          respect to any Pledged Collateral.

               (e) Voting Rights in Respect of the Pledged Collateral.

                         (i) So long as no Event of Default shall have occurred
                    and be continuing, to the extent permitted by law, each
                    Pledgor may exercise any and all voting and other consensual
                    rights pertaining to the Pledged Collateral of such Pledgor
                    or any part thereof for any purpose not inconsistent with
                    the terms of this Pledge Agreement or the Credit Agreement;
                    and

                         (ii) Upon the occurrence and during the continuance of
                    an Event of Default, all rights of a Pledgor to exercise the
                    voting and other consensual rights which it would otherwise
                    be entitled to exercise pursuant to paragraph (i) of this
                    subsection shall cease and all such rights shall thereupon
                    become vested in the Collateral Agent which shall then have
                    the sole right to exercise such voting and other consensual
                    rights.

               (f) Dividend Rights in Respect of the Pledged Collateral.


                                       11



                         (i) So long as no Event of Default shall have occurred
                    and be continuing and subject to Section 4(b) hereof, each
                    Pledgor may receive and retain any and all dividends (other
                    than stock dividends and other dividends constituting
                    Pledged Collateral which are addressed hereinabove) or
                    interest paid in respect of the Pledged Collateral to the
                    extent they are allowed under the Credit Agreement.

                         (ii) Upon the occurrence and during the continuance of
                    an Event of Default:

                              (A) all rights of a Pledgor to receive the
                         dividends and interest payments which it would
                         otherwise be authorized to receive and retain pursuant
                         to paragraph (i) of this subsection shall cease and all
                         such rights shall thereupon be vested in the Collateral
                         Agent (or its designee) which shall then have the sole
                         right to receive and hold as Pledged Collateral such
                         dividends and interest payments; and

                              (B) all dividends and interest payments which are
                         received by a Pledgor contrary to the provisions of
                         paragraph (A) of this subsection shall be received in
                         trust for the benefit of the Collateral Agent, shall be
                         segregated from other property or funds of such
                         Pledgor, and shall be forthwith paid over to the
                         Collateral Agent (or its designee) as Pledged
                         Collateral in the exact form received, to be held by
                         the Collateral Agent (or its designee) as Pledged
                         Collateral and as further collateral security for the
                         Secured Obligations.

               (g) Release of Pledged Collateral. The Collateral Agent may
          release any of the Pledged Collateral from this Pledge Agreement or
          may substitute any of the Pledged Collateral for other Pledged
          Collateral without altering, varying or diminishing in any way the
          force, effect, lien, pledge or security interest of this Pledge
          Agreement as to any Pledged Collateral not expressly released or
          substituted, and this Pledge Agreement shall continue as a first
          priority lien (subject in priority solely to the Liens in favor of the
          Working Capital Lender) on all Pledged Collateral not expressly
          released or substituted.

          11. Exception for Unlimited Liability Company Shares. Notwithstanding
anything contained in this Pledge Agreement to the contrary, with respect to the
Pledged Collateral that constitutes the ULC Shares, subsections 10(e) and 10(f)
shall not apply to such ULC Shares, and neither the Collateral Agent nor any
person other than the PRG-Schultz Canada shall become or deemed to become
members or shareholders of the ULC for the purposes of the Companies Act (Nova
Scotia) pursuant to this Pledge Agreement until such time as notice is given to
the PRG-Schultz Canada and further steps are taken under this Pledge Agreement
to register the Collateral Agent or its nominee as holder of the ULC Shares. No
provision in this Pledge Agreement or actions taken by the Collateral Agent
pursuant to this


                                       12


Pledge Agreement which might provide or be deemed to provide otherwise than as
set forth above or which might provide or be deemed to provide the Collateral
Agent any other ownership or indicia of ownership of the ULC shall apply in
respect of ULC Shares except as set forth in the final sentence of this Section
11. To the extent that any provision of this Pledge Agreement would have the
effect of constituting the Collateral Agent as a member of the ULC prior to the
time of the re-registration of the shares in its name or that of its nominee,
such provision shall be severed herefrom and rendered ineffective with respect
to (but only with respect to) Pledged Collateral comprising the ULC Shares and
without otherwise invalidating or rendering unenforceable this Pledge Agreement
or invalidating or rendering unenforceable such provision insofar as it relates
to Pledged Collateral that is not comprised of the ULC Shares. Without limiting
the generality of the foregoing and notwithstanding anything to the contrary in
this Pledge Agreement with respect to the ULC Shares only, neither PRG-Schultz
Canada nor the ULC, the issuer of the ULC Shares, shall, or shall be obliged to,
cause or permit the Collateral Agent to be, or to be deemed to be or entitled
to, (i) be registered as shareholder or member, or apply to be registered as
shareholder or member of the ULC other than upon the enforcement of rights'
described in the final sentence of this Section 11 upon the giving of notice;
(ii) be referred to in any notation entered in any share register in respect of
ULC Shares; (iii) be held out as shareholder or member of the ULC; or (iv) to
act as shareholder or member of the ULC, or obtain, exercise or attempt to
exercise any rights of a shareholder or member including, without limitation,
the right to attend a meeting of, or to vote the shares of, the ULC or to
receive (other than to hold as Pledged Collateral), any dividend or other
distribution in respect of ULC Shares. The foregoing limitations shall not
restrict the Collateral Agent from exercising the rights, powers and remedies
which it is entitled to exercise under Section 9 of this Pledge Agreement in
respect of any Pledged Collateral constituting the ULC Shares at any time that
the Collateral Agent shall be entitled to realize on all or any portion of the
Pledged Collateral pursuant to the security interests and pledges granted by
this Pledge Agreement, provided that no such exercise shall occur, or be deemed
to have occurred, prior to the provision to PRG-Schultz Canada by the Collateral
Agent of prior written notice of the Collateral Agent's intention to exercise
such rights, powers and remedies.

          12. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of any Pledged Collateral, when received by the
Collateral Agent or the Lenders in cash or its equivalent, will be applied in
reduction of the Secured Obligations in the order set forth in Section 9.3 of
the Credit Agreement, and each Pledgor irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
the Collateral Agent and the Lenders shall have the continuing and exclusive
right to apply and reapply any and all such payments and proceeds in the
Collateral Agent's and the Lenders' sole discretion, notwithstanding any entry
to the contrary upon any of its books and records.

          13. Costs of Counsel. At all times hereafter, the Pledgors agree to
promptly pay upon demand any and all reasonable costs and expenses of (a) the
Collateral Agent and each Lender, as required under Section 10.4 of the Credit
Agreement and (b) of the Collateral Agent as the incurrence of such costs and
expenses are reasonably necessary to protect the Pledged Collateral or to
exercise any rights or remedies under this Pledge Agreement or with respect to
any Pledged Collateral. All of the foregoing costs and expenses shall constitute
Secured Obligations hereunder.


                                       13



          14. Continuing Agreement.

               (a) This Pledge Agreement shall be a continuing agreement in
          every respect and shall remain in full force and effect so long as any
          of the Secured Obligations remain outstanding and the Credit Document
          shall not have been terminated (other than any obligations with
          respect to the indemnities and the representations and warranties set
          forth in the Credit Documents). Upon such payment and termination,
          this Pledge Agreement shall be automatically terminated and the
          Collateral Agent shall, upon the request and at the expense of the
          Pledgors, forthwith promptly release all of its liens and security
          interests hereunder and shall execute and deliver all UCC termination
          statements and/or other documents reasonably requested by the Pledgors
          evidencing such termination. Notwithstanding the foregoing all
          releases and indemnities provided hereunder shall survive termination
          of this Pledge Agreement.

               (b) This Pledge Agreement shall continue to be effective or be
          automatically reinstated, as the case may be, if at any time payment,
          in whole or in part, of any of the Secured Obligations is rescinded or
          must otherwise be restored or returned by the Collateral Agent or any
          Lender as a preference, fraudulent conveyance or otherwise under any
          bankruptcy, insolvency or similar law, all as though such payment had
          not been made; provided that in the event payment of all or any part
          of the Secured Obligations is rescinded or must be restored or
          returned, all reasonable costs and expenses (including without
          limitation any reasonable legal fees and disbursements) incurred by
          the Collateral Agent or any Lender in defending and enforcing such
          reinstatement shall be deemed to be included as a part of the Secured
          Obligations.

          15. Amendments; Waivers: Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Collateral Agent and
each of the Obligors.

          16. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns and shall inure, together with the rights
and remedies of the Collateral Agent hereunder, to the Collateral Agent, for the
ratable benefit of the Lenders and each of their respective successors and
permitted assigns; provided, however, that none of the Pledgors may assign its
rights or delegate its duties hereunder without the prior written consent of the
Required Lenders. To the fullest extent permitted by law, each Pledgor hereby
releases the Collateral Agent and each Lender, and their successors and assigns
and their respective officers, attorneys, employees and agents, from any
liability for any act or omission or any error of judgment or mistake of fact or
of law relating to this Pledge Agreement or the Collateral, except as set forth
in Section 10 hereof and except for any liability arising from the gross
negligence or willful misconduct of the Collateral Agent or any Lender,
respectively, or its officers, employees or agents.


                                       14



          17. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with Section 10.1 of the Credit
Agreement.

          18. Counterparts. This Pledge Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.

          19. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.

          20. Governing Law; Submission to Jurisdiction; Venue.

               (a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
          ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO
          AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE;
          PROVIDED THAT THE COLLATERAL AGENT AND THE LENDERS SHALL RETAIN ALL
          RIGHTS ARISING UNDER FEDERAL LAW.

               (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE
          AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF
          THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, NEW YORK OR OF THE
          UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY
          EXECUTION AND DELIVERY OF THIS PLEDGE AGREEMENT, EACH CREDIT PARTY,
          EACH LENDER AND THE COLLATERAL AGENT CONSENTS, FOR ITSELF AND IN
          RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
          COURTS. EACH CREDIT PARTY, EACH LENDER AND THE COLLATERAL AGENT
          IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
          LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CON VENIENS,
          WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
          PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY CREDIT DOCUMENT OR
          OTHER DOCUMENT RELATED THERETO. EACH CREDIT PARTY, EACH LENDER AND THE
          COLLATERAL AGENT WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
          OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE
          LAW OF SUCH STATE.

          21. Waiver of Jury Trial. EACH PARTY TO THIS PLEDGE AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER THIS PLEDGE AGREEMENT OR ANY OTHER CREDIT DOCUMENT
OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER
CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE


                                       15


WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS PLEDGE AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

          22. Severability. If any provision of this Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.

          23. Entirety. This Pledge Agreement, the other Credit Documents and
the other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations or the transactions contemplated herein and therein.

          24. Survival. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement, and
the other Credit Documents.

          25. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Collateral Agent shall, subject in priority solely to the Liens in favor of
the Working Capital Lender, have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of any Event of Default,
and the Collateral Agent has the right, in its sole discretion, to determine
which rights, security, liens, security interests or remedies the Collateral
Agent shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of them or any of
the Collateral Agent's rights or the Secured Obligations under this Pledge
Agreement, under any other of the Credit Documents or under any other documents
relating to the Secured Obligations.

          26. Joint and Several Obligations of Pledgors.

               (a) Each of the Pledgors is accepting joint and several liability
          hereunder in consideration of the financial accommodation to be
          provided by the Collateral Agent and the Lenders under the Credit
          Agreement, for the mutual benefit, directly and indirectly, of each of
          the Pledgors and in consideration of the undertakings of each of the
          Pledgors to accept joint and several liability for the obligations of
          each of them.

               (b) Each of the Pledgors jointly and severally hereby irrevocably
          and unconditionally accepts, not merely as a surety but also as a
          co-debtor, joint and several liability with the other Pledgors with
          respect to the payment and


                                       16



          performance of all of the Secured Obligations arising under this
          Pledge Agreement, and the other Credit Documents, it being the
          intention of the parties hereto that all the Secured Obligations shall
          be the joint and several obligations of each of the Pledgors without
          preferences or distinction among them.

               (c) Notwithstanding any provision to the contrary contained
          herein, in any other of the Credit Documents, the obligations of each
          Guarantor under the Credit Agreement, the other Credit Documents and
          the documents relating to the Secured Obligations shall be limited to
          an aggregate amount equal to the largest amount that would not render
          such obligation subject to avoidance under Section 548 of the United
          States Bankruptcy Code or any comparable provisions of any applicable
          state law.

          27. Intercreditor Agreement. Notwithstanding anything to the contrary
in this Pledge Agreement, (i) the rights of each Pledgor, the Collateral Agent
and the Lenders under this Pledge Agreement are subject to the terms of the
Intercreditor Agreement, (ii) any obligation of any Pledgor in this Pledge
Agreement that requires delivery of Pledged Collateral to, possession or control
of Pledged Collateral with, the pledge, assignment, endorsement or transfer of
Pledged Collateral to or the registration of Pledged Collateral in the name of,
the Collateral Agent shall be deemed complied with and satisfied if such
delivery of Pledged Collateral is made to, such possession or control of Pledged
Collateral is with, or such Pledged Collateral be assigned, endorsed or
transferred to or registered in the name of, the Working Capital Lender, and
(iii) in the event of a direct conflict between the terms and provisions of this
Pledge Agreement and the terms and provisions of the Intercreditor Agreement, it
is the intention of each Pledgor, the Collateral Agent and the Lenders that such
provisions shall be read together and construed, to the fullest extent possible,
to be in concert with each other; however, in the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of the Intercreditor Agreement shall control and, in such case, no
Pledgor shall be in breach of its obligations under this Pledge Agreement as a
result of complying with the terms and provisions of the Intercreditor
Agreement; provided that, notwithstanding the foregoing, nothing contained in
this Section 27 shall limit or otherwise adversely effect the grant of a lien on
or a security interest in any Pledged Collateral under Section 2 of this Pledge
Agreement.

                  [remainder of page intentionally left blank]


                                       17



          Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.

PLEDGORS:                               PRG-SCHULTZ USA, INC.,
                                        a Georgia corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President
                                               - Finance, Chief Financial
                                               Officer and Treasurer


                                        PRG SCHULTZ INTERNATIONAL, INC.,
                                        a Georgia corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President
                                               - Finance, Chief Financial
                                               Officer and Treasurer


                                        PRGFS, INC.,
                                        PRGLS, INC.
                                        Each a Delaware corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President
                                               - Finance


                                        PRGFS, INC., a Delaware corporation


                                        By: s/
                                            ------------------------------------
                                        Name: James B. McCurry
                                        Title: President


                                        PRG HOLDING CO. (FRANCE) NO. 1, LLC,
                                        PRG HOLDING CO. (FRANCE) NO.2, LLC,
                                        Each a Delaware limited liability
                                        company


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President
                                               - Finance, Chief Financial
                                               Officer and Treasurer


                                       18



                                        THE PROFIT RECOVERY GROUP ASIA, INC.,
                                        PRG-SCHULTZ CANADA, INC.,
                                        THE PROFIT RECOVERY GROUP NEW ZEALAND,
                                           INC.,
                                        THE PROFIT RECOVERY GROUP NETHERLANDS,
                                           INC.,
                                        THE PROFIT RECOVERY GROUP MEXICO, INC.
                                        PRG-SCHULTZ FRANCE, INC.,
                                        PRG-SCHULTZ AUSTRALIA, INC.,
                                        PRG-SCHULTZ BELGIUM, INC.,
                                        PRG-SCHULTZ CHILE, INC.,
                                        THE PROFIT RECOVERY GROUP GERMANY, INC.,
                                        PRG INTERNATIONAL, INC.,
                                        PRG-SCHULTZ SWITZERLAND, INC.,
                                        THE PROFIT RECOVERY GROUP SOUTH AFRICA,
                                           INC.,
                                        THE PROFIT RECOVERY GROUP SPAIN, INC.,
                                        THE PROFIT RECOVERY GROUP ITALY, INC.,
                                        PRG-SCHULTZ SCANDINAVIA, INC.,
                                        PRG-SCHULTZ PORTUGAL, INC.,
                                        PRG-SCHULTZ JAPAN, INC.,
                                        THE PROFIT RECOVERY GROUP COSTA RICA,
                                           INC.,
                                        PRG-SCHULTZ PUERTO RICO, INC.,
                                        PRG USA, INC.,
                                        PRG-SCHULTZ EUROPE, INC.,
                                        EACH A GEORGIA CORPORATION


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President
                                               - Finance, Chief Financial
                                               Officer and Treasurer


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


                                        By: s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President
                                               - Finance, Chief Financial
                                               Officer and Treasurer


                                       19



COLLATERAL AGENT:                       BLUM STRATEGIC PARTNERS II, L.P.


                                        By: s/
                                            ------------------------------------
                                        Name: Jose Medeiros
                                        Title: Partner


                                       20



                                  Schedule 2(a)

                                       to

                                Pledge Agreement

                          dated as of December __, 2005

                           in favor of [____________]

                               as Collateral Agent

                                  PLEDGED STOCK

PLEDGOR: [EACH PLEDGOR]



                     Number of   Certificate   Percentage
Name of Subsidiary     Shares       Number      Ownership
- ------------------   ---------   -----------   ----------
                                      



[EACH SUBSIDIARY OF
SUCH PLEDGOR]



                                  Exhibit 4(b)

                                       to

                                Pledge Agreement

                          dated as of December __, 2005

                           in favor of [____________]

                               as Collateral Agent

                             IRREVOCABLE STOCK POWER

          FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers to __________________________________ the following shares of capital
stock of ________________________ - ______________ corporation:



No. of Shares   Certificate No.
- -------------   ---------------
             



and irrevocably appoints ____________________________________ its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for him.

                                        a _______________________ corporation

                                        _________________________,

                                        a ________________________ corporation


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

EX-10.64

                              FORBEARANCE AGREEMENT

     This FORBEARANCE AGREEMENT (this "Agreement") is entered into as of
November 8, 2005, between and among PRG-SCHULTZ USA, INC., a Georgia corporation
(the "Borrower"), PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation
("Parent"), each of the Domestic Subsidiaries of the Parent (such Domestic
Subsidiaries, together with the Parent, individually a "Guarantor" and
collectively the "Guarantors"), and BANK OF AMERICA, N.A. (the "Lender").
Capitalized terms used herein but not otherwise defined shall have the meanings
set forth, or incorporated, in the Credit Agreement (defined below).

                                    RECITALS

     A. The Borrower, the Parent, the Guarantors and the Lender are parties to
that certain Amended and Restated Credit Agreement dated as of November 30, 2004
(as amended and otherwise modified from time to time, the "Credit Agreement").

     B. The Borrower has reported that (i) certain Events of Default exist under
the Credit Agreement arising from (a) the Borrower's failure to comply with the
financial covenants set forth in Section 7.11 of the Credit Agreement as of the
fiscal quarter ending September 30, 2005, (b) the Borrower's failure to provide
written notice to the Lender of the incorporation of PRG-Schultz Europe, Inc.
(the "New Subsidiary") within 45 days after such incorporation as required under
Section 7.12(a) of the Credit Agreement, (c) the Borrower's failure to cause the
New Subsidiary to execute a Joinder Agreement as required under Section 7.12(a)
of the Credit Agreement, (d) the Borrower's failure to cause 100% of the Capital
Stock of the New Subsidiary to be delivered and pledged to the lender as
required under Section 7.12(a) of the Credit Agreement, (e) the Borrower's
failure to deliver to the Lender copies of the changes to the articles of
incorporation of The Profit Recovery Group Switzerland, Inc. and PRG-Schultz
Norway, Inc. (collectively, the "Name Change Subsidiaries") as required under
Section 8.10 of the Credit Agreement and (f) the Borrower's default under
Section 9.1(d) of the Credit Agreement resulting from the Borrower's failure to
provide the notices required under the Security Agreement in connection with the
corporate activities described above (collectively, the "Existing Events of
Default"), and (ii) the Borrower anticipates certain additional Events of
Default may arise under the Credit Agreement or other Credit Documents as a
result of (a) the Borrower's failure to comply with the financial covenants set
forth in Section 7.11 of the Credit Agreement as of the fiscal quarter ending
December 31, 2005, and (b) the Parent's potential failure to make the interest
payment due in respect of the Subordinated Debt on November 28, 2005 (the
"Anticipated Defaults" and, together with the Existing Events of Default, the
"Acknowledged Events of Default").

     C. The Borrower has reported that it may borrow up to $10,000,000 on a
subordinated basis (the "Subordinated Loan"), with a portion of the proceeds
thereof to be used to fund the payment of interest due in respect of the
Subordinated Debt on or about November 28, 2005 (the "November Interest
Payment") and the remaining proceeds to be used for general working capital
purposes.



     D. The Borrower has requested that the Lender agree to (i) forbear from
exercising any rights and remedies arising from the Acknowledged Events of
Default until March 31, 2006 and (ii) consent to the incurrence of the
Subordinated Loan.

     E. The Lender has agreed to do so, but only pursuant to the terms and
conditions set forth herein.

     NOW, THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:

     1. Estoppel, Acknowledgement and Reaffirmation. As of November 2, 2005, the
total outstanding principal amount of Revolving Loans was not less than
$14,200,000, which constitutes a valid and subsisting obligation of the Credit
Parties under the Credit Documents that is not subject to any credits, offsets,
defenses, claims, counterclaims or adjustments of any kind. Each of the Credit
Parties hereby acknowledges its respective Credit Party Obligations under the
Credit Documents and reaffirms that each of the Liens and security interests
created and granted in or pursuant to the Credit Documents are valid and
subsisting and that this Agreement shall in no manner impair or otherwise
adversely affect such Credit Party Obligations, Liens or security interests.

     2. Forbearance. Subject to the terms and conditions set forth herein, the
Lender agrees that from and after the Forbearance Effective Date (as defined
below) it shall, until the occurrence of a Forbearance Termination Event (as
defined below), forbear from exercising any right or remedy under the Credit
Documents (including without limitation the right to cease making Revolving
Loans) or applicable law, but only to the extent that such right or remedy
arises exclusively as a result of the occurrence of the Acknowledged Events of
Default; provided, however, that the foregoing shall not otherwise affect (i)
the Lender's right to effect a "Payment Blockage Period" (as defined in the
Indenture) with respect to the Subordinated Debt (except to the extent that the
November Interest Payment is funded entirely with proceeds of the Subordinated
Loan) or (ii) any other rights the Lender may have against the holder of the
Subordinated Debt; provided, further, that the Lender shall be free to exercise
any or all of its rights and remedies under the Credit Documents after the
occurrence of a Forbearance Termination Event.

     3. Forbearance Termination Event. Nothing set forth herein or contemplated
hereby is intended to constitute an agreement by the Lender to forbear from
exercising any of the rights and remedies available to it under the Credit
Agreement, the other Credit Documents, or applicable law (all of which rights
and remedies are hereby expressly reserved by the Lender) upon or after the
occurrence of a Forbearance Termination Event. As used herein, a "Forbearance
Termination Event" shall mean the occurrence of any of the following: (a) any
Default or Event of Default under the Credit Documents other than the
Acknowledged Events of Default, (b) a breach by the Credit Parties of any of the
provisions of this Agreement, and (c) March 31, 2006.


                                       2



     4. One-Time Overadvance. The Lender agrees, notwithstanding the definition
of Borrowing Base set forth in the Credit Agreement but subject to all other
terms and conditions of the Credit Agreement, that it shall, on any one occasion
prior to the occurrence of a Forbearance Termination Event, make Revolving Loans
to the Borrower in an amount up to $600,000 in excess of the Borrowing Base to
the extent such funds are necessary for general working capital purposes (an
"Overadvance"); provided, that the Borrower shall have delivered the UK
Receivables Documentation (as defined below) prior to the request for such
Overadvance. An Overadvance shall be available to the Borrower on only one
occasion and the Borrower shall repay such Overadvance within thirty (30) days
thereafter, so that at such time the Revolving Obligations outstanding at such
time do not exceed the Borrowing Base. The failure by the Borrower to repay such
Overadvance as and when required hereunder shall constitute an immediate Event
of Default, irrespective of any otherwise applicable grace period.

     5. Consent to Subordinated Loan. The Lender agrees that neither (a) the
Borrower's incurrence of up to $10,000,000 of Indebtedness in connection with
the Subordinated Loan, nor (b) its failure to pay the Lender 100% of the Net
Cash Proceeds thereof as required under Section 3.3(b)(iv) of the Credit
Agreement shall constitute an Event of Default under the Credit Agreement;
provided, that (x) the proceeds of the Subordinated Loan are used to make the
November Interest Payment and for general working capital purposes, and (y) the
repayment of such Subordinated Loan is subordinated to repayment in full of the
Credit Party Obligations on terms and conditions acceptable to the Lender in its
sole discretion.

     6. Interim Financial Covenants. The Borrower shall (a) cause Adjusted
Consolidated EBITDA for the fiscal quarter ending December 31, 2005 to be not
less than $1, and (b) deliver, on or before January 31, 2006, a certificate of
an Executive Officer certifying as to its Adjusted Consolidated EBITDA
(determined on an unaudited basis) for the fiscal quarter ending December 31,
2005 together with such supporting documentation as may be reasonably requested
by the Lender in connection therewith. For purposes of this covenant, "Adjusted
Consolidated EBITDA" shall mean for any period Consolidated EBITDA plus, to the
extent deducted in calculation Consolidated EBITDA, (i) all noncash,
nonrecurring charges incurred by the Parent and its Subsidiaries during such
period and (ii) all cash restructuring charges (an amount not to exceed
$1,800,000 in the aggregate) incurred by the Parent and its Subsidiaries during
such period.

     7. Refinancing Loan. On or before December 23, 2005, the Borrower shall
deliver to the Lender a copy of a bona fide commitment letter, subject only to
customary terms and conditions, from a recognized institutional lender to make a
loan (a "Refinancing Loan") to the Borrower sufficient in amount as to fully
satisfy the Revolving Obligations on or before March 31, 2006. To the extent
such commitment for a Refinancing Loan requires the Borrower to obtain
additional capital or incur additional subordinated debt, the Borrower shall, on
or before December 23, 2005, supply the Lender with a copy of a bona fide
commitment letter, subject only to customary terms and conditions, from a third
party capable of performing, for the provision of such additional capital or
subordinated debt sufficient to satisfy such requirement.

     8. Post-Closing Deliveries. On or before November 9, 2005, the Borrower
shall deliver to the Lender the following documents:


                                       3



          (a) all deliveries required under Section 7.12(a) of the Credit
     Agreement with respect to the New Subsidiary; and

          (b) all deliveries required under Section 8.10 of the Credit Agreement
     with respect to each Name Change Subsidiary.

     9. Notice Prior to Payment of Subordinated Debt. The Borrower hereby agrees
to provide the Lender with not less than seven (7) Business Days' prior written
notice before making any payment with respect to the Subordinated Debt.

     10. UK Receivables. As soon as practicable but in any event on or before
December 31, 2005, the Borrower shall (i) cause all accounts receivable arising
from the operations of the Borrower, its Subsidiaries or its Affiliate,
PRG-Schultz UK Ltd. in the United Kingdom (the "UK Receivables") to be pledged
to the Lender as collateral for the Credit Party Obligations pursuant to
documentation satisfactory to the Lender, (ii) execute such other documents or
instruments (including, without limitation, a guaranty by any such Subsidiaries
or Affiliate of the Credit Party Obligations, limited in amount to the value of
the UK Receivables) as may be reasonably requested by the Lender in connection
with such pledge to ensure that the Lender has a first priority perfected
security interest in such UK Receivables (collectively, the "UK Receivables
Documentation").

     11. Forbearance Fee. In consideration of the Lender's willingness to enter
this Agreement, the Borrower shall pay to the Lender a nonrefundable fee in the
amount of $100,000 (the "Forbearance Fee"), which Forbearance Fee shall be due
and payable on the effective date of this Agreement.

     12. Expenses. Upon demand therefor, the Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Lender (including without limitation the
reasonable fees and out-of-pocket expenses of counsel) in connection with or
related to the negotiation, drafting, and execution of this Agreement and the
transactions contemplated hereby.

     13. Conditions Precedent. As conditions precedent to the effectiveness of
this Agreement:

          (a) the Lender shall have received counterparts of this Agreement duly
     executed by the Credit Parties;

          (b) the Lender shall have received the Forbearance Fee; and

          (c) the Borrower shall have reimbursed the Lender for any unreimbursed
     fees and expenses of its counsel, Moore & Van Allen PLLC incurred through
     November 7, 2005 in the amount of $17,000.

The date on which each of the foregoing conditions precedent have been satisfied
being referred to herein as the "Forbearance Effective Date".


                                       4



     14. No Waiver. Nothing herein is or shall be construed to be a waiver of
the Acknowledged Events of Default, or any other Default or Event of Default
that may exist under the Credit Documents. Except as expressly modified or
limited hereby, the terms and conditions of the Credit Documents remain in full
force and effect.

     15. Representations and Warranties. Each of the Credit Parties hereby
represents and warrants to the Lender that:

          (a) after giving effect to this Agreement, other than the Acknowledged
     Events of Default, no Default or Event of Default exists under the Credit
     Documents; and

          (b) (i) the execution, delivery and performance by the Credit Parties
     of this Agreement are within the Credit Parties' corporate powers and have
     been duly authorized by all necessary corporate action on the part of the
     Credit Parties, (ii) subject to the effect of bankruptcy, insolvency,
     reorganization, arrangement, moratorium or other similar laws relating to
     or affecting creditors' rights (including, without limitation, preference
     and fraudulent conveyance or transfer laws), this Agreement constitutes a
     legal, valid and binding obligation of the Credit Parties enforceable
     against the Credit Parties in accordance with its terms and (iii) neither
     this Agreement, nor the execution, delivery or performance by the Credit
     Parties hereof (A) violates any law or regulation, or any order or decree
     of any court or governmental authority, (B) conflicts with or results in
     the breach or termination of, constitutes a default under or accelerates
     any performance required by, any material indenture, mortgage, deed of
     trust, lease, agreement or other instrument to which the Credit Parties are
     a party or by which the Credit Parties or any of their property is bound,
     or (C) results in the creation or imposition of any lien upon any of the
     Collateral (as defined under the Security Agreement).

     16. Release. In consideration of the willingness of the Lender to enter
into this Agreement, the Credit Parties hereby release the Lender and its
officers, employees, representatives, counsel, subsidiaries, affiliates,
trustees and directors, from any and all actions, causes of action, claims,
demands, damages and liabilities of whatever kind or nature, in law or in
equity, now known or unknown, suspected or unsuspected relating to or arising
under the Credit Documents, excluding any ongoing obligations the Lender may
have pursuant to the Credit Documents.

     17. Further Assurances. The parties hereto each agree to execute and
deliver, or to cause to be executed and delivered, all such instruments as they
may reasonably request to effectuate the intent and purposes, and to carry out
the terms, of this Agreement.

     18. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAW OF THE STATE OF GEORGIA (WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS THEREOF).


                                       5



     19. Miscellaneous.

          (a) This Agreement shall be binding on and shall inure to the benefit
     of the Borrower, the Guarantors, the Lender and their respective successors
     and permitted assigns. The terms and provisions of this Agreement are for
     the purpose of defining the relative rights and obligations of the
     Borrower, the Guarantors and the Lender with respect to the transactions
     contemplated hereby and there shall be no third party beneficiaries of any
     of the terms and provisions of this Agreement.

          (b) Section headings in this Agreement are included herein for
     convenience of reference only and shall not constitute a part of this
     Agreement for any other purpose.

          (c) Wherever possible, each provision of this Agreement shall be
     interpreted in such a manner as to be effective and valid under applicable
     law, but if any provision of this Agreement shall be prohibited by or
     invalid under applicable law, such provision shall be ineffective to the
     extent of such prohibition or invalidity, without invalidating the
     remainder of such provision or the remaining provisions of this Agreement.

          (d) Except as otherwise provided in this Agreement, if any provision
     contained in this Agreement is in conflict with, or inconsistent with, any
     provision in the Credit Documents, the provision contained in this
     Agreement shall govern and control.

          (e) This Agreement may be executed in any number of separate
     counterparts, each of which shall collectively and separately constitute
     one agreement. Delivery of an executed counterpart of this Agreement by
     telecopy shall be effective as an original and shall constitute a
     representation that an original shall be delivered to the Lender.

          (f) This Agreement and the documents executed in connection herewith
     shall be deemed Credit Documents executed pursuant to the Credit Agreement
     and the other Credit Documents and shall (unless otherwise expressly
     indicated therein) be construed, administered and applied in accordance
     with the terms and provisions of the Credit Agreement and the other Credit
     Documents.

     20. Entirety. This Agreement and the Credit Documents embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof. This Agreement
and the Credit Documents represent the final agreement between the parties and
may not be contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       6



     IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.

BORROWER:                           PRG-SCHULTZ USA, INC.,
                                    a Georgia corporation


                                    By: /s/
                                        ----------------------------------------
                                    Name: James E. Moylan, Jr.
                                    Title: Executive Vice President - Finance,
                                           Chief Financial Officer and Treasurer


GUARANTORS:                         PRG-SCHULTZ INTERNATIONAL, INC.,
                                    a Georgia corporation


                                    By: /s/
                                        ----------------------------------------
                                    Name: James E. Moylan, Jr.
                                    Title: Executive Vice President - Finance,
                                           Chief Financial Officer and Treasurer


                                    PRGFS, INC.,
                                    PRGLS, INC.,
                                    each a Delaware corporation


                                    By: /s/
                                        ----------------------------------------
                                    Name: James E. Moylan, Jr.
                                    Title: Executive Vice President - Finance


                                    PRGRS, INC., a Delaware corporation


                                    By: /s/
                                        ----------------------------------------
                                    Name: James E. Moylan, Jr.
                                    Title: E.V.P.- Finance



GUARANTORS:                           THE PROFIT RECOVERY GROUP ASIA, INC.,
                                      PRG-SCHULTZ CANADA, INC.,
                                      THE PROFIT RECOVERY GROUP NEW ZEALAND,
                                         INC.,
                                      THE PROFIT RECOVERY GROUP NETHERLANDS,
                                         INC.,
                                      THE PROFIT RECOVERY GROUP MEXICO, INC.,
                                      PRG-SCHULTZ FRANCE, INC.,
                                      PRG-SCHULTZ AUSTRALIA, INC.,
                                      PRG-SCHULTZ BELGIUM, INC.,
                                      PRG-SCHULTZ CHILE, INC.,
                                      THE PROFIT RECOVERY GROUP GERMANY, INC.,
                                      PRG INTERNATIONAL, INC.,
                                      PRG-SCHULTZ SWITZERLAND, INC.,
                                      THE PROFIT RECOVERY GROUP SOUTH AFRICA,
                                         INC.,
                                      THE PROFIT RECOVERY GROUP SPAIN, INC.,
                                      THE PROFIT RECOVERY GROUP ITALY, INC.,
                                      PRG-SCHULTZ SCANDINAVIA, INC.,
                                      PRG-SCHULTZ PORTUGAL, INC.,
                                      PRG-SCHULTZ JAPAN, INC.,
                                      THE PROFIT RECOVERY GROUP COSTA RICA,
                                         INC.,
                                      PRG-SCHULTZ PUERTO RICO, INC.,
                                      PRG USA, INC.,
                                      PRG-SCHULTZ EUROPE, INC.,
                                      each a Georgia corporation


                                      By: /s/
                                          --------------------------------------
                                      Name: James E. Moylan, Jr.
                                      Title: Executive Vice President - Finance,
                                             Chief Financial Officer and
                                             Treasurer


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


                                      By: /s/
                                          --------------------------------------
                                      Name: James E. Moylan, Jr.
                                      Title: Executive Vice President - Finance,
                                             Chief Financial Officer and
                                             Treasurer



LENDER:                                 BANK OF AMERICA, N.A.


                                        By: /s/
                                            ------------------------------------
                                        Name: Joseph M. Martens
                                        Title: Senior Vice President

EX-10.65

                       AMENDMENT TO FORBEARANCE AGREEMENT
                              AND CREDIT AGREEMENT

     This AMENDMENT TO FORBEARANCE AGREEMENT AND CREDIT AGREEMENT (this
"Agreement") is entered into as of December 23, 2005, between and among
PRG-SCHULTZ USA, INC., a Georgia corporation (the "Borrower"), PRG-SCHULTZ
INTERNATIONAL, INC., a Georgia corporation ("Parent"), each of the Domestic
Subsidiaries of the Parent (such Domestic Subsidiaries, together with the
Parent, individually a "Guarantor" and collectively the "Guarantors"), and BANK
OF AMERICA, N.A. (the "Lender"). Capitalized terms used herein but not otherwise
defined shall have the meanings set forth, or incorporated, in the Forbearance
Agreement (defined below).

                                    RECITALS

     A. The Borrower, the Parent, the Guarantors and the Lender are parties to
that certain Amended and Restated Credit Agreement dated as of November 30, 2004
(as amended and otherwise modified from time to time, the "Credit Agreement").

     B. The Borrower, the Parent, the Guarantors and the Lender are parties to
that certain Forbearance Agreement dated as of November 8, 2005 (as amended and
otherwise modified from time to time, the "Forbearance Agreement") pursuant to
which the Lender agreed to temporarily forbear from exercising its rights and
remedies arising from the Acknowledged Events of Default pursuant to the terms
and conditions set forth therein.

     C. The Borrower has requested that the Lender amend the Forbearance
Agreement (i) to extend the deadline by which the Borrower is required to
deliver to the Lender a bona fide commitment letter from a recognized lender to
make a Refinancing Loan (as defined in the Forbearance Agreement), (ii) to
require the pledge of certain Canadian Receivables (as defined below) to the
Lender and (iii) to modify the requirement to pledge UK Receivables (as defined
below).

     D. The Borrower has also requested that the Lender permit the Borrower to
incur certain subordinated debt, as contemplated under the Forbearance
Agreement, for working capital purposes and to enable the Borrower to make the
November Interest Payment with respect to the Subordinated Debt.

     E. The Lender has agreed to do so, but only pursuant to the terms and
conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

     1. Estoppel, Acknowledgement and Reaffirmation. As of December 22, 2005,
the total outstanding principal amount of Revolving Loans was not less than
$14,600,000, which amount constitutes a valid and subsisting obligation of the
Credit Parties under the Credit



Documents that is not subject to any credits, offsets, defenses, claims,
counterclaims or adjustments of any kind. Each of the Credit Parties hereby
acknowledges its Credit Party Obligations under the Credit Documents and
reaffirms that each of the Liens and security interests created and granted in
or pursuant to the Credit Documents are valid and subsisting and that this
Agreement shall in no manner impair or otherwise adversely effect such Credit
Party Obligations, Liens or security interests.

     2. Amendments to Forbearance Agreement.

          (a) Extension of Commitment Letter Deadline. Section 7 of the
     Forbearance Agreement is hereby amended by deleting the reference to
     "December 23, 2005" contained in the first sentence thereof and replacing
     it with "January 31, 2006".

          (b) Waiver and Consent. Notwithstanding the provisions of Section 9 of
     the Forbearance Agreement, the Lender hereby waives notice of payment with
     respect to the November Interest Payment on the Subordinated Debt and
     acknowledges that the proceeds of the Subordinated Debt may be applied to
     such payment.

          (c) Pledge of Foreign Receivables.

               (i) Section 4 of the Forbearance Agreement is hereby amended by
          deleting the reference to "UK Receivables Documentation" contained in
          the proviso thereof and replacing it with "Foreign Receivables
          Documentation."

               (ii) Section 10 of the Forbearance Agreement is amended and
          restated in its entirety so that such Section reads as follows:

               10. Foreign Receivables. As soon as practicable but in any event
          on or before January 15, 2006, the Borrower shall (i) cause all
          accounts receivable arising from the operations of PRG-Schultz UK Ltd.
          in the United Kingdom (excluding accounts receivable owed by clients
          for auditing services performed by independent contractors hired by
          PRG-Schultz UK, Ltd.) (the "UK Receivables") to be pledged to the
          Lender as collateral for the Credit Party Obligations pursuant to
          documentation satisfactory to the Lender, (ii) cause all accounts
          receivable arising from the operations of PRG-Schultz Canada Corp. in
          Canada (the "Canadian Receivables", and together with the UK
          Receivables, the "Foreign Receivables") to be pledged to the Lender as
          collateral for the Credit Party Obligations pursuant to documentation
          satisfactory to the Lender, (iii) execute such other documents or
          instruments (including, without limitation, a guaranty by any such
          Subsidiaries or Affiliate of the Credit Party Obligations, limited in
          amount to the value of the UK Receivables or the Canadian Receivables,
          as applicable) as may be reasonably requested by the Lender in
          connection with such pledge to ensure that the Lender has a first
          priority perfected security interest in such Foreign Receivables
          (collectively, the "Foreign Receivables Documentation").



          (d) Addition of Acknowledged Event of Default. The "Acknowledged
     Events of Default" shall include the failure of the representation
     contained in Section 6.18 to be true (whether prior to the date hereof or
     hereafter).

     3. Amendments to Credit Agreement.

          (a) Definitions.

               (i) The following definitions set forth in Section 1.1 of the
          Credit Agreement are hereby amended and restated in their entirety to
          read as follows:

                    "Amendment Effective Date" means the date which the
               conditions specified in the Amendment to Forbearance Agreement
               and Credit Agreement have been satisfied or waived.

                    "Credit Documents" means a collective reference to this
               Credit Agreement, the Notes, the LOC Documents, each Joinder
               Agreement, the Intercreditor Agreement, the Collateral Documents
               and all other related agreements and documents issued or
               delivered hereunder or thereunder or pursuant hereto or thereto
               (in each case as the same may be amended, modified, restated,
               supplemented, extended, renewed or replaced from time to time),
               and "Credit Document" means any one of them.

               (ii) Subpart (xi) and (xii) of the definition of "Permitted
          Liens" set forth in Section 1.1 of the Credit Agreement are hereby
          amended and restated in their entirety and the definition of
          "Permitted Liens" is further amended by adding the new subsections
          (xiii) to read as follows:

                    (xi) Lien in favor of Meridian International on the Capital
               Stock of PRG-Schultz UK Ltd. owned by Tamebond which Lien secures
               the Meridian Loan;

                    (xii) Liens on Property of Meridian or any of its
               Subsidiaries securing those obligations of Meridian or any of its
               Subsidiaries permitted under Section 8.1(h); and

                    (xiii) Liens in favor of the Subordinated Term Loan Lenders
               to secure the Subordinated Term Loan Debt, provided that such
               liens are subordinated to the Lien of the Lender pursuant to the
               Intercreditor Agreement.

               (iii) The following new definitions are hereby added to Section
          1.1 of the Credit Agreement in the appropriate alphabetical order to
          read as follows:

                    "Extraordinary Receipts" means any cash received by the
               Parent or any of its Subsidiaries not in the ordinary course of
               business



               (and not consisting of proceeds described in Section 3.3(b)(ii)
               and (iii) hereof) including, without limitation, (i) foreign,
               United States, state or local tax refunds, (ii) pension plan
               reversions, (iii) proceeds of insurance, (iv) judgments, proceeds
               of settlements or other consideration of any kind in connection
               with any cause of action, (v) condemnation awards (and payments
               in lieu thereof), (vi) indemnity payments and (vii) any purchase
               price adjustment received in connection with any purchase
               agreement.

                    "Intercreditor Agreement" means the Intercreditor and
               Subordination Agreement, dated as of the 23rd day of December,
               2005, by and between Lender, the Subordinated Term Loan Lenders,
               Borrower, Parent and the Guarantors (as amended from time to
               time).

                    "Subordinated Term Loan Lenders" means the holders of the
               Subordinated Term Loan Debt from time to time.

                    "Subordinated Term Loan Credit Agreement" the Credit
               Agreement, dated as December 23, 2005, by and among each of the
               Subordinated Term Loan Lenders, Blum Strategic Partners II, L.P.
               as collateral agent for the Subordinated Term Loan Lenders and
               the Borrower (as amended from time to time to the extent
               permitted under the Intercreditor Agreement).

                    "Subordinated Term Loan Debt" shall mean and include all
               indebtedness, obligations and liabilities of any Credit Party
               under the Subordinated Term Loan Documents, including, without
               limitation, all principal, interest, expenses, and other amounts
               payable thereunder or with respect thereto.

                    "Subordinated Term Loan Documents" shall mean the
               Subordinated Term Loan Credit Agreement and all agreements,
               documents and instruments executed and delivered in connection
               therewith (each as amended from time to time to the extent
               permitted under the Intercreditor Agreement).

          (b) Mandatory Prepayment. Section 3.3(b) of the Credit Agreement is
     hereby amended to add new subsection (v) to read as follows:

               (v) Extraordinary Receipts. Upon the receipt by any Credit Party
          or any of its Subsidiaries of any Extraordinary Receipts, the Borrower
          shall repay the outstanding principal of the Loans in an amount equal
          to 100% of such Extraordinary Receipts, net of any reasonable expenses
          incurred in collecting such Extraordinary Receipts.



          (c) Information Covenant. Subsection (l) of Section 7.1 of the Credit
     Agreement is hereby amended and restated in its entirety and Section 7.1 of
     the Credit Agreement is amended by adding the new subsection (m) to read as
     follows:

               (l) Monthly Financial Statements. As soon as available, and in
          any event within 30 days after the end of each fiscal month of the
          Consolidated Parties commencing with the first fiscal month of the
          Consolidated Parties ending after the Amendment Effective Date, an
          internally prepared consolidated balance sheets and income statements
          of the various geographic segments of the Consolidated Parties, as at
          the end of such fiscal month, and for the period commencing at the end
          of the immediately preceding fiscal year and ending with the end of
          such fiscal month, together with related consolidated statements of
          cash flows for such month, all in reasonable detail and certified by
          the chief financial officer of the Borrower to the effect that such
          financial statements fairly present in all material respects the
          financial condition of the Consolidated Parties and have been prepared
          in accordance with GAAP, subject to changes resulting from audit and
          normal year-end adjustments.

               (m) Other Information. With reasonable promptness upon any such
          request, such other information regarding the business, properties or
          financial condition of any Consolidated Party as the Lender may
          reasonably request.

          (d) Debt Covenant. Subsections (h) and (i) of Section 8.1 of the
     Credit Agreement are hereby amended and restated in their entirety and
     Section 8.1 of the Credit Agreement is amended by adding the new subsection
     (j) to read as follows:

               (h) obligations of Meridian or any of its Subsidiaries with
          respect to any letter of credit, bond or other surety provided for the
          account of Meridian or any of its Subsidiaries to support Meridian's
          or any of its Subsidiaries' obligations to the French VAT authorities;
          provided, that (i) the aggregate amount of such obligations shall not
          exceed $6,000,000 in the aggregate and (ii) such Indebtedness shall
          not have a cross-default to the Indebtedness arising under this Credit
          Agreement and the other Credit Documents;

               (i) the Meridian Loan; and

               (j) the Subordinated Term Loan Debt in a principal amount not to
          exceed $10,000,000, provided that the repayment of such Subordinated
          Term Loan Debt is subordinated to the payment of the Credit Party
          Obligations pursuant to the Intercreditor Agreement, and provided that
          the covenants, defaults and events of default in the Subordinated Term
          Loan Documents are not materially more restrictive to any of the
          Credit Parties, or materially more



          extensive, than the covenants, defaults and events of default in the
          Credit Agreement.

          (e) Limitation of Restricted Actions. Section 8.11 of the Credit
     Agreement is hereby amended by (i) deleting the word "or" appearing at the
     end of clause (iv) thereto and substituting a "," in lieu thereof, (ii)
     deleting the "." at the end of clause (v) thereof and substituting "or" in
     lieu thereof and adding new clause (vi) as follows: "(vi) the Subordinated
     Term Loan Documents."

          (f) Capital Expenditures. Section 8.14 of the Credit Agreement is
     hereby amended and restated in its entirety to read as follows:

               8.14 Capital Expenditures.

                    The Credit Parties will not permit aggregate Consolidated
               Capital Expenditures for any fiscal year to exceed $6 million.

          (g) Subordinated Debt / Term Loan Debt. Section 8.17 of the Credit
     Agreement is hereby amended and restated in its entirety to read as
     follows:

               8.17 Subordinated Debt and Subordinated Term Loan Debt.

                    (a) No Credit Party will, nor will it permit any of its
               Subsidiaries to (a) make or offer to make any principal payments
               with respect to the Subordinated Debt, (b) redeem or offer to
               redeem any of the Subordinated Debt, (c) deposit any funds
               intended to discharge the Subordinated Debt, or (d) amend or
               modify the Subordinated Debt in any manner that would adversely
               affect the Lender without the prior written consent of the
               Lender.

                    (b) No Credit Party will, nor will it permit any of its
               Subsidiaries to, subject to the Intercreditor Agreement, (a) make
               any payments with respect to the Subordinated Term Loan Debt
               other than as expressly permitted by the Intercreditor Agreement,
               (b) deposit any funds intended to discharge the Subordinated Term
               Loan Debt, or (c) amend or modify the Subordinated Term Loan Debt
               in any manner.

          (h) Additional Negative Covenant. The following new Section 8.19 is
     hereby added to the Credit Agreement to read as follows:

               8.19 Liens/Guarantees

                    (A) Unless the Credit Parties shall have previously granted
               or shall simultaneously grant a Lien to the Lender pursuant to
               documentation reasonably satisfactory to the Lender, the Credit
               Parties shall not grant a Lien in any property of any Credit
               Party or



               any guarantor or any other person or entity as security for the
               Subordinated Term Loan Debt, as in effect from time to time, and
               (B) unless the Lender shall have previously obtained or shall
               simultaneously obtain a comparable guaranty or other instruments
               in connection with the obligations hereunder, pursuant to
               documentation reasonably satisfactory to the Lender, no Person
               shall guarantee, or otherwise become an obligor on, all or any
               portion of the Subordinated Term Loan Debt, as in effect from
               time to time.

          (i) Events of Default. Subsections (i) and (j) of Section 9.1 of the
     Credit Agreement are hereby amended and restated in their entirety and
     Section 9.1 of the Credit Agreement is amended by adding the new
     subsections (k) to read as follows:

               (i) Ownership. There shall occur a Change of Control;

               (j) Subordinated Debt. There shall occur (a) an "Event of
          Default" under, and as defined in, the Indenture or (b) a "Change in
          Control" (or any comparable term) under and as defined in the
          Indenture; or

               (k) Subordinated Term Loan Debt. There shall occur a "Default" or
          an "Event of Default" under, and as defined in, the Subordinated Term
          Loan Credit Agreement or any of the Subordinated Term Loan Documents.

     4. Expenses. Upon demand therefor, the Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Lender (including without limitation the
reasonable fees and out-of-pocket expenses of counsel) in connection with or
related to the negotiation, drafting, and execution of this Agreement and the
transactions contemplated hereby.

     5. Prepayment Waiver. Lender hereby waives the mandatory prepayment
otherwise required under Section 3.3(b) of the Credit Agreement and any required
reduction to the Revolving Committed Amount otherwise required pursuant to
Section 3.4(b) with respect to the Subordinated Term Loan Debt (as defined in
the Credit Agreement as amended hereby).

     6. Conditions Precedent. As conditions precedent to the effectiveness of
this Agreement:

          (a) the Lender shall have received counterparts of this Agreement duly
     executed by the Credit Parties;

          (b) the Lender shall have received a fully executed copy of the
     Intercreditor Agreement (as defined in the Credit Agreement as amended
     hereby);

          (c) the Lender shall have received a fully executed copy of the
     Subordinated Term Loan Documents (as defined in the Credit Agreement as
     amended hereby);



          (d) the Lender shall have received a copy of an opinion of counsel to
     the Borrower in form reasonably acceptable to the Lender with respect to
     the Borrower's execution of and performance under the Subordinated Term
     Loan Documents (as defined in the Credit Agreement as amended hereby),
     including without limitation an opinion that such execution and performance
     does not violate the terms of the Indenture or of the Credit Agreement (as
     amended hereby); and

          (e) the Borrower shall have reimbursed the Lender for any unreimbursed
     fees and expenses of its counsel, Moore & Van Allen, PLLC incurred through
     the date hereof in the amount of $40,000.

     7. No Waiver. Nothing herein is or shall be construed to be a waiver of the
Acknowledged Events of Default, or any other Default or Event of Default that
may exist under the Credit Documents. Except as expressly modified or limited
hereby, the terms and conditions of the Credit Documents remain in full force
and effect.

     8. Representations and Warranties. Each of the Credit Parties hereby
represents and warrants to the Lender that:

          (a) after giving effect to this Agreement, other than the Acknowledged
     Events of Default, no Default or Event of Default exists under the Credit
     Documents;

          (b) (i) the execution, delivery and performance by the Credit Parties
     of this Agreement are within the Credit Parties' corporate powers and have
     been duly authorized by all necessary corporate action on the part of the
     Credit Parties, (ii) subject to the effect of bankruptcy, insolvency,
     reorganization, arrangement, moratorium or other similar laws relating to
     or affecting creditors' rights (including, without limitation, preference
     and fraudulent conveyance or transfer laws), this Agreement constitutes a
     legal, valid and binding obligation of the Credit Parties enforceable
     against the Credit Parties in accordance with its terms and (iii) neither
     this Agreement, nor the execution, delivery or performance by the Credit
     Parties hereof (A) violates any law or regulation, or any order or decree
     of any court or governmental authority, (B) conflicts with or results in
     the breach or termination of, constitutes a default under or accelerates
     any performance required by, any material indenture, mortgage, deed of
     trust, lease, agreement or other instrument to which the Credit Parties are
     a party or by which the Credit Parties or any of their property is bound,
     or (C) results in the creation or imposition of any lien upon any of the
     Collateral (as defined under the Security Agreement);

          (c) the covenants, defaults and events of default in the Subordinated
     Term Loan Documents (as defined in the Credit Agreement as amended hereby)
     are not materially more restrictive to any of the Credit Parties, or
     materially more extensive, than the covenants, defaults and events of
     default in the Credit Agreement (as amended hereby); and

          (d) there are no fees or other amounts, other than reimbursement of
     costs and expenses, payable by any Credit Party in connection with the
     Subordinated Term Loan



     Debt (as defined in the Credit Agreement as amended hereby) except for
     those set forth on Schedule 8(d) hereof.

     9. Release. In consideration of the willingness of the Lender to enter into
this Agreement, the Credit Parties hereby release the Lender and its officers,
employees, representatives, counsel, subsidiaries, affiliates, trustees and
directors, from any and all actions, causes of action, claims, demands, damages
and liabilities of whatever kind or nature, in law or in equity, now known or
unknown, suspected or unsuspected relating to or arising under the Credit
Documents, excluding any ongoing obligations the Lender may have pursuant to the
Credit Documents.

     10. Further Assurances. The parties hereto each agree to execute and
deliver, or to cause to be executed and delivered, all such instruments as they
may reasonably request to effectuate the intent and purposes, and to carry out
the terms, of this Agreement.

     11. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAW OF THE STATE OF GEORGIA (WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS THEREOF).

     12. Miscellaneous.

          (a) This Agreement shall be binding on and shall inure to the benefit
     of the Borrower, the Guarantors, the Lender and their respective successors
     and permitted assigns. The terms and provisions of this Agreement are for
     the purpose of defining the relative rights and obligations of the
     Borrower, the Guarantors and the Lender with respect to the transactions
     contemplated hereby and there shall be no third party beneficiaries of any
     of the terms and provisions of this Agreement.

          (b) Section headings in this Agreement are included herein for
     convenience of reference only and shall not constitute a part of this
     Agreement for any other purpose.

          (c) Wherever possible, each provision of this Agreement shall be
     interpreted in such a manner as to be effective and valid under applicable
     law, but if any provision of this Agreement shall be prohibited by or
     invalid under applicable law, such provision shall be ineffective to the
     extent of such prohibition or invalidity, without invalidating the
     remainder of such provision or the remaining provisions of this Agreement.

          (d) Except as otherwise provided in this Agreement, if any provision
     contained in this Agreement is in conflict with, or inconsistent with, any
     provision in the Credit Documents, the provision contained in this
     Agreement shall govern and control.

          (e) This Agreement may be executed in any number of separate
     counterparts, each of which shall collectively and separately constitute
     one agreement. Delivery of an executed counterpart of this Agreement by
     telecopy shall be effective as an original and shall constitute a
     representation that an original shall be delivered to the Lender.



          (f) This Agreement and the documents executed in connection herewith
     shall be deemed Credit Documents executed pursuant to the Credit Agreement
     and the other Credit Documents and shall (unless otherwise expressly
     indicated therein) be construed, administered and applied in accordance
     with the terms and provisions of the Credit Agreement and the other Credit
     Documents.

     13. Entirety. This Agreement and the Credit Documents embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof. This Agreement
and the other Credit Documents represent the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous or subsequent
oral agreements of the parties.

                  [REMAINDER OF PAGE LEFT BLANK INTENTIONALLY.]



     IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.

BORROWER:                               PRG-SCHULTZ USA, INC.,
                                        a Georgia corporation


                                        By: /s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance,
                                               Chief Financial Officer
                                               and Treasurer


GUARANTORS:                             PRG-SCHULTZ INTERNATIONAL, INC.,
                                        a Georgia corporation


                                        By: /s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance,
                                               Chief Financial Officer
                                               and Treasurer


                                        PRGFS, INC.,
                                        PRGLS, INC.,
                                        each a Delaware corporation


                                        By: /s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance


                                        PRGRS, INC., a Delaware corporation


                                        By: /s/
                                            ------------------------------------
                                        Name: James B. McCurry
                                        Title: President



GUARANTORS:                             THE PROFIT RECOVERY GROUP ASIA, INC.,
                                        PRG-SCHULTZ CANADA, INC.,
                                        THE PROFIT RECOVERY GROUP NEW ZEALAND,
                                        INC.,
                                        THE PROFIT RECOVERY GROUP NETHERLANDS,
                                        INC.,
                                        THE PROFIT RECOVERY GROUP MEXICO, INC.,
                                        PRG-SCHULTZ FRANCE, INC.,
                                        PRG-SCHULTZ AUSTRALIA, INC.,
                                        PRG-SCHULTZ BELGIUM, INC.,
                                        PRG-SCHULTZ CHILE, INC.,
                                        THE PROFIT RECOVERY GROUP GERMANY, INC.,
                                        PRG INTERNATIONAL, INC.,
                                        PRG-SCHULTZ SWITZERLAND, INC.,
                                        THE PROFIT RECOVERY GROUP SOUTH AFRICA,
                                        INC.,
                                        THE PROFIT RECOVERY GROUP SPAIN, INC.,
                                        THE PROFIT RECOVERY GROUP ITALY, INC.,
                                        PRG-SCHULTZ SCANDINAVIA, INC.,
                                        PRG-SCHULTZ PORTUGAL, INC.,
                                        PRG-SCHULTZ JAPAN, INC.,
                                        THE PROFIT RECOVERY GROUP COSTA RICA,
                                        INC.,
                                        PRG-SCHULTZ PUERTO RICO, INC.,
                                        PRG USA, INC.,
                                        PRG-SCHULTZ EUROPE, INC.,
                                        each a Georgia corporation


                                        By: /s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance,
                                               Chief Financial Officer
                                               and Treasurer


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


                                        By: /s/
                                            ------------------------------------
                                        Name: James E. Moylan, Jr.
                                        Title: Executive Vice President -
                                               Finance,
                                               Chief Financial Officer
                                               and Treasurer



LENDER:                                 BANK OF AMERICA, N.A.


                                        By: /s/
                                            ------------------------------------
                                        Name: Joseph M. Martens
                                        Title: Senior Vice President



                                  SCHEDULE 8(D)

               FEES PAYABLE TO THE SUBORDINATED TERM LOAN LENDERS

1)   $100,000 on execution of the Commitment,

2)   $25,000 on increase in Commitment to $10,000,000 and

3)   $225,000 on the Closing Date

EX-10.66

                                                                  EXECUTION COPY

                         RESTRUCTURING SUPPORT AGREEMENT

          This RESTRUCTURING SUPPORT AGREEMENT is made and entered into as of
December 23, 2005 (the "Agreement") by and among PRG-Schultz International,
Inc., a Georgia corporation ("PRG" or the "Company"), and (i) each of the
undersigned beneficial owners (or investment managers or advisors for the
beneficial owners) of the Notes (as defined below) and (ii) each other
beneficial owner (or investment manager or advisor for such beneficial owner) of
the Notes that executes a counterpart signature page to this Agreement after the
date of this Agreement, as provided herein (each, a "Noteholder" and
collectively, the "Noteholders").

                                    RECITALS:

     A. PRG has issued and outstanding $125,000,000 aggregate principal amount
of its 4-3/4% Convertible Subordinated Notes due 2006 (the "Notes") pursuant to
that certain indenture, dated as of November 26, 2001 (the "Indenture"), between
PRG (as successor in interest to The Profit Recovery Group International, Inc.)
and SunTrust Bank, as trustee.

     B. The Noteholders are beneficial owners of the Notes (and/or are serving
as the investment advisors or managers or in a similar capacity for the
beneficial owners of such Notes, having the power to enter into this Agreement
on behalf of such beneficial owners) in the respective aggregate principal
amounts separately disclosed to PRG on a confidential basis (provided that the
aggregate principal amount of the holdings of all the Noteholders shall not be
deemed confidential).

     C. Exhibit A hereto (the "Term Sheet") and the provisions hereof set forth
the basic terms of a financial restructuring of the Notes to be realized through
an exchange offer (the "Exchange Offer" and, collectively with any transactions
substantially as contemplated by the Term Sheet or this Agreement, the
"Restructuring").

     D. The parties have agreed to the terms of the Restructuring and the
Noteholders each have agreed to support the Restructuring on the terms and
conditions set forth herein.

     E. The Company intends to (i) conduct the Exchange Offer as soon as
practicable and (ii) use commercially reasonable efforts to obtain acceptance of
the Exchange Offer by the holders of 99% of the outstanding Notes.

                                   AGREEMENT:

          NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:



     Section 1. General.

          (a) The Company agrees and covenants that, subject to the conditions
set forth on the Term Sheet, it will use its commercially reasonable best
efforts to complete the Restructuring through the Exchange Offer.

          (b) The parties shall negotiate in good faith (i) the documentation
regarding the Restructuring contemplated by the Term Sheet, (ii) the Exchange
Offer, and (iii) the other documents contemplated hereby and thereby
(collectively, the "Restructuring Documents").

          (c) The parties hereto shall not (i) object to, delay, impede, or
commence any proceeding pertaining to, or take any other action to interfere,
directly or indirectly, in any material respect with the acceptance or
implementation of, the Restructuring provided that the terms of the final
Restructuring Documents are materially consistent with the Term Sheet and
otherwise in form and substance satisfactory to the Company and the Noteholders
in their reasonable discretion, (ii) encourage or support any person or entity
to do any of the foregoing, (iii) in the case of the Noteholders, exercise any
rights under any indenture or other agreement with the Company or instruct any
trustee to exercise any such rights except as consistent with this Agreement, or
(iv) seek or solicit, propose, file, support, encourage, vote for, consent to,
instruct, or engage in discussions with any person or entity, other than PRG,
concerning any restructuring, workout, plan of reorganization, dissolution,
winding up, acquisition or liquidation of PRG and/or its affiliates, other than
the Exchange Offer, provided that the Company may, upon one Business Day's
notice to the other parties hereto, respond to and engage in discussions
concerning unsolicited offers that the Company's board of directors believes in
good faith will lead to an alternative transaction that would provide more value
to the holders of the Notes and to PRG's current shareholders than the
Restructuring.

          (d) The parties agree nothing in this Agreement shall limit, modify or
otherwise effect any of the Lenders' rights under that certain Credit Agreement
among PRG-Schultz USA, Inc as Borrower, PRG and certain of its other affiliates,
as Guarantors and certain of the Noteholders, as Lenders, dated December 23,
2005 (the "Bridge Loan Credit Agreement"), or any documents related thereto
(collectively, the "Bridge Loan Documents").

     Section 2. Support for the Restructuring.

          (a) PRG agrees and covenants that it will use commercially reasonable
best efforts to take or cause to be taken all actions commercially reasonably
necessary and appropriate in furtherance of the Exchange Offer, including as
promptly as practicable to:

               (1) prepare the solicitation materials relating to the Exchange
Offer (the "Solicitation Materials") in form and substance consistent with the
Term Sheet, except to the extent otherwise consented to by the Noteholders;

               (2) commence the Exchange Offer and disseminate the Solicitation
Materials in a manner customary for comparable transactions;

               (3) seek satisfaction of all conditions precedent to the
Restructuring;


                                        2



               (4) defend in good faith any suit or other legal or
administrative proceeding seeking to interfere with, impair or impede the
Restructuring;

               (5) promptly amend the Solicitation Materials, as necessary and
as may be required by applicable law and provide a draft of such amended
Solicitation Materials to the Ad Hoc Committee prior to the distribution of such
materials to holders of the Notes;

               (6) not solicit or encourage others to formulate any other tender
offer, settlement offer, or exchange offer for the Notes other than the Exchange
Offer;

               (7) so long as this Agreement is effective and has not been
terminated in accordance with Section 5 or 6, hereof, and except to the extent
necessary for the fulfillment of the fiduciary duties of the Company's board of
directors as referred to in Section 6(c) hereof, not object to, nor otherwise
commence any proceeding to oppose, the Restructuring, it being understood and
agreed that the Company shall not seek, solicit, support, consent to,
participate in the formulation of, or encourage any other plan, sale, proposal,
or offer of winding up, liquidation, reorganization, merger, consolidation,
dissolution, or restructuring of the Company; and

               (8) subject to the satisfaction or waiver of any conditions
precedent to the Exchange Offer, consummate the Exchange Offer, including
delivery of all securities required to be issued thereunder (within the time
that is customary for transactions of this type) and the other transactions that
are part of the Restructuring.

          (b) PRG agrees and covenants that it will not, and will cause each of
its direct and indirect subsidiaries not to, sell, liquidate, or dispose of any
assets, outside the ordinary course of business consistent with past practices,
prior to the date on which the Exchange Offer closes other than as permitted by
the Section 8.5 of the Bridge Loan Credit Agreement as in effect on the Closing
Date (as defined under the Bridge Loan Credit Agreement), without the prior
written consent of the holders of a majority of the Notes subject to this
Agreement.

          (c) Each of the Noteholders agrees and covenants that it shall, as
long as this Agreement is in effect:

               (1) no later than 15 days prior to the first date scheduled for
the closing of the Exchange Offer, (i) tender all Notes beneficially owned by it
and (ii) cause the beneficial owner of all Notes for which the Noteholder is the
investment advisor or manager having the power to vote and dispose of such Notes
on behalf of such beneficial owner, to tender all such Notes together with
properly completed and duly executed letter or letters of transmittal with
respect to such Notes as required by the instructions to the letter of
transmittal pursuant to and in accordance with the Exchange Offer within 5
business days after receipt of the relevant letters of transmittal;

               (2) not revoke any of the foregoing unless and until this
Agreement is terminated in accordance with its terms;


                                        3



               (3) not vote for, consent to, provide any support for,
participate in the formulation of, or solicit or encourage others to formulate
any other tender offer, settlement offer, or exchange offer for the Notes other
than the Exchange Offer; and

               (4) so long as this Agreement is effective and has not been
terminated in accordance with Section 5 or 6 hereof and the final Restructure
Documents are materially consistent with the Term Sheet, not object to, nor
otherwise commence any proceeding to oppose, the Restructuring, it being
understood and agreed that each Noteholder shall not (i) directly or indirectly
seek, solicit, support, or encourage any other plan, sale, proposal, or offer of
winding up, liquidation, reorganization, merger, consolidation, dissolution, or
restructuring of the Company or (ii) commence an involuntary bankruptcy case
against the Company.

     Section 3. Representations and Warranties.

          (a) Each of the parties severally represents and warrants to each of
the other parties that the following statements are true and correct as of the
date hereof:

               (1) Power and Authority. It has all requisite power and authority
to enter into this Agreement and to carry out the transactions contemplated by,
and perform its respective obligations under, this Agreement.

               (2) Authorization. The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly authorized by
all necessary action on its part.

               (3) No Conflicts. The execution, delivery, and performance by it
of this Agreement do not and shall not (i) violate any provision of law, rule,
or regulation applicable to it or its certificate of incorporation or by-laws
(or other organizational documents) or (ii) conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default under any
material contractual obligation to which it is a party or under its certificate
of incorporation or by-laws (or other organizational documents), except, with
respect to the Company, for any contractual obligation that would not have a
material adverse effect on the business, assets, financial condition, or results
of operations of PRG and its subsidiaries, taken as a whole.

               (4) Governmental Consents. The execution, delivery, and
performance by it of this Agreement do not and shall not require any
registration or filing with, consent or approval of, or notice to, or other
action to, with, or by, any Federal, state, or other governmental authority or
regulatory body, except (i) such filings as may be necessary and/or required for
disclosure by the Securities and Exchange Commission and (ii) filings with
NASDAQ in connection with the Restructuring.

               (5) Binding Obligation. This Agreement is the legally valid and
binding obligation of it, enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other


                                        4



similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.

               (6) Proceedings. No litigation or proceeding before any court,
arbitrator, or administrative or governmental body is pending against it that
would adversely affect its ability to enter into this Agreement or perform its
obligations hereunder.

          (b) Each of the Noteholders represents and warrants, severally and not
jointly, to each of the other parties that the following statements are true,
correct, and complete as of the date hereof:

               (1) Ownership. It has disclosed to PRG on a confidential basis
the aggregate principal amount of the Notes for which (i) it is the sole
beneficial owner and (ii) it is the investment advisor or manager for the
beneficial owners of such Notes, having the power to vote and dispose of such
Notes on behalf of such beneficial owners. It is entitled (for its own account
or for the account of other persons claiming through it) to all of the rights
and economic benefits of such Notes.

               (2) Transfers. It has made no prior assignment, sale,
participation, grant, conveyance, or other transfer of, and has not entered into
any other agreement to assign, sell, participate, grant, or otherwise transfer,
in whole or in part, any right, title, or interests in (or portion thereof) the
Notes referred to in Subsection 3(b)(1), except as permitted by Section 4
hereto.

               (3) Laws. It (i) is a sophisticated investor with respect to the
transactions described herein with knowledge and experience in financial and
business matters sufficient to evaluate the merits and risks of owning and
investing in securities similar to the Notes (including any securities that may
be issued in connection with the Restructuring), making an informed decision
with respect thereto, and evaluating properly the terms and conditions of this
Agreement, and it has made its own analysis and decision to enter in this
Agreement, (ii) is, and any person for which it is the investment advisor or
manager and which is the beneficial owner of Notes is, an "accredited investor"
within the meaning of Rule 501 of the Securities Act of 1933, as amended, and
(iii) it has had the opportunity to meet with management of PRG and to ask
questions and review information with respect to PRG's business, financial
condition, results of operations and financial and operational outlook, and it
has obtained all information it deems necessary or appropriate in order to enter
into this agreement and make the investment decision contemplated hereby.

     Section 4. Restriction On the Sale Of the Notes. Each Noteholder
individually covenants that, from the date hereof until the termination of this
Agreement, such party shall not, directly or indirectly, sell, pledge,
hypothecate, or otherwise transfer any Notes or any option, right to acquire, or
voting, participation, or other interest therein, except to a purchaser or other
entity who executes and delivers to PRG, concurrently or prior to any binding
commitment with respect to such transfer, an agreement in writing to be bound by
all the terms of this Agreement with respect to the relevant Notes or other
interests being transferred to such purchaser (which agreement shall include the
representations and warranties set forth in Section 3 hereof). This Agreement
shall in no way be construed to preclude a party from acquiring additional Notes
or


                                        5



other interests in PRG. All Notes held by a Noteholder, including Notes acquired
after the date hereof shall be subject to all the terms of this Agreement.

     Section 5. Termination by the Noteholders. This Agreement may be terminated
by Noteholders that beneficially own or act as the investment advisor or manager
with respect to at least a majority of the Notes subject to the terms of this
Agreement on the occurrence of any of the following events (each a "Noteholder
Termination Event"), by delivering written notice of the occurrence of such
event in accordance with Section 11 below to the other parties:

          (a) the Exchange Offer has not been commenced by January 31, 2006 or
completed by March 31, 2006;

          (b) after the date hereof there shall have occurred any event or
circumstance that individually or in the aggregate reflect a material adverse
change in the financial condition, business, or operations of the Company and
its subsidiaries; or

          (c) the failure to repay all obligations under the facility
contemplated by the Bridge Loan Documents (the "Bridge Loan"), in full, in cash,
concurrent with the closing of the Exchange Offer

          (d) the exercise of any remedies under the Bridge Loan Documents
following an Event of Default (as defined therein) arising from any the
following: (i) the failure to make any scheduled payment of principal or
interest as and when required under the Bridge Loan Documents; (ii) the failure
by the Company to make any Mandatory Prepayments or Payment of Taxes; (iii) a
default under any Other Indebtedness, unless otherwise permitted by the Bridge
Loan Documents; (iv) the failure to maintain Insurance required by the Bridge
Loan Documents; (v) the incurrence of any Debt or Indebtedness in excess of the
limitations in the Bridge Loan Documents; (iv) any Consolidation, Dissolution or
Merger in violation of the Bridge Loan Documents; (vii) making any Restricted
Payments in violation of the Bridge Loan Documents; (viii) any Transactions with
Affiliates in violation of the Bridge Loan Documents; (ix) taking any Restricted
Action in violation of the Bridge Loan Documents; (x) making any Negative Pledge
in violation of the Bridge Loan Documents; (xi) occurrence of any Bankruptcy
Event or Change of Control.(1)

          (e) the exercise of any remedies under that certain Amended and
Restated Credit Agreement among PRG-Schulz USA, Inc., as Borrower, PRG, and
certain of its other affiliates, as Guarantors, and Bank of America, N.A., dated
as of November 30, 2004, and any documents related thereto;

          (f) the Restructuring or the final Restructuring Documents do not
conform to the Term Sheet with respect to the treatment of the Notes, except as
modified in any non-material respect or as approved by the Ad Hoc Committee of
the Noteholders (the members of which are identified on the signature pages
hereto); or

- ----------
(1)  All capitalized terms used in this Section 5(c) shall have the meaning
     given such terms in the Bridge Loan Credit Agreement.


                                       6



          (g) a material breach of this Agreement by the Company that is not, by
its terms, curable or that is, by its terms, curable and is not cured by the
fifth calendar day after notice of such breach (for the purposes of this
Agreement, the term "material breach" includes a breach of the covenant in
Section 2(b)).

     Section 6. Termination by the Company. The Company shall have the right to
terminate this Agreement on the occurrence of any of the following events (each
a "Company Termination Event") by giving written notice in accordance with
Section 11 below to the other parties:

          (a) the exercise of any remedies under the Bridge Loan Documents; or

          (b) a material breach of this Agreement by any of the Noteholders that
is not, by its terms, curable or that is, by its terms, curable and is not cured
by the fifth calendar day after notice of such breach; or

          (c) a good faith determination by the Company's board of directors
(following consultation with its reputable outside legal counsel and its
financial advisor of national recognized reputation) that such termination is
required by its fiduciary duty to the Company, its then current shareholders,
and its creditors in order to enter into an alternative transaction (whether in
the form of a merger, consolidation or combination with a third party or the
sale of all, substantially all, or a significant portion of the assets or
businesses of the Company) that will be at least as favorable to each of such
parties but more favorable to the parties as a whole, from a financial
perspective, than the Restructuring and is reasonably capable of being
consummated, taking into account, among other things, all legal, financial,
regulatory and other aspects of the alternative transaction and the person or
group making such proposal (a "Superior Proposal"); provided that (i) the Bridge
Loan has been paid in full, in accordance with the Bridge Loan Documents, (ii)
the Company provides the Noteholders five (5) business days prior notice of the
Company's intent to terminate this Agreement under this Section (c) and the
terms and conditions of such Superior Proposal (including the identity of the
person or group making such Superior Proposal), and (iii) the Company provides
the Noteholders and their representatives a good faith opportunity during such 5
day notice period and prior to any such termination to revise the terms of the
Restructuring.

     Section 7. Termination of Agreement. Notwithstanding anything to the
contrary in this Agreement, the Term Sheet or any other agreement, this
Agreement shall terminate on the earlier of (a) the occurrence of a Noteholder
Termination Event after expiration of any cure periods and satisfaction of any
conditions set forth in Section 5 of this Agreement, (b) the occurrence of a
Company Termination Event, after expiration of any cure periods and satisfaction
of any conditions set forth in Section 6 of this Agreement, and (c) 5:00 pm on
June 15, 2006.

     Section 8. Effect of Termination and of Waiver of Termination Event. On the
delivery of the written notice referred to in Sections 5 or 6 in connection with
the valid termination of this Agreement, the obligations of each of the parties
hereunder shall thereupon terminate and be of no further force and effect. Prior
to the delivery of such notice the Noteholders may waive the occurrence of a
Noteholder Termination Event and PRG may waive


                                        7



the occurrence of a Company Termination Event. No such waiver shall affect any
subsequent termination event or impair any right consequent thereon. Upon
termination of this Agreement, no party shall have any continuing liability or
obligation to the other parties hereunder; provided, however, that no such
termination shall relieve any party from liability for its breach or
non-performance of its obligations hereunder prior to the date of such
termination.

     Section 9. Amendments. This Agreement may be modified, amended, or
supplemented by a written agreement executed by the Company and the Noteholders
that beneficially own or act as the investment advisors or managers with respect
to at least a majority of the aggregate principal face amount of the Notes
subject to this Agreement, provided, however, that in the event of a material
change to the Term Sheet, or a change of any of the economic terms of the Term
Sheet, any Noteholder that does not consent shall have no further obligations
under the Agreement.

     Section 10. Further Assurances. Each of the parties to this Agreement
hereby further covenants and agrees to cooperate in good faith to execute and
deliver all further documents and agreements and take all further action that
may be commercially reasonably necessary or desirable in order to enforce and
effectively implement the terms and conditions of this Agreement. Each
Noteholder agrees to advise the Company of any changes in the amount of Notes
beneficially owned by it and the amount of Notes for which such Noteholder is
the investment manager or advisor for beneficial owners.

     Section 11. Governing Law; Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws of the State of New York. By its execution and delivery of
this Agreement, each of the parties hereto hereby irrevocably and
unconditionally agrees for itself that any legal action, suit, or proceeding
against it with respect to any matter under or arising out of or in connection
with this Agreement or for recognition or enforcement of any judgment rendered
in any such action, suit, or proceeding, shall be brought in a federal court of
competent jurisdiction in the Southern District of New York. By execution and
delivery of this Agreement, each of the parties hereto hereby irrevocably
accepts and submits to the jurisdiction of such court, generally and
unconditionally, with respect to any such action, suit, or proceeding.

     Section 12. Notices. All demands, notices, requests, consents, and
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or by courier service, messenger, facsimile,
telecopy, or if duly deposited in the mails, by certified or registered mail,
postage prepaid-return receipt requested, and shall be deemed to have been duly
given or made (i) upon delivery, if delivered personally or by courier service,
or messenger, in each case with record of receipt, (ii) upon transmission with
confirmed delivery, if sent by facsimile or telecopy, or (iii) two business days
after being sent by certified or registered mail, postage pre-paid, return
receipt requested, to the following addresses, or such other addresses as may be
furnished hereafter by notice in writing, to the following parties:


                                        8



          If to PRG, or any of its subsidiaries, to:

          PRG-Schultz International, Inc.
          600 Galleria Parkway, Suite 600
          Atlanta, GA 30339
          Facsimile: (770) 779-3133
          Attn: Clint McKellar, Esq.

          with a copy to:

          Weil, Gotshal & Manges LLP
          767 Fifth Avenue
          New York, NY 10153
          Facsimile: (212) 310-8007
          Attn: Michael F. Walsh, Esq.

          If to the Noteholders, or any one Noteholder, to:

          Houlihan Lokey Howard & Zukin
          685 Third Avenue, 15th Floor
          New York, NY 10017
          Facsimile: (212) 497-3070
          Attn: David Hilty

          with a copy to:

          Schulte Roth & Zabel LLP
          919 Third Avenue
          New York, NY 10022
          Facsimile: (212) 593-5955
          Attn: Jeffrey S. Sabin, Esq.

     Section 13. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement among the parties with regard to the subject
matter hereof, and supersedes all prior agreements with respect to the subject
matter hereof.

     Section 14. Headings. The headings of the paragraphs and subparagraphs of
this Agreement are inserted for convenience only and shall not affect the
interpretation hereof.

     Section 15. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of the parties and their respective permitted successors
and assigns, provided, however, that nothing contained in this paragraph shall
be deemed to permit sales, assignments, or transfers other than in accordance
with Section 4.

     Section 16. Specific Performance. Each party hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause other parties to sustain damages for which such
parties would not have an adequate remedy at law for


                                        9



money damages, and therefore each party hereto agrees that in the event of any
such breach, such other parties shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which such parties may be entitled, at
law or in equity.

     Section 17. Several, Not Joint, Obligations. The agreements,
representations, and obligations of the parties under this Agreement are, in all
respects, several and not joint.

     Section 18. Remedies Cumulative. All rights, powers, and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any right,
power, or remedy thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power, or remedy by such party.

     Section 19. No Waiver. The failure of any party hereto to exercise any
right, power, or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power, or remedy or to
demand such compliance.

     Section 20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement. Delivery of an executed signature page of
this Agreement by telecopier or email shall be as effective as delivery of a
manually executed signature page of this Agreement.

     Section 21. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

     Section 22. No Third-Party Beneficiaries. Unless expressly stated herein,
this Agreement shall be solely for the benefit of the parties, and no other
person or entity shall be a third party beneficiary hereof.

     Section 23. Additional Parties. Without in any way limiting the provisions
hereof, additional holders of Notes may elect to become parties by executing and
delivering to PRG a counterpart hereof. Each such additional holder shall become
a party to this Agreement as a Noteholder in accordance with the terms of this
Agreement.

     Section 24. No Solicitation. This Agreement is not intended to be, and each
signatory to this Agreement acknowledges that this Agreement is not, a
solicitation with respect to the Exchange Offer or with respect to any other
mechanism to accomplish a restructuring of the obligations under the Notes,
whether such mechanism is to be accomplished in or outside a court.

     Section 25. Consideration. It is hereby acknowledged by the parties hereto
that, other than the agreements, covenants, representations, and warranties set
forth herein and in the Term


                                       10



Sheet, no consideration shall be due or paid to the Noteholders for their
agreement to vote to accept the Exchange Offer in accordance with the terms and
conditions of this Agreement.

     Section 26. Receipt of Adequate Information; Representation by Counsel.
Each party acknowledges that it has received adequate information to enter into
this Agreement and that it has been represented by counsel in connection with
this Agreement and the transactions contemplated by this Agreement. Accordingly,
any rule of law or any legal decision that would provide any party with a
defense to the enforcement of the terms of this Agreement against such party
shall have no application and is expressly waived. The provisions of the
Agreement shall be interpreted in a reasonable manner to effect the intent of
the parties.

                            [Signature Page Follows]


                                       11



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

                                        PRG-Schultz International, Inc.


                                        By: /s/
                                            ------------------------------------
                                        Name: Clinton McKellar, Jr.
                                        Title: SVP, General Counsel & Secretary


                                       12



                                        NOTEHOLDERS:

                                        BLUM CAPITAL PARTNERS LP


                                        By: /s/
                                            ------------------------------------
                                        Name: Jose S. Medeiros
                                        Title: Partner


                                        PARKCENTRAL GLOBAL HUB LIMITED


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


                                        PETRUS SECURITIES LP


                                        By: /s/
                                            ------------------------------------
                                        Name: Steven Blasnik
                                        Title: President of General Partner


                                        TENOR OPPORTUNITY MASTER FUND, LTD


                                        By: /s/
                                            ------------------------------------
                                        Name: Robin Shah
                                        Title: Partner


                                        THALES FUND MANAGEMENT, LLC


                                        By: /s/
                                            ------------------------------------
                                        Name: A. Aadei Shaaban
                                        Title: Senior Analyst


                                       13



                                    EXHIBIT A

                                   TERM SHEET

                     
PROPOSED TRANSACTION:   The following describes an agreement in principal
                        between PRG-Schultz International, Inc. and its
                        subsidiaries (collectively, the "Company") and the Ad
                        Hoc Committee of Holders of the Company's 4.75%
                        Convertible Subordinated Notes due 2006 (the "Ad Hoc
                        Committee") and to restructure the financial obligations
                        of the Company.

                        The Transaction will involve the recapitalization of the
                        Company through:

                             (i) A Bridge Loan (as defined below) of $10 million
                                 to provide the Company with sufficient funds to
                                 pay the interest payment due on the Notes and
                                 additional working capital, pending the closing
                                 of the Recapitalization (as defined below);

                             (ii) A credit facility or facilities, consisting of
                                 a minimum revolver of $20 million and total
                                 commitments of no more than $47.5 million,
                                 amending or refinancing (a) the Amended and
                                 Restated Credit Agreement, dated as of November
                                 30, 2004, among (x) PRG-Schultz USA, Inc., the
                                 Company, and certain of the Company's
                                 subsidiaries and (y) Bank of America, N.A. (the
                                 "Existing Credit Facility"), and (b) the Bridge
                                 Loan and

                             (iii) A pro-rata exchange of the 4.75% Convertible
                                 Subordinated Notes due 2006 issued by the
                                 Company (the "Notes") for three new securities
                                 including: (1) New Senior Notes; (2) New Senior
                                 Convertible Notes; and (3) New Senior Series A
                                 Convertible Participating Preferred Stock
                                 (collectively the "Transaction Securities").

                        Points (i) through (iii), collectively are defined as
                        the "Recapitalization".

EX-10.67

                      FIRST AMENDMENT TO RETAINER AGREEMENT

This First Amendment to Retainer Agreement (this "Amendment") is entered into as
of October 1, 2005, between PRG-SCHULTZ INTERNATIONAL, INC., a Georgia
corporation (PRGX) and David A. Cole ("Director").

WHEREAS, PRGX and Director entered into the Retainer Agreement dated as of July
20, 2005 (the "Agreement") that provided for, among other things, compensation
to be paid by Director;

WHEREAS, because of the evolution of Director's role since the execution of the
Agreement, the parties wish to reduce the Director's time commitment as
non-executive Chairman and revise the amount of the compensation paid to
Director under the Agreement effective as of October 1, 2005;

NOW, THEREFORE, PRGX and Director agree to amend the Agreement as follows:

     1. Subparagraph (c) of paragraph 2 of the Agreement is hereby deleted in
     its entirety and the following new subparagraph (c) of paragraph 2 is
     inserted in lieu thereof:

          (c) Director acknowledges that the duties described in this paragraph
     2 are expected to require Director's commitment of the equivalent of two
     days per week of Director's business time and attention during the first
     two months of the Appointment Period and one day per week thereafter during
     the Appointment Period. Director further acknowledges that these duties
     may, at times, require more or less than the time commitment described in
     the immediately preceding sentence

     2. Subparagraph (a) of paragraph 4 of the Agreement is hereby deleted in
     its entirety and the following new subparagraph (a) is inserted in lieu
     thereof:

          (a) Retainer Fee. On the Effective Date, PRGX shall pay Director an
     initial cash retainer fee of $42,000. Thereafter, during the Appointment
     Period, PRGX shall pay Director a cash retainer fee, payable monthly, as
     follows: (i) for the period commencing on August 1, 2005 through September
     30 2005, PRGX shall pay Director a cash retainer fee of $42,000 per month;
     (ii) for the period commencing October 1, 2005 through the end of the
     Appointment Period, PRGX shall pay Director the regular director cash
     retainer fee of $2,500 per month plus a supplemental retainer of $5,000 per
     month as Non-Executive Chairman. (iii) for the period commencing October 1,
     2005 through the end of the Appointment Period, Director shall be eligible
     for payment of the attendance fees paid to the other members of the Board,
     currently $1,500 per each Meeting of the Board and $1,000 for each Board
     committee meeting for which an attendance fee is earned. The retainer fee
     payable for any month in which Director serves as Non-Executive Chairman
     for less than the entire month (other than July 2005) will be prorated
     based on the number of days during such month in which Director served as
     Non-Executive Chairman. The retainer fee payable for any month (other than
     July 2005) shall be payable in arrears at the end of such month.



     3. Subparagraph (d) of paragraph 4 of the Agreement is hereby deleted in
     its entirety and the following new subparagraph (d) is inserted in lieu
     thereof:

          (d) The $42,000 retainer fee payable pursuant to subparagraph (a) of
     paragraph 4 is in lieu of any regular directors' retainer and attendance
     fees otherwise payable to members of the Board (or any committee thereof)
     generally. Upon cessation of service by Director as Non-Executive Chairman,
     Director shall be eligible to receive the same regular director retainer
     and attendance fees otherwise payable to other members of the Board (or any
     committee thereof) so long as Director serves as a member of the Board.

     4 Counterparts. This Amendment may be executed in separate counterparts,
     each of which is to be deemed to be an original and both of which taken
     together are to constitute one and the same agreement.

     5. Effect of Amendment. Except as expressly modified by this Amendment, all
     terms and conditions of the Agreement are hereby ratified.

The parties are signing this First Amendment as of the date set forth above.

                                        PRG-SCHULTZ INTERNATIONAL, INC.


                                        By: /s/
                                            ------------------------------------
                                        Name: Clinton McKellar, Jr.
                                        Title: SVP & General Counsel


                                        /s/
                                        ----------------------------------------
                                        DAVID A. COLE

EX-10.68

                                                                   EXHIBIT 10.68

January 1, 2006

Larry Robinson
111 Blair Road
Cambridge, Ontario Canada  N1S  2J2

Dear Larry:

This letter is to confirm the terms of your full time employment with
PRG-Schultz International, Inc. ("PRGS") as President - Canada, Latin America
and Asia-Pacific, reporting to James B. McCurry, Chief Executive Officer,
conditioned upon your signing this offer letter.

The terms are as follows:

1.    Base Salary. Base salary of CAD$412,093.00 per annum.

2.    Auto Allowance: Auto allowance of CAD$18,579.60 per annum.

3.    2006 Performance Bonus. You will be eligible for a performance bonus
      ("Incentive Bonus") which will include payout potentials of 45% of your
      base pay for achievement of annual target performance goals and payout
      potentials of 85% of your base pay for achievement of annual maximum
      performance goals, in accordance with PRGS performance bonus plan.

4.    2006 Stock Based Incentive Plan. You will be eligible to participate in
      the final Executive stock based management incentive plan contemplated by
      PRGS' financial restructuring currently in
      process.

5.    Termination.

      (a)   This Agreement may be terminated by PRGS for reasonable cause upon
            delivery to you of a thirty (30) days notice of termination. As used
            herein, "reasonable cause" shall mean (i) fraud, dishonesty, gross
            negligence, willful misconduct, commission of a felony or an act of
            moral turpitude, or (ii) any breach by you of any material provision
            of the PRGS Employee Agreement previously executed by you (the "PRGS
            Agreement").

      (b)   Either party, without cause, may terminate this Agreement by giving
            written notice in the manner specified in Section 7 hereof



      (c)   In the event of your Disability, PRGS will have the right, subject
            to all applicable laws, to terminate your employment immediately.
            For purposes of this Agreement, "Disability" shall mean your
            inability or expected inability (or a combination of both) to
            perform the services required of you hereunder due to illness,
            accident or any other physical or mental incapacity for an aggregate
            of ninety (90) days within any period of one hundred eighty (180)
            consecutive days during which this Agreement is in effect, as agreed
            by the parties or as determined pursuant to the next sentence. If
            there is a dispute between you and PRGS as to whether a Disability
            exists, then such issue shall be decided by a medical doctor
            selected by PRGS and a medical doctor selected by you and your legal
            representative (or, in the event that such doctors fail to agree,
            then in the majority opinion of such doctors and a third medical
            doctor chosen by such doctors). Each party shall pay all costs
            associated with engaging the medical doctor selected by such party
            and the parties shall each pay one-half (1/2) of the costs
            associated with engaging any third medical doctor.

      (d)   In the event this Agreement is terminated, all provisions in this
            Agreement or in the PRGS Employee Agreement which by their terms are
            intended to survive termination shall so survive.

5.    Payments after Termination of Employment.

      (a)   If your employment with PRGS is terminated for reasonable cause or
            if you voluntarily resign, you will receive your base salary
            prorated through the date of termination, payable in accordance with
            PRGS' standard payroll practices in effect on the date of
            termination, and you will not receive any bonus or any other amount
            in respect of the year in which termination occurs or in respect of
            any subsequent year.

      (b)   If your employment with PRGS is terminated without reasonable cause,
            and provided that you sign the Company's form of separation and
            release agreement, you will receive severance equal to one hundred
            percent (100%) of your then-current base salary for the year in
            which such termination occurs, payable in accordance with PRGS'
            standard payroll practices in effect on the date of termination.
            Except as provided in the immediately preceding sentence, you will
            not receive any bonus or any other amount in respect of the year in
            which termination occurs or in respect of any subsequent year.

      (c)   If your employment with PRGS is terminated by your death or
            retirement, you (or your legal representative in the case of death)
            will receive your then-current base salary and bonus for the year in
            which such termination occurs, prorated through the date of such
            termination, and neither you nor any legal representative will
            receive any other amount in respect of the year in which termination
            occurs or in respect of any subsequent year. The prorated base
            salary will be paid in accordance with PRGS' standard payroll
            practices in effect on the date of termination, and the prorated
            bonus will be paid in a lump sum within ninety (90) days after the
            end of the year to which it relates. You will not receive any other
            amount in respect of the year in which termination occurs or in
            respect of any subsequent year.

                                       2


      (d)   If your employment with PRGS is terminated for Disability, you or
            your legal representative will receive all unpaid base salary and
            bonus for the year in which such termination occurs, prorated
            through the date of termination. Such prorated base salary shall be
            paid in accordance with PRGS' standard payroll practices in effect
            on the date of termination, and the prorated bonus payable in a lump
            sum within ninety (90) days after the end of the year to which it
            relates. You will not receive any other amount in respect of the
            year in which termination occurs or in respect of any subsequent
            year.

      (e)   If you breach any material obligation under the PRGS Employee
            Agreement, you will forfeit any right to severance or other
            termination payments, other than payment of your base salary
            prorated through the date of your termination. Upon PRGS' demand for
            same, you shall repay PRGS any severance or other termination
            payments paid to you after the date of termination of your
            employment with PRGS (other than your base salary prorated through
            the date of your termination).

6.    Successors and Assigns. You may not assign this Agreement. This Agreement
      may be assigned by PRGS to any affiliate of PRGS. The provisions of this
      Agreement will be binding upon your heirs and legal
      representatives.

7.    Notices. Any notice to be given under this Agreement shall be given in
      writing and shall be effected by (i) personal delivery, (ii) overnight
      delivery by a reputable overnight delivery service with a reliable system
      for tracking delivery, or (iii) United States certified mail (or the
      Canadian equivalent of same), return receipt requested and addressed as
      set forth below, or to such other address as a party has notified the
      other in accordance with the provisions hereof:

      If to PRGS:                              PRG Schultz International, Inc.
                                               600 Galleria Parkway
                                               Suite 100
                                               Atlanta, GA  30339
                                               Attention: General Counsel

      If to you:                               Larry Robinson
                                               111 Blair Road
                                               Cambridge, Ontario Canada N1S 2J2

8.    Withholdings. PRGS will deduct or withhold from all amounts payable to you
      pursuant to this Agreement such amount(s) as may be required pursuant to
      applicable laws.

9.    Entire Agreement. This Agreement, the PRGS Employee Agreement and such
      other documents as may be referenced by such documents (the "Referenced
      Documents"), constitute our entire agreement with respect to the subject
      matter hereof and, except as specifically provided herein or in the PRGS
      Employee Agreement or the Referenced Documents, supersedes all of our
      prior discussions, understandings and agreements with respect to such
      subject matter. Any such prior agreements shall be null and void. This
      Agreement may not be changed orally, but only by an agreement in writing
      signed by the

                                       3


      party against whom enforcement of any waiver, change, modification,
      extension or discharge is sought. Time is of the essence of this Agreement
      and each and every Section and subsection hereof.

Please confirm your agreement with the terms of this letter by signing and
returning the letter to me within seven (7) days. Thank you.

Sincerely,

James B. McCurry
Chief Executive Officer

Accepted and agreed:

- ----------------------------------              --------------------------------
Larry Robinson                                  Date

                                       4

EX-10.69

                                                                   Exhibit 10.69

                                  June 1, 2001

Mr. Bradley Roos
3989 Wieuca Road
Atlanta, Georgia 30342

Dear Brad:

I am pleased to confirm the following terms of your continued full time
employment with The Profit Recovery Group USA, Inc. ("PRG") as Senior Vice
President-Sales and Marketing.

1.   Base Salary. Effective February 26, 2001, base salary paid at the rate of
     $185,000.00 per annum, paid $7,115.38 every two weeks and pro-rated for
     partial years.

2.   Performance Bonus. Beginning January 1, 2001 and for so long as you remain
     employed by PRG you will be eligible for annual bonuses, which will include
     annual payout potentials of 35% of your base salary for achievement of your
     Target performance goals, and a maximum annual payout potential of 70% of
     your base salary. The measurement periods will be calendar quarter or
     calendar year or a combination of both. Your bonus will be pro-rated for
     partial years based on the number of days you were employed by PRG during
     such year.

3.   Employee Benefits. You will continue to be eligible for participation in
     PRG's Employee Benefits Plan, which currently offers medical, dental, life,
     short term and long term disability insurance, flexible spending accounts,
     401(k) Savings Plan and Employee Stock Purchase Program. The effective
     dates for your coverage and participation in these plans have previously
     been communicated to you under separate cover.

4.   Reimbursement of Expenses. PRG will pay your reasonable travel and business
     expenses (including air travel at business class rate), subject to you
     submitting receipts in accordance with PRG's normal practices and
     procedures.



Mr. Bradley Roos
June 1, 2001
Page 2


5.   Termination.

     (a)  This Agreement may be terminated by PRG for "cause" upon delivery to
          you of notice of termination. As used herein, "cause" shall mean (i)
          any material misstatement or omission in your employment application,
          resume or any other materials provided by you and used by PRG in its
          decision to employ you, (ii) fraud, dishonesty, gross negligence,
          willful misconduct, commission of a felony or an act of moral
          turpitude, or (iii) engaging in activities prohibited by Sections 3,
          4, 5, 6 or 7 of the Employee Agreement signed by you and dated
          February 14, 2000, or any other material breach of this Agreement.

     (b)  You may, without cause, terminate this Agreement by giving PRG thirty
          (30) days' written notice in the manner specified in Section 8 hereof
          and such termination will be effective on the thirtieth (30th) day
          following the date of such notice or such earlier date as PRG
          specifies. PRG may, without cause, terminate this Agreement by giving
          to you thirty (30) days' written notice in the manner specified in
          Section 8 hereof and such termination will be effective on the
          thirtieth (30th) day following the date of such notice. At PRG's
          option, you will cease performing your duties as an employee on such
          earlier date as PRG may specify in notice of termination.

     (c)  In the event of your Disability, physical or mental, PRG will have the
          right, subject to all applicable laws, including without limitation,
          the Americans with Disabilities Act ("ADA"), to terminate your
          employment immediately. For purposes of this Agreement, the term
          "Disability" shall mean your inability or expected inability (or a
          combination of both) to perform the services required of you hereunder
          due to illness, accident or any other physical or mental incapacity
          for an aggregate of ninety (90) days within any period of one hundred
          eighty (180) consecutive days during which this Agreement is in
          effect, as agreed by the parties or as determined pursuant to the next
          sentence. If there is a dispute between you and PRG as to whether a
          Disability exists, then such issue shall be decided by a medical
          doctor selected by PRG and a medical doctor selected by you and your
          legal representative (or, in the event that such doctors fail to
          agree, then in the majority opinion of such doctors and a third
          medical doctor chosen by such doctors). Each party shall pay all costs
          associated with engaging the medical doctor selected by such party and
          the parties shall each pay one-half (1/2) of the costs associated with
          engaging any third medical doctor.



Mr. Bradley Roos
June 1, 2001
Page 3


     (d)  In the event this Agreement is terminated, all provisions in this
          Agreement or the Employee Agreement relating to any actions, including
          those of payment or compliance with covenants, subsequent to
          termination shall survive such termination.

6.   Severance Payments.

     (a)  If your employment with PRG is terminated by PRG for cause or if you
          voluntarily resign other than due to Retirement (as defined below),
          you will receive your base salary prorated through the date of
          termination, payable in accordance with PRG's normal payroll
          procedure, and you will not receive any bonus or any other amount in
          respect of the year in which termination occurs or in respect of any
          subsequent years.

     (b)  If your employment with PRG is terminated by PRG without cause, you
          will receive your base salary and bonus for the year in which such
          termination occurs prorated through the date of such termination, plus
          a severance payment, subject to adjustment as set forth below, equal
          to twelve (12) months of the then current base salary. Except as
          provided in the immediately preceding sentence, you will not receive
          any other amount in respect of the year in which termination occurs or
          in respect of any subsequent years. The prorated base salary will be
          paid in accordance with PRG's normal payroll procedure, the prorated
          bonus will be paid in a lump sum within ninety (90) days after the end
          of the year to which it relates and the severance payment will be paid
          in twelve (12) equal monthly installments commencing on the last day
          of the first month following termination. If you are terminated
          without cause, any severance benefits to which you are otherwise
          entitled will be reduced by any compensation you earn from other
          employment or consulting or otherwise for services during the twelve
          (12) month period following the effective date of your termination of
          employment with PRG.

     (c)  If your employment with PRG is terminated by your death or Retirement,
          you (or your legal representative in the case of death) will receive
          base salary and bonus for the year in which such termination occurs
          prorated through the date of such termination and will not receive any
          other amount in respect of the year in which termination occurs or in
          respect of any subsequent years. The prorated base salary will be in
          accordance with PRG's normal payroll procedure and the prorated bonus
          will be paid in a lump sum within ninety (90) days after the end of
          the year to which it relates.

     (d)  If your employment with PRG is terminated for Disability (as defined
          below), you or your legal representative will receive (i) all unpaid
          base salary and



Mr. Bradley Roos
June 1, 2001
Page 4


          bonus for the year in which such termination occurs prorated through
          the date of termination with such prorated base salary payable in
          accordance with PRG's normal payroll procedure and the prorated bonus
          payable in a lump sum within ninety (90) days after the end of the
          year to which it relates, and (ii) base salary for a period of ninety
          (90) days following termination of employment due to Disability at the
          rates in effect upon the date of such termination payable in
          accordance with PRG's normal payroll procedure, reduced (but not below
          zero) by the sum of (x) all amounts paid by PRG to you as base salary
          prior to termination of employment for the times that you were unable
          to perform the services required of you under this Agreement due to
          illness, accident or any other physical or mental incapacity which
          resulted in your Disability and (y) all amounts that you are eligible
          to receive under any of PRG's standard short-term group disability
          insurance coverage provided to you as a result of such illness,
          accident or any other physical or mental incapacity. To the extent
          that PRG has not reduced its payments to you to reflect such amount
          that you are eligible to receive under such short-term group
          disability coverage, you will immediately remit to PRG such amount
          upon your receipt thereof. You will not receive any other amount in
          respect of the year in which termination occurs or in respect of any
          subsequent years. In lieu of terminating your employment, PRG may
          elect to put you on unpaid leave of absence for a period determined in
          PRG's sole discretion, but in no event to exceed one year. If put on
          unpaid leave of absence, you will be entitled to the same compensation
          to which you are entitled if you are terminated as set forth above and
          shall not be entitled to any further compensation except that you will
          continue to maintain your eligibility in all PRG benefit plans (but
          only to the extent such continued eligibility is not prohibited
          pursuant to the terms of any such plan) provided that PRG will have no
          responsibility to pay any premiums or other amounts on your behalf
          with respect to any such plans. Notwithstanding anything contained
          herein to the contrary, if PRG elects to place you on unpaid leave of
          absence in lieu of terminating you, (i) PRG will be entitled to
          subsequently terminate your employment with PRG on the expiration of
          such leave of absence without any further monetary obligations to you
          and (ii) PRG will have no obligation to reinstate you to active status
          unless PRG determines in its sole discretion that such reinstatement
          is in the best interests of both PRG and you.

     (e)  If your employment is terminated for any reason, you will be paid
          within sixty (60) days of termination for the value of all unused
          vacation time which accrued during the calendar year in which such
          termination occurs up to the date of termination in accordance with
          the Company's policies.



Mr. Bradley Roos
June 1, 2001
Page 5


     (f)  If you fail to observe or perform any of your duties and obligations
          under Sections 3, 4, 5, 6 or 7 of the attached Employee Agreement, you
          will forfeit any right to severance or other termination payments of
          any amounts other than base salary prorated through the date of
          termination and upon PRG's demand for same, you shall repay PRG any
          severance or other termination payments paid to you after the date of
          termination of your employment with PRG (other than such base salary).

     (g)  Notwithstanding anything contained herein to the contrary, as
          conditions precedent to receiving any severance benefits under this
          Agreement, you will be required to (i) return all property of PRG
          including, without limitation, all Confidential Information (as that
          term is define in your Employee Agreement), and (ii) execute and
          deliver in a mutually satisfactory form (A) a general release and
          covenant not to sue in favor of PRG, and its officers, directors and
          employees, and (B) an agreement (1) to assist PRG with any claims or
          litigation with others involving matters within the scope of your
          employment with PRG, whether or not such claims or litigation is
          initiated by PRG or others, (2) to refrain from assisting others who
          are asserting claims against PRG or suing PRG, and (3) to refrain from
          any disparagement of PRG, or its officers, directors or employees.

7.   Successors and Assigns. You may not assign this Agreement. This Agreement
     may be assigned by PRG to any affiliate of PRG. The provisions of this
     Agreement will be binding upon your heirs and legal representatives.

8.   Notices. Any notice to be given under this Agreement shall be given in
     writing and may be effected by personal delivery or by placing such in the
     United States certified mail, return receipt requested and addressed as set
     forth below, or as otherwise addressed as specified by the parties by
     notice given in like manner:

If to PRG: The Profit Recovery Group USA, Inc.
           2300 Windy Ridge Parkway
           Suite 100 North
           Atlanta, Georgia 30339-8426
           Attention: President

If to you: 3989 Wieuca Road
           Atlanta, Georgia 30342

9.   Withholdings. PRG will deduct or withhold from all amounts payable to you
     pursuant to this Agreement such amount(s) as may be required pursuant to
     applicable federal, state or local laws.



Mr. Bradley Roos
June 1, 2001
Page 6


10.  Entire Agreement. This Agreement, the Employee Agreement and such other
     documents as may be referenced by such documents (the "Referenced
     Documents"), constitute our entire agreement with respect to the subject
     matter hereof and, except as specifically provided herein or in the
     Employee Agreement and the Referenced Documents, supersedes all of our
     prior discussions, understandings and agreements. Any such prior agreements
     shall be null and void. This Agreement may not be changed orally, but only
     by an agreement in writing signed by the party against whom enforcement of
     any waiver, change, modification, extension or discharge is sought. Time is
     of the essence of this Agreement and each and every Section and subsection
     hereof.

Please confirm your acceptance of this offer by signing and returning this
letter to me at your earliest convenience but in any event on or before June 8,
2001.

                                        Best wishes,


                                        /S/ Marie Neff
                                        ----------------------------------------
                                        Marie A. Neff,
                                        Senior Vice President, Human Resources

Accepted and agreed:


/S/ Bradley Roos
- -------------------------------------
Bradley Roos

Date: 1 June 2001

EX-10.70

[PRG SCHULTZ LOGO]

Mr. Bradley Roos


RE:      Expatriate Assignment -- Letter of Understanding

This letter confirms our mutual understanding of the terms and conditions
applying to your expatriate assignment in the United Kingdom.

Your assignment is subject to medical clearances, proper immigration and/or work
clearances, and your acceptance of the terms and conditions outlined in this
letter. The effective date of your assignment will be June 1, 2005, given all
the appropriate work visa paperwork is completed and approved by that date. This
assignment is expected to last through May 31, 2008. Your point of origin has
been designated as MIRAMAR, FLORIDA, USA.

For the duration of your assignment you will be employed by PRG-Schultz
International Pte. Ltd. (the "Company"), as President, Europe. You will continue
to report to Rick Bacon, EVP, International Operations or his designee.

COMPENSATION

- -        Your annual base salary will be (U.S.$) 280,000.00 subject to periodic
         review, with the first opportunity for a merit increase in March, 2006
         according to the company policy and guidelines related to merit
         increases. Your salary will be paid bi-weekly at a rate of $10,769.23.
         Your base salary will not be adjusted downward for as long as you
         remain the President, Europe, unless PRG-Schultz's Board of Directors
         or the Compensation Committee of the Board (the "Committee") has duly
         authorized and directed a general compensation decrease for all
         executive employees of PRG-Schultz and the reduction of the sum of your
         Base Salary and potential Bonus hereunder is similarly reduced in
         respect of other executives. However, if you voluntarily transfer to
         another position within the Company, the salary would be reviewed
         accordingly. Any other change in your position shall be dealt with as
         set forth herein under the resignation and termination provisions.

- -        You will be eligible to participate in the PRG-S Incentive Plan ("the
         plan") with an incentive payout potential of between 40% (at target)
         and 80% (at maximum) of your base salary, subject to the terms and
         conditions of the Plan. Any updates or changes to the Plan would be
         applied to all participants globally.

- -        You will be eligible to participate in the employee benefit plans
         available to Corporate employees. Your assignment will have no effect
         on accrual of benefits to which you are presently entitled.



                                                                               1



PAY DELIVERY

Your salary and allowances will be electronically deposited in U.S. dollars to
your U.S. bank account or otherwise to the account you have designated. You
should instruct your bank as to the amount that should be converted into host
country currency and transferred to your host country account. The Company will
bear the cost of one fund conversion and transfer per month.


HOUSING ASSISTANCE

The Company will lease a home on your behalf. The assistance method will be
structured so that the Company receives the best tax treatment in the United
Kingdom. The Company will pay the lease up front in the amount of up to Pound
Sterling 2,500per week. You will receive a one time furnishing allowance of
$5,000.

RELOCATION ALLOWANCE & TEMPORARY LIVING EXPENSES

- -        The Company will provide a business class house-hunting/orientation
         trip for you and your spouse to the United Kingdom for purposes of
         finding suitable housing. Airfare and daily living expenses for one
         week, including meals will be reimbursed in accordance with the
         Company's Corporate Travel Policy.

- -        You will be reimbursed for temporary living expenses from the date
         movers begin packing your household goods to the date reasonable
         furnished housing is available in the host country. The total duration
         of temporary living may not exceed 30 days effective with your
         assignment date of June 1, 2005.

- -        The Company will reimburse you for certain expenses incurred with the
         shipment of personal effects and storage and shipment of certain
         household goods. Please refer to the PRG-Schultz International
         Relocation Policy for details.

- -        You will also receive the following lump sum allowances for incidental
         expenses:

         -        $5,000 Relocation Allowance.

         -        $2,000 per automobile, when sold in home country.

OTHER EXECUTIVE COMPONENTS

In addition to the allowances mentioned above, the Company will provide you with
the following:

- -        Home Leave -- Employee and family will be entitled to two home leaves
         per year reimbursed according to the Company relocation and travel
         policy. Employee home leave is subject to the allowed vacation time.
         The length of family leave is at your discretion.

- -        Tax Return Preparation and Counseling Session -- You will meet with a
         tax consultant for an initial review of your tax position prior to
         departure. This will provide you with an opportunity to assess your tax
         liability while on assignment. Additionally, the Company will retain
         the services of a public accounting firm to assist you in the
         preparation of tax returns for the years affected by the International
         assignment.


                                                                               2


- -        Cost of Living Allowance -- You will receive a Cost of Living Allowance
         (COLA) of $37,000 per annum, paid bi-weekly in accordance with the U.S.
         payroll procedures and subject to applicable taxes.

- -        Transportation Allowance -- You will receive a Transportation Allowance
         of $15,000 per annum, paid bi-weekly in accordance with the U.S.
         payroll procedures and subject to applicable taxes.

- -        Education Allowance -- You will receive an annual Education Allowance
         of $28,000 per child for your children to attend the American school.

- -        Club Dues -- You will receive a $6,000 annual allowance for local club
         dues, payable bi-weekly in accordance with the U.S. payroll procedures
         and subject to applicable taxes.

The objective of tax equalization is to ensure that the employee does not
experience a significant tax loss or gain as a result of the assignment. The tax
equalization system provides that you will bear a total annual cost
approximately equivalent to the U.S. and State income tax, U.S. social tax cost
which would rise if you continued to work in the U.S.

The Company will equalize your tax liability to the U.S. You will be held
responsible for hypothetical U.S. income, State income, and U.S. social security
taxes on your base salary and incentive bonus. Taxes on your personal income
will be your responsibility and items such as stock options, restricted stock,
etc.

A hypothetical obligation (hypothetical U.S. and U.S. state) will be withheld
from your base, bonus and other incentive compensation. You will be responsible
for U.S. social taxes on your entire compensation.

Having taken the hypothetical withholding and actual social tax from your
periodic pay, the Company will be responsible for the payment of Host Country
income/social taxes on your base, bonus, other incentive compensation and
international assignment allowances. You will be responsible for remitting
payment of tax on your personal income as required by local law.

You will receive a Tax Equalization calculation for each calendar year of your
assignment. A tax settlement amount may be due to/from the Company as a result.
It is expected that any tax settlement amount be made within 30 days of receipt
of the settlement calculation whether due to, or from, the Company.

The tax consultant will review the concepts of Tax Equalization and answer any
questions you may have about this benefit during your tax consultation.

The Company expects that you will fully comply with all U.S./State and host
country tax rules.

The Company requires that you:


                                                                               3


- -        Exercise reasonable care and attention in minimizing host country and
         U.S. tax liabilities in accordance with the tax planning positions
         recommended by the Company's tax services provider, and

- -        Provide the Company's tax service provider with the annual tax filing
         information required to prepare U.S. and host country tax returns and
         tax equalization calculations.

If you do not comply with the U.S. tax compliance calendar, you will be
responsible for all penalty interest costs arising after the due date as a
result of late or delayed filing or underpayment of actual U.S. income tax
liabilities.

HOST COUNTRY BENEFITS

Because you may be required to participate in United Kingdom benefits plans, the
Company will reimburse you for the cost of any United Kingdom social benefit
programs to which you are required to contribute. You agree that any benefit
made payable to you upon your termination, severance, or retirement from a
foreign subsidiary or affiliate will revert to the Company.

EMPLOYMENT RESTRICTION

It is understood that in accepting this assignment, you agree that you will not
engage in any employment or business enterprise that would in any way conflict
with your service to the interests of the Company.

REPATRIATION

Once your assignment has been successfully completed, you will be repatriated to
the U.S. PRG-Schultz will seek to provide you with a position equivalent to the
foreign assignment in terms of both base salary and grade. However, this is not
a guarantee of employment and is subject to the situation and circumstances at
the time of repatriation.

The Company will pay the cost of shipment of household good and personal effects
including, return transportation, temporary housing, and tax counseling services
upon repatriation to the U.S.

Voluntary Resignation

If the resignation is voluntary, the Company will not be responsible to relocate
you to your point of origin. In case the resignation is to take a position with
another company, it is expected that moving expenses will be obtained from the
new employer.

In the event of voluntary resignation not involving another position, the
Company will not be responsible for the cost of returning you, your family, and
belongings back to the point of origin.



                                                                               4





Company Initiated Termination

If your employment with the Company is terminated without cause (initiated by
the Company), you will receive your base salary and bonus for the year in which
such termination occurs prorated through the date of such termination, plus a
severance payment, subject to adjustment as set forth below, equal to twelve
(12) months of base salary, payable monthly and subject to applicable payroll
taxes and deductions subject to signing and agreement and release. The Company
will also pay the cost of returning you, your family, and belongings, back to
the point of origin, and equal to the amount initially provided for your
relocation to United Kingdom. The Company will also provide reimbursement for
temporary living expenses up to 60 days.

In the event of termination by the Company for cause, the Company will pay you
through the termination date, plus any accrued, unused vacation time, any
business expenses incurred through the termination date. You will be responsible
for the cost of returning you, your family, and belongings, back to the point of
origin.

Termination for Cause means conviction of a felony, conviction of fraud,
embezzlement or attempted fraud or embezzlement of assets of the company, use of
illegal drugs, material breach of this contract, gross negligence or willful
misconduct in the performance of duties, breach of fiduciary duty to the
Company, such as engaging in directly competitive acts while employed with the
Company.

Return to the U.S. must be made within 30 days of termination of employment.

GENERAL

This Letter of Understanding specifies the conditions surrounding your
expatriate assignment to the United Kingdom as of your date of assignment. The
Company reserves the right to modify the terms and conditions of your
international assignment due to changes in company-wide policy. The actual
duration of your assignment shall be subject to the needs of the Company and
nothing contained herein shall be construed as an employment contract with the
Company for any fixed term or for any purpose. If your assignment is extended
beyond May 31, 2008, a new Letter of Understanding will be drawn up in
accordance with the Company's International Assignment Policy.

You agree that, should any difference between you and the Company be
adjudicated, this will be in accordance with U.S. law, not the United Kingdom
law.

Except for the adjustments related in this assignment letter regarding your
expatriate assignment, the terms of your employment agreement with PRG-Schultz
USA, Inc. dated June 1, 2001 (and subsequent addendums) shall continue in full
force and effect as originally executed.

Please signify your understanding of, and agreement with, the terms of this
agreement by initialing each page and signing below.

- ----------------------------             ------------------------------------
(Name)                                   (Name)

- ----------------------------             ------------------------------------
(Title)                                  (Title)

- ----------------------------             ------------------------------------
(Date)                                   (Date)

- ----------------------------
(Employee's Name)



                                                                               5

EX-10.71

                  (HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL LOGO)

                     HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL

                               INVESTMENT BANKERS

                                  www.hlhz.com

October 21, 2005

To:  Schulte Roth & Zabel LLP ("SRZ"), as counsel to The Ad Hoc Committee (the
     "Ad Hoc Committee") of Holders of 4.75% Convertible Subordinated Notes due
     2006 (the "Notes") of PRG - Schultz International, Inc. and its affiliated
     and subsidiary corporations (collectively, "PRG" or the "Company"), in care
     of:

     Schulte Roth & Zabel LLP
     919 Third Avenue
     New York, NY 10022

     Attn: Jeffrey S. Sabin
     Counsel to the Ad Hoc Committee

     PRG - Schultz International, Inc.
     600 Galleria Parkway
     Suite 100
     Atlanta, GA 30339

     Attn: James McCurry
     President and CEO

Gentlemen:

This letter confirms the terms of the agreement between Houlihan Lokey Howard &
Zukin Capital, Inc. ("Houlihan Lokey" or the "Finn"), SRZ, as counsel to the Ad
Hoc Committee (the "Ad Hoc Committee Counsel"), and the Company concerning the
Ad Hoc Committee Counsel's engagement of Houlihan Lokey to provide financial
advisory and related services to the Ad Hoc Commitee Counsel in connection with
the restructuring of the Company.

1. SCOPE OF ENGAGEMENT. Houlihan Lokey's exclusive representation of the Ad
Hoc Committee Counsel in connection with include:

     (a)  Evaluating the assets and liabilities of the Company;

     (b)  Analyzing and reviewing the financial and operating statements of the
          Company;

     (c)  Analyzing the business plans and forecasts of the Company;

     (d)  Evaluating all aspects of the Company's near term liquidity, including
          all available financing alternatives;

          NEW YORK - 245 PARK AVENUE, 20TH FLOOR - NEW YORK, NY 10167
                      - TEL.212.497.4100 - FAX.212.661.3070
         LOS ANGELES CHICAGO SAN FRANCISCO WASHINGTON, D.C. MINNEAPOLIS
                           DALLAS ATLANTA LONDON PARIS
                      INVESTMENT ADVISORY SERVICES THROUGHT
                HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS.



Ad Hoc Committee of Holders of the Notes of PRG
October 21, 2005                                                             -2-


     (e)  Providing such specific valuation or other financial analyses as the
          Ad Hoc Committee may require in connection with the case;

     (f)  Assessing the financial issues and options concerning any proposed
          Transaction; and

     (g)  Preparing analyzing and explaining any Transaction to various
          constituencies.

As used herein, the term "Transaction" shall include the Company's efforts to
enter into any agreement or series of agreements, or transaction or series of
transactions (which agreement or  transaction or series of transactions
subsequently closes within a reasonable time period thereafter), which in each
case may include, but is not limited to, the following:

          (i)  Any merger, consolidation, reorganization, recapitalization,
               business combination or other transaction pursuant to which the
               Company is acquired by, or combined with, any person, group of
               persons, partnership, corporation or other entity (including,
               without limitation, existing creditors, employees, affiliates,
               and/or shareholders) (collectively, a "Purchaser");

          (ii) The acquisition, directly or indirectly, by a Purchaser (or by
               one or more persons acting together with a Purchaser pursuant to
               a written agreement or otherwise) outside the ordinary course of
               the Company's business, in a single transaction or a series of
               transactions of (x) any of the assets or operations of the
               Company; or (y) any outstanding or newly-issued shares of the
               Company's capital stock (or any securities convertible into, or
               options, warrants or other rights to acquire such capital stock);

          (iii) The closing of any other sale, transfer or assumption of all or
               substantially all of the assets, liabilities or stock of the
               Company (including without limitation any consolidation or merger
               involving the Company);

          (iv) Obtaining the requisite consents or acceptances from the holders
               of the Notes to a restructuring/recapitalization either
               out-of-court or pursuant to a "pre-packaged" or "pre-arranged"
               Chapter 11 plan of reorganization, through a tender offer,
               exchange offer, consent solicitation or other process;



Ad Hoc Committee of Holders of the Notes of PRG
October 21, 2005                                                             -3-


          (v)  The confirmation of any other Chapter 11 plan of reorganization
               or liquidation, the terms of which have been substantially agreed
               to by the Ad Hoc Committee; or

          (vi) The material credit enhancement of the Notes in conjunction with
               any other transaction involving the Company, the terms of which
               have been approved by the Ad Hoc Committee (collectively, a
               "Transaction").

2. EXCLUSIVE REPRESENTATION- Neither the Ad Hoc Committee, its constituents, nor
any of their advisors or professionals (including, but not limited to, Ad Hoc
Committee Counsel), shall be liable for the fees, expenses or other amounts
payable to Houlihan Lokey hereunder. Notwithstanding such arrangement, I
Houlihan Lokey's duties hereunder run solely to the Ad Hoc Committee Counsel,
and Houlihan Lokey is not authorized to be, and will not purport to be, acting
on behalf of, or at the direction of the Company for any purpose unless
otherwise agreed to by the Ad Hoc Committee Counsel and the Company, All
financial advice written or oral, provided by Houlihan Lokey to the Ad Hoc
Committee Counsel pursuant to this Agreement is intended solely for the use and
benefit of the Ad Hoc Committee Counsel, which agrees that such advice may not
be disclosed publicly or made available, other than to the Ad Hoc Committee, its
constituents, or any of its or their advisors or professionals, to third-parties
without the prior consent of Houlihan Lokey, which consent shall not be
unreasonably withheld. At the direction of Ad Hoc Committee Counsel, certain
communication and correspondence between Houlihan Lokey and the Ad Hoc
Committee, and work product and analyses prepared by Houlihan Lokey for the Ad
Hoc Committee in connection with this matter, will be considered in preparation
for litigation over the restructuring of the Company, and accordingly, will be
subject to the attorney-client privilege and work-product privilege between
Houlihan Lokey and the Ad Hoc Committee.

3. ADVISOR. Houlihan Lokey's services are limited to those specifically provided
in this Agreement or subsequently agreed-upon by the parties hereto, and
Houlihan Lokey shall have no obligation or responsibility for any other
services. Houlihan Lokey is providing its services hereunder as an independent
contractor, and the parties agree that this Agreement does not create an agency
or fiduciary relationship between Houlihan Lokey and the parties to this
Agreement

4. CONSIDERATION. As consideration for the services being provided by Houlihan
Lokey to assist the Ad Hoc Committee Counsel in analyzing various restructuring
options concerning the Company, the Company shall pay Houlihan Lokey a fee of
$100,000 per month (the "Monthly Fee(1)"). Notwithstanding any termination of
this Agreement, the Company agrees to pay Houlihan Lokey the Monthly Fee for a
minimum of three (3) months. Payment shall be made to Houlihan Lokey at the
address above, Attention: David R. Hilly. The first Monthly Fee shall be
pro-rated for the period October 21, 2005 through October 31, 2005 and shall be
due and payable in cash upon the Company and Houlihan Lokey's execution of this
Agreement. All additional


Ad Hoc Committee of Holders of the Notes of PRG
October 21, 2005                                                             -4-


Monthly Fees shall be due and payable in cash in advance on the 1st day of each
month. In addition, the Company agrees to promptly reimburse Houlihan Lokey,
upon request from time to time, for all out-of-pocket expenses reasonably
incurred by Houlihan Lokey before termination (or related to Houlihan Lokey's
pre-termination services) in connection with the matters contemplated by this
Agreement. Out-of-pocket expenses shall include, but not limited to, all
reasonable travel expenses, duplicating charges, on-line service charges,
messenger services, delivery services, meeting services, long distance telephone
and facsimile charges incurred by Houlihan Lokey.

In addition, if a Transaction is consummated, upon the consummation of the
Transaction Houlihan Lokey shall be paid an additional fee (a "Transaction Fee")
equal to seventy-five (75) basis points of the value of the Aggregate Gross
Consideration ("ACG") received by holders of the Notes(1), payable in cash or,
at the option of the Ad Hoc Committee, in the same consideration received by the
holders of the Notes. For purposes of calculating the Transaction Fee, the
Aggregate Gross Consideration shall be the cumulative total proceeds and other
consideration paid to or received by, or to be paid or received by, the holders
of the Notes in connection with that Transaction and all Transactions
consummated on or prior to the date such Transaction was consummated, including,
but not limited to, cash, notes, securities, preferred stock, common stock,
other property and/or payments made in installments, all related rights, options
and contractual benefits, including, any interest payments received by the
holders of the Notes after the effective date of this Agreement. The Transaction
Fee shall be reduced by fifty percent (50%) of the aggregate Monthly Fees paid
to Houlihan Lokey following the fifth full month but in no event shall the
Transaction Fee be reduced to less than zero. The Transaction Fee shall be paid
upon the consummation of a Transaction either (i) during the term of this
Agreement or (ii) within twelve months of the effective date of termination of
this Agreement (such twelve-month period being referred to herein as the "Tail
Period.") unless paid in kind.

The parties acknowledge that a substantial professional commitment of time and
effort will be required by Houlihan Lokey and its professionals hereunder, and
that such commitment may foreclose other opportunities for the Firm. Moreover,
the actual time and commitment required for the engagement may vary
substantially from week to week or month to month, creating "peak load" issues
for the Firm. Given the numerous issues which may arise in these cases, the
Firm's

- ----------
(1)  For the purpose of calculating the value of the ACG received by the holders
     of the Notes represented by the Ad Hoc Committee in the Transaction, any
     consideration received, including, without limitation, cash, debt
     securities, equity securities, property or other interests or
     consideration, will be valued as follows: the greater of (i) if the value
     of such securities is disclosed in a court approved disclosure statement in
     support of a confirmed Chapter 11 plan, the value of the securities in such
     disclosure statement; or (ii) (x) if such securities are traded, the
     securities will be valued at the mean of the closing bid and asked
     quotations averaged for the ten trading days immediately prior to the
     closing of the Transaction; or (y) if such securities have not been traded
     prior to the closing of the Transaction, Houlihan Lokey will prepare a
     valution of the securities and, together with the Ad Hoc Committee and the
     Company, will mutually agree on a fair valuation thereof for the purposes
     of calculating the Transaction fee, provided that, for purposes of
     calculating the Transaction Fee under this agreement, the AGC shall not
     exceed the face amount of the Notes plus any accrued and unpaid interest
     thereon.



Ad Hoc Committee of Holders of the Notes of PRG
October 21, 2005                                                             -5-


commitment to the variable level of time and effort necessary to address such
issues, the expertise and capabilities of Houlihan lokey that will be required
in this engagement, and the market rate for Houlihan Lokey's services of this
nature whether in, or out of court, the parties agree that the fee arrangement
hereunder is reasonable, fairly compensates Houlihan Lokey and provides
certainty to the Company and the Ad Hoc Committee.

5. BANKRUPTCY COURT: In the event the Company seeks protection under Title 11 of
the United States Code (the "Bankruptcy Code"), the Company shall affirmatively
support the retention of Houlihan Lokey by any Official Committee of Unsecured
Creditors appointed in the case or cases resulting from such filing pursuant to
section 1103 of the Bankruptcy Code and use all reasonable efforts to fulfill
its obligations owed upon such filing under this Agreement in a manner mutually
agreeable to the Ad Hoc Committee Counsel, the Company and Houlihan Lokey,
provided, however, that the form of documentation to satisfy the foregoing
obligations shall be acceptable to Houlihan Lokey in its sole discretion. Upon
the filing of a bankruptcy case, Houlihan Lokey's obligations to provide
services under this Agreement on behalf of the Ad Hoc Committee Counsel may, at
Houlihan Lokey's exclusive option, cease until such time as Houlihan Lokey is
authorized by the Bankruptcy Court having jurisdiction over the case to provide
services under Sections 328 and 1103 of the Bankruptcy Code, provided however,
that the obligations of the Company under this Agreement shall continue in full
force and effect.

6. TERMINATION. This Agreement is terminable upon ten (10) days written notice
by the Ad Hoc Committee Counsel, Houlihan Lokey or the Company, provided,
however, that (a) if the Agreement is terminated during the first three (3)
months of the engagement, the Company shall immediately pay Houlihan Lokey the
unpaid portion of those Monthly Fees for the first three (3) months of the
engagement, and (b) if the Agreement is terminated thereafter, the Company shall
pay Houlihan Lokey all previously unpaid Monthly Fees and the pro-rata portion
of the Monthly Fee for the month in which the Agreement is terminated. The
termination of the Agreement will not affect (a) the Company's indemnification,
reimbursement, contribution and other obligations set forth in this Agreement
and (b) Houlihan Lokey's right to receive, and the Company' obligation to pay
(i) any and all fees and expenses accrued as of the effective date of
termination of this Agreement, and (ii) those fees earned for a Transaction that
is consummated during the Tail Period as described in this Agreement.

7. INFORMATION. The Ad Hoc Committee and the Ad Hoc Committee Counsel
acknowledges and agrees that, in rendering its services hereunder, Houlihan
Lokey will be using and relying on information made available to it by the
Company and their advisors (the "Information") (and information available from
public sources and other sources deemed reliable by Houlihan Lokey) without
independent verification thereof by Houlihan Lokey or independent appraisal by
Houlihan Lokey. Houlihan Lokey does not assume responsibility for the accuracy
or completeness of the Information or any other information regarding the
Company.

8. CHOICE OF LAW; JURISDICTION. THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND
DELIVERED AT AND SHALL BE DEEMED TO



Ad Hoc Committee of Holders of the Notes of PRG
October 21, 2005                                                             -6-


HAVE BEEN MADE IN NEW YORK, NEW YORK. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. REGARDLESS OF
ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF THE PARTIES
HERETO, EACH PARTY HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY CLAIMS OR
DISPUTES BETWEEN OR AMONG THE PARTIES HERETO PERTAINING TO THIS AGREEMENT OR TO
ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT SHALL BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK,
PROVIDED THAT SUCH CONSENT AND AGREEMENT SHALL NOT BE DEEMED TO REQUIRE ANY
BANKRUPTCY CASE INVOLVING THE COMPANY TO BE FILED IN SUCH COURTS. BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT. EACH PARTY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. THE CONSENT TO SERVICE OF PROCESS IN ACCORDANCE WITH NEW YORK LAW. THE
PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED UPON CONTACT, TORT OR OTHERWISE) RELATED TO OR
ARISING OUT OF THE ENGAGEMENT OF HOULIHAN LOKEY PURSUANT TO, OR THE PERFORMANCE
BY HOULIHAN LOKEY OF THE SERVICES CONTEMPLATED BY, THIS AGREEMENT.

9. AUTHORITY. The Company has all requisite corporate power and authority to
enter into this Agreement and the transactions contemplated hereby (including,
without limitation, any Transaction). The Company and Houlihan Lokey have fully
reviewed this Agreement, have obtained counsel on its terms, and have
participated in the drafting of this Agreement such that it shall not be
construed against any one party. This Agreement has been duly and validly
authorized by all necessary corporate action on the part of the Company and has
been duly executed and delivered by the Company and constitutes a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.

10. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of this Agreement may be executed by the parties hereto. Each such counterpart
shall be, and shall be deemed to be, an original instrument, but all such
counterparts taken together shall constitute one and the same Agreement.

11. SEVERABILITY. If it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) that any term or provision hereof
is invalid or unenforceable, (i) the remaining terms and provisions hereof shall
be unimpaired and shall remain in full force and effect and (ii) the invalid or
unenforceable provision or term shall be replaced by a term or


Ad Hoc Committee of Holders of the Notes of PRG
October 21, 2005                                                             -7-


provision that is valid and enforceable and that comes closest to expressing the
intention of such invalid or unenforceable term or provision.

12. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements and understanding relating to the mailers provided for herein. No
alteration, waiver, amendment, change or supplement hereto shall be binding or
effective unless the same is set forth in writing signed by a duly authorized
representative of each party.

13. Indemnification. As a material part of the consideration for Houlihan Lokey
to furnish its services under this Agreement, the Company shall indemnify
Houlihan Lokey and shall hold harmless Houlihan Lokey and its affiliates, and
their respective past, present and future directors, officers, shareholders,
employees, agents and controlling persons within the meaning of either Section
15 of the Securities Act of 1933, as amended, or Section 20 of the Securities
Exchange Act of 1934, as amended (collectively, the "Indemnified Parties"), to
the fullest extent lawful, from and against any and all losses, claims, damages
or liabilities (or actions in respect thereof), Ad Hoc Committee, or any
Transaction (as defined herein) or proposed Transaction contemplated thereby. In
addition, the Company shall reimburse the Indemnified Parties for any legal or
other expenses reasonably incurred by them in respect thereof at the time such
expenses are incurred; provided, however, there shall be no liability under the
foregoing indemnity and reimbursement agreement to the extent that any loss,
claim, damage or liability which is finally judicially determined (and from
which there is no further right of appeal) to have resulted from the willful
misconduct, gross negligence, bad faith or self-dealing of any Indemnified
Party.

If for any reason the foregoing indemnification is unavailable to any
Indemnified Party or is insufficient to hold any Indemnified Party harmless, the
Company shall contribute to the amount paid or payable by the Indemnified Party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received (or
anticipated to be received) by the Ad Hoc Committee and the Company, on the
one hand, and Houlihan Lokey, on the other hand, in connection with the proposed
Transaction and/or the services rendered by Houlihan Lokey. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or otherwise, then the Company shall contribute to such amount
paid or payable by any Indemnified Party in such proportion as is appropriate to
reflect not only such relative benefits, but also the relative fault of the Ad
Hoc Committee and the Company, on the one hand, and Houlihan Lokey, on the
other hand, in connection therewith, as well as any other relevant equitable
considerations. Notwithstanding the foregoing, the aggregate contribution of all
Indemnified Parties to any such losses, claims, damages, liabilities and
expenses shall not exceed the amount of fees actually received by Houlihan Lokey
pursuant to the Agreement.



Ad Hoc Committee of Holders of the Notes of PRG
October 21, 2005                                                             -8-


The Ad Hoc Committee and the Company shall not effect any settlement or release
from liability in connection with any matter for which an Indemnified Party
would be entitled to indemnification from the Company unless, such settlement or
release contains a release of the Indemnified Parties reasonably satisfactory in
form and substance to Houlihan Lokey. Notwithstanding the immediately preceding
sentence, if Houlihan Lokey refuses to approve a confidential settlement,
compromise or discharge which would provide for an express full and
unconditional release of Houlihan Lokey and the other Indemnified Parties, and
which further provides that there shall be no action of, agreement, payment or
admission by, or any adverse statement with respect to the character,
professionalism, due care, loyalty, expertise or reputation of, Houlihan Lokey
or any other Indemnified Party, the Company may enter into such proposed
settlement, compromise or discharge on behalf of any or all of the defendants
other than the Indemnified Parties, and thereafter the Company shall have no
further obligation to pay any judgment rendered against, or to pay the amount of
any settlement subsequently agreed to by any Indemnified Party. The Ad Hoc
Committee and/or the Company shall not be required to indemnify any Indemnified
Party for any amount paid or payable by such party in the settlement or
compromise of any claim or action without the prior written consent of the Ad
Hoc Committee and the Company.

Within the earlier of one year from the termination of this Agreement or the
consummation of a Transaction, prior to entering into any agreement or
arrangement with respect to, or effecting, any (i) merger, statutory exchange or
other business combination or proposed sale, exchange, dividend or other
distribution or liquidation of all or a significant proportion of its assets, or
(ii) significant recapitalization or classification of its outstanding
securities that does not directly or indirectly provide for the assumption of
the obligations of the Company set forth in this Agreement, the Company will
notify Houlihan Lokey in writing thereof (if not previously so notified) and, if
requested by Houlihan Lokey, shall arrange in connection therewith alternative
means of providing for the obligations of the Company set forth herein,
including the assumption of such obligations by another party, insurance, surety
bonds or the creation of an escrow, in each case in an amount and upon terms and
conditions reasonably satisfactory to Houlihan Lokey.

The Ad Hoc Committee and the Company further agree that neither Houlihan Lokey
nor any other Indemnified Party shall have any liability, regardless of the
legal theory advanced, to the Ad Hoc Committee, the Company or any other person
or entity (including the Company" equity holders and creditors) related to or
arising out of Houlihan Lokey's engagement, except to the extent that any
liability for losses, claims, damages, liabilities or expenses incurred by the
Ad Hoc Committee and/or the Company which are finally judicially determined to
have resulted from the willful misconduct, gross negligence, bad faith or
self-dealing of any Indemnified Party. The indemnity, reimbursement,
contribution and other obligations and agreements of the Ad Hoc Committee and
the Company set forth herein shall apply to any modifications of this Agreement,
shall be in addition to any liability which these parties may otherwise have,
and shall be binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of these parties and each Indemnified Party.
The foregoing indemnification provisions shall survive



Ad Hoc Committee of Holders of the Notes of PRG
October 21, 2005                                                             -9-


the consummation of any Transaction and/or any termination of the relationship
established by this Agreement.

The obligations of Houlihan Lokey are solely corporate obligations, and no
officer, director, employee, agent, shareholder or controlling person of
Houlihan Lokey shall be subjected to any personal liability whatsoever to any
person, nor will any such claim be asserted by or on behalf of any other party
to this Agreement or any person relying on the services provided hereunder. The
Company's obligations with respect to any and all payments owing to Houlihan
Lokey and the indemnification, reimbursement, contribution and other similar
obligations of the Company under this Agreement shall survive any termination of
this Agreement.

Accepted and agreed to as of the date above.

PRG - SCHULTZ INTERNATIONAL, INC.


/s/ James E. Moylan, Jr.
- -------------------------------------
BY: James E. Moylan, Jr.
Title: EXECUTIVE VICE PRESIDENT AND
       CHIEF FINANCIAL OFFICER


ON BEHALF OF THE AD HOC COMMITTEE:
AD HOC COMMITTEE COUNSEL
SCHULTE ROTH & ZABEL LLP


- -------------------------------------
By: Jeffrey Sabin


HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL, INC.


/s/ David R.Hilty
- -------------------------------------
By: David R.Hilty
    Managing Director

EX-10.72

                  (HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL LOGO)

                     HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL

                               INVESTMENT BANKERS

                                  www.hlhz.com

February 1,2006

To:  Schulte Roth & Zabel LLP ("SRZ"), as counsel to The Ad Hoc Committee (the
     "Ad Hoc Committee") of Holders of 4.75% Convertible Subordinated Notes due
     2006 (the "Notes") of PRG - Schultz International, Inc. and its affiliated
     and subsidiary corporations (collectively, "PRG" or the "Company"), in care
     of:

          Schulte Roth & Zabel LLP
          919 Third Avenue
          New York, NY 10022

          Attn: Jeffrey S. Sabin
          Counsel to the Ad Hoc Committee

          PRG - Schultz International, Inc.
          600 Galleria Parkway
          Suite 100
          Atlanta, GA 30339

          Attn: James McCurry
          President and CEO

Gentlemen:

This letter (the "Amendment Letter") hereby amends the terms of the agreement
dated October 21, 2005 between Houlihan Lokey Howard & Zukin Capital, Inc
("Houlihan Lokey"), SRZ, as counsel to the Ad Hoc Committee (the "Ad Hoc
Committee Counsel") and the Company concerning the Ad Hoc Committee Counsel's
engagement of Houlihan Lokey to provide financial advisory and related services
to the Ad Hoc Committee Counsel in connection with a restructuring of the
Company, (the "Engagement Letter").

The second full paragraph of section 4 on page 4 including footnote 1 in the
Engagement Letter is deleted in its entirety and replaced by the following
paragraph;

     "Houlihan Lokey shall be paid an additional fee (the "Completion Fee") of
     $975,227.86 subject to reduction by fifty percent (50%) of the aggregate
     Monthly Fees paid to Houlihan Lokey commencing with the Monthly Fees due
     for April 2006 but in no event shall the Completion Fee be less then zero.
     The Completion Fee will be payable on the earlier to occur of (i) the
     consummation of the exchange offer or other alternative Transaction and
     (ii) August 31, 2006. The Completion Fee is payable in cash or, in the
     event of the consummation of the exchange offer or other alternative
     Transaction, at the election of the Ad Hoc Committee, in the same form of
     consideration received by the holders of the existing Notes."

           NEW YORK - 245 PARK AVENUE, 20TH FLOOR - NEW YORK, NY 10167
                      - TEL.212.497.4100 - FAX.212.661.3070
              LOS ANGELES CHICAGO SAN FRANCISCO WASHINGTON, D.C.,
                    HINNEAPOLIS DALLAS ATLANTA LONDON PARIS
               INVESTMENT ADVISORY SERVICES THROUGH HOULIHAN LOKEY
                       HOWARD & ZUKIN FINANCIAL ADVISORS.





February 1, 2006                                                             -2-


Notwithstanding the foregoing, in the event a Bankruptcy Case is commenced under
the Bankruptcy Code by or against the Company or any of its subsidiaries, or any
combination thereof, this Amendment Letter shall immediately terminate and be
deemed null and void and of no further force or effect, and the rights and
responsibilities of the Company and Houlihan Lokey shall be determined solely
under the original terms of the Engagement Letter.

Except as expressly amended hereby, the Engagement Letter is in all respects
ratified and confirmed including the indemnification obligations under paragraph
13 of the Engagement Letter and all terms thereof shall remain in full force and
effect.

Accepted and agreed to as of the date above.

PRG-SCHULTZ INTERNATIONAL, INC.


/s/ Clinton McKellar, Jr.
- -------------------------------------
By: Clinton McKellar, Jr.
Title: S.V.P., General Counsel


ON BEHALF OF THE AD HOC COMMITTEE:
AD HOC COMMITTEE COUNSEL
SCHULTE ROTH & ZABEL LLP


/s/ Jeffrey Sabin
- -------------------------------------
By: Jeffrey Sabin


HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL, INC.


/s/ David R. Hilty
- -------------------------------------
By: David R. Hilty
    Managing Director

EX-10.73

                                                               (ROTHSCHILD LOGO)

As of September 14, 2005

Mr. James B. McCurry
President and Chief Executive Officer
PRG-Schultz International, Inc.
600 Galleria Parkway, Suite 100
Atlanta, Georgia 30339

Dear Mr. McCurry:

     This letter (the "Agreement") will confirm the terms and conditions of the
agreement among PRG-Schultz International, Inc., collectively with its direct
and indirect subsidiaries, (the "Company") and Rothschild Inc. ("Rothschild")
regarding the retention of Rothschild as financial advisor and investment banker
to the Company in connection with a possible restructuring of its businesses
and/or certain liabilities of the Company.

     Section 1 Services to be Rendered. In connection with the formulation,
analysis and implementation of various options for a restructuring,
reorganization or other strategic alternative relating to the Company, whether
pursuant to a Transaction (as defined below), any series or combination of
Transactions or otherwise, Rothschild will perform such services as the Company
may request including, but not limited to, the following:

     (a) to the extent deemed desirable by the Company, identify and/or initiate
potential Transactions or other transactions;

     (b) to the extent Rothschild deems necessary, appropriate and feasible, or
as the Company may request, review and analyze the Company's assets and the
operating and financial strategies of the Company;

     (c) review and analyze the business plans and financial projections
prepared by the Company including, but not limited to, testing assumptions and
comparing those assumptions to historical Company and industry trends;

     (d) evaluate the Company's debt capacity in light of its projected cash
flows and assist in the determination of an appropriate capital structure for
the Company;

     (e) assist the Company and its other professionals in reviewing the terms
of any proposed Transaction or other transaction, in responding thereto and, if
directed, in evaluating alternative proposals for a Transaction or other
transaction, whether in connection with a Plan (as defined below) or otherwise;

     (f) determine a range of values for the Company and any securities that the
Company offers or proposes to offer in connection with a Transaction or other
transaction;

     (g) advise the Company on the risks and benefits of considering a
Transaction or other transaction with respect to the Company's intermediate and
long-term business prospects and strategic alternatives to maximize the business
enterprise value of the Company, whether pursuant to a Plan or otherwise;

Rothschild Inc.               Neil A. Augustine
1251 Avenue of the Americas   Managing Director
New York. NY 10020            Telephone 212 403-5411
www.rothschild.com            Facsimile 212 403-5454
                              Email neil.augustine@us.rothschild.com



PRG-Schultz International, Inc.
As of September 14, 2005
Page 2


                                                               (ROTHSCHILD LOGO)

     (h) review, analyze and advise the Company with respect to any proposals
the Company receives from third parties in connection with a Transaction or
other transaction;

     (i) assist or participate in negotiations with the parties in interest,
including, without limitation, any current or prospective creditors of, holders
of equity in, or claimants against the Company and/or their respective
representatives in connection with a Transaction or other transaction;

     (j) advise and attend meetings of the Company's Board of Directors,
creditor groups, official constituencies and other interested parties, as
necessary;

     (k) assist the Company in raising equity, debt, and/or hybrid capital
and/or refinancing any of its existing debt facilities;

     (l) with respect to any 3(a)(9) Offer (as defined below), subject to the
exemption from registration provided by Section 3(a)(9) of the Securities Act of
1933 (as amended, together with the rules and regulations promulgated
thereunder, the "Securities Act"), Rothschild and the Company shall, in
consultation with their respective counsel establish guidelines regarding the
scope and execution of Rothschild's services hereunder with respect to any
3(a)(9) Offer;

     (m) in the event the Company determines to commence Chapter 11 cases in
order to pursue a Transaction or other transaction, and if requested by the
Company, participate in hearings before the Bankruptcy Court in which such cases
are commenced (the "Bankruptcy Court") and provide relevant testimony with
respect to the matters described herein and issues arising in connection with
any proposed Plan; and

     (n) render such other financial advisory and investment banking services as
may be agreed upon by Rothschild and the Company in connection with any of the
foregoing.

     As used herein, the term "Transaction" shall mean, collectively, whether
pursuant to a plan of reorganization (a "Plan") confirmed in connection with any
case or cases commenced by or against the Company, any of its subsidiaries, any
of its affiliates or any combination thereof, whether individually or on a
consolidated basis (a "Bankruptcy Case"), under Title 11 of the United States
Code Sections 101 et seq. (the "Bankruptcy Code") or otherwise: (a) any
transaction or series of related transactions approved by the Company's Board of
Directors that affects material amendments to or other material changes in the
Company's outstanding indebtedness as of August 31, 2005, including, but not
limited to, any defeasance, redemption, exchange or repayment of any of the
Company's outstanding indebtedness, whether in reliance on the exemption from
registration provided under Section 3(a)(9) of the Securities Act (a "3(a)(9)
Offer") or otherwise; (b) (i) any merger, consolidation, reorganization,



PRG-Schultz International, Inc.
As of September 14, 2005
Page 3


                                                               (ROTHSCHILD LOGO)

recapitalization, financing, refinancing, business combination or other
transaction pursuant to which the Company (or control thereof) is acquired by,
or combined with, any person, group of persons, partnership, corporation or
other entity (an "Acquirer") or (ii) any acquisition, directly or indirectly, by
an Acquirer (or by one or more persons acting together with an Acquirer pursuant
to a written agreement or otherwise), whether in a single transaction, multiple
transactions or a series of transactions, of (A) other than in the ordinary
course of business, substantially all of the assets or operations of the Company
or (B) any outstanding or newly-issued shares of the Company's capital stock or
any securities convertible into, or options, warrants or other rights to acquire
such capital stock or other equity securities of the Company, for the purpose of
effecting either (1) a recapitalization or restructuring (as approved by the
Company's Board of Directors) of the Company's outstanding indebtedness as of
August 31, 2005 or (2) a change of control of the Company (each, an "M&A
Transaction"); or (c) raising of new capital, in the form of debt, equity or
hybrid securities in an amount that is mutually agreed upon by the Company and
Rothschild or (d) any transaction (as approved by the Company's Board of
Directors), similar in form to any of the foregoing.

     In performing its services pursuant to this Agreement, and notwithstanding
anything to the contrary herein, Rothschild is not assuming any responsibility
for the Company's decision to pursue (or not to pursue) any business strategy or
to effect (or not to effect) any Transaction or other transaction. Rothschild
shall not have any obligation or responsibility to provide accounting, audit,
"crisis management" or business consultant services (except to the extent
expressly described above) to the Company, and shall have no responsibility for
designing or implementing operating, organizational, administrative, cash
management or liquidity improvements.

     Section 2 Information Provided by the Company.

     (a) The Company will cooperate with Rothschild and furnish to, or cause to
be furnished to, Rothschild any and all information as Rothschild deems
appropriate to enable Rothschild to render services hereunder (all such
information being the "Information"). The Company recognizes and confirms that
Rothschild (i) will use and rely solely on the Information and on information
available from generally recognized public sources in performing the services
contemplated by this Agreement without having assumed any obligation to verify
independently the same; (n) does not assume responsibility for the accuracy or
completeness of the Information and such other information, and (iii) will not
act in the official capacity of an appraiser of specific assets of the Company
or any other party. The Company confirms that the information to be furnished by
the Company, when delivered, to the best of its knowledge (i) will be true and
correct in all material respects (ii) will be prepared in good faith and (iii)
will not contain any material misstatement of fact or omit to state any material
fact. The Company will promptly notify Rothschild if it learns of any


PRG-Schultz International, Inc.
As of September 14, 2005
Page 4


                                                               (ROTHSCHILD LOGO)

material inaccuracy or misstatement in, or material omission from, any
Information theretofore delivered to Rothschild. Company acknowledges that in
the course of this engagement it may be necessary for Rothschild and the Company
to communicate electronically.

     (b) The Company further acknowledges that although Rothschild will use
commercially reasonable procedures to check for the most commonly known viruses,
the electronic transmission of information cannot be guaranteed to be secure or
error-free. Furthermore such information could be intercepted, corrupted, lost,
destroyed, arrive late or incomplete or otherwise be adversely affected or
unsafe to use. Accordingly, the Company agrees that to the extent information
communicate electronically is so affected, Rothschild shall have no liability to
the Company with respect to any error or omission arising from or in connection
with: (i) the electronic communication of information to the Company; or (ii)
the Company's reliance on such information.

     (c) Except as permitted in Section 9(e), any services, information or
advice provided by Rothschild in connection with this engagement is for the
confidential use of the Company's Board of Directors and senior management and
may not be disclosed or referred to publicly to any third party, without the
Company's prior written consent. All material non-public information furnished
to Rothschild during this engagement, unless publicly available or otherwise
available to Rothschild without, to its actual knowledge, any restriction or
breach of any confidentiality or non-disclosure agreement (the "Confidential
Information"), will be held by Rothschild in confidence and will not be
disclosed to anyone other than Rothschild's employees and advisors (who have a
legal obligation to maintain the confidentiality of such Confidential
Information) without the Company's prior written approval or used for any
purpose other than those described in this Agreement except as (i) required to
perform the services to be rendered pursuant to this engagement, including
disclosing such information to its employees and advisors as necessary, (ii)
such information becomes publicly available other than by disclosure by
Rothschild or its employees or advisors in violation of this Agreement, or (iii)
otherwise required by law or judicial or regulatory process, provided that
Rothschild (if otherwise permitted to do so) has given the Company reasonable
prior notice of such disclosure requirement.

     Section 3 Application for Retention of Rothschild. In the event the Company
determines to commence Chapter 11 proceedings in order to pursue a Transaction
or other transaction, the Company shall apply promptly to the Bankruptcy Court
pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code, Rule 2014 of the
Federal Rules of Bankruptcy Procedure, applicable local rules and procedural
orders of the Bankruptcy Court and procedural guidelines established by the
Office of the United States Trustee, for approval of (a) this Agreement and (b)
if permitted under applicable law, Rothschild's retention by the Company under
the terms of this Agreement to the date of this Agreement, and shall use its



PRG-Schultz International, Inc.
As of September 14, 2005
Page 5


                                                               (ROTHSCHILD LOGO)

best efforts to obtain Bankruptcy Court authorization thereof. The Company shall
use its best efforts to obtain such Bankruptcy Court approval and authorization
subject only to the subsequent review by the Bankruptcy Court under the standard
of review provided in Section 328(a) of the Bankruptcy Code, and not subject to
the standard of review set forth in Section 330 of the Bankruptcy Code. The
Company shall supply Rothschild and its counsel with a draft of such application
and any proposed order authorizing Rothschild's retention sufficiently in
advance of the filing of such application and proposed order to enable
Rothschild and its counsel to review and comment thereon. Rothschild shall have
no obligation to provide any services under this Agreement unless Rothschild's
retention under the terms of this Agreement is approved in the manner set forth
above by a final order of the Bankruptcy Court no longer subject to appeal,
rehearing, reconsideration or petition for certiorari and which order is
reasonably acceptable to Rothschild in all respects.

     Rothschild acknowledges that in the event that the Bankruptcy Court
approves its retention by the Company pursuant to the application process
described in this Section 3, payment of Rothschild's fees and expenses shall be
subject to (i) the jurisdiction and approval of the Bankruptcy Court under
Section 328(a) of the Bankruptcy Code and any order approving Rothschild's
retention, (ii) any applicable fee and expense guidelines and/or orders and
(iii) any requirements governing interim and final fee applications. In the
event that Rothschild's engagement hereunder is approved by the Bankruptcy
Court, the Company shall pay all fees and expenses of Rothschild hereunder as
promptly as practicable in accordance with the terms hereof and the orders
governing interim and final fee applications, and after obtaining all necessary
further approvals from the Bankruptcy Court, if any. In so agreeing to seek
Rothschild's retention under Section 328(a) of the Bankruptcy Code, the Company
acknowledges that it believes that Rothschild's general restructuring experience
and expertise, its knowledge of the industry in which the Company operates and
the capital markets and its merger and acquisition capabilities will inure to
the benefit of the Company in pursuing any Transaction or other transaction,
that the value to the Company of Rothschild's services hereunder derives in
substantial part from that expertise and experience and that, accordingly, the
structure and amount of the Monthly Fee, the Completion Fee and the M&A Fee (as
each is defined below) are reasonable regardless of the number of hours to be
expended by Rothschild's professionals in performance of the services to be
provided hereunder.

     Section 4 Fees of Rothschild. As compensation for the services rendered
hereunder, the Company, and its successors, if any, agree to pay Rothschild (via
wire transfer or other mutually acceptable means) the following fees in cash:

     (a) Commencing as of the date hereof, and whether or not a Transaction is
proposed or consummated, a cash advisory fee (the "Monthly Fee") of $125,000 per
month. The initial Monthly Fee shall be pro-rated based on the commencement of
services as of the



PRG-Schultz International, Inc.
As of September 14, 2005
Page 6


                                                               (ROTHSCHILD LOGO)

date hereof and shall be payable by the Company upon the execution of this
Agreement by each of the parties hereto, and thereafter the Monthly Fee shall be
payable by the Company in advance on the first day of each month.

     (b) Either (1) a fee (the "Completion Fee") of $1,737,500, payable in cash
upon the consummation of a Transaction other than an M&A Transaction, or (2) a
fee (the "M&A Fee") equal to the greater of $1,737,500 or 0.85% of the
Consideration (as defined below) for any M&A Transaction. The M&A Fee shall be
payable when and if such Consideration is paid.

     The term "Consideration" shall mean the total value of all cash,
securities, the repurchase, cancellation or buy-out of any options or warrants,
any agreements or other property and any other consideration, including, without
limitation, any contingent, earned or other consideration, paid or payable,
directly or indirectly, in connection with a Transaction. Consideration shall be
deemed to include the face amount of any indebtedness for borrowed money,
including, without limitation, pension liabilities and obligations assumed,
retired or defeased, directly or indirectly, in connection with, or which
survive the closing of, a Transaction. In the event such Transaction takes the
form of a recapitalization, restructuring, spin-off or similar transaction,
"Consideration" shall also include the fair market value of (i) the equity
securities of the Company retained by the Company's security holders following
such Transaction and (ii) any securities received by the Company's security
holders in exchange for or in respect of securities of the Company following
such Transaction (all securities received by such security holders being deemed
to have been paid to such security holders in such Transaction).

     The Company and Rothschild acknowledge and agree that (i) the hours worked,
(ii) the results achieved and (iii) the ultimate benefit to the Company of the
work performed, in each case, in connection with this engagement, may be
variable, and that the Company and Rothschild have taken such factors into
account in setting the fees hereunder.

     The Company shall not be obligated to pay under clause (b) of this Section
4 an amount exceeding the greater of one Completion Fee or one M&A Fee. Except
as otherwise provided in Section 8, the Company shall not be obligated to pay
any Completion Fee or M&A Fee if a Transaction occurs after this Agreement has
terminated. If an M&A Transaction and a non-M&A Transaction both occur on the
"Effective Date" of a Plan or as a part of a transaction outside of a bankruptcy
proceeding, the amount of any fee otherwise payable by the Company shall be the
greater of the M&A Fee for the M&A Transaction or the Completion Fee for the
non-M&A Transaction.


PRG-Schultz International, Inc.
As of September 14, 2005
Page 7


                                                               (ROTHSCHILD LOGO)

     To the extent the Company requests Rothschild to perform additional
services not contemplated by this Agreement, such additional fees shall be
mutually agreed upon by Rothschild and the Company, in writing, in advance.

     Section 5 Credit. Rothschild shall credit against the Completion Fee or the
M&A Fee, as applicable, 50% of the aggregate Monthly Fees paid to Rothschild
under Section 4(a) in excess of $375,000 (the "Monthly Fee Credit"); provided
that the Monthly Fee Credit shall not exceed the Completion Fee or M&A Fee
payable, as applicable. In addition, the Completion Fee, to the extent paid,
shall be fully credited against the M&A Fee; provided that such credit shall not
exceed the M&A Fee. Alternatively, the M&A Fee, to the extent paid, shall be
fully credited against the Completion Fee; provided that such credit shall not
exceed the Completion Fee.

     Section 6 Expenses. Without in any way reducing or affecting the provisions
of Exhibit A hereto, the Company shall reimburse Rothschild for its reasonable
expenses incurred in connection with and solely as the result of the performance
of its engagement hereunder, and the enforcement of this Agreement, including
without limitation the reasonable fees, disbursements and other charges of one
counsel utilized by Rothschild in connection with such enforcement. Reasonable
expenses shall also include, but not be limited to, expenses incurred in
connection with travel and lodging, data processing and communication charges,
research and courier services. In the event the Company becomes a debtor and/or
a debtor-in-possession in a Chapter 11 case, consistent with and subject to any
applicable order of the Bankruptcy Court, the Company shall promptly reimburse
Rothschild for such expenses under this Section 6 upon presentation of an
invoice or other similar documentation with reasonable detail.

     Section 7 Indemnity. The Company agrees to the provisions of Exhibit A
hereto which provide for indemnification by the Company of Rothschild and
certain related persons. Such indemnification is an integral part of this
Agreement and the terms thereof are incorporated by reference as if fully stated
herein. Such indemnification shall survive any termination, expiration or
completion of this Agreement or Rothschild's engagement hereunder.

     Section 8 Term, (a) The term of Rothschild's engagement shall extend until
the completion of the first Transaction. This Agreement may be terminated by
either the Company or Rothschild after one hundred and twenty (120) days from
the date hereof by providing ten (10) days advance notice in writing. If
terminated, Rothschild shall be entitled to payment of any fees for any monthly
period which are due and owing to Rothschild upon the effective date of
termination; however, such amounts will be pro-rated for any incomplete monthly
period of service, and Rothschild will be entitled to reimbursement of any and
all reasonable expenses described in Section 6. Termination of Rothschild's
engagement



PRG-Schultz International, Inc.
As of September 14, 2005
Page 8


                                                               (ROTHSCHILD LOGO)

hereunder shall not affect or impair the Company's continuing obligation to
indemnify Rothschild and certain related persons as provided in Exhibit A.

     (b) If this Agreement is terminated by the Company (other than for a
material breach hereof by Rothschild and after giving Rothschild prior written
notice thereof and a reasonable opportunity to cure) and within one year after
the effective date of such termination (the "Tail Period"), a Transaction is
consummated or the Company enters into a binding written agreement providing for
a Transaction (and such Transaction is subsequently consummated at any time
thereafter), the Company shall pay Rothschild upon consummation of such
Transaction a Completion Fee or M&A Fee (whichever is applicable based on the
Transaction), less the Monthly Fee Credit as provided in Section 5.

     (c) Notwithstanding the foregoing, in the event that, prior to the
consummation of any Transaction or entering into a binding agreement providing
for a Transaction, Neil Augustine ("Key Employee") is no longer actively working
on this engagement (other than by reason of death or disability), the
responsibilities of Key Employee shall be assumed by a Managing Director of
Rothschild with similar experience in advising companies on potential
restructurings ("Key Employee Replacement"). If the Company determines, in good
faith and after providing Rothschild with a reasonable opportunity to identify
and discuss with the Company a suitable Key Employee Replacement, that none of
the Key Employee Replacements proposed by Rothschild is acceptable, the Company
may terminate this Agreement as provided in clause (a) above and the Tail Period
otherwise applicable hereunder, shall be reduced to one hundred and thirty-five
(135) days.

     Section 9 Miscellaneous.

     (a) Administrative Expense Priority. To the extent such compensation is
approved by the Bankruptcy Court, in the event the Company determines to
commence Chapter 11 cases in order to pursue a Transaction or other transaction,
the Company agrees that Rothschild's post-petition compensation as set forth
herein and payments made pursuant to reimbursement and indemnification
provisions of this Agreement shall be entitled to priority as expenses of
administration under Sections 503(b)(1)(A) and 507(a)(1) of the Bankruptcy Code
and shall be entitled to the benefits of any "carve-outs" for professional fees
and expenses in effect in such Chapter 11 cases pursuant to one or more
financing orders entered by the Bankruptcy Court.

     (b) Survival, Successors & Assigns. Sections 4 through 9 hereof, inclusive
(excluding the obligation to pay ongoing Monthly Fees as provided in Section
4(a)), including the provisions set forth in Exhibit A hereto, shall survive the
termination or expiration of this Agreement. The benefits of this Agreement and
the indemnification and other obligations of the Company to Rothschild and
certain related persons contained in Exhibit A hereto shall inure to the
respective successors and assigns of the parties hereto and thereto and of the



PRG-Schultz International, Inc.
As of September 14, 2005
Page 9


                                                               (ROTHSCHILD LOGO)

indemnified parties, and the obligations and liabilities assumed in this
Agreement and Exhibit A by the parties hereto and thereto shall be binding upon
their respective successors and assigns.

     (c) Benefit of Agreement; No Reliance by Third Parties. The advice (oral or
written) rendered by Rothschild pursuant to this Agreement is intended solely
for the benefit and use of the Company and its professionals and professional
advisors in considering the matters to which this Agreement relates, and the
Company agrees that such advice may not be relied upon by any other person, used
for any other purpose or reproduced, disseminated, quoted or referred to at any
time, in any manner or for any purpose without the prior written consent of
Rothschild.

     (d) Nature of Relationship. The relationship of Rothschild to the Company
hereunder shall be that of an independent contractor and Rothschild shall have
no authority to bind, represent or otherwise act as agent, executor,
administrator, trustee, lawyer or guardian for the Company, nor shall Rothschild
have the authority to manage money or property of the Company. The parties
hereto acknowledge and agree that, except as specifically set forth in the last
sentence of Section 1 above, by providing the services contemplated hereunder,
Rothschild will not act, nor will it be deemed to have acted, in any managerial
or fiduciary capacity whatsoever with respect to the Company or any third party
including security holders, creditors or employees of the Company.

     (e) Public Announcements. The Company acknowledges that Rothschild may at
its option and expense, after announcement of the Transaction, place
announcements and advertisements or otherwise publicize the Transaction in such
financial and other newspapers and journals as it may choose, stating that
Rothschild acted as financial advisor to the Company in connection with such
Transaction; provided that such actions comply in full with all requirements
imposed by federal and state law and regulations and the Nasdaq stock market, if
any, and the Company is not caused to incur material or significant expense or
regulatory compliance requirements as a result thereof. Company further consents
to Rothschild's public use or display of Company's logo, symbol or trademark as
part of Rothschild's general marketing or promotional activities, provided such
use or display is in the nature of a public record or tombstone announcement in
relation to the Transaction. Rothschild consents to the Company's announcement
in a press release of the engagement of Rothschild and entering into this
Agreement and the disclosure of same in the Company's filings with the SEC and
filing of this Agreement as an exhibit to such SEC filings.

     (f) CHOICE OF LAW: JURISDICTION. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW
YORK. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE


PRG-Schultz International, Inc.
As of September 14, 2005
Page 10


                                                               (ROTHSCHILD LOGO)

STATE OF NEW YORK, WITHOUT GIVING EFFECT TO SUCH STATE'S PRINCIPLES OF CONFLICTS
OF LAWS. REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF
BUSINESS OF THE PARTIES HERETO, EACH SUCH PARTY HEREBY IRREVOCABLY CONSENTS AND
AGREES THAT ANY AND ALL CLAIMS OR DISPUTES BETWEEN THE PARTIES HERETO PERTAINING
TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
SHALL BE BROUGHT IN ANY OF (A) ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK OR (B) THE BANKRUPTCY COURT OR ANY COURT
HAVING APPELLATE JURISDICTION OVER THE BANKRUPTCY COURT. BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT. EACH PARTY
HERETO HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. THE COMPANY CONSENTS TO THE SERVICE OF PROCESS IN ACCORDANCE WITH NEW
YORK LAW, AND AGREES THAT CLINTON MCKELLAR, JR. SHALL BE AUTHORIZED TO ACCEPT
SERVICE ON ITS BEHALF.

     (g) Waiver of Jury Trial. Each of the parties hereto hereby knowingly,
voluntarily and irrevocably waives any right it may have to a trial by jury in
respect of any claim upon, arising out of or in connection with this Agreement
or any Transaction or other transaction. Each of the parties hereto hereby
certifies that no representative or agent of any other party hereto has
represented expressly or otherwise that such party would not seek to enforce the
provisions of this waiver. Each of the parties hereto hereby acknowledges that
it has been induced to enter into this Agreement by and in reliance upon, among
other things, the provisions of this paragraph.

     (h) Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to the matters provided for herein. No
alteration, waiver, amendment, change or supplement hereto shall be binding or
effective unless the same is set forth in writing signed by a duly authorized
representative of each of the parties hereto.

     (i) Authority. Each party hereto represents and warrants that it has all
requisite power and authority to enter into this Agreement and Exhibit A
attached hereto and the transactions contemplated hereby. Each party hereto
further represents that this Agreement has been duly and validly authorized by
all necessary corporate action and has been duly executed and delivered by each
of the parties hereto and constitutes the legal, valid and



PRG-Schultz International, Inc.
As of September 14, 2005
Page 11


                                                               (ROTHSCHILD LOGO)

binding agreement thereof, enforceable in accordance with its terms. Rothschild
will assume that any instructions, notices or requests have been properly
authorized by the Company if they are given or purported to be given by a person
who is, or is reasonably believed by Rothschild to be a director or officer of
the Company.

     (j) Counterparts. This Agreement may be executed in as many counterparts as
may be deemed necessary and convenient, and by the different parties hereto on
separate counterparts, each of which when so executed shall be deemed an
original, but all such counterparts shall constitute one and the same
instrument. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart to this Agreement.

     If the foregoing correctly sets forth the understanding and agreement
between Rothschild and the Company, please so indicate by signing the enclosed
copy of this letter, whereupon it shall become a binding agreement between the
parties hereto as of the date first above written.

                                        Very truly yours,

                                        ROTHSCHILD INC.


                                        By: /s/ Neil A. Augustine
                                            ------------------------------------
                                            Neil A. Augustine
                                            Managing Director


Accepted and Agreed to as of
the date first written above:

PRG-SCHULTZ INTERNATIONAL, INC.


By: /s/ Clinton McKellar, Jr.
    ---------------------------------
Name: Clinton McKellar, Jr.
Title: S.V.P.



                                    Exhibit A

     The Company shall indemnify and hold harmless Rothschild and its
affiliates, counsel and other professional advisors, and the respective
directors, officers, controlling persons, agents and employees of each of the
foregoing (Rothschild and all of such other persons collectively, the
"Indemnified Parties"), from and against any losses, claims or proceedings,
including without limitation stockholder actions, damages, judgments,
assessments, investigation costs, settlement costs, fines, penalties,
arbitration awards and any other liabilities, costs, fees and expenses
(collectively, "Losses") (a) directly or indirectly related to or arising out of
(i) oral or written information provided by the Company, the Company's employees
or other agents, which either the Company or an Indemnified Party provides to
any person or entity or (ii) any other action or failure to act by the Company,
the Company's employees or other agents or any Indemnified Party at the
Company's request or with the Company's consent, in each case in connection
with, arising out of, based upon, or in any way related to this Agreement, the
retention of and services provided by Rothschild under this Agreement, or any
Transaction or other transaction contemplated by the Agreement; or (b) otherwise
directly or indirectly in connection with, arising out of, based upon, or in any
way related to the engagement of Rothschild under this Agreement or any
transaction or conduct in connection therewith, provided that the Company shall
not be required to indemnify any Indemnified Party for such Losses if and only
to the extent that it is finally judicially determined by a court of competent
jurisdiction that such Losses arose primarily because of the gross negligence,
willful misconduct or fraud of an Indemnified Party. If multiple claims are
brought against an Indemnified Party in an arbitration, with respect to at least
one of which indemnification is permitted under applicable law and provided for
under this Agreement, the Company agrees that any arbitration award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the arbitration award expressly
states that the award, or any portion thereof, is based on a claim as to which
indemnification is not available.

     The Company shall further reimburse any Indemnified Party promptly after
obtaining the necessary approval of the Bankruptcy Court, if any, for any
reasonable legal or other fees, disbursements or expenses as they are incurred
(a) in investigating, preparing or pursuing any action or other proceeding
(whether formal or informal) or threat thereof as to which such Indemnified
Party reasonably believes that indemnification hereunder may be available,
whether or not in connection with pending or threatened litigation or
arbitration and whether or not such Indemnified Party is a party (each, an
"Action") and (b) in connection with enforcing such Indemnified Party's rights
under this Agreement; provided, however, that in the event and only to the
extent that it is finally judicially determined by a court of competent
jurisdiction that the Losses of such Indemnified Party arose primarily because
of the gross negligence, willful misconduct or fraud of such Indemnified Party,
such Indemnified Party will promptly remit to the Company any amounts reimbursed
under this paragraph.

     Upon receipt by an Indemnified Party of notice of any Action, such
Indemnified Party shall notify the Company in writing of such Action, but the
failure to so notify shall not relieve


PRG-Schultz International, Inc.
As of September 14, 2005
Page A-2.


the Company from any liability hereunder (i) if the Company had actual notice of
such Action or (ii) unless and only to the extent that such failure results in
the forfeiture by the Company of substantial rights and defenses. The Company
shall, if requested by Rothschild, assume the defense of any such Action
including the employment of counsel reasonably satisfactory to Rothschild and
will not, without the prior written consent of Rothschild, settle, compromise,
consent or otherwise resolve or seek to terminate any pending or threatened
Action (whether or not any Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination (a) contains an express,
unconditional release of each Indemnified Party from all liability relating to
such Action and the engagement of Rothschild under this Agreement and (b) does
not include a statement as to, or an admission of fault, culpability or a
failure to act by or on behalf of any Indemnified Party. Any Indemnified Party
shall be entitled to retain separate counsel of its choice and participate in
the defense of any Action in connection with any of the matters to which this
Agreement relates, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (x) the Company has failed promptly to
assume the defense and employ counsel or (y) the named parties to any such
Action (including any impleaded parties) include such Indemnified Party and the
Company, and such Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to it which are different from
or in addition to those available to the Company; provided that the Company
shall not in such event be responsible under this Agreement for the fees and
expenses of more than one firm of separate counsel (in addition to local
counsel) in connection with any such Action in the same jurisdiction.

     The Company agrees that if any right of any Indemnified Party set forth in
the preceding paragraphs is finally determined by a court of competent
jurisdiction to be unavailable (except by reason of the gross negligence,
willful misconduct or fraud of such Indemnified Party),, then the Company shall
contribute to such Losses (a) in such proportion as is appropriate to reflect
the relative benefits received by the Company and its creditors and
stockholders, on the one hand, and such Indemnified Party, on the other hand, in
connection with the transactions contemplated hereby, and (b) if (and only if)
the allocation provided in clause (a) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (a) but also the relative fault of the Company and such
Indemnified Party; provided, that, in no event shall the aggregate contribution
of all such Indemnified Parties exceed the amount of fees received by Rothschild
under this Agreement. Benefits received by Rothschild shall be deemed to be
equal to the compensation paid by the Company to Rothschild in connection with
this Agreement. Relative fault shall be determined by reference to, among other
things, whether any alleged untrue statement or omission or any other alleged
conduct relates to information provided by the Company or other conduct by the
Company (or the Company's employees or other agents) on the one hand or by
Rothschild on the other hand.

     The Company also agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to the Company
for or in connection with



PRG-Schultz International, Inc.
As of September 14, 2005
Page A-3


advice or services rendered or to be rendered by any Indemnified Party pursuant
to this Agreement, the transactions contemplated hereby or any Indemnified
Party's actions or inactions in connection with any such advice, services or
transactions except for and only to the extent that such Losses of the Company
are finally determined by a court of competent jurisdiction to have arisen
primarily because of the gross negligence, willful misconduct or fraud of such
Indemnified Party in connection with any such advice, actions, inactions or
services.

     The rights of the Indemnified Parties and the Company hereunder shall be in
addition to any other rights that any of them may have at common law, by statute
or otherwise. Except as otherwise expressly provided for in this Agreement, if
any term, provision, covenant or restriction contained in this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions contained in this Agreement shall all
remain in full force and effect and shall in no way be affected, impaired or
invalidated. The reimbursement, indemnity and contribution obligations of the
Company set forth herein shall apply to any modification of this Agreement and
shall remain in full force and effect regardless of any termination of, or the
completion of any Indemnified Party's services under or in connection with, this
Agreement.

EX-10.74

                                                               (ROTHSCHILD LOGO)

February 1, 2006

Mr. James B. McCurry
President and Chief Executive Officer
PRG-Schultz International, Inc.
600 Galleria Parkway, Suite 100
Atlanta, Georgia 30339

Dear Mr. McCurry:

     This letter (the "Letter Agreement") shall confirm our understanding that
the Completion Fee has, as of the date hereof, been fully earned and shall be
payable, net of applicable credits, if any, upon the earliest of (i) the date of
consummation of the Restructuring (as defined in that certain Restructuring
Support Agreement dated as of December 23, 2005 (as amended on February 1,
2006), among the Company and certain beneficial owners of the Company's 4-3/4%
Convertible Subordinated Notes due 2006), (ii) the date of consummation of any
alternative Transaction, including any M&A Transaction (in which case the
Completion Fee shall be payable in lieu of an M&A Fee), and (iii) August 31,
2006.

     Notwithstanding the foregoing, in the event a Bankruptcy Case is commenced
under the Bankruptcy Code by or against the Company or any of its subsidiaries,
or any combination thereof, this Letter Agreement shall immediately terminate
and be deemed null and void and of no further force or effect, and the rights
and responsibilities of the Company and Rothschild shall be determined solely
under the original terms of the Engagement Letter.

     Except as expressly amended hereby, the Engagement Letter is in all
respects ratified and confirmed and all the terms thereof shall be and remain in
full force and effect.

     Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the letter agreement dated as of September
14, 2005 between PRG-Schultz International, Inc., collectively with its direct
and indirect subsidiaries (the "Company") and Rothschild Inc. ("Rothschild")
(the "Engagement Letter").

     In addition, the parties hereto expressly agree that the Indemnification
Agreement dated as of September 14, 2005 (the "Indemnity Agreement") providing
for the indemnification by the Company of Rothschild and certain related persons
and entities shall remain in full force and effect and, except as provided
above, shall be deemed to cover the engagement as amended hereby.

Rothschild Inc.               Neil A. Augustine
1251 Avenue of the Americas   Managing Director
New York, NY 10020            Telephone 212 403-5411
www.rothschild.com            Facsimile 212 403-5454
                              Email neil.augustine@us.rothschild.com



PRG-Schultz International, Inc.
February 1, 2006
Page 2


     If you are in agreement with the above amendment, please so indicate by
signing the enclosed copy of this letter in the space designated below and
returning it to us whereupon this amendment shall be binding upon the parties
hereto.

                                        Sincerely,

                                        ROTHSCHILD INC.


                                        By: /s/ Neil A. Augustine
                                            ------------------------------------
                                            Neil A. Augustine
                                            Managing Director


Agreed and Accepted:

PRG-SCHULTZ INTERNATIONAL, INC.


By: /s/ James B. McCurry
    ---------------------------------
    James B. McCurry
    President and Chief Executive
    Officer

EX-21.1

                                                                               .
                                                                               .
                                                                               .

                                  SUBSIDIARIES



                                                                      JURISDICTION OF
                       COMPANY                                          ORGANIZATION
                       -------                                        ---------------
                                                               
PRG-Schultz USA, Inc.                                                     Georgia
The Profit Recovery Group Asia, Inc.
PRG-Schultz Australia, Inc.
PRG-Schultz Belgium, Inc.
PRG-Schultz Canada, Inc.
The Profit Recovery Group Costa Rica, Inc.
The Profit Recovery Group New Zealand, Inc.
The Profit Recovery Group Netherlands, Inc.
The Profit Recovery Group Mexico, Inc.
PRG-Schultz France, Inc.
The Profit Recovery Group Germany, Inc.
The Profit Recovery Group South Africa, Inc.
PRG-Schultz Switzerland, Inc.
The Profit Recovery Group Italy, Inc.
The Profit Recovery Group Spain, Inc.
PRG-Schultz Portugal, Inc.
PRG International, Inc.
PRG USA, Inc.
PRG-Schultz Scandinavia, Inc.
PRG-Schultz Japan, Inc.
PRG-Schultz Puerto Rico, Inc.
PRG-Schultz Chile, Inc.
PRG-Schultz Europe, Inc.
The Profit Recovery Group Holdings Mexico, S de RL de CV                   Mexico
The Profit Recovery Group Servicios Mexico S de RL de CV                   Mexico
The Profit Recovery Group de Mexico S de RL de CV
The Profit Recovery Group Argentina S.A.                                  Argentina
Profit Recovery Brasil Ltda.                                               Brazil
PRG-Schultz International PTE LTD                                         Singapore
PRG-Schultz Suzhou' Co Ltd.                                                 China
PRG International CR s.r.o.                                              Czech Republic
PRGFS, Inc.                                                                Delaware
HS&A Acquisition - UK Inc.                                                  Texas
Meridian Corporation Limited                                      Jersey (Channel Islands)
Tamebond Limited                                                        United Kingdom
JA Ewing, Inc.                                                             New York
Meridian VAT Reclaim Operations Limited                                    Ireland
PRG-Schultz Ireland LTD
PRG-Schultz UK Ltd.                                                     United Kingdom
Meridian VAT Processing (International) Limited,                           Ireland




                                                                    
Meridian VAT Processing (N. America) Limited
Meridian VAT Processing (Japan) Limited
VATClaim International (Ireland) Limited
Meridian VAT Reclaim, Inc.                                                Delaware
Meridian VAT Reclaim Canada, Inc.                                          Canada
Meridian VAT Reclaim Hong Kong Limited                                    Hong Kong
Meridian VAT Reclaim (India) Private Limited                                India
Meridian VAT Reclaim (UK) Limited                                      United Kingdom
Meridian, Inc.                                                             Japan
Meridian VAT Reclaim (Schwiez) AG                                       Switzerland
Meridian VAT Reclaim GmbH                                                  Germany
Meridian VAT Reclaim Services Limited                                  United Kingdom
Meridian VAT Reclaim France S.A.R.L.                                       France
Meridian Sverige AB                                                        Sweden
Meridian VAT Reclaim Korea Co., Limited                                  South Korea
Meridian VAT Reclaim (Australia) Pty. Limited                            Australia
VAT Claim (International) UK Limited                                   United Kingdom
PRG-Schultz Canada Corp.                                                   Canada
PRG-Schultz (Deutschland) GmbH                                             Germany
PRG-Schultz Nederland B.V.                                               Netherlands
PRG-Schultz Italia SRL                                                     Italy
PRG-Schultz Puerto Rico                                                  Puerto Rico
PRG-Schultz Peru S.R.L.                                                     Peru
PRG-Schultz Colombia Ltda                                                 Colombia
PRG-Schultz Svenska A. B.                                                  Sweden
PRG-Schultz Venezuela S. R. L.                                           Venezuela
PRG-Schultz Chile Ltda                                                     Chile
PRG-Schultz Polska Sp. Zo. O.                                              Poland
Howard Schultz & Associates (Asia) Limited                               Hong Kong
HS&A International PTE LTD                                               Singapore
PRG-Schultz (Thailand) Co., Limited                                      Thailand
Howard Schultz de Mexico, S.A. de C.V.                                    Mexico
PRG-Schultz Insurance Limited                                             Bermuda
PRGDS, LLC                                                                Georgia
PRGTS, LLC                                                                Georgia

EX-23.1

                                                                    EXHIBIT 23.1

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
PRG-Schultz International, Inc.:

We consent to the incorporation by reference in the Registration Statements
(Nos. 333-64125, 333-08707, 333-30885, 333-61578, 333-81168 and 333-100817) on
Form S-8 of PRG-Schultz International, Inc. and subsidiaries of our report dated
March 17, 2006 with respect to the consolidated balance sheets of PRG-Schultz
International, Inc. and subsidiaries as of December 31, 2005 and 2004, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for each of the years in the three-year period ended December 31,
2005, and related financial statement schedule, and our report dated March 17,
2006 with respect to management's assessment of internal control over financial
reporting as of December 31, 2005 and the effectiveness of internal control over
financial reporting as of December 31, 2005, which reports appear in the
December 31, 2005 annual report on Form 10-K of PRG-Schultz International, Inc.

Our report dated March 17, 2006 with respect to the consolidated balance sheets
of PRG-Schultz International, Inc. and subsidiaries as of December 31, 2005 and
2004, and the related consolidated statements of operations, shareholders'
equity (deficit), and cash flows for each of the years in the three-year period
ended December 31, 2005, and related financial statement schedule, contains an
explanatory paragraph regarding matters that raise substantial doubt about the
Company's ability to continue as a going concern.  The consolidated financial
statements and related financial statement schedule do not include any
adjustments that might result from the outcome of this uncertainty.

Our report dated March 17, 2006, on management's assessment of the effectiveness
of internal control over financial reporting and the effectiveness of internal
control over financial reporting as of December 31, 2005, expresses our opinion
that PRG-Schultz International, Inc. and subsidiaries did not maintain effective
internal control over financial reporting as of December 31, 2005 because of the
effect of material weaknesses on the achievement of the objectives of the
control criteria and contains an explanatory paragraph that states that the
Company identified material weaknesses relating to company level controls and
internal controls over revenue recognition.

/s/ KPMG LLP

Atlanta, Georgia
March 17, 2006

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, James B. McCurry, certify that:

1.	I have reviewed this Form 10-K of PRG-Schultz International, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ JAMES B. MCCURRY
		James B. McCurry
March 23, 2006		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Peter Limeri, certify that:

1.	I have reviewed this Form 10-K of PRG-Schultz International, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ PETER LIMERI
		Peter Limeri
March 23, 2006		Executive Vice President-Finance,
		Chief Financial Officer and Treasurer
		(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of PRG-Schultz International, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James B. McCurry, President and Chief Executive Officer of the Company and I, Peter Limeri, Executive Vice President-Finance, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of the undersigned’s knowledge: (1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By:	/s/ JAMES B. MCCURRY
		James B. McCurry
March 23, 2006		President and Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ PETER LIMERI
		Peter Limeri
March 23, 2006		Executive Vice President-Finance,
		Chief Financial Officer and Treasurer
		(Principal Financial Officer)