10-Q

                                                                                       Page 1 of 245
                                                                                       Index to Exhibits on Page 19

                                UNITED STATES

                   SECURITIES AND EXCHANGE COMMISSION

                         Washington, D.C. 20549

                                 FORM 10-Q
(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2001.

                                    OR

[  ] 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 1-3208.


                    NATIONAL SERVICE INDUSTRIES, INC.
       (Exact name of registrant as specified in its charter)

          Delaware                                     58-0364900
- --------------------------------        ----------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

        1420 Peachtree Street, N.E., Atlanta, Georgia       30309-3002
- --------------------------------------------------------------------------------
         (Address of principal executive offices)           (Zip Code)

                            (404) 853-1000
        ----------------------------------------------------------
           (Registrant's telephone number, including area code)

                                 None
          --------------------------------------------------
            (Former Name, Former Address and Former Fiscal
                   Year, if Changed Since Last Report)

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 [ X ] No [ ]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

Common Stock - $1.00 Par Value - 41,188,504 shares as of May 31, 2001.





                                                                          Page 2

             NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES

                                INDEX



                                                                                       Page No.
                                                                                     -----------

PART I.  FINANCIAL INFORMATION

          ITEM 1.  FINANCIAL STATEMENTS

                   CONSOLIDATED BALANCE SHEETS (Unaudited) -
                   MAY 31, 2001 AND AUGUST 31, 2000                                      3

                   CONSOLIDATED STATEMENTS OF INCOME (Unaudited) -
                   THREE AND NINE MONTHS ENDED MAY 31, 2001 AND 2000
                                                                                         4
                   CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) -
                   NINE MONTHS ENDED MAY 31, 2001 AND 2000                               5

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)             6-12

          ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS                               13-15

          ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                   MARKET RISK                                                          15

PART II.  OTHER INFORMATION

          ITEM 1.  LEGAL PROCEEDINGS                                                    17

          ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                     17

SIGNATURES                                                                              18

INDEX TO EXHIBITS                                                                       19








                                                                          Page 3

                                NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
                                --------------------------------------------------
                                      CONSOLIDATED BALANCE SHEETS (Unaudited)
                                      ---------------------------------------
                                  (In thousands, except share and per-share data)
                                                                                                      May 31,         August 31,
                                                                                                       2001              2000
                                                                                                 ------------------ ---------------
Assets
- ------
Current Assets:
      Cash and cash equivalents                                                                         $    9,018      $    1,510
      Receivables, less reserves for doubtful accounts of $8,435 at May 31,
           2001 and $7,310 at August 31, 2000 (Note 8)                                                     372,410         405,748
      Inventories, at the lower of cost (on a first-in, first-out basis) or market                         254,447         257,579
      Linens in service, net of amortization                                                                57,306          57,162
      Deferred income taxes                                                                                  4,094          10,285
      Prepayments and other current assets                                                                  33,440          25,740
                                                                                                 ------------------ ---------------
           Total Current Assets                                                                            730,715         758,024
                                                                                                 ------------------ ---------------

Property, Plant, and Equipment, at cost:
      Land                                                                                                  28,561          28,697
      Buildings and leasehold improvements                                                                 219,152         206,946
      Machinery and equipment                                                                              587,291         559,483
                                                                                                 ------------------ ---------------
           Total Property, Plant, and Equipment                                                            835,004         795,126
      Less-Accumulated depreciation and amortization                                                       410,180         368,067
                                                                                                 ------------------ ---------------
           Property, Plant, and Equipment-net                                                              424,824         427,059
                                                                                                 ------------------ ---------------

Other Assets:
      Goodwill and other intangibles                                                                       514,490         536,009
      Other                                                                                                 92,762          95,347
                                                                                                 ------------------ ---------------
           Total Other Assets                                                                              607,252         631,356
                                                                                                 ------------------ ---------------
                Total Assets                                                                            $1,762,791      $1,816,439
                                                                                                 ================== ===============

Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
      Current maturities of long-term debt                                                              $    1,089      $      201
      Commercial paper                                                                                     120,665         236,706
      Short-term secured borrowings (Note 8)                                                               118,900               -
      Notes payable                                                                                         18,690          20,285
      Accounts payable                                                                                     123,317         130,573
      Accrued salaries, commissions, and bonuses                                                            47,070          63,832
      Current portion of self-insurance reserves                                                             6,794           7,006
      Accrued taxes payable                                                                                      -           1,924
      Other accrued liabilities                                                                             76,472          76,425
                                                                                                 ------------------ ---------------
           Total Current Liabilities                                                                       512,997         536,952
                                                                                                 ------------------ ---------------

Long-Term Debt, less current maturities                                                                    383,213         384,242
                                                                                                 ------------------ ---------------
Deferred Income Taxes                                                                                       65,421          96,153
                                                                                                 ------------------ ---------------
Self-Insurance Reserves, less current portion                                                               30,682          37,484
                                                                                                 ------------------ ---------------
Other Long-Term Liabilities                                                                                 90,587          93,138
                                                                                                 ------------------ ---------------

Stockholders' Equity:
      Series A participating preferred stock, $.05 stated value, 500,000 shares
           Authorized, none issued
      Preferred stock, no par value, 500,000 shares authorized, none issued
      Common stock, $1 par value, 120,000,000 shares authorized, 57,918,978 shares issued                   57,919          57,919
      Paid-in capital                                                                                       29,662          29,657
      Retained earnings                                                                                  1,027,232       1,022,974
      Unearned compensation on restricted stock (Note 7)                                                    (1,020)              -
      Accumulated other comprehensive income                                                               (13,640)        (12,777)
                                                                                                 ------------------ ---------------
                                                                                                         1,100,153       1,097,773
      Less-Treasury stock, at cost (16,730,474 shares at May 31, 2001 and
           17,090,414 shares at August 31, 2000)                                                           420,262         429,303
                                                                                                 ------------------ ---------------
                  Total Stockholders' Equity                                                               679,891         668,470
                                                                                                 ------------------ ---------------
                          Total Liabilities and Stockholders' Equity                                    $1,762,791      $1,816,439
                                                                                                 ================== ===============

       The accompanying notes to consolidated financial statements are an integral part of these statements.





                                                                          Page 4

                                National Service Industries, Inc. and Subsidiaries
                                --------------------------------------------------
                                   Consolidated Statements of Income (Unaudited)
                                   ---------------------------------------------
                                       (In thousands, except per-share data)


                                                                        THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                              MAY 31                          MAY 31
                                                                   ------------------------------  -----------------------------
                                                                       2001            2000            2001           2000
                                                                   --------------  --------------  -------------- --------------

Sales and Service Revenues:
      Net sales of products                                             $560,957        $562,000      $1,651,430     $1,632,288
      Service revenues                                                    88,019          83,040         248,734        238,175
                                                                   --------------  --------------  -------------- --------------
           Total Revenues                                                648,976         645,040       1,900,164      1,870,463
                                                                   --------------  --------------  -------------- --------------

Costs and Expenses:
      Cost of products sold                                              331,354         337,771         978,821        978,648
      Cost of services                                                    49,300          46,070         141,934        136,009
      Selling and administrative expenses                                214,548         211,192         636,906        604,166
      Amortization expense                                                 5,316           5,287          15,635         15,650
      Interest expense, net                                               12,392          11,678          39,028         32,191
      (Gain) loss on sale of businesses                                   14,557            (170)         12,197           (356)
      Other expense (income), net                                           (447)           (738)          2,319         (2,777)
                                                                   --------------  --------------  -------------- --------------
           Total Costs and Expenses                                      627,020         611,090       1,826,840      1,763,531
                                                                   --------------  --------------  -------------- --------------

Income before Provision for Income Taxes                                  21,956          33,950          73,324        106,932

Provision for Income Taxes                                                 9,385          13,174          28,391         41,490
                                                                   --------------  --------------  -------------- --------------

Net Income                                                              $ 12,571        $ 20,776      $   44,933     $   65,442
                                                                   ==============  ==============  ============== ==============

Per Share:
      Basic Earnings per Share                                          $   0.31        $   0.51      $     1.09     $     1.61
                                                                   ==============  ==============  ============== ==============
        Basic Weighted Average Number of Shares Outstanding               41,119          40,752          41,039         40,677
                                                                   ==============  ==============  ============== ==============

      Diluted Earnings per Share                                        $   0.30        $   0.51      $     1.09     $     1.61
                                                                   ==============  ==============  ============== ==============
         Diluted Weighted Average Number of Shares Outstanding            41,532          40,756          41,280         40,711
                                                                   ==============  ==============  ============== ==============

       The accompanying notes to consolidated financial statements are an integral part of these statements.





                                                                          Page 5

                                National Service Industries, Inc. and subsidiaries
                                --------------------------------------------------
                                 Consolidated Statements of Cash Flows (Unaudited)
                                 -------------------------------------------------
                                                  (In thousands)
                                                                                                      NINE MONTHS ENDED
                                                                                                            MAY 31
                                                                                                -------------------------------
                                                                                                    2001             2000
                                                                                                --------------   --------------
Cash Provided by (Used for) Operating Activities
      Net income                                                                                      $44,933          $65,442
      Adjustments to reconcile net income to net cash provided by (used for) operating
      activities:
           Depreciation and amortization                                                               69,380           63,875
           Provision for losses on accounts receivable                                                  3,499            3,520
           (Gain) loss on the sale of property, plant, and equipment                                    1,359           (1,198)
           (Gain) loss on the sale of businesses                                                       12,197             (356)
           Change in assets and liabilities net of effect of acquisitions and divestitures-
                Receivables                                                                            27,875           (1,639)
                Inventories and linens in service, net                                                    923          (44,493)
                Deferred income taxes                                                                 (24,541)           1,818
                Prepayments and other current assets                                                   (9,003)          (5,265)
                Accounts payable and accrued liabilities                                              (23,672)         (37,070)
                Self-insurance reserves and other long-term liabilities                                (9,118)          (2,883)
                                                                                                --------------   --------------
                      Net Cash Provided by Operating Activities                                        93,832           41,751
                                                                                                --------------   --------------

Cash Provided by (Used for) Investing Activities
      Purchases of property, plant, and equipment                                                     (53,742)         (78,793)
      Sale of property, plant, and equipment                                                            2,196            3,287
      Acquisitions                                                                                     (2,598)         (21,550)
      Proceeds from the sale of businesses                                                              4,085                -
      Change in other assets                                                                            2,408           (3,660)
                                                                                                --------------   --------------
           Net Cash Used for Investing Activities                                                     (47,651)        (100,716)
                                                                                                --------------   --------------

Cash Provided by (Used for) Financing Activities
      Net repayments of notes payable                                                                  (1,595)            (229)
      Issuances (repayments) of commercial paper, net (less than 90 days)                            (107,188)          93,699
      Issuances of commercial paper (greater than 90 days)                                              1,347          186,024
      Repayments of commercial paper (greater than 90 days)                                           (10,200)        (182,750)
      Proceeds from short-term secured borrowings                                                     118,900                -
      Repayments of long-term debt                                                                       (826)            (861)
      Treasury stock transactions, net                                                                  2,260            3,039
      Cash dividends paid                                                                             (40,675)         (39,884)
                                                                                                --------------   --------------
           Net Cash Provided by (Used for) Financing Activities                                       (37,977)          59,038
                                                                                                --------------   --------------

Effect of Exchange Rate Changes on Cash                                                                  (696)            (838)
                                                                                                --------------   --------------

Net Change in Cash and Cash Equivalents                                                                 7,508             (765)

Cash and Cash Equivalents at Beginning of Period                                                        1,510            2,254
                                                                                                --------------   --------------

Cash and Cash Equivalents at End of Period                                                            $ 9,018          $ 1,489
                                                                                                ==============   ==============

Supplemental Cash Flow Information:
      Income taxes paid during the period                                                             $55,678          $53,801
      Interest paid during the period                                                                  35,169           28,309

Noncash Investing and Financing Activities:
      Treasury shares issued under long-term incentive plan                                           $ 6,784          $ 5,667
      Noncash aspects of acquisitions--
           Assets acquired                                                                            $ 2,894          $     -
           Liabilities assumed or incurred                                                                296            1,219





       The accompanying notes to consolidated financial statements are an integral part of these statements.





                                                                          Page 6


             NATIONAL SERVICE INDUSTRIES, INC. AND SUBSIDIARIES
             --------------------------------------------------

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
            ------------------------------------------------------
               (Dollar amounts in thousands, except share and
                 per-share data and as otherwise indicated)

1.    BASIS OF PRESENTATION

The interim consolidated financial statements included herein have been prepared
by the company without audit and the condensed  consolidated balance sheet as of
August 31, 2000 has been  derived  from  audited  statements.  These  statements
reflect all adjustments,  all of which are of a normal,  recurring nature, which
are, in the opinion of management,  necessary to present fairly the consolidated
financial  position as of May 31,  2001 and August 31,  2000,  the  consolidated
results of operations for the three and nine months ended May 31, 2001 and 2000,
and the consolidated cash flows for the nine months ended May 31, 2001 and 2000.
Certain   reclassifications  have  been  made  to  the  prior  year's  financial
statements to conform to the current year's  presentation.  Certain  information
and footnote  disclosures  normally included in financial statements prepared in
accordance with accounting  principles  generally  accepted in the United States
have been condensed or omitted.  The company  believes that the  disclosures are
adequate to make the information presented not misleading.  It is suggested that
these financial  statements be read in conjunction with the financial statements
and notes thereto  included in the company's  Annual Report on Form 10-K for the
fiscal year ended August 31, 2000.

The results of  operations  for the three and nine months ended May 31, 2001 are
not  necessarily  indicative  of the results to be expected  for the full fiscal
year  because the  company's  revenues  and income are  generally  higher in the
second  half of its  fiscal  year and  because  of the  uncertainty  of  general
business conditions.

2.    Accounting Standards Yet to be Adopted

In September  2000,  the  Emerging  Issues Task Force  ("EITF")  reached a final
consensus on EITF Issue 00-10,  "Accounting  for Shipping and Handling  Fees and
Costs."  Specifically,  Issue  00-10  addresses  how the seller of goods  should
classify  amounts  billed to a customer  for  shipping  and  handling.  The EITF
concluded that all amounts billed to a customer in a sale transaction related to
shipping  and  handling  represent  revenues  earned for the goods  provided and
should be classified as revenue.  The company is required to and will adopt EITF
00-10 in the fourth  quarter of fiscal year 2001.  The company has  historically
netted certain shipping and handling  revenues charged to customers in costs and
expenses.  The  adoption  of EITF 00-10 will  result in an increase in sales and
service  revenues  and costs and  expenses,  with no impact on net  income.  The
company  has not yet  calculated  the  effect  of this  reclassification  on its
reported revenues and costs.






                                                                          Page 7

3.    BUSINESS SEGMENT INFORMATION

                                                                               Depreciation        Capital
                                                  Sales and     Operating          and          Expenditures
                                                   Service        Profit       Amortization          and
Nine Months Ended May 31, 2001                     Revenues       (Loss)         Expense        Acquisitions
                                                 ------------- ------------- ----------------- ----------------
Lighting Equipment                                 $1,096,466      $ 93,670           $39,436          $31,031
Chemical                                              386,491        16,250             8,690            6,689
Textile Rental                                        248,734        16,033            12,345           13,729
Envelope                                              168,473         3,991             7,171            3,749
                                                 ------------- ------------- ----------------- ----------------
                                                    1,900,164       129,944            67,642           55,198
Corporate                                                           (17,592)            1,738            1,142
Interest expense, net                                               (39,028)
                                                 ------------- ------------- ----------------- ----------------
Total                                              $1,900,164      $ 73,324           $69,380          $56,340
                                                 ============= ============= ================= ================


                                                                               Depreciation        Capital
                                                  Sales and     Operating          and          Expenditures
                                                   Service        Profit       Amortization          and
Nine Months Ended May 31, 2000                     Revenues       (Loss)         Expense        Acquisitions
                                                 ------------- ------------- ----------------- ----------------
Lighting Equipment                                 $1,093,469      $ 92,187           $36,630         $ 58,279
Chemical                                              373,153        34,644             8,290            4,254
Textile Rental                                        238,175        19,410            11,525           20,526
Envelope                                              165,666         6,185             5,714           15,240
                                                 ------------- ------------- ----------------- ----------------
                                                    1,870,463       152,426            62,159           98,299
Corporate                                                           (13,303)            1,716            2,044
Interest expense, net                                               (32,191)
                                                 ------------- ------------- ----------------- ----------------
Total                                              $1,870,463      $106,932           $63,875         $100,343
                                                 ============= ============= ================= ================


                                                                               Depreciation        Capital
                                                  Sales and     Operating          and          Expenditures
                                                   Service        Profit       Amortization          and
Three Months Ended May 31, 2001                    Revenues       (Loss)         Expense        Acquisitions
                                                 ------------- ------------- ----------------- ----------------
Lighting Equipment                                   $368,821       $32,056           $13,304          $ 7,336
Chemical                                              136,763          (637)            2,924            2,192
Textile Rental                                         88,019         8,297             4,077            7,925
Envelope                                               55,373         1,416             2,415            1,407
                                                 ------------- ------------- ----------------- ----------------
                                                      648,976        41,132            22,720           18,860
Corporate                                                            (6,784)              505              273
Interest expense, net                                               (12,392)
                                                 ------------- ------------- ----------------- ----------------
Total                                                $648,976       $21,956           $23,225          $19,133
                                                 ============= ============= ================= ================


                                                                               Depreciation        Capital
                                                  Sales and     Operating          and          Expenditures
                                                   Service        Profit       Amortization          and
Three Months Ended May 31, 2000                    Revenues       (Loss)         Expense        Acquisitions
                                                 ------------- ------------- ----------------- ----------------
Lighting Equipment                                   $371,778       $27,887           $11,984          $17,669
Chemical                                              133,645        14,550             2,780            2,003
Textile Rental                                         83,040         7,976             3,969            5,502
Envelope                                               56,577           662             2,066            6,026
                                                 ------------- ------------- ----------------- ----------------
                                                      645,040        51,075            20,799           31,200
Corporate                                                            (5,447)              583              167
Interest expense, net                                               (11,678)
                                                 ------------- ------------- ----------------- ----------------
Total                                                $645,040       $33,950           $21,382          $31,367
                                                 ============= ============= ================= ================





                                                                          Page 8

                                                                Total Assets
                                                 -------------------------------------------
                                                      May 31, 2001         August 31, 2000
                                                 -------------------      ------------------
Lighting Equipment                                       $1,107,141              $1,142,227
Chemical                                                    235,083                 241,645
Textile Rental                                              226,923                 222,957
Envelope                                                    147,278                 151,003
                                                 -------------------      ------------------
Subtotal                                                  1,716,425               1,757,832
Corporate                                                    46,366                  58,607
                                                 -------------------      ------------------
Total                                                    $1,762,791              $1,816,439
                                                 ===================      ==================


4.    INVENTORIES

Major classes of inventory as of May 31, 2001 and August 31, 2000 were as follows:

                                                    May 31,             August 31,
                                                     2001                 2000
                                               -----------------    -----------------
Raw Materials and Supplies                             $101,411             $104,566
Work-in-Process                                          18,987               20,262
Finished Goods                                          134,049              132,751
                                               -----------------    -----------------
Total                                                  $254,447             $257,579
                                               =================    =================


5.    EARNINGS PER SHARE

The company  accounts  for  earnings  per share  using  Statement  of  Financial
Accounting Standards No. 128, "Earnings per Share." Under this statement,  basic
earnings  per share is computed by dividing  net  earnings  available  to common
stockholders by the weighted average number of common shares  outstanding during
the period.  Diluted  earnings per share is computed  similarly but reflects the
potential  dilution  that would occur if dilutive  options  were  exercised  and
restricted  stock awards were  vested.  The  following  table  calculates  basic
earnings per common share and diluted  earnings per common share at May 31, 2001
and May 31, 2000:


                                                                      Three Months Ended                  Nine Months Ended
                                                                --------------------------------    -------------------------------
                                                                 May 31, 2001      May 31, 2000     May 31, 2001      May 31, 2000
                                                                ---------------    -------------    --------------    -------------
Basic earnings per common share:
    Net income                                                         $12,571          $20,776           $44,933          $65,442
    Basic weighted average shares outstanding (in thousands)            41,119           40,752            41,039           40,677
                                                                ---------------    -------------    --------------    -------------
    Basic earnings per common share                                    $  0.31          $  0.51           $  1.09          $  1.61
                                                                ===============    =============    ==============    =============

Diluted earnings per common share:
    Net income                                                         $12,571          $20,776           $44,933          $65,442

    Basic weighted average shares outstanding (in thousands)            41,119           40,752            41,039           40,677
       Add - Shares of common stock issuable upon assumed
       exercise of dilutive stock options (in thousands)                   362                4               216               34
       Add - Unvested restricted stock (in thousands)                       51                -                25                -
                                                                ---------------    -------------    --------------    -------------
    Diluted weighted average shares outstanding (in thousands)          41,532           40,756            41,280           40,711
                                                                ---------------    -------------    --------------    -------------

    Diluted earnings per common share                                  $  0.30          $  0.51           $  1.09          $  1.61
                                                                ===============    =============    ==============    =============






                                                                          Page 9

6.    COMPREHENSIVE INCOME

Statement of Financial  Accounting  Standards No. 130, "Reporting  Comprehensive
Income,"  requires  the  reporting  of a measure of all  changes in equity of an
entity that result from recognized  transactions and other economic events other
than transactions with owners in their capacity as owners.  Other  comprehensive
income  (loss) for the three and nine months ended May 31, 2001 and May 31, 2000
includes only foreign  currency  translation  adjustments.  The  calculation  of
comprehensive income is as follows:

                                                              Three Months Ended                    Nine Months Ended
                                                       ----------------------------------    ---------------------------------
                                                        May 31, 2001       May 31, 2000      May 31, 2001       May 31, 2000
                                                       ---------------    ---------------    --------------    ---------------

Net income                                                    $12,571            $20,776           $44,933            $65,442
Foreign currency translation adjustments                        1,241             (2,615)           (1,776)            (2,375)
Reclassification   adjustment  for  foreign  currency
  translation  loss  realized in net income as a result
  of the sale of a foreign entity (Note 9)                        913                  -               913                  -
                                                       ---------------    ---------------    --------------    ---------------
       Comprehensive Income                                   $14,725            $18,161           $44,070            $63,067
                                                       ===============    ===============    ==============    ===============

7.    RESTRICTED STOCK

In October 2000,  the company  awarded  256,800  shares of  restricted  stock to
officers and other key employees  under the National  Service  Industries,  Inc.
Long-Term  Achievement  Incentive  Plan.  The shares  are  granted in 20 percent
increments  when the company's stock price equals or exceeds certain stock price
targets ranging from $22.14 to $38.50 for thirty consecutive  calendar days. The
shares vest ratably in four equal annual  installments  beginning  one year from
the date of grant.  During the  vesting  period,  the  participants  have voting
rights  and  receive  dividends,  but  the  shares  may not be  sold,  assigned,
transferred, pledged or otherwise encumbered. If the stock price targets are not
reached on or before the fifth  anniversary of the award date, the corresponding
shares are not granted. Additionally,  granted but unvested shares are forfeited
upon termination of employment, unless certain retirement criteria are met.

The  fair  value of the  restricted  shares  on the  date of grant is  amortized
ratably over the vesting  period.  In January 2001, the first stock price target
was achieved and 51,260 restricted shares were granted. Unearned compensation of
$1,281 on restricted  stock was initially  recorded based on the market value of
the  shares  on the date of grant and is  generally  being  amortized  over four
years. The unamortized  balance of unearned  compensation on restricted stock is
included as a separate component of stockholders' equity.

8.    SECURED BORROWINGS

In May 2001, the company entered into a three-year  agreement (the  "Receivables
Facility")  to borrow,  on an ongoing  basis,  up to $150.0  million  secured by
undivided  interests  in a  defined  pool of trade  accounts  receivable  of the
lighting  equipment and chemical  segments.  At May 31, 2001, net trade accounts
receivable  pledged as security for borrowings  under the  Receivables  Facility
totaled $220.4 million. Borrowings outstanding at May 31, 2001 of $118.9 million
were used to reduce  borrowings  under the company's  commercial  paper program.
Interest rates under the Receivables Facility are based on the LIBOR rate.

9.    SALE OF BUSINESSES

As part of an  initiative  to refocus the  overseas  operations  of the chemical
segment,  the company sold its Australian  subsidiary,  NSI  International  Pty,
Ltd.,  resulting  in a pretax loss of $5.6  million.  In  addition,  the company
entered  into a  contract  to sell its  French  operations,  as well as  certain
trademarks and formulas.  The company  recorded an estimated pretax loss on this
transaction  of $9.0  million  and  finalized  the  sale on June 29,  2001.  The
combined  pretax loss of $14.6  million is  included in "(Gain)  loss on sale of
businesses" in the accompanying Consolidated Statements of Income.


                                                                         Page 10

10.   LEGAL PROCEEDINGS

The company is subject to various  legal claims  arising in the normal course of
business  out of the  conduct of its  current  and prior  businesses,  including
patent infringement and product liability claims. Based on information currently
available,  it is the opinion of  management  that the  ultimate  resolution  of
pending and threatened legal proceedings will not have a material adverse effect
on the company's financial  condition or results of operations.  However, in the
event of  unexpected  future  developments,  it is  possible  that the  ultimate
resolution of such matters, if unfavorable, could have a material adverse effect
on the  company's  results of  operations  in a particular  future  period.  The
company reserves for known legal claims when payments associated with the claims
become probable and the costs can be reasonably  estimated.  The actual costs of
resolving legal claims may be substantially  lower or higher than that reserved.
The company does not believe that the amount of such costs below or in excess of
that reserved is reasonably estimable.

Among the  product  liability  claims to which the company is subject are claims
arising  from  the   installation   and   distribution  of   asbestos-containing
insulation,  primarily  in  the  southeastern  United  States,  by a  previously
divested  business of the  company.  Most claims  against the company  seek both
substantial compensatory damages and punitive damages. The company believes that
many of the claims against it are without merit,  and the company  believes that
it has done nothing which should  justify  punitive  damages.  In addition,  the
company  believes that it has substantial  legal defenses  against many of these
claims,  including that the company did not manufacture any  asbestos-containing
building  products  and that  statutes  of repose in some states bar the claims.
However,  there is no assurance that the company will be successful in asserting
defenses to these claims.

The company has reached  settlement  agreements  with  substantially  all of its
relevant insurers  providing for their payment of these claims up to the various
policy limits. Over the past two decades, through May 2001, approximately 38,500
such  claims  against the  company  have been  resolved  for an  aggregate  cost
(liability   payments  and  other  expenses)  of   approximately   $47  million,
approximately  $45  million of which has been paid or is  expected to be paid by
insurers.  The average  per-claim  liability payment made by the company and its
insurers was  approximately  nine hundred  dollars over that period and has been
slightly more than twelve hundred dollars during the past eighteen months. As of
May 31, 2001, there were approximately 26,100 similar claims pending against the
company,  including  approximately  12,700  claims  that  have been  settled  in
principle (but not yet finalized) for amounts  generally  consistent with recent
historical  per-claim  settlement  costs.  The company  anticipates that similar
claims will be made in the future.

Prior to February 1, 2001, the Center for Claims  Resolution (the "CCR") handled
the  processing  and  settlement of claims on behalf of the company and retained
local counsel for the defense of claims.  Through  February 1, 2001, the company
was responsible for varying  percentages of CCR's defense and liability payments
on a  claim-by-claim  basis  pursuant to  predetermined  sharing  formulae,  and
substantially  all of the company's portion of those payments were paid directly
by the company's insurers. During the past eighteen months, several members have
left the CCR or declared  bankruptcy.  These  members have failed to pay, or may
fail to pay, certain  financial  obligations in connection with settlements that
were reached while they were CCR members. The company has paid CCR approximately
five hundred  thousand  dollars for the company's  allocated share of the amount
needed to cover defaulted obligations relating to paid settlements;  the CCR may
request,  and the company may be subject to claims  that it has  liability  for,
further  payments  with  respect to  settlements  reached in  principle  but not
finalized.  Although the company will seek to recover the recent payment and any
future  payments from  insurance and other  sources,  there is no assurance that
such payments will be recoverable.  In addition,  several significant  companies
that are traditional  co-defendants  in similar  claims,  but are not members of
CCR, sought bankruptcy  protection during the past eighteen months.  The absence
of these  traditional  defendants  may increase  the cost of  resolving  similar
claims for other defendants, including the company.

The ultimate asbestos-related liability of the company is difficult to estimate.
Based on the company's  experience to date,  and in light of the legal  defenses
that the company believes should protect it and the increasing  number of claims
by persons who are not impaired as a result of occupational exposure to asbestos
fibers, the company believes that substantially all of the costs it may incur in
defending and ultimately disposing of asbestos-related claims in the foreseeable
future will be paid by its insurers. The company is and will continue monitoring
and analyzing  the trends,  developments,  and variables  affecting or likely to
affect the resolution of pending and future claims against the company.

11.   ENVIRONMENTAL MATTERS

The company's operations,  as well as similar operations of other companies, are
subject  to  comprehensive  laws and  regulations  relating  to the  generation,
storage,  handling,  transportation,  and disposal of hazardous  substances  and
solid and hazardous wastes and to the remediation of contaminated sites. Permits
and environmental  controls are required for certain of the company's operations
to limit air and water pollution, and these permits are subject to modification,
renewal, and revocation by issuing authorities.  The company believes that it is
in substantial compliance with all material environmental laws, regulations, and
permits.  On an ongoing basis,  the company  incurs capital and operating  costs
relating to environmental  compliance.  Environmental  laws and regulations have
generally  become stricter in recent years, and the cost of responding to future
changes may be substantial.


                                                                         Page 11

The company's environmental reserves, which are included in current liabilities,
totaled  $7.5  million and $10.2  million at May 31,  2001 and August 31,  2000,
respectively. The actual cost of environmental issues may be substantially lower
or higher than that reserved due to the  difficulty  in  estimating  such costs,
potential changes in the status of government regulations,  and the inability to
determine  the  extent  to which  contributions  will be  available  from  other
parties.  The company does not believe that any amount of such costs below or in
excess of that accrued is reasonably estimable.

Certain  environmental  laws,  such as Superfund,  can impose  liability for the
entire cost of site  remediation  upon each of the  current or former  owners or
operators  of a site or  parties  who sent  waste to a site where a release of a
hazardous  substance has occurred  regardless of fault or the  lawfulness of the
original disposal activity.  Generally,  where there are a number of potentially
responsible  parties  ("PRPs") that are financially  viable,  liability has been
apportioned  based on the type and amount of waste  disposed of by each party at
such  disposal  site and the number of  financially  viable  PRPs,  although  no
assurance as to the method of apportioning  the liability can be given as to any
particular site.

The company is currently a party to, or otherwise involved in, legal proceedings
in connection with state and federal  Superfund  sites, two of which are located
on property owned by the company.  Except for the Blydenburgh Landfill matter in
New York (which is discussed  below),  the company  believes its liability is de
minimis at each of the currently active sites which it does not own where it has
been named as a PRP due to its limited involvement at the site and/or the number
of viable PRPs.  Specifically,  the preliminary  allocation among 48 PRPs at the
Crymes  Landfill site in Georgia  indicates that the company's  liability is not
significant,  and there are more than  1,000  PRPs at the M&J  Solvents  site in
Georgia. For property which the company owns on Seaboard Industrial Boulevard in
Atlanta,  Georgia,  the  company  has  conducted  an  investigation  on its  and
adjoining  properties  and submitted a Compliance  Status Report  ("CSR") to the
State of Georgia  Environmental  Protection  Division  ("EPD")  pursuant  to the
Georgia  Hazardous Site Response Act. The CSR is currently  pending,  subject to
EPD's final approval.  Until the CSR is finalized,  the company will not be able
to determine  if  remediation  will be  required,  if the company will be solely
responsible for the cost of such remediation,  or whether such cost is likely to
result in a material  adverse  effect on the  company.  For  property  which the
company owns on East Paris Street in Tampa,  Florida,  the company was requested
by the State of Florida to clean up  chlorinated  solvent  contamination  in the
groundwater  beneath the  property  and beneath  surrounding  property  known as
Seminole  Heights Solvent Site and to reimburse  approximately  $430 thousand of
costs  already  incurred  by the  State  of  Florida  in  connection  with  such
contamination.  The company presented expert evidence to the State of Florida in
1998 that the company is not the source of the contamination,  and the State has
not  responded.  On this matter,  it is not  possible to quantify the  company's
potential exposure.

In  connection  with the sale of certain  assets,  including 29 of the company's
textile  rental  plants  in  1997,   the  company  has  retained   environmental
liabilities  arising  from events  occurring  prior to the  closing,  subject to
certain  exceptions.  The  company  has  received  notice  from the buyer of the
textile rental plants of the alleged presence of perchloroethylene contamination
on one of the  properties  involved in the sale.  Because the company is not the
source of contamination,  the company asserted an indemnification  claim against
the company  from which it bought the  property.  The prior  owner is  currently
addressing the contamination at its expense, subject to a reservation of rights.
At this time,  it is too early to quantify the company's  potential  exposure in
this  matter,  the  likelihood  of an  adverse  result,  or the  outcome  of the
company's indemnification claim against the prior owner.

During the second  quarter of 2001,  management  performed a review of the other
environmental  liabilities  recorded  in  connection  with  the  textile  rental
segment's 1997 uniform plants divestiture.  Based on the advice of the company's
environmental   experts,   the  company  decreased  its  estimates  for  certain
environmental  exposures  and, as a result,  reduced the related  liability  and
recorded  a gain  of  approximately  $2.0  million.  The  gain  is  included  in
"(Gain)loss on sale of businesses" in the accompanying  Consolidated Statements
of Income.

The State of New York has filed a lawsuit against the company  alleging that the
company is responsible as a successor to Serv-All  Uniform Rental Corp. for past
and future response costs in connection with the release or potential release of
hazardous  substances at and from the Blydenburgh  Landfill in Islip,  New York.
The company believes that it is not a successor to Serv-All Uniform Rental Corp.
and therefore has no liability with respect to the Blydenburgh Landfill,  and it
has  responded  to the lawsuit  accordingly.  The  company has also  asserted an
indemnification claim against the parent of Initial Services Investments,  Inc.,
which the company  acquired in 1992 and which had previously  purchased and sold
certain assets of Serv-All  Uniform  Rental Corp. The federal  district court in
the  Eastern  District  of New York  denied the  company's  motion  for  summary
judgment  on the issue of  successor  liability  and  granted  the State of New
York's motion for partial summary  judgment and for a declaratory  judgment that
the  company is a successor  to Serv-All  Uniform  Rental  Corp.  The company is
appealing  this  decision.  At this  stage,  it is too  early  to  quantify  the
company's  potential  exposure,  the  likelihood  of an adverse  result,  or the
outcome of the company's indemnification claim.




                                                                         Page 12

12. SUBSEQUENT EVENT

On June 28,  2001,  the  company's  Board of  Directors  approved a plan for the
company to consider the spin-off of the lighting equipment and chemical segments
to its stockholders in the form of a tax-free dividend.  Separating the lighting
equipment and chemical segments from the rest of the company's  operations would
create  two  companies,  each with its own  management  and  board of  directors
focused on their respective businesses. Management believes the transaction will
enhance  the  ability  of  the  respective   companies  to  focus  on  strategic
initiatives  and  new  business  opportunities,   improve  cost  structures  and
operating efficiencies,  and better align equity-based compensation to operating
performance.  The company  will receive  opinions  from counsel and from its tax
advisor that the spin-off will be tax-free for U.S.  federal income tax purposes
to the company and its stockholders. At the effective time of the spin-off, each
holder of the company's common stock will receive a distribution of one share of
common stock of the newly formed entity comprised of the lighting  equipment and
chemical  segments  for each  share of  company  common  stock.  Assuming  final
approvals are obtained,  management expects to complete the transaction early in
fiscal 2002.





                                                                         Page 13

                  MANAGEMENT'S DISCUSSION AND ANALYSIS
                  ------------------------------------

              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
              ------------------------------------------------

The following  discussion  should be read in conjunction  with the  consolidated
financial statements and related notes.

National Service Industries is a diversified  service and manufacturing  company
operating in four segments: lighting equipment,  chemicals,  textile rental, and
envelopes.  The company  remained in solid financial  condition at May 31, 2001.
Net working capital was $217.7  million,  down from $221.1 million at August 31,
2000, and the current ratio remained  constant at 1.4. The company's  percentage
of debt to total capitalization improved from 49.0 percent at August 31, 2000 to
48.6 percent at May 31, 2001.

Results of Operations

National Service Industries generated revenue of $649.0 million and $1.9 billion
in the three and nine  months  ended May 31,  2001,  respectively,  compared  to
revenue of $645.0 million and $1.9 billion,  respectively, in the previous year.
Increased  revenue in the chemical  and textile  rental  segments was  partially
offset by decreases in the lighting  equipment and envelope  segments during the
third quarter.  Year-to-date  revenue increased $29.7 million,  primarily in the
chemical and textile rental segments.

Net income  totaled  $12.6  million,  or $.30 per diluted  share,  for the three
months ended May 31, 2001 compared to net income of $20.8  million,  or $.51 per
diluted share, for the three months ended May 31, 2000. On a year-to-date basis,
net income  declined  $20.5 million,  from $65.4 million to $44.9  million.  Net
income was negatively impacted by losses on the sale of the company's French and
Australian chemical businesses,  weakened economic  conditions,  higher interest
expense and energy costs, and expenses associated with repositioning the company
for an economic  slowdown.  The company  anticipates  that its  operations  will
continue to be impacted by a softer  economy.  Although  the company  expects to
offset the effects of the economic slowdown with operational initiatives such as
the consolidation of the chemical businesses, a major sourcing initiative, other
cost reduction projects, and aggressive sales efforts,  further deterioration in
economic conditions could negatively impact future earnings.

The lighting  equipment segment reported revenue of $368.8 million for the third
quarter,  representing a decrease of $3.0 million compared to the previous year.
The decrease in revenue during the quarter  resulted  primarily from a continued
softening in the  non-residential  construction  market. The company expects the
non-residential construction market to remain flat or slightly down from current
levels over the remainder of calendar year 2001.  Operating profit for the third
quarter  increased  $4.2 million to $32.1 million  versus $27.9 million one year
ago as the  decrease in revenue  was offset by  manufacturing  efficiencies  and
other cost reductions.  On a year-to-date basis,  revenue increased $3.0 million
to $1.1 billion, or less than 1 percent.  Excluding a $1.0 million pretax charge
during the first quarter of fiscal 2000 for closing a manufacturing  facility in
California,  year-to-date  operating  profit remained  relatively flat as profit
improvements  during the third  quarter  were offset by  increased  spending for
sales,  marketing  and  technology  initiatives,  and costs to establish a Texas
distribution center.

Revenue in the  chemical  segment of $136.8  million and $386.5  million for the
quarter and nine months ended May 31, 2001, respectively, increased $3.1 million
and $13.3 million,  respectively,  compared to the same prior-year periods.  The
increase  was due to  sales  volume  growth  in  North  America  in the  retail,
industrial, and institutional channels, offset somewhat by a decrease in revenue
in Europe and Australia. The decrease in international revenue was attributable,
in part, to unfavorable  foreign  currency  fluctuations.  The chemical  segment
realized  a slight  loss for the  quarter as the  profit  contribution  from the
increase in revenue was more than offset by a loss on the sale of the  segment's
French and Australian operations. In addition to these factors, operating profit
for the nine  months  ended May 31, 2001  decreased  compared to a year ago as a
result of costs incurred to integrate the chemical operations,  increased energy
costs, and up-front costs associated with developing new sales representatives.

As part of an  initiative  to refocus the  overseas  operations  of the chemical
segment,  the company sold its Australian  subsidiary,  NSI  International  Pty,
Ltd.,  resulting  in a pretax loss of $5.6  million.  In  addition,  the company
entered  into a  contract  to sell its  French  operations,  as well as  certain
trademarks and formulas.  The company  recorded an estimated pretax loss on this
transaction  of $9.0  million  and  finalized  the  sale on June 29,  2001.  The
combined  pretax loss of $14.6  million is  included in "(Gain)  loss on sale of
businesses" in the accompanying Consolidated Statements of Income.

                                                                         Page 14

Textile  rental  segment  revenue,  representing  all of the  company's  service
revenue,  increased  $5.0 million to $88.0 million  during the third quarter and
increased $10.6 million to $248.7 million year-to-date  primarily as a result of
additional  volume  associated with several new large customer  accounts,  price
increases,  and revenues associated with acquired businesses.  Operating margins
during the third  quarter  remained in line with the same period a year ago. The
year-to-date  decrease  in  operating  margins  primarily  resulted  from higher
natural  gas prices,  costs  incurred to close a facility in order to reduce the
segment's cost structure and improve customer service, increased retiree medical
and other insurance costs, and fewer gains associated with the sale of assets.

During  the  second  quarter  of 2001,  management  performed  a  review  of the
liabilities  recorded in  connection  with the  textile  rental  segment's  1997
uniform plants  divestiture.  In 1997,  the textile  rental segment  accrued for
items  related  to the  sale  of its  uniform  plants,  including  environmental
exposures.  Based on the  advice of the  company's  environmental  experts,  the
company  decreased its estimates for certain  environmental  exposures and, as a
result,   reduced  the  related   liability   and  recorded  a  pretax  gain  of
approximately  $2.0  million.  The gain is  included in  "(Gain)loss  on sale of
businesses" in the accompanying Consolidated Statements of Income.

Third quarter revenue in the envelope segment decreased $1.2 million compared to
the respective prior year period as a result of lower volumes in the courier and
direct mail markets.  Revenue increased $2.8 million,  or 1.7 percent, to $168.5
million for the nine months ended May 31, 2001  compared to a year ago primarily
because of higher sales volumes to strategic  partners during the first quarter.
Operating  profit for the  quarter  ended May 31,  2001  increased  $.8  million
compared to the quarter ended May 31, 2000 primarily because of lower production
costs. Operating profit for the nine-month period decreased $2.2 million to $4.0
million  principally  as a result of higher costs for raw  materials  during the
first half of the year,  power outages in California,  and costs associated with
reorganizing the Miami, Florida manufacturing facility.

Corporate  expenses  for the third  quarter of $6.8  million  were $1.3  million
higher than the previous  year.  The  increase  for the quarter was  primarily a
result of higher costs  associated with strategic and  operational  initiatives.
For the nine  months  ended May 31,  2001,  corporate  expenses  increased  $4.3
million to $17.6 million.  Higher year-to-date corporate expenses were primarily
caused by  lower-than-normal  long-term  incentive  compensation  expense in the
prior-year  first quarter and higher costs related to strategic and  operational
initiatives.  Net interest expense increased for the quarter and year-to-date as
a result  of  higher  outstanding  debt  balances  and  higher  interest  rates.
Additionally,  during the third quarter of fiscal 2001, the provision for income
taxes  increased to 42.7 percent of pretax  income as a result of  nondeductible
losses  associated  with  the  chemical  segment's  divestiture  of  its  French
operations.  On a  year-to-date  basis,  the provision for income taxes was 38.7
percent  of pretax  income  compared  to 38.8  percent  in the prior  year.  The
year-to-date decrease is primarily attributable to the implementation of various
tax-saving  strategies during the current year,  offset by nondeductible  losses
related to one of the chemical segment divestitures.

Liquidity and Capital Resources

Operating Activities
- --------------------

Operations  provided cash of $93.8 million  during the nine months ended May 31,
2001 compared with $41.8 million during the respective period of the prior year.
The  improvement  in operating  cash flows was largely due to an increase in net
cash  provided  by  receivables  and  inventory  primarily  as a  result  of the
implementation  of working capital  initiatives.  Improvements in cash flow from
these items were partially offset by the decrease in net income.

Investing Activities
- --------------------

Investing  activities  used cash of $47.7 million  versus $100.7  million in the
prior  year.  The change in  investing  cash flows  related  primarily  to lower
capital  expenditures and acquisition  spending and an increase in cash provided
from the sale of  businesses.  Higher  acquisition  spending  in fiscal 2000 was
primarily due to remaining  payments  associated  with the 1999  acquisition  of
Holophane.

Capital  expenditures  totaled  $53.7  million for the nine months ended May 31,
2001 compared to $78.8 million in the prior  period.  In the lighting  equipment
segment, investments were made primarily in manufacturing cost improvements, new
product  tooling,  and  the  completion  of a new  corporate  headquarters.  The
envelope segment invested in manufacturing  process improvements and information
systems.  In the chemical  segment,  capital  expenditures  were associated with
manufacturing equipment and facilities improvements.  Capital investments in the
textile  rental segment were primarily  attributable  to building  improvements,
equipment  upgrades,  and  information  systems.  In the same  period last year,
capital spending was primarily attributable to the lighting equipment, envelope,
and textile rental segments.  The lighting  equipment  segment invested in land,
buildings,  and  equipment  for  a  new  plant  in  Mexico,  manufacturing  cost
improvements,  and new product  tooling.  Capital  expenditures  in the envelope
segment  related  primarily  to  new  folding  capacity,  manufacturing  process
improvements, and information systems. The textile rental segment's expenditures
related  to  replacing   old  equipment   and  delivery   truck   purchases  and
refurbishments.

                                                                         Page 15

Management   believes  current  cash  balances,   anticipated  cash  flows  from
operations,  available  funds  from the  commercial  paper  program,  short-term
secured   borrowings,   and  a  committed  credit  facility,   as  well  as  the
complimentary  lines of credit,  are  sufficient to meet the  company's  planned
level of capital spending and general  operating cash  requirements for at least
the next twelve months.

Financing Activities
- --------------------

Cash used for financing  activities  totaled $38.0 million during the nine-month
period  compared to cash provided of $59.0 million one year ago,  primarily as a
result of a reduction in cash provided by net  borrowings.  The decrease in cash
provided by net  borrowings  was primarily due to improved  operating cash flows
and a decrease in capital  expenditures and acquisition  spending.  Year-to-date
dividend  payments totaled $40.7 million,  or 99 cents per share,  compared with
$39.9 million, or 98 cents per share, in the previous year.

In May 2001, the company entered into a three-year  agreement (the  "Receivables
Facility")  to borrow,  on an ongoing  basis,  up to $150.0  million  secured by
undivided  interests  in a  defined  pool of trade  accounts  receivable  of the
lighting  equipment and chemical  segments.  At May 31, 2001, net trade accounts
receivable  pledged as security for borrowings  under the  Receivables  Facility
totaled $220.4 million. Borrowings outstanding at May 31, 2001 of $118.9 million
were used to reduce  borrowings  under the company's  commercial  paper program.
Interest rates under the Receivables Facility are based on the LIBOR rate.

In June 2001, the company renewed the $250.0 million,  364-day  committed credit
facility  (the  "Revolving  Credit  Facility")  with  six  domestic  banks.  The
Revolving Credit Facility supports the company's $250.0 million commercial paper
program.  Interest  rates under the Revolving  Credit  Facility are based on the
LIBOR rate or other rates, at the company's  option.  The company pays an annual
fee on the commitment based on the company's debt rating.

Legal Proceedings
- -----------------

For information concerning legal proceedings,  including trends and developments
involving  legal  proceedings,  see  footnote  10 to  the  financial  statements
included in this filing.

Environmental Matters
- ---------------------

For  information  concerning   environmental   matters,   including  trends  and
developments  involving  environmental matters, see footnote 11 to the financial
statements included in this filing.

Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------

The company is exposed to market risks that may impact the Consolidated  Balance
Sheets,  Consolidated  Statements of Income, and Consolidated Statements of Cash
Flows due to changing  interest rates and foreign  exchange  rates.  The company
does not currently  participate in any significant hedging activities,  nor does
it currently  utilize any  significant  derivative  financial  instruments.  The
following  discussion  provides additional  information  regarding the company's
market risks.

Interest Rates- Interest rate  fluctuations  expose the company's  variable-rate
debt to changes in interest expense and cash flows. The company's  variable-rate
debt, primarily commercial paper and short-term secured borrowings,  amounted to
$269.4 million at May 31, 2001. Based on outstanding  borrowings at quarter-end,
a 10  percent  adverse  change in market  interest  rates at May 31,  2001 would
result in additional  annual after-tax  interest  expense of approximately  $0.8
million.  Although a  fluctuation  in interest  rates would not affect  interest
expense or cash flows related to the $360 million  publicly  traded  notes,  the
company's  primary  fixed-rate  debt, a 10 percent  increase in market  interest
rates  at May 31,  2001  would  decrease  the  fair  value  of  these  notes  to
approximately $345.7 million.

Foreign  Exchange  Rates-The  majority of the company's  revenue,  expense,  and
capital purchases are transacted in U.S. dollars. The company does not believe a
10 percent  fluctuation in average foreign  currency rates would have a material
effect on its  consolidated  financial  position or results of  operations.  The
company does not engage in speculative  transactions,  nor does the company hold
or issue financial instruments for trading purposes. To the extent possible, the
company  mitigates  its exposure to  unfavorable  foreign  currency  translation
adjustments through the use of foreign-currency denominated debt agreements.

                                                                         Page 16

Cautionary Statement Regarding Forward-Looking Information
- ----------------------------------------------------------

This  filing  contains  forward-looking  statements,  within the  meaning of the
Private  Securities  Litigation  Reform  Act of 1995,  that  involve  risks  and
uncertainties.  Consequently,  actual results may differ  materially  from those
indicated by the forward-looking statements.  Statements made herein that may be
considered  forward  looking include  statements  concerning:  (a)  expectations
regarding a softer economy and the impact of the softer economy on the company's
operations  and future  earnings;  (b) the  ability of the company to offset the
effects  of an  economic  slowdown  with  operational  initiatives  such  as the
consolidation of the chemical  businesses,  a major sourcing  initiative,  other
cost reduction projects,  and aggressive sales efforts; (c) expectations related
to growth in the  non-residential  construction  market  over the  remainder  of
calendar year 2001;  (d) the ability of the company to meet its planned level of
capital  spending and general  operating cash  requirements  for the next twelve
months;  (e)  the  potential  impact  on the  company's  consolidated  financial
position or results of operations of an adverse  fluctuation in average  foreign
currency  rates;  (f)  anticipated  benefits of the  spin-off  of the  company's
lighting and chemical  segments  such as the ability of  management  to focus on
strategic initiatives and new business  opportunities,  improved cost structures
and operating efficiencies,  and a better alignment of equity-based compensation
to operating performance;  (g) the timing of the completion of the spin-off; and
(h)  expectations  related to  contingent  liabilities  involving  environmental
matters and legal proceedings.  A variety of risks and uncertainties could cause
the company's actual results to differ  materially from the anticipated  results
or other expectations expressed in the company's forward-looking statements. The
risks and  uncertainties  include  without  limitation  the  following:  (a) the
uncertainty of general business and economic conditions, including the potential
for a more severe slowdown in non-residential construction awards, interest rate
changes,  and  fluctuations  in  commodity  and raw  material  prices or foreign
currency rates; (b) unexpected  developments and outcomes in the company's legal
and  environmental  proceedings;  (c)  underlying  assumptions  or  expectations
related to the spin-off  transaction  prove to be inaccurate or unrealized;  and
(d) the company's  ability to realize the anticipated  benefits of strategic and
operational   initiatives  related  to  increased   productivity,   new  product
development,  technological advances,  cost synergies,  the consolidation of the
company's chemical businesses,  sourcing,  decreases in net working capital, and
the achievement of sales growth across the business segments.




                                                                         Page 17


                                            PART II. OTHER INFORMATION
                                            --------------------------

Item 1.  Legal Proceedings
- --------------------------

For information concerning legal proceedings,  including trends and developments
involving  legal  proceedings,  see  footnote  10 to  the  financial  statements
included in this filing.

Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------

(a) Exhibits are listed on the Index to Exhibits (page 19).

(b) There were no reports on Form 8-K for the three months ended May 31, 2001.





                                                                         Page 18


                                                    SIGNATURES
                                                    ----------



Pursuant  to the  requirements  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.


                                                NATIONAL SERVICE INDUSTRIES, INC.
                                                          REGISTRANT


DATE  July 3, 2001                                        /s/KENYON MURPHY
                                                          -------------------
                                                             KENYON MURPHY
                                                         SENIOR VICE PRESIDENT
                                                          AND GENERAL COUNSEL



DATE  July 3, 2001                                        /s/BROCK HATTOX
                                                          -------------------
                                                             BROCK HATTOX
                                                    EXECUTIVE VICE PRESIDENT AND
                                                       CHIEF FINANCIAL OFFICER






                                                                         Page 19

                                                 INDEX TO EXHIBITS
                                                 -----------------


                                                                                                             Page No.
                                                                                                             --------
EXHIBIT 10(i)A               (1)    Third Amendment to US$250,000,000 Credit Agreement, dated as of June
                                    27, 2001, among National Service Industries, Inc., Certain of its        20
                                    Subsidiaries, Certain Listed Banks, Bank One, NA, as Administrative
                                    Agent, Wachovia Bank, N.A., as Syndication Agent, and SunTrust Bank,
                                    as Documentation Agent.

                             (2)    Receivables Sale Agreement between NSI Enterprises, Inc., as seller,     30
                                    and National Service Industries, Inc., as purchaser, dated as of May
                                    2, 2001.

                             (3)    Receivables Sale and Contribution Agreement between National Service     66
                                    Industries, Inc., as seller, and NSI Funding, Inc., as buyer, dated as
                                    of May 2, 2001.

                             (4)    Credit and Security Agreement, dated as of May 2, 2001, among NSI        120
                                    Funding, Inc., National Service Industries, Inc., Blue Ridge Asset
                                    Funding Corporation, Certain Liquidity Banks, and Wachovia Bank, N.A.,
                                    as Agent.

                             (5)    Amendment No. 1, dated May 24, 2001, to the Credit and Security          232
                                    Agreement between NSI Funding, Inc., National Service Industries,
                                    Inc., Blue Ridge Asset Funding Corporation, and Wachovia Bank, N.A.,
                                    as Agent.

                             (6)    Performance Undertaking, dated as of May 2, 2001, between National       237
                                    Service Industries, Inc. and NSI Funding, Inc.

EX-10

                                                                         Page 20
                                                               Exhibit 10(i)A(1)

                   THIRD AMENDMENT TO 364 DAY CREDIT AGREEMENT


     THIS THIRD AMENDMENT TO 364 DAY CREDIT  AGREEMENT (this "Third  Amendment")
is dated as of June 27,  2001  among  NATIONAL  SERVICE  INDUSTRIES,  INC.  (the
"Parent"), NSI LEASING, INC., and NSI ENTERPRISES, INC. (collectively,  with the
Parent, the "Borrowers "), the BANKS parties hereto,  BANK ONE, NA (as successor
to  The  First  National  Bank  of  Chicago),   as  Administrative   Agent  (the
"Administrative  Agent"),   WACHOVIA  BANK,  N.A.,  as  Syndication  Agent  (the
"Syndication  Agent"),  and SUNTRUST BANK (formerly  SunTrust Bank,  Atlanta) as
Documentation  Agent (the  "Documentation  Agent")  (the  Administrative  Agent,
Syndication  Agent and the Documentation  Agent are collectively  referred to as
the "Agents").


                              W I T N E S S E T H :
                               - - - - - - - - - -

     WHEREAS,  the Borrowers,  the Agents and the Banks parties thereto executed
and  delivered  that certain  Credit  Agreement  dated as of July 15,  1999,  as
amended by First Amendment to Credit Agreement dated as of July 14, 2000, and as
further  amendment by Second Amendment to Credit Agreement dated as of April 18,
2001 (as so amended, the "364 Day Credit Agreement");

     WHEREAS,  each of ABN Amro, N.V.  ("ABN"),  Commerzbank AG, New York Branch
("Commerzbank")  and  Morgan  Guaranty  Trust  Company  of New  York  ("Morgan")
collectively,  has elected  not to extended  the  Termination  Date  pursuant to
Section  2.05(b)  of the 364 Day  Credit  Agreement  and is  therefore  deemed a
Terminating  Bank  under the 364 Day Credit  Agreement  whose  Commitment  shall
terminate as of the date hereof; and

     WHEREAS,  the Banks other than the Resigning Banks (the "Remaining  Banks")
desire to appoint Bank One, NA as the Administrative  Agent, Wachovia Bank, N.A.
as  Syndication  Agent  and  SunTrust  Bank  as  Documentation  Agent,  and  the
Borrowers,  the Agents and the Remaining Banks have agreed to certain amendments
to the 364 Day Credit  Agreement,  as set forth  herein and subject to the terms
and conditions hereof;

     NOW,  THEREFORE,  for and in  consideration of the above premises and other
good and valuable consideration,  the receipt and sufficiency of which hereby is
acknowledged by the parties hereto, the Borrowers,  the Administrative Agent and
the Banks hereby covenant and agree as follows:

1.   Definitions.  Unless otherwise  specifically defined herein, each term used
     herein  which is  defined in the 364 Day  Credit  Agreement  shall have the
     meaning  assigned  to  such  term in the 364  Day  Credit  Agreement.  Each
     reference  to "hereof",  "hereunder",  "herein" and "hereby" and each other
     similar  reference and each  reference to "this  Agreement"  and each other
     similar reference  contained in the 364 Day Credit Agreement shall from and
     after the date  hereof  refer to the 364 Day  Credit  Agreement  as amended
     hereby.

2.   Resignation   of   Commerzbank   and  ABN  as  Co-Agents  and  Wachovia  as
     Co-Arranger;    Appointment    of   Bank   One,   NA   as    Administrative
     Agent,   Wachovia   Bank  as   Syndication   Agent  and  SunTrust  Bank  as
     Documentation  Agent.  Each of  Commerzbank  and  ABN  hereby  submits  its
     resignation as Co-Agent,  (ii) Wachovia Bank hereby submits its resignation
     as Co-Arranger;

                                                                         Page 21
                                                               Exhibit 10(i)A(1)

     (iii) the  Remaining  Banks hereby  appoint Bank One, NA as  Administrative
     Agent,   Wachovia   Bank  as   Syndication   Agent  and  SunTrust  Bank  as
     Documentation  Agent,  (iv)  Bank  One,  NA  accepts  such  appointment  as
     Administrative Agent, Wachovia Bank accepts such appointment as Syndication
     Agent and SunTrust Bank accepts such appointment as Documentation Agent and
     (v)  the  Borrowers  consent  to  such  appointments  of  Bank  One,  NA as
     Administrative  Agent, Wachovia Bank as Syndication Agent and SunTrust Bank
     as Documentation Agent.

3.   Withdrawal of Commerzbank, ABN and Morgan as Banks; Amendment to Commitment
     Amounts.

     (a) Each of  Commerzbank,  ABN and Morgan hereby  withdraws as a Bank,  its
Commitment is terminated entirely, and it shall have no further obligation under
the 364 Day Credit Agreement or the other Loan Documents; provided, that as soon
as reasonably  practical,  each of Commerzbank,  ABN and Morgan shall submit its
respective Notes to the Borrowers for cancellation.

     (b) The signature pages of the 364 Day Credit  Agreement hereby are amended
to provide that the following Remaining Banks have the following Commitments:

                      Commitments                Bank
                      -----------                ----

                      $65,000,000                Bank One, NA

                      $60,000,000                Wachovia Bank, N.A.

                      $40,000,000                SunTrust Bank

                      $35,000,000                Mellon Bank, N.A.

                      $25,000,000                Bank of America, N.A.

                      $25,000,000                The Bank of New York
                    -------------

Total Commitments:   $250,000,000

     (c) Hereinafter,  for all purposes under the 364 Credit Agreement, the term
"Banks" shall refer to the Remaining Banks. The amendments to the 364 Day Credit
Agreement set below are agreed to by the Borrowers, the Agents and the Remaining
Banks.

4.   Amendment to Section 1.01.  Section 1.01 of the Credit  Agreement hereby is
     amended  by   deleting   the   definitions   of   "Administrative   Agent,"
     "Administrative  Agent's  Letter  Agreement,"  "Prime  Rate,"  "Syndication
     Agent's Letter  Agreement,"  "Termination  Date," by amending and restating
     each of the  following  definitions  previously  contained  therein  and by
     adding thereto the following  definitions  which have not  previously  been
     contained therein.

          "Administrative  Agent's Letter  Agreement"  means that certain letter
     agreement,   dated  as  of  June  4,  2001,   among  the   Borrowers,   the
     Administrative  Agent and the Lead Arranger,  relating to certain fees from
     time to time payable by the Borrowers to the  Administrative  Agent and the
     Lead Arranger, together with all amendments and supplements thereto.

          "Documentation Agent" means SunTrust Bank.

                                                                         Page 22
                                                               Exhibit 10(i)A(1)


          "Prime Rate" refers to that  interest rate so  denominated  and set by
     Bank One,  NA from time to time as an interest  rate basis for  borrowings.
     The Prime Rate is but one of several  interest rate bases used by Bank One,
     NA. Bank One, NA lends at interest rates above and below the Prime Rate.

          "Termination  Date"  means the earlier of (i) June 26,  2002,  or such
     later  date to  which it is  extended  by the  Banks  pursuant  to  Section
     2.05(b),  in  their  sole  and  absolute  discretion,  (ii)  the  date  the
     Commitments   are  terminated   pursuant  to  Section  6.01  following  the
     occurrence  of an  Event of  Default,  or  (iii)  the  date  the  Borrowers
     terminate the Commitments entirely pursuant to Section 2.08.

5.   Global  Amendments.  (a)  Wherever in the 364 Day Credit  Agreement  or any
     Exhibits to the 364 Credit  Agreement or in any Loan Documents  (including,
     without limitation, the Notes and the Compliance Certificates) (i) there is
     a reference to the  Administrative  Agent,  such reference shall be changed
     and  shall be  deemed to refer to Bank  One,  NA as  Administrative  Agent,
     rather than to Wachovia Bank,  N.A., and (ii) there is set forth an address
     for the  Administrative  Agent,  such address shall be changed and shall be
     deemed to refer to Bank One, NA's address at: -

                                  Bank One, NA
                               One Bank One Plaza
                            Suite IL1-0429, 8th Floor
                             Chicago, Illinois 60670
                            Attention: Matthew Bittner
                         Telecopier number: (312) 732-6894
                        Confirmation number: (312) 732-6726

          (b)  Wherever in the 364 Day Credit  Agreement  or any Exhibits to the
     364  Credit  Agreement  or  in  any  Loan  Documents  (including,   without
     limitation,  the  Notes  and the  Compliance  Certificates)  (i) there is a
     reference to the  Syndication  Agent,  such reference  shall be changed and
     shall be deemed to refer to  Wachovia  Bank,  N.A.  as  Syndication  Agent,
     rather than to Bank One, NA, and (ii) there is set forth an address for the
     Syndication  Agent,  such  address  shall be changed and shall be deemed to
     refer to Wachovia Bank, N.A.'s address at:

                                Wachovia Bank, N.A.
                            191 Peachtree Street, N.E.
                                   29th Floor
                              Atlanta, Georgia 30303
                              Attention: Karin Reel
                         Telecopier number: (404) 332-4058
                        Confirmation number: (404) 332-5187

6.   Amendment to Section  2.03(c)(i).  Section 2.03(c)(i) of the 364 Day Credit
     Agreement hereby is deleted and the following is substituted therefor:

          (c) (i) Each  Bank may,  but shall  have no  obligation  to,  submit a
     response  containing an offer to make a Money Market Loan  substantially in
     the form of Exhibit J hereto (a "Money  Market  Quote") in  response to any
     Money Market Quote Request;  provided that, if the Borrower's request under
     Section 2.03(b)  specified more than 1 Stated Maturity Date, such Bank may,
     but shall have no obligation to,

                                                                         Page 23
                                                               Exhibit 10(i)A(1)


     make a single  submission  containing a separate offer for each such Stated
     Maturity Date and each such separate offer shall be deemed to be a separate
     Money  Market  Quote.  Each Money  Market  Quote must be  submitted  to the
     Administrative  Agent not later than 10:00 A.M. (Atlanta,  Georgia time) on
     the Money  Market  Borrowing  Date;  provided  that any Money  Market Quote
     submitted by Bank One, NA may be submitted,  and may only be submitted,  if
     Bank One, NA  notifies  the  Borrower  of the terms of the offer  contained
     therein  not  later  than 9:45 A.M.  (Atlanta,  Georgia  time) on the Money
     Market Borrowing Date (or 15 minutes prior to the time that the other Banks
     are required to have  submitted  their  respective  Money  Market  Quotes).
     Subject  to  Section  6.01,  any  Money  Market  Quote  so  made  shall  be
     irrevocable  except with the written  consent of the  Administrative  Agent
     given on the instructions of the Borrower.

7.   Amendment  to  Section  2.03(f).  Section  2.03(f)  of the 364  Day  Credit
     Agreement hereby is deleted and the following is substituted therefor:

     (f) Any Bank whose offer to make any Money  Market  Loan has been  accepted
     shall, not later than 1:00 P.M. (Atlanta, Georgia time) on the Money Market
     Borrowing  Date,  make the amount of such Money Market Loan allocated to it
     available to the Administrative Agent at its address referred to in Section
     9.01  in  immediately  available  funds.  The  amount  so  received  by the
     Administrative  Agent shall,  subject to the terms and  conditions  of this
     Agreement, be made available to the Borrower on such date by depositing the
     same, in immediately  available funds,  not later than 4:00 P.M.  (Atlanta,
     Georgia time), in an account of such Borrower maintained with Bank One, NA.

8.   Amendment to Section  7.04.  Section  7.04 of the 364 Day Credit  Agreement
     hereby is deleted and the following is substituted therefor:

               SECTION 7.04.  Rights of  Administrative  Agent as a Bank and its
          Affiliates. With respect to the Loans made by the Administrative Agent
          and any  Affiliate of the  Administrative  Agent,  the  Administrative
          Agent in its  capacity as a Bank  hereunder  and any  Affiliate of the
          Administrative  Agent or such Affiliate,  Bank One, NA in its capacity
          as a Bank hereunder shall have the same rights and powers hereunder as
          any other Bank and may  exercise the same as though it were not acting
          as the  Administrative  Agent,  and the term "Bank" or "Banks"  shall,
          unless the context  otherwise  indicates,  include Bank One, NA in its
          individual  capacity and any Affiliate of the Administrative  Agent in
          its individual capacity. The Administrative Agent and any Affiliate of
          the  Administrative  Agent may (without having to account  therefor to
          any Bank) accept deposits from, lend money to and generally  engage in
          any kind of banking, trust or other business with any of the Borrowers
          (and any of the Borrowers'  Affiliates) as if the Bank were not acting
          as the  Administrative  Agent,  and the  Administrative  Agent and any
          Affiliate  of the  Administrative  Agent  may  accept  fees and  other
          consideration  from the  Borrowers (in addition to any agency fees and
          arrangement  fees  heretofore  agreed to between the Borrowers and the
          Administrative  Agent) for services in connection  with this Agreement
          or any other Loan Document or otherwise  without having to account for
          the same to the Banks.

9.   Amendment to Section  9.03.  Section  9.03 of the 364 Day Credit  Agreement
     hereby is deleted and the following is substituted therefor:

                                                                         Page 24
                                                               Exhibit 10(i)A(1)


               SECTION 9.03.  Expenses;  Documentary  Taxes. The Borrowers shall
          pay (i) all reasonable  out-of-pocket  expenses of the  Administrative
          Agent,  the  Syndication  Agent,  the  Documentation  Agent,  Banc One
          Capital Markets,  Inc., as Lead Arranger,  including reasonable actual
          fees  and   disbursements  of  special  counsel  for  the  Banks,  the
          Administrative  Agent, the Syndication Agent, the Documentation Agent,
          Banc One Capital Markets,  Inc., as Lead Arranger,  in connection with
          the  preparation of this Agreement and the other Loan  Documents,  any
          waiver or consent  hereunder or thereunder or any amendment  hereof or
          thereof or any Default or alleged Default  hereunder or thereunder and
          (ii)  if a  Default  occurs,  all  reasonable  out-of-pocket  expenses
          incurred  by  the  Administrative  Agent  and  the  Banks,   including
          reasonable  actual  fees  and  disbursements  of  counsel   (including
          allocated costs of in-house counsel),  in connection with such Default
          and collection and other enforcement  proceedings resulting therefrom,
          including reasonable out-of-pocket expenses incurred in enforcing this
          Agreement and the other Loan Documents.  The Borrowers shall indemnify
          the  Administrative  Agent and each Bank against any  transfer  taxes,
          documentary  taxes,  and other similar  taxes,  assessments or charges
          made by any  Authority by reason of the execution and delivery of this
          Agreement or the other Loan Documents.

10.  Amendment to Schedule 4.08.  Schedule 4.08 to the 364 Day Credit  Agreement
     hereby  is  deleted  and  Schedule  4.08  attached  hereto  is  substituted
     therefor.

11.  Restatement of Representations and Warranties. The Borrowers hereby restate
     and renew each and every  representation  and warranty  heretofore  made by
     each of them in the 364 Day Credit  Agreement and the other Loan  Documents
     as fully as if made on the date hereof and with specific  reference to this
     Third Amendment and all other loan documents  executed and/or  delivered in
     connection herewith.

12.  Effect of Third Amendment.  Except as set forth expressly hereinabove,  all
     terms of the 364 Day Credit Agreement and the other Loan Documents shall be
     and remain in full force and effect, and shall constitute the legal, valid,
     binding and enforceable obligations of the Borrowers.

13.  Ratification.  The Borrowers  hereby restate,  ratify and reaffirm each and
     every  term,  covenant  and  condition  set  forth  in the 364  Day  Credit
     Agreement and the other Loan Documents effective as of the date hereof.

14.  Counterparts.  This  Third  Amendment  may be  executed  in any  number  of
     counterparts and by different  parties hereto in separate  counterparts and
     transmitted  by  facsimile  to the  other  parties,  each of which  when so
     executed and  delivered by facsimile  shall be deemed to be an original and
     all of which counterparts, taken together, shall constitute but one and the
     same instrument.

15.  Section  References.  Section  titles  and  references  used in this  Third
     Amendment  shall be  without  substantive  meaning  or  content of any kind
     whatsoever  and are not a part of the  agreements  among the parties hereto
     evidenced hereby.

16.  No Default. To induce the Agents and the Remaining Banks to enter into this
     Third  Amendment and to continue to make  advances  pursuant to the 364 Day
     Credit Agreement,  each Borrower hereby acknowledges and agrees that, as of
     the date hereof, and after giving effect to the terms hereof,  there exists
     (i) no Default or Event of Default and (ii) no right of offset,

                                                                         Page 25
                                                               Exhibit 10(i)A(1)

     defense, counterclaim, claim or objection in favor of the Borrowers arising
     out of or with  respect  to any of the  Loans or other  obligations  of the
     Borrowers  owed to the  Agents  or the  Remaining  Banks  under the 364 Day
     Credit Agreement.

17.  Further  Assurances.  Each Borrower  agrees to take such further actions as
     the Administrative Agent shall reasonably request in connection herewith to
     evidence the amendments herein contained.

18.  Governing Law. This Third  Amendment shall be governed by and construed and
     interpreted in accordance with, the laws of the State of Georgia.

19.  Conditions  Precedent.  This Third  Amendment  shall become  effective only
     upon: (i) execution and delivery  (which may be by facsimile) of this Third
     Amendment  by the  Borrowers,  the Agents  and the  Remaining  Banks;  (ii)
     receipt  by  the  Remaining  Banks  from  each  Borrower  of a  replacement
     Syndicated Loan Note in favor of each Remaining Bank, each in substantially
     the  form  attached  to the  Credit  Agreement  as  Exhibit  A-1,  and each
     reflecting  the  respective  increased  amounts of the  Commitments;  (iii)
     payment  to the  Administrative  Agent,  for  the  ratable  account  of the
     Remaining  Banks,  of an  up-front  fee in an amount  equal to 0.03% of the
     aggregate  Commitments,  (iv) payment to the Administrative  Agent, for its
     account,  the  initial  fees of the  Administrative  Agent and the fees and
     expenses of special counsel to the Administrative  Agent in connection with
     the  negotiation  and  preparation  of this  Third  Amendment,  and (v) the
     execution and delivery of the Consent and Reaffirmation of Guarantor at the
     end hereof by the Parent.




                       [SIGNATURES CONTAINED ON NEXT PAGE]






                                                                                                            Page 26
                                                                                                  Exhibit 10(i)A(1)

     IN WITNESS  WHEREOF,  the  Borrowers,  the Agents and each of the Remaining
Banks has caused this Third  Amendment to be duly  executed,  under seal, by its
duly authorized officer as of the day and year first above written.

NATIONAL SERVICE INDUSTRIES, INC.                              NSI LEASING, INC.


By:                                              (SEAL)        By:                                             (SEAL)
   ----------------------------------------------                 ---------------------------------------------
     Name:  Brock Hattox                                            Name:  Brock Hattox
     Title:  Executive Vice President & CFO                         Title:  Executive Vice President & CFO

NSI ENTERPRISES, INC.                                          BANK ONE, NA (as successor to The First National Bank
                                                               of Chicago), as Administrative Agent and as a Bank

By:                                              (SEAL)
   ----------------------------------------------
     Name:  Brock Hattox                                       By:                                             (SEAL)
     Title:  Executive Vice President & CFO                       ---------------------------------------------
                                                                    Name:
                                                                    Title:

WACHOVIA BANK, N.A., as Syndication                            SUNTRUST BANK (formerly Sun
Agent and as a Bank                                            Trust Bank, Atlanta),
                                                               as Documentation Agent and as a Bank

By:                                              (SEAL)        By:                                             (SEAL)
   ----------------------------------------------                 ---------------------------------------------
     Name:                                                          Name:
     Title:                                                         Title:

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

THE BANK OF NEW YORK,                                          MELLON BANK, N.A.,
as a Bank                                                      as a Bank


By:                                              (SEAL)        By:                                             (SEAL)
   ----------------------------------------------                 ---------------------------------------------
     Name:                                                          Name:
     Title:                                                         Title:


BANK OF AMERICA, N.A.
as a Bank

By:                                              (SEAL)
   ----------------------------------------------
     Name:
     Title:








                                                                         Page 27
                                                               Exhibit 10(i)A(1)

               CONSENT, REAFFIRMATION AND AGREEMENT OF GUARANTOR


     The undersigned (i)  acknowledges  receipt of the foregoing Third Amendment
To 364 Day Credit  Agreement  (the  "Third  Amendment"),  (ii)  consents  to the
execution and delivery of the Third Amendment by the parties thereto,  and (iii)
reaffirms  all of its  obligations  and covenants  under the Guaranty  Agreement
dated  as of  July  15,  1999  executed  by it,  and  agrees  that  none of such
obligations and covenants shall be affected by the execution and delivery of the
Third Amendment.


NATIONAL SERVICE INDUSTRIES, INC.


By:                                              (SEAL)
   ----------------------------------------------
     Name:  Brock Hattox
     Title:  Executive Vice President & CFO






                                                                                                             Page 28
                                                                                                   Exhibit 10(i)A(1)


                                                             Schedule 4.08
                                                             -------------


                                                             SUBSIDIARIES
                                                         (DOMESTIC & FOREIGN)


        Name                                        Date                   State/Country         Tax ID
- ------- ------------------------------------------- ---------------------- --------------------- --------------------
1.      The Austphane Trust                         August 3, 1995         Australia
2.      C&G Carandini S.A.                                                 Spain
3.      Castlight de Mexico, S.A. de C.V.                                  Mexico
4.      Graham International B.V.                   August 14, 1979        The Netherlands       VAT-NL008871280B02;
                                                                                                 COC-24131864
5.      Holophane Alumbrado Iberica SRL                                    Spain
6.      Holophane Australia Corp. Pty. Ltd.                                Australia
7.      Holophane Canada, Inc.                      June 20, 1989          Canada
8.      Holophane Europe Ltd.                       March 29, 1989         United Kingdom        3702370015907
9.      Holophane Holdings Company                  December 9, 1998       Ohio                  31-1627476
10.     Holophane Lichttechnik G.m.b.H.             January 5, 1996        Germany               HRB 32909
11.     Holophane Lighting Ltd. (Inactive)                                 United Kingdom
12.     Holophane Market Development Corp.          November 12, 1998      Cayman Islands
13.     Holophane S.A. de C.V.                                             Mexico
14.     HSA Acquisition Corporation                 May 29, 1998           Ohio                  31-1600314
15.     ID Limited                                  March 11, 1980         Isle of Man
16.     KEM Europe B.V.                             October 13, 1986       The Netherlands       VAT-NL008871280B05;
                                                                                                 COC-20052512
17.     KEPLIME B.V.                                April 23, 1987         The Netherlands       VAT-0071163502B;
                                                                                                 COC-24164785
18.     KEPLIME Ltd. (Inactive)                     May 9, 1977            United Kingdom        1313202
19.     Lithonia Lighting de Mexico S.A. de C.V.    October 20, 1994       Mexico                LLM9410208W4
20.     Lithonia Lighting do Brasil Ltda            March 23, 1999         Brazil
21.     Lithonia Lighting Servicios S.A. de C.V.    October 20, 1994       Mexico                NIM941020A90
22.     Luxfab Limited                              February 28, 1989      United Kingdom        3704370016439
23.     National Service Industries Canada L.P.                            Canada
24.     National Service Industries, Inc. (DE)      August 20, 1928        Delaware              58-0364900
25.     National Service Industries, Inc. (GA)      March 27, 1996         Georgia               58-2227507
26.     National Service Industries, Inc. Chili     July 19, 2000          Chili
        Ltda
27.     NSI Enterprises, Inc.                       September 25, 1992     California            77-0319365
28.     NSI Export Ltd.                             August 26, 1998        Barbados              Co. # 15825
29.     NSI Funding, Inc.                           April 24, 2001         Delaware              58-2616706

                                                                                                              Page 29
                                                                                                    Exhibit 10(i)A(1)


        Name                                        Date                   State/Country         Tax ID
- ------- ------------------------------------------- ---------------------- --------------------- --------------------
30.     NSI Holdings, Inc.                          January 1, 1990        Quebec
31.     NSI Insurance Ltd.                          February 14, 1990      Bermuda               98-0230326
32.     NSI International Pty. Ltd. (sold 5/31/01)  June 17, 1998          Australia
33.     NSI Leasing, Inc.                           October 26, 1994       Delaware              58-2136874
34.     NSI Ventures, Inc. (Inactive)                                      Delaware              58-2227629
35.     Productos Lithonia Lighting de Mexico,      October 20, 1994       Mexico
        S.A. de C.V.
36.     Produits de Maintenance et de Proprete                             France
        Industrielle (PMPI)
37.     Selig Company of Puerto Rico, Inc.          January 31, 1964       Puerto Rico           66-0256538
38.     Unique Lighting Solutions Pty. Ltd.         March 8, 1995          Australia             2843456
39.     ZEP Belgium S.A.                            September 27, 1992     Belgium
40.     ZEP Europe B.V.                             August 26, 1992        The Netherlands
41.     ZEP France SARL                                                    France
42.     ZEP Industries B.V.                         November 18, 1995      The Netherlands
43.     ZEP Industries S.A.                         December 16, 1975      Switzerland
44.     ZEP Industries SAS                                                 France
45.     ZEP International Pty. Ltd. (sold 5/31/01)  June 17, 1998          Australia
46.     ZEP Italia S.R.L.                           September 19, 1992     Italy
47.     ZEP KEM Italia S.R.L.                       September 19, 1992     Italy
48.     ZEP Manufacturing B.V.                      October 13, 1986       The Netherlands

EX-10

                                                                         Page 30
                                                               Exhibit 10(i)A(2)





                           RECEIVABLES SALE AGREEMENT


                             DATED AS OF MAY 2, 2001


                                     BETWEEN


                             NSI ENTERPRISES, INC.,
                                   AS SELLER,


                                       AND



                       NATIONAL SERVICE INDUSTRIES, INC.,
                                  AS PURCHASER







                                                                         Page 31
                                                               Exhibit 10(i)A(2)



                                TABLE OF CONTENTS


ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES................................2

Section 1.1       Purchases of Receivables..................................2
                  ------------------------

Section 1.2       Payment for the Purchases.................................3
                  -------------------------

Section 1.3       Purchase Price Credit Adjustments.........................3
                  ---------------------------------

Section 1.4       Payments and Computations, Etc............................4
                  -------------------------------

Section 1.5       Transfer of Records.......................................4
                  -------------------

Section 1.6       Characterization.. .......................................5
                  ----------------


ARTICLE II REPRESENTATIONS AND WARRANTIES...................................5

Section 2.1       Representations and Warranties of NSI Enterprises.........5
                  -------------------------------------------------


ARTICLE III CONDITIONS OF PURCHASES.........................................9

Section 3.1       Conditions Precedent to Initial Purchase..................9
                  ----------------------------------------

Section 3.2       Conditions Precedent to All Purchases.....................9
                  -------------------------------------

ARTICLE IV COVENANTS........................................................9

Section 4.1       Affirmative Covenants.....................................9
                  ---------------------

Section 4.2       Negative Covenants of NSI Enterprises....................12
                  -------------------------------------


ARTICLE V TERMINATION EVENTS...............................................13

Section 5.1       Termination Events.......................................13
                  ------------------

Section 5.2       Remedies.................................................14
                  --------


ARTICLE VI INDEMNIFICATION.................................................15

Section 6.1       Indemnities by NSI Enterprises...........................15
                  ------------------------------

Section 6.2       Other Costs and Expenses.................................17
                  ------------------------

                                                                         Page 32
                                                               Exhibit 10(i)A(2)


ARTICLE VII MISCELLANEOUS..................................................17

Section 7.1       Waivers and Amendments...................................17
                  ----------------------

Section 7.2       Notices..................................................18
                  -------

Section 7.3       Protection of Ownership Interests of NSI Georgia.........18
                  ------------------------------------------------

Section 7.4       Confidentiality of Fee Letter............................19
                  -----------------------------

Section 7.5       Bankruptcy Petition......................................19
                  -------------------

Section 7.6       CHOICE OF LAW............................................19
                  -------------

Section 7.7       CONSENT TO JURISDICTION..................................19
                  -----------------------

Section 7.8       WAIVER OF JURY TRIAL.....................................20
                  --------------------

Section 7.9       Integration; Binding Effect; Survival of Terms...........20
                  ----------------------------------------------

Section 7.10      Counterparts; Severability; Section References...........21
                  ----------------------------------------------

                             EXHIBITS AND SCHEDULES
                             ----------------------

Exhibit I:        Definitions

Exhibit II:       Chief Executive Office; Principal Place of Business;
                  Location(s) of Records; Federal Employer Identification
                  Number; Other Names

Exhibit III       Lock-Boxes; Collection Accounts; Collection Banks

Schedule A:  List of Documents to Be Delivered to NSI Georgia Prior to the
             initial Purchase




                                                                         Page 33
                                                               Exhibit 10(i)A(2)



                           RECEIVABLES SALE AGREEMENT

     THIS RECEIVABLES SALE AGREEMENT, dated as of May 2, 2001, is by and between
NSI  Enterprises,  Inc.,  a  California  corporation  ("NSI  Enterprises"),  and
National Service Industries, Inc., a Georgia corporation ("NSI Georgia"). Unless
defined  elsewhere  herein,  capitalized terms used in this Agreement shall have
the  meanings  assigned to such terms in Exhibit I hereto  (and,  if not defined
therein,  the  meanings  assigned  to such  terms  in the  Credit  and  Security
Agreement hereinafter described).

                             PRELIMINARY STATEMENTS

     NSI  Enterprises  now  owns,  and from  time to time  hereafter  will  own,
Receivables.  NSI Enterprises wishes to sell and assign to NSI Georgia,  and NSI
Georgia wishes to purchase from NSI Enterprises,  all of NSI Enterprises' right,
title  and  interest  in and to such  Receivables,  together  with  the  Related
Security and Collections with respect thereto.

     The parties hereto intend the transactions  contemplated  hereby to be true
sales of the  Receivables  from NSI  Enterprises  to NSI Georgia,  providing NSI
Georgia with the full benefits of ownership of the Receivables,  and the parties
hereto  do not  intend  these  transactions  to be,  or for  any  purpose  to be
characterized as, loans from NSI Georgia to NSI Enterprises.

     Following  each  purchase  of  Receivables  from NSI  Enterprises,  (a) NSI
Georgia will sell or contribute certain of its trade receivables,  including the
Receivables  acquired from and all rights and remedies  against NSI  Enterprises
hereunder,  to NSI  Georgia's  wholly-owned  Subsidiary,  NSI  Funding,  Inc., a
Delaware corporation (the "SPE"),  pursuant to that certain Receivables Sale and
Contribution  Agreement  dated as of May 2,  2001 (as the same may from  time to
time hereafter be amended,  supplemented,  restated or otherwise  modified,  the
"Sale and Contribution  Agreement") between NSI Georgia and the SPE, and (b) the
SPE will  borrow  and  pledge its assets  pursuant  to that  certain  Credit and
Security  Agreement  dated as of May 2,  2001 (as the same may from time to time
hereafter be amended, supplemented,  restated or otherwise modified, the "Credit
and Security  Agreement")  among the SPE, as Borrower,  NSI Georgia,  as initial
Servicer,  Blue Ridge Asset Funding  Corporation  ("Blue Ridge"),  the banks and
other  financial  institutions  from time to time party  thereto  as  "Liquidity
Banks" and Wachovia Bank, N.A. or any successor agent appointed  pursuant to the
terms of the Credit  and  Security  Agreement,  as agent for Blue Ridge and such
Liquidity Banks (in such capacity, the "Agent").

                                                                         Page 34
                                                               Exhibit 10(i)A(2)


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

                                   ARTICLE I
                       AMOUNTS AND TERMS OF THE PURCHASES

Section 1.1       Purchases of Receivables.

(a)  Effective on the date hereof,  in consideration  for the Purchase Price and
     upon the  terms  and  subject  to the  conditions  set  forth  herein,  NSI
     Enterprises  does hereby sell,  assign,  transfer,  set-over and  otherwise
     convey to NSI Georgia,  without  recourse  (except to the extent  expressly
     provided   herein),   and  NSI  Georgia  does  hereby   purchase  from  NSI
     Enterprises,  all of NSI Enterprises'  right,  title and interest in and to
     all Receivables  existing as of the close of business on the Initial Cutoff
     Date (all such Receivables, the "Existing Receivables"),  together with all
     Related Security relating thereto and all Collections thereof.

(b)  Effective on each day after the Initial Cutoff Date on which any Receivable
     is  created  (each  such  Receivable,  an  "Additional   Receivable"),   in
     consideration  for the Purchase Price and upon the terms and subject to the
     conditions  set forth herein,  NSI  Enterprises  does hereby sell,  assign,
     transfer,  set-over and otherwise  convey to NSI Georgia,  without recourse
     (except to the extent  expressly  provided  herein),  and NSI Georgia  does
     hereby purchase from NSI Enterprises,  all of NSI Enterprises' right, title
     and interest in and to all Additional Receivables existing as of such date,
     together with all Related  Security  relating  thereto and all  Collections
     thereof.

(c)  NSI Georgia  shall be obligated to pay the Purchase  Price for the Existing
     Receivables  and  the  Additional   Receivables   purchased   hereunder  in
     accordance with Section 1.2.

(d)  It is the intention of the parties hereto that each Purchase of Receivables
     made  hereunder  shall  constitute  a  sale,  which  sale is  absolute  and
     irrevocable and provides NSI Georgia with the full benefits of ownership of
     the  Receivables.  Except for the Purchase  Price  Credits owed pursuant to
     Section 1.3, each sale of Receivables hereunder is made without recourse to
     NSI  Enterprises;  provided,  however,  that (i) NSI  Enterprises  shall be
     liable to NSI Georgia for all  representations,  warranties,  covenants and
     indemnities  made  by  NSI  Enterprises   pursuant  to  the  terms  of  the
     Transaction  Documents to which NSI  Enterprises is a party,  and (ii) such
     sale does not  constitute and is not intended to result in an assumption by
     NSI Georgia (or the SPE or the Agent,  as its  assignees) of any obligation
     of NSI  Enterprises  or any other  Person  arising in  connection  with the
     Receivables,  the related  Contracts  and/or other Related  Security or any
     other  obligations  of NSI  Enterprises.  In view of the  intention  of the
     parties  hereto that each  transfer of  Receivables  made  hereunder  shall
     constitute a sale of such  Receivables  rather than loans secured  thereby,

                                                                         Page 35
                                                               Exhibit 10(i)A(2)


     NSI Enterprises  agrees that it will, on or prior to the date hereof and in
     accordance with Section 4.1(f)(ii), mark its master data processing records
     relating  to the  Receivables  with a legend  stating  that NSI Georgia has
     purchased  NSI  Enterprises'  Receivables,  together  with  the  associated
     Related Security and  Collections,  and, to the extent that NSI Enterprises
     prepares any stand-alone  financial  statements,  to note in such financial
     statements that NSI Enterprises' Receivables,  together with the associated
     Related Security and Collections, have been sold to NSI Georgia.

Section 1.2       Payment for the Purchases.

(a)  The Purchase Price for the Existing Receivables shall be payable in full by
     NSI Georgia to NSI Enterprises on the date hereof in immediately  available
     funds.

(b)  The Purchase Price for each Additional Receivable shall be due and owing in
     full by NSI  Georgia to NSI  Enterprises  or its  designee on the date each
     such Additional  Receivable  comes into existence  (except that NSI Georgia
     may, with respect to any such Purchase Price,  offset against such Purchase
     Price any amounts  owed by NSI  Enterprises  to NSI Georgia  hereunder  and
     which  have  become  due  but  remain  unpaid)  and  shall  be  paid to NSI
     Enterprises  in  immediately  available  funds as provided in this  Section
     1.2(b) and subject to Section 1.3.  Although  the  Purchase  Price for each
     Additional  Receivable  shall be due and  payable in full by NSI Georgia to
     NSI Enterprises on the date such Additional Receivable came into existence,
     settlement  of the  Purchase  Price  for  Additional  Receivables  shall be
     effected on at least a monthly  basis on  Settlement  Dates with respect to
     all Additional  Receivables coming into existence during the same month (or
     shorter period, as applicable).

Section 1.3       Purchase Price Credit Adjustments.  If on any day:

(a)  the Outstanding Balance of any Receivable is:

          (i) reduced as a result of any defective or rejected or returned goods
     or services, any discount or any adjustment or otherwise by NSI Enterprises
     (other than as a result of such  Receivable's  being charged off for credit
     reasons or reduced as a result of cash Collections actually received),

          (ii)  reduced  or  canceled  as a result of a setoff in respect of any
     claim by any Person (whether such claim arises out of the same or a related
     transaction or an unrelated transaction), or

(b)  any of the representations and warranties set forth in Section 2.1(c), (h),
     (i),  (j),  (l),  (q),  (r), (s) or the second  sentence of Section  2.1(p)
     hereof  are  not  true  when  made  or  deemed  made  with  respect  to any
     Receivable,

                                                                         Page 36
                                                               Exhibit 10(i)A(2)


then,  in such  event,  NSI  Georgia  shall be  entitled  to a credit  (each,  a
"Purchase Price Credit") against the Purchase Price otherwise  payable hereunder
equal to (x) in the case of a partial  reduction,  the amount of such reduction,
and (y) in the case of a total  reduction  or  cancellation,  the  lesser of the
total Purchase Price paid for such  Receivable  and the  Outstanding  Balance of
such Receivable  immediately  prior to such reduction or  cancellation.  If such
Purchase  Price Credit  exceeds the  aggregate  Purchase  Price for  Receivables
coming into existence on any day, then NSI  Enterprises  shall pay the remaining
amount of such Purchase Price Credit in cash immediately.

     Section  1.4  Payments  and  Computations,  Etc.  All amounts to be paid or
deposited by NSI Georgia hereunder shall be paid or deposited in accordance with
the terms  hereof on the  required  day in  immediately  available  funds to the
account of NSI Enterprises designated from time to time by NSI Enterprises or as
otherwise directed by NSI Enterprises. In the event that any payment owed by any
Person  hereunder  becomes  due on a day that is not a Business  Day,  then such
payment shall be made on the next  succeeding  Business Day. If any Person fails
to pay any amount hereunder when due, such Person agrees to pay, on demand,  the
Default Fee in respect thereof until paid in full; provided,  however, that such
Default  Fee  shall  not at any  time  exceed  the  maximum  rate  permitted  by
applicable law. All computations of interest payable  hereunder shall be made on
the basis of a year of 360 days for the  actual  number of days  (including  the
first but excluding the last day) elapsed.

     Section 1.5 Transfer of Records.

     (a)  In  connection  with  the  Purchases  of  Receivables  hereunder,  NSI
          Enterprises hereby sells, transfers,  assigns and otherwise conveys to
          NSI Georgia all of NSI Enterprises' right and title to and interest in
          the Records  relating to all Receivables  sold hereunder,  without the
          need for any further  documentation  in connection with the Purchases.
          In connection  with such transfer,  NSI  Enterprises  hereby grants to
          each  of NSI  Georgia,  the  SPE,  the  Agent  and  the  Servicer,  an
          irrevocable,  non-exclusive license to use, without royalty or payment
          of any kind,  all software used by NSI  Enterprises to account for the
          Receivables,  to the extent  necessary to administer the  Receivables,
          whether  such  software  is  owned by NSI  Enterprises  or is owned by
          others  and used by NSI  Enterprises  under  license  agreements  with
          respect  thereto,  provided that should the consent of any licensor of
          such  software  be  required  for the grant of the  license  described
          herein, to be effective,  NSI Enterprises  hereby agrees that upon the
          request of NSI  Georgia,  the SPE,  the  Servicer  or the  Agent,  NSI
          Enterprises  will use its reasonable  efforts to obtain the consent of
          such  third-party  licensor.  The  license  granted  hereby  shall  be
          irrevocable  until the  indefeasible  payment in full of the Aggregate
          Unpaids,  and shall terminate on the date this Agreement terminates in
          accordance with its terms.

     (b)  NSI Enterprises (i) shall take such action reasonably requested by NSI
          Georgia,  the SPE and/or the Agent (as NSI Georgia's  assignee),  from
          time to time hereafter, that may be necessary or appropriate to ensure
          that  NSI  Georgia,  the  SPE,  the  Servicer  and the  Agent  have an

                                                                         Page 37
                                                               Exhibit 10(i)A(2)

          enforceable   ownership  interest  in  the  Records  relating  to  the
          Receivables purchased from NSI Enterprises  hereunder,  and (ii) shall
          use its  reasonable  efforts to ensure that NSI Georgia,  the SPE, the
          Agent and the  Servicer  each has an  enforceable  right  (whether  by
          license  or  sublicense  or  otherwise)  to use  all  of the  computer
          software used to account for the  Receivables  and/or to recreate such
          Records.

     Section 1.6  Characterization.  If,  notwithstanding  the  intention of the
parties expressed in Section 1.1(d),  any sale by NSI Enterprises to NSI Georgia
of Receivables hereunder shall be characterized as a secured loan and not a sale
or such sale shall for any reason be  ineffective  or  unenforceable,  then this
Agreement  shall be deemed to constitute a security  agreement under the UCC and
other  applicable  law. For this purpose and without  being in derogation of the
parties'  intention that the sale of Receivables  hereunder  shall  constitute a
true sale thereof, NSI Enterprises hereby grants to NSI Georgia a duly perfected
security  interest in all of NSI Enterprises'  right,  title and interest in, to
and under all  Receivables now existing and hereafter  arising,  all Collections
and  Related  Security  with  respect  thereto,  all other  rights and  payments
relating to the  Receivables  and all  proceeds of the  foregoing  to secure the
prompt  and  complete  payment  of a loan  deemed to have been made in an amount
equal  to the  Purchase  Price  of  the  Receivables  together  with  all  other
obligations of NSI Enterprises hereunder, which security interest shall be prior
to all other Adverse  Claims  thereto.  During the existence of any  Termination
Event,  NSI Georgia and the SPE and the Agent (as its assignees)  shall have, in
addition to the rights and  remedies  which they may have under this  Agreement,
all other rights and remedies  provided to a secured  creditor under the UCC and
other applicable law, which rights and remedies shall be cumulative.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

     Section  2.1  Representations  and  Warranties  of  NSI  Enterprises.   NSI
Enterprises hereby represents and warrants to NSI Georgia on the date hereof and
on (except for any representation or warranty that is limited to a specific date
or period) each date on or prior to the Termination Date on which any Additional
Receivable comes into existence that:

     (a) Existence and Power.  NSI Enterprises is a corporation  duly organized,
validly  existing and in good  standing  under the laws of  California,  is duly
qualified to transact business in every jurisdiction where, by the nature of its
business,  such  qualification  is  necessary,  and where the failure to qualify
would have or could  reasonably be expected to cause a Material  Adverse Effect,
and  has  all  corporate   powers  and  all  material   governmental   licenses,
authorizations,  consents and approvals required to carry on its business as now
conducted.

     (b) Power and Authority;  Due  Authorization,  Execution and Delivery.  The
execution,  delivery  and  performance  by NSI  Enterprises  of the  Transaction
Documents (i) are within NSI Enterprises'  corporate powers, (ii) have been duly
authorized by all necessary  corporate action,  (iii) require no action by or in

                                                                         Page 38
                                                               Exhibit 10(i)A(2)


respect of or filing with, any governmental  body,  agency or official,  (iv) do
not contravene,  or constitute a default under,  any provision of applicable law
or  regulation  or of  the  certificate  of  incorporation  or  by-laws  of  NSI
Enterprises or of any agreement,  judgment,  injunction,  order, decree or other
instrument  binding upon NSI Enterprises or any of its Subsidiaries,  and (v) do
not result in the creation or  imposition  of any Adverse  Claim on any asset of
NSI  Enterprises  (except as created  hereunder).  This Agreement and each other
Transaction  Document to which NSI Enterprises is a party has been duly executed
and delivered by NSI Enterprises.

     (c) No Bulk Sale. No transaction  contemplated  hereby requires  compliance
with any bulk sales act or similar law.

     (d)  Governmental  Authorization.  Other than the  filing of the  financing
statements required hereunder,  no authorization or approval or other action by,
and no notice to or filing with, any  governmental  authority or regulatory body
is  required  for the due  execution  and  delivery by NSI  Enterprises  of this
Agreement  and each other  Transaction  Document  to which it is a party and the
performance of its obligations hereunder and thereunder.

     (e) Actions,  Suits. There is no action,  suit or proceeding pending, or to
the  knowledge of NSI  Enterprises  overtly  threatened  in writing,  against or
affecting  NSI  Enterprises  or any of its  Subsidiaries  before  any  court  or
arbitrator or any governmental  body,  agency or official which has or is likely
to have a Material Adverse Effect.

     (f) Binding  Effect.  This  Agreement  constitutes  and,  when executed and
delivered in accordance with this Agreement, each other- Transaction Document to
which NSI Enterprises is a party, will constitute valid and binding  obligations
of NSI  Enterprises  enforceable  in  accordance  with their  respective  terms,
provided that the  enforceability  hereof and thereof is subject in each case to
general  principles  of equity and to  bankruptcy,  insolvency  and similar laws
affecting  the  enforcement  of  creditors'  rights  generally  and  by  general
equitable principles.

     (g) Accuracy of Information.  All information  heretofore  furnished by NSI
Enterprises to NSI Georgia for purposes of or in connection  with this Agreement
or any transaction  contemplated  hereby is, and all such information  hereafter
furnished  by NSI  Enterprises  to NSI Georgia (or the SPE or the Agent,  as its
assignees)  will be,  true and  accurate in every  material  respect or based on
reasonable  estimates  on the date as of which  such  information  is  stated or
certified. NSI Enterprises has disclosed to NSI Georgia and the Agent in writing
any and all facts known to the Executive Officers which would have or reasonably
would be expected to cause a Material Adverse Effect.

     (h) Use of Proceeds. NSI Enterprises is not engaged principally,  or as one
of its  important  activities,  in the  business of  purchasing  or carrying any
Margin  Stock,  and no  part of the  proceeds  of any  Purchase  will be used to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of  purchasing  or carrying any Margin  Stock,  or be used for any purpose which
violates, or which is inconsistent with, the provisions of Regulation T, U or X.

                                                                         Page 39
                                                               Exhibit 10(i)A(2)


     (i)  Good  Title.   Immediately  prior  to  each  Purchase  hereunder,  NSI
Enterprises (i) is the legal and beneficial  owner of the  Receivables  that are
the subject of such Purchase and (ii) is the legal and  beneficial  owner of the
Related  Security  with  respect  thereto  or  possesses  a valid and  perfected
security  interest  therein,  in each case, free and clear of any Adverse Claim,
except for  Permitted  Encumbrances.  There  have been duly filed all  financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect NSI Enterprises'
ownership interest in each Receivable, its Collections and the Related Security.

     (j) Perfection.  This Agreement,  together with the filing of the financing
statements contemplated hereby, is effective to transfer to NSI Georgia (and NSI
Georgia shall acquire from NSI  Enterprises)  (i) legal and equitable  title to,
with the right to sell and  encumber  each  Receivable  existing  and  hereafter
arising, together with the Collections with respect thereto, and (ii) all of NSI
Enterprises'  right, title and interest in the Related Security  associated with
each Receivable,  in each case, free and clear of any Adverse Claim,  except for
Permitted  Encumbrances.  There have been duly filed all financing statements or
other  similar  instruments  or  documents  necessary  under  the  UCC  (or  any
comparable  law) of all  appropriate  jurisdictions  to  perfect  NSI  Georgia's
ownership interest in the Receivables, the Related Security and the Collections.

     (k) Places of Business and Locations of Records.  The  principal  places of
business and chief executive  office of NSI Enterprises and the offices where it
keeps all of its Records are located at the address(es)  listed on Exhibit II or
such other  locations of which NSI Georgia has been notified in accordance  with
Section 4.2(a) in jurisdictions  where all action required by Section 4.2(a) has
been taken and  completed.  NSI  Enterprises'  Federal  Employer  Identification
Number is correctly set forth on Exhibit II.

     (l)  Collections.  The  conditions  and  requirements  set forth in Section
4.1(j)  have at all  times  been  satisfied  and duly  performed.  The names and
addresses of all  Collection  Banks,  together  with the account  numbers of the
Collection  Accounts of NSI  Enterprises  at each  Collection  Bank and the post
office box number of each Lock-Box,  are listed on Exhibit III. NSI  Enterprises
has not granted any Person,  other than NSI Georgia  (and the SPE and the Agent,
as its assignees) dominion and control of any Lock-Box or Collection Account, or
the right to take  dominion  and  control  of any such  Lock-Box  or  Collection
Account at a future time or upon the occurrence of a future event.

     (m) Material Adverse Effect. During the period from August 31, 2000 through
the Initial Cut-Off Date, in the good faith judgment of the Executive  Officers,
no event has  occurred  that has had or could  reasonably  be expected to have a
Material Adverse Effect.

     (n) Names. The name in which NSI Enterprises has executed this Agreement is
identical to the name of NSI  Enterprises  as indicated on the public  record of
its state of organization which shows NSI Enterprises to have been organized. In
the past five (5) years, NSI Enterprises has not used any corporate names, trade

                                                                         Page 40
                                                               Exhibit 10(i)A(2)


names or  assumed  names  other  than the  name in  which it has  executed  this
Agreement and as listed on Exhibit II.

     (o) Not a Holding Company or an Investment Company.  NSI Enterprises is not
a "holding  company" or a "subsidiary  holding  company" of a "holding  company"
within  the  meaning of the  Public  Utility  Holding  Company  Act of 1935,  as
amended,  or any  successor  statute.  NSI  Enterprises  is  not an  "investment
company"  within the meaning of the Investment  Company Act of 1940, as amended,
or any successor statute.

     (p) Compliance  with Law. NSI Enterprises has complied in all respects with
all applicable laws, rules, regulations, orders, writs, judgments,  injunctions,
decrees or awards to which it may be  subject,  except  where the  failure to so
comply could not reasonably be expected to have a Material Adverse Effect.  Each
Receivable,  together with the Contract related thereto, does not contravene any
laws, rules or regulations  applicable thereto  (including,  without limitation,
laws, rules and regulations  relating to truth in lending,  fair credit billing,
fair credit reporting, equal credit opportunity,  fair debt collection practices
and privacy), and no part of such Contract is in violation of any such law, rule
or regulation, except where such contravention or violation could not reasonably
be expected to have a Material Adverse Effect.

     (q)  Compliance  with Credit and Collection  Policy.  NSI  Enterprises  has
complied in all material  respects  with the Credit and  Collection  Policy with
regard to each Receivable and the related Contract,  and has not made any change
to such Credit and Collection  Policy,  except such material  change as to which
NSI Georgia (and the SPE and the Agent,  as its  assignees) has been notified in
accordance with Section 4.1(a).

     (r)  Payments  to  NSI   Enterprises.   With  respect  to  each  Receivable
transferred  to NSI  Georgia  hereunder,  the  Purchase  Price  received  by NSI
Enterprises  constitutes reasonably equivalent value in consideration  therefor.
No transfer by NSI Enterprises of any Receivable hereunder is or may be voidable
under any section of the Bankruptcy  Reform Act of 1978 (11  U.S.C.ss.ss.101  et
seq.), as amended.

     (s)  Enforceability  of  Contracts.  Each  Contract  with  respect  to each
Receivable is effective to create,  and has created,  a legal, valid and binding
obligation  of  the  related  Obligor  to pay  the  Outstanding  Balance  of the
Receivable  created  thereunder and any accrued  interest  thereon,  enforceable
against the Obligor in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws  relating  to or  limiting  creditors'  rights  generally  and  by  general
principles  of  equity  (regardless  of  whether  enforcement  is  sought  in  a
proceeding in equity or at law).

     (t)  Accounting.  The  manner in which  NSI  Enterprises  accounts  for the
transactions   contemplated   by  this   Agreement   does  not   jeopardize  the
characterization of the transactions contemplated herein as being true sales.

                                                                         Page 41
                                                               Exhibit 10(i)A(2)


                                  ARTICLE III
                             CONDITIONS OF PURCHASES

     Section 3.1 Conditions Precedent to Initial Purchase.  The initial Purchase
under this  Agreement  is subject to the  condition  precedent  that NSI Georgia
shall have received on or before the date of such Purchase the documents  listed
on Schedule A.

     Section 3.2 Conditions Precedent to All Purchases. NSI Georgia's obligation
to purchase any Receivable shall be subject to the further conditions  precedent
that: (a) NSI Georgia (and the SPE and the Agent,  as its assignees)  shall have
received such additional  approvals,  opinions or documents as it may reasonably
request and (b) on the date such Receivable  came into existence,  the following
statements shall be true (and acceptance of the proceeds of any payment for such
Receivable shall be deemed a representation and warranty by NSI Enterprises that
such statements are then true):

          (i) the  representations  and  warranties  set forth in Article II are
     true and  correct  in all  material  respects  on and as of the  date  such
     Receivable  came  into  existence  as though  made on and as of such  date;
     provided that the materiality  threshold in the preceding  clause shall not
     be applicable with respect to any  representation  or warranty which itself
     contains a materiality threshold; and

          (ii) no event has occurred and is  continuing  that will  constitute a
     Termination Event or an Unmatured Termination Event.

Notwithstanding the foregoing conditions precedent, upon payment of the Purchase
Price for any Receivable,  title to such Receivable and the Related Security and
Collections  with respect thereto shall vest in NSI Georgia,  whether or not the
conditions  precedent to NSI Georgia's  obligation  to purchase such  Receivable
were in fact  satisfied.  The failure of NSI  Enterprises  to satisfy any of the
foregoing  conditions  precedent,  however,  shall  give  rise to a right of NSI
Georgia to rescind the related purchase and direct NSI Enterprises to pay to NSI
Georgia an amount equal to the Purchase  Price payment that shall have been made
with respect to any Receivables related thereto.

                                   ARTICLE IV
                                    COVENANTS

     Section 4.1 Affirmative  Covenants.  Until the date on which this Agreement
terminates in accordance with its terms, NSI Enterprises hereby covenants as set
forth below:

     (a) Change in Credit and Collection Policy. At least thirty (30) days prior
to the  effectiveness  of any  material  change in or material  amendment to the
Credit and Collection Policy, NSI Enterprises will deliver to NSI

                                                                         Page 42
                                                               Exhibit 10(i)A(2)


Georgia a copy of the Credit and  Collection  Policy then in effect and a notice
(A)  indicating  such  proposed  change or  amendment,  and (B) if such proposed
change  or  amendment  would  be  reasonably  likely  to  adversely  affect  the
collectibility  of the  Receivables  or decrease the credit quality of any newly
created Receivables, requesting NSI Georgia's (and the Agent's, as NSI Georgia's
ultimate assignee) consent thereto.

     (b) Other  Information.  From time to time  promptly upon NSI Georgia's (or
the SPE or the Agent, as its assignees) reasonable request, NSI Enterprises will
deliver to NSI Georgia  such other  information,  documents,  records or reports
relating  to the  Receivables  or the  condition  or  operations,  financial  or
otherwise,  of NSI  Enterprises as NSI Georgia (or the SPE or the Agent,  as its
assignees)  may from time to time  reasonably  request in order to  protect  the
interests of NSI Georgia (and such  assigns)  under or as  contemplated  by this
Agreement  (except such plans or forecasts which have not been made available by
Parent to its creditors).

     (c) Notice of Certain  Material  Events.  NSI  Enterprises  will notify NSI
Georgia (and the SPE and the Agent,  as its assignees) in writing within one (1)
Business Day after learning thereof by any Responsible Officer of the occurrence
of (i) each Termination Event and (ii) each Unmatured  Termination  Event, which
notice shall be signed by an  Authorized  Officer of NSI  Enterprises  and shall
advised what steps are being taken in respect thereto.

     (d) Compliance  with Laws and  Preservation  of Existence.  NSI Enterprises
will  comply in all  respects  with all  applicable  laws,  rules,  regulations,
orders,  writs,  judgments,  injunctions,  decrees  or awards to which it may be
subject,  except where the failure to so comply could not reasonably be expected
to have a Material  Adverse Effect.  NSI Enterprises  will preserve and maintain
its legal  existence,  rights,  franchises and privileges in the jurisdiction of
its organization, and qualify and remain qualified in good standing as a foreign
entity in each  jurisdiction  where its business is conducted,  except where the
failure  to so  qualify  or remain in good  standing  could  not  reasonably  be
expected to have a Material  Adverse  Effect;  provided,  however,  that nothing
herein shall be deemed to preclude NSI Enterprises from merging or consolidating
with any other Person to the extent  permitted  under Section  7.1(c)(ii) of the
Credit and Security Agreement.

     (e) Audits.  NSI  Enterprises  will furnish to NSI Georgia (and the SPE and
the Agent, as its assignees) from time to time such  information with respect to
it and the  Receivables  as NSI Georgia (or the SPE or the Agent) may reasonably
request.  NSI Enterprises  will, from time to time during regular business hours
as requested by NSI Georgia (or the SPE or the Agent as its assignees), upon not
less than 3 Business Days' prior written notice, permit NSI Georgia (and the SPE
and the Agent, as its assignees) or their respective agents or  representatives,
(i) to  examine  and  make  copies  of and  abstracts  from all  Records  in the
possession or under the control of NSI  Enterprises  relating to the Receivables
and the Related Security,  including, without limitation, the related Contracts,
and (ii) to visit the offices and properties of NSI  Enterprises for the purpose
of  examining  such  materials  described  in clause (i)  above,  and to discuss
matters relating to NSI Enterprises'  financial condition or the Receivables and
the  Related  Security  or  NSI  Enterprises'   performance  under  any  of  the
Transaction  Documents or NSI Enterprises'  performance under the Contracts and,

                                                                         Page 43
                                                               Exhibit 10(i)A(2)

in each case,  with any of the officers or employees of NSI  Enterprises  having
knowledge  of such  matters.  To the extent  that NSI Georgia (or the SPE or the
Agent, as its assignees), in the course of any such visit or inspection, obtains
possession of any Proprietary  Information  pertaining to NSI Enterprises or any
of its Affiliates, NSI Georgia (or such assign) shall handle such information in
accordance  with the  requirements  of Section  14.5 of the Credit and  Security
Agreement.

     (f) Keeping and Marking of Records and Books.

          (i) NSI  Enterprises  will maintain and implement  administrative  and
     operating procedures (including, without limitation, an ability to recreate
     records  evidencing  Receivables  in the  event of the  destruction  of the
     originals thereof), and keep and maintain all documents, books, records and
     other information  reasonably  necessary or advisable for the collection of
     all Receivables (including,  without limitation, records adequate to permit
     the immediate  identification of each new Receivable and all Collections of
     and adjustments to each existing Receivable). NSI Enterprises will give NSI
     Georgia  (and  the SPE and  the  Agent,  as its  assignees)  notice  of any
     material change in the administrative and operating  procedures referred to
     in the previous sentence.

          (ii) NSI Enterprises will (A) on or prior to the date hereof, mark its
     master data processing  records and other books and records relating to the
     Receivables  with a legend,  stating  that NSI  Georgia has  purchased  its
     Receivables  and (B) upon the  request  of NSI  Georgia  (or the SPE or the
     Agent, as its assignees) and when a Termination Event is in existence:  (x)
     mark  each  Contract  with a  legend  describing  NSI  Georgia's  ownership
     interests in the  Receivables and (y) deliver to NSI Georgia (or the SPE or
     the Agent, as its assignees) all Contracts (including,  without limitation,
     all multiple originals of any such Contract) relating to the Receivables.

     (g)  Compliance  with  Contracts  and Credit  and  Collection  Policy.  NSI
Enterprises  will  timely  and  fully (i)  perform  and  comply in all  material
respects  with all  provisions,  covenants  and other  promises  required  to be
observed by it under the Contracts  related to the Receivables,  and (ii) comply
in all material respects with the Credit and Collection Policy in regard to each
Receivable and the related Contract.

     (h) Ownership.  NSI Enterprises will take all necessary action to establish
and maintain,  irrevocably in NSI Georgia,  (A) legal and equitable title to the
Receivables and the Collections and (B) all of NSI Enterprises' right, title and
interest in the Related Security associated with the Receivables,  in each case,
free and clear of any Adverse Claims other than Permitted  Encumbrances (and the

                                                                         Page 44
                                                               Exhibit 10(i)A(2)

SPE and the Agent, as its assignees) (including,  without limitation, the filing
of all financing  statements or other similar instruments or documents necessary
under  the UCC (or any  comparable  law)  of all  appropriate  jurisdictions  to
perfect  NSI  Georgia's  interest  in such  Receivables,  Related  Security  and
Collections and such other action to perfect, protect or more fully evidence the
interest  of NSI  Georgia  as NSI  Georgia  (or  the  SPE or the  Agent,  as its
assignees) may reasonably request).

     (i)  Collections.  NSI  Enterprises  will cause (1) all  proceeds  from all
Lock-Boxes  in  which  any of  the  Receivables  are  collected  to be  directly
deposited by a Collection  Bank into a Collection  Account and (2) each Lock-Box
and  Collection  Account  to be  subject  at all times to a  Collection  Account
Agreement that is in full force and effect.  In the event any payments  relating
to Receivables are remitted  directly to NSI Enterprises or any Affiliate of NSI
Enterprises,  NSI Enterprises  will remit (or will cause all such payments to be
remitted)  directly to a Collection Bank and deposited into a Collection Account
within two (2) Business Days following  receipt  thereof and, at all times prior
to such  remittance,  NSI Enterprises  will itself hold or, if applicable,  will
cause  such  payments  to be held in  trust  for the  exclusive  benefit  of NSI
Georgia, the SPE and the Agent (as its assignees). NSI Enterprises will transfer
exclusive  ownership,  dominion  and  control of each  Lock-Box  and  Collection
Account  to NSI  Georgia  and,  will not grant the  right to take  dominion  and
control of any  Lock-Box  or  Collection  Account  at a future  time or upon the
occurrence of a future event to any Person, except to NSI Georgia (or the SPE or
the Agent,  as its assignees) as  contemplated  by this Agreement and the Credit
and Security Agreement.

     (j) Taxes. Unless otherwise handled by the Parent: (i) NSI Enterprises will
file all material tax returns and reports  required by law to be filed by it and
promptly  pay all  material  taxes and  governmental  charges at any time owing,
except  any such  taxes  which are not yet  delinquent  or are being  diligently
contested  in good  faith by  appropriate  proceedings  and for  which  adequate
reserves  in  accordance  with GAAP shall have been set aside on its books,  and
(ii) NSI Enterprises  will pay when due any taxes payable in connection with the
Receivables,  exclusive  of taxes on or measured by income or gross  receipts of
NSI Georgia and its assigns.

     Section 4.2 Negative Covenants of NSI Enterprises.  Until the date on which
this Agreement  terminates in accordance with its terms, NSI Enterprises  hereby
covenants that:

     (a) Name Change,  Offices and Records.  NSI Enterprises will not change its
(i) state of organization,  (ii) name,  (iii) identity or structure  (within the
meaning of  Article 9 of any  applicable  enactment  of the UCC) or, at any time
while the location of its chief  executive  office is relevant to  perfection of
NSI Georgia's interest in the Receivables or the associated Related Security and
Collections, relocate its chief executive office or any office where Records are
kept unless it shall have: (i) given NSI Georgia (and the SPE and the Agent,  as
its assignees) at least ten (10) Business Day's prior written notice thereof and
(ii)  delivered to NSI Georgia (or the SPE or the Agent,  as its  assignees) all
financing  statements,  instruments and other documents  reasonably requested by
NSI Georgia (or the SPE or the Agent,  as its assignees) in connection with such
change or relocation.

                                                                         Page 45
                                                               Exhibit 10(i)A(2)


     (b) Change in Payment  Instructions to Obligors.  NSI Enterprises  will not
add or  terminate  any bank as a  Collection  Bank,  or make any  change  in the
instructions  to  Obligors  regarding  payments  to be made to any  Lock-Box  or
Collection  Account,  unless  NSI  Georgia  (and the SPE and the  Agent,  as its
assignees)  shall have  received,  at least ten (10) days  before  the  proposed
effective  date therefor,  (i) written  notice of such addition,  termination or
change  and  (ii)  with  respect  to the  addition  of a  Collection  Bank  or a
Collection  Account or Lock-Box,  an executed  Collection Account Agreement with
respect to the new Collection Account or Lock-Box;  provided,  however, that NSI
Enterprises may make changes in instructions to Obligors  regarding  payments if
such new instructions  require such Obligor to make payments to another existing
Collection Account.

     (c)  Modifications  to  Contracts  and Credit and  Collection  Policy.  NSI
Enterprises  will not make any  material  change to the  Credit  and  Collection
Policy that could  adversely  affect the  collectibility  of the  Receivables or
decrease the credit quality of any newly created  Receivables.  NSI  Enterprises
will not extend,  amend or otherwise  modify the terms of any  Receivable or any
Contract related thereto other than in accordance with the Credit and Collection
Policy.

     (d) Sales,  Liens. NSI Enterprises  will not sell,  assign (by operation of
law or otherwise) or otherwise  dispose of, or grant any option with respect to,
or  create  or  suffer  to exist any  Adverse  Claim  upon  (including,  without
limitation,  the filing of any  financing  statement)  or with  respect  to, any
Receivable,  Related  Security or  Collections,  or upon or with  respect to any
Contract  under which any  Receivable  arises,  or any  Lock-Box  or  Collection
Account, or assign any right to receive income with respect thereto (other than,
in each case,  the  creation  of the  interests  therein in favor of NSI Georgia
provided for herein and other Permitted Encumbrances),  and NSI Enterprises will
defend the right,  title and interest of NSI Georgia in, to and under any of the
foregoing  property,  against all claims of third  parties  claiming  through or
under NSI Enterprises (other than Permitted Encumbrances).

     (e) Accounting for Purchases. NSI Enterprises will not, and will not permit
any  Affiliate  to,  account for or treat  (whether in financial  statements  or
otherwise)  the  transactions  contemplated  hereby in any manner other than the
sale of the  Receivables  and the  Related  Security by NSI  Enterprises  to NSI
Georgia  except to the  extent  that such  transactions  are not  recognized  on
account of consolidated financial reporting in accordance with GAAP.

                                   ARTICLE V
                               TERMINATION EVENTS

     Section 5.1  Termination  Events.  The occurrence of any one or more of the
following events shall constitute a Termination Event:

          (a) NSI  Enterprises  shall  fail (i) to make any  payment  or deposit
     required  hereunder  when due and, for any such payment or deposit which is
     not in respect of principal, such failure continues for two (2) consecutive
     Business Days.

                                                                         Page 46
                                                               Exhibit 10(i)A(2)


          (b) NSI  Enterprises  shall  fail to  perform  or  observe  any  term,
     covenant or  agreement  hereunder  (other than as referred to in  paragraph
     (a)) or any  other  Transaction  Document  to which it is a party  and such
     failure  shall  continue  for and such  failure  shall not have been  cured
     within 30 days after the earlier to occur of (i) written notice thereof has
     been given to NSI  Enterprises by NSI Georgia or (ii) an Executive  Officer
     otherwise becomes aware of any such failure;  provided,  however, that such
     cure  period  shall be  extended  for a period  of time,  not to  exceed an
     additional 30 days, reasonably sufficient to permit NSI Enterprises to cure
     such  failure if such  failure  cannot be cured  within the initial  30-day
     period but  reasonably  could be expected to be capable of cure within such
     additional 30 days,  NSI  Enterprises  has  commenced  efforts to cure such
     failure during the initial 30-day period and NSI  Enterprises is diligently
     pursuing such cure.

          (c) Any representation,  warranty,  certification or statement made by
     NSI Enterprises in this Agreement, any other Transaction Document or in any
     other  document  delivered  pursuant  hereto or thereto shall prove to have
     been incorrect in any material  respect when made or deemed made;  provided
     that  the  materiality  threshold  in the  preceding  clause  shall  not be
     applicable  with  respect to any  representation  or warranty  which itself
     contains a materiality threshold.

          (d) (i) NSI  Enterprises  shall  generally  not pay its  debts as such
     debts  become due or shall admit in writing its  inability to pay its debts
     generally or shall make a general  assignment for the benefit of creditors;
     or (ii) any  proceeding  shall be instituted by or against NSI  Enterprises
     seeking to  adjudicate it bankrupt or  insolvent,  or seeking  liquidation,
     winding up, reorganization,  arrangement, adjustment, protection, relief or
     composition  of it or its  debts  under  any law  relating  to  bankruptcy,
     insolvency or reorganization or relief of debtors,  or seeking the entry of
     an order for  relief or the  appointment  of a  receiver,  trustee or other
     similar  official for it or any  substantial  part of its property or (iii)
     NSI  Enterprises  shall take any  corporate  action to authorize any of the
     actions set forth in the foregoing  clauses (i) or (ii) of this  subsection
     (c).

          (e) The Parent ceases to directly or indirectly own,  beneficially and
     of record,  100% of the issued and outstanding  voting stock of each of NSI
     Georgia and NSI Enterprises.

     Section 5.2 Remedies.  Upon the occurrence and during the continuation of a
Termination  Event,  NSI  Georgia  may take any of the  following  actions:  (i)
declare the Termination  Date to have occurred,  whereupon the Termination  Date
shall forthwith  occur,  without demand,  protest or further notice of any kind,
all of which are hereby expressly waived by NSI Enterprises;  provided, however,
that upon the occurrence of a Termination  Event described in Section 5.1(c), or
of an  actual  or  deemed  entry of an order  for  relief  with  respect  to NSI
Enterprises  under the  Federal  Bankruptcy  Code,  the  Termination  Date shall
automatically occur,  without demand,  protest or any notice of any kind, all of
which are hereby expressly waived by NSI Enterprises, and/or (ii) to the fullest
extent  permitted by applicable  law,  declare that the Default Fee shall accrue

                                                                         Page 47
                                                               Exhibit 10(i)A(2)

with  respect  to any  amounts  then  due and  owing by NSI  Enterprises  to NSI
Georgia. The aforementioned  rights and remedies shall be without limitation and
shall be in  addition  to all other  rights and  remedies of NSI Georgia and its
assigns  otherwise  available under any other  provision of this  Agreement,  by
operation  of law,  at equity or  otherwise,  all of which are hereby  expressly
preserved, including, without limitation, all rights and remedies provided under
the UCC, all of which rights shall be cumulative.

                                   ARTICLE VI
                                 INDEMNIFICATION

     Section 6.1  Indemnities  by NSI  Enterprises.  Without  limiting any other
rights  that  NSI  Georgia  may have  hereunder  or under  applicable  law,  NSI
Enterprises  hereby agrees to indemnify (and pay upon demand to) NSI Georgia and
its assigns,  officers,  directors,  agents and employees  (each an "Indemnified
Party")  from  and  against  any  and  all  damages,   losses,   claims,  taxes,
liabilities, costs, expenses and for all other amounts payable, including actual
and reasonable  attorneys' fees (which attorneys may be employees of NSI Georgia
or any such assign) and disbursements  (all of the foregoing being  collectively
referred to as "Indemnified  Amounts")  awarded against or actually  incurred by
any of them arising out of or as a result of this Agreement or the  acquisition,
either directly or indirectly, by NSI Georgia of an interest in the Receivables,
excluding, however:

          (a)  Indemnified  Amounts  to  the  extent  such  Indemnified  Amounts
     resulted  from gross  negligence  or willful  misconduct on the part of the
     Indemnified Party seeking  indemnification or by reason of such Indemnified
     Party's breach of its obligations hereunder or other legal duty;

          (b)  Indemnified  Amounts to the extent  the same  includes  losses in
     respect of Receivables that are uncollectible on account of the insolvency,
     bankruptcy or lack of creditworthiness of the related Obligor; or

          (c)  taxes  imposed  by the  jurisdiction  in which  such  Indemnified
     Party's  principal  executive  office is  located,  on or  measured  by the
     overall net income of such Indemnified Party;

provided,  however,  that  nothing  contained in this  sentence  shall limit the
liability  of NSI  Enterprises  or limit  the  recourse  of NSI  Georgia  to NSI
Enterprises  for  amounts  otherwise  specifically  provided  to be  paid by NSI
Enterprises  under the terms of this Agreement.  Without limiting the generality
of the foregoing  indemnification,  but subject in each case to clauses (a), (b)
and (c) above,  NSI  Enterprises  shall  indemnify  NSI Georgia for  Indemnified
Amounts relating to or resulting from:

          (i) any  representation  or warranty made by NSI  Enterprises  (or any
     officers of NSI  Enterprises)  under or in connection  with this Agreement,
     any other Transaction Document or any other information or report delivered

                                                                         Page 48
                                                               Exhibit 10(i)A(2)

     by NSI Enterprises pursuant hereto or thereto for which NSI Georgia has not
     received a Purchase  Price  Credit that shall have been false or  incorrect
     when made or deemed made;

          (ii) the failure by NSI  Enterprises,  to comply  with any  applicable
     law, rule or regulation with respect to any Receivable or Contract  related
     thereto,  or the  nonconformity  of any  Receivable  or  Contract  included
     therein with any such  applicable law, rule or regulation or any failure of
     NSI  Enterprises  to keep or  perform  any of its  obligations,  express or
     implied, with respect to any Contract;

          (iii) any failure of NSI Enterprises to perform its duties,  covenants
     or other obligations in accordance with the provisions of this Agreement or
     any other Transaction Document;

          (iv) any products liability,  personal injury or damage, suit or other
     similar claim arising out of or in connection with  merchandise,  insurance
     or services that are the subject of any Contract or any Receivable;

          (v) any dispute,  claim,  offset or defense  (other than  discharge in
     bankruptcy of the Obligor) of the Obligor to the payment of any  Receivable
     (including,  without limitation,  a defense based on such Receivable or the
     related  Contract not being a legal,  valid and binding  obligation of such
     Obligor  enforceable against it in accordance with its terms), or any other
     claim resulting from the sale of the merchandise or service related to such
     Receivable  or the  furnishing  or failure to furnish such  merchandise  or
     services;

          (vi) the  commingling  of  Collections of Receivables at any time with
     other funds;

          (vii)  any  investigation,  litigation  or  proceeding  related  to or
     arising  from  this  Agreement  or  any  other  Transaction  Document,  the
     transactions  contemplated  hereby, the use of the proceeds of the Purchase
     hereunder,  the ownership of the  Receivables  or any other  investigation,
     litigation  or  proceeding   relating  to  NSI  Enterprises  in  which  any
     Indemnified  Party becomes  involved as a result of any of the transactions
     contemplated  hereby  except to the extent  arising from NSI  Georgia's own
     gross negligence or willful misconduct;

          (viii) any  inability  to  litigate  any claim  against any Obligor in
     respect of any  Receivable  as a result of such  Obligor  being immune from
     civil  and  commercial  law  and  suit on the  grounds  of  sovereignty  or
     otherwise from any legal action, suit or proceeding;

          (ix) any Termination Event described in Section 5.1(c);

                                                                         Page 49
                                                               Exhibit 10(i)A(2)


          (x) any  failure to vest and  maintain  vested in NSI  Georgia,  or to
     transfer to NSI Georgia,  legal and  equitable  title to, and ownership of,
     the Receivables and the  Collections,  and all of NSI  Enterprises'  right,
     title and interest in the Related Security associated with the Receivables,
     in each case, free and clear of any Adverse Claim;

          (xi) the  failure to have  filed,  or any delay in  filing,  financing
     statements or other similar  instruments or documents  under the UCC of any
     applicable  jurisdiction  or other  applicable  laws  with  respect  to any
     Receivable,  the Related Security and Collections with respect thereto, and
     the proceeds of any thereof,  whether at the time of the Purchase or at any
     subsequent time;

          (xii) any  action or  omission  by NSI  Enterprises  which  reduces or
     impairs the rights of NSI Georgia  with  respect to any  Receivable  or the
     value of any such  Receivable (for any reason other than the application of
     Collections  thereto or  charge-off  of any  Receivable  as  uncollectible)
     unless NSI Georgia has received a Purchase Price Credit therefor; and

          (xiii) any attempt by any Person to void any Purchase  hereunder under
     statutory provisions, common law or equitable action.

     Section  6.2 Other Costs and  Expenses.  NSI  Enterprises  shall pay to NSI
Georgia  on  demand  any and all  reasonable  costs and  out-of-pocket  expenses
actually incurred by NSI Georgia, if any, including  reasonable counsel fees and
expenses  actually incurred in connection with the enforcement of this Agreement
and  the  other  documents  delivered  hereunder  and  in  connection  with  any
restructuring   or  workout  of  this  Agreement  or  such  documents,   or  the
administration of this Agreement following a Termination Event.

                                  ARTICLE VII
                                  MISCELLANEOUS

     Section 7.1 Waivers and Amendments.

          (a) No  failure  or delay on the  part of NSI  Georgia  (or any of its
     assigns) in  exercising  any power,  right or remedy  under this  Agreement
     shall operate as a waiver thereof, nor shall any single or partial exercise
     of any such power,  right or remedy  preclude  any other  further  exercise
     thereof or the exercise of any other power, right or remedy. The rights and
     remedies herein provided shall be cumulative and nonexclusive of any rights
     or  remedies  provided  by law.  Any  waiver  of this  Agreement  shall  be
     effective  only in the specific  instance and for the specific  purpose for
     which given.

          (b) No  provision  of this  Agreement  may be  amended,  supplemented,
     modified  or waived  except in writing  signed by NSI  Enterprises  and NSI

                                                                         Page 50
                                                               Exhibit 10(i)A(2)

     Georgia  and,  to  the  extent  required  under  the  Credit  and  Security
     Agreement,  the Agent and the  Liquidity  Banks or the  Required  Liquidity
     Banks.  Any material  amendment,  supplement,  modification  of waiver will
     required satisfaction of the Rating Agency Condition.

     Section 7.2 Notices.  All communications and notices provided for hereunder
shall be in writing  (including  bank wire,  telecopy  or  electronic  facsimile
transmission or similar  writing) and shall be given to the other parties hereto
at their  respective  addresses or telecopy  numbers set forth on the  signature
pages  hereof or at such other  address or  telecopy  number as such  Person may
hereafter specify for the purpose of notice to each of the other parties hereto.
Each  such  notice or other  communication  shall be  effective  (a) if given by
telecopy, upon the receipt thereof, (b) if given by mail, five (5) Business Days
after the time such  communication  is  deposited  in the mail with first  class
postage prepaid or (c) if given by any other means, when received at the address
specified in this Section 7.2.

          Section 7.3 Protection of Ownership Interests of NSI Georgia.

          (a) NSI Enterprises agrees that from time to time, at its expense,  it
     will promptly  execute and deliver all instruments and documents,  and take
     all actions,  that may be necessary or  desirable,  or that NSI Georgia (or
     its  assigns) may  reasonably  request,  to perfect,  protect or more fully
     evidence  the  interest  of  NSI  Georgia   hereunder  and  the  Receivable
     Interests,  or to enable NSI  Georgia  (or its  assigns)  to  exercise  and
     enforce their rights and remedies hereunder. At any time when a Termination
     Event exists,  NSI Georgia (or its assigns) may, at NSI  Enterprises'  sole
     cost and  expense,  direct  NSI  Enterprises  to  notify  the  Obligors  of
     Receivables of the ownership  interests of NSI Georgia under this Agreement
     and may also  direct  that  payments  of all amounts due or that become due
     under  any or all  Receivables  be  made  directly  to NSI  Georgia  or its
     designee.

          (b)  If NSI  Enterprises  fails  to  perform  any  of its  obligations
     hereunder,  NSI Georgia (or its assigns) may (but shall not be required to)
     perform,  or cause performance of, such obligations,  and NSI Georgia's (or
     such  assigns')  actual  and  reasonable  costs and  expenses  incurred  in
     connection  therewith  shall be payable by NSI  Enterprises  as provided in
     Section 6.2. NSI  Enterprises  irrevocably  authorizes NSI Georgia (and its
     assigns)  at any time and from time to time in the sole  discretion  of NSI
     Georgia (or its assigns), and appoints NSI Georgia (and its assigns) as its
     attorney(ies)-in-fact,  to act on behalf of NSI  Enterprises (i) to execute
     on behalf of NSI  Enterprises  as debtor and to file  financing  statements
     necessary  or  desirable  in NSI  Georgia's  (or its  assigns')  reasonable
     opinion to perfect  and to  maintain  the  perfection  and  priority of the
     interest of NSI Georgia in the Receivables and associated  Related Security
     and  Collections  and  (ii)  to  file  a  carbon,   photographic  or  other
     reproduction  of this Agreement or any financing  statement with respect to
     the Receivables as a financing statement in such offices as NSI Georgia (or
     its assigns) in their reasonable opinion deem necessary or desirable to

                                                                         Page 51
                                                               Exhibit 10(i)A(2)

     perfect and to  maintain  the  perfection  and  priority  of NSI  Georgia's
     interests in the Receivables.  This appointment is coupled with an interest
     and is irrevocable.

     Section  7.4  Confidentiality  of Fee  Letter.  Each of NSI Georgia and NSI
Enterprises  shall maintain and shall cause each of its employees,  officers and
advisers  to maintain  the  confidentiality  of the Fee Letter,  except that NSI
Enterprises and its officers and employees may disclose such  information to NSI
Enterprises' external consultants,  accountants and attorneys and as required by
any  applicable  law,  rule,  regulation,  direction,  request  or  order of any
judicial,  administrative or regulatory authority or proceedings (whether or not
having the force or effect of law) or to the  extent  necessary  to enforce  its
rights under the Transaction Documents.

     Section 7.5 Bankruptcy Petition.

     (a) Each of NSI  Enterprises  and NSI Georgia  hereby  covenants and agrees
that,  prior to the date that is one year and one day after the  payment in full
of all  outstanding  senior  indebtedness  of Blue Ridge,  it will not institute
against,  or join any  other  Person  in  instituting  against,  Blue  Ridge any
bankruptcy,  reorganization,  arrangement, insolvency or liquidation proceedings
or other similar  proceeding under the laws of the United States or any state of
the United States.

     (b) Each of NSI  Enterprises  and NSI Georgia  hereby  covenants and agrees
that,  prior to the date that is one year and one day after the  payment in full
of all  outstanding  obligations  of the  SPE  under  the  Credit  and  Security
Agreement,  it  will  not  institute  against,  or  join  any  other  Person  in
instituting  against,  the  SPE  any  bankruptcy,  reorganization,  arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States.

     Section 7.6 CHOICE OF LAW.  THIS  AGREEMENT  SHALL BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF GEORGIA  WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER
JURISDICTION   GOVERN  THE   PERFECTION,   OR  THE  EFFECT  OF   PERFECTION   OR
NONPERFECTION,  OF THE OWNERSHIP  INTERESTS OR SECURITY INTERESTS OF NSI GEORGIA
OR ANY OF ITS ASSIGNS.

     Section  7.7  CONSENT  TO  JURISDICTION.  EACH OF NSI  ENTERPRISES  AND NSI
GEORGIA HEREBY  IRREVOCABLY  SUBMITS TO THE  NON-EXCLUSIVE  JURISDICTION  OF ANY
UNITED STATES FEDERAL OR GEORGIA STATE COURT SITTING IN FULTON  COUNTY,  GEORGIA
IN ANY ACTION OR PROCEEDING  ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER  TRANSACTION  DOCUMENT  AND HEREBY  IRREVOCABLY  AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR  PROCEEDING  MAY BE HEARD AND  DETERMINED  IN ANY SUCH
COURT AND  IRREVOCABLY  WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER  HAVE AS TO

                                                                         Page 52
                                                               Exhibit 10(i)A(2)

THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF NSI
GEORGIA (OR ITS ASSIGNS) TO BRING  PROCEEDINGS  AGAINST NSI  ENTERPRISES  IN THE
COURTS OF ANY OTHER  JURISDICTION.  ANY JUDICIAL  PROCEEDING BY NSI  ENTERPRISES
AGAINST  NSI  GEORGIA  (OR ITS  ASSIGNS)  OR ANY  AFFILIATE  THEREOF  INVOLVING,
DIRECTLY OR  INDIRECTLY,  ANY MATTER IN ANY WAY  ARISING OUT OF,  RELATED TO, OR
CONNECTED  WITH THIS  AGREEMENT  OR ANY  DOCUMENT  EXECUTED  BY NSI  ENTERPRISES
PURSUANT TO THIS  AGREEMENT  SHALL BE BROUGHT ONLY IN A COURT IN FULTON  COUNTY,
GEORGIA.

     Section  7.8 WAIVER OF JURY  TRIAL.  TO THE  MAXIMUM  EXTENT  PERMITTED  BY
APPLICABLE  LAW,  EACH PARTY HERETO  HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING  INVOLVING,  DIRECTLY OR INDIRECTLY,  ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS AGREEMENT,  ANY DOCUMENT EXECUTED BY NSI ENTERPRISES  PURSUANT TO THIS
AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

     Section 7.9 Integration; Binding Effect; Survival of Terms.

          (a) This  Agreement and each other  Transaction  Document  contain the
     final and  complete  integration  of all prior  expressions  by the parties
     hereto with respect to the subject  matter hereof and shall  constitute the
     entire  agreement  among the  parties  hereto  with  respect to the subject
     matter hereof superseding all prior oral or written understandings.

          (b) This  Agreement  shall be binding upon and inure to the benefit of
     NSI Enterprises,  NSI Georgia and their respective successors and permitted
     assigns (including any trustee in bankruptcy).

          (c) NSI  Enterprises  may not assign any of its rights and obligations
     hereunder or any interest  herein without the prior written  consent of NSI
     Georgia.

          (d) NSI  Georgia  may assign at any time its  rights  and  obligations
     hereunder and interests  herein to any other Person  without the consent of
     NSI   Enterprises.   Without   limiting  the  foregoing,   NSI  Enterprises
     acknowledges  that  NSI  Georgia,  pursuant  to the  Contribution  and Sale
     Agreement,  may assign to the SPE, and the SPE,  pursuant to the Credit and
     Security  Agreement,  may  assign  to the  Agent,  for the  benefit  of the
     Lenders, its rights, remedies, powers and privileges hereunder and that the
     Agent may further  assign such rights,  remedies,  powers and privileges to
     the extent permitted in the Credit and Security Agreement.

                                                                         Page 53
                                                               Exhibit 10(i)A(2)


          (e) NSI Enterprises  agrees that the Agent,  as the ultimate  assignee
     hereof,  shall,  subject to the terms of the Credit and Security Agreement,
     have the right to enforce this  Agreement  and to exercise  directly all of
     NSI Georgia's rights and remedies under this Agreement (including,  without
     limitation,  the right to give or withhold any consents or approvals of NSI
     Georgia to be given or withheld  hereunder) and NSI  Enterprises  agrees to
     cooperate fully with the Agent in the exercise of such rights and remedies.

          (f)  This  Agreement   shall  create  and  constitute  the  continuing
     obligations  of the parties  hereto in accordance  with its terms and shall
     remain in full force and effect until  terminated  in  accordance  with its
     terms; provided,  however, that the rights and remedies with respect to (i)
     any  breach of any  representation  and  warranty  made by NSI  Enterprises
     pursuant to Article II; (ii) the  indemnification and payment provisions of
     Article VI; and (iii) Section 7.5 shall be continuing and shall survive any
     termination of this Agreement.

     Section 7.10 Counterparts; Severability; Section References. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate  counterparts,  each of which when so executed shall be deemed to be an
original and all of which when taken together shall  constitute one and the same
Agreement.   Any   provisions  of  this   Agreement   which  are  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, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.  Unless otherwise expressly indicated, all references herein
to  "Article,"  "Section,"  "Schedule"  or  "Exhibit"  shall mean  articles  and
sections of, and schedules and exhibits to, this Agreement.

                           {signature page follows}



                                                                         Page 54
                                                               Exhibit 10(i)A(2)



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.

                                 NSI ENTERPRISES, INC., a California corporation


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

                                      Address:
                                       NSI Center
                                       1420 Peachtree Street, N.E.
                                       Atlanta, Georgia 30309

                                       Attention: Treasurer

                                       Fax No.:                (404) 853-1330
                                       Telephone No.:  (404) 853-1368


                                 NATIONAL SERVICE INDUSTRIES, INC., a
                                 Georgia corporation


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

                                      Address:
                                       NSI Center
                                       1420 Peachtree Street, N.E.
                                       Atlanta, Georgia 30309

                                       Attention: Treasurer

                                       Fax No.:                (404) 853-1330
                                       Telephone No.:  (404) 853-1368


                                                                         Page 55
                                                               Exhibit 10(i)A(2)



                                    Exhibit I

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

     This is Exhibit I to the Agreement (as hereinafter defined). As used in the
Agreement and the Exhibits and  Schedules  thereto,  capitalized  terms have the
meanings set forth in this Exhibit I (such meanings to be equally  applicable to
the singular and plural forms  thereof).  If a  capitalized  term is used in the
Agreement,  or any Exhibit or Schedule  thereto,  and is not  otherwise  defined
therein or in this Exhibit I, such term shall have the meaning  assigned thereto
in Exhibit I to the Credit and Security Agreement.

     "Additional  Receivable" has the meaning set forth in Section 1.1(b) of the
Agreement.

     "Agent"  has the  meaning set forth in the  Preliminary  Statements  to the
Agreement.

     "Agreement" means the Receivables Sale Agreement,  dated as of May 2, 2001,
between NSI Enterprises and NSI Georgia, as the same may be amended, restated or
otherwise modified.

     "Blue Ridge" has the meaning set forth in the Preliminary Statements to the
Agreement.

     "Contract" means, with respect to any Receivable,  any and all instruments,
agreements,  invoices or other writings pursuant to which such Receivable arises
or which evidences such Receivable.

     "Credit and  Collection  Policy" means NSI  Enterprises'  and NSI Georgia's
collective  credit and collection  policies and practices  relating to Contracts
and  Receivables  existing on the date hereof,  as modified from time to time in
accordance with the Credit and Security Agreement.

     "Credit  and  Security   Agreement"  has  the  meaning  set  forth  in  the
Preliminary Statements to the Agreement.

     "Default  Fee" means a per annum rate of  interest  equal to the sum of (i)
the Prime Rate, plus (ii) 2% per annum.

     "Discount Factor" means a percentage calculated to provide NSI Georgia with
a reasonable profit on its investment in the Receivables after taking account of
(i) the time value of money based upon the  anticipated  dates of  collection of
the  Receivables  and the cost to NSI Georgia of financing its investment in the
Receivables during such period, (ii) the risk of nonpayment by the Obligors, and

                                                                         Page 56
                                                               Exhibit 10(i)A(2)

(iii) the cost of  compensating  someone to service and collect the  Receivables
for NSI Georgia.  NSI Enterprises and NSI Georgia may agree from time to time to
change  the  Discount  Factor  based  on  changes  in one or more  of the  items
affecting  the  calculation  thereof,  provided  that any change to the Discount
Factor  shall take effect as of the  commencement  of a month,  shall apply only
prospectively  and shall not affect the Purchase Price payment made prior to the
month during which NSI Enterprises and NSI Georgia agree to make such change.

     "Executive  Officer" means any of the chief executive  officer,  president,
executive vice president or senior vice president of the Parent.

     "Existing  Receivables"  has the meaning set forth in Section 1.1(a) of the
Agreement.

     "GAAP" means generally  accepted  accounting  principles applied on a basis
consistent  with  those  which are to be used in  making  the  calculations  for
purposes of determining compliance with the terms of this Agreement.

     "Initial Cutoff Date" means the Business Day immediately  prior to the date
hereof.

     "Lien" shall mean nay lien, charge, claim,  security interest,  mortgage or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever.

     "Margin  Stock" means "margin  stock" as defined in Regulation T, U or X of
the Board of Governors of the Federal Reserve System,  as in effect from time to
time, together with all official rulings and interpretations issued thereunder.

     "Material  Adverse  Effect"  means a  material  adverse  effect  on (i) the
financial   condition  or  operations   of  the  Parent  and  its   consolidated
Subsidiaries,  taken as a whole,  (ii) the ability of NSI Enterprises to perform
its obligations under the Agreement or any other Transaction Document, (iii) the
legality,  validity or  enforceability of the Agreement or any other Transaction
Document,  (iv) NSI Georgia's  interest in the  Receivables  generally or in any
significant portion of the Receivables, the Related Security or Collections with
respect thereto,  or (v) the  collectibility of the Receivables  generally or of
any material portion of the Receivables.

     "NSI  Enterprises"  has  the  meaning  set  forth  in the  preamble  to the
Agreement,  and such term shall include such Person's  successors  and permitted
assigns.

     "NSI  Georgia" has the meaning set forth in the preamble to the  Agreement,
and such term shall include such Person's successors and permitted assigns.

                                                                         Page 57
                                                               Exhibit 10(i)A(2)


     "Outstanding  Balance"  of  any  Receivable  at any  time  means  the  then
outstanding principal balance thereof.

     "Parent" means National Service Industries,  Inc., a Delaware  corporation,
and its successors and permitted assigns.

     "Permitted  Encumbrances" shall mean the following:  (a) Liens for taxes or
assessments or other governmental charges not yet due and payable; and (b) Liens
created by the Transaction Documents.

     "Person"  means  an  individual,  partnership,   corporation  (including  a
business  trust),  limited  liability  company,  joint  stock  company,   trust,
unincorporated  association,  joint venture or other entity,  or a government or
any political subdivision or agency thereof.

     "Purchase" means each purchase  pursuant to Section 1.1 of the Agreement by
NSI Georgia from NSI  Enterprises  of Receivables  and the Related  Security and
Collections  related  thereto,  together  with all related  rights in connection
therewith.

     "Purchase Price" means, with respect to each Purchase,  the aggregate price
to be paid by NSI Georgia to NSI  Enterprises  for such  Purchase in  accordance
with Section 1.2 of the Agreement for the  Receivables,  Collections and Related
Security then being sold to NSI Georgia, which price shall equal on any date (i)
the product of (x) the  Outstanding  Balance of such  Receivables  on such date,
multiplied  by (y) one minus the Discount  Factor in effect on such date,  minus
(ii) any  Purchase  Price  Credits to be  credited  against the  Purchase  Price
otherwise payable in accordance with Section 1.3 of the Agreement.

     "Purchase  Price  Credit"  has the  meaning set forth in Section 1.3 of the
Agreement.

     "Receivable"  means  all  indebtedness  and other  obligations  owed to NSI
Enterprises (at the times it arises, and before giving effect to any transfer or
conveyance   under  the   Agreement),   including,   without   limitation,   any
indebtedness,  obligation or interest  constituting  an account,  chattel paper,
instrument or general  intangible,  arising in connection with the sale of goods
or the rendering of services by NSI  Enterprises and further  includes,  without
limitation,  the  obligation  to pay any Finance  Charges with respect  thereto.
Indebtedness and other rights and obligations  arising from any one transaction,
including,  without  limitation,  indebtedness  and other rights and obligations
represented by an individual  invoice,  shall  constitute a Receivable  separate
from  a  Receivable   consisting  of  the  indebtedness  and  other  rights  and
obligations  arising from any other  transaction;  provided,  further,  that any
indebtedness,  rights or obligations  referred to in the  immediately  preceding
sentence  shall be a Receivable  regardless or whether the account debtor or NSI
Enterprises  treats  such  indebtedness,  rights or  obligations  as a  separate
payment obligation.

                                                                         Page 58
                                                               Exhibit 10(i)A(2)


     "Receivable  Sale  Agreement" has the meaning set forth in the  Preliminary
Statements to the Agreement.

     "Records"  means,  with respect to any Receivable,  all Contracts and other
documents, books, records and other information (including,  without limitation,
computer  programs,  tapes,  disks,  punch cards,  data processing  software and
related property and rights)  relating to such Receivable,  any Related Security
therefor and the related Obligor.

     "Related Security" means, with respect to any Receivable:

          (i)  all of NSI  Enterprises'  interest  in the  inventory  and  goods
     (including  returned or repossessed  inventory or goods), if any, the sale,
     financing  or  lease  of  which  by  NSI  Enterprises  gave  rise  to  such
     Receivable, and all insurance contracts with respect thereto,

          (ii) all  other  security  interests  or liens  and  property  subject
     thereto from time to time,  if any,  purporting  to secure  payment of such
     Receivable,  whether pursuant to the Contract related to such Receivable or
     otherwise,  together with all financing  statements and security agreements
     describing any collateral securing such Receivable,

          (iii)  all  guaranties,   letters  of  credit,   insurance  and  other
     agreements  or  arrangements  of  whatever  character  from  time  to  time
     supporting or securing  payment of such Receivable  whether pursuant to the
     Contract related to such Receivable or otherwise,

          (iv)  all  service   contracts  and  other  contracts  and  agreements
     associated with such Receivable,

          (v) all Records related to such Receivable,

          (vi)  all of NSI  Enterprises'  right,  title  and  interest  in  each
     Lock-Box and each Collection Account, and

          (vii) all proceeds of any of the foregoing.

     "Responsible  Officer"  means any  Executive  Officer  as well as any other
officer of the Parent who is primarily responsible for the administration of the
transactions contemplated by the Transaction Documents.

     "Settlement  Date" has the  meaning  given to that term in the  Credit  and
Security Agreement.

     "Termination  Date"  means the  earliest to occur of (i) the  Business  Day
immediately  prior to the occurrence of a Termination Event set forth in Section
5.1(c),  (ii) the Business Day specified in a written notice from NSI Georgia to

                                                                         Page 59
                                                               Exhibit 10(i)A(2)

NSI  Enterprises  following the  occurrence and during the  continuation  of any
other  Termination  Event,  and (iii) the date which is ten (10)  Business  Days
after NSI  Georgia's  receipt of written  notice  from NSI  Enterprises  that it
wishes to terminate purchases under this Agreement.

     "Termination  Event"  has the  meaning  set  forth  in  Section  5.1 of the
Agreement.

     "Transaction   Documents"  means,   collectively,   this  Agreement,   each
Collection  Account Agreement to which NSI Enterprises is a party, and all other
instruments,  documents  and  agreements  executed and  delivered in  connection
herewith.

     "UCC" means the Uniform Commercial Code as the same may, from time to time,
be enacted  and in effect in the State of  Georgia;  provided  that in the event
that, by reason of mandatory  provisions  of law, any or all of the  attachment,
perfection or priority of, or remedies  with respect to, NSI Georgia's  interest
in the Receivables is governed by the Uniform  Commercial Code as enacted and in
effect in a jurisdiction  other than the State of Georgia,  the term "UCC" shall
mean  the  Uniform  Commercial  Code as  enacted  and in  effect  in such  other
jurisdiction  solely for  purposes of the  provisions  thereof  relating to such
attachment,  perfection,  priority or remedies and for  purposes of  definitions
related to such provisions

     "Unmatured  Termination  Event" means an event  which,  with the passage of
time or the giving of notice, or both, would constitute a Termination Event.

     All accounting terms not specifically  defined herein shall be construed in
accordance  with  GAAP.  All terms  used in Article 9 of the UCC in the State of
Georgia, and not specifically defined herein, are used herein as defined in such
Article 9.

                                                                         Page 60
                                                               Exhibit 10(i)A(2)



                                   Exhibit II
                                   ----------

   Chief Executive Office; Principal Place of Business; Locations of Records;
   --------------------------------------------------------------------------
               Federal Employer Identification Number; Other Names
               ---------------------------------------------------


Chief Executive Office:
         1420 Peachtree Street
         Atlanta, Georgia  30309

Principal Place of Business:
         1420 Peachtree Street
         Atlanta, Georgia  30309

Locations of Records:

         1420 Peachtree Street
         Atlanta, Georgia  30309

         One Lithonia Way
         Conyers, Georgia  30012

Federal Employer Identification Number:   77-0319365

Legal, Trade and Assumed Names:  Lithonia Lighting, Peerless Lighting and Hydrel



                                                                         Page 61
                                                               Exhibit 10(i)A(2)



                                   Exhibit III
                                   -----------

           NAMES OF COLLECTION BANKS; LOCK-BOXES & COLLECTION ACCOUNTS




     LOCK-BOX                                 RELATED COLLECTION ACCOUNT
     --------                                 --------------------------

                              Name of Current Account Holder:  Lithonia Lighting, a division of NSI GA
P.O. Box 100863                               Account Number:  Lockbox #100863, DDA#3750249781
Atlanta, GA 30384                                  Bank Name:  Bank of America
                                                  ABA Number:  111000012
                                              Contact Person:  Debbie Hembree
                                               Contact's Tel:  404-607-2851
                                               Contact's Fax:  404-532-2943


                              Name of Current Account Holder:  Lithonia Lighting, a division of NSI
P.O. Box 360305                               Account Number:  DDA#1911121
Pittsburgh, PA 15251                               Bank Name:  Mellon Bank, Pittsburgh PA
                                                  ABA Number:  043000261
Dept. LA 21025                                Contact Person:  Patti Sostaric
Pasadena, CA                                   Contact's Tel:  412-234-6626
91185-1025                                     Contact's Fax:  412-209-6082




                                                                         Page 62
                                                               Exhibit 10(i)A(2)



                                   Schedule A
                                   ----------

                    DOCUMENTS TO BE DELIVERED TO NSI GEORGIA
                       ON OR PRIOR TO THE INITIAL PURCHASE

1.   Executed  copies of the Receivables  Sale  Agreement,  duly executed by the
     parties thereto.

2.   Copy of the Credit and Collection  Policy to attach to the Receivables Sale
     Agreement as an Exhibit.

3.   A certificate of NSI Enterprises' [Assistant] Secretary certifying:

          (a) A copy  of  the  Resolutions  of the  Board  of  Directors  of NSI
     Enterprises,   authorizing  NSI   Enterprises'   execution,   delivery  and
     performance of the Receivables Sale Agreement and the other documents to be
     delivered by it thereunder;

          (b) A  copy  of the  articles  of  incorporation  and  by-laws  of NSI
     Enterprises (also certified, in the case of such articles, by the Secretary
     of State of California on or within thirty (30) days prior to closing);

          (c) Good  Standing  Certificates  for NSI  Enterprises  issued  by the
     Secretaries  of  State of (i) its  state of  incorporation,  and  (ii),  if
     different,  that state where it maintains its principal  place of business;
     and

          (d) The names and signatures of the officers  authorized on its behalf
     to execute the  Receivables  Sale  Agreement and any other  documents to be
     delivered by it thereunder.

4.   Pre-filing state and federal tax lien,  judgment lien and UCC lien searches
     against NSI Enterprises from the following jurisdictions:

                  a. Clerk of Superior Court of Fulton County, Georgia

                  b. Georgia Superior Court Clerks Cooperative Authority

                  c. Secretary of State of California

                  d. Santa Clara County, California.

5.   Proper financing statements, duly filed under the UCC on or before the date
     of the initial  Purchase (as defined in the Receivables  Sale Agreement) in

                                                                         Page 63
                                                               Exhibit 10(i)A(2)

     all jurisdictions as may be necessary or, in the opinion of NSI Georgia (or
     its assigns),  desirable, under the UCC of all appropriate jurisdictions or
     any comparable law in order to perfect the ownership interests contemplated
     by the Receivables Sale Agreement.

6.   Time stamped receipt copies of proper UCC termination  statements,  if any,
     necessary to release all security  interests and other rights of any Person
     in the Receivables, Contracts or Related Security previously granted by NSI
     Enterprises.

7.   Executed  Collection  Account  Agreements  for each Lock-Box and Collection
     Account that,  prior to the date of this  Agreement,  was maintained in NSI
     Enterprises' name.

8.   A favorable  opinion of legal counsel for NSI Enterprises  licensed to give
     opinions  under Georgia law  reasonably  acceptable to NSI Georgia (and the
     Agent, as NSI Georgia's assignee) as to the following:

          (a) NSI Enterprises is a corporation duly organized, validly existing,
     and in good standing under the laws of the State of California.

          (b) NSI  Enterprises  has  all  requisite  authority  to  conduct  its
     business in each jurisdiction where failure to be so qualified would have a
     material adverse effect on NSI Enterprises' business.

          (c) The execution and delivery by NSI  Enterprises of the  Receivables
     Sale Agreement and each other  Transaction  Document to which it is a party
     and its performance of its obligations thereunder have been duly authorized
     by all necessary  organizational  action and proceedings on the part of NSI
     Enterprises and will not:

               (i) require any action by or in respect of, or filing  with,  any
          governmental  body,  agency or official  (other than the filing of UCC
          financing statements);

               (ii) contravene,  or constitute a default under, any provision of
          applicable  law or  regulation  or of its articles or  certificate  of
          incorporation  or bylaws or of any  agreement,  judgment,  injunction,
          order, decree or other instrument binding upon NSI Enterprises; or

               (iii) result in the creation or  imposition  of any Adverse Claim
          on assets of NSI  Enterprises  or any of its  Subsidiaries  (except as
          contemplated by the Receivables Sale Agreement).

          (d) The Receivables Sale Agreement and each other Transaction Document
     to  which  it is a party  has  been  duly  executed  and  delivered  by NSI
     Enterprises and constitutes  the legally valid,  and binding  obligation of
     NSI  Enterprises  enforceable in accordance  with its terms,  except to the
     extent the enforcement thereof may be limited by bankruptcy,  insolvency or

                                                                         Page 64
                                                               Exhibit 10(i)A(2)

     similar laws affecting the enforcement of creditors'  rights  generally and
     subject  also  to the  availability  of  equitable  remedies  if  equitable
     remedies are sought.

          (e) In the event that the receivables Sale Agreement is held to create
     a transfer for security  purposes rather than a true sale or other outright
     assignment,  the provisions of the Receivables Sale Agreement are effective
     to create  valid  security  interests in favor of NSI Georgia in all of NSI
     Enterprises'  right,  title  and  interest  in and to the  Receivables  and
     Related Security  described therein which constitute  "accounts,"  "chattel
     paper" or "general intangibles" (each as defined in the UCC) (collectively,
     the "Opinion Collateral"),  as security for the payment of a loan deemed to
     have been made by NSI Georgia to NSI  Enterprises in an amount equal to the
     Purchase  Price  (as  defined  therein)  of  the  Receivables  (as  defined
     therein), together with all other obligations of NSI Georgia thereunder.

          (f) Each of the UCC-1 Financing  Statements  naming NSI Enterprises as
     debtor, NSI Georgia,  as secured party, and the SPE, as assignee of secured
     party, and each of the UCC-3  Assignments  naming the Agent, as assignee of
     the SPE, to be filed in the [describe  filing  offices],  is in appropriate
     form for filing therein. Upon filing of such UCC-1 Financing Statements and
     such UCC-3  Assignments  in such filing offices and payment of the required
     filing fees,  the security  interest in favor of NSI Georgia in the Opinion
     Collateral  will be perfected and assigned of record to first,  to the SPE,
     and then, to the Agent.

          (g) Based solely on our review of the [describe  UCC Search  Reports],
     and assuming (i) the filing of the Financing  Statements and payment of the
     required  filing fees in accordance with paragraph (f) and (ii) the absence
     of any intervening  filings between the date and time of the Search Reports
     and the  date and  time of the  filing  of the  Financing  Statements,  the
     security interest of NSI Georgia (and the Agent, as its ultimate  assignee)
     in the Opinion  Collateral is prior to any security interest granted in the
     Opinion Collateral by NSI Enterprises,  the priority of which is determined
     solely by the  filing of a  financing  statement  in the  [describe  filing
     offices].

          (h) To the best of the opinion giver's knowledge,  there is no action,
     suit or other  proceeding  against NSI  Enterprises or any Affiliate of NSI
     Enterprises,  which  would  materially  adversely  affect the  business  or
     financial  condition of NSI Enterprises and its Affiliates taken as a whole
     or which would  materially  adversely affect the ability of NSI Enterprises
     to perform its obligations under the Receivables Sale Agreement.

          (i) NSI  Enterprises  is not an  "investment  company" as such term is
     defined in the Investment Company Act of 1940, as amended.

9.   A "true sale"  opinion of counsel for NSI  Enterprises  with respect to the
     transactions contemplated by the Receivables Sale Agreement.

10.  A Certificate of NSI Enterprises'  chief financial officer certifying that,
     as of the closing date, no Termination Event or Unmatured Termination Event
     exists and is continuing.

                                                                         Page 65
                                                               Exhibit 10(i)A(2)


11.  Executed copies of (i) all consents from and  authorizations by any Persons
     and (ii) all waivers and amendments to existing credit facilities, that are
     necessary in connection with the Receivables Sale Agreement.

EX-10

                                                                         Page 66
                                                               Exhibit 10(i)A(3)






                   RECEIVABLES SALE AND CONTRIBUTION AGREEMENT


                             DATED AS OF MAY 2, 2001


                                     BETWEEN


            National Service Industries, Inc., A GEORGIA CORPORATION,
                                   AS SELLER,


                                       AND



                   NSI Funding, Inc., A DELAWARE CORPORATION,
                                    AS BUYER






                                                                         Page 67
                                                               Exhibit 10(i)A(3)




ARTICLE I AMOUNTS AND TERMS OF THE PURCHASE..................................2

Section 1.1       Initial Contribution of Receivables........................2

Section 1.2       Purchases of Receivables...................................2

Section 1.3       Payment for the Purchases..................................3

Section 1.4       Purchase Price Credit Adjustments..........................4

Section 1.5       Payments and Computations, Etc.............................5

Section 1.6       Transfer of Records........................................5

Section 1.7       Characterization...........................................5


ARTICLE II REPRESENTATIONS AND WARRANTIES....................................6

Section 2.1       Representations and Warranties of NSI Georgia..............6
   (a)      Existence and Power..............................................6
   (b)      Power and Authority; Due Authorization, Execution and Delivery...6
   (c)      No Bulk Sale.....................................................6
   (d)      Governmental Authorization.......................................7
   (e)      Actions, Suits...................................................7
   (f)      Binding Effect...................................................7
   (g)      Accuracy of Information..........................................7
   (h)      Use of Proceeds..................................................7
   (i)      Good Title.......................................................7
   (j)      Perfection.......................................................7
   (k)      Places of Business and Locations of Records......................8
   (l)      Collections......................................................8
   (m)      Material Adverse Effect..........................................8
   (n)      Names............................................................8
   (o)      Not a Holding Company or an Investment Company...................8
   (p)      Compliance with Law..............................................8
   (q)      Compliance with Credit and Collection Policy.....................9
   (r)      Payments to NSI Georgia..........................................9
   (s)      Enforceability of Contracts......................................9
   (t)      Accounting.......................................................9
   (u)      Eligible Receivables.............................................9


ARTICLE III CONDITIONS OF PURCHASES..........................................9

Section 3.1       Conditions Precedent to Initial Purchase...................9

Section 3.2       Conditions Precedent to All Purchases......................9


ARTICLE IV COVENANTS........................................................10

Section 4.1       Affirmative Covenants of NSI Georgia......................10

                                                                         Page 68
                                                               Exhibit 10(i)A(3)

   (a)      Financial Reporting.............................................10
      (i)      Annual Reporting.............................................10
      (ii)     Quarterly Reporting..........................................11
      (iii)    Compliance Certificate.......................................11
      (iv)     Shareholders Statements and Reports..........................11
      (v)      S.E.C. Filings...............................................11
      (vi)     Copies of Notices............................................11
      (vii)    Change in Credit and Collection Policy.......................11
      (viii)      Other Information.........................................11
   (b)      Notices.........................................................12
      (i)      Termination Events or Unmatured Termination Events...........12
      (ii)     Defaults Under Other Agreements..............................12
      (iii)    ERISA Events.................................................12
   (c)      Compliance with Laws and Preservation of Existence..............12
   (d)      Audits..........................................................12
   (e)      Keeping and Marking of Records and Books........................13
   (f)      Compliance with Contracts and Credit and Collection Policy......13
   (g)      Performance and Enforcement of First-Step Sale Agreement........14
   (h)      Ownership.......................................................14
   (i)      Lenders' Reliance...............................................14
   (j)      Collections.....................................................15
   (k)      Taxes...........................................................15
   (l)      Payment to NSI Enterprises......................................15

Section 4.2       Negative Covenants of NSI Georgia.........................15
   (a)      Name Change, Offices and Records................................15
   (b)      Change in Payment Instructions to Obligors......................16
   (c)      Modifications to Contracts and Credit and Collection Policy.....16
   (d)      Sales, Liens....................................................16
   (e)      Accounting for Purchases........................................16


ARTICLE V TERMINATION EVENTS................................................17

Section 5.1       Termination Events........................................17

Section 5.2       Remedies..................................................18


ARTICLE VI INDEMNIFICATION..................................................19

Section 6.1       Indemnities by NSI Georgia................................19

Section 6.2       Other Costs and Expenses..................................21


ARTICLE VII MISCELLANEOUS...................................................21

Section 7.1       Waivers and Amendments....................................21

Section 7.2       Notices...................................................22

Section 7.3       Protection of Ownership Interests of Buyer................22

                                                                         Page 69
                                                               Exhibit 10(i)A(3)


Section 7.4       Confidentiality of Fee Letter.............................23

Section 7.5       Bankruptcy Petition.......................................23

Section 7.6       Limitation of Liability...................................24

Section 7.7       CHOICE OF LAW.............................................24

Section 7.8       CONSENT TO JURISDICTION...................................24

Section 7.9       WAIVER OF JURY TRIAL......................................24

Section 7.10      Integration; Binding Effect; Survival of Terms............25

Section 7.11      Counterparts; Severability; Section References............25

                                              EXHIBITS AND SCHEDULES
                                              ----------------------

Exhibit I        -          Definitions

Exhibit II       -          Principal Place of Business; Location(s) of Records;
                            Federal Employer Identification Number; Other Names

Exhibit III      -          Lock-Boxes; Collection Accounts; Collection Banks

Exhibit IV       -          Form of Compliance Certificate

Exhibit V        -          Copy of Credit and Collection Policy

Exhibit VI       -          Form of Subordinated Note

Exhibit VII                 Form of Purchase Report

Schedule A                  List of Documents to Be Delivered to Buyer Prior to
                            the Initial Purchase


                                                                         Page 70
                                                               Exhibit 10(i)A(3)





                   RECEIVABLES SALE AND CONTRIBUTION AGREEMENT

     THIS RECEIVABLES SALE AND CONTRIBUTION AGREEMENT,  dated as of May 2, 2001,
is by and between National Service Industries, Inc., a Georgia corporation ("NSI
Georgia"),  and NSI Funding,  Inc.,  a Delaware  corporation  ("Buyer").  Unless
defined  elsewhere  herein,  capitalized terms used in this Agreement shall have
the  meanings  assigned to such terms in Exhibit I hereto (or, if not defined in
Exhibit I hereto,  the meaning  assigned  --------- to such term in Exhibit I to
the Credit and Security Agreement).

                             PRELIMINARY STATEMENTS

          NSI  Georgia  now  owns,  and from  time to time  hereafter  will own,
     Receivables.  NSI Georgia wishes to contribute all Existing  Receivables to
     Buyer's  capital,  together with the Related  Security and Collections with
     respect thereto, and Buyer wishes to accept such contribution. In addition,
     NSI Georgia wishes to sell and assign all Additional  Receivables to Buyer,
     together with the Related  Security and Collections  with respect  thereto,
     and Buyer  wishes  to  acquire  all such  Additional  Receivables,  Related
     Security and Collections from NSI Georgia.

          NSI Georgia and Buyer intend the transactions  contemplated  hereby to
     be true sales or other  outright  conveyances of the  Receivables  from NSI
     Georgia to Buyer,  providing  Buyer with the full  benefits of ownership of
     the Receivables, and NSI Georgia and Buyer do not intend these transactions
     to be, or for any purpose to be  characterized  as, loans from Buyer to NSI
     Georgia.

          Immediately   following  the  contribution  of  Existing   Receivables
     hereunder, Buyer will borrow and pledge its assets pursuant to that certain
     Credit and Security Agreement dated as of May 2, 2001 (as the same may from
     time to time  hereafter  be amended,  supplemented,  restated or  otherwise
     modified,  the "Credit and Security  Agreement")  among Buyer, as Borrower,
     NSI Georgia,  as initial  Servicer,  Blue Ridge Asset  Funding  Corporation
     ("Blue  Ridge"),  the banks and other financial  institutions  from time to
     time party  thereto as  "Liquidity  Banks" and Wachovia  Bank,  N.A. or any
     successor agent appointed  pursuant to the terms of the Credit and Security
     Agreement,  as agent  for Blue  Ridge  and such  Liquidity  Banks  (in such
     capacity, the "Agent").

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

                                                                         Page 71
                                                               Exhibit 10(i)A(3)


                                   ARTICLE I
                        AMOUNTS AND TERMS OF THE PURCHASE

     Section 1.1 Initial  Contribution of Receivables.  On the date hereof,  NSI
Georgia does hereby contribute,  assign, transfer, set-over and otherwise convey
to  Buyer,  and  Buyer  does  hereby  accept  from  NSI  Georgia,  all  Existing
Receivables,  whether  originated by NSI Enterprises and acquired by NSI Georgia
or  originated   by  NSI  Georgia   (collectively,   the  "Initial   Contributed
Receivables"),  together  with all  Related  Security  relating  thereto and all
Collections thereof.

     Section 1.2 Purchases of Receivables.

          (a)  Effective on each day after the Initial  Cutoff Date on which any
     Receivable is created (each such Receivable,  an "Additional  Receivable"),
     in  consideration  for the Purchase Price and upon the terms and subject to
     the  conditions  set forth  herein,  NSI Georgia does hereby sell,  assign,
     transfer,  set-over and otherwise convey to Buyer, without recourse (except
     to the extent expressly  provided  herein),  and Buyer does hereby purchase
     from NSI Georgia,  all of NSI Georgia's right, title and interest in and to
     all  Additional  Receivables  existing as of such date,  together  with all
     Related Security relating thereto and all Collections thereof.

          (b)  Buyer  shall  be  obligated  to pay the  Purchase  Price  for the
     Additional Receivables purchased hereunder in accordance with Section 1.3.

          (c) It is the  intention of the parties  hereto that each  Purchase of
     Receivables  made hereunder shall constitute a sale, which sale is absolute
     and  irrevocable  and provides Buyer with the full benefits of ownership of
     the  Receivables.  Except for the Purchase  Price  Credits owed pursuant to
     Section 1.4, each sale of Receivables hereunder is made without recourse to
     NSI Georgia;  provided,  however,  that (i) NSI Georgia  shall be liable to
     Buyer for all representations,  warranties,  covenants and indemnities made
     by NSI Georgia pursuant to the terms of the Transaction  Documents to which
     NSI Georgia is a party,  and (ii) such sale does not  constitute and is not
     intended  to  result  in an  assumption  by  Buyer  (or the  Agent,  as its
     assignee) of any  obligation of NSI Georgia or any other Person  arising in
     connection with the Receivables, the related Contracts and/or other Related
     Security or any other obligations of NSI Georgia.  In view of the intention
     of the parties  hereto that each  transfer of  Receivables  made  hereunder
     shall  constitute  a sale of such  Receivables  rather  than loans  secured
     thereby,  NSI Georgia  agrees that it will,  on or prior to the date hereof
     and in accordance with Section 4.1(e)(ii),  mark its master data processing
     records  relating to the  Receivables  with a legend stating that Buyer has
     purchased the  Receivables,  together with the associated  Related Security
     and  Collections,  and,  to  the  extent  that  NSI  Georgia  prepares  any

                                                                         Page 72
                                                               Exhibit 10(i)A(3)


     stand-alone financial statements, to note in such financial statements that
     the  Receivables,   together  with  the  associated  Related  Security  and
     Collections, have been sold to Buyer.

     Section 1.3 Payment for the Purchases.

          (a) The Purchase  Price for each  Purchase of  Additional  Receivables
     shall  become  owing  to NSI  Georgia  on the  date  each  such  Additional
     Receivable  comes into  existence but shall be paid on the next  succeeding
     Settlement  Date in the  following  manner  (except  that Buyer  may,  with
     respect to any such Purchase Price,  offset against such Purchase Price any
     amounts  owed by NSI Georgia to Buyer  hereunder  and which have become due
     but remain unpaid) and shall be paid to NSI Georgia in the manner  provided
     in the following paragraphs (b) and (c):

          first,  by delivery of immediately  available  funds, to the extent of
     funds available to Buyer from its borrowings  under the Credit and Security
     Agreement or other cash on hand;

          second,  by delivery of the proceeds of a subordinated  revolving loan
     from NSI  Georgia  to Buyer (a  "Subordinated  Loan") in an  amount  not to
     exceed  the least of (A) the  remaining  unpaid  portion  of such  Purchase
     Price,  (B) the maximum  Subordinated  Loan that could be borrowed  without
     rendering Buyer's Net Worth less than the Required Capital Amount,  and (C)
     fifteen percent (15%) of such Purchase Price; and

          third,  unless NSI Georgia or Buyer has declared the Termination  Date
     to have occurred pursuant to this Agreement, by accepting a contribution to
     its  capital in an amount  equal to the  remaining  unpaid  balance of such
     Purchase Price.

     Subject to the  limitations  set forth in clause second above,  NSI Georgia
     irrevocably  agrees to advance each Subordinated Loan requested by Buyer on
     or prior to the Termination Date. NSI Georgia is hereby authorized by Buyer
     to endorse on the schedule attached to the Subordinated Note an appropriate
     notation evidencing the date and amount of each advance thereunder, as well
     as the date of each payment with respect thereto, provided that the failure
     to make such notation shall not affect any obligation of Buyer  thereunder.
     The  Subordinated  Loans  shall be  evidenced  by,  and shall be payable in
     accordance with the terms and provisions of the Subordinated Note and shall
     be payable  solely from funds which Buyer is not required  under the Credit
     and Security  Agreement  to set aside for the benefit of, or otherwise  pay
     over to, the Agent or the Lenders.

          (b) From and after the  Termination  Date,  NSI  Georgia  shall not be
     obligated to (but may, at its option):  (i) sell  Receivables to Buyer,  or
     (ii) contribute  Receivables to Buyer's capital pursuant to clause third of
     Section 1.3(a) unless NSI Georgia  reasonably  determines that the Purchase

                                                                         Page 73
                                                               Exhibit 10(i)A(3)


     Price therefor will be satisfied  with funds  available to Buyer from sales
     of  interests  in the  Receivables  pursuant  to the  Credit  and  Security
     Agreement,  Collections, proceeds of Subordinated Loans, other cash on hand
     or otherwise.

          (c) Although the Purchase Price for each Additional  Receivable  shall
     be due and  payable  in full by  Buyer  to NSI  Georgia  on the  date  such
     Receivable  came into  existence,  settlement of the Purchase Price between
     Buyer and NSI  Georgia  shall be  effected  on at least a monthly  basis on
     Settlement  Dates with  respect to all  Receivables  coming into  existence
     during the same month (or shorter  period,  as applicable) and based on the
     information  contained in the Purchase Report  delivered by NSI Georgia for
     the month then most recently ended.  Although  settlement shall be effected
     on Settlement  Dates,  increases or decreases in the amount owing under the
     Subordinated  Note made  pursuant  to clause  second of Section 1.3 and any
     contribution  of capital by NSI  Georgia to Buyer made  pursuant  to clause
     third of  Section  1.3(a)  shall be  deemed to have  occurred  and shall be
     effective as of the last Business Day of the month to which such settlement
     relates.

     Section 1.4 Purchase Price Credit Adjustments. If on any day:

          (a)  the Outstanding Balance of any Additional Receivable is:

               (i) reduced as a result of any  defective or rejected or returned
          goods or services,  any discount or any  adjustment or otherwise by an
          Originator  (other  than as a result of such  Additional  Receivable's
          being  charged  off for credit  reasons or reduced as a result of cash
          Collections actually received),

               (ii)  reduced or  canceled  as a result of a setoff in respect of
          any claim by any Person  (whether such claim arises out of the same or
          a related transaction or an unrelated transaction), or

          (b)  any of the  representations  and  warranties set forth in Section
               2.1(c),  (h), (i), (j), (l), (q), (r), (s) or the second sentence
               of Section  2.1(p)  hereof are not true when made or deemed  made
               with respect to any Additional Receivable,

then,  in such event,  Buyer shall be  entitled to a credit  (each,  a "Purchase
Price Credit") against the Purchase Price otherwise  payable  hereunder equal to
(x) in the case of a partial reduction, the amount of such reduction, and (y) in
the case of a total reduction or cancellation,  the lesser of the Purchase Price
paid for and the Outstanding Balance of such Receivable.  If such Purchase Price
Credit exceeds the aggregate  Purchase Price payable for Receivables coming into
existence on any day, then Buyer shall pay the remaining amount of such Purchase
Price Credit in cash immediately,  provided that if the Termination Date has not
occurred,  NSI Georgia shall be allowed to deduct the  remaining  amount of such
Purchase Price Credit from any  indebtedness  owed to it under the  Subordinated
Note.

                                                                         Page 74
                                                               Exhibit 10(i)A(3)


     Section  1.5  Payments  and  Computations,  Etc.  All amounts to be paid or
deposited by Buyer  hereunder  shall be paid or deposited in accordance with the
terms hereof on the day when due in immediately  available  funds to the account
of NSI  Georgia  designated  from time to time by NSI  Georgia  or as  otherwise
directed  by NSI  Georgia.  In the event  that any  payment  owed by any  Person
hereunder  becomes due on a day that is not a Business  Day,  then such  payment
shall be made on the next  succeeding  Business  Day. If any Person fails to pay
any amount hereunder when due, such Person agrees to pay, on demand, the Default
Fee in respect thereof until paid in full; provided,  however, that such Default
Fee shall not at any time exceed the maximum rate  permitted by applicable  law.
All computations of interest  payable  hereunder shall be made on the basis of a
year of 360  days  for the  actual  number  of days  (including  the  first  but
excluding the last day) elapsed.

     Section 1.6 Transfer of Records.

          (a) In connection  with each Purchase of  Receivables  hereunder,  NSI
     Georgia hereby sells, transfers, assigns and otherwise conveys to Buyer all
     of NSI Georgia's right and title to and interest in the Records relating to
     all  Receivables  sold or contributed  hereunder,  without the need for any
     further  documentation in connection with such Purchase. In connection with
     such transfer,  NSI Georgia  hereby grants to each of Buyer,  the Agent and
     the Servicer an irrevocable,  non-exclusive license to use, without royalty
     or payment of any kind, all software used by NSI Georgia to account for the
     Receivables, to the extent necessary to administer the Receivables, whether
     such software is owned by NSI Georgia or is owned by others and used by NSI
     Georgia under license agreements with respect thereto, provided that should
     the consent of any  licensor of such  software be required for the grant of
     the license described  herein,  to be effective,  NSI Georgia hereby agrees
     that upon the request of Buyer (or Buyer's assignee),  NSI Georgia will use
     its reasonable efforts to obtain the consent of such third-party  licensor.
     The license  granted  hereby shall be  irrevocable  until the  indefeasible
     payment in full of the Aggregate  Unpaids,  and shall terminate on the date
     this Agreement terminates in accordance with its terms.

          (b) NSI  Georgia (i) shall take such action  reasonably  requested  by
     Buyer and/or the Agent (as Buyer's assignee),  from time to time hereafter,
     that may be necessary or  appropriate  to ensure that Buyer and its assigns
     under the Credit  and  Security  Agreement  have an  enforceable  ownership
     interest in the  Records  relating to the  Receivables  purchased  from NSI
     Georgia hereunder, and (ii) shall use its reasonable efforts to ensure that
     Buyer, the Agent and the Servicer each has an enforceable right (whether by
     license or sublicense  or  otherwise)  to use all of the computer  software
     used to account for the Receivables and/or to recreate such Records.

     Section 1.7  Characterization.  If,  notwithstanding  the  intention of the
parties expressed in Section 1.2(b),  any sale or contribution by NSI Georgia to
Buyer of Receivables  hereunder shall be characterized as a secured loan and not
a sale or such sale shall for any reason be ineffective or  unenforceable,  then

                                                                         Page 75
                                                               Exhibit 10(i)A(3)

this Agreement shall be deemed to constitute a security  agreement under the UCC
and other  applicable  law. For this purpose and without  being in derogation of
the parties' intention that the sale of Receivables hereunder shall constitute a
true sale thereof,  NSI Georgia hereby grants to Buyer a duly perfected security
interest in all of NSI Georgia's right,  title and interest in, to and under all
Receivables  now existing and hereafter  arising,  all  Collections  and Related
Security  with respect  thereto,  each  Lock-Box  and  Collection  Account,  the
First-Step  Sale  Agreement,  all other  rights  and  payments  relating  to the
Receivables  and all proceeds of the foregoing to secure the prompt and complete
payment of a loan  deemed to have been made in an amount  equal to the  Purchase
Price of the  Receivables  together  with all other  obligations  of NSI Georgia
hereunder,  which  security  interest shall be prior to all other Adverse Claims
thereto.  During the existence of any Termination Event, Buyer and the Agent (as
its assignee)  shall have, in addition to the rights and remedies which they may
have under this Agreement,  all other rights and remedies  provided to a secured
creditor under the UCC and other applicable law, which rights and remedies shall
be cumulative.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

     Section 2.1  Representations  and  Warranties  of NSI Georgia.  NSI Georgia
hereby  represents  and warrants to Buyer on the date hereof and (except for any
representation or warranty that is limited to a specific date or period) on each
date on or prior to the  Termination  Date on which  any  Additional  Receivable
comes into existence that:

          (a) Existence and Power.  NSI Georgia is a corporation duly organized,
     validly  existing and in good standing  under the laws of Georgia,  is duly
     qualified to transact business in every  jurisdiction  where, by the nature
     of its business, such qualification is necessary,  and where the failure to
     qualify  would have or could  reasonably  be  expected  to cause a Material
     Adverse Effect, and has all corporate powers and all material  governmental
     licenses,  authorizations,  consents and approvals required to carry on its
     business as now conducted.

          (b) Power and Authority;  Due  Authorization,  Execution and Delivery.
     The execution,  delivery and  performance by NSI Georgia of the Transaction
     Documents (i) are within NSI  Georgia's  corporate  powers,  (ii) have been
     duly authorized by all necessary corporate action,  (iii) require no action
     by or in  respect  of or filing  with,  any  governmental  body,  agency or
     official,  (iv) do not  contravene,  or  constitute  a default  under,  any
     provision  of  applicable  law  or  regulation  or of  the  certificate  of
     incorporation  or by-laws of NSI  Georgia  or of any  agreement,  judgment,
     injunction,  order,  decree or other instrument binding upon NSI Georgia or
     any  of  its  Subsidiaries,  and  (v) do not  result  in  the  creation  or
     imposition  of any  Adverse  Claim on any asset of NSI  Georgia  (except as
     created hereunder).  This Agreement and each other Transaction  Document to
     which NSI Georgia is a party has been duly  executed  and  delivered by NSI
     Georgia.

          (c)  No  Bulk  Sale.  No  transaction   contemplated  hereby  requires
     compliance with any bulk sales act or similar law.

                                                                         Page 76
                                                               Exhibit 10(i)A(3)


          (d) Governmental Authorization. Other than the filing of the financing
     statements required hereunder, no authorization or approval or other action
     by,  and no  notice  to or  filing  with,  any  governmental  authority  or
     regulatory  body is  required  for the due  execution  and  delivery by NSI
     Georgia of this Agreement and each other  Transaction  Document to which it
     is a party and the performance of its obligations hereunder and thereunder.

          (e) Actions, Suits. There is no action, suit or proceeding pending, or
     to the knowledge of NSI Georgia overtly  threatened in writing,  against or
     affecting  NSI  Georgia  or any of its  Subsidiaries  before  any  court or
     arbitrator or any  governmental  body,  agency or official  which has or is
     likely to have a Material Adverse Effect.

          (f) Binding Effect. This Agreement  constitutes and, when executed and
     delivered  in  accordance  with  this  Agreement,  each  other  Transaction
     Document to which NSI Georgia is a party, will constitute valid and binding
     obligations of NSI Georgia  enforceable in accordance with their respective
     terms,  provided that the  enforceability  hereof and thereof is subject in
     each case to general principles of equity and to bankruptcy, insolvency and
     similar laws affecting the enforcement of creditors'  rights  generally and
     by general equitable principles.

          (g) Accuracy of Information.  All information  heretofore furnished by
     NSI Georgia to Buyer or the Agent,  as its  assignee  for purposes of or in
     connection with this Agreement or any transaction  contemplated  hereby is,
     and all such  information  hereafter  furnished by NSI Enterprises to Buyer
     (or the  Agent,  as its  assignee)  will  be,  true and  accurate  in every
     material  respect or based on reasonable  estimates on the date as of which
     such information is stated or certified. NSI Georgia has disclosed to Buyer
     and the Agent in writing any and all facts known to the Executive  Officers
     which  would  have or  reasonably  would be  expected  to cause a  Material
     Adverse Effect.

          (h) Use of Proceeds. NSI Georgia is not engaged principally, or as one
     of its important activities,  in the business of purchasing or carrying any
     Margin  Stock,  and no part of the proceeds of any Purchase will be used to
     purchase  or carry any Margin  Stock or to extend  credit to others for the
     purpose of  purchasing  or carrying  any Margin  Stock,  or be used for any
     purpose which violates,  or which is  inconsistent  with, the provisions of
     Regulation T, U or X..

          (i) Good Title.  Immediately  prior to each  Purchase  hereunder,  NSI
     Georgia (i) is the legal and beneficial  owner of the Receivables  that are
     the subject of such Purchase and (ii) is the legal and beneficial  owner of
     the  Related  Security  with  respect  thereto  or  possesses  a valid  and
     perfected  security interest  therein,  in each case, free and clear of any
     Adverse  Claim,  except for  Permitted  Encumbrances.  There have been duly
     filed all financing  statements or other similar  instruments  or documents
     necessary  under  the  UCC  (or  any  comparable  law)  of all  appropriate
     jurisdictions  to  perfect  NSI  Georgia's   ownership   interest  in  each
     Receivable, its Collections and the Related Security.

          (j)  Perfection.  This  Agreement,  together  with the  filing  of the
     financing  statements  contemplated hereby, is effective to transfer to NSI
     Georgia  (and NSI Georgia  shall  acquire  from NSI  Georgia) (i) legal and
     equitable  title to, with the right to sell and  encumber  each  Receivable
     existing and hereafter arising,

                                                                         Page 77
                                                               Exhibit 10(i)A(3)

     together with the  Collections  with respect  thereto,  and (ii) all of NSI
     Georgia's right, title and interest in the Related Security associated with
     each Receivable,  in each case, free and clear of any Adverse Claim, except
     for  Permitted  Encumbrances.  There  have  been duly  filed all  financing
     statements or other similar  instruments or documents  necessary  under the
     UCC (or any comparable law) of all appropriate jurisdictions to perfect NSI
     Georgia's  interest in the Receivables  acquired from NSI Enterprises under
     the  First-Step  Sale  Agreement,  together  with  the  associated  Related
     Security and Collections.

          (k) Places of Business and Locations of Records.  The principal places
     of business and chief executive office of NSI Georgia and the offices where
     it keeps  all of its  Records  are  located  at the  address(es)  listed on
     Exhibit II or such other  locations of which NSI Georgia has been  notified
     in  accordance  with  Section  4.2(a) in  jurisdictions  where  all  action
     required  by Section  4.2(a) has been taken and  completed.  NSI  Georgia's
     Federal  Employer  Identification  Number is correctly set forth on Exhibit
     II.

          (l) Collections.  The conditions and requirements set forth in Section
     4.1(j) have at all times been satisfied and duly  performed.  The names and
     addresses of all Collection Banks, together with the account numbers of the
     Collection  Accounts at each Collection Bank and the post office box number
     of each  Lock-Box,  are listed on Exhibit  III. NSI Georgia has not granted
     any Person,  other than Buyer (and the Agent, as its assignee) dominion and
     control  of any  Lock-Box  or  Collection  Account,  or the  right  to take
     dominion and control of any such Lock-Box or Collection Account at a future
     time or upon the occurrence of a future event.

          (m) Material  Adverse  Effect.  During the period from August 31, 2000
     through  the  Initial  Cut-Off  Date,  in the good  faith  judgment  of the
     Executive Officers,  no event has occurred that has had or could reasonably
     be expected to have a Material Adverse Effect.

          (n) Names.  The name in which NSI Georgia has executed this  Agreement
     is identical  to the name of NSI Georgia as indicated on the public  record
     of its  state  of  organization  which  shows  NSI  Georgia  to  have  been
     organized.  In the  past  five  (5)  years,  NSI  Georgia  has not used any
     corporate names,  trade names or assumed names other than the name in which
     it has executed this Agreement and as listed on Exhibit II.

          (o) Not a Holding Company or an Investment Company. NSI Georgia is not
     a  "holding  company"  or a  "subsidiary  holding  company"  of a  "holding
     company"  within the meaning of the Public Utility  Holding  Company Act of
     1935,  as  amended,  or  any  successor  statute.  NSI  Georgia  is  not an
     "investment  company"  within the meaning of the Investment  Company Act of
     1940, as amended, or any successor statute.

          (p) Compliance with Law. NSI Georgia has complied in all respects with
     all  applicable  laws,  rules,   regulations,   orders,  writs,  judgments,
     injunctions, decrees or awards to which it may be subject, except where the
     failure to so comply  could not  reasonably  be expected to have a Material
     Adverse  Effect.  Each  Receivable,  together  with  the  Contract  related
     thereto,  does not  contravene any laws,  rules or  regulations  applicable
     thereto (including, without limitation,

                                                                         Page 78
                                                               Exhibit 10(i)A(3)

     laws,  rules and  regulations  relating  to truth in  lending,  fair credit
     billing,  fair  credit  reporting,  equal  credit  opportunity,  fair  debt
     collection  practices  and  privacy),  and no part of such  Contract  is in
     violation  of  any  such  law,  rule  or  regulation,   except  where  such
     contravention  or  violation  could not  reasonably  be  expected to have a
     Material Adverse Effect.

          (q)  Compliance  with Credit and  Collection  Policy.  NSI Georgia has
     complied in all material  respects  with the Credit and  Collection  Policy
     with regard to each Receivable and the related  Contract,  and has not made
     any change to such  Credit and  Collection  Policy,  except  such  material
     change as to which Buyer (and the Agent, as its assignee) has been notified
     in accordance with Section 4.1(a).

          (r)  Payments  to  NSI  Georgia.   With  respect  to  each  Receivable
     transferred to Buyer hereunder,  the Purchase Price received by NSI Georgia
     constitutes  reasonably equivalent value in consideration therefor and such
     transfer was not made for or on account of an antecedent  debt. No transfer
     by NSI Georgia of any Receivable  hereunder is or may be voidable under any
     section of the Bankruptcy Reform Act of 1978 (11  U.S.C.ss.ss.101 et seq.),
     as amended.

          (s)  Enforceability  of Contracts.  Each Contract with respect to each
     Receivable  is effective to create,  and has  created,  a legal,  valid and
     binding obligation of the related Obligor to pay the Outstanding Balance of
     the  Receivable  created  thereunder  and  any  accrued  interest  thereon,
     enforceable  against the Obligor in  accordance  with its terms,  except as
     such  enforcement  may be limited  by  applicable  bankruptcy,  insolvency,
     reorganization  or other  similar laws  relating to or limiting  creditors'
     rights generally and by general principles of equity (regardless of whether
     enforcement is sought in a proceeding in equity or at law).

          (t)  Accounting.  The  manner in which NSI  Georgia  accounts  for the
     transactions  contemplated  by  this  Agreement  does  not  jeopardize  the
     characterization  of the  transactions  contemplated  herein as being  true
     sales.

          (u) Eligible  Receivables.  Each Receivable  reflected in any Purchase
     Report as an Eligible  Receivable was an Eligible Receivable on the date of
     its acquisition by Buyer hereunder.

                                  ARTICLE III
                             CONDITIONS OF PURCHASES

     Section 3.1 Conditions  Precedent to Initial  Purchase.  The Purchase under
this Agreement is subject to the conditions  precedent that (a) Buyer shall have
been capitalized with the Initial Contributed Receivables,  (b) Buyer shall have
received  on or  before  the date of such  purchase  those  documents  listed on
Schedule  A and (c) all of the  conditions  to the  initial  purchase  under the
Credit and Security  Agreement shall have been satisfied or waived in accordance
with the terms thereof.

     Section 3.2 Conditions  Precedent to All Purchases.  Buyer's  obligation to
purchase  Receivables  coming into existence after the Initial Cutoff Date shall

                                                                         Page 79
                                                               Exhibit 10(i)A(3)

be  subject  to  the  further  conditions   precedent  that:  (a)  the  Facility
Termination  Date  shall  not  have  occurred  under  the  Credit  and  Security
Agreement;  (b) Buyer (and the Agent,  as its assignee) shall have received such
other approvals,  opinions or documents as it may reasonably  request and (c) on
the date such Receivable came into existence,  the following statements shall be
true (and acceptance of the proceeds of any payment for such Receivable shall be
deemed a  representation  and warranty by NSI Georgia that such  statements  are
then true):

          (i) the  representations  and  warranties  set forth in Article II are
     true and  correct  in all  material  respects  on and as of the  date  such
     Receivable  came  into  existence  as though  made on and as of such  date;
     provided that the materiality  threshold in the preceding  clause shall not
     be applicable with respect to any  representation  or warranty which itself
     contains a materiality threshold; and

          (ii) no event has occurred and is  continuing  that will  constitute a
     Termination Event or an Unmatured Termination Event.

Notwithstanding the foregoing conditions precedent, upon payment of the Purchase
Price for any Receivable (whether by payment of cash, through an increase in the
amounts  outstanding  under the Subordinated  Note, by offset of amounts owed to
Buyer and/or by offset of capital  contributions),  title to such Receivable and
the Related  Security and Collections  with respect thereto shall vest in Buyer,
whether or not the conditions  precedent to Buyer's  obligation to purchase such
Receivable were in fact satisfied.  The failure of NSI Georgia to satisfy any of
the foregoing conditions precedent, however, shall give rise to a right of Buyer
to rescind the related purchase and direct NSI Georgia to pay to Buyer an amount
equal to the  Purchase  Price  payment that shall have been made with respect to
any Receivables related thereto.

                                   ARTICLE IV
                                    COVENANTS

     Section 4.1 Affirmative  Covenants of NSI Georgia.  Until the date on which
this  Agreement  terminates in  accordance  with its terms,  NSI Georgia  hereby
covenants as set forth below:

          (a) Financial  Reporting.  NSI Georgia will  maintain,  for itself and
     each  of  its  Subsidiaries,   a  system  of  accounting   established  and
     administered  in accordance with GAAP, and furnish to Buyer (and the Agent,
     as its assignee):

               (i)  Annual  Reporting.  As soon as  available  and in any  event
          within  90 days (or such  longer  period as may be the  subject  of an
          extension granted by the Securities and Exchange Commission) after the
          end of each Fiscal Year, a  consolidated  balance  sheet of the Parent
          and its  Consolidated  Subsidiaries  as of the end of such Fiscal Year
          and the  related  consolidated  statements  of  income,  stockholders'
          equity and cash flows for such Fiscal Year, setting forth in each case
          in  comparative  form the figures for the previous  fiscal  year,  all
          certified  by  Arthur  Andersen,   LLP  or  other  independent  public
          accountants of nationally recognized standing, with such

                                                                         Page 80
                                                               Exhibit 10(i)A(3)

          certification  to  be  free  of  exceptions  and   qualifications  not
          acceptable to Buyer and the Agent.

               (ii) Quarterly  Reporting.  As soon as available and in any event
          within  45 days (or such  longer  period as may be the  subject  of an
          extension granted by the Securities and Exchange Commission) after the
          end of each of the first 3 Fiscal  Quarters  of each  Fiscal  Year,  a
          consolidated   balance  sheet  of  the  Parent  and  its  Consolidated
          Subsidiaries  as of the end of such  Fiscal  Quarter  and the  related
          statement of income and statement of cash flows for the portion of the
          Fiscal Year ended at the end of such Fiscal Quarter,  setting forth in
          each case in comparative form the figures for the corresponding Fiscal
          Quarter and the corresponding portion of the previous Fiscal Year, all
          certified  (subject to normal year-end  adjustments) as to fairness of
          presentation,  GAAP and consistency by the chief financial  officer or
          the chief accounting officer of the Parent.

               (iii)  Compliance   Certificate.   Together  with  the  financial
          statements   required   hereunder,   a   compliance   certificate   in
          substantially  the form of  Exhibit  IV signed by the chief  financial
          officer  or the chief  accounting  officer of the Parent and dated the
          date of such annual  financial  statement or such quarterly  financial
          statement, as the case may be.

               (iv)  Shareholders  Statements  and  Reports.  Promptly  upon the
          mailing thereof to the shareholders of the Parent generally, copies of
          all financial statements, reports and proxy statements so mailed.

               (v) S.E.C. Filings.  Promptly upon the filing thereof,  copies of
          all registration  statements  (other than the exhibits thereto and any
          registration  statements  on Form S-8 or its  equivalent)  and annual,
          quarterly  or monthly  reports  which the Parent shall have filed with
          the Securities and Exchange Commission.

               (vi) Copies of Notices.  Promptly upon its receipt of any notice,
          request for consent,  financial statements,  certification,  report or
          other  communication  under  or in  connection  with  any  Transaction
          Document  from any Person  other than Buyer,  the Agent or Blue Ridge,
          copies of the same.

               (vii)  Change in Credit and  Collection  Policy.  At least thirty
          (30) days  prior to the  effectiveness  of any  material  change in or
          material  amendment to the Credit and Collection Policy, a copy of the
          Credit  and  Collection  Policy  then  in  effect  and  a  notice  (A)
          indicating such proposed change or amendment, and (B) if such proposed
          change or amendment would be reasonably likely to adversely affect the
          collectibility  of the  Receivables  or decrease the credit quality of
          any newly created Receivables, requesting Buyer's (and the Agent's, as
          Buyer's assignee) consent thereto.

               (viii) Other Information. Promptly, from time to time, such other
          information, documents, records or reports relating to the Receivables
          or the condition or operations,  financial or otherwise, of the Parent
          or NSI Georgia as Buyer (or the Agent,  as its assignee) may from time
          to time reasonably  request in order to protect the interests of Buyer
          (and the

                                                                         Page 81
                                                               Exhibit 10(i)A(3)

          Agent,  as its assignee)  under or as  contemplated  by this Agreement
          (except such plans or forecasts  which have not been made available by
          Parent to its creditors).

          (b)  Notices.  NSI Georgia  will notify  Buyer (and the Agent,  as its
     assignee) in writing of any of the following  promptly upon learning of the
     occurrence thereof, describing the same and, if applicable, the steps being
     taken with respect thereto:

               (i) Termination Events or Unmatured  Termination  Events.  Within
          one  (1)  Business  Day  after  learning  thereof  by any  Responsible
          Officer,  the occurrence of each Termination  Event and each Unmatured
          Termination  Event,  by a statement  of an  Authorized  Officer of NSI
          Georgia.

               (ii) Defaults Under Other Agreements. Within one (1) Business Day
          after learning thereof by any Responsible Officer, the occurrence of a
          default or an event of default under any other  financing  arrangement
          pursuant  to which NSI  Georgia  is a debtor or an  obligor  and which
          relates to a Debt in excess of $25,000,000.

               (iii)  ERISA  Events.  If and when any  member of the  Controlled
          Group  (i)  gives or is  required  to give  notice  to the PBGC of any
          "reportable  event" (as defined in Section 4043 of ERISA) with respect
          to any Plan which could  reasonably be expected to constitute  grounds
          for a termination of such Plan under Title IV of ERISA,  or knows that
          the plan  administrator  of any Plan has given or is  required to give
          notice  of any such  reportable  event,  a copy of the  notice of such
          reportable  event  given or  required  to be given to the  PBGC;  (ii)
          receives  notice of complete  or partial  withdrawal  liability  under
          Title IV of ERISA,  a copy of such notice;  or (iii)  receives  notice
          from the PBGC  under  Title IV of ERISA of an intent to  terminate  or
          appoint a trustee  to  administer  any  Plan,  a copy of such  notice;
          provided,  however,  that each of the  foregoing  notices shall not be
          required  to  be  given  unless  the  reportable   event,   withdrawal
          liability,  plan  termination  or trustee  appointment  involved could
          reasonably  be  expected  to give  rise to a  liability  of more  than
          $1,000,000 on the part of the Parent or any of its Subsidiaries.

          (c) Compliance with Laws and  Preservation  of Existence.  NSI Georgia
     will comply in all respects with all applicable laws,  rules,  regulations,
     orders, writs, judgments, injunctions, decrees or awards to which it may be
     subject,  except  where the failure to so comply  could not  reasonably  be
     expected to have a Material  Adverse Effect.  NSI Georgia will preserve and
     maintain its legal  existence,  rights,  franchises  and  privileges in the
     jurisdiction of its organization,  and qualify and remain qualified in good
     standing as a foreign  entity in each  jurisdiction  where its  business is
     conducted,  except  (i) where the  failure  to so qualify or remain in good
     standing could not reasonably be expected to have a Material Adverse Effect
     and (ii) NSI Georgia may merge or consolidate  with any other Person to the
     extent  permitted  under  Section  7.1(c)(ii)  of the Credit  and  Security
     Agreement.

          (d) Audits.  NSI Georgia will furnish to Buyer (and the Agent,  as its
     assignee)  from time to time such  information  with  respect to it and the
     Receivables  as Buyer (or the Agent) may  reasonably  request.  NSI Georgia
     will, from time to time during regular business hours as requested by Buyer
     (the  Agent as its  assignee),  upon not less than 3 Business  Days'  prior
     written notice,

                                                                         Page 82
                                                               Exhibit 10(i)A(3)

     permit Buyer (and the Agent, as its assignee) or their respective agents or
     representatives,  (i) to examine and make copies of and abstracts  from all
     Records in the  possession or under the control of NSI Georgia  relating to
     the Receivables and the Related Security,  including,  without  limitation,
     the related Contracts,  and (ii) to visit the offices and properties of NSI
     Georgia for the purpose of examining such materials described in clause (i)
     above, and to discuss matters relating to NSI Georgia's financial condition
     or the  Receivables and the Related  Security or NSI Georgia's  performance
     under any of the Transaction  Documents or NSI Georgia's  performance under
     the Contracts  and, in each case,  with any of the officers or employees of
     NSI Georgia having knowledge of such matters.  To the extent that Buyer (or
     the Agent, as its assignee), in the course of any such visit or inspection,
     obtains possession of any Proprietary Information pertaining to NSI Georgia
     or any of  its  Affiliates,  Buyer  (or  such  assign)  shall  handle  such
     information  in  accordance  with the  requirements  of Section 14.5 of the
     Credit and Security Agreement.

          (e) Keeping and Marking of Records and Books.

               (i) NSI Georgia will (and will cause NSI Enterprises to) maintain
          and  implement  administrative  and operating  procedures  (including,
          without   limitation,   an  ability  to  recreate  records  evidencing
          Receivables in the event of the destruction of the originals thereof),
          and  keep  and  maintain  all  documents,  books,  records  and  other
          information  reasonably  necessary or advisable for the  collection of
          all Receivables  (including,  without limitation,  records adequate to
          permit the immediate  identification  of each new  Receivable  and all
          Collections  of and  adjustments  to each  existing  Receivable).  NSI
          Georgia will (and will cause NSI  Enterprises  to) give Buyer (and the
          Agent,  as  its  assignee)  notice  of  any  material  change  in  the
          administrative  and operating  procedures  referred to in the previous
          sentence.

               (ii) NSI Georgia will (and will cause NSI  Enterprises to) (A) on
          or prior to the date hereof,  mark its master data processing  records
          and other books and records relating to the Receivables with a legend,
          acceptable  to Buyer  (and the  Agent,  as its  assignee),  describing
          Buyer's ownership  interests in the Receivables and further describing
          the Receivable Interests of the Agent (on behalf of the Lenders) under
          the Credit and  Security  Agreement  and (B) upon the request of Buyer
          (or the Agent,  as its assignee)  and when a  Termination  Event is in
          existence:  (x) mark each  Contract with a legend  describing  Buyer's
          ownership  interests in the  Receivables  and further  describing  the
          Receivable  Interests  of the Agent (on behalf of the Lenders) and (y)
          deliver  to  Buyer  (or the  Agent,  as its  assignee)  all  Contracts
          (including,  without  limitation,  all multiple  originals of any such
          Contract) relating to the Receivables.

          (f) Compliance  with Contracts and Credit and Collection  Policy.  NSI
     Georgia  will (and will  cause NSI  Enterprises  to)  timely  and fully (i)
     perform and comply

                                                                         Page 83
                                                               Exhibit 10(i)A(3)

     in all material respects with all provisions,  covenants and other promises
     required  to  be  observed  by  it  under  the  Contracts  related  to  the
     Receivables,  and (ii) comply in all material  respects with the Credit and
     Collection Policy in regard to each Receivable and the related Contract.

          (g) Performance  and  Enforcement of First-Step  Sale  Agreement.  NSI
     Georgia will and will  require NSI  Enterprises  to,  perform each of their
     respective   obligations  and  undertakings   under  and  pursuant  to  the
     First-Step Sale Agreement,  will purchase Receivables  thereunder in strict
     compliance  with the terms thereof and will  vigorously  enforce the rights
     and remedies  accorded to NSI Georgia under the First-Step  Sale Agreement.
     NSI  Georgia  will take all  actions to perfect  and enforce its rights and
     interests  (and the  rights  and  interests  of Buyer  as  assignee  of NSI
     Georgia) under the First-Step Sale Agreement as Buyer (or the Agent, as its
     assignee)  may from time to time  reasonably  request,  including,  without
     limitation,  making claims to which it may be entitled under any indemnity,
     reimbursement  or  similar  provision  contained  in  the  First-Step  Sale
     Agreement.

          (h) Ownership.  NSI Georgia will (and will cause NSI  Enterprises  to)
     take all  necessary  action to (i) vest  legal and  equitable  title to the
     Receivables,  the Related Security and the Collections  purchased under the
     First-Step Sale Agreement irrevocably in NSI Georgia, free and clear of any
     Adverse  Claims  other  than  Permitted  Encumbrances  (including,  without
     limitation,  the  filing  of all  financing  statements  or  other  similar
     instruments or documents necessary under the UCC (or any comparable law) of
     all  appropriate  jurisdictions  to perfect NSI Georgia's  interest in such
     Receivables,  Related  Security  and  Collections  and such other action to
     perfect, protect or more fully evidence the interest of NSI Georgia therein
     as Buyer (or the Agent, as its assignee) may reasonably request),  and (ii)
     establish and maintain, irrevocably in Buyer, (A) legal and equitable title
     to the Receivables and the Collections and (B) all of NSI Georgia's  right,
     title and interest in the Related Security associated with the Receivables,
     in each case,  free and clear of any Adverse  Claims  other than  Permitted
     Encumbrances  (including,  without limitation,  the filing of all financing
     statements or other similar  instruments or documents  necessary  under the
     UCC (or any comparable  law) of all  appropriate  jurisdictions  to perfect
     Buyer's interest in such Receivables,  Related Security and Collections and
     such other action to perfect,  protect or more fully  evidence the interest
     of Buyer as Buyer (or the Agent, as its assignee) may reasonably request).

          (i) Lenders' Reliance. NSI Georgia acknowledges that the Agent and the
     Lenders are entering into the  transactions  contemplated by the Credit and
     Security Agreement in reliance upon Buyer's identity as a legal entity that
     is separate from NSI Georgia and any Affiliates  thereof.  Therefore,  from
     and after the date of execution and delivery of this Agreement, NSI Georgia
     will take all reasonable steps  including,  without  limitation,  all steps
     that  Buyer or any  assignee  of Buyer  may  from  time to time  reasonably
     request to maintain Buyer's identity as a separate legal entity and to make
     it  manifest  to third  parties  that  Buyer is an entity  with  assets and
     liabilities  distinct from those of NSI Georgia and any Affiliates  thereof
     and not just a  division  of NSI  Georgia  or any such  Affiliate.  Without
     limiting  the  generality  of the  foregoing  and in  addition to the other
     covenants  set forth  herein,  NSI  Georgia (i) will not hold itself out to
     third  parties  as liable  for the debts of Buyer  nor  purport  to own the
     Receivables  and other assets  acquired by Buyer,  (ii) will take all other
     actions  necessary  on its part to  ensure  that  Buyer is at all  times in
     compliance with

                                                                         Page 84
                                                               Exhibit 10(i)A(3)

     the "separateness  covenants" set forth in Section 7.1(i) of the Credit and
     Security  Agreement  and (iii)  will cause all tax  liabilities  arising in
     connection  with the  transactions  contemplated  herein or otherwise to be
     allocated  between NSI Georgia and Buyer on an arm's-length  basis and in a
     manner   consistent  with  the  procedures  set  forth  in  U.S.   Treasury
     Regulations ss.ss.1.1502-33(d) and 1.1552-1.

          (j)  Collections.  NSI Georgia  will cause (1) all  proceeds  from all
     Lock-Boxes to be directly  deposited by a Collection Bank into a Collection
     Account and (2) each Lock-Box and  Collection  Account to be subject at all
     times to a Collection  Account  Agreement that is in full force and effect.
     In the event any payments  relating to Receivables are remitted directly to
     NSI Georgia or any  Affiliate  of NSI  Georgia,  NSI Georgia will remit (or
     will cause all such payments to be remitted)  directly to a Collection Bank
     and  deposited  into a  Collection  Account  within two (2)  Business  Days
     following  receipt thereof and, at all times prior to such remittance,  NSI
     Georgia will itself hold or, if applicable,  will cause such payments to be
     held in trust  for the  exclusive  benefit  of Buyer and its  assigns.  NSI
     Georgia will  transfer  exclusive  ownership,  dominion and control of each
     Lock-Box and  Collection  Account to Buyer and, will not grant the right to
     take dominion and control of any Lock-Box or Collection Account at a future
     time or upon the  occurrence  of a future  event to any  Person,  except to
     Buyer (and the Agent,  as its assignee) as  contemplated  by this Agreement
     and the Credit and Security Agreement.

          (k) Taxes.  NSI Georgia will file all material tax returns and reports
     required by law to be filed by it and promptly  pay all material  taxes and
     governmental charges at any time owing, except any such taxes which are not
     yet  delinquent  or  are  being  diligently  contested  in  good  faith  by
     appropriate  proceedings and for which adequate reserves in accordance with
     GAAP shall have been set aside on its books.  NSI Georgia will pay when due
     any taxes payable in connection with the Receivables, exclusive of taxes on
     or measured by income or gross receipts of Buyer and its assigns.

          (l)  Payment  to NSI  Enterprises.  With  respect  to  any  Receivable
     purchased by NSI Georgia from NSI Enterprises,  such sale shall be effected
     under,  and in strict  compliance  with the terms of, the  First-Step  Sale
     Agreement,  including without limitation,  the terms relating to the amount
     and  timing of  payments  to be made to NSI  Enterprises  in respect of the
     purchase price for such Receivable.

     Section 4.2 Negative Covenants of NSI Georgia. Until the date on which this
Agreement  terminates in accordance with its terms, NSI Georgia hereby covenants
that:

          (a) Name Change,  Offices and Records. NSI Georgia will not change its
     (i) state of organization,  (ii) name, (iii) identity or structure  (within
     the  meaning  of  Article  9 of any  applicable  enactment  of the  UCC) or
     relocate its chief  executive  office at any time while the location of its
     chief executive office is relevant to perfection of Buyer's interest in the
     Receivables  or the associated  Related  Security and  Collections,  or any
     office  where  Records are kept unless it shall have:  (i) given Buyer (and
     the Agent,  as its assignee) at least ten (10) days' prior  written  notice
     thereof and (ii)  delivered to Buyer (and the Agent,  as its  assignee) all
     financing statements, instruments and other

                                                                         Page 85
                                                               Exhibit 10(i)A(3)

     documents reasonably requested by Buyer (and the Agent, as its assignee) in
     connection with such change or relocation.

          (b) Change in Payment  Instructions to Obligors.  NSI Georgia will not
     add or terminate  any bank as a Collection  Bank, or make any change in the
     instructions to Obligors  regarding  payments to be made to any Lock-Box or
     Collection  Account,  unless Buyer (and the Agent,  as its assignee)  shall
     have  received,  at least ten (10) days before the proposed  effective date
     therefor,  (i) written notice of such  addition,  termination or change and
     (ii) with  respect to the  addition of a  Collection  Bank or a  Collection
     Account or Lock-Box,  an executed Collection Account Agreement with respect
     to the new  Collection  Account or Lock-Box;  provided,  however,  that NSI
     Georgia may make changes in instructions to Obligors  regarding payments if
     such new  instructions  require  such  Obligor to make  payments to another
     existing Collection Account.

          (c) Modifications to Contracts and Credit and Collection  Policy.  NSI
     Georgia will not (and will not permit NSI Enterprises to) make any material
     change to the Credit and Collection  Policy that could adversely affect the
     collectibility  of the  Receivables  or decrease the credit  quality of any
     newly created Receivables. Except as otherwise permitted in its capacity as
     Servicer  pursuant to the Credit and Security  Agreement,  NSI Georgia will
     not (and will not permit NSI  Enterprises  to) extend,  amend or  otherwise
     modify the terms of any  Receivable or any Contract  related  thereto other
     than in accordance with the Credit and Collection Policy.

          (d) Sales,  Liens. NSI Georgia will not sell,  assign (by operation of
     law or otherwise) or otherwise dispose of, or grant any option with respect
     to, or create or suffer to exist any Adverse Claim upon (including, without
     limitation,  the filing of any financing statement) or with respect to, any
     Receivable, Related Security or Collections, or upon or with respect to any
     Contract under which any Receivable  arises,  or any Lock-Box or Collection
     Account,  or assign any right to receive income with respect thereto (other
     than, in each case, the creation of the interests therein in favor of Buyer
     provided for herein and the Permitted  Encumbrances),  and NSI Georgia will
     defend the right,  title and  interest of Buyer in, to and under any of the
     foregoing property, against all claims of third parties claiming through or
     under NSI Georgia (other than Permitted Encumbrances).

          (e)  Accounting  for  Purchases.  NSI Georgia  will not,  and will not
     permit  any  Affiliate  to,  account  for or treat  (whether  in  financial
     statements or otherwise) the transactions contemplated hereby in any manner
     other than the sale of the  Receivables  and the  Related  Security  by NSI
     Georgia  to  Buyer  or in  any  other  respect  account  for or  treat  the
     transactions  contemplated hereby in any manner other than as a sale of the
     Receivables and the Related  Security by NSI Georgia to Buyer except to the
     extent that such transactions are not recognized on account of consolidated
     financial  reporting  in  accordance  with  generally  accepted  accounting
     principles.

                                                                         Page 86
                                                               Exhibit 10(i)A(3)


                                   ARTICLE V
                               TERMINATION EVENTS

     Section 5.1  Termination  Events.  The occurrence of any one or more of the
following events shall constitute a Termination Event:

          (a) NSI Georgia shall fail to make any payment or deposit  required to
     be made by it under the  Transaction  Documents  when due and, for any such
     payment or  deposit  which is not in respect  of  principal,  such  failure
     continues for two (2) consecutive Business Days.

          (b) NSI Georgia shall fail to perform or observe any term, covenant or
     agreement  hereunder  (other than as referred to in  paragraph  (a)) or any
     other  Transaction  Document to which it is a party and such failure  shall
     continue  for and such  failure  shall not have been  cured  within 30 days
     after the earlier to occur of (i) written  notice thereof has been given to
     NSI Georgia by the Buyer or (ii) an  Executive  Officer  otherwise  becomes
     aware of any such failure;  provided,  however, that such cure period shall
     be  extended  for a period of time,  not to exceed an  additional  30 days,
     reasonably  sufficient  to permit NSI Georgia to cure such  failure if such
     failure  cannot be cured within the initial  30-day  period but  reasonably
     could be expected to be capable of cure within such additional 30 days, NSI
     Georgia  has  commenced  efforts to cure such  failure  during the  initial
     30-day period and NSI Georgia is diligently pursuing such cure.

          (c) Any representation,  warranty,  certification or statement made by
     NSI Georgia in this  Agreement,  any other  Transaction  Document or in any
     other  document  delivered  pursuant  hereto or thereto shall prove to have
     been incorrect in any material  respect when made or deemed made;  provided
     that  the  materiality  threshold  in the  preceding  clause  shall  not be
     applicable  with  respect to any  representation  or warranty  which itself
     contains a materiality threshold.

          (d) An Event of  Bankruptcy  shall occur with respect to the Parent or
     any of its Material Subsidiaries.

          (e) A Change of Control shall occur.

          (f) One or more  judgments  or orders  for the  payment of money in an
     aggregate amount in excess of 10% of Stockholders'  Equity as of the end of
     the Fiscal Quarter just ended shall be rendered against the Parent,  either
     Originator  or  the  Buyer  and  such  judgment  or  order  shall  continue
     unsatisfied and unstayed for a period of 30 days.

          (g) Either of the Originators or any Subsidiary shall fail to make any
     payment in respect of Debt  outstanding in an aggregate amount in excess of
     $25,000,000 when due or within any applicable grace period.

                                                                         Page 87
                                                               Exhibit 10(i)A(3)


          (h)  Any  event  or  condition   shall  occur  which  results  in  the
     acceleration  of  the  maturity  of  Debt  outstanding  of  either  of  the
     Originators  or  any  Subsidiary  in  an  aggregate  amount  in  excess  of
     $25,000,000   (including,   without  limitation,   any  required  mandatory
     prepayment  or "put" of such  Debt to such  Originator  or  Subsidiary)  or
     enables  (or,  with the  giving of  notice or lapse of time or both,  would
     enable) the holders of such Debt or commitment or any Person acting on such
     holders'  behalf to accelerate  the maturity  thereof or terminate any such
     commitment   (including,   without   limitation,   any  required  mandatory
     prepayment or "put" of such Debt to such Originator or Subsidiary).

          (i) The Parent or any member of the Controlled Group shall fail to pay
     when due any amount in excess of 10% of Stockholders'  Equity as of the end
     of the Fiscal  Quarter just ended which it shall have become  liable to pay
     to the PBGC or to a Plan  under  Title IV of ERISA;  or notice of intent to
     terminate  a Plan or Plans  shall be filed  under  Title IV of ERISA by the
     Parent,  any member of the Controlled Group, any plan  administrator or any
     combination  of the  foregoing  if the amount of  liability  involved is in
     excess of 10% of  Stockholders'  Equity as of the end of the Fiscal Quarter
     just ended; or the PBGC shall institute proceedings under Title IV of ERISA
     to terminate or to cause a trustee to be appointed to  administer  any such
     Plan or Plans or a  proceeding  shall be  instituted  by a fiduciary of any
     such Plan or Plans to enforce  Section 515 or  4219(c)(5) of ERISA and such
     proceeding  shall not have been dismissed  within 30 days thereafter if the
     amount of liability involved is in excess of 10% of Stockholders' Equity as
     of the end of the Fiscal Quarter just ended;  or a condition shall exist by
     reason of which the PBGC would be entitled to obtain a decree  adjudicating
     that any such Plan or Plans must be terminated,  if the amount  involved is
     in  excess  of 10% of  Stockholders'  Equity  as of the  end of the  Fiscal
     Quarter just ended.

          (j) A federal  tax lien  shall be filed  against  the  Parent,  either
     Originator  or Buyer  under  Section  6323 of the Tax Code or a lien of the
     PBGC shall be filed  against the Parent,  either  Originator or Buyer under
     Section   4068  of  ERISA  and  in  either  case  such  lien  shall  remain
     undischarged  for a  period  of 25 days  after  the date of  filing  if the
     aggregate amount involved is in excess of 10% of Stockholders' Equity as of
     the end of the Fiscal Quarter just ended.

     Section 5.2 Remedies.  Upon the occurrence and during the continuation of a
Termination Event, Buyer may take any of the following actions:  (i) declare the
Termination  Date  to  have  occurred,  whereupon  the  Termination  Date  shall
forthwith occur,  without demand,  protest or further notice of any kind, all of
which are hereby expressly waived by NSI Georgia;  provided,  however, that upon
the  occurrence of a Termination  Event  described in Section  5.1(d),  or of an
actual or deemed entry of an order for relief with respect to NSI Georgia  under
the Federal  Bankruptcy  Code, the Termination Date shall  automatically  occur,
without  demand,  protest  or any  notice of any kind,  all of which are  hereby
expressly  waived by NSI  Georgia and (ii) to the fullest  extent  permitted  by
applicable  law,  declare  that the Default Fee shall accrue with respect to any
amounts then due and owing by NSI Georgia to Buyer.  The  aforementioned  rights

                                                                         Page 88
                                                               Exhibit 10(i)A(3)

and remedies  shall be without  limitation and shall be in addition to all other
rights and remedies of Buyer and its assigns otherwise available under any other
provision of this Agreement, by operation of law, at equity or otherwise, all of
which are hereby expressly preserved,  including, without limitation, all rights
and remedies provided under the UCC, all of which rights shall be cumulative.

                                   ARTICLE VI
                                 INDEMNIFICATION

     Section 6.1 Indemnities by NSI Georgia.  Without  limiting any other rights
that Buyer may have hereunder or under applicable law, NSI Georgia hereby agrees
to  indemnify  (and  pay  upon  demand  to)  Buyer  and its  assigns,  officers,
directors,  agents and employees (each an "Indemnified  Party") from and against
any and all damages, losses, claims, taxes, liabilities, costs, expenses and for
all other amounts  payable,  including  actual and  reasonable  attorneys'  fees
(which attorneys may be employees of Buyer or any such assign) and disbursements
(all of the foregoing being collectively  referred to as "Indemnified  Amounts")
awarded  against or  actually  incurred  by any of them  arising  out of or as a
result of this Agreement or the acquisition,  either directly or indirectly,  by
Buyer of an interest in the Receivables, excluding, however:

          (a)  Indemnified  Amounts  to  the  extent  such  Indemnified  Amounts
     resulted  from gross  negligence  or willful  misconduct on the part of the
     Indemnified Party seeking  indemnification or by reason of such Indemnified
     Party's breach of its obligations hereunder or other legal duty;

          (b)  Indemnified  Amounts to the extent  the same  includes  losses in
     respect of Receivables that are uncollectible on account of the insolvency,
     bankruptcy or lack of creditworthiness of the related Obligor; or

          (c)  taxes  imposed  by the  jurisdiction  in which  such  Indemnified
     Party's  principal  executive  office is  located,  on or  measured  by the
     overall  net  income  of such  Indemnified  Party  to the  extent  that the
     computation  of such  taxes is  consistent  with the  characterization  for
     income  tax  purposes  of the  acquisition  by the  Lenders  of  Receivable
     Interests under the Credit and Security Agreement as a loan or loans by the
     Lenders to Buyer  secured by,  among other  things,  the  Receivables,  the
     Related Security and the Collections;

provided,  however,  that  nothing  contained in this  sentence  shall limit the
liability  of NSI  Georgia or limit the  recourse  of Buyer to NSI  Georgia  for
amounts  otherwise  specifically  provided to be paid by NSI  Georgia  under the
terms of this  Agreement.  Without  limiting  the  generality  of the  foregoing
indemnification, but subject in each case to clauses (a), (b) and (c) above, NSI
Georgia shall indemnify Buyer for Indemnified  Amounts  relating to or resulting
from:

               (i) any  representation  or warranty  made by NSI Georgia (or any
          officers of NSI  Georgia)  under or in  connection  with any  Purchase
          Report,  this Agreement,  any other Transaction  Document or any other
          information  or report  delivered  by NSI Georgia  pursuant  hereto or

                                                                         Page 89
                                                               Exhibit 10(i)A(3)

          thereto for which Buyer has not received a Purchase  Price Credit that
          shall have been false or incorrect when made or deemed made;

               (ii) the failure by NSI  Georgia,  to comply with any  applicable
          law,  rule or  regulation  with respect to any  Receivable or Contract
          related  thereto,  or the  nonconformity of any Receivable or Contract
          included  therein with any such  applicable law, rule or regulation or
          any failure of NSI Georgia to keep or perform any of its  obligations,
          express or implied, with respect to any Contract;

               (iii) any failure of NSI Georgia to perform its duties, covenants
          or  other  obligations  in  accordance  with  the  provisions  of this
          Agreement or any other Transaction Document;

               (iv) any products  liability,  personal injury or damage, suit or
          other similar claim arising out of or in connection with  merchandise,
          insurance  or  services  that are the  subject of any  Contract or any
          Receivable;

               (v) any dispute,  claim,  offset or defense (other than discharge
          in  bankruptcy  of the  Obligor)  of the Obligor to the payment of any
          Receivable  (including,  without  limitation,  a defense based on such
          Receivable  or the  related  Contract  not  being a legal,  valid  and
          binding  obligation  of  such  Obligor   enforceable   against  it  in
          accordance with its terms), or any other claim resulting from the sale
          of the  merchandise  or  service  related  to such  Receivable  or the
          furnishing or failure to furnish such merchandise or services;

               (vi) the  commingling  of  Collections of Receivables at any time
          with other funds;

               (vii) any  investigation,  litigation or proceeding related to or
          arising from this  Agreement or any other  Transaction  Document,  the
          transactions  contemplated  hereby,  the  use of the  proceeds  of any
          Purchase  hereunder,  the  ownership of the  Receivables  or any other
          investigation,  litigation  or  proceeding  relating to NSI Georgia in
          which any Indemnified Party becomes involved as a result of any of the
          transactions  contemplated  hereby  except to the extent  arising from
          Buyer's own gross negligence or willful misconduct;

               (viii) any inability to litigate any claim against any Obligor in
          respect of any  Receivable  as a result of such  Obligor  being immune
          from civil and  commercial  law and suit on the grounds of sovereignty
          or otherwise from any legal action, suit or proceeding;

               (ix) any Termination Event described in Section 5.1(d);

               (x) any failure of NSI Georgia to acquire and maintain  legal and
          equitable  title to, and ownership of any  Receivable  and the Related
          Security and Collections  with respect  thereto from NSI  Enterprises,
          free and clear of any Adverse Claim (other than as created hereunder);

                                                                         Page 90
                                                               Exhibit 10(i)A(3)

          or any failure of NSI Georgia to give reasonably  equivalent  value to
          NSI Enterprises  under the First-Step Sale Agreement in  consideration
          of the transfer by NSI Enterprises of any  Receivable,  or any attempt
          by any Person to void such  transfer  under  statutory  provisions  or
          common law or equitable action;

               (xi) any  failure  to vest and  maintain  vested in Buyer,  or to
          transfer to Buyer, legal and equitable title to, and ownership of, the
          Receivables and the Collections, and all of NSI Georgia's right, title
          and interest in the Related Security  associated with the Receivables,
          in each case, free and clear of any Adverse Claim;

               (xii)  the  failure  to  have  filed,  or any  delay  in  filing,
          financing  statements or other similar  instruments or documents under
          the UCC of any applicable  jurisdiction or other  applicable laws with
          respect to any Receivable,  the Related  Security and Collections with
          respect thereto, and the proceeds of any thereof,  whether at the time
          of any Purchase or at any subsequent time;

               (xiii) any action or  omission by NSI  Georgia  which  reduces or
          impairs  the rights of Buyer with  respect  to any  Receivable  or the
          value  of  any  such   Receivable  (for  any  reason  other  than  the
          application of Collections  thereto or charge-off of any Receivable as
          uncollectible)  unless the Buyer has received a Purchase  Price Credit
          therefor;

               (xiv) any  attempt by any Person to void any  Purchase  hereunder
          under statutory provisions or common law or equitable action; and

               (xvi) the  failure of any  Receivable  reflected  as an  Eligible
          Receivable on any Purchase Report to be an Eligible  Receivable at the
          time acquired by Buyer.

     Section 6.2 Other  Costs and  Expenses.  NSI Georgia  shall pay to Buyer on
demand all reasonable  costs and  out-of-pocket  expenses  actually  incurred in
connection with the preparation,  execution, delivery and administration of this
Agreement,  the transactions  contemplated  hereby and the other documents to be
delivered  hereunder.  NSI  Georgia  shall  pay to Buyer on  demand  any and all
reasonable  costs and expenses of Buyer, if any,  including  reasonable  counsel
fees and expenses  actually  incurred in connection with the enforcement of this
Agreement and the other documents delivered hereunder and in connection with any
restructuring   or  workout  of  this  Agreement  or  such  documents,   or  the
administration of this Agreement following a Termination Event.

                                  ARTICLE VII
                                  MISCELLANEOUS

     Section 7.1 Waivers and Amendments.

          (a) No  failure  or delay on the part of Buyer (or the  Agent,  as its
     assignee) in  exercising  any power,  right or remedy under this  Agreement
     shall operate as a waiver thereof, nor shall any single or partial exercise
     of any such power,  right or remedy  preclude  any other  further  exercise

                                                                         Page 91
                                                               Exhibit 10(i)A(3)

     thereof or the exercise of any other power, right or remedy. The rights and
     remedies herein provided shall be cumulative and nonexclusive of any rights
     or  remedies  provided  by law.  Any  waiver  of this  Agreement  shall  be
     effective  only in the specific  instance and for the specific  purpose for
     which given.

          (b) No  provision  of this  Agreement  may be  amended,  supplemented,
     modified or waived  except in writing  signed by NSI Georgia and Buyer and,
     to the extent required under the Credit and Security  Agreement,  the Agent
     and the  Liquidity  Banks or the  Required  Liquidity  Banks.  Any material
     amendment, supplement, modification of waiver will required satisfaction of
     the Rating Agency Condition.

     Section 7.2 Notices.  All communications and notices provided for hereunder
shall be in writing  (including  bank wire,  telecopy  or  electronic  facsimile
transmission or similar  writing) and shall be given to the other parties hereto
at their  respective  addresses or telecopy  numbers set forth on the  signature
pages  hereof or at such other  address or  telecopy  number as such  Person may
hereafter specify for the purpose of notice to each of the other parties hereto.
Each  such  notice or other  communication  shall be  effective  (a) if given by
telecopy,  upon the receipt  thereof,  (b) if given by mail,  three (3) Business
Days after the time such communication is deposited in the mail with first class
postage prepaid or (c) if given by any other means, when received at the address
specified in this Section 7.2.

     Section 7.3 Protection of Ownership Interests of Buyer.

          (a) NSI Georgia agrees that from time to time, at its expense, it will
     promptly  execute and deliver all instruments  and documents,  and take all
     actions,  that may be necessary or desirable,  or that Buyer (or the Agent,
     as its assignee) may reasonably request, to perfect,  protect or more fully
     evidence the interest of Buyer hereunder and the Receivable  Interests,  or
     to enable  Buyer (or the Agent,  as its  assignee)  to exercise and enforce
     their rights and remedies  hereunder.  At any time when a Termination Event
     Exists,  Buyer (or the Agent,  as its assignee)  may, at NSI Georgia's sole
     cost and expense,  direct NSI Georgia to notify the Obligors of Receivables
     of the  ownership  interests  of Buyer  under this  Agreement  and may also
     direct that payments of all amounts due or that become due under any or all
     Receivables be made directly to Buyer or its designee.

          (b) If NSI Georgia fails to perform any of its obligations  hereunder,
     Buyer (or the Agent,  as its  assignee)  may (but shall not be required to)
     perform,  or cause performance of, such  obligations,  and Buyer's (or such
     assigns') actual and reasonable  costs and expenses  incurred in connection
     therewith  shall be payable by NSI Georgia as provided in Section  6.2. NSI
     Georgia irrevocably authorizes Buyer (and its assigns) at any time and from
     time to  time in the  sole  discretion  of  Buyer  (or  the  Agent,  as its
     assignee),    and    appoints    Buyer   (and   its    assigns)    as   its
     attorney(ies)-in-fact,  to act on behalf of NSI  Georgia  (i) to execute on

                                                                         Page 92
                                                               Exhibit 10(i)A(3)

     behalf of NSI Georgia as debtor and to file financing  statements necessary
     or desirable in Buyer's (or the Agent, as its assignee') reasonable opinion
     to perfect and to maintain the  perfection  and priority of the interest of
     Buyer in the  Receivables and associated  Related  Security and Collections
     and  (ii) to file a  carbon,  photographic  or other  reproduction  of this
     Agreement or any financing  statement with respect to the  Receivables as a
     financing  statement  in  such  offices  as  Buyer  (or the  Agent,  as its
     assignee)  in their  reasonable  opinion  deem  necessary  or  desirable to
     perfect and to maintain the perfection and priority of Buyer's interests in
     the  Receivables.  This  appointment  is coupled  with an  interest  and is
     irrevocable. From and after July 1, 2001: (A) NSI Georgia hereby authorizes
     Buyer (and the Agent,  as its assignee) to file  financing  statements  and
     other filing or recording  documents  with respect to the  Receivables  and
     Related  Security  (including any amendments  thereto,  or  continuation or
     termination   statements   thereof),   without  the   signature   or  other
     authorization of NSI Georgia, in such form and in such offices as Buyer (or
     any of  its  assigns)  reasonably  determines  appropriate  to  perfect  or
     maintain the  perfection  of the  ownership or security  interests of Buyer
     (and the Agent, as its assignee)  hereunder,  (B) NSI Georgia  acknowledges
     and  agrees  that it is not  authorized  to, and will not,  file  financing
     statements  or other  filing or  recording  documents  with  respect to the
     Receivables  or Related  Security  (including any  amendments  thereto,  or
     continuation or termination statements thereof),  without the express prior
     written approval by the Agent (as Buyer's assignee), consenting to the form
     and  substance  of such filing or recording  document,  and (C) NSI Georgia
     approves,  authorizes and ratifies any filings or recordings  made by or on
     behalf of the Agent (as Buyer's  assign) in connection  with the perfection
     of the  ownership or security  interests in favor of Buyer or the Agent (as
     Buyer's assign).

     Section 7.4  Confidentiality  of Fee Letter.  Each of NSI Georgia and Buyer
shall maintain and shall cause each of its  employees,  officers and advisers to
maintain  the  confidentiality  of the Fee  Letter,  except  that  Buyer and its
officers  and  employees  may  disclose  such  information  to Buyer's  external
consultants,  accountants  and attorneys and as required by any applicable  law,
rule, regulation, direction, request or order of any judicial, administrative or
regulatory  authority or proceedings  (whether or not having the force or effect
of law) or to the extent  necessary to enforce its rights under the  Transaction
Documents.

     Section 7.5 Bankruptcy Petition.

          (a) NSI Georgia and Buyer each hereby covenants and agrees that, prior
     to the date that is one year and one day after the  payment  in full of all
     outstanding  senior  indebtedness  of Blue  Ridge,  it will  not  institute
     against,  or join any other Person in instituting  against,  Blue Ridge any
     bankruptcy,   reorganization,   arrangement,   insolvency  or   liquidation
     proceedings or other similar proceeding under the laws of the United States
     or any state of the United States.

          (b) NSI Georgia  covenants and agrees that,  prior to the date that is
     one  year  and one  day  after  the  payment  in  full  of all  outstanding
     obligations of Buyer under the Credit and Security  Agreement,  it will not
     institute against, or join any other Person in instituting  against,  Buyer

                                                                         Page 93
                                                               Exhibit 10(i)A(3)

     any  bankruptcy,  reorganization,  arrangement,  insolvency or  liquidation
     proceedings or other similar proceeding under the laws of the United States
     or any state of the United States.

     Section 7.6  Limitation  of  Liability.  Except  with  respect to any claim
arising out of the willful  misconduct or gross  negligence  of Blue Ridge,  the
Agent or any  Liquidity  Bank,  no claim may be made by NSI Georgia or any other
Person against Blue Ridge,  the Agent or any Liquidity Bank or their  respective
Affiliates, directors, officers, employees, attorneys or agents for any special,
indirect,  consequential  or punitive damages in respect of any claim for breach
of contract or any other  theory of  liability  arising out of or related to the
transactions  contemplated  by this  Agreement,  or any act,  omission  or event
occurring in connection therewith;  and NSI Georgia hereby waives, releases, and
agrees not to sue upon any claim for any such  damages,  whether or not  accrued
and whether or not known or suspected to exist in its favor.

     Section 7.7 CHOICE OF LAW.  THIS  AGREEMENT  SHALL BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF GEORGIA  WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER
JURISDICTION   GOVERN  THE   PERFECTION,   OR  THE  EFFECT  OF   PERFECTION   OR
NONPERFECTION,  OF THE OWNERSHIP  INTERESTS OR SECURITY INTERESTS OF NSI GEORGIA
OR ANY OF ITS ASSIGNS.

     Section 7.8 CONSENT TO  JURISDICTION.  EACH OF NSI GEORGIA AND BUYER HEREBY
IRREVOCABLY  SUBMITS TO THE  NON-EXCLUSIVE  JURISDICTION  OF ANY  UNITED  STATES
FEDERAL OR GEORGIA STATE COURT SITTING IN FULTON  COUNTY,  GEORGIA IN ANY ACTION
OR  PROCEEDING  ARISING  OUT OF OR  RELATING  TO  THIS  AGREEMENT  OR ANY  OTHER
TRANSACTION DOCUMENT AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH  ACTION OR  PROCEEDING  MAY BE HEARD AND  DETERMINED  IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT,  ACTION OR PROCEEDING  BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF BUYER (OR THE
AGENT,  AS ITS ASSIGNEE) TO BRING  PROCEEDINGS  AGAINST NSI  ENTERPRISES  IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY NSI GEORGIA AGAINST
BUYER  (OR  ITS  ASSIGNS)  OR  ANY  AFFILIATE  THEREOF  INVOLVING,  DIRECTLY  OR
INDIRECTLY,  ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS  AGREEMENT  OR ANY  DOCUMENT  EXECUTED  BY NSI  GEORGIA  PURSUANT  TO  THIS
AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN FULTON COUNTY, GEORGIA.

     Section  7.9 WAIVER OF JURY  TRIAL.  TO THE  MAXIMUM  EXTENT  PERMITTED  BY
APPLICABLE  LAW,  EACH PARTY HERETO  HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING  INVOLVING,  DIRECTLY OR INDIRECTLY,  ANY MATTER (WHETHER SOUNDING IN

                                                                         Page 94
                                                               Exhibit 10(i)A(3)

TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS  AGREEMENT,  ANY  DOCUMENT  EXECUTED BY NSI  GEORGIA  PURSUANT TO THIS
AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

     Section 7.10 Integration; Binding Effect; Survival of Terms.

          (a) This  Agreement and each other  Transaction  Document  contain the
     final and  complete  integration  of all prior  expressions  by the parties
     hereto with respect to the subject  matter hereof and shall  constitute the
     entire  agreement  among the  parties  hereto  with  respect to the subject
     matter hereof superseding all prior oral or written understandings.

          (b) This  Agreement  shall be binding upon and inure to the benefit of
     NSI Georgia,  Buyer and their respective  successors and permitted  assigns
     (including  any trustee in  bankruptcy).  NSI Georgia may not assign any of
     its rights and  obligations  hereunder or any interest  herein  without the
     prior written consent of Buyer. Buyer may assign at any time its rights and
     obligations  hereunder and interests herein to any other Person without the
     consent  of NSI  Georgia.  Without  limiting  the  foregoing,  NSI  Georgia
     acknowledges that Buyer, pursuant to the Credit and Security Agreement, may
     assign to the Agent, for the benefit of the Lenders, its rights,  remedies,
     powers and privileges  hereunder and that the Agent may further assign such
     rights,  remedies,  powers and  privileges  to the extent  permitted in the
     Credit and Security  Agreement.  NSI Georgia agrees that the Agent,  as the
     assignee of Buyer,  shall,  subject to the terms of the Credit and Security
     Agreement,  have the  right  to  enforce  this  Agreement  and to  exercise
     directly  all  of  Buyer's   rights  and  remedies   under  this  Agreement
     (including,  without limitation, the right to give or withhold any consents
     or  approvals of Buyer to be given or withheld  hereunder)  and NSI Georgia
     agrees to cooperate fully with the Agent in the exercise of such rights and
     remedies.  This  Agreement  shall  create  and  constitute  the  continuing
     obligations  of the parties  hereto in accordance  with its terms and shall
     remain in full force and effect until  terminated  in  accordance  with its
     terms; provided,  however, that the rights and remedies with respect to (i)
     any breach of any  representation and warranty made by NSI Georgia pursuant
     to Article II; (ii) the  indemnification  and payment provisions of Article
     VI;  and (iii)  Section  7.5 shall be  continuing  and  shall  survive  any
     termination of this Agreement.

     Section 7.11 Counterparts; Severability; Section References. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate  counterparts,  each of which when so executed shall be deemed to be an
original and all of which when taken together shall  constitute one and the same
Agreement.   Any   provisions  of  this   Agreement   which  are  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the

                                                                         Page 95
                                                               Exhibit 10(i)A(3)

remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.  Unless otherwise expressly indicated, all references herein
to  "Article,"  "Section,"  "Schedule"  or  "Exhibit"  shall mean  articles  and
sections of, and schedules and exhibits to, this Agreement.



                            {signature pages follow}


                                                                         Page 96
                                                               Exhibit 10(i)A(3)



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.

                    National Service Industries, Inc., A GEORGIA CORPORATION


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

                    Address:
                    National Service Industries, Inc.
                    NSI Center
                    1420 Peachtree Street
                    Atlanta, Georgia  30309

                    Attention: Treasurer

                    Fax No.:          (404) 853-1330
                    Telephone No.:    (404) 853-1368



                    NSI Funding, Inc., A DELAWARE CORPORATION


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

                    Address:
                    NSI Funding, Inc.
                    NSI Center
                    1420 Peachtree Street, Suite 832
                    Atlanta, Georgia  30309

                    Attention:  General Counsel

                    Phone:   (404) 853-1440
                    Fax:     (404) 853-1015



                                                                         Page 97
                                                               Exhibit 10(i)A(3)



                                    Exhibit I

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

     This is Exhibit I to the Agreement (as hereinafter defined). As used in the
Agreement and the Exhibits and  Schedules  thereto,  capitalized  terms have the
meanings set forth in this Exhibit I (such meanings to be equally  applicable to
the singular and plural forms  thereof).  If a  capitalized  term is used in the
Agreement,  or any Exhibit or Schedule  thereto,  and is not  otherwise  defined
therein or in this Exhibit I, such term shall have the meaning  assigned thereto
in Exhibit I to the Credit and Security Agreement (hereinafter defined).

          "Additional Receivable" has the meaning set forth in Section 1.2(a) of
     the Agreement.

          "Agent" has the meaning set forth in the Preliminary Statements to the
     Agreement.

          "Agreement"  means the Receivables  Sale and  Contribution  Agreement,
     dated as of April 27, 2001,  between NSI Georgia and Buyer, as the same may
     be amended, restated or otherwise modified.

          "Blue Ridge" has the meaning set forth in the  Preliminary  Statements
     to the Agreement.

          "Buyer" has the meaning set forth in the preamble to the Agreement.

          "Capital  Leases" means leases which are required to be capitalized in
     accordance with GAAP.

          "Change of Control"  means (a) the Parent  ceases to own,  directly or
     indirectly, 100% of the outstanding voting stock of each of the Originators
     and Buyer,  or (b) (i) any Person or two or more Persons  acting in concert
     shall have acquired after the Closing Date beneficial ownership (within the
     meaning of Rule 13d-3 of the Securities and Exchange  Commission  under the
     Securities  Exchange Act of 1934) of 30% or more of the outstanding  shares
     of the voting stock of the Parent;  or (ii) the individuals  who, as of the
     Closing Date, are members of the Board of the Parent (the "Incumbent Board"
     ) cease for any reason  thereafter  to  constitute  at least 66-2/3% of the
     Board of the Parent; provided, however, that if the election, or nomination
     for election by the Parent's stockholders, of any new director was approved
     by a vote of at least  66-2/3% of the  Incumbent  Board,  such new director
     shall,  for purposes of this  definition,  be considered as a member of the
     Incumbent Board.

          "Consolidated  Debt"  means at any date the Debt of the Parent and its
     Consolidated  Subsidiaries,  determined on a consolidated  basis as of such
     date.

          "Consolidated  Operating Profits" means, for any period, the Operating
     Profits of the Parent and its Consolidated Subsidiaries.

                                                                         Page 98
                                                               Exhibit 10(i)A(3)


          "Consolidated  Subsidiary"  means at any date any  Subsidiary or other
     entity  the  accounts  of  which,  in  accordance   with  GAAP,   would  be
     consolidated  with  those  of  the  Parent  in its  consolidated  financial
     statements as of such date.

          "Consolidated  Total Assets"  means,  at any time, the total assets of
     the Parent and its Consolidated Subsidiaries,  determined on a consolidated
     basis,  as set forth or reflected on the most recent  consolidated  balance
     sheet  of  the  Parent  and  its  Consolidated  Subsidiaries,  prepared  in
     accordance with GAAP.

          "Contract"  means,  with  respect  to  any  Receivable,  any  and  all
     instruments,  agreements, invoices or other writings pursuant to which such
     Receivable arises or which evidences such Receivable.

          "Controlled  Group"  means  all  members  of  a  controlled  group  of
     corporations  and all trades or  businesses  (whether or not  incorporated)
     under common  control  which,  together  with the Parent,  are treated as a
     single employer under Section 414 of the Tax Code.

          "Credit  and  Collection   Policy"  means  NSI  Georgia's  credit  and
     collection  policies and practices  relating to Contracts  and  Receivables
     existing on the date hereof and  summarized  in Exhibit V, as modified from
     time to time in accordance with the Agreement.

          "Credit  and  Security  Agreement"  has the  meaning  set forth in the
     Preliminary Statements to the Agreement.

          "Debt" of any Person means at any date, without  duplication,  (i) all
     obligations of such Person for borrowed money, (ii) all obligations of such
     Person evidenced by bonds, debentures,  notes or other similar instruments,
     (iii) all obligations of such Person to pay the deferred  purchase price of
     property or services, except trade accounts payable arising in the ordinary
     course of  business,  (iv) all  obligations  of such Person as lessee under
     Capital Leases, (v) all obligations of such Person to reimburse any bank or
     other  Person in respect of amounts  payable  under a banker's  acceptance,
     (vi) all  Redeemable  Preferred  Stock of such  Person  (in the event  such
     Person is a corporation), (vii) all obligations of such Person to reimburse
     any bank or other  Person in respect of amounts  paid or to be paid under a
     letter of credit or similar  instrument,  (viii) all Debt of others secured
     by a Lien on any asset of such Person,  whether or not such Debt is assumed
     by such Person, and (ix) all Debt of others Guaranteed by such Person.

          "Default  Fee" means a per annum rate of interest  equal to the sum of
     (i) the Prime Rate, plus (ii) 2% per annum.

          "Discount Factor" means a percentage  calculated to provide Buyer with
     a  reasonable  profit on its  investment  in the  Receivables  after taking
     account of (i) the time value of money based upon the anticipated  dates of
     collection  of the  Receivables  and the  cost to Buyer  of  financing  its
     investment  in the  Receivables  during  such  period,  (ii)  the  risk  of
     nonpayment by the Obligors,  and (iii) the cost of compensating  someone to
     service  and  collect  the  Receivables  for Buyer and the Agent,  as their
     interests may appear.  NSI Georgia and Buyer may agree from time to time to
     change  the  Discount  Factor  based on changes in one or more of the items
     affecting the calculation thereof, provided that any change to the Discount

                                                                         Page 99
                                                               Exhibit 10(i)A(3)

     Factor  shall take effect as of the  commencement  of a month,  shall apply
     only  prospectively  and shall not affect the Purchase  Price  payment made
     prior to the month  during  which NSI  Georgia and Buyer agree to make such
     change.

          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
     amended  from time to time,  or any  successor  law.  Any  reference to any
     provision of ERISA shall also be deemed to be a reference to any  successor
     provision or provisions thereof.

          "Executive   Officer"  means  any  of  the  chief  executive  officer,
     president, executive vice president or senior vice president of the Parent.

          "Existing  Receivables"  means  all  Receivables  existing  as of  the
     Initial Cutoff Date.

          "Fiscal Quarter" means any fiscal quarter of the Parent.

          "Fiscal Year" means any fiscal year of the Parent.

          "First-Step  Sale  Agreement"  means  that  certain  Receivables  Sale
     Agreement  dated as of May 2, 2001 between NSI Enterprises and NSI Georgia,
     as amended, supplemented or restated from time to time.

          "GAAP" means generally  accepted  accounting  principles  applied on a
     basis consistent with those which are to be used in making the calculations
     for purposes of determining compliance with the terms of this Agreement.

          "Guarantee"  by  any  Person  means  any  obligation,   contingent  or
     otherwise,  of such Person directly or indirectly  guaranteeing any Debt or
     other  obligation of any other Person and,  without limiting the generality
     of the  foregoing,  any  obligation,  direct  or  indirect,  contingent  or
     otherwise,  of such  Person (i) to secure,  purchase  or pay (or advance or
     supply funds for the purchase or payment of) such Debt or other  obligation
     (whether  arising by virtue of  partnership  arrangements,  by agreement to
     keep-well,  to purchase assets,  goods,  securities or services, to provide
     collateral  security,  to take-or-pay,  or to maintain financial  statement
     conditions  or  otherwise) or (ii) entered into for the purpose of assuring
     in any other  manner the  obligee of such Debt or other  obligation  of the
     payment  thereof or to protect such obligee against loss in respect thereof
     (in whole or in part),  provided that the term Guarantee  shall not include
     endorsements  for collection or deposit in the ordinary course of business.
     The term "Guarantee" used as a verb has a corresponding meaning.

          "Initial Contributed Receivables" has the meaning set forth in Section
     1.1 of this Agreement.

          "Initial Cutoff Date" means the Business Day immediately  prior to the
     date of this Agreement.

                                                                        Page 100
                                                               Exhibit 10(i)A(3)


          "Lien" means, with respect to any asset, any mortgage,  deed to secure
     debt, deed of trust, lien,  pledge,  charge,  security  interest,  security
     title,   preferential   arrangement  which  has  the  practical  effect  of
     constituting  a  security  interest  or  encumbrance,   or  encumbrance  or
     servitude of any kind in respect of such asset to secure or assure  payment
     of a Debt or a Guarantee,  whether by consensual  agreement or by operation
     of statute or other law, or by any agreement,  contingent or otherwise,  to
     provide any of the foregoing.  For the purposes of this Agreement, a Person
     shall be deemed to own subject to a Lien any asset which it has acquired or
     holds  subject to the interest of a vendor or lessor under any  conditional
     sale agreement,  Capital Lease or other title retention  agreement relating
     to such asset.

          "Material  Adverse Effect" means a material  adverse effect on (i) the
     financial condition or operations of the Parent and its Subsidiaries (taken
     as a whole),  (ii) the ability of NSI  Georgia to perform  its  obligations
     under the Agreement or any other Transaction Document,  (iii) the legality,
     validity  or  enforceability  of the  Agreement  or any  other  Transaction
     Document, (iv) NSI Georgia's, Buyer's, the Agent's or any Lender's interest
     in  the  Receivables  generally  or  in  any  significant  portion  of  the
     Receivables,  the Related Security or Collections with respect thereto,  or
     (v) the  collectibility  of the  Receivables  generally  or of any material
     portion of the Receivables.

          "Material  Subsidiary"  means (i) each  Originator  and Buyer and (ii)
     each other Consolidated Subsidiary, now existing or hereinafter established
     or acquired, that at any time prior to the payment in full of all Aggregate
     Unpaids under the Credit and Security  Agreement either (x) has or acquires
     total  assets in excess of 10% of  Consolidated  Total Assets at the end of
     the  most  recent  Fiscal  Quarter,  or (y)  contributed  more  than 10% of
     Consolidated  Operating  Profits for the 4 most recent Fiscal Quarters then
     ended (or, with respect to any Subsidiary which existed during the entire 4
     Fiscal  Quarter  period but was acquired by the Parent  during such period,
     which  would  have  contributed  more  than 10% of  Consolidated  Operating
     Profits for such period had it been a Subsidiary for the entire period,  as
     determined on a pro forma basis in accordance with GAAP).

          "Moody's" means Moody's Investor Service, Inc.

          "Multiemployer  Plan"  shall  have the  meaning  set forth in  Section
     4001(a)(3) of ERISA.

          "Net  Income"  means,  as applied to any  Person for any  period,  the
     aggregate  amount  of net  income of such  Person,  after  taxes,  for such
     period, as determined in accordance with GAAP.

          "Net Worth" means as of the last Business Day of each month  preceding
     any  date  of  determination,  the  excess,  if any,  of (a) the  aggregate
     Outstanding  Balance of the  Receivables at such time,  over (b) the sum of
     (i) the Aggregate  Invested Amount  outstanding at such time, plus (ii) the
     aggregate  outstanding  principal balance of the Subordinated Loans at such
     time  (including any  Subordinated  Loan proposed to be made on the date of
     determination).

                                                                        Page 101
                                                               Exhibit 10(i)A(3)


          "NSI   Enterprises"   means  NSI   Enterprises,   Inc.,  a  California
     corporation, and its successors and permitted assigns.

          "NSI  Georgia"  has the  meaning  set  forth  in the  preamble  to the
     Agreement,  and such  term  shall  include  such  Person's  successors  and
     permitted assigns.

          "Operating  Profits"  means,  as applied to any Person for any period,
     the sum of (i) net  revenues,  less (ii) cost of goods and  services  sold,
     less (iii) operating expenses (including  depreciation and amortization) of
     such Person for such period, as determined in accordance with GAAP.

          "Organizational  Documents"  means, for any Person,  the documents for
     its formation and organization,  which, for example,  (a) for a corporation
     are  its  corporate  charter  and  bylaws,  (b) for a  partnership  are its
     certificate of partnership (if applicable) and partnership  agreement,  (c)
     for a  limited  liability  company  are its  certificate  of  formation  or
     organization and its operating  agreement,  regulations or the like and (d)
     for a trust is the trust  agreement,  declaration  of trust,  indenture  or
     bylaws under which it is created.

          "Original  Balance" means,  with respect to any Receivable coming into
     existence  after the Initial Cutoff Date, the  Outstanding  Balance of such
     Receivable on the date it was created.

          "Originator" means NSI Enterprises in its capacity as the seller under
     the First-Step  Sale Agreement or NSI Georgia in its capacity as the seller
     under this Agreement.

          "Outstanding  Balance"  of any  Receivable  at any time means the then
     outstanding principal balance thereof.

          "Parent"  means  National   Service   Industries,   Inc.,  a  Delaware
     corporation, and its successors and permitted assigns.

          "PBGC" means the Pension  Benefit  Guaranty  Corporation or any entity
     succeeding to any or all of its functions under ERISA.

          "Permitted Encumbrances" shall mean the following: (a) Liens for taxes
     or assessments or other governmental  charges not yet due and payable;  and
     (b) Liens created by the Transaction Documents.

          "Person" means an individual, a corporation,  a partnership, a limited
     liability  company,  an  unincorporated  association,  a trust or any other
     entity or  organization,  including,  but not limited to, a  government  or
     political subdivision or an agency or instrumentality thereof.

          "Plan"  means at any time an employee  pension  benefit  plan which is
     covered by Title IV of ERISA or subject to the  minimum  funding  standards
     under Section 412 of the Tax Code and is either (i)  maintained by a member
     of the Controlled Group for employees of any member of the Controlled Group
     or (ii)  maintained  pursuant to a collective  bargaining  agreement or any

                                                                        Page 102
                                                               Exhibit 10(i)A(3)

     other  arrangement  under which more than one employer makes  contributions
     and to which a member of the Controlled Group is then making or accruing an
     obligation to make  contributions  or has within the preceding 5 plan years
     made contributions.

          "Proprietary  Information" means all information about the Performance
     Guarantor or any of its Subsidiaries  which has been furnished to the Agent
     or any Lender by or on behalf of the  Performance  Guarantor  or any of its
     Subsidiaries  before or after the date  hereof or which is  obtained by any
     Lender or the Agent in the course of any Review  made  pursuant  to Section
     7.1(d) of the Credit and Security Agreement;  provided,  however,  that the
     term "Proprietary Information" does not include information which (x) is or
     becomes  publicly  available (other than as a result of a breach of Section
     14.5  of  the  Credit  and  Security  Agreement),  (y) is  possessed  by or
     available to the Agent or any Lender on a  non-confidential  basis prior to
     its disclosure to the Agent or such Lender by Borrower or Subsidiary or (z)
     becomes  available to the Agent or any Lender on a  non-confidential  basis
     from a Person which,  to the knowledge of the Agent or such Lender,  as the
     case  may  be,  is  not  bound  by a  confidentiality  agreement  with  the
     Performance  Guarantor  or  any of its  Subsidiaries  and is not  otherwise
     prohibited from  transmitting such information to the Agent or such Lender.
     In  the  event  the  Agent  or any  Lender  is  required  to  disclose  any
     Proprietary  Information  by virtue of clause  (ii) (but only if and to the
     extent such disclosure has not been sought by the Agent or any Lender,  and
     if  neither  the  Performance  Guarantor  nor  Borrower  is a party to such
     litigation),  (iv) or (v) above, to the extent such Lender or the Agent (as
     the case may be)  determines in good faith that it is permissible by law so
     to do, it shall promptly notify the Performance  Guarantor of same so as to
     allow the  Performance  Guarantor or its  Subsidiaries to seek a protective
     order or to take other appropriate action;  provided,  however, neither any
     Lender  nor the  Agent  shall  be  required  to delay  compliance  with any
     directive to disclose any such  information so as to allow the  Performance
     Guarantor or any of Subsidiaries to effect any such action.

          "Purchase"  means  a  purchase  pursuant  to  Section  1.2(a)  of  the
     Agreement  by Buyer from NSI  Georgia  of  Additional  Receivables  and the
     Related Security and Collections related thereto, together with all related
     rights in connection therewith.

          "Purchase  Price" means,  with respect to the Purchase,  the aggregate
     price to be paid by Buyer to NSI  Georgia for such  Purchase in  accordance
     with Section 1.3 of the  Agreement  for the  Receivables,  Collections  and
     Related  Security being sold to Buyer,  which price shall equal on any date
     (i) the product of (x) the Outstanding  Balance of such Receivables on such
     date,  multiplied  by (y) one minus the  Discount  Factor in effect on such
     date,  minus (ii) any  Purchase  Price  Credits to be credited  against the
     Purchase  Price  otherwise  payable in  accordance  with Section 1.4 of the
     Agreement.

          "Purchase  Price  Credit"  has the meaning set forth in Section 1.4 of
     the Agreement.

          "Purchase  Report" has the meaning set forth in Section  1.2(b) of the
     Agreement.

          "Receivable"  means (a) any  "Receivable"  under and as defined in the
     First-Step  Sale  Agreement  which is conveyed to NSI Georgia in accordance
     with the terms thereof,  or (b) all indebtedness and other obligations owed

                                                                        Page 103
                                                               Exhibit 10(i)A(3)


     to NSI Georgia  (at the times it arises,  and before  giving  effect to any
     transfer or conveyance under the Agreement), including, without limitation,
     any indebtedness,  obligation or interest constituting an account,  chattel
     paper,  instrument or general  intangible,  arising in connection  with the
     sale  of  goods  or the  rendering  of  services  by  any of NSI  Georgia's
     "Lithonia  Lighting"  and "NSI  Chemicals  Group"  divisions,  and  further
     includes,  without  limitation,  the obligation to pay any Finance  Charges
     with  respect  thereto  (except that for  purposes of this  definition  NSI
     Georgia's "Selig  Chemical"  operations shall not be considered part of its
     "NSI  Chemical  Group"  division  unless and until (i) the  Obligors on the
     Receivables  originated by NSI Georgia's  "Selig  Chemical"  operations are
     instructed  to pay  all  Collections  on  such  Receivables  directly  to a
     Lock-Box or  Collection  Account in accordance  with Section  8.2(b) of the
     Credit and Security Agreement and (ii) the Agent has expressly consented in
     writing to such operations  becoming a part of the "NSI Chemical Group" for
     purposes of this definition). Indebtedness and other rights and obligations
     arising  from  any  one   transaction,   including,   without   limitation,
     indebtedness and other rights and obligations  represented by an individual
     invoice,   shall  constitute  a  Receivable   separate  from  a  Receivable
     consisting of the  indebtedness  and other rights and  obligations  arising
     from any  other  transaction;  provided,  further,  that any  indebtedness,
     rights or obligations  referred to in the  immediately  preceding  sentence
     shall be a  Receivable  regardless  or whether  the  Obligor or NSI Georgia
     treats  such  indebtedness,  rights or  obligations  as a separate  payment
     obligation.

          "Records"  means,  with respect to any  Receivable,  all Contracts and
     other documents,  books, records and other information (including,  without
     limitation,  computer programs,  tapes, disks, punch cards, data processing
     software and related property and rights) relating to such Receivable,  any
     Related Security therefor and the related Obligor.

          "Redeemable  Preferred  Stock" of any Person means any preferred stock
     issued by such Person  which is at any time prior to the  Termination  Date
     either (i)  mandatorily  redeemable  (by  required  sinking fund or similar
     payments  or  otherwise)  or (ii)  redeemable  at the  option of the holder
     thereof.

          "Related Security" means, with respect to any Receivable:

               (i) all of the applicable  Originator's interest in the inventory
          and goods (including  returned or repossessed  inventory or goods), if
          any,  the  sale,  financing  or  lease  of  which  by  the  applicable
          Originator gave rise to such Receivable,  and all insurance  contracts
          with respect thereto,

               (ii) all other security  interests or liens and property  subject
          thereto from time to time,  if any,  purporting  to secure  payment of
          such  Receivable,  whether  pursuant to the  Contract  related to such
          Receivable or otherwise,  together with all financing  statements  and
          security   agreements   describing   any   collateral   securing  such
          Receivable,

               (iii) all  guaranties,  letters  of credit,  insurance  and other
          agreements or  arrangements  of whatever  character  from time to time
          supporting or securing payment of such Receivable  whether pursuant to

                                                                        Page 104
                                                               Exhibit 10(i)A(3)

          the Contract related to such Receivable or otherwise,

               (iv) all service  contracts and other  contracts  and  agreements
          associated with such Receivable,

               (v) all Records related to such Receivable,

               (vi) all of NSI  Georgia's  right,  title  and  interest  in each
          Lock-Box and each Collection Account,

               (vii)  all  of NSI  Georgia's  interest  in,  to  and  under  the
          First-Step Sale Agreement, and

               (viii) all proceeds of any of the foregoing.

               "Reportable  Event"  means any of the events set forth in Section
          4043(c) of ERISA or the  regulations  thereunder,  other than any such
          event for which the 30-day  notice  requirement  under  ERISA has been
          waived in regulations issued by the PBGC.

               "Required Capital Amount" means, as of any date of determination,
          an amount equal to the greater of (a) 3% of the Borrowing  Limit under
          the  Credit and  Security  Agreement,  and (b) the  product of (i) 1.5
          times the  product of the  Default  Ratio  times the  Default  Horizon
          Ratio, each as determined from the most recent Monthly Report received
          from the Servicer  under the Credit and Security  Agreement,  and (ii)
          the  Outstanding  Balance  of all  Receivables  as of  such  date,  as
          determined  from the most  recent  Monthly  Report  received  from the
          Servicer under the Credit and Security Agreement.

               "Responsible  Officer" means any Executive Officer as well as any
          other  officer  of the  Parent who is  primarily  responsible  for the
          administration  of the  transactions  contemplated  by the Transaction
          Documents.

               "S&P" means  Standard & Poor's  Ratings  Group, a division of The
          McGraw-Hill Companies, Inc.

               "Settlement  Date"  has the  meaning  given  to that  term in the
          Credit and Security Agreement.

               "Stockholders'  Equity"  means,  at any time,  the  shareholders'
          equity of the Parent and its Consolidated  Subsidiaries,  as set forth
          or  reflected  on the most recent  consolidated  balance  sheet of the
          Parent and its Consolidated  Subsidiaries  prepared in accordance with
          GAAP,  but excluding any Redeemable  Preferred  Stock of the Parent or
          any of its Consolidated Subsidiaries.

               "Subordinated Loan" has the meaning set forth in clause second of
          Section 1.3(a) of the Agreement.

                                                                        Page 105
                                                               Exhibit 10(i)A(3)


               "Subordinated  Note" means a promissory note in substantially the
          form of Exhibit VI hereto as more fully  described  in Section  1.3 of
          the Agreement, as the same may be amended,  restated,  supplemented or
          otherwise modified from time to time.

               "Subsidiary"  means, with respect to any Person,  any corporation
          or other  entity  of which  securities  or other  ownership  interests
          having  ordinary  voting  power to elect a  majority  of the  board of
          directors or other  persons  performing  similar  functions are at the
          time directly or indirectly owned by such Person.

               "Tax Code" means the Internal  Revenue Code of 1986,  as the same
          may be amended from time to time.

               "Termination  Date"  means  the  earliest  to  occur  of (i)  the
          Termination Date (as defined in the First-Step Sale  Agreement),  (ii)
          the Facility  Termination  Date (as defined in the Credit and Security
          Agreement), (iii) the Business Day immediately prior to the occurrence
          of a Termination Event set forth in Section 5.1(d),  (iv) the Business
          Day specified in a written notice from Buyer to NSI Georgia  following
          the occurrence and during the  continuation  of any other  Termination
          Event,  and (v) the  date  which is 10  Business  Days  after  Buyer's
          receipt of written notice from NSI Georgia that it wishes to terminate
          the facility evidenced by this Agreement.

               "Termination  Event" has the  meaning set forth in Section 5.1 of
          the Agreement.

               "Transaction Documents" means, collectively,  this Agreement, the
          First-Step Sale  Agreement,  each Collection  Account  Agreement,  the
          Subordinated  Note, the Credit and Security  Agreement,  and all other
          instruments,  documents  and  agreements  executed  and  delivered  in
          connection herewith.

               "UCC" means the  Uniform  Commercial  Code as the same may,  from
          time to time,  be  enacted  and in  effect  in the  State of  Georgia;
          provided, that in the event that, by reason of mandatory provisions of
          law,  any or all of the  attachment,  perfection  or  priority  of, or
          remedies  with  respect to,  Buyer's  interest in the  Receivables  is
          governed by the Uniform  Commercial Code as enacted and in effect in a
          jurisdiction  other than the State of  Georgia,  the term "UCC"  shall
          mean the  Uniform  Commercial  Code as  enacted  and in effect in such
          other  jurisdiction  solely for  purposes  of the  provisions  thereof
          relating to such attachment,  perfection, priority or remedies and for
          purposes of definitions related to such provisions

               "Unmatured  Termination  Event"  means an event  which,  with the
          passage of time or the giving of notice,  or both,  would constitute a
          Termination Event.

     All accounting terms not specifically  defined herein shall be construed in
accordance  with  GAAP.  All terms  used in Article 9 of the UCC in the State of
Georgia, and not specifically defined herein, are used herein as defined in such
Article 9.

                                                                        Page 106
                                                               Exhibit 10(i)A(3)





                                   Exhibit II
                                   ----------

                    Places of Business; Locations of Records;
                    -----------------------------------------
             Federal Employer Identification Number(s); Other Names
             ------------------------------------------------------



Places of Business:

         1420 Peachtree Street
         Atlanta, Georgia  30309



Locations of Records:

         1420 Peachtree Street
         Atlanta, Georgia  30309

         One Lithonia Way
         Conyers, Georgia  30012

         Highway 41 North
         Emerson, Georgia  30137

         1310 Seaboard Industrial Blvd.
         Atlanta, Georgia  30318



Federal Employer Identification Number:     58-2227507


Legal, Trade and Assumed Names:  [see next page]

                                                                        Page 107
                                                               Exhibit 10(i)A(3)




Legal, Trade and Assumed Names:

Atlantic Envelope Company                  Lakeland Linen
Atenco Filing Systems                      Orlando Linen
Lyon Folder Company                        Pensacola Linen
Stumb Metal Products                       Sarasota Linen
Techno-Aide Products                       St Petersburg Linen
Enforcer Products                          Upton's Healthcare
Lithonia Lighting                          Tropical Linen Service
Major Reflector                            Texarkana Uniform & Linen Supply
Holophane                                  Ouachachita Uniform & Linen Supply
Metal Optics                               Franklin Laundry, Dust Tex Services
Austin Lighting Products                   N-Pac
Antique Street Lamps                       Dixie Dust Control
National Linen Service                     Spauldings
National Uniform Service                   Selig Chemical Industries
National Healthcare Linen Service          Selig Industries
National Dust Control Service              Zep Manufacturing Company
Arkansas Linen & Uniform
F & F Dust Control
Dickies
Jacksonville Linen



                                                                        Page 108
                                                               Exhibit 10(i)A(3)


                                   Exhibit III
                                   -----------

           NAMES OF COLLECTION BANKS; LOCK-BOXES & COLLECTION ACCOUNTS


            LOCK-BOX                           RELATED COLLECTION ACCOUNT
            --------                           --------------------------
                             Name of Current Account Holder:  Enforcer Products, a division of NSI GA
P.O. Box 945786                              Account Number:  Lockbox #945786, DDA #13245324
Atlanta, GA                                       Bank Name:  Wachovia Bank of Georgia
30392-5786                                       ABA Number:  061000010
                                             Contact Person:  Shari Hall
                                              Contact's Tel:  404-332-5319
                                              Contact's Fax:  404-332-5016
- --------------------------------- ------------------------------------------------ ----------------------
                             Name of Current Account Holder:  Zep Chemicals, a division of NSI GA
                                             Account Number:  13021386
              n/a                                 Bank Name:  Wachovia Bank of Georgia
                                                 ABA Number:  061000010
                                             Contact Person:  Shari Hall
                                              Contact's Tel:  404-332-5319
                                              Contact's Fax:  404-332-5016
- --------------------------------- ------------------------------------------------ ----------------------
                             Name of Current Account Holder:  Zep Chemicals, a division of NSI GA
                                             Account Number:  18646071
                                                  Bank Name:  Wachovia Bank of Georgia
              n/a                                ABA Number:  061000010
                                             Contact Person:  Shari Hall
                                              Contact's Tel:  404-332-5319
                                              Contact's Fax:  404-332-5016
- --------------------------------- ------------------------------------------------ ----------------------
                             Name of Current Account Holder:  Lithonia Lighting, a division of NSI GA
P.O. Box 100863                              Account Number:  Lockbox #100863, DDA#3750249781
Atlanta, GA 30384                                 Bank Name:  Bank of America
                                                 ABA Number:  111000012
                                             Contact Person:  Debbie Hembree
                                              Contact's Tel:  404-607-2851
                                              Contact's Fax:  404-532-2943
- --------------------------------- ------------------------------------------------ ----------------------
                             Name of Current Account Holder:  Lithonia Lighting, a division of NSI
P.O. Box 360305                              Account Number:  DDA#1911121
Pittsburgh, PA 15251                              Bank Name:  Mellon Bank, Pittsburgh PA
                                                 ABA Number:  043000261
Dept. LA 21025                               Contact Person:  Patti Sostaric
Pasadena, CA 91185-1025                       Contact's Tel:  412-234-6626
                                              Contact's Fax:  412-209-6082
- --------------------------------- ------------------------------------------------ ----------------------


                                                                        Page 109
                                                               Exhibit 10(i)A(3)



P.O. Box 530737              Name of Current Account Holder:  NSI Chemicals (Zep), a division of NSI, GA
Atlanta, GA 30353-0737                       Account Number:  0373309
                                                  Bank Name:  Mellon Bank, Pittsburgh PA
Dept. CH10697                                    ABA Number:  043000261
Palatine, IL 60055-0697                      Contact Person:  Patti Sostaric
                                              Contact's Tel:  412-234-6626
Dept. LA21294                                 Contact's Fax:  412-209-6082
Pasadena, CA 91185-1294

Dept. 0905
P.O. Box 120001
Dallas, TX 75312-0905

Box 382012
Pittsburgh, PA 15250-8012

Box 382156
Pittsburgh, PA 15250-8156

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


                                                                        Page 110
                                                               Exhibit 10(i)A(3)


                                   Exhibit IV
                                   ----------

                         Form of Compliance Certificate
                         ------------------------------


     This  Compliance   Certificate  is  furnished   pursuant  to  that  certain
Receivables  Sale  and  Contribution  Agreement  dated  as of May 2,  2001  (the
"Agreement")  between National Service  Industries,  Inc., a Georgia corporation
("NSI  Georgia"),  and NSI  Funding,  Inc.,  a Delaware  corporation  ("Buyer").
Capitalized  terms  used and not  otherwise  defined  herein  are used  with the
meanings attributed thereto in the Agreement.

     THE UNDERSIGNED HEREBY CERTIFIES,  IN HIS OR HER REPRESENTATIVE CAPACITY ON
BEHALF OF THE PARENT, THAT:

     1. I am the duly elected  ______________  of National  Service  Industries,
Inc., a Delaware corporation (the "Parent").

     2. I have  reviewed  the terms of the  Agreement  and I have made,  or have
caused to be made under my supervision,  a detailed  review of the  transactions
and  conditions  of the  Parent  and its  Consolidated  Subsidiaries  during the
accounting period covered by the attached financial statements.

     3. The examinations  described in paragraph 2 did not disclose,  and I have
no knowledge  of, the  existence of any  condition or event which  constitutes a
Termination  Event or an  Unmatured  Termination  Event,  as each  such  term is
defined  under  the  Agreement,  during or at the end of the  accounting  period
covered  by  the  attached  financial  statements  or as of  the  date  of  this
Certificate[, except as set forth below].

     [4. Described below are the exceptions,  if any, to paragraph 3 by listing,
in detail,  the nature of the condition or event, the period during which it has
existed  and the action  which the Parent has taken,  is taking,  or proposes to
take     with     respect     to    each     such     condition     or    event:
- -------------------------------].

     The foregoing  certifications,  together with the computations set forth in
Schedule I hereto and the financial  statements  delivered with this Certificate
in support hereof,  are made and delivered in the  undersigned's  representative
capacity  on behalf of the  Parent,  all as of this ____ day of  ______________,
200_.

                                     ------------------------------
                                               [Name]


                                                                        Page 111
                                                               Exhibit 10(i)A(3)





                                    Exhibit V
                                    ---------

                          Credit and Collection Policy
                          ----------------------------

                                 [see attached]



                                                                        Page 112
                                                               Exhibit 10(i)A(3)



                                   Exhibit VI
                                   ----------

                            Form of Subordinated Note
                            -------------------------


                               SUBORDINATED NOTE
                                                                     May 2, 2001

     1. Note. FOR VALUE RECEIVED, the undersigned, NSI Funding, Inc., a Delaware
corporation  ("SPV"),  hereby  unconditionally  promises  to pay to the order of
National Service  Industries,  Inc., a Georgia  corporation ("NSI Georgia"),  in
lawful money of the United States of America and in immediately available funds,
on or before the date following the  Termination  Date which is one year and one
day after the date on which (i) the Outstanding  Balance of all Receivables sold
under the "Sale  Agreement"  referred to below has been reduced to zero and (ii)
NSI Georgia has paid to Buyer all  indemnities,  adjustments  and other  amounts
which may be owed  thereunder in connection  with the Purchases  thereunder (the
"Collection  Date"),  the  aggregate  unpaid  principal sum  outstanding  of all
"Subordinated  Loans" made from time to time by NSI  Georgia to SPV  pursuant to
and  in  accordance  with  the  terms  of  that  certain  Receivables  Sale  and
Contribution  Agreement  dated as of May 2, 2001 between NSI Georgia and SPV (as
amended,  restated,  supplemented  or otherwise  modified from time to time, the
"Sale Agreement"). Reference to Section 1.3 of the Sale Agreement is hereby made
for a statement  of the terms and  conditions  under  which the loans  evidenced
hereby  have been and will be made.  All terms  which are  capitalized  and used
herein and which are not otherwise  specifically  defined  herein shall have the
meanings ascribed to such terms in the Sale Agreement.

     2. Interest. SPV further promises to pay interest on the outstanding unpaid
principal  amount  hereof from the date hereof until payment in full hereof at a
rate equal to the 1-month LIBOR rate published in The Wall Street Journal on the
first  Business Day of each month (or portion  thereof)  during the term of this
Subordinated  Note,  computed  for  actual  days  elapsed on the basis of a year
consisting  of 360 days and  changing  on the first  business  day of each month
hereafter ("LIBOR"); provided, however, that if SPV shall default in the payment
of any principal  hereof,  SPV promises to pay, on demand,  interest at the rate
equal to LIBOR plus 2.00% per annum on any such  unpaid  amounts,  from the date
such payment is due to the date of actual payment.  Interest shall be payable on
the first Business Day of each month in arrears; provided, however, that SPV may
elect on the date any  interest  payment is due  hereunder to defer such payment
and upon such  election the amount of interest due but unpaid on such date shall
constitute principal under this Subordinated Note. The outstanding  principal of
any loan made  under  this  Subordinated  Note  shall be due and  payable on the
Collection  Date and may be repaid or  prepaid  at any time  without  premium or
penalty.

     3.  Principal  Payments.  NSI Georgia is authorized  and directed by SPV to
enter on the grid attached hereto,  or, at its option, in its books and records,
the  date  and  amount  of each  loan  made by it  which  is  evidenced  by this
Subordinated  Note and the amount of each payment of principal  made by SPV, and
absent manifest error, such entries shall constitute prima facie evidence of the
accuracy of the information so entered; provided that neither the failure of NSI

                                                                        Page 113
                                                               Exhibit 10(i)A(3)


Georgia  to make any such  entry or any error  therein  shall  expand,  limit or
affect the obligations of SPV hereunder.

     4.  Subordination.  NSI Georgia  shall have the right to  receive,  and SPV
shall make,  any and all  payments  and  prepayments  relating to the loans made
under this  Subordinated  Note,  provided that,  after giving effect to any such
payment or prepayment, the aggregate Outstanding Balance of Receivables (as each
such term is defined in the Credit and Security Agreement  hereinafter  referred
to) owned by SPV at such time exceeds the sum of (a) the  Aggregate  Unpaids (as
defined in the Credit and Security Agreement) outstanding at such time under the
Credit and Security  Agreement,  plus (b) the  aggregate  outstanding  principal
balance of all loans  made under this  Subordinated  Note.  NSI  Georgia  hereby
agrees that at any time during which the  conditions set forth in the proviso of
the immediately preceding sentence shall not be satisfied,  NSI Georgia shall be
subordinate  in right of payment to the prior  payment  of any  indebtedness  or
obligation of SPV owing to the Agent or any Lender under that certain Credit and
Security  Agreement  dated as of May 2, 2001 by and among SPV, as Borrower,  NSI
Georgia, as initial Servicer, various "Lenders" from time to time party thereto,
and Wachovia Bank, N.A., as the "Agent" (as amended,  restated,  supplemented or
otherwise modified from time to time, the "Credit and Security Agreement").  The
subordination provisions contained herein are for the direct benefit of, and may
be  enforced  by,  the  Agent and the  Lenders  and/or  any of their  respective
assignees  (collectively,  the "Senior Claimants") under the Credit and Security
Agreement.  Until the date on which the "Aggregate  Invested Amount" outstanding
under the Credit and  Security  Agreement  has been repaid in full and all other
obligations  of SPV and/or the  Servicer  thereunder  and under the "Fee Letter"
referenced therein (all such obligations, collectively, the "Senior Claim") have
been  indefeasibly  paid and satisfied in full,  NSI Georgia shall not institute
against SPV any  proceeding of the type  described in Section 5.1(d) of the Sale
Agreement unless and until the Collection Date has occurred. Should any payment,
distribution  or  security  or  proceeds  thereof be  received by NSI Georgia in
violation  of this  Section 4, NSI  Georgia  agrees that such  payment  shall be
segregated,  received and held in trust for the benefit of, and deemed to be the
property of, and shall be  immediately  paid over and delivered to the Agent for
the benefit of the Senior Claimants.

     5.  Bankruptcy;  Insolvency.  Upon the  occurrence of any proceeding of the
type described in Section 5.1(d) of the Sale Agreement  involving SPV as debtor,
then and in any such event the Senior Claimants shall receive payment in full of
all  amounts  due or to become due on or in respect  of the  Aggregate  Invested
Amount and the Senior Claim (including  "Yield" as defined and as accruing under
the Credit and Security Agreement after the commencement of any such proceeding,
whether  or not any or all of such  Yield  is an  allowable  claim  in any  such
proceeding) before NSI Georgia is entitled to receive payment on account of this
Subordinated Note, and to that end, any payment or distribution of assets of SPV
of any kind or character,  whether in cash, securities or other property, in any
applicable  insolvency  proceeding,  which  would  otherwise  be  payable  to or
deliverable  upon  or  with  respect  to  any  or all  indebtedness  under  this
Subordinated  Note, is hereby  assigned to and shall be paid or delivered by the
Person  making such  payment or  delivery  (whether a trustee in  bankruptcy,  a
receiver,  custodian or liquidating  trustee or otherwise) directly to the Agent
for  application to, or as collateral for the payment of, the Senior Claim until
such Senior Claim shall have been paid in full and satisfied.

                                                                        Page 114
                                                               Exhibit 10(i)A(3)



     6.  Amendments.  This  Subordinated  Note shall not be amended or  modified
except in accordance with Section 7.1 of the Sale  Agreement.  The terms of this
Subordinated  Note may not be amended or  otherwise  modified  without the prior
written consent of the Agent for the benefit of the Lenders.

     7.  GOVERNING  LAW. THIS  SUBORDINATED  NOTE HAS BEEN MADE AND DELIVERED AT
FULTON COUNTY,  GEORGIA, AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES  HERETO  DETERMINED IN ACCORDANCE  WITH THE LAWS AND DECISIONS OF
THE STATE OF GEORGIA. WHEREVER POSSIBLE EACH PROVISION OF THIS SUBORDINATED NOTE
SHALL  BE  INTERPRETED  IN  SUCH  MANNER  AS TO BE  EFFECTIVE  AND  VALID  UNDER
APPLICABLE  LAW,  BUT IF ANY  PROVISION  OF  THIS  SUBORDINATED  NOTE  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
SUBORDINATED NOTE.

     8. Waivers. All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
NSI Georgia  additionally  expressly  waives all notice of the acceptance by any
Senior Claimant of the  subordination  and other provisions of this Subordinated
Note and expressly waives reliance by any Senior Claimant upon the subordination
and other provisions herein provided.

     9.  Assignment.  This  Subordinated  Note may not be  assigned,  pledged or
otherwise  transferred  to any party  other than NSI  Georgia  without the prior
written consent of the Agent, and any such attempted transfer shall be void.

                                      NSI Funding, Inc.


                                      By:_____________________________
                                                  Title:



                                                                                                 Page 115
                                                                                         Exhibit 10(i)A(3)




                                    Schedule
                                       to
                                SUBORDINATED NOTE
                  SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL

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

                      AMOUNT OF           AMOUNT OF PRINCIPAL          UNPAID
                    SUBORDINATED                 PAID                PRINCIPAL         NOTATION MADE BY
     DATE               LOAN                                          BALANCE             (INITIALS)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


                                                                                                 Page 116
                                                                                         Exhibit 10(i)A(3)


                                   Exhibit VII
                                   -----------

                            [Form of] Purchase Report
                            -------------------------

                For the month beginning [date] and ending [date]
                                     -------

TO:  BUYER AND THE AGENT (AS BUYER's ASSIGNEE)



Aggregate Outstanding Balance of all Receivables sold
during the period:                                        $_____________                                        A

Less:  Aggregate Outstanding Balance of all Receivables
sold during such period which were not Eligible
Receivables on the date when sold:
                                                          ($____________)                                      (B)

Equals:  Aggregate Outstanding Balance of all Eligible
Receivables sold during the period (A - B):
                                                                                     $___________               =C

Less:  Purchase Price discount during the Period:
                                                          ($____________)                                      (D)

Equals:  Gross Purchase Price Payable during the period
(C - D)                                                                              $____________              =E

Less:  Total Purchase Price Credits arising during the                                                         (F)
Period:                                                   ($____________)

Equals:  Net Purchase Price payable during the Period
(E - F):                                                                             $____________              =G



Cash Purchase Price Paid to NSI Georgia during the                                                              H
Period:                                                   $_____________

Subordinated Loans made during the Period:                                                                      I
                                                          $_____________

Less:  Repayments of Subordinated Loans received during                                                        (J)
the Period:                                               ($____________)

Equals:  Purchase Price paid in Cash or Subordinated
Loans during the period
(H + I - J):                                                                         $_____________             =K

Aggregate Outstanding Balance of Receivables
contributed during the Period:                            $_____________                                        L




                                                                        Page 117
                                                               Exhibit 10(i)A(3)


                                   Schedule A
                                   ----------

                       DOCUMENTS TO BE DELIVERED TO BUYER
                       ON OR PRIOR TO THE INITIAL PURCHASE

1.   Executed copies of the Receivables  Sale and Contribution  Agreement,  duly
     executed by the parties thereto.

2.   Copy of the Credit and Collection  Policy to attach to the Receivables Sale
     and Contribution Agreement as an Exhibit.

3.   A certificate of NSI Georgia's [Assistant] Secretary certifying:

          (a) A copy  of  the  Resolutions  of the  Board  of  Directors  of NSI
     Georgia,  authorizing NSI Georgia's execution,  delivery and performance of
     the Receivables Sale and Contribution  Agreement and the other documents to
     be delivered by it thereunder;

          (b) A copy  of the  Organizational  Documents  of  NSI  Georgia  (also
     certified,   to  the  extent  that  such   documents  are  filed  with  any
     governmental  authority,  by the Secretary of State of the  jurisdiction of
     organization  of NSI  Georgia  on or  within  thirty  (30)  days  prior  to
     closing);

          (c)  Good  Standing   Certificates  for  NSI  Georgia  issued  by  the
     Secretaries  of  State  of (i) its  state  of  incorporation,  and  (ii) if
     different,  the state where it maintains its  principal  place of business;
     and

          (d) The names and signatures of the officers  authorized on its behalf
     to execute the Receivables  Sale and  Contribution  Agreement and any other
     documents to be delivered by it thereunder.

4.   Pre-filing state and federal tax lien,  judgment lien and UCC lien searches
     against NSI Georgia from the following jurisdictions:

          a. Clerk of Superior Court of Fulton County, Georgia

          b. Georgia Superior Court Clerks Cooperative Authority

5.   Proper financing statements, duly filed under the UCC on or before the date
     of  the  initial   Purchase  (as  defined  in  the  Receivables   Sale  and
     Contribution Agreement) in all jurisdictions as may be necessary or, in the
     opinion of Buyer (or the Agent, as its assignee),  desirable, under the UCC
     of all appropriate  jurisdictions or any comparable law in order to perfect
     the  ownership   interests   contemplated  by  the  Receivables   Sale  and
     Contribution Agreement.

                                                                        Page 118
                                                               Exhibit 10(i)A(3)


6.   Time stamped receipt copies of proper UCC termination  statements,  if any,
     necessary to release all security  interests and other rights of any Person
     in the Receivables, Contracts or Related Security previously granted by NSI
     Georgia.

7.   Executed  Collection  Account  Agreements  for each Lock-Box and Collection
     Account.

8.   A  favorable  opinion of legal  counsel  for NSI  Georgia  licensed to give
     opinions under Georgia law  reasonably  acceptable to Buyer (and the Agent,
     as Buyer's assignee) as to the following:

          (a) NSI Georgia is a corporation duly organized, validly existing, and
     in good standing under the laws of the state of Georgia.

          (b) NSI Georgia has all requisite authority to conduct its business in
     each  jurisdiction  where failure to be so qualified  would have a material
     adverse effect on NSI Georgia's business.

          (c) The execution and delivery by NSI Georgia of the Receivables  Sale
     and Contribution  Agreement and each other Transaction Document to which it
     is a party and its performance of its obligations thereunder have been duly
     authorized by all necessary  organizational  action and  proceedings on the
     part of NSI Georgia and will not:

               (i) require any action by or in respect of, or filing  with,  any
          governmental  body,  agency or official  (other than the filing of UCC
          financing statements);

               (ii) contravene,  or constitute a default under, any provision of
          applicable  law or  regulation  or of its articles or  certificate  of
          incorporation  or bylaws or of any  agreement,  judgment,  injunction,
          order, decree or other instrument binding upon NSI Georgia; or

               (iii) result in the creation or  imposition  of any Adverse Claim
          on  assets  of NSI  Georgia  or any of  its  Subsidiaries  (except  as
          contemplated by the Receivables Sale and Contribution Agreement).

          (d) The  Receivables  Sale and  Contribution  Agreement and each other
     Transaction  Document  to which it is a party  has been duly  executed  and
     delivered by NSI Georgia and  constitutes  the legally  valid,  and binding
     obligation of NSI Georgia  enforceable in accordance with its terms, except
     to the  extent  the  enforcement  thereof  may be  limited  by  bankruptcy,
     insolvency or similar laws affecting the  enforcement of creditors'  rights
     generally  and subject also to the  availability  of equitable  remedies if
     equitable remedies are sought.

          (e) In the event that the Receivables Sale and Contribution  Agreement
     is held to create a transfer for security  purposes rather than a true sale
     or other outright  assignment,  the provisions of the Receivables  Sale and
     Contribution  Agreement are effective to create valid security interests in
     favor of Buyer in all of NSI Georgia's right,  title and interest in and to

                                                                        Page 119
                                                               Exhibit 10(i)A(3)


     the Receivables and Related  Security  described  therein which  constitute
     "accounts,"  "chattel paper" or "general  intangibles"  (each as defined in
     the UCC)  (collectively,  the  "Opinion  Collateral"),  as security for the
     payment  of a loan  deemed to have been made by Buyer to NSI  Georgia in an
     amount equal to the Purchase Price (as defined  therein) of the Receivables
     (as  defined  therein),  together  with  all  other  obligations  of  Buyer
     thereunder.

          (f) Each of the UCC-1  Financing  Statements  naming  NSI  Georgia  as
     debtor, Buyer, as secured party, and Agent, as assignee of secured party to
     be filed in the  [describe  filing  offices],  is in  appropriate  form for
     filing  therein.  Upon filing of such UCC-1  Financing  Statements  in such
     filing  offices and  payment of the  required  filing  fees,  the  security
     interest in favor of Buyer in the Opinion  Collateral will be perfected and
     assigned of record to the Agent.

          (g) Based solely on our review of the [describe  UCC Search  Reports],
     and assuming (i) the filing of the Financing  Statements and payment of the
     required  filing fees in accordance with paragraph (f) and (ii) the absence
     of any intervening  filings between the date and time of the Search Reports
     and the  date and  time of the  filing  of the  Financing  Statements,  the
     security  interest  of  Buyer  in the  Opinion  Collateral  is prior to any
     security  interest  granted in the Opinion  Collateral by NSI Georgia,  the
     priority  of  which is  determined  solely  by the  filing  of a  financing
     statement in the [describe filing offices].

          (h) To the best of the opinion giver's knowledge,  there is no action,
     suit or other  proceeding  against  NSI  Georgia  or any  Affiliate  of NSI
     Georgia,  which would materially adversely affect the business or financial
     condition of NSI Georgia and its Affiliates taken as a whole or which would
     materially  adversely  affect  the  ability of NSI  Georgia to perform  its
     obligations under the Receivables Sale and Contribution Agreement.

          (i) NSI Georgia is not an "investment company" as such term is defined
     in the Investment Company Act of 1940, as amended.

9.   A "true sale" opinion and  "substantive  consolidation"  opinion of counsel
     for NSI  Georgia  with  respect  to the  transactions  contemplated  by the
     Receivables Sale and Contribution Agreement.

10.  A Certificate of NSI Georgia's chief financial officer  certifying that, as
     of the closing date, no Termination  Event or Unmatured  Termination  Event
     exists and is continuing.

11.  Executed copies of (i) all consents from and  authorizations by any Persons
     and (ii) all waivers and amendments to existing credit facilities, that are
     necessary  in  connection  with  the  Receivables   Sale  and  Contribution
     Agreement.

12.  Executed Subordinated Note by Buyer in favor of NSI Georgia.

EX-10

                                                                        Page 120
                                                               Exhibit 10(i)A(4)



                          CREDIT AND SECURITY AGREEMENT

                             DATED AS OF MAY 2, 2001

                                      AMONG

             NSI Funding, Inc., A DELAWARE CORPORATION, AS BORROWER,

     National Service Industries, Inc., A GEORGIA CORPORATION, AS SERVICER,

                      BLUE RIDGE ASSET FUNDING CORPORATION,

               THE LIQUIDITY BANKS FROM TIME TO TIME PARTY HERETO

                                       AND

                          WACHOVIA BANK, N.A., AS AGENT


                                                                        Page 121
                                                               Exhibit 10(i)A(4)




                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----


ARTICLE I. THE ADVANCES.....................................................1

Section 1.1       Credit Facility...........................................1
Section 1.2       Increases.................................................2
Section 1.3       Decreases.................................................2
Section 1.4       Deemed Collections; Borrowing Limit.......................3
Section 1.5       Payment Requirements......................................4
Section 1.6       Ratable Loans; Funding Mechanics; Liquidity Fundings......4

ARTICLE II. PAYMENTS AND COLLECTIONS........................................5

Section 2.1       Payments..................................................5
Section 2.2       Collections Prior to Amortization; Repayment of Certain
                  Demand Advances...........................................5
Section 2.3       Repayment of Demand Advances on the Amortization Date;
                  Collections Following Amortization........................6
Section 2.4       Payment Recission.........................................7

ARTICLE III. BLUE RIDGE FUNDING.............................................7

Section 3.1       CP Costs..................................................7
Section 3.2       Calculation of CP Costs...................................7
Section 3.3       CP Costs Payments.........................................7
Section 3.4       Default Rate..............................................7

ARTICLE IV. LIQUIDITY BANK FUNDING..........................................7

Section 4.1       Liquidity Bank Funding....................................7
Section 4.2       Interest Payments.........................................8
Section 4.3       Selection and Continuation of Interest Periods............8
Section 4.4       Liquidity Bank Interest Rates.............................8
Section 4.5       Suspension of the LIBO Rate...............................8
Section 4.6       Default Rate..............................................9

ARTICLE V. REPRESENTATIONS AND WARRANTIES...................................9

Section 5.1       Representations and Warranties of the Loan Parties........9
Section 5.2       Liquidity Bank Representations and Warranties............12

ARTICLE VI. CONDITIONS OF ADVANCES.........................................13

Section 6.1       Conditions Precedent to Initial Advance..................13
Section 6.2       Conditions Precedent to All Advances.....................13

ARTICLE VII. COVENANTS.....................................................14

Section 7.1       Affirmative Covenants of the Loan Parties................14
Section 7.2       Negative Covenants of the Loan Parties...................23

ARTICLE VIII. ADMINISTRATION AND COLLECTION................................24

Section 8.1       Designation of Servicer..................................24
Section 8.2       Duties of Servicer.......................................25
Section 8.3       Collection Notices.......................................27
Section 8.4       Responsibilities of Borrower.............................27
Section 8.5       Monthly Reports..........................................27
Section 8.6       Servicing Fee............................................27

                                                                        Page 122
                                                               Exhibit 10(i)A(4)


ARTICLE IX. AMORTIZATION EVENTS............................................27

Section 9.1       Amortization Events......................................27
Section 9.2       Remedies.................................................29

ARTICLE X. INDEMNIFICATION.................................................30

Section 10.1      Indemnities by the Loan Parties..........................30
Section 10.2      Increased Cost and Reduced Return........................32
Section 10.3      Other Costs and Expenses.................................33
Section 10.4      Allocations..............................................34

ARTICLE XI. THE AGENT......................................................34

Section 11.1      Authorization and Action.................................34
Section 11.2      Delegation of Duties.....................................35
Section 11.3      Exculpatory Provisions...................................35
Section 11.4      Reliance by Agent........................................35
Section 11.5      Non-Reliance on Agent and Other Lenders..................36
Section 11.6      Reimbursement and Indemnification........................36
Section 11.7      Agent in its Individual Capacity.........................36
Section 11.8      Successor Agent..........................................36

ARTICLE XII. ASSIGNMENTS; PARTICIPATIONS...................................37

Section 12.1      Assignments..............................................37
Section 12.2      Participations...........................................38

ARTICLE XIII. SECURITY INTEREST............................................38

Section 13.1      Grant of Security Interest...............................38
Section 13.2      Termination after Final Payout Date......................38

ARTICLE XIV. MISCELLANEOUS.................................................39

Section 14.1      Waivers and Amendments...................................39
Section 14.2      Notices..................................................40
Section 14.3      Ratable Payments.........................................40
Section 14.4      Protection of Agent's Security Interest..................40
Section 14.5      Confidentiality..........................................41
Section 14.6      Bankruptcy Petition......................................42
Section 14.7      Limitation of Liability..................................42
Section 14.8      CHOICE OF LAW............................................42
Section 14.9      CONSENT TO JURISDICTION..................................42
Section 14.10     WAIVER OF JURY TRIAL.....................................43
Section 14.11     Integration; Binding Effect; Survival of Terms...........43
Section 14.12     Counterparts; Severability; Section References...........43
Section 14.13     Wachovia Roles...........................................44
Section 14.14     Interest.................................................44
Section 14.15     Source of Funds -- ERISA.................................45



                                                                        Page 123
                                                               Exhibit 10(i)A(4)



                             EXHIBITS AND SCHEDULES

Exhibit I         Definitions

Exhibit II        Form of Borrowing Notice

Exhibit III       Places of Business of the Loan Parties; Locations of Records;
                  Federal Employer Identification Number(s)

Exhibit IV        Names of Collection Banks; Collection Accounts

Exhibit V         Form of Compliance Certificate

Exhibit VI        Form of Collection Account Agreement

Exhibit VII       Form of Assignment Agreement

Exhibit VIII      Form of Monthly Report

Exhibit IX        Form of Performance Undertaking


Schedule A        Commitments

Schedule B        Closing Documents



                                                                        Page 124
                                                               Exhibit 10(i)A(4)


                          CREDIT AND SECURITY AGREEMENT

     This Credit and Security Agreement, dated as of May 2, 2001 is entered into
by and among:

          (a) NSI Funding, Inc., a Delaware corporation ("Borrower"),

          (b) National Service  Industries,  Inc., a Georgia  corporation  ("NSI
     Georgia"),  as initial Servicer (the Servicer  together with Borrower,  the
     "Loan Parties" and each, a "Loan Party"),

          (c) The entities listed on Schedule A to this Agreement (together with
     any of their respective  successors and assigns  hereunder,  the "Liquidity
     Banks"),

          (d) Blue Ridge  Asset  Funding  Corporation,  a  Delaware  corporation
     ("Blue Ridge"), and

          (e) Wachovia  Bank,  N.A.,  as agent for the Lenders  hereunder or any
     successor  agent  hereunder  (together  with  its  successors  and  assigns
     hereunder, the "Agent").

Unless defined elsewhere herein,  capitalized terms used in this Agreement shall
have the meanings assigned to such terms in Exhibit I.

                             PRELIMINARY STATEMENTS

     Borrower desires to borrow from the Lenders from time to time.

     Blue Ridge may,  in its  absolute  and sole  discretion,  make  Advances to
Borrower from time to time.

     In the event that Blue Ridge  declines to make any Advance,  the  Liquidity
Banks shall, at the request of Borrower, make Advances from time to time.

     Wachovia  Bank,  N.A. has been  requested and is willing to act as Agent on
behalf  of Blue  Ridge  and the  Liquidity  Banks in  accordance  with the terms
hereof.

                                   ARTICLE I.
                                  THE ADVANCES

     Section 1.1 Credit Facility.

     (a) Upon the terms and subject to the conditions hereof,  from time to time
prior to the Facility Termination Date:

               (i)  Borrower  may,  at its  option,  request  Advances  from the
          Lenders in an aggregate  principal  amount at any one time outstanding

                                                                        Page 125
                                                               Exhibit 10(i)A(4)

          not to exceed the lesser of the Aggregate Commitment and the Borrowing
          Base (such lesser amount, the "Borrowing Limit"); and

               (ii) Blue Ridge may, at its option,  make the requested  Advance,
          or if  Blue  Ridge  shall  decline  to make  any  Advance,  except  as
          otherwise provided in Section 1.2, the Liquidity Banks severally agree
          to make Loans in an aggregate  principal amount equal to the requested
          Advance.

Each of the  Advances,  and all  other  Obligations,  shall  be  secured  by the
Collateral  as provided in Article  XIII. It is the intent of Blue Ridge to fund
all Advances by the issuance of Commercial Paper.

     (b)  Borrower  may,  upon at least 5  Business  Days'  notice to the Agent,
terminate in whole or reduce in part,  ratably  among the Liquidity  Banks,  the
unused portion of the Aggregate Commitment; provided that each partial reduction
of the  Aggregate  Commitment  shall be in an amount equal to  $5,000,000  (or a
larger  integral  multiple of $1,000,000 if in excess  thereof) and shall reduce
the  Commitments  of the  Liquidity  Banks  ratably  in  accordance  with  their
respective Pro Rata Shares.

     Section 1.2  Increases.  Borrower shall provide the Agent with at least two
(2) Business Days' prior notice in a form set forth as Exhibit II hereto of each
Advance (each, a "Borrowing Notice").  Each Borrowing Notice shall be subject to
Section 6.2 hereof and,  except as set forth  below,  shall be  irrevocable  and
shall specify the requested increase in Aggregate  Principal (which shall not be
less  than  $1,000,000  or a  larger  integral  multiple  of  $100,000)  and the
Borrowing  Date  (which,  in the case of any Advance  after the initial  Advance
hereunder, shall only be on a Settlement Date) and, in the case of an Advance to
be funded by the  Liquidity  Banks,  the  requested  Interest  Rate and Interest
Period.  Following  receipt of a  Borrowing  Notice,  the Agent  will  determine
whether Blue Ridge agrees to make the requested Advance.  If Blue Ridge declines
to make a proposed Advance,  Borrower may cancel the Borrowing Notice or, in the
absence of such a cancellation, the Advance will be made by the Liquidity Banks.
On the date of each Advance,  upon  satisfaction  of the  applicable  conditions
precedent  set forth in  Article  VI,  Blue  Ridge or the  Liquidity  Banks,  as
applicable,  shall deposit to the Facility  Account,  in  immediately  available
funds,  no later than 2:00 p.m.  (New York time),  an amount equal to (i) in the
case of Blue Ridge, the principal amount of the requested Advance or (ii) in the
case of a Liquidity Bank, such Liquidity  Bank's Pro Rata Share of the principal
amount of the requested Advance.

     Section 1.3  Decreases.  Except as provided in Section 1.4,  Borrower shall
provide the Agent with prior  written  notice in  conformity  with the  Required
Notice  Period (a  "Reduction  Notice") of any  proposed  reduction of Aggregate
Principal.  Such  Reduction  Notice shall  designate (i) the date (the "Proposed
Reduction  Date") upon which any such  reduction  of Aggregate  Principal  shall
occur (which date shall give effect to the applicable  Required  Notice Period),
and (ii) the amount of Aggregate  Principal to be reduced which shall be applied
ratably to the Loans of Blue Ridge and the Liquidity  Banks in  accordance  with
the amount of principal (if any) owing to Blue Ridge,  on the one hand,  and the
amount of principal (if any) owing to the  Liquidity  Banks  (ratably,  based on

                                                                        Page 126
                                                               Exhibit 10(i)A(4)

their   respective  Pro  Rata  Shares),   on  the  other  hand  (the  "Aggregate
Reduction"). Only one (1) Reduction Notice shall be outstanding at any time.

     Section 1.4 Deemed Collections; Borrowing Limit.

          (a) If on any day:

               (i) the  Outstanding  Balance of any  Receivable  is reduced as a
          result  of any  defective  or  rejected  goods or  services,  any cash
          discount or any other  adjustment  by any  Originator or any Affiliate
          thereof,  or as a  result  of any  tariff  or  other  governmental  or
          regulatory action, or

               (ii) the  Outstanding  Balance  of any  Receivable  is reduced or
          canceled  as a  result  of a setoff  in  respect  of any  claim by the
          Obligor  thereof  (whether  such  claim  arises  out of the  same or a
          related or an unrelated transaction), or

               (iii) the  Outstanding  Balance of any  Receivable  is reduced on
          account of the obligation of any  Originator or any Affiliate  thereof
          to pay to the related Obligor any rebate or refund, or

               (iv) the  Outstanding  Balance of any Receivable is less than the
          amount  included in  calculating  the Net Pool Balance for purposes of
          any Monthly Report (for any reason other than such Receivable becoming
          a Defaulted Receivable), or

               (v) any of the  representations  or  warranties  of Borrower  set
          forth in Section 5.1(i),  (j), (q), (r), (s) or (t) were not true when
          made with respect to any Receivable,

then,  on such day,  Borrower  shall be deemed to have  received a Collection of
such Receivable (A) in the case of clauses (i)-(iv) above, in the amount of such
reduction  or  cancellation  or the  difference  between the actual  Outstanding
Balance  and the  amount  included  in  calculating  such Net Pool  Balance,  as
applicable;  and (B) in the case of  clause  (v)  above,  in the  amount  of the
Outstanding  Balance of such Receivable  and,  effective as of the date on which
the next  succeeding  Monthly Report is required to be delivered,  the Borrowing
Base shall be reduced by the amount of such Deemed Collection.

          (b)  Borrower  shall  ensure that the  Aggregate  Principal at no time
     exceeds the Borrowing Limit. If at any time the Aggregate Principal exceeds
     the  Borrowing  Limit,  Borrower  shall pay to the Agent not later than the
     next  succeeding  Settlement  Date an amount to be  applied  to reduce  the
     Aggregate  Principal  (as  allocated by the Agent),  such that after giving
     effect to such payment the Aggregate Principal is less than or equal to the
     Borrowing Limit.

                                                                        Page 127
                                                               Exhibit 10(i)A(4)


     Section 1.5 Payment  Requirements.  All amounts to be paid or  deposited by
any Loan Party  pursuant to any  provision  of this  Agreement  shall be paid or
deposited in accordance with the terms hereof no later than 12:00 noon (New York
time) on the day when due in immediately  available  funds,  and if not received
before  12:00 noon (New York time)  shall be deemed to be  received  on the next
succeeding  Business  Day. If such amounts are payable to a Lender they shall be
paid to the Agent's  Account,  for the account of such Lender,  until  otherwise
notified by the Agent. Upon notice to Borrower, the Agent may debit the Facility
Account for all amounts due and payable hereunder. All computations of CP Costs,
Interest,  per annum  fees  calculated  as part of any CP Costs,  per annum fees
hereunder  and per annum fees under the Fee Letter shall be made on the basis of
a year of 360  days  for  the  actual  number  of days  elapsed.  If any  amount
hereunder  shall be payable on a day which is not a Business  Day,  such  amount
shall be payable on the next succeeding Business Day.

     Section 1.6 Ratable Loans; Funding Mechanics; Liquidity Fundings.

          (a) Each Advance  hereunder shall consist of one or more Loans made by
     Blue Ridge and/or the Liquidity Banks.

          (b) Each Lender  funding any Loan shall wire  transfer  the  principal
     amount of its Loan to the Agent in  immediately  available  funds not later
     than 12:00 noon (New York City time) on the applicable  Borrowing Date and,
     subject to its receipt of such Loan proceeds, the Agent shall wire transfer
     such funds to the account  specified by Borrower in its  Borrowing  Request
     not later than 2:00 p.m. (New York City time) on such Borrowing Date.

          (c)  While  it is the  intent  of Blue  Ridge to fund  each  requested
     Advance  through  the  issuance  of  its  Commercial   Paper,  the  parties
     acknowledge that if Blue Ridge is unable,  or determines in good faith that
     it is undesirable,  to issue Commercial Paper to fund all or any portion of
     its Loans,  or is unable to repay such  Commercial  Paper upon the maturity
     thereof,  Blue  Ridge  may  put  all or any  portion  of its  Loans  to the
     Liquidity Banks at any time pursuant to the Liquidity  Agreement to finance
     or refinance the necessary portion of its Loans through a Liquidity Funding
     to the extent available.  The Liquidity Fundings may be Alternate Base Rate
     Loans or LIBO Rate Loans, or a combination thereof, selected by Borrower in
     accordance  with  Article IV.  Regardless  of whether a  Liquidity  Funding
     constitutes  the direct  funding of a Loan, an assignment of a Loan made by
     Blue Ridge or the sale of one or more participations in a Loan made by Blue
     Ridge, each Liquidity Bank  participating in a Liquidity Funding shall have
     the rights of a "Lender"  hereunder with the same force and effect as if it
     had  directly  made a Loan  to  Borrower  in the  amount  of its  Liquidity
     Funding.

          (d) Nothing herein shall be deemed to commit Blue Ridge to make Loans.

                                                                        Page 128
                                                               Exhibit 10(i)A(4)


                                  ARTICLE II.
                            PAYMENTS AND COLLECTIONS

     Section 2.1 Payments. Borrower hereby promises to pay:

          (a) the Aggregate Principal on and after the Facility Termination Date
     as and when Collections are received;

          (b) the  fees set  forth  in the Fee  Letter  on the  dates  specified
     therein;

          (c) all accrued and unpaid  Interest on the Alternate  Base Rate Loans
     on each Settlement Date applicable thereto;

          (d) all accrued and unpaid Interest on the LIBO Rate Loans on the last
     day of each Interest Period applicable thereto;

          (e) all  accrued  and  unpaid  CP Costs  on the CP Rate  Loans on each
     Settlement Date; and

          (f) all Broken Funding Costs and Indemnified Amounts upon demand.

     Section 2.2 Collections Prior to Amortization;  Repayment of Certain Demand
Advances.  Without  limiting  recourse to  Borrower  for the  Obligations  under
Section 2.1:

          (a) On each  Settlement  Date  prior  to the  Amortization  Date,  the
     Servicer  shall deposit to the Agent's  Account,  for  distribution  to the
     Lenders,  a portion of the Collections  received by it during the preceding
     Settlement  Period (after  deduction of its Servicing Fee) equal to the sum
     of the following  amounts for  application to the  Obligations in the order
     specified:

          first,  ratably  to the  payment of all  accrued  and unpaid CP Costs,
     Interest and Broken Funding Costs (if any) that are then due and owing,

          second,  ratably to the  payment of all  accrued and unpaid fees under
     the Fee Letter (if any) that are then due and owing,

          third, if required under Section 1.3 or 1.4, to the ratable  reduction
     of Aggregate Principal,

          fourth,  for the ratable payment of all other unpaid  Obligations,  if
     any, that are then due and owing, and

          fifth,  the balance,  if any, to Borrower or  otherwise in  accordance
     with Borrower's instructions.

Collections  applied  to the  payment of  Obligations  shall be  distributed  in
accordance with the aforementioned provisions, and, giving effect to each of the

                                                                        Page 129
                                                               Exhibit 10(i)A(4)

priorities  set forth  above in this  Section  2.2(a),  shall be shared  ratably
(within each  priority)  among the Agent and the Lenders in accordance  with the
amount  of such  Obligations  owing  to each of  them in  respect  of each  such
priority.

          (b) If the Collections  are  insufficient to pay the Servicing Fee and
     the Obligations specified above on any Settlement Date, Borrower shall make
     demand upon NSI Georgia for repayment of any outstanding Demand Advances in
     an aggregate amount equal to the lesser of (i) the amount of such shortfall
     in Collections, and (ii) the aggregate outstanding principal balance of the
     Demand Advances, together with all accrued and unpaid interest thereon, and
     NSI Georgia hereby agrees to pay such amount to the Agent's Account on such
     Settlement Date.

     Section  2.3  Repayment  of  Demand  Advances  on  the  Amortization  Date;
Collections Following Amortization.

          (a) On the  Amortization  Date, NSI Georgia hereby agrees to repay the
     aggregate  outstanding  principal balance of all Demand Advances,  together
     with all  accrued and unpaid  interest  thereon,  to the  Agent's  Account,
     without  demand or notice of any kind,  all of which are  hereby  expressly
     waived by NSI Georgia.

          (b) Without  limiting  recourse to Borrower for the Obligations  under
     Section  2.1,  on the  Amortization  Date and on each day  thereafter,  the
     Servicer shall set aside and hold in trust,  for the Secured  Parties,  all
     Collections  received on such day. On and after the Amortization  Date, the
     Servicer  shall,  on each  Settlement  Date and on each other  Business Day
     specified by the Agent (after deduction of any accrued and unpaid Servicing
     Fee as of such  date):  (i) remit to the  Agent's  Account  the amounts set
     aside pursuant to the preceding two sentences,  and (ii) apply such amounts
     to reduce the Obligations as follows:

          first, to the reimbursement of the Agent's actual and reasonable costs
     of collection and enforcement of this Agreement,

          second,  ratably to the  payment of all  accrued  and unpaid CP Costs,
     Interest and Broken Funding Costs,

          third, ratably to the payment of all accrued and unpaid fees under the
     Fee Letter,

          fourth, to the ratable reduction of Aggregate Principal,

          fifth, for the ratable payment of all other unpaid Obligations, and

          sixth,  after the Obligations have been indefeasibly  reduced to zero,
     to Borrower.

Collections  applied  to the  payment of  Obligations  shall be  distributed  in
accordance with the aforementioned provisions, and, giving effect to each of the
priorities  set forth  above in this  Section  2.3(b),  shall be shared  ratably
(within each  priority)  among the Agent and the Lenders in accordance  with the
amount  of such  Obligations  owing  to each of  them in  respect  of each  such
priority.

                                                                        Page 130
                                                               Exhibit 10(i)A(4)


     Section 2.4 Payment  Recission.  No payment of any of the Obligations shall
be considered paid or applied  hereunder to the extent that, at any time, all or
any portion of such payment or application is rescinded by application of law or
judicial  authority,  or must  otherwise be returned or refunded for any reason.
Borrower shall remain  obligated for the amount of any payment or application so
rescinded,  returned  or  refunded,  and shall  promptly  pay to the Agent  (for
application  to the Person or Persons who  suffered  such  recission,  return or
refund) the full  amount  thereof,  plus  Interest on such amount at the Default
Rate from the date of any such recission, return or refunding.

                                  ARTICLE III.
                               BLUE RIDGE FUNDING

     Section  3.1 CP Costs.  Borrower  shall pay CP Costs  with  respect  to the
principal balance of Blue Ridge's Loans from time to time outstanding. Each Loan
of Blue Ridge that is funded  substantially  with Pooled  Commercial  Paper will
accrue CP Costs each day on a pro rata basis,  based upon the  percentage  share
that the principal in respect of such Loan  represents in relation to all assets
held by Blue Ridge and  funded  substantially  with  related  Pooled  Commercial
Paper.

     Section 3.2  Calculation  of CP Costs.  Not later than the 3rd Business Day
immediately  preceding each Monthly  Reporting  Date, Blue Ridge shall calculate
the  aggregate  amount  of CP  Costs  applicable  to its CP Rate  Loans  for the
Calculation  Period then most recently  ended and shall notify  Borrower of such
aggregate amount.

     Section 3.3 CP Costs Payments.  On each Settlement Date, Borrower shall pay
to the Agent (for the benefit of Blue Ridge) an  aggregate  amount  equal to all
accrued and unpaid CP Costs in respect of the principal  associated  with all CP
Rate Loans for the  Calculation  Period then most  recently  ended in accordance
with Article II.

     Section  3.4 Default  Rate.  From and after the  occurrence  and during the
continuation  of an  Amortization  Event,  all Loans of Blue Ridge shall  accrue
Interest at the Default Rate and shall cease to be CP Rate Loans.

                                  ARTICLE IV.
                             LIQUIDITY BANK FUNDING

     Section  4.1  Liquidity  Bank  Funding.  Prior  to  the  occurrence  of  an
Amortization Event, the outstanding  principal balance of each Liquidity Funding
shall accrue interest for each day during its Interest Period at either the LIBO
Rate or the  Alternate  Base Rate in  accordance  with the terms and  conditions
hereof.  Until  Borrower  gives notice to the Agent of another  Interest Rate in
accordance with Section 4.4, the initial  Interest Rate for any Loan transferred
to the Liquidity  Banks by Blue Ridge pursuant to the Liquidity  Agreement shall
be the Alternate Base Rate (unless the Default Rate is then applicable).  If the
Liquidity  Banks acquire by assignment  from Blue Ridge any Loan pursuant to the

                                                                        Page 131
                                                               Exhibit 10(i)A(4)

Liquidity  Agreement,  each  Loan so  assigned  shall  each be deemed to have an
Interest Period commencing on the date of any such assignment.

     Section 4.2 Interest  Payments.  On the Settlement  Date for each Liquidity
Funding,  Borrower  shall pay to the Agent  (for the  benefit  of the  Liquidity
Banks) an  aggregate  amount  equal to the accrued and unpaid  Interest  for the
entire Interest Period of each such Liquidity Funding in accordance with Article
II.

     Section 4.3 Selection and Continuation of Interest Periods.

          (a) With consultation from (and approval by) the Agent (which approval
     shall not be unreasonably withheld or delayed), Borrower shall from time to
     time request Interest Periods for the Liquidity Fundings,  provided that if
     at any time any Liquidity  Funding is  outstanding,  Borrower  shall always
     request  Interest  Periods such that at least one Interest Period shall end
     on the date specified in clause (A) of the definition of Settlement Date.

          (b)  Borrower  or the Agent,  upon  notice to and consent by the other
     received at least three (3)  Business  Days prior to the end of an Interest
     Period  (the  "Terminating   Tranche")  for  any  Liquidity  Funding,  may,
     effective on the last day of the Terminating  Tranche:  (i) divide any such
     Liquidity Funding into multiple Liquidity  Fundings,  (ii) combine any such
     Liquidity  Funding with one or more other  Liquidity  Fundings  that have a
     Terminating  Tranche ending on the same day as such Terminating  Tranche or
     (iii) combine any such Liquidity Funding with a new Liquidity Funding to be
     made by the Liquidity Banks on the day such Terminating Tranche ends.

     Section 4.4  Liquidity  Bank Interest  Rates.  Borrower may select the LIBO
Rate or the Alternate  Base Rate for each Liquidity  Funding.  Borrower shall by
12:00 noon (New York time):  (i) at least three (3)  Business  Days prior to the
expiration  of any  Terminating  Tranche  with respect to which the LIBO Rate is
being  requested as a new  Interest  Rate and (ii) at least one (1) Business Day
prior to the  expiration  of any  Terminating  Tranche with respect to which the
Alternate Base Rate is being  requested as a new Interest  Rate,  give the Agent
irrevocable notice of the new Interest Rate for the Liquidity Funding associated
with such  Terminating  Tranche.  Until  Borrower  gives  notice to the Agent of
another Interest Rate, the initial Interest Rate for any Loan transferred to the
Liquidity Banks pursuant to the Liquidity  Agreement shall be the Alternate Base
Rate (unless the Default Rate is then applicable).

     Section 4.5 Suspension of the LIBO Rate

          (a) If any Liquidity  Bank  notifies the Agent that it has  reasonably
     determined  that funding its Pro Rata Share of the Liquidity  Fundings at a
     LIBO Rate would violate any applicable law, rule, regulation,  or directive
     of any  governmental  or  regulatory  authority,  whether or not having the
     force of law, or that (i)  deposits of a type and maturity  appropriate  to
     match fund its  Liquidity  Funding at such LIBO Rate are not  available  or
     (ii) such LIBO Rate does not  accurately  reflect the cost of  acquiring or
     maintaining  a  Liquidity  Funding at such LIBO Rate,  then the Agent shall
     suspend the  availability of such LIBO Rate and require  Borrower to select
     the Alternate Base Rate for any Liquidity Funding accruing Interest at such
     LIBO Rate.

                                                                        Page 132
                                                               Exhibit 10(i)A(4)


          (b) If less than all of the Liquidity Banks give a notice to the Agent
     pursuant to Section  4.5(a),  each  Liquidity Bank which gave such a notice
     shall be obliged,  at the request of Borrower,  Blue Ridge or the Agent, to
     assign all of its rights and obligations hereunder to (i) another Liquidity
     Bank or (ii) another funding entity nominated by Borrower or the Agent that
     is an Eligible  Assignee  willing to participate in this Agreement  through
     the Liquidity  Termination  Date in the place of such  notifying  Liquidity
     Bank;  provided that (i) the notifying  Liquidity Bank receives  payment in
     full, pursuant to an Assignment  Agreement,  of all Obligations owing to it
     (whether due or accrued), and (ii) the replacement Liquidity Bank otherwise
     satisfies the requirements of Section 12.1(b).


     Section  4.6 Default  Rate.  From and after the  occurrence  and during the
continuation  of an  Amortization  Event,  all Liquidity  Fundings  shall accrue
Interest at the Default Rate.

                                   ARTICLE V.
                         REPRESENTATIONS AND WARRANTIES

     Section 5.1 Representations  and Warranties of the Loan Parties.  Each Loan
Party hereby represents and warrants to the Agent and the Lenders, as to itself,
as of the date hereof and except for such representations or warranties that are
limited to a certain  date or period,  as of the date of each  Advance and as of
each Settlement Date that:

          (a)  Existence  and  Power.  Such  Loan  Party is a  corporation  duly
     organized,  validly  existing  and in good  standing  under the laws of the
     state  indicated in the preamble to this  Agreement,  is duly  qualified to
     transact  business  in  every  jurisdiction  where,  by the  nature  of its
     business, such qualification is necessary, and where the failure to qualify
     would have or could  reasonably  be  expected  to cause a Material  Adverse
     Effect,  and  has  all  corporate  powers  and  all  material  governmental
     licenses,  authorizations,  consents and approvals required to carry on its
     business as now conducted.

          (b) Power and Authority;  Due  Authorization,  Execution and Delivery.
     The  execution,  delivery  and  performance  by  such  Loan  Party  of  the
     Transaction  Documents  to which it is a party  (i) are  within  such  Loan
     Party's corporate  powers,  (ii) have been duly authorized by all necessary
     corporate  action,  (iii)  require  no action by or in respect of or filing
     with, any governmental body, agency or official, (iv) do not contravene, or
     constitute a default  under,  any provision of applicable law or regulation
     or of the certificate of  incorporation or by-laws of such Loan Party or of
     any agreement,  judgment,  injunction,  order,  decree or other  instrument
     binding  upon such Loan  Party or any of its  Subsidiaries,  and (v) do not
     result in the creation or  imposition  of any Adverse Claim on any asset of
     such Loan Party  (except as created  hereunder).  This  Agreement  and each
     other  Transaction  Document  to which  such Loan Party is a party has been
     duly executed and delivered by such Loan Party.

          (c)  No  Bulk  Sale.  No  transaction   contemplated  hereby  requires
     compliance with any bulk sales act or similar law.

                                                                        Page 133
                                                               Exhibit 10(i)A(4)


          (d) Governmental Authorization. Other than the filing of the financing
     statements required hereunder, no authorization or approval or other action
     by,  and no  notice  to or  filing  with,  any  governmental  authority  or
     regulatory body is required for the due execution and delivery by such Loan
     Party of this Agreement and each other Transaction  Document to which it is
     a party and the performance of its obligations hereunder and thereunder.

          (e) Actions, Suits. There is no action, suit or proceeding pending, or
     to the knowledge of such Loan Party overtly threatened in writing,  against
     or affecting such Loan Party or any of its Subsidiaries before any court or
     arbitrator or any governmental body, agency or official which has had or is
     likely to have a Material Adverse Effect.

          (f) Binding Effect. This Agreement  constitutes and, when executed and
     delivered  in  accordance  with  this  Agreement,  each  other  Transaction
     Document  to which such Loan Party is a party,  will  constitute  valid and
     binding obligations of such Loan Party enforceable in accordance with their
     respective terms,  provided that the  enforceability  hereof and thereof is
     subject in each case to  general  principles  of equity and to  bankruptcy,
     insolvency and similar laws affecting the enforcement of creditors'  rights
     generally and by general equitable principles.

          (g) Accuracy of Information.  All information  heretofore furnished by
     such Loan Party to the Agent or any of the  Lenders  for  purposes of or in
     connection with this Agreement or any transaction  contemplated  hereby is,
     and all such  information  hereafter  furnished  by such Loan  Party to the
     Agent or any of the Lenders  will be, true and  accurate in every  material
     respect  or  based on  reasonable  estimates  on the date as of which  such
     information  is stated or  certified.  Such Loan Party has disclosed to the
     Agent in writing any and all facts known to its  Executive  Officers  which
     would have or  reasonably  would be  expected  to cause a Material  Adverse
     Effect.

          (h) Use of Proceeds. Borrower is not engaged principally, or as one of
     its  important  activities,  in the business of  purchasing or carrying any
     Margin  Stock,  and no part of the  proceeds of any Advance will be used to
     purchase  or  carry  any  Margin  Stock  (except  to the  extent  expressly
     permitted  under the proviso to Section  7.1(i)(L))  or to extend credit to
     others for the purpose of purchasing  or carrying any Margin  Stock,  or be
     used for any purpose which  violates,  or which is  inconsistent  with, the
     provisions of Regulation T, U or X.

          (i) Good Title.  Borrower (i) is the legal and beneficial owner of the
     Receivables  and (ii) is the  legal  and  beneficial  owner of the  Related
     Security with respect  thereto or possesses a valid and perfected  security
     interest therein, in each case, free and clear of any Adverse Claim, except
     for  Permitted  Encumbrances.  There  have  been duly  filed all  financing
     statements or other similar  instruments or documents  necessary  under the
     UCC (or any comparable  law) of all  appropriate  jurisdictions  to perfect
     Borrower's  ownership interest in each Receivable,  its Collections and the
     Related Security and the Agent's security interest therein.

          (j)  Perfection.  This  Agreement,  together  with the  filing  of the
     financing  statements  contemplated hereby, is effective to create in favor
     of the  Agent,  for the  benefit  of the  Lenders,  a valid  and  perfected
     security interest in all of Borrower's right,  title and interest in and to

                                                                        Page 134
                                                               Exhibit 10(i)A(4)

     each  Receivable   existing  and  hereafter  arising,   together  with  all
     Collections and Related Security with respect  thereto,  in each case, free
     and clear of any Adverse Claim, except for Permitted Encumbrances.

          (k) Places of Business and Locations of Records.  The principal places
     of business and chief  executive  office of each Loan Party and the offices
     where it keeps all of its Records are located at the address(es)  listed on
     Exhibit III or such other locations of which the Agent has been notified in
     accordance with Section 7.2(a) in  jurisdictions  where all action required
     by Section 7.2(a) has been taken and completed. Borrower's Federal Employer
     Identification Number is correctly set forth on Exhibit III.

          (l) Collections.  The conditions and requirements set forth in Section
     7.1(j) have at all times been satisfied and duly  performed.  The names and
     addresses of all Collection Banks, together with the account numbers of the
     Collection  Accounts at each Collection Bank and the post office box number
     of each  Lock-Box,  are listed on Exhibit IV.  Borrower has not granted any
     Person,  other than the Agent under  Section 8.3 hereof and the  Collection
     Account  Agreements  dominion  and control of any  Lock-Box  or  Collection
     Account,  or the right to take dominion and control of any such Lock-Box or
     Collection  Account  at a future  time or upon the  occurrence  of a future
     event.

          (m) Material  Adverse  Effect.  During the period from August 31, 2000
     through  the  Initial  Cut-Off  Date,  in the good  faith  judgment  of the
     Executive Officers,  no event has occurred that has had or could reasonably
     be expected to have a Material Adverse Effect.

          (n) Names.  The name in which  Borrower has executed this Agreement is
     identical to the name of Borrower as indicated on the public  record of its
     state of organization  which shows Borrower to have been organized.  In the
     past five (5) years, Borrower has not used any corporate names, trade names
     or  assumed  names  other  than  the name in  which  it has  executed  this
     Agreement and as listed on Exhibit III.

          (o) Not a Holding Company or an Investment Company.  Borrower is not a
     "holding company" or a "subsidiary  holding company" of a "holding company"
     within the meaning of the Public  Utility  Holding  Company Act of 1935, as
     amended, or any successor statute.  Borrower is not an "investment company"
     within the meaning of the  Investment  Company Act of 1940, as amended,  or
     any successor statute.

          (p)  Compliance  with Law.  Borrower has complied in all respects with
     all  applicable  laws,  rules,   regulations,   orders,  writs,  judgments,
     injunctions, decrees or awards to which it may be subject, except where the
     failure to so comply  could not  reasonably  be expected to have a Material
     Adverse  Effect.  Each  Receivable,  together  with  the  Contract  related
     thereto,  does not  contravene any laws,  rules or  regulations  applicable
     thereto  (including,   without  limitation,  laws,  rules  and  regulations
     relating to truth in lending,  fair credit billing,  fair credit reporting,
     equal credit opportunity,  fair debt collection practices and privacy), and
     no  part  of  such  Contract  is in  violation  of any  such  law,  rule or
     regulation,   except  where  such  contravention  or  violation  could  not
     reasonably be expected to have a Material Adverse Effect.

                                                                        Page 135
                                                               Exhibit 10(i)A(4)


          (q)  Compliance  with  Credit  and  Collection  Policy.  Borrower  has
     complied in all material  respects  with the Credit and  Collection  Policy
     with regard to each Receivable and the related  Contract,  and has not made
     any  material  change to such  Credit and  Collection  Policy,  except such
     material  change as to which the Agent has been notified in accordance with
     Section _7.1(a).

          (r)  Enforceability  of Contracts.  Each Contract with respect to each
     Receivable  is effective to create,  and has  created,  a legal,  valid and
     binding obligation of the related Obligor to pay the Outstanding Balance of
     the  Receivable  created  thereunder  and  any  accrued  interest  thereon,
     enforceable  against the Obligor in  accordance  with its terms,  except as
     such  enforcement  may be limited  by  applicable  bankruptcy,  insolvency,
     reorganization  or other  similar laws  relating to or limiting  creditors'
     rights generally and by general principles of equity (regardless of whether
     enforcement is sought in a proceeding in equity or at law).

          (s)  Accounting.  The  manner  in  which  Borrower  accounts  for  the
     transactions  contemplated  by the  Receivables  Sale  Agreement  does  not
     jeopardize the characterization of the transactions contemplated therein as
     being true sales.

          (t) Eligible  Receivables.  Each  Receivable  reflected in any Monthly
     Report as an Eligible  Receivable was an Eligible Receivable on the date of
     such Monthly Report.

          (u) Borrowing Limit.  Immediately  after giving effect to each Advance
     and  each  settlement  on any  Settlement  Date  hereunder,  the  Aggregate
     Principal is less than or equal to the Borrowing Limit.

     Section 5.2 Liquidity Bank  Representations and Warranties.  Each Liquidity
Bank  hereby  represents  and  warrants  to the  Agent,  Blue Ridge and the Loan
Parties that:

          (a) Existence and Power. Such Liquidity Bank is a banking  association
     duly organized, validly existing and in good standing under the laws of its
     jurisdiction of organization,  and has all organizational  power to perform
     its obligations hereunder and under the Liquidity Agreement.

          (b) No Conflict.  The execution and delivery by such Liquidity Bank of
     this  Agreement and the  Liquidity  Agreement  and the  performance  of its
     obligations  hereunder and thereunder are within its corporate powers, have
     been duly authorized by all necessary  corporate  action, do not contravene
     or violate (i) its certificate or articles of  incorporation or association
     or by-laws,  (ii) any law, rule or  regulation  applicable to it, (iii) any
     restrictions  under any agreement,  contract or instrument to which it is a
     party or any of its property is bound, or (iv) any order,  writ,  judgment,
     award, injunction or decree binding on or affecting it or its property, and
     do not result in the  creation or  imposition  of any Adverse  Claim on its
     assets.   This  Agreement  and  the  Liquidity  Agreement  have  been  duly
     authorized, executed and delivered by such Liquidity Bank.

          (c) Governmental Authorization.  No authorization or approval or other
     action by, and no notice to or filing with, any  governmental  authority or
     regulatory  body is required  for the due  execution  and  delivery by such

                                                                        Page 136
                                                               Exhibit 10(i)A(4)

     Liquidity  Bank  of  this  Agreement  or the  Liquidity  Agreement  and the
     performance of its obligations hereunder or thereunder.

          (d) Binding Effect. Each of this Agreement and the Liquidity Agreement
     constitutes the legal,  valid and binding obligation of such Liquidity Bank
     enforceable  against  such  Liquidity  Bank in  accordance  with its terms,
     except  as  such  enforcement  may be  limited  by  applicable  bankruptcy,
     insolvency,  reorganization  or other  similar laws relating to or limiting
     creditors' rights generally and by general principles of equity (regardless
     of whether such enforcement is sought in a proceeding in equity or at law).

                                  ARTICLE VI.
                             CONDITIONS OF ADVANCES

     Section 6.1 Conditions  Precedent to Initial  Advance.  The initial Advance
under this Agreement is subject to the  conditions  precedent that (a) the Agent
shall have received on or before the date of such Advance those documents listed
on Schedule A to the Receivables  Sale Agreement and those  documents  listed on
Schedule B to this  Agreement,  (b) the Rating Agency  Condition shall have been
satisfied,  and (c) the Agent shall have received all fees and expenses required
to be paid on such  date  pursuant  to the terms of this  Agreement  and the Fee
Letter.

     Section 6.2  Conditions  Precedent to All  Advances.  Each Advance and each
rollover  or  continuation  of any  Advance  shall  be  subject  to the  further
conditions  precedent that (a) the Servicer shall have delivered to the Agent on
or prior to the date thereof,  in form and substance  satisfactory to the Agent,
all  Monthly  Reports  as and when  due  under  Section  8.5;  (b) the  Facility
Termination Date shall not have occurred; (c) the Agent shall have received such
other approvals,  opinions or documents as it may reasonably request; and (d) on
the date thereof,  the following statements shall be true (and acceptance of the
proceeds  of such  Advance  shall be deemed a  representation  and  warranty  by
Borrower that such statements are then true):

          (i) the  representations  and  warranties set forth in Section 5.1 are
     true and  correct in all  material  respects  on and as of the date of such
     Advance (or such Settlement Date, as the case may be) as though made on and
     as of such date;

          (ii) no event has  occurred  and is  continuing,  or would result from
     such  Advance  (or the  continuation  thereof),  that  will  constitute  an
     Amortization  Event, and no event has occurred and is continuing,  or would
     result  from  such  Advance  (or  the  continuation  thereof),  that  would
     constitute an Unmatured Amortization Event; and

          (iii)  after  giving  effect  to such  Advance  (or  the  continuation
     thereof), the Aggregate Principal will not exceed the Borrowing Limit.

                                                                        Page 137
                                                               Exhibit 10(i)A(4)


                                  ARTICLE VII.
                                    COVENANTS

     Section 7.1  Affirmative  Covenants  of the Loan  Parties.  Until the Final
Payout Date, each Loan Party hereby covenants, as to itself, as set forth below:

          (a) Financial Reporting. Such Loan Party will maintain, for itself and
     each  of  its  Subsidiaries,   a  system  of  accounting   established  and
     administered  in accordance with GAAP, and furnish or cause to be furnished
     to the Agent:

               (i)  Annual  Reporting.  As soon as  available  and in any  event
          within  90 days (or such  longer  period as may be the  subject  of an
          extension granted by the Securities and Exchange Commission) after the
          end of each  Fiscal  Year,  (A) a  consolidated  balance  sheet of the
          Performance Guarantor and its Consolidated  Subsidiaries as of the end
          of such Fiscal Year and the related consolidated statements of income,
          stockholders'  equity and cash  flows for such  Fiscal  Year,  setting
          forth in each case in  comparative  form the figures for the  previous
          fiscal  year,  all  certified  by  Arthur   Andersen,   LLP  or  other
          independent public accountants of nationally recognized standing, with
          such  certification  to be free of exceptions and  qualifications  not
          acceptable to the Agent, and (B) an unaudited balance sheet and income
          statement  for Borrower  for such Fiscal  Year,  certified in a manner
          acceptable to the Agent by Borrower's chief financial officer.

               (ii) Quarterly  Reporting.  As soon as available and in any event
          within  45 days (or such  longer  period as may be the  subject  of an
          extension granted by the Securities and Exchange Commission) after the
          end of each of the first 3 Fiscal  Quarters of each Fiscal Year, (A) a
          consolidated  balance  sheet  of the  Performance  Guarantor  and  its
          Consolidated Subsidiaries as of the end of such Fiscal Quarter and the
          related  statement  of  income  and  statement  of cash  flows for the
          portion of the Fiscal  Year ended at the end of such  Fiscal  Quarter,
          setting  forth in each case in  comparative  form the  figures for the
          corresponding  Fiscal  Quarter  and the  corresponding  portion of the
          previous  Fiscal  Year,  all  certified  (subject  to normal  year-end
          adjustments) as to fairness of  presentation,  GAAP and consistency by
          the chief  financial  officer or the chief  accounting  officer of the
          Performance  Guarantor,  and (B) an unaudited balance sheet and income
          statement for Borrower for such Fiscal Quarter,  certified in a manner
          acceptable to the Agent by Borrower's chief financial officer.

               (iii)  Compliance   Certificate.   Together  with  the  financial
          statements   required   hereunder,   a   compliance   certificate   in
          substantially the form of Exhibit V signed by an Authorized Officer of
          the Performance  Guarantor and dated the date of such annual financial
          statement or such quarterly financial statement, as the case may be.

               (iv)  Shareholders  Statements  and  Reports.  Promptly  upon the
          mailing  thereof  to the  shareholders  of the  Performance  Guarantor
          generally,  copies  of all  financial  statements,  reports  and proxy
          statements so mailed.

                                                                        Page 138
                                                               Exhibit 10(i)A(4)


               (v) S.E.C. Filings.  Promptly upon the filing thereof,  copies of
          all registration  statements  (other than the exhibits thereto and any
          registration  statements  on Form S-8 or its  equivalent)  and annual,
          quarterly or monthly  reports which the  Performance  Guarantor  shall
          have filed with the Securities and Exchange Commission.

               (vi) Copies of Notices.  Promptly upon its receipt of any notice,
          request for consent,  financial statements,  certification,  report or
          other  communication  under  or in  connection  with  any  Transaction
          Document from any Person other than the Agent or Blue Ridge, copies of
          the same.

               (vii)  Change in Credit and  Collection  Policy.  At least thirty
          (30) days  prior to the  effectiveness  of any  material  change in or
          material  amendment to the Credit and Collection Policy, a copy of the
          Credit  and  Collection  Policy  then  in  effect  and  a  notice  (A)
          indicating  such change or amendment,  and (B) if such proposed change
          or  amendment  would be  reasonably  likely to  adversely  affect  the
          collectibility  of the  Receivables  or decrease the credit quality of
          any newly created Receivables, requesting the Agent's consent thereto.

               (viii) Other Information. Promptly, from time to time, such other
          information, documents, records or reports relating to the Receivables
          or the condition or operations,  financial or otherwise,  of such Loan
          Party as the Agent may from time to time  reasonably  request in order
          to protect the interests of the Agent,  for the benefit of Blue Ridge,
          under or as contemplated by this Agreement.

          (b)  Notices.  Such Loan Party will notify the Agent in writing of any
     of  the  following  promptly  upon  learning  of  the  occurrence  thereof,
     describing the same and, if applicable,  the steps being taken with respect
     thereto:

               (i) Amortization Events or Unmatured  Amortization Events. Within
          one (1) Business Day after any Responsible Officer learns thereof, the
          occurrence of each Amortization Event and each Unmatured  Amortization
          Event, by a statement of an Authorized Officer of such Loan Party.

               (ii) Termination Events or Unmatured  Termination Events.  Within
          one (1) Business Day after any Responsible Officer learns thereof, the
          occurrence of each  Termination  Event and each Unmatured  Termination
          Event, by a statement of an Authorized Officer of NSI Georgia.

               (iii)  Defaults Under Other  Agreements.  Within one (1) Business
          Day after any Responsible Officer learns thereof,  the occurrence of a
          default or an event of default under any other  financing  arrangement
          pursuant  to which  any Loan  Party is a debtor  or an  obligor  which
          relates to debt in excess of $25,000,000.

               (iv) ERISA Events. If and when any member of the Controlled Group
          (i) gives or is required to give notice to the PBGC of any "reportable
          event" (as defined in Section  4043 of ERISA) with respect to any Plan
          which  could  reasonably  be  expected  to  constitute  grounds  for a
          termination of such Plan

                                                                        Page 139
                                                               Exhibit 10(i)A(4)

          under Title IV of ERISA, or knows that the plan  administrator  of any
          Plan has given or is required  to give  notice of any such  reportable
          event, a copy of the notice of such reportable event given or required
          to be given to the PBGC;  (ii) receives  notice of complete or partial
          withdrawal  liability  under Title IV of ERISA, a copy of such notice;
          or (iii)  receives  notice from the PBGC under Title IV of ERISA of an
          intent to  terminate  or appoint a trustee to  administer  any Plan, a
          copy of such notice;  provided,  however,  that each of the  foregoing
          notices shall not be required to be given unless the reportable event,
          withdrawal liability, plan termination or trustee appointment involved
          could  reasonably be expected to give rise to a liability of more than
          $1,000,000  on the  part of the  Performance  Guarantor  or any of its
          Subsidiaries.

               (v)  Termination  Date.  Within  one (1)  Business  Day after any
          Responsible Officer learns thereof, the occurrence of the "Termination
          Date" under and as defined in the  Receivables  Sale  Agreement or the
          First-Step Sale Agreement.

               (vi) Notices under  Receivables  Sale Agreement or the First-Step
          Sale Agreement.  Copies of all notices delivered under the Receivables
          Sale Agreement or the First-Step Sale Agreement.

          (c) Compliance with Laws and Preservation of Corporate Existence.

               (i)  Such  Loan  Party  will  comply  in all  respects  with  all
          applicable  laws,  rules,   regulations,   orders,  writs,  judgments,
          injunctions,  decrees  or  awards to which it may be  subject,  except
          where the  failure to so comply  could not  reasonably  be expected to
          have a Material  Adverse  Effect.  Such Loan Party will  preserve  and
          maintain its corporate existence, rights, franchises and privileges in
          the  jurisdiction  of  its  incorporation,   and  qualify  and  remain
          qualified  in  good  standing  as  a  foreign   corporation   in  each
          jurisdiction  where its  business is  conducted,  except (A) where the
          failure to so preserve and maintain or qualify could not reasonably be
          expected  to have a  Material  Adverse  Effect,  and (B) to the extent
          permitted under Section 7.1(c)(ii) below.

               (ii)  Notwithstanding  anything  herein  or in any  of the  other
          Transaction Documents to the contrary:

               (A) NSI  Enterprises,  NSI  Georgia  or the  Parent  may merge or
          consolidate  with any other  Person  provided  that (1) the  surviving
          corporation is the Parent or a wholly-owned  Subsidiary of the Parent,
          (2) the survivor  executes and delivers such Uniform  Commercial  Code
          financing  statements and other documents as the Administrative  Agent
          may  reasonably  request in order to maintain  the  perfection  of the
          interests  conveyed  under  the  Transaction   Documents  and  (3)  no
          Amortization Event or Unmatured Amortization Event has occurred and is
          continued after giving effect to such transaction,

               (B) NSI Enterprises or NSI Georgia may merge or consolidate  with
          the Parent provided that (1) the Parent is the  corporation  surviving
          such  merger,  (2) the  Parent  executes  and  delivers  such  Uniform
          Commercial  Code  financing  statements  and  other  documents  as the

                                                                        Page 140
                                                               Exhibit 10(i)A(4)

          Administrative  Agent may reasonably  request in order to maintain the
          perfection of the interests  conveyed under the Transaction  Documents
          and (3) no  Amortization  Event or  Unmatured  Amortization  Event has
          occurred and is continued after giving effect to such transaction, and

               (C) Any or all of NSI Enterprises, NSI Georgia and the Parent may
          enter  into  a one  or  more  other  transactions  (collectively,  the
          "Reorganization")  in which such Person or Persons (each, an "Existing
          NSI Party") merge or consolidate with or transfer all or a substantial
          portion  of their  assets  to  another  Person  or  Persons  (each,  a
          "Successor  NSI  Party"),  without  any Loan  Party's  payment  of any
          additional  structuring,  origination or similar fees (other than fees
          and costs  referenced in Section 10.3),  if and only if each and every
          of the  following  conditions  are  fulfilled  with  respect  to  such
          Reorganization:

                    (1)  Each  Successor  NSI  Party  shall  be  a  corporation,
               partnership,  limited liability company or trust  incorporated or
               organized  under  the  laws of the  United  States  or any  state
               thereof or the District of Columbia;

                    (2) Each Successor NSI Party shall  expressly  assume all of
               the  obligations of the  applicable  Existing NSI Party under the
               Transaction  Documents  pursuant  to  a  written  agreement  duly
               executed  by the  Successor  NSI  Party  in  form  and  substance
               reasonably satisfactory to the Administrative Agent;

                    (3) Each  Successor  NSI Party shall execute or deliver such
               officer  certificates,  legal opinions,  Uniform  Commercial Code
               financing  statements and other  documents as the  Administrative
               Agent may reasonably request in order to further evidence or give
               notice of the Reorganization;

                    (4)  After  giving  effect  to  the   consummation   of  the
               Reorganization,  no Amortization Event or Unmatured  Amortization
               Event shall be in existence;

                    (5) If, as a result of the  Reorganization,  NSI Enterprises
               or NSI Georgia is no longer a Subsidiary of the Parent, then such
               Loan Party or its new parent  company shall satisfy the following
               additional  conditions:  (w)  such  Person  shall  have  the same
               shareholders  immediately after giving effect to the consummation
               of the  Reorganization as the Parent had immediately prior to the
               consummation  of  the  Reorganization;  (x)  one or  more  of the
               president,  the chief executive officer,  and the chief financial
               officer of such Person shall be individuals who were directors or
               officers  of the  Parent  or one or more of its  Subsidiaries  or
               business units prior to the effectiveness of the  Reorganization,
               (y) a majority of the members of the board of  directors  of such
               Person  shall be  individuals  who were  members  of the board of
               directors of the Parent or one or more of its Subsidiaries  prior
               to the effectiveness of the Reorganization; and (z) such Person's
               short term  unsecured  debt ratings from Moody's and S&P shall be

                                                                        Page 141
                                                               Exhibit 10(i)A(4)

               not less than A-3 and P-3,  respectively,  after giving effect to
               the consummation of the Reorganization; and

                    (6) The Rating Agency  Condition  shall have been  satisfied
               with respect to the consummation of the Reorganization.

          (d)  Audits.  Such Loan Party  will  furnish to the Agent from time to
     time such  information  with respect to it and the Receivables as the Agent
     may reasonably request. Such Loan Party will, at the sole cost of such Loan
     Party  from time to time upon  prior  written  request  of the Agent  given
     (unless an  Amortization  Event shall have occurred and be continuing)  not
     less than three (3) Business  Days prior to a requested  visit,  permit the
     Agent, or its agents or representatives (and shall cause each Originator to
     permit the Agent or its agents or  representatives)  during normal business
     hours:  (i) to examine and make copies of and abstracts from all Records in
     the  possession  or  under  the  control  of such  Person  relating  to the
     Collateral,  including, without limitation, the related Contracts, and (ii)
     to visit the  offices  and  properties  of such  Person for the  purpose of
     examining  such  materials  described  in clause (i) above,  and to discuss
     matters relating to such Person's financial  condition or the Collateral or
     any  Person's  performance  under any of the  Transaction  Documents or any
     Person's performance under the Contracts and, in each case, with any of the
     officers or employees of Borrower or the Servicer having  knowledge of such
     matters  (each of the  foregoing  examinations  and  visits,  a  "Review");
     provided,  however, that, so long as no Amortization Event has occurred and
     is continuing, (A) the Loan Parties shall only be responsible for the costs
     and expenses of one (1) Review in any one calendar  year, and (B) the Agent
     will not request  more than four (4) Reviews in any one calendar  year.  To
     the extent that Agent, in the course of any Review,  obtains  possession of
     any  Proprietary  Information  pertaining  to any Loan  Party or any of its
     Affiliates,  Agent shall handle such  information  in  accordance  with the
     requirements of Section 14.5 hereof.

          (e) Keeping and Marking of Records and Books.

               (i) The  Servicer  will  (and  will  cause  each  Originator  to)
          maintain  and  implement   administrative  and  operating   procedures
          (including,   without  limitation,  an  ability  to  recreate  records
          evidencing  Receivables  in  the  event  of  the  destruction  of  the
          originals  thereof),  and  keep and  maintain  all  documents,  books,
          records and other  information  reasonably  necessary or advisable for
          the  collection of all  Receivables  (including,  without  limitation,
          records  adequate to permit the immediate  identification  of each new
          Receivable  and all  Collections  of and  adjustments to each existing
          Receivable).  The Servicer  will (and will cause each  Originator  to)
          give the Agent notice of any material change in the administrative and
          operating procedures referred to in the previous sentence.

               (ii) Such Loan Party will (and will  cause each  Originator  to):
          (A) on or prior to the date  hereof,  mark its master data  processing
          records and other books and records relating to the Receivables with a
          legend,  acceptable  to the Agent,  describing  the  Agent's  security
          interest  in the  Collateral  and (B) upon the  request  of the  Agent
          following the occurrence and during the continuance of an Amortization
          Event:  (x) mark each  Contract with a legend  describing  the Agent's

                                                                        Page 142
                                                               Exhibit 10(i)A(4)

          security   interest  and  (y)  deliver  to  the  Agent  all  Contracts
          (including,  without  limitation,  all multiple  originals of any such
          Contract  constituting  an  instrument,  a  certificated  security  or
          chattel paper) relating to the Receivables.

          (f) Compliance with Contracts and Credit and Collection  Policy.  Such
     Loan Party will (and will  cause each  Originator  to) timely and fully (i)
     perform and comply in all material respects with all provisions,  covenants
     and other  promises  required  to be  observed  by it under  the  Contracts
     related to the Receivables,  and (ii) comply in all material  respects with
     the  Credit  and  Collection  Policy in regard to each  Receivable  and the
     related Contract.

          (g) Performance and Enforcement of Receivables  Sale Agreement and the
     First-Step Sale Agreement.  Borrower will, and will require each Originator
     to, perform each of their respective obligations and undertakings under and
     pursuant  to  the  Receivables  Sale  Agreement  and  the  First-Step  Sale
     Agreement,  will purchase Receivables  thereunder in strict compliance with
     the terms of the Receivables Sale Agreement and will vigorously enforce the
     rights  and  remedies  accorded  to  Borrower  under the  Receivables  Sale
     Agreement. Borrower will take all actions to perfect and enforce its rights
     and  interests  (and the rights and  interests of the Agent,  as Borrower's
     assignee)  under the  Receivables  Sale Agreement and the  First-Step  Sale
     Agreement as the Agent may from time to time reasonably request, including,
     without  limitation,  making  claims to which it may be entitled  under any
     indemnity,  reimbursement or similar provision contained in the Receivables
     Sale Agreement or the First-Step Sale Agreement.

          (h) Ownership.  Borrower will (or will cause each  Originator to) take
     all  necessary  action  to  (i)  vest  legal  and  equitable  title  to the
     Collateral  purchased under the Receivables  Sale Agreement  irrevocably in
     Borrower,  free and  clear of any  Adverse  Claims  (other  than  Permitted
     Encumbrances)  including,  without limitation,  the filing of all financing
     statements or other similar  instruments or documents  necessary  under the
     UCC (or any comparable  law) of all  appropriate  jurisdictions  to perfect
     Borrower's  interest in such  Collateral  and such other action to perfect,
     protect or more fully  evidence  the  interest of  Borrower  therein as the
     Agent may reasonably request), and (ii) establish and maintain, in favor of
     the Agent,  for the benefit of the Secured  Parties,  a valid and perfected
     first priority security  interest in all Collateral,  free and clear of any
     Adverse  Claims (other than  Permitted  Encumbrances),  including,  without
     limitation,  the  filing  of all  financing  statements  or  other  similar
     instruments or documents necessary under the UCC (or any comparable law) of
     all  appropriate  jurisdictions  to perfect the Agent's (for the benefit of
     the Secured  Parties)  security  interest in the  Collateral and such other
     action to perfect, protect or more fully evidence the interest of the Agent
     for the benefit of the Secured Parties as the Agent may reasonably request.

          (i) Reliance.  Borrower acknowledges that the Agent and Blue Ridge are
     entering into the  transactions  contemplated by this Agreement in reliance
     upon  Borrower's  identity as a legal  entity  that is  separate  from each
     Originator. Therefore, from and after the date of execution and delivery of
     this  Agreement,  Borrower  shall  take all  reasonable  steps,  including,
     without limitation, all steps that the Agent or Blue Ridge may from time to
     time  reasonably  request,  to maintain  Borrower's  identity as a separate

                                                                        Page 143
                                                               Exhibit 10(i)A(4)

     legal entity and to make it manifest to third  parties that  Borrower is an
     entity with assets and  liabilities  distinct from those of each Originator
     and any Affiliates thereof (other than Borrower) and not just a division of
     any Originator or any such  Affiliate.  Without  limiting the generality of
     the  foregoing  and in addition to the other  covenants  set forth  herein,
     Borrower will:

               (A) conduct its own business in its own name;

               (B) compensate all employees,  consultants  and agents  directly,
          from Borrower's own funds,  for services  provided to Borrower by such
          employees,  consultants  and agents and,  to the extent any  employee,
          consultant  or agent of Borrower is also an  employee,  consultant  or
          agent  of  any  Originator  or any  Affiliate  thereof,  allocate  the
          compensation  of such employee,  consultant or agent between  Borrower
          and such Originator or such Affiliate, as applicable,  on a basis that
          reflects the services rendered to Borrower and such Originator or such
          Affiliate, as applicable;

               (C) clearly identify its offices (by signage or otherwise) as its
          offices  and,  if  such  office  is  located  in  the  offices  of any
          Originator, Borrower shall lease such office at a fair market rent;

               (D) have a separate telephone number, which will be answered only
          in its name and separate stationery and checks in its own name;

               (E)  conduct  all  transactions  with  each  Originator  and  the
          Servicer  (including,   without  limitation,  any  delegation  of  its
          obligations  hereunder as Servicer) strictly on an arm's-length basis,
          allocate  all  overhead  expenses   (including,   without  limitation,
          telephone and other utility charges) for items shared between Borrower
          and  such  Originator  on the  basis  of  actual  use  to  the  extent
          practicable and, to the extent such allocation is not practicable,  on
          a basis reasonably related to actual use;

               (F) at all times have a Board of  Directors  consisting  of three
          members, at least one member of which is an Independent Director;

               (G) observe all corporate  formalities as a distinct entity,  and
          ensure  that all  corporate  actions  relating  to (A) the  selection,
          maintenance  or  replacement  of the  Independent  Director,  (B)  the
          dissolution  or  liquidation  of  Borrower or (C) the  initiation  of,
          participation  in,  acquiescence  in or  consent  to  any  bankruptcy,
          insolvency,  reorganization or similar proceeding  involving Borrower,
          are duly  authorized  by  unanimous  vote of its  Board  of  Directors
          (including the Independent  Director);

               (H) maintain  Borrower's books and records separate from those of
          each  Originator  and any  Affiliate  thereof  and  otherwise  readily
          identifiable as its own assets rather than assets of any Originator or
          any Affiliate thereof;

               (I) prepare its  financial  statements  separately  from those of
          each Originator and insure that any consolidated  financial statements
          of any Originator or any Affiliate  thereof that include  Borrower and
          that are filed with the  Securities  and  Exchange  Commission  or any

                                                                        Page 144
                                                               Exhibit 10(i)A(4)

          other governmental  agency have notes clearly stating that Borrower is
          a separate  corporate  entity and that its  assets  will be  available
          first and foremost to satisfy the claims of the creditors of Borrower;

               (J) except as herein specifically  otherwise  provided,  maintain
          the  funds  or  other  assets  of  Borrower  separate  from,  and  not
          commingled with, those of any Originator or any Affiliate  thereof and
          only  maintain  bank  accounts or other  depository  accounts to which
          Borrower alone is the account  party,  into which Borrower alone makes
          deposits and from which  Borrower  alone (or the Agent  hereunder) has
          the power to make withdrawals;

               (K) pay all of Borrower's  operating expenses from Borrower's own
          assets (except for certain payments by any Originator or other Persons
          pursuant to allocation  arrangements that comply with the requirements
          of this Section 7.1(i));

               (L) operate its business and  activities  such that:  it does not
          engage in any  business  or  activity  of any kind,  or enter into any
          transaction or indenture, mortgage,  instrument,  agreement, contract,
          lease or other undertaking,  other than the transactions  contemplated
          and authorized by this Agreement and the  Receivables  Sale Agreement;
          and does not create, incur,  guarantee,  assume or suffer to exist any
          indebtedness or other liabilities, whether direct or contingent, other
          than (1) as a result of the endorsement of negotiable  instruments for
          deposit or collection or similar  transactions  in the ordinary course
          of business,  (2) the incurrence of obligations  under this Agreement,
          (3) the incurrence of  obligations,  as expressly  contemplated in the
          Receivables  Sale  Agreement,   to  make  payment  to  the  applicable
          Originator  thereunder  for the  purchase  of  Receivables  from  such
          Originator  under  the  Receivables   Sale  Agreement,   and  (4)  the
          incurrence of operating expenses in the ordinary course of business of
          the type  otherwise  contemplated  by this  Agreement;  provided  that
          Borrower may own non-passive  financial assets which have a total cost
          to Borrower of not more than $1,000;

               (M)  maintain  its  corporate  charter  in  conformity  with this
          Agreement,  such  that it  does  not  amend,  restate,  supplement  or
          otherwise  modify its Certificate of  Incorporation  or By-Laws in any
          respect  that would  materially  impair its ability to comply with the
          terms or provisions of any of the  Transaction  Documents,  including,
          without limitation, Section 7.1(i) of this Agreement;

               (N) maintain the  effectiveness of, and continue to perform under
          the Receivables Sale Agreement and the First-Step Sale Agreement, such
          that it does not amend,  restate,  supplement,  cancel,  terminate  or
          otherwise modify the Receivables Sale Agreement or the First-Step Sale
          Agreement,  or  give  any  consent,   waiver,  directive  or  approval
          thereunder or waive any default,  action, omission or breach under the
          Receivables  Sale  Agreement  or  the  First-Step  Sale  Agreement  or
          otherwise grant any indulgence thereunder,  without (in each case) the
          prior written consent of the Agent;

               (O) maintain  its  corporate  separateness  such that it does not
          merge or  consolidate  with or into,  or  convey,  transfer,  lease or
          otherwise  dispose of  (whether in one  transaction  or in a series of
          transactions,  and except as  otherwise  contemplated  herein)  all or
          substantially  all of its  assets  (whether  now  owned  or  hereafter
          acquired)  to, or acquire all or  substantially  all of the assets of,

                                                                        Page 145
                                                               Exhibit 10(i)A(4)

          any Person, nor at any time create,  have,  acquire,  maintain or hold
          any interest in any Subsidiary.

               (P) maintain at all times the Required Capital Amount (as defined
          in the  Receivables  Sale  Agreement)  and  refrain  from  making  any
          dividend, distribution,  redemption of capital stock or payment of any
          subordinated  indebtedness  which  would  cause the  Required  Capital
          Amount to cease to be so maintained; and

               (Q) take  such  other  actions  as are  necessary  on its part to
          ensure that the facts and  assumptions set forth in the opinion issued
          by Kilpatrick  Stockton  LLP, as counsel for  Borrower,  in connection
          with the closing or initial  Advance under this Agreement and relating
          to  substantive   consolidation   issues,   and  in  the  certificates
          accompanying  such  opinion,  remain true and correct in all  material
          respects at all times.

          (j) Collections.  Such Loan Party will cause (1) all proceeds from all
     Lock-Boxes to be directly  deposited by a Collection Bank into a Collection
     Account and (2) each Lock-Box and  Collection  Account to be subject at all
     times to a Collection  Account  Agreement that is in full force and effect.
     In the event any payments  relating to the Collateral are remitted directly
     to Borrower or any  Affiliate  of  Borrower,  Borrower  will remit (or will
     cause all such payments to be remitted)  directly to a Collection  Bank and
     deposited into a Collection  Account within two (2) Business Days following
     receipt thereof, and, at all times prior to such remittance,  Borrower will
     itself hold or, if applicable, will cause such payments to be held in trust
     for the  exclusive  benefit  of the Agent  and Blue  Ridge.  Borrower  will
     maintain exclusive ownership, dominion and control (subject to the terms of
     this Agreement) of each Lock-Box and Collection Account and shall not grant
     the right to take  dominion  and  control  of any  Lock-Box  or  Collection
     Account at a future time or upon the  occurrence  of a future  event to any
     Person, except to the Agent as contemplated by this Agreement.

          (k) Taxes.  Such Loan Party will file all  material  tax  returns  and
     reports  required  by law to be  filed  by it and  will  promptly  pay  all
     material taxes and governmental  charges at any time owing, except any such
     taxes which are not yet  delinquent  or are being  diligently  contested in
     good faith by appropriate  proceedings  and for which adequate  reserves in
     accordance with GAAP shall have been set aside on its books.  Borrower will
     pay  when  due any  taxes  payable  in  connection  with  the  Receivables,
     exclusive of taxes on or measured by income or gross  receipts of the Agent
     or Blue Ridge.

          (l) Payment to Applicable  Originator.  With respect to any Receivable
     purchased  by  Borrower  from any  Originator,  such sale shall be effected
     under,  and in strict  compliance with the terms of, the  Receivables  Sale
     Agreement,  including, without limitation, the terms relating to the amount
     and  timing of  payments  to be made to such  Originator  in respect of the
     purchase price for such Receivable.

                                                                        Page 146
                                                               Exhibit 10(i)A(4)


     Section 7.2 Negative Covenants of the Loan Parties.  Until the Final Payout
Date, each Loan Party hereby covenants, as to itself, that:

          (a) Name Change,  Offices and Records. Such Loan Party will not change
     its name,  identity or  structure  (within  the  meaning of any  applicable
     enactment  of the UCC),  relocate  its chief  executive  office at any time
     while the location of its chief executive  office is relevant to perfection
     of the Agent's security  interest,  for the benefit of the Secured Parties,
     in the Receivables,  Related Security and Collections, or change any office
     where  Records are kept unless it shall have:  (i) given the Agent at least
     ten (10) days' prior written notice thereof and (ii) delivered to the Agent
     all  financing  statements,  instruments  and  other  documents  reasonably
     requested by the Agent in connection with such change or relocation.

          (b)  Change in  Payment  Instructions  to  Obligors.  Except as may be
     required by the Agent pursuant to Section 8.2(b),  such Loan Party will not
     add or terminate  any bank as a Collection  Bank, or make any change in the
     instructions to Obligors  regarding  payments to be made to any Lock-Box or
     Collection Account, unless the Agent shall have received, at least ten (10)
     days before the proposed  effective  date  therefor,  (i) written notice of
     such addition,  termination or change and (ii) with respect to the addition
     of a  Collection  Bank or a  Collection  Account or  Lock-Box,  an executed
     Collection  Account Agreement with respect to the new Collection Account or
     Lock-Box;  provided,  however,  that  the  Servicer  may  make  changes  in
     instructions  to  Obligors  regarding  payments  if such  new  instructions
     require  such  Obligor  to make  payments  to another  existing  Collection
     Account.

          (c) Modifications to Contracts and Credit and Collection Policy.  Such
     Loan  Party  will not,  and will not permit  any  Originator  to,  make any
     material  change to the Credit and Collection  Policy that could  adversely
     affect the collectibility of the Receivables or decrease the credit quality
     of any newly created Receivables. Except as provided in Section 8.2(d), the
     Servicer will not, and will not permit any Originator to, extend,  amend or
     otherwise  modify  the  terms of any  Receivable  or any  Contract  related
     thereto other than in accordance with the Credit and Collection Policy.

          (d) Sales, Liens.  Borrower will not sell, assign (by operation of law
     or otherwise) or otherwise dispose of, or grant any option with respect to,
     or create or suffer to exist any  Adverse  Claim upon  (including,  without
     limitation,  the filing of any financing statement) or with respect to, any
     of the  Collateral,  or assign any right to  receive  income  with  respect
     thereto (other than Permitted  Encumbrances),  and Borrower will defend the
     right,  title and  interest of the Secured  Parties in, to and under any of
     the  foregoing  property,  against  all  claims of third  parties  claiming
     through  or  under  Borrower  or  any  Originator   (other  than  Permitted
     Encumbrances).  Borrower  will not create or suffer to exist any  mortgage,
     pledge,  security  interest,  encumbrance,  lien,  charge or other  similar
     arrangement on any of its inventory.

          (e)  Use of  Proceeds.  Borrower  will  not use  the  proceeds  of the
     Advances for any purpose other than (i) paying for  Receivables and Related
     Security  under and in  accordance  with the  Receivables  Sale  Agreement,
     including without limitation,  making payments on the Subordinated Notes to
     the extent  permitted  thereunder and under the Receivables Sale Agreement,

                                                                        Page 147
                                                               Exhibit 10(i)A(4)

     (ii)  making  Demand  Advances  to NSI  Georgia  at any  time  prior to the
     Facility   Termination   Date  while  it  is  acting  as  Servicer  and  no
     Amortization   Event  or  Unmatured   Amortization   Event  exists  and  is
     continuing, (iii) paying its ordinary and necessary operating expenses when
     and as due, (iv) making  Restricted Junior Payments to the extent permitted
     under this Agreement,  and (v) purchasing  non-passive  financial assets to
     the extent expressly permitted under the proviso to Section 7.1(I)(L).

          (f) Termination  Date  Determination.  Borrower will not designate the
     Termination Date (as defined in the Receivables  Sale  Agreement),  or send
     any written notice to any Originator in respect thereof,  without the prior
     written consent of the Agent, except with respect to the occurrence of such
     Termination Date arising pursuant to Section 5.1(d) of the Receivables Sale
     Agreement.

          (g) Restricted Junior Payments.  Borrower will not make any Restricted
     Junior  Payment if after giving effect  thereto,  Borrower's  Net Worth (as
     defined in the Receivables  Sale Agreement) would be less than the Required
     Capital Amount (as defined in the Receivables Sale Agreement).

          (h) Borrower Indebtedness.  Borrower will not incur or permit to exist
     any  Indebtedness  or  liability  on account of  deposits  except:  (i) the
     Obligations,  (ii) the Subordinated Loans, and (iii) other current accounts
     payable arising in the ordinary course of business and not overdue.

          (i)  Prohibition on Additional  Negative  Pledges.  No Loan Party will
     enter into or assume any agreement (other than this Agreement and the other
     Transaction  Documents)  prohibiting  the  creation  or  assumption  of any
     Adverse Claim upon the Collateral except as contemplated by the Transaction
     Documents,   or  otherwise   prohibiting  or  restricting  any  transaction
     contemplated  hereby or by the  other  Transaction  Documents,  and no Loan
     Party will enter into or assume any  agreement  creating any Adverse  Claim
     upon the Subordinated Notes.

                                 ARTICLE VIII.
                          ADMINISTRATION AND COLLECTION

     Section 8.1 Designation of Servicer.

          (a) The servicing,  administration  and collection of the  Receivables
     shall be conducted by such Person (the  "Servicer") so designated from time
     to time in  accordance  with  this  Section  8.1.  NSI  Georgia  is  hereby
     designated as, and hereby agrees to perform the duties and  obligations of,
     the Servicer pursuant to the terms of this Agreement.  The Agent may at any
     time  following  the  occurrence  of an  Amortization  Event  designate  as
     Servicer  any  Person to succeed  NSI  Georgia  or any  successor  Servicer
     provided that the Rating Agency Condition is satisfied.

          (b) NSI  Georgia may  delegate,  and NSI  Georgia  hereby  advises the
     Lenders  and  the  Agent  that it has  delegated,  to NSI  Enterprises,  as
     sub-servicer of the Servicer, certain of its duties and responsibilities as

                                                                        Page 148
                                                               Exhibit 10(i)A(4)

     Servicer  hereunder  in  respect  of  the  Receivables  originated  by  NSI
     Enterprises.  Without  the  prior  written  consent  of the  Agent  and the
     Required  Liquidity  Banks,  NSI Georgia shall not be permitted to delegate
     any of its duties or  responsibilities as Servicer to any Person other than
     (i)  NSI   Enterprises,   and  (ii)  with  respect  to  certain   Defaulted
     Receivables,  outside collection  agencies in accordance with its customary
     practices.  NSI Enterprises  shall not be permitted to further  delegate to
     any other  Person any of the  duties or  responsibilities  of the  Servicer
     delegated to it by NSI Georgia. If at any time the Agent shall designate as
     Servicer any Person other than NSI Georgia, all duties and responsibilities
     theretofore  delegated  by NSI  Georgia  to  NSI  Enterprises  may,  at the
     discretion  of the Agent,  be  terminated  forthwith on notice given by the
     Agent to NSI Georgia and to Borrower.

          (c)   Notwithstanding   any  delegation   pursuant  to  the  foregoing
     subsection (b): (i) NSI Georgia shall be and remain primarily liable to the
     Agent and the Lenders for the full and prompt performance of all duties and
     responsibilities  of the  Servicer  hereunder  and (ii) the  Agent  and the
     Lenders shall be entitled to deal  exclusively  with NSI Georgia in matters
     relating   to  the   discharge   by  the   Servicer   of  its   duties  and
     responsibilities hereunder. The Agent and the Lenders shall not be required
     to give notice,  demand or other communication to any Person other than NSI
     Georgia and  Borrower in order for  communication  to the  Servicer and its
     sub-servicer or other delegate with respect thereto to be accomplished. NSI
     Georgia,  at all times that it is the Servicer,  shall be  responsible  for
     providing  any  sub-servicer  or other  delegate of the  Servicer  with any
     notice given to the Servicer under this Agreement.

     Section 8.2 Duties of Servicer.

          (a) The  Servicer  shall take or cause to be taken all such actions as
     may be necessary or advisable to collect each Receivable from time to time,
     all in  accordance  with  applicable  laws,  rules  and  regulations,  with
     reasonable  care and  diligence,  and in  accordance  with the  Credit  and
     Collection Policy.

          (b) The Servicer  will  instruct  all Obligors to pay all  Collections
     directly to a Lock-Box or Collection  Account.  The Servicer shall effect a
     Collection  Account Agreement  substantially in the form of Exhibit VI with
     each bank party to a  Collection  Account  at any time.  In the case of any
     remittances  received in any Lock-Box or Collection Account that shall have
     been  identified,  to the  satisfaction of the Servicer,  to not constitute
     Collections or other proceeds of the  Receivables or the Related  Security,
     the Servicer shall promptly remit such items to the Person identified to it
     as being the owner of such  remittances.  From and after the date the Agent
     delivers to any  Collection  Bank a Collection  Notice  pursuant to Section
     8.3, the Agent may request that the  Servicer,  and the Servicer  thereupon
     promptly  shall instruct all Obligors with respect to the  Receivables,  to
     remit all payments  thereon to a new  depositary  account  specified by the
     Agent and, at all times  thereafter,  Borrower and the  Servicer  shall not
     deposit or  otherwise  credit,  and shall not  permit  any other  Person to
     deposit or  otherwise  credit to such new  depositary  account  any cash or
     payment item other than Collections.

          (c) The Servicer shall  administer the  Collections in accordance with
     the procedures  described  herein and in Article II. The Servicer shall set
     aside and hold in trust for the account of Borrower  and the Lenders  their

                                                                        Page 149
                                                               Exhibit 10(i)A(4)

     respective  shares of the  Collections  in accordance  with Article II. The
     Servicer  shall,  upon the  request  of the Agent,  segregate,  in a manner
     acceptable to the Agent, all cash, checks and other instruments received by
     it from time to time constituting Collections from the general funds of the
     Servicer or Borrower  prior to the  remittance  thereof in accordance  with
     Article II. If the  Servicer  shall be required  to  segregate  Collections
     pursuant to the  preceding  sentence,  the  Servicer  shall  segregate  and
     deposit  with a bank  designated  by the  Agent  such  allocable  share  of
     Collections of Receivables  set aside for the Lenders on the first Business
     Day following receipt by the Servicer of such Collections, duly endorsed or
     with duly executed instruments of transfer.

          (d) The Servicer  may, in  accordance  with the Credit and  Collection
     Policy,  extend the maturity of any  Receivable  or adjust the  Outstanding
     Balance of any  Receivable as the Servicer  determines to be appropriate to
     maximize Collections  thereof;  provided,  however,  that such extension or
     adjustment  shall not alter the status of such  Receivable  as a Delinquent
     Receivable or Defaulted  Receivable or limit the rights of the Agent or the
     Lenders  under this  Agreement.  Notwithstanding  anything to the  contrary
     contained herein,  from and after the occurrence of an Amortization  Event,
     the Agent  shall  have the  absolute  and  unlimited  right to  direct  the
     Servicer  to  commence  or settle  any legal  action  with  respect  to any
     Receivable or to foreclose upon or repossess any Related Security; provided
     that (i) in lieu of commencing any such action or taking other  enforcement
     action,  the  Servicer  may,  at its  option,  elect to pay to the Agent an
     amount equal to the  Outstanding  Balance of such  Receivable  and (ii) the
     Servicer shall not, unless  indemnified to its satisfaction by the Lenders,
     be obligated to commence or take any legal action that is in  contravention
     of applicable law or regulation,  or to settle any action that would entail
     an  admission  by  the  Servicer,  Borrower  or  any  Originator  of  legal
     wrongdoing  or  culpability  or  require  the  payment  of  damages  by any
     Originator or the Servicer to any third party.

          (e) The Servicer  shall hold in trust for Borrower and the Lenders all
     Records  that (i)  evidence  or  relate  to the  Receivables,  the  related
     Contracts and Related Security or (ii) are otherwise necessary or desirable
     to collect the Receivables and shall, as soon as practicable upon demand of
     the Agent at any time when an  Amortization  Event exists,  deliver or make
     available to the Agent all such Records,  at a place selected by the Agent.
     The Servicer shall, as soon as practicable  following  receipt thereof turn
     over to Borrower any cash collections or other cash proceeds  received with
     respect to Indebtedness not constituting  Receivables.  The Servicer shall,
     from time to time at the  request of any  Lender,  furnish  to the  Lenders
     (promptly  after any such request) a  calculation  of the amounts set aside
     for the Lenders pursuant to Article II.

          (f) Any payment by an Obligor in respect of any  indebtedness  owed by
     it to Originator or Borrower shall,  except as otherwise  specified by such
     Obligor or  otherwise  required  by  contract  or law and unless  otherwise
     instructed by the Agent,  be applied as a Collection  of any  Receivable of
     such Obligor  (starting  with the oldest such  Receivable) to the extent of
     any amounts then due and payable  thereunder  before  being  applied to any
     other receivable or other obligation of such Obligor.

                                                                        Page 150
                                                               Exhibit 10(i)A(4)


     Section 8.3 Collection  Notices.  The Agent is authorized at any time after
the occurrence and during the continuance of an  Amortization  Event to date and
to deliver to the  Collection  Banks the  Collection  Notices.  Borrower  hereby
transfers to the Agent for the benefit of the Lenders,  effective when the Agent
delivers such notice,  the exclusive  ownership and control of each Lock-Box and
the  Collection  Accounts.  In case any  authorized  signatory of Borrower whose
signature  appears on a Collection  Account  Agreement  shall cease to have such
authority  before the  delivery of such  notice,  such  Collection  Notice shall
nevertheless  be valid as if such  authority  had  remained  in force.  Borrower
hereby  authorizes the Agent, and agrees that the Agent shall be entitled (i) at
any time after delivery of the Collection Notices, to endorse Borrower's name on
checks and other instruments  representing  Collections,  (ii) at any time after
the occurrence and during the continuance of an  Amortization  Event, to enforce
the Receivables,  the related Contracts and the Related  Security,  and (iii) at
any time after the  occurrence  and during the  continuance  of an  Amortization
Event, to take such action as shall be necessary or desirable to cause all cash,
checks and other  instruments  constituting  Collections  of Receivables to come
into the possession of the Agent rather than Borrower.

     Section 8.4  Responsibilities of Borrower.  Anything herein to the contrary
notwithstanding,  the  exercise  by the Agent and the  Lenders  of their  rights
hereunder shall not release the Servicer, any Originator or Borrower from any of
their duties or obligations with respect to any Receivables or under the related
Contracts. The Lenders shall have no obligation or liability with respect to any
Receivables or related Contracts,  nor shall any of them be obligated to perform
the obligations of Borrower.

     Section 8.5 Monthly Reports.  The Servicer shall prepare and forward to the
Agent (i) on each Monthly  Reporting  Date, a Monthly  Report and an  electronic
file of the data  contained  therein  and (ii) at such times as the Agent  shall
request, a listing by Obligor of all Receivables  together with an aging of such
Receivables; provided, however, that if an Amortization Event shall exist and be
continuing,  the Agent may request a Monthly Report be prepared and forwarded to
the Agent more frequently than monthly.

     Section 8.6 Servicing Fee. As  compensation  for the  Servicer's  servicing
activities  on their  behalf,  Borrower  hereby  agrees to pay the  Servicer the
Servicing Fee in arrears on each Settlement Date.  Notwithstanding the fact that
Sections 2.2 and 2.3  authorize  the Servicer to deduct its  Servicing  Fee from
Collections,  Borrower  is  and  shall  remain  the  Person  who  is  ultimately
responsible  for paying  the  Servicing  Fee and other  costs of  servicing  the
Receivables.


                                  ARTICLE IX.
                               AMORTIZATION EVENTS

     Section 9.1 Amortization  Events.  The occurrence of any one or more of the
following events shall constitute an Amortization Event:

          (a) Any Loan  Party or  Performance  Guarantor  shall fail to make any
     payment  or  deposit  required  to be  made  by it  under  the  Transaction
     Documents  when due and,  for any such  payment or deposit  which is not in

                                                                        Page 151
                                                               Exhibit 10(i)A(4)

     respect  of  principal,  such  failure  continues  for two (2)  consecutive
     Business Days.

          (b) Any representation,  warranty,  certification or statement made by
     Performance  Guarantor  or any Loan Party in any  Transaction  Document  to
     which it is a party or in any other  document  delivered  pursuant  thereto
     shall prove to have been  incorrect  in any  material  respect when made or
     deemed  made (it being  understood  and agreed  that any error or  omission
     which results in the  Aggregate  Principal  exceeding  the Borrowing  Limit
     shall per se constitute a material error).

          (c) Any Loan Party or Performance  Guarantor  shall fail to perform or
     observe any covenant  contained in Section 7.1(b),  7.1(j), 7.2 or 8.5 when
     due.

          (d) Any Loan Party or Performance  Guarantor  shall fail to perform or
     observe  any other  term,  covenant  or  agreement  hereunder  or any other
     Transaction  Document (other than a term,  covenant or agreement covered by
     another clause of this Section 9.1) to which it is a party and such failure
     shall  continue  for and such  failure  shall not have been cured within 30
     days after the  earlier to occur of (i)  written  notice  thereof  has been
     given by such  Loan  Party  or  Performance  Guarantor  to Agent or (ii) an
     Executive  Officer of such Loan Party or  Performance  Guarantor  otherwise
     becomes aware of any such failure;  provided,  however, that, except in the
     case of a failure  to perform or  observe  Section  7.1(a)(vii),  such cure
     period shall be extended for a period of time,  not to exceed an additional
     30 days,  reasonably  sufficient  to permit such Loan Party or  Performance
     Guarantor to cure such  failure if such failure  cannot be cured within the
     initial  30-day  period but  reasonably  could be expected to be capable of
     cure  within  such  additional  30 days,  such  Loan  Party or  Performance
     Guarantor  has  commenced  efforts to cure such failure  during the initial
     30-day  period and such Loan Party or  Performance  Guarantor is diligently
     pursuing such cure.

          (e) Failure of  Borrower to pay any Debt (other than the  Obligations)
     when  due or the  default  by  Borrower  in the  performance  of any  term,
     provision or condition contained in any agreement under which any such Debt
     was created or is governed,  the effect of which is to cause,  or to permit
     the holder or holders of such Debt to cause,  such Debt to become due prior
     to its stated  maturity;  or any such Debt of Borrower shall be declared to
     be due and  payable or  required  to be prepaid  (other than by a regularly
     scheduled payment) prior to the date of maturity thereof.

          (f) An Event of  Bankruptcy  shall occur with respect to Parent or any
     of its Material Subsidiaries.

          (g) As at the end of any Calculation Period:

               (i) the  three-month  rolling  average  Delinquency  Ratio  shall
          exceed 4.25%,

               (ii) the  three-month  rolling average Default Ratio shall exceed
          2.55%, or

                                                                        Page 152
                                                               Exhibit 10(i)A(4)


               (iii) the three-month rolling average Dilution Ratio shall exceed
          8.00%;

     provided,  however,  that the Borrower and the Agent agree to  re-negotiate
     the  aforementioned  ratios in good  faith once the Agent has  received  an
     additional 6 months of data regarding the Receivables.

          (h) A Change of Control shall occur.

          (i)  One or more  final  judgments  for the  payment  of  money  in an
     aggregate amount of $10,700 or more shall be entered against Borrower.

          (j) The occurrence of any  "Termination  Event" or of the "Termination
     Date"  (as  each  of the  foregoing  is  defined  in the  Receivables  Sale
     Agreement or the First-Step Sale Agreement).

          (k) This  Agreement  shall  terminate  in whole or in part  (except in
     accordance  with its terms),  or shall cease to be  effective  or to be the
     legally  valid,  binding and  enforceable  obligation  of Borrower,  or any
     Obligor  shall   directly  or   indirectly   contest  in  any  manner  such
     effectiveness, validity, binding nature or enforceability, or the Agent for
     the benefit of Blue Ridge shall cease to have a valid and  perfected  first
     priority  (except  for  Permitted  Encumbrances)  security  interest in the
     Collateral.

          (l) The Internal  Revenue  Service shall  commence  enforcement of any
     federal  tax lien under  Section  6323 of the Tax Code  against  any of the
     Collateral,  or the PBGC shall commence  enforcement any lien under Section
     4068 of ERISA against any of the Collateral.

          (m) Any event shall occur which  materially and adversely  impairs (i)
     the ability of the Originators to originate Receivables of a credit quality
     that is at least  equal to the credit  quality of the  Receivables  sold or
     contributed to Borrower on the date of this Agreement or (ii) the legality,
     validity  or  enforceability  of this  Agreement  or any other  Transaction
     Document,  (iii) the  Agent's  security  interest,  for the  benefit of the
     Secured Parties, in the Receivables generally or in any significant portion
     of the  Receivables,  the Related  Security or the Collections with respect
     thereto.

          (n) On any  Settlement  Date,  after giving  effect to the turnover of
     Collections by the Servicer on such date and the application thereof to the
     Obligations  in accordance  with this  Agreement,  the Aggregate  Principal
     shall exceed the Borrowing Limit.

          (o) The Performance  Undertaking  shall cease to be effective or to be
     the  legally  valid,  binding and  enforceable  obligation  of  Performance
     Guarantor, or Performance Guarantor shall directly or indirectly contest in
     any manner such effectiveness,  validity,  binding nature or enforceability
     of its obligations thereunder.

     Section 9.2 Remedies. Upon the occurrence and during the continuation of an
Amortization  Event,  the  Agent  may,  or upon the  direction  of the  Required
Liquidity Banks shall, upon notice to Borrower and the Servicer, take any of the

                                                                        Page 153
                                                               Exhibit 10(i)A(4)

following  actions:  (i) replace the Person then acting as Servicer (ii) declare
the Amortization Date to have occurred, whereupon the Aggregate Commitment shall
immediately  terminate and the  Amortization  Date shall  forthwith  occur,  all
without  demand,  protest or further notice of any kind, all of which are hereby
expressly waived by each Loan Party; provided, however, that upon the occurrence
of an Event of Bankruptcy with respect to any Loan Party, the Amortization  Date
shall automatically  occur,  without demand,  protest or any notice of any kind,
all of which are hereby expressly  waived by each Loan Party,  (iii) deliver the
Collection  Notices  to the  Collection  Banks,  (iv)  exercise  all  rights and
remedies  of a secured  party upon  default  under the UCC and other  applicable
laws,  and  (v)  notify  Obligors  of  the  Agent's  security  interest  in  the
Receivables and other Collateral.  The aforementioned  rights and remedies shall
be without limitation, and shall be in addition to all other rights and remedies
of the Agent and the Lenders  otherwise  available  under any other provision of
this  Agreement,  by operation of law, at equity or otherwise,  all of which are
hereby  expressly  preserved,  including,  without  limitation,  all  rights and
remedies provided under the UCC, all of which rights shall be cumulative.


                                   ARTICLE X.
                                 INDEMNIFICATION

     Section 10.1  Indemnities by the Loan Parties.  Without  limiting any other
rights that the Agent or any Lender may have hereunder or under  applicable law,
(A) Borrower hereby agrees to indemnify (and pay upon demand to) the Agent, Blue
Ridge, each of the Liquidity Banks and each of the respective assigns, officers,
directors,  agents and employees of the foregoing (each, an "Indemnified Party")
from and against any and all damages, losses, claims, taxes, liabilities, costs,
expenses and for all other  amounts  payable,  including  actual and  reasonable
attorneys'  fees (which  attorneys may be employees of the Agent or such Lender)
and  disbursements  (all of the  foregoing  being  collectively  referred  to as
"Indemnified  Amounts")  awarded  against or  actually  incurred  by any of them
arising  out of or as a result  of this  Agreement  or the  acquisition,  either
directly or indirectly,  by a Lender of an interest in the Receivables,  and (B)
the  Servicer  hereby  agrees  to  indemnify  (and  pay  upon  demand  to)  each
Indemnified Party for Indemnified  Amounts awarded against or incurred by any of
them arising out of the Servicer's  activities as Servicer hereunder  excluding,
however,  in all of the foregoing  instances under the preceding clauses (A) and
(B):

          (a)  Indemnified  Amounts to the extent a final judgment of a court of
     competent  jurisdiction  holds that such Indemnified  Amounts resulted from
     gross negligence or willful misconduct on the part of any Indemnified Party
     seeking  indemnification or by reason of such Indemnified Party's breach of
     its obligations hereunder or other legal duty;

          (b)  Indemnified  Amounts to the extent  the same  includes  losses in
     respect of Receivables that are uncollectible on account of the insolvency,
     bankruptcy or lack of creditworthiness of the related Obligor; or

                                                                        Page 154
                                                               Exhibit 10(i)A(4)


          (c)  taxes  imposed  by the  jurisdiction  in which  such  Indemnified
     Party's  principal   executive  office  is  located   (including,   without
     limitation,  in the case of the Agent or Blue  Ridge,  the  States of North
     Carolina  and  Georgia),  on or  measured by the overall net income of such
     Indemnified  Party to the  extent  that the  computation  of such  taxes is
     consistent  with  the  characterization  for  income  tax  purposes  of the
     acquisition  by the  Lenders of Loans as a loan or loans by the  Lenders to
     Borrower secured by the Receivables,  the Related Security,  the Collection
     Accounts and the Collections;

provided,  however,  that  nothing  contained in this  sentence  shall limit the
liability  of any Loan Party or limit the  recourse  of the  Lenders to any Loan
Party for amounts otherwise  specifically provided to be paid by such Loan Party
under  the terms of this  Agreement.  Without  limiting  the  generality  of the
foregoing  indemnification,  Borrower shall  indemnify the Agent and the Lenders
for Indemnified  Amounts (including,  without  limitation,  losses in respect of
uncollectible  receivables,  regardless of whether reimbursement  therefor would
constitute recourse to Borrower or the Servicer) relating to or resulting from:

          (i) any  representation  or  warranty  made by any  Loan  Party or any
     Originator (or any officers of any such Person) under or in connection with
     this Agreement,  any other Transaction Document or any other information or
     report delivered by any such Person pursuant hereto or thereto, which shall
     have been false or incorrect when made or deemed made;

          (ii) the failure by Borrower, the Servicer or any Originator to comply
     with any applicable  law, rule or regulation with respect to any Receivable
     or Contract  related  thereto,  or the  nonconformity  of any Receivable or
     Contract  included therein with any such applicable law, rule or regulation
     or any failure of any Originator to keep or perform any of its obligations,
     express or implied, with respect to any Contract;

          (iii) any  failure of  Borrower,  the  Servicer or any  Originator  to
     perform its duties,  covenants or other  obligations in accordance with the
     provisions of this Agreement or any other Transaction Document;

          (iv) any products liability,  personal injury or damage suit, or other
     similar claim arising out of or in connection with  merchandise,  insurance
     or services that are the subject of any Contract or any Receivable;

          (v) any dispute,  claim,  offset or defense  (other than  discharge in
     bankruptcy of the Obligor) of the Obligor to the payment of any  Receivable
     (including,  without limitation,  a defense based on such Receivable or the
     related  Contract not being a legal,  valid and binding  obligation of such
     Obligor  enforceable against it in accordance with its terms), or any other
     claim resulting from the sale of the merchandise or service related to such
     Receivable  or the  furnishing  or failure to furnish such  merchandise  or
     services;

          (vi) the  commingling  of  Collections of Receivables at any time with
     other funds;

                                                                        Page 155
                                                               Exhibit 10(i)A(4)


          (vii)  any  investigation,  litigation  or  proceeding  related  to or
     arising  from  this  Agreement  or  any  other  Transaction  Document,  the
     transactions  contemplated  hereby, the use of the proceeds of any Advance,
     the  Collateral  or  any  other  investigation,  litigation  or  proceeding
     relating  to  Borrower,  the  Servicer  or  any  Originator  in  which  any
     Indemnified  Party becomes  involved as a result of any of the transactions
     contemplated hereby;

          (viii) any  inability  to  litigate  any claim  against any Obligor in
     respect of any  Receivable  as a result of such  Obligor  being immune from
     civil  and  commercial  law  and  suit on the  grounds  of  sovereignty  or
     otherwise from any legal action, suit or proceeding;

          (ix) any Amortization Event;

          (x) any  failure  of  Borrower  to  acquire  and  maintain  legal  and
     equitable  title  to,  and  ownership  of any of the  Collateral  from  the
     applicable  Originator,  free and clear of any Adverse Claim (other than as
     created  hereunder);   or  any  failure  of  Borrower  to  give  reasonably
     equivalent  value to any Originator under the Receivables Sale Agreement in
     consideration of the transfer by such Originator of any Receivable,  or any
     attempt by any Person to void such transfer under  statutory  provisions or
     common law or equitable action;

          (xi) any  failure  to vest and  maintain  vested  in the Agent for the
     benefit of the Lenders,  or to transfer to the Agent for the benefit of the
     Secured Parties, a valid first priority perfected security interests in the
     Collateral,  free and clear of any Adverse  Claim (except as created by the
     Transaction Documents);

          (xii) the  failure to have  filed,  or any delay in filing,  financing
     statements or other similar  instruments or documents  under the UCC of any
     applicable  jurisdiction  or other  applicable  laws  with  respect  to any
     Collateral, and the proceeds thereof, whether at the time of any Advance or
     at any subsequent time;

          (xiii)  any action or  omission  by any Loan  Party  which  reduces or
     impairs  the  rights  of the  Agent  or the  Lenders  with  respect  to any
     Collateral  or the value of any  Collateral  (for any reason other than the
     application  of  Collections  thereto or  charge-off  of any  Receivable as
     uncollectible);

          (xiv) any  attempt  by any Person to void any  Advance or the  Agent's
     security  interest in the Collateral  under statutory  provisions or common
     law or equitable action; and

          (xv) the failure of any Receivable  included in the calculation of the
     Net Pool Balance as an Eligible  Receivable to be an Eligible Receivable at
     the time so included.

     Section 10.2 Increased Cost and Reduced Return.

          (a) If after the date hereof,  any Funding Source shall be charged any
     fee, expense or increased cost on account of the adoption of any applicable
     law, rule or regulation  (including any applicable  law, rule or regulation
     regarding  capital  adequacy) or any change  therein,  or any change in the
     interpretation or

                                                                        Page 156
                                                               Exhibit 10(i)A(4)

     administration  thereof  by any  governmental  authority,  central  bank or
     comparable  agency  charged  with  the   interpretation  or  administration
     thereof, or compliance with any request or directive (whether or not having
     the force of law) of any such authority,  central bank or comparable agency
     (a "Regulatory Change"): (i) that subjects any Funding Source to any charge
     or  withholding  on or with  respect to any Funding  Agreement or a Funding
     Source's  obligations under a Funding  Agreement,  or on or with respect to
     the  Receivables,  or changes  the basis of  taxation  of  payments  to any
     Funding Source of any amounts payable under any Funding  Agreement  (except
     for  changes  in the rate of tax on the  overall  net  income  of a Funding
     Source or taxes excluded by Section 10.1) or (ii) that imposes, modifies or
     deems applicable any reserve, assessment, insurance charge, special deposit
     or similar  requirement against assets of, deposits with or for the account
     of a Funding  Source,  or credit extended by a Funding Source pursuant to a
     Funding  Agreement or (iii) that imposes any other  condition the result of
     which is to  increase  the  cost to a  Funding  Source  of  performing  its
     obligations under a Funding Agreement, or to reduce the rate of return on a
     Funding  Source's  capital  as a  consequence  of its  obligations  under a
     Funding  Agreement,  or to  reduce  the  amount  of  any  sum  received  or
     receivable by a Funding Source under a Funding  Agreement or to require any
     payment calculated by reference to the amount of interests or loans held or
     interest  received by it, then,  upon written  demand by the Agent no later
     than  ninety  (90)  days  after the  adoption  of such  Regulatory  Change,
     Borrower  shall pay to the Agent,  for the benefit of the relevant  Funding
     Source,  such  amounts  charged to such  Funding  Source or such amounts to
     otherwise  compensate  such Funding  Source for such increased cost or such
     reduction. In the event that the Agent fails to give Borrower notice within
     the ninety (90) day time limitation  prescribed above,  Borrower shall have
     no obligation to pay such claim for compensation hereunder.  Borrower shall
     have no obligation to pay any amount with respect to claims  accruing under
     this  Section  10.2(a)  prior  to the  90th day  preceding  written  demand
     therefor from Agent.

          (b) The  Agent  and  each  Funding  Source  agrees,  if  requested  by
     Borrower,  it will use  reasonable  efforts  (subject to the overall policy
     considerations  of such Funding  Source) to designate an alternate  lending
     office  with   respect  to  Loans   affected  by  any  of  the  matters  or
     circumstances  prescribed in Section  10.2(a) hereof in order to reduce the
     liability of Borrower or avoid the results provided thereunder,  so long as
     such  designation  is  not   disadvantageous  to  such  Funding  Source  as
     determined by such Funding  Source,  which  determination,  if made in good
     faith,  shall be conclusive and binding on all parties  hereto.  Nothing in
     this Section  10.2(b)  shall affect or postpone  any of the  obligation  of
     Borrower hereunder or any right of any Funding Source hereunder

     Section 10.3 Other Costs and Expenses.  Borrower shall pay to the Agent and
Blue Ridge on demand all reasonable costs and  out-of-pocket  expenses  actually
incurred  in  connection   with  the   preparation,   execution,   delivery  and
administration of this Agreement,  the transactions  contemplated hereby and the
other documents to be delivered  hereunder,  including without  limitation,  the
cost of Blue Ridge's  auditors  auditing the books,  records and  procedures  of
Borrower,  reasonable fees and out-of-pocket  expenses of legal counsel for Blue
Ridge and the Agent  (which such  counsel may be  employees of Blue Ridge or the
Agent)  with  respect  thereto and with  respect to advising  Blue Ridge and the
Agent as to their respective rights and remedies under this Agreement.  Borrower
shall pay to the Agent on demand any and all  reasonable  costs and  expenses of

                                                                        Page 157
                                                               Exhibit 10(i)A(4)

the  Agent  and the  Lenders,  if any,  including  reasonable  counsel  fees and
expenses,  actually  incurred  in  connection  with  the  amendment,  waiver  or
enforcement of this Agreement and the other documents delivered hereunder and in
connection  with  any  restructuring  or  workout  of  this  Agreement  or  such
documents,  or the  administration  of this Agreement  following an Amortization
Event.  Borrower shall  reimburse Blue Ridge on demand for all other  reasonable
costs and expenses actually  incurred by Blue Ridge ("Other Costs"),  including,
without limitation,  the cost of auditing Blue Ridge's books by certified public
accountants,  the cost of rating the Commercial  Paper by independent  financial
rating agencies,  and the reasonable fees and out-of-pocket  expenses of counsel
for Blue Ridge or any counsel for any  shareholder of Blue Ridge with respect to
advising Blue Ridge or such  shareholder as to matters  relating to Blue Ridge's
operations.

     Section 10.4  Allocations.  Blue Ridge shall allocate the liability for (a)
increased  costs covered by Section 10.2 arising under Funding  Agreements  that
are not specifically related solely to this Agreement ("Shared Increased Costs")
and (b) Other Costs among  Borrower  and other  Persons with whom Blue Ridge has
entered into  agreements  to purchase  interests in or finance  receivables  and
other financial assets ("Other Customers").  If any Other Costs are attributable
to Borrower and not  attributable to any Other Customer or any Shared  Increased
Costs are  attributable  to the facility  evidenced by this Agreement and not to
any Other Customers' facilities,  Borrower shall be solely liable for such Other
Costs or Shared  Increased  Costs.  However,  if Other Costs or Shared Increased
Costs  are  attributable  to  Other  Customers  and  their  facilities  but  not
attributable to Borrower or the facility  evidenced hereby,  such Other Customer
shall be solely liable for such Other Costs or Shared  Increased  Costs,  as the
case may be. All allocations to be made pursuant to the foregoing  provisions of
this Article X shall be made by Blue Ridge in its sole  discretion  and shall be
binding on Borrower and the Servicer.

                                  ARTICLE XI.
                                   THE AGENT

     Section 11.1  Authorization  and Action.  Each Lender hereby designates and
appoints Wachovia to act as its agent under the Transaction  Documents and under
the Liquidity Agreement,  and authorizes the Agent to take such actions as agent
on its behalf and to exercise  such powers as are  delegated to the Agent by the
terms of the Liquidity  Agreement or the  Transaction  Documents,  together with
such powers as are reasonably  incidental thereto.  The Agent shall not have any
duties or  responsibilities,  except those  expressly set forth in the Liquidity
Agreement or in any Transaction Document, or any fiduciary relationship with any
Lender,  and  no  implied  covenants,   functions,   responsibilities,   duties,
obligations  or  liabilities  on the part of the  Agent  shall be read  into the
Liquidity  Agreement  or any  Transaction  Document or  otherwise  exist for the
Agent. In performing its functions and duties under the Liquidity  Agreement and
the Transaction  Documents,  the Agent shall act solely as agent for the Lenders
and does not  assume  nor shall be  deemed to have  assumed  any  obligation  or
relationship  of trust or agency  with or for any Loan Party or any of such Loan
Party's  successors  or  assigns.  The Agent  shall not be  required to take any
action that  exposes the Agent to personal  liability or that is contrary to the
Liquidity  Agreement  or  any  Transaction   Document  or  applicable  law.  The

                                                                        Page 158
                                                               Exhibit 10(i)A(4)

appointment  and  authority  of the Agent  hereunder  shall  terminate  upon the
indefeasible  payment in full of all Obligations.  Each Lender hereby authorizes
the Agent to  execute  each of the UCC  financing  statements,  each  Collection
Account  Agreement on behalf of such Lender (the terms of which shall be binding
on such Lender).

     Section 11.2 Delegation of Duties.  The Agent may execute any of its duties
under the Liquidity Agreement and each Transaction Document by or through agents
or  attorneys-in-fact  and shall be entitled to advice of counsel concerning all
matters  pertaining to such duties.  The Agent shall not be responsible  for the
negligence or misconduct of any agents or attorneys-in-fact  selected by it with
reasonable care.

     Section  11.3  Exculpatory  Provisions.  Neither  the  Agent nor any of its
directors,  officers,  agents or  employees  shall be (i)  liable for any action
lawfully taken or omitted to be taken by it or them under or in connection  with
the Liquidity  Agreement or any Transaction  Document  (except for its, their or
such Person's own gross negligence or willful  misconduct),  or (ii) responsible
in  any  manner  to  any  of  the   Lenders   for  any   recitals,   statements,
representations  or warranties made by any Loan Party contained in the Liquidity
Agreement,  any Transaction  Document or any certificate,  report,  statement or
other  document  referred  to or  provided  for  in,  or  received  under  or in
connection  with,  any  Transaction   Document  or  for  the  value,   validity,
effectiveness,  genuineness,  enforceability  or  sufficiency  of the  Liquidity
Agreement  or any  Transaction  Document  or any  other  document  furnished  in
connection  therewith,  or for any  failure  of any Loan  Party to  perform  its
obligations  under any  Transaction  Document,  or for the  satisfaction  of any
condition specified in Article VI, or for the perfection,  priority,  condition,
value or sufficiency of any collateral pledged in connection herewith. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or  performance  of any of the agreements or covenants  contained
in, or conditions of, any  Transaction  Document,  or to inspect the properties,
books or  records  of the Loan  Parties.  The Agent  shall not be deemed to have
knowledge of any Amortization  Event or Unmatured  Amortization Event unless the
Agent has received notice from a Loan Party or a Lender.

     Section 11.4 Reliance by Agent. The Agent shall in all cases be entitled to
rely, and shall be fully protected in relying, upon any document or conversation
believed by it to be genuine and correct and to have been  signed,  sent or made
by the proper Person or Persons and upon advice and  statements of legal counsel
(including,  without limitation,  counsel to Borrower),  independent accountants
and other experts  selected by the Agent.  The Agent shall in all cases be fully
justified  in  failing  or  refusing  to take any  action  under  the  Liquidity
Agreement or any Transaction  Document unless it shall first receive such advice
or  concurrence  of Blue  Ridge or the  Required  Liquidity  Banks or all of the
Lenders,  as  applicable,  as  it  deems  appropriate  and  it  shall  first  be
indemnified to its  satisfaction by the Lenders,  provided that unless and until
the Agent shall have  received  such advice,  the Agent may take or refrain from
taking any action,  as the Agent shall deem  advisable and in the best interests
of the Lenders. The Agent shall in all cases be fully protected in acting, or in
refraining  from  acting,  in  accordance  with a request  of Blue  Ridge or the
Required Liquidity Banks or all of the Lenders, as applicable,  and such request
and any action  taken or failure to act pursuant  thereto  shall be binding upon
all the Lenders.

                                                                        Page 159
                                                               Exhibit 10(i)A(4)


     Section 11.5 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges  that  neither  the  Agent,  nor  any of its  officers,  directors,
employees, agents,  attorneys-in-fact or affiliates has made any representations
or warranties  to it and that no act by the Agent  hereafter  taken,  including,
without limitation, any review of the affairs of any Loan Party, shall be deemed
to  constitute  any  representation  or  warranty  by  the  Agent.  Each  Lender
represents  and  warrants to the Agent that it has and will,  independently  and
without  reliance upon the Agent or any other Lender and based on such documents
and  information  as it has deemed  appropriate,  made its own  appraisal of and
investigation into the business, operations,  property, prospects, financial and
other conditions and  creditworthiness  of Borrower and made its own decision to
enter into the  Liquidity  Agreement,  the  Transaction  Documents and all other
documents related thereto.

     Section 11.6 Reimbursement and  Indemnification.  The Liquidity Banks agree
to reimburse and indemnify  the Agent and its  officers,  directors,  employees,
representatives  and agents ratably  according to their Pro Rata Shares,  to the
extent not paid or  reimbursed by the Loan Parties (i) for any amounts for which
the Agent,  acting in its capacity as Agent, is entitled to reimbursement by the
Loan Parties hereunder and (ii) for any other expenses incurred by the Agent, in
its capacity as Agent and acting on behalf of the Lenders,  in  connection  with
the  administration   and  enforcement  of  the  Liquidity   Agreement  and  the
Transaction Documents.

     Section 11.7 Agent in its Individual Capacity. The Agent and its Affiliates
may make loans to,  accept  deposits  from and  generally  engage in any kind of
business with Borrower or any Affiliate of Borrower as though the Agent were not
the Agent  hereunder.  With  respect  to the  making of Loans  pursuant  to this
Agreement,  the Agent shall have the same rights and powers under the  Liquidity
Agreement and this  Agreement in its  individual  capacity as any Lender and may
exercise  the same as though  it were not the  Agent,  and the terms  "Liquidity
Bank," "Lender,"  "Liquidity Banks" and "Lenders" shall include the Agent in its
individual capacity.

     Section 11.8 Successor Agent. The Agent,  upon five (5) days' notice to the
Loan Parties and the Lenders,  may voluntarily  resign and may be removed at any
time, with or without cause, by the Required Liquidity Banks; provided, however,
that Wachovia  shall not  voluntarily  resign as the Agent so long as any of the
Liquidity  Commitments remain in effect or Blue Ridge has any outstanding Loans.
If the Agent (other than  Wachovia)  shall  voluntarily  resign or be removed as
Agent  under this  Agreement,  then the  Required  Liquidity  Banks  during such
five-day  period  shall  appoint,  with the consent of  Borrower  from among the
remaining  Liquidity  Banks, a successor  Agent,  whereupon such successor Agent
shall succeed to the rights, powers and duties of the Agent and the term "Agent"
shall mean such successor agent, effective upon its appointment,  and the former
Agent's  rights,  powers and duties as Agent  shall be  terminated,  without any
other  or  further  act or deed on the part of such  former  Agent or any of the
parties to this  Agreement.  Upon  resignation  or  replacement  of any Agent in
accordance  with this Section 11.8,  the retiring Agent shall execute such UCC-3
assignments  and  amendments,  and  assignments  and amendments of the Liquidity
Agreement and the Transaction  Documents,  as may be necessary to give effect to
its replacement by a successor  Agent.  After any retiring  Agent's  resignation
hereunder as Agent,  the provisions of this Article XI and Article X shall inure

                                                                        Page 160
                                                               Exhibit 10(i)A(4)

to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.

                                  ARTICLE XII.
                           ASSIGNMENTS; PARTICIPATIONS

     Section 12.1 Assignments.

          (a) Each of the Agent, the Loan Parties and the Liquidity Banks hereby
     agrees and consents to the complete or partial  assignment by Blue Ridge of
     all  or  any  portion  of its  rights  under,  interest  in,  title  to and
     obligations  under this  Agreement to the Liquidity  Banks  pursuant to the
     Liquidity Agreement.

          (b) Any Liquidity Bank may at any time and from time to time assign to
     one or more Eligible Assignees (each, a "Purchasing Liquidity Bank") all or
     any part of its rights and obligations under this Agreement  pursuant to an
     assignment  agreement  substantially  in the form set forth in Exhibit  VII
     hereto (an "Assignment  Agreement")  executed by such Purchasing  Liquidity
     Bank  and  such  selling  Liquidity  Bank;  provided,   however,  that  any
     assignment of a Liquidity  Bank's rights and  obligations  hereunder  shall
     include a pro rata  assignment  of its  rights  and  obligations  under the
     Liquidity  Agreement.  The consent of Blue Ridge (and,  if no  Amortization
     Event  then  exists,  Borrower,  which  consent  shall not be  unreasonably
     withheld or delayed)  shall be required prior to the  effectiveness  of any
     such assignment.  Each assignee of a Liquidity Bank must (i) be an Eligible
     Assignee  and (ii) agree to deliver to the Agent,  promptly  following  any
     request therefor by the Agent or Blue Ridge, an  enforceability  opinion in
     form and substance  satisfactory to the Agent and Blue Ridge. Upon delivery
     of an executed  Assignment  Agreement to the Agent,  such selling Liquidity
     Bank  shall be  released  from its  obligations  hereunder  and  under  the
     Liquidity  Agreement  to the  extent  of such  assignment.  Thereafter  the
     Purchasing  Liquidity Bank shall for all purposes be a Liquidity Bank party
     to this Agreement and the Liquidity Agreement and shall have all the rights
     and  obligations  of a Liquidity  Bank hereunder and thereunder to the same
     extent as if it were an  original  party  hereto and thereto and no further
     consent or action by Borrower,  the Lenders or the Agent shall be required.
     Agent shall give Borrower and NSI Georgia  prior notice of each  assignment
     made under this Section.

          (c) Each of the Liquidity Banks agrees that in the event that it shall
     suffer a Downgrading Event, such Downgraded Liquidity Bank shall be obliged
     to notify the Agent, Borrower and NSI Georgia thereof and shall be obliged,
     at the  request  of Blue  Ridge  or the  Agent,  to (i)  collateralize  its
     Commitment  and its  Liquidity  Commitment  in a manner  acceptable  to the
     Agent, or (ii) assign all of its rights and obligations hereunder and under
     the Liquidity Agreement to an Eligible Assignee nominated by the Agent or a
     Loan Party and acceptable to Blue Ridge (and, if no Amortization Event then
     exists,  Borrower,  which  consent  shall not be  unreasonably  withheld or
     delayed) and willing to  participate  in this  Agreement  and the Liquidity
     Agreement  through  the  Liquidity  Termination  Date in the  place of such
     Downgraded  Liquidity  Bank;  provided that the  Downgraded  Liquidity Bank
     receives payment in full, pursuant to an Assignment Agreement, of an amount

                                                                        Page 161
                                                               Exhibit 10(i)A(4)

     equal to such Liquidity  Bank's Pro Rata Share of the Obligations  owing to
     the Liquidity Banks.

          (d) No Loan Party may assign  any of its rights or  obligations  under
     this Agreement  without the prior written  consent of the Agent and each of
     the Lenders and without satisfying the Rating Agency Condition.

     Section 12.2 Participations. Any Liquidity Bank may, in the ordinary course
of its business at any time sell to one or more Persons (each, a  "Participant")
participating  interests in its Pro Rata Share of the Aggregate Commitment,  its
Loans,  its Liquidity  Commitment or any other  interest of such  Liquidity Bank
hereunder or under the Liquidity  Agreement.  Notwithstanding any such sale by a
Liquidity  Bank of a  participating  interest to a  Participant,  such Liquidity
Bank's rights and obligations  under this Agreement and the Liquidity  Agreement
shall remain unchanged,  such Liquidity Bank shall remain solely responsible for
the performance of its obligations  hereunder and under the Liquidity Agreement,
and the Loan Parties, Blue Ridge and the Agent shall continue to deal solely and
directly with such  Liquidity  Bank in  connection  with such  Liquidity  Bank's
rights and obligations  under this Agreement and the Liquidity  Agreement.  Each
Liquidity  Bank agrees that any agreement  between such  Liquidity  Bank and any
such  Participant in respect of such  participating  interest shall not restrict
such  Liquidity  Bank's right to agree to any amendment,  supplement,  waiver or
modification to this Agreement, except for any amendment,  supplement, waiver or
modification described in Section 14.1(b)(i).


                                 ARTICLE XIII.
                                SECURITY INTEREST

     Section  13.1 Grant of Security  Interest.  To secure the due and  punctual
payment of the Obligations,  whether now or hereafter existing, due or to become
due,  direct  or  indirect,  or  absolute  or  contingent,   including,  without
limitation,  all  Indemnified  Amounts,  in each case pro rata  according to the
respective amounts thereof, Borrower hereby grants to the Agent, for the benefit
of the Secured Parties,  a security interest in, all of Borrower's right,  title
and interest,  whether now owned and existing or hereafter arising in and to all
of the Receivables,  the Related  Security,  the Collections and all proceeds of
the foregoing (collectively, the "Collateral").

     Section  13.2  Termination  after Final  Payout  Date.  Each of the Secured
Parties hereby authorizes the Agent, and the Agent hereby agrees, promptly after
the Final  Payout Date to execute and deliver to Borrower  such UCC  termination
statements as may be necessary to terminate the Agent's security interest in and
Lien upon the Collateral, all at Borrower's expense. Upon the Final Payout Date,
all right,  title and interest of the Agent and the other Secured Parties in and
to the Collateral shall terminate.

                                                                        Page 162
                                                               Exhibit 10(i)A(4)


                                  ARTICLE XIV.
                                  MISCELLANEOUS

     Section 14.1 Waivers and Amendments.

          (a) No  failure  or delay on the part of the  Agent or any  Lender  in
     exercising any power, right or remedy under this Agreement shall operate as
     a waiver  thereof,  nor shall any  single or partial  exercise  of any such
     power,  right or remedy preclude any other further  exercise thereof or the
     exercise  of any other  power,  right or remedy.  The  rights and  remedies
     herein  provided  shall be  cumulative  and  nonexclusive  of any rights or
     remedies  provided by law. Any waiver of this Agreement  shall be effective
     only in the specific instance and for the specific purpose for which given.

          (b) No  provision  of this  Agreement  may be  amended,  supplemented,
     modified or waived except in writing in accordance  with the  provisions of
     this Section 14.1(b).  Blue Ridge, Borrower and the Agent, at the direction
     of the Required  Liquidity Banks,  may enter into written  modifications or
     waivers of any provisions of this  Agreement,  provided,  however,  that no
     such modification or waiver shall:

               (i) without the consent of each affected  Lender,  (A) extend the
          Liquidity  Termination  Date or the date of any  payment or deposit of
          Collections by Borrower or the Servicer, (B) reduce the rate or extend
          the time of payment of Interest or any CP Costs (or any  component  of
          Interest or CP Costs), (C) reduce any fee payable to the Agent for the
          benefit of the  Lenders,  (D) except  pursuant  to Article XII hereof,
          change the amount of the principal of any Lender, any Liquidity Bank's
          Pro Rata Share or any Liquidity Bank's Commitment,  (E) amend,  modify
          or waive any provision of the definition of Required  Liquidity  Banks
          or this Section  14.1(b),  (F) consent to or permit the  assignment or
          transfer by Borrower of any of its rights and  obligations  under this
          Agreement,  (G) change the definition of "Eligible  Receivable," "Loss
          Reserve,"  "Dilution Reserve," "Yield Reserve,"  "Servicing  Reserve,"
          "Servicing Fee Rate," "Required  Reserve" or "Required  Reserve Factor
          Floor" or (H) amend or modify any defined  term (or any  defined  term
          used  directly or indirectly in such defined term) used in clauses (A)
          through (G) above in a manner that would  circumvent  the intention of
          the restrictions set forth in such clauses; or

               (ii) without the written consent of the then Agent, amend, modify
          or waive any provision of this  Agreement if the effect  thereof is to
          affect the rights or duties of such Agent,

          and any  material  amendment,  waiver  or other  modification  of this
          Agreement shall require  satisfaction of the Rating Agency  Condition.
          Notwithstanding  the  foregoing,   (i)  without  the  consent  of  the
          Liquidity Banks, but with the consent of Borrower, the Agent may amend
          this  Agreement  solely to add additional  Persons as Liquidity  Banks
          hereunder and (ii) the Agent,  the Required  Liquidity  Banks and Blue
          Ridge  may  enter  into  amendments  to  modify  any of the  terms  or
          provisions  of Article XI,  Article  XII,  Section  14.13 or any other
          provision of this Agreement without the consent of Borrower,  provided
          that  such  amendment  has  no  negative  impact  upon  Borrower.  Any

                                                                        Page 163
                                                               Exhibit 10(i)A(4)

          modification or waiver made in accordance with this Section 14.1 shall
          apply  to each of the  Lenders  equally  and  shall  be  binding  upon
          Borrower, the Lenders and the Agent.

     Section  14.2  Notices.  Except  as  provided  in this  Section  14.2,  all
communications and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or similar writing) and
shall be given to the other  parties  hereto at their  respective  addresses  or
telecopy  numbers  set forth on the  signature  pages  hereof  or at such  other
address or telecopy number as such Person may hereafter  specify for the purpose
of  notice  to each of the  other  parties  hereto.  Each  such  notice or other
communication  shall be  effective  (i) if given by  telecopy,  upon the receipt
thereof,  (ii) if given by mail,  three (3)  Business  Days  after the time such
communication is deposited in the mail with first class postage prepaid or (iii)
if given by any other  means,  when  received at the address  specified  in this
Section  14.2.  Borrower  hereby  authorizes  the Agent to effect  Advances  and
Interest Period and Interest Rate selections based on telephonic notices made by
any  Person  whom the  Agent in good  faith  believes  to be acting on behalf of
Borrower.   Borrower  agrees  to  deliver   promptly  to  the  Agent  a  written
confirmation  of each  telephonic  notice  signed by an  authorized  officer  of
Borrower;  provided,  however, the absence of such confirmation shall not affect
the validity of such notice. If the written confirmation differs from the action
taken by the Agent, the records of the Agent shall govern absent manifest error.

     Section  14.3  Ratable  Payments.  If any  Lender,  whether  by  setoff  or
otherwise, has payment made to it with respect to any portion of the Obligations
owing to such Lender (other than payments  received  pursuant to Section 10.2 or
10.3) in a greater proportion than that received by any other Lender entitled to
receive a ratable share of such Obligations,  such Lender agrees,  promptly upon
demand,  to  purchase  for cash  without  recourse or warranty a portion of such
Obligations  held by the other  Lenders so that after such  purchase each Lender
will hold its ratable  proportion of such  Obligations;  provided that if all or
any portion of such excess amount is thereafter recovered from such Lender, such
purchase  shall be rescinded  and the purchase  price  restored to the extent of
such recovery, but without interest.

     Section 14.4 Protection of Agent's Security Interest.

          (a) Borrower  agrees that from time to time,  at its expense,  it will
     promptly  execute and deliver all instruments  and documents,  and take all
     actions,  that  may be  necessary  or  desirable,  or that  the  Agent  may
     reasonably request, to perfect,  protect or more fully evidence the Agent's
     security interest in the Collateral,  or to enable the Agent or the Lenders
     to exercise and enforce  their rights and remedies  hereunder.  At any time
     after the occurrence and during the continuation of an Amortization  Event,
     the Agent may, or the Agent may direct  Borrower or the Servicer to, notify
     the Obligors of  Receivables,  at Borrower's  expense,  of the ownership or
     security  interests of the Lenders under this Agreement and may also direct
     that  payments  of all  amounts  due or that  become  due  under any or all
     Receivables be made directly to the Agent or its designee.  Borrower or the
     Servicer  (as  applicable)  shall,  at any Lender's  request,  withhold the
     identity of such Lender in any such notification.

                                                                        Page 164
                                                               Exhibit 10(i)A(4)


          (b) If  any  Loan  Party  fails  to  perform  any  of its  obligations
     hereunder,  the Agent or any  Lender  may (but  shall not be  required  to)
     perform, or cause performance of, such obligations, and the Agent's or such
     Lender's  actual and reasonable  costs and expenses  incurred in connection
     therewith  shall be payable by Borrower as provided in Section  10.3.  Each
     Loan Party  irrevocably  authorizes  the Agent at any time and from time to
     time in the sole  discretion  of the Agent,  and  appoints the Agent as its
     attorney-in-fact,  to act on behalf of such Loan  Party (i) to  execute  on
     behalf of Borrower as debtor and to file financing  statements necessary or
     desirable in the Agent's  reasonable opinion to perfect and to maintain the
     perfection  and priority of the interest of the Lenders in the  Receivables
     and  (ii) to file a  carbon,  photographic  or other  reproduction  of this
     Agreement or any financing  statement with respect to the  Receivables as a
     financing  statement in such offices as the Agent in its reasonable opinion
     deems  necessary or desirable to perfect and to maintain the perfection and
     priority  of the  Agent's  security  interest  in the  Collateral,  for the
     benefit  of the  Secured  Parties.  This  appointment  is  coupled  with an
     interest and is irrevocable.

     Section 14.5 Confidentiality.

          (a) Each Loan Party and each  Lender  shall  maintain  and shall cause
     each  of  its   employees,   officers  and   Affiliates   to  maintain  the
     confidentiality of the Fee Letter and the other confidential or proprietary
     information  with respect to the Agent and Blue Ridge and their  respective
     businesses  obtained  by it or them in  connection  with  the  structuring,
     negotiating and execution of the transactions  contemplated herein,  except
     that such Loan Party and such Lender and its  officers  and  employees  may
     disclose such  information to such Loan Party's and such Lender's  external
     consultants,  accountants  and attorneys and as required by any  applicable
     law,  rule  or  regulation  or  order  of any  judicial  or  administrative
     proceeding or to enforce its rights under the Transaction Documents.

          (b) Unless otherwise  agreed to in writing by the Parent,  each Lender
     and  the  Agent  hereby   agrees  to  keep  all   Proprietary   Information
     confidential  and not to disclose or reveal any Proprietary  Information to
     any  Person  other  than  its  (or  its  Affiliates)  directors,  officers,
     employees,   agents  or   representatives   who  reasonably   require  such
     information in connection with their  activities  concerning this Agreement
     or  the  transactions  contemplated  hereby  and  to  actual  or  potential
     Participants  or  Purchasing   Liquidity   Banks,  and  then  only  upon  a
     confidential basis in any such case; provided,  however,  that the Agent or
     any Lender may disclose  Proprietary  Information:  (i) to the Agent or any
     other Lender, (ii) to the extent reasonably required in connection with any
     litigation to which the Agent,  any Lender or their  respective  Affiliates
     may be a party, (iii) to the extent reasonably  required in connection with
     the  exercise  of any remedy  hereunder,  (iv) as  required  by law,  rule,
     regulation,  direction, request or order of any judicial, administrative or
     regulatory  authority  or  proceedings  (whether or not having the force or
     effect of law), (v) to its attorneys, accountants or other consultants (but
     only on a confidential basis), (vi) to bank regulatory authorities or other
     governmental  authorities  and (vii) by Blue  Ridge to any  rating  agency,
     commercial  paper  dealer,  or provider of a surety,  guaranty or credit or
     liquidity enhancement to Blue Ridge which has agreed in writing to be bound
     by the provisions of this Section 14.5.

                                                                        Page 165
                                                               Exhibit 10(i)A(4)


     Section 14.6 Bankruptcy  Petition.  Borrower,  the Servicer,  the Agent and
each Liquidity Bank hereby  covenants and agrees that, prior to the date that is
one  year  and one day  after  the  payment  in full of all  outstanding  senior
indebtedness  of Blue Ridge,  it will not institute  against,  or join any other
Person  in  instituting  against,  Blue  Ridge any  bankruptcy,  reorganization,
arrangement,  insolvency or liquidation  proceedings or other similar proceeding
under the laws of the United States or any state of the United States.

     Section  14.7  Limitation  of  Liability.  Except with respect to any claim
arising out of the willful  misconduct or gross  negligence  of Blue Ridge,  the
Agent or any Liquidity Bank, no claim may be made by any Loan Party or any other
Person against Blue Ridge,  the Agent or any Liquidity Bank or their  respective
Affiliates, directors, officers, employees, attorneys or agents for any special,
indirect,  consequential  or punitive damages in respect of any claim for breach
of contract or any other  theory of  liability  arising out of or related to the
transactions  contemplated  by this  Agreement,  or any act,  omission  or event
occurring in connection therewith;  and each Loan Party hereby waives, releases,
and  agrees  not to sue upon any  claim  for any such  damages,  whether  or not
accrued and whether or not known or suspected to exist in its favor.

     Section 14.8 CHOICE OF LAW. THIS AGREEMENT  SHALL BE GOVERNED AND CONSTRUED
IN  ACCORDANCE  WITH THE LAWS OF THE  STATE OF  GEORGIA,  without  regard to the
principles  of  conflicts  of laws  thereof  (except  in the  case of the  other
Transaction  Documents,  to the extent  otherwise  expressly stated therein) AND
EXCEPT TO THE EXTENT THAT THE  PERFECTION OF THE OWNERSHIP  INTEREST OF BORROWER
OR THE SECURITY  INTEREST OF THE AGENT,  FOR THE BENEFIT OF THE SECURED PARTIES,
IN ANY OF THE  COLLATERAL IS GOVERNED BY THE LAWS OF A  JURISDICTION  OTHER THAN
THE STATE OF GEORGIA.

     Section 14.9 CONSENT TO  JURISDICTION.  EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY  SUBMITS TO THE  NON-EXCLUSIVE  JURISDICTION  OF ANY  UNITED  STATES
FEDERAL OR NEW YORK STATE COURT SITTING IN FULTON COUNTY, GEORGIA, IN ANY ACTION
OR  PROCEEDING  ARISING  OUT OF OR RELATING TO THIS  AGREEMENT  OR ANY  DOCUMENT
EXECUTED BY SUCH PERSON PURSUANT TO THIS  AGREEMENT,  AND EACH SUCH PARTY HEREBY
IRREVOCABLY  AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING  MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND  IRREVOCABLY  WAIVES ANY OBJECTION
IT MAY NOW OR  HEREAFTER  HAVE AS TO THE  VENUE  OF ANY  SUCH  SUIT,  ACTION  OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT  FORUM.
NOTHING  HEREIN  SHALL  LIMIT  THE  RIGHT OF THE  AGENT OR ANY  LENDER  TO BRING
PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION.  ANY
JUDICIAL  PROCEEDING  BY ANY LOAN PARTY  AGAINST  THE AGENT OR ANY LENDER OR ANY
AFFILIATE  OF THE AGENT OR ANY LENDER  INVOLVING,  DIRECTLY OR  INDIRECTLY,  ANY
MATTER IN ANY WAY ARISING OUT OF,  RELATED TO, OR CONNECTED  WITH THIS AGREEMENT

                                                                        Page 166
                                                               Exhibit 10(i)A(4)

OR ANY DOCUMENT  EXECUTED BY SUCH LOAN PARTY PURSUANT TO THIS AGREEMENT SHALL BE
BROUGHT ONLY IN A COURT IN FULTON COUNTY, GEORGIA.

     Section  14.10  WAIVER OF JURY TRIAL.  TO THE MAXIMUM  EXTENT  PERMITTED BY
APPLICABLE  LAW,  EACH PARTY HERETO  HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING  INVOLVING,  DIRECTLY OR INDIRECTLY,  ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS  AGREEMENT,  ANY DOCUMENT  EXECUTED BY ANY LOAN PARTY PURSUANT TO THIS
AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

     Section 14.11 Integration; Binding Effect; Survival of Terms.

          (a) This  Agreement and each other  Transaction  Document  contain the
     final and  complete  integration  of all prior  expressions  by the parties
     hereto with respect to the subject  matter hereof and shall  constitute the
     entire  agreement  among the  parties  hereto  with  respect to the subject
     matter hereof superseding all prior oral or written understandings.

          (b) This  Agreement  shall be binding upon and inure to the benefit of
     the parties hereto and their  respective  successors and permitted  assigns
     (including  any trustee in  bankruptcy).  This  Agreement  shall create and
     constitute the  continuing  obligations of the parties hereto in accordance
     with its terms and shall remain in full force and effect  until  terminated
     in  accordance  with its  terms;  provided,  however,  that the  rights and
     remedies with respect to (i) any breach of any  representation and warranty
     made by any Loan Party pursuant to Article V, (ii) the  indemnification and
     payment  provisions  of  Article  X, and  Sections  14.5 and 14.6  shall be
     continuing and shall survive any termination of this Agreement.

     Section  14.12  Counterparts;   Severability;   Section  References.   This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts,  each of which when so executed shall be deemed
to be an original and all of which when taken together shall  constitute one and
the same Agreement.  Delivery of an executed  counterpart of a signature page to
this  Agreement  by  telecopier  shall be  effective  as  delivery of a manually
executed  counterpart of a signature page to this  Agreement.  Any provisions of
this Agreement which are 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.  Unless otherwise
expressly indicated,  all references herein to "Article,"  "Section," "Schedule"
or "Exhibit" shall mean articles and sections of, and schedules and exhibits to,
this Agreement.

                                                                        Page 167
                                                               Exhibit 10(i)A(4)


     Section 14.13 Wachovia Roles. Each of the Liquidity Banks acknowledges that
Wachovia  acts, or may in the future act: (i) as  administrative  agent for Blue
Ridge or any  Liquidity  Bank,  (ii) as an  issuing  and  paying  agent  for the
Commercial  Paper,  (iii) to provide  credit or  liquidity  enhancement  for the
timely payment for the Commercial  Paper,  and/or (iv) to provide other services
from  time to time  for Blue  Ridge or any  Liquidity  Bank  (collectively,  the
"Wachovia  Roles").  Without limiting the generality of this Section 14.13, each
Liquidity  Bank hereby  acknowledges  and consents to any and all Wachovia Roles
and agrees that in  connection  with any Wachovia  Role,  Wachovia may take,  or
refrain from taking,  any action that it, in its discretion,  deems appropriate,
including,  without  limitation,  in its role as  administrative  agent for Blue
Ridge,  and the  giving  of  notice  of a  mandatory  purchase  pursuant  to the
Liquidity Agreement.

     Section 14.14 Interest.  In no event shall the amount of interest,  and all
charges,  amounts or fees contracted for, charged or collected  pursuant to this
Agreement or the other  Transaction  Documents  and deemed to be interest  under
applicable law  (collectively,  "Interest  Amounts" ) exceed the highest rate of
interest  allowed by applicable law (the "Maximum  Rate"),  and in the event any
such payment is inadvertently received by Blue Ridge or any Liquidity Bank, then
the excess  sum (the  "Excess")  shall be  credited  as a payment of  principal,
unless the relevant  Borrower shall notify the  applicable  recipient in writing
that it elects to have the Excess returned  forthwith.  It is the express intent
hereof that Borrower not pay and Blue Ridge and the Liquidity Banks not receive,
directly  or  indirectly  in any manner  whatsoever,  interest in excess of that
which may legally be paid by such Borrower  under  applicable  law. The right to
accelerate maturity of any of the Loans does not include the right to accelerate
any interest  that has not otherwise  accrued on the date of such  acceleration,
and the Agent and the  Liquidity  Banks do not  intend to collect  any  unearned
interest in the event of any such acceleration.  All monies paid to the Agent or
the Liquidity Banks hereunder or under any of the other  Transaction  Documents,
whether at  maturity  or by  prepayment,  shall be subject to rebate of unearned
interest as and to the extent  required by  applicable  law. By the execution of
this Agreement, Borrower covenants, to the fullest extent permitted by law, that
(i) the  credit or return of any  Excess  shall  constitute  the  acceptance  by
Borrower of such Excess,  and (ii)  Borrower  shall not seek or pursue any other
remedy,  legal or equitable,  against the Agent or any Liquidity Bank,  based in
whole or in part upon contracting for charging or receiving any Interest Amounts
in excess of the Maximum Rate. For the purpose of determining whether or not any
Excess  has  been  contracted  for,  charged  or  received  by the  Agent or any
Liquidity  Bank, all interest at any time  contracted  for,  charged or received
from  such  Borrower  in  connection  with  this  Agreement  or any of the other
Transaction  Documents  shall,  to the extent  permitted by  applicable  law, be
amortized,  prorated,  allocated and spread in equal parts  throughout  the full
term of the Commitments.  Borrower,  the Agent and each Liquidity Bank shall, to
the  maximum  extent  permitted  under  applicable  law,  (i)  characterize  any
non-principal  payment as an  expense,  fee or premium  rather  than as Interest
Amounts and (ii) exclude  voluntary  prepayments  and the effects  thereof.  The
provisions of this Section shall be deemed to be  incorporated  into each of the
other  Transaction  Documents  (whether or not any  provision of this Section is
referred to therein). All such Transaction Documents and communications relating
to any  Interest  Amounts  owed by Borrower  and all  figures set forth  therein
shall, for the sole purpose of computing the extent of obligations hereunder and
under the other Transaction  Documents be automatically  recomputed by Borrower,

                                                                        Page 168
                                                               Exhibit 10(i)A(4)

and by any court  considering  the same,  to give effect to the  adjustments  or
credits required by this Section.

     Section  14.15  Source  of  Funds  --  ERISA.  Each of Blue  Ridge  and the
Liquidity Banks hereby  severally (and not jointly)  represents to Borrower that
no part of the funds to be used by it to fund the Loans  hereunder  from time to
time constitutes (i) assets  allocated to any separate account  maintained by it
in which any employee  benefit plan (or its related  trust) has any interest nor
(ii) any other assets of any employee benefit plan. As used in this Section, the
terms "employee  benefit plan" and "separate  account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.

                                             {signature pages follow}


                                                                        Page 169
                                                               Exhibit 10(i)A(4)



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.


NSI Funding, Inc., A DELAWARE CORPORATION


By:_______________________________________

Name:
Title:

Address:

NSI Funding, Inc.
NSI Center
1420 Peachtree Street, Suite 832
Atlanta, Georgia  30309

Attention:  General Counsel

Phone:   (404) 853-1440
Fax:     (404) 853-1015


National Service Industries, Inc., A GEORGIA CORPORATION, AS SERVICER


By:_______________________________________

Name:
Title:

Address:
National Service Industries, Inc.
NSI Center
1420 Peachtree Street
Atlanta, Georgia  30309

Attention: Treasurer

Fax No.:          (404) 853-1330
Telephone No.:    (404) 853-1368



                                                                        Page 170
                                                               Exhibit 10(i)A(4)



BLUE RIDGE ASSET FUNDING CORPORATION

BY:  WACHOVIA BANK, N.A., ITS ATTORNEY-IN-FACT


By:  __________________________________
         Name:
         Title:

         Address:
         Blue Ridge Asset Funding Corporation
         100 North Main Street
         Winston-Salem, NC 27150

         Attention:  John Dillon

         Phone:   (336) 732-2690
         Fax:              (336) 732-5021

         With a copy to:

         Blue Ridge Asset Funding Corporation
         c/o AMACAR Group, L.L.C.
         6525 Morrison Blvd., Suite 318
         Charlotte, North Carolina 28211
         Attention:  Douglas K.  Johnson

         Phone:  (704) 365-0569
         Fax:      (704) 365-1362

                                                                        Page 171
                                                               Exhibit 10(i)A(4)


WACHOVIA BANK, N.A., as a Liquidity Bank and as Agent


By:__________________________________________________

Name:
Title:

Address:
Wachovia Bank, N.A.
191 Peachtree Street, 26th Floor
GA-423
Atlanta, Georgia  30303
Attention:  Elizabeth K. Wagner

Phone:   (404) 332-1398
Fax:     (404) 332-5152


                                                                        Page 172
                                                               Exhibit 10(i)A(4)


                                    EXHIBIT I

                                   DEFINITIONS


     Capitalized  terms used and not  otherwise  defined  herein  shall have the
meanings  attributed  thereto in the  Receivables  Sale  Agreement  (hereinafter
defined)  and,  if  not  defined  therein,  in  the  First-Step  Sale  Agreement
(hereinafter defined).

     In addition, as used in this Agreement,  the following terms shall have the
following  meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):

          "Adjusted  Dilution  Ratio" means, at any time, the rolling average of
     the Dilution Ratio for the 12 Calculation Periods then most recently ended.

          "Advance"  means a borrowing  hereunder  consisting  of the  aggregate
     amount of the several Loans made on the same Borrowing Date.

          "Adverse   Claim"  means  a  lien,   security   interest,   charge  or
     encumbrance,  or other right or claim in, of or on any  Person's  assets or
     properties in favor of any other Person.

          "Affiliate"  means,  with  respect  to any  Person,  any other  Person
     directly  or  indirectly  controlling,  controlled  by, or under  direct or
     indirect common control with, such Person or any Subsidiary of such Person.
     A Person  shall be  deemed to  control  another  Person if the  controlling
     Person owns 20% or more of any class of voting securities of the controlled
     Person or possesses,  directly or indirectly,  the power to direct or cause
     the  direction  of the  management  or policies of the  controlled  Person,
     whether through ownership of stock, by contract or otherwise.

          "Agent" has the meaning set forth in the preamble to this Agreement.

          "Agent's  Account" means account  #8735-098787 at Wachovia Bank, N.A.,
     ABA #053100494.

          "Aggregate  Commitment"  means,  on any  date  of  determination,  the
     aggregate  amount  of  the  Liquidity  Banks'  Commitments  to  make  Loans
     hereunder. As of the date hereof, the Aggregate Commitment is $150,000,000.

          "Aggregate  Principal"  means,  on  any  date  of  determination,  the
     aggregate  outstanding principal amount of all Advances outstanding on such
     date.

          "Aggregate Reduction" has the meaning specified in Section 1.3.

          "Agreement"  means this Credit and  Security  Agreement,  as it may be
     amended or modified and in effect from time to time.

                                                                        Page 173
                                                               Exhibit 10(i)A(4)


          "Alternate  Base Rate" means for any day,  the rate per annum equal to
     the higher as of such day of (i) the Prime  Rate,  or (ii)  one-half of one
     percent  (0.50%) above the Federal Funds Rate.  For purposes of determining
     the  Alternate  Base Rate for any day,  changes  in the  Prime  Rate or the
     Federal Funds Rate shall be effective on the date of each such change.

          "Alternate  Base Rate Loan" means a Loan which  bears  interest at the
     Alternate Base Rate or the Default Rate.

          "Amortization  Date" means the  earliest to occur of (i) the  Business
     Day  immediately  prior to the  occurrence of an Event of  Bankruptcy  with
     respect to any Loan Party,  (ii) the  Business  Day  specified in a written
     notice from the Agent following the occurrence and during the  continuation
     of any other  Amortization  Event, (iii) the date which is 10 Business Days
     after the Agent's receipt of written notice from Borrower that it wishes to
     terminate  the  facility  evidenced by this  Agreement,  and (iv) April 23,
     2004.

          "Amortization Event" has the meaning specified in Article IX.

          "Applicable  Margin" means, for each Interest Period applicable to any
     Loan for which  Interest is calculated  on the basis of the LIBO Rate,  the
     greater of the following on the first day of such Interest Period:

               (a) two times the sum of (i) the Usage Fee plus (ii) the  Program
          Fee; or

               (b) the margin then applicable to borrowings under the NSI Credit
          Agreement at a London  interbank  offered rate or Eurodollar  rate, as
          the case may be.

          "Assignment Agreement" has the meaning set forth in Section 12.1(b).

          "Authorized Officer" means, with respect to any Person, its president,
     corporate controller, treasurer or chief financial officer.

          "Blue  Ridge"  has the  meaning  set  forth  in the  preamble  to this
     Agreement.

          "Borrower"  has  the  meaning  set  forth  in  the  preamble  to  this
     Agreement.

          "Borrowing  Base" means,  on any date of  determination,  the Net Pool
     Balance as of the last day of the period covered by the most recent Monthly
     Report, minus the Required Reserve as of the last day of the period covered
     by the most recent Monthly Report,  and minus Deemed  Collections that have
     occurred  since the most recent Cut-Off Date to the extent that such Deemed
     Collections exceed the Dilution Reserve.

          "Borrowing  Date"  means a  Business  Day on which an  Advance is made
     hereunder.

          "Borrowing Notice" has the meaning set forth in Section 1.2.

                                                                        Page 174
                                                               Exhibit 10(i)A(4)


          "Broken  Funding  Costs"  means for any CP Rate Loan or LIBO Rate Loan
     which: (a) in the case of a CP Rate Loan, has its principal reduced without
     compliance by Borrower with the notice requirements  hereunder,  (b) in the
     case of a CP Rate Loan or a LIBO Rate Loan,  does not become  subject to an
     Aggregate  Reduction following the delivery of any Reduction Notice, (c) in
     the case of a CP Rate Loan, is assigned under the Liquidity  Agreement,  or
     (d) in the case of a LIBO Rate Loan,  is terminated or reduced prior to the
     last day of its Interest Period,  an amount equal to the excess, if any, of
     (i) the CP Costs or Interest (as applicable) that would have accrued during
     the remainder of the Interest Periods or the tranche periods for Commercial
     Paper  determined  by the  Agent to  relate  to such  Loan (as  applicable)
     subsequent to the date of such reduction,  assignment or termination (or in
     respect  of  clause  (b)  above,  the date  such  Aggregate  Reduction  was
     designated to occur  pursuant to the Reduction  Notice) of the principal of
     such Loan if such reduction,  assignment or termination had not occurred or
     such Reduction  Notice had not been delivered,  over (ii) the sum of (x) to
     the extent all or a portion of such principal is allocated to another Loan,
     the amount of CP Costs or Interest actually accrued during the remainder of
     such period on such  principal for the new Loan, and (y) to the extent such
     principal is not allocated to another Loan,  the income,  if any,  actually
     received  during the  remainder  of such  period by the holder of such Loan
     from investing the portion of such principal not so allocated. In the event
     that the amount referred to in clause (B) exceeds the amount referred to in
     clause (A),  the  relevant  Lender or Lenders  agree to pay to Borrower the
     amount of such excess.  All Broken  Funding  Costs shall be due and payable
     hereunder upon demand.

          "Business  Day"  means any day on which  banks are not  authorized  or
     required  to  close in New  York,  New York or  Atlanta,  Georgia,  and The
     Depository  Trust  Company of New York is open for  business,  and,  if the
     applicable  Business Day relates to any  computation  or payment to be made
     with respect to the LIBO Rate, any day on which dealings in dollar deposits
     are carried on in the London interbank market.

          "Calculation Period" means a Fiscal Month.

          "Capital  Leases" means leases which are required to be capitalized in
     accordance with GAAP.

          "Change  of  Control"  means (a) a "Change  of  Control"  under and as
     defined in either the  First-Step  Sale Agreement or the  Receivables  Sale
     Agreement  shall  occur,  or (b)  NSI  Georgia  ceases  to own  100% of the
     outstanding shares of voting stock of Borrower.

          "Collateral" has the meaning set forth in Section 13.1.

          "Collection  Account"  means each  concentration  account,  depositary
     account,  lock-box  account or similar account in which any Collections are
     collected or deposited and which is listed on Exhibit IV.

          "Collection Account Agreement" means an agreement substantially in the
     form of Exhibit VI among one or both Originators, Borrower, the Agent and a
     Collection Bank.

                                                                        Page 175
                                                               Exhibit 10(i)A(4)


          "Collection  Bank" means, at any time, any of the banks holding one or
     more Collection Accounts.

          "Collection Notice" means a notice, in substantially the form of Annex
     A to Exhibit VI, from the Agent to a Collection Bank.

          "Collections"  means,  with  respect  to  any  Receivable,   all  cash
     collections  and  other  cash  proceeds  in  respect  of  such  Receivable,
     including, without limitation, all Finance Charges or other related amounts
     accruing in respect thereof and all cash proceeds of Related  Security with
     respect to such Receivable.

          "Commercial Paper" means promissory notes of Blue Ridge issued by Blue
     Ridge in the commercial paper market.

          "Commitment"  means,  for each Liquidity  Bank, the commitment of such
     Liquidity  Bank to make Loans to Borrower  hereunder  in the event the Blue
     Ridge  elects not to fund any Advance in an aggregate  principal  amount at
     any one time  outstanding  not to exceed the amount set forth opposite such
     Liquidity Bank's name on Schedule A to this Agreement.

          "Consolidated  Operating Profits" means, for any period, the Operating
     Profits of the Parent and its Consolidated Subsidiaries.

          "Consolidated  Subsidiary"  means at any date any  Subsidiary or other
     entity  the  accounts  of  which,  in  accordance   with  GAAP,   would  be
     consolidated  with  those  of  the  Parent  in its  consolidated  financial
     statements as of such date.

          "Contingent  Obligation" of a Person means any agreement,  undertaking
     or  arrangement  by  which  such  Person  assumes,  guarantees,   endorses,
     contingently  agrees to  purchase  or provide  funds for the payment of, or
     otherwise  becomes  or is  contingently  liable  upon,  the  obligation  or
     liability  of any other  Person,  or agrees  to  maintain  the net worth or
     working  capital  or other  financial  condition  of any other  Person,  or
     otherwise   assures  any  creditor  of  such  other  Person  against  loss,
     including,  without limitation,  any comfort letter,  operating  agreement,
     take-or-pay contract or application for a letter of credit.

          "Contract"  means,  with  respect  to  any  Receivable,  any  and  all
     instruments,  agreements, invoices or other writings pursuant to which such
     Receivable arises or which evidences such Receivable.

          "CP Costs"  means,  for each day,  the sum of (i) discount or interest
     accrued  on  Pooled  Commercial  Paper on such  day,  plus (ii) any and all
     accrued  commissions in respect of placement  agents and  Commercial  Paper
     dealers,  and issuing and paying  agent fees  incurred,  in respect of such
     Pooled  Commercial  Paper for such day,  plus (iii) other costs  associated
     with  funding  small or odd-lot  amounts  with  respect  to all  receivable
     purchase  facilities  which are funded by Pooled  Commercial Paper for such
     day, minus (iv) any accrual of income net of expenses  received on such day
     from  investment of collections  received under all receivable  purchase or
     financing  facilities  funded  substantially  with Pooled Commercial Paper,

                                                                        Page 176
                                                               Exhibit 10(i)A(4)

     minus (v) any  payment  received  on such day net of expenses in respect of
     Broken  Funding Costs (or similar  costs)  related to the prepayment of any
     investment of Blue Ridge pursuant to the terms of any  receivable  purchase
     or financing  facilities funded substantially with Pooled Commercial Paper.
     In addition to the foregoing  costs,  if Borrower shall request any Advance
     during any period of time determined by the Agent in its sole discretion to
     result in  incrementally  higher CP Costs  applicable to such Advance,  the
     principal  associated with any such Advance shall,  during such period,  be
     deemed to be funded by Blue  Ridge in a special  pool  (which  may  include
     capital associated with other receivable purchase or financing  facilities)
     for purposes of determining  such  additional CP Costs  applicable  only to
     such  special  pool and charged  each day during such period  against  such
     principal.

          "CP Rate Loan"  means,  for each Loan of Blue Ridge prior to the time,
     if any, when (i) it is refinanced with a Liquidity  Funding pursuant to the
     Liquidity  Agreement,  or (ii) the occurrence of an Amortization  Event and
     the commencement of the accrual of Interest thereon at the Default Rate.

          "Credit and  Collection  Policy"  means each  Originator's  credit and
     collection  policies and practices  relating to Contracts  and  Receivables
     existing  on  the  date  hereof  and  summarized  in  the  Exhibits  to the
     First-Step Sale Agreement and the Receivables  Sale Agreement,  as modified
     from time to time in accordance with this Agreement.

          "Cut-Off Date" means the last day of a Calculation Period.

          "Days Sales Outstanding"  means, as of any day, an amount equal to the
     product of (x) 91,  multiplied  by (y) the amount  obtained by dividing (i)
     the  aggregate  outstanding  balance of  Receivables  as of the most recent
     Cut-Off Date, by (ii) the aggregate  amount of  Receivables  created during
     the three (3) Calculation Periods including and immediately  preceding such
     Cut-Off Date.

          "Deemed  Collections"  means  Collections  deemed received by Borrower
     under Section 1.4(a).

          "Default  Horizon  Ratio"  means,  as of any Cut-Off  Date,  the ratio
     (expressed  as a decimal)  computed by  dividing  (i) the  aggregate  sales
     generated by the  Originators  during the 5 Calculation  Periods  ending on
     such Cut-Off Date, by (ii) the Net Pool Balance as of such Cut-off Date.

          "Default  Rate"  means a rate  per  annum  equal to the sum of (i) the
     Alternate  Base Rate plus (ii) 2.00%,  changing  when and as the  Alternate
     Base Rate changes.

          "Default Ratio" means, as of any Cut-Off Date, the ratio (expressed as
     a  percentage)  computed by dividing  (x) the total  amount of  Receivables
     which  became  Defaulted  Receivables  during the  Calculation  Period that
     includes  such Cut-Off Date,  by (y) the  aggregate  amount of  Receivables
     generated by the  Originators  during the  Calculation  Period  occurring 5
     months prior to the Calculation Period ending on such Cut-Off Date.

                                                                        Page 177
                                                               Exhibit 10(i)A(4)


          "Defaulted Receivable" means a Receivable: (i) as to which the Obligor
     thereof has suffered an Event of Bankruptcy;  (ii) which,  consistent  with
     the Credit and Collection Policy,  would be written off Borrower's books as
     uncollectible;  or (iii) as to which any payment, or part thereof,  remains
     unpaid for 91 days or more from the original due date for such payment.

          "Delinquency  Ratio" means, at any time, a percentage equal to (i) the
     aggregate  Outstanding  Balance  of all  Receivables  that were  Delinquent
     Receivables at such time divided by (ii) the aggregate  Outstanding Balance
     of all Receivables at such time.

          "Delinquent Receivable" means a Receivable as to which any payment, or
     part thereof,  remains unpaid for 61-90 days from the original due date for
     such payment.

          "Demand  Advance" means any advance made by Borrower to NSI Georgia at
     any time while it is acting as the  Servicer,  which advance (a) is payable
     upon demand,  (b) is not  evidenced by an  instrument,  chattel  paper or a
     certificated  security,  (c) bears interest at a market rate  determined by
     Borrower and the Servicer from time to time, (d) is not subordinated to any
     other Debt or obligation of the Servicer,  and (e) may not be offset by NSI
     Georgia  against  amounts  due and  owing  from  Borrower  to it under  its
     Subordinated Note;  provided,  however,  that no Demand Advance may be made
     after the  Facility  Termination  Date or on any date prior to the Facility
     Termination   Date  on  which  an   Amortization   Event  or  an  Unmatured
     Amortization Event exists and is continuing.

          "Dilution"  means the amount of any reduction or  cancellation  of the
     Outstanding Balance of a Receivable as described in Section 1.4(a).

          "Dilution  Horizon  Ratio"  means,  as of any  Cut-off  Date,  a ratio
     (expressed  as a decimal),  computed by dividing  (i) the  aggregate  sales
     generated by the Originators  during the Calculation  Period ending on such
     Cut-Off Date, by (ii) the Net Pool Balance as of such Cut-Off Date.

          "Dilution  Ratio" means, as of any Cut-Off Date, a ratio (expressed as
     a  percentage),  computed by dividing  (i) the total amount of decreases in
     Outstanding  Balances due to Dilutions during the Calculation Period ending
     on such Cut-Off Date, by (ii) the  aggregate  dollar amount of  Receivables
     generated by the Originators  during the Calculation  Period ending 1-month
     prior to the Calculation Period ending on such Cut-Off Date.

          "Dilution  Reserve"  means,  for any Calculation  Period,  the product
     (expressed as a percentage) of:

               (a) the sum of (i) two (2) times the Adjusted  Dilution  Ratio as
          of the  immediately  preceding  Cut-Off  Date,  plus (ii) the Dilution
          Volatility  Component as of the  immediately  preceding  Cut-Off Date,
          times

               (b) the Dilution  Horizon Ratio as of the  immediately  preceding
          Cut-Off Date.

                                                                        Page 178
                                                               Exhibit 10(i)A(4)


          "Dilution  Volatility  Component"  means the product  (expressed  as a
     percentage) of (i) the difference  between (a) the highest three  (3)-month
     rolling average Dilution Ratio over the past 12 Calculation Periods and (b)
     the Adjusted Dilution Ratio, and (ii) a fraction, the numerator of which is
     equal  to the  amount  calculated  in  (i)(a)  of this  definition  and the
     denominator  of which is equal to the amount  calculated  in (i)(b) of this
     definition.

          "Downgraded  Liquidity Bank" means a Liquidity Bank which has been the
     subject of a Downgrading Event.

          "Downgrading  Event" with  respect to any Person means the lowering of
     the rating with regard to the short-term securities of such Person to below
     (i) A-1 by S&P, or (ii) P-1 by Moody's.

          "Eligible  Assignee" means a commercial bank having a combined capital
     and  surplus of at least  $250,000,000  with a rating of its (or its parent
     holding company's) short-term securities equal to or higher than (i) A-1 by
     S&P and (ii) P-1 by Moody's.

          "Eligible Receivable" means, at any time, a Receivable:

               (i) the Obligor of which (a) if a natural  person,  is a resident
          of  the  United  States  or,  if  a  corporation   or  other  business
          organization,  is organized under the laws of the United States or any
          political  subdivision  thereof and has its chief executive  office in
          the United States; (b) is not an Affiliate of any of the Loan Parties;
          and (c) is not a government or a governmental subdivision or agency;

               (ii) which is not a Defaulted Receivable,

               (iii)  which is not owing  from an  Obligor as to which more than
          35% of the aggregate Outstanding Balance of all Receivables owing from
          such Obligor are Defaulted Receivables,

               (iv) which was not a Delinquent  Receivable  on the date on which
          it was acquired by Borrower from the applicable Originator,

               (v) which by its terms is due and  payable  within 60 days of the
          original  billing  date  therefor  and has not had its  payment  terms
          extended  more  than  once  (except  that  up to 5% of  the  aggregate
          Outstanding  Balance of all  Receivables may have terms payable within
          61-90 days of the original billing date therefor),

               (vi) which is an "account" within the meaning of Article 9 of the
          UCC of all applicable jurisdictions,

               (vii)  which is  denominated  and payable  only in United  States
          dollars in the United States,

                                                                        Page 179
                                                               Exhibit 10(i)A(4)


               (viii) which arises under a Contract  which,  together  with such
          Receivable,  is in full force and effect  and  constitutes  the legal,
          valid  and  binding  obligation  of the  related  Obligor  enforceable
          against such Obligor in accordance with its terms,

               (ix)  which  arises  under a Contract  which  does not  contain a
          confidentiality  provision  that  purports to restrict  the ability of
          Blue Ridge to exercise  its rights  under this  Agreement,  including,
          without limitation, its right to review the Contract,

               (x) which arises under a Contract  that contains an obligation to
          pay a specified sum of money,  contingent  only upon the sale of goods
          or the provision of services by the applicable Originator,

               (xi) which,  together with the Contract related thereto, does not
          contravene any law, rule or regulation  applicable thereto (including,
          without limitation,  any law, rule and regulation relating to truth in
          lending,  fair credit  billing,  fair credit  reporting,  equal credit
          opportunity,  fair debt  collection  practices  and  privacy) and with
          respect  to  which  no  part of the  Contract  related  thereto  is in
          violation of any such law, rule or regulation,

               (xii) which  satisfies all applicable  requirements of the Credit
          and Collection Policy,

               (xiii)  which  was  generated  in  the  ordinary  course  of  the
          applicable Originator's business,

               (xiv) which arises solely from the sale of goods or the provision
          of services to the related Obligor by the applicable  Originator,  and
          not by any other Person (in whole or in part),

               (xv) which is not subject to any dispute, counterclaim,  right of
          rescission,  set-off,  counterclaim  or any other  defense  (including
          defenses  arising out of violations  of usury laws) of the  applicable
          Obligor against the applicable  Originator or any other Adverse Claim,
          and the Obligor  thereon holds no right as against such  Originator to
          cause such  Originator to repurchase the goods or merchandise the sale
          of which shall have given rise to such Receivable (except with respect
          to sale  discounts  effected  pursuant to the  Contract,  or defective
          goods  returned  in  accordance  with  the  terms  of  the  Contract);
          provided,  however,  that if such  dispute,  offset,  counterclaim  or
          defense  affects  only a portion  of the  Outstanding  Balance of such
          Receivable,  then such Receivable may be deemed an Eligible Receivable
          to the extent of the portion of such Outstanding  Balance which is not
          so affected,  and provided,  further,  that Receivables of any Obligor
          which has any accounts  payable by the  applicable  Originator or by a
          wholly-owned  Subsidiary  of such  Originator  (thus  giving rise to a
          potential offset against such  Receivables) may be treated as Eligible
          Receivables  to the extent  that the Obligor of such  Receivables  has
          agreed  pursuant  to  a  written   agreement  in  form  and  substance
          satisfactory to the Agent,  that such Receivables shall not be subject
          to such offset,

               (xvi) as to which the  applicable  Originator  has  satisfied and
          fully  performed  all  obligations  on its part with  respect  to such
          Receivable  required to be fulfilled  by it, and no further  action is

                                                                        Page 180
                                                               Exhibit 10(i)A(4)

          required to be performed by any Person with respect thereto other than
          payment  thereon  by  the  applicable  Obligor   (excluding   warranty
          obligations for which no claim exists),

               (xvii) as to which  each of the  representations  and  warranties
          contained in Sections 5.1(g),  (i), (j), (q), (r), (s) and (t) is true
          and correct, and

               (xviii)  all right,  title and  interest to and in which has been
          validly transferred by the applicable  Originator directly to Borrower
          under and in  accordance  with the  Receivables  Sale  Agreement,  and
          Borrower has good and  marketable  title thereto free and clear of any
          Adverse Claim (other than Permitted Encumbrances).

          "Event of Bankruptcy" shall be deemed to have occurred with respect to
     a Person if either:

               (a) a case or other  proceeding  shall be commenced,  without the
          application  or consent of such  Person,  in any  court,  seeking  the
          liquidation,  reorganization,  debt arrangement,  dissolution, winding
          up,  or  composition  or  readjustment  of debts of such  Person,  the
          appointment of a trustee, receiver, custodian,  liquidator,  assignee,
          sequestrator or the like for such Person or all or  substantially  all
          of its assets, or any similar action with respect to such Person under
          any law relating to bankruptcy, insolvency, reorganization, winding up
          or  composition  or adjustment  of debts,  and such case or proceeding
          shall continue undismissed, or unstayed and in effect, for a period of
          60 consecutive  days; or an order for relief in respect of such Person
          shall be entered in an involuntary  case under the federal  bankruptcy
          laws or other similar laws now or hereafter in effect; or

               (b)  such  Person  shall  commence  a  voluntary  case  or  other
          proceeding    under    any    applicable    bankruptcy,    insolvency,
          reorganization, debt arrangement, dissolution or other similar law now
          or  hereafter in effect,  or shall  consent to the  appointment  of or
          taking possession by a receiver, liquidator,  assignee, trustee (other
          than  a  trustee   under  a  deed  of  trust,   indenture  or  similar
          instrument),  custodian, sequestrator (or other similar official) for,
          such Person or for any substantial part of its property, or shall make
          any  general  assignment  for the  benefit of  creditors,  or shall be
          adjudicated  insolvent,  or admit in writing its  inability to pay its
          debts  generally as they become due, or, if a  corporation  or similar
          entity,  its board of  directors  shall vote to  implement  any of the
          foregoing.

          "Executive   Officer"  means  any  of  the  chief  executive  officer,
     president, executive vice president or senior vice president of the Parent.

          "Facility Account" means Borrower's account no. 13690450 at Wachovia.

          "Facility  Termination  Date" means the  earlier of (i) the  Liquidity
     Termination Date and (ii) the Amortization Date.

                                                                        Page 181
                                                               Exhibit 10(i)A(4)


          "Federal  Bankruptcy  Code" means  Title 11 of the United  States Code
     entitled "Bankruptcy," as amended and any successor statute thereto.

          "Federal Funds  Effective Rate" means,  for any period,  a fluctuating
     interest  rate per annum for each day during such  period  equal to (a) the
     weighted average of the rates on overnight federal funds  transactions with
     members of the Federal Reserve System arranged by federal funds brokers, as
     published  for such day (or,  if such day is not a  Business  Day,  for the
     preceding  Business  Day) by the  Federal  Reserve  Bank of New York in the
     Composite Closing Quotations for U.S. Government Securities; or (b) if such
     rate is not so published  for any day which is a Business  Day, the average
     of the quotations at approximately  11:30 a.m. (New York time) for such day
     on such transactions received by the Agent from three federal funds brokers
     of recognized standing selected by it.

          "Fee Letter" means that certain  letter  agreement  dated as of May 2,
     2001 among  Borrower,  NSI  Georgia  and the Agent,  as it may be  amended,
     restated or otherwise modified and in effect from time to time.

          "Final Payout Date" means the date on which all Obligations  have been
     paid in full and the Aggregate Commitment has been terminated.

          "First-Step  Sale  Agreement"  means  that  certain  Receivables  Sale
     Agreement,  dated as of May 2, 2001,  between NSI Enterprises and Borrower,
     as the same may be amended,  restated or  otherwise  modified  from time to
     time.

          "Finance  Charges"  means,  with  respect to a Contract,  any finance,
     interest,  late  payment  charges  or similar  charges  owing by an Obligor
     pursuant to such Contract.

          "Fiscal Month" means any fiscal month of the Performance Guarantor.

          "Fiscal   Quarter"  means  any  fiscal  quarter  of  the   Performance
     Guarantor.

          "Fiscal Year" means any fiscal year of the Performance Guarantor.

          "Funding  Agreement"  means  (i) this  Agreement,  (ii) the  Liquidity
     Agreement  and (iii) any other  agreement  or  instrument  executed  by any
     Funding Source with or for the benefit of Blue Ridge.

          "Funding  Source" means (i) any  Liquidity  Bank or (ii) any insurance
     company,   bank  or  other  funding  entity  providing  liquidity,   credit
     enhancement or back-up purchase support or facilities to Blue Ridge.

          "GAAP" means generally accepted accounting principles in effect in the
     United States of America as of the date of this Agreement.

          "Guarantee"  by  any  Person  means  any  obligation,   contingent  or
     otherwise,   of  such  Person  directly  or  indirectly   guaranteeing  any
     Indebtedness or other  obligation of any other Person and, without limiting
     the  generality  of the  foregoing,  any  obligation,  direct or  indirect,

                                                                        Page 182
                                                               Exhibit 10(i)A(4)

     contingent or otherwise,  of such Person (i) to secure, purchase or pay (or
     advance or supply funds for the  purchase or payment of) such  Indebtedness
     or other obligation (whether arising by virtue of partnership arrangements,
     by  agreement  to  keep-well,  to purchase  assets,  goods,  securities  or
     services,  to provide collateral security,  to take-or-pay,  or to maintain
     financial  statement  conditions or otherwise) or (ii) entered into for the
     purpose of assuring in any other manner the obligee of such Indebtedness or
     other  obligation of the payment thereof or to protect such obligee against
     loss in  respect  thereof  (in  whole or in part),  provided  that the term
     Guarantee shall not include  endorsements  for collection or deposit in the
     ordinary  course of  business.  The term  "Guarantee"  used as a verb has a
     corresponding meaning.

          "Indebtedness" of any Person means at any date,  without  duplication,
     (i) all obligations of such Person for borrowed money, (ii) all obligations
     of such  Person  evidenced  by bonds,  debentures,  notes or other  similar
     instruments,  (iii) all  obligations  of such  Person  to pay the  deferred
     purchase  price of property or  services,  except  trade  accounts  payable
     arising in the ordinary  course of business,  (iv) all  obligations of such
     Person as lessee under Capital  Leases,  (v) all obligations of such Person
     to reimburse any bank or other Person in respect of amounts payable under a
     banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in
     the event such  Person is a  corporation),  (vii) all  obligations  of such
     Person to reimburse  any bank or other Person in respect of amounts paid or
     to be paid  under a letter of  credit or  similar  instrument,  (viii)  all
     Indebtedness  of  others  secured  by a Lien on any  asset of such  Person,
     whether or not such  Indebtedness  is assumed by such Person,  and (ix) all
     Indebtedness of others Guaranteed by such Person.

          "Independent  Director"  shall mean a member of the Board of Directors
     of  Borrower  who is not at such time,  and has not been at any time during
     the  preceding  five  (5)  years:  (A) a  director,  officer,  employee  or
     affiliate  of  Performance  Guarantor,  any  Originator  or  any  of  their
     respective  Subsidiaries or Affiliates  (other than  Borrower),  or (B) the
     beneficial  owner  (at  the  time of such  individual's  appointment  as an
     Independent  Director  or  at  any  time  thereafter  while  serving  as an
     Independent  Director) of any of the outstanding common shares of Borrower,
     any  Originator,  or any of their  respective  Subsidiaries  or Affiliates,
     having general voting rights (excepting  immaterial beneficial interests in
     mutual funds or similar managed investment  accounts which in no case shall
     exceed 5% of any class of such shares).

          "Initial Cutoff Date" means the Business Day immediately  prior to the
     date hereof.

          "Interest" means for each respective Interest Period relating to Loans
     of the Liquidity  Banks,  an amount equal to the product of the  applicable
     Interest  Rate for each Loan  multiplied  by the principal of such Loan for
     each day  elapsed  during such  Interest  Period,  annualized  on a 360 day
     basis.

          "Interest  Period" means, with respect to any Loan held by a Liquidity
     Bank:

               (a) if Interest for such Loan is  calculated  on the basis of the
          LIBO Rate, a period of one,  two,  three or six months,  or such other
          period  as may  be  mutually  agreeable  to the  Agent  and  Borrower,
          commencing  on a  Business  Day  selected  by  Borrower  or the  Agent

                                                                        Page 183
                                                               Exhibit 10(i)A(4)

          pursuant to this Agreement.  Such Interest Period shall end on the day
          in  the  applicable   succeeding   calendar  month  which  corresponds
          numerically  to the beginning day of such Interest  Period,  provided,
          however,  that if there is no such  numerically  corresponding  day in
          such  succeeding  month,  such  Interest  Period shall end on the last
          Business Day of such succeeding month; or

               (b) if Interest for such Loan is  calculated  on the basis of the
          Alternate Base Rate, a period commencing on a Business Day selected by
          Borrower  and agreed to by the  Agent,  provided  that no such  period
          shall exceed one month.

     If any Interest Period would end on a day which is not a Business Day, such
     Interest  Period shall end on the next succeeding  Business Day,  provided,
     however,  that in the case of Interest  Periods  corresponding  to the LIBO
     Rate,  if such next  succeeding  Business  Day falls in a new  month,  such
     Interest Period shall end on the immediately preceding Business Day. In the
     case of any  Interest  Period  for any  Loan  which  commences  before  the
     Amortization  Date and would  otherwise end on a date  occurring  after the
     Amortization Date, such Interest Period shall end on the Amortization Date.
     The duration of each Interest Period which commences after the Amortization
     Date shall be of such duration as selected by the Agent.

          "Interest  Rate"  means,  with  respect to each Loan of the  Liquidity
     Banks,  the LIBO Rate,  the  Alternate  Base Rate or the Default  Rate,  as
     applicable.

          "Interest  Reserve"  means,  for any Calculation  Period,  the product
     (expressed as a percentage)  of (i) 1.5 times (ii) the Alternate  Base Rate
     as of the  immediately  preceding  Cut-Off  Date times (iii) a fraction the
     numerator  of which is the  highest  Days  Sales  Outstanding  for the most
     recent 12 Calculation Periods and the denominator of which is 360.

          "Lender" means Blue Ridge and each Liquidity Bank.

          "LIBO  Rate"  means,  for any  Interest  Period,  the rate  per  annum
     determined on the basis of the offered rate for deposits in U.S. dollars of
     amounts equal or  comparable  to the  principal  amount of the related Loan
     offered for a term comparable to such Interest  Period,  which rates appear
     on a Bloomberg L.P. terminal,  displayed under the address "US0001M Index Q
     Go" effective as of 11:00 A.M., London time, two Business Days prior to the
     first day of such Interest  Period,  provided that if no such offered rates
     appear on such page,  the LIBO Rate for such  Interest  Period  will be the
     arithmetic  average  (rounded  upwards,  if  necessary,  to the next higher
     1/100th  of 1%) of rates  quoted by not less  than two  major  banks in New
     York, New York, selected by the Agent, at approximately 10:00 a.m.(New York
     time),  two Business Days prior to the first day of such  Interest  Period,
     for deposits in U.S. dollars offered by leading European banks for a period
     comparable to such Interest Period in an amount comparable to the principal
     amount of such Loan, divided by (b) one minus the maximum aggregate reserve
     requirement (including all basic, supplemental, marginal or other reserves)
     which is imposed against the Agent in respect of Eurocurrency  liabilities,
     as defined in Regulation D of the Board of Governors of the Federal Reserve
     System as in effect from time to time (expressed as a decimal),  applicable
     to such Interest Period plus (ii) the Applicable Margin per annum. The LIBO
     Rate shall be rounded, if necessary, to the next higher 1/16 of 1%.

                                                                        Page 184
                                                               Exhibit 10(i)A(4)


          "LIBO Rate Loan" means a Loan which bears interest at the LIBO Rate.

          "Lien" shall mean any lien, charge, claim, security interest, mortgage
     or  encumbrance,  or preference,  priority or other  security  agreement or
     preferential arrangement of any kind or nature whatsoever.

          "Liquidity  Agreement"  means that certain  Liquidity  Asset  Purchase
     Agreement,  dated as of May 2, 2001 by and among Blue Ridge,  the Agent and
     the banks  from time to time  party  thereto,  as the same may be  amended,
     restated and/or otherwise modified from time to time in accordance with the
     terms thereof.

          "Liquidity  Banks" has the meaning  set forth in the  preamble in this
     Agreement.

          "Liquidity   Commitment"   means,  as  to  each  Liquidity  Bank,  its
     commitment  under the  Liquidity  Agreement  (which shall equal 102% of its
     Commitment hereunder).

          "Liquidity  Funding"  means (a) a purchase made by any Liquidity  Bank
     pursuant  to its  Liquidity  Commitment  of all or any  portion  of, or any
     undivided  interest  in,  a Blue  Ridge  Loan,  or (b) any  Loan  made by a
     Liquidity Bank in lieu of Blue Ridge pursuant to Section 1.1.

          "Liquidity  Termination  Date"  means  the  earlier  to  occur  of the
     following:

               (a) the date on which the Liquidity Banks' Liquidity  Commitments
          expire,  cease to be available to Blue Ridge or otherwise  cease to be
          in full force and effect; or

               (b) the date on  which a  Downgrading  Event  with  respect  to a
          Liquidity  Bank shall have occurred and been  continuing  for not less
          than 30 days, and either (i) the  Downgraded  Liquidity Bank shall not
          have been replaced by an Eligible  Assignee  pursuant to the Liquidity
          Agreement,  or  (ii)  the  Liquidity  Commitment  of  such  Downgraded
          Liquidity Bank shall not have been funded or  collateralized in such a
          manner  that will avoid a  reduction  in or  withdrawal  of the credit
          rating  applied  to the  Commercial  Paper  to  which  such  Liquidity
          Agreement  applies  by any of the rating  agencies  then  rating  such
          Commercial Paper.

          "Loan"  means any loan made by a Lender to  Borrower  pursuant to this
     Agreement (including, without limitation, any Liquidity Funding). Each Loan
     shall either be a CP Rate Loan, an Alternate Base Rate Loan or a Eurodollar
     Rate Loan, selected in accordance with the terms of this Agreement.

          "Loan  Parties"  has the  meaning  set forth in the  preamble  to this
     Agreement.

          "Lock-Box"  means each locked  postal box with respect to which a bank
     who has executed a Collection  Account Agreement has been granted exclusive
     access for the purpose of retrieving  and  processing  payments made on the
     Receivables and which is listed on Exhibit IV.

          "Loss  Reserve"  means,  for  any  Calculation   Period,  the  product
     (expressed as a percentage) of (a) 2.25, times (b) the highest  three-month
     rolling average  Default Ratio during the 12 Calculation  Periods ending on

                                                                        Page 185
                                                               Exhibit 10(i)A(4)

     the immediately preceding Cut-Off Date, times (c) the Default Horizon Ratio
     as of the immediately preceding Cut-Off Date.

          "Margin  Stock" means "margin stock" as defined in Regulations T, U or
     X.

          "Material  Adverse Effect" means a material  adverse effect on (i) the
     financial  condition or operations of the Parent and its Subsidiaries taken
     as a whole,  (ii) the ability of any Loan Party to perform its  obligations
     under  this  Agreement  or  the   Performance   Guarantor  to  perform  its
     obligations under the Performance Undertaking, (iii) the legality, validity
     or enforceability of this Agreement or any other Transaction Document, (iv)
     the Agent's security interest,  for the benefit of the Secured Parties,  in
     the Receivables generally or in any significant portion of the Receivables,
     the Related Security or the Collections  with respect  thereto,  or (v) the
     collectibility of the Receivables  generally or of any significant  portion
     of the Receivables.

          "Material Subsidiary" means (i) Borrower and NSI Georgia and (ii) each
     other Consolidated  Subsidiary,  now existing or hereinafter established or
     acquired,  that at any time prior to the  payment in full of all  Aggregate
     Unpaids under the Credit and Security  Agreement either (x) has or acquires
     total  assets in excess of 10% of  Consolidated  Total Assets at the end of
     the  most  recent  Fiscal  Quarter,  or (y)  contributed  more  than 10% of
     Consolidated  Operating  Profits for the 4 most recent Fiscal Quarters then
     ended (or, with respect to any Subsidiary which existed during the entire 4
     Fiscal  Quarter  period but was acquired by the Parent  during such period,
     which  would  have  contributed  more  than 10% of  Consolidated  Operating
     Profits for such period had it been a Subsidiary for the entire period,  as
     determined on a pro forma basis in accordance with GAAP).

          "Monthly Report" means a report,  in substantially the form of Exhibit
     VIII hereto  (appropriately  completed),  furnished  by the Servicer to the
     Agent pursuant to Section 8.5.

          "Monthly  Reporting  Date"  means the 15th day of each month after the
     date of this  Agreement (or if any such day is not a Business Day, the next
     succeeding Business Day thereafter) or such other days of each month as the
     Agent shall request in connection with Section 8.5 hereof.

          "Moody's" means Moody's Investors Service, Inc.

          "Net Pool  Balance"  means,  at any time,  the  aggregate  Outstanding
     Balance of all Eligible  Receivables  at such time reduced by the aggregate
     amount by which the Outstanding Balance of all Eligible Receivables of each
     Obligor and its Affiliates exceeds the Obligor Concentration Limit for such
     Obligor.

          "NSI Credit  Agreement" means that certain Credit Agreement as of July
     15, 1999 among Performance Guarantor,  the other borrowers parties thereto,
     the  banks  from  time to time  party  thereto,  Wachovia  Bank,  N.A.,  as
     administrative  agent and Bank One,  NA (f/k/a The First  National  Bank of
     Chicago),  as Syndication  Agent,  as the same may be amended,  restated or
     replaced from time to time.

                                                                        Page 186
                                                               Exhibit 10(i)A(4)


          "NSI   Enterprises"   means  NSI   Enterprises,   Inc.,  a  California
     corporation, and its successors and permitted assigns.

          "NSI  Georgia"  has the  meaning  set  forth  in the  preamble  to the
     Agreement,  and such  term  shall  include  such  Person's  successors  and
     permitted assigns.

          "Obligations" means, at any time, any and all obligations of either of
     the  Loan  Parties  to any of  the  Secured  Parties  arising  under  or in
     connection  with  the  Transaction  Documents,   whether  now  existing  or
     hereafter  arising,  due or  accrued,  absolute or  contingent,  including,
     without  limitation,  obligations  in respect of  Aggregate  Principal,  CP
     Costs,  Interest,  fees  under the Fee  Letter,  Broken  Funding  Costs and
     Indemnified Amounts.

          "Obligor"  means a Person  obligated  to make  payments  pursuant to a
     Contract.

          "Obligor  Concentration  Limit" means, at any time, in relation to the
     aggregate Outstanding Balance of Receivables owed by any single Obligor and
     its  Affiliates  (if any),  the  applicable  concentration  limit  shall be
     determined  as follows  for  Obligors  who have short term  unsecured  debt
     ratings  currently  assigned  to them by S&P and Moody's (or in the absence
     thereof,  the  equivalent  long term unsecured  senior debt  ratings),  the
     applicable  concentration  limit  shall  be  determined  according  to  the
     following table:


                                                        Allowable % of Eligible
      S&P Rating              Moody's Rating                Receivables
- --------------------- ----------------------------- ----------------------------
        A-1+                     P-1                            10%
        A-1                      P-1                            8%
        A-2                      P-2                            6%
        A-3                      P-3                            4%
Below A-3 or Not Rated       Below P-3 or Not Rated
by either S&P or Moody's     by either S&P or Moody's           4%


; provided,  however, that (a) if any Obligor has a split rating, the applicable
rating  will be the lower of the two,  (b) if any Obligor is not rated by either
S&P or Moody's, the applicable Obligor  Concentration Limit shall be the one set
forth in the last line of the table above,  and (c) subject to  satisfaction  of
the Rating Agency  Condition  and/or an increase in the  percentage set forth in
clause (a)(i) of the definition of "Required  Reserve," upon Borrower's  request
from  time to time,  the  Agent may  agree to a higher  percentage  of  Eligible
Receivables  for a  particular  Obligor  and its  Affiliates  (each such  higher
percentage,  a "Special  Concentration  Limit"),  it being  understood  that any
Special  Concentration  Limit may be  cancelled  by the Agent upon not less than
five (5) Business Days' written notice to the Loan Parties.

          "Operating  Profits"  means,  as applied to any Person for any period,
     the sum of (i) net  revenues,  less (ii) cost of goods and  services  sold,
     less (iii) operating expenses (including  depreciation and amortization) of
     such Person for such period, as determined in accordance with GAAP.

                                                                        Page 187
                                                               Exhibit 10(i)A(4)


          "Originator"  means each of (a) NSI  Enterprises,  in its  capacity as
     seller under the  First-Step  Sale  Agreement  and (b) NSI Georgia,  in its
     capacity as seller under the Receivables Sale Agreement.

          "Outstanding  Balance"  of any  Receivable  at any time means the then
     outstanding principal balance thereof.

          "Participant" has the meaning set forth in Section 12.2.

          "Performance  Guarantor"  means National Service  Industries,  Inc., a
     Delaware corporation, and its successors and permitted assigns.

          "Performance  Undertaking" means that certain Performance Undertaking,
     dated as of May 2, 2001,  by  Performance  Guarantor  in favor of Borrower,
     substantially  in the form of  Exhibit  IX,  as the  same  may be  amended,
     restated or otherwise modified from time to time.

          "Permitted Encumbrances" shall mean the following: (a) Liens for taxes
     or assessments or other governmental  charges not yet due and payable;  and
     (b) Liens created by the Transaction Documents.

          "Person" means an individual,  partnership,  corporation  (including a
     business trust),  limited liability  company,  joint stock company,  trust,
     unincorporated association,  joint venture or other entity, or a government
     or any political subdivision or agency thereof.

          "Pooled  Commercial  Paper" means Commercial Paper notes of Blue Ridge
     subject to any particular pooling  arrangement by Blue Ridge, but excluding
     Commercial  Paper  issued  by  Blue  Ridge  for a  tenor  and in an  amount
     specifically  requested  by any  Person in  connection  with any  agreement
     effected by Blue Ridge.

          "Prime  Rate"  means a rate  per  annum  equal  to the  prime  rate of
     interest  announced from time to time by Wachovia (which is not necessarily
     the lowest rate charged to any  customer),  changing when and as said prime
     rate changes.

          "Pro Rata Share" means, for each Liquidity Bank, a percentage equal to
     the Commitment of such Liquidity Bank, divided by the Aggregate Commitment.

          "Program Fee" has the meaning set forth in the Fee Letter.

          "Proposed Reduction Date" has the meaning set forth in Section 1.3.

          "Proprietary  Information" means all information about the Performance
     Guarantor or any of its Subsidiaries  which has been furnished to the Agent
     or any Lender by or on behalf of the  Performance  Guarantor  or any of its
     Subsidiaries  before or after the date  hereof or which is  obtained by any
     Lender or the Agent in the course of any Review  made  pursuant  to Section
     7.1(d) of the  Agreement;  provided,  however,  that the term  "Proprietary
     Information" does not include  information which (x) is or becomes publicly
     available  (other  than as a result  of a  breach  of  Section  14.5 of the
     Agreement),  (y) is possessed by or available to the Agent or any Lender on

                                                                        Page 188
                                                               Exhibit 10(i)A(4)

     a  non-confidential  basis  prior to its  disclosure  to the  Agent or such
     Lender by Borrower or Subsidiary  or (z) becomes  available to the Agent or
     any  Lender  on a  non-confidential  basis  from  a  Person  which,  to the
     knowledge of the Agent or such Lender,  as the case may be, is not bound by
     a  confidentiality  agreement with the Performance  Guarantor or any of its
     Subsidiaries  and  is  not  otherwise  prohibited  from  transmitting  such
     information  to the  Agent or such  Lender.  In the  event the Agent or any
     Lender is required to disclose  any  Proprietary  Information  by virtue of
     clause  (ii) (but only if and to the extent  such  disclosure  has not been
     sought by the Agent or any Lender, and if neither the Performance Guarantor
     nor  Borrower  is a party to such  litigation),  (iv) or (v) above,  to the
     extent  such  Lender or the Agent (as the case may be)  determines  in good
     faith that it is permissible by law so to do, it shall promptly  notify the
     Performance  Guarantor of same so as to allow the Performance  Guarantor or
     its  Subsidiaries to seek a protective  order or to take other  appropriate
     action;  provided,  however,  neither  any  Lender  nor the Agent  shall be
     required  to delay  compliance  with any  directive  to  disclose  any such
     information so as to allow the Performance Guarantor or any of Subsidiaries
     to effect any such action.

          "Purchasing  Liquidity  Bank" has the  meaning  set  forth in  Section
     12.1(b).

          "Rating Agency  Condition"  means that Blue Ridge has received written
     notice from S&P and Moody's that an amendment,  a change or a waiver to the
     Liquidity Agreement, this Agreement, the Receivables Sale Agreement, or the
     First-Step  Sale  Agreement will not result in a withdrawal or downgrade of
     the then current ratings on Blue Ridge's Commercial Paper.

          "Receivable"  means  each  "Receivable"  under and as  defined  in the
     Receivables Sale Agreement in which Borrower now has or hereafter  acquires
     any interest.  Debt and other rights and  obligations  arising from any one
     transaction,  including, without limitation,  indebtedness and other rights
     and obligations  represented by an individual  invoice,  shall constitute a
     Receivable  separate from a Receivable  consisting of the  indebtedness and
     other rights and obligations  arising from any other transaction;  provided
     further,  that any indebtedness,  rights or obligations  referred to in the
     immediately  preceding sentence shall be a Receivable regardless of whether
     the  account  debtor  or  Borrower  treats  such  indebtedness,  rights  or
     obligations as a separate payment obligation.

          "Receivables  Sale Agreement" means that certain  Receivables Sale and
     Contribution  Agreement,  dated as of May 2, 2001,  between NSI Georgia and
     Borrower,  as the same may be amended,  restated or otherwise modified from
     time to time.

          "Records"  means,  with respect to any  Receivable,  all Contracts and
     other documents,  books, records and other information (including,  without
     limitation,  computer programs,  tapes, disks, punch cards, data processing
     software and related property and rights) relating to such Receivable,  any
     Related Security therefor and the related Obligor.

          "Redeemable  Preferred  Stock" of any Person means any preferred stock
     issued by such Person which is at any time prior to the  Amortization  Date

                                                                        Page 189
                                                               Exhibit 10(i)A(4)

     either (i)  mandatorily  redeemable  (by  required  sinking fund or similar
     payments  or  otherwise)  or (ii)  redeemable  at the  option of the holder
     thereof.

          "Reduction Notice" has the meaning set forth in Section 1.3.

          "Regulation  T" means  Regulation  T of the Board of  Governors of the
     Federal Reserve System,  as in effect from time to time,  together with all
     official rulings and interpretations issued thereunder.

          "Regulation  U" means  Regulation  U of the Board of  Governors of the
     Federal Reserve System,  as in effect from time to time,  together with all
     official rulings and interpretations issued thereunder.

          "Regulation  X" means  Regulation  X of the Board of  Governors of the
     Federal Reserve System,  as in effect from time to time,  together with all
     official rulings and interpretations issued thereunder.

          "Regulatory Change" has the meaning set forth in Section 10.2(a).

          "Related  Security"  means  (i) all  "Related  Security"  under and as
     defined in the Receivables  Sale Agreement,  (ii) all of Borrower's  right,
     title and  interest  in, to and under the  Receivables  Sale  Agreement  in
     respect  of such  Receivable,  (iii)  all of  Borrower's  right,  title and
     interest in and to the Demand Advances, and (iv) all proceeds of any of the
     foregoing.

          "Required  Liquidity  Banks" means, at any time,  Liquidity Banks with
     Commitments in excess of 66-2/3% of the Aggregate Commitment.

          "Required  Notice Period" means the number of days required notice set
     forth below applicable to the Aggregate Reduction indicated below:

             Aggregate Reduction                        Required Notice Period
             -------------------                        ----------------------
             less than 25% of the then-current          2 Business Days
             Aggregate Commitment

             greater than or equal to                   5 Business Days
             25% but less than 50% of the
             then-current
             Aggregate Commitment

             greater than or equal to 50% of            10 Business Days
             the then-current Aggregate Commitment

                                                                        Page 190
                                                               Exhibit 10(i)A(4)


          "Required Reserve" means, on any day during a Calculation  Period, the
     product of (a) the greater of (i) the  Required  Reserve  Factor  Floor and
     (ii)  the sum of the Loss  Reserve,  the  Interest  Reserve,  the  Dilution
     Reserve and the Servicing Reserve, times (b) the Net Pool Balance as of the
     Cut-Off Date immediately preceding such Calculation Period.

          "Required Reserve Factor Floor" means, for any Calculation Period, the
     sum  (expressed  as a  percentage)  of (a) 16% plus (b) the  product of the
     Adjusted Dilution Ratio and the Dilution Horizon Ratio, in each case, as of
     the immediately preceding Cut-Off Date.

          "Responsible Officer" means any Executive Officer as well as any other
     officer of the Parent who is primarily  responsible for the  administration
     of the transactions contemplated by the Transaction Documents.

          "Restricted   Junior   Payment"   means  (i)  any  dividend  or  other
     distribution,  direct or indirect, on account of any shares of any class of
     capital stock of Borrower now or hereafter  outstanding,  except a dividend
     payable  solely in shares of that class of stock or in any junior  class of
     stock of Borrower, (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  Borrower  now or  hereafter
     outstanding,  (iii) any payment or prepayment of principal of, premium,  if
     any,  or  interest,  fees or other  charges on or with  respect to, and any
     redemption,  purchase,  retirement,  defeasance,  sinking  fund or  similar
     payment and any claim for rescission with respect to the Subordinated Loans
     (as defined in the Receivables  Sale  Agreement),  (iv) any payment made to
     redeem, purchase,  repurchase or retire, or to obtain the surrender of, any
     outstanding  warrants,  options or other  rights to  acquire  shares of any
     class of capital  stock of Borrower now or hereafter  outstanding,  and (v)
     any  payment  of  management  fees  by  Borrower   (except  for  reasonable
     management  fees to any  Originator or its Affiliates in  reimbursement  of
     actual management services performed).

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

          "Secured Parties" means the Indemnified Parties.

          "Servicer"  means at any time the Person (which may be the Agent) then
     authorized  pursuant  to Article  VIII to service,  administer  and collect
     Receivables.

          "Servicing Fee" means, for each day in a Calculation Period:

               (a) an amount  equal to (i) the  Servicing  Fee Rate (or,  at any
          time while NSI Georgia or one of its Affiliates is the Servicer,  such
          lesser  percentage as may be agreed between  Borrower and the Servicer
          on an arms'  length  basis based on then  prevailing  market terms for
          similar services), times (ii) the aggregate Outstanding Balance of all
          Receivables  at the close of business on the Cut-Off Date  immediately
          preceding such Calculation Period, times (iii) 1/360; or

                                                                        Page 191
                                                               Exhibit 10(i)A(4)


               (b) on and after the  Servicer's  reasonable  request made at any
          time when NSI Georgia or one of its  Affiliates is no longer acting as
          Servicer  hereunder,  an alternative amount specified by the successor
          Servicer not exceeding (i) 110% of such  Servicer's  reasonable  costs
          and expenses of performing its obligations under this Agreement during
          the preceding  Calculation Period,  divided by (ii) the number of days
          in the current Calculation Period.

               "Servicing  Fee Rate"  means  0.25%  per  annum  (or such  higher
          percentage  as the Agent and Borrower may from time to time agree upon
          based upon then prevailing market conditions).

               "Servicing  Reserve"  means,  for  any  Calculation  Period,  the
          product  (expressed  as a  percentage)  of  (a)  1.00%,  times  (b)  a
          fraction, the numerator of which is the highest Days Sales Outstanding
          for the most  recent 12  Calculation  Periods and the  denominator  of
          which is 360.

               "Settlement  Date"  means (A) the 2nd  Business  Day  after  each
          Monthly  Reporting Date, and (B) the last day of the relevant Interest
          Period in respect of each Loan of the Liquidity Banks.

               "Settlement  Period"  means (A) in  respect  of each Loan of Blue
          Ridge,  the  immediately  preceding  Calculation  Period,  and  (B) in
          respect  of each Loan of the  Liquidity  Banks,  the  entire  Interest
          Period of such Loan.

               "Subsidiary"  means, with respect to any Person,  any corporation
          or other  entity  of which  securities  or other  ownership  interests
          having  ordinary  voting  power to elect a  majority  of the  board of
          directors or other  persons  performing  similar  functions are at the
          time directly or indirectly owned by such Person.

               "Tax Code" means the Internal  Revenue Code of 1986,  as the same
          may be amended from time to time.

               "Termination Date" has the meaning set forth in Section 2.2.

               "Termination  Percentage"  has the  meaning  set forth in Section
          2.2.

               "Terminating  Tranche"  has the  meaning  set  forth  in  Section
          4.3(b).

               "Transaction Documents" means, collectively, this Agreement, each
          Borrowing Notice, the Receivables Sale Agreement,  the First-Step Sale
          Agreement,   each  Collection  Account   Agreement,   the  Performance
          Undertaking,  the Fee Letter, the Subordinated Note (as defined in the
          Receivables Sale Agreement) and all other  instruments,  documents and
          agreements executed and delivered in connection herewith.

               "UCC" means the Uniform  Commercial  Code as from time to time in
          effect in the specified jurisdiction.

                                                                        Page 192
                                                               Exhibit 10(i)A(4)


               "Unmatured  Amortization  Event" means an event  which,  with the
          passage of time or the giving of notice,  or both, would constitute an
          Amortization Event.

               "Usage Fee" has the meaning set forth in the Fee Letter.

               "Wachovia"  means Wachovia Bank, N.A. in its individual  capacity
          and its capacity as agent.

     Unless otherwise  specified  herein,  all terms of an accounting  character
used herein shall be interpreted,  all accounting determinations hereunder shall
be made, and all financial  statements  required to be delivered hereunder shall
be prepared,  in accordance with GAAP, applied on a basis consistent (except for
changes concurred in by the Parent's independent public accountants or otherwise
required  by a  change  in  GAAP)  with the  most  recent  audited  consolidated
financial statements of the Parent and its Consolidated  Subsidiaries  delivered
to the Agent unless with respect to any such change concurred in by the Parent's
independent  public  accountants or required by GAAP, in determining  compliance
with any of the  provisions  of this  Agreement or any of the other  Transaction
Documents:  (i) the Parent shall have objected to determining such compliance on
such basis at the time of delivery  of such  financial  statements,  or (ii) the
Agent  shall so object in  writing  within 30 days  after the  delivery  of such
financial statements,  in either of which events such calculations shall be made
on a basis consistent with those used in the preparation of the latest financial
statements as to which such objection shall not have been made.

     All terms  used in  Article 9 of the UCC in the State of  Georgia,  and not
specifically defined herein, are used herein as defined in such Article 9.

                                                                        Page 193
                                                               Exhibit 10(i)A(4)



                                   EXHIBIT II

                            FORM OF BORROWING NOTICE

                                       ---

                                NSI Funding, Inc.

                                BORROWING NOTICE
                           dated ______________, 20__
                     for Borrowing on ________________, 20__


Wachovia Bank, N.A., as Agent
191 Peachtree Street, N.E., GA-423
Atlanta, Georgia 30303

Attention:  Elizabeth R. Wagner, Fax No. (404) 332-5152

Ladies and Gentlemen:

     Reference is made to the Credit and Security  Agreement  dated as of May 2,
2001 (as amended,  supplemented  or otherwise  modified  from time to time,  the
"Credit  Agreement")  among NSI  Funding,  Inc.,  a  Delaware  corporation  (the
"Borrower"),  National  Service  Industries,  Inc.,  a Georgia  corporation,  as
initial Servicer, Blue Ridge Asset Funding Corporation,  and Wachovia Bank N.A.,
individually and as Agent. Capitalized terms defined in the Credit Agreement are
used herein with the same meanings.

     1. The [Servicer,  on behalf of the] Borrower hereby certifies,  represents
and warrants to the Agent and the Lenders that on and as of the  Borrowing  Date
(as hereinafter defined):

     (a) all  applicable  conditions  precedent  set forth in  Article VI of the
Credit Agreement have been satisfied;

     (b) each of its representations and warranties  contained in Section 5.1 of
the Credit Agreement will be true and correct,  in all material respects,  as if
made on and as of the Borrowing Date;

     (c) no event will have occurred and is continuing, or would result from the
requested   Advance,   that  constitutes  an  Amortization  Event  or  Unmatured
Amortization Event;

     (d) the Facility Termination Date has not occurred; and

                                                                        Page 194
                                                               Exhibit 10(i)A(4)


     (e) after  giving  effect to the Loans  comprising  the  Advance  requested
below, the Aggregate Principal will not exceed the Borrowing Limit.

     2. The  [Servicer,  on behalf of the]  Borrower  hereby  requests that Blue
Ridge (or their respective Liquidity Banks) make an Advance on ___________, 20__
(the "Borrowing Date") as follows:

     (a) Aggregate Amount of Advance: $_____________

     (b) If the Advance is not funded by Blue Ridge, [Servicer on behalf of the]
Borrower requests that the Liquidity Banks make an Alternate Base Rate Loan that
converts  into LIBO Rate Loan  with an  Interest  Period of _____  months on the
third Business Day after the Borrowing Date).

     3. Please disburse the proceeds of the Loans as follows:

     [Apply $________ to payment of principal and interest of existing Loans due
on the Borrowing  Date].  [Apply $______ to payment of fees due on the Borrowing
Date].  [Wire transfer $________ to account no. ________ at ___________ Bank, in
[city, state], ABA No. __________, Reference: ________].

     IN WITNESS  WHEREOF,  the [Servicer,  on behalf of the] Borrower has caused
this  Borrowing  Request to be  executed  and  delivered  as of this ____ day of
___________, _____.

                               [National Service Industries, Inc., A GEORGIA
                               CORPORATION, AS SERVICER, on behalf of]
                               NSI FUNDING, INC., AS BORROWER


                               By:  _________________________________
                               Name:
                               Title:



                                                                        Page 195
                                                               Exhibit 10(i)A(4)


                                   EXHIBIT III

          PLACES OF BUSINESS OF THE LOAN PARTIES; LOCATIONS OF RECORDS;

                    FEDERAL EMPLOYER IDENTIFICATION NUMBER(S)



Places of Business:

         1420 Peachtree Street
         Atlanta, Georgia  30309



Locations of Records:

         1420 Peachtree Street
         Atlanta, Georgia  30309

         One Lithonia Way
         Conyers, Georgia  30012

         Highway 41 North
         Emerson, Georgia  30137

         1310 Seaboard Industrial Blvd.
         Atlanta, Georgia  30318



Federal Employer Identification Number:

         NSI Georgia:               58-2227507
         NSI Enterprises:           77-0319365
         Borrower:                  58-2616706

Prior Borrower Legal Names, Borrower Trade and Assumed Names:  None

                                                                                               Page 196
                                                                                      Exhibit 10(i)A(4)


                                   EXHIBIT IV

           NAMES OF COLLECTION BANKS; LOCK-BOXES & COLLECTION ACCOUNTS




    LOCK-BOX                                 RELATED COLLECTION ACCOUNT
    --------                                 --------------------------

                             Name of Current Account Holder:  Enforcer Products, a division of NSI GA
P.O. Box 945786                              Account Number:  Lockbox #945786, DDA #13245324
Atlanta, GA                                       Bank Name:  Wachovia Bank of Georgia
30392-5786                                       ABA Number:  061000010
                                             Contact Person:  Shari Hall
                                              Contact's Tel:  404-332-5319
                                              Contact's Fax:  404-332-5016
- ----------------------------------------------- -------------------------------------------------------
                             Name of Current Account Holder:  Zep Chemicals, a division of NSI GA
                                             Account Number:  13021386
             n/a                                  Bank Name:  Wachovia Bank of Georgia
                                                 ABA Number:  061000010
                                             Contact Person:  Shari Hall
                                              Contact's Tel:  404-332-5319
                                              Contact's Fax:  404-332-5016
- ----------------------------------------------- -------------------------------------------------------
                             Name of Current Account Holder:  Zep Chemicals, a division of NSI GA
                                             Account Number:  18646071
                                                  Bank Name:  Wachovia Bank of Georgia
              n/a                                ABA Number:  061000010
                                             Contact Person:  Shari Hall
                                              Contact's Tel:  404-332-5319
                                              Contact's Fax:  404-332-5016
- ----------------------------------------------- -------------------------------------------------------
                             Name of Current Account Holder:  Lithonia Lighting, a division of NSI GA
P.O. Box 100863                              Account Number:  Lockbox #100863, DDA#3750249781
Atlanta, GA 30384                                 Bank Name:  Bank of America
                                                 ABA Number:  111000012
                                             Contact Person:  Debbie Hembree
                                              Contact's Tel:  404-607-2851
                                              Contact's Fax:  404-532-2943
- ----------------------------------------------- -------------------------------------------------------
                             Name of Current Account Holder:  Lithonia Lighting, a division of NSI
P.O. Box 360305                              Account Number:  DDA#1911121
Pittsburgh, PA 15251                              Bank Name:  Mellon Bank, Pittsburgh PA
                                                 ABA Number:  043000261
Dept. LA 21025                               Contact Person:  Patti Sostaric
Pasadena, CA 91185-1025                       Contact's Tel:  412-234-6626
                                              Contact's Fax:  412-209-6082


                                                                                               Page 197
                                                                                      Exhibit 10(i)A(4)

- ----------------------------------------------- -------------------------------------------------------
P.O. Box 530737              Name of Current Account Holder:  NSI Chemicals (Zep), a division of NSI, GA
Atlanta, GA 30353-0737                       Account Number:  0373309
                                                  Bank Name:  Mellon Bank, Pittsburgh PA
Dept. CH10697                                    ABA Number:  043000261
Palatine, IL 60055-0697                      Contact Person:  Patti Sostaric
                                              Contact's Tel:  412-234-6626
Dept. LA21294                                 Contact's Fax:  412-209-6082
Pasadena, CA 91185-1294

Dept. 0905
P.O. Box 120001
Dallas, TX 75312-0905

Box 382012
Pittsburgh, PA 15250-8012

Box 382156
Pittsburgh, PA 15250-8156



                                                                        Page 198
                                                               Exhibit 10(i)A(4)


                                    EXHIBIT V

                         FORM OF COMPLIANCE CERTIFICATE

To:  Wachovia Bank, N.A., as Agent

     This  Compliance  Certificate is furnished  pursuant to that certain Credit
and  Security  Agreement  dated as of May 2, 2001  among NSI  Funding,  Inc.,  a
Delaware  corporation (the  "Borrower"),  National Service  Industries,  Inc., a
Georgia  corporation  (the  "Servicer"),  the Lenders party thereto and Wachovia
Bank, N.A., as agent for such Lenders (the "Agreement").

     THE UNDERSIGNED HEREBY CERTIFIES IN HIS OR HER  REPRESENTATIVE  CAPACITY ON
BEHALF OF PERFORMANCE GUARANTOR THAT:

     1. I am the duly elected _________________ of Borrower.

     2. I have  reviewed  the terms of the  Agreement  and I have made,  or have
caused to be made under my supervision,  a detailed  review of the  transactions
and  conditions  of  Performance  Guarantor  and  its  Subsidiaries  during  the
accounting period covered by the attached financial statements.

     3. The examinations  described in paragraph 2 did not disclose,  and I have
no knowledge of, the existence of any  condition or event which  constitutes  an
Amortization Event or Unmatured Amortization Event, as each such term is defined
under the Agreement,  during or at the end of the  accounting  period covered by
the attached financial statements or as of the date of this Certificate[, except
as set forth in paragraph 5 below].

     4. Schedule I attached  hereto sets forth  financial data and  computations
evidencing the compliance with certain covenants of the Agreement,  all of which
data and computations are true, complete and correct.

     [5. Described below are the exceptions,  if any, to paragraph 3 by listing,
in detail,  the nature of the condition or event, the period during which it has
existed and the action which  Performance  Guarantor  has taken,  is taking,  or
proposes   to  take   with   respect   to  each   such   condition   or   event:
- --------------------]


                                                                        Page 199
                                                               Exhibit 10(i)A(4)



     The foregoing  certifications,  together with the computations set forth in
Schedule I hereto and the financial  statements  delivered with this Certificate
in support  hereof,  are made and  delivered  by the  undersigned  in his or her
representative  capacity  on  behalf  of the  Performance  Guarantor,  all as of
______________, 20__.



                  By:___________________________
                  Name:
                  Title:







                                                                        Page 200
                                                               Exhibit 10(i)A(4)


                      SCHEDULE I TO COMPLIANCE CERTIFICATE

     A. Schedule of Compliance  as of  __________,  200_ with Section ___ of the
Agreement.  Unless otherwise  defined herein,  the terms used in this Compliance
Certificate have the meanings ascribed thereto in the Agreement.

     This schedule relates to the month ended: _______________




                                                                        Page 201
                                                               Exhibit 10(i)A(4)



                                   EXHIBIT VI

                      FORM OF COLLECTION ACCOUNT AGREEMENT



                          COLLECTION ACCOUNT AGREEMENT


                                                _____________, 2001

[Collection Bank Name]
[Collection Bank Address]

Attn:  ____________________
Fax No. (___) ______________

Re:  NSI Enterprises, Inc./National Service Industries, Inc./NSI Funding, Inc.

Ladies and Gentlemen:

     Reference  is hereby made to each of the  [departmental]  post office boxes
listed on Schedule 1 hereto  (each,  a  "Lock-Box")  of which  [Collection  Bank
Name], a _________ banking  association  (hereinafter  "you"),  -------- --- has
exclusive  control for the purpose of  receiving  mail and  processing  payments
therefrom  pursuant to the [Lock-Box Service  Agreement] dated  _______________,
originally by and between NSI Enterprises,  Inc., a California  corporation (the
"Company") and you (the "Service Agreement").

     1. You hereby  confirm your  agreement  to perform the  services  described
therein.  Among the services you have agreed to perform  therein,  is to endorse
all checks and other  evidences of payment  received in each of the  Lock-Boxes,
and credit such payments to account no.  _____________ (the "Lock-Box Account").

     2. The Company hereby informs you that it has transferred to its affiliate,
National Service Industries,  Inc., a Georgia  corporation ("NSI Georgia"),  and
NSI Georgia has  transferred to itsn and to the items from time to time received
in the Lock-Boxes and/or deposited in the Lock-Box Account, but that NSI Georgia
and the Company have agreed to continue to service the  receivables  giving rise
to such items. Accordingly, the Company, NSI Georgia and Borrower hereby request
that the name of the Lock-Box Account be changed to "NSI Funding, Inc." Borrower
hereby further  advises you that it has pledged the  receivables  giving rise to
such items to a group of lenders for whom Wachovia Bank,  N.A. acts as agent (in
such capacity,  the "Agent") and has granted a security interest to the Agent in
all of Borrower's  right,  title and interest in and to the Lock-Box Account and
the funds therein.

                                                                        Page 202
                                                               Exhibit 10(i)A(4)


     3.  Each of the  Company,  NSI  Georgia  and  Borrower  hereby  irrevocably
instructs you, and you hereby agree,  that upon receiving  notice from the Agent
in the form attached hereto as Annex A:

     (i) the name of the Lock-Box  Account  will be changed to  "Wachovia  Bank,
N.A.,  as  Agent"  (or any  designee  of the  Agent),  and the  Agent  will have
exclusive  ownership of and access to the Lock-Boxes  and the Lock-Box  Account,
and none of the Company,  NSI  Georgia,  Borrower,  nor any of their  respective
affiliates  will have any control of the  Lock-Boxes or the Lock-Box  Account or
any access  thereto,  (ii) you will  either  continue to send the funds from the
Lock-Boxes to the Lock-Box Account,  or will redirect the funds as the Agent may
otherwise  request,  (iii) you will  transfer  monies on deposit in the Lock-Box
Account to the following account:

       Bank Name:                Wachovia Bank, N.A.
       Location:                 Winston-Salem, SC
       ABA Routing No.:          ABA # 053100494
       Credit Account No.:       For credit to Blue Ridge Asset Funding Account
                                 #8735-098787.
       Reference:  Blue Ridge/NSI Funding, Inc.
       Attention:  John Dillon, tel. (336) 732-2690


or to such  other  account as the Agent may  specify,  (iv) all  services  to be
performed by you under the Service  Agreement will be performed on behalf of the
Agent, and (v) all correspondence or other mail which you have agreed to send to
the Company,  NSI Georgia or Borrower will be sent to the Agent at the following
address:

       Wachovia Bank, N.A., as Agent
       191 Peachtree Street
       Mail Stop GA-423
       Atlanta, GA  30303
       Attn:  Elizabeth K. Wagner, Asset-Backed Finance
       FAX:  (404) 332- 5152

Moreover, upon such notice, the Agent will have all rights and remedies given to
the Company (and Borrower, as the Company's and NSI Georgia's ultimate assignee)
under the Service Agreement. The Company agrees, however, to continue to pay all
fees and other assessments due thereunder at any time.

     4. You hereby  acknowledge that monies deposited in the Lock-Box Account or
any other account established with you by the Agent for the purpose of receiving
funds from the Lock-Boxes are subject to the liens of the Agent, and will not be
subject to deduction, set-off, banker's lien or any other right you or any other
party may have against the Company,  NSI Georgia or Borrower except that you may
debit the Lock-Box Account for any items deposited  therein that are returned or

                                                                        Page 203
                                                               Exhibit 10(i)A(4)

otherwise  not  collected and for all charges,  fees,  commissions  and expenses
incurred by you in providing  services  hereunder,  all in accordance  with your
customary practices for the charge back of returned items and expenses.

     5. You will be  liable  only for  direct  damages  in the event you fail to
exercise  ordinary care. You shall be deemed to have exercised  ordinary care if
your action or failure to act is in conformity with general banking usages or is
otherwise a commercially  reasonable practice of the banking industry. You shall
not be liable for any special,  indirect or consequential  damages,  even if you
have been advised of the possibility of these damages.

     6. The parties  acknowledge that you may assign or transfer your rights and
obligations  hereunder  solely to a  wholly-owned  subsidiary of [insert name of
Collection Bank's holding company].

     7. Borrower  agrees to indemnify you for, and hold you harmless  from,  all
claims,  damages,  losses,  liabilities  and expenses,  including legal fees and
expenses,  resulting  from or with  respect  to this  letter  agreement  and the
administration and maintenance of the Lock-Box Account and the services provided
hereunder, including, without limitation: (a) any action taken, or not taken, by
you in regard thereto in accordance with the terms of this letter agreement, (b)
the breach of any  representation  or warranty made by Borrower pursuant to this
letter agreement,  (c) any item,  including,  without limitation,  any automated
clearinghouse transaction, which is returned for any reason, and (d) any failure
of Borrower to pay any invoice or charge to you for  services in respect to this
letter  agreement  and the  Lock-Box  Account  or any  amount  owing to you from
Borrower with respect thereto or to the service provided hereunder.

     8. THIS  LETTER  AGREEMENT  AND THE RIGHTS AND  OBLIGATIONS  OF THE PARTIES
HEREUNDER WILL BE GOVERNED BY AND CONSTRUED AND  INTERPRETED IN ACCORDANCE  WITH
THE LAWS OF THE STATE OF  _________,  WHICH STATE SHALL BE YOUR  "LOCATION"  FOR
PURPOSES OF THE UNIFORM COMMERCIAL CODE FROM AND AFTER JULY 1, 2001. This letter
agreement  may be  executed  in any  number  of  counterparts  and  all of  such
counterparts  taken  together  will be  deemed  to  constitute  one and the same
instrument.

     9. This letter agreement contains the entire agreement between the parties,
and may not be altered, modified,  terminated or amended in any respect, nor may
any right,  power or privilege  of any party  hereunder be waived or released or
discharged,  except upon execution by all parties hereto of a written instrument
so  providing.  In the event that any  provision in this letter  agreement is in
conflict with, or is inconsistent  with, any provision of the Service Agreement,
this letter agreement will exclusively govern and control.  Each party agrees to
take all  actions  reasonably  requested  by any  other  party to carry  out the
purposes of this letter  agreement or to preserve and protect the rights of each
party hereunder.

                                                                        Page 204
                                                               Exhibit 10(i)A(4)

     Please  indicate  your  agreement to the terms of this letter  agreement by
signing in the space provided below. This letter agreement will become effective
immediately  upon  execution of a  counterpart  of this letter  agreement by all
parties hereto.

                         Very truly yours,

                         NSI ENTERPRISES, INC., A CALIFORNIA CORPORATION


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

                         NATIONAL SERVICE INDUSTRIES, INC., A GEORGIA CORPORATION


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



                         NSI FUNDING, INC., A DELAWARE CORPORATION

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

                                                                        Page 205
                                                               Exhibit 10(i)A(4)


Acknowledged and agreed to as of the
date first above written:

[COLLECTION BANK]


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



WACHOVIA BANK, N.A., AS AGENT


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



                                                                        Page 206
                                                               Exhibit 10(i)A(4)


                                                      ANNEX A
                                                  FORM OF NOTICE

                                           [On letterhead of the Agent]


                                                      [Date]



[Collection Bank Name]
[Collection Bank Address]

Attn:  ____________________
Fax No. (___) ______________

Re:  NSI Enterprises, Inc./National Service Industries, Inc./NSI Funding, Inc.


Ladies and Gentlemen:

     We hereby  notify you that we are  exercising  our rights  pursuant to that
certain letter agreement dated ____________, 2001 (the "Letter Agreement") among
NSI Enterprises, Inc., National Service Industries, Inc., NSI Funding, Inc., you
and us, to have the name of, and to have  exclusive  ownership  and  control of,
account  no.  __________  identified  in the  Letter  Agreement  (the  "Lock-Box
Account")  maintained  with you,  transferred  to us. The Lock-Box  Account will
henceforth  be a  zero-balance  account,  and funds  deposited  in the  Lock-Box
Account  should  be  sent at the end of each  day to the  account  specified  in
Section  3(i)  of  the  Letter  Agreement,  or  as  otherwise  directed  by  the
undersigned.  You have  further  agreed to perform  all other  services  you are
performing under the "Service Agreement" (as defined in the Letter Agreement) on
our behalf.

     We appreciate your cooperation in this matter.

                                            Very truly yours,

                                            WACHOVIA BANK, N.A., AS AGENT


                                            By:__________________________
                                                              Title:



                                                                        Page 207
                                                               Exhibit 10(i)A(4)>


                               SCHEDULE 1

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

                        LOCK-BOX POST OFFICE ADDRESS
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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




                                                                        Page 208
                                                               Exhibit 10(i)A(4)


                                  EXHIBIT VII

                          FORM OF ASSIGNMENT AGREEMENT

     THIS ASSIGNMENT AGREEMENT (this "Assignment  Agreement") is entered into as
of the ___  day of  ____________,  ____,  by and  between  _____________________
("Assignor") and __________________ ("Assignee").

                             PRELIMINARY STATEMENTS

     A. This Assignment  Agreement is being executed and delivered in accordance
with Section  12.1(b) of that certain Credit and Security  Agreement dated as of
May 2,  2001 by and among NSI  Funding,  Inc.,  as  Borrower,  National  Service
Industries,  Inc., as Servicer,  Blue Ridge Asset Funding Corporation,  Wachovia
Bank,  N.A.,  as Agent,  and the  Liquidity  Banks party  thereto  (as  amended,
modified or restated from time to time, the "Credit and Security Agreement") and
that certain  Liquidity Asset Purchase  Agreement dated as of May 2, 2001 by and
among Blue  Ridge,  the  Liquidity  Banks from time to time  party  thereto  and
Wachovia  Bank,  N.A.,  as Agent (as amended,  modified or restated from time to
time,  the  "Liquidity  Agreement").  Capitalized  terms used and not  otherwise
defined herein are used with the meanings set forth or incorporated by reference
in the Credit and Security Agreement.

     B. Assignor is a Liquidity Bank party to the Credit and Security  Agreement
and the  Liquidity  Agreement,  and Assignee  wishes to become a Liquidity  Bank
thereunder; and

     C. Assignor is selling and assigning to Assignee an undivided ____________%
(the  "Transferred  Percentage")  interest  in  all  of  Assignor's  rights  and
obligations  under  the  Transaction  Documents  and  the  Liquidity  Agreement,
including,  without  limitation,  Assignor's  Commitment,  Assignor's  Liquidity
Commitment and (if applicable) Assignor's Loans as set forth herein.

                                    AGREEMENT

     The parties hereto hereby agree as follows:

     1. The sale, transfer and assignment effected by this Assignment  Agreement
shall become  effective  (the  "Effective  Date") two (2) Business Days (or such
other date selected by the Agent in its sole  discretion)  following the date on
which a notice  substantially  in the  form of  Schedule  II to this  Assignment
Agreement  ("Effective  Notice")  is  delivered  by the  Agent  to  Blue  Ridge,
Borrower,  Servicer,  Assignor and Assignee.  From and after the Effective Date,
Assignee  shall be a Liquidity  Bank party to the Credit and Security  Agreement
for all  purposes  thereof as if  Assignee  were an original  party  thereto and
Assignee  agrees  to be  bound  by all of the  terms  and  provisions  contained
therein.

     2. If Assignor has no outstanding  principal  under the Credit and Security
Agreement or the Liquidity  Agreement,  on the Effective Date, Assignor shall be
deemed to have hereby  transferred and assigned to Assignee,  without  recourse,

                                                                        Page 209
                                                               Exhibit 10(i)A(4)

representation  or warranty  (except as provided in paragraph 6 below),  and the
Assignee shall be deemed to have hereby irrevocably taken,  received and assumed
from Assignor, the Transferred Percentage of Assignor's Commitment and Liquidity
Commitment and all rights and obligations  associated  therewith under the terms
of the Credit and Security  Agreement  and the Liquidity  Agreement,  including,
without  limitation,  the  Transferred  Percentage of Assignor's  future funding
obligations under the Credit and Security Agreement and the Liquidity Agreement.

     3. If Assignor has any outstanding  principal under the Credit and Security
Agreement  and  Liquidity  Agreement,  at or before  12:00  noon,  local time of
Assignor,  on the Effective Date Assignee shall pay to Assignor,  in immediately
available funds, an amount equal to the sum of (i) the Transferred Percentage of
the  outstanding   principal  of  Assignor's  Loans  and,  without  duplication,
Assignor's  Percentage  Interests (as defined in the Liquidity  Agreement) (such
amount, being hereinafter referred to as the "Assignee's  Principal");  (ii) all
accrued but unpaid (whether or not then due) Interest attributable to Assignee's
Principal;  and (iii)  accruing  but unpaid  fees and other  costs and  expenses
payable in respect of Assignee's  Principal for the period  commencing upon each
date such unpaid amounts commence accruing,  to and including the Effective Date
(the "Assignee's Acquisition Cost"); whereupon, Assignor shall be deemed to have
sold, transferred and assigned to Assignee, without recourse,  representation or
warranty (except as provided in paragraph 6 below), and Assignee shall be deemed
to have hereby  irrevocably  taken,  received  and assumed  from  Assignor,  the
Transferred Percentage of Assignor's Commitment, Liquidity Commitment, Loans (if
applicable) and Percentage  Interests (if applicable) and all related rights and
obligations  under  the  Transaction  Documents  and  the  Liquidity  Agreement,
including,  without limitation,  the Transferred Percentage of Assignor's future
funding  obligations  under the Credit and Security  Agreement and the Liquidity
Agreement.

     4.  Concurrently  with the  execution  and delivery  hereof,  Assignor will
provide to Assignee  copies of all  documents  requested by Assignee  which were
delivered  to Assignor  pursuant  to the Credit and  Security  Agreement  or the
Liquidity Agreement.

     5. Each of the parties to this Assignment Agreement agrees that at any time
and from time to time upon the  written  request  of any  other  party,  it will
execute and deliver such further  documents  and do such further acts and things
as such other party may  reasonably  request in order to effect the  purposes of
this Assignment Agreement.

     6. By executing and  delivering  this  Assignment  Agreement,  Assignor and
Assignee confirm to and agree with each other, the Agent and the Liquidity Banks
as  follows:  (a) other than the  representation  and  warranty  that it has not
created  any  Adverse  Claim  upon any  interest  being  transferred  hereunder,
Assignor makes no representation or warranty and assumes no responsibility  with
respect  to any  statements,  warranties  or  representations  made by any other
Person  in or in  connection  with  any  of  the  Transaction  Documents  or the
Liquidity  Agreement  or  the  execution,  legality,  validity,  enforceability,
genuineness,   sufficiency  or  value  of  Assignee,  the  Credit  and  Security
Agreement, the Liquidity Agreement or any other instrument or document furnished
pursuant thereto or the perfection, priority, condition, value or sufficiency of

                                                                        Page 210
                                                               Exhibit 10(i)A(4)

any Collateral;  (b) Assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower, any Obligor,
any Affiliate of Borrower or the  performance  or  observance  by Borrower,  any
Obligor, any Affiliate of Borrower of any of their respective  obligations under
the Transaction Documents or any other instrument or document furnished pursuant
thereto or in connection therewith; (c) Assignee confirms that it has received a
copy of each of the Transaction Documents and the Liquidity Agreement, and other
documents and information as it has requested and deemed appropriate to make its
own credit  analysis and decision to enter into this Assignment  Agreement;  (d)
Assignee will,  independently  and without reliance upon the Agent,  Blue Ridge,
Borrower or any other  Liquidity  Bank or Lender and based on such documents and
information as it shall deem  appropriate at the time,  continue to make its own
credit decisions in taking or not taking action under the Transaction  Documents
and the Liquidity  Agreement;  (e) Assignee appoints and authorizes the Agent to
take such  action as agent on its behalf and to exercise  such powers  under the
Transaction  Documents and the Liquidity Agreement as are delegated to the Agent
by the terms  thereof,  together with such powers as are  reasonably  incidental
thereto;  and (f) Assignee  agrees that it will perform in accordance with their
terms all of the obligations which, by the terms of the Liquidity Agreement, the
Credit and Security Agreement and the other Transaction Documents,  are required
to be performed by it as a Liquidity Bank or, when applicable, as a Lender.

     7. Each party hereto  represents  and warrants to and agrees with the Agent
that it is aware of and  will  comply  with the  provisions  of the  Credit  and
Security  Agreement,  including,  without  limitation,  Sections  14.5  and 14.6
thereof.

     8.  Schedule  I hereto  sets forth the  revised  Commitment  and  Liquidity
Commitment of Assignor and the Commitment and Liquidity  Commitment of Assignee,
as well as administrative information with respect to Assignee.

     9. THIS  ASSIGNMENT  AGREEMENT  SHALL BE  GOVERNED  BY,  AND  CONSTRUED  IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     10. Assignee hereby  covenants and agrees that,  prior to the date which is
one year and one day after the  payment in full of all senior  indebtedness  for
borrowed money of Blue Ridge, it will not institute  against,  or join any other
Person  in  instituting  against,  Blue  Ridge any  bankruptcy,  reorganization,
arrangement,  insolvency or liquidation  proceedings or other similar proceeding
under the laws of the United States or any state of the United States.

     IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Assignment
Agreement to be executed by their  respective  duly  authorized  officers of the
date hereof.

                                            [ASSIGNOR]


                                            By:  _________________________
                                            Title:


                                                                        Page 211
                                                               Exhibit 10(i)A(4)


                                            [ASSIGNEE]


                                            By:  __________________________
                                            Title:



                                                                                                              Page 212
                                                                                                      Exhibit 10(i)A(4)


                                        SCHEDULE I TO ASSIGNMENT AGREEMENT

                                        LIST OF LENDING OFFICES, ADDRESSES
                                        FOR NOTICES AND COMMITMENT AMOUNTS

Date:  _____________, ______

Transferred Percentage:    ____________%


- ---------------- --------------- ----------------- --------------- ----------------- ----------------- ----------------
                      A-1              A-2              B-1              B-2               C-1               C-2
- ---------------- --------------- ----------------- --------------- ----------------- ----------------- ----------------
Assignor           Commitment       Commitment      Outstanding     Ratable Share       Liquidity         Liquidity
                   (prior to      (after giving    principal (if    of Outstanding      Commitment       Commitment
                 giving effect    effect to the         any)          principal         (prior to       (after giving
                     to the         Assignment                                        giving effect     effect to the
                   Assignment       Agreement)                                            to the         Assignment
                   Agreement)                                                           Assignment       Agreement)
                                                                                        Agreement)
- ---------------- --------------- ----------------- --------------- ----------------- ----------------- ----------------


- ---------------- --------------- ----------------- --------------- ----------------- ----------------- ----------------
                      A-1              A-2              B-1              B-2               C-1               C-2
- ---------------- --------------- ----------------- --------------- ----------------- ----------------- ----------------
Assignee           Commitment       Commitment      Outstanding     Ratable Share       Liquidity         Liquidity
                   (prior to      (after giving    principal (if    of Outstanding      Commitment       Commitment
                 giving effect    effect to the         any)          principal         (prior to       (after giving
                     to the         Assignment                                        giving effect     effect to the
                   Assignment       Agreement)                                            to the         Assignment
                   Agreement)                                                           Assignment       Agreement)
                                                                                        Agreement)
- ---------------- --------------- ----------------- --------------- ----------------- ----------------- ----------------


Address for Notices
- -------------------

Attention:
Phone:
Fax:




                                                                        Page 213
                                                               Exhibit 10(i)A(4)


                       SCHEDULE II TO ASSIGNMENT AGREEMENT

                                EFFECTIVE NOTICE

TO:      ________________________, Assignor


TO:      ________________________, Assignee

     The undersigned,  as Agent under the Credit and Security Agreement dated as
of May 2, 2001 by and among NSI Funding,  Inc.,  as Borrower,  National  Service
Industries,  Inc., as Servicer,  Blue Ridge Asset Funding Corporation,  Wachovia
Bank, N.A., as Agent, and the Liquidity Banks party thereto, hereby acknowledges
receipt of executed counterparts of a completed Assignment Agreement dated as of
____________,    2001   between    __________________,    as    Assignor,    and
__________________,  as Assignee. Terms defined in such Assignment Agreement are
used herein as therein defined.

     1.  Pursuant  to such  Assignment  Agreement,  you  are  advised  that  the
Effective Date will be

     2. Each of the undersigned  hereby consents to the Assignment  Agreement as
required by Section 12.1(b) of the Credit and Security Agreement.

     [3. Pursuant to such Assignment Agreement,  the Assignee is required to pay
$____________  to Assignor at or before  12:00 noon (local time of  Assignor) on
the Effective Date in immediately available funds.]

                                            Very truly yours,

                                            WACHOVIA BANK, N.A., as Agent


                                            By: __________________________
                                            Title:_______________________


                                                                        Page 214
                                                               Exhibit 10(i)A(4)


                                            BLUE RIDGE ASSET FUNDING CORPORATION

                                            BY:  WACHOVIA BANK, N.A., ITS ATTORNEY-IN-FACT


                                            By:  ____________________________
                                            Name:
                                            Title:



***[Borrower hereby consents to the foregoing assignment:

NSI Funding, Inc.


By:  ______________________________
         Name:
         Title:]****


                                                                                                         Page 215
                                                                                                Exhibit 10(i)A(4)


                                                   EXHIBIT VIII

                                              FORM OF MONTHLY REPORT

- -----------------------------------------------------------------------------------------------------------------
                                            Monthly Receivables Report
                                               For the Month Ended:
                                                _____________, 20__
                                                     (Page 1)
- -----------------------------------------------------------------------------------------------------------------

                                                        ($)
- -----------------------------------------------------------------------------------------------------------------

I . Portfolio Information
- -----------------------------------------------------------------------------------------------------------------
                           1. Beginning of Month Balance: (Total A/R Outstanding)
- -----------------------------------------------------------------------------------------------------------------
                           2. Gross Sales (Domestic & Foreign):
- -----------------------------------------------------------------------------------------------------------------
                           3. Deduct:
- -----------------------------------------------------------------------------------------------------------------
                                                          a. Total Collections:
- -----------------------------------------------------------------------------------------------------------------
                                                          b. Dilution
- -----------------------------------------------------------------------------------------------------------------
                                                          c. Write Offs
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
                           4.
- -----------------------------------------------------------------------------------------------------------------
                              a. Calculated Ending A/R Balance [(1) + (2) - (3 a,b,c)+(3d)]:
- -----------------------------------------------------------------------------------------------------------------
                              b. Reported Ending A/R Balance
- -----------------------------------------------------------------------------------------------------------------
                              c. Difference (If any)
- -----------------------------------------------------------------------------------------------------------------
                           5. Deduct:
- -----------------------------------------------------------------------------------------------------------------
                                                          a. Defaulted Receivables
- -----------------------------------------------------------------------------------------------------------------
                                                          b. Government
- -----------------------------------------------------------------------------------------------------------------
                                                          c. Foreign
- -----------------------------------------------------------------------------------------------------------------
                                                          d. Contra
- -----------------------------------------------------------------------------------------------------------------
                                                          e. Bankrupt
- -----------------------------------------------------------------------------------------------------------------
                                                          f. Ineligible Terms > 90 days (5% carve-out)
- -----------------------------------------------------------------------------------------------------------------
                                                          g. Installment Contracts
- -----------------------------------------------------------------------------------------------------------------
                                                          H. Total Ineligibles
- -----------------------------------------------------------------------------------------------------------------
                           6. Eligible Receivables [(4 b) - (5.h.)]:
- -----------------------------------------------------------------------------------------------------------------
                           7. Deduct: Excess Concentration:
- -----------------------------------------------------------------------------------------------------------------
                           8. Net Pool Balance [(6) -(7)]:
- -----------------------------------------------------------------------------------------------------------------
                           9.            Aging                       Current                   One Month
- -----------------------------------------------------------------------------------------------------------------
                                       Schedule:                      Month               %      Prior
- -----------------------------------------------------------------------------------------------------------------
                           a.            #REF!
- -----------------------------------------------------------------------------------------------------------------
                           b.            #REF!
- -----------------------------------------------------------------------------------------------------------------
                           c.            #REF!
- -----------------------------------------------------------------------------------------------------------------
                           d.            #REF!
- -----------------------------------------------------------------------------------------------------------------
                           e.            #REF!
- -----------------------------------------------------------------------------------------------------------------
                           f.            #REF!
- -----------------------------------------------------------------------------------------------------------------
                           h.     Total:
- -----------------------------------------------------------------------------------------------------------------



                                                                                                         Page 216
                                                                                                Exhibit 10(i)A(4)



                                            Monthly Receivables Report
                                               For the Month Ended:
                                                _____________, 20__
                                                     (Page 2)
                                                         $

II. Calculations Reflecting Current Activity
- -----------------------------------------------------------------------------------------------------------------
           10. Face Value CP Outstanding
- -----------------------------------------------------------------------------------------------------------------
           11. Required Reserve %
- -----------------------------------------------------------------------------------------------------------------
           12. Required Reserve [(8) x (11)]:
- -----------------------------------------------------------------------------------------------------------------

III. Compliance
- -----------------------------------------------------------------------------------------------------------------
           13. Asset Interest [(10) + (12) / (8)] ‹ 100% :
- -----------------------------------------------------------------------------------------------------------------
           14. 3M Avg. Delinquency Ratio
- -----------------------------------------------------------------------------------------------------------------
           15. 3M Avg. Default Ratio
- -----------------------------------------------------------------------------------------------------------------
           16. 3M Avg. Dilution Ratio
- -----------------------------------------------------------------------------------------------------------------
           17. Facility Limit [(12)‹= $xxxx
- -----------------------------------------------------------------------------------------------------------------



                                                                                                         Page 217
                                                                                                Exhibit 10(i)A(4)



                                            Monthly Receivables Report
                                               For the Month Ended:
                                                _____________, 20__
                                                     (Page 3)
                                                         $
         IV. Excess Concentration: (Calculation)
- -----------------------------------------------------------------------------------------------------------------
                             Eligible
                             Receivables
- -----------------------------------------------------------------------------------------------------------------
                                Allowable      Max.             Credit
                                ----------     -----            -------
                                Percentage     Allowable        Rating
                                ----------     ----------       ------
                                               Balance)
                                               --------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
                                  Largest        Short-Term    Allowable     Total    Allowable         Excess
                                 Obligors       Debt Rating   Percentage  Receivables Receivables    Receivables
- -----------------------------------------------------------------------------------------------------------------
                           1
- -----------------------------------------------------------------------------------------------------------------
                           2
- -----------------------------------------------------------------------------------------------------------------
                           3
- -----------------------------------------------------------------------------------------------------------------
                           4
- -----------------------------------------------------------------------------------------------------------------
                           5
- -----------------------------------------------------------------------------------------------------------------
                           6
- -----------------------------------------------------------------------------------------------------------------
                           7
- -----------------------------------------------------------------------------------------------------------------
                           8
- -----------------------------------------------------------------------------------------------------------------
                           9
- -----------------------------------------------------------------------------------------------------------------
                          10
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
                             Total                                                 $0         $0           $0
- -----------------------------------------------------------------------------------------------------------------
The  undersigned  hereby  represents  and warrants  that the  foregoing is a true and  accurate  accounting  in all
material respects with respect to outstanding  Receivables as of  ______________  (the "Report Date") in accordance
with the Credit and Security  Agreement dated as of May 2, 2001 (it being understood that any error,  inaccuracy or
omission in the foregoing that, when corrected,  reveals that the Aggregate  Principal exceeded the Borrowing Limit
as of the Report Date shall  constitute a material  error or inaccuracy  herein) and that all  representations  and
warranties related to such Agreement are restated and reaffirmed.



Signed:  ____________________________                         Date:  ______________________________
Name:
Title:
- -----------------------------------------------------------------------------------------------------------------




                                                                        Page 218
                                                               Exhibit 10(i)A(4)


                              EXHIBIT IX [FORM OF]
                            PERFORMANCE UNDERTAKING

     This Performance Undertaking (this "Undertaking"), dated as of May 2, 2001,
is executed by National Service  Industries,  Inc., a Delaware  corporation (the
"Performance  Guarantor") in favor of NSI Funding,  Inc., a Delaware corporation
(together with its successors and assigns, "Recipient").

                                    RECITALS

1.   NSI Enterprises,  Inc., a California  corporation ("NSI Enterprises"),  and
     National Service  Industries,  Inc., a Georgia  corporation  ("NSI Georgia"
     and,  together with NSI Enterprises,  the  "Originators")  are parties to a
     Receivables Sale Agreement,  dated as of May 2, 2001 (as amended,  restated
     or otherwise  modified from time to time, the "First-Step Sale Agreement"),
     pursuant  to which NSI  Enterprises,  subject  to the terms and  conditions
     contained  therein,  plans to sell its  right,  title and  interest  in its
     accounts receivable and certain related assets to NSI Georgia.

2.   NSI  Georgia  and  Recipient   are  parties  to  a  Receivables   Sale  and
     Contribution  Agreement,  dated as of May 2, 2001 (as amended,  restated or
     otherwise modified from time to time, the "Sale and Contribution Agreement"
     and, together with the First-Step Sale Agreement,  the "Sale  Agreements"),
     pursuant  to  which  NSI  Georgia,  subject  to the  terms  and  conditions
     contained  therein,  plans  to sell or  contribute  its  right,  title  and
     interest in certain of its accounts  receivable and certain  related assets
     (including  NSI Georgia's  rights under the First-Step  Sale  Agreement) to
     Recipient.

3.   Recipient  intends to finance its purchases under the Sale and Contribution
     Agreement in part by borrowing under a Credit and Security  Agreement dated
     as of May 2, 2001 (as the same may from time to time  hereafter be amended,
     supplemented,  restated or  otherwise  modified,  the "Credit and  Security
     Agreement" and, together with the Sale Agreements,  the "Agreements") among
     Recipient,  as Borrower, NSI Georgia, as initial Servicer, Blue Ridge Asset
     Funding   Corporation  ("Blue  Ridge"),   the  banks  and  other  financial
     institutions from time to time party thereto as "Liquidity Banks" (together
     with Blue Ridge,  the "Lenders")  and Wachovia Bank,  N.A. or any successor
     agent appointed pursuant to the terms of the Credit and Security Agreement,
     as agent for the Lenders (in such capacity, the "Agent").

4.   Performance  Guarantor  owns,  directly or indirectly,  one hundred percent
     (100%) of the capital stock of each of the Originators  and Recipient,  and
     each  of  the  Originators  (and  accordingly,  Performance  Guarantor)  is
     expected to receive  substantial  direct and indirect  benefits  from their
     sales and/or  contributions of receivables  pursuant to the Sale Agreements
     (which benefits are hereby acknowledged).

5.   As an inducement for Recipient to acquire Originators'  accounts receivable
     pursuant  to the Sale  Agreements,  Performance  Guarantor  has  agreed  to
     guaranty (a) the due and punctual  performance  by NSI  Enterprises  of its

                                                                        Page 219
                                                               Exhibit 10(i)A(4)

     obligations  under the First-Step Sale Agreement,  (b) the due and punctual
     performance  by  NSI  Georgia  of  its  obligations   under  the  Sale  and
     Contribution  Agreement,  and (c) the due and punctual  performance  by NSI
     Georgia of its servicing  duties,  and NSI Enterprises of its sub-servicing
     duties, under the Credit and Security Agreement.

6.   Performance  Guarantor wishes to guaranty the due and punctual  performance
     by NSI Enterprises and NSI Georgia of the aforesaid obligations as provided
     herein.

                                    AGREEMENT

     NOW, THEREFORE, Performance Guarantor hereby agrees as follows:

     Section  1.  Definitions.  Capitalized  terms used  herein and not  defined
herein shall the respective  meanings  assigned  thereto in the  Agreements.  In
addition:

     "Guaranteed   Obligations"   means,   collectively,   (a)  all   covenants,
agreements,  terms,  conditions and  indemnities to be performed and observed by
(i) NSI  Enterprises as seller under the  First-Step  Sale Agreement or (ii) NSI
Georgia as seller and  contributor  under the Sale and  Contribution  Agreement,
including,  without  limitation,  in each of the  foregoing  cases,  the due and
punctual  payment  of all sums  which are or may  become due and owing by either
such Originator in its capacity as a seller or seller and contributor  under the
Sale Agreements,  whether for fees,  expenses  (including  actual and reasonable
counsel fees), indemnified amounts or otherwise, whether upon any termination or
for any other reason, and (b) all Servicing-Related Obligations.

     "Servicing  Related  Obligations" means all covenants,  agreements,  terms,
conditions  and  indemnities  to be performed and observed by (i) NSI Georgia in
its capacity as Servicer  under the Credit and Security  Agreement,  and/or (ii)
NSI  Enterprises  in its  capacity as a  sub-servicing  delegate of the Servicer
under the Credit and Security Agreement.

     Section 2. Guaranty of Performance of Guaranteed  Obligations.  Performance
Guarantor  hereby  guarantees  to Recipient,  the full and punctual  payment and
performance by each Originator of its respective  Guaranteed  Obligations.  This
Undertaking is an absolute,  unconditional  and continuing  guaranty of the full
and punctual performance of all Guaranteed  Obligations of each Originator under
the  Agreements  and each  other  document  executed  and  delivered  by  either
Originator  pursuant to the  Agreements  and is in no way  conditioned  upon any
requirement  that Recipient first attempt to collect any amounts owing by either
Originator to Recipient, the Agent or Blue Ridge from any other Person or resort
to any collateral security,  any balance of any deposit account or credit on the
books of Recipient, the Agent or Blue Ridge in favor of either Originator or any
other  Person or other means of  obtaining  payment.  Should  either  Originator
default in the  payment or  performance  of any of its  Guaranteed  Obligations,
Recipient (or its assigns) may cause the immediate  performance  by  Performance
Guarantor  of the  Guaranteed  Obligations  and  cause  any  payment  Guaranteed
Obligations  to become  forthwith due and payable to Recipient (or its assigns),
without  demand  or notice  of any  nature  (other  than as  expressly  provided

                                                                        Page 220
                                                               Exhibit 10(i)A(4)

herein),  all of which are hereby  expressly  waived by  Performance  Guarantor.
Notwithstanding  the  foregoing,  this  Undertaking  is not a  guarantee  of the
payment or collection of any of the  Receivables or the Loans,  and  Performance
Guarantor shall not be responsible for any Guaranteed  Obligations to the extent
the failure to perform such Guaranteed  Obligations by either Originator results
from Receivables being uncollectible on account of the insolvency, bankruptcy or
lack of  creditworthiness  of the related Obligor;  provided that nothing herein
shall  relieve  either   Originator  from  performing  in  full  its  Guaranteed
Obligations  under the  Agreements or Performance  Guarantor of its  undertaking
hereunder with respect to the full performance of such duties.

     Section 3. Performance  Guarantor's Further Agreements to Pay.  Performance
Guarantor  further agrees, as the principal obligor and not as a guarantor only,
to  pay  to  Recipient  (and  its  assigns),  forthwith  upon  demand  in  funds
immediately available to Recipient, all reasonable costs and expenses (including
court costs and  reasonable  legal  expenses)  actually  incurred or expended by
Recipient in connection with  enforcement of the Guaranteed  Obligations  and/or
this  Undertaking,  together  with  interest on amounts not paid by  Performance
Guarantor  under this  Undertaking  within two Business  Days after such amounts
become due until payment,  at a rate of interest (computed for the actual number
of days  elapsed  based on a 360 day year)  equal to the Prime  Rate plus 2% per
annum, such rate of interest changing when and as the Prime Rate changes.

     Section 4. Waivers by Performance  Guarantor.  Performance Guarantor waives
notice of acceptance of this Undertaking,  notice of any action taken or omitted
by  Recipient  (or  its  assigns)  in  reliance  on  this  Undertaking,  and any
requirement  that  Recipient  (or its  assigns)  be diligent or prompt in making
demands  under  this  Undertaking,  giving  notice  of  any  Termination  Event,
Amortization  Event, other default or omission by either Originator or asserting
any other  rights of Recipient  under this  Undertaking.  Performance  Guarantor
warrants  that it has  adequate  means to  obtain  from  each  Originator,  on a
continuing  basis,  information  concerning  the  financial  condition  of  such
Originator, and that it is not relying on Recipient to provide such information,
now or in the future. Performance Guarantor also irrevocably waives all defenses
(i) that at any time may be available in respect of the  Guaranteed  Obligations
by virtue of any statute of  limitations,  valuation,  stay,  moratorium  law or
other similar law now or hereafter in effect or (ii) that arise under the law of
suretyship,  including  impairment of  collateral.  Recipient  (and its assigns)
shall be at  liberty,  without  giving  notice  to or  obtaining  the  assent of
Performance  Guarantor  and  without  relieving  Performance  Guarantor  of  any
liability  under this  Undertaking,  to deal with each  Originator and with each
other party who now is or after the date hereof becomes liable in any manner for
any of the  Guaranteed  Obligations,  in such  manner as  Recipient  in its sole
discretion  deems fit,  and to this end  Performance  Guarantor  agrees that the
validity and enforceability of this Undertaking,  including without  limitation,
the provisions of Section 7 hereof,  shall not be impaired or affected by any of
the following: (a) any extension, modification or renewal of, or indulgence with
respect to, or substitutions for, the Guaranteed Obligations or any part thereof
or any agreement  relating  thereto at any time;  (b) any failure or omission to
enforce any right, power or remedy with respect to the Guaranteed Obligations or
any part thereof or any agreement relating thereto,  or any collateral  securing
the  Guaranteed  Obligations  or any part thereof;  (c) any waiver of any right,
power or remedy or of any Termination Event, Amortization Event, or default with

                                                                        Page 221
                                                               Exhibit 10(i)A(4)

respect to the  Guaranteed  Obligations  or any part  thereof  or any  agreement
relating thereto; (d) any release, surrender,  compromise,  settlement,  waiver,
subordination  or  modification,  with or  without  consideration,  of any other
obligation of any person or entity with respect to the Guaranteed Obligations or
any  part  thereof;  (e)  the  enforceability  or  validity  of  the  Guaranteed
Obligations or any part thereof or the genuineness,  enforceability  or validity
of any agreement relating thereto or with respect to the Guaranteed  Obligations
or any part thereof; (f) the application of payments received from any source to
the payment of any payment  obligations of either Originator or any part thereof
or amounts which are not covered by this  Undertaking  even though Recipient (or
its assigns)  might  lawfully have elected to apply such payments to any part or
all of the payment  obligations  of such  Originator or to amounts which are not
covered by this  Undertaking;  (g) the  existence of any claim,  setoff or other
rights  which  Performance  Guarantor  may  have  at  any  time  against  either
Originator  in  connection  herewith  or  any  unrelated  transaction;  (h)  any
assignment or transfer of the Guaranteed Obligations or any part thereof; or (i)
any failure on the part of either  Originator to perform or comply with any term
of the  Agreements or any other  document  executed in  connection  therewith or
delivered  thereunder,  all whether or not Performance  Guarantor shall have had
notice or knowledge of any act or omission  referred to in the foregoing clauses
(a) through (i) of this Section 4.

     Section 5. Unenforceability of Guaranteed  Obligations Against Originators.
Notwithstanding  (a) any change of ownership of Performance  Guarantor or either
Originator or the insolvency, bankruptcy or any other change in the legal status
of either  Originator;  (b) the change in or the imposition of any law,  decree,
regulation or other governmental act which does or might impair, delay or in any
way  affect  the  validity,  enforceability  or  the  payment  when  due  of the
Guaranteed  Obligations  (unless the same shall be applicable to the Performance
Guarantor);  (c) the failure of either  Originator or  Performance  Guarantor to
maintain in full force,  validity or effect or to obtain or renew when  required
all  governmental  and  other  approvals,   licenses  or  consents  required  in
connection with the Guaranteed  Obligations or this Undertaking,  or to take any
other action  required in connection  with the  performance  of all  obligations
pursuant to the Guaranteed Obligations or this Undertaking; or (d) if any of the
moneys included in the Guaranteed  Obligations  have become  irrecoverable  from
either  Originator  for any other reason other than final payment in full of the
payment  obligations  in accordance  with their terms or lawful setoff of claims
against  the  Purchasers,  this  Undertaking  shall  nevertheless  be binding on
Performance  Guarantor.  This  Undertaking  shall be in  addition  to any  other
guaranty or other security for the Guaranteed  Obligations,  and it shall not be
rendered unenforceable by the invalidity of any such other guaranty or security.
In the event that  acceleration of the time for payment of any of the Guaranteed
Obligations  is stayed upon the  insolvency,  bankruptcy  or  reorganization  of
either Originator or for any other reason with respect to either Originator, all
such amounts then due and owing with respect to the Guaranteed Obligations under
the terms of the  Agreements,  or any other  agreement  evidencing,  securing or
otherwise  executed in  connection  with the  Guaranteed  Obligations,  shall be
immediately due and payable by Performance Guarantor.

     Section 6.  Representations  and Warranties.  Performance  Guarantor hereby
represents  and  warrants  to  Recipient  and its assigns  that (a)  Performance

                                                                        Page 222
                                                               Exhibit 10(i)A(4)

Guarantor is a corporation duly organized, validly existing and in good standing
under  the  laws of  Delaware  and has all  corporate  powers  and all  material
governmental licenses, authorizations,  consents and approvals required to carry
on its  business  as now  conducted,  and (b) this  Undertaking  has  been  duly
executed and  delivered by  Performance  Guarantor and  constitutes  its legally
valid and binding  obligation,  enforceable  against  Performance  Guarantor  in
accordance with its terms, provided that the enforceability hereof is subject to
general  principles  of equity and to  bankruptcy,  insolvency  and similar laws
affecting  the  enforcement  of  creditors'  rights  generally  and  by  general
equitable principles.

     Section 7. Subrogation.  Notwithstanding anything to the contrary contained
herein, until the Guaranteed Obligations are paid in full Performance Guarantor:
(a) will not enforce or otherwise  exercise any right of  subrogation  to any of
the rights of Recipient, the Agent or Blue Ridge against either Originator,  (b)
hereby waives all rights of subrogation (whether contractual,  under Section 509
of the United States  Bankruptcy  Code, at law or in equity or otherwise) to the
claims of Recipient,  the Agent and Blue Ridge against either Originator and all
contractual,   statutory   or  legal  or  equitable   rights  of   contribution,
reimbursement,  indemnification and similar rights and "claims" (as that term is
defined in the United States Bankruptcy Code) which Performance  Guarantor might
now have or hereafter  acquire  against  either  Originator  that arise from the
existence or performance of Performance Guarantor's  obligations hereunder,  (c)
will not claim any setoff,  recoupment or counterclaim against either Originator
in respect of any liability of Performance  Guarantor to such Originator and (d)
waives any benefit of and any right to participate  in any  collateral  security
which may be held by Beneficiaries, the Agent or Blue Ridge.

     Section 8. Termination of Performance Undertaking.  Performance Guarantor's
obligations  hereunder  shall  continue  in full  force  and  effect  until  all
Obligations  are finally paid and  satisfied in full and the Credit and Security
Agreement is  terminated,  provided that this  Undertaking  shall continue to be
effective or shall be reinstated,  as the case may be, if at any time payment or
other  satisfaction  of any of the  Guaranteed  Obligations is rescinded or must
otherwise  be  restored  or  returned  upon  the  bankruptcy,   insolvency,   or
reorganization of either Originator or otherwise, as though such payment had not
been made or other  satisfaction  occurred,  whether  or not  Recipient  (or its
assigns) is in possession of this  Undertaking.  No invalidity,  irregularity or
unenforceability  by reason of the federal  bankruptcy code or any insolvency or
other  similar  law,  or any law or order of any  government  or agency  thereof
purporting to reduce, amend or otherwise affect the Guaranteed Obligations shall
impair,  affect, be a defense to or claim against the obligations of Performance
Guarantor under this Undertaking.

     Section 9. Effect of Bankruptcy. This Performance Undertaking shall survive
the  insolvency  of  either  Originator  and  the  commencement  of any  case or
proceeding by or against either Originator under the federal  bankruptcy code or
other   federal,   state  or  other   applicable   bankruptcy,   insolvency   or
reorganization  statutes.  No automatic stay under the federal  bankruptcy  code
with respect to either  Originator or other federal,  state or other  applicable
bankruptcy,  insolvency or reorganization statutes to which either Originator is
subject shall  postpone the  obligations  of  Performance  Guarantor  under this
Undertaking.

                                                                        Page 223
                                                               Exhibit 10(i)A(4)

     Section 10. Setoff.  Regardless of the other means of obtaining  payment of
any of the  Guaranteed  Obligations,  Recipient  (and  its  assigns)  is  hereby
authorized  at any  time and  from  time to time  during  the  existence  of any
Amortization  Event,  without notice to  Performance  Guarantor (any such notice
being  expressly  waived by  Performance  Guarantor)  and to the fullest  extent
permitted  by law, to set off and apply any  deposits and other sums against the
obligations of Performance  Guarantor under this  Undertaking  then past due for
more than two Business Days.

     Section  11.  Taxes.  All  payments  to be  made by  Performance  Guarantor
hereunder  shall be made free and clear of any deduction or withholding  (except
for taxes excluded under Section 10.1 of the Credit and Security Agreement).  If
Performance Guarantor is required by law to make any deduction or withholding on
account  of any  Taxes or  otherwise  from any such  payment  (except  for taxes
excluded under Section 10.1 of the Credit and Security  Agreement),  the sum due
from it in respect of such payment shall be increased to the extent necessary to
ensure  that,  after the  making of such  deduction  or  withholding,  Recipient
receive  a net sum  equal to the sum  which  they  would  have  received  had no
deduction or withholding been made.

     Section 12. Further Assurances.  Performance  Guarantor agrees that it will
from  time to time,  at the  request  of  Recipient  (or its  assigns),  provide
information  relating to the  business and affairs of  Performance  Guarantor as
Recipient may reasonably request.

     Section 13. Successors and Assigns.  This Performance  Undertaking shall be
binding upon Performance  Guarantor,  its successors and permitted assigns,  and
shall inure to the benefit of and be enforceable by Recipient and its successors
and  assigns.  Without  limiting  the  generality  of  the  foregoing  sentence,
Recipient may pledge or assign, and hereby notifies  Performance  Guarantor that
it has pledged and assigned,  this Performance Undertaking to the Agent, for the
benefit  of the  Lenders,  as  security  for the  Obligations,  and  Performance
Guarantor  hereby  acknowledges  that the Agent  may  enforce  this  Performance
Undertaking,  on behalf of Recipient  and the  Lenders,  with the same force and
effect as though  the Agent  were the  Recipient  hereunder.  Subject to Section
7.1(c)(ii) of the Credit and Security Agreement,  Performance  Guarantor may not
assign or transfer any of its  obligations  hereunder  without the prior written
consent of each of Recipient and the Agent.

     Section 14. Amendments and Waivers. No amendment or waiver of any provision
of this  Undertaking  nor  consent to any  departure  by  Performance  Guarantor
therefrom  shall be effective  unless the same shall be in writing and signed by
Recipient,  the Agent  and  Performance  Guarantor.  No  failure  on the part of
Recipient to exercise,  and no delay in exercising,  any right  hereunder  shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any other right.

     Section 15.  Notices.  All notices and other  communications  provided  for
hereunder  shall be made in writing and shall be  addressed  as  follows:  if to
Performance  Guarantor,  at the address set forth beneath its signature  hereto,

                                                                        Page 224
                                                               Exhibit 10(i)A(4)

and if to  Recipient,  at the  addresses  set forth beneath its signature to the
Credit and Security Agreement, or at such other addresses as each of Performance
Guarantor or any  Recipient  may  designate  in writing to the other.  Each such
notice or other communication shall be effective (a) if given by telecopy,  upon
the receipt thereof, (b) if given by mail, five (5) Business Days after the time
such  communication is deposited in the mail with first class postage prepaid or
(c) if given by any other means,  when received at the address specified in this
Section 15.

     Section  16.  GOVERNING  LAW.  THIS  UNDERTAKING   SHALL  BE  CONSTRUED  IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
GEORGIA.

     Section 17. CONSENT TO  JURISDICTION.  TO THE FULLEST  EXTENT  PERMITTED BY
APPLICABLE  LAW:  (A)  EACH  OF  PERFORMANCE   GUARANTOR  AND  RECIPIENT  HEREBY
IRREVOCABLY  SUBMITS TO THE  NON-EXCLUSIVE  JURISDICTION  OF ANY  UNITED  STATES
FEDERAL OR GEORGIA STATE COURT SITTING IN FULTON  COUNTY,  GEORGIA IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS UNDERTAKING,  THE AGREEMENTS OR
ANY OTHER DOCUMENT EXECUTED IN CONNECTION  THEREWITH OR DELIVERED THEREUNDER AND
(B) EACH OF PERFORMANCE  GUARANTOR AND RECIPIENT HEREBY  IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING  MAY BE HEARD AND  DETERMINED
IN ANY SUCH COURT AND  IRREVOCABLY  WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT,  ACTION OR  PROCEEDING  BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.

     Section  18.  WAIVER OF JURY  TRIAL.  TO THE MAXIMUM  EXTENT  PERMITTED  BY
APPLICABLE LAW, EACH OF PERFORMANCE  GUARANTOR AND RECIPIENT HEREBY WAIVES TRIAL
BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER  SOUNDING IN TORT,  CONTRACT OR  OTHERWISE)  IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED  WITH THIS  UNDERTAKING,  THE  AGREEMENTS  OR ANY OTHER
DOCUMENT  EXECUTED  IN  CONNECTION  THEREWITH  OR  DELIVERED  THEREUNDER  OR THE
RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER

     Section 19. Bankruptcy Petition. Performance Guarantor hereby covenants and
agrees that, prior to the date that is one year and one day after the payment in
full of all  outstanding  senior  indebtedness  owed by Blue Ridge,  it will not
institute against, or join any other Person in instituting  against,  Blue Ridge
any   bankruptcy,   reorganization,   arrangement,   insolvency  or  liquidation
proceedings or other similar  proceeding  under the laws of the United States or
any state of the United States.

     Section  20.  Miscellaneous.   This  Undertaking   constitutes  the  entire
agreement of Performance Guarantor with respect to the matters set forth herein.
The rights and remedies  herein provided are cumulative and not exclusive of any

                                                                        Page 225
                                                               Exhibit 10(i)A(4)

remedies  provided by law or any other agreement,  and this Undertaking shall be
in  addition  to any other  guaranty of or  collateral  security  for any of the
Guaranteed Obligations. The provisions of this Undertaking are severable, and in
any action or  proceeding  involving  any state  corporate  law, or any state or
federal bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors  generally,  if the obligations of Performance  Guarantor hereunder
would otherwise be held or determined to be avoidable,  invalid or unenforceable
on  account  of the  amount of  Performance  Guarantor's  liability  under  this
Undertaking,  then,  notwithstanding  any other provision of this Undertaking to
the contrary,  the amount of such liability shall, without any further action by
Performance Guarantor or Recipient,  be automatically limited and reduced to the
highest  amount that is valid and  enforceable  as  determined in such action or
proceeding.   Any  provisions  of  this  Undertaking  which  are  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, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.  Unless otherwise specified,  references herein to "Section"
shall mean a reference to sections of this Undertaking.



                            {signature page follows}


                                                                        Page 226
                                                               Exhibit 10(i)A(4)


     IN WITNESS WHEREOF, Performance Guarantor has caused this Undertaking to be
executed and delivered as of the date first above written.

                         National Service Industries, Inc., A DELAWARE CORPORATION

                         By: ______________________________
                         Name: ____________________________
                         Title: _____________________________

                         Address for Notices:

                         NSI Center
                         1420 Peachtree Street, N.E.
                         Atlanta, Georgia 30309
                         Attention: Treasurer
                         Telecopier: 404-853-1330
                         Telephone: 404-853-1368





                                                                        Page 227
                                                               Exhibit 10(i)A(4)



                                   SCHEDULE A

                         COMMITMENTS OF LIQUIDITY BANKS

- --------------------------------------------------------------------------------
     LIQUIDITY BANK                                          COMMITMENT
    --------------                                          ----------
   Wachovia Bank, N.A.                                       $150,000,000





                                                                        Page 228
                                                               Exhibit 10(i)A(4)


                                   SCHEDULE B
                     DOCUMENTS TO BE DELIVERED TO THE AGENT
                       ON OR PRIOR TO THE INITIAL PURCHASE

     1. Executed copies of the First-Step  Sale Agreement,  duly executed by NSI
Enterprises  and NSI  Georgia,  together  with all  closing  documents  required
thereunder.

     2. Executed copies of the Receivables Sale Agreement,  duly executed by NSI
Georgia and Borrower, together with all closing documents required thereunder.

     3. Executed copies of the Credit and Security  Agreement,  duly executed by
the parties thereto.

     4. Copy of the Resolutions of the Board of Directors of each Loan Party and
Performance  Guarantor  certified by its  Secretary  authorizing  such  Person's
execution, delivery and performance of this Agreement and the other documents to
be delivered by it hereunder.

     5.  Articles  or  Certificate  of  Incorporation  of each  Loan  Party  and
Performance Guarantor certified by the Secretary of State of its jurisdiction of
incorporation on or within thirty (30) days prior to the initial Advance.

     6. Good Standing Certificate for each Loan Party and Performance  Guarantor
issued  by the  Secretaries  of State of its  state  of  incorporation  and each
jurisdiction where it has material operations, each of which is listed below:

          a.   Borrower: Delaware and Georgia

          b.   Servicer: Georgia

          c.   Performance Guarantor: Delaware and Georgia

          d.   NSI Enterprises: California and Georgia

     7. A  certificate  of the  Secretary  of each Loan  Party  and  Performance
Guarantor  certifying (i) the names and signatures of the officers authorized on
its behalf to execute this Agreement and any other  documents to be delivered by
it hereunder and (ii) a copy of such Person's By-Laws.

     8.  Pre-filing  state  and  federal  tax lien,  judgment  lien and UCC lien
searches against each Loan Party from the following jurisdictions:

          a.   Borrower:   Fulton   County,   GA  and  Georgia   Superior  Court
               Cooperative Authority

                                                                        Page 229
                                                               Exhibit 10(i)A(4)

          b.   Servicer:   Fulton   County,   GA  and  Georgia   Superior  Court
               Cooperative Authority

     9. Proper financing  statements,  duly filed under the UCC on or before the
date of the initial Advance in all  jurisdictions as may be necessary or, in the
opinion of the Agent, desirable,  under the UCC of all appropriate jurisdictions
or any comparable law in order to perfect the ownership  interests  contemplated
by this Agreement.

     10.  Copies of proper UCC  termination  statements,  if any,  necessary  to
release  all  security   interests  and  other  rights  of  any  Person  in  the
Receivables, Contracts or Related Security previously granted by Borrower.

     11. Executed copies of Collection  Account Agreements for each Lock-Box and
Collection Account.

     12.  A  favorable  opinion  of  legal  counsel  for the  Loan  Parties  and
Performance  Guarantor  reasonably  acceptable to the Agent which  addresses the
following matters and such other matters as the Agent may reasonably request:

     (a) Each of the Loan Parties and  Performance  Guarantor  is a  corporation
duly  organized,  validly  existing,  and in good standing under the laws of the
state of ______________.

     (b) Each of the Loan Parties and  Performance  Guarantor  has all requisite
authority to conduct its business in each  jurisdiction  where  failure to be so
qualified would have a material adverse effect on such entity's business.

     (c) The execution and delivery by each of the Loan Parties and  Performance
Guarantor of the Transaction Document to which it is a party and its performance
of its  obligations  thereunder  have  been  duly  authorized  by all  necessary
organizational action and proceedings on the part of such entity and will not:

     (i)  require  any  action  by  or  in  respect  of,  or  filing  with,  any
governmental  body,  agency or official  (other than the filing of UCC financing
statements);

     (ii) contravene, or constitute a default under, any provision of applicable
law or regulation or of its articles or certificate of  incorporation  or bylaws
or of any agreement,  judgment,  injunction,  order,  decree or other instrument
binding upon such entity; or

     (iii) result in the creation or  imposition  of any Adverse Claim on assets
of  such  entity  or any of its  Subsidiaries  (except  as  contemplated  by the
Transaction Documents).

     (d) Each of the Transaction Documents to which each of the Loan Parties and
Performance  Guarantor is a party has been duly  executed and  delivered by such
entity and constitutes the legally valid, and binding  obligation of such entity
enforceable in accordance  with its terms,  except to the extent the enforcement
thereof may be limited by  bankruptcy,  insolvency or similar laws affecting the

                                                                        Page 230
                                                               Exhibit 10(i)A(4)

enforcement of creditors'  rights generally and subject also to the availability
of equitable remedies if equitable remedies are sought.

     (e) The  provisions  of the Credit and Security  Agreement are effective to
create valid  security  interests in favor of the Agent,  for the benefit of the
Secured Parties,  in all of Borrower's  right,  title and interest in and to the
Receivables and Related Security described therein which constitute  "accounts,"
"chattel  paper"  or  "general   intangibles"  (each  as  defined  in  the  UCC)
(collectively,  the  "Opinion  Collateral"),  as security for the payment of the
Obligations.

     (f) Each of the UCC-1 Financing  Statements naming Borrower as debtor,  and
Agent, as secured party,  to be filed in the [describe  filing  offices],  is in
appropriate  form for  filing  therein.  Upon  filing  of such  UCC-1  Financing
Statements in such filing  offices and payment of the required  filing fees, the
security interest in favor of the Agent, for the benefit of the Secured Parties,
in the Opinion Collateral will be perfected.

     (g) Based solely on our review of the  [describe UCC Search  Reports],  and
assuming (i) the filing of the Financing  Statements and payment of the required
filing  fees in  accordance  with  paragraph  (f) and  (ii) the  absence  of any
intervening filings between the date and time of the Search Reports and the date
and time of the filing of the Financing Statements, the security interest of the
Agent in the Opinion Collateral is prior to any security interest granted in the
Opinion  Collateral by Borrower,  the priority of which is determined  solely by
the filing of a financing statement in the [describe filing offices].

     (h) Neither of the Loan  Parties is a "holding  company"  or a  "subsidiary
holding company" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended,  or an "investment  company" within the
meaning of the Investment Company Act of 1940, as amended.

     13. A Compliance Certificate.

     14. The Fee Letter.

     15. A Monthly Report as at _____________, 2001.

     16.  Executed  copies of (i) all consents  from and  authorizations  by any
Persons and (ii) all waivers and amendments to existing credit facilities,  that
are necessary in connection with this Agreement.

     17. If applicable,  a direction letter executed by each of the Loan Parties
authorizing  the Agent and Blue Ridge,  and directing  warehousemen to allow the
Agent and Blue Ridge to inspect and make copies from such Loan Party's books and
records maintained at off-site data processing or storage facilities.

     18. The Liquidity Agreement, duly executed by each of the parties thereto.

                                                                        Page 231
                                                               Exhibit 10(i)A(4)

     19. Performance Undertaking, duly executed by the Performance Guarantor.

     20. If applicable,  for each Lender that is not incorporated under the laws
of the United States of America,  or a state thereof,  two duly completed copies
of United States Internal Revenue Service Form W-8BEN or W-8ECI,  as applicable,
certifying in either case that such Lender is entitled to receive payments under
the Agreement  without  deduction or  withholding  of any United States  federal
income taxes.

EX-10

                                                                        Page 232
                                                               Exhibit 10(i)A(5)




                AMENDMENT NO. 1 TO CREDIT AND SECURITY AGREEMENT

     THIS AMENDMENT NO. 1 TO CREDIT AND SECURITY AGREEMENT (this "Amendment") is
entered into as of May 24, 2001, by and among:

     (a) NSI Funding, Inc., a Delaware corporation ("Borrower"),

     (b) National Service Industries,  Inc., a Georgia  corporation,  as initial
Servicer (together with Borrower, the "Loan Parties" and each, a "Loan Party"),

     (c) Wachovia Bank,  N.A., a national  banking  association,  and Blue Ridge
Asset  Funding  Corporation,   a  Delaware  corporation   (together  with  their
respective successors and assigns, the "Lenders"), and

     (d)  Wachovia  Bank,  N.A.,  as agent for the  Lenders  (together  with its
successors and assigns, the "Agent"),

with respect to that certain  Credit and Security  Agreement  dated as of May 2,
2001,  by and among the Borrower,  the Servicer,  the Lenders and the Agent (the
"Existing Agreement" which, as amended hereby, is hereinafter referred to as the
"Agreement").

     Unless otherwise  indicated,  capitalized  terms used in this Amendment are
used with the meanings attributed thereto in the Existing Agreement.

                              W I T N E S S E T H :

     WHEREAS,  the parties  hereto  desire to amend the  Existing  Agreement  as
hereinafter set forth;

     NOW, THEREFORE,  in consideration of the premises and the mutual agreements
herein contained, the parties hereto hereby agree as follows:

     1.  Amendments to Existing  Agreement.  Upon execution of this Amendment by
all parties hereto, the parties hereby agree that:

     (a) Section 9.1(g)(i) of the Existing Agreement is hereby amended to delete
"4.25%" where it appears and to substitute in lieu thereof "2.85%," and

     (b) Section 14.9 of the Existing Agreement is hereby amended to delete "NEW
YORK" where it appears and to substitute in lieu thereof "GEORGIA."

     (c) The definition of "Monthly Reporting Date" in Exhibit I to the Existing
Agreement is hereby amended and restated in its entirety to read as follows:

                                                                        Page 233
                                                               Exhibit 10(i)A(5)

     "Monthly  Reporting  Date" means the 15th  Business Day of each month after
the date of this  Agreement (or such other days of each month as the Agent shall
request in connection with Section 8.5 hereof).

     2. Representations.

     2.1.  Each of the Loan Parties  represents  and warrants to the Lenders and
the Agent that it has duly authorized, executed and delivered this Amendment and
that the  Agreement  constitutes a legal,  valid and binding  obligation of such
Loan Party,  enforceable in accordance with its terms (except as  enforceability
may be limited by applicable bankruptcy,  insolvency,  or similar laws affecting
the  enforcement  of  creditors'  rights  generally or by  equitable  principles
relating to enforceability).

     2.2.  Each of the Loan  Parties  further  represents  and  warrants  to the
Lenders and the Agent that each of its  representations and warranties set forth
in Section  5.1 of the  Agreement  is true and correct as of the date hereof and
that no Amortization Event or Unmatured Amortization Event exists as of the date
hereof and is continuing.

     3. Conditions  Precedent.  This Amendment shall become  effective as of the
date first above written upon receipt by the Agent of a counterpart  hereof duly
executed by each of the parties hereto (including the Performance Guarantor).

     4. Miscellaneous.

     4.1.  Except as expressly  amended  hereby,  the Existing  Agreement  shall
remain  unaltered and in full force and effect,  and each of the parties  hereby
ratifies and confirms the Agreement and each of the other Transaction  Documents
to which it is a party.

     4.2. THIS AMENDMENT  SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF GEORGIA.

     4.3.  EACH  PARTY  TO THIS  AMENDMENT  HEREBY  IRREVOCABLY  SUBMITS  TO THE
NON-EXCLUSIVE  JURISDICTION  OF ANY UNITED STATES FEDERAL OR GEORGIA STATE COURT
SITTING IN FULTON COUNTY, GEORGIA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THE  AGREEMENT OR ANY DOCUMENT  EXECUTED BY SUCH PERSON  PURSUANT TO
THE AGREEMENT,  AND EACH SUCH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR  PROCEEDING  MAY BE HEARD AND  DETERMINED  IN ANY SUCH
COURT AND  IRREVOCABLY  WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER  HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF
ANY OTHER  JURISDICTION.  ANY JUDICIAL  PROCEEDING BY ANY LOAN PARTY AGAINST THE
AGENT OR ANY  LENDER  OR ANY  AFFILIATE  OF THE AGENT OR ANY  LENDER  INVOLVING,
DIRECTLY OR  INDIRECTLY,  ANY MATTER IN ANY WAY  ARISING OUT OF,  RELATED TO, OR

                                                                        Page 234
                                                               Exhibit 10(i)A(5)

CONNECTED  WITH THE  AGREEMENT  OR ANY  DOCUMENT  EXECUTED  BY SUCH  LOAN  PARTY
PURSUANT TO THE  AGREEMENT  SHALL BE BROUGHT  ONLY IN A COURT IN FULTON  COUNTY,
GEORGIA.

     4.4. TO THE MAXIMUM EXTENT  PERMITTED BY APPLICABLE  LAW, EACH PARTY HERETO
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL  PROCEEDING  INVOLVING,  DIRECTLY OR
INDIRECTLY,  ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED  WITH THE  AGREEMENT,  ANY DOCUMENT
EXECUTED  BY ANY  LOAN  PARTY  PURSUANT  TO THE  AGREEMENT  OR THE  RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER.

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

                            {Signature pages follow}


                                                                        Page 235
                                                               Exhibit 10(i)A(5)




     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
executed and delivered by their duly authorized officers as of the date hereof.


BLUE RIDGE ASSET FUNDING CORPORATION

BY:  WACHOVIA BANK, N.A., ITS ATTORNEY-IN-FACT


By:  __________________________________
         Name:
         Title:


WACHOVIA BANK, N.A., AS A LIQUIDITY BANK AND AS AGENT


By:____________________________________
         Name:
         Title:







                                                                        Page 236
                                                               Exhibit 10(i)A(5)





NSI Funding, Inc.,
A DELAWARE CORPORATION, AS BORROWER


By:____________________________________
Name:
Title:


National Service Industries, Inc.,
A GEORGIA CORPORATION, AS SERVICER


By:____________________________________
Name:
Title:


The  undersigned,  as Performance  Guarantor,  hereby  consents to the foregoing
amendment and confirms that its Performance Undertaking remains unaltered and in
full force and effect after giving effect to such amendment:

National Service Industries, Inc.,
A DELAWARE CORPORATION,  AS PERFORMANCE GUARANTOR



By:____________________________________
Name:
Title:

EX-10

                                                                        Page 237
                                                               Exhibit 10(i)A(6)




                             PERFORMANCE UNDERTAKING

     This Performance Undertaking (this "Undertaking"), dated as of May 2, 2001,
is executed by National Service  Industries,  Inc., a Delaware  corporation (the
"Performance  Guarantor") in favor of NSI Funding,  Inc., a Delaware corporation
(together with its successors and assigns, "Recipient").

                                    RECITALS

1.   NSI Enterprises,  Inc., a California  corporation ("NSI Enterprises"),  and
     National Service  Industries,  Inc., a Georgia  corporation  ("NSI Georgia"
     and,  together with NSI Enterprises,  the  "Originators")  are parties to a
     Receivables Sale Agreement,  dated as of May 2, 2001 (as amended,  restated
     or otherwise  modified from time to time, the "First-Step Sale Agreement"),
     pursuant  to which NSI  Enterprises,  subject  to the terms and  conditions
     contained  therein,  plans to sell its  right,  title and  interest  in its
     accounts receivable and certain related assets to NSI Georgia.

2.   NSI  Georgia  and  Recipient   are  parties  to  a  Receivables   Sale  and
     Contribution  Agreement,  dated as of May 2, 2001 (as amended,  restated or
     otherwise modified from time to time, the "Sale and Contribution Agreement"
     and, together with the First-Step Sale Agreement,  the "Sale  Agreements"),
     pursuant  to  which  NSI  Georgia,  subject  to the  terms  and  conditions
     contained  therein,  plans  to sell or  contribute  its  right,  title  and
     interest in certain of its accounts  receivable and certain  related assets
     (including  NSI Georgia's  rights under the First-Step  Sale  Agreement) to
     Recipient.

3.   Recipient  intends to finance its purchases under the Sale and Contribution
     Agreement in part by borrowing under a Credit and Security  Agreement dated
     as of May 2, 2001 (as the same may from time to time  hereafter be amended,
     supplemented,  restated or  otherwise  modified,  the "Credit and  Security
     Agreement" and, together with the Sale Agreements,  the "Agreements") among
     Recipient,  as Borrower, NSI Georgia, as initial Servicer, Blue Ridge Asset
     Funding   Corporation  ("Blue  Ridge"),   the  banks  and  other  financial
     institutions from time to time party thereto as "Liquidity Banks" (together
     with Blue Ridge,  the "Lenders")  and Wachovia Bank,  N.A. or any successor
     agent appointed pursuant to the terms of the Credit and Security Agreement,
     as agent for the Lenders (in such capacity, the "Agent").

4.   Performance  Guarantor  owns,  directly or indirectly,  one hundred percent
     (100%) of the capital stock of each of the Originators  and Recipient,  and
     each  of  the  Originators  (and  accordingly,  Performance  Guarantor)  is
     expected to receive  substantial  direct and indirect  benefits  from their
     sales and/or  contributions of receivables  pursuant to the Sale Agreements
     (which benefits are hereby acknowledged).

5.   As an inducement for Recipient to acquire Originators'  accounts receivable
     pursuant  to the Sale  Agreements,  Performance  Guarantor  has  agreed  to
     guaranty (a) the due and punctual  performance  by NSI  Enterprises  of its
     obligations  under the First-Step Sale Agreement,  (b) the due and punctual
     performance  by  NSI  Georgia  of  its  obligations   under  the  Sale  and

                                                                        Page 238
                                                               Exhibit 10(i)A(6)

     Contribution  Agreement,  and (c) the due and punctual  performance  by NSI
     Georgia of its servicing  duties,  and NSI Enterprises of its sub-servicing
     duties, under the Credit and Security Agreement.

6.   Performance  Guarantor wishes to guaranty the due and punctual  performance
     by NSI Enterprises and NSI Georgia of the aforesaid obligations as provided
     herein.

                                    AGREEMENT

     NOW, THEREFORE, Performance Guarantor hereby agrees as follows:

     Section  1.  Definitions.  Capitalized  terms used  herein and not  defined
herein shall the respective  meanings  assigned  thereto in the  Agreements.  In
addition:

     "Guaranteed   Obligations"   means,   collectively,   (a)  all   covenants,
agreements,  terms,  conditions and  indemnities to be performed and observed by
(i) NSI  Enterprises as seller under the  First-Step  Sale Agreement or (ii) NSI
Georgia as seller and  contributor  under the Sale and  Contribution  Agreement,
including,  without  limitation,  in each of the  foregoing  cases,  the due and
punctual  payment  of all sums  which are or may  become due and owing by either
such Originator in its capacity as a seller or seller and contributor  under the
Sale Agreements,  whether for fees,  expenses  (including  actual and reasonable
counsel fees), indemnified amounts or otherwise, whether upon any termination or
for any other reason, and (b) all Servicing-Related Obligations.

     "Servicing  Related  Obligations" means all covenants,  agreements,  terms,
conditions  and  indemnities  to be performed and observed by (i) NSI Georgia in
its capacity as Servicer  under the Credit and Security  Agreement,  and/or (ii)
NSI  Enterprises  in its  capacity as a  sub-servicing  delegate of the Servicer
under the Credit and Security Agreement.

     Section 2. Guaranty of Performance of Guaranteed  Obligations.  Performance
Guarantor  hereby  guarantees  to Recipient,  the full and punctual  payment and
performance by each Originator of its respective  Guaranteed  Obligations.  This
Undertaking is an absolute,  unconditional  and continuing  guaranty of the full
and punctual performance of all Guaranteed  Obligations of each Originator under
the  Agreements  and each  other  document  executed  and  delivered  by  either
Originator  pursuant to the  Agreements  and is in no way  conditioned  upon any
requirement  that Recipient first attempt to collect any amounts owing by either
Originator to Recipient, the Agent or Blue Ridge from any other Person or resort
to any collateral security,  any balance of any deposit account or credit on the
books of Recipient, the Agent or Blue Ridge in favor of either Originator or any
other  Person or other means of  obtaining  payment.  Should  either  Originator
default in the  payment or  performance  of any of its  Guaranteed  Obligations,
Recipient (or its assigns) may cause the immediate  performance  by  Performance
Guarantor  of the  Guaranteed  Obligations  and  cause  any  payment  Guaranteed
Obligations  to become  forthwith due and payable to Recipient (or its assigns),
without  demand  or notice  of any  nature  (other  than as  expressly  provided
herein),  all of which are hereby  expressly  waived by  Performance  Guarantor.

                                                                        Page 239
                                                               Exhibit 10(i)A(6)

Notwithstanding  the  foregoing,  this  Undertaking  is not a  guarantee  of the
payment or collection of any of the  Receivables or the Loans,  and  Performance
Guarantor shall not be responsible for any Guaranteed  Obligations to the extent
the failure to perform such Guaranteed  Obligations by either Originator results
from Receivables being uncollectible on account of the insolvency, bankruptcy or
lack of  creditworthiness  of the related Obligor;  provided that nothing herein
shall  relieve  either   Originator  from  performing  in  full  its  Guaranteed
Obligations  under the  Agreements or Performance  Guarantor of its  undertaking
hereunder with respect to the full performance of such duties.

     Section 3. Performance  Guarantor's Further Agreements to Pay.  Performance
Guarantor  further agrees, as the principal obligor and not as a guarantor only,
to  pay  to  Recipient  (and  its  assigns),  forthwith  upon  demand  in  funds
immediately available to Recipient, all reasonable costs and expenses (including
court costs and  reasonable  legal  expenses)  actually  incurred or expended by
Recipient in connection with  enforcement of the Guaranteed  Obligations  and/or
this  Undertaking,  together  with  interest on amounts not paid by  Performance
Guarantor  under this  Undertaking  within two Business  Days after such amounts
become due until payment,  at a rate of interest (computed for the actual number
of days  elapsed  based on a 360 day year)  equal to the Prime  Rate plus 2% per
annum, such rate of interest changing when and as the Prime Rate changes.

     Section 4. Waivers by Performance  Guarantor.  Performance Guarantor waives
notice of acceptance of this Undertaking,  notice of any action taken or omitted
by  Recipient  (or  its  assigns)  in  reliance  on  this  Undertaking,  and any
requirement  that  Recipient  (or its  assigns)  be diligent or prompt in making
demands  under  this  Undertaking,  giving  notice  of  any  Termination  Event,
Amortization  Event, other default or omission by either Originator or asserting
any other  rights of Recipient  under this  Undertaking.  Performance  Guarantor
warrants  that it has  adequate  means to  obtain  from  each  Originator,  on a
continuing  basis,  information  concerning  the  financial  condition  of  such
Originator, and that it is not relying on Recipient to provide such information,
now or in the future. Performance Guarantor also irrevocably waives all defenses
(i) that at any time may be available in respect of the  Guaranteed  Obligations
by virtue of any statute of  limitations,  valuation,  stay,  moratorium  law or
other similar law now or hereafter in effect or (ii) that arise under the law of
suretyship,  including  impairment of  collateral.  Recipient  (and its assigns)
shall be at  liberty,  without  giving  notice  to or  obtaining  the  assent of
Performance  Guarantor  and  without  relieving  Performance  Guarantor  of  any
liability  under this  Undertaking,  to deal with each  Originator and with each
other party who now is or after the date hereof becomes liable in any manner for
any of the  Guaranteed  Obligations,  in such  manner as  Recipient  in its sole
discretion  deems fit,  and to this end  Performance  Guarantor  agrees that the
validity and enforceability of this Undertaking,  including without  limitation,
the provisions of Section 7 hereof,  shall not be impaired or affected by any of
the following: (a) any extension, modification or renewal of, or indulgence with
respect to, or substitutions for, the Guaranteed Obligations or any part thereof
or any agreement  relating  thereto at any time;  (b) any failure or omission to
enforce any right, power or remedy with respect to the Guaranteed Obligations or
any part thereof or any agreement relating thereto,  or any collateral  securing
the  Guaranteed  Obligations  or any part thereof;  (c) any waiver of any right,
power or remedy or of any Termination Event, Amortization Event, or default with
respect to the  Guaranteed  Obligations  or any part  thereof  or any  agreement
relating thereto; (d) any release, surrender,  compromise,  settlement,  waiver,
subordination  or  modification,  with or  without  consideration,  of any other
obligation of any person or entity with respect to the Guaranteed Obligations or
any  part  thereof;  (e)  the  enforceability  or  validity  of  the  Guaranteed

                                                                        Page 240
                                                               Exhibit 10(i)A(6)

Obligations or any part thereof or the genuineness,  enforceability  or validity
of any agreement relating thereto or with respect to the Guaranteed  Obligations
or any part thereof; (f) the application of payments received from any source to
the payment of any payment  obligations of either Originator or any part thereof
or amounts which are not covered by this  Undertaking  even though Recipient (or
its assigns)  might  lawfully have elected to apply such payments to any part or
all of the payment  obligations  of such  Originator or to amounts which are not
covered by this  Undertaking;  (g) the  existence of any claim,  setoff or other
rights  which  Performance  Guarantor  may  have  at  any  time  against  either
Originator  in  connection  herewith  or  any  unrelated  transaction;  (h)  any
assignment or transfer of the Guaranteed Obligations or any part thereof; or (i)
any failure on the part of either  Originator to perform or comply with any term
of the  Agreements or any other  document  executed in  connection  therewith or
delivered  thereunder,  all whether or not Performance  Guarantor shall have had
notice or knowledge of any act or omission  referred to in the foregoing clauses
(a) through (i) of this Section 4.

     Section 5. Unenforceability of Guaranteed  Obligations Against Originators.
Notwithstanding  (a) any change of ownership of Performance  Guarantor or either
Originator or the insolvency, bankruptcy or any other change in the legal status
of either  Originator;  (b) the change in or the imposition of any law,  decree,
regulation or other governmental act which does or might impair, delay or in any
way  affect  the  validity,  enforceability  or  the  payment  when  due  of the
Guaranteed  Obligations  (unless the same shall be applicable to the Performance
Guarantor);  (c) the failure of either  Originator or  Performance  Guarantor to
maintain in full force,  validity or effect or to obtain or renew when  required
all  governmental  and  other  approvals,   licenses  or  consents  required  in
connection with the Guaranteed  Obligations or this Undertaking,  or to take any
other action  required in connection  with the  performance  of all  obligations
pursuant to the Guaranteed Obligations or this Undertaking; or (d) if any of the
moneys included in the Guaranteed  Obligations  have become  irrecoverable  from
either  Originator  for any other reason other than final payment in full of the
payment  obligations  in accordance  with their terms or lawful setoff of claims
against  the  Purchasers,  this  Undertaking  shall  nevertheless  be binding on
Performance  Guarantor.  This  Undertaking  shall be in  addition  to any  other
guaranty or other security for the Guaranteed  Obligations,  and it shall not be
rendered unenforceable by the invalidity of any such other guaranty or security.
In the event that  acceleration of the time for payment of any of the Guaranteed
Obligations  is stayed upon the  insolvency,  bankruptcy  or  reorganization  of
either Originator or for any other reason with respect to either Originator, all
such amounts then due and owing with respect to the Guaranteed Obligations under
the terms of the  Agreements,  or any other  agreement  evidencing,  securing or
otherwise  executed in  connection  with the  Guaranteed  Obligations,  shall be
immediately due and payable by Performance Guarantor.

     Section 6.  Representations  and Warranties.  Performance  Guarantor hereby
represents  and  warrants  to  Recipient  and its assigns  that (a)  Performance
Guarantor is a corporation duly organized, validly existing and in good standing
under  the  laws of  Delaware  and has all  corporate  powers  and all  material
governmental licenses, authorizations,  consents and approvals required to carry
on its  business  as now  conducted,  and (b) this  Undertaking  has  been  duly
executed and  delivered by  Performance  Guarantor and  constitutes  its legally
valid and binding  obligation,  enforceable  against  Performance  Guarantor  in
accordance with its terms, provided that the enforceability hereof is subject to

                                                                        Page 241
                                                               Exhibit 10(i)A(6)

general  principles  of equity and to  bankruptcy,  insolvency  and similar laws
affecting  the  enforcement  of  creditors'  rights  generally  and  by  general
equitable principles.

     Section 7. Subrogation.  Notwithstanding anything to the contrary contained
herein, until the Guaranteed Obligations are paid in full Performance Guarantor:
(a) will not enforce or otherwise  exercise any right of  subrogation  to any of
the rights of Recipient, the Agent or Blue Ridge against either Originator,  (b)
hereby waives all rights of subrogation (whether contractual,  under Section 509
of the United States  Bankruptcy  Code, at law or in equity or otherwise) to the
claims of Recipient,  the Agent and Blue Ridge against either Originator and all
contractual,   statutory   or  legal  or  equitable   rights  of   contribution,
reimbursement,  indemnification and similar rights and "claims" (as that term is
defined in the United States Bankruptcy Code) which Performance  Guarantor might
now have or hereafter  acquire  against  either  Originator  that arise from the
existence or performance of Performance Guarantor's  obligations hereunder,  (c)
will not claim any setoff,  recoupment or counterclaim against either Originator
in respect of any liability of Performance  Guarantor to such Originator and (d)
waives any benefit of and any right to participate  in any  collateral  security
which may be held by Beneficiaries, the Agent or Blue Ridge.

     Section 8. Termination of Performance Undertaking.  Performance Guarantor's
obligations  hereunder  shall  continue  in full  force  and  effect  until  all
Obligations  are finally paid and  satisfied in full and the Credit and Security
Agreement is  terminated,  provided that this  Undertaking  shall continue to be
effective or shall be reinstated,  as the case may be, if at any time payment or
other  satisfaction  of any of the  Guaranteed  Obligations is rescinded or must
otherwise  be  restored  or  returned  upon  the  bankruptcy,   insolvency,   or
reorganization of either Originator or otherwise, as though such payment had not
been made or other  satisfaction  occurred,  whether  or not  Recipient  (or its
assigns) is in possession of this  Undertaking.  No invalidity,  irregularity or
unenforceability  by reason of the federal  bankruptcy code or any insolvency or
other  similar  law,  or any law or order of any  government  or agency  thereof
purporting to reduce, amend or otherwise affect the Guaranteed Obligations shall
impair,  affect, be a defense to or claim against the obligations of Performance
Guarantor under this Undertaking.

     Section 9. Effect of Bankruptcy. This Performance Undertaking shall survive
the  insolvency  of  either  Originator  and  the  commencement  of any  case or
proceeding by or against either Originator under the federal  bankruptcy code or
other   federal,   state  or  other   applicable   bankruptcy,   insolvency   or
reorganization  statutes.  No automatic stay under the federal  bankruptcy  code
with respect to either  Originator or other federal,  state or other  applicable
bankruptcy,  insolvency or reorganization statutes to which either Originator is
subject shall  postpone the  obligations  of  Performance  Guarantor  under this
Undertaking.

     Section 10. Setoff.  Regardless of the other means of obtaining  payment of
any of the  Guaranteed  Obligations,  Recipient  (and  its  assigns)  is  hereby
authorized  at any  time and  from  time to time  during  the  existence  of any
Amortization  Event,  without notice to  Performance  Guarantor (any such notice
being  expressly  waived by  Performance  Guarantor)  and to the fullest  extent
permitted  by law, to set off and apply any  deposits and other sums against the
obligations of Performance  Guarantor under this  Undertaking  then past due for
more than two Business Days.

                                                                        Page 242
                                                               Exhibit 10(i)A(6)


     Section  11.  Taxes.  All  payments  to be  made by  Performance  Guarantor
hereunder  shall be made free and clear of any deduction or withholding  (except
for taxes excluded under Section 10.1 of the Credit and Security Agreement).  If
Performance Guarantor is required by law to make any deduction or withholding on
account  of any  Taxes or  otherwise  from any such  payment  (except  for taxes
excluded under Section 10.1 of the Credit and Security  Agreement),  the sum due
from it in respect of such payment shall be increased to the extent necessary to
ensure  that,  after the  making of such  deduction  or  withholding,  Recipient
receive  a net sum  equal to the sum  which  they  would  have  received  had no
deduction or withholding been made.

     Section 12. Further Assurances.  Performance  Guarantor agrees that it will
from  time to time,  at the  request  of  Recipient  (or its  assigns),  provide
information  relating to the  business and affairs of  Performance  Guarantor as
Recipient may reasonably request.

     Section 13. Successors and Assigns.  This Performance  Undertaking shall be
binding upon Performance  Guarantor,  its successors and permitted assigns,  and
shall inure to the benefit of and be enforceable by Recipient and its successors
and  assigns.  Without  limiting  the  generality  of  the  foregoing  sentence,
Recipient may pledge or assign, and hereby notifies  Performance  Guarantor that
it has pledged and assigned,  this Performance Undertaking to the Agent, for the
benefit  of the  Lenders,  as  security  for the  Obligations,  and  Performance
Guarantor  hereby  acknowledges  that the Agent  may  enforce  this  Performance
Undertaking,  on behalf of Recipient  and the  Lenders,  with the same force and
effect as though  the Agent  were the  Recipient  hereunder.  Subject to Section
7.1(c)(ii) of the Credit and Security Agreement,  Performance  Guarantor may not
assign or transfer any of its  obligations  hereunder  without the prior written
consent of each of Recipient and the Agent.

     Section 14. Amendments and Waivers. No amendment or waiver of any provision
of this  Undertaking  nor  consent to any  departure  by  Performance  Guarantor
therefrom  shall be effective  unless the same shall be in writing and signed by
Recipient,  the Agent  and  Performance  Guarantor.  No  failure  on the part of
Recipient to exercise,  and no delay in exercising,  any right  hereunder  shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any other right.

     Section 15.  Notices.  All notices and other  communications  provided  for
hereunder  shall be made in writing and shall be  addressed  as  follows:  if to
Performance  Guarantor,  at the address set forth beneath its signature  hereto,
and if to  Recipient,  at the  addresses  set forth beneath its signature to the
Credit and Security Agreement, or at such other addresses as each of Performance
Guarantor or any  Recipient  may  designate  in writing to the other.  Each such
notice or other communication shall be effective (a) if given by telecopy,  upon
the receipt thereof, (b) if given by mail, five (5) Business Days after the time
such  communication is deposited in the mail with first class postage prepaid or
(c) if given by any other means,  when received at the address specified in this
Section 15.

     Section  16.  GOVERNING  LAW.  THIS  UNDERTAKING   SHALL  BE  CONSTRUED  IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
GEORGIA.

                                                                        Page 243
                                                               Exhibit 10(i)A(6)


     Section 17. CONSENT TO  JURISDICTION.  TO THE FULLEST  EXTENT  PERMITTED BY
APPLICABLE  LAW:  (A)  EACH  OF  PERFORMANCE   GUARANTOR  AND  RECIPIENT  HEREBY
IRREVOCABLY  SUBMITS TO THE  NON-EXCLUSIVE  JURISDICTION  OF ANY  UNITED  STATES
FEDERAL OR GEORGIA STATE COURT SITTING IN FULTON  COUNTY,  GEORGIA IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS UNDERTAKING,  THE AGREEMENTS OR
ANY OTHER DOCUMENT EXECUTED IN CONNECTION  THEREWITH OR DELIVERED THEREUNDER AND
(B) EACH OF PERFORMANCE  GUARANTOR AND RECIPIENT HEREBY  IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING  MAY BE HEARD AND  DETERMINED
IN ANY SUCH COURT AND  IRREVOCABLY  WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT,  ACTION OR  PROCEEDING  BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.

     Section  18.  WAIVER OF JURY  TRIAL.  TO THE MAXIMUM  EXTENT  PERMITTED  BY
APPLICABLE LAW, EACH OF PERFORMANCE  GUARANTOR AND RECIPIENT HEREBY WAIVES TRIAL
BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER  SOUNDING IN TORT,  CONTRACT OR  OTHERWISE)  IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED  WITH THIS  UNDERTAKING,  THE  AGREEMENTS  OR ANY OTHER
DOCUMENT  EXECUTED  IN  CONNECTION  THEREWITH  OR  DELIVERED  THEREUNDER  OR THE
RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER

     Section 19. Bankruptcy Petition. Performance Guarantor hereby covenants and
agrees that, prior to the date that is one year and one day after the payment in
full of all  outstanding  senior  indebtedness  owed by Blue Ridge,  it will not
institute against, or join any other Person in instituting  against,  Blue Ridge
any   bankruptcy,   reorganization,   arrangement,   insolvency  or  liquidation
proceedings or other similar  proceeding  under the laws of the United States or
any state of the United States.

     Section  20.  Miscellaneous.   This  Undertaking   constitutes  the  entire
agreement of Performance Guarantor with respect to the matters set forth herein.
The rights and remedies  herein provided are cumulative and not exclusive of any
remedies  provided by law or any other agreement,  and this Undertaking shall be
in  addition  to any other  guaranty of or  collateral  security  for any of the
Guaranteed Obligations. The provisions of this Undertaking are severable, and in
any action or  proceeding  involving  any state  corporate  law, or any state or
federal bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors  generally,  if the obligations of Performance  Guarantor hereunder
would otherwise be held or determined to be avoidable,  invalid or unenforceable
on  account  of the  amount of  Performance  Guarantor's  liability  under  this
Undertaking,  then,  notwithstanding  any other provision of this Undertaking to
the contrary,  the amount of such liability shall, without any further action by
Performance Guarantor or Recipient,  be automatically limited and reduced to the
highest  amount that is valid and  enforceable  as  determined in such action or
proceeding.   Any  provisions  of  this  Undertaking  which  are  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, and any such prohibition or unenforceability in any

                                                                        Page 244
                                                               Exhibit 10(i)A(6)

jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.  Unless otherwise specified,  references herein to "Section"
shall mean a reference to sections of this Undertaking.



                            {signature page follows}


                                                                        Page 245
                                                               Exhibit 10(i)A(6)



     IN WITNESS WHEREOF, Performance Guarantor has caused this Undertaking to be
executed and delivered as of the date first above written.

                         National Service Industries, Inc., A DELAWARE CORPORATION

                         By: ______________________________
                         Name: ____________________________
                         Title: _____________________________

                         Address for Notices:

                         NSI Center
                         1420 Peachtree Street, N.E.
                         Atlanta, Georgia 30309
                         Attention: Treasurer
                         Telecopier: 404-853-1330
                         Telephone: 404-853-1368