View:


<PAGE>   1
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                           ANNUAL REPORT ON FORM 10-K


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

                       For the year ended January 1, 1999

                         Commission file number 0-27824

                        PIA MERCHANDISING SERVICES, INC.


           Delaware                                      33-0684451
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

                19900 MACARTHUR BLVD, SUITE 900, IRVINE, CA 92612

       Registrant's telephone number, including area code: (949) 476-2200

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

           Securities registered pursuant to section 12(g) of the Act:
                     Common Stock, par value $.01 per share

        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]

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

        The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant on March 19, 1999, based on the closing price
of the Common Stock as reported by the Nasdaq National Market on such date, was
approximately $10,723,899.

        The number of shares of the Registrant's Common Stock outstanding as of
March 19, 1999 was 5,477,846 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission within 120 days of January 1, 1999 in connection with the Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.

================================================================================

<PAGE>   2

                        PIA MERCHANDISING SERVICES, INC.

                           ANNUAL REPORT ON FORM 10-K


                                      INDEX


                                     PART I

<TABLE>
<CAPTION>
                                                                                  PAGE 
<S>        <C>                                                                    <C>  

 Item 1.   Business                                                                  3 

 Item 2.   Properties                                                               15 

 Item 3.   Legal and Administrative Proceedings                                     15 

 Item 4.   Submission of Matters to a Vote of Security Holders                      15 
                                                                                       

                                   PART II                                             
                                                                                       

 Item 5.   Market for Registrant's Common Equity and Related Shareholder Matters    16 

 Item 6.   Selected Consolidated Financial Data                                     17 

 Item 7.   Management's Discussion and Analysis of Financial Condition and             
           Results of Operations                                                    18 

 Item 7A.  Quantitative and Qualitative Disclosures About Market Risk               25 

 Item 8.   Financial Statements and Supplementary Data                              25 

 Item 9.   Changes in and Disagreements with Accountants on Accounting and             
           Financial Disclosure                                                     25 
                                                                                       

                                  PART III                                             
                                                                                       

 Item 10.  Directors and Executive Officers of the Registrant                       26 

 Item 11.  Executive Compensation                                                   26 

 Item 12.  Security Ownership of Certain Beneficial Owners and Management           26 

 Item 13.  Certain Relationships and Related Transactions                           26 
                                                                                       

                                   PART IV                                             

 Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K          26 
           Signatures                                                               28 
</TABLE>




                                       2

<PAGE>   3


                                     PART I

        THIS ANNUAL REPORT ON FORM 10-K INCLUDES " FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
EXCHANGE ACT INCLUDING, IN PARTICULAR, THE STATEMENTS ABOUT PIA'S PLANS AND
STRATEGIES UNDER THE HEADINGS "BUSINESS" AND "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." ALTHOUGH PIA
BELIEVES THAT ITS PLANS, INTENTIONS AND EXPECTATIONS REFLECTED IN OR SUGGESTED
BY SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CANNOT ASSURE THAT SUCH
PLANS, INTENTIONS OR EXPECTATIONS WILL BE ACHIEVED. IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS
MADE IN THIS ANNUAL REPORT ON FORM 10-K ARE SET FORTH UNDER THE HEADING "RISK
FACTORS" AND ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K. ALL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO PIA OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED BY THE CAUTIONARY STATEMENTS CONTAINED IN THIS ANNUAL REPORT ON
FORM 10-K.

        SEE THE GLOSSARY AT PAGE 13 FOR A DESCRIPTION OF CERTAIN TERMS THAT ARE
USED THROUGHOUT THIS ANNUAL REPORT ON FORM 10-K.


ITEM 1.  BUSINESS

GENERAL

        PIA Merchandising Services, Inc. ("PIA" or the "Company") is a supplier
of in-store merchandising and sales services in the United States and Canada.
The Company provides these services primarily on behalf of consumer product
manufacturers, consumer service companies and retailers at approximately 17,000
retail grocery stores, 6,000 mass merchandiser and 8,800 drug stores.

        The Company currently provides three principal types of services: shared
services, where an associate represents multiple clients; dedicated services,
where associates work for one specific client; and project services, where
associates perform specified in-store activities.

      Shared services consist of regularly scheduled, routed merchandising
services provided at the stores for multiple manufacturers, primarily under
multi-year contracts. Shared services may include activities such as: ensuring
that client's products authorized for distribution are in stock and on the
shelf, adding in new products that are approved for distribution but not present
on the shelf, setting category shelves in accordance with approved store
schematics, ensuring that shelf tags are in place, checking for the overall
salability of clients' products and selling new product and promotional items.

      In 1998, PIA developed a new strategy for routed merchandising services.
The stores are selected for routed merchandising services based on two sets of
criteria. The first is the store's weekly All Commodity Volume ("ACV"). The
higher the sales volume of a store, the greater the need for merchandising
services and more frequent visits to the store are required. The second
criterion is based on retailer discipline. This is a subjective determination
and therefore based on retail conditions, schematic discipline and competitive
activity. This new market strategy provides our clients with an added focused
approach to meeting their merchandising needs.

        Dedicated services generally consist of merchandising services as
described above except that dedicated services are performed for a specific
retailer or manufacturer by a dedicated organization. The merchandisers and
management team work exclusively for that retailer or manufacturer. These
services are normally provided under multi-year contracts.

      For both shared service clients and dedicated service clients, the Company
also performs project services. Project services consist primarily of specific
in-store services initiated by retailers and manufacturers, such as new product
launches, special seasonal or promotional merchandising, focused product support
and product recalls. These services typically are used for large-scale
implementations over 30 days. The Company also performs other project services,
such as new store sets and existing store resets, re-merchandising, remodels and
category implementations, under shared service contracts or stand-alone project
contracts.



                                       3

<PAGE>   4

        As part of its shared and dedicated services, PIA also collects and
provides to certain clients a variety of merchandising data that is category,
product and store specific.

        PIA, organized in 1943, initially provided merchandising services in
grocery retail chains on behalf of manufacturers. In mid-1988, it was determined
that a national merchandising company could capitalize on developments within
the retail grocery industry by providing merchandising services to a variety of
manufacturers in the industry. Until 1989, the Company operated exclusively in
grocery retail chains in California and Arizona. In 1990, PIA implemented a
national expansion strategy to cover the grocery trade. In 1993, the Company
expanded to address additional retail channels, including mass merchandiser,
chain drug and discount drug stores. In 1994, PIA began offering dedicated
services to retailers and manufacturers. In 1997, the Company established a
corporate and division infrastructure for its project services business. The
Company currently performs its services primarily on behalf of approximately 805
consumer product manufacturers.

INDUSTRY OVERVIEW

        A number of trends have impacted the retail industry and have created a
demand for providers of third party merchandising services such as those offered
by the Company.

SHIFT OF MERCHANDISING SERVICES

        Historically, employees of retailers, consumer product manufacturers and
food brokers principally performed merchandising functions. Retailers staffed
their stores as needed to ensure in-stock conditions, the placement of new items
on shelves, and the maintenance of shelf schematics to approved standards.
Manufacturers typically deployed their own sales people in an effort to ensure
that their products were in distribution and properly positioned on the shelves.
However, the primary function of these sales people was to sell the
manufacturers' products and promotions, and not to perform significant in-store
services at the shelf level. In addition, food brokers performed retail
merchandise services on behalf of the manufacturer in conjunction with their
sales efforts. Brokers also often performed work at the shelf level at the
request of the retailer and their principal client, the manufacturer.

        The average grocery store carries approximately 22,000 items. In an
effort to maintain or improve their margins, grocery retailers have broadened
their product offerings and services from traditional grocery, household and
health and beauty care products to include new product categories such as
general merchandise and service departments such as bakery, deli and prepared
fast foods. The Company believes that, as a result, these retailers have shifted
employee hours away from the traditional maintenance of packaged goods in order
to support these new categories and service departments. The Company further
believes retailers have converted many hours of basic merchandising work from
full-time professionals to part-time labor, who are generally less skilled and
trained. These trends have caused poorer shelf conditions and an increasing
number of out-of-stock items, resulting in lost sales. As a result, retailers
are increasingly relying on manufacturers and food brokers, among others, to
support their in-store needs such as new store sets and existing store resets,
re-merchandising, remodels and category implementations. Initially,
manufacturers deployed their sales professionals to perform these
retailer-mandated services. However, manufacturers found the deployment of sales
professionals to perform retail-merchandising services were expensive and not an
effective use of their resources. As manufacturers' costs to perform these
services grew and shelf integrity declined, manufacturers began to outsource
these merchandising activities to third parties such as the Company.

      The outsourcing trend to third party merchandisers has resulted in an
increasing number of organizations providing services to manufacturers and
retailers. Certain retailers and manufacturers have chosen to consolidate in
order to reduce the number of third parties they have to manage, to achieve
consistent execution of their retail merchandising strategies, and to customize
the scope of services performed on their behalf.



                                       4

<PAGE>   5

RETAILER CONSOLIDATION

        As retailer-mandated activities have continued to increase in both
number and type, with a corresponding increase in the amount of labor required
to complete them, manufacturers have increased their use of third party
suppliers. For example, additional category implementation activities are
required to effect retailers' in-store schematics. Schematics are changing more
frequently as the result of a growing number of new product introductions each
year. Retailers continue to require numerous resets, re-merchandising, and
remodels in response to the increasing number of changes in the product mix. PIA
estimates that these activities have doubled over the last five years, so that
most stores are currently re-merchandised or remodeled every 24 months. In
certain areas of the country and with certain retailers, these activities are
conducted annually.

INCREASE IN MERCHANDISING SERVICES REQUIRED IN OTHER RETAIL CHANNELS

        Unlike the merchandising services performed for grocery retailers, work
performed by manufacturers in mass merchandiser, chain drug and other retail
formats has historically been much less demanding. In these retail channels,
retailers performed most of their own merchandising work. However, the Company
believes that as these retailers become more competitive, they are attempting to
maintain their margins by requesting more support from the manufacturer
community to provide merchandising services similar to those provided to the
grocery retailers. These retailers have become increasingly important to
manufacturers, causing manufacturers to provide greater retail focus and support
to ensure out-of-stock conditions are reduced, authorized items are available,
and general product conditions are good. Manufacturers have become particularly
sensitive to the requirements of seasonal and promotional activities, which
require rapid and effective in-store support in order to maximize sales.

INCREASE IN USE OF INFORMATION TECHNOLOGIES

        Information technology is playing an increasingly important role in the
retail industry, particularly in light of industry initiatives towards efficient
consumer response ("ECR") and category management. Retailers and manufacturers
have expanded their use of information technology to manage product distribution
in stores, item placements on the shelves, and off-shelf displays. In
particular, retailers and manufacturers are increasingly looking for causal data
(e.g., display, pricing and product adjacency information) that is category and
store specific. Both retailers and manufacturers use this information to make
decisions regarding ECR category management, shelf management, and new product
promotion plans. It also gives retailers the ability to tailor their stores to
regional demographics.

BUSINESS STRATEGY

        PIA believes the increasing demand for national solutions to
manufacturers' diverse merchandising requirements, together with the
consolidation of the retail industry, has increased the growth of outsourcing.
The increase in required merchandising services, and the increased use of
information technology, will foster the growth of those companies that can
provide these solutions, have the flexibility to respond to the changing retail
environment and have the financial resources to provide rapid deployment of
merchandising resources. The Company has developed a strategy it believes will
address these industry trends. The major components of PIA's strategy are as
follows:

      POSITION THE COMPANY AS A NATIONAL, FULL SERVICE RETAIL SOLUTIONS COMPANY

        PIA's objective is to strengthen its position as a leading national
supplier of retail solutions by expanding the services it will offer including
category management, data gathering, interpretation and management, to both its
existing and prospective manufacturer clients and its newer and prospective
retailer clients, and to offer its existing and newer services in additional
retail channels.



                                       5

<PAGE>   6

      SERVE EMERGING DEMAND FOR DEDICATED SERVICES

        PIA believes certain retailers and manufacturers will increasingly
prefer merchandising service on a dedicated basis, and the significant size of
such contracts requires substantial financial, recruitment, deployment,
reporting and management capabilities. The Company believes it is positioned
well to serve this emerging need for dedicated services.

      INCREASE THE COMPANY'S UTILIZATION OF INFORMATION TECHNOLOGY

        The Company has been focusing Information Technology resources on
applications, which help improve productivity of field merchandisers. PIA
believes a commitment to technology will provide a long term competitive
advantage. The Company believes the technology it develops will present
increased opportunities for PIA on project specific requests from manufacturers.
PIA also expects to use technology to expand its informational services and
consulting capabilities. Additionally, the Company will continue to provide its
proprietary software program, Merchandisers Toolbox, to certain retailers. This
program is designed to manage the deployment of manufacturer supplied labor, to
measure their performance against the retailers' in-store plans and to develop
databases that include a "blueprint" of a store by category. The Company also
expects its key account managers will continue to use various shelf technology
programs, which the Company licenses from A.C. Nielsen, IRI and Intactix.

DESCRIPTION OF SERVICES

        The Company provides a broad array of merchandising services on a
national, regional and local basis to manufacturers and retailers. PIA believes
its full-line capability of developing plans at one centralized headquarters
location, executing chain wide, fully integrated national solutions and
implementing rapid, coordinated responses to needs on a real time basis
differentiates the Company from its competitors. The Company also believes its
centralized decision-making ability, local follow-through, ability to recruit,
train and supervise merchandisers, ability to perform large-scale initiatives on
short notice and strong retailer relationships provide it with a competitive
advantage over local, regional or retailer specific competitors.

        The Company provides its merchandising and sales services primarily on
behalf of consumer product manufacturers at approximately 17,000 retail grocery,
6,000 mass merchandiser and 8,800 drug stores. PIA currently provides three
principal types of merchandising and sales services: shared services, dedicated
services and project services.

      SHARED SERVICES

        Shared services consist of regularly scheduled, routed merchandising
services provided at the store level for manufacturers. PIA's shared services
are performed for multiple manufacturers including, in some cases, manufacturers
whose products are in the same product category. Shared services may include
activities such as: 

        -   Ensuring that client's products authorized for distribution are in
            stock and on the shelf

        -   Adding in new products that are approved for distribution but not
            present on the shelf

        -   Setting category shelves in accordance with approved store
            schematics

        -   Ensuring that shelf tags are in place

        -   Checking for the overall salability of clients' products and

        -   Selling new product and promotional items.

The Company's shared services are performed principally by full-time retail
sales merchandisers, retail sales specialists and key account managers, along
with district and division manager supervision.



                                       6

<PAGE>   7

      RETAIL SALES MERCHANDISERS

      PIA's retail sales merchandisers ("RSM") perform shared service coverage
at the store level. These services include a review of the retailer's shelves
and the appropriate store (or chain) prepared shelf schematic to ensure all
clients' approved products are available for sale in the store, that such
products have the approved shelf placement and number of facings (the horizontal
and vertical space occupied by a package front) on the shelf, and the approved
shelf tag is in position. If a product is not in distribution, the RSM adds the
product to the shelf if it is available in the store's product storage area. If
a product is unavailable, the RSM prepares a place on the shelf for this product
and a shelf tag. The presence of a shelf tag is critical to a store's ability to
reorder an individual stock-keeping unit ("SKU") from the distribution center.
The RSM checks for the presence of and replaces, if necessary, the shelf tags
for all client SKUs. The RSM also reviews all SKUs for product freshness, if
appropriate, and for general salability.

      KEY ACCOUNT MANAGERS

      On behalf of its manufacturer clients, PIA selectively deploys key account
managers ("KAMs") inside of the major retail chains. These KAMs, assigned
exclusively to a single retailer, work with that retailer's headquarters staff
in the execution of category management initiatives and in the development and
implementation of shelf schematics. The KAMs provide both the manufacturer and
PIA with a headquarters' perspective of the retailer and its primary objectives
at the store level. The KAMs work with manufacturer clients to develop and
achieve their merchandising goals, including those related to product
distribution, shelf placement, the number of facings for particular products,
and product adjacencies. The KAMs also work with manufacturer clients to gain
retailer authorization for new products and approval of new category schematics
that are compatible with the retailer's own category management strategies. PIA
generally attempts to position its KAMs within the retailer's organization in a
leadership capacity, both in category management and vendor deployment
activities. The KAMs typically are placed within the retailer's shelf technology
department and are equipped with the specific shelf technology software utilized
by the retailer. The KAMs work with the retailer in the development of new shelf
schematics, category layouts and, in some cases, total store space plans. The
Company is also training its KAMs in category management in order to provide
further value to both the Companies' manufacturer clients and to the retailer.

      DEDICATED SERVICES

        Dedicated services consist of merchandising services, generally as
described above, that are performed for a specific retailer or manufacturer by a
dedicated organization, including a management team, working exclusively for
that retailer or manufacturer. These services provided are primarily based on
agreed hourly rates and fixed management fees under multi-year contracts.

      The Company believes it pioneered the concept of dedicated service in 1994
with a program designed for Thrifty-PayLess Drug Stores. The program covered 995
stores, and PIA was responsible for implementing product selection changes and
resetting all categories to meet Thrifty-PayLess' category management plans. In
implementing the program, PIA was able to ensure placement of new products on
the shelf within five days of availability and completed section changes within
ten days. In 1996, Rite Aid acquired Thrifty-PayLess and the contract was not
renewed beyond December 1996.

      In 1997, PIA started a dedicated program with CVS/Revco to convert Revco
stores to the CVS format. The conversion project was a total re-merchandising of
all Revco stores to the new CVS format. PIA moved gondolas, built new gondolas,
and installed new fixtures and re-planogramed all categories to the CVS
conversion plan. In 1999, PIA will be responsible for new store set ups and
special projects for CVS/Revco in the state of Ohio.

      The Company has not expanded the dedicated service concept during fiscal
year 1998. Net revenues have decreased from 34.6% in 1997 to 31.9% in 1998,
primarily due to project completions of the CVS/Revco conversions.



                                       7

<PAGE>   8

      PROJECT SERVICES

        Project services consist primarily of specific in-store services
initiated by retailers and manufacturers, such as new product launches, special
seasonal or promotional merchandising, focused product support and product
recalls. These services are used typically for large-scale implementations over
30 days. The Company also performs other project services, such as new store
sets and existing store resets, re-merchandising, remodels and category
implementations, under shared service contracts or stand-alone project
contracts.

RELATED SERVICES

INFORMATION TECHNOLOGY SERVICES

        PIA has been focusing information systems resources on applications,
which help improve productivity of field merchandisers. The Labor Tracking
System ("LTS") was introduced to PIA's 12 service centers in 1998. This
proprietary application records actual time spent on each work initiative. The
benefits of the system include real-time reporting, improved client billing, and
more efficient management of the field labor.

      In August 1998, the Work Generator System was implemented. This system
schedules shared services and project work from a central system. It reduces the
travel time by coordinating shared service work with project work. The system
provides associates with a daily schedule of work assignments and expected
completion times.

      In September 1998, the Company began using Symbol scanners to capture
inventory and returned inventory data for Buena Vista Home Entertainment
("BVHE"). BVHE retrieves the scanner information daily via the Internet from
PIA's server. This information is used for daily updates to BVHE's vendor
managed inventory system.

      PIA also expanded the use of its Interactive Voice Response ("IVR")
system. Hourly status updates can now be provided to clients on critical new
item launches, such as BVHE's video releases. The IVR system can process 2,500
calls per day. This gives the Company the ability to give clients
up-to-the-minute status on any work that uses the IVR system.

TELEMARKETING SERVICES

       PIA owns 20% of Ameritel, Inc., a company that performs inbound and
outbound telemarketing services, including those on behalf of certain of PIA's
manufacturer clients. Ameritel provides telemarketing sales services for
manufacturers that sell directly into smaller, independent retail stores. The
Company believes that its affiliation with Ameritel provides an additional
merchandising solution for some packaged product manufacturers and retailer
clients.
      The Company, in conjunction with Ameritel, developed an automated
interface between the Ameritel Vantive system and the LTS. PIA associates now
telephone work assignment completion information to Ameritel. PIA associates are
able to report hours, mileage, and other completion information for each work
assignment on a daily basis. The information is used to update the LTS the next
day. This provides the 12 service centers with daily, detailed tracking of work
completion.

RETAIL AND SECONDARY HEADQUARTERS SELLING SERVICES

      The Company deploys retail sales specialists ("RSS") to provide product
selling support for certain manufacturers at the retail store and secondary
retailer's headquarters buying offices. These services are performed principally
for manufacturers that choose to outsource their sales function for calls on
wholesaler-supplied individual stores or small chains. Sales services performed
by the RSS's include product sales, selling point of sale promotions, discount
and allowance programs and shelf merchandising plans.



                                       8

<PAGE>   9

SALES AND MARKETING

        The Company's sales efforts are structured to develop new business in
national and local markets. At the national level, PIA's corporate business
development team directs its efforts toward the senior management of prospective
clients. At the regional level, sales efforts are principally guided through
PIA's 12 service center offices located nationwide.

        The Company's corporate account executives play an important role in
PIA's new business development efforts within its existing manufacturer client
base. The corporate account executives are generally located in the clients'
corporate headquarters. The corporate account executives plan merchandising and
product introductions with the manufacturer so that PIA can achieve the
objectives of such clients' major new product and promotional initiatives. In
addition, the corporate account executives present PIA's services to the sales
and marketing executives of these clients, and utilize marketing data provided
by IRI, A.C. Nielsen and others in an effort to ascertain additional market
opportunities for such clients at the local level. Client service managers are
part of the Company's geographic division teams and work with the local
management of the Company's clients. The client service manager's primary
responsibility is to work with the client to establish specific, measurable
objectives for PIA, and to market additional services. As part of this process,
the division account executive is responsible for developing retail
merchandising solutions for such objectives.

        As part of retailer consolidation, retailers are centralizing most
administrative functions, including operations, procurement and category
management. In response to this centralization and the growing importance of
large retailers, many manufacturers have reorganized their selling organizations
around a retailer team concept that focuses on a particular retailer. PIA has
also responded to this emerging trend by establishing client service offices
that are fully staffed to provide the PIA client and the retailer with access to
all of PIA's services. PIA currently has retailer teams in place at Wal*Mart
(Rogers, Arkansas), Kmart (Detroit, Michigan) and Eckerd Drug (Tampa, Florida).

        The Company's business development process encompasses a due diligence
period to determine the objectives of the prospective client, the work to be
performed to satisfy those objectives and the market value of the work to be
performed. PIA employs a formal cost development and proposal process that
determines the cost of each element of work required to achieve the prospective
client's objectives. These costs, together with an analysis of market rates, are
used in the development of a quotation approval form that is presented to the
Company's proposal committee for approval. The pricing must meet PIA's
objectives for profitability, which are established as part of the business
planning process. After approval of this quotation by the proposal committee, a
detailed proposal is presented to the prospective client. Following agreement
regarding the elements of service and corresponding rates, a contract is
prepared and executed. See "--Customers."

CUSTOMERS

      PIA currently represents approximately 805 manufacturer clients, including
approximately 648 branded product manufacturers and approximately 157 private
label manufacturers. Before 1993, the Company represented its manufacturer
clients primarily in the retail grocery industry. Beginning in 1993, the Company
found that additional opportunities to provide its services existed throughout
the much broader marketplace. This marketplace included mass merchandiser, chain
drug and deep discount drug stores, as well as in other retail trade groups such
as home improvement centers, computer/electronic stores, toy stores, convenience
stores and office supply stores. As a result, the Company has contracted with a
number of manufacturers to provide services in several additional retail
markets, and has agreed to provide services to a number of retailers directly.



                                       9

<PAGE>   10

COMPETITION

      The third-party merchandising industry is highly competitive and is
comprised of an increasing number of merchandising companies with either
specific retailer, retail channel or geographic coverage, as well as food
brokers. These companies tend to compete with the Company primarily in the
retail grocery channel, and some of them may have a greater presence in certain
of the retailers in whose stores the Company performs its services. The Company
also competes with several companies that are national in scope, such as
Powerforce, Alpha One, Pimms, and SPAR Marketing Force. These companies compete
with PIA principally in the mass merchandiser, chain drug and deep discount drug
retail channels. PIA believes the principal competitive factors within its
industry include development of technology breadth and quality of client
services, cost, and the ability to execute specific client priorities rapidly
and consistently over a wide geographic area.

      PIA recently entered into an agreement with SPAR Marketing Force and
certain of its affiliates ("SPAR Group") in which PIA will essentially be
acquired by SPAR Group in a merger in which all the outstanding Common Stock of
SPAR will be exchanged for approximately 12.3 million shares of PIA Common
Stock. See "--Recent Transaction." After the merger, the SPAR Group shareholders
will own approximately 69% of PIA Common Stock.

TRADEMARKS

        PIA(R) is a registered trademark of the Company. In addition, the
Company has recently commenced the process of registering the service mark for
the term Precision Merchandising. Although the Company believes its trademarks
may have value, the Company believes its services are sold primarily based on
breadth and quality of service, cost, and the ability to execute specific client
priorities rapidly and consistently over a wide geographic area. See "--Industry
Overview" and "--Competition."

EMPLOYEES

        As of January 1, 1999, the Company employed approximately 1,109
full-time employees, of whom approximately 83 worked in executive,
administrative and clerical capacities at the Company's corporate headquarters,
and 1,026 of whom worked in division offices nationwide. In addition, the
Company employed 1,030 part-time employees. Approximately 180 of the Company's
employees are covered by contracts with labor unions. The Company considers its
relations with its employees and its employees' unions to be good. The Company
also uses the services of up to 3,000 flextime personnel whose payroll is
generated through a company not affiliated with PIA.

RECENT TRANSACTION

      On February 28, 1999, PIA entered into an agreement with SPAR Group, a
privately held affiliated group of companies to merge in a stock transaction.
Under the agreement, PIA will issue approximately 12.3 million shares of PIA
Common Stock to the stockholders of SPAR Group. SPAR Group is a privately owned
provider of retail marketing and sales services offering merchandising support,
incentive and motivation marketing programs, information management, marketing
research, data base marketing and promotional analysis and forecasting. The
transaction will be accounted for as a reverse acquisition in which SPAR Group
is deemed to be the accounting acquirer. SPAR Group has annual revenues of
approximately $75 million. After the merger, SPAR Group stockholders will own
approximately 69% of PIA Common Stock. The transaction requires regulatory and
stockholder approval and is expected to close in May 1999.



                                       10

<PAGE>   11

                                  RISK FACTORS

        The following risk factors should be carefully reviewed in addition to
the other information contained in this annual report on Form 10-K

HISTORY OF LOSSES

        During the years ended December 31, 1997 and January 1, 1999, the
Company incurred significant losses and experienced substantial negative cash
flow. PIA had net losses of $15.1 million for the fiscal year ended 1997 and
$4.3 million for fiscal year 1998. Losses in 1997 were primarily caused by
margin reductions from the loss of shared service clients, inefficiencies in
field labor execution, poor pricing decisions for some client contracts and
higher business unit overhead costs. The recognition of $5.4 million in
restructuring and other charges was also responsible for the losses. Losses in
1998 primarily were caused by margin reductions and from a decline in revenues
due to loss of shared service clients and completion of dedicated projects. The
Company expects to have further losses for the first quarter of fiscal 1999. As
noted in Recent Transaction, the Company has entered into a merger agreement
with SPAR Group. Should this merger not be completed, the Company will be
required to significantly reduce its operating costs to minimize the effects of
further reductions in revenues and operating losses. PIA cannot guarantee that
it will not sustain further losses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."

LOSS OF BUSINESS

        PIA's business mix has changed significantly over the last year, and is
expected to continue to change during 1999, in response to client needs, and the
evolving third party merchandising industry. Due in part to the completion of a
major dedicated client program, and the loss of several shared service clients,
sales have declined over the last 18 months, and no sizable new dedicated
business has been sold to compensate for these losses. The Company has reduced
its dedicated management and personnel infrastructure accordingly.

INDUSTRY CONSOLIDATION; CONCENTRATED CLIENT BASE

        The retail and manufacturing industries are undergoing consolidation
processes that result in larger but fewer retailers and suppliers. PIA's success
depends in part upon its ability to maintain its existing clients and to obtain
new clients. Because of industry consolidation, PIA has lost certain clients,
and this trend could continue to have a negative effect on PIA's client base and
results of operations. PIA's ten largest clients generated approximately 75% of
PIA's net revenues for the year ended January 1, 1999, and approximately 69% for
the year ended December 31, 1997. During the year ended January 1, 1999 none of
PIA's manufacturer or retailer clients accounted for greater than 10% of net
revenues other than Eckerd Drug Stores, CVS Pharmacy Incorporated and Buena
Vista Home Entertainment, which account for 15.6%, 12.6% and 10.6%,
respectively. During the year ended December 31, 1997, none of PIA's
manufacturer or retailer clients accounted for greater than 10% of net revenues
other than Buena Vista Home Entertainment and Eckerd Drug Stores which
accounted for 16.0% and 13.6% of net revenues, respectively. The majority of the
Company's contracts with its clients for shared services have multi-year terms.
PIA believes the uncollectibility of amounts due from any of its large clients,
a significant reduction in business from such clients, or the inability to
attract new clients, could have a material adverse effect on the Company's
results of operations.



                                       11

<PAGE>   12

UNCERTAINTY OF COMMISSION INCOME

        Approximately 15% of the Company's net revenues for the year ended
January 1, 1999 were earned under commission-based contracts. These contracts
provide for commissions based on a percentage of the client's net sales of
certain of its products to designated retailers. Under certain of these
contracts, the Company generally receives a draw on a monthly or quarterly
basis, which is then applied against commissions earned. Adjustments are made on
a monthly or quarterly basis upon receipt of reconciliations between commissions
earned from the client and the draws previously received. The reconciliations
typically result in commissions owed to the Company in excess of previous draws;
however, the Company cannot predict with accuracy the level of its clients'
commission-based sales. Accordingly, the amount of commissions in excess of or
less than the draws previously received will fluctuate and can significantly
affect the Company's operating results in any quarter.

CONTROL BY CERTAIN STOCKHOLDERS

        Riordan, Lewis & Haden ("RLH"), a private investment firm, beneficially
owns approximately 29.7% of PIA's outstanding Common Stock. PIA's directors and
officers, in the aggregate, beneficially own approximately 16.2% of PIA's
outstanding Common Stock (excluding the shares owned by Riordan, Lewis & Haden
which are deemed to be beneficially owned by Mr. Haden and Mr. Lewis). While not
controlling a majority of the outstanding shares, RLH, and the directors and
officers acting together generally will have significant influence with respect
to the election of directors and other matters submitted to the PIA
stockholders, including amendments to PIA's charter and Bylaws and approval of
certain mergers or similar transactions and sales of all or substantially all of
PIA's assets. If the merger with the SPAR Group is consummated the current
stockholders of SPAR Group will beneficially own approximately 69% of PIA's
outstanding Common Stock. Accordingly, if they act as a group they will
generally be able to elect all directors and they will have the power to prevent
or cause a change in control of PIA. Such concentration of ownership could have
the effect of making it more difficult for a third party to acquire control of
PIA in the future, and may discourage third parties from attempting to do so.

RESTRICTIONS ON DIVIDENDS

        The Company has never paid dividends on its capital stock, and currently
intends to retain any earnings or other cash resources to finance future growth.

EFFECT OF CERTAIN CHARTER PROVISIONS; ANTI-TAKEOVER EFFECTS OF CERTIFICATE OF
INCORPORATION, BY-LAWS AND DELAWARE LAW

The Company's Board of Directors has the authority to issue up to 3,000,000
shares of Preferred Stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the stockholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of PIA.
In addition, PIA is subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, which will prohibit the Company from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. The application of Section 203 also could have the effect
of delaying or preventing a change of control of PIA. Certain provisions of
PIA's Certificate of Incorporation and Bylaws could delay or make more difficult
a merger, tender offer or proxy contest involving PIA. For example, PIA's
Bylaws, a special meeting of stockholders may be called only upon the request of
holders of at least 30% of the shares entitled to vote. Any delay in change of
control due to these provisions could adversely affect the market price of PIA's
Common Stock, which could adversely affect the market price of PIA 's Common
Stock.


                                       12

<PAGE>   13

      GLOSSARY

      The following glossary includes definitions of certain general industry
      terms as well as terms relating specifically to the company.

      CATEGORY - A segment or sub-segment of a department within a retail
      outlet. For example, the health and beauty care department consists of
      several categories such as oral care and shampoo; and the shampoo section
      is divided into sub-categories such as salon formulas and dandruff
      control.

      CATEGORY MANAGEMENT - A process for managing a retailer's or a
      manufacturer's business that recognizes categories as strategic business
      units for the purpose of planning sales and profit objectives.

      CAUSAL DATA - Data that defines the factors within a retail outlet that
      impact sales. These factors usually include display, pricing and product
      adjacency information.

      EFFICIENT CONSUMER RESPONSE (ECR) - A grocery industry strategy in which
      retailers and manufacturers incorporate the principles of efficient
      replenishment with effective assortment and promotion of products.

      FACING - The horizontal and vertical space occupied by a package front
      when displayed on a store shelf.

      KEY ACCOUNT MANAGER (KAM) - A KAM is assigned exclusively to a single
      retailer and works with that retailer's corporate headquarters staff in
      the execution of category management initiatives and in the development
      and implementation of shelf schematics.

      MASS MERCHANDISER - The segment of retailers that offers multi-departments
      in a single location, each of which is typically quite large (at least
      75,000 square feet). Examples include Kmart and Wal*Mart.

      NEW STORE SET - The initial merchandising of a new retail outlet that was
      either built or acquired.

      OUT-OF-STOCK - A situation that exists when a product normally carried by
      a retailer is temporarily unavailable. This means that shelf allocation
      exists, but inventory has been depleted.

      RE-MERCHANDISING - A retail unit that is enhanced by the relocation of
      sections, aisles and/or departments, and usually involves the total store.

      REMODEL - A retail unit that is enhanced by enlargement and/or redesign.
      Structural changes most often result in departments and/or services being
      added or deleted, which requires the relocation of most products and
      sections within the store.

      RESET - Relocation of products within a given category or section of a
      retail store. A reset typically involves removal of all products from the
      retailer's shelves, restocking of products and reallocation of space.

      RETAIL AND SECONDARY HEADQUARTERS SELLING - Refers to the selling of
      products and/or taking of orders in chains which do not operate their own
      warehouses and in stores having the authority to purchase and/or approve
      orders.

      RETAIL SALES MERCHANDISERS (RSM) - An RSM is a full-time associate who
      performs shared service coverage at the store level.

      RETAIL SALES SPECIALIST (RSS) - A retail sales specialist provides product
      selling support for certain manufacturers at the retail store and
      secondary retailers headquarters buying offices.



                                       13

<PAGE>   14

      RETAILER - An operator of retail stores or groups of retail stores that
      are also referred to as chains.

      SCHEMATIC - A diagram that lists the specific location and shelf space to
      be allocated for all items within a section. The schematic also contains
      data relating to merchandising such as width, depth of shelving, shelf
      elevations and height of gondola.

      SHARED SERVICES - A group of associates who perform specific functions for
      multiple clients on each store visit.

      STOCK KEEPING UNIT (SKU) - A unit of product having its own unique
      size/weight and product description.

      VOID - A situation that exists when a retailer does not carry a product
      and there is no allocated space or reorder tag present.



                                       14

<PAGE>   15


I
TEM 2. PROPERTIES.

        The Company maintains its corporate headquarters in approximately 20,000
square feet of leased office space located in Irvine, California, under a lease
with a term expiring in February 2000.

        The Company leases certain office and storage facilities for its
divisions and subsidiaries under operating leases, which expire at various dates
during the next five years. Most of these leases require the Company to pay
minimum rents, subject to periodic adjustments, plus other charges including
utilities, real estate taxes and common area maintenance.

        The following is a list of the locations where the Company maintains
leased facilities for its division offices and subsidiaries:



<TABLE>
<S>                                            <C>
       Scottsdale, Arizona                     Southfield, Michigan
       Rogers, Arkansas                        Chesterfield Missouri
       Irvine, California                      Edison, New Jersey
       Pleasanton, California                  Albuquerque, New Mexico
       Englewood, Colorado                     Blue Ash, Ohio
       Tampa, Florida                          Cranberry Township, Pennsylvania        
       Norcross, Georgia                       Carrollton, Texas
       Oakwood Terrace, Illinois               Houston, Texas
       Overland Park, Kansas                   Bellevue, Washington
       Woburn, Massachusetts
</TABLE>



        Although the Company believes that its existing facilities are adequate
for its current business, new facilities may be added should the need arise in
the future. Certain of the above facilities may be closed or subleased as the
Company streamlines its operations.


ITEM 3. LEGAL AND ADMINISTRATIVE PROCEEDINGS.

        On February 25, 1998, the Company and its Canadian subsidiary were
served with two Statements of Claim in the Ontario court (General Division) of
the Province of Ontario, Canada, filed by Merchandising Consultants Associates
("MCA") asserting claims for alleged breach of Confidentiality Agreements dated
October 19, 1996 and July 17, 1997. Both of these lawsuits assert that the
Company and its subsidiary improperly used confidential information provided by
MCA as part of the Company's due diligence concerning its proposed acquisition
of MCA, including alleged clientele, contracts, financial statements and
business opportunities of MCA. In addition, MCA contends that the Company
breached and allegedly reneged upon the terms for acquisition of MCA contained
in a Letter of Intent between the parties dated July 17, 1997, which by its
express terms was non-binding. The Statements of Claim seek damages totaling
$10.2 million.

        The Company denies all wrongdoing and intends to defend itself
aggressively in this action. It is not possible to predict the outcome of this
action at this time.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        None.


                                       15



<PAGE>   16


                                    PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

PRICE RANGE OF COMMON STOCK

        The following table sets forth the reported high and low sales prices of
the Common Stock for the quarters indicated as reported on the Nasdaq National
Market. The Common Stock is traded on the Nasdaq National Market under the
symbol "PIAM".



<TABLE>
<CAPTION>
                            1997                   1998
                    ------------------       -----------------
                      High       Low         High        Low
                    -------     ------       ------     ------
<S>                 <C>         <C>          <C>        <C>   
First Quarter       $11.000     $5.125       $6.500     $5.000
Second Quarter        7.125      5.375        8.156      3.688
Third Quarter         8.250      5.125        6.844      4.125
Fourth Quarter        9.000      4.875        4.875      2.000
</TABLE>



        As of March 19, 1999, there were approximately 872 holders of record of
the Company's Common Stock.

        The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. The Company currently intends to retain future earnings to
finance its operations and fund the growth of its business. Any payment of
future dividends will be at the discretion of the Board of Directors of the
Company and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, level of indebtedness, contractual
restrictions in respect to the payment of dividends and other factors that the
Company's Board of Directors deems relevant.


                                       16



<PAGE>   17


ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.

        The following selected consolidated financial data sets forth, for the
periods and the dates indicated, summary consolidated financial data of the
Company and its subsidiaries. Below, with respect to the three years ending
December 31, 1996, December 31, 1997 and January 1, 1999 is the consolidated
statement of operations and the consolidated balance sheet data as of December
31, 1997 and January 1, 1999 have derived from, and are qualified by reference
to the audited consolidated financial statements included elsewhere in this Form
10-K. These statements should be read in conjunction with such financial
statements and related notes thereto in "Management's Discussion and Analysis of
Financial Condition and Results of Operations."


<TABLE>
<CAPTION>

                                                                                  YEARS ENDED                         
                                                      -----------------------------------------------------------------  
                                                        DEC 31,        DEC 31,         DEC 31,      DEC 31,    JAN 1,    
                                                         1994           1995            1996         1997       1999     
                                                      ---------      ---------        ---------   ---------   ---------  
                                                                  (in thousands, except per share data)             
<S>                                                   <C>            <C>              <C>          <C>        <C>        
STATEMENT OF OPERATIONS DATA:                                                                                            
Net revenues                                          $  80,449      $ 104,791        $ 119,940   $ 128,208   $ 121,788  
Operating expenses:                                                                                                      
   Field services costs                                  61,876         81,320           94,841     119,830     105,448  
   Selling expenses                                       9,028         10,339           11,133      10,482       8,245  
   General and administrative expenses                    5,800          6,810            8,081      10,234      11,788  
   Restructure and other charges                             --             --               --       5,420          --  
   Depreciation and amortization                            339            497              595         997       1,129  
                                                      ---------      ---------        ---------   ---------   ---------  
       Total operating expenses                          77,043         98,966          114,650     146,963     126,610  
                                                      ---------      ---------        ---------   ---------   ---------  
Operating income (loss)                                   3,406          5,825            5,290     (18,755)     (4,822) 
Other income                                               (725)          (465)             895         895         611  
                                                      ---------      ---------        ---------   ---------   ---------  
Income (loss) before provision (benefit)                                                                                 
  for income taxes                                        2,681          5,360            6,185     (17,860)     (4,211) 
Income tax provision (benefit)                              101          1,829            2,426      (2,761)         55  
                                                      ---------      ---------        ---------   ---------   ---------  
Net income (loss)                                     $   2,580      $   3,531        $   3,759   $ (15,099)  $  (4,266) 
                                                      =========      =========        =========   =========   =========  
Net income (loss) per share - basic(1)                $    0.88      $    1.13        $    0.70   $   (2.72)  $   (0.78) 
                                                      =========      =========        =========   =========   =========  
Weighted average shares - basic(1)                        2,923          3,117            5,370       5,551       5,439  
                                                      =========      =========        =========   =========   =========  
Net income (loss) per share - diluted(1)              $    0.68      $    0.89        $    0.63   $   (2.72)  $   (0.78) 
                                                      =========      =========        =========   =========   =========  
Weighted average shares - diluted(1)                      3,895          3,981            5,990       5,551       5,439  
                                                      =========      =========        =========   =========   =========  
</TABLE>



<TABLE>
<CAPTION>

                                                       Dec 31,        Dec 31,          Dec 31,     Dec 31,     Jan 1,    
                                                        1994           1995             1996        1997        1999     
                                                      --------       --------         --------    --------    --------  
                                                                               (in thousands)                        
<S>                                                   <C>            <C>              <C>          <C>        <C>        
BALANCE SHEET DATA:                                                                                                      
Working capital                                       $ 3,642        $ 7,131          $32,737    $15,938      $13,844  
Total assets                                           10,224         16,086           47,672     36,467       26,054  
Current portion of long-term debt                         277             --               --         --           --  
Long-term debt, net of current portion                  3,274          3,400               --         --        2,000  
Total stockholders' equity                              2,481          5,988           36,718      18,67       14,724  
</TABLE>



(1) Net income (loss) per share has been restated for all applicable periods
presented in accordance with the adoption of SFAS No. 128 Earnings per share.


                                       17



<PAGE>   18


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

        PIA provides merchandising services to manufacturers and retailers
principally in grocery, mass merchandiser and chain and discount drug stores.
For the years ended December 31, 1997, and January 1, 1999, the Company
generated approximately 74% and 59% of its net revenues from manufacturer
clients and 26% and 41% from retailer clients, respectively.

        During the five years that ended January 1, 1999, none of the Company's
manufacturer or retailer clients accounted for greater than 10% of the Company's
net revenues, other than Thrifty-Payless, which accounted for approximately 13%
of net revenues for the year ended December 31, 1995, and BVHE and S.C. Johnson
which accounted for 11.7% and 10.3% of net revenues, respectively, for the year
ended December 31, 1996, and BVHE and Eckerd Drug Stores which accounted for
approximately 16.0% and 13.6% respectively, of net revenues for the year ended
December 31, 1997, and Eckerd Drug Store, CVS Pharmacy, and BVHE which accounted
for approximately 15.6%, 12.6% , and 10.6% respectively, of net revenues for the
year ended January 1, 1999.

        During the fiscal year 1998, the Company continued to experience a
decline in its shared service business. Shared services consist of regularly
scheduled, routed merchandising services provided at the store level for
manufacturers, primarily under multi-year contracts. Due in part to industry
consolidation, increased competition, and performance, the Company lost a number
of shared service clients in 1997 and 1998. The Company has historically
required a significant fixed management and personnel infrastructure to support
shared services. Accordingly, the loss of shared services business, without
offsetting gains, had a material adverse effect on the Company's results of
operations in 1997 and 1998. These losses have been partially offset with
additional project revenue from shared service clients. In 1997 and 1998, shared
service client's accounted for $83.8 and $83.0 million in net revenue and
dedicated clients accounted for $44.4 and $38.8 million in net revenue,
respectively. The Company believes revenues in fiscal year 1999 from shared
service clients will decline as a result of the wind-down of the lost business.

        The Company's profitability has been adversely affected by the loss of
its dedicated client services business in 1998. However, this decline has been
offset by an increase in gross margin, both in absolute amount and as a
percentage of net revenues, as a result of the effects of improved labor
productivity and service cost reduction in the field. Dedicated services consist
of merchandising services that are performed for a specific retailer or
manufacturer by a dedicated organization, including a management team, working
exclusively for that retailer or manufacturer. The net revenues associated with
dedicated clients decreased as a percentage of overall net revenues, from 34.6%
in 1997 to 31.9% in 1998.

        Due to the change in business mix, and resulting negative impact on
margins, the Company realigned its cost structure, and, in the third quarter of
1997, recorded a charge of $5.4 million for restructuring and other costs
associated with the realignment of management structure and the organization.
The Company continues to review its organizational structure and the fixed and
variable costs associated with delivery of its services. It is anticipated that
further organizational changes will take place in the fiscal year 1999, as the
Company puts structure, programs and processes in place to reduce its fixed
overhead in line with lower revenue levels.


                                       18



<PAGE>   19
The following table sets forth certain financial data as a percentage of net
revenues for the periods indicated:



<TABLE>
<CAPTION>
                                                                                  YEARS ENDED
                                                                 ---------------------------------------------
                                                                 DECEMBER 31,     DECEMBER 31,      JANUARY 1,
                                                                    1996             1997              1999
                                                                 ============     ============      ==========
<S>                                                              <C>              <C>               <C>   
Net revenues                                                        100.0%           100.0%            100.0%
Operating expenses:
       Field services costs                                          79.1             93.5              86.6
       Selling expenses                                               9.3              8.2               6.8
       General and administrative expenses                            6.7              8.0               9.7
       Restructure and other charges                                  0.0              4.2               0.0
       Depreciation and amortization                                  0.5              0.8               0.9
                                                                   ------           ------            ------
                     Total operating expenses                        95.6            114.7             104.0
                                                                   ------           ------            ------
Operating income (loss)                                               4.4            (14.7)             (4.0)
Other income                                                          0.8              0.7               0.5
                                                                   ------           ------            ------
Income (loss) before provision (benefit) for income taxes             5.2            (14.0)             (3.5)
Provision (benefit) for income taxes                                  2.0             (2.2)               --
                                                                   ------           ------            ------
Net income (loss)                                                     3.2%           (11.8)%            (3.5)%
                                                                   ======           ======            ======
</TABLE>



YEAR ENDED JANUARY 1, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1997

NET REVENUES

        For fiscal year 1998, net revenues were $121.8 million, compared to
$128.2 million in 1997, a 5.0% decrease. Shared service and project client net
revenues decreased from $83.8 million in 1997 to $83.0 million in 1998, a
decrease of $0.8 million or 1.0%. In 1998, the traditional shared services,
consisting of regularly scheduled routed merchandising service, decreased from
$44.9 million in 1997 to $40.1 million. This decrease of $4.8 million or 10.7%
was due in part to industry consolidation, increased competition and client
reorganization of marketing strategy. During the same period project revenues
for shared service clients increased by $4.0 million or 10.3% primarily due to a
major client switching from a dedicated program to a shared service program. The
Company's dedicated client net revenues declined from $44.4 million in 1997 to
$38.8 million in 1998, representing a 12.6% decrease. This decrease in dedicated
client net revenues resulted primarily from the completion of a major drug chain
dedicated program. Management expects that net revenues from dedicated clients
will decrease in 1999 due to the completion of a $15.0 million project in the
last quarter of 1998.

The following table sets forth net revenues by client type as a percentage of
net revenues for the periods indicated:



<TABLE>
<CAPTION>
                                                                            YEARS ENDED
                                                  ------------------------------------------------------------------
                                                      DECEMBER 31,            JANUARY 1,
                                                         1997                   1999                     CHANGE
                                                  ------------------     -------------------      ------------------
                                                                        (dollars in millions)
                                                   AMOUNT       %         AMOUNT        %          AMOUNT       %
                                                  -------    -------     -------     -------      -------    -------
<S>                                               <C>         <C>        <C>         <C>          <C>        <C>   
Shared service and project client net revenues    $  83.8      65.4%     $  83.0      68.1%       $ (0.8)      (1.0)%
Dedicated client net revenues                        44.4      34.6         38.8      31.9          (5.6)     (12.6)
                                                  -------     -----      -------     -----        ------      -----
Net revenues                                      $ 128.2     100.0%     $ 121.8     100.0%       $ (6.4)      (5.0)%
                                                  =======     =====      =======     =====        ======      =====
</TABLE>



                                       19



<PAGE>   20
OPERATING EXPENSES

        Field service costs were $105.4 million in the fiscal year 1998 compared
to $119.8 million in 1997, representing a decrease of $14.4 million, or 12.0%.
As a percentage of net revenues, field service costs were 93.5% of net revenues
in 1997 versus 86.6% of net revenues in 1998. Field service costs are comprised
principally of field labor and related costs and overhead expenses required to
provide services to both dedicated and shared service clients. The decrease in
field service costs is primarily due to significant labor efficiency savings
from new labor deployment systems and controls and a decline in services due to
the completion of a dedicated project in the third quarter 1998.

        Selling expenses were $8.2 million in 1998, compared to $10.5 million in
the prior year. As a percentage of net revenues, selling expenses were 6.8% in
1998, compared to 8.2% in 1997. This decrease in costs, both in absolute amount
and as a percentage of net revenues, is a result of lower staffing and travel
expenses.

        General and administrative expenses increased 15.2% in 1998 to $11.8
million, compared to $10.2 million in 1997. This increase was due primarily to
consulting and promotional expenses of $1.0 million, salary and salary related
expenses of $0.5 million to support technology advancements, office equipment
and leases of $0.7 million, offset by a reduction in bad debt provision of $0.8
million due to improved collection of outstanding accounts.

        Restructuring and other charge payments of $5.0 million did not
significantly differ from the initial restructuring and other charges expense.
In addition, accrued liabilities for restructuring at January 1, 1999 of $0.4
million will be sufficient to pay remaining employee separation costs and
special computer equipment under long-term operating leases no longer in use.
(See Note F-12).

        Depreciation and amortization expenses were $1.1 million in 1998
compared to $1.0 million in 1997, an increase of $0.1 million as a result of
depreciation, amortization on computer hardware, software development costs for
shelf technology and for general business purposes.

OTHER INCOME

        Interest income decreased 42.2% or $0.3 million in 1998 compared to
1997, due to lower cash balances available for investment in 1998.

        Equity in earnings of affiliate represents the Company's share of the
earnings of Ameritel, Inc., a full service telemarketing company. Equity of
earnings of affiliate increased 55.2% or 0.1 million in 1998 compared to 1997.
During 1996, the Company exercised its option to increase its ownership of
Ameritel to 20% and is now required for financial reporting purposes to
recognize its equity interest in Ameritel's earnings.

INCOME TAXES

        Income tax expense was approximately $0.1 million in 1998, compared to
an income tax benefit of $2.8 million in 1997, representing an effective rate of
1.3% and (15.5)%, respectively. The 1998 tax rate differed from the expected
federal tax rate of 35% due to a valuation allowance of $1.6 million on the
Company's deferred tax asset, caused by a net operating loss carryforward
created in 1998 and the uncertainty over the future utilization of such 
carryforwards. An income tax benefit in 1997 was derived from carrying back 
net operating losses to previous years and obtaining an income tax refund of 
$2.9 million.

NET LOSS

        The Company incurred a net loss of approximately $4.3 million in 1998,
$0.78 per diluted share, compared to a net loss of approximately $15.1 million,
or $2.72 per diluted share, in 1997. The improved performance during 1998 was
primarily due to labor efficiency savings from utilizing new labor systems and
controls, reduction in field service costs from the implementation of the 1997
restructure programs. The loss incurred in 1998 is primarily a result of margin
reductions because of reductions in dedicated clients and higher business unit
overhead rates.


                                       20



<PAGE>   21
NEW FINANCIAL MODEL

        The Company has developed a new financial model with which its business
can be analyzed to assist in the understanding of the operating results and
impact of various cost functions within the organization. This model follows
more standard metrics and allows the Company to analyze and manage at the
business unit level. The following table illustrates this financial model for
the years ended December 31, 1997 and January 1, 1999.

        Management expects to continue to review the business results based on
the comparable financial statement format contained in this Form 10-K until
comparisons can be made using the new financial model.



<TABLE>
<CAPTION>
                                                                                    YEARS ENDED
                                                              --------------------------------------------------------
                                                                      DECEMBER 31                      JANUARY 1
                                                                         1997                            1999
                                                              -----------------------          -----------------------
                                                                               (dollars in millions)
                                                              AMOUNT             %             AMOUNT              %
                                                              ------           ------          ------           ------
<S>                                                           <C>              <C>             <C>              <C>    
Net revenues                                                  $128.2            100.0%         $121.8            100.0%

     Direct business unit field expense                         98.7             77.0            88.9             73.0
                                                              ------           ------          ------           ------
Gross margin                                                    29.5             23.0            32.9             27.0

     Overhead and allocated field expense                       26.6             20.7            20.8             17.1
                                                              ------           ------          ------           ------
Business unit margin                                             2.9              2.3            12.1              9.9
                                                              ------           ------          ------           ------

     Selling, general and administrative expenses               15.3             11.9            15.8             12.9
     Restructure and non-recurring charges                       5.4              4.2             0.0              0.0
                                                              ------           ------          ------           ------
Total selling, general and administrative expenses              20.7             16.1            15.8             12.9
                                                              ------           ------          ------           ------

Earnings (loss) before interest, taxes, depreciation
and amortization  (EBITDA)                                     (17.8)           (13.8)           (3.7)            (3.0)

     Depreciation and amortization                              (1.0)            (0.8)           (1.1)            (0.9)
     Other income                                                0.9              0.7             0.6              0.5
     Income tax benefit (provision)                              2.8              2.1            (0.1)            (0.1)
                                                              ------           ------          ------           ------

Net loss                                                      $(15.1)           (11.8)%        $ (4.3)            (3.5)%
                                                              ======           ======          ======           ======
</TABLE>



YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

NET REVENUES

        For 1997, net revenues were $128.2 million, compared to $119.9 million
in 1996, a 6.9% increase. The Company's dedicated client net revenues had grown
from $21.9 million in 1996 to $44.4 million in 1997, a 102.7% increase. This
increase in dedicated client net revenues resulted from the addition of two
major new clients. Shared service and project client net revenues decreased from
$98.0 million in 1996 to $83.8 million in 1997, a decrease of $14.2 million or
14.5%. In 1997, the traditional shared services, consisting of regularly
scheduled routed merchandising services, decreased from $68.4 million in 1996 to
$44.9 million in 1997. Resulting in a decrease of $23.5 million or 34.4%, while
project revenues for shared clients increased to $9.3 million or 31.4%



                                       21



<PAGE>   22

The following table sets forth net revenues by client type as a percentage of
net revenues for the periods indicated:



<TABLE>
<CAPTION>
                                                                                 YEARS ENDED
                                                 -------------------------------------------------------------------------
                                                      DECEMBER 31,              DECEMBER 31,
                                                         1996                       1997                     CHANGE
                                                 --------------------       -------------------       --------------------
                                                                            (dollars in millions)
                                                 AMOUNT          %          AMOUNT          %         AMOUNT           %
                                                 ------        ------       ------       ------       ------        ------
<S>                                              <C>           <C>          <C>          <C>          <C>           <C>    
Shared service and project client net revenues   $ 98.0          81.7%      $ 83.8         65.4%      $(14.2)        (14.5)%
Dedicated client net revenues                      21.9          18.3         44.4         34.6         22.5         102.7
                                                 ------        ------       ------       ------       ------        ------
Net revenues                                     $119.9         100.0%      $128.2        100.0%      $  8.3           6.9 %
                                                 ======        ======       ======       ======       ======        ======
</TABLE>


OPERATING EXPENSES

        In 1997, field service costs increased $25.0 million, or 26.3%, to
$119.8 million, as compared to $94.8 million in 1996. As a percentage of net
revenues, field service costs were 79.1% of net revenues in 1996 versus 93.5% of
net revenues in 1997. Field service costs are comprised principally of field
labor and their related costs, and overhead expenses required to provide
services to both dedicated and shared service clients. The increase in field
service costs is due primarily to labor costs required to provide the necessary
level of business support for dedicated clients. In addition, the Company did
not adequately decrease shared client service labor and overhead costs as the
net revenue from this client base decreased.

        Selling expenses were $10.5 million in 1997, compared to $11.1 million
in 1996. As a percentage of net revenues, selling expenses were 8.2% in 1997,
compared to 9.3% in 1996. This decrease in costs, both in absolute amount and as
a percentage of net revenues, is a result of lower staffing and travels.

        General and administrative expenses increased 25.9% in 1997 to $10.2
million, compared to $8.1 million in 1996. The increase in general and
administrative expenses was due to increases in expenses that were required to
support overall business growth, including a larger dedicated client base. The
major increases included executive salaries and salary related expenses of $0.3
million, recruiting, employment and training of $0.3 million, and consulting,
legal and office lease expense of $0.6 million. In addition, increased costs
were experienced due to termination costs.

        During 1997, the Company experienced declining gross margins, and
resultant operating losses, due to service performance issues and the loss of
several shared clients. This decline in margins has resulted in insufficient
margin dollars to cover the overhead structure, which had developed at the field
level and in the general corporate area. In the quarter ended September 30,
1997, the Company began to address these conditions by restructuring its
operations. The Company redirected its focus in the quarter ended September 30,
1997, on a more disciplined and functional structure. These strategies resulted
in a $5.4 million charge for the restructuring and other additional charges. The
restructure and other charges consisted of $1.5 million of identified severance,
lease costs in various management and administrative functions and $2.1 million
in write-downs and accruals associated with the redirection of the Company's
technology strategies. Additional charges consist primarily of $1.3 million of
reserves, write-offs related to unprofitable contracts and $0.5 million of costs
associated with changes in the Company's service delivery model.

        Depreciation and amortization expenses were $1.0 million in 1997
compared to $0.6 million in 1996. The depreciation and amortization on computer
hardware and the software development costs for shelf technology increased this
expense $0.4 million.


                                       22



<PAGE>   23
OTHER INCOME

        Interest income decreased slightly in 1997 compared to 1996, due to
lower cash balances available for investment in 1997. Other income included
interest income on the net proceeds from the Company's initial public offering,
which took place in March 1996.

        Equity in earnings of affiliate represents the Company's share of the
earnings of Ameritel, Inc., a full service telemarketing company. Equity in
earnings of affiliate increased by 33.3% in 1997 compared to 1996. During 1996,
the Company exercised its option to increase its ownership of Ameritel to 20%
and is now required for financial reporting purposes to recognize its equity
interest in Ameritel earnings.

INCOME TAXES

        Income tax benefit was approximately $2.8 million in 1997, compared to
income tax expense of $2.4 million in 1996, representing an effective rate of
(15.5%) and 39.2%, respectively. The 1997 tax benefit rates differed from the
expected Federal and tax rate of 35% due to a valuation allowance of $3.6
million on the Company's deferred tax asset, caused by a net operating loss
carryforward created in 1997.

NET LOSS

        The Company incurred a net loss of approximately $15.1 million in 1997,
$2.72 per diluted share, compared to net income of approximately $3.8 million,
or $0.63 per diluted share, in 1996. The net loss for 1997 included the net
impact, after related tax benefit, of restructure and other charges of $4.6
million, or $0.83 per diluted share. The loss incurred in 1997 is primarily a
result of margin reductions due to reductions in shared service clients and
start up expenses on dedicated client services, inefficiencies in field labor
execution, poor pricing decisions for some client contracts, higher business
unit overhead costs and the recognition of restructure charges and other
non-reoccurring charges.

LIQUIDITY AND CAPITAL RESOURCES

        On March 1, 1996, the Company completed an initial public offering of
its Common Stock, raising $26.5 million. Prior to this offering, the Company's
primary sources of financing were senior borrowings from a bank under a
revolving line of credit and subordinated borrowings from two stockholders. As
of January 1, 1999, the Company used the proceeds from the offering to repay
bank debt of $3.4 million, to repurchase 507,000 shares of the Company's stock
for approximately $3.0 million and to fund the Company's operating losses in
1997 and 1998. During the year ended January 1, 1999, the Company had a net
decrease in cash of $1.9 million, resulting from its operating losses and
restructure charge payments and a reduction in accounts payable, that were
offset partially by a reduction in accounts receivable, income tax receivable
and proceeds of $2.0 million from its line of credit.

        In March 1997, the Company's Board of Directors approved a stock
repurchase program under which the Company was authorized to repurchase up to
1,000,000 shares of Common Stock from time to time in the open market, depending
on market conditions. This program was funded by proceeds from the initial
public offering. As of July 14, 1997, the Company repurchased an aggregate of
507,000 shares of its Common Stock for an aggregate price of approximately $3.0
million. No further repurchases are currently planned.

        In December 1998, PIA Merchandising Co., Inc. ("PIA Co.") and another
subsidiary of PIA entered into a loan and security agreement with Mellon Bank,
N.A. The agreement provides for a revolving line of credit that allows maximum
borrowing of $20.0 million and requires PIA Co. to borrow and maintain a minimum
balance of $2.0 million. The three-year credit facility will be used for working
capital purposes and potential acquisitions.

        Cash and cash equivalents totaled $11.1 million at January 1, 1999
compared with $13.0 million at December 31, 1997. At January 1, 1999 and
December 31, 1997, the Company had working capital of $13.8 million and $15.9
million, respectively, and current ratios of 2.50 and 1.95, respectively.


                                       23



<PAGE>   24

        Net cash used in operating activities in 1998 was $3.4 million, compared
with $2.8 million in 1997. This use of cash for operating activities in 1998
resulted primarily from net operating losses of $4.3 million and a reduction in
accrued liabilities primarily attributed to the Company's 1997 restructuring and
other charges and a reduction in accounts payable of $2.2 million related to a
reduction in third party payroll liability. These uses were offset by an income
tax refund of $2.9 million outstanding in 1997 and a decrease in account
receivable of $5.1 million from improved collection of outstanding accounts. Net
cash used in investing activities for 1998 was $0.7 million compared to $0.8
million in 1997 from additions to property and equipment and internally
developed software. Net cash provided by financing activities for 1998 was $2.1
million, compared to net cash used in financing activities of $2.9 million in
1997. In 1998 the Company received net proceeds from the issuance of common
stock of $0.1 million and increased the line of credit by $2.0 million.

        The above activity resulted in a decrease in cash and cash equivalents
of $1.9 million for the year ended January 1, 1999.

        Cash and cash equivalents and the timely collection of its receivables
provide the Company's current liquidity. However, the potential uncollectibility
of receivables due from any of PIA's major clients, or a significant reduction
in business from such clients, or the inability to acquire new clients would
have an adverse material effect on the Company's cash resources and its ongoing
ability to fund operations.

        The Company had a 4.3 million loss and experienced a decrease in cash
and cash equivalents of $1.9 million for the year ended January 1, 1999.
However, with the addition of the revolving line of credit, timely collection of
receivables, and the Company's positive working capital position, management
believes the funding of operations over the next twelve months will be
sufficient.

        PIA may incur additional indebtedness in 1999 in connection with the
merger. SPAR Group acquired the assets of an incentive marketing company in
January 1999. A portion of the purchase price was paid through the issuance of a
promissory note in the principal amount of $12,422,189 (plus an earnout, if
any), which matures on September 15, 1999. In addition, the stockholders of SPAR
Group loaned SPAR Group $2,958,000 to facilitate the acquisition. If this
indebtedness is not repaid before the transaction with PIA is consummated, the
combined company will assume these obligations. PIA will also be obligated,
under certain circumstances, to pay severance compensation to its employees in
connection with the merger. Further, PIA will incur substantial costs in
connection with the transaction, including legal fees of approximately $0.4
million and investment banking fees of approximately $1.0 million. PIA has
entered into discussions with Mellon Bank to increase its credit line to enable
it to meet its cash needs in connection with the merger and future potential
acquisitions in 1999.

YEAR 2000 SOFTWARE COSTS

        Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. As a result, many
date-sensitive computer applications will fail beginning January 1, 2000 because
they are unable to process dates properly beyond December 31, 1999. PIA has
reviewed its computer systems to identify areas that could be affected by Year
2000 issues and has implemented a plan to resolve these issues.

        PIA has substantially completed the evaluation of its information
technology infrastructure, software, hardware and communications systems. PIA
believes that its critical hardware and software applications are currently Year
2000 compliant. Completion of PIA's plan to upgrade all hardware and software
applications to be Year 2000 compliant is expected by the third quarter of 1999.
Third party vendors are also being reviewed for Year 2000 compliance and PIA
expects this risk assessment to be complete by the second quarter of 1999. PIA's
assessment and evaluation efforts include testing systems, inquiries of third
parties and other research. By implementing significant systems upgrades, PIA
believes that it has substantially reduced its potential internal exposure to
Year 2000 problems.

        In the event that certain systems fail to function properly, manual
processes will be implemented. Due to the nature of the business, PIA does not
anticipate a system failure to cease the operations, as operations are not
deemed to be systems dependent. Additionally, PIA plans to be capable of
operating in the event of a systems failure of any vendor.


                                       24



<PAGE>   25

        PIA will utilize internal resources to reprogram, or replace and test
the software for Year 2000 modifications. The total cost of the Year 2000
project is estimated at $67,000 and is being funded through operating cash
flows. Of the total project cost, approximately $6,000 was expensed in the
fiscal year 1998 and the remaining $61,000 will be expensed in 1999. It is not
expected that these costs will have a material effect on the results of
operations.

        The extent and magnitude of the Year 2000 problem as it will affect PIA
externally, both before and after January 1, 2000, is difficult to predict or
quantify for a number of reasons. These include the lack of control over systems
that are used by third parties that are critical to PIA's operation, the
complexity of testing inter-connected networks and applications that depend on
third party networks. If any of these third parties experience Year 2000
problems, it could have a material adverse effect on PIA.

        PIA is not currently aware of any material operational issues associated
with preparing its internal systems for the Year 2000, or the adequacy of
critical third party systems. PIA has not developed a contingency plan in case
it does not achieve Year 2000 compliance on or before December 31, 1999. The
results of its evaluation and assessment efforts do not indicate a need for
contingency planning. PIA intends to continue assessing its Year 2000
compliance, implementing compliance plans and communicating with third parties
about their Year 2000 compliance. If PIA's continued efforts indicate that
contingency planning is prudent, PIA will undertake appropriate planning at that
time.


I
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        The Company is exposed to market risk related to changes in interest
rates. A discussion of the Company's accounting policies for financial
instruments and further disclosures relating to financial instruments is
included in the Summary of Significant Accounting Policies in the Notes to
Consolidated Financial Statements. The Company's monitors the risks associated
with interest rates and financial instrument positions.

        The Company's revenue derived from international operations is not
material and, therefore, the risk related to foreign currency exchange rates is
not material.

INVESTMENT PORTFOLIO

        The Company has no derivative financial instruments or derivative
commodity instruments in its cash and cash equivalents and investments. The
Company invests its cash and cash equivalents and investments in high-quality
and highly liquid investments consisting of taxable money market instruments,
corporate bonds and some tax-exempt securities. The average yields on the
Company's investments in fiscal 1998 resulted primarily from investments and
averaged approximately 4.9%. As of January 1, 1999, PIA's cash and cash
equivalents and investments consisted primarily of taxable money market
instruments, corporate and tax-exempt securities with maturities of less than
one year with an average yield of approximately 3.7%.

DEBT

        The Company's debt is comprised of a line of credit with Mellon Bank
N.A. and requires monthly interest payments based on a variable interest rate
applied to the outstanding loan balance. If there were a 1% change in the
interest rate based upon, the Company's minimum borrowing requirement of
$2,000,000, interest expense would increase or decrease by $20,000 per annum.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        See Item 14 of this Annual Report on Form 10-K.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

        None.


                                       25



<PAGE>   26

PART III


ITEMS 10, 11, 12 AND 13.

        The information required in these items 10, 11, 12 and 13 of this Form
10-K is incorporated by reference to those portions of the Company's 1999 Proxy
Statement which contains such information.


PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)   1. INDEX TO FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT:



<TABLE>
<S>                                                                                  <C>
        Independent Auditors' Report                                                 F-1

        Consolidated Balance Sheets as of December 31, 1997 and January 1, 1999      F-2

        Consolidated Statements of Operations for the three years
            in the period ended January 1, 1999                                      F-4

        Consolidated Statements of Stockholders' Equity for the three years
            in the period ended January 1, 1999                                      F-5

        Consolidated Statements of Cash Flows for the three years in the period
            ended January 1, 1999                                                    F-6

        Notes to Consolidated Financial Statements for the three years
            in the period ended January 1, 1999                                      F-8

      2. FINANCIAL STATEMENT SCHEDULES.

        Schedule II - Valuation and Qualifying Accounts for the three years in
            the period ended January 1, 1999                                         F-25
</TABLE>



      3. EXHIBITS.


<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER             DESCRIPTION
          ------             -----------
<S>                 <C> <C>
            3.1     *   Certificate of Incorporation of PIA

            3.2     *   By-laws of PIA

            4.1     *   Registration Rights Agreement entered into as of
                        January 21, 1992 by and between RVM Holding Corporation.
                        RVM/PIA, a California Limited Partnership, The Riordan
                        Foundation and Creditanstalt-Bankvering.

           10.1     *   1990 Stock Option Plan

           10.2         Amended and Restated 1995 Stock Option Plan (incorporated by
                        reference of Exhibit 10.2 to the Company's Form 10Q for the
                        2nd Quarter ended July 3, 1998).

           10.3     *   1995 Stock Option Plan for Non-employee Directors

           10.4         Employment Agreement dated as of June 25, 1997 between
                        PIA and Terry R. Peets (incorporated by reference to
                        Exhibit 10.5 to the Company's Form 10-Q for the 2nd
                        Quarter ended June 30, 1997)

           10.5         Severance Agreement dated as of February 20, 1998
                        between PIA and Cathy L. Wood (incorporated by reference
                        to Exhibit 10.5 to the Company's Form 10-Q for the 1st
                        Quarter ended April 30, 1998)
</TABLE>



                                       26



<PAGE>   27


<TABLE>
<CAPTION>
EXHIBIT
NUMBER             DESCRIPTION
- ------             -----------
<S>          <C> 
10.6         Severance Agreement dated as of August 10, 1998 between
             PIA and Clinton E. Owens (incorporated by reference to
             Exhibit 10.6 to the Company's Form 10-Q for the 3rd
             Quarter ended October 2, 1998) 

10.7         Amendment No. 1 to Employment Agreement dated as of
             October 1, 1998 between PIA and Terry R. Peets 
             (filed herein)

10.8         Amended and Restated Severance Compensation Agreement
             dated as of October 1, 1998 between PIA and Cathy L. Wood
             (filed herein)

10.9         Loan and Security Agreement dated December 7, 1998 among Mellon 
             Bank, N.A., PIA Merchandising Co., Inc., Pacific Indoor Display 
             Co. and PIA. (filed herein)

10.10        Agreement and Plan of Merger dated as of February 28,
             1999 among PIA, S.G. Acquisition, Inc., PIA
             Merchandising Co., Inc., SPAR Acquisition, In., SPAR
             Marketing, Inc., SPAR Marketing Force, Inc., SPAR, Inc.,
             SPAR/Burgoyne Retail Services, Inc., SPAR Incentive
             Marketing, Inc., SPAR MCI Performance Group, Inc. and
             SPAR Trademarks, Inc. (filed herein)

10.11        Voting Agreement dated as of February 28, 1999 among
             PIA, Clinton E. Owens, RVM/PIA, California limited
             partnership, Robert G. Brown and William H. Bartels
             (filed herein)

21.1     *   Subsidiaries of the Company

23.1         Consent of Deloitte & Touche LLP

27.1         Financial Data Schedule
</TABLE>


        *Filed as an Exhibit to the Company's Registration Statement on Form S-1
        (Registration No. 33-80429) on December 14, 1995.

(b) REPORTS ON FORM 8-K.

None


                                       27



<PAGE>   28


SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1943, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                           PIA MERCHANDISING SERVICES, INC.

                             By: /s/ Terry R. Peets
                                -------------------------------
                             Terry R. Peets
                             President, Chief Executive Officer and Director

                             Date:      March 30, 1999
                                -------------------------------

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



<TABLE>
<CAPTION>

SIGNATURE                    TITLE                                    DATE       
- ---------                    -----                                    ----       
<S>                          <C>                                  <C>            

/s/ Clinton E. Owens         Chairman of the Board                March 30, 1999
- -------------------------                                                          
    Clinton E. Owens                                                               
                                                                                   
/s/ Terry R. Peets           President, Chief Executive           March 30, 1999
- -------------------------    Officer and Director                 
    Terry R. Peets                                      
                                                                                   
/s/ Cathy L. Wood            Executive Vice President,            March 30, 1999
- -------------------------    Chief Financial Officer and            
    Cathy L. Wood            Secretary (Principal Financial
                             and Accounting Officer)                               
                                                                                   
                                                                                   
/s/ Patrick W. Collins       Director                             March 30, 1999
- -------------------------
    Patrick W. Collins

/s/ John A. Colwell          Director                             March 30, 1999
- -------------------------                                                          
    John A. Colwell                                                                
                                                                                   
/s/ Joseph H. Coulombe       Director                             March 30, 1999
- -------------------------                                                          
    Joseph H. Coulombe                                           
                                                                                   
/s/ Patrick C. Haden         Director                             March 30, 1999
- -------------------------                                                          
    Patrick C. Haden                                                               
                                                                                   
/s/ J. Christopher Lewis     Director                             March 30, 1999
- -------------------------
    J. Christopher Lewis
</TABLE>



                                       28



<PAGE>   29
PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                             PAGE
                                                                             ----
<S>                                                                         <C>
INDEPENDENT AUDITORS' REPORT                                                 F-1

FINANCIAL STATEMENTS:


Consolidated balance sheets as of December 31, 1997 and January 1, 1999      F-2

Consolidated statements of operations for each of the three years
   in the period ended January 1, 1999                                       F-4

Consolidated statements of stockholders' equity for each
   of the three years in the period ended January 1, 1999                    F-5

Consolidated statements of cash flows for each of the three years
   in the period ended January 1, 1999                                       F-6

Notes to consolidated financial statements for each of the three years

   in the period ended January 1, 1999                                       F-8

Schedule II - Valuation and qualifying accounts                              F-25
</TABLE>



                                      29



<PAGE>   30


INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders of
  PIA Merchandising Services, Inc.:


We have audited the accompanying consolidated balance sheets of PIA
Merchandising Services, Inc. and subsidiaries (the Company) as of December 31,
1997 and January 1, 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended January 1, 1999. Our audits also included the financial statement schedule
listed in Item 14(a) 2. These consolidated financial statements and financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of PIA Merchandising
Services, Inc. and subsidiaries as of December 31, 1997 and January 1, 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended January 1, 1999 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.


Deloitte & Touche LLP

Costa Mesa, California
February 18, 1999

(Except for Note 14, as to which the date is February 28, 1999)



                                      F-1

<PAGE>   31

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS



<TABLE>
<CAPTION>
                                                       DECEMBER 31,   JANUARY 1,
                                                          1997           1999
                                                       -----------    ----------
<S>                                                    <C>             <C>    
CURRENT ASSETS:
Cash and cash equivalents                              $   12,987     $  11,064
Accounts receivable, net (Note 3)                          16,053        11,222
Income tax refund receivable (Note 6)                       2,905            81
Prepaid expenses and other current assets                     816           712
                                                       ----------     ---------

    Total current assets                                   32,761        23,079

PROPERTY AND EQUIPMENT, net (Note 3)                        2,416         1,991

INVESTMENTS AND OTHER ASSETS:
Investment in affiliate (Note 4)                              418           553
Other assets                                                  872           431
                                                       ----------     ---------

    Total investments and other assets                      1,290           984
                                                       ----------     ---------

    Total assets                                       $   36,467     $  26,054
                                                       ==========     =========
</TABLE>


See notes to consolidated financial statements



                                      F-2

<PAGE>   32

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                        (IN THOUSANDS, EXCEPT SHARE DATA)


                      LIABILITIES AND STOCKHOLDERS' EQUITY



<TABLE>
<CAPTION>
                                                             DECEMBER 31,      JANUARY 1,
                                                                 1997             1999
                                                             ------------      ----------
<S>                                                            <C>              <C>     
CURRENT LIABILITIES:
Accounts payable                                               $  3,442         $  1,194
Other current liabilities (Note 3)                               13,334            7,951
Income taxes payable (Note 6)                                        47               90
                                                               --------         --------

    Total current liabilities                                    16,823            9,235

LINE OF CREDIT AND LONG-TERM LIABILITIES (Note 5)                   966            2,095

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY (Notes 10 and 11):
Preferred stock, $.01 par value;
  3,000,000 shares authorized; none issued and 
  outstanding Common stock, $.01 par value;
  15,000,000 shares authorized; 5,392,558 and 
  5,477,846 shares issued and
  outstanding as of December 31, 1997
  and January 1, 1999, respectively                                  59               60
Additional paid-in capital                                       33,429           33,740
Accumulated deficit                                             (11,806)         (16,072)
Less treasury stock at cost (507,000 shares at 
  December 31, 1997 and January 1, 1999)                         (3,004)          (3,004)
                                                               --------         --------

    Total stockholders' equity                                   18,678           14,724
                                                               --------         --------

    Total liabilities and stockholders' equity                 $ 36,467         $ 26,054
                                                               ========         ========
</TABLE>




See notes to consolidated financial statements



                                      F-3

<PAGE>   33

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                               YEARS ENDED
                                                             ----------------------------------------------- 
                                                             DECEMBER 31,      DECEMBER 31,       JANUARY 1,
                                                                1996              1997               1999
                                                             ------------      ------------       ---------- 
<S>                                                          <C>               <C>                <C>      
NET REVENUES (Note 13)                                        $ 119,940         $ 128,208         $ 121,788

OPERATING EXPENSES:
Field service costs                                              94,841           119,830           105,448
Selling expenses                                                 11,133            10,482             8,245
General and administrative expenses (Notes 7, 8 and 9)            8,081            10,234            11,788
Restructuring and other charges (Note 2)                                            5,420
Depreciation and amortization                                       595               997             1,129
                                                              ---------         ---------         ---------

    Total operating expenses                                    114,650           146,963           126,610
                                                              ---------         ---------         ---------

OPERATING INCOME (LOSS)                                           5,290           (18,755)           (4,822)

OTHER INCOME:
Interest expense                                                    (46)                                (25)
Interest income                                                     869               799               487
Equity in earnings of affiliate (Note 4)                             72                96               149
                                                              ---------         ---------         ---------

     Total other income                                             895               895               611
                                                              ---------         ---------         ---------

INCOME (LOSS) BEFORE PROVISION (BENEFIT)
  FOR INCOME TAXES                                                6,185           (17,860)           (4,211)

INCOME TAX PROVISION (BENEFIT) (Note 6)                           2,426            (2,761)               55
                                                              ---------         ---------         ---------

NET INCOME (LOSS)                                             $   3,759         $ (15,099)        $  (4,266)
                                                              =========         =========         =========

BASIC EARNINGS (LOSS) PER SHARE (Note 12)                     $    0.70         $   (2.72)        $   (0.78)
                                                              =========         =========         =========

DILUTED EARNINGS (LOSS) PER SHARE (Note 12)                   $    0.63         $   (2.72)        $   (0.78)
                                                              =========         =========         =========

WEIGHTED AVERAGE COMMON SHARES - BASIC                            5,370             5,551             5,439
                                                              =========         =========         =========

WEIGHTED AVERAGE COMMON SHARES - DILUTED                          5,990             5,551             5,439
                                                              =========         =========         =========
</TABLE>



See notes to consolidated financial statements



                                      F-4

<PAGE>   34

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

           Years ended December 31, 1996 and 1997 and January 1, 1999


<TABLE>
<CAPTION>
                                                                                                           RETAINED
                                                COMMON STOCK            TREASURY STOCK        ADDITIONAL   EARNINGS      TOTAL
                                            ---------------------     --------------------      PAID-IN  (ACCUMULATED STOCKHOLDERS'
                                             SHARES       AMOUNT       SHARES      AMOUNT       CAPITAL    DEFICIT)      EQUITY
                                            --------     --------     --------    --------    ---------  ------------ -------------
<S>                                         <C>          <C>          <C>         <C>         <C>        <C>          <C>     
BALANCE, January 1, 1996                       3,564     $  6,454           --    $     --     $     --    $   (466)    $  5,988

Change in stated par value of
  shares from no par to $.01                               (6,418)                                6,418                         
Stock issued to the public                     2,138           21                                26,499                   26,520
Stock options exercised                           58            1                                   334                      335
Tax benefit related to exercise of stock
  options                                                                                           116                      116
Cashless exercise of warrants (Note 11)          131                                                                            
Net income                                                                                                    3,759        3,759
                                            --------     --------     --------    --------     --------    --------     --------
BALANCE, December 31, 1996                     5,891           58                                33,367       3,293       36,718

Stock options exercised                            9            1                                    62                       63
Repurchase of common stock                      (507)                      507      (3,004)                               (3,004)
Net loss                                                                                                    (15,099)     (15,099)
                                            --------     --------     --------    --------     --------    --------     --------
BALANCE, December 31, 1997                     5,393           59          507      (3,004)      33,429     (11,806)      18,678

Stock options exercised                           30                                                 88                       88
Employee stock purchases                          12                                                 45                       45
Shares issued as bonus (Note 10)                  43            1                                   178                      179
Net loss                                                                                                     (4,266)      (4,266)
                                            --------     --------     --------    --------     --------    --------     --------
BALANCE, January 1, 1999                       5,478     $     60          507    $ (3,004)    $ 33,740    $(16,072)    $ 14,724
                                            ========     ========     ========    ========     ========    ========     ========
</TABLE>



See notes to consolidated financial statements



                                      F-5

<PAGE>   35

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                              YEARS ENDED
                                                             --------------------------------------------
                                                             DECEMBER 31,     DECEMBER 31,     JANUARY 1,
                                                                1996             1997             1999
                                                             ------------    -------------     ----------
<S>                                                          <C>             <C>               <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                             $  3,759         $(15,099)        $ (4,266)
Adjustments to reconcile net income (loss) to net cash
  used in operating activities:
  Depreciation and amortization                                    595              997            1,129
  Equity in earnings of affiliate                                  (72)             (96)            (149)
  Deferred income taxes, net                                      (167)             360
  Provision for doubtful receivables and other, net                105              918             (270)
  Restructuring and other charges (Note 2)                                        5,420
  Changes in assets and liabilities:
    Accounts receivable                                        (10,522)           5,659            5,101
  Income tax refund receivable                                                   (2,905)           2,824
    Prepaid expenses and other current assets                       74             (252)             104
    Other assets                                                   213             (744)             441
    Accounts payable                                            (1,066)           2,670           (2,248)
    Other current liabilities                                    5,657              173           (5,204)
    Income taxes payable                                          (228)             (64)              43
    Other liabilities                                                               131             (871)
                                                              --------         --------         --------
      Net cash used in operating activities                     (1,652)          (2,832)          (3,366)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment                               (332)            (759)            (516)
Capitalization of software development costs                    (1,987)                             (174)
Investment in affiliate                                           (150)
                                                              --------         --------         --------

      Net cash used in investing activities                     (2,469)            (759)            (690)
</TABLE>




See notes to consolidated financial statements



                                      F-6

<PAGE>   36

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (IN THOUSANDS)




<TABLE>
<CAPTION>
                                                                                YEARS ENDED
                                                                ---------------------------------------------
                                                                DECEMBER 31,    DECEMBER 31,       JANUARY 1,
                                                                   1996             1997             1999
                                                                ------------    ------------       ----------
<S>                                                             <C>             <C>                <C>     
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt                             $ (3,400)        $     --         $     --
Proceeds from long-term debt                                                                          2,000
Proceeds from issuance of common stock to the public               26,520
Proceeds from issuance of common stock                                335               63              133
Repurchase of common stock                                                          (3,004)
                                                                 --------         --------         --------
      Net cash provided by(used in) financing activities           23,455           (2,941)           2,133
                                                                 --------         --------         --------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                                 19,334           (6,532)          (1,923)

CASH AND CASH EQUIVALENTS, beginning of period                        185           19,519           12,987
                                                                 --------         --------         --------
CASH AND CASH EQUIVALENTS, end of period                         $ 19,519         $ 12,987         $ 11,064
                                                                 ========         ========         ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION - Cash paid (refunded) during the year for:
  Interest                                                       $     69         $     --         $     25
                                                                 ========         ========         ========
  Income taxes                                                   $  2,853         $    129         $ (2,753)
                                                                 ========         ========         ========
</TABLE>


See Notes 10 and 11 to consolidated financial statements for description of
noncash transactions.



See notes to consolidated financial statements



                                      F-7

<PAGE>   37

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Company Description - PIA Merchandising Services, Inc. and subsidiaries
      ("Company") provides in-store merchandising services primarily on behalf
      of branded product manufacturers at retail grocery stores, mass
      merchandisers, drug stores and discount drug stores. The Company's
      in-store services include checking for authorized distribution of client
      products, cutting in products approved for distribution but not present on
      the shelf, setting category shelves in accordance with approved store
      schematics, ensuring shelf tags are in place, checking for the overall
      salability of clients' products, and performing new product and promotion
      selling. The Company also performs special in-store projects, such as new
      store sets and existing store resets, remerchandisings, remodels and
      category implementations, and executes and maintains point of purchase
      displays and materials. In addition, the Company collects and provides to
      certain clients a variety of merchandising data that is category and
      store-specific. The Company is also a supplier of regularly scheduled,
      shared merchandising services in the United States. The Company's
      management has evaluated the allocation of resources in assessing
      performance and determined the Company operates in three operating
      segments, dedicated services, shared services, and project services (Note
      13).

      Principles of Consolidation - The consolidated financial statements
      include the accounts of PIA Merchandising Services, Inc. and its wholly
      owned subsidiaries. All significant intercompany accounts and transactions
      have been eliminated in consolidation. The equity method of accounting is
      used for the Company's investment in affiliate (Note 4).

      Cash Equivalents - The Company considers all highly liquid short-term
      investments with original maturities of three months or less to be cash
      equivalents.

      Accounts Receivable and Credit Risk - During the ordinary course of the
      Company's business, the Company grants trade credit to its clients, which
      consist primarily of packaged goods manufacturers and retailers. The
      Company's ten largest clients generated approximately 57.0%, 69.0% and
      75.0% of the Company's net revenues for the fiscal years ended December
      31, 1996, December 31, 1997 and January 1, 1999, respectively.

      During the fiscal year ended January 1, 1999, three of the Company's
      clients accounted for 15.6%, 12.6% and 10.6% of the Company's net
      revenues. During 1997, two clients accounted for 16.0% and 13.6% of the
      Company's net revenues. Given the significant amount of net revenues
      derived from certain clients, collectibility issues arising from financial
      difficulties of any of these clients or the loss of any such clients could
      have a material adverse effect on the Company's business. Unbilled
      accounts receivable represent merchandising services performed that are
      pending billing until the requisite documents have been processed or
      projects have been completed (Note 3).

      Property and Equipment - Property and equipment are stated at cost and
      depreciated on the straight-line method over estimated useful lives,
      ranging from three to seven years. Leasehold improvements are amortized
      over the estimated useful life of the asset or the term of the lease,
      whichever is shorter.



                                      F-8

<PAGE>   38

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


      The Company has chosen to early adopt Statement of Position ("SOP") No. 98
      -1, Accounting for the Costs of Computer Software Developed or Obtained
      for Internal Use as of January 1, 1998. The SOP provides guidance in
      accounting for the costs of computer software developed or obtained for
      internal use. The effects of the adoption of the SOP have been reflected
      in the 1998 consolidated financial statements and are not material.

      Other Assets - Other assets consist primarily of refundable deposits.

      Deferred Revenue - Client payments received in advance of merchandising
      services performed are classified as deferred revenue (Note 3).

      Amounts Held on Behalf of Third Parties - Amounts held on behalf of third
      parties arise from agreements with retailers to provide services for their
      private label manufacturers' products and represent amounts to be utilized
      for certain future services including merchandising-related expenditures
      on behalf of the retailers (Note 3). These agreements renew annually and
      are cancelable on December 31 of each year or upon ninety-day written
      notice by either party.

      Revenue Recognition - The Company's services are provided under various
      types of contracts, which consist primarily of fixed fee and
      commission-based arrangements. Under fixed fee arrangements, revenues are
      recognized monthly based on a fixed fee per month over a service period of
      typically one year, as defined in the contract.

      The Company's commission-based contracts provide for commissions to be
      earned based on a specified percentage of the client's net sales of
      certain products to designated retail chains. In conjunction with these
      commission arrangements, the Company receives draws on a monthly basis,
      which are to be applied against commissions earned. These draws
      approximate estimated minimum revenue to be earned on the contract and are
      recognized on a monthly basis, over a service period of typically
      one-year. The Company recognizes adjustments on commission-based sales in
      the period such amounts become determinable. Commissions are usually owed
      to the Company in excess of draws received.

      The Company also performs services on a specific project basis. Revenues
      related to these projects are recognized as services are performed or
      costs are incurred. Certain of the Company's contracts are to perform
      project work over a specified period ranging from one to twelve months.
      Revenue under these types of contracts is recognized essentially on the
      percentage of completion method. Provisions for estimated losses on
      uncompleted contracts are recorded in the period in which such losses are
      determinable.

      Field Service Costs - Field service costs are comprised principally of
      field labor and related costs and expenses required to provide shared
      services, project activities, key account management and related
      technology costs, as well as field overhead required to support the
      activities of these groups of employees.



                                      F-9

<PAGE>   39

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


      Accounting for Stock-Based Compensation - Statement of Financial
      Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
      Compensation, requires disclosure of fair value method of accounting for
      stock options and other equity instruments. Under the fair value method,
      compensation cost is measured at the grant date based on the fair value of
      the award and is recognized over the service period, which is usually the
      vesting period. The Company has chosen, under the provisions of SFAS No.
      123, to continue to account for employee stock-based transactions under
      Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
      Issued to Employees. The Company has disclosed in Note 11 to the
      consolidated financial statements pro forma diluted net income (loss) and
      net income (loss) per share as if the Company had applied the fair value
      method of accounting.

      Income Taxes - Income taxes are provided for the tax effects of
      transactions reported in the financial statements and consist of taxes
      currently due plus deferred taxes related primarily to differences between
      the basis of assets and liabilities for financial and tax reporting. The
      deferred tax assets and liabilities represent the future tax return
      consequences of those differences, which will either be taxable or
      deductible when the assets and liabilities are recovered or settled.
      Deferred taxes are also recognized for operating losses that are available
      to offset future taxable income and tax credits that are available to
      offset future income taxes. In the event the future consequences of
      differences between financial reporting bases and tax bases of the
      Company's assets and liabilities result in deferred tax assets, an
      evaluation of the probability of being able to realize the future benefits
      indicated by such asset is required. A valuation allowance is provided
      when it is more likely than not that some portion or the entire deferred
      tax asset will not be realized.

      Comprehensive Income - The Company has adopted SFAS No. 130, Reporting
      Comprehensive Income. For the years ended January 1, 1999, December 31,
      1997 and December 31, 1996, the Company has no reported differences
      between net income (loss) and comprehensive income (loss). Therefore,
      statements of comprehensive income (loss) have not been presented.

      Earnings Per Share - The Company has adopted SFAS No. 128, Earnings per
      Share, which replaces the presentation of "Primary" earnings per share
      with "Basic" earnings per share and the presentation of "Fully Diluted"
      earnings per share with "Diluted" earnings per share. Prior periods have
      been restated to reflect the change in presentation.

      Basic earnings per share amounts are based upon the weighted-average
      number of common shares outstanding. Diluted earnings per share amounts
      are based upon the weighted-average number of common and potential common
      shares for each period presented. Potential common shares include stock
      options, using the treasury stock method.

      Vendor Concentration - In addition to the Company's own employees, the
      Company utilizes a force of trained merchandisers employed by a
      third-party payrolling company engaged principally in the performance of
      retailer-mandated and project activities. For the fiscal years ended
      December 31, 1996, December 31, 1997 and January 1, 1999, the Company
      paid this payrolling company approximately $31,145,000, $38,936,000 and
      $32,213,000, respectively (Note 3).



                                      F-10

<PAGE>   40

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


      Use of Estimates - The preparation of financial statements in conformity
      with generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the
      date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from
      these estimates.

      Fair Value of Financial Instruments - The Company's consolidated balance
      sheets include the following financial instruments: cash and cash
      equivalents, accounts receivable, accounts payable and long term debt. The
      Company considers carrying amounts of current assets and liabilities in
      the consolidated financial statements to approximate the fair value for
      these financial instruments, because of the relatively short period of
      time between origination of the instruments and their expected
      realization. The carrying amounts of long-term debt approximate fair value
      because the obligation bears interest at a floating rate.

      Change in Fiscal Year - Effective January 1, 1998, the Company changed its
      fiscal year end for financial statement purposes from a calendar year to a
      52/53-week fiscal year. Beginning with fiscal year 1998, the Company's
      fiscal year will end on the Friday closest to December 31. The years ended
      December 31, 1997 and January 1, 1999 each consist of approximately 52
      weeks. The Company does not believe that this change has a material impact
      on the financial statements.

      New Accounting Pronouncements - The Company has adopted SFAS No. 131.
      Disclosure About Segments of an Enterprise and Related Information. In
      accordance with SFAS No. 131, the Company has disclosed in Note 13 certain
      information about the Company's products and major customers.

      In June 1998, the Financial Accounting Standards Board (the "FASB") issued
      SFAS No. 133, Accounting for Derivative Instruments and Hedging
      Activities, which the Company is required to adopt effective in its fiscal
      year 2000. SFAS No. 133 will require the Company to record all derivatives
      on the balance sheet at fair value. The Company does not currently engage
      in hedging activities and will continue to evaluate the effect of adopting
      SFAS No. 133. The Company is expected to adopt SFAS No. 133 in its fiscal
      year 2000.


                                      F-11

<PAGE>   41

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


2.    RESTRUCTURING AND OTHER CHARGES

During 1997, the Company experienced declining gross margins and resultant
operating losses, due to service performance issues and the loss of several
shared clients. This decline in margins has resulted in insufficient margin
dollars to cover the overhead structure, which had developed at the field level
and in the general corporate area. In the quarter ended September 30, 1997, the
Company addressed these conditions by restructuring its operations, focusing on
a more disciplined and functional operational structure, and redirecting its
technology strategies, resulting in a $5,420,000 charge for restructuring and
other charges. The restructuring charges consist of $1,522,000 identified
severance of corporate and field employees and lease costs in various management
and administrative functions. The restructuring charges also include $2,121,000
in the write downs and accruals associated with the abandonment of certain
internally developed software and specialized computer equipment under long-term
operating leases due to a redirection of the Company's technology strategies
(Note 3). Other charges consisted primarily of $1,297,000 of reserves and write
offs related to unprofitable contracts, and $480,000 of costs associated with
changes in the Company's service delivery model. At January 1, 1999, $428,000 is
remaining in accrued liabilities in the accompanying consolidated balance sheet
consisting of $410,000 to specialized computer equipment under long-term
operating leases no longer in use and $18,000 to employee separation costs.

The following table displays a rollforward of the liabilities for restructuring
and other charges from December 31, 1996 to January 1, 1999 (in thousands):


<TABLE>
<CAPTION>
                                         INITIAL                        DECEMBER 31,                     JANUARY 1,
                                      RESTRUCTURING         1997           1997            1998            1999
TYPE OF COST                         AND OTHER CHARGES   DEDUCTIONS       BALANCE        DEDUCTIONS       BALANCE
- ----------------------------------  ------------------- ------------   --------------   ------------    ------------
<S>                                 <C>                 <C>            <C>              <C>             <C>    
  Employee Separation                     $ 1,372         $  (885)        $   487         $  (469)        $    18
  Facility Closing                            150                            150             (150)
  Technology writedown
      and related operating leases          2,121          (1,086)          1,035            (625)            410
  Unprofitable Contracts                    1,297            (797)            500            (500)
  Other                                       480            (338)            142            (142)
                                          -------         -------         -------         -------         -------
                                          $ 5,420         $(3,106)        $ 2,314         $(1,886)        $   428
                                          =======         =======         =======         =======         =======
</TABLE>



Management believes that the remaining reserves for restructuring are adequate
to complete its plan.



                                      F-12

<PAGE>   42
                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


3.    SUPPLEMENTAL BALANCE SHEET INFORMATION

      Accounts receivable, net, consist of the following (in thousands):



<TABLE>
<CAPTION>
                                                    DECEMBER 31,      JANUARY 1,
                                                        1997             1999
                                                    ------------      ----------
<S>                                                 <C>               <C>     
     Trade                                            $ 15,411         $  9,511
     Unbilled                                            2,034            2,358
     Non-trade                                              59              174
                                                      --------         --------

                                                        17,504           12,043
     Allowance for doubtful accounts and other          (1,451)            (821)
                                                      --------         --------

                                                      $ 16,053         $ 11,222
                                                      ========         ========
</TABLE>


      Property and equipment, net, consist of the following (in thousands):


<TABLE>
<CAPTION>
                                                    DECEMBER 31,      JANUARY 1,
                                                        1997             1999
                                                    ------------      ----------
<S>                                                 <C>               <C>     
     Equipment                                        $  3,680         $  3,873
     Furniture and fixtures                                662              719
     Leasehold improvements                                160              165
     Capitalized software development costs                902            1,076
                                                      --------         --------

                                                         5,404            5,833
     Less accumulated depreciation and amortization     (2,988)          (3,842)
                                                      --------         --------

                                                      $  2,416         $  1,991
                                                      ========         ========
</TABLE>



      During 1997, the Company recorded certain restructuring charges (Note 2).
      In connection with the restructuring, the Company recorded a charge of
      approximately $1,000,000 for the impairment of capitalized software costs.



                                      F-13

<PAGE>   43
                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


      Other current liabilities consist of the following (in thousands):


<TABLE>
<CAPTION>
                                                     DECEMBER 31,    JANUARY 1,
                                                         1997           1999
                                                     ------------    ----------
<S>                                                  <C>             <C>    
     Accrued salaries and other related costs          $ 1,237        $ 1,123
     Accrued payroll to third party                      2,847          1,557
     Accrued medical and compensation insurance          1,456          1,906
     Deferred revenue                                    1,039            426
     Amounts held on behalf of third parties             1,116            641
     Accrued rebate                                      2,200
     Restructuring costs                                 1,475            428
     Other                                               1,964          1,870
                                                       -------        -------
                                                       $13,334        $ 7,951
                                                       =======        =======
</TABLE>


4.    INVESTMENT IN AFFILIATE

      During 1996, the Company increased its voting ownership in Ameritel
      Corporation, a full-service telemarketing company, to 20%. Accordingly,
      the Company changed its method of carrying the investment from cost to
      equity as required by generally accepted accounting principles. The change
      in method was not material to the carrying value of the investment in the
      accompanying financial statements.

      Following is a summary of condensed unaudited financial information
      pertaining to Ameritel Corporation (in thousands):



<TABLE>
<CAPTION>
                                                     DECEMBER 31,    JANUARY 1, 
                                                         1997           1999    
                                                     ------------    ---------- 
<S>                                                  <C>             <C>        
     Current assets                                     $1,545         $2,816   
     Noncurrent assets                                   1,252          3,786   
     Current liabilities                                 1,443          1,827   
     Long-term liabilities                                 128          2,803   
     Stockholders' equity                                1,226          1,972   
     Net income for the year                               523            746   
</TABLE>




                                      F-14

<PAGE>   44

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


5.    LINE OF CREDIT

      On December 10, 1998, the Company entered a long-term revolving line of
      credit agreement a bank to provide an asset-based credit facility with
      maximum borrowing up to $20.0 million. Under this agreement, the line is
      to expire on December 7, 2001. All revolving credit loans bear interest at
      the agent bank's prime rate plus 0.25 % (7.75% at January 1, 1999, or
      8.0%), or the London Interbank Offered Rate ("LIBOR") plus 2.75% (5.06% at
      January 1, 1999, or 7.81%) at the Company's option. As of January 1, 1999,
      the outstanding balance on the line of credit was $2,000,000. The
      Company's available borrowing is the sum of 80% of all eligible accounts
      receivable, plus 100% of eligible cash collateral less outstanding
      revolving credit loan.

      Under the terms of the long-term debt agreement, the Company is subject to
      certain financial covenants. Key covenants require the Company to maintain
      a minimum current ratio, total liabilities to tangible net worth ratio,
      tangible net worth, working capital, and net income. At January 1, 1999,
      the Company complied with all such covenants. As of January 1, 1999,
      available borrowings were $4,796,000.

6.    INCOME TAXES

      The provision (benefit) for income taxes is summarized below for the years
      ended December 31, 1996, December 31, 1997 and January 1, 1999 (in
      thousands):


<TABLE>
<CAPTION>
                                                            YEARS ENDED                 
                                            ------------------------------------------- 
                                            DECEMBER 31,    DECEMBER 31,     JANUARY 1, 
                                               1996            1997            1999     
                                            ------------    ------------     ---------- 
<S>                                         <C>             <C>              <C>        
     Current income taxes:                                                              
       Federal                                $ 2,163         $(3,082)        $    --   
       State                                      430             (19)             55   
                                              -------         -------         -------   
                                                                                        
                                                2,593          (3,101)             55   
     Deferred income taxes:                                                             
       Federal                                   (135)         (2,846)         (1,554)  
       State                                      (32)           (380)             (1)  
                                              -------         -------         -------   
                                                                                        
                                                 (167)         (3,226)         (1,555)  
     Increase in valuation allowance                            3,566           1,555   
                                              -------         -------         -------   
                                                                                        
     Provision (benefit) for income taxes     $ 2,426         $(2,761)        $    55   
                                              =======         =======         =======   
</TABLE>




                                      F-15

<PAGE>   45
                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


      Reconciliation between the provision (benefit) for income taxes as
      required by applying the federal statutory rate of 35% to that included in
      the financial statements is as follows (in thousands):



<TABLE>
<CAPTION>
                                                                    YEARS ENDED
                                                     -------------------------------------------
                                                     DECEMBER 31,    DECEMBER 31,     JANUARY 1,
                                                        1996            1997            1999
                                                     ------------    ------------     ----------
<S>                                                  <C>             <C>              <C>     
     Provision (benefit) for income taxes at
       federal statutory rate                          $ 2,165         $(6,251)        $(1,473)
     State income taxes, net of federal benefit            259             (12)             14
     Other permanent differences                           (31)
     Change in valuation allowance                                       3,566           1,555
     Other                                                  33             (64)            (41)
                                                       -------         -------         -------

     Provision (benefit) for income taxes              $ 2,426         $(2,761)        $    55
                                                       =======         =======         =======
</TABLE>



      Deferred taxes consist of the following (in thousands):



<TABLE>
<CAPTION>
                                                                     DECEMBER 31,     JANUARY 1,
                                                                         1997            1999
                                                                     ------------     ----------
<S>                                                                  <C>              <C>    
     Net operating loss carryforwards                                  $ 1,877         $ 3,880
     State tax provision                                                  (270)           (146)
     Accrued compensation                                                  131             229
     Accrued insurance                                                     427             793
     Allowance for doubtful accounts and other receivable                1,158             312
     Depreciation                                                         (180)            (52)
     Other                                                                 423             105
                                                                       -------         -------

     Deferred tax assets                                                 3,566           5,121
     Valuation allowance                                                (3,566)         (5,121)
                                                                       -------         -------

     Net deferred taxes                                                $    --         $    --
                                                                       =======         =======
</TABLE>


      At January 1, 1999, the Company has net operating loss carry forwards of
      $10,688,000 available to reduce future federal taxable income and
      $3,815,000 available to reduce future California State taxable income. The
      Company has Federal and California net operating loss carry forwards which
      begin expiring in the year 2012 and 2002, respectively. The Company has
      established a full valuation allowance for the deferred tax assets due to
      its continuing losses.



                                      F-16

<PAGE>   46

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


7.    EMPLOYEE BENEFITS

      Pension Plans - Certain of the Company's employees are covered by
      union-sponsored, collectively bargained, multi-employer pension plans.
      Pension expense related to these plans was approximately $172,000,
      $178,000 and $202,000 for the years ended December 31, 1996, December 31,
      1997 and January 1, 1999, respectively. The administrators have advised
      the Company that there were no withdrawal liabilities as of December 1990,
      the most recent date for which an analysis was made. The Company has no
      current intention of withdrawing from any of these plans.

      Retirement Plan - The Company has a 401(k)-retirement plan covering all
      employees not participating in the pension plans. Eligible employees, as
      defined by the 401(k) plan, may elect to contribute up to 15% of their
      total compensation; not to exceed the amount allowed by the Internal
      Revenue Service code guidelines. The Company makes matching contributions
      to the 401(k) plan each year equal to 50% of the employee contributions,
      not to exceed 4% of the total compensation, and can also make
      discretionary matching contributions. Employee contributions are fully
      vested at all times, and the Company's matching contributions vest over
      five years. The Company's matching contributions were approximately
      $468,000, $506,000 and $471,000 for the years ended December 31, 1996,
      December 31, 1997 and January 1, 1999, respectively.

8.    COMMITMENTS AND CONTINGENCIES

      The Company leases its facilities under operating leases and leases
      certain computer and office equipment under two- to five-year operating
      lease agreements. Total rent expense relating to these leases was
      approximately $2,756,000, $6,369,000 and $5,646,000 for the years ended
      December 31, 1996, December 31, 1997 and January 1, 1999, respectively,
      with sublease income of $101,000 in fiscal year 1998.

      The following table sets forth future minimum lease payments under
      noncancelable operating leases as of January 1, 1999 (in thousands):



<TABLE>
<CAPTION>
          Fiscal Year:
                                                   Rent    Sublease    Total
                                                  ------   --------   ------
<S>                                               <C>      <C>        <C>   
             1999                                 $4,038    $ (261)   $3,777
             2000                                  1,882               1,882
             2001                                  1,238               1,238
             2002                                    903                 903
             2003                                    147                 147
                                                  ------    ------    ------
             Total future minimum lease payments  $8,208    $ (261)   $7,947
                                                  ======    ======    ======
</TABLE>




                                      F-17

<PAGE>   47

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


9.    RELATED-PARTY TRANSACTIONS

      The Company receives legal services from a law firm previously affiliated
      with its principal stockholder and paid approximately $516,000, $189,000
      and $114,000 for such legal services during the years ended December 31,
      1996, December 31, 1997 and January 1, 1999, respectively.

      The Company has an investment in an affiliate, which provides
      telemarketing and related services (Note 4). The Company paid
      approximately $524,000 and $898,000 during the years ended December 31,
      1997 and January 1, 1999, respectively. Approximately $50,000 was payable
      to the affiliate at January 1, 1999.

10.   STOCK TRANSACTIONS AND WARRANTS

      In March 1996, the Company completed an initial stock offering and sold
      1,788,000 shares of its common stock, at a net price of $13.02 per share.
      An additional 349,800 shares of common stock were sold also at a net
      $13.02 per share, pursuant to an underwriters over-allotment provision.
      The net proceeds of the approximately $26.5 million raised by the Company
      were used, in part, to repay existing bank debt.

      During the three fiscal years 1996, 1997 and 1998, the Company issued the
      following shares of common stock, 57,798 shares, 8,107 shares, and 30,328
      shares, respectively as a result of options that were exercised (Note 11).
      The income tax effect of any difference between the market price of the
      Company's common stock at the grant date and the market price at the
      exercise date is credited to additional paid-in capital, as required.

      On February 17, 1997, the Company adopted an Employee Stock Purchase Plan
      ("ESP Plan"). The ESP Plan allows employees of the Company to purchase
      common stock at a discount, without having to pay any commissions on the
      purchases. The discount is the greater of 15% of the fair market value
      ("FMV") at the end of the reportable period or the difference between the
      FMV at the beginning and end of the reportable period. The maximum amount
      that any employee can contribute to the ESP Plan per quarter is $6,250,
      and the total number of shares reserved by the Company for purchase under
      the ESP Plan is 200,000. During 1998, the Company issued 12,290 shares of
      common stock, at a weighted average price of $3.69 per share.

      In May 1998, the Company issued 42,670 shares of common stock to two
      employees as compensation for services and recorded $179,000 of
      compensation expense.



                                      F-18

<PAGE>   48

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


      During February 1996, 100,000 warrants issued in conjunction with a 1992
      line of credit for the purchase of 152,405 shares of common stock at $1.82
      per share, were exercised through a cashless exercise, based on the
      estimated fair market value of the Company's common stock, at the date of
      exercise of $14.00, reduced the number of shares issued to 87,000. During
      October 1996, the remaining warrants to purchase 52,405 shares of common
      stock at $1.82 per share were exercised through a cashless exercise, based
      on the estimated fair value of the Company's common stock at the date of
      exercise of $12.75, reduced the number of shares issued to 44,924.

11.   STOCK OPTIONS

      The Company has three stock option plans: the 1990 Stock Option Plan (1990
      Plan), the 1995 Stock Option Plan (1995 Plan), and the 1995 Director's
      Plan (Director's Plan).

      The 1990 Plan is a nonqualified option plan providing for the issuance of
      up to 810,811 shares of common stock to officers, directors and key
      employees. The options have a term of 10 years and one week and are either
      fully vested or will vest ratably no later than five years from the grant
      date. During 1995, the Company elected to no longer grant options under
      this plan.

      The 1995 Plan provides for the granting of either incentive or
      nonqualified stock options to specified employees, consultants and
      directors of the Company for the purchase of up to 1,300,000 shares of the
      Company's common stock. The options have a term of ten years, except in
      the case of incentive stock options granted to greater than ten-percent
      stockholders of the Company, for which the term is five years. The
      exercise price of nonqualified stock options must be equal to at least 85%
      of the fair market value of the Company's common stock at the date of
      grant; the exercise price of incentive stock options must be equal to at
      least the fair market value of the Company's common stock at the date of
      grant. At January 1, 1999, options to purchase 281,746 shares were
      available for grant under this plan.

      The Director's Plan is a stock option plan for nonemployee directors and
      provides for the purchase of up to 100,000 shares of the Company's common
      stock. An option to purchase 1,500 shares of the Company's common stock
      shall be granted automatically each year to each director, following the
      Company's annual stockholders' meeting. The exercise price of options
      issued under this plan shall be not less than the fair market value of the
      Company's common stock on the date of grant. Each option under this plan
      shall vest and become exercisable in full on the first anniversary of its
      grant date, provided the optionee is reelected as a director of the
      Company. The maximum term of options granted under the plan is ten years
      and one day, subject to earlier termination following an optionee's
      cessation of service with the Company. At January 1, 1999, options to
      purchase 89,500 shares were available for grant under this plan.



                                      F-19

<PAGE>   49
                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


      The Company has adopted the disclosure-only provisions of SFAS No. 123,
      Accounting for Stock-Based Compensation. No compensation cost has been
      recognized for the stock option plans. The impact of stock options granted
      prior to 1995 has been excluded from the pro forma calculation;
      accordingly, the 1996, 1997 and 1998 pro forma adjustments may not be
      indicative of future period pro forma adjustments, when the calculation
      will apply to all applicable future stock options. Had compensation cost
      for the Company's option plans been determined based on the fair value at
      the grant date for awards in 1996, 1997 and 1998 consistent with the
      provisions of SFAS No. 123, the Company's net income (loss) and net income
      (loss) per share would have been reduced to the pro forma amounts
      indicated below:



<TABLE>
<CAPTION>
                                                                              Years Ended
                                                            ------------------------------------------------
                                                            DECEMBER 31,      DECEMBER 31,         JANUARY 1,
                                                                1996              1997               1999
                                                            ------------      ------------        ----------
<S>                                                         <C>               <C>                 <C>        
     Net income (loss), as reported (in thousands)           $    3,759        $  (15,099)        $   (4,266)
     Net income (loss), pro forma (in thousands)             $    3,564        $  (15,808)        $   (5,420)

     Basic net income (loss) per share, as reported          $     0.70        $    (2.72)        $    (0.78)
     Basic net income (loss) per share, pro forma            $     0.66        $    (2.85)        $    (1.00)

     Diluted net income (loss) per share, as reported        $     0.63        $    (2.72)        $    (0.78)
     Diluted net income (loss) per share, pro forma          $     0.60        $    (2.85)        $    (1.00)
</TABLE>


      The fair value of each option grant is estimated based on the date of
      grant using the Black-Scholes option-pricing model, using the return on a
      ten year treasury bill, with the following weighted-average assumptions
      used for grants in 1998: dividend yield of 0%; expected volatility of
      104.6%; risk-free interest rate of 4.7%; and expected lives of six years.
      The following weighted-average assumptions were used for grants in 1997:
      dividend yield of 0%; expected weighted-average volatility of 79.5%;
      risk-free interest rate of 6.2%; and expected lives of six years. The
      following assumptions were used for grants in 1996: dividend yield of 0%;
      expected volatility of 101.7%; risk-free interest rate of 6.3%; and
      expected lives of six years.




                                      F-20

<PAGE>   50

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


      The following table summarizes activity under the Company's 1990 Plan,
      1995 Plan and Directors' Plan:


<TABLE>
<CAPTION>

                                                                       YEARS ENDED                                            
                           -------------------------------------------------------------------------------------------------- 
                                    DECEMBER 31,                       DECEMBER 31,                      JANUARY 1,           
                                       1996                               1997                              1999              
                           ----------------------------       ----------------------------       ---------------------------- 
                                             WEIGHTED-                          WEIGHTED-                          WEIGHTED-  
                                              AVERAGE                            AVERAGE                           AVERAGE    
                                              EXERCISE                           EXERCISE                          EXERCISE   
                             SHARES            PRICE            SHARES            PRICE            SHARES            PRICE    
                           ----------        ----------       ----------        ----------       ----------        ---------- 
<S>                        <C>               <C>              <C>               <C>              <C>               <C>        
Options                                                                                                                       
  outstanding,                                                                                                                
  beginning of year           791,356         $   6.76           883,202         $   8.12         1,526,851         $   6.10  
Options granted               234,540         $  13.57           938,325         $   5.55           350,500         $   5.49  
Options exercised             (57,798)        $   5.85            (8,107)        $   7.77           (30,328)        $   2.91  
Options canceled                                                                                                              
   or expired                 (84,896)        $   9.25          (286,569)        $  10.45          (408,738)        $   6.51  
                           ----------                         ----------                         ----------                   
                                                                                                                              
Options                                                                                                                       
  outstanding,                                                                                                                
  end of year                 883,202         $   8.12         1,526,851         $   6.10         1,438,285         $   5.91  
                           ==========                         ==========                         ==========                   
Option price                                                                                                                  
  range at                                                                                                                    
  end of year              $     2.78 to                      $     2.78 to                      $     2.78 to                
                           $    14.00                         $    14.00                         $    14.00                   
                                                                                                                              
Option price                                                                                                                  
  range for                $     2.78 to                      $     7.40 to                      $     2.78 to                
  exercised shares         $     9.81                         $     8.51                         $     5.32                   
                                                                                                                              
Weighted-average                                                                                                              
  fair value of                                                                                                               
  options granted                                                                                                             
  during the year          $    11.18                         $     4.01                         $     5.49                   
</TABLE>




                                      F-21

<PAGE>   51

                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


      The following table summarizes information about fixed-price stock options
      outstanding at January 1, 1999:


<TABLE>
<CAPTION>
                                                  OPTIONS OUTSTANDING                            OPTIONS EXERCISABLE
                                  -------------------------------------------------        ------------------------------
                                                       WEIGHTED-
                                     NUMBER             AVERAGE           WEIGHTED-           NUMBER            WEIGHTED-
              RANGE OF            OUTSTANDING AT       REMAINING           AVERAGE         EXERCISABLE AT        AVERAGE
              EXERCISE              JANUARY 1,        CONTRACTUAL          EXERCISE          JANUARY 1,          EXERCISE
               PRICES                 1999               LIFE               PRICE              1999               PRICE
          ---------------         --------------      -----------         ---------        --------------       ---------
<S>                               <C>                 <C>                 <C>              <C>                  <C>      
                    $2.78             129,729               3.17          $    2.78            129,729          $    2.78
              $3.69-$6.25           1,005,119               8.91          $    5.51            208,537          $    5.55
              $7.40-$9.81             263,302               5.09          $    7.75            261,275          $    7.74
                   $14.00              40,135               7.51          $   14.00             35,135          $   14.00
                                    ---------                                                ---------
          $2.78 to $14.00           1,438,285               7.65          $    5.91            634,676          $    6.35
                                    =========                                                =========        
</TABLE>


      Outstanding warrants are summarized below:



<TABLE>
<CAPTION>
                                          SHARES               EXERCISE
                                        SUBJECT TO            PRICE PER
                                         WARRANTS               SHARE
                                       -----------          -------------
<S>                                    <C>                  <C>
     Balance, January 1, 1996             248,800           $1.82 - $8.51
       Exercised                         (152,405)                  $1.82
                                         --------

     Balance, December 31, 1996            96,395           $2.78 - $8.51
                                         --------

     Balance, December 31, 1997            96,395           $2.78 - $8.51
                                         --------

     Balance, January 1, 1999              96,395           $2.78 - $8.51
                                         ========
</TABLE>


      The above warrants expire at various dates from 2002 through 2004.



                                      F-22

<PAGE>   52
                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


12.   EARNINGS PER SHARE



<TABLE>
<CAPTION>
                                                                           YEARS ENDED
                                                         ------------------------------------------------
                                                         DECEMBER 31,      DECEMBER 31,        JANUARY 1,
                                                             1996              1997               1999
                                                         ------------      ------------        ----------
                                                               (in thousands, except per share data)
<S>                                                      <C>               <C>                 <C>      
     Basic:
       Weighted-average common shares outstanding             5,370             5,551              5,439

     Net income (loss)                                     $  3,759          $(15,099)          $ (4,266)
                                                           ========          ========           ========

     Basic earnings per share                              $   0.70          $  (2.72)          $  (0.78)
                                                           ========          ========           ========

     Diluted:
       Weighted-average common shares - basic                 5,370             5,551              5,439
       Potential common shares                                  620
                                                           --------          --------           --------

       Weighted-average common shares - diluted               5,990             5,551              5,439
                                                           ========          ========           ========

     Net income (loss)                                     $  3,759          $(15,099)          $ (4,266)
                                                           ========          ========           ========

     Diluted earnings per share                            $   0.63          $  (2.72)          $  (0.78)
                                                           ========          ========           ========
</TABLE>




                                      F-23

<PAGE>   53
                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR EACH OF THE THREE YEARS
                       IN THE PERIOD ENDED JANUARY 1, 1999


13.   SEGMENTS

      Utilizing the management approach, the Company has broken down its
      business based upon the nature of services provided, i.e., dedicated,
      shared service and project. The Company does not allocate operating
      expenses to these segments, nor does it allocate specific assets to these
      segments. Therefore, segment information reported in the following
      includes only net revenues (in thousands):



<TABLE>
<CAPTION>
                                                     BUSINESS SEGMENTS
                               --------------------------------------------------------------
                               DEDICATED      SHARED SERVICE       PROJECTS           TOTAL
                               --------       --------------       --------          --------
<S>                            <C>            <C>                  <C>               <C>     
     Fiscal year 1998
       Net revenues            $ 38,766          $ 40,216          $ 42,806          $121,788
                               ========          ========          ========          ========

     Fiscal year 1997
       Net revenues            $ 44,423          $ 44,932          $ 38,853          $128,208
                               ========          ========          ========          ========

     Fiscal year 1996
       Net revenues            $ 21,894          $ 68,446          $ 29,600          $119,940
                               ========          ========          ========          ========
</TABLE>



      During the years ended January 1, 1999, December 31, 1997 and December 31,
      1996, sales to two major customers (three major customers for year ended
      January 1, 1999) totaled $47.3 million, 38.0 million and $26.4 million,
      respectively.

14.   SUBSEQUENT EVENT

      On February 28, 1999, the Company signed a definitive agreement with the
      SPAR Group to merge in a stock transaction involving the issuance of
      approximately 12.3 million of PIA stock to the shareholders of the SPAR
      Group. The transaction is subject to shareholder and regulatory approval.
      After the merger, SPAR Group shareholders will own approximately 69% of
      PIA Common Stock. The Companies expect to complete the transaction by May
      1999.


                                     F-24


<PAGE>   54


 
                                                                   EXHIBIT 11.1


                PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)




<TABLE>
<CAPTION>
                                                                  ADDITIONS       WRITE OFFS
                                                  BALANCE AT      CHARGED TO          AND         BALANCE AT
                                                   BEGINNING      COSTS AND        ALLOWANCE         END
                                                    OF YEAR       EXPENSES(1)       CHARGES        OF YEAR
                                                  ----------     ------------     -----------     ---------
<S>                                               <C>            <C>              <C>             <C>
DESCRIPTION

Year ended December 31, 1996 -
  Allowance for doubtful accounts and other        $    424        $  105           $   54         $    583

Year ended December 31, 1997 -
  Allowance for doubtful accounts and other        $    583        $  918           $  (50)        $  1,451

Year ended January 1, 1999 -
  Allowance for doubtful accounts and other        $  1,451        $ (270)          $ (360)        $    821



(1)  Includes amounts charged to revenues for rebates, price adjustments and other.
</TABLE>


                                      F-25

<PAGE>   55


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>

EXHIBIT                                                                     
NUMBER             DESCRIPTION                                              
- ------             -----------                                              
          <C> <C>                                                           
  3.1     *   Certificate of Incorporation of PIA                           
                                                                            
  3.2     *   By-laws of PIA                                                
                                                                            
  4.1     *   Registration Rights Agreement entered into as of              
              January 21, 1992 by and between RVM Holding Corporation.      
              RVM/PIA, a California Limited Partnership, The Riordan        
              Foundation and Creditanstalt-Bankvering.                      
                                                                            
 10.1     *   1990 Stock Option Plan                                        
                                                                            
 10.2         Amended and Restated 1995 Stock Option Plan (incorporated by  
              reference of Exhibit 10.2 to the Company's Form 10Q for the   
              2nd Quarter ended July 3, 1998).                              
                                                                            
 10.3     *   1995 Stock Option Plan for Non-employee Directors             
                                                                            
 10.4         Employment Agreement dated as of June 25, 1997 between        
              PIA and Terry R. Peets (incorporated by reference to          
              Exhibit 10.5 to the Company's Form 10-Q for the 2nd           
              Quarter ended June 30, 1997)                                  
                                                                            
 10.5         Severance Agreement dated as of February 20, 1998             
              between PIA and Cathy L. Wood (incorporated by reference      
              to Exhibit 10.5 to the Company's Form 10-Q for the 1st        
              Quarter ended April 30, 1998)                                 
                                                                            
 10.6         Severance Agreement dated as of August 10, 1998 between       
              PIA and Clinton E. Owens (incorporated by reference to        
              Exhibit 10.6 to the Company's Form 10-Q for the 3rd           
              Quarter ended October 2, 1998)                                
                                                                            
 10.7         Amendment No. 1 to Employment Agreement dated as of           
              October 1, 1998 between PIA and Terry R. Peets                
              (filed herein)                                                
                                                                            
 10.8         Amended and Restated Severance Compensation Agreement         
              dated as of October 1, 1998 between PIA and Cathy L. Wood     
              (filed herein)                                                
                                                                            
 10.9         Loan and Security Agreement dated December 7, 1998 among      
              Mellon Bank, N.A., PIA Merchandising Co., Inc., Pacific       
              Indoor Display Co. and PIA. (filed herein)                    
                                                                            
 10.10        Agreement and Plan of Merger dated as of February 28,         
              1999 among PIA, S.G. Acquisition, Inc., PIA                   
              Merchandising Co., Inc., SPAR Acquisition, In., SPAR          
              Marketing, Inc., SPAR Marketing Force, Inc., SPAR, Inc.,      
              SPAR/Burgoyne Retail Services, Inc., SPAR Incentive           
              Marketing, Inc., SPAR MCI Performance Group, Inc. and         
              SPAR Trademarks, Inc. (filed herein)                          
                                                                            
 10.11        Voting Agreement dated as of February 28, 1999 among          
              PIA, Clinton E. Owens, RVM/PIA, California limited            
              partnership, Robert G. Brown and William H. Bartels           
              (filed herein)                                                
                                                                            
 21.1     *   Subsidiaries of the Company                                   
                                                                            
 23.1         Consent of Deloitte & Touche LLP                              
                                                                            
 27.1         Financial Data Schedule                                       
</TABLE>


- -------------
* Filed as an Exhibit to the Company's Registration Statement on Form S-1
  (Registration No. 33-80429) on December 14, 1995.







<PAGE>   1

                                                                    EXHIBIT 10.2


                        PIA MERCHANDISING SERVICES, INC.

                   AMENDED AND RESTATED 1995 STOCK OPTION PLAN

        Section 1. Description of this Plan. This is the 1995 Stock Option Plan,
dated December 5, 1995, as amended and restated effective as of February 28,
1999 (this "Plan"), of PIA Merchandising Services, Inc., a Delaware corporation
(the "Company"). Under this Plan, officers, directors, key employees and
consultants of the Company or its wholly-owned Subsidiaries (as defined below),
and other persons directly or indirectly providing valuable services to the
Company and the Subsidiaries, to be selected as set forth below, may be granted
options ("Options") to purchase shares of the common stock, par value $0.01 per
share, of the Company ("Common Stock"). This Plan permits the granting of both
Options that qualify for treatment as incentive stock options ("Incentive Stock
Options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and Options that do not qualify as Incentive Stock Options
("Nonqualified Stock Options"). For purposes of this Plan, the term "Subsidiary"
shall mean any corporation or other entity of which 50% or more of the voting
stock (or equivalent thereof) is owned by the Company or by another Subsidiary
(as
 so defined) of the Company.

        Section 2. Purpose of this Plan. The purpose of this Plan and of
granting Options to specified persons is to further the growth, development and
financial success of the Company and the Subsidiaries by providing additional
incentives to certain officers, directors, key employees and consultants of, and
other persons directly or indirectly providing valuable services to, the Company
and the Subsidiaries. By assisting such persons in acquiring shares of Common
Stock, the Company can ensure that such persons will themselves benefit directly
from the Company's and the Subsidiaries' growth, development and financial
success.

        Section 3. Eligibility. The persons who shall be eligible to receive
grants of Options under this Plan shall be, at the time of the grant, the
officers, directors, key employees and consultants of, and other persons
directly or indirectly providing valuable services to, the Company and the
Subsidiaries. Notwithstanding the preceding sentence, only persons who are
employees of the Company and the Subsidiaries shall be eligible to receive
grants of Incentive Stock Options under this Plan. A person who holds an Option
is herein referred to as a "Participant." More than one Option may be granted to
any Participant, grants of Options may be made on more than one occasion to any
Participant and any individual Participant may receive grants of Options on up
to 1,000,000 shares of Common Stock. Such grants of Options under this Plan may
include an Incentive Stock Option, Nonqualified Stock Option, or any combination
thereof.

        Section 4. Administration. This Plan shall be administered by the Board
of Directors (the "Board") or by the Compensation Committee established by the
Board. (The entity actually administering this Plan at any time, whether the
Board or the Compensation Committee, is referred to herein as the "Committee.")
If the Compensation Committee is authorized to administer


                                        1


<PAGE>   2

this Plan at any time, it shall, if possible, be composed solely of two or more
Non-Employee Directors, as such term is defined in Rule 16b-3(b)(3) under the
Securities Exchange Act of 1934 (the "Exchange Act") and of persons who are
"outside directors" within the meaning of Code Section 162(m). The Committee
shall meet at such times and places as it determines and may meet through a
telephone conference call. A majority of its members shall constitute a quorum,
and the decision of a majority of those present at any meeting at which a quorum
is present shall constitute the decision of the Committee. A memorandum signed
by all the members of the Committee shall constitute the decision of the
Committee without necessity, in such event, for holding an actual meeting. The
Committee is authorized and empowered to administer this Plan and, subject to
this Plan (a) to select the Participants, to specify the number of shares of
Common Stock with respect to which Options are granted to each Participant, to
specify the terms of the Options and whether such Options shall be Incentive
Stock Options or Nonqualified Stock Options, and in general to grant Options;
(b) to determine the dates upon which Options shall be granted and the terms and
conditions thereof in a manner consistent with this Plan, which terms and
conditions need not be identical as to the various Options granted; (c) to
interpret this Plan; (d) to prescribe, amend and rescind rules relating to this
Plan; (e) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
the Committee; (f) to determine the rights and obligations of Participants under
this Plan; (g) to specify the Option Price (as hereinafter defined); (h) to
accelerate the time during which an Option may be exercised, including, but not
limited to, upon a change of control of the Company, and to otherwise accelerate
the time or extend the post-termination exercise period during which an Option
may be exercised, in each case notwithstanding the provisions in the Option
Agreement (as defined in Section 13) stating the time during which it may be
exercised; and (i) to make all other determinations deemed necessary or
advisable for the administration of this Plan. The good faith interpretation and
construction by the Committee of any provision of this Plan or of any Option
granted under it shall be final, conclusive and binding. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to this Plan or any Option granted under it.

        Section 5. Shares Subject to this Plan. The number of shares of Common
Stock in respect of which Options may be granted under this Plan is 1,300,000,
subject to adjustment as provided in Section 12 hereof. Upon the expiration,
termination or cancellation, in whole or in part, for any reason of an
outstanding Option or any portion thereof which shall not have vested or shall
not have been exercised in full, any shares of Common Stock then remaining
unissued which shall have been reserved for issuance upon such exercise shall
again become available for the granting of additional Options under this Plan.
Notwithstanding the foregoing, shares subject to a terminated Option shall
continue to be considered to be outstanding for purposes of determining the
maximum number of shares that may be issued to a Participant. Similarly, the
repricing of an Option will be considered the grant of a new Option for this
purpose.

        Section 6. Option Price. Except as provided in Section 12 hereof, the
purchase price per share (the "Option Price") of the shares of Common Stock
underlying each Incentive Stock Option shall be not less than the fair market
value of such shares on the date of granting of the Incentive Stock Option;
provided, however, that if the Participant is a ten percent (10%) stockholder of
the


                                        2


<PAGE>   3

Company as detailed in Code Section 422(b)(6) at the time such Option is granted
(determined after taking into account the constructive ownership rules of
Section 424(d) of the Code), the Option Price shall be not less than 110 percent
(110%) of said fair market value. The Option Price of the shares of Common Stock
underlying each Nonqualified Stock Option shall be not less than eighty-five
percent (85%) of the fair market value of such shares on the date of granting of
the Nonqualified Stock Option; provided, however, that with respect to any
Nonqualified Stock Option granted to a "covered employee" (as such term is
defined in Section 162(m) of the Code), the Option Price of the shares of Common
Stock underlying such Nonqualified Stock Option shall be not less than the fair
market value of such shares on the date of granting of such Nonqualified Stock
Option. The fair market value of such shares shall, unless otherwise expressly
determined by the Committee for good reason, shall be (i) the last reported sale
price of the Common Stock on the Nasdaq National Market, if the Common Stock is
quoted on the Nasdaq National Market, (ii) the last reported sale price of the
Common Stock on a national securities exchange, if the Common Stock is listed on
a national securities exchange, or (iii) if the Common Stock is not so reported
or listed, the average of the last reported bid and asked price of the Common
Stock in such market as the Common Stock may be traded.

        Section 7. Restrictions on Grants; Vesting of Options. Notwithstanding
any other provisions set forth herein or in any Option Agreement, no Options may
be granted under this Plan subsequent to December 5, 2005. All Options granted
pursuant to this Plan shall be granted pursuant to Option Agreements, as
described in Section 13 hereof. The vesting of all Options may be based on the
Company's attaining of performance criteria as specified at the time of the
granting thereof and/or may also be based on the passage of time. The Committee
shall determine the performance criteria, the performance measurement period and
the vesting schedule applicable to each Option or group of Options in a
schedule, a copy of which shall be filed with the records of the Committee and
attached to each Option Agreement to which the same applies. The performance
criteria, the performance measurement period and the vesting schedule and period
of exercisability need not be identical for all Options granted hereunder.
Following the conclusion of each applicable performance measurement period, the
Committee shall determine, in its sole good faith judgment, the extent, if at
all, that each Option subject thereto shall have vested based upon the
applicable performance criteria and vesting schedule. To the extent any Option
shall not have vested, because the applicable performance criteria has not been
met, and does not also vest based on the passage of time, it shall, to that
extent, automatically terminate and cease to be exercisable to such extent
notwithstanding the stated term during which it may be exercised. The Committee
shall promptly notify each affected Participant of such determination. The
Committee may periodically review the performance criteria applicable to any
Option or Options and, in its sole good faith judgment, may adjust the same to
reflect unanticipated major events, such as catastrophic occurrences, mergers,
acquisitions and the like.

        Section 8. Special Limitations on Incentive Stock Options. To the extent
that the aggregate fair market value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year under all incentive stock option plans of the Company
and


                                        3


<PAGE>   4

the Subsidiaries exceeds $100,000, or such other limit as may be required by the
Code, such excess Incentive Stock Options shall be treated as Nonqualified Stock
Options. The Committee shall determine, in accordance with applicable provisions
of the Code, Treasury Regulations and other administrative pronouncements, which
of a Participant's Incentive Stock Options will not constitute Incentive Stock
Options because of such limitation and shall notify the Participant of such
determination as soon as practicable after such determination.

        Section 9. Exercise of Options. Subject to all other provisions of this
Plan, once vested, each Option shall be exercisable for the full number of
shares of Common Stock subject thereto, or any part thereof, in such
installments and at such intervals as the Committee may determine in granting
such Option, provided that no option may be exercisable subsequent to its
termination date. Once vested, and prior to its termination date, an Option may
be exercised by the Participant by giving written notice to the Company
specifying the number of full shares to be purchased and accompanied by payment
of the full purchase price therefor in cash, by check or in such other form of
lawful consideration as the Committee may approve from time to time, including,
without limitation and in the sole discretion of the Committee, the assignment
and transfer by the Participant to the Company of outstanding shares of Common
Stock theretofore held by the Participant. In connection with such assignment
and transfer, the Company shall have the right to deduct any fractional share to
be paid to the Participant. Once vested, and prior to its termination date, an
Option may only be exercised by the Participant or, in the event of death of the
Participant, by the person or persons (including the deceased Participant's
estate) to whom the deceased Participant's rights under such Option shall have
passed by will or the laws of descent and distribution. Notwithstanding the
foregoing in the immediately preceding sentence, in the event of disability
(within the meaning of Section 22(e)(3) of the Code) of a Participant, a
designee, or if the Participant has no designee, the legal representative, of
such Participant may exercise the Option on behalf of such Participant (provided
such Option would have been exercisable by such Participant) until the right to
exercise such Option expires, as set forth in such Participant's particular
Option Agreement.

        Section 10. Issuance of Common Stock. The Company's obligation to issue
shares of its Common Stock upon exercise of an Option is expressly conditioned
upon the compliance by the Company with any registration or other qualification
obligations with respect to such shares under any state or federal law or
rulings and regulations of any government regulatory body and the making of such
investment representations or other representations and undertakings by the
Participant (or the Participant's legal representative, heir or legatee, as the
case may be) in order to comply with the requirements of any exemption from any
such registration or other qualification obligations with respect to such shares
which the Company in its sole discretion shall deem necessary or advisable. Such
required representations and undertakings may include representations and
agreements that such Participant (or the Participant's legal representative,
heir or legatee): (a) is purchasing such shares for investment and not with any
present intention of selling or otherwise disposing of such shares; and (b)
agrees to have a legend placed upon the face and reverse of any certificates
evidencing such shares (or, if applicable, an appropriate data entry made in the
ownership records of the Company) setting forth (i) any representations and
undertakings which such Participant has given to the Company or a reference
thereto, and (ii) that, prior to effecting any sale or other disposition of any
such shares,


                                        4


<PAGE>   5

the Participant must furnish to the Company an opinion of counsel, satisfactory
to the Company and its counsel, to the effect that such sale or disposition will
not violate the applicable requirements of state and federal laws and regulatory
agencies; provided, however, that any such legend or data entry shall be removed
when no longer applicable. The Company, during the term of this Plan, will at
all times reserve and keep available, and will use its reasonable efforts to
obtain from any regulatory body having jurisdiction any requisite authority in
order to issue and sell such number of shares of Common Stock as shall be
sufficient to satisfy the requirements of this Plan. The inability of the
Company to obtain, from any regulatory body having jurisdiction, authority
reasonably deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect of the non-issuance or sale of such shares as to which such
requisite authority shall not have been obtained.

        Section 11. Non-transferability. Except as otherwise provided below, an
Option may not be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent or distribution.
The Committee may, in its discretion, authorize all or a portion of any
Nonqualified Stock Option granted to a Participant to be on terms which permit
transfer by such Participant to (a) the spouse, children or grandchildren of the
optionee ("Immediate Family Members"), (b) a trust or trusts for the exclusive
benefit of such Immediate Family Members, or (c) a partnership in which such
Immediate Family Members are the only partners, provided that (i) there may be
no consideration for any such transfer, and (ii) the Option Agreement (defined
below) pursuant to which such Options are granted must be approved by the
Committee, and must expressly provide for transferability in a manner consistent
with this Section 11. Following transfer, any such Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Sections 9 and 10 hereof the term
"Participants" shall be deemed to refer to the transferee. The events of
termination of employment of Section 25 hereof shall continue to be applied with
respect to the original Participant, following which the Options shall be
exercisable by the transferee only to the extent, and for the periods specified
in the Option Agreement. Any permitted transferee shall be required prior to any
transfer of an Option or shares of Common Stock acquired pursuant to the
exercise of an Option to execute a written undertaking to be bound by the
provisions of the applicable Option Agreement.

        Section 12. Adjustments Upon Capitalization and Corporate Changes;
Substitute Options. Subject to Section 15(b) hereof, if the outstanding shares
of the Common Stock of the Company are changed into, or exchanged for, a
different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization or reclassification, or if the number
of outstanding shares is changed through a stock split, stock dividend, stock
consolidation or like capital adjustment, or if the Company makes a distribution
in partial liquidation or any other comparable extraordinary distribution with
respect to its Common Stock, an appropriate adjustment shall be made by the
Committee in the number, kind or Option Price of shares as to which Options may
be granted. A corresponding adjustment shall likewise be made in the number,
kind or Option Price of shares with respect to which unexercised Options have
theretofore been granted. Any such adjustment in an outstanding Option, however,
shall be made without change in the total price applicable to the unexercised
portion of the Option but with a corresponding adjustment in the price for each
share


                                        5


<PAGE>   6

covered by the Option. In making such adjustments, or in determining that no
such adjustments are necessary, the Committee may rely upon the advice of
counsel and accountants to the Company, and the good faith determination of the
Committee shall be final, conclusive and binding. No fractional shares of stock
shall be issued under this Plan on account of any such adjustment.

        If the Company at any time should succeed to the business of another
corporation through a merger or consolidation, or through the acquisition of
stock or assets of such corporation or its subsidiaries, Options may be granted
under this Plan to option holders of such corporation or its subsidiaries, in
substitution for options to purchase stock of such corporation held by them at
the time of succession. The Committee, in its sole and absolute discretion,
shall determine the extent to which such substitute Options shall be granted (if
at all), the person or persons to receive such substitute Options (who need not
be all option holders of such corporation), the number of Options to be received
by each such person, the Option Price of such Option (which may be determined
without regard to Section 6 hereof) and the terms and conditions of such
substitute Options; provided, however, that the Option Price of each such
substituted Option which is an Incentive Stock Option shall be an amount such
that, in the sole and absolute judgment of the Committee (and in compliance with
Section 424(a) of the Code in the case of an Incentive Stock Option), the
economic benefit provided by such Option is not greater than the economic
benefit represented by the option in the acquired corporation as of the date of
the Company's acquisition of such corporation.

        Section 13. Option Agreement. Each Option granted under this Plan shall
be evidenced by a written stock option agreement (an "Option Agreement")
executed by the Company and the Participant which (a) shall contain each of the
provisions and agreements herein specifically required to be contained therein,
(b) shall indicate whether such Option is to be an Incentive Stock Option or a
Nonqualified Stock Option, and if an Incentive Stock Option, shall contain terms
and conditions permitting such Option to qualify for treatment as an incentive
stock option under Section 422 of the Code, and (c) may contain such other terms
and conditions as the Committee deems desirable and which are not inconsistent
with this Plan.

        Section 14. Rights as a Stockholder. A Participant or permitted
transferee of a Participant shall have no rights as a stockholder with respect
to any shares covered by an Option until the date of an entry evidencing such
ownership is made in the stock transfer books of the Company (the "Exercise
Date"). No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the Exercise Date.

        Section 15. Termination of Options, Acceleration of Options.

           (a) Each Option shall terminate and expire, and shall no longer be
subject to exercise, as the Committee may determine in granting such Option, and
each Option granted under this Plan shall set forth a termination date thereof,
which, subject to earlier termination as set forth in Section 7 hereof or this
Section 15, or as otherwise set forth in any particular Option Agreement, with
respect to Nonqualified Stock Options, shall be no later than ten years from the
date such Option


                                        6


<PAGE>   7

is granted, and with respect to Incentive Stock Options, shall also be no later
than ten years from the date such Option is granted unless the Participant is a
ten percent (10%) stockholder of the Company (as described in Section 422(b)(6)
of the Code, and determined after taking into account the constructive ownership
rules of Section 424(d) of the Code) at the time such Option is granted, in
which case the Option shall terminate and expire no later than five years from
the date of the grant thereof. An Incentive Stock Option shall contain any
additional termination events required by Section 422 of the Code.

           (b) Subject to Section 15(c) hereof, unless the Committee shall, in
its sole discretion, determine otherwise, upon (i) the dissolution, liquidation
or sale of all or substantially all of the business, properties and assets of
the Company, (ii) upon any reorganization, merger or consolidation in which the
Company does not survive, (iii) upon any reorganization, merger, consolidation
or exchange of securities in which the Company does survive and any of the
Company's stockholders have the opportunity to receive cash, securities of
another corporation and/or other property in exchange for their capital stock of
the Company, or (iv) upon any acquisition by any person or group (as defined in
Section 13(d) of the Securities Act of 1934) of beneficial ownership of more
than fifty percent (50%) of the Company's then outstanding shares of Common
Stock (each of the events described in clauses (i), (ii), (iii) or (iv) is
referred to herein individually as an "Extraordinary Event"), this Plan and each
outstanding Option shall terminate. In such event each Participant shall have
the right until 10 days before the effective date of the Extraordinary Event to
exercise, in whole or in part, any unexpired Option or Options issued to the
Participant, to the extent that said Option is then vested and exercisable
pursuant to the provisions of said Option or Options and of Section 7 hereof.
The termination of employment of, or the termination of a consulting or other
relationship with, a Participant for any reason shall not accelerate or
otherwise affect the number of shares with respect to which an Option may be
exercised; provided, however, that the Option may only be exercised with respect
to that number of shares which could have been purchased under the Option had
the Option been exercised by the Participant on the date of such termination.

           (c) Notwithstanding the provisions of Section 7 or paragraphs (a) or
(b) of this Section 15, or any provision to the contrary contained in a
particular Option Agreement, the Committee, in its sole discretion, at any time,
or from time to time, may elect to accelerate the vesting of all or any portion
of any Option then outstanding. The decision by the Committee to accelerate an
Option or to decline to accelerate an Option shall be final, conclusive and
binding. In the event of the acceleration of the exercisability of Options as
the result of a decision by the Committee pursuant to this Section 15(c), each
outstanding Option so accelerated shall be exercisable for a period from and
after the date of such acceleration and upon such other terms and conditions as
the Committee may determine in its sole discretion; provided, however, that such
terms and conditions (other than terms and conditions relating solely to the
acceleration of exercisability and the related termination of an Option) may not
adversely affect the rights of any Participant without the consent of the
Participant so adversely affected. Any outstanding Option which has not been
exercised by the holder at the end of such stated period shall terminate
automatically and become null and void.


                                        7


<PAGE>   8

           Section 16. Withholding of Taxes. The Company, or a Subsidiary, as
the case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to the Participant the requisite
tax upon the amount of taxable income, if any, recognized by the Participant in
connection with the exercise in whole or in part of any Option, or the sale of
Common Stock issued to the Participant upon the exercise of an Option, as may be
required from time to time under any federal or state tax laws and regulations.
This withholding of tax shall be made from the Company's (or such Subsidiaries')
concurrent or next payment of wages, salary, bonus or other income to the
Participant or by payment to the Company (or such Subsidiaries) by the
Participant of the required withholding tax, as the Committee may determine. The
Company may permit the Participant to elect to surrender, or authorize the
Company to withhold, shares of Common Stock (valued at their fair market value
on the date of surrender or withholding of such shares) in satisfaction of the
Company's withholding obligation, however, no fractional shares of Common Stock
shall be delivered, nor shall any cash in lieu of fractional shares be paid, by
the Company. The Company shall have the right to deduct fractional shares to be
paid to the Participant as a result of such surrender or withholding of shares.

           Section 17. Effectiveness and Termination of this Plan. This Plan
became effective on the date on which it was adopted by the Board and was
approved by approved by the stockholders of the Company within 12 months of
December 5, 1995. This Plan shall terminate at the earliest of the time when all
shares of Common Stock which may be issued hereunder have been so issued, or at
such time as set forth in Section 15(b) hereof; provided, however, that the
Board may in its sole discretion terminate this Plan at any other time. Unless
earlier terminated by the Board, this Plan shall terminate on December 5, 2005.
Subject to Section 15(b) hereof, no such termination shall in any way affect any
Option then outstanding.

           Section 18. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Notice of the determination shall be given
to each Participant to whom an Option is so granted within a reasonable time
after the date of such grant.

           Section 19. Amendment of this Plan. The Board may (a) make such
changes in the terms and conditions of granted Options as it deems advisable,
provided each Participant adversely affected by such change consents thereto,
and (b) make such amendments to this Plan as it deems advisable. Such amendments
and changes shall include, but not be limited to, acceleration of the time at
which an Option may be exercised. The Board may obtain stockholder approval of
any amendment to this Plan for any reason (including in order to take advantage
of certain exemptions under Code Section 162(m) or Code Section 422), but shall
not be required to do so unless required by law or by the rules of the Nasdaq
National Market or any stock exchange on which the Common Stock may then be
listed.

           Section 20. Transfers and Leaves of Absence. For purposes of this
Plan, (a) a transfer of a Participant's employment or consulting relationship,
without an intervening period, between the Company and a Subsidiary shall not be
deemed a termination of employment or a termination of a


                                        8


<PAGE>   9

consulting relationship, and (b) a Participant who is granted in writing a leave
of absence shall be deemed to have remained in the employ of, or in a consulting
relationship with, the Company (or a Subsidiary, whichever is applicable) during
such leave of absence. Notwithstanding the foregoing, for purposes of
determining the exercisability of an Incentive Stock Option, a Participant who
is on a leave of absence that exceeds 90 days will be considered to have
terminated his or her employment on the 91st day of the leave of absence, unless
the Participant's rights to reemployment are guaranteed by statute or contract.

           Section 21. No Obligation to Exercise Option. The granting of an
Option shall impose no obligation on the Participant to exercise such Option.

           Section 22. Governing Law. This Plan and any Option granted pursuant
to this Plan shall be construed under and governed by the laws of the State of
Delaware without regard to conflict of law provisions thereof.

           Section 23. Not an Employment or Other Agreement. Nothing contained
in this Plan or in any Option Agreement shall confer, intend to confer or imply
any rights of employment or any rights to any other relationship or rights to
continued employment by, or rights to a continued consulting relationship with,
the Company or any Subsidiaries in favor of any Participant or limit the ability
of the Company or any Subsidiaries to terminate, with or without cause, in its
sole and absolute discretion, the employment of, or relationship with, any
Participant, subject to the terms of any written employment or other agreement
to which a Participant is a party.

           Section 24. Termination of Employment. The terms and conditions under
which an Option may be exercised after a Participant's termination of employment
shall be determined by the Committee and shall be specified in the Option
Agreement. The conditions under which such post- termination exercises shall be
permitted with respect to Incentive Stock Options shall be determined in
accordance with the provisions of Section 422 of the Code.

           Section 25. Indemnification. In addition to such other rights of
indemnification as they may have as directors, the members of the Committee
shall be indemnified by the Company to the fullest extent permitted by law
against the reasonable expenses, including reasonable attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with this Plan or any Option granted thereunder, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member is not entitled to
indemnification under applicable law; provided that within 60 days after
institution of any such action, suit or proceeding such Committee member shall
in writing offer the Company the opportunity, at the Company's expense, to
handle and defend the same.


                                        9




<PAGE>   1

                                                                    EXHIBIT 10.7


                     AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT


        This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this "Amendment") is made
and entered into effective as of October 1, 1998, by and between PIA
Merchandising Services, Inc., a Delaware corporation ("Employer"), and Terry R.
Peets ("Executive").

                                 R E C I T A L S

        A. Employer and Executive have entered into that certain Employment
Agreement dated June 25, 1997 (the "Employment Agreement"). Capitalized terms
used herein but which are not otherwise defined shall have the meanings given to
such terms in the Employment Agreement.

        B. Employer has granted to Executive a stock option dated June 25. 1997
to purchase 250,000 shares of Employer's Common Stock for an exercise price of
$5.75 per share and a stock option dated September 22 1998 to purchase 35,000
shares of Employer's Common Stock for an exercise price of $4.50 per share
(collectively, the "Stock Options").

        C. Employer and Executive desire to amend the Employment Agreement and
the Stock Options as provided in this Amendment.

                                A G R E E M E N T

        In consideration of the foregoing recitals and the respective covenants
and agreements contained herein, the parties, intending to be legally bound,
agree as follows:

        1. AMENDMENT TO SECTION 4(A) OF THE
 EMPLOYMENT AGREEMENT. Effective
retroactive to August 10, 1998, Section 4(a) of the Employment Agreement shall
be amended to increase the fixed annual salary provided for therein by three
percent (3%) to $21,459 per month. Such increase is intended to constitute the
adjustment "in accordance with the percentage change in the Los Angeles-Long
Beach-Anaheim Consumer Price Index" required by the third sentence of Section
4(a), and the parties agree that such adjustment shall fully satisfy Employer's
obligation to make such adjustment regardless of the actual increase in such
Index.

        2. AMENDMENT TO SECTION 4(B) OF THE EMPLOYMENT AGREEMENT. Section 4(b)
of the Employment Agreement shall be amended to provide that Employer's
obligation to pay the Bonus provided for in such Section 4(b) (the "Current
Bonus Plan") may be terminated upon the occurrence of an Acquisition Event (as
such term is defined below); provided, however, that unless the Current Bonus
Plan is replaced with a substantially similar incentive plan, Executive will
receive, upon the termination of the Current Bonus Plan, a pro rated Bonus based
on his year to date performance for the year in which the Current Bonus Plan is
terminated. For example, if an Acquisition Event occurs on September 30 of a
given year and the Current Bonus Plan is terminated and not replaced by a
substantially similar incentive plan, Executive would be entitled



<PAGE>   2

to receive four percent (4%) of EBITA for the nine-month period ending September
30 up to a maximum of 75% of the annual fixed salary as then in effect.

        3. AMENDMENT TO SECTION 8 OF THE EMPLOYMENT AGREEMENT. Section 8 of the
Employment Agreement is hereby amended to add, following the existing subsection
(e), a new subsection (f) which reads in its entirety as follows:

        "(F) THE PROVISIONS OF SECTION 8(C) NOTWITHSTANDING, UPON TERMINATION OF
        EXECUTIVE'S EMPLOYMENT WITHOUT CAUSE (AS SUCH TERM IS DEFINED IN SECTION
        8(A)) WITHIN TWO YEARS FOLLOWING A MATERIAL CORPORATE EVENT (AS SUCH
        TERM IS DEFINED BELOW) OR IN THE EVENT EXECUTIVE RESIGNS FOR MATERIAL
        REASON (AS SUCH TERM IS DEFINED BELOW) WITHIN ONE YEAR FOLLOWING A
        MATERIAL CORPORATE EVENT, THEN (I) EXECUTIVE SHALL RECEIVE, IN LIEU OF
        ANY PAYMENTS PURSUANT TO SECTION 8(C), THE FIXED SALARY PROVIDED FOR IN
        THE EMPLOYMENT AGREEMENT FOR 18 MONTHS FOLLOWING SUCH TERMINATION (THE
        "SEVERANCE PERIOD"), SUBJECT TO REDUCTION TO THE EXTENT EXECUTIVE
        OBTAINS FULL TIME EMPLOYMENT IN A COMPARABLE FULL-TIME POSITION (BUT NOT
        SUBJECT TO REDUCTION BASED ON CONSULTING OR SIMILAR PART-TIME INCOME)
        DURING THE SEVERANCE PERIOD, (II) TO THE EXTENT EMPLOYER IS ABLE TO
        OBTAIN STOP LOSS INSURANCE COVERAGE WITH RESPECT TO EXECUTIVE DURING THE
        SEVERANCE PERIOD, EXECUTIVE SHALL BE ENTITLED TO PARTICIPATE IN
        EMPLOYER'S EMPLOYEE HEALTH INSURANCE PLANS DURING THE SEVERANCE PERIOD
        AND TO THE EXTENT EMPLOYER IS NOT ABLE TO OBTAIN SUCH STOP LOSS
        INSURANCE COVERAGE, EXECUTIVE SHALL NOT BE ENTITLED TO PARTICIPATE IN
        EMPLOYER'S EMPLOYEE HEALTH INSURANCE PLANS DURING THE SEVERANCE PERIOD,
        EXCEPT TO THE EXTENT PERMITTED BY COBRA, AND EMPLOYER SHALL REIMBURSE
        EXECUTIVE FOR HIS COBRA PREMIUMS DURING SUCH PERIOD, (III) EMPLOYER
        SHALL MAKE THE REQUIRED PREMIUM PAYMENTS TO KEEP EXECUTIVE'S LIFE
        INSURANCE POLICY UNDER EMPLOYER'S GENERAL LIFE INSURANCE PROGRAM (AS IN
        EFFECT ON THE DATE HEREOF) AND EXECUTIVE'S "KEY MAN" LIFE INSURANCE
        POLICY (POLICY NUMBER 6238149, ISSUED BY MASSACHUSETTS MUTUAL LIFE
        INSURANCE COMPANY) IN EFFECT DURING THE SEVERANCE PERIOD, AT WHICH TIME
        EXECUTIVE SHALL CEASE TO BE ENTITLED TO PARTICIPATE IN ANY LIFE
        INSURANCE PLAN PROVIDED BY EMPLOYER, PROVIDED, HOWEVER, THAT EMPLOYER
        SHALL COOPERATE WITH EXECUTIVE AT THAT TIME TO MAKE AVAILABLE TO
        EXECUTIVE ANY LIFE INSURANCE POLICY CONVERSION OPTIONS WHICH MAY BE
        AVAILABLE, AND (IV) EMPLOYER SHALL MAKE THE REQUIRED PREMIUM PAYMENTS TO
        KEEP EXECUTIVE'S LONG TERM DISABILITY INSURANCE POLICY UNDER EMPLOYER'S
        GENERAL LONG TERM DISABILITY INSURANCE PROGRAM (AS IN EFFECT ON THE DATE
        HEREOF) AND EXECUTIVE'S "KEY MAN" LONG TERM DISABILITY INSURANCE POLICY
        (POLICY SERIES 297NC-2, POLICY NUMBER 5533855, ISSUED BY PROVIDENT LIFE
        AND ACCIDENT INSURANCE COMPANY) IN EFFECT DURING THE SEVERANCE PERIOD,
        AT WHICH TIME EXECUTIVE SHALL CEASE TO BE ENTITLED TO PARTICIPATE IN ANY
        LONG TERM DISABILITY INSURANCE PROGRAM PROVIDED BY EMPLOYER, PROVIDED,
        HOWEVER, THAT EMPLOYER SHALL COOPERATE WITH EXECUTIVE AT THAT TIME TO
        MAKE AVAILABLE TO EXECUTIVE ANY LONG TERM DISABILITY INSURANCE POLICY
        CONVERSION OPTIONS WHICH MAY BE AVAILABLE. EXCEPT AS OTHERWISE REQUIRED
        BY LAW, FROM AND AFTER THE TERMINATION OF HIS EMPLOYMENT FOR ANY REASON,
        EXECUTIVE SHALL CEASE TO BE ENTITLED TO PARTICIPATE IN EMPLOYER'S 401(K)
        PLAN. AS USED IN THIS SECTION 8(F), THE FOLLOWING TERMS SHALL HAVE THE
        MEANINGS INDICATED:


                                        2


<PAGE>   3

             (I) "MATERIAL CORPORATE EVENT" SHALL MEAN (I) ANY MERGER OR
             CONSOLIDATION IN WHICH THE SHARES OF EMPLOYER'S CAPITAL STOCK
             OUTSTANDING IMMEDIATELY PRIOR TO SUCH TRANSACTION REPRESENT LESS
             THAN 65% OF THE OUTSTANDING VOTING POWER OF EMPLOYER (OR OF THE
             SURVIVING COMPANY IN A CONSOLIDATION OR IN A MERGER IN WHICH
             EMPLOYER IS NOT THE SURVIVING COMPANY) AFTER SUCH TRANSACTION, (II)
             ANY STOCK ISSUANCE (OR SERIES OF RELATED STOCK ISSUANCES) TO A
             PERSON OR ENTITY (OR GROUP) AS A RESULT OF WHICH THE SHARES OF
             EMPLOYER'S CAPITAL STOCK OUTSTANDING IMMEDIATELY PRIOR TO SUCH
             ISSUANCE (OR THE FIRST ISSUANCE IN A SERIES OF RELATED ISSUANCES)
             REPRESENT LESS THAN 65% OF THE OUTSTANDING VOTING POWER OF EMPLOYER
             AFTER SUCH ISSUANCE (OR ANY ISSUANCE IN A SERIES OF RELATED
             ISSUANCES), (III) ANY TENDER OFFER OR OTHER PURCHASE (OR SERIES OF
             PURCHASES) OF OUTSTANDING SHARES OF CAPITAL STOCK AS A RESULT OF
             WHICH A PERSON OR ENTITY (OR GROUP), OTHER THAN ONE OF THE MAJOR
             STOCKHOLDERS OF EMPLOYER AS OF THE DATE OF THIS MEMORANDUM,
             ACQUIRES MORE THAN 35% OF THE OUTSTANDING SHARES OF EMPLOYER'S
             COMMON STOCK, AND (IV) ANY TRANSACTION (OR SERIES OF RELATED
             TRANSACTIONS) AS A DIRECT RESULT OF WHICH THE COMPOSITION OF THE
             BOARD OF DIRECTORS IS CHANGED SUCH THAT, FOLLOWING SUCH TRANSACTION
             (OR ANY TRANSACTION IN A SERIES OF TRANSACTIONS), A MAJORITY OF THE
             MEMBERS OF THE BOARD OF DIRECTORS ARE PERSONS WHO WERE NOT MEMBERS
             OF THE BOARD OF DIRECTORS PRIOR TO SUCH TRANSACTION (OR THE FIRST
             TRANSACTION IN A SERIES OF TRANSACTIONS); AND

             (II) "MATERIAL REASON" SHALL MEAN (I) THE ASSIGNMENT TO EXECUTIVE
             (WITHOUT EXECUTIVE'S WRITTEN CONSENT) OF ANY POSITION, DUTIES OR
             RESPONSIBILITIES WHICH EXECUTIVE, IN HIS REASONABLE JUDGMENT, DEEMS
             TO BE MATERIALLY AND SUBSTANTIALLY LESS FAVORABLE THAN HIS
             POSITIONS, DUTIES AND RESPONSIBILITIES WITH EMPLOYER IMMEDIATELY
             PRIOR TO SUCH MATERIAL CORPORATE EVENT, (II) A CHANGE IN
             EXECUTIVE'S REPORTING RESPONSIBILITIES, STATUS, TITLES OR OFFICES
             AS IN EFFECT IMMEDIATELY PRIOR TO SUCH MATERIAL CORPORATE EVENT
             (WITHOUT EXECUTIVE'S WRITTEN CONSENT) WHICH EXECUTIVE, IN HIS
             REASONABLE JUDGMENT, DEEMS TO BE MATERIALLY ADVERSE TO EXECUTIVE,
             (III) A REDUCTION IN EXECUTIVE'S BASE SALARY AS IN EFFECT AT THE
             TIME OF SUCH MATERIAL CORPORATE EVENT; (IV) A FAILURE TO CONTINUE
             TO PROVIDE INCENTIVE COMPENSATION PLANS OR OTHER EMPLOYEE BENEFITS
             OR COMPENSATION PLANS, IN THE AGGREGATE, REASONABLY COMPARABLE TO
             THOSE PROVIDED IMMEDIATELY PRIOR TO SUCH MATERIAL CORPORATE EVENT;
             (V) A MATERIAL BREACH OF THIS AGREEMENT BY EMPLOYER; OR (VI) A
             REQUIREMENT THAT EXECUTIVE REPORT TO AN OFFICE MORE THAN 25 MILES
             FURTHER FROM EXECUTIVE'S RESIDENCE AT THE TIME OF SUCH MATERIAL
             CORPORATE EVENT THAN THE OFFICE TO WHICH EXECUTIVE WAS REQUIRED TO
             REPORT IMMEDIATELY PRIOR TO SUCH MATERIAL CORPORATE EVENT.

        4. AMENDMENT TO STOCK OPTIONS.

        (a) The Stock Options are hereby amended as follows (the terms "Cause,"
"Material Corporate Event" and "Material Reason" used in this Section 4 shall
have the meanings given to such terms in the Employment Agreement, as amended by
this Amendment):


                                        3


<PAGE>   4

            (i)   Upon the occurrence of an Acquisition Event (as such term is
                  defined in Section 4(b) of this Amendment), the dates on which
                  the Stock Options will vest, as set forth in the vesting
                  schedule attached to the Stock Options as Schedule A, shall be
                  accelerated by two years, such that, with respect to any
                  Acquisition Event which occurs after the date of this
                  Amendment, the installments scheduled to vest in 1999 and 2000
                  shall be deemed fully vested, the installments scheduled to
                  vest in 2001 shall vest on the same month and day in 1999 (or
                  if such date in 1999 is prior to the date of such Acquisition
                  Event, shall be deemed vested upon the consummation of such
                  Acquisition Event), and the installments scheduled to vest in
                  2002 shall vest on the same month and day in 2000 (or if such
                  date in 2000 is prior to the date of such Acquisition Event,
                  shall be deemed vested upon the consummation of such
                  Acquisition Event).

            (ii)  If, in connection with an Acquisition Event, Employer does not
                  survive as a public company or the acquiror does not assume
                  the Stock Options (or issue substitute stock options in
                  exchange therefor), such that the assumed (or substitute)
                  options are exercisable for publicly traded stock and
                  maintains the economic value of the Stock Options, the Stock
                  Options shall automatically vest in full immediately prior to
                  the consummation of such Acquisition Event and Employee shall
                  be given an opportunity to exercise the Stock Options upon
                  such vesting.

            (iii) Section 6(c) of each Stock Option is supplemented to provide
                  that, in exercising such Stock Option to purchase a specified
                  number of shares of Common Stock (the "Purchased Shares"),
                  Employee may pay the Option Price for such Purchased Shares
                  (i.e., $5.75 or $4.50 per Purchased Share) by either (i)
                  delivering to Employer shares of Common Stock which Executive
                  has owned for at least six months which have a fair market
                  value on the close of business on the date of delivery equal
                  to the Option Price of the Stock Option being exercised times
                  the number of Purchased Shares or (ii) by directing Employer
                  to cancel a portion of one or both of the Stock Options as to
                  such number of shares of Common Stock as shall equal (x) the
                  Option Price of the Stock Option being exercised times the
                  number of Purchased Shares divided by (y) the amount by which
                  the Quoted Price exceeds the Option Price for the number of
                  shares represented by the portion of the Stock Option or Stock
                  Options being canceled (the "Spread"). For example, if
                  Employee desires to purchase 1,000 shares upon the partial
                  exercise of the Stock Option with an Option Price of $5.75 and
                  the Quoted Price is $10.75 (i.e., the Spread is $5.00),
                  Employee can pay the Option


                                        4


<PAGE>   5

                  Price for such 1,000 shares by directing Employer to cancel
                  the Stock Option with an Option Price of $5.75 with respect to
                  1,150 shares (i.e., 1,150 = (1,000 x $5.75)/$5.00).

            (iv)  In the event Executive's employment is terminated without
                  Cause within two years following a Material Corporate Event or
                  in the event Executive resigns for Material Reason within one
                  year following a Material Corporate Event, the Stock Options
                  shall automatically vest and become exercisable in full.

        (b) As used in this Section 4, "Acquisition Event" shall mean (i) any
merger or consolidation in which the shares of Employer's capital stock
outstanding immediately prior to such transaction represent less than 40% of the
outstanding voting power of Employer (or of the surviving company in a
consolidation or in a merger in which Employer is not the surviving company)
after such transaction, (ii) any merger or consolidation as a result of which a
person or entity (or "group" within the meaning of Rule 13d-5 under the
Securities Exchange Act of 1934) becomes the holder of more than 40% of the
outstanding voting power of Employer (or of the surviving company), (iii) any
tender offer or other purchase of outstanding shares of capital stock as a
result of which a person or entity (or group), other than one of Employer's
current major stockholders, acquires more than 40% of the outstanding shares of
Employer's common stock, (iv) the sale of all or substantially all of the assets
of Employer, and (v) a successful proxy contest (led by a party other than
Employer's current major stockholders) in which a majority of the Board is
replaced.

        (c) Upon termination of Executive's employment by Employer without Cause
within two years following a Material Corporate Event or in the event Executive
resigns for Material Reason within one year following a Material Corporate Event
(but not in the event of the termination of employment due to death or
disabiltiy), then the termination provisions of the Stock Options
notwithstanding, the Stock Options may be exercised at any time during the six
months following such termination of his employment.

        (d) The foregoing provisions notwithstanding, no amendment to the Stock
Options effected hereby shall be effective in connection with a potential
transaction which would constitute an Acquisition Event or a Material Corporate
Event which Employer (or the acquiror) intends to account for as a
pooling-of-interests if such amendment would make it impossible for such
transaction to be accounted for as a pooling-of-interests, in which event, such
amendment shall have no force and effect and the Stock Options shall be amended
only to the extent of the amendments effected hereby, if any, which would not
make it impossible for such transaction to be accounted for as a
pooling-of-interests.

        5. FULL FORCE AND EFFECT. Except as expressly amended hereby, the
Employment Agreement and the Stock Options shall continue in full force and
effect in accordance with the provisions thereof on the date hereof.


                                        5


<PAGE>   6

        6. GOVERNING LAW. This Amendment shall be construed in accordance with
and governed by the Laws of the State of California without giving effect to the
principles of conflict of laws.

        7. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single agreement.

        IN WITNESS WHEREOF, each of the parties has executed this Amendment as
of the dates set forth below.


"EMPLOYER":                                    "EXECUTIVE":

PIA MERCHANDISING SERVICES, INC., 
a Delaware corporation                         /s/ Terry R. Peets
                                               ---------------------------------
                                                   TERRY R. PEETS

By: /s/   Patrick C. Haden
    -----------------------------------
Title: Chairman, Compensation Committee


                                       6



<PAGE>   1

                                                                    EXHIBIT 10.8


                              AMENDED AND RESTATED
                        SEVERANCE COMPENSATION AGREEMENT


        This AMENDED AND RESTATED SEVERANCE COMPENSATION AGREEMENT (this
"Amended and Restated Agreement") is made and entered into effective as of
October 1, 1998, by and between PIA Merchandising Services, Inc., a Delaware
corporation ("PIA"), and Cathy L. Wood ("Executive").

                                 R E C I T A L S

        A. PIA's Board of Directors considers the establishment and maintenance
of a sound and vital management team to be essential to protecting and enhancing
the best interests of PIA and its stockholders. PIA recognizes that the
possibility of a Change of Control (as defined in Section 4), and the
uncertainty and questions which that possibility may raise among members of the
management team, may result in the departure or distraction of management
personnel to the detriment of PIA and its stockholders. The Board of Directors
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of PIA's management team,
including Executive, to their assigned duties.

        B. PIA and Executive are parties to that certain Severance Compensation
Agreement dated February 20, 1998 (the "Original Severance Agreement")
 which
provides for the payment of severance compensation to Executive if Executive's
employment with PIA should terminate under certain circumstances described below
following a Change of Control of PIA.

        C. PIA has granted to Executive a stock option dated August 4, 1997 to
purchase 100,000 shares of PIA's Common Stock for $5.38 per share, a stock
option dated August 3, 1998 to purchase 50,000 shares of Common Stock for a
purchase price of $5.87 per share and a stock option dated September 22, 1998 to
purchase 15,000 shares of Common Stock for a purchase price of $4.50 per share
(collectively, the "Stock Options").

        D. PIA and Executive desire to amend and restate the Original Severance
Agreement as provided herein and to amend the Stock Options as provided herein.

                                A G R E E M E N T

        In consideration of the foregoing recitals and the respective covenants
and agreements contained herein, the parties, intending to be legally bound,
agree as follows:

        1. Basic Agreement. In order to protect Executive against certain
possible consequences of a Change in Control of PIA, and thereby to induce
Executive to continue to serve as a key employee of PIA, PIA agrees that if
there is a Change of Control of PIA, and if Executive's employment by PIA is
subsequently terminated, after, but within specified time periods following,
such Change of Control, Executive shall be entitled to the severance
compensation specified in




<PAGE>   2

Section 3 hereof unless such termination is (a) a result of Executive's death or
Retirement (as defined in Section 4); (b) by PIA for Cause (as defined in
Section 4); or (c) by Executive other than for Good Reason (as defined in
Section 4). As partial consideration for this Agreement, Executive agrees that
she will not voluntarily leave the employ of PIA and will continue to perform
her existing duties, or such other comparable duties as may be assigned by PIA,
for a period of at least one (1) year following any Change of Control, subject
to her right to resign for Good Reason (as provided herein). Notwithstanding the
foregoing, PIA may terminate Executive's employment at any time, with or without
cause, subject to providing the benefits hereinafter specified in accordance
with the terms hereof if such termination occurs after a Change of Control.

        2. Term of Agreement. This Agreement shall initially continue until the
earlier to occur of (i) the termination of Executive's employment with PIA for
any reason whatsoever, whether by action of Executive or of PIA or (ii) a Change
of Control. In the former event, all rights of Executive hereunder shall
terminate at the time of such termination of employment. In the latter case,
this Agreement shall remain effective until the termination of all of PIA's
obligations hereunder and shall not be terminated until the expiration of such
period.

        3. Severance Compensation.

           (a) If, during the two (2) year period following a Change of
Control, PIA shall terminate Executive's employment other than by reason of
Disability, Retirement or for Cause (as such terms are defined in Section 4), or
if, during the one year period following a Change of Control, Executive shall
terminate her employment for Good Reason (as such term is defined in Section 4),
then (i) PIA shall pay to Executive, as severance pay, her salary (at the rate
at which Executive was being compensated immediately prior to such termination,
unless Executive has resigned due to a reduction in compensation, in which case,
Executive shall be paid at the rate of compensation immediately prior to such
reduction) for 18 months following such termination (the "Severance Period"),
provided, however that PIA's obligation to make such payments shall be subject
to reduction to the extent Executive obtains full time employment in a
comparable full-time position (but shall not be subject to reduction based on
consulting or similar part-time income) during the Severance Period; (ii) to the
extent PIA is able to obtain stop loss insurance coverage with respect to
Executive during the Severance Period, Executive shall be entitled to
participate in PIA's employee health insurance plans during the Severance Period
and to the extent PIA is not able to obtain such stop loss insurance coverage,
Executive shall not be entitled to participate in PIA's employee health
insurance plans during the Severance Period, except to the extent permitted by
COBRA, and PIA shall reimburse Executive for her COBRA premiums during the
Severance Period; (iii) PIA shall make the required premium payments to keep
Executive's life insurance policy under PIA's general life insurance program (as
in effect on the date hereof) in effect during the Severance Period, at which
time Executive shall cease to be entitled to participate in any life insurance
plan provided by PIA, provided, however, that PIA shall cooperate with Executive
at that time to make available to Executive any life insurance policy conversion
options which may be available, and (iv) PIA shall make the required premium
payments to keep Executive's long term disability insurance policy under PIA's
general long term disability insurance program (as in effect on the date hereof)
and Executive's


                                        2


<PAGE>   3

"key man" long term disability insurance policy (Policy Series 297NC-2, Policy
Number 5533849, issued by Provident Life and Accident Insurance Company) in
effect during the Severance Period, at which time Executive shall cease to be
entitled to participate in any long term disability insurance program provided
by PIA, provided, however, that PIA shall cooperate with Executive at that time
to make available to Executive any long term disability insurance policy
conversion options which may be available. Executive shall not be entitled to
any other benefits following the termination of her employment except as
otherwise expressly provided herein or required by law.

            (b) Notwithstanding the foregoing provisions of this Section 3, if
the severance compensation provided in this Section 3, either alone or together
with other payments which Executive would have the right to receive from PIA,
would constitute a "parachute payment," as defined in Section 280G of the
Internal Revenue Code of 1986 (the "Code"), as in effect at the time of payment,
such payment shall be reduced to the largest amount as will result in no portion
being subject to the excise tax imposed by Section 4999 of the Code or the
disallowance of a deduction by PIA pursuant to Section 280G(a) of the Code. The
determination of the amount of any reduction pursuant to this paragraph, and the
payments or other compensation to which such reductions shall apply, shall be
made in good faith by PIA, and such determination shall be binding on Executive.

            (c) Any termination by PIA pursuant to this Section 3 shall be
communicated by a written notice of termination indicating the specific
termination provisions in this Agreement relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provisions so indicated. No
termination by PIA shall be effective for purposes of this Section 3 without
such written notice of termination.

            (d) Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by Executive as the result
of employment by any other person after the termination of employment with PIA,
or otherwise, except as otherwise expressly provided in this Section 3. The
provisions of this Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish Executive's
existing rights, or rights which would accrue solely as a result of the passage
of time, under any benefit plan, incentive plan or securities plan, employment
agreement or other contract, plan or arrangement.

        4. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated:

           (a) "Change of Control" shall mean the happening of any of the
following:

               (i)   any merger or consolidation in which the shares of PIA's
                     capital stock outstanding immediately prior to such
                     transaction represent less than 65% of the outstanding
                     voting power of PIA (or of the surviving


                                        3


<PAGE>   4

                     company in a consolidation or in a merger in which PIA is 
                     not the surviving company) after such transaction;

               (ii)  any stock issuance (or series of related stock issuances)
                     to a person or entity (or group) as a result of which the
                     shares of PIA's capital stock outstanding immediately prior
                     to such issuance (or the first issuance in a series of
                     related issuances) represent less than 65% of the
                     outstanding voting power of PIA after such issuance (or any
                     issuance in a series of related issuances);

               (iii) any tender offer or other purchase (or series of purchases)
                     of outstanding shares of capital stock as a result of which
                     a person or entity (or group), other than one of the major
                     stockholders of PIA as of the date of this memorandum,
                     acquires more than 35% of the outstanding shares of PIA's
                     Common Stock; and

               (iv)  any transaction (or series of related transactions) as a
                     direct result of which the composition of the Board of
                     Directors is changed such that, following such transaction
                     (or any transaction in a series of transactions), a
                     majority of the members of the Board of Directors are
                     persons who were not members of the Board of Directors
                     prior to such transaction (or the first transaction in a
                     series of transactions).

           (b) "Disability" shall mean absence from full time performance of
Executive's duties with PIA for one hundred thirty (130) consecutive business
days, as a result of Executive's incapacity due to physical or mental illness,
unless within thirty (30) days after notice of such termination is given
following such absence Executive shall have returned to the full time
performance of Executive's duties.

           (c) "Retirement" shall mean a termination of employment in accordance
with the retirement policy generally applicable to all salaried employees at the
time of the Change of Control.

           (d) "Cause" shall mean (i) the deliberate and intentional failure by
Executive to devote substantially all of her full business time and efforts to
the performance of her duties (other than any such failure resulting from
Executive's incapacity due to physical or mental illness or disability); (ii)
gross misconduct by Executive materially and demonstrably injurious to PIA,
(iii) the commission of any crime (other than minor traffic offenses and similar
infractions) by Executive; or (iv) Executive's wilful failure to comply with
instructions of the Board of Directors of PIA.

           (e) "Good Reason" shall mean (i) the assignment to Executive (without
Executive's written consent) of any position, duties or responsibilities which
Executive, in her reasonable judgment, deems to be materially and substantially
less favorable than her positions, duties and responsibilities with Executive
immediately prior to such Change of Control; (ii) a change in


                                        4


<PAGE>   5

Executive's reporting responsibilities, status, titles or offices as in effect
immediately prior to such Change of Control (without Executive's written
consent) which Executive, in her reasonable judgment, deems to be materially
adverse to Executive; (iii) a reduction in Executive's base salary as in effect
at the time of such Change of Control; (iv) a failure to continue to provide
incentive compensation plans or other employee benefits or compensation plans,
in the aggregate, reasonably comparable to those provided immediately prior to
such Change of Control; or (v) a requirement that Executive report to an office
more than 25 miles further from Executive's residence at the time of such Change
of Control than the office to which Executive was required to report immediately
prior to such Change of Control.

        5. Amendment of the Stock Options. The Stock Options are hereby amended
as follows:

           (a) Upon the occurrence of an Acquisition Event (as such term is
defined below), the dates on which the Stock Options will vest, as set forth in
the vesting schedule attached to the Stock Options as Schedule A, shall be
accelerated by two years, such that, with respect to any Acquisition Event which
occurs after the date of this Amended and Restated Agreement, the installments
scheduled to vest in 1999 and 2000 shall be deemed fully vested, the
installments scheduled to vest in 2001 shall vest on the same month and day in
1999 (or if such date in 1999 is prior to the date of such Acquisition Event,
shall be deemed vested upon the consummation of such Acquisition Event), and the
installments scheduled to vest in 2002 shall vest on the same month and day in
2000 (or if such date in 2000 is prior to the date of such Acquisition Event,
shall be deemed vested upon the consummation of such Acquisition Event).

           (b) If, in connection with an Acquisition Event, PIA does not survive
as a public company or the acquiror does not assume the Stock Options (or issue
substitute stock options in exchange therefor), such that the assumed (or
substitute) options are exercisable for publicly traded stock and maintains the
economic value of the Stock Options, the Stock Options shall automatically vest
in full immediately prior to the consummation of such Acquisition Event and
Executive shall be given an opportunity to exercise the Stock Options upon such
vesting.

           (c) Section 6(c) of the Stock Options is supplemented to provide
that, in exercising the Stock Options to purchase a specified number of shares
of Common Stock (the "Purchased Shares"), Executive may pay the Option Price for
such Purchased Shares (i.e., $5.38, or $5.87 or $4.50 per Purchased Share, as
the case may be) by either (i) delivering to PIA shares of Common Stock which
Executive has owned for at least six months which have a fair market value on
the close of business on the date of delivery equal to the Option Price of the
Stock Option being exercised times the number of Purchased Shares or (ii)
directing PIA to cancel a portion of one or both of the Stock Options as to such
number of shares of Common Stock as shall equal (x) the Option Price of the
Stock Option being exercised times the number of Purchased Shares divided by (y)
the amount by which the Quoted Price exceeds the Option Price for the number of
shares represented by the portion of the Stock Option or Stock Options being
canceled (the "Spread"). For example, if Executive desires to purchase 1,000
shares upon the partial exercise of the Stock Option with an Option Price of
$5.87 and the Quoted Price is $10.87, Executive can pay the Option Price


                                        5


<PAGE>   6

for such 1,000 shares by directing PIA to cancel the Stock Option with an Option
Price of $5.87 (reflecting a Spread of $5.00 per share) with respect to 1,174
shares (i.e., 1,174 = (1,000 x $5.87)/$5.00).

           (d) In the event Executive's employment is terminated without Cause
(as such term is defined in Section 4) within two years following a Change of
Control (as such term is defined in Section 4) or in the event Executive resigns
for Good Reason (as such term is defined in Section 4) within one year following
a Change of Control, the Stock Options shall automatically vest and become
exercisable in full.

           (e) As used in this Section 5, "Acquisition Event" shall mean (i) any
merger or consolidation in which the shares of PIA's capital stock outstanding
immediately prior to such transaction represent less than 40% of the outstanding
voting power of PIA (or of the surviving company in a consolidation or in a
merger in which PIA is not the surviving company) after such transaction, (ii)
any merger or consolidation as a result of which a person or entity (or "group"
within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934)
becomes the holder of more than 40% of the outstanding voting power of PIA (or
of the surviving company), (iii) any tender offer or other purchase of
outstanding shares of capital stock as a result of which a person or entity (or
group), other than one of PIA's current major stockholders, acquires more than
40% of the outstanding shares of PIA's Common Stock, (iv) the sale of all or
substantially all of the assets of PIA, and (v) a successful proxy contest (led
by a party other than PIA's current major stockholders) in which a majority of
the Board is replaced.

           (f) If, during the two (2) year period following a Change of Control,
PIA shall terminate Executive's employment other than by reason of Disability,
Retirement or for Cause (as such terms are defined in Section 4), or if, during
the one year period following a Change of Control, Executive shall terminate her
employment for Good Reason (as such term is defined in Section 4), then, the
termination provisions of the Stock Options notwithstanding, the Stock Options
may be exercised at any time during the 12 months following such termination of
her employment.

           (g) The foregoing provisions notwithstanding, no amendment to the
Stock Options effected hereby shall be effective in connection with a potential
transaction which would constitute an Acquisition Event or a Change of Control
which PIA (or the acquiror) intends to account for as a pooling-of-interests if
such amendment would make it impossible for such transaction to be accounted for
as a pooling-of-interests, in which event, such amendment shall have no force
and effect and the Stock Options shall be amended only to the extent of the
amendments effected hereby, if any, which would not make it impossible for such
transaction to be accounted for as a pooling-of-interests.

        6. Effect of this Amended and Restated Agreement. This Amended and
Restated Agreement shall replace and supersede the Original Severance Agreement
in its entirety and the Original Severance Agreement shall have no further force
or effect. Except as expressly amended


                                        6


<PAGE>   7

hereby, the Stock Options shall continue in full force and effect in accordance
with the provisions thereof on the date hereof.

        7. Binding on Successors. This Agreement shall be binding on and inure
to the benefit of any successor to PIA. PIA agrees to require any successor or
assign to all or substantially all of its business and/or assets, by written
agreement, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that PIA would be required to perform it if no
such transaction had taken place, except where such assignment occurs as a
matter of law (e.g., in the case of a merger or consolidation), in which case no
such formal assumption shall be required. Any failure of PIA to obtain such
agreement prior to the effectiveness of any such transaction shall be a material
breach of this Agreement and shall entitle Executive to terminate her employment
for Good Reason, but shall not otherwise affect the rights of PIA or such
successor or assign under any such agreement between them, nor invalidate any
such agreement. As used in this Agreement, "PIA" shall mean PIA as presently
constituted and any successor or assign to its business and/or assets which
executes and delivers the agreement provided for in this Section 7 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. This Agreement shall inure to the benefit of and be
enforceable by Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devotees and legatees. If
Executive should die while any amounts are still payable to her hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive's estate.

        8. Notices. Any notice (which term includes payments and communications
of any sort whatsoever) required or permitted to be delivered under this
Agreement shall be in writing and shall be delivered to the party to whom
addressed in person, or by certified mail, return receipt requested, addressed
as follows:

           If to PIA:          PIA Merchandising Services, Inc.
                               19900 MacArthur Boulevard
                               Suite 900
                               Irvine, California  92718

            If to Executive:   At her address as shown on the records of PIA.

Any person whose address is specified herein may change such address by giving
notice to the other in the manner herein provided. All notices given in
accordance with this Agreement shall, if mailed, be deemed to have been given or
delivered two (2) days after the date they are placed in the United States mail,
postage prepaid, properly addressed as herein required. If delivered personally
or by courier, they shall be deemed given when actually received.

        9. Choice of Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California.


                                        7


<PAGE>   8

        10. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

        11. Legal Fees and Expenses. In the event of any dispute under this
Agreement, the prevailing party shall be entitled to recover all legal fees and
expenses which it may incur in resolving such dispute.

        12. Counterparts. This Amended and Restated Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute a single agreement.

        IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Agreement on the day and year first above written.


PIA MERCHANDISING SERVICES, INC.             EXECUTIVE:


By: /s/ Terry R. Peets                       /s/ Cathy L. Wood
    ----------------------------------       -----------------------------------
    Terry R. Peets, Chief Executive          CATHY L. WOOD
    Officer and President



                                        8




<PAGE>   1

                                                                    EXHIBIT 10.9


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

                           LOAN AND SECURITY AGREEMENT

                                      AMONG

                                MELLON BANK, N.A.
                                   AS LENDER,

                           PIA MERCHANDISING CO., INC.

                                       AND

                           PACIFIC INDOOR DISPLAY CO.
                              DBA RETAIL RESOURCES
                                  AS BORROWERS,

                                       AND

                        PIA MERCHANDISING SERVICES, INC.
                                    AS PARENT


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


<PAGE>   2

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----
<S>                                                                           <C>
1.  DEFINITIONS AND CONSTRUCTION................................................1

    1.1  Definitions............................................................1
    1.2  Accounting Terms and Principles.......................................16
    1.3  Code.  ...............................................................16
    1.4  Schedules and Exhibits................................................16

2.  LOAN AND TERMS OF PAYMENT..................................................17

    2.1  Revolving Credit......................................................17
    2.2  Letters of Credit.....................................................19
    2.3  Overadvances..........................................................20
    2.4  Interest; Rates, Payments, and Calculations...........................20

                (a)         Initial Interest Rates.............................20
                (b)         Conditional, Performance-Based Interest Rate.......25
                (c)         Default Rate.......................................26
                (d)         Payments...........................................26
                (e)         Continuation of Interest Charges.  ................26
                (f)         Applicable Interest Limitations.  .................26

    2.5  Collections, Disbursements and Borrowing Availability.  ..............27
    2.6  Statements of Obligations.  ..........................................27
    2.7  Fees.  ...............................................................27

                (a)         Closing Fee.  .....................................28
                (b)         Unused Line Fee.  .................................28
                (c)         Field Examination Fees.  ..........................28

3.  CONDITIONS TO EFFECTIVENESS: TERM OF AGREEMENT.............................28

    3.1  Conditions Precedent to Initial Advance or L/C.  .....................28
    3.2  Conditions Precedent to All Loans and L/Cs.  .........................32
    3.3  Term; Automatic Renewal.  ............................................32
    3.4  Effect of Termination.  ..............................................32
</TABLE>



                                      -i-

<PAGE>   3


<TABLE>
<S>                                                                           <C>
    3.5  Early Termination by Borrowers.  .....................................33
    3.6  Termination Upon Event of Default.  ..................................33

4.  CREATION OF SECURITY
 INTEREST..............................................34

    4.1  Grant of Security Interest.  .........................................34
    4.2  Negotiable Collateral.  ..............................................34
    4.3  Collection of Accounts, General Intangibles, Negotiable Collateral.  .34
    4.4  Delivery of Additional Documentation Required.  ......................34
    4.5  Power of Attorney.  ..................................................35

5.  REPRESENTATIONS AND WARRANTIES.............................................35

    5.1  No Prior Encumbrances.................................................35
    5.2  Eligible Accounts.  ..................................................35
    5.3  Intentionally Deleted.................................................36
    5.4  Location of Inventory and Equipment.  ................................36
    5.5  Inventory Records.  ..................................................36
    5.6  Location of Chief Executive Office.  .................................36
    5.7  Due Authorization and Qualification; Subsidiaries.  ..................36
    5.8  Due Authorization; No Conflict.  .....................................37
    5.9  Litigation.  .........................................................37
    5.10  No Material Adverse Change in Financial Condition.  .................37
    5.11  Solvency.  ..........................................................37
    5.12  ERISA................................................................37
    5.13  Environmental Condition..............................................38
    5.14  Patents, Copyrights and Trademarks.  ................................39
    5.15  Reliance by Lender; Cumulative.  ....................................39
    5.16  Governmental Consent.  ..............................................39
    5.17  Taxes.  .............................................................40
    5.18  Financial Statements.  ..............................................40
    5.19  Full Disclosure.  ...................................................40
    5.20  Guarantees, Contracts, etc...........................................41
    5.21  Government Regulations, etc..........................................41
    5.22  Business Interruptions...............................................42
    5.23  Names.  .............................................................42
    5.24  Other Associations.  ................................................42
    5.25  Regulation O. .......................................................42
    5.26  Capital Stock.  .....................................................42
    5.27  Year 2000 Compliance.................................................43
</TABLE>



                                      -ii-

<PAGE>   4


<TABLE>
<S>                                                                           <C>
    5.28 Financing Statements..................................................43

6.  AFFIRMATIVE COVENANTS......................................................43

    6.1   Accounting System.  .................................................43
    6.2   Collateral Reports.  ................................................44
    6.3   Schedules of Accounts.  .............................................44
    6.4   Financial Statements, Reports, Certificates.  .......................44
    6.5   Tax Returns.  .......................................................45
    6.6   Disputes and Claims. ................................................45
    6.7   Title to Equipment.  ................................................45
    6.8   Maintenance of Equipment.  ..........................................46
    6.9   Taxes.  .............................................................46
    6.10  Insurance............................................................46
    6.11  Lender Expenses.  ...................................................47
    6.12  Financial Covenants.  ...............................................47
    6.13  No Setoffs or Counterclaims.  .......................................49
    6.14  Compliance with Laws, Regulations, Etc...............................49
    6.15  Projections.  .......................................................51
    6.16  Bank Accounts.  .....................................................51
    6.17  Use of Lender's Name.  ..............................................51
    6.18  Miscellaneous Covenants..............................................51
    6.19  Notice of Event of Default...........................................51
    6.20  Notice of Claimed Default.  .........................................52
    6.21  Material Adverse Developments.  .....................................52
    6.22  Corporate Meeting Minutes............................................52
    6.23  Information to Participant...........................................52
    6.24  Year 2000 Compliance.................................................52
    6.25  Additional Landlord Waivers..........................................53
    6.26 Ownership.............................................................53

7.  NEGATIVE COVENANTS.........................................................53

    7.1  Indebtedness.  .......................................................53
    7.2  Liens.  ..............................................................54
    7.3  Restrictions on Fundamental Changes.  ................................54
    7.4  Extraordinary Transactions and Disposal of Assets.....................54
    7.5  Change Name.  ........................................................54
    7.6  Guarantee.  ..........................................................54
    7.7  Restructure.  ........................................................55
</TABLE>



                                      -iii-

<PAGE>   5


<TABLE>
<S>                                                                           <C>
    7.8   Prepayments.  .......................................................55
    7.9   Intentionally Deleted................................................55
    7.10  Intentionally Deleted................................................55
    7.11  Capital Expenditures.  ..............................................55
    7.12  Consignments.  ......................................................55
    7.13  Distributions.  .....................................................55
    7.14  Accounting Methods.  ................................................56
    7.15  Investments.  .......................................................56
    7.16  Transactions with Affiliates.  ......................................56
    7.17  Suspension.  ........................................................56
    7.18  Compliance with ERISA................................................56
    7.19  Permitted Acquisitions...............................................57

8.  EVENTS OF DEFAULT..........................................................58

9.  LENDER'S RIGHTS AND REMEDIES...............................................61

    9.1  Rights and Remedies.  ................................................61
    9.2  Remedies Cumulative.  ................................................63

10. TAXES AND EXPENSES REGARDING THE COLLATERAL................................63

11. WAIVERS; INDEMNIFICATION...................................................64

    11.1  Demand, Protest, etc.  ..............................................64
    11.2  Lender's Liability for Collateral.  .................................64
    11.3  Indemnification; Loss of Margin......................................64

12. NOTICES....................................................................65

13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.................................67

14. DESTRUCTION OF BORROWERS' DOCUMENTS........................................68

15. GENERAL PROVISIONS.........................................................68

    15.1  Effectiveness.  .....................................................68
    15.2  Successors and Assigns.  ............................................68
    15.3  Section Headings.  ..................................................68
    15.4  Interpretation.  ....................................................68
</TABLE>



                                      -iv-

<PAGE>   6


<TABLE>
<S>                                                                           <C>
    15.5   Severability of Provisions.  .......................................69
    15.6   Amendments in Writing.  ............................................69
    15.7   Counterparts; Facsimile Execution.  ................................69
    15.8   Revival and Reinstatement of Obligations. ..........................69
    15.9   Withholding and Other Tax Liabilities.  ............................69
    15.10  Integration.  ......................................................70
    15.11  Publicity.  ........................................................70

16. SURETYSHIP WAIVERS AND CONSENTS............................................70
</TABLE>



                             EXHIBITS AND SCHEDULES

Exhibit 2.1(e) -- Form of Revolving Credit Note

Schedule P-1 -- Permitted Liens

Schedule P-2 -- Permitted Parent Pension Obligations

Schedule 5.4 -- Location of Inventory and Equipment

Schedule 5.9 -- Litigation

Schedule 5.12 -- ERISA

Schedule 5.13 -- Environmental Disclosures

Schedule 5.14 -- Patents, Copyrights and Trademarks

Schedule 5.20 -- Guarantees, Contracts, etc.

Schedule 5.23 -- Names of Borrowers

Schedule 5.24 -- Joint Ventures and Other Associations

Schedule 5.26 -- Capital Stock of Borrower

Exhibit 6.4 -- Form of Chief Financial Officer's Compliance Certificate

Schedule 7.1(b) -- Indebtedness


                                      -v-


<PAGE>   7

            This LOAN AND SECURITY AGREEMENT is entered into as of December 7,
1998 by and among MELLON BANK, N.A. ("Lender"), with a place of business located
at Mellon Bank Center, 1735 Market Street, 6th Floor, Philadelphia, Pennsylvania
19101-7899, PIA MERCHANDISING CO., INC., a California corporation, with its
chief executive office located at 19900 MacArthur Boulevard, Suite 900, Irvine,
California 92612 ("PIA"), and PACIFIC INDOOR DISPLAY CO. dba RETAIL RESOURCES, a
California corporation, with its chief executive office located at 10 Pasteur,
Irvine, California 92612 ("Retail Resources," and collectively with PIA,
"Borrowers"), and PIA MERCHANDISING SERVICES, INC., a Delaware corporation, with
its chief executive office located at 19900 MacArthur Boulevard, Suite 900,
Irvine, California 92612 ("Parent").

                              W I T N E S S E T H:

            WHEREAS, Borrowers and Parent have requested that Lender enter into
certain financing arrangements with Borrowers pursuant to which Lender may make
loans and provide other financial accommodations to Borrowers; and

            WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein.

            NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

            1. DEFINITIONS AND CONSTRUCTION

               1.1 Definitions. All terms used herein which are defined in
Article 1 or Article 9 of the Pennsylvania Uniform Commercial Code shall have
the respective meanings given therein unless otherwise defined in this
Agreement. All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural. All references to Borrowers and
Lender pursuant to the definitions set forth in the recitals hereto, or to any
other person herein, shall include their respective successors and assigns. The
words "hereof", "herein", "hereunder", "this Agreement" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not any particular provision of this Agreement and as this Agreement now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced. The word "including" when used in this Agreement is not limiting
and, unless the context of this Agreement clearly requires otherwise, the word
"or" as used herein has the alternatively conjunctive or disjunctive meaning


                                      -1-

<PAGE>   8

represented by the phrase "and/or". Section, subsection, clause, schedule and
exhibit references are to this Agreement unless otherwise specified. An Event of
Default shall exist or continue or be continuing until such Event of Default is
waived in writing. Any accounting term used herein unless otherwise defined in
this Agreement shall have the meaning customarily given to such term in
accordance with GAAP. For purposes of this Agreement, the following terms shall
have the respective meanings given to them below:

            "Account Debtor" means any person who is or who may become obligated
under, with respect to, or on account of an Account.

            "Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to any
Borrower arising out of the sale or lease of goods or the rendition of services
by any Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor.

            "Agreement" means this Loan and Security Agreement and any
extensions, riders, supplements, notes, amendments, or modifications to or in
connection with this Loan and Security Agreement.

            "Authorized Officer" means any officer of any Borrower.

            "Availability Reserves" means, as of any date of determination, such
amounts as Lender may from time to time establish and revise reducing the amount
of the Revolving Credit Loans and L/Cs which would otherwise be available to
Borrowers under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks which, as determined by Lender,
affect or may affect (i) the Collateral, any other property which is security
for the Obligations, or the value of the Collateral or such other property, (ii)
the assets, business or prospects of any Borrower or Parent or (iii) the
security interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's
belief that any collateral report or financial information furnished by or on
behalf of Borrowers or Parent to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) in respect of any state
of facts which Lender determines constitutes an Event of Default or may, with
notice or passage of time or both, constitute an Event of Default.

            "Average Unused Portion of Maximum Amount" means (a) the Maximum
Amount less (b) the greater of (i) $2,000,000 or (ii) the sum of (A) the average
Daily 


                                      -2-

<PAGE>   9

Balance of the Revolving Credit Loans that were outstanding during the
immediately preceding calendar month and (B) the average Daily Balance of the
undrawn L/Cs issued by Lender under Section 2.2 that were outstanding during the
immediately preceding calendar month.

            "Borrowers" has the meaning set forth in the introduction to this
Agreement.

            "Borrowers' Books" means all books and records of Borrowers or any
Borrower, including: ledgers; records indicating, summarizing, or evidencing any
Borrowers' assets or liabilities, or the Collateral; all information relating to
any Borrower's business operations or financial condition; and all computer
programs, disc or tape files, printouts, runs, or other computer prepared
information, and the equipment containing such information.

            "Borrowing Base" has the meaning set forth in Section 2.1(a).

            "Borrowing Base Certificate" means a certificate signed by an
officer of a Borrower detailing, as of the Closing Date, the amount of such
Borrower's cash or cash equivalent balances, the Eligible Accounts, the L/C's,
the Obligations and other information required by Lender.

            "Business Day" means any day which is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.

            "Capital Expenditure" means any expenditure that would be classified
as a capital expenditure on a consolidated statement of cash flow of Parent and
its Subsidiaries prepared in accordance with GAAP, consistently applied.

            "Capitalized Lease" means any lease of property which, in accordance
with GAAP, should be capitalized on the lessee's balance sheet, or for which the
amount of the assets and liabilities thereunder as if so capitalized should be
disclosed, in accordance with GAAP, in a note to such balance sheets.

            "Cash Collateral Account" has the meaning set forth in Section 2.5.

            "Change of Control" shall be deemed to have occurred at such times
as either (i) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities and Exchange Act of 1934, as amended), other than a
"person" or "group" that is a stockholder as of the date hereof, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities and Exchange
Act of 1934, as amended), directly or 



                                     -3-


<PAGE>   10

indirectly, of more than twenty-five percent (25%) of the total voting power of
all classes of stock then outstanding of Parent normally entitled to vote in
elections of directors, or (ii) Parent's failure to be the beneficial owner,
directly or indirectly, of the total voting power of all classes of stock then
outstanding of each Subsidiary of Parent.

            "Closing Date" means the date of the execution of all Loan Documents
and satisfaction or waiver by Lender of all conditions precedent set forth in
Section 3.

            "Code" means the Pennsylvania Uniform Commercial Code.

            "Collateral" means each of the following: the Accounts; Borrowers'
Books; the Equipment; the General Intangibles; the Inventory; the Negotiable
Collateral; any money or other assets of each Borrower (expressly excluding any
cash or assets held on behalf of or for the benefit of Borrowers' employees in
any 401(k) plan, employee savings plan, employee stock option plan, deferred
compensation plan or similar account) which hereafter come into the possession,
custody, or control of Lender; and the proceeds and products, whether tangible
or intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Borrowers' Books,
Equipment, General Intangibles, Inventory, Negotiable Collateral, money, deposit
accounts, or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of the foregoing, or any portion
thereof or interest therein, and the proceeds thereof.

            "Current Assets" means, at any time, all assets of Parent and its
Subsidiaries that should be classified as current assets on a consolidated
balance sheet of Parent and its Subsidiaries prepared in accordance with GAAP.

            "Current Liabilities" means, at any time, all liabilities of Parent
and its Subsidiaries that should be classified as current liabilities on a
consolidated balance sheet of Parent and its Subsidiaries prepared in accordance
with GAAP, including, without duplication, all Obligations consisting of
Revolving Credit Loans.

            "Daily Balance" means the amount of an Obligation owed at the end of
a given day.

            "Default Pricing Event" has the meaning set forth in Section 2.4(c).

            "Early Termination Premium" has the meaning set forth in Section
3.5.


                                      -4-


<PAGE>   11

            "Eligible Accounts" means those Accounts created by any Borrower in
the ordinary course of business that arise out of such Borrower's sale of goods
or rendition of services, that strictly comply with all of such Borrower's
representations and warranties to Lender as set forth in the Loan Documents, and
that are and at all times shall continue to be acceptable to Lender in all
respects; provided, however, that standards of eligibility may be fixed and
revised from time to time by Lender. Eligible Accounts shall not include the
following:

                        (a) Accounts which the Account Debtor has failed to pay
            within sixty (60) days after invoice date;

                        (b) All Accounts owed by any Account Debtor having
            twenty-five percent (25%) or more of the aggregate amount of the
            Accounts it owes to Borrower outstanding more than sixty (60) days
            after invoice date unless specifically approved by Lender in its
            sole discretion and with the establishment of such reserves as
            Lender may require;

                        (c) Accounts with respect to which the Account Debtor is
            an officer, employee, affiliate, or agent of Parent and its
            Subsidiaries;

                        (d) Accounts with respect to which the Account Debtor is
            not a resident of the United States, and which are not either (1)
            covered by credit insurance in form and amount, and by an insurer
            satisfactory to Lender, or (2) supported by one or more letters of
            credit that are assignable and have been assigned and delivered to
            Lender in an amount and of a tenor, and issued by a financial
            institution, acceptable to Lender;

                        (e) Accounts with respect to which the Account Debtor is
            a foreign government, the United States of America, any State,
            political subdivision, department, agency or instrumentality
            thereof, unless, if the Account Debtor is the United States of
            America, any State, political subdivision, department, agency or
            instrumentality thereof, the Federal Assignment of Claims Act of
            1940, as amended, or any similar State or local law, if applicable,
            has been complied with in a manner satisfactory to Lender;

                        (f) Accounts with respect to which the Account Debtor is
            a Subsidiary of, related to, affiliated with or has common officers
            with any Borrower;


                                      -5-


<PAGE>   12

                        (g) Accounts with respect to which any Borrower is or
            may become liable to the Account Debtor for goods sold or leased or
            for services rendered by the Account Debtor to any Borrower, to the
            extent of such liability; provided, however, that Lender shall have
            a right, in its sole discretion, to establish reserves in such
            amount or hold such portion of said Accounts ineligible;

                        (h) Accounts with respect to which the Account Debtor
            disputes liability or makes any claim with respect thereto, to the
            extent of such dispute; provided, however, that Lender shall have a
            right, in its sole discretion, to establish reserves in such amount
            or hold such portion of said Accounts ineligible, or with respect to
            which the Account Debtor is subject to any Insolvency Proceeding, or
            becomes insolvent, or goes out of business;

                        (i) Accounts the collection of which Lender believes to
            be doubtful by reason of the Account Debtor's financial condition;

                        (j) Accounts with respect to which the Account Debtor's
            total obligations to such Borrower exceed twenty-five percent (25%)
            of all Eligible Accounts relating to such Borrower, to the extent of
            such excess; and

In the event of a dispute over the terms of "Eligible Accounts," Lender's
determination shall govern and apply.

            "Eligible Cash Collateral" means cash pledged to Lender by PIA and
maintained in one or more deposit accounts under the satisfactory control and
dominion of Lender or its designee, but shall expressly exclude (a) the deposit
in the amount of Two Hundred Fifty Thousand Dollars deposit ($250,000)
maintained by PIA in Account No. 4509035582 with Union Bank of California, N.A.,
and (b) the deposit in the amount of Two Million Dollars ($2,000,000) plus
interest thereon presently maintained by PIA in Account No. 870-02172 with ING
Barings Furman Selz LLC.

            "Eligible Corporate Bonds" means bonds or other debentures issued by
a corporation regularly quoted on a national bond exchange, possessing a Moody's
rating of Baa or a Standard & Poor's rating of BBB or higher, held in a
brokerage account maintained by Lender or its designee for PIA in which Lender
has a first priority lien perfected by control or possession, which are not
subject to any other claims or other liens and which meet all other
specifications established by Lender in its sole discretion from time to time.


                                      -6-


<PAGE>   13

            "Eligible Government Treasury Bills" means bonds, bills and notes
issued by the United State of America or any agency thereof, quoted daily in the
Wall Street Journal (or similar publication acceptable to Lender in its
discretion), supported by the full faith and credit of the United States
government, held by Lender or its designee for the benefit of PIA, in which
Lender has a prior perfected, first priority lien, which are not subject to any
other claims or other liens and which meet all other specification established
by Lender in its sole discretion from time to time.

            "Eligible Investment Property" means, collectively, Eligible Cash
Collateral, Eligible Corporate Bonds, Eligible Government Treasury Bills,
Eligible Listed Securities and Eligible Mutual Funds.

            "Eligible Listed Securities" means equity securities registered and
listed for trading on a national exchange in the United States (e.g., NYSE,
AMEX, NASDAQ and OTC), having a $10 per share minimum value, trading at
sufficient volume as determined by Lender in its discretion to ensure ready
marketability under normal market conditions, held in a brokerage account
maintained by Lender or its designee for PIA, in which Lender has a first
priority lien perfected by control or possession, which are not subject to any
other claims or liens and which meet all other specifications established by
Lender in its sole discretion from time to time.

            "Eligible Mutual Funds" means mutual funds listed daily in the Wall
Street Journal (or a similar publication acceptable to Lender in its
discretion), which are not deemed speculative in nature by Lender in its
discretion, which do not invest primarily in foreign securities, held by Lender
or its designee for the benefit of PIA, in which Lender has a prior perfected,
first priority lien, which are not subject to any other claims or liens and
which meet all other specifications established by Lender in its sole discretion
from time to time.

            "Equipment" means all of Borrowers' present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, dies, jigs,
goods (other than consumer goods, farm products, or Inventory), wherever
located, and any interest of Borrower in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.

            "Environmental Laws" means all federal, state, district, local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to any Borrower's business
and facilities (whether or not owned by 


                                     -7-


<PAGE>   14

it), including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contamination, chemicals, or hazardous, toxic or
dangerous substances, materials or wastes into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the generation, manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals, or hazardous, toxic or
dangerous substances, materials or wastes.

            "ERISA" means the United States Employee Retirement Income Security
Act of 1974, as the same now exists or may hereafter from time to time be
amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder and related thereto.

            "ERISA Affiliate" means any person required to be aggregated with
any Borrower or Parent and its Subsidiaries under Sections 414(b), 414(c),
414(m) or 414(o) of the I.R. Code.

            "Event of Default" has the meaning set forth in Section 8.

            "Excess Availability" means the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of: (i) the amount of the
Revolving Credit available to Borrowers as of such time based on the applicable
lending formulas multiplied by the amount of Eligible Accounts and the amount of
Eligible Cash Collateral, as determined by Lender, and subject to the sublimits
and Availability Reserves from time to time established by Lender hereunder, and
(ii) the Maximum Amount, minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Obligations, and (ii) the aggregate amount of all then
outstanding and unpaid trade payables and other current obligations of Borrowers
which are past due as of such time.

            "GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, applied by Parent and its Subsidiaries
in a manner consistent with the most recent audited financial statements of
Parent and its Subsidiaries furnished to Lender under Section 6.4.

            "General Intangibles" means all of each Borrower's present and
future general intangibles and other personal property (including choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreement, infringements, claims, computer
programs, computer discs, computer tapes, literature, 


                                     -8-


<PAGE>   15

reports, catalogs, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims) other than goods, Accounts and Negotiable Collateral.

            "Good Business Day" means any Business Day when banks in
Philadelphia, Pennsylvania, New York, New York and London, England are open for
business.

            "Guarantor" means, collectively and individually, Parent, Borrowers
and each other current and future Subsidiary of Parent, and any other present or
future Person executing a guaranty with respect to the Obligations.

            "Guaranty" means any present or future guaranty made and delivered
to Lender with respect to the Obligations.

            "Hazardous Materials" means any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or, man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes, and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation, any that are or become classified as hazardous or toxic under any
Environmental Law.

            "Indebtedness" means: (a) all obligations of each Borrower for
borrowed money; (b) all obligations of each Borrower evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations of each Borrower in respect of letters of credit, letter of credit
guaranties, bankers acceptances, interest rate swaps, controlled disbursement
accounts, or other financial products; (c) all obligations under capitalized
leases; (d) all obligations or liabilities of others secured by a lien or
security interest on any asset of any Borrower, irrespective of whether such
obligation or liability is assumed; and (e) any obligation of any Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other person.

            "Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the United States Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency law, including assignments for the
benefit of 


                                      -9-


<PAGE>   16

creditors, formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.

            "Inventory" means all present and future inventory in which any
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of each Borrower's present and
future raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing any of the
above.

            "I.R. Code" means the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.

            "Judicial Officer or Assignee" means any trustee, receiver,
controller, custodian, assignee for the benefit of creditors, or any other
person or entity having powers or duties like or similar to the powers and
duties of a trustee, receiver, controller, custodian, or assignee for the
benefit of creditors.

            "L/Cs" has the meaning set forth in Section 2.2(a).

            "Lender" has the meaning set forth in the introduction to this
Agreement.

            "Lender Expenses" means all: costs or expenses (including taxes,
photocopying, notarization, telecommunication and insurance premiums) required
to be paid by any Borrower under any of the Loan Documents that are paid or
advanced by Lender; documentation, filing, recording, publication, appraisal
(including periodic Collateral appraisals), real estate survey, environmental
audit, and search fees assessed, paid, or incurred by Lender in connection with
Lender's transactions with Borrowers; costs and expenses incurred by Lender in
the disbursement of funds to any Borrower (by wire transfer or otherwise);
charges paid or incurred by Lender resulting from the dishonor of checks; costs
and expenses paid or incurred by Lender to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, whether or not a
sale is consummated; costs and expenses paid or incurred by Lender in examining
any Borrower's Books; costs and expenses of third party claims or any other suit
paid or incurred by Lender in enforcing or defending the Loan Documents; and
Lender's reasonable attorneys' fees and expenses incurred in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing (including attorneys' fees and expenses incurred in connection with a
"workout", a "restructuring", or an 


                                      -10-


<PAGE>   17

Insolvency Proceeding concerning any Borrower), defending, or concerning the
Loan Documents, whether or not suit is brought.

            "LIBOR Based Loans" means all Revolving Credit Loans and all other
Obligations (other than contingent reimbursement obligations owing to Lender
under any outstanding L/Cs) bearing interest at the LIBOR Based Rate.

            "LIBOR Based Rate" means the interest rate per annum equal to two
and three-quarters percent (2.75%) in excess of the LIBOR Rate.

            "LIBOR Interest Period" shall have the meaning set forth in
Section 2.4(a)(iv)(B).

            "LIBOR Rate" means the annual rate of interest determined by Lender
as being the rate available to Lender at approximately 11:00 a.m. London time in
the London Interbank Market, as referenced by Reuters Screen "LIBO," in
accordance with the usual practice in such market, for the LIBOR Interest Period
elected by any Borrower, in effect two (2) Good Business Days prior to the
funding date for a requested LIBOR Based Loan for deposits of dollars in amounts
equal (as nearly as may be estimated) to the amount of such LIBOR Based Loan
which shall then be made by Lender to any Borrower as of the time of such
determination, as such rate may be adjusted by the reserve percentage applicable
during the LIBOR Interest Period in effect (or if more than one such percentage
shall be applicable, the daily average of such percentages for those days in
such LIBOR Interest Period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for Lender with respect to liabilities or
assets consisting of or including "Eurocurrency Liabilities" as such term is
defined in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time, having a term equal to such LIBOR Interest
Period (the "Eurocurrency Reserve Requirement"). Such adjustment shall be
effectuated by calculating, and the LIBOR Rate shall be equal to, the quotient
(rounded upward to the nearest 1/16 of 1%) of (i) the offered rate divided by
(ii) one minus the Eurocurrency Reserve Requirement.

            "Loan Documents" means, collectively, this Agreement, the Revolving
Credit Notes, the Lockbox Agreements, any other note or notes executed by any
Borrower or Borrowers to the order of Lender, and Guaranty, and any other
agreement entered into in connection with this Agreement, together with all
alterations, amendments, changes, 


                                      -11-


<PAGE>   18

extensions, modifications, refinancing, refundings, renewals, replacements,
restatements, or supplements, of or to any of the foregoing.

            "Lockbox" has the meaning set forth in Section 2.5.

            "Lockbox Agreements" has the meaning set forth in Section 2.5.

            "Material Adverse Effect" means any material adverse effect on any
Borrower's or Parent's financial condition, assets, operating status or
projected financial condition or any fact or circumstance that singly or in the
aggregate with any other fact or circumstance, has a reasonable likelihood of
resulting in or leading to the inability of such Borrower or Parent to perform
in any material respect its obligations under this Agreement or under any other
Loan Document or the inability of Lender to enforce in any material respect the
rights purported to be granted to Lender under this Agreement or any other Loan
Document or which might have a material adverse effect on the ability of such
Borrower or Parent to effectuate (including hindering or unduly delaying) the
transactions contemplated by this Agreement and the other Loan Documents on the
terms contemplated hereby and thereby.

            "Maximum Amount" has the meaning set forth in Section 2.1(c).

            "Multiemployer Plan" means a "multiemployer plan" as defined in
ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees
of Borrower or any ERISA Affiliate.

            "Negotiable Collateral" means all of each Borrower's present and
future letters of credit, notes, drafts, instruments, certificated and
uncertificated securities, investment property (including, without limitation,
any and all Eligible Investment Property), documents, personal property leases
(wherein such Borrower is the lessor), chattel paper, and such Borrower's Books
relating to any of the foregoing.

            "Net Income" means, in respect of each fiscal year of Parent and its
Subsidiaries, the net annual income after taxes of Parent and its Subsidiaries
as such would appear on a consolidated statement of earnings of Parent and its
Subsidiaries prepared in accordance with GAAP, consistently applied, excluding
any extraordinary gains.

            "Obligations" means the Revolving Credit Loans, all other loans,
advances, debts, principal, interest (including any interest that, but for the
provisions of the United States Bankruptcy Code, would have accrued), contingent
reimbursement 


                                     -12-


<PAGE>   19

obligations owing to Lender under any outstanding L/Cs, premiums (including
Early Termination Premiums), liabilities (including all amounts charged to any
Borrower's loan account pursuant to any agreement authorizing Lender to charge
such Borrower's loan account), obligations, fees, lease payments, guaranties,
covenants, and duties owing, by any Borrower to Lender of any kind and
description (whether pursuant to or evidenced by the Loan Documents, by any
other note or instrument, or by any other agreement between Lender and any
Borrower, and whether or not for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
any Borrower to others that Lender may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Lender Expenses
that any Borrower is required to pay or reimburse by the Loan Documents, by law,
or otherwise.

            "Overadvance" has the meaning set forth in Section 2.3.

            "Parent" means PIA Merchandising Services, Inc., a Delaware
corporation.

            "Parent and its Subsidiaries" means Parent and each of its
Subsidiaries, (including Borrowers) and each Subsidiary of such Subsidiaries.

            "PBGC" means the Pension Benefit Guaranty Corporation.

            "Permitted Acquisitions" has the meaning set forth in Section 7.19
of this Agreement.

            "Permitted Liens" means: (a) liens and security interests held by
Lender; (b) liens for unpaid taxes that are not yet due and payable; (c) liens
and security interests set forth on Schedule P-1 attached hereto; (d) purchase
money security interests and liens of lessors under capitalized leases to the
extent that the acquisition or lease of the underlying asset was permitted under
Section 7.11, and so long as the security interest or lien only secures the
purchase price of the asset; (e) liens on leasehold interests created by the
lessor in favor of any mortgagee of the leased premises; (f) liens for taxes,
assessments, governmental charges, levies or claims that are being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside, but only so long as no levy, foreclosure, or
similar proceedings have been commenced with respect thereto; (g) liens incurred
in the ordinary course of business in connection with worker's compensation,
unemployment insurance or similar legislation; (h) easements, right-of-way,
matters of public record, restrictions and other similar encumbrances on the use
of real property 


                                     -13-


<PAGE>   20

which do not materially interfere with the ordinary conduct of business of any
Borrower as currently conducted; and (i) liens in respect of judgments or awards
for which appeals or proceedings for review are being prosecuted and in respect
of which a stay of execution upon any such appeal or proceeding for review shall
have been secured, provided that adequate reserves for such judgments or awards
have been established, or such judgments or awards are fully insured or been
fully bonded but only so long as no levy or similar proceedings have been
commenced with respect thereto.

            "Permitted Parent Expenditures" means: expenditures which Parent is
obligated to make in the ordinary course of its business of serving as the
holding company for Borrowers, including, without limitation, the following: (i)
payments of Taxes; (ii) payments required by the Securities and Exchange
Commission (e.g. filing fees), the National Association of Securities Dealers or
the Nasdaq Stock Market; (iii) professional fees and expenses for accountants
and attorneys engaged in providing accounting and legal services, respectively,
to Parent for the collective benefit of Parent and its Subsidiaries; (iv)
payments under the Agreement dated as of August 10, 1998 between Parent and
Clinton E. Owens as such Agreement exists as of the Closing Date; (v) payments
under the Employment Agreement dated June 25, 1997 between Parent and Terry
Peets, as amended by Amendment No. 1 to the Employment Agreement dated December
1, 1998, as such Employment Agreement, as amended, exists as of the Closing
Date; (vi) payments under the Amended and Restated Severance Agreement between
Parent and Cathy L. Wood dated December 1, 1998, as such Amended and Restated
Severance Agreement exists as of the Closing Date; (vii) payment of the pension
obligations of Parent as identified more particularly in, and not to exceed the
monthly payment amounts set forth in, Schedule P-2 attached hereto; and (viii)
other fees and expenses in an amount not to exceed $200,000 per year on a
non-cumulative basis.

            "Person" means any individual, sole proprietorship, partnership,
limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
entity, party, or government (whether national, federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).

            "PIA" has the meaning set forth in the introduction to this
Agreement.

            "Plan" means any plan described in ERISA Section 3(2) maintained for
employees of any Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.


                                     -14-


<PAGE>   21

            "Prime Based Loans" means all Revolving Credit Loans and all other
Obligations (other than contingent reimbursement obligations owing to Lender
under any outstanding L/Cs) bearing interest at the Prime Based Rate.

            "Prime Based Rate" means the interest rate per annum equal to
one-quarter percent (.25%) in excess of the Prime Rate.

            "Prime Rate" means the variable rate of interest, per annum, most
recently announced by Lender, or any successor, at its principal office as its
"prime rate", which may be greater or less than other interest rates charged by
Lender to other borrowers and is not necessarily solely based on, dependent upon
or equal to the interest rate that Lender may charge any particular borrower or
class of borrowers.

            "Prohibited Transaction" means any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the I.R. Code which is not exempt by
reason of Section 4975(c)(2) of the I.R. Code.

            "Reportable Event" means a reportable event described in Section
4043 of ERISA or the regulations thereunder, a withdrawal from a Plan described
in Section 4063 of ERISA, or a cessation of operations described in Section
4068(f) of ERISA.

            "Retail Resources" has the meaning set forth in the introduction to
this Agreement.

            "Retail Resources Line" means a maximum amount which may be advanced
against the Eligible Accounts of Retail Resources, which amount shall not at any
time exceed the lesser of (a) One Million Five Hundred Thousand Dollars
($1,500,000) or (b) the amount available under the Total Facility.

            "Revolving Credit" has the meaning set forth in Section 2.1(a).

            "Revolving Credit Loans" means all outstanding cash advances under
the Revolving Credit.

            "Revolving Credit Maturity Date" has the meaning set forth in
Section 2.1(f).

            "Revolving Credit Notes" has the meaning set forth in Section
2.1(e).


                                      -15-


<PAGE>   22

            "Standby L/C's" means standby letters of credit issued for the
account of any Borrower for business purposes of such Borrower and having a
tenor of not more than one (1) year.

            "Subsidiaries" means, as of any date of determination and with
respect to any Person, any corporation, limited liability company, partnership
or joint venture, whether now existing or hereafter organized or acquired: (a)
in the case of a corporation, of which a majority of the securities having
ordinary voting power for the election of directors or other governing body
(other than securities having such power only by reason of the happening of a
contingency) are at the time beneficially owned by such Person and/or one or
more Subsidiaries of such Person, or (b) in the case of a partnership or joint
venture, of which such Person or a Subsidiary of such Person is a general
partner or joint venturer or of which a majority of the partnership or other
ownership interests are at the time beneficially owned by such Person and/or one
or more of its Subsidiaries.

            "Tangible Net Worth" means, at any time, the amount by which all
assets of Parent and its Subsidiaries in the aggregate, excluding intangible
assets, as that term would be defined under GAAP, together with deferred costs,
exceed all of Parent's and its Subsidiaries' liabilities, as would be shown on a
consolidated balance sheet of Parent and its Subsidiaries prepared as of such
date in accordance with GAAP.

            "Tax" and "Taxes" means any tax, including, without limitation, any
income, gross receipts, sales, use, an valorem, transfer, franchise,
withholding, payroll, employment, excise, occupation, premium or property tax,
together with any interest, any penalties, additions to any such tax or
additional amounts imposed by any governmental body (domestic or foreign).

            "Total Facility" means the aggregate principal amount of all
outstanding Revolving Credit Loans, which shall not, at any time, exceed the
lesser of the Maximum Amount or the Borrowing Base.

            "Voidable Transfer" has the meaning set forth in Section 15.8.

            "Working Capital" means, at any time, the amount by which the
Current Assets of Parent and its Subsidiaries exceed the Current Liabilities of
Parent and its Subsidiaries, as would be shown on a consolidated balance sheet
of Parent and its Subsidiaries prepared as of such date in accordance with GAAP.


                                     -16-


<PAGE>   23

               1.2 Accounting Terms and Principles. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. Where the character or amount or any asset or liability or
item of income or expense is required to be determined or any consolidation or
other accounting computation is required to be made for the purposes of this
Agreement, this shall be done in accordance with GAAP, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Agreement.

               1.3 Code. Any terms used in this Agreement which are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.

               1.4 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.

            2. LOAN AND TERMS OF PAYMENT

               2.1 Revolving Credit.

                        (a) Subject to the terms and conditions of this
            Agreement, Lender hereby establishes for the benefit of Borrowers a
            revolving credit facility ("Revolving Credit") which shall include
            advances extended by Lender to or for the benefit of Borrowers from
            time to time hereunder. The aggregate principal amount of all
            outstanding Revolving Credit Loans shall not, at any time, exceed
            the lesser of the Maximum Amount or the Borrowing Base ("Total
            Facility"). Subject to such limitation, the outstanding balance
            under the Revolving Credit may fluctuate from time to time; the
            Revolving Credit will be reduced by repayments made by any Borrower
            and increased by future advances which may be made by Lender to or
            for the benefit of any Borrower. For the purposes of this Agreement,
            any determination as to whether there is availability within the
            Borrowing Base for advances shall be determined by Lender in its
            sole discretion and shall be final and binding upon Borrowers.
            Subject to availability under the Borrowing Base, the fulfillment of
            any other conditions to borrowing contained in this Agreement and
            the absence of an Event of Default or any event which with the
            giving of notice or passage of time or both would become an Event of
            Default, Borrowers may borrow, repay and reborrow under the
            Revolving Credit from time to time during the term of this
            Agreement. Lender shall have the right from time to time to
            establish reserves against the Borrowing Base in such amounts and
            with respect to such matters as Lender in 


                                     -17-


<PAGE>   24

            its sole discretion deems appropriate. For the purposes of this
            Agreement, "Borrowing Base" shall mean the sum of:

                                    (i) an amount equal to eighty percent (80%)
                        of the amount of Eligible Accounts of PIA; plus

                                    (ii) an amount equal to eighty percent (80%)
                        of the amount of Eligible Accounts of Retail Resources,
                        not to exceed the Retail Resources Line; plus

                                    (iii) an amount equal to one hundred percent
                        (100%) of the amount of Eligible Cash Collateral; plus

                                    (iv) an amount equal to ninety percent (90%)
                        of the value, as reasonably determined by Lender from
                        time to time, of PIA's Eligible Government Treasury
                        Bills; plus

                                    (v) an amount equal to eighty percent (80%)
                        of the value, as reasonably determined by Lender from
                        time to time, of PIA's Eligible Corporate Bonds; plus

                                    (vi) an amount equal to seventy percent
                        (70%) of the value, as reasonably determined by Lender
                        from time to time, of PIA's Eligible Listed Securities;
                        plus

                                    (vii) an amount equal to fifty percent (50%)
                        of the value, as reasonably determined by Lender from
                        time to time, of PIA's Eligible Mutual Funds; less

                                    (viii) any Availability Reserves; and less

                                    (ix) outstanding L/C's.

                        (b) Lender may, in its sole discretion, from time to
            time, among other permissible discretionary actions that Lender may
            take with respect to the Revolving Credit, reduce the lending
            formula with respect to Eligible Accounts, among other permissible
            reasons, to the extent that Lender determines that: (A) the dilution
            with respect to the Accounts for any period (based on the ratio of
            (i) the aggregate amount of reductions in Accounts other than as a
            result of payments in cash to (ii) the aggregate amount of total
            sales) 


                                      -18-


<PAGE>   25

            exceeds five percent (5%), in which case Lender may reduce the
            advance rate applicable to Eligible Accounts by one percent (1%) for
            each percent of such dilution in excess of five percent (5%), or (B)
            the general creditworthiness of account debtors has declined. In
            determining whether to reduce the lending formula with respect to
            Eligible Accounts, Lender may consider, among other factors, events,
            conditions, contingencies or risks which are also considered in
            determining Eligible Accounts or in establishing Availability
            Reserves.

                        (c) Lender shall have no obligation to make Revolving
            Credit Loans hereunder to the extent they would cause the aggregate
            outstanding Obligations of Borrowers under this Section 2.1 and
            under Section 2.2 to exceed Twenty Million Dollars ($20,000,000)
            (the "Maximum Amount").

                        (d) Lender is authorized to make Revolving Credit Loans
            under this Agreement based upon telephonic or other instructions
            received from anyone purporting to be an Authorized Officer of any
            Borrower or, without instructions, if pursuant to Section 2.4(d).
            Each Borrower agrees to establish and maintain all operating
            accounts with Lender for the purpose of receiving the proceeds of
            the Revolving Credit Loans requested by such Borrower and made by
            Lender hereunder. Unless otherwise agreed by Lender and Borrowers in
            writing, any Revolving Credit Loan requested by any Borrower and
            made by Lender hereunder shall be made to one of such operating
            accounts. The proceeds of the Revolving Credit Loans made under this
            Section 2.1 shall be used by each Borrower, consistent with this
            Agreement, for each Borrower's general working capital purposes and,
            with respect to PIA, for Permitted Acquisitions.

                        (e) Upon the Closing Date, each Borrower shall execute
            and deliver a promissory note to Lender in the form of Exhibit 2.1
            (e) attached hereto (the "Revolving Credit Notes") to evidence such
            Borrower's unconditional obligation to repay Lender for all advances
            made under the Revolving Credit, with interest as herein and therein
            provided. Each advance under the Revolving Credit shall be deemed
            evidenced by the Revolving Credit Note, which is deemed incorporated
            herein by reference and made a part hereof.

                        (f) Subject to the terms of Section 3.3, the term of the
            Revolving Credit shall expire on the third (3rd) anniversary of the
            date of this Agreement (the "Revolving Credit Maturity Date"), on
            which date all of the outstanding Revolving Credit Loans and other
            Obligations of every kind whatsoever, unless having been sooner
            accelerated pursuant to the terms hereof, 


                                     -19-


<PAGE>   26

            shall be due and payable in full, and as of and after which date no
            further advances or extensions of credit shall be available from
            Lender.

               2.2 Letters of Credit.

                        (a) Subject to the terms and conditions of this
            Agreement, Lender agrees to issue Standby L/C's for the account of a
            Borrower (each, an "L/C") in an aggregate face amount not to exceed
            the lesser of: (i) the Borrowing Base less the amount of outstanding
            Revolving Credit Loans; or (ii) Two Million Dollars ($2,000,000).
            Each L/C shall have an expiration date no later than sixty (60) days
            prior to the date on which this Agreement is scheduled to terminate
            under Section 3.3 hereof and all L/Cs shall be in form and substance
            acceptable to Lender in its sole discretion. Lender shall not have
            any obligation to issue L/Cs to the extent that the face amount of
            all outstanding L/Cs plus the aggregate amount of the Revolving
            Credit Loans outstanding pursuant to Section 2.1 would exceed the
            Maximum Amount. The L/Cs issued under this Section 2.2 shall be used
            by the account party Borrower, consistent with this Agreement, for
            its general working capital purposes. If Lender is obligated to
            advance funds under an L/C, the amount so advanced immediately shall
            be deemed to be a Revolving Credit Loan made by Lender to the
            account party Borrower pursuant to Section 2.1 and, thereafter,
            shall bear interest at the rate then applicable under Section 2.4.

                        (b) Each Borrower hereby agrees to indemnify, save,
            defend and hold Lender harmless from any loss, cost, expense, or
            liability, including payments made by Lender, expenses, and
            attorneys' fees incurred by Lender arising out of or in connection
            with any L/Cs. Each Borrower agrees to be bound by Lender's
            interpretation of any L/C issued by Lender to or for Borrowers'
            account, even though this interpretation may be different from such
            Borrower's own, and each Borrower understands and agrees that Lender
            shall not be liable for any error, negligence, or mistake, whether
            of omission or commission, in following any Borrower's instructions
            or those contained in the L/Cs or any modifications, amendments, or
            supplements thereto.

                        (c) Borrowers will pay Lender upon the issuance of each
            Standby L/C a fee equal to two percent (2.0%) per annum times the
            face amount of such L/C. Service and other standard Lender charges,
            commissions, fees and costs relating to L/Cs may be charged to
            Borrowers' loan account at the time the service is rendered or the
            cost is incurred.


                                      -20-


<PAGE>   27

                        (d) Immediately upon the termination of this Agreement,
            Borrowers agree either: (i) to provide cash collateral to be held by
            Lender in an amount equal to the maximum amount of Lender's
            obligations under all L/Cs, or (ii) to cause to be delivered to
            Lender releases of all of Lender's obligations under all outstanding
            L/Cs, including the return to Lender of all original, canceled L/Cs.
            At Lender's discretion, any proceeds of Collateral received by
            Lender may be held as the cash collateral required by this Section
            2.2(d).

               2.3 Overadvances. If, at any time or for any reason, the amount
of Obligations owed by Borrowers to Lender pursuant to Sections 2.1 and 2.2 is
greater than either the dollar or percentage limitations set forth in Sections
2.1 or 2.2 (an "Overadvance"), Borrowers immediately shall pay to Lender, in
cash, the amount of such excess.

               2.4 Interest; Rates, Payments, and Calculations.

                        (a) Initial Interest Rates. All Revolving Credit Loans
            shall bear interest, at the applicable Borrower's option, at either
            the LIBOR Based Rate or the Prime Based Rate as set forth below.

                                    (i) Prime Based Rate. Subject to the terms
                        and conditions set forth below and unless subject to the
                        LIBOR Based Rate, all Obligations (other than contingent
                        reimbursement obligations owing to Lender under any
                        outstanding LC/s) shall bear interest at the Prime Based
                        Rate.

                                    (ii) LIBOR Based Rate. Subject to the terms
                        and conditions set forth below and unless subject to the
                        Prime Based Rate, all Obligations (other than contingent
                        reimbursement obligations owing to Lender under any
                        outstanding L/Cs) shall bear interest at the LIBOR Based
                        Rate.

                                    (iii) Additional Interest Provisions for
                        Prime Based Loans.

                                                (A) The interest rate charged on
                                    Prime Based Loans shall change on the same
                                    day as Lender's Prime Rate may change from
                                    time to time.


                                      -21-


<PAGE>   28

                                                (B) Interest on Prime Based
                                    Loans shall be due and payable monthly, in
                                    arrears, on the first day of each calendar
                                    month, and shall be calculated on the basis
                                    of a 360-day year for the actual number of
                                    days elapsed, based upon the greater of Two
                                    Million Dollars ($2,000,000) or the actual
                                    average monthly balance of the Obligations
                                    (other than contingent reimbursement
                                    obligations owing to Lender under any
                                    outstanding L/Cs).

                                    (iv) Additional Interest Provisions for
                        LIBOR Based Loans.

                                                (A) Each LIBOR Based Loan must
                                    be for an integral multiple of One Million
                                    Dollars ($1,000,000), but not less than Two
                                    Million Dollars ($2,000,000). There may be
                                    only three (3) LIBOR Based Loans outstanding
                                    at any one time.

                                                (B) (1) LIBOR Based Loans shall
                                    be selected for a period of either a thirty
                                    (30) day, sixty (60) day, ninety (90) day or
                                    one hundred eighty (180) day duration, as
                                    the applicable Borrower may elect, during
                                    which the LIBOR Based Rate is applicable (a
                                    "LIBOR Interest Period"); provided, however:
                                    (x) if a LIBOR Interest Period would
                                    otherwise end on a day which shall not be a
                                    Good Business Day, such LIBOR Interest
                                    Period shall be extended to the next
                                    succeeding Good Business Day, unless such
                                    Good Business Day falls in another calendar
                                    month, in which case such LIBOR Interest
                                    Period shall end on the immediately
                                    preceding Good Business Day subject to
                                    clause (z) below; (y) interest shall accrue
                                    from and including the first day of each
                                    LIBOR Interest Period, to, but excluding,
                                    the day on which such LIBOR Interest Period
                                    expires; and (z) with respect to any LIBOR
                                    Interest Period which begins on the last
                                    Good Business Day of a calendar month (or on
                                    a day for which there is no numerically
                                    corresponding day in the calendar month at
                                    the end of such LIBOR Interest Period), the
                                    LIBOR Interest Period shall end on the last
                                    Good Business Day of the applicable calendar
                                    month. Interest on a LIBOR Based Loan shall
                                    be due and payable in arrears on the first
                                    day of each calendar month, provided that
                                    all remaining accrued and unpaid interest on
                                    each LIBOR Based Loan must be repaid in full
                                    on the day the applicable LIBOR 


                                      -22-


<PAGE>   29

                                    Interest Period expires. No LIBOR Interest
                                    Period may end after the Revolving Credit
                                    Maturity Date.

                                                (2) Subject to all of the terms
                                    and conditions applicable to a request that
                                    all or a portion of a new Revolving Credit
                                    Loan be a LIBOR Based Loan, the applicable
                                    Borrower may extend a LIBOR Based Loan as of
                                    the last day of its LIBOR Interest Period to
                                    a new LIBOR Based Loan or may convert all or
                                    a portion of the Prime Based Loans to a
                                    LIBOR Based Loan. If the applicable Borrower
                                    fails to notify Lender of the LIBOR Interest
                                    Period for a new, renewed or converted LIBOR
                                    Based Loan at least three (3) Good Business
                                    Days prior to the last day of the then
                                    current LIBOR Interest Period of an
                                    outstanding LIBOR Based Loan, then such
                                    outstanding LIBOR Based Loan shall become a
                                    Prime Based Loan at the end of the current
                                    LIBOR Interest Period for such outstanding
                                    LIBOR Based Loan and shall accrue interest
                                    accordingly.

                                                (C) The LIBOR Rate may be
                                    automatically adjusted by Lender on a
                                    prospective basis to take into account the
                                    additional or increased cost of maintaining
                                    any necessary reserves for Eurodollar
                                    deposits or increased costs due to changes
                                    in applicable law or regulation or the
                                    interpretation thereof occurring subsequent
                                    to the commencement of the then applicable
                                    LIBOR Interest Period, including, but not
                                    limited to, changes in tax laws (except
                                    changes of general applicability in
                                    corporate income tax laws as they affect
                                    financial institutions) and changes in the
                                    reserve requirements imposed by the Board of
                                    Governors of the Federal Reserve System (or
                                    any successor) that increase the cost to
                                    Lender of funding a LIBOR Based Loan. Lender
                                    shall promptly give Borrowers notice of such
                                    a determination and adjustment, which
                                    determination shall be prima facie evidence
                                    of the correctness of the fact and the
                                    amount of such adjustment.

                                                (D) In the event that a Borrower
                                    shall have requested the LIBOR Rate option
                                    and Lender shall have reasonably determined
                                    that Eurodollar deposits equal to the amount
                                    of the principal of the requested LIBOR
                                    Based Loan and for the LIBOR Interest Period
                                    specified are unavailable, impractical or
                                    unlawful, or that the rate based on the
                                    LIBOR Rate 


                                      -23-


<PAGE>   30

                                    will not adequately and fairly reflect the
                                    cost of the LIBOR Based Rate applicable to
                                    the specified LIBOR Interest Period, of
                                    making or maintaining the principal amount
                                    of the requested LIBOR Based Loan specified
                                    by the applicable Borrower during the LIBOR
                                    Interest Period specified, or that by reason
                                    of circumstances affecting Eurodollar
                                    markets, adequate and reasonable means do
                                    not exist for ascertaining the rate based on
                                    the LIBOR Rate applicable to the specified
                                    LIBOR Interest Period, Lender shall promptly
                                    give notice of such determination to the
                                    applicable Borrower that the rate based on
                                    the LIBOR Rate is not available. A
                                    determination by Lender hereunder shall be
                                    prima facie evidence of the correctness of
                                    the fact and amount of such additional costs
                                    or unavailability. Upon such a
                                    determination, (1) the right of any Borrower
                                    to select, convert to, or maintain a LIBOR
                                    Based Loan at the rate based on the LIBOR
                                    Rate shall be suspended until Lender shall
                                    have notified the applicable Borrower that
                                    such conditions shall have ceased to exist,
                                    (2) Lender shall use reasonable efforts to
                                    offer to the applicable Borrower a
                                    replacement index at a rate with a margin
                                    that gives Lender a comparable yield to the
                                    LIBOR Rate option, and (3) the LIBOR Based
                                    Loans subject to the requested LIBOR Rate
                                    option shall accrue interest at the Prime
                                    Based Rate.

                                                (E) In the event that, as a
                                    result of any changes in applicable law or
                                    regulation or the interpretation thereof, it
                                    becomes unlawful for Lender to maintain
                                    Eurodollar liabilities sufficient to fund
                                    any LIBOR Based Loan subject to the LIBOR
                                    Based Rate, then Lender shall immediately
                                    notify Borrowers thereof and Lender's
                                    obligation to make, convert to, or maintain
                                    a LIBOR Based Loan at the LIBOR Based Rate
                                    shall be suspended until such time as Lender
                                    may again cause the LIBOR Based Rate to be
                                    applicable to any LIBOR Based Loans and the
                                    LIBOR Based Loans subject to the LIBOR Based
                                    Rate shall accrue interest at the Prime
                                    Based Rate. Promptly after becoming aware
                                    that it is no longer unlawful for Lender to
                                    maintain such Eurodollar liabilities, Lender
                                    shall notify Borrowers thereof and such
                                    suspension shall cease to exist.

                                                (F) Each Borrower shall
                                    indemnify, defend and hold Lender harmless
                                    against any and all loss, liability, cost or


                                      -24-


<PAGE>   31

                                    expense Lender may sustain or incur as a
                                    consequence of (1) any failure of any
                                    Borrower to obtain, convert or extend any
                                    LIBOR Based Loan after notice thereof has
                                    been given to Lender or (2) any payment,
                                    prepayment (voluntary or otherwise),
                                    termination or conversion of a LIBOR Based
                                    Loan made for any reason on a date other
                                    than the last day of the applicable LIBOR
                                    Interest Period; provided, however, any
                                    Borrower may elect to require that Lender
                                    avoid the incurrence of any loss, liability,
                                    cost or expense pursuant to this clause (2)
                                    by notifying Lender to deposit any such
                                    payment or prepayment by any Borrower in a
                                    non-interest-bearing deposit account with
                                    Lender until the last day of the applicable
                                    LIBOR Interest Period. Borrowers shall pay
                                    to Lender the full amount payable under this
                                    subsection (F) on demand by Lender.

                                                (G) In the event that any
                                    present or future law, rule, regulation,
                                    treaty or official directive or the
                                    interpretation or application thereof by any
                                    central bank, monetary authority or
                                    governmental authority, or the compliance
                                    with any guideline or request of any central
                                    bank, monetary authority or governmental
                                    authority (whether or not having the force
                                    of law) imposes, modifies or deems
                                    applicable any reserve, special deposit, or
                                    other similar requirement with respect to
                                    LIBOR Based Loans, or commitments to make
                                    such loans or advances by Lender, and the
                                    result of any of the foregoing is to
                                    increase the costs of Lender, reduce the
                                    income receivable by or return on equity of
                                    Lender or impose any expense upon Lender
                                    with respect to any LIBOR Based Loans or
                                    commitments to make such loans, Lender shall
                                    so notify Borrowers in writing. Upon notice
                                    from Lender, Borrowers shall pay Lender the
                                    amount of such increase in cost, reduction
                                    in income, reduced return on equity or
                                    capital, or additional expense after
                                    presentation by Lender of a statement
                                    concerning such increase in cost, reduction
                                    in income, reduced return on equity or
                                    capital, or additional expense. Such
                                    statement shall set forth Lender's
                                    calculation of the amount (in determining
                                    such amount, Lender may use any reasonable
                                    averaging and attribution methods), which
                                    statement shall be prima facie evidence of
                                    the correctness of the fact.


                                      -25-


<PAGE>   32

                                    (v) Requests for Loans. All requests by any
                        Borrower for a Prime Based Loan must be made by 1:00
                        p.m., Philadelphia time, on the date such requested
                        Prime Based Loan is to be made. All requests by any
                        Borrower for a LIBOR Based Loan (including renewals of
                        existing LIBOR Based Loans or conversions from a Prime
                        Based Loan), must be made by 1:00 p.m. Philadelphia
                        time, three (3) Good Business Days prior to the date of
                        such requested LIBOR Based Loan or conversion. Lender
                        may require that any Borrower accompany any request for
                        a LIBOR Based Loan or a Prime Based Loan with a written
                        confirmation of such request (including the amount so
                        requested) within one (1) Business Day after the date of
                        such request.

                                    (vi) Limitation on LIBOR Based Loans. Upon
                        the occurrence of an Event of Default, Lender may, in
                        its sole discretion, eliminate the availability of LIBOR
                        Based Loans and convert all outstanding LIBOR Based
                        Loans to Prime Based Loans.

                        (b) Conditional, Performance-Based Interest Rate. The
            LIBOR Based Rate and the Prime Based Rate each shall be subject to a
            one-time reduction of one-eighth of one (1/8) percentage point which
            shall apply if (i) Parent's audited financial statements for any
            fiscal year delivered to Lender pursuant to Section 6.4 hereof
            reflect that Parent and its Subsidiaries had positive Net Income for
            such fiscal year of at least Two Hundred Fifty Thousand Dollars
            ($250,000), (ii) no Event of Default exists and (iii) Borrowers had
            an aggregate average borrowing availability (excluding Eligible
            Investment Property) for the preceding ninety-day period of at least
            Four Million Dollars ($4,000,000).

                        (c) Default Rate. All Obligations (other than contingent
            reimbursement obligations owing to Lender under any outstanding
            L/Cs) shall bear interest at a rate equal to two (2) percentage
            points above the interest rate applicable to the respective
            Obligations from and after the occurrence and during the continuance
            of either of the following events (collectively, the "Default
            Pricing Events"): (i) an Event of Default; or (ii) an Overadvance.
            From and after the occurrence and during the continuance of a
            Default Pricing Event, the respective L/C fees provided in Section
            2.2(c) each shall be increased by two percent (2%) per annum. A
            Default Pricing Event shall no longer be continuing from and after
            such time as (x) the Event of Default has been cured by Borrowers or
            waived by Lender or this Agreement has been amended to eliminate
            such Event of Default, in the case of a Default Pricing Event


                                      -26-


<PAGE>   33

            described in clause (i) of the first sentence of this Section
            2.4(c), or (y) the Overadvance has been eliminated, in the case of a
            Default Pricing Event described in clause (ii) of this Section
            2.4(c).

                        (d) Payments. Each Borrower hereby authorizes Lender, at
            its option, to charge all interest payable hereunder, all Lender
            Expenses and all fees payable under Section 2.7 hereof to Borrowers'
            Revolving Credit loan account, which amounts shall thereafter accrue
            interest at the rate then applicable hereunder. Any interest not
            paid when due shall be compounded by becoming a part of the
            Obligations, and such interest shall thereafter accrue interest at
            the rate then applicable hereunder.

                        (e) Continuation of Interest Charges. All contractual
            rates of interest chargeable on outstanding Revolving Credit Loans,
            regardless of the rate option, shall continue to accrue and be paid
            even after default, maturity, acceleration, judgment, bankruptcy,
            insolvency proceedings of any kind or the happening of any event or
            occurrences similar or dissimilar.

                        (f) Applicable Interest Limitations. In no contingency
            or event whatsoever shall the aggregate of all amounts deemed
            interest hereunder and charged or collected pursuant to the terms of
            this Agreement exceed the highest rate permissible under any law
            which a court of competent jurisdiction shall, in a final
            determination, deem applicable hereto. In the event that such court
            determines Lender has charged or received interest hereunder in
            excess of the highest applicable rate, Lender shall in its sole
            discretion, apply and set off such excess interest received by
            Lender against other Obligations due or to become due and such rate
            shall automatically be reduced to the maximum rate permitted by such
            law.

               2.5 Collections, Disbursements and Borrowing Availability. Each
Borrower shall maintain one or more lockbox accounts (each a "Lockbox") with
Lender or another depository institution acceptable to Lender ("Lender's Lockbox
bank") and one or more non-interest bearing depository accounts (each a "Cash
Collateral Account") with Lender or Lender's Lockbox bank subject to the
provisions of this Section 2.5, and shall enter into one or more lockbox
agreements with Lender or one or more tri-party lockbox agreements with Lender
and Lender's Lockbox bank (the "Lockbox Agreements"), and such other agreements
related thereto as Lender may require. All collections of Accounts shall be paid
directly from Account Debtors into Lender's Lockbox from which collected funds
shall be transferred to Lender's Cash Collateral Account, and from which funds
shall be applied by Lender, daily, to reduce 


                                      -27-


<PAGE>   34

the outstanding Obligations under the Revolving Credit with future advances to
be made by Lender under the conditions set forth in this Section 2.5. In the
event that collections of Accounts and proceeds of other Collateral are received
at any time by any Borrower, such collections shall be held in trust for the
benefit of Lender and shall be remitted, in the form received, to Lender for
deposit in the Cash Collateral Account immediately upon receipt by such
Borrower. All funds transferred from the Cash Collateral Account shall, upon
application to any Borrower's Obligations to Lender, reduce the Revolving Credit
loan balance, but for the purpose of calculating interest, shall be subject to a
one (1) Business Day clearance period from the time such funds are transferred
from the Cash Collateral Account. No Borrower shall have a right of access to or
withdrawal from the Lockbox or Lender's Cash Collateral Account. At any time
prior to the occurrence of an Event of Default, if no Revolving Credit Loans are
outstanding, funds received in the Cash Collateral Account shall be transferred
to Borrowers' operating account with Lender. Anything to the contrary contained
herein notwithstanding, any wire transfer, check, or other item of payment
received by Lender after 1:00 p.m. Philadelphia time shall be deemed to have
been received by Lender as of the opening of business on the immediately
following Business Day. All returned or dishonored checks shall be debited from
such Borrower's operating account as of the date of receipt and deemed a
Revolving Credit Loan as of such date.

               2.6 Statements of Obligations. Lender shall render to Borrowers
monthly statements of the Obligations, including principal, interest, fees, and
Lender Expenses owing, and, absent manifest error, such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrowers and Lender unless, within sixty (60) days after receipt
thereof by Borrowers, Borrowers deliver to Lender by registered or certified
mail at its address specified in Section 12, written objection thereto
describing the error or errors contained in any such statements.

               2.7 Fees. Borrowers shall pay to Lender the following fees:

                        (a) Closing Fee. A one-time closing fee of One Hundred
            Thousand Dollars ($100,000). Lender acknowledges prior receipt of
            one-half of such fee from Borrowers in connection with the
            acceptance of Lender's commitment letter dated October 28, 1998
            respecting the financing contemplated hereunder. Borrowers shall pay
            the remaining half of such fee on the first anniversary of the date
            of this Agreement or upon the earlier termination of this Agreement.


                                      -28-


<PAGE>   35

                        (b) Unused Line Fee. On the first Business Day of each
            calendar month during the term of this Agreement, a fee, in respect
            of the Revolving Credit, in an amount equal to the sum of (i)
            three-eighths percent (0.375%) per annum times the first Five
            Million Dollars ($5,000,000) of the Average Unused Portion of the
            Maximum Amount for the immediately preceding month and (ii) one-half
            percent (0.50%) per annum times the remainder of the Average Unused
            Portion of the Maximum Amount for such preceding month.

                        (c) Field Examination Fees. Lender's customary fee of
            Six Hundred Seventy-Five Dollars ($675) per day per examiner, plus
            out-of-pocket expenses for each field examination of Borrowers
            performed by Lender or its agents.

            3. CONDITIONS TO EFFECTIVENESS: TERM OF AGREEMENT

               3.1 Conditions Precedent to Initial Advance or L/C. The
obligation of Lender to make the initial Revolving Credit Loan or provide the
initial L/C hereunder is subject to the fulfillment, to the satisfaction of
Lender and its counsel, of each of the following conditions on or before the
Closing Date.

                        (a) the Closing Date shall occur on or before December
            11, 1998;

                        (b) Lender shall have received UCC search reports
            reflecting the filing of its UCC-1 Financing Statements with the
            California Secretary of State's Office, and with such other filing
            offices as Lender may deem necessary or advisable, and indicating
            that Lender has a first priority security interest in all of the
            Collateral consisting of personal property;

                        (c) Lender shall have received copies of each Borrower's
            and Parent's Articles of Incorporation and By-laws, as amended,
            modified, or supplemented to the Closing Date, certified by the
            Secretary of such Borrower or Parent;

                        (d) Lender shall have received a certificate of
            corporate status with respect to each Borrower and Parent, dated
            within ten (10) days of the Closing Date, issued by the Secretary of
            State of the state of incorporation of such Borrower and Parent,
            which certificate shall indicate that such Borrower and Parent is in
            good standing in such state;


                                      -29-


<PAGE>   36

                        (e) Lender shall have received a certificate from the
            Secretary of each Borrower and Parent attesting to the resolutions
            of each Borrower's and Parent's Board of Directors authorizing such
            Borrower's or Parent's execution and delivery of this Agreement and
            the other Loan Documents to which such Borrower or Parent is a party
            and authorizing specific officers of such Borrower and Parent to
            execute such documents;

                        (f) Lender shall have received certificates of corporate
            status with respect to each Borrower and Parent, each dated within
            ten (10) days of the Closing Date, such certificates to be issued by
            the Secretary of State of the states in which such Borrower's or
            Parent's failure to be duly qualified or licensed as a foreign
            corporation would have a material adverse effect on the financial
            condition or assets of such Borrower or Parent, which certificates
            shall indicate that such Borrower or Parent is in good standing as a
            foreign corporation in such states;

                        (g) Lender shall have received the insurance
            certificates and certified copies of policies required by Section
            6.10 hereof, along with a 438BFU lender's loss payable endorsement,
            all in form and substance satisfactory to Lender and its counsel;

                        (h) Lender shall have received each of the following
            documents, duly executed, and each such document shall be in full
            force and effect:

                                    (1) this Agreement;

                                    (2) the Lockbox Agreement (and Borrowers'
                        main operating deposit account shall have been
                        established with Lender);

                                    (3) the Revolving Credit Note executed by
                        PIA;

                                    (4) the Revolving Credit Note executed by
                        Retail Resources;

                                    (5) the Guaranty executed by Parent;

                                    (6) the Guaranty executed by PIA;


                                      -30-


<PAGE>   37

                                    (7) the Guaranty executed by Retail
                        Resources;

                                    (8) the Guaranty executed by Pivotal Sales
                        Company, Inc.;

                                    (9) the Guaranty executed by PIA
                        Merchandising, Ltd. and

                                    (10) such control agreements, pledge
                        agreements, security agreements or other agreements as
                        Lender may require to create or perfect its security
                        interest in the Eligible Investment Property.

                        (i) Lender shall have received a landlord waiver from
            the lessor of PIA's and Parent's facility located at 19900 MacArthur
            Boulevard, Suite 900, Irvine, California 92612;

                        (j) Lender shall have received an opinion of counsel to
            Borrowers and each Guarantor in form and substance satisfactory to
            Lender and its counsel in their sole discretion;

                        (k) the Excess Availability as determined by Lender, as
            of the Closing Date, shall be not less than Four Million Dollars
            ($4,000,000) after giving effect to the initial Revolving Credit
            Loan made or to be made and L/Cs issued or to be issued and to all
            Lender Expenses incurred in connection with the initial transactions
            hereunder, and excluding cash and cash equivalents;

                        (l) Borrowers shall have aggregate cash and cash
            equivalents of not less than Seven Million Five Hundred Thousand
            Dollars ($7,500,000);

                        (m) Lender shall have received such financial
            statements, reports, certifications and other operational
            information required to be delivered hereunder, including, without
            limitation, an initial Borrowing Base Certificate calculating the
            Borrowing Base;

                        (n) Lender shall have received a certification by an
            officer of each Borrower that (i) there has not occurred any
            material adverse change in the operations, condition (financial or
            otherwise) or business prospects of such Borrower from the
            information presented to Lender on Parent and its Subsidiaries'
            financial statements dated June 30, 1998 and projected through
            December 31, 2001; (ii) all representations and warranties of such
            Borrower 


                                      -31-


<PAGE>   38

            contained herein are true and correct as of the Closing Date; (iii)
            no Event of Default, or event which, with the giving of notice or
            the passage of time or both, would constitute an Event of Default,
            has occurred; and (iv) all of the other conditions specified in
            Section 3 of this Agreement have been fulfilled;

                        (o) Lender shall have received payment by Borrowers of
            all fees required to be paid to Lender prior to the Closing Date and
            of all Lender Expenses associated with the Revolving Credit Loans
            incurred prior to the Closing Date;

                        (p) Lender shall have conducted and been satisfied with
            the results of its "take-over" field examination;

                        (q) Lender shall have received satisfactory reference
            checks with respect to each Borrower, Parent and their management;

                        (r) Lender shall have received and been satisfied with
            its review of (i) the audited financial statements for Parent and
            its Subsidiaries' fiscal year ended on December 31, 1997, which
            audited financial statements shall have been prepared by an
            accounting firm acceptable to Lender, and (ii) Parent and its
            Subsidiaries' most recent consolidated projections, which shall have
            included balance sheets, profit and loss statements, cash receipts
            and disbursements and borrowing availability prepared on a monthly
            basis, and the foregoing items shall not have revealed the
            occurrence of any material adverse change in the financial condition
            of such Borrower;

                        (s) Lender shall have received satisfactory consolidated
            projections for Parent's and its Subsidiaries' 1999 fiscal year of
            the type described in Section 6.15; and

                        (t) all other documents and legal matters in connection
            with the transactions contemplated by this Agreement shall have been
            delivered or executed or recorded and shall be in form and substance
            satisfactory to Lender and its counsel.

               3.2 Conditions Precedent to All Loans and L/Cs. The following
shall be conditions precedent to all Revolving Credit Loans and L/Cs hereunder:

                        (a) the representations and warranties contained in this
            Agreement and the other Loan Documents shall be true and correct in
            all 


                                      -32-


<PAGE>   39

            respects on and as of the date of such Revolving Credit Loan or L/C,
            as though made on and as of such date (except to the extent that
            such representations and warranties relate solely to an earlier
            date);

                        (b) no Event of Default or event which with the giving
            of notice or passage of time would constitute an Event of Default
            shall have occurred and be continuing on the date of such Revolving
            Credit Loan or L/C, nor shall either result from the making thereof;
            and

                        (c) no injunction, writ, restraining order, or other
            order of any nature prohibiting, directly or indirectly, the making
            of such Revolving Credit Loan or the issuance of such L/C shall have
            been issued and remain in force by any governmental authority
            against any Borrower, Lender, or any of their affiliates.

               3.3 Term; Automatic Renewal. The term ("Initial Term") of the
Revolving Credit shall expire on the Revolving Credit Maturity Date. On such
date, all of the outstanding Obligations under the Revolving Credit, unless
having been sooner demanded by Lender pursuant to the terms hereof or of the
Revolving Credit Notes, shall be due and payable in full and after which due
date no further advances or extensions of credit shall be available from Lender.
The Revolving Credit shall nonetheless automatically renew for one (1) year from
the expiration of the Initial Term and from year to year thereafter unless (i)
Borrowers or Lender (each in their respective sole discretion) notifies the
other in writing of the termination of the Revolving Credit at least ninety (90)
days prior to the end of the then current term; or (ii) an Event of Default or
event which, with the passage of time or giving of notice, or both, would become
an Event of Default hereunder has occurred and is continuing.

               3.4 Effect of Termination. On the date of termination, all
Obligations (including contingent reimbursement obligations under any
outstanding L/Cs) shall become immediately due and payable without notice or
demand. No termination of this Agreement, however, shall relieve or discharge
any Borrower of such Borrower's duties, Obligations, or covenants hereunder, and
Lender's continuing security interest in the Collateral shall remain in effect
until all Obligations have been fully discharged and Lender's obligation to
provide advances hereunder is terminated. If Borrowers have sent a notice of
termination pursuant to the provisions of Section 3.3, but fail to pay all
Obligations as of the date set forth in such notice, then Lender may, but shall
not be required to, renew this Agreement for an additional term of one (1) year.


                                      -33-


<PAGE>   40

               3.5 Early Termination by Borrowers. Notwithstanding the
provisions of Section 3.3 that allow termination of this Agreement by Borrowers
only on the Revolving Credit Maturity Date and certain anniversaries thereof,
Borrowers (collectively and not separately) have the option, upon ninety (90)
days prior written notice to Lender, to terminate this Agreement by paying to
Lender, in cash, the Obligations, (including any contingent reimbursement
obligations of Lender under any L/Cs), together with a premium (the "Early
Termination Premium") equal to the following percentage of the total committed
credit facilities hereunder (i.e., $20,000,000) at the time of early
termination:


<TABLE>
<CAPTION>
                                             Percentage of Total
     Date of Termination                     Committed Credit Facilities
     -------------------                     ---------------------------
<S>                                          <C>
     1.    Prior to the first                           1.0%
           anniversary of the date of
           this Agreement

     2.    After the first anniversary                  0.50%
           of the date of this
           Agreement
</TABLE>



provided, however, Borrowers shall not be obligated to pay any Early Termination
Premium to Lender in connection with a refinancing of the Obligations by the
Middle Market Banking Department of either Mellon Bank, N.A. or Mellon 1st
Business Bank occurring after the eighteenth (18th) month of the term of this
Agreement; provided, further, however, if any Borrower subsequently terminates
its credit facilities with the Middle Market Banking Department of either Mellon
Bank, N.A. or Mellon 1st Business Bank prior to the Revolving Credit Maturity
Date, Borrowers shall be obligated to pay an Early Termination Premium to the
Middle Market Banking Department of Mellon Bank, N.A. or Mellon 1st Business
Bank, as applicable, in accordance with the premium schedule set forth above.

               3.6 Termination Upon Event of Default. If Lender terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrowers shall pay to Lender upon the effective
date of such termination, a premium in an amount equal to the Early Termination
Premium. The Early Termination Premium shall be presumed to be the amount of
damages sustained by Lender as the result of the early termination, and each
Borrower agrees that it is reasonable under the 


                                      -34-


<PAGE>   41

circumstances currently existing. The Early Termination Premium provided for in
this Section 3.6 shall be deemed included in the Obligations.

            4. CREATION OF SECURITY INTEREST

               4.1 Grant of Security Interest. Each Borrower hereby grants to
Lender a continuing security interest in all currently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by each Borrower of
each of its covenants and duties under the Loan Documents. Lender's security
interest in the Collateral shall attach to all Collateral without further act on
the part of Lender or any Borrower.

               4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, such
Borrower shall, immediately upon the request of Lender, endorse and assign such
Negotiable Collateral to Lender, deliver physical possession of such Negotiable
Collateral to Lender and/or take such action as Lender shall require to permit
Lender to exercise control over intangible Negotiable Collateral.

               4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral. At any time, Lender or Lender's designee may: (a) upon an Event of
Default, notify customers or Account Debtors of any Borrower that the Accounts,
General Intangibles, or Negotiable Collateral have been assigned to Lender or
that Lender has a security interest therein; (b) collect the Accounts, General
Intangibles, and Negotiable Collateral directly and charge the collection costs
and expenses to Borrowers' loan account. Each Borrower agrees that it will hold
in trust for Lender, as Lender's trustee, any cash receipts, checks, and other
items of payment that it receives on account of the Accounts, General
Intangibles, or Negotiable Collateral and immediately will deliver such cash
receipts, checks, and other items of payment to Lender in their original form as
received by such Borrower.

               4.4 Delivery of Additional Documentation Required. Each Borrower
shall execute and deliver to Lender, prior to or concurrently with Borrowers'
execution and delivery of this Agreement and at any time thereafter at the
request of Lender, all financing statements, continuation financing statements,
fixture filings, security agreements, chattel mortgages, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Lender may reasonably request, in form satisfactory to Lender, to
perfect and continue perfected Lender's security interests in 


                                      -35-


<PAGE>   42

the Collateral and in order to fully consummate all of the transactions
contemplated hereby and under the other Loan Documents.

               4.5 Power of Attorney. Each Borrower hereby irrevocably makes,
constitutes, and appoints Lender (and any of Lender's officers, employees, or
agents designated by Lender) as such Borrower's true and lawful attorney, with
power to: (a) sign the name of such Borrower on any of the documents described
in Section 4.4 or on any other similar documents to be executed, recorded, or
filed in order to perfect or continue perfected Lender's security interest in
the Collateral; (b) sign such Borrower's name on any invoice or bill of lading
relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors; (c) send requests for verification of Accounts; (d) endorse such
Borrower's name on any checks, notices, acceptances, money orders, drafts, or
other items of payment or security that may come into Lender's possession; (e)
at any time that an Event of Default has occurred, notify the post office
authorities to change the address for delivery of such Borrower's mail to an
address designated by Lender, to receive and open all mail addressed to such
Borrower, and to retain all mail relating to the Collateral and forward copies
of all returned mail and originals of all other mail to such Borrower; (f) at
any time that an Event of Default has occurred or Lender deems itself insecure,
make, settle, and adjust all claims under such Borrower's policies of insurance
and make all determinations and decisions with respect to such policies of
insurance; and (g) at any time that an Event of Default has occurred or Lender
deems itself insecure, settle and adjust disputes and claims respecting the
Accounts directly with Account Debtors, for amounts and upon terms which Lender
determines to be reasonable, and Lender may cause to be executed and delivered
any documents and releases which Lender determines to be necessary. The
appointment of Lender as such Borrower's attorney, and each and every one of
Lender's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Lenders
obligation to provide advances hereunder is terminated.

            5. REPRESENTATIONS AND WARRANTIES

            Each Borrower represents and warrants to Lender as follows:

               5.1 No Prior Encumbrances. Each Borrower has good and
indefeasible title to the Collateral, free and clear of liens, claims, security
interests, or encumbrances except for Permitted Liens.


                                      -36-


<PAGE>   43

               5.2 Eligible Accounts. The Eligible Accounts are, and at all
times, hereafter shall be, bona fide existing obligations created by the sale
and delivery of Inventory or the rendition of services to Account Debtors in the
ordinary course of such Borrower's business, unconditionally owed to such
Borrower without defenses, disputes, offsets, counterclaims, or rights of return
or cancellation. The property giving rise to such Eligible Accounts has been
delivered to the Account Debtor, or to the Account Debtor's agent for immediate
shipment to and unconditional acceptance by the Account Debtor. No Borrower has,
and at all times hereafter, shall not have, received notice of actual or
imminent bankruptcy, insolvency or of a material adverse change in the financial
condition of any Account Debtor at the time an Account due from such Account
Debtor is created.

               5.3 Intentionally Deleted.

               5.4 Location of Inventory and Equipment. The Inventory and
Equipment are not now and shall not at any time hereafter be stored with a
bailee, warehouseman, or similar party without prior notice to and the written
consent of Lender. Except as provided in the preceding sentence, and except for
laptop computers removed from such locations by employees of Borrowers for use
at home or on travel in the ordinary course of business, Borrowers shall keep
the Inventory and Equipment only at the locations listed on Schedule 5.4 hereto.

               5.5 Inventory Records. Each Borrower now keeps, and hereafter at
all times shall keep, correct and accurate records itemizing and describing the
kind, type, quality, and quantity of the Inventory, and such Borrower's cost
therefor.

               5.6 Location of Chief Executive Office. The chief executive
office of each Borrower is located at the address indicated in the introduction
to this Agreement and each Borrower covenants and agrees that it will not,
without thirty (30) days prior written notification to Lender, relocate such
chief executive office.

               5.7 Due Authorization and Qualification; Subsidiaries. Each
Borrower is and shall at all times hereafter be duly organized and existing and
in good standing under the laws of the State of California and qualified and
licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be so
qualified, except to the extent that the failure to be so qualified would not be
reasonably likely to have a Material Adverse Effect. Schedule 5.7, as such
Schedule hereafter may be amended from time to time to reflect future acquired
or created Subsidiaries, sets forth a complete and correct list of the Parent
and 


                                      -37-


<PAGE>   44

its Subsidiaries, indicating in each case the outstanding capital stock of such
Subsidiary and the holder of such capital stock.

               5.8 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within each Borrower's and Parent's
corporate powers, have been duly authorized, and are not in conflict with nor
constitute a breach of any provision contained in such Borrower's or Parent's
Articles of Incorporation, or By-laws, nor will they constitute an event of
default under any material agreement to which any Borrower or Parent is a party
or by which its assets or properties may be bound.

               5.9 Litigation. Except as disclosed on Schedule 5.9, there are no
actions or proceedings pending by or against any Borrower or Parent or any of
its Subsidiaries before any court or administrative agency and Borrowers do not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving any Borrower or Parent or any of its Subsidiaries or any Guarantor of
the Obligations, except for ongoing collection matters in which a Borrower is
the plaintiff.

               5.10 No Material Adverse Change in Financial Condition. All
financial statements relating to Parent and its Subsidiaries, including any
Borrower that have been or may hereafter be delivered to Lender have been
prepared in accordance with GAAP and fairly present Parent and its Subsidiaries'
consolidated financial condition as of the date thereof and Parent and its
Subsidiaries' consolidated results of operations for the period then ended.
There has not been a material adverse change in the financial condition of
Parent and its Subsidiaries, including any Borrower since the date of the latest
financial statements submitted to Lender on or before the Closing Date.

               5.11 Solvency. Each Borrower's assets at a fair valuation exceed
the amount of all of its debts at a fair valuation, and each Borrower is able to
pay all of its debts (including trade debts and contingent liabilities) as they
become due, and each Borrower has sufficient capital to conduct its business.

               5.12 ERISA.

                        (a) No Borrower has engaged in any transaction in
            connection with which such Borrower or any of its ERISA Affiliates
            could be subject to either a civil penalty assessed pursuant to
            Section 502(i) of ERISA or a tax imposed by Section 4975 of the I.R.
            Code, including any accumulated funding 


                                      -38-


<PAGE>   45

            deficiency described in Section 5.12(c) hereof and any deficiency
            with respect to vested accrued benefits described in Section 5.12(d)
            hereof.

                        (b) No liability to the PBGC has been or is expected by
            any Borrower to be incurred with respect to any employee pension
            benefit plan of any Borrower or any of its ERISA Affiliates. There
            has been no reportable event (within the meaning of Section 4043(b)
            of ERISA) or any other event or condition with respect to any
            employee pension benefit plan of any Borrower or any of its ERISA
            Affiliates which presents a risk of termination of any such plan by
            the PBGC.

                        (c) Full payment has been made of all amounts which any
            Borrower or any of its ERISA Affiliates is required under Section
            302 of ERISA and Section 412 of the I.R. Code to have paid under the
            terms of each employee pension benefit plan as contributions to such
            plan as of the last day of the most recent fiscal year of such plan
            ended prior to the date hereof, and no accumulated funding
            deficiency (as defined in Section 302 of ERISA and Section 412 of
            the I.R. Code), whether or not waived, exists with respect to any
            employee pension benefit plan, including any penalty or tax
            described in Section 5.12(a) hereof and any deficiency with respect
            to vested accrued benefits described in Section 5.12(d) hereof.

                        (d) The current value of all vested accrued benefits
            under all employee pension benefit plans maintained by any Borrower
            that are subject to Title IV of ERISA does not exceed the current
            value of the assets of such plans allocable to such vested accrued
            benefits, including any penalty or tax described in Section 5.12(a)
            hereof and any accumulated funding deficiency described in Section
            5.12(c) hereof. The terms "current value" and "accrued benefit" have
            the meanings specified in ERISA.

                        (e) Except as set forth in Schedule 5.12(e) attached
            hereto, neither any of the Borrowers nor any of the ERISA Affiliates
            is or has ever been obligated to contribute to any "multiemployer
            plan" (as such term is defined in Section 4001(a)(3) of ERISA) that
            is subject to Title IV of ERISA.

               5.13 Environmental Condition.

                        (a) Except as set forth on Schedule 5.13 hereto, no
            Borrower has generated, used, stored, treated, transported,
            manufactured, handled, produced or disposed of any Hazardous
            Materials, on or off its premises 


                                      -39-


<PAGE>   46

            (whether or not owned by it) in any manner which at any time
            violates any applicable Environmental Law or any license, permit,
            certificate, approval or similar authorization thereunder, and the
            operations of each Borrower complies in all material respects with
            all Environmental Laws and all licenses, permits, certificates,
            approvals and similar authorizations thereunder.

                        (b) Except as set forth on Schedule 5.13 hereto, there
            has been no investigation, proceeding, complaint, order, directive,
            claim, citation or notice by any governmental authority or any other
            person nor is any pending or to the best of Borrowers' knowledge
            threatened, with respect to any non-compliance with or violation of
            the requirements of any Environmental Law by any Borrower or the
            release, spill or discharge, threatened or actual, of any Hazardous
            Material or the generation, use, storage, treatment, transportation,
            manufacture, handling, production or disposal of any Hazardous
            Materials or any other environmental, health or safety matter, which
            affects any Borrower or its business, operations or assets or any
            properties at which any Borrower has transported, stored or disposed
            of any Hazardous Materials.

                        (c) No Borrower has material liability (contingent or
            otherwise) in connection with a release, spill or discharge,
            threatened or actual, of any Hazardous Materials or the generation,
            use, storage, treatment, transportation, manufacture, handling,
            production or disposal of any Hazardous Materials.

                        (d) Each Borrower has all licenses, permits,
            certificates, approvals or similar authorizations required to be
            obtained or filed in connection with the operations of such Borrower
            under any Environmental Law and all of such licenses, permits,
            certificates, approvals or similar authorizations are valid and in
            full force and effect.

               5.14 Patents, Copyrights and Trademarks. All of each Borrower's
registered trademarks and copyrights and issued or applied for patents are
listed in Schedule 5.14 hereto, if attached.

               5.15 Reliance by Lender; Cumulative. Each warranty and
representation contained in this Agreement shall be automatically deemed
repeated with each advance or issuance of an L/C and shall be conclusively
presumed to have been relied on by Lender regardless of any investigation made
or information possessed by Lender. The warranties and representations set forth
herein shall be cumulative and in addition to 


                                       40

<PAGE>   47

any and all other warranties and representations that any Borrower shall now or
hereinafter give, or cause to be given, to Lender.

               5.16 Governmental Consent. Neither the nature of any Borrower or
such Borrower's business, assets or properties, nor any relationship between any
Borrower and any third party, nor any circumstance affecting any Borrower in
connection with this Agreement is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of such Borrower in conjunction with the
execution and delivery of this Agreement or the other Loan Documents.

               5.17 Taxes. All tax returns required to be filed by Parent and
its Subsidiaries, including each Borrower in any jurisdiction have in fact been
filed, and all taxes, assessments, fees and other governmental charges upon
Parent and its Subsidiaries, including each Borrower, or upon any of any of
their assets, property, income or franchises, which are due and payable have
been paid, except for those taxes being contested in good faith with due
diligence by appropriate proceedings for which appropriate reserves have been
maintained under GAAP. Parent and Borrowers are not aware of any proposed
additional tax assessment or tax to be assessed against or applicable to Parent
and its Subsidiaries, including any Borrower.

               5.18 Financial Statements. The audited financial statements for
Parent's fiscal year ended December 31, 1997 previously delivered to Lender,
were prepared in accordance with GAAP, and present fairly the financial position
of Parent and its Subsidiaries as of such date and the results of Parent's and
its Subsidiaries' operations for such period. The fiscal year and each fiscal
quarter of Parent and its Subsidiaries is as set forth in Schedule 5.18 attached
hereto. The federal tax identification number of PIA is 95-4001109; the federal
tax identification number of Retail Resources is 95- 4236931; and the federal
tax identification number of Parent is 33-0684451.

               5.19 Full Disclosure. Neither the financial statements referred
to in Section 5.18, nor this Agreement or the other Loan Documents or any
written statement furnished by any Borrower or Parent to Lender in connection
with the negotiation hereof and contained in any financial statements or
documents relating to the Collateral contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein in light of the circumstances when made not misleading. There is no
fact known to any executive officer of any Borrower which such Borrower has not
disclosed to Lender in writing, which materially affects adversely or may
materially affect adversely the assets, 


                                       41

<PAGE>   48

properties, business or financial condition or the ability of such Borrower to
perform under this Agreement.

               5.20 Guarantees, Contracts, etc.

                        (a) No Borrower or Parent owns or holds any equity or
            long term debt investments in, have any outstanding advances to, has
            any outstanding guarantees for the obligations of, or has any
            outstanding borrowings from, any third party except as described in
            Schedule 5.20, attached hereto;

                        (b) No Borrower is a party to any contract or agreement,
            or subject to any charter or other corporate restriction, which
            presently materially and adversely affects its business;

                        (c) Except as otherwise specifically provided in this
            Agreement, no Borrower has agreed or consented to cause or permit
            any of its assets or properties whether now owned or hereafter
            acquired to be subject in the future (upon the happening of a
            contingency or otherwise), to a lien or security interest not
            permitted by this Agreement;

               5.21 Government Regulations, etc.

                        (a) The use of the proceeds of the Loans and Borrowers'
            issuance of the Revolving Credit Notes will not directly or
            indirectly violate or result in a violation of the Securities Act of
            1933 or the Securities Exchange Act of 1934, as amended, or any
            regulations issued pursuant thereto, including, without limitation,
            Regulations U, T and X of the Board of Governors of the Federal
            Reserve System, 12 C.F.R., Chapter II. Except as disclosed to lender
            in connection with any Permitted Acquisition, no Borrower owns or
            intends to carry or purchase any "margin security" within the
            meaning of such Regulations;

                        (b) Each Borrower has obtained all licenses, permits,
            franchises or other authorizations necessary to the ownership of its
            assets and properties and to the conduct of its business, which
            violation or failure to obtain is reasonably likely to materially
            adversely affect the business, assets, properties or financial
            condition of such Borrower or the ability of such Borrower to
            perform under this Agreement;

                        (c) No Borrower is in violation of any applicable
            statute, 


                                       42

<PAGE>   49

            regulation or ordinance of the United States of America, or of any
            state, city, town, municipality, county or of any other
            jurisdiction, or of any agency thereof (including without
            limitation, environmental laws and regulations), which is reasonably
            likely to materially and adversely affect the business, assets,
            properties, or financial condition of such Borrower or the ability
            of such Borrower to perform under this Agreement;

                        (d) Each Borrower and Parent are current with all
            reports and documents required to be filed with any state or federal
            securities commission or similar agency and is in full compliance in
            all material respects with all applicable rules and regulations of
            such commission;

               5.22 Business Interruptions. Within five (5) years prior to the
date hereof, neither the business, assets, properties or operations of any
Borrower have been materially and adversely affected in any way by any casualty,
strike, lockout, combination of workers, order of the United States of America
or any state, or local government, or any political subdivision or agency
thereof, directed against any Borrower. To any Borrower's knowledge, there are
no pending or threatened labor disputes, strikes, lockouts or similar
occurrences or grievances affecting the business being operated by any Borrower;

               5.23 Names. Within five (5) years prior to the Closing Date,
neither any Borrower nor any predecessor into or with which any Borrower has
merged or consolidated, has conducted business under or used any other name
(whether corporate or assumed) except for the names shown on Schedule 5.23
attached hereto. Borrowers are the sole owners of all names listed on such
Schedule 5.23, and any and all business conducted and all invoices issued in
such trade names are such Borrower's sales, business and invoices;

               5.24 Other Associations. Neither Parent nor any Borrower is
engaged in any joint venture or partnership with any third person except as
described on Schedule 5.24 hereto;

               5.25 Regulation O. No director, executive officer or principal
shareholder of any Borrower or of Parent is a director, executive officer or
principal shareholder of Lender. For the purposes hereof, the terms "director"
(when used with reference to Lender), executive officer" and "principal
shareholder" have the respective meanings assigned thereto in Regulation O
issued by the Board of Governors of the Federal Reserve System.


                                       43

<PAGE>   50

               5.26 Capital Stock. As of the date hereof, the authorized and
outstanding capital stock of each Borrower is as set forth on Schedule 5.26
attached hereto. All such capital stock of each Borrower has been duly and
validly authorized and issued and is fully paid and nonassessable and has been
sold and delivered to the holders thereof in compliance with, or under valid
exemption from, all federal and state laws and the rules and regulations of all
regulatory bodies thereto governing the sale and delivery of securities. Except
for the rights, obligations and transactions set forth in Schedule 5.26, as of
the date hereof, there are no subscriptions, warrants, options, calls,
commitments, rights or agreements by which any Borrower is bound relating to the
issuance, transfer, voting or redemption of shares of its capital stock or any
pre-emptive rights held by any person with respect to the shares of capital
stock of such Borrower. Further, as of the date hereof, no Borrower has issued
any securities convertible into or exchangeable for shares of its capital stock
or any options, warrants or other rights to acquire such shares or securities
convertible into or exchangeable for such shares except as set forth on Schedule
5.26.

               5.27 Year 2000 Compliance. Each Borrower and Parent have
performed all acts reasonably necessary to ensure that (a) such Borrower and
Parent and any business in which such Borrower or Parent holds a substantial
interest, and (b) all customers, suppliers and vendors that are material to such
Borrower's business, become Year 2000 Compliant in a timely manner. Such acts
have included, without limitation, performing comprehensive review and
assessment of all of each Borrower's and Parent's systems and adopting a
detailed plan, with itemized budget, for the remediation, monitoring and testing
of such systems. As used herein, the term "Year 2000 Compliant" means, in regard
to any entity, that all software, hardware, firmware, equipment, goods or
systems utilized by or material to the business operations or financial
condition of such entity, will properly perform date sensitive functions before,
during and after the year 2000.

               5.28 Financing Statements. Except for those set forth in Schedule
P-1 attached hereto, no Borrower or Guarantor has executed any Uniform
Commercial Code financing statements.

            6. AFFIRMATIVE COVENANTS

            Each Borrower and Parent, as applicable, covenant and agree that, so
long as any credit hereunder shall be available and until payment in full of the
Obligations, and unless Lender shall otherwise consent in writing, each Borrower
and Parent, as applicable, shall do all of the following:


                                       44

<PAGE>   51

               6.1 Accounting System. Parent and each Borrower at all times
hereafter shall maintain a standard and modern system of accounting in
accordance with GAAP with ledger and account cards or computer tapes, discs,
printouts, and records pertaining to the Collateral which contain information as
from time to time may be requested by Lender. Each Borrower also shall keep
proper books of account showing all sales, claims, and allowances on its
Inventory.

               6.2 Collateral Reports. Each Borrower shall deliver to Lender, no
later than fifteen (15) Business Days after the end of each fiscal month until
January 31, 1999, and thereafter, no later than fifteen (15) calendar days after
the end of each month, a detailed aging, by total, of its Accounts and a summary
aging, by vendor, of all accounts payable. Each Borrower shall deliver to
Lender, at least weekly by the second Business Day of the succeeding week,
reports of collections with respect to its Accounts. Each Borrower also shall
deliver to Lender, no later than seven (7) Business Days after the end of each
month, monthly reports of sales, credit adjustments and all other information
pertaining to current balances with respect to its Accounts, all in a form
satisfactory to Lender. At its option after January 1, 1999, Lender may require
weekly reporting of all of the information respecting the Accounts described in
the immediately preceding sentence. Upon the occurrence of an Event of Default,
original sales invoices evidencing daily sales shall be mailed by each Borrower
to each Account Debtor with a copy to Lender, and, at Lender's direction, the
invoices shall indicate on their face that the Account has been assigned to
Lender and that all payments are to be made directly to Lender.

               6.3 Schedules of Accounts. With such regularity as Lender shall
require, Borrowers shall provide Lender with schedules describing all Accounts.
Lender's failure to request such schedules or any Borrower's failure to execute
and deliver such schedules shall not affect or limit Lender's security interest
or other rights in and to the Accounts.

               6.4 Financial Statements, Reports, Certificates. Parent and
Borrowers agree to deliver to Lender: (a) as soon as available, but in any event
before the last day of the immediately subsequent fiscal month after the end of
each fiscal month during each of Parent's and its Subsidiaries' fiscal years, a
company-prepared consolidated and consolidating balance sheet, income statement
and cash flow statement covering Parent's and its Subsidiaries' consolidated
operations during such period, prepared in accordance with GAAP and compared to
Borrowers' projections and to Parent's and its Subsidiaries' prior fiscal year
on a month-to-date and year-to-date basis; (b) as soon as available, but in any
event within ninety (90) days after the end of each of Parent's and its
Subsidiaries' fiscal years, consolidated and consolidating financial statements
of 


                                       45

<PAGE>   52

Parent and its Subsidiaries for each such fiscal year, audited by a "big five
firm" or such other independent certified public accountants acceptable to
Lender and certified, without any qualifications, by such accountants to have
been prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Lender stating that such accountants do not have
knowledge of the existence of any event or condition constituting an Event of
Default, unless such certification is included within the audited financial
statements. Such audited financial statements shall include a consolidated and
consolidating balance sheet, profit and loss statement, and cash flow statement,
and such accountants' opinion letter and letter to management. Borrowers and
Parent shall issue written instructions to their independent certified public
accountants, authorizing them to communicate with Lender and to release to
Lender whatever financial information concerning any Borrower or Parent and its
Subsidiaries that Lender may request, provided, Lender shall attempt to first
obtain any such information directly from Borrowers and Parent.

            Within thirty (30) days after the end of each fiscal month, each
Borrower and Parent shall deliver to Lender a certificate signed by its chief
financial officer, substantially in the form of Exhibit 6.4 hereto, to the
effect that: (a) all reports, statements, or computer prepared information of
any kind or nature delivered or caused to be delivered to Lender hereunder have
been prepared in accordance with GAAP and fully and fairly present the
consolidated financial condition of Parent and its Subsidiaries; (b) such
Borrower and Parent are in timely compliance with all representations,
warranties, and covenants hereunder (including all of the financial covenants
set forth in Section 6.12, as to which such certificate shall demonstrate such
compliance); and (c) on the date of delivery of such certificate to Lender there
does not exist any condition or event which constitutes an Event of Default.

            Each Borrower and Parent hereby irrevocably authorizes and directs
all auditors, accountants, or other third parties to deliver to Lender, at
Borrowers' expense, copies of such Borrower's and Parent's financial statements,
papers related thereto, and other accounting records of any nature in their
possession, and to disclose to Lender any information they may have regarding
such Borrower's business affairs and financial conditions; provided, Lender
shall attempt to obtain any such information directly from such Borrower or
Parent.

               6.5 Tax Returns. Borrowers and Parent agree to deliver to Lender
copies of each of Parent's consolidated future federal income tax returns, and
any amendments thereto, within thirty (30) days of the filing thereof with the
Internal Revenue Service.


                                       46

<PAGE>   53

               6.6 Disputes and Claims. Each Borrower shall report promptly to
Lender all disputes and claims by such Borrower's Account Debtors involving an
amount in excess of $100,000 individually or $250,000 in the aggregate.

               6.7 Title to Equipment. Upon Lender's request, Borrowers shall
immediately deliver to Lender, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to, any items of
Equipment.

               6.8 Maintenance of Equipment. Each Borrower shall keep and
maintain its Equipment in good operating condition and repair, and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. No Borrower shall permit
any item of Equipment to become a fixture to real estate or an accession to
other property, and the Equipment is now and shall at all times remain personal
property.

               6.9 Taxes. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Parent and
its Subsidiaries or any of their properties have been paid, and shall hereafter
be paid in full, before delinquency or before the expiration of any extension
period. Parent and its Subsidiaries shall make due and timely payment or deposit
of all federal, state, and local taxes, assessments, or contributions required
by law, and will execute and deliver to Lender, on demand, appropriate
certificates attesting to the payment or deposit thereof. Parent and its
Subsidiaries will make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., State disability, and local, state, and federal
income taxes, and will, upon request, furnish Lender with proof satisfactory to
Lender indicating that Parent and its Subsidiaries have made such payments or
deposits.

               6.10 Insurance.

                        (a) Each Borrower, at its expense, shall keep the
            Collateral insured against loss or damage by fire, flood (if
            Borrower's facilities are located in a flood plain), theft,
            explosion, sprinklers, and all other hazards and risks. Each
            Borrower also shall maintain business interruption, public
            liability, product liability and property damage insurance relating
            to such Borrower's ownership and use of the Collateral, as well as
            insurance against larceny, embezzlement, and criminal
            misappropriation.

                        (b) All such policies of insurance shall be in such
            form, with such companies, and in such amounts as may be
            satisfactory to Lender. All 


                                       47

<PAGE>   54

            such policies of insurance (except those of public liability and
            property damage) shall contain a 438BFU lender's loss payable
            endorsement and mortgagee endorsement, or equivalent endorsements in
            a form satisfactory to Lender, showing Lender as sole loss payee
            thereof, and shall contain a waiver of warranties, and shall specify
            that the insurer must give at least ten (10) days prior written
            notice to Lender before canceling its policy for any reason. Each
            Borrower shall deliver to Lender certified copies of such policies
            of insurance and evidence of the payment of all premiums therefor.
            All proceeds payable under any such policy shall be payable to
            Lender to be applied on account of the Obligations.

               6.11 Lender Expenses. Borrowers shall immediately and without
demand reimburse Lender for all sums expended by Lender which constitute Lender
Expenses, and each Borrower hereby authorizes and approves all advances and
payments by Lender for items constituting Lender Expenses.

               6.12 Financial Covenants. Parent and its Subsidiaries shall
comply with each of the following financial covenants:

                        (a) Current Ratio. At all times during the period
            commencing on the Closing Date and ending on December 31, 1998,
            Parent and its Subsidiaries shall maintain a ratio of Current Assets
            to Current Liabilities of not less than 1.8 to 1.0, and at all times
            from and after January 1, 1999, Parent and its Subsidiaries shall
            maintain a ratio of Current Assets to Current Liabilities of not
            less than 2.0 to 1.0;

                        (b) Total Liabilities to Tangible Net Worth Ratio. At
            all times, Parent and its Subsidiaries shall maintain a ratio of
            total liabilities to Tangible Net Worth of not more than 1.0 to 1.0;

                        (c) Net Income. Commencing with Parent's and its
            Subsidiaries' fiscal year ending January 1, 1999, Parent and its
            Subsidiaries shall achieve annual Net Income of not less than the
            correlative amounts set forth below for the fiscal years indicated:


                                       48

<PAGE>   55


<TABLE>
<CAPTION>
            Fiscal Year Ended                       Minimum Net Income
            -----------------                       ------------------
<S>                                                 <C>
            1/1/99                                     ($4,500,000)

            12/31/99                                     ($500,000)

            12/29/00                                    $2,000,000

            12/28/01                                    $2,000,000;
</TABLE>


                        (d) Tangible Net Worth. At all times, Parent and its
            Subsidiaries shall maintain or achieve Tangible Net Worth of not
            less than the correlative amounts set forth below as of the dates
            indicated:


<TABLE>
<CAPTION>
            Date                                  Minimum Tangible Net Worth
            ----                                  --------------------------
<S>                                               <C>        
            1/1/99                                        $13,935,000

            4/2/99                                        $12,435,000

            7/2/99                                        $12,935,000

            10/1/99                                       $13,435,000

            12/31/99                                      $13,435,000

            3/31/00                                       $12,435,000

            6/30/00                                       $11,995,000

            9/29/00                                       $14,435,000

            12/29/00                                      $15,435,000

            3/30/01                                       $14,435,000

            6/29/01                                       $14,435,000

            9/28/01                                       $16,435,000

            12/28/01                                      $17,435,000
</TABLE>



                                       49

<PAGE>   56

            Additionally, at all times, each Borrower shall have a Net Worth not
less than zero.

                        (e) Working Capital. At all times during each of the
            periods indicated below, Parent and its Subsidiaries shall maintain
            or achieve Working Capital of not less than the correlative amounts
            set forth below for such periods:


<TABLE>
<CAPTION>
                  Period                         Minimum Working Capital
                  ------                         -----------------------
<S>                                              <C>        
            Closing Date through
            January 1, 1999                            $ 8,500,000

            Fiscal Year 1999                           $ 9,500,000

            Fiscal Year 2000                           $11,650,000

            Fiscal Year 2001                           $15,575,000.
</TABLE>


                        (f) Book Net Worth of Retail Resources. At all times,
            Retail Resources shall maintain a book net worth of not less than
            negative $880,000.

Lender shall test compliance with each of the foregoing financial covenants on a
quarterly basis (i.e., as of the last day of each fiscal quarter), except for
the Net Income covenant set forth in clause (c) above, as to which covenant
Lender shall test compliance on an annual basis (i.e., for the fiscal years
indicated).

               6.13 No Setoffs or Counterclaims. All payments hereunder and
under the other Loan Documents made by or on behalf of any Borrower shall be
made without setoff or counterclaim and free and clear of, and without deduction
or withholding for or on account of, any federal, State or local taxes.

               6.14 Compliance with Laws, Regulations, Etc.

                        (a) Each Borrower shall, at all times, comply in all
            material respects with all laws, rules, regulations, licenses,
            permits, approvals and orders applicable to it and duly observe all
            requirements of any Federal, State or local governmental authority,
            including, without limitation, the Employee Retirement Security Act
            of 1974, as amended, the Occupational Safety and Hazard Act of 


                                       50

<PAGE>   57

            1970, as amended, the Fair Labor Standards Act of 1938, as amended,
            and all statutes, rules, regulations, orders, permits and
            stipulations relating to environmental pollution and employee health
            and safety, including, without limitation, all of the Environmental
            Laws.

                        (b) Each Borrower shall establish and maintain, at its
            expense, a system to assure and monitor its continued compliance
            with all Environmental Laws in all of its operations, which system
            shall include annual reviews of such compliance by employees or
            agents of such Borrower who are familiar with the requirements of
            the Environmental Laws. Copies of all environmental surveys, audits,
            assessments, feasibility studies and results of remedial
            investigations shall be promptly furnished, or caused to be
            furnished, by each Borrower to Lender. Each Borrower shall take
            prompt and appropriate action to respond to any non-compliance with
            any of the Environmental Laws and shall regularly report to Lender
            on such response.

                        (c) Each Borrower shall give both oral and written
            notice to Lender immediately upon such Borrower's receipt of any
            notice of, or any Borrower's otherwise obtaining knowledge of, (i)
            the occurrence of any event involving the release, spill or
            discharge, threatened or actual, of any Hazardous Material or (ii)
            any investigation, proceeding, complaint, order, directive, claims,
            citation or notice with respect to: (A) any non-compliance with or
            violation of any Environmental Law by any Borrower or (B) the
            release, spill or discharge, threatened or actual, of any Hazardous
            Material or (C) the generation, use, storage, treatment,
            transportation, manufacture, handling, production or disposal of any
            Hazardous Materials or (D) any other environmental, health or safety
            matter which affects any Borrower or its business, operations or
            assets or any properties at which any Borrower transported, stored
            or disposed of any Hazardous Materials.

                        (d) Without limiting the generality of the foregoing,
            whenever Lender reasonably determines that there is non-compliance,
            or any condition which requires any action by or on behalf of any
            Borrower in order to avoid any material non-compliance, with any
            Environmental Law, such Borrower shall, at Lender's request and such
            Borrower's expense: (i) cause an independent environmental engineer
            acceptable to Lender to conduct such tests of the site where such
            Borrower's non-compliance or alleged non-compliance with such
            Environmental Laws has occurred as to such non-compliance and
            prepare and deliver to Lender a report as to such non-compliance
            setting forth the results of such tests, a proposed plan for
            responding to any environmental problems 


                                       51

<PAGE>   58

            described therein, and an estimate of the costs thereof and (ii)
            provide to Lender a supplemental report of such engineer whenever
            the scope of such non-compliance, or such Borrower's response
            thereto or the estimate costs thereof, shall change in any material
            respect.

                        (e) Each Borrower shall indemnify and hold harmless
            Lender, its directors, officers, employees, agents, invitees,
            representatives, successors and assigns, from and against any and
            all losses, claims, damages, liabilities, costs and expenses
            (including attorneys' fees and legal expenses) directly or
            indirectly arising out of or attributable to the use, generation,
            manufacture, reproduction, storage, release, threatened release,
            spill, discharge, disposal or presence of a Hazardous Material,
            including, without limitation, the costs of any required or
            necessary repair, cleanup or other remedial work with respect to any
            property of any Borrower and the preparation and implementation of
            any closure, remedial or other required plans. All representations,
            warranties, covenants and indemnifications in this Section 6.14
            shall survive the payment of the Obligations and the termination or
            non-renewal of this Agreement.

               6.15 Projections. No later than 30 days prior to the end of each
of Parent's and its Subsidiaries' fiscal years, beginning with fiscal year 1999,
each Borrower shall provide to Lender, in form and substance satisfactory to
Lender, projections of the upcoming year's profit and loss, balance sheet, cash
flow and availability, all on a monthly basis. On or before the Closing Date,
each Borrower shall provide to Lender, in form and substance satisfactory to
Lender, projections of fiscal year 1999's profit and loss, balance sheet, cash
flow and availability, all on a quarterly basis.

               6.16 Bank Accounts. Each Borrower shall maintain its main
disbursement deposit account and all of each Borrower's other depository
accounts with Lender.

               6.17 Use of Lender's Name. No Borrower may use Lender's name (or
the name of any of Lender's affiliates) in connection with any of its business
operations. Nothing herein contained is intended to permit or authorize any
Borrower to make any contract on behalf of Lender.


                                       52

<PAGE>   59

               6.18 Miscellaneous Covenants.

                        (a) No Borrower may become or be a party to any contract
            or agreement which impairs any Borrower's ability to perform under
            this Agreement or under any other instrument, agreement or document
            to which any Borrower is a party or by which it is or may be bound;
            and

                        (b) No Borrower or Parent may carry or purchase any
            "margin security" within the meaning of Regulations T, U or X of the
            Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter
            II.

               6.19 Notice of Event of Default. Within two (2) Business Days of
becoming aware of the existence of any condition or event which constitutes an
Event of Default under this Agreement, or which with the passage of time or the
giving of notice, or both, could become an Event of Default hereunder, Borrowers
shall provide Lender with a written notice specifying the nature and period of
existence thereof and what action Borrowers have taken or propose to take with
respect thereto.

               6.20 Notice of Claimed Default. Within two (2) Business Days of
receipt thereof by any Borrower, such Borrower shall provide Lender with a copy
of any notice of default given to such Borrower by any creditor for borrowed
money of such Borrower for an amount in excess of $100,000 individually, or for
all such defaults if such defaults exceed $500,000 in the aggregate during any
fiscal year.

               6.21 Material Adverse Developments. Promptly upon becoming aware
of any development or other information outside the ordinary course of business
and excluding matters of a general economic, financial or political nature which
is reasonably likely to materially and adversely affect the assets, properties,
businesses, prospects, or financial condition of any Borrower, or the
Collateral, or the ability of any Borrower, to perform under this Agreement,
Borrowers shall give to Lender telephonic or telegraphic notice specifying the
nature of such development or information and such anticipated effect. In
addition, such verbal communication shall be confirmed by written notice thereof
transmitted to Lender on the same day such verbal communication is made.

               6.22 Corporate Meeting Minutes. Upon request, Parent and each
Borrower shall provide Lender with a copy of the minutes of each meeting of the
board of directors of such Parent or Borrower.


                                       53

<PAGE>   60

               6.23 Information to Participant. Lender may divulge to any
participant or prospective participant it may obtain in the Obligations, or any
portion thereof, all financial and other information concerning Parent and its
Subsidiaries, and furnish to such participant copies of reports, financial
statements, certificates, and documents obtained under any provision of this
Agreement; provided however that any potential participant agrees to hold in
confidence all confidential information or proprietary information provided to
it by any Borrower or Lender except (a) to the extent that the production of
such information is required pursuant to any statute, ordinance, regulation,
rule or order or any subpoena or any governmental inquiry or by reason of any
bank regulation in connection with any bank examination, and (b) such potential
participant shall not be prohibited from disclosing any such information to any
of its agents, officers, employees, attorneys, accountants, or consultants, who
shall be informed of this provision.

               6.24 Year 2000 Compliance. Each Borrower agrees to perform all
acts reasonably necessary to ensure that (a) such Borrower and any business in
which such Borrower holds a substantial interest, and (b) all customers,
suppliers and vendors that are material to such Borrower's business, become Year
2000 Compliant (as such term is defined in Section 5.27 above) in a timely
manner. Such acts shall include, without limitation, performing a comprehensive
review and assessment of all of such Borrower's systems and adopting a detailed
plan, with itemized budget, for the remediation, monitoring and testing of such
systems. Each Borrower shall, immediately upon Lender's request, provide Lender
such certifications or other evidence of such Borrower's compliance with the
terms of this Section 6.24 as Lender may from time to time require.

               6.25 Additional Landlord Waivers. In addition to obtaining the
landlord waiver for Borrower's Irvine facility required under Section 3.1(i) as
a [CONDITION PRECEDENT] to the effectiveness of this Agreement, Borrowers shall
obtain landlord waivers, each in form and substance acceptable to Lender, from
the lessor of each of seventy-five percent (75%) of the other leased facilities
of Borrowers set forth in Schedule 5.4 by no later than March 31, 1999.

               6.26 Ownership. At all times Parent shall own not less than one
hundred percent (100%) of all issued and outstanding stock of PIA and PIA shall
own not less than one hundred percent of all issued and outstanding stock of
Retail Resources.


                                       54

<PAGE>   61

            7. NEGATIVE COVENANTS

            Each Borrower and Parent, as applicable, covenant and agree that, so
long as any credit hereunder shall be available and until payment in full of the
Obligations, no Borrower or Parent, as applicable, will do any of the following
without Lender's prior written consent:

               7.1 Indebtedness. Borrowers will not create, incur, assume,
permit, guarantee, or otherwise become or remain, directly or indirectly, liable
with respect to any Indebtedness, except:

                        (a)         Indebtedness evidenced by this Agreement;

                        (b)         Indebtedness set forth in Schedule 7.1 (b)
                                    attached hereto;

                        (c)         Indebtedness secured by Permitted Liens; and

                        (d)         refinancings, renewals, or extensions of
                                    Indebtedness permitted under clauses (b) and
                                    (c) of this Section 7.1 (and the continuance
                                    or renewal of any Permitted Liens associated
                                    therewith) so long as: (i) the terms and
                                    conditions of such refinancings, renewals,
                                    or extensions do not materially impair the
                                    prospect of repayment of the Obligations by
                                    any Borrower, (ii) the net cash proceeds of
                                    such refinancings, renewals, or extensions
                                    do not result in an increase in the
                                    aggregate principal amount of the
                                    Indebtedness so refinanced, renewed, or
                                    extended, and (iii) such refinancings,
                                    renewals, refundings, or extensions do not
                                    result in a shortening of the average
                                    weighted maturity of the Indebtedness so
                                    refinanced, renewed, or extended.

               7.2 Liens. Borrowers will not create, incur, assume, or permit to
exist, directly or indirectly, any lien on or with respect to any of its
property or assets, of any kind, whether now owned or hereafter acquired, or any
income or profits therefrom, except for Permitted Liens (including Permitted
Liens that are continued or renewed as permitted under Section 7.1(d)).

               7.3 Restrictions on Fundamental Changes. Except in connection
with a Permitted Acquisition, Borrowers and Parent will not enter into any
merger, 


                                       55

<PAGE>   62

consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its business, property, or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all the assets, stock, or
other evidence of beneficial ownership of any person or entity.

               7.4 Extraordinary Transactions and Disposal of Assets. Except for
Permitted Acquisitions, Borrowers and Parent will not enter into any transaction
not in the ordinary and usual course of such Person's business, including, but
not limited to, the sale, lease, or other disposition of, moving, relocation, or
transfer, whether by sale or otherwise, of any of such Person's assets (other
than sales of Inventory in the ordinary and usual course of such Person's
business as currently conducted), or the making of any advance or loan except in
the ordinary course of business as currently conducted.

               7.5 Change Name. Borrowers and Parent will not change their
names, business structures, or identities, or add any new fictitious names.

               7.6 Guarantee. Except in connection with a Permitted Acquisition,
guarantee or otherwise become in any way liable with respect to the obligations
of any third party except by endorsement of instruments or items of payment for
deposit to the account of any Borrower or which are transmitted or turned over
to Lender.

               7.7 Restructure. Borrowers and Parent will not make any change in
any of their financial structures, the principal nature of their business
operations, or the date of their fiscal year.

               7.8 Prepayments. Borrowers will not prepay any Indebtedness owing
to any third party.

               7.9 Intentionally Deleted.

               7.10 Intentionally Deleted.

               7.11 Capital Expenditures. Parent and its Subsidiaries will not
make any plant or fixed Capital Expenditure, or any commitment therefor, or
purchase or lease any real or personal property or replacement Equipment subject
to a purchase money security interest, trust deed or lease which would cause the
aggregate amount of such 


                                       56

<PAGE>   63

transactions in any fiscal year to exceed the applicable amount for Parent and
its Subsidiaries, on a consolidated basis, for such fiscal year set forth below:


<TABLE>
<CAPTION>
                 Period                    Maximum Capital Expenditures
                 ------                    ----------------------------
<S>                                        <C>        
            Fiscal Year 1998                      $ 1,100,000

            Fiscal Year 1999                      $ 2,500,000

            Fiscal Year 2000                      $ 3,000,000

            Fiscal Year 2001                      $ 2,500,000.
</TABLE>


               7.12 Consignments. Borrowers will not consign any Inventory, sell
any Inventory on bill and hold, sale or return, sale on approval, or other
conditional terms of sale.

               7.13 Distributions. Except to the extent made to fund Permitted
Parent Expenditures, Borrowers will not make any distribution or declare or pay
any distributions (in cash or in stock) on, or purchase, acquire, redeem, or
retire any of any Borrower's capital stock, of any class, whether now or
hereafter outstanding.

               7.14 Accounting Methods. Parent and Borrowers will not modify or
change their method of accounting or enter into, modify, or terminate any
agreement currently existing, or at any time hereafter entered into with any
third party accounting firm or service bureau for the preparation or storage of
Parent's or Borrowers' accounting records without such accounting firm or
service bureau agreeing to provide Lender information regarding the Collateral
or Parent's or Borrower's financial condition. Each Borrower and Parent and its
Subsidiaries waive the right to assert a confidential relationship, if any, it
may have with any accounting firm or service bureau in connection with any
information requested by Lender pursuant to or in accordance with this
Agreement, and agrees that Lender may contact directly any such accounting firm
or service bureau in order to obtain such information.

               7.15 Investments. Parent and Borrowers will not, except in
connection with a Permitted Acquisition or except to the extent made to fund
Permitted Parent Expenditures, directly or indirectly make or own any beneficial
interest in (including stock, partnership interest, or other securities of), or
make any loan (other than loans to 


                                       57

<PAGE>   64

employees of $50,000 individually, not to exceed $250,000 in total at any one
time), advance, or capital contribution to, any corporation, association,
person, or entity.

               7.16 Transactions with Affiliates. Except in connection with
transactions intended to fund Permitted Parent Expenditures, Borrowers will not,
directly or indirectly, enter into or permit to exist any material transaction
with any person or entity controlling, controlled by, or under common control
(whether by contract, ownership of voting securities, or otherwise) with any
Borrower except for transactions that are (i) with any Subsidiary, in the
ordinary course of such Borrower's business, and in accordance with such
Borrower's historical activity, or (ii) in the ordinary course of such
Borrower's business, upon fair and reasonable terms, and that are fully
disclosed to Lender and no less favorable to such Borrower than would be
obtained in arm's length transaction with a non-affiliated person or entity.

               7.17 Suspension. Parent and Borrowers will not suspend or go out
of a substantial portion of their business.

               7.18 Compliance with ERISA. Borrowers and Parent will not:

                        (a) (i) terminate any "employee pension benefit plans"
            maintained by any Borrower or any of its ERISA Affiliates so as to
            incur any liability to the PBGC established pursuant to ERISA, (ii)
            allow or suffer to exist any prohibited transaction involving any of
            such employee pension benefit plans or any trust created thereunder
            which would subject such Borrower or Parent or such ERISA Affiliate
            to a tax or penalty or other liability on prohibited transactions
            imposed under Section 4975 of the I.R. Code or ERISA, (iii) fail to
            pay to any such employee pension benefit plan any contribution which
            it is obligated to pay under Section 302 of ERISA, Section 412 of
            the I.R. Code or the terms of such plan, (iv) allow or suffer to
            exist any accumulated funding deficiency, whether or not waived,
            with respect to any such employee pension benefit plan, (v) allow or
            suffer to exist any occurrence of a reportable event or any other
            event or condition which presents a material risk of termination by
            the PBGC of any such employee pension benefit plan that is a single
            employer plan, which termination could result in any liability to
            the PBGC or (vi) incur any withdrawal liability with respect to any
            multiemployer pension plan.

                        (b) As used in this Section 7.18, the term "employee
            pension benefit plans," "employee benefit plans", "accumulated
            funding deficiency" and "reportable event" shall have the respective
            meanings assigned to them in 


                                       58

<PAGE>   65

            ERISA, and the term "prohibited transaction" shall have the meaning
            assigned to it in Section 4975 of the I.R. Code and ERISA.

               7.19 Permitted Acquisitions. Notwithstanding any contrary
provision of this Agreement, PIA may consummate acquisitions of the assets or
capital stock of other entities for aggregate purchase consideration (including
the stated purchase price, assumption of liabilities of the acquired entity,
non-competition payments, employment agreement payments, and any and all other
related payments which Lender determines constitute part of the purchase
consideration paid or purchase obligations incurred by PIA in connection with an
acquisition) during the term of this Agreement of not more than Five Million
Dollars ($5,000,000), provided that each of the following conditions is met:

                        (i) PIA's and Retail Resource's combined pro forma
            borrowing availability, after giving effect to each such proposed
            acquisition (including all borrowings, collateral availability and
            cash on hand in connection therewith) exceeds Ten Million Dollars
            ($10,000,000);

                        (ii) Lender has completed an acceptable due diligence
            investigation with respect to the target;

                        (iii) all purchase-money indebtedness incurred by PIA to
            the seller shall be subordinated to the repayment of the Obligations
            on terms and conditions acceptable to Lender;

                        (iv) based upon the most recent monthly financial
            statements provided by Parent and its Subsidiaries to Lender
            pursuant to Section 6.4(a) hereof, and the applicable financial
            covenant requirements for the most recent fiscal quarter ended as
            set forth in Section 6.12 hereof, Lender shall have determined that
            Borrowers and Parent are then in compliance with each of the
            financial covenants set forth in Section 6.12 hereof and that Parent
            and its Subsidiaries would remain in compliance with each such
            covenant after giving effect to the proposed acquisition; and

                        (v) both before and after giving effect to the proposed
            acquisition no Event of Default shall exist.


                                       59

<PAGE>   66

                        Acquisitions satisfying all of the foregoing conditions
                        and complying with the foregoing dollar limitation on
                        purchase consideration shall be referred to herein
                        collectively as "Permitted Acquisitions."

            Lender shall increase the aggregate purchase consideration dollar
limitation for Permitted Acquisitions to Ten Million Dollars ($10,000,000) upon
Lender's receipt of audited financial statements for Parent's and its
Subsidiaries' fiscal year ending on January 1, 1999, together with an
unqualified opinion and management letter in form and substance acceptable to
Lender and its counsel, which evidence that all items set forth in the
management letter for such Parent's and its Subsidiaries' 1997 fiscal year have
been resolved satisfactorily. Upon Lender's receipt of the items referred to in
the preceding sentence, the following shall occur: (x) the aggregate dollar
limitation on purchase consideration for Permitted Acquisitions shall increase
to Ten Million Dollars ($10,000,000); (y) conditions (i) through (v) set forth
in the preceding paragraph shall remain in effect; and (z) a limit of Five
Million Dollars ($5,000,000) shall apply to the aggregate purchase consideration
that PIA may expend for any single Permitted Acquisition.

            8. EVENTS OF DEFAULT

            Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:

               8.1 If any Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the United
States Bankruptcy Code, would have accrued on such amounts), fees and charges
due Lender, taxes, reimbursement of Lender Expenses, or other amounts
constituting obligations);

               8.2 If any Borrower or Parent fails or neglects to perform, keep,
or observe any term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between any Borrower or Parent and Lender, and such failure or neglect
is not cured within ten consecutive days of the date on which such Borrower or
Parent first has or should have notice thereof; provided, however, that such
ten-day period shall not apply in the case of: (i) any failure or neglect to
perform, keep or observe any such term, provision, condition, covenant or
agreement that is not capable of being cured at all or within such ten-day
period; (ii) an intentional breach by such Borrower or Parent of any such term,
provision, condition, covenant or agreement; or (iii) any failure or neglect to
provide notice of an Event of Default pursuant to Section 6.19;


                                       60

<PAGE>   67

               8.3 If there is a material impairment of the prospect of
repayment of any portion of the Obligations owing to Lender or a material
impairment of the value or priority of Lender's security interests in the
Collateral;

               8.4 If any material portion of any Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any Judicial Officer or Assignee;

               8.5 If an Insolvency Proceeding is commenced by any Borrower or
Guarantor;

               8.6 If an Insolvency Proceeding is commenced against any Borrower
or Guarantor and such Insolvency Proceeding remains undismissed and unstayed for
a period of sixty (60) days;

               8.7 If any Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;

               8.8 If a notice of lien, levy, or assessment is filed of record
with respect to any of any Borrower's assets by the United States Government, or
any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, upon any of any Borrower's assets and the same is not paid on the
payment date thereof;

               8.9 If a judgment or other claim becomes a lien or encumbrance
upon a material portion of any Borrower's assets;

               8.10 If there is a default in any material agreement to which any
Borrower is a party with one or more third parties resulting in a right by such
third parties, whether or not exercised, to accelerate the maturity of such
Borrower's obligations thereunder;

               8.11 If any Borrower makes any payment on account of Indebtedness
that has been subordinated in right of payment to the payment of the Obligations
except to the extent such payment is allowed under the subordination provisions
applicable to such Indebtedness;


                                       61

<PAGE>   68

               8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Lender
by Parent or any Borrower or any officer, employee, agent, or director of Parent
or any Borrower, or if any such warranty or representation is withdrawn;

               8.13 If a Prohibited Transaction or Reportable Event shall occur
with respect to a Plan which would have a material adverse effect on the
financial condition of any Borrower; if any lien upon the assets of any Borrower
in connection with any Plan shall arise; if any Borrower or any ERISA Affiliate
shall completely or partially withdraw from a Multiemployer Plan or Multiple
Employer Plan of which such Borrower or such ERISA Affiliate was a substantial
employer, and such withdrawal could, in the opinion of Lender, have a material
adverse effect on the financial condition of any Borrower; if any Borrower or
any of its ERISA Affiliates shall fail to make full payment when due of all
amounts which any Borrower or any of its ERISA Affiliates may be required to pay
to any Plan or any Multiemployer Plan as one or more contributions thereto; if
any Borrower or any of its ERISA Affiliates creates or permits the creation of
any accumulated funding deficiency, whether or not waived; or upon the voluntary
or involuntary termination of any Plan which termination could, in the opinion
of Lender, have a material adverse effect on the financial condition of any
Borrower; or any Borrower shall fail to notify Lender promptly and in any event
within ten (10) days of the occurrence of any event that constitutes an Event of
Default under this clause or would constitute such an Event of Default upon the
exercise of Lender's judgment;

               8.14 If any writing, document, aging, certificate or other
evidence of the Accounts or Inventory shall be materially incomplete, incorrect,
or misleading at the time the same is furnished to Lender; and

               8.15 If any Guarantor shall revoke or terminate, or attempt to
revoke or terminate, its Guaranty.

            9. LENDER'S RIGHTS AND REMEDIES

               9.1 Rights and Remedies. Upon the occurrence of an Event of
Default, Lender may, at its election, without notice of its election and without
demand, do any one or more of the following, all of which are authorized by each
Borrower:

                        (a) Declare all Obligations, whether evidenced by this
            Agreement, by any of the other Loan Documents, or otherwise,
            immediately due and payable;


                                       62

<PAGE>   69

                        (b) Cease advancing money or extending credit to or for
            the benefit of any Borrower or Borrowers under this Agreement, under
            any of the other Loan Documents, or under any other agreement
            between any Borrower or Borrowers and Lender;

                        (c) Terminate this Agreement and any of the other Loan
            Documents as to any future liability or obligation of Lender, but
            without affecting Lender's rights and security interests in the
            Collateral and without affecting the Obligations;

                        (d) Settle or adjust disputes and claims directly with
            Account Debtors for amounts and upon terms which Lender considers
            advisable, and in such cases, Lender will credit such Borrower's
            loan account with only the net amounts received by Lender in payment
            of such disputed Accounts after deducting all Lender Expenses
            incurred or expended in connection therewith;

                        (e) Without notice to or demand upon any Borrower or any
            Guarantor, make such payments and do such acts as Lender considers
            necessary or reasonable to protect its security interest in the
            Collateral. Each Borrower agrees to assemble the Collateral if
            Lender so requires, and to make the Collateral available to Lender
            as Lender may designate. Each Borrower authorizes Lender to enter
            the premises where the Collateral is located, to take and maintain
            possession of the Collateral, or any part of it, and to pay,
            purchase, contest, or compromise any encumbrance, charge, or lien
            that in Lender's determination appears to be prior or superior to
            its security interest and to pay all expenses incurred in connection
            therewith; provided, however, that Lender will provide Parent and
            Borrowers reasonable access to Borrowers' books. With respect to any
            of any Borrower's owned premises, such Borrower hereby grants Lender
            a license to enter into possession of such premises and to occupy
            the same, without charge, for up to one hundred twenty (120) days in
            order to exercise any of Lender's rights or remedies provided
            herein, at law, in equity, or otherwise;

                        (f) Without notice to any Borrower (such notice being
            expressly waived), and without constituting a retention of any
            Collateral in satisfaction of an obligation (within the meaning of
            Section 9505 of the Code), set off and apply to the Obligations any
            and all (i) balances and deposits of any Borrower held by or for the
            benefit of Lender (including any amounts received 


                                       63

<PAGE>   70

            at the Lockbox), or (ii) indebtedness at any time owing to or for
            the credit or the account of any Borrower held by Lender;

                        (g) Hold, as cash collateral, any and all balances and
            deposits of any Borrower held by Lender, and any amounts received in
            the Lockbox Accounts, to secure the full and final repayment of all
            of the Obligations;

                        (h) Ship, reclaim, recover, store, finish, maintain,
            repair, prepare for sale, advertise for sale, and sell (in the
            manner provided for herein) the Collateral. Lender is hereby granted
            a license or other right to use, without charge, any Borrower's
            labels, patents, copyrights, rights of use of any name, trade
            secrets, trade names, trademarks, service marks, and advertising
            matter, or any property of a similar nature, as it pertains to the
            Collateral, in completing production of, advertising for sale, and
            selling any Collateral and any Borrower's rights under all licenses
            and all franchise agreements shall inure to Lender's benefit;

                        (i) Sell the Collateral at either a public or private
            sale, or both, by way of one or more contracts or transactions, for
            cash or on terms, in such manner and at such places (including any
            Borrower's premises) as Lender determines is commercially
            reasonable. It is not necessary that the Collateral be present at
            any such sale;

                        (j) Lender shall give notice of the disposition of the
            Collateral as follows:

                                    (1) Lender shall give each Borrower and each
                        holder of a security interest in the Collateral who has
                        filed with Lender a written request for notice, a notice
                        in writing of the time and place of public sale, or, if
                        the sale is a private sale or some other disposition
                        other than a public sale is to be made of the
                        Collateral, then the time on or after which the private
                        sale or other disposition is to be made;

                                    (2) The notice shall be personally delivered
                        or mailed, postage prepaid, to such Borrower as provided
                        in Section 12, at least five (5) calendar days before
                        the date fixed for the sale, or at least five (5)
                        calendar days before the date on or after which the
                        private sale or other disposition is to be made; no
                        notice needs to be given prior to the disposition of any
                        portion of the Collateral that is perishable or
                        threatens to decline speedily in value or is of a type
                        customarily sold on a 


                                       64

<PAGE>   71

                        recognized market. Notice to persons other than such
                        Borrower claiming an interest in the Collateral shall be
                        sent to such addresses as they have furnished to Lender;

                                    (3) If the sale is to be a public sale,
                        Lender also shall give notice of the time and place by
                        publishing a notice one time at least five (5) calendar
                        days before the date of the sale in a newspaper of
                        general circulation in the county in which the sale is
                        to be held;

                        (k) Lender may credit bid and purchase at any public
            sale; and

                        (l) Any deficiency that exists after disposition of the
            Collateral as provided above will be paid immediately by Borrowers.
            Any excess will be returned, without interest and subject to the
            rights of third parties, by Lender to Borrowers.

               9.2 Remedies Cumulative. Lender's rights and remedies under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default shall be deemed a continuing waiver. No delay by Lender
shall constitute a waiver, election, or acquiescence by it.

            10. TAXES AND EXPENSES REGARDING THE COLLATERAL

            If any Borrower fails to pay any monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third persons or entities,
or fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then, to the extent
that Lender determines that such failure by such Borrower could have a material
adverse effect on Lender's interests in the Collateral, in its discretion and
without prior notice to Borrowers, Lender may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves in
such Borrower's loan account as Lender deems necessary to protect Lender from
the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type described in Section 6.10, and take any action with respect
to such policies as Lender deems prudent. Any amounts paid or deposited by
Lender shall constitute Lender Expenses, shall be immediately charged to such
Borrower's loan account and become additional Obligations, shall bear interest
at the then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made 


                                       65

<PAGE>   72

by Lender shall not constitute an agreement by Lender to make similar payments
in the future or a waiver by Lender of any Event of Default under this
Agreement. Lender need not inquire as to, or contest the validity of, any such
expense, tax, security interest, encumbrance, or lien and the receipt of the
usual official notice for the payment thereof shall be conclusive evidence that
the same was validly due and owing.

            11. WAIVERS; INDEMNIFICATION

               11.1 Demand, Protest, etc. Each Borrower and Parent waive demand,
protest, notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Lender on which such Borrower may in
any way be liable.

               11.2 Lender's Liability for Collateral. So long as Lender
complies with its obligations, if any, under Section 9207 of the Code, Lender
shall not in any way or manner be liable or responsible for: (i) the safekeeping
of the Collateral; (ii) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (iii) any diminution in the value thereof; or
(iv) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other person whomsoever. All risk of loss, damage, or destruction of the
Collateral shall be borne by Borrowers.

               11.3 Indemnification; Loss of Margin.

                        (a) Each Borrower agrees to defend and indemnify Lender
            and its officers, employees, and agents and hold Lender harmless
            against: (i) all obligations, demands, claims, and liabilities
            claimed or asserted by any other party; and (ii) all losses
            (including attorneys' fees and disbursements) in any way suffered,
            incurred, or paid by Lender as a result of or in any way arising out
            of, following, or consequential to the transactions with any
            Borrower or Borrowers whether under this Agreement, the other Loan
            Documents or otherwise. This provision shall survive the termination
            of this Agreement.

                        (b) In the event that any present or future law, rule,
            regulation, treaty or official directive or the interpretation or
            application thereof by any central bank, monetary authority or
            governmental authority, or the compliance with any guideline or
            request of any central bank, monetary authority or governmental
            authority (whether or not having the force of law) imposes, modifies
            or deems applicable any deposit insurance, reserve, special deposit,
            or 


                                       66

<PAGE>   73

            other similar requirement with respect to deposits in or for the
            account of, or loans or advances or commitments to make loans or
            advances by, Lender and the result of any of the foregoing is to
            increase the costs of Lender, reduce the income receivable by or
            return on equity of Lender or impose any expense upon Lender with
            respect to any advances or extensions of credit or commitments to
            make advances or extensions of credit under this Agreement, Lender
            shall so notify Borrowers in writing. Upon notice from Lender,
            Borrowers agree to pay Lender the amount of such increase in cost,
            reduction in income, reduced return on equity or capital, or
            additional expense after presentation by Lender of a statement
            concerning such increase in cost, reduction in income, reduced
            return on equity or capital, or additional expense. Such statement
            shall set forth a brief explanation of the amount and Lender's
            calculation of the amount (in determining such amount Lender may use
            any reasonable averaging and attribution methods), which statement
            shall be conclusively deemed correct absent manifest error. In the
            event that a participant in this credit, other than Lender,
            exercises any rights it may have under this Section 11.3(b),
            Borrowers shall have the option to replace such participant with
            another financial institution (acceptable to Lender) who will
            purchase all (but not part) of such participant's pro rata share of
            this credit facility on terms acceptable to Lender. Such participant
            shall be required to assign and transfer to the financial
            institution obtained by Borrowers, pursuant to an agreement
            reasonably satisfactory to such participant and without
            representation, warranty or recourse, its respective pro rata share
            in this credit facility in exchange for full payment of the
            outstanding balance thereof, with accrued interest and unpaid fees.

            12. NOTICES

            Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid telex, TWX, 


                                       67

<PAGE>   74

telefacsimile, or telegram (with messenger delivery specified) to Borrower or to
Lender, as the case may be, at its address set forth below:

            If to Borrowers:   PIA MERCHANDISING CO., INC.
                               19900 MacArthur Boulevard, Suite 900
                               Irvine, California 92612
                               Attention: Ms. Cathy L. Wood
                               Facsimile No.: (949) 474-3570
                               Confirmation No.: (949) 474-3585

                               PACIFIC INDOOR DISPLAY CO.
                               dba RETAIL RESOURCES
                               19900 MacArthur Boulevard, Suite 900
                               Irvine, California 92612
                               Attention: Ms. Cathy L. Wood
                               Facsimile No.: (949) 474-3570
                               Confirmation No.: (949) 474-3585

            If to Parent:      PIA MERCHANDISING SERVICES, INC.
                               19900 MacArthur Boulevard, Suite 900
                               Irvine, California 92612
                               Attention: Ms. Cathy L. Wood
                               Facsimile No.: (949) 474-3570
                               Confirmation No.: (949) 474-3585

            If to Lender:      MELLON BANK, N.A.
                               Mellon Bank Center
                               1735 Market Street, 6th Floor
                               Philadelphia, Pennsylvania 19101-7899
                               Attention: Mr. John M. DePledge
                               Facsimile No.: (215) 553-0201
                               Confirmation No.: (215) 553-2961


            With a copy to:    SHEPPARD, MULLIN, RICHTER & HAMPTON, LLP
                               333 South Hope Street, 48th Floor
                               Los Angeles, California 90071
                               Attention: Anthony R. Callobre, Esq.
                               Facsimile No.: (213) 620-1398
                               Confirmation No.: (213) 617-5466


                                       68

<PAGE>   75

            The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
than notices by Lender in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) calendar days after the deposit thereof in the mail. Each Borrower
acknowledges and agrees that notices sent by Lender in connection with Sections
9504 or 9505 of the Code shall be deemed sent when deposited in the mail or
transmitted by telefacsimile or other similar method set forth above.

            13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

            THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS
LOCATED IN THE COUNTY OF PHILADELPHIA, COMMONWEALTH OF PENNSYLVANIA OR, AT THE
SOLE OPTION OF LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY. EACH BORROWER AND LENDER WAIVE, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. EACH BORROWER, PARENT AND LENDER HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH BORROWER, PARENT AND
LENDER REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.


                                       69

<PAGE>   76

            14. DESTRUCTION OF BORROWERS' DOCUMENTS

            All documents, schedules, invoices, agings, or other papers
delivered to Lender may be destroyed or otherwise disposed of by Lender after
they are delivered to or received by Lender, unless Borrowers request, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrowers' expense, for their return.

            15. GENERAL PROVISIONS

               15.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by each Borrower and by Lender.

               15.2 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of each of the parties;
provided, however, that no Borrower or Parent may assign this Agreement or any
rights or duties hereunder without Lender's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Lender shall release any Borrower from its Obligations. Lender may assign this
Agreement and its rights and duties hereunder and no consent or approval by any
Borrower or Parent is required in connection with any such assignment. Lender
reserves the right to sell, assign, transfer, negotiate, or grant participations
in all or any part of, or any interest in, Lender's rights and benefits
hereunder. In connection with any such assignment or participation, Lender may
disclose all documents and information which Lender now or hereafter may have
relating to any Borrower or Parent or any Borrower's business. To the extent
that Lender assigns its rights and obligations hereunder to a third party,
Lender shall thereafter be released from such assigned obligations to each
Borrower or Parent and such assignment shall effect a novation between each
Borrower, Parent and such third party.

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

               15.4 Interpretation. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Lender, Parent or any
Borrower, whether under any rule of construction or otherwise. On the contrary,
this 


                                       70

<PAGE>   77

Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.

               15.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

               15.6 Amendments in Writing. This Agreement cannot be changed or
terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations, if any, are merged into this Agreement.

               15.7 Counterparts; Facsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivering of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver a manually executed
counterpart of this Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.

               15.8 Revival and Reinstatement of Obligations. If the incurrence
or payment of the Obligations by any Borrower or any Guarantor of the
Obligations or the transfer by either or both such parties to Lender of any
property of either or both of such parties should for any reason subsequently be
declared to be improper under any state or federal law relating to creditors'
rights, including, without limitation, provisions of the United States
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Lender is required to repay or
restore, in whole or in part, any such Voidable Transfers, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses and attorneys' fees of Lender
related thereto, the liability of such Borrower or such Guarantor automatically
shall be revived, reinstated and restored and shall exist as though such
Voidable Transfer had never been made.

               15.9 Withholding and Other Tax Liabilities. Lender shall have the
right to refuse to make any advances from time to time unless such Borrower
shall, at 


                                       71

<PAGE>   78

Lender's request, have given to Lender evidence, reasonably satisfactory to
Lender, that such Borrower has properly deposited or paid, as required by law,
all withholding taxes and all federal, state, city, county or other taxes due up
to and including the date of the loan. Until all of each Borrower's Obligations
to Lender have been paid in full, Lender shall be entitled to continue to hold
any and all of the Collateral until such Borrower has given to Lender evidence,
reasonably satisfactory to Lender, that such Borrower has properly deposited or
paid, as required by law, all federal withholding taxes due up to and including
the date of such expiration or termination. Copies of deposit slips showing
payment shall likewise constitute satisfactory evidence for such purpose. In the
event that any lien, assessment or tax liability against any Borrower shall
arise in favor of any taxing authority, whether or not notice thereof shall be
filed or recorded as may be required by law, Lender shall have the right (but
shall not be obligated, nor shall Lender hereby assume the duty) upon reasonable
prior notice to such Borrower to pay any such lien, assessment or tax liability
by virtue of which such charge shall have arisen; provided, however, that Lender
shall not pay any such tax, assessment or lien if the amount, applicability or
validity thereof is being contested in good faith and by appropriate proceedings
by such Borrower and further provided that such Borrower's title to and its
right to use, the Collateral are not materially adversely affected and Lender's
lien and priority in the Collateral are not affected, altered or impaired
thereby. In order to pay any such lien, assessment or tax liability, Lender
shall not be obligated to wait until such lien, assessment or tax liability is
filed before taking such action as hereinabove set forth. Any sum or sums which
Lender shall have paid for the discharge of any such lien shall be added to the
Revolving Credit and shall be paid by such Borrower to Lender with interest
thereon, upon demand, and Lender shall be subrogated to all rights of such
taxing authority against such Borrower.

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

               15.11 Publicity. Lender may use its reasonable discretion in
disclosing the fact of the financing under this Agreement to a public forum
including, without limitation, "tombstone" announcements in the print media.

            16. SURETYSHIP WAIVERS AND CONSENTS

            The obligations of each Borrower are independent of the obligations
of each Borrower. Each Borrower expressly waives any right to require Lender to
proceed against any other Borrower, to proceed against or exhaust any Collateral
or 


                                       72

<PAGE>   79

any other security for the Obligations or to pursue any remedy Lender may have
at any time. Each Borrower agrees that Lender may proceed against any one or
more Borrower and/or the Collateral in such order and manner as Lender shall
determine in its sole and absolute discretion. A separate action or actions may
be brought and prosecuted against any one or more Borrower whether an action is
brought or prosecuted against any other Borrower or with respect to any
Collateral or whether any other person shall be joined in any such action or
actions. Each Borrower expressly waives the benefit of any statute(s) of
limitations affecting its liability under this Agreement or the enforcement of
the Obligations or any rights of Lender created or granted under this Agreement.
Lender's rights hereunder shall be reinstated and revived, and the obligations
and liability of each Borrower hereunder shall continue, with respect to any
amount at any time paid on account of the Obligations which thereafter shall be
required to be restored or returned by Lender upon the bankruptcy, insolvency or
reorganization of any Borrower, or otherwise, all as though such amount had not
been paid.

            Each Borrower expressly waives any and all defenses now or hereafter
arising or asserted by reason of (i) any disability or other defense of any
other Borrower or with respect to the Obligations; (ii) the cessation for any
cause whatsoever liability of any of the other Borrower and (iii) any act or
omission of Lender or others that directly or indirectly results in or aids the
discharge or release of any other Borrower or the Obligations or any Collateral
or any guaranty therefor by operation of law or otherwise. Each Borrower agrees
that any amounts received by Lender from whatever source on account of the
Obligations may be applied by Lender toward the payment of such of the
Obligations and in such order of application as Lender may from time to time
elect; and, notwithstanding any payments made by any Borrower, such Borrower
shall have no right of subrogation, reimbursement, exoneration, indemnity,
contribution or any other rights that would result in such Borrower being deemed
a creditor of any other Borrower under the federal Bankruptcy Code or any other
law or for any other purpose and such Borrower hereby irrevocably waives all
such rights, the right to assert any such rights and any right to enforce any
remedy which Lender now or may hereafter have against any Borrower and hereby
irrevocably waives any benefit of and any right to participate in, any security
now or hereafter held by Lender, whether any of the foregoing rights arise in
equity, at law or by contract.

            Each Borrower represents and warrants to Lender that it has
established adequate means of obtaining from each other Borrower, on a
continuing basis, financial and other information pertaining to the businesses,
operations and condition (financial and otherwise) of each other Borrower and
their properties, and each Borrower now is and hereafter will be completely
familiar with the businesses, 


                                       73

<PAGE>   80

operations and condition (financial and otherwise) or each other Borrower and
their properties. Each Borrower hereby expressly waives and relinquishes any
duty on the part of Lender (should any such duty exist) to disclose to any
Borrower any matter, fact or thing related to the businesses, operations or
condition (financial or otherwise) of each Borrower or their properties, whether
now known or hereafter known by Lender.

            Each Borrower represents and warrants that each of the waivers set
forth herein are made with each Borrower's full knowledge of their significance
and consequences, and that under the circumstances the waivers are reasonable
and not contrary to public policy or law. If any of said waivers are determined
to be contrary to any applicable law or public policy, such waivers shall be
effective only to the maximum extent permitted by law.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed at Los Angeles, California.

                                   Borrowers:

                                   PIA MERCHANDISING CO., INC.,
                                   a California corporation


                                   By:  /s/ Cathy L. Wood
                                        ----------------------------------------
                                        Cathy L. Wood
                                        Executive Vice President and
                                        Chief Financial Officer


                                   PACIFIC INDOOR DISPLAY CO.
                                   dba RETAIL RESOURCES,
                                   a California corporation


                                   By:  /s/ Cathy L. Wood
                                        ----------------------------------------
                                        Cathy L. Wood
                                        Executive Vice President and
                                        Chief Financial Officer


                                       74

<PAGE>   81

                                   Parent:

                                   PIA MERCHANDISING SERVICES,
                                   INC., a Delaware corporation


                                   By:  /s/ Cathy L. Wood
                                        ----------------------------------------
                                        Cathy L. Wood
                                        Executive Vice President and
                                        Chief Financial Officer


Accepted and effective this 7th day of December, 1998.

                                   Lender:

                                   MELLON BANK, N.A.,
                                   a national banking association


                                   By:  /s/ John M. DePledge
                                        ----------------------------------------
                                        John M. DePledge
                                        Vice President


                                       75

<PAGE>   82

                         FORM OF COMPLIANCE CERTIFICATE

                           OF CHIEF FINANCIAL OFFICER



                          Dated: ______________, _____



TO:   Mellon Bank, N.A.
      Mellon Bank Center
      1735 Market Street, 6th Floor
      Philadelphia, Pennsylvania 19101-7899

Ladies and Gentlemen:

         The undersigned, the Chief Financial Officer of each of PIA
Merchandising Services, Inc., a Delaware corporation ("Parent"), PIA
Merchandising Co., Inc., a California corporation ("PIA"), and Pacific Indoor
Display Co., dba Retail Resources, a California corporation, ("Retail
Resources," and collectively with PIA, the "Borrowers") hereby certifies to you
pursuant to Section 6.4 of the Loan and Security Agreement, dated as of December
7, 1998, by and among Parent, Borrowers, and Mellon Bank, N.A., a national
banking association (the "Loan Agreement"), as follows:

         1. Based upon my review of the balance sheets and statements of income
of Parent and its Subsidiaries for the month ending (month, date, year), (the
"Measurement Date"), copies of which, along with the calculations for each
covenant, are attached hereto, I hereby certify that, as of the Measurement
Date, Parent and its Subsidiaries maintain the following financial covenants
pursuant to Section 6.12 of the Loan Agreement:

               A. Ratio of Current Assets to Current Liabilities;


<TABLE>
<CAPTION>
                                                      Compliance
                                                      ----------
<S>                       <C>                       <C>       <C>
       Actual: ___:1.0    Required: ____:1.0(1)     [ ] Yes   [ ] No
</TABLE>

- --------
(1)      Insert applicable amount required by Section 6.12(a) of the Loan
         Agreement.


                                   Exhibit 6.4
                                  (Page 1 of 4)


<PAGE>   83

               B. Ratio of Total Liabilities to Tangible Net Worth;


<TABLE>
<CAPTION>
                                                      Compliance
                                                      ----------
<S>                       <C>                       <C>       <C>
       Actual: ___:1.0    Required: 1.0:1.0        [ ] Yes   [ ] No
</TABLE>


               C. Net Income(2);


<TABLE>
<CAPTION>
                                                      Compliance
                                                      ----------
<S>                       <C>                       <C>       <C>
       Actual: $___       Required: $____(3)        [ ] Yes   [ ] No
</TABLE>


               D. Tangible Net Worth; and


<TABLE>
<CAPTION>
                                                      Compliance
                                                      ----------
<S>                       <C>                       <C>       <C>
       Actual: $___       Required: $____(4)        [ ] Yes   [ ] No
</TABLE>


               E. Working Capital


<TABLE>
<CAPTION>
                                                      Compliance
                                                      ----------
<S>                       <C>                       <C>       <C>
       Actual: $___       Required: $____(5)        [ ] Yes   [ ] No
</TABLE>


         4. As of the Measurement Date, Parent's and its Subsidiaries'
cumulative fiscal year to date Capital Expenditures, on a consolidated basis,
are as follows:


<TABLE>
<CAPTION>
                                                      Compliance
                                                      ----------
<S>                       <C>                       <C>       <C>
       Actual: $___       Maximum Annual Capital    [ ] Yes   [ ] No
                          Expenditures: $____(6)
</TABLE>


- --------

(2)      Compliance with this covenant shall be determined on an annual basis.

(3)      Insert applicable amount required by Section 6.12(c) of the Loan
         Agreement.

(4)      Insert applicable amount required by Section 6.12(d) of the Loan
         Agreement.

(5)      Insert applicable amount required by Section 6.12(e) of the Loan
         Agreement.

(6)      Insert applicable amount required by Section 7.11 of the Loan
         Agreement.


                                   Exhibit 6.4
                                  (Page 2 of 4)


<PAGE>   84

         5. As of the Measurement Date, the book net worth of Retail Resources
is as follows:


<TABLE>
<CAPTION>
                                                      Compliance
                                                      ----------
<S>                       <C>                       <C>       <C>
       Actual: $___       Mimimum Book Net          [ ] Yes   [ ] No
                          Worth: negative $880,000
</TABLE>


         6. All reports, statements, or computer prepared information of any
kind or nature delivered or caused to be delivered to Lender under the Loan
Agreement have been prepared in accordance with GAAP and fully and fairly
present the financial condition of Parent and its Subsidiaries;

         7. All representations and warranties contained in the Loan Agreement
are true and correct in all material respects as of the date hereof with the
same effect as if they were made on and as of the date hereof, except to the
extent such representations and warranties expressly relate to an earlier date,
and, unless noted to the contrary in Section 1 or 4 hereof, Borrowers are in
timely compliance with all of its covenants under the Loan Agreement.

         8. As of the date hereof, no Event of Default or event which with the
lapse of time or the giving of notice, or both, would become an Event of Default
(an "Unmatured Event of Default") has occurred except: (specify nature and
extent of default)

________________________________________________________________________________

_______________________________________________________________________.

         9. If applicable, the corrective action taken or proposed to be taken
to prevent or cure such Event of Default or Unmatured Event of Default is as
follows:

________________________________________________________________________________

_______________________________________________________________________.


                                   Exhibit 6.4
                                  (Page 3 of 4)


<PAGE>   85

         Any and all initially capitalized terms set forth in this certificate
without definition shall have the respective meanings ascribed thereto in the
Loan Agreement.


                                   PIA MERCHANDISING SERVICES, INC.,
                                   a Delaware corporation



                                   By:
                                       -----------------------------------------
                                       Cathy L. Wood
                                       Chief Financial Officer


                                   PIA MERCHANDISING CO., INC.,
                                   a California corporation



                                   By:
                                       -----------------------------------------
                                       Cathy L. Wood
                                       Chief Financial Officer


                                   PACIFIC INDOOR DISPLAY CO.,
                                   dba Retail Resources,
                                   a California corporation



                                   By:
                                       -----------------------------------------
                                       Cathy L. Wood
                                       Chief Financial Officer


                                   Exhibit 6.4
                                  (Page 4 of 4)

<PAGE>   86

                       PROMISSORY NOTE (REVOLVING CREDIT)

[$20,000,000/$1,500,000]                                        December 7, 1998


         FOR VALUE RECEIVED, [PIA MERCHANDISING CO., INC./PACIFIC INDOOR DISPLAY
dba RETAIL RESOURCES], a California corporation (the "Borrower"), promises to
pay to the order of MELLON BANK, N.A., a national banking association
("Lender"), on the Revolving Credit Maturity Date (as defined in the Loan
Agreement referred to below) the lesser of (i) [Twenty Million Dollars
($20,000,000)/ One Million Five Hundred Thousand Dollars ($1,500,000)] or (ii)
the unpaid principal amount of all advances made by Lender to the Borrower as
Revolving Credit Loans under the Loan Agreement referred to below.

         The Borrower also promises to pay interest on the unpaid principal
amount hereof from the date hereof until paid in full at the rates and at the
times which shall be determined in accordance with the provisions of the Loan
Agreement, plus all other charges, fees and Obligations at any time owing under
or pursuant to the Loan Agreement.

         This Promissory Note (Revolving Credit) ("Note") is one of the
"Revolving Credit Notes" referred to in, and is entitled to the benefits of, the
Loan and Security Agreement, of even date herewith, by and between the Borrower
and Pacific Indoor Display Co., Inc., dba Retail Resources, and Lender (the
"Loan Agreement"), to which reference is hereby made for a more complete
statement of the terms and conditions under which the Revolving Credit Loans
evidenced hereby were made and are to be repaid. (Initially capitalized terms
set forth without definition in this Note shall have the respective meanings
assigned to such terms in the Loan Agreement.) This Note is secured by the
Collateral described in the Loan Agreement.

         All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at
Lender's office located at Mellon Business Credit, Mellon Bank Center, 1735
Market Street, 6th Floor, Philadelphia, Pennsylvania 19101-7899 or at such other
place as shall be designated in writing for such purpose in accordance with the
terms of the Loan Agreement. Until notified of the transfer of this Note, the
Borrower shall be entitled to deem Lender or such person who has been so
identified by the transferor in writing to the Borrower as the holder of this
Note, as the owner and holder of this Note. Each of the Lender and any
subsequent holder of this Note agrees that before disposing of this Note or any
part hereof, it will make a notation hereon of all principal payments previously
made hereunder and of the date to which interest hereon has been paid on the
schedule attached


                                 Exhibit 2.1(e)
                                 (Page 1 of 3)

<PAGE>   87

hereto, if any; provided, however, that the failure to make notation of any
payment made on this Note shall not limit or otherwise affect the obligation of
the Borrower hereunder with respect to payments of principal or interest on this
Note.

         The Borrower may prepay this Note only as permitted under the Loan
Agreement.

         THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND LENDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES. THE BORROWER AGREES THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS NOTE SHALL BE TRIED AND LITIGATED
ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF PHILADELPHIA,
COMMONWEALTH OF PENNSYLVANIA OR, AT THE SOLE OPTION OF LENDER, IN ANY OTHER
COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.

         THE BORROWER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THE PRECEDING
PARAGRAPH. THE BORROWER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR THE LOANS CONTEMPLATED
HEREUNDER, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND,
ALL OTHER COMMON LAW OR STATUTORY CLAIMS. THE BORROWER REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.


                                 Exhibit 2.1(e)
                                 (Page 2 of 3)


<PAGE>   88

         Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest,
fees and charges thereon, may become, or may be declared to be, due and payable
in the manner, upon the conditions and with the effect provided in the Loan
Agreement.

         This Note is subject to restrictions on transfer or assignment as
provided in Section 15.2 of the Loan Agreement. The terms of this Note are
subject to amendment only in the manner provided in the Loan Agreement.

         No reference herein to the Loan Agreement and no provision of this Note
or the Loan Agreement shall alter or impair the obligation of the Borrower,
which is absolute and unconditional, to pay the principal of and interest, fees
and charges on this Note at the place, at the respective times, and in United
States Dollars.

         The Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred in the collection and enforcement of this
Note. The Borrower hereby consents to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waives diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.

         IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
and delivered by its duly authorized officer as of the date and the place first
above written.

                                   PIA MERCHANDISING CO., INC.,
                                   a California corporation


                                   By:
                                      ------------------------------------------
                                      Cathy L. Wood
                                      Chief Executive Officer and
                                      Executive Vice President


                                 Exhibit 2.1(e)
                                 (Page 3 of 3)



<PAGE>   1

                                                                   EXHIBIT 10.10

================================================================================





                                    AGREEMENT

                                       AND

                                 PLAN OF MERGER


                                      among


                        PIA Merchandising Services, Inc.,

                              SG Acquisition, Inc.,

                          PIA Merchandising Co., Inc.,

                             SPAR Acquisition, Inc.,

                  SPAR Marketing Inc., a Delaware corporation,

                           SPAR Marketing Force, Inc.,

                  SPAR Marketing, Inc., a Nevada Corporation,

                                  SPAR, Inc.,

                      SPAR/Burgoyne Retail Services, Inc.,

                         SPAR Incentive Marketing, Inc.,

                        SPAR MCI Performance Group, Inc.

                                       and

                              SPAR Trademarks, Inc.


                          Dated as of February 28, 1999


================================================================================



<PAGE>   2

                                TABLE OF CONTENTS

                                    ARTICLE I

                                   THE MERGER


<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----
<S>             <C>                                                           <C>
Section 1.01.   The Merger......................................................3
Section 1.02.   Closing; Effective Time of the Merger...........................3
Section 1.03.   Name, Certificate of Incorporation, Bylaws, Board of Directors 
                and Officers of the Surviving Corporation.......................3
Section 1.04.   Effects of the Merger...........................................3
Section 1.05.   Tax Consequences................................................3
Section 1.06.   Further Assurances..............................................4

                                   ARTICLE II

                              MERGER CONSIDERATION

Section 2.01.   Conversion of Capital Stock, Etc................................4
Section 2.02.   Exchange Procedures.............................................4
Section 2.03.   No Fractional Shares............................................4
Section 2.04.   SAI Option Assumption and Exchange..............................4
Section 2.05.   Granting of New Stock Options under the PIA Stock Option Plan...5
Section 2.06.   Reservation and Registration of Option Shares...................5
Section 2.07.   Transfer Taxes..................................................5

                                   ARTICLE III

               REPRESENTATIONS AND WARRANTIES OF THE SPAR PARTIES


Section 3.01.   Corporate Existence.............................................5
Section 3.02.   Authorization and Enforceability................................6
Section 3.03.   Capital Stock of the SPAR Parties...............................6
Section 3.04.   No Violations...................................................7
Section 3.05.   Financial Statements............................................7
Section 3.06.   Permits.........................................................8
Section 3.07.   Real and Personal Property......................................8
Section 3.08.   Contracts and Commitments.......................................9
Section 3.09.   Insurance......................................................10
Section 3.10.   Employees......................................................10
Section 3.11.   Employee Benefit Plans and Arrangements........................10
Section 3.12.   Compliance with Law............................................12
Section 3.13.   Transactions With Affiliates...................................12
Section 3.14.   Litigation.....................................................12
Section 3.15.   Taxes..........................................................12
Section 3.16.   Intellectual Property Matters..................................13
Section 3.17.   Existing Condition.............................................14
</TABLE>



                                      -ii-


<PAGE>   3

                         TABLE OF CONTENTS (Continued)

<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----
<S>             <C>                                                           <C>
Section 3.18.   Books of Account...............................................15
Section 3.19.   Environmental Matters..........................................15
Section 3.20.   No Illegal Payments............................................16
Section 3.21.   Brokers........................................................17

                                   ARTICLE IV

                REPRESENTATIONS AND WARRANTIES OF THE PIA PARTIES

Section 4.01.   Corporate Existence............................................17
Section 4.02.   Authorization and Enforceability...............................17
Section 4.03.   Capital Stock of the PIA Parties...............................18
Section 4.04.   No Violations..................................................18
Section 4.05.   Financial Statements...........................................19
Section 4.06.   Permits........................................................19
Section 4.07.   Real and Personal Property.....................................19
Section 4.08.   Contracts and Commitments......................................20
Section 4.09.   Insurance......................................................21
Section 4.10.   Employees......................................................21
Section 4.11.   Employee Benefit Plans and Arrangements........................21
Section 4.12.   Compliance with Law............................................23
Section 4.13.   Transactions With Affiliates...................................23
Section 4.14.   Litigation.....................................................23
Section 4.15.   Taxes..........................................................23
Section 4.16.   Intellectual Property Matters..................................24
Section 4.17.   Existing Condition.............................................24
Section 4.18.   Books of Account...............................................25
Section 4.19.   Environmental Matters..........................................25
Section 4.20.   No Illegal Payments............................................26
Section 4.21.   Brokers........................................................26
Section 4.22.   SEC Filings....................................................26
Section 4.23.   No Misrepresentation by the PIA Parties........................26
Section 4.24.   Board Action; Opinion of Financial Advisor.....................27

                                    ARTICLE V

                                    COVENANTS

Section 5.01.   PIA Proxy Statement; Stockholders Meeting......................27
Section 5.02.   Conduct Prior to the Closing Date..............................27
Section 5.03.   Consummation of the SPAR Reorganization Transactions;
                SPAR Stockholder Action........................................28
Section 5.04.   Access.........................................................28
Section 5.05.   Negotiations...................................................28
Section 5.06.   Press Releases and Other Communications........................28
Section 5.07.   Third Party Approvals..........................................29
Section 5.08.   Notice to Bargaining Agents....................................29
Section 5.09.   Notification of Certain Matters................................29
Section 5.10.   Closing Net Worth..............................................29
</TABLE>



                                      -iii-


<PAGE>   4

                         TABLE OF CONTENTS (Continued)

<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----
<S>             <C>                                                           <C>
Section 5.11.   Post Merger Indemnification of
                Officers and Directors by Parties..............................29
Section 5.12.   Further Assurances.............................................30

                                   ARTICLE VI

                              CONDITIONS PRECEDENT

Section 6.01.   Conditions to Each Party's Obligations.........................30
Section 6.02.   Conditions Precedent to the Obligations of the SPAR Parties....31
Section 6.03.   Conditions Precedent to the Obligations of the PIA Parties.....32

                                   ARTICLE VII

                CLOSING NET WORTH; NONSURVIVAL OF REPRESENTATIONS

Section 7.01.   SPAR Closing Net Worth.........................................33
Section 7.02.   Survival of Representations and Warranties.....................34

                                  ARTICLE VIII

                            TERMINATION OF AGREEMENT

Section 8.01.   Termination....................................................34
Section 8.02.   Effect of Termination..........................................35
Section 8.03.   Breakup Fee....................................................35

                                   ARTICLE IX

                                     GENERAL

Section 9.01.   Successors and Assigns; Assignment.............................35
Section 9.02.   No Third Party Rights..........................................35
Section 9.03.   Counterparts...................................................35
Section 9.04.   Expenses.......................................................35
Section 9.05.   Notices........................................................36
Section 9.06.   Governing Law..................................................37
Section 9.07.   Consent to Jurisdiction, Etc...................................37
Section 9.08.   Waiver of Jury Trial...........................................37
Section 9.09.   Exercise of Rights and Remedies................................37
Section 9.10.   Reformation and Severability...................................37
Section 9.11.   Remedies Cumulative............................................37
Section 9.12.   Captions.......................................................37
Section 9.13.   Amendments.....................................................37
Section 9.14.   Entire Agreement...............................................38
</TABLE>



                                      -iv-


<PAGE>   5

                          TABLE OF CONTENTS (Continued)

<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----
<S>              <C>                                                          <C>
Exhibits:
- ---------

A                Articles of Merger
B                Special Purpose Option Plan
C                SPAR Trademark License
D                Business Manager Agreement
E                Proposed PIA Certificate of Amendment
F                Amended and Restated 1995 Stock Option Plan
G                Limited Indemnification Agreement
H                Indemnity Escrow Agreement
</TABLE>





                                       -v-


<PAGE>   6

                          AGREEMENT AND PLAN OF MERGER


         This Agreement and Plan of Merger, dated as of February 28, 1999 (as
the same may be supplemented, modified, amended, restated or replaced from time
to time in the manner provided herein, this "Agreement"), is made by and among
PIA Merchandising Services, Inc., a Delaware corporation ("PIA Delaware"), SG
Acquisition, Inc., a Nevada corporation ("PIA Acquisition"), PIA Merchandising
Co., Inc., a California corporation ("PIA California"), SPAR Acquisition, Inc.,
a Nevada corporation ("SAI"), SPAR Marketing, Inc., a Delaware corporation
("SMI"), SPAR Marketing Force, Inc., a Nevada corporation ("SMF"), SPAR
Marketing, Inc., a Nevada corporation ("SMNEV"), SPAR, Inc., a Nevada
corporation ("SINC"), SPAR/Burgoyne Retail Services, Inc., an Ohio corporation
("SBRS"), SPAR Incentive Marketing, Inc., a Delaware corporation ("SIM"), SPAR
MCI Performance Group, Inc., a Delaware corporation ("SMCI"), and SPAR
Trademarks, Inc., a Nevada corporation ("STM"). SMF, SINC and SBRS are sometimes
referred to herein individually as a "SPAR Marketing Company" and collectively
as the "SPAR Marketing Companies". SMI and the SPAR Marketing Companies are
sometimes referred to herein individually as a "SPAR Marketing Party" and
collectively as the "SPAR Marketing Parties". SIM and SMCI are sometimes
referred to herein individually as a "SPAR Incentive Party" and collectively as
the "SPAR Incentive Parties". SAI, STM, the SPAR Marketing Parties and the SPAR
Incentive Companies are sometimes referred to herein individually as a "SPAR
Party" and collectively as the "SPAR Parties". PIA Delaware, PIA Acquisition and
PIA California are sometimes referred to herein individually as a "PIA Party"
and collectively as the "PIA Parties". The PIA Parties and the SPAR Parties are
sometimes referred to herein individually as a "Party" and collectively as the
"Parties".

                                    Recitals

        A. ROBERT G. BROWN AND WILLIAM H. BARTELS (each a "SPAR Principal", and
collectively the "SPAR Principals") own a majority of all of the outstanding
shares of common stock of SAI, par value $0.01 per share ("SAI Stock"), and all
of the outstanding capital stock of the other SPAR Parties as of the date
hereof. The SPAR Principals together with other owners of SAI Stock are
sometimes referred to herein individually as a "SPAR Stockholder" and
collectively as the "SPAR Stockholders". Options to acquire shares of common
stock of SAI (each a "SAI Option" and collectively the "SAI Options") will be
held by certain employees of the SPAR Parties, certain others providing services
to the SPAR Parties and certain other persons (each a "SAI Option Holder" and
collectively the "SAI Option Holders") in the aggregate amount and on the terms
described in the SPAR Disclosure Letter.

        B. The SPAR Principals also own all of the outstanding shares of capital
stock, and are officers and directors, of: (i) SPAR Marketing Services, Inc., a
Nevada Corporation ("SMS"), which provides certain field services pursuant to
Service Agreement dated as of January 4, 1999 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein, the "Field Service Agreement"); (ii) SPAR InfoTech, Inc. ("SIT"), a
startup venture that provides certain programming services to the SPAR Marketing
Parties; and (iii) SPAR Group, Inc. ("SGI"), a Delaware corporation that will
change its name prior to the Effective Time. SMS, SIT, STM, SGI and any other
companies owned by the SPAR Principals (other than the SPAR Parties) and their
respective assets and properties are not part of the proposed merger
transactions.

        C. On January 15, 1999, SMCI purchased substantially all of the assets
and assumed certain liabilities (the "MCI Acquisition") of MCI Performance
Group, Inc., a Texas corporation ("MCI"), pursuant to an Asset Purchase
Agreement dated as of December 22, 1998, among MCI, John H. Wile (the "MCI
Stockholder") and SMCI, as amended by a First Amendment dated as of January 15,
1999 (as amended, and as the same may be supplemented, modified, amended,
restated or replaced from time to time in the manner provided therein, the "MCI
Purchase Agreement"), under which SGI is a guarantor. The MCI Acquisition was
financed in part by SMCI's issuance of its Promissory Note to MCI dated as of
January 15, 1999 (as the same may be supplemented, modified, amended, restated
or replaced from time to time in the manner provided therein, the "MCI Note"),
which MCI Note is secured by the pledge to MCI of all of the stock of SMCI
pursuant to the Hypothecation Agreement from the SPAR Principals dated as of
January 15, 1999


                                       -1-


<PAGE>   7

(as the same may be supplemented, modified, amended, restated or replaced from
time to time in the manner provided therein, the "MCI Hypothecation"). The MCI
Purchase Agreement contains certain representations, warranties and
indemnifications of MCI and the MCI Stockholder with respect to the assets,
business and liabilities of MCI acquired by SMCI thereunder.

        D. The SPAR Principals have entered into an agreement with the SPAR
Parties dated as of February 28, 1999 (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
therein, the "SPAR Reorganization Agreement"), pursuant to which (i) the SPAR
Principals have agreed to contribute to SAI all of their shares of STM, the SPAR
Marketing Parties and SPAR Incentive Parties in return for the issuance to them
of additional shares of SAI Stock as provided therein, and (ii) SAI would then
contribute the capital stock of SMCI to SIM and the capital stock of the SPAR
Marketing Companies to SMI, such that SAI will be the sole stockholder of STM,
SIM and SMI, SIM will be the sole stockholder of SMCI, and SMI will be the sole
stockholder of the SPAR Marketing Companies. The transactions to be effected
pursuant to the Reorganization Agreement will be referred to as the "SPAR
Reorganization Transactions" and collectively with the MCI Acquisition will be
referred to as the "SPAR Premerger Transactions". The MCI Purchase Agreement,
the MCI Note and related documents and the SPAR Reorganization Agreement may be
referred to individually as a "SPAR Premerger Agreement" and collectively as the
"SPAR Premerger Agreements".

        E. Pursuant to the SPAR Reorganization Agreement, SAI will issue to the
SPAR Principals sufficient additional shares of SAI Stock such that (after such
issuance and including shares previously issued to them) they will then together
own shares of SAI Stock equal in number to (i) the product of (A) 2.2546 times
(B) the total number of shares of PIA Delaware Stock (as hereinafter defined)
issued and outstanding as of the close of business on the Business Day preceding
the Closing Date (as defined in the Reorganization Agreement), minus (ii) the
sum of the number of shares of SAI Stock issuable upon exercise of the SAI
Options (without regard to the vesting provisions thereof).

        F. The SPAR Principals and the respective Boards of Directors of the
SPAR Parties have approved the SPAR Premerger Transactions.

        G. PIA Acquisition and PIA California each is a direct wholly owned
subsidiary of PIA Delaware.

        H. The respective Boards of Directors of the PIA Parties and of the SPAR
Parties deem it advisable and in the best interests of such corporations and
their respective stockholders that, following the consummation of the SPAR
Reorganization Transactions, PIA Acquisition merge with and into SAI (the
"Merger") pursuant to this Agreement and the applicable provisions of the
General Corporation Law of the State of Nevada (the "NGCL"). SAI and PIA
Acquisition are sometimes collectively referred to as the "Constituent
Corporations" and SAI, following the Merger, is sometimes referred to as the
"Surviving Corporation".

        I. As provided herein, (i) as a result of the Merger, each outstanding
share of SAI Common Stock will be converted into the right to receive one share
of common stock of PIA Delaware, par value $0.01 per share ("PIA Delaware
Stock"), and (ii) following the Merger, each SAI Option Holder will receive a
Substitute Option (as hereinafter defined) to purchase the same number of shares
of PIA Delaware Stock on the same terms as the number of shares of SAI Stock
that such SAI Option Holder was entitled to purchase under such SAI Option.
Immediately following the Merger, (A) the SPAR Stockholders will hold and the
SAI Option Holders will have the right to acquire upon exercise (without regard
to vesting) shares of PIA Delaware Stock that, in the aggregate, will represent
approximately 69.274% of the sum of (1) the total number of shares of PIA
Delaware Stock issued and outstanding immediately after the Merger plus (2) the
total number of shares of PIA Delaware Stock issuable upon exercise of the
Substitute Options (without regard to vesting), and (B) the shares of PIA
Delaware Stock held by stockholders of PIA Delaware immediately prior to the
Merger will represent approximately 30.726% of such post-Merger sum.

        J. The respective Boards of Directors of PIA Delaware, PIA Acquisition
and SAI have approved the Merger on the terms and subject to the conditions set
forth herein.


                                       -2-


<PAGE>   8

        K. The Parties intend the Merger to qualify as a tax-free reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").


                                    AGREEMENT

        In consideration of the foregoing, the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration (the receipt
and adequacy of which is hereby acknowledged by the Parties), the Parties hereto
hereby agree as follows:


                                    ARTICLE I

                                   THE MERGER

        Section 1.01. The Merger. Upon the terms and conditions hereinafter set
forth and in accordance with the NGCL, at the Effective Time (as defined in
Section 1.02), PIA Acquisition shall be merged with and into SAI, and thereupon
the separate existence of PIA Acquisition shall cease, and SAI, as the Surviving
Corporation, shall continue to exist under and be governed by the NGCL.

        Section 1.02. Closing; Effective Time of the Merger. The consummation of
the transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of Parker Chapin Flattau & Klimpl, LLP, in New York, New York, at
10:00 a.m. on a date to be designated by mutual agreement of PIA Delaware and
SAI (the "Closing Date"), which shall be no later than the second business day
after the satisfaction (or, to the extent permitted by law, the waiver) of the
conditions set forth in Article VI. Concurrently with or as soon as practicable
after the Closing, PIA Delaware, PIA Acquisition and SAI will cause the Articles
of Merger in substantially the form of Exhibit A attached hereto (the "Articles
of Merger") to be executed and filed with the Secretary of State of the State of
Nevada as provided in Section 92A.200 of the NGCL. The Merger shall become
effective immediately upon such filing of the Articles of Merger with the
Secretary of State of the State of Nevada or at such other time as PIA
Acquisition and SAI shall agree and specify in the Articles of Merger. The time
of the effectiveness of the Merger is sometimes referred to as the "Effective
Time."

        Section 1.03. Name, Certificate of Incorporation, Bylaws, Board of
Directors and Officers of the Surviving Corporation. Upon the effectiveness of
the Merger:

            (a) the name of the Surviving Corporation shall be "SPAR
Acquisition, Inc."

            (b) the Certificate of Incorporation of the Surviving Corporation
shall be the Certificate of Incorporation of SAI until thereafter duly amended
or restated;

            (c) the Bylaws of the Surviving Corporation shall be the Bylaws of
SAI until thereafter duly amended or restated;

            (d) the directors of SAI shall serve as the directors of the
Surviving Corporation until their respective successors have been duly elected
and qualified; and

            (e) the officers of SAI shall serve as the officers of the Surviving
Corporation in the same capacity or capacities until their respective successors
have been duly appointed.

        Section 1.04. Effects of the Merger. The Merger shall have the effects
set forth in Section 92A.250 of the NGCL. Without in any way limiting such 
effects, at and after the Effective Time (a) the Constituent


                                       -3-


<PAGE>   9

Corporations shall merge and become and continue as part of a single
corporation, SAI, which is the Surviving Corporation, and (b) the Surviving
Corporation shall (to the same extent and with the same effect as was the case
with the applicable Constituent Corporation): (i) own and possess any and all
(A) financial assets, accounts, documents, instruments, equipment, inventory,
intellectual property, contracts, general intangibles, real property and
improvements, and other assets and properties of each Constituent Corporation,
and (B) rights, powers, privileges, security or other entitlements, licenses,
franchises and other interests of each Constituent Corporation, all of which
will be automatically vested in the Surviving Corporation at the Effective Time
(subject to any existing liens or encumbrances thereon, which shall continue
unimpaired), and none of which shall be impaired or otherwise adversely affected
by the Merger; and (ii) be liable for all of the debts, liabilities, obligations
and duties of each Constituent Corporation, all of which will continue
unimpaired and may be enforced against the Surviving Corporation to the same
extent as it would have been enforceable against the applicable Constituent
Corporation.

        Section 1.05. Tax Consequences. The Merger is intended to constitute a
reorganization within the meaning of Section 368 of the Code for federal income
tax purposes, and the Parties will take all commercially reasonable steps in
furtherance thereof, including (without limitation) the making of all required
filings and the keeping of all required records. The parties to this Agreement
hereby adopt this Agreement as a "plan of reorganization" within the meaning of
ss.ss.1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.

        Section 1.06. Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are necessary,
desirable or proper to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, the title to any property or right of the Constituent
Corporations acquired or to be acquired by reason of, or as a result of, the
Merger, or otherwise to carry out the purposes of this Agreement, the Surviving
Corporation and its proper officers and directors (on behalf of PIA Acquisition
or SAI) shall execute and deliver all such deeds, assignments and assurances in
law and do all acts necessary, desirable or proper to vest, perfect or confirm
title to such property or right in the Surviving Corporation and otherwise to
carry out the purposes of this Agreement, and the proper officers and directors
of the Surviving Corporation are fully authorized to take any and all such
action.


                                   ARTICLE II

                              MERGER CONSIDERATION

        Section 2.01. Conversion of Capital Stock, Etc. At the Effective Time
and without any further action on the part of the holder thereof:

        (a) each share of SAI Stock that is issued and outstanding immediately
prior to the Effective Time shall automatically be converted into the right to
receive one (1) fully paid and nonassessable share of PIA Delaware Stock (which
1:1 ratio will be referred to as the "Exchange Ratio"); and

        (b) each share of common stock of PIA Acquisition, par value $.01 per
share, that is issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of PIA
Delaware as the holder thereof, be converted into and become one (1) share of
common stock of the Surviving Corporation, par value $.01 per share.

        Section 2.02. Exchange Procedures. Following the Effective Time, upon
surrender to PIA Delaware of stock certificates representing outstanding shares
of SAI Stock (the "Certificates"), each holder of SAI Stock shall be entitled to
receive, in exchange therefor, one or more new stock certificates representing,
in the aggregate, that number of whole shares of PIA Delaware Stock which such
holder has the right to receive pursuant to Section 2.01(a) in respect of the
shares of SAI Stock evidenced by the Certificate surrendered, and each
Certificate so surrendered shall forthwith be canceled; provided, however, that
PIA Delaware shall cause ten percent (10%) of the


                                       -4-


<PAGE>   10

shares which each SPAR Principal and their Family Members (as hereinafter
defined) would otherwise have had the right to receive pursuant to Section
2.01(a) (the "Share Escrow Amount") to be registered in the name of, and
delivered to, the Indemnity Escrow Agent (as such term is defined in Section
6.01(g) hereof) to be held in accordance with the provisions of the Limited
Indemnification Agreement and the Indemnity Escrow Agreement (as such terms are
defined in Section 6.01(g) hereof); and provided further that the Share Escrow
Amount may be satisfied by the shares of the SPAR Principals as opposed to the
shares of such Family Members.

        Section 2.03. No Fractional Shares. Notwithstanding any other provision
of this Article II, no fractional shares of PIA Delaware Stock shall be issued
in connection with the Merger and any holder of SAI Stock entitled hereunder to
receive a fractional share of PIA Delaware Stock but for this Section shall be
entitled to receive from PIA Delaware a cash payment (rounded to the nearest
whole cent) equal to the product of such fraction multiplied by the last sale
price of PIA Delaware Stock as reported on the Nasdaq National Market on the
Closing Date.

        Section 2.04. SAI Option Assumption and Exchange. As of the Effective
Time, PIA Delaware shall be deemed to have assumed all of the outstanding SAI
Options, in each case on the terms and conditions set forth in the written
option agreements (copies of which have been provided to PIA Delaware). PIA
Delaware shall issue to each holder of an outstanding SAI Option, against
delivery and cancellation of the agreement evidencing such outstanding SAI
Option, a new substitute option (a "Substitute Option") under PIA Delaware's
Special Purpose Stock Option Plan substantially in the form of Exhibit B hereto,
together with such changes therein as may be made with the approval of the PIA
Delaware Board and SAI (the "PIA Special Purpose Plan"). Each Substitute Option
shall entitle the SAI Option Holder to purchase the same number of shares of PIA
Delaware Stock as the number of shares of SAI Stock that could have been
purchased under the SAI Option (reflecting the 1:1 Exchange Ratio) and shall
otherwise be issued upon the same terms and conditions as set forth in the
written agreement evidencing the SAI Option so surrendered, including (without
limitation) the same per share exercise price and the same vesting (if any) as
the surrendered SAI Option. Each SAI Option so surrendered shall forthwith be
canceled.

         Section 2.05. Granting of New Stock Options under the PIA Stock Option
Plan. Subject to the consummation of the Merger and the approval by the
stockholders of PIA Delaware of the Proposed Plan Amendment (as hereinafter
defined), effective as of the close of business on the date on which the Merger
is consummated, PIA Delaware shall issue, subject to the availability of shares
under PIA Delaware's Amended and Restated 1995 Stock Option Plan (the "PIA Stock
Option Plan"), stock options under the PIA Stock Option Plan (each a "New PIA
Option") to the persons and in the amounts (which may include unallocated
amounts for later allocation by SAI) listed in the letter of even date herewith
delivered to PIA Delaware (the "New Option Schedule") or in the terms of the
agreement governing such options, which stock options shall cover an aggregate
of 2,133,744 shares of PIA Delaware Stock). Except as otherwise indicated on the
New Option Schedule or in the terms of the agreements governing such options,
each New PIA Option shall (i) vest (become exercisable) in four equal annual
installments, (ii) have an exercise price equal to the last sale price for the
PIA Delaware Stock as reported on the Nasdaq National Market on the date of
issuance and (iii) have such other terms and conditions consistent with the PIA
Stock Option Plan as the Board of Directors of PIA Delaware may determine. The
New Option Schedule may be amended by SAI (by written notice to PIA Delaware) at
any time prior to the issuance of the affected New PIA Options to add or delete
names or to increase or decrease the number of shares to be covered by any
unissued proposed New PIA Option; provided, however, that the aggregate number
of shares of PIA Delaware Stock issuable upon exercise of all New PIA Options
(without regard to the vesting provisions thereof) shall not exceed 2,133,744
shares without the prior written consent of PIA Delaware; and provided further
that the terms and conditions of any New PIA Option indicated on the New Option
Schedule as of the date hereof may not be materially improved (other than a
reallocation of shares or allocation of previously unallocated shares to any
employee or other recipient permitted under the PIA Stock Plan) without the
prior written consent of PIA Delaware.

        Section 2.06. Reservation and Registration of Option Shares. PIA
Delaware shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of PIA Delaware Stock for delivery upon exercise of
the Substitute Options and the New PIA Options. As soon as practicable after the
Effective Time, to the extent such form is available therefor, PIA Delaware
shall file a registration statement on Form S-8 (or any successor form) with
respect to the shares of PIA Delaware Stock subject to the Substitute Options
and the New PIA Options (and any other PIA Options that the PIA Board may wish
to treat similarly). PIA Delaware shall use


                                       -5-


<PAGE>   11

commercially reasonable efforts to maintain the effectiveness of such
registration statement(s) so long as any options covered thereby remain
outstanding and unexercised.

        Section 2.07. Transfer Taxes. PIA Delaware shall pay any and all
transfer taxes incurred in connection the Merger and the stock and option
issuances and other transactions contemplated hereunder.


                                   ARTICLE III

               REPRESENTATIONS AND WARRANTIES OF THE SPAR PARTIES

        Except as otherwise disclosed in that certain letter of even date
herewith delivered to PIA Delaware prior to the execution hereof (which letter
shall contain appropriate references and cross references to identify the
Sections hereof to which the information in such letter relates) (the "SPAR
Disclosure Letter"), each SPAR Party, jointly and severally, represents and
warrants to the PIA Parties as follows:

        Section 3.01. Corporate Existence. Except as otherwise set forth in the
SPAR Disclosure Letter:

        (a) Each SPAR Party is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation. Each SPAR
Party is duly qualified to conduct business and is in good standing as a foreign
corporation in each jurisdiction in which the conduct of its business requires
it to be so qualified, except where the failure to be so qualified would not
have a material adverse effect on the business, operations, properties, assets
or financial condition of the SPAR Parties taken as a whole (a "SPAR Material
Adverse Effect").

        (b) As of the date hereof, neither SAI, SIM nor SMI has any assets or
liabilities or has conducted any business operations except in anticipation of
and in connection with the SPAR Reorganization Transactions and the other
transactions contemplated by the SPAR Reorganization Agreement and this
Agreement.

        (c) As of the date of this Agreement, no SPAR Party has any subsidiary
or owns, of record or beneficially, or controls, directly or indirectly, any
other capital stock, any securities convertible into capital stock or any other
equity interest in any corporation, association or other business entity or is,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity. However, the Parties acknowledge and understand that
immediately prior to the Effective Time, upon the terms and subject to the
conditions set forth in the Reorganization Agreement, the Reorganization
Transactions described in the Recitals hereto will occur.

        (d) The SPAR Disclosure Letter sets forth a list of (i) the names of all
predecessor companies of each SPAR Marketing Company, (ii) the names of all
entities from which any SPAR Party previously acquired any significant assets,
and (iii) all sales (other than in the ordinary course of business) and spinoffs
of significant assets by any SPAR Marketing Company since March 31, 1996.

        Section 3.02. Authorization and Enforceability. Except as otherwise set
forth in the SPAR Disclosure Letter:

        (a) Each SPAR Party has the corporate power, authority and legal right
to execute, deliver and perform (i) the SPAR Reorganization Agreement, (ii) this
Agreement, and (iii) to the extent a party thereto (A) the Business Manager
Agreement to be delivered pursuant to Section 6.01(f)(i) hereof, (B) the
Trademark License Agreements to be delivered pursuant to Section 6.01(f)(ii)
hereof, (C) the Limited Indemnification Agreement and the Indemnity Escrow
Agreement to be delivered pursuant to Section 6.01(g) hereof, and (D) the
releases from SPAR Principals to be delivered pursuant to Section 6.03(g)
(together with the SPAR Reorganization Agreement and this Agreement, each a
"Merger Document" and collectively the "Merger Documents"). The execution,
delivery and performance of the SPAR Reorganization Agreement, this Agreement
and the other Merger Documents by each SPAR


                                       -6-


<PAGE>   12

Party (to the extent it is a party thereto) have been duly authorized by all
necessary corporate action and no further corporate action on the part of any
SPAR Party is necessary to authorize the SPAR Premerger Agreements to which it
is a party or this Agreement or any other Merger Document to which it is a party
or the performance of the transactions contemplated hereby or thereby .

        (b) The SPAR Premerger Agreements and this Agreement (i) have been duly
executed and delivered on behalf of each SPAR Party (to the extent it is a party
thereto) and (ii) constitute legal, valid and binding obligations of such SPAR
Party, enforceable in accordance with their respective terms, except as may be
limited by (A) applicable bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization or other laws affecting any rights, powers, privileges,
remedies and interests of creditors generally, (B) rules or principles of equity
or public policy affecting the enforcement of obligations generally, whether at
law, in equity or otherwise, including (without limitation) those pertaining to
materiality, reasonableness, unconscionability, impossibility of performance,
redemption or other cure, surety rights or defenses, waiver, latches, estoppel,
or judicial deference, or (C) discretionary powers of any court or other
authority before which may be brought any proceeding seeking equitable or other
remedies, in each case whether at law, in equity or otherwise (the "Bankruptcy
Exceptions").

        Section 3.03. Capital Stock of the SPAR Parties. Except as otherwise set
forth in the SPAR Disclosure Letter:

        (a) As of the date of this Agreement, the authorized SAI Stock consists
of 50,000,000 shares of capital stock of SAI, which may be issued as either
common or preferred stock. The SPAR Disclosure Letter sets forth (i) the issued
and outstanding capital stock of SAI as of the date of this Agreement and (ii)
the names of each proposed SAI Option Holder and the number of shares of SAI
Stock purchasable pursuant to their respective SAI Options as of the date
hereof. The PIA Parties acknowledge and agree that the schedule of SAI Options
may be amended by SAI (by written notice to PIA Delaware) to add or delete names
or to increase or decrease the number of shares to be covered by any proposed
SAI Option at any time prior to (1) the mailing of the PIA Proxy Statement in
the case of any individual whose present or future holdings of shares of PIA
Delaware Stock or options to acquire such shares are disclosed in the PIA Proxy
Statement, or (2) the Effective Time in the case of any other person. Each of
the SAI Options will be evidenced by a written option agreement, copies of which
have been provided to PIA Delaware. The SPAR Disclosure Letter sets forth the
authorized and the issued and outstanding capital stock of each other SPAR Party
as of the date of this Agreement. As of the date of this Agreement, all of the
issued and outstanding shares of the capital stock of each SPAR Party are owned
beneficially and of record by the SPAR Stockholders in the case of SAI and by
the SPAR Principals in the case of all other SPAR Parties, free and clear of
all Restrictions (as hereinafter defined), and have been validly issued and are
fully paid and nonassessable. "Restrictions" shall mean any and all material
liens, security interests, pledges, charges, voting trusts, equities,
restrictions, encumbrances and claims of every kind, except for (A) restrictions
on sale or resale under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (as the same may be supplemented,
modified, amended, restated or replaced from time to time, the "Securities
Act"), or state securities laws, (B) in the case of the SMCI shares, the pledge
of the SMCI shares pursuant to the MCI Hypothecation, and (C) in the case of the
SPAR Parties that certain Agreement dated December 14, 1992, by and between
Robert G. Brown, William H. Bartels and Donald R. Young as escrow agent (as
amended, the "Buy-Sell Agreement").

        (b) Upon the consummation of the SPAR Reorganization Transactions upon
the terms and subject to the conditions set forth in the Reorganization
Agreement, (i) the outstanding shares of SAI Stock will be equal to the number
described in the Recitals, above, and will have been validly issued and will be
fully paid and nonassessable, (ii) the SPAR Stockholders will own beneficially
and of record all of the shares of capital stock of SAI in the amounts indicated
in the SPAR Disclosure Letter, free and clear of all Restrictions, (iii) SAI
will acquire all of the capital stock of the SPAR Marketing Companies and the
SPAR Incentive Companies (subject to the pledge of the SMCI shares pursuant to
the MCI Hypothecation), (iv) SIM will acquire all of the capital stock of SMCI
(subject to the pledge of the SMCI shares pursuant to the MCI Hypothecation),
and (v) SMI will acquire all of the capital stock of the SPAR Marketing
Companies.


                                       -7-


<PAGE>   13
        (c) Other than the proposed SAI Options or in connection with the SPAR
Reorganization Transactions or this Agreement, as of the date hereof: (i) there
are no outstanding rights, subscriptions, warrants, calls, convertible
securities, unsatisfied preemptive rights, options or other agreements of any
kind pursuant to which any SPAR Party is required to issue any of its authorized
but unissued capital stock; and (ii) no SPAR Party has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any
outstanding shares of capital stock or to pay any dividend or make any
distribution in respect thereof.

        Section 3.04. No Violations. Except as otherwise set forth in the SPAR
Disclosure Letter:

        (a) The execution, delivery and performance of the SPAR Premerger
Agreements and this Agreement by each SPAR Party (to the extent it is a party
thereto) do not and will not violate or result in the breach of any term,
condition or provision of, or require the consent of any other person under, (i)
any existing applicable law, ordinance, or governmental rule or regulation
("Applicable Law") to which any SPAR Party or any SPAR Principal is subject,
(ii) any judgment, order, writ, injunction, decree or award of any Governmental
Entity (as defined in Section 3.04(d) hereof) that is applicable to any SPAR
Party or any SPAR Principal (each a "SPAR Court Order"), (iii) the charter
documents of any SPAR Party, or (iv) any SPAR Contract (as defined in Section
3.08), SPAR Realty Lease (as defined in Section 3.07(a)), material SPAR
Personalty Lease (as defined in Section 3.07(b)) or other material mortgage,
indenture, agreement, contract, commitment, lease, permit, plan, authorization,
instrument or document to which any SPAR Marketing Company or any SPAR Principal
is a party, by which any SPAR Marketing Company or any SPAR Principal has any
rights or by which any of the properties or assets of any SPAR Marketing Company
is bound or subject (each a "Material SPAR Document").

        (b) The execution, delivery and performance of the SPAR Premerger
Agreements and this Agreement by each SPAR Marketing Company (to the extent it
is a party thereto) will not be reasonably likely to result in (A) any
termination, cancellation or acceleration of any Material SPAR Document or (B)
termination, modification or other change in any material respect of the
existing rights and obligations of any SPAR Marketing Company under such
Material SPAR Document.

        (c) No SPAR Marketing Company, and to the knowledge of each SPAR
Marketing Company, no other party thereto, is in default in any material respect
under any Material SPAR Document, and to the knowledge of each SPAR Marketing
Company, no event has occurred that with the giving of notice or lapse of time
(or both) would constitute such a default.

        (d) Other than the filing of a pre-merger notification report under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act") and in connection with or
in compliance with the provisions of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (as the same may
be supplemented, modified, amended, restated or replaced from time to time, the
"Exchange Act"), and the Securities Act, no authorization, approval or consent
of, and no registration or filing with, any Governmental Entity is required in
connection with the execution and delivery of the SPAR Premerger Agreements or
this Agreement by any SPAR Party or any SPAR Principal and the performance of
the transactions contemplated hereunder and thereunder. As used herein, the term
"Governmental Entity" means any court, administrative or regulatory agency or
commission, or other governmental authority or instrumentality, domestic,
foreign or supranational.

        Section 3.05. Financial Statements. Except as otherwise set forth in the
SPAR Disclosure Letter:

        (a) The SPAR Parties have delivered to PIA Delaware copies of (i) the
combined balance sheets of the SPAR Marketing Companies at March 31, 1998 (the
"Audited SPAR Marketing Balance Sheet Date"), and March 31, 1997, and the
related combined statements of income, cash flows and changes in stockholders'
equity for the fiscal years then ended, together with the report of Ernst &
Young, LLP thereon (the "Audited SPAR Marketing


                                       -8-


<PAGE>   14

Financial Statements"); (ii) the unaudited (but reviewed) combined balance
sheets of the SPAR Marketing Companies at December 31, 1998 (the "Interim SPAR
Marketing Balance Sheet Date"), and the related combined statements of income
and cash flows for the nine month period then ended (the "Interim SPAR Marketing
Financial Statements" and together with the Audited SPAR Marketing Financial
Statements, the "SPAR Marketing Financial Statements"); and (iii) the balance
sheets of MCI at December 31, 1998 (the "Audited MCI Balance Sheet Date"), and
December 31, 1997, and the related combined statements of income, cash flows and
changes in stockholders' equity for the fiscal years then ended, together with
the report of Ernst & Young, LLP thereon (the "Audited MCI Financial
Statements"), in each case adjusted to exclude the MCI assets not acquired by
SMCI and the other pro forma adjustments contemplated by the MCI Purchase
Agreement. The SPAR Marketing Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved and fairly present the combined
financial position and the combined results of operations of the SPAR Marketing
Companies as of the dates and for the periods indicated, subject in the case of
the Interim SPAR Marketing Financial Statements to nonrecurring year end audit
adjustments, which adjustments would not in the aggregate be materially adverse
to the financial condition of the SPAR Marketing Companies. To the knowledge of
the SPAR Parties, based upon such audit, the Audited MCI Financial Statements
have been prepared in accordance with GAAP consistently applied throughout the
periods involved and fairly present the pro forma financial position and the
results of operations of MCI as of the dates and for the periods indicated.

        (b) The Interim SPAR Marketing Financial Statements contain all
adjustments of a normal recurring nature, based upon historical operations of
the SPAR Marketing Companies and reporting determinations made with respect to
the most recent Audited SPAR Marketing Financial Statements, necessary to
present fairly the financial position for the periods then ended.

        Section 3.06. Permits. Except as otherwise set forth in the SPAR
Disclosure Letter:

        (a) Each SPAR Marketing Company owns, holds, possesses or lawfully uses
in the operation of its business all governmental franchises, licenses, permits,
easements, rights, applications, filings, registrations and other authorizations
that are necessary for it to conduct its business as now conducted in all
material respects or for the ownership and use of the material assets owned or
used by such SPAR Marketing Company in the conduct of its business (each a "SPAR
Permit" and collectively the "SPAR Permits").

        (b) Each SPAR Permit is valid and in full force and effect, and no SPAR
Permit will be terminated or impaired in any material respect or become
terminable as a result of the SPAR Premerger Transactions, the Merger or any
other transaction contemplated by this Agreement.

        Section 3.07. Real and Personal Property. Except as otherwise set forth
in the SPAR Disclosure Letter:

        (a) All buildings, leasehold improvements, structures, facilities, and
fixtures used in any material respect by any SPAR Marketing Company in the
conduct of its business (limited in the case of leased property to the primary
demised premises) (each a "SPAR Premises") (i) are leased by any SPAR Marketing
Company pursuant to a valid lease (each a "SPAR Realty Lease" and collectively
the "SPAR Realty Leases"), except as may be limited by the Bankruptcy
Exceptions, (ii) are in good operating condition and repair (subject to normal
wear and tear, replacement, retirement, and maintenance), (iii) are usable in
the regular and ordinary course of business, and (iv) are used in compliance in
all material respects with all Applicable Laws and authorizations relating to
their construction (limited to tenant improvements in the case of leased
property), use and operation. A list of all SPAR Realty Leases is set forth in
the SPAR Disclosure Letter. No SPAR Marketing Company owns any real estate.

        (b) All items of equipment and other tangible property and assets used
in any material respect by any SPAR Marketing Company in the conduct of its
business (i) are either (A) owned by any SPAR Marketing Company, or (B) leased
by any SPAR Marketing Company pursuant to a valid lease (each a "SPAR Personalty
Lease"


                                       -9-


<PAGE>   15

and collectively the "SPAR Personalty Leases"), except as may be limited by the
Bankruptcy Exceptions, (ii) are in good operating condition and repair (subject
to normal wear and tear, replacement, retirement, and maintenance), (iii) are
usable in the regular and ordinary course of business, and (iv) comply in all
material respects with all Applicable Laws and authorizations relating to their
construction, use and operation. A list of all SPAR Personalty Leases is set
forth in the SPAR Disclosure Letter.

        Section 3.08. Contracts and Commitments. The SPAR Disclosure Letter sets
forth an accurate, correct and complete list of all material agreements,
contracts, commitments, arrangements and understandings, written or oral,
including all amendments and supplements thereto, of each SPAR Marketing Company
(the "SPAR Contracts"), to which any SPAR Marketing Company is a party or is
bound, or by which any of their respective assets are bound, and which involve
any:

        (a) agreement, contract, commitment or other legally binding arrangement
with any present or former (within the past two years) officer, employee or
material consultant involving annual salaries or minimum annual payments of
$100,000 or more (excluding normal salesmen's commissions);

        (b) agreement, contract, commitment or other legally binding arrangement
for the future purchase of, or payment for, supplies or products, or for the
performance of services by a third party involving in any one case $100,000 or
more (other than those that may be terminated without penalty);

        (c) agreement, contract, commitment or other legally binding arrangement
to sell or supply products or to perform services involving in any one case
$100,000 or more (other than those that may be terminated without penalty);

        (d) agreement, contract, commitment or other legally binding arrangement
continuing over a period of more than twelve months from the date hereof and
requiring more than $100,000 in annual payments by a SPAR Marketing Company;

        (e) sales representative, sales agency or similar agreement, contract,
commitment or other legally binding arrangement with any Person not under the
employ, control or direction of a SPAR Marketing Company;

        (f) agreement, contract, commitment or other legally binding arrangement
containing a provision to indemnify any person or entity or assume any tax,
environmental or other non-ordinary course liability;

        (g) agreement, contract, commitment or other legally binding arrangement
with any Governmental Entity (other than a SPAR Permit);

        (h) note, debenture, bond, equipment trust agreement, letter of credit
agreement, loan agreement or other contract for the borrowing or lending of
money, or any guarantee, pledge or undertaking of or credit support for the
indebtedness of any other person by any SPAR Marketing Company;

        (i) agreement, contract, commitment or other legally binding arrangement
for any charitable or political contribution;

        (j) agreement, contract, commitment or other legally binding arrangement
for any capital expenditure or leasehold improvement in excess of $100,000;

        (k) agreement, contract, commitment or other legally binding arrangement
limiting or restraining: (i) any SPAR Marketing Company or any successor thereto
from engaging in the businesses of the SPAR Parties or PIA Parties post Merger
(other than any customer contract not in excess of $100,000 that may contain
such


                                      -10-


<PAGE>   16

a prohibition with respect to the performance of services for the customer's
competitors); or (ii) to the knowledge of any SPAR Marketing Company, any
employee of any SPAR Marketing Company from engaging in or competing with the
businesses of the SPAR Parties or PIA Parties post Merger on behalf of the
Parties; or

        (l) agreement, contract, commitment or other legally binding arrangement
of any SPAR Marketing Company not made in the ordinary course of business (other
than as would have been disclosable in one of the preceding clauses but for the
amount or term thereof);

in each case excluding the SPAR Premerger Agreements, the SPAR Realty Leases,
the SPAR Personalty Leases, the SPAR Trademark Licenses, the SPAR Permits and
this Agreement (which are not intended, and shall not be deemed or construed, to
be SPAR Contracts). Except as otherwise set forth in the SPAR Disclosure Letter:
(A) each of the SPAR Contracts is valid and enforceable in all material
respects, except as may be limited by the Bankruptcy Exceptions; (B) each SPAR
Marketing Company is, and to the knowledge of such SPAR Marketing Company, all
other parties thereto are, in material compliance with the provisions thereof in
all material respects; and (C) no SPAR Marketing Company is nor has ever been a
party to any contract with any Governmental Entity subject to retroactive price
redetermination or renegotiation.

        Section 3.09. Insurance. Except as otherwise set forth in the SPAR
Disclosure Letter: (a) the assets, properties and operations of each SPAR
Marketing Company are insured under various policies of general liability,
workers' compensation and other forms of insurance in amounts that are adequate
in the judgment of the SPAR Marketing Companies in relation to the business and
assets of such SPAR Marketing Company; (b) all such policies are in full force
and effect in accordance with their terms, no notice of cancellation has been
received, and to the knowledge of the SPAR Marketing Companies, with respect to
any such policy, there is no existing default or event that with the giving of
notice or lapse of time (or both), would constitute a material default under any
such policy; and (c) no SPAR Marketing Company has been refused any insurance,
nor has any SPAR Marketing Company's coverage been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years.

        Section 3.10. Employees. Except as otherwise set forth in the SPAR
Disclosure Letter: (a) there have not been in the past five years and, to the
knowledge of the SPAR Marketing Companies, there are not pending, any organized
or coordinated labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (b) there are and have
been no unresolved material violations of any laws of any Governmental Entity
respecting the employment of any employees; (c) there is no unfair labor
practice, charge or complaint pending, unresolved or, to the knowledge of the
SPAR Marketing Companies, overtly threatened that would be reasonably likely to
be brought or filed with the National Labor Relations Board or similar body in
any foreign country; (d) the employees of the SPAR Marketing Companies are not
covered by any collective bargaining agreement; and (e) each SPAR Marketing
Company has paid or properly accrued in accordance with GAAP in the ordinary
course of business all wages and compensation due to employees, including all
vacations or vacation pay, holidays or holiday pay, sick days or sick pay, and
bonuses.

        Section 3.11. Employee Benefit Plans and Arrangements. Except as
otherwise set forth in the SPAR Disclosure Letter:

        (a) The SPAR Disclosure Letter sets forth a complete and accurate list
of each Benefit Plan covering any present or former officers, employees,
consultants, or directors of any SPAR Marketing Company (a "SPAR Benefit Plan").
As used in this Agreement: "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder, as the same may be supplemented, modified, amended, restated or
replaced from time to time; "Pension Plan" of a referenced party shall mean each
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) of the
referenced party; "Welfare Plan" of a referenced party shall mean each "employee
welfare benefit plan" (as defined in Section 3(i) of ERISA) of the referenced
party; "Other ERISA Benefit" of a referenced party shall mean any plan or
agreement governed by ERISA


                                      -11-


<PAGE>   17

or the Code of the referenced party relating to deferred compensation, bonus and
performance compensation (other than salesmen commissions), stock purchase,
stock option, stock appreciation, severance, vacation, sick leave, holiday
fringe benefits, personnel policy, reimbursement program, insurance, welfare or
similar plan, program, policy or arrangement; and "Benefit Plan" of a referenced
party shall mean each Pension Plan, Welfare Plan and Other ERISA Benefit of the
referenced party; in each case to the extent maintained or contributed to, or
required to be maintained or contributed to, by or for which there otherwise is
any liability as of the Effective Time, of such party or its respective
affiliates or any other person or entity that, together with such party, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each, together with such party, a "Commonly Controlled Entity") for the benefit
of any present or former officer, employee, consultant or director.

        (b) Each SPAR Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements applicable to such SPAR Benefit
Plan. Each SPAR Benefit Plan that is a Pension Plan and intended to be qualified
under Section 401(a) of the Code (each a "SPAR Pension Plan") has been
determined by the Internal Revenue Service to be so qualified and, to the
knowledge of the SPAR Marketing Companies, no condition exists or has occurred
that would adversely affect any such determination. Neither any SPAR Benefit
Plan, nor any SPAR Marketing Company, nor to the knowledge of any SPAR Marketing
Company any Commonly Controlled Entity of any SPAR Marketing Company or any
trustee or agent of any SPAR Benefit Plan, has been or is presently engaged in
any prohibited transactions as defined by Section 406 of ERISA or Section 4975
of the Code (i) for which an exemption is not applicable, or (ii) that would be
reasonably likely to subject any SPAR Marketing Company to a material amount of
tax or penalty imposed by Section 4975 of the Code or Section 502 of ERISA. To
the knowledge of the SPAR Marketing Companies, there is no event or condition
existing that would be deemed a "reportable event" (within the meaning of
Section 4043 of ERISA) with respect to which the thirty-day notice requirement
has not been waived. To the knowledge of the SPAR Marketing Companies, no
condition exists that would be reasonably likely to subject any SPAR Marketing
Company to a material amount of penalty under Section 4071 of ERISA.

        (c) Neither any SPAR Marketing Company nor any Commonly Controlled
Entity of any SPAR Marketing Company is or has ever been party to any
"'multi-employer plan," as that term is defined in Section 3(37) of ERISA. True
and correct copies of (i) the most recent annual report (Form 5500 series) and
any attached schedules for each SPAR Benefit Plan (if any such report was
required by applicable law), (ii) the most recent summary plan description for
each SPAR Benefit Plan and (iii) the most recent determination letter issued by
the Internal Revenue Service for each SPAR Pension Plan have been provided to
PIA Delaware.

        (d) With respect to each SPAR Benefit Plan, there are no actions, suits
or claims (other than routine claims for benefits in the ordinary course or
relating to qualified domestic relations orders within the meaning of Section
414(p) of the Code) pending or, to the knowledge of the SPAR Marketing
Companies, overtly threatened against any SPAR Benefit Plan, any SPAR Marketing
Company, any Commonly Controlled Entity of any SPAR Marketing Company or any
trustee or agent of any SPAR Benefit Plan, nor to the knowledge of the SPAR
Marketing Companies, is there any reasonable basis for such claims.

        (e) With respect to each SPAR Benefit Plan to which any SPAR Marketing
Company or any Commonly Controlled Entity of any SPAR Marketing Company is a
party which constitutes a group health plan subject to Section 4980B of the
Code, each such SPAR Benefit Plan substantially complies, and in each case has
substantially complied, with all applicable requirements of Section 4980B of the
Code. There is no outstanding material liability (except for premiums that have
not become overdue) or other accrued but unpaid obligations under Title IV of
ERISA with respect to any SPAR Pension Plan, and no condition exists that would
be reasonably expected to result in any SPAR Marketing Company incurring a
material liability under Title IV of ERISA, either directly or with respect to
any Commonly Controlled Entity of any SPAR Marketing Company. All premiums
payable to the Pension Benefit Guaranty Corporation (the "PBGC") have been paid
prior to becoming overdue. Neither the PBGC nor any SPAR Marketing Company nor
any Commonly Controlled Entity of any SPAR Marketing Company has instituted
proceedings to terminate any SPAR Pension Plan that is subject to Title IV of
ERISA, and the PBGC has not informed any SPAR Marketing Company of its intent to
institute proceedings to terminate any such plan. Full payment has been


                                      -12-


<PAGE>   18

made of all amounts that any SPAR Marketing Company or any Commonly Controlled
Entity of any SPAR Marketing Company was required to have paid as a contribution
to any SPAR Pension Plan that is subject to Title IV of ERISA (with
applicability determined as of the last day of the most recent fiscal year of
each of the SPAR Pension Plans ended prior to the date of this Agreement), and
none of the SPAR Pension Plans has incurred any material amount of "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal year
of each such SPAR Pension Plan ended prior to the date of this Agreement.

        (f) No SPAR Pension Plan is a defined benefit pension plan. Each SPAR
Benefit Plan is, and its administration is and at all times has been in
substantial compliance with, and no SPAR Marketing Company has received any
claim or notice that any such SPAR Benefit Plan is not in substantial compliance
with, its terms and all Applicable Laws, including without limitation, to the
extent applicable, the requirements of ERISA and the Code. No SPAR Marketing
Company and no Commonly Controlled Entity of any SPAR Marketing Company is in
default in any material respect in performing any of its contractual obligations
under any SPAR Benefit Plan or any related trust agreement or insurance
contract. There are no material outstanding liabilities of any SPAR Benefit Plan
other than liabilities for benefits to be paid to participants in any SPAR
Benefit Plan and their beneficiaries in accordance with the terms of such SPAR
Benefit Plan. Each SPAR Benefit Plan may be amended or modified or terminated by
the applicable SPAR Marketing Company or a Commonly Controlled Entity of a SPAR
Marketing Company at any time without liability except under any defined pension
benefit plan. No SPAR Benefit Plan other than a SPAR Pension Plan, retiree
medical plan or severance plan provides benefits to any individual after
termination of employment.

        (g) The consummation of the transactions contemplated by the SPAR
Premerger Agreements and this Agreement will not: (A) entitle any employee of
any SPAR Marketing Company to severance pay, unemployment compensation or any
other payment or benefit; (B) accelerate the time of payment or vesting, or
increase the amount of compensation due to any such employee; (C) result in any
liability under Title IV of ERISA; (D) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available; or (E) result (either alone or in conjunction with
any other event) in the payment or series of payments by any SPAR Marketing
Company or any of its affiliates to any person of an "excess parachute payment"
within the meaning of Section 280G of the Code.

        (h) With respect to each SPAR Benefit Plan that is funded wholly or
partially through an insurance policy, all material amounts of premiums required
to have been paid to date under the insurance policy have been paid, all
material amounts of premiums required to be paid under the insurance policy
through the Closing Date will have been paid on or before the Closing Date and,
as of the Closing Date, there will be no material amount of liability of any
SPAR Marketing Company or any Commonly Controlled Entity of any SPAR Marketing
Company under any insurance policy or ancillary agreement with respect to such
insurance policy in the nature of a retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or partially
out of events occurring prior to the Closing Date.

        (i) Each SPAR Benefit Plan that constitutes a "welfare benefit plan"
(within the meaning of Section 3(i) of ERISA) for which contributions are
claimed by any SPAR Marketing Company or any Commonly Controlled Entity of any
SPAR Marketing Company as deductions under any provision of the Code is in
material compliance with all applicable requirements pertaining to such
deduction. With respect to any "welfare benefit fund" (within the meaning of
Section 419 of the Code) related to such a welfare benefit plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code) that
would result in the imposition of a tax under Section 4976(a) of the Code. All
welfare benefit funds intended to be exempt from tax under Section 501(a) of the
Code have been determined by the Internal Revenue Service to be so exempt and no
event or condition exists or has occurred which would adversely affect any such
determination.

        (j) No SPAR Marketing Company has any Benefit Plan outside of the United
States.


                                      -13-


<PAGE>   19

        (k) All persons classified by any SPAR Marketing Company as independent
contractors or "leased employees" within the meaning of Section 414(n) of the
Code ("SPAR Leased Employees") satisfy and have at all times satisfied the
requirements of applicable law to be so classified. Each SPAR Marketing Company
has fully and accurately reported their compensation on IRS Forms 1099 when
required to do so. No SPAR Marketing Company has any obligation to provide
benefits with respect to such independent contractors or SPAR Leased Employees
under any SPAR Benefit Plan or otherwise.

        Section 3.12. Compliance with Law. Except as otherwise set forth in the
SPAR Disclosure Letter: each SPAR Marketing Company has complied in all material
respects with each, and is not in violation in any material respect of, any
Applicable Law to which such SPAR Marketing Company's business, operations,
assets or properties are subject.

        Section 3.13. Transactions With Affiliates. Except as otherwise set
forth in the SPAR Disclosure Letter: (a) no stockholder and no director, officer
or employee of any SPAR Marketing Company, or any member of his or her immediate
family or any other of its, his or her affiliates, owns or has a 5% or more
ownership interest in any material business, corporation or other entity that is
or was during the last three years a party to, or in any property which is or
was during the last three years the subject of, any contract, agreement,
commitment or legally binding arrangement with such SPAR Marketing Company; and
(b) the SPAR Disclosure Letter includes a complete list as of the date hereof of
all amounts owed by any SPAR Marketing Company to any SPAR Principal (other than
salary and expense reimbursements in the normal course) or any affiliate of any
SPAR Principal (other than for goods purchased or services rendered in the
normal course) or owed on account of any loan or advance to any SPAR Marketing
Company by any SPAR Principal or any affiliate of any SPAR Principal (other than
for goods purchased or services rendered in the normal course).

        Section 3.14. Litigation. Except as otherwise set forth in the SPAR
Disclosure Letter, as of the date hereof: (a) no litigation, including any
arbitration, investigation or other proceeding of or before any Governmental
Entity, is pending (or to the knowledge of the SPAR Marketing Companies) overtly
threatened against any SPAR Marketing Company, other than litigation that (i) is
not reasonably likely to be adversely determined or (ii) if reasonably likely to
be adversely determined, would not be reasonably likely to have, individually or
in the aggregate with other such litigation, a SPAR Material Adverse Effect; and
(b) no SPAR Marketing Company is a party to or subject to the provisions of any
SPAR Court Order.

        Section 3.15. Taxes. Except as otherwise set forth in the SPAR
Disclosure Letter:

        (a) All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by any SPAR Marketing
Company (the "SPAR Tax Returns") with respect to any material federal, state,
local or foreign taxes, assessments, interest, penalties, deficiencies, fees and
other governmental charges or impositions (including without limitation all
income tax, unemployment compensation, social security, payroll, withholding,
sales and use, excise, privilege, property, ad valorem, franchise, license,
school and any other tax or similar governmental charge or imposition, and
interest and penalties therein, under the Applicable Laws of the United States
or any state or Municipal or political subdivision thereof or any foreign
country or political subdivision thereon ("Taxes") have been timely filed with
the appropriate governmental agencies in all jurisdictions in which such SPAR
Tax Returns are required to be filed, and all such SPAR Tax Returns are true,
complete and correct in all material respects and fairly reflect the liabilities
of the SPAR Marketing Companies for Taxes for the periods, property or events
covered thereby.

        (b) All Taxes, including (without limitation) those called for by the
SPAR Tax Returns, required to be paid or withheld by any SPAR Marketing Company
and any deficiency assessments, penalties and interest for which a notice of
assessment has been received (other than as may have been settled and paid in
full in accordance therewith, and other than those being contested, if any, as
set forth in the SPAR Disclosure Letter) have been timely paid or withheld.


                                      -14-


<PAGE>   20

        (c) The accruals for Taxes contained in the Interim SPAR Marketing
Financial Statements for the Tax liabilities of the SPAR Marketing Companies
have been made in accordance with GAAP as of that date and include adequate
provision under GAAP for all deferred Taxes (other than necessary increments due
to the passage of time), except that no accruals have been made for income Taxes
for SINC and SBRS, which are Subchapter S corporations under the Code. SMF
utilizes the accrual method of accounting for income tax purposes, SINC and SBRS
utilize the cash method of accounting for income tax purposes, and none of them
has changed its method of accounting for income tax purposes in the past five
years. Each SPAR Marketing Company that has filed SPAR Tax Returns under
Subchapter S of the Code has made a timely and effective election to be taxed
under the provisions of Subchapter S of the Code and has at no time been taxable
under the provisions of Subchapter C of the Code. No such SPAR Marketing Company
has any net unrealized built-in gain that has not been recognized within the
meaning of Section 1374 of the Code.

        (d) No SPAR Marketing Company is or has at any time ever been a party to
a Tax sharing, Tax indemnity or Tax allocation agreement, and no SPAR Marketing
Company has assumed any Tax liability of any other person or entity under
contract.

        (e) No SPAR Marketing Company has received any notice of assessment or
proposed assessment in connection with any SPAR Tax Returns, other than as may
have been settled and paid in full in accordance therewith, and there are no
pending tax examinations of or material tax claims asserted against any SPAR
Marketing Company or any of its assets or properties. No SPAR Marketing Company
has extended, or waived the application of, any statute of limitations of any
jurisdiction regarding the assessment or collection of any Taxes.

        (f) There are now, and as of immediately following the Effective Time
there will be, no liens (other than any lien for Taxes not yet overdue and
payable) on any of the assets or properties of any SPAR Marketing Company
relating to or attributable to Taxes. To the knowledge of the SPAR Marketing
Companies, there is no reasonable basis for the assertion of any claim relating
to or attributable to Taxes that, if adversely determined, would result in any
lien on the assets of any SPAR Marketing Company or otherwise have a SPAR
Material Adverse Effect.

        (g) None of the SPAR Marketing Companies has any knowledge of any
reasonable basis for any additional assessment of any Taxes for any period
ending on or before the Closing Date (other than increased Taxes based upon
increased business units, business sites, payroll, profits or other taxable
attribute relating to an expanding enterprise prior to the Closing Date). All
Tax payments related to employees, including income tax withholding, FICA, FUTA,
unemployment and worker's compensation, required to be made by the SPAR
Marketing Companies, have been fully and properly paid, withheld, accrued or
recorded.

        Section 3.16. Intellectual Property Matters. Except as otherwise set
forth in the SPAR Disclosure Letter:

        (a) The SPAR Disclosure Letter sets forth all patents, trademarks, trade
names, service marks, copyrights, software, material trade secrets or material
know-how owned or used in any material respect by any SPAR Marketing Company in
the conduct of its business (the "SPAR Intellectual Property"), excluding,
however, all readily commercially available software programs licensed to a SPAR
Marketing Company (for example, without limitation, Windows, Windows NT, MS
Word, MS Excel, and MS Explorer) ("Commercial Software"), which Commercial
Software need not be set forth on such schedule. All of the SPAR Intellectual
Property is (or will be as of the Effective Time) owned by or licensed to STM or
one of the SPAR Marketing Companies free and clear of any liens (except insofar
as a license or the restrictions thereunder may constitute a lien, and except
for the SPAR Trademark Licenses and the Business Manager Agreement). At or
before the Closing, (i) SIT and SMS will enter into non-exclusive perpetual
royalty free licenses with STM respecting their use of the name "SPAR" and
certain other trademarks and related rights owned or to be owned by STM (the
"SPAR Trademark Licenses") such agreement to be substantially in the form
attached as Exhibit C hereto, and (ii) SMF, SMS and SIT will enter into a
Software Ownership Agreement


                                      -15-


<PAGE>   21

with respect to the Internet job scheduling software (called "Business Manager")
jointly developed and owned by them, such agreement to be substantially in the
form attached as Exhibit D hereto (the "Business Manager Agreement").

        (b) There are no ongoing royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements from any SPAR Marketing Company as a
licensor, pertaining to the current use of the SPAR Intellectual Property,
except as may be applicable under the Commercial Software, the SPAR Trademark
Licenses and the Business Manager Agreement.

        (c) No SPAR Marketing Company infringes upon or unlawfully or wrongfully
uses any patent, trademark, trade name, service mark, copyright or trade secret
owned or claimed by any other person or entity. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the SPAR Marketing
Companies, overtly threatened relating to any, patent, trademark, trade name,
service mark, copyright or trade secret formerly or currently used by any SPAR
Marketing Company. None of the SPAR Intellectual Property is subject to any
outstanding order, decree or judgment. No SPAR Marketing Company has agreed to
indemnify any person or entity for or against any infringement of or by the SPAR
Intellectual Property. Except for (i) the SPAR Intellectual Property licensed or
to be licensed to SMS and SIT by STM, (ii) the common ownership of the software
reflected in the Business Manager Agreement, and (iii) the ownership of and
director and officer positions in the SPAR Marketing Companies, SGI, SMS, SIT,
STM and the SPAR Parties, no present or former employee of any SPAR Marketing
Company, and no person or entity other than SGI, SMS, SIT, STM and the SPAR
Parties (and the SPAR Principals solely as the officers and shareholders
thereof), directly or indirectly owns or has any proprietary, financial or other
interest in, in whole or in part, any SPAR Intellectual Property.

        (d) All SPAR Intellectual Property in the form of computer software that
is utilized by any SPAR Marketing Company in the operation of its business is
capable of processing date data between and within the twentieth and
twenty-first centuries or can be rendered capable of processing such data prior
to the date necessary to avoid disruption of its business by utilizing the
employees of one or more of the SPAR Marketing Companies in the normal course of
business and by expenditure of not more than $100,000 in excess of the cost of
software purchased for reasons other than the failure of existing software to be
capable of such processing.

        Section 3.17. Existing Condition. Except as otherwise set forth in the
SPAR Disclosure Letter, since the Interim SPAR Marketing Balance Sheet Date, no
SPAR Marketing Company has:

        (a) incurred any liabilities, other than liabilities incurred in the
ordinary course of business consistent with past practice (including, without
limitation, advances under its commitments and lines of credit), the liabilities
contemplated under the SPAR Premerger Agreements;

        (b) discharged or satisfied any lien or encumbrance or paid any
liabilities, other than in the ordinary course of business consistent with past
practice (including, without limitation, repayments under its commitments and
lines of credit), or failed to pay or discharge when due any liabilities, other
than in the ordinary course of business consistent with past practice, or where
the obligation is being contested in good faith, and the failure to pay or
discharge has not caused and would not be reasonably likely to cause any SPAR
Material Adverse Effect;

        (c) sold, encumbered, assigned or transferred any assets, properties or
rights or any interest therein, or made any agreement or commitment or granted
any option or right with, of or to any person to acquire any assets, properties
or rights of any SPAR Marketing Company or any interest therein, except for
sales and dispositions in the ordinary course of business consistent with past
practice, and except for the transactions contemplated under the SPAR Premerger
Agreements and this Agreement;

        (d) created, incurred, assumed or guaranteed any indebtedness for money
borrowed, or mortgaged, pledged or subjected any of its assets to any mortgage,
lien, pledge, security interest, conditional sales contract or other encumbrance
of any nature whatsoever, other than (i) in the ordinary course of business
(including,


                                      -16-


<PAGE>   22

without limitation, future advances and floating liens under existing, increased
or replacement credit facilities), or (ii) in connection with the financing of
the MCI Acquisition;

        (e) made or suffered any early cancellation or termination of any
Material SPAR Document (other than in the ordinary course of business with a
vendor to a SPAR Marketing Company); or amended, modified or waived any
substantial debts or claims held by it under any Material SPAR Document other
than in the ordinary course of business;

        (f) declared, set aside or paid any dividend or made or agreed to make
any other distribution or payment in respect of its capital shares or redeemed,
purchased or otherwise acquired or agreed to redeem, purchase or acquire any of
shares of its capital stock or its other ownership interests;

        (g) suffered any damage, destruction or loss that has had or will have
(i) a SPAR Material Adverse Effect, or (ii) a replacement cost individually or
in the aggregate at more than $100,000;

        (h) suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;

        (i) suffered any material adverse change in the business, operations,
properties, assets or financial condition of the SPAR Marketing Companies taken
as a whole;

        (j) received notice or had knowledge of any actual or overtly threatened
organized or coordinated labor trouble, strike or other similar occurrence,
event or condition of any similar character that has had or would be reasonably
likely to have a SPAR Material Adverse Effect;

        (k) increased the salaries or other compensation of, or made any advance
(excluding advances for ordinary and necessary business expenses) or loan to,
any of its employees or made any increase in, or any addition to, other benefits
to which any of its employees are entitled (in each case other than increases in
salaries or other compensation in the ordinary course of business consistent
with past practice and that in the aggregate have not resulted in a SPAR
Material Adverse Effect);

        (l) changed any of the accounting principles followed by it or the
methods of applying such principles, other than the contemplated change for
certain of the SPAR Marketing Companies from "subchapter s" status to
"subchapter c" status for federal income tax purposes (to be effected shortly
before the Effective Time) and other changes in implementing the SPAR Premerger
Transactions;

        (m) except as contemplated by the SPAR Premerger Agreements or this
Agreement, entered into any transaction other than in the ordinary course of
business consistent with past practice;

        (n) except as contemplated by the SPAR Premerger Agreements or this
Agreement, changed its authorized capital or its securities outstanding or
otherwise changed its ownership interests, or granted any options, warrants,
calls, conversion rights or commitments with respect to any of its capital stock
or other ownership interests; or

        (o) agreed to take any of the actions referred to above.

        Section 3.18. Books of Account. Except as otherwise set forth in the
SPAR Disclosure Letter: (a) the books, records and accounts of each SPAR
Marketing Company accurately and fairly reflect, in reasonable detail, the
transactions and the assets and liabilities of such SPAR Marketing Company; and
(b) no SPAR Marketing Company has engaged in any transaction, maintained any
bank account or used any of the funds of such SPAR


                                      -17-


<PAGE>   23

Marketing Company except for transactions, bank accounts and funds that have
been and are fairly reflected in the normally maintained books and records of
the business.

        Section 3.19. Environmental Matters. Except as otherwise set forth in
the SPAR Disclosure Letter:

        (a) Each SPAR Marketing Company has secured, and is in compliance in all
material respects with, all Environmental Permits (as such term is defined
below), with respect to any premises on which its business is operated. Each
SPAR Marketing Company is in compliance in all material respects with all
applicable Environmental Laws (as hereinafter defined).

        (b) As used herein: (i) "Environmental Laws" shall mean any and all
treaties, laws, regulations, ordinances, enforceable requirements, binding
determinations, orders, decrees, judgments, injunctions, permits, approvals,
authorizations, licenses or binding agreements issued, promulgated or entered
into by any Governmental Entity, relating to the environment, preservation or
reclamation of natural resources, or to the management, Release (as defined
below) or overtly threatened Release of or exposure to Hazardous Substances (as
such term is defined below), including, CERCLA (as such term is defined below),
the Resource Conservation and Recovery Act. 42 U.S.C. Section 6901 et seq., the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Clean
Air Act, 42 U.S.C. Section 7401 et seq., the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq., the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq., the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C.
Section 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., and any similar or implementing state or local law and all
amendments or regulations promulgated thereunder; (ii) "Release" shall mean any
spill, emission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching, emanation or migration of any Hazardous Substance in, into,
onto or through the environment (including ambient air, surface water, ground
water, soils, land surface, subsurface strata, workplace or structure); (iii)
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq.; (iv) "Hazardous Substances" shall
mean any waste or other substance that is listed, defined, designated, or
classified as, or otherwise determined to be, hazardous, radioactive, or toxic
under or pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or
synthetic substitutes therefor and asbestos or asbestos-containing materials;
and (v) the term "Environmental Permits" means all permits, licenses, approvals
or authorizations from any Governmental Entity required under Environmental
Laws.

        (c) No SPAR Marketing Company has: (x) received any written
communication from any Governmental Entity that alleges that any SPAR Marketing
Company is not in compliance in any material respect with any Environmental Laws
or Environmental Permits; (y) entered into or agreed to any court decree or
order, and no SPAR Marketing Company is subject to any judgment, decree or
order, relating to compliance with any Environmental Law or to investigation or
cleanup of a Hazardous Substance under any Environmental Law in any material
respect; or (z) received a CERCLA 104(e) information request or has been named a
potentially responsible party for any National Priorities List site under CERCLA
or any site under analogous state law or received an analogous notice or request
from any non-U.S. Governmental Entity, which notice, request or any resulting
inquiry or litigation has not been fully and finally resolved without
possibility of reopening. No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the SPAR Marketing Companies, overtly
threatened to or against any material assets or properties of any SPAR Marketing
Company pursuant to any Environmental Law.

        (d) To the knowledge of the SPAR Marketing Companies: (i) there has been
no unlawful treatment, storage, disposal or release by any SPAR Marketing
Company or any of its representatives of any Hazardous Substance on any SPAR
Premises; (ii) there has been no unlawful treatment, storage, disposal or
release of any Hazardous Substance on any SPAR Premises; (iii) there are no
aboveground storage tanks located on or underground storage tanks located within
any SPAR Premises; (iv) each aboveground storage tank formerly located on or
underground storage tank formerly located within any SPAR Premises (if any) have
been removed in accordance with


                                      -18-


<PAGE>   24

all Environmental Laws and no residual contamination from any Hazardous
Substance, if any, remains at such sites in excess of applicable standards under
Applicable Law; (v) there are no polychlorinated biphenyls ("PCBs") leaking from
any article, container or equipment located on or under any SPAR Premises, and
there are no such articles, containers or equipment containing leaking PCBs; and
(vi) there is no asbestos containing material not contained in a manner
reasonably acceptable under Applicable Law in any material respect located on or
under any SPAR Premises.

        Section 3.20. No Illegal Payments. No SPAR Marketing Company and, to the
knowledge of the SPAR Marketing Companies, no affiliate, officer, agent or
employee of any SPAR Marketing Company, has directly or indirectly on behalf of
or with respect to any SPAR Marketing Company during the past five years, (a)
made any unlawful domestic or foreign political contributions, (b) made any
payment or provided services that were unlawful in any material respect for such
Person to make or provide or for the recipient to receive, (c) received any
payment or services that were unlawful in any material respect for the payer or
the provider of such services to make or provide, or (d) made any payment to any
person or entity, or agent or employee thereof, in connection with any SPAR
Contract to induce such person or entity to enter into such SPAR Contract that
were unlawful in any material respect for the payer to make or provide or the
recipient to receive. No SPAR Marketing Company has during the past five years,
(i) had any transactions or payments not recorded in their accounting books and
records in accordance with GAAP in any material respect, or (ii) had any
off-book bank or cash accounts or "slush funds" related to any SPAR Marketing
Company.

        Section 3.21. Brokers. The SPAR Disclosure Letter lists all investment
banking fees, finders' fees, brokers' commissions and similar payments which any
SPAR Marketing Company or (to the knowledge of any SPAR Marketing Company) any
SPAR Principal has paid or will be obligated to pay in connection with the
transactions contemplated by the SPAR Premerger Agreements or this Agreement.

        Section 3.22. No Misrepresentation by the SPAR Marketing Companies. The
representations and warranties of the SPAR Marketing Companies made or contained
in this Agreement (whether with respect to any SPAR Marketing Company or
otherwise), and the information contained in the SPAR Disclosure Letter and the
other certificates, schedules and documents furnished by or on behalf of any
SPAR Marketing Company in connection with the transactions contemplated by this
Agreement (whether with respect to any SPAR Marketing Company or otherwise), do
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein in order to make it, in the light of
the circumstances under which made, not misleading.


                                   ARTICLE IV

                REPRESENTATIONS AND WARRANTIES OF THE PIA PARTIES

        Except as otherwise disclosed in that certain letter of even date
herewith delivered to the SPAR Parties prior to the execution hereof (which
letter shall contain appropriate references and cross references to identify the
Sections hereof to which the information in such letter relates) (the "PIA
Disclosure Letter"), each PIA Party, jointly and severally, represents and
warrants to the SPAR Parties as follows:

        Section 4.01. Corporate Existence. Except as otherwise disclosed in the
PIA Disclosure Letter:

        (a) Each PIA Party is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation. PIA Delaware has
no subsidiaries other than PIA California. The PIA Disclosure Letter sets forth
a complete list of the subsidiaries of PIA California (individually, a "PIA
Subsidiary" and collectively, the "PIA Subsidiaries") and the owner of each.


                                      -19-


<PAGE>   25

        (b) Each PIA Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. PIA Delaware, PIA California, and the PIA Subsidiaries are
sometimes collectively referred to individually as a "PIA Company" and
collectively as the "PIA Companies".

        (c) Each PIA Company is duly qualified to conduct business and is in
good standing as a foreign corporation in each jurisdiction in which the conduct
of its business requires it to be so qualified, except where the failure to be
so qualified would not have a material adverse effect on the business,
operations, properties, assets or financial condition of the PIA Companies taken
as a whole (a "PIA Material Adverse Effect").

        (d) As of the date of this Agreement, except to the extent it is the
sole stockholder of another PIA Company, no PIA Company owns, of record or
beneficially, or controls, directly or indirectly, any capital stock, any
securities convertible into capital stock or any other equity interest in any
corporation, association or other business entity or is, directly or indirectly,
a participant in any joint venture, partnership or other non-corporate entity.

        Section 4.02. Authorization and Enforceability. Except as otherwise
disclosed in the PIA Disclosure Letter:

        (a) Each PIA Party has the corporate power , authority and legal right
to execute, deliver and perform this Agreement and the other Merger Documents to
which it is a party.

        (b) The execution, delivery and performance of this Agreement and each
of the other Merger Documents by each PIA Party (to the extent it is a party
thereto) have been duly authorized by all necessary corporate action and no
further corporate action on the part of any PIA Party is necessary to authorize
this Agreement or any other Merger Document to which it is a party or the
performance of the transactions contemplated hereby or thereby; provided
however, that the issuance of the shares of PIA Delaware Stock pursuant to
Section 2.01(a) (the "Share Issuance") (i) must be approved by the stockholders
of PIA Delaware in accordance with Rule 4310(c)(25) of The Nasdaq Stock Market
(the "Nasdaq Rules") and (ii) cannot be effected prior to the approval of the
Proposed PIA Certificate of Amendment (as defined in Section 4.03(b) hereof) by
the stockholders of PIA Delaware as required by the General Corporation Law of
the State of Delaware (the "DGCL").

        (c) This Agreement has been duly executed and delivered on behalf of
each PIA Party and constitutes a legal, valid and binding obligation of each PIA
Party, enforceable in accordance with its terms, except as may be limited by the
Bankruptcy Exceptions.

        Section 4.03. Capital Stock of the PIA Parties. Except as otherwise
disclosed in the PIA Disclosure Letter:

        (a) As of the date of this Agreement, the authorized capital stock of
PIA Delaware consists of (i) 15,000,000 shares of PIA Delaware Stock, of which
5,478,458 shares are issued and outstanding and fully paid and non assessable,
and (ii) 3,000,000 shares of preferred stock, $0.01 par value per share, of
which none have been issued or are outstanding. All of the issued and
outstanding shares of capital stock of PIA California are owned beneficially and
of record by PIA Delaware, all of the issued and outstanding shares of capital
stock of each of the PIA Subsidiaries are owned beneficially and of record by
PIA California, and all such shares of capital stock are free and clear of all
Restrictions and have been validly issued and are fully paid and nonassessable.

        (b) The Board of Directors of PIA Delaware (the "PIA Delaware Board")
(i) has authorized and approved the adoption of an amendment to PIA Delaware's
certificate of incorporation in the form annexed hereto as Exhibit E (together
with such changes as may be made therein in accordance with the PIA Delaware
Board's approval, but subject to the consent of the SPAR Parties, the "Proposed
PIA Certificate of Amendment"), which (among other things) provides for an
increase in the authorized number of shares of PIA Delaware Stock to 47,000,000
shares and changes the name of PIA Delaware to "SPAR GROUP, INC." (or such other
name as the Parties may mutually agree


                                      -20-


<PAGE>   26
prior to the mailing of the PIA Proxy Materials) and deletes Article Tenth
containing the prohibition against actions by stockholders without a meeting,
and (ii) has directed that the Proposed PIA Certificate of Amendment be
submitted to PIA Delaware's stockholders at the PIA Stockholders Meeting (as
such term is defined in Section 5.01). Upon the approval of the Proposed PIA
Certificate of Amendment by the stockholders of PIA Delaware as required by the
DGCL and the filing thereof with the Secretary of State of the State of
Delaware, the shares of PIA Delaware Stock to be issued in connection with the
Merger will be duly authorized and, when issued as contemplated hereby at and
after the Effective Time, will be validly issued, fully paid and nonassessable
and free of all Restrictions.

        (c) The PIA Disclosure Letter sets forth a complete list of all
outstanding rights, subscriptions, warrants, calls, convertible securities,
unsatisfied preemptive rights, options or other agreements or arrangements of
any kind pursuant to which any PIA Company may be required to issue any of its
authorized but unissued capital stock. No PIA Company has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any
outstanding shares of capital stock or to pay any dividend or make any
distribution in respect thereto. The PIA Delaware Board has approved the
adoption of the PIA Special Purpose Plan, a copy of which is annexed hereto as
Exhibit B, pursuant to which the Substitute Options will be issued as provided
in Section 2.04 hereof. The PIA Delaware Board has also approved an amendment
and restatement of the PIA 1995 Stock Option Plan, a copy of which is annexed
hereto as Exhibit F (together with such changes as may be made therein in
accordance with the PIA Delaware Board's approval, but subject to the consent of
the SPAR Parties, the "Proposed Plan Amendment"), that would (among other
things) increase the number of shares of Common Stock issuable upon the exercise
of options granted thereunder from 1,300,000 shares to 3,500,000 shares, subject
to the consummation of the Merger.

        Section 4.04. No Violations. Except as otherwise disclosed in the PIA
Disclosure Letter:

        (a) The execution, delivery and performance of this Agreement by the PIA
Parties do not and will not violate or result in the breach of any term,
condition or provision of, or require the consent of any other person under (i)
any existing Applicable Law to which any PIA Company is subject, (ii) any
judgment, order, writ, injunction, decree or award of any Governmental Entity
that is applicable to any PIA Company (each a "PIA Court Order"), (iii) the
charter documents of any PIA Company, or (iv) any PIA Contract, PIA Realty
Lease, material PIA Personalty Lease or other material mortgage, indenture,
agreement, contract, commitment, lease, permit, plan, authorization, instrument
or document to which any PIA Company is a party, by which any PIA Company has
any rights or by which any of the properties or assets of any PIA Company is
bound or subject (each a "Material PIA Document").

        (b) The execution, delivery and performance of this Agreement by each
PIA Party (to the extent it is a party thereto) will not be reasonably likely to
result in (A) any termination, cancellation or acceleration of any Material PIA
Document or (B) termination, modification or other change in any material
respect of the existing rights and obligations of any PIA Party under such
Material PIA Document.

        (c) No PIA Company, and to the knowledge of each PIA Party, no other
party thereto, is in default in any material respect under any Material PIA
Document, and to the knowledge of each PIA Party, no event has occurred that
with the giving of notice or lapse of time (or both) would constitute such a
default.

        (d) Other than the filing of a pre-merger notification report under the
HSR Act and in connection with or in compliance with the provisions of the
Securities Act and the Exchange Act, no authorization, approval or consent of,
and no registration or filing with, any Governmental Entity is required in
connection with the execution and delivery of this Agreement by any PIA Party
and the performance of the transactions contemplated hereunder .

        Section 4.05. Financial Statements. Except as otherwise disclosed in the
PIA Disclosure Letter: PIA Delaware has delivered to the SPAR Parties copies of
the consolidated balance sheets of the PIA Companies at December 31, 1998 (the
"PIA Balance Sheet Date"), and December 31, 1997, and the related consolidated
statements of income, cash flows and changes in stockholder's equity for the
fiscal years then ended, together with the report of Deloitte & Touche LLP
thereon (the "PIA Financial Statements"). The PIA Financial Statements have been
prepared


                                      -21-


<PAGE>   27

in accordance with GAAP consistently applied throughout the periods involved and
fairly present the consolidated financial position and the consolidated results
of operations of the PIA Companies as of the dates and for the periods
indicated.

        Section 4.06. Permits. Except as otherwise disclosed in the PIA
Disclosure Letter:

        (a) Each PIA Company owns, holds, possesses or lawfully uses in the
operation of its business all governmental franchises, licenses, permits,
easements, rights, applications, filings, registrations and other authorizations
that are necessary for it to conduct its business as now conducted in all
material respects or for the ownership and use of the material assets owned or
used by such PIA Company in the conduct of its business (each a "PIA Permit" and
collectively the "PIA Permits").

        (b) Each PIA Permit is valid and in full force and effect and no PIA
Permit will be terminated or impaired in any material respect or become
terminable as a result of the Merger or any other transaction contemplated by
this Agreement.

        Section 4.07. Real and Personal Property. Except as otherwise set forth
in the PIA Disclosure Letter:

        (a) All buildings, leasehold improvements, structures, facilities, and
fixtures used in any material respect by any PIA Company in the conduct of its
business (limited in the case of leased property to the primary demised
premises) (each a "PIA Premises") (i) are leased by a PIA Party pursuant to a
valid lease (each a "PIA Realty Lease" and collectively the "PIA Realty
Leases"), except as may be limited by the Bankruptcy Exceptions, (ii) are in
good operating condition and repair (subject to normal wear and tear,
replacement, retirement, and maintenance), (iii) are usable in the regular and
ordinary course of business, and (iv) used in compliance in all material
respects with all Applicable Laws and authorizations relating to their
construction (limited to tenant improvements in the case of leased property),
use and operation. A list of all PIA Realty Leases is set forth in the PIA
Disclosure Letter. No PIA Company owns any real estate.

        (b) All items of equipment and other tangible property and assets used
in any material respect by any PIA Company in the conduct of its business (i)
are either (A) owned by a PIA Company, or (B) leased by a PIA Company pursuant
to a valid lease (each a "PIA Personalty Lease" and collectively the "PIA
Personalty Leases"), except as may be limited by the Bankruptcy Exceptions, (ii)
are in good operating condition and repair (subject to normal wear and tear,
replacement, retirement, and maintenance), (iii) are usable in the regular and
ordinary course of business, and (iv) comply in all material respects with all
Applicable Laws and authorizations relating to their use and operation. A list
of all PIA Personalty Leases is set forth in the PIA Disclosure Letter.

        Section 4.08. Contracts and Commitments. The PIA Disclosure Letter sets
forth an accurate, correct and complete list of all material agreements,
contracts, commitments, arrangements and understandings, written or oral,
including all amendments and supplements thereto, of each PIA Company (the "PIA
Contracts"), to which any PIA Company is a party or is bound, or by which any of
their respective assets are bound, and which involve any:

        (a) agreement, contract, commitment or other legally binding arrangement
with any present or former (within the past two years) officer, employee or
material consultant involving annual salaries or minimum annual payments of
$100,000 or more (excluding normal salesmen's commissions);

        (b) agreement, contract, commitment or other legally binding arrangement
for the future purchase of, or payment for, supplies or products, or for the
performance of services by a third party involving in any one case $100,000 or
more (other than those that may be terminated without penalty);


                                      -22-


<PAGE>   28

        (c) agreement, contract, commitment or other legally binding arrangement
to sell or supply products or to perform services involving in any one case
$100,000 or more (other than those that may be terminated without penalty);

        (d) agreement, contract, commitment or other legally binding arrangement
continuing over a period of more than twelve months from the date hereof and
requiring more than $100,000 in annual payments by a PIA Company;

        (e) sales representative, sales agency or similar agreement, contract,
commitment or other legally binding arrangement with any Person not under the
employ, control or direction of a PIA Company;

        (f) agreement, contract, commitment or other legally binding arrangement
containing, a provision to indemnify any person or entity or assume any tax,
environmental or other non-ordinary course liability;

        (g) agreement, contract, commitment or other legally binding arrangement
with any Governmental Entity (other than a PIA Permit);

        (h) note, debenture, bond, equipment trust agreement, letter of credit
agreement, loan agreement or other contract for the borrowing or lending of
money, or any guarantee, pledge or undertaking of or credit support for the
indebtedness of any other person by any PIA Company;

        (i) agreement, contract, commitment or other legally binding arrangement
for any charitable or political contribution;

        (j) agreement, contract, commitment or other legally binding arrangement
for any capital expenditure or leasehold improvement in excess of $100,000;

        (k) agreement, contract, commitment or other legally binding arrangement
limiting or restraining: (i) any PIA Company or any successor thereto from
engaging in the businesses of the SPAR Parties or PIA Parties post Merger (other
than any customer contract not in excess of $100,000 that may contain such a
prohibition with respect to the performance of services for the customer's
competitors); or (ii) to the knowledge of any PIA Delaware or PIA California,
any employee of any PIA Company from engaging in or competing with the
businesses of the SPAR Parties or PIA Parties post Merger on behalf of the
Parties; or

        (l) agreement, contract, commitment or other legally binding arrangement
of any PIA Company not made in the ordinary course of business (other than as
would have been disclosable in one of the preceding clauses but for the amount
or term thereof).

in each case excluding the PIA Realty Leases, the PIA Personalty Leases and this
Agreement (which are not intended, and shall not be deemed or construed, to be
PIA Contracts). Each of the PIA Contracts is valid and enforceable in all
material respects, except as may be limited by the Bankruptcy Exceptions. No PIA
Company is nor has ever been a party to any contract with any Governmental
Entity subject to retroactive price redetermination or renegotiation.

        Section 4.09. Insurance. Except as otherwise disclosed in the PIA
Disclosure Letter: (a) the assets, properties and operations of each PIA Company
are insured under various policies of general liability, workers' compensation
and other forms of insurance in amounts which are adequate in the judgment of
the PIA Companies in relation to the business and assets of such PIA Company;
(b) all such policies are in full force and effect in accordance with their
terms, no notice of cancellation has been received and to the knowledge of the
PIA Companies with respect to any such policy, and there is no existing default
or event that with the giving of notice or lapse of time (or both) would
constitute a material default under any such policy; and (c) no PIA Company has
been refused any


                                      -23-


<PAGE>   29

insurance, nor has any Company's coverage been limited, by any insurance carrier
to which it has applied for insurance or with which it has carried insurance
during the past five years.

        Section 4.10. Employees. Except as otherwise disclosed in the PIA
Disclosure Letter: (a) there have not been in the past five years and, to the
knowledge of the PIA Parties, there are not pending, any organized or
coordinated labor disputes, work stoppages, requests for representation, pickets
or work slow-downs due to labor disagreements; (b) there are and have been no
unresolved material violations of any laws of any Governmental Entity respecting
the employment of any employees; (c) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the PIA Parties,
overtly threatened that would be reasonably likely to be brought or filed with
the National Labor Relations Board or similar body in any foreign country; (d)
the PIA Disclosure Letter describes each collective bargaining agreement which
covers any employees of any PIA Company; and (e) each PIA Company has paid or
properly accrued in accordance with GAAP in the ordinary course of business all
wages and compensation due to employees, including all vacations or vacation
pay, holidays or holiday pay, sick days or sick pay, and bonuses.

        Section 4.11. Employee Benefit Plans and Arrangements. Except as
otherwise disclosed in the PIA Disclosure Letter:

        (a) The PIA Disclosure Letter sets forth a complete and accurate list of
each Benefit Plan covering any present or former officers, employees,
consultants or directors of any PIA Company (a "PIA Benefit Plan"). ERISA,
Benefit Plan, Welfare Plan, Pension Plan and Commonly Controlled Entity are
defined in Section 3.11.

        (b) Each PIA Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements applicable to such PIA Benefit
Plan. Each PIA Benefit Plan that is a Pension Plan (a "PIA Pension Plan") and
that is intended to be qualified under Section 401(a) of the Code, has been
determined by the Internal Revenue Service to be so qualified and, to the
knowledge of the PIA Parties, no condition exists or has occurred that would
adversely affect any such determination. Neither any PIA Benefit Plan nor any
PIA Company, nor to the knowledge of any PIA Company any Commonly Controlled
Entity of any PIA Company or any trustee or agent of any PIA Benefit Plan, has
been or is presently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
applicable which would be reasonably likely to subject any PIA Company to a
material amount of tax or penalty imposed by Section 4975 of the Code or Section
502 of ERISA. To the knowledge of the PIA Companies, there is no event or
condition existing that would be deemed a "reportable event" (within the meaning
of Section 4043 of ERISA) with respect to which the thirty-day notice
requirement has not been waived. To the knowledge of the PIA Parties, no
condition exists that would be reasonably likely to subject any PIA Company to a
material amount of penalty under Section 4071 of ERISA.

        (c) Neither any PIA Company nor any Commonly Controlled Entity of any
PIA Company is or has ever been party to any "'multi-employer plan," as that
term is defined in Section 3(37) of ERISA. True and correct copies of (i) the
most recent annual report (Form 5500 series) and any attached schedules for each
PIA Benefit Plan (if any such report was required by applicable law), (ii) the
most recent summary plan description for each PIA Benefit Plan and (iii) the
most recent determination letter issued by the Internal Revenue Service for each
PIA Pension Plan have been provided to the SPAR Parties.

        (d) With respect to each PIA Benefit Plan, there are no actions. suits
or claims (other than routine claims for benefits in the ordinary course or
relating to qualified domestic relations orders within the meaning of Section
414(p) of the Code) pending or, to the knowledge of the PIA Parties, overtly
threatened against any PIA Benefit Plan, any PIA Company, any Commonly
Controlled Entity of any PIA Company or any trustee or agent of any PIA Benefit
Plan, nor to the knowledge of the PIA Parties is there any reasonable basis for
such claims.


                                      -24-


<PAGE>   30

        (e) With respect to each PIA Benefit Plan to which any PIA Company or
any Commonly Controlled Entity of any PIA Company is a party which constitutes a
group health plan subject to Section 4980B of the Code, each such PIA Benefit
Plan substantially complies, and in each case has substantially complied, with
all applicable requirements of Section 4980B of the Code. There is no
outstanding material liability (except for premiums that have not become
overdue) or other accrued but unpaid obligations under Title IV of ERISA with
respect to any PIA Pension Plan and no condition exists that would be reasonably
expected to result in any PIA Company incurring a material liability under Title
IV of ERISA, either directly or with respect to any Commonly Controlled Entity
of any PIA Company. All premiums payable to the PBGC have been paid when due.
Neither the PBGC nor any PIA Company nor any Commonly Controlled Entity of any
PIA Company has instituted proceedings to terminate any PIA Pension Plan that is
subject to Title IV of ERISA and the PBGC has not informed any PIA Company of
its intent to institute proceedings to terminate any such plan. Full payment has
been made of all amounts that any PIA Company or any Commonly Controlled Entity
of any PIA Company was required to have paid as a contribution to any PIA
Pension Plan that is subject to Title IV of ERISA (with applicability determined
as of the last day of the most recent fiscal year of each of the PIA Pension
Plans ended prior to the date of this Agreement), and none of any PIA Pension
Plans has incurred any "accumulated funding deficiency" (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, as of the last
day of the most recent fiscal year of each such PIA Pension Plan ended prior to
the date of this Agreement.

        (f) To the knowledge of the PIA Parties, the actuarial assumptions
utilized, where appropriate, in connection with determining the funding of each
PIA Pension Plan that is a defined benefit pension plan (as set forth in the
actuarial report for such PIA Pension Plan) are reasonable. Copies of the most
recent actuarial reports have been furnished to the SPAR Parties. Based on such
actuarial assumptions, as of the PIA Balance Sheet Date, the fair market value
of the assets or properties held under each such PIA Pension Plan exceeds the
actuarially determined present value of all accrued benefits of such PIA Pension
Plan (whether or not vested) determined on an ongoing basis. Each PIA Benefit
Plan is, and its administration is and at all times has been in substantial
compliance with, and no PIA Company has received any claim or notice that any
such PIA Benefit Plan is not in substantial compliance with, its terms and all
Applicable Laws, including without limitation, to the extent applicable, the
requirements of ERISA and the Code. No PIA Company and no Commonly Controlled
Entity of any PIA Company is in default in any material respect in performing
any of its contractual obligations under any PIA Benefit Plan or any related
trust agreement or insurance contract. There are no material outstanding
liabilities of any PIA Benefit Plan other than liabilities for benefits to be
paid to participants in such PIA Benefit Plan and their beneficiaries in
accordance with the terms of such PIA Benefit Plan. Each PIA Benefit Plan may be
amended or modified or terminated by the applicable PIA Company or a Commonly
Controlled Entity of a PIA Company at any time without liability except under
any defined pension benefit plan. No PIA Benefit Plan other than a PIA Pension
Plan, retiree medical plan or severance plan provides benefits to any individual
after termination of employment.

        (g) The consummation of the transactions contemplated by this Agreement
will not (A) entitle any employee of any PIA Company to severance pay,
unemployment compensation or any other payment or benefit; (B) accelerate the
time of payment or vesting, or increase the amount of compensation due to any
such employee; (C) result in any liability under Title IV of ERISA; (D) result
in any prohibited transaction described in Section 406 of ERISA or Section 4975
of the Code for which an exemption is not available; or (E) result (either alone
or in conjunction with any other event) in the payment or series of payments by
any PIA Company or any of its affiliates to any person of an "excess parachute
payment" within the meaning of Section 280G of the Code.

        (h) With respect to each PIA Benefit Plan that is funded wholly or
partially through an insurance policy, all material amounts of premiums required
to have been paid to date under the insurance policy have been paid, all
material amounts of premiums required to be paid under the insurance policy
through the Closing Date will have been paid on or before the Closing Date and,
as of the Closing Date, there will be no material amount of liability of any PIA
Company or any Commonly Controlled Entity of any PIA Company under any insurance
policy or ancillary agreement with respect to such insurance policy in the
nature of a retroactive rate adjustment, loss sharing


                                      -25-


<PAGE>   31

arrangement or other actual or contingent liability arising wholly or partially
out of events occurring prior to the Closing Date.

        (i) Each PIA Benefit Plan that constitutes a "welfare benefit plan,"
within the meaning of Section 3(i) of ERISA, for which contributions are claimed
by any PIA Company or any Commonly Controlled Entity of any PIA Company as
deductions under any provision of the Code, is in material compliance with all
applicable requirements pertaining to such deduction. With respect to any
welfare benefit fund (within the meaning of Section 419 of the Code) related to
a welfare benefit plan, there is no disqualified benefit (within the meaning of
Section 4976(b) of the Code) that would result in the imposition of a tax under
Section 4976(a) of the Code. All welfare benefit funds intended to be exempt
from tax under Section 501(a) of the Code have been determined by the Internal
Revenue Service to be so exempt and no event or condition exists or has occurred
which would adversely affect any such determination. No PIA Company has any
Benefit Plan outside of the United States.

        (j) No PIA Company has any Benefit Plan outside of the United States.

        (k) All persons classified by any PIA Company as independent contractors
or leased employees within the meaning of Section 414(n) of the Code ("PIA
Leased Employees") satisfy and have at all times satisfied the requirements of
applicable law to be so classified. Each PIA Company has fully and accurately
reported their compensation on IRS Forms 1099 when required to do so. No PIA
Company has any obligation to provide benefits with respect to such independent
contractors or PIA Leased Employees under any PIA Benefit Plan or otherwise.

        Section 4.12. Compliance with Law. Except as otherwise disclosed in the
PIA Disclosure Letter, each PIA Company has complied in all material respects
with each, and is not in violation in any material respect of, any Applicable
Law to which such PIA Company's business, operations, assets or properties are
subject.

        Section 4.13. Transactions With Affiliates. Except as otherwise
disclosed in the PIA Disclosure Letter, no stockholder and no director, officer
or employee of any PIA Company, or any member of his or her immediate family or
any other of its, his or her affiliates, owns or has a 5% or more ownership
interest in any material business, corporation or other entity that is or was
during the last three years a party to, or in any property which is or was
during the last three years the subject of, any contract, agreement, commitment
or legally binding arrangement with such PIA Company; and (b) the PIA Disclosure
Letter includes a complete list as of the date hereof of all material amounts
owed by any PIA Company to any PIA officer, director (other than salary and
expense reimbursements in the normal course) or affiliate or owed to any PIA
Company by any PIA officer, director or affiliate.

        Section 4.14. Litigation. Except as otherwise disclosed in the PIA
Disclosure Letter: (a) no litigation, including any arbitration, investigation
or other proceeding of or before any Governmental Entity is pending (or to the
knowledge of the PIA Parties) overtly threatened against any PIA Company, other
than litigation that (i) is not reasonably likely to be adversely determined or
(ii) if reasonably likely to be adversely determined, would not be reasonably
likely to have, individually or in the aggregate with other such litigation, a
PIA Material Adverse Effect; and (b) no PIA Company is a party to or subject to
the provisions of any PIA Court Order.

        Section 4.15. Taxes. Except as otherwise disclosed in the PIA Disclosure
Letter:

        (a) All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by any PIA Company
(the "PIA Tax Returns") with respect to any Taxes have been timely filed with
the appropriate governmental agencies in all jurisdictions in which such PIA Tax
Returns are required to be filed, and all such PIA Tax Returns are true,
complete and correct in all material respects and properly reflect the
liabilities of the PIA Companies for Taxes for the periods, property or events
covered thereby.

        (b) All Taxes, including (without limitation) those called for by the
PIA Tax Returns, required to be paid or withheld by any PIA Company and any
deficiency assessments, penalties and interest for which a notice


                                      -26-


<PAGE>   32

of assessment has been received (other than as may have been settled and paid in
full in accordance therewith) and other than those being contested, if any, as
set forth in the PIA Disclosure Letter, have been timely paid or withheld.

        (c) The accruals for Taxes contained in the PIA Financial Statements for
the Tax liabilities of the PIA Companies have been made in accordance with GAAP
as of that date and include adequate provision under GAAP for all deferred Taxes
(other than necessary increments due to the passage of time).

        (d) No PIA Company is or has at any time ever been a party to a Tax
sharing, Tax indemnity or Tax allocation agreement, and no PIA Company has
assumed any Tax liability of any other person or entity under contract. No PIA
Company has received any notice of assessment or proposed assessment in
connection with any PIA Tax Returns other than as may have been settled and paid
in full in accordance therewith, and there are no pending tax examinations of or
material tax claims asserted against any PIA Company or any of its assets or
properties. No PIA Company has extended or waived the application of, any
statute of limitations of any jurisdiction regarding the assessment or
collection of any Taxes. There are now (and as of immediately, following the
Effective Time there will be no liens (other than any lien for Taxes not yet
overdue and payable) on any of the assets or properties of any PIA Company
relating, to or attributable to Taxes. To the knowledge of the PIA Parties,
there is no reasonable basis for the assertion of any claim relating to or
attributable to Taxes that, if adversely determined, would result in any lien on
the assets of any PIA Company or otherwise have a PIA Material Adverse Effect.

        (e) None of the PIA Companies has any knowledge of any reasonable basis
for any additional assessment of any Taxes for any period ending on or before
the Closing Date (other than increased Taxes based upon increased business
units, business sites, payroll, profits or other taxable attribute relating to
an expanding enterprise prior to the Closing Date). All Tax payments related to
employees, including income tax withholding, FICA, FUTA, unemployment and
worker's compensation, required to be made by the PIA Companies have been fully
and properly paid, withheld, accrued or recorded.

        Section 4.16. Intellectual Property Matters. Except as otherwise
disclosed in the PIA Disclosure Letter:

        (a) The PIA Disclosure Letter sets forth all patents, trademarks, trade
names, service marks, copyrights, software, material trade secrets or material
know-how owned or used in any material respect by any PIA Company in the conduct
of its business (the "PIA Intellectual Property"), excluding, however, all
Commercial Software, which Commercial Software need not be set forth on such
schedule. All of the PIA Intellectual Property is owned by or licensed to one of
the PIA Companies free and clear of any liens (except insofar as a license or
the restrictions thereunder may constitute a lien).

        (b) There are no ongoing royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, from any PIA Company as licensor,
pertaining to the current use of the PIA Intellectual Property, except as may be
applicable under the Commercial Software.

        (c) No PIA Company infringes upon or unlawfully or wrongfully uses any
patent, trademark, trade name, service mark, copyright or trade secret owned or
claimed by any other person or entity. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the PIA Parties,
overtly threatened relating to any, patent, trademark, trade name, service mark,
copyright or trade secret formerly or currently used by any PIA Company. None of
the PIA Intellectual Property is subject to any outstanding order, decree or
judgment. No PIA Company has agreed to indemnify any person or entity for or
against any infringement of or by the PIA Intellectual Property. No present or
former employee of any PIA Company and no other person or entity owns or has any
proprietary, financial or other interest, direct or indirect, in whole or in
part, in any patent, trademark, trade name, service mark or copyright, or in any
application therefor, or in any trade secret, which any PIA Company owns,
possesses or uses in its operations as now or heretofore conducted.


                                      -27-


<PAGE>   33

        (d) All PIA Intellectual Property in the form of computer software that
is utilized by any PIA Company in the operation of its business is capable of
processing date data between and within the twentieth and twenty-first centuries
or can be rendered capable of processing such data prior to the date necessary
to avoid disruption of its business by utilizing the employees of one or more of
the PIA Companies in the normal course of business and by expenditure of not
more than $100,000 in excess of the cost of software purchased for reasons other
than the failure of existing software to be capable of such processing.

        Section 4.17. Existing Condition. Except as otherwise disclosed in the
PIA Disclosure Letter, since the PIA Balance Sheet Date, no PIA Company has:

        (a) incurred any liabilities, other than liabilities incurred in the
ordinary course of business consistent with past practice;

        (b) discharged or satisfied any lien or encumbrance or paid any
liabilities, other than in the ordinary course of business consistent with past
practice, or failed to pay or discharge when due any liabilities, other than in
the ordinary course of business consistent with past practice, or where the
obligation is being contested in good faith, and the failure to pay or discharge
has not caused and would not be reasonably likely to cause any PIA Material
Adverse Effect;

        (c) sold, encumbered, assigned or transferred any assets, properties or
rights or any interest therein, or made any agreement or commitment or granted
any option or right with, of or to any person to acquire any assets, properties
or rights of any PIA Company or any interest therein, except for sales and
dispositions in the ordinary course of business consistent with past practice
and except for the transactions contemplated under this Agreement;

        (d) created, incurred, assumed or guaranteed any indebtedness for money
borrowed, or mortgaged, pledged or subjected any of its assets to any mortgage,
lien, pledge, security interest, conditional sales contract or other encumbrance
of any nature whatsoever other than in the ordinary course of business
(including, without limitation, future advances and floating liens under
existing or replacement credit facilities);

        (e) made or suffered any early cancellation or termination of any
Material PIA Document (other than in the ordinary course of business with a
vendor to a PIA Company); or amended, modified or waived any substantial debts
or claims held by it under any Material PIA Document other than in the ordinary
course of business;

        (f) declared, set aside or paid any dividend or made or agreed to make
any other distribution or payment in respect of its capital shares or redeemed,
purchased or otherwise acquired or agreed to redeem, purchase or acquire any
shares of its capital stock or its other ownership interests;

        (g) suffered any damage, destruction or loss that has had or will have
(i) a PIA Material Adverse Effect, or (ii) a replacement cost individually or in
the aggregate at more than $100,000;

        (h) suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;

        (i) suffered any material adverse change in the business, operations,
properties, assets or financial condition of the PIA Parties taken as a whole;

        (j) received notice or had knowledge of any actual or overtly threatened
organized or coordinated labor trouble, strike or other similar occurrence,
event or condition of any similar character that has had or would be reasonably
likely to have a PIA Material Adverse Effect;


                                      -28-


<PAGE>   34

        (k) increased the salaries or other compensation of, or made any advance
(excluding advances for ordinary and necessary business expenses) or loan to,
any of its employees or made any increase in, or any addition to, other benefits
to which any of its employees are entitled (in each case other than increases in
salaries or other compensation in the ordinary course of business consistent
with past practice and that in the aggregate have not resulted in a PIA Material
Adverse Effect);

        (l) changed any of the accounting principles followed by it or the
methods of applying such principles;

        (m) except as contemplated by this Agreement, entered into any
transaction other than in the ordinary course of business consistent with past
practice;

        (n) except as contemplated by this Agreement, changed its authorized
capital or its securities outstanding or otherwise changed its ownership
interests, or granted any options, warrants, calls, conversion rights or
commitments with respect to any of its capital stock or other ownership
interests; or

        (o) agreed to take any of the actions referred to above.

        Section 4.18. Books of Account. Except as otherwise disclosed in the PIA
Disclosure Letter: (a) the books, records and accounts of each PIA Company
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of such PIA Company; and (b) no PIA Company has engaged
in any transaction, maintained any bank account or used any of the funds of such
PIA Company except for transactions, bank accounts and funds that have been and
are reflected in the normally maintained books and records of the business.

        Section 4.19. Environmental Matters. Except as otherwise disclosed in
the PIA Disclosure Letter:

        (a) Each PIA Company has secured, and is in compliance in all material
respects with, all Environmental Permits, with respect to any premises on which
its business is operated. Each PIA Company is in compliance in all material
respects with all applicable Environmental Laws.

        (b) No PIA Party has (x) received any written communication from any
Governmental Entity that alleges that any PIA Company is not in compliance in
any material respect with any Environmental Laws or Environmental Permits; (y)
entered into or agreed to any court decree or order, and no PIA Company is
subject to any judgment, decree or order, relating to compliance with any
Environmental Law or to investigation or cleanup of a Hazardous Substance under
any Environmental Law in any material respect; (z) received a CERCLA 104(e)
information request or has been named a potentially responsible party for any
National Priorities List site under CERCLA or any site under analogous state law
or received an analogous notice or request from any non-U.S. Governmental
Entity, which notice, request or any resulting inquiry or litigation has not
been fully and finally resolved without possibility of reopening. No lien,
charge, interest or encumbrance has been attached, asserted, or to the knowledge
of the PIA Parties, overtly threatened to or against any assets or properties of
any PIA Company pursuant to any Environmental Law.

        (c) To the knowledge of the PIA Companies: (i) there has been no
unlawful treatment, storage, disposal or release of any Hazardous Substance on
any PIA Premises; (ii) there has been no unlawful treatment, storage, disposal
or release of any Hazardous Substance on any PIA Premises; (iii) there are no
aboveground storage tanks located on or underground storage tanks located within
any PIA Premises; (iv) each aboveground storage tank formerly located on or
underground storage tank formerly located within any PIA Premises (if any) have
been removed in accordance with all Environmental Laws and no residual
contamination from any Hazardous Substance, if any, remains at such sites in
excess of applicable standards under Applicable Law; (v) there are no PCBs
leaking from any article, container or equipment located on or under any PIA
Premises and there are no such articles, containers or


                                      -29-


<PAGE>   35

equipment containing leaking PCBs; and (vi) there is no asbestos containing
material not contained in a manner reasonably acceptable under Applicable Law in
any material respect located on or under any PIA Premises.

        Section 4.20. No Illegal Payments. Except as otherwise disclosed in the
PIA Disclosure Letter: (a) no PIA Company and, to the knowledge of the PIA
Parties, no affiliate, officer, agent or employee of any PIA Company, has
directly or indirectly on behalf of or with respect to any PIA Company during
the past five years, (i) made any unlawful domestic or foreign political
contributions, (ii) made any payment or provided services that were unlawful in
any material respect for such Person to make or provide or for the recipient to
receive, (iii) received any payment or services that were unlawful in any
material respect for the payer to make or provide, or (iv) made any payment to
any person or entity, or agent or employee thereof, in connection with any PIA
Contract to induce such person or entity to enter into such PIA Contract that
were unlawful in any material respect for the payer to make or provide or the
recipient to receive; and (b) no PIA Company has during the past five years (i)
had any transactions or payments not recorded in their accounting books and
records in accordance with GAAP , or (ii) had any off-book bank or cash accounts
or "slush funds" related to any PIA Company.

        Section 4.21. Brokers. The PIA Disclosure Letter lists all investment
banking fees, finders' fees, brokers' commissions and similar payments which any
PIA Company has paid or will be obligated to pay in connection with the
transactions contemplated by this Agreement.

        Section 4.22. SEC Filings. PIA Delaware has delivered to the SPAR
Parties true and complete copies of (i) PIA Delaware's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 (the "PIA 10- K") as filed with
the Securities and Exchange Commission (the "Commission"), (ii) PIA's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and
October 2, 1998, and (iii) PIA's proxy statement relating to the annual meeting
of its stockholders held on May 12, 1998 (collectively, the "PIA SEC Filings").
As of the respective times such documents were filed or, as applicable, became
effective, the PIA SEC Filings did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

        Section 4.23. No Misrepresentation by the PIA Parties. The
representations and warranties of the PIA Parties made or contained in this
Agreement (whether with respect to any PIA Company or otherwise), and the
information contained in the PIA Disclosure Letter and the other certificates,
schedules and documents furnished by or on behalf of any PIA Party in connection
with the transactions contemplated by this Agreement (whether with respect to
any PIA Company or otherwise), do not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein in order
to make it, in the light of the circumstances under which made, not misleading.

        Section 4.24. Board Action; Opinion of Financial Advisor. The PIA
Delaware Board has unanimously determined that the transactions contemplated by
this Agreement are fair to and in the best interests of PIA Delaware's
stockholders and has resolved to recommend in the PIA Proxy Statement the
approval by PIA Delaware's stockholders of (i) the Share Issuance, (ii) the
Proposed PIA Certificate of Amendment, and (iii) the Proposed Plan Amendment.
PIA Delaware has received the opinion of ING Baring Furman Selz LLC, dated the
date of this Agreement, substantially to the effect that the Exchange Ratio is
fair to PIA Delaware and its stockholders from a financial point of view.

                                    ARTICLE V

                                    COVENANTS

        Section 5.01. PIA Proxy Statement; Stockholders Meeting. As promptly as
practicable after the execution of this Agreement, but in no event later than
April 8, 1999, PIA Delaware will file with the Commission preliminary proxy
materials ("Preliminary Proxy Materials") relating to the solicitation of


                                      -30-


<PAGE>   36

proxies for a special meeting of PIA Delaware's stockholders (the "PIA
Stockholders Meeting") seeking (among other things) stockholder approval of the
Share Issuance, the Proposed PIA Certificate of Amendment and the Proposed Plan
Amendment. PIA Delaware shall respond promptly to any comments made by the
Commission with respect to such preliminary proxy materials and cause a
definitive proxy statement (the "PIA Proxy Statement") and proxy to be mailed to
its stockholders at the earliest practicable time calling for the PIA
Stockholders Meeting at the earliest practicable time. PIA Delaware shall submit
the Share Issuance, the Proposed PIA Certificate of Amendment and the Proposed
Plan Amendment to its stockholders for approval at the PIA Stockholders Meeting.
The PIA Delaware Board shall recommend in the PIA Proxy Statement the approval
of (i) the Share Issuance, (ii) the Proposed PIA Certificate of Amendment, and
(iii) the Proposed Plan Amendment by its stockholders. Each SPAR Party and each
SPAR Principal will cooperate in the preparation of the PIA Proxy Statement and
shall provide PIA Delaware with all information reasonably requested by PIA
Delaware for inclusion in the PIA Proxy Statement. The PIA Parties and the SPAR
Parties shall use their reasonable best efforts to ensure that the PIA Proxy
Statement is not false or misleading with respect to any material fact, and does
not omit to state any material fact necessary in order to make the statements
therein not misleading. If, at any time prior to the date of the PIA
Stockholders Meeting, any event relating to any PIA Company is discovered by any
PIA Party that should be set forth in a supplement to the PIA Proxy Statement,
such PIA Party will promptly inform the SPAR Parties, and such amendment or
supplement shall be promptly filed with the Commission and disseminated to the
stockholders of PIA Delaware, to the extent required by applicable law. If, at
any time prior to the date of the PIA Stockholders Meeting, any event relating
to any SPAR Party is discovered by any SPAR Party that should be set forth in a
supplement to the PIA Proxy Statement, such SPAR Party will promptly inform PIA,
and such amendment or supplement shall be promptly filed with the Commission and
disseminated to the stockholders of PIA Delaware, to the extent required by
applicable law.

        Section 5.02. Conduct Prior to the Closing Date.

        (a) Except as otherwise contemplated in the SPAR Disclosure Letter, from
and after the date of this Agreement through the Closing Date, each SPAR Party
shall, and shall cause each other SPAR Party to, and each PIA Party shall, and
shall cause each other PIA Company to, use their respective reasonable best
efforts to: (i) conduct their respective businesses in the ordinary course and
consistent in all material respects with past practice; (ii) maintain and
service their respective properties and assets in order to preserve their value
and usefulness in the conduct of their respective business consistent with past
practice and commercially reasonable standards; (iii) keep available the
services of their current employees and agents and maintain their relations and
goodwill with suppliers, customers, distributors and any others with whom or
with which they have business relations; (iv) comply in all material respects
with all laws, ordinances, rules, regulations and orders; and (v) cause all of
the conditions to the consummation of the transactions contemplated by this
Agreement to be satisfied on or prior to the Closing Date.

        (b) Without limiting the generality of subsection (a) of this Section,
no PIA Party and no SPAR Party shall, without the prior written consent of SAI
in the case of any proposed action by a PIA Party, or PIA Delaware in the case
of any proposed action by a SPAR Party: (A) enter into any agreement or other
legally binding arrangement with respect to the acquisition or proposed
acquisition of any other corporation, business or entity, whether by means of an
asset purchase, stock purchase, merger or otherwise; (B) except as expressly
contemplated by this Agreement or upon the exercise of stock options outstanding
on the date hereof, issue or agree to issue, any shares of, or rights of any
kind to acquire any shares of its capital stock; (C) increase the compensation
payable or to become payable to any officer or director except in accordance
with employment agreements or benefit plans in effect on the date hereof and
except for increases consistent with past practice; (D) adopt or enter into any
bonus, profit sharing, pension, retirement, deferred compensation, employment or
other payment or employee compensation plan, agreement or arrangement except for
individual employment agreements and arrangements in the ordinary course of
business consistent with past practice; (E) make any loan or advance to, or
enter into any non-employment contract, lease or commitment with, any officer or
director; (F) assume, guarantee, endorse or otherwise become responsible for any
material obligations of any other individual, firm or corporation or make any
material loans or advances to any individual, firm or corporation (other than
pursuant to existing agreements disclosed to the other hereunder); (G) modify or
amend in any material respect or take any action to voluntarily terminate any
material contract (including, without limitation, in the case of


                                      -31-


<PAGE>   37

the SPAR Parties, any amendment to any agreement related to the MCI
Acquisition) or any amendment to the Field Service Agreement; (H) waive,
release, grant or (ii) for transfers of capital stock by the SPAR Principals to
each spouse, child, sibling, lineal descendant or ancestor whether by blood,
marriage or adoption, or anyone related by blood, marriage or adoption to such
individual, each trust, foundation, partnership, limited liability company or
other entity organized for gift or estate planning or other similar purposes, in
each case created principally for the benefit of one or more of the foregoing
persons, and each custodian or guardian of any property of one or more of the
foregoing persons in his capacity as such custodian or guardian (the "Family
Members"), or (iii) transfer any rights of material value except (i) in the
ordinary course of business or as contemplated under the Reorganization
Agreement or this Agreement; (I) transfer, lease, license, sell, mortgage,
pledge, dispose of or encumber any material assets other than in the ordinary
course of business and consistent with past practice; (J) take any action, other
than reasonable and usual actions in the ordinary course of business and
consistent with past practice, with respect to accounting policies or
procedures, except for changes required by GAAP; (K) settle or compromise any
material federal, state, local or foreign income tax proceeding or audit with
respect to such Party; or (L) enter into an agreement to do any of the
foregoing.

        Section 5.03. Consummation of the SPAR Reorganization Transactions; SPAR
Principal Action. The SPAR Parties shall cause the SPAR Reorganization
Transaction to be consummated no later than the Effective Time, in accordance
with the terms and provisions of the SPAR Reorganization Agreement and shall
cause the SPAR Principals to execute such written consents prior to the mailing
of the PIA Proxy Statement as shall be necessary to approve the SPAR
Reorganization Transactions and the Merger (the "SPAR Stockholder Action").

        Section 5.04. Access. Each Party (and in the case of the PIA Parties,
each PIA Company) shall give the other Party's officers, employees, counsel,
accountants and other representatives free and full access to and the right to
audit and inspect, during normal business hours with reasonable advance notice,
all of the premises, properties, assets, records, contracts and other documents
relating to such Party or company and shall permit them to consult with the
officers, employees, accountants, counsel and agents of such Party or company
for the purpose of making such investigation as the other Party shall desire to
make; provided, however, that such investigation shall not unreasonably
interfere with any Party's or company's business operations. Each Party (and in
the case of the PIA Parties, each PIA Company) shall furnish to the other Party
all such documents and copies of documents and records and information with
respect to the affairs of such Party or company and copies of any working papers
relating thereto as shall from time to time reasonably request. No information
or knowledge obtained in any investigation by any Party or any of its
representatives or affiliates pursuant to this Section or otherwise shall affect
or be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
Merger.

        Section 5.05. Negotiations. Except in the furtherance of the
transactions contemplated hereby, prior to the Closing Date, no PIA Party shall
or shall direct and cause its respective directors, officers, employees,
representatives or agents to, directly or indirectly, initiate, solicit or
encourage any inquiries or the making or implementation of any proposal or
offer, with respect to any merger, acquisition, consolidation, share exchange,
business combination or other transaction involving, or which would result in,
(A) the acquisition of a majority of the outstanding equity securities of any
PIA Company, (B) the issuance by any PIA Company, in a single transaction or a
series of related transactions, of equity securities which would represent upon
issuance a majority of the outstanding equity securities of PIA Party, or (C)
the acquisition of a majority of the consolidated assets of any PIA Company (any
such proposal or offer being hereinafter referred to as an"Acquisition
Proposal"), or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person or
entity relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Section shall prohibit the PIA Delaware Board from
exercising their respective fiduciary duties by (i) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal, or (ii) furnishing information to or entering into
discussions or negotiations with any person or entity that makes an unsolicited
bona fide Acquisition Proposal.

        Section 5.06. Press Releases and Other Communications. Except to the
extent required by law or by any listing agreement with the Nasdaq Stock Market,
no Party shall issue any press release or otherwise making any public statement
with respect to any of the transactions contemplated hereby without prior
consultation with the other Parties.


                                      -32-


<PAGE>   38

        Section 5.07. Third Party Approvals. Prior to the Closing, Date, each
Party shall use its best efforts to satisfy any requirement for notice and
approval of the transactions contemplated by this Agreement under all SPAR
Material Documents and all PIA Material Documents.

        Section 5.08. Notice to Bargaining Agents. Prior to the Closing Date,
each Party shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under any applicable collective bargaining
agreement.

        Section 5.09. Notification of Certain Matters.

        (a) Each Party shall give prompt notice to each other Party of (i) the
occurrence or non- occurrence of any event known to such Party which would be
likely to cause any representation or warranty of such Party contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Closing Date, and (ii) any failure of such Party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such Party
hereunder in any material respect.

        (b) Each Party shall have the continuing obligation until the Closing
Date to supplement or amend promptly its Disclosure Letter delivered to the
other Party group with respect to any matter hereafter arising or discovered
that, if existing or known at the date of this Agreement, would have been
required to have been set forth or described in such Disclosure Letter (in each
case, "Amended Disclosure") in order that the corresponding representation or
warranty would not have been untrue in any material respect, which may include
supplemental disclosure to a representation or warranty with respect to which no
disclosure was made previously. Any Amended Disclosure that would constitute a
failure to satisfy the condition precedent set forth in Section 6.02(a), (b) or
(c) or in Section 6.03(a), (b) or (c) shall not be effective unless consented to
in the sole discretion of the other Party group (i.e., by SPAR in the case of a
failure to satisfy Section 6.02(a), (b) or (c) and by PIA Delaware in the case
of a failure to satisfy Section 6.03(a), (b) or (c)). To the extent such consent
is obtained, or to the extent the condition precedent is waived on the Closing
Date, the Amended Disclosure shall be deemed effective.

        Section 5.10. Closing Net Worth. The SPAR Parties shall use their
reasonable best efforts to ensure that the Closing Net Worth (as such term is
defined in Section 7.01) is not less than the Target Amount (as such term is
defined in Section 7.01(b) hereof).

        Section 5.11. Post Merger Indemnification of Officers and Directors by
Parties.

        (a) For a period of six years following the Closing Date, no PIA Party
will (or will permit any other PIA Company to) and no SPAR Party will, amend,
repeal or limit in any way the provisions limiting the personal liability of any
present or former director, officer, employee or agent (and their respective
heirs and assigns) of any PIA Company or any SPAR Party (the "Indemnified
Parties"), as set forth in the certificate of incorporation or by-laws or such
company or party as of the date of this Agreement. In addition, for a period of
six years following the Closing Date, the PIA Parties shall, and shall cause
each of the other PIA Companies to, indemnify, to the fullest extent permitted
by applicable law, (i) the directors of each PIA Company as of the date of this
Agreement, (ii) any persons who served as directors of any PIA Company prior to
the date of this Agreement, (iii) all officers holding the title of Senior Vice
President or any higher office with any PIA Company as of the date of this
Agreement, in each case from and against any and all amounts for which an
employee may be indemnified under the corporate laws of its state of
incorporation. Without limiting the generality of the foregoing, costs and
expenses (including reasonable attorney's fees and expenses) incurred by such
indemnified person shall be advanced to or on behalf such indemnified person (in
advance of any final disposition of such matter) if such indemnified person (A)
agrees in writing with the indemnitor to repay all such advances in the event
that it is ultimately determined that he or she is not entitled to such
indemnification hereunder or under applicable law, and (B) furnishes reasonable
documentation with respect to such amounts.


                                      -33-


<PAGE>   39

        (b) This Section is expressly intended to benefit each of the
Indemnified Parties (each of whom shall be entitled to enforce the provisions of
this Section).

        (c) For a period of six years following the Closing Date, the PIA
Parties and the SPAR Parties shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained as of the
Closing Date (or substitute policies with reputable and financially sound
carriers of at least the same coverage and amounts containing terms and
conditions which are not materially less advantageous in the aggregate) with
respect to claims arising from or related to facts or events which occurred at
or prior to the Effective Time; provided, however, that no Party shall be
obligated to make annual premium payments for such insurance to the extent such
premiums exceed 150% of the annual premiums paid by such Party as of the date
hereof for such insurance (such 150% amount, the "Maximum Premium"). If such
insurance coverage cannot be obtained at all, or can only be obtained at an
annual premium in excess of the Maximum Premium, such Party shall maintain the
most advantageous policies of directors' and officers' insurance obtainable for
an annual premium equal to the Maximum Premium.

        Section 5.12. Further Assurances. The SPAR Parties shall at any time
after the Effective Time, upon request, take such further action and execute
such further agreements as may be necessary, desirable or proper to give effect
to the intentions of the parties as set forth in Section 6.03(g), (h), (i), (j),
and (k).


                                   ARTICLE VI

                              CONDITIONS PRECEDENT

        Section 6.01. Conditions to Each Party's Obligations. The respective
obligations of each Party hereunder are subject to the satisfaction (or to the
extent permitted by law, the waiver) at or prior to the Closing Date of the
following conditions:

        (a) Stockholder Approvals.

            (i) The Proposed PIA Certificate of Amendment shall have been
approved at the PIA Stockholders Meeting by the vote of a majority of the
outstanding shares of PIA Delaware Stock as required by Section 242 of the DGCL
and the Share Issuance shall have been approved at the PIA Stockholder Meeting
by the vote of a majority of the total votes cast with respect thereto.

            (ii) The Proposed Agreement and Plan Merger shall have been approved
by the vote of a majority of the outstanding shares of PIA Acquisition as
required by Section 92A.120 of the NGCL, and PIA Delaware (as the sole
shareholder of PIA Acquisition) hereby covenants and agrees that it will vote in
favor thereof.

            (iii) The Proposed Agreement and Plan Merger shall have been
approved pursuant to the SPAR Principals Action by the vote of a majority of
the outstanding shares of SAI Stock as required by Section 92A.120 of the NGCL.

        (b) Filing of the PIA Restated Certificate. The Proposed PIA Certificate
of Amendment shall have been duly filed with the Secretary of State of the State
of Delaware and become effective.

        (c) HSR. Any waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated.

        (d) Nasdaq Approval. The shares of PIA Delaware Stock issuable in
connection with the Merger as contemplated by this Agreement shall have been
authorized for listing on the Nasdaq Stock Market, upon official notice of
issuance, and the existing shares of PIA Delaware Stock shall continue to be
traded on such market.


                                      -34-


<PAGE>   40

        (e) No Injunctions. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and has
the effect of making illegal or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement.

        (f) SPAR Intellectual Property.

            (i) SMF, SMS and SIT shall have entered into the Business Manager
Agreement.

            (ii) STM shall have received the assignment of the SPAR trademark
registrations in the United States and Canada.

            (iii) STM shall have executed the SPAR Trademark Licenses with the
SMS and SIT.

        (g) Indemnity Agreement and Indemnity Escrow Agreement. The PIA Parties
and the SPAR Parties shall have executed and delivered the Limited
Indemnification Agreement with the SPAR Principals in substantially in the form
annexed hereto as Exhibit G with respect to the SMS tax litigation and ADVO
matters (the "Limited Indemnification Agreement"); and the Surviving
Corporation, the PIA Parties, the SPAR Marketing Companies and Parker Chapin
Flattau & Klimpl, LLP (the "Indemnity Escrow Agent"), shall have executed and
delivered to the SPAR Principals the Indemnity Escrow Agreement substantially in
the form annexed hereto as Exhibit H (the "Indemnity Escrow Agreement").

        Section 6.02. Conditions Precedent to the Obligations of the SPAR
Parties. The obligations of the SPAR Parties hereunder are subject to the
satisfaction (or waiver) on or prior to the Closing Date of the following
conditions:

        (a) Representations and Warranties. The representations and warranties
of the PIA Parties contained in this Agreement (other than as contained in
Section 4.17(i) hereof, which is addressed by Section 6.02(c), below) shall be
accurate in all material respects as of the Closing Date (other than as a result
of (i) any proposed or pending transactions described in the PIA Disclosure
Letter and this Agreement or (ii) any adverse change(s) in the overall economy
or in the market segments in which such parties do business) as though such
representations and warranties had been made as of such time.

        (b) Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by any PIA Party
on or before the Closing Date shall have been duty complied with and performed
in all material respects.

        (c) No Material Adverse Change. Except as previously disclosed in the
PIA Disclosure Letter: no material adverse change in the business, operations,
assets, properties or condition (financial or otherwise) of the PIA Companies
taken as a whole (a "PIA Material Adverse Change") shall have occurred since
December 31, 1998 (other than as a result of adverse change(s) in the overall
economy or in the market segments in which such parties do business, and with
the understanding that the loss of a single material customer as a result of the
announcement of the transactions contemplated by this agreement shall not
constitute a PIA Material Adverse Change); and since the PIA Balance Sheet Date
the PIA Companies (taken as a whole) shall not have suffered any material
uninsured loss or damage to any of its properties or assets that would be
reasonably likely to materially affect or impair the ability of the PIA
Companies to conduct their business as now conducted or as proposed to be
conducted.

        (d) Officer's Certificate. A certificate dated the Closing Date and
signed by the President or any Vice President of PIA Delaware shall have been
delivered to the SPAR Parties certifying that the conditions specified in the
foregoing clauses (a), (b) and (c) have been satisfied.


                                      -35-


<PAGE>   41
 (e) Election of Directors. The members of the PIA Delaware Board shall have
taken all necessary action to cause the PIA Delaware Board and the PIA
California Board, from and after the Effective Time, until duly changed, to be
comprised of seven members and to cause the following persons to be elected to
serve as the members of the PIA Delaware Board and of the PIA California Board,
until the next annual meeting or until their successors shall have been duly
elected and qualified: Robert G. Brown, William H. Bartels, Patrick W. Collins,
one person nominated by PIA Delaware (the "PIA Nominee") and one person
nominated by the SPAR Principals (the "SPAR Nominee") who is reasonably
acceptable to PIA Delaware. The PIA Nominee and the SPAR Nominee shall be
identified prior to the mailing of the PIA Proxy Statement and named therein.
Without limiting the generality of the foregoing, each member of the PIA
Delaware Board and each member of the PIA California Board who will not continue
in such capacity after the Effective Time, and each member of the Board of
Directors of each PIA Subsidiary, shall have delivered to the SPAR Parties a
resignation from such Board of Directors dated the Closing Date which shall
become effective at the Effective Time.

        (f) Appointment of Officers. The PIA Delaware Board shall have taken all
necessary action to cause the following persons to be appointed to the offices
indicated as of the Effective Time to serve until their successors shall have 
been duly elected and qualified:


<TABLE>
<CAPTION>
    Name                                          Office
    ----                                          ------
<S>                         <C>
Robert G. Brown             Chairman, Chief Executive Officer and President
William H. Bartels          Vice Chairman
Terry R. Peets              Vice Chairman
Cathy L. Wood               Chief Financial Officer and Executive Vice President
James R. Ross               Treasurer
</TABLE>


        (g) Opinion of Counsel. The SPAR Parties shall have received an opinion
from Riordan & McKinzie, counsel for the PIA Companies, dated the Closing Date
in form and substance reasonably satisfactory to the SPAR Parties.

        (h) Good Standing Certificates. The PIA Parties shall have delivered to
the SPAR Parties certificates, dated as of a date no earlier than five days
prior to the Closing Date, duly issued by the appropriate governmental authority
in each PIA Company's jurisdiction of incorporation and in each state in which
each PIA Company is qualified to do business, showing that each PIA Party is in
good standing and qualified to do business and that all state franchise and/or
income tax returns and taxes for such PIA Party for all periods prior to the
dates of such certificates have been filed and paid.

        Section 6.03. Conditions Precedent to the Obligations of the PIA
Parties. The obligations of the PIA Parties hereunder are subject to the
satisfaction (or waiver) on or prior to the Closing Date of the following
conditions:

        (a) Representations and Warranties. The representations and warranties
of the SPAR Parties contained in this Agreement (other than as contained in
Section 3.17(i) hereof, which is addressed by Section 6.03(c), below) shall be
accurate in all material respects as of the Closing Date (other than as a result
of any proposed or pending transactions described in the SPAR Disclosure Letter,
this Agreement and the SPAR Premerger Agreements or (ii) any adverse change(s)
in the overall economy or in the market segments in which such parties do
business) as though such representations and warranties had been made as of such
time.

        (b) Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by any SPAR Party
on or before the Closing Date shall have been duly complied with and performed
in all material respects.


                                      -36-


<PAGE>   42

        (c) No Material Adverse Change. Except as previously disclosed in the
SPAR Disclosure Letter: no material adverse change in the business, operations,
assets, properties, prospects or condition (financial or otherwise) of the SPAR
Parties taken as a whole (a "SPAR Material Adverse Change") shall have occurred
since December 31, 1998 (other than as a result of adverse change(s) in the
overall economy or in the market segments in which such parties do business, and
with the understanding that the loss of a single material customer as a result
of the announcement of the transactions contemplated by this agreement shall not
constitute a SPAR Material Adverse Change); and since the Interim SPAR Marketing
Balance Sheet Date the SPAR Parties (taken as a whole) shall not have suffered
any material uninsured loss or damage to their assets and properties that would
be reasonably likely to materially affect or impair the ability of the SPAR
Parties to conduct their business as now conducted or as proposed to be
conducted.

        (d) Certificate of the SPAR Parties. A certificate dated the Closing
Date and signed by each SPAR Party shall have been delivered to the PIA Parties
certifying that the conditions specified in the foregoing clauses (a), (b) and
(c) have been satisfied.

        (e) Opinion of Counsel. The PIA Parties shall have received an opinion
from Parker Chapin Flattau & Klimpl, LLP, counsel to the SPAR Parties and the
SPAR Principals, dated the Closing Date, in form and substance reasonably
satisfactory to the PIA Parties.

        (f) Good Standing Certificates. The SPAR Parties shall have delivered to
the PIA Parties certificates, dated as of a date no earlier than ten days prior
to the Closing Date (30 days in the case of separate tax certificates), duly
issued by the appropriate governmental authority in each SPAR Party's state of
incorporation and in each state in which each SPAR Party is qualified to do
business, showing that each SPAR Party is in good standing and qualified to do
business and that all state franchise and/or income tax returns and taxes for
such SPAR Party for all periods prior to the dates of such certificates have
been filed and paid.

        (g) SPAR Principals' and Parties' Mutual Releases. The SPAR Principals
shall have delivered to the PIA Parties a mutual release dated the Closing Date
releasing each SPAR Party from any and all claims of the SPAR Principals against
each such SPAR Party with respect to matters preceding the Closing Date.

        (h) Transfer of Other Assets. All assets and properties currently used
by any SPAR Party in the conduct of its business that are not owned (in whole or
in part) by, licensed to or leased by a SPAR Party as of the date of this
Agreement (if any) shall have been transferred or assigned to a SPAR Party
without the payment of any consideration therefor, as evidenced by the
certificate of the SPAR Parties and copies of all such assignments (if any).

        (i) Termination of Phantom Stock Plan. PIA Delaware shall have received
evidence reasonably satisfactory to it that the SPAR Phantom Stock Plan (the
"Phantom Plan") has been terminated and that all obligations of any SPAR Party
thereunder have been satisfied in full by the SPAR Parties, without any further
recourse to or liability any SPAR Party or the Surviving Corporation thereunder.

        (j) Termination or Separation of SPAR Benefit Plans. PIA Delaware shall
have received evidence reasonably satisfactory to it that either (at the option
of the SPAR Parties) (i) each SPAR Benefit Plan (A) has been terminated, or (B)
has been modified to exclude any employer other than a SPAR Party, or (ii) each
non- SPAR Party to a SPAR Benefit Plan shall have entered into a separation,
reimbursement and indemnity agreement with such SPAR Party on terms and
provisions reasonably acceptable to PIA Delaware providing for the eventual
exclusion of such person from the applicable SPAR Benefit Plan.

        (k) Termination of Buy-Sell Agreement. The SPAR Principals shall have
amended the Buy-Sell Agreement to terminate its applicability to the stock of
any SPAR Party.


                                      -37-


<PAGE>   43

                                   ARTICLE VII

                CLOSING NET WORTH; NONSURVIVAL OF REPRESENTATIONS

        Section 7.01. SPAR Closing Net Worth.

        (a) As soon as practicable, but in any event within thirty (30) days
following, the Closing Date, PIA Delaware shall cause Ernst & Young LLP to audit
the books of SAI and its subsidiaries to determine the SPAR Net Worth (as
hereinafter defined) immediately prior to the Merger (the "Closing Net Worth").
"SPAR Net Worth" shall mean the consolidated net worth of SAI and its
subsidiaries, calculated in accordance with generally accepted accounting
principles ("GAAP") consistently applied, excluding (i.e., without taking into
account) (i) up to $300,000 of non-capitalizable merger transaction charges and
other one time expenses, reserves or accruals related to the SPAR Reorganization
Transactions or the Merger, and (ii) any tax accruals and similar adjustments
necessitated by the SPAR Premerger Transaction.

        (b) Promptly after such calculation of the Closing Net Worth, the
Surviving Corporation shall deliver to the SPAR Principals written notice of the
Closing Net Worth as so calculated (the "Closing Net Worth Notice"). Following
the delivery of the Closing Net Worth Notice, the SPAR Principals shall have the
right to review the calculation thereof for a period of thirty (30) days after
the delivery of the Closing Net Worth Notice to the SPAR Principals (the "Review
Period"). If, the SPAR Principals do not provide PIA Delaware with written
objection to the calculation of the Closing Net Worth prior to the expiration of
the Review Period, then, (i) to the extent that the Closing Net Worth, as set
forth in the Closing Net Worth Notice, is greater than five hundred thousand
dollars ($500,000) (the "Target Amount"), no adjustment will be made, and the
SPAR Principals will have no further obligations hereunder; and (ii) to the
extent the Closing Net Worth, as set forth in the Closing Net Worth Notice, is
less than the Target Amount, the SPAR Principals shall pay to PIA Delaware,
within five (5) business days after the last day of the Review Period, the
amount of such shortfall, such payment obligation to be borne by the SPAR
Principals pro rata (44/72 by Mr. Brown and 28/72 by Mr. Bartels), and to be
satisfied either (at the election of the SPAR Principals) (A) by wire transfer
of immediately available funds to such account as PIA Delaware may designate or
(B) by corresponding reductions in the loans owed to the SPAR Principals from
SMCI.

        (c) If the SPAR Principals provide PIA Delaware with written objection
(which objection shall specify the basis for such objection in reasonable
detail) to the calculation of the Closing Net Worth prior to the expiration of
the Review Period, PIA Delaware and the SPAR Principals shall attempt to resolve
such dispute through good faith negotiations for a period of at least thirty
(30) days (or such longer period as PIA Delaware and the SPAR Principals may
agree). If PIA Delaware and the SPAR Principals cannot resolve such dispute in
such period, then such dispute shall be resolved by an independent nationally
recognized accounting firm which is reasonably acceptable to PIA Delaware and
the SPAR Principals (the "Independent Accounting Firm"). The Independent
Accounting Firm shall make its determination of the Closing Date Net Worth
within thirty (30) days of its selection. The determination made by the
Independent Accounting Firm shall be final and binding on the parties hereto.
The costs of the Independent Accounting Firm shall be borne by PIA Delaware.

        Section 7.02. Survival of Representations and Warranties. If the Merger
occurs, the representations and warranties made by the parties in this
Agreement, or in any certificate or other instrument delivered pursuant to this
Agreement, shall not survive the Merger, but rather shall terminate at the
Effective Time.


                                      -38-


<PAGE>   44

                                  ARTICLE VIII

                            TERMINATION OF AGREEMENT

        Section 8.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time:

        (a) by the mutual written agreement of PIA Delaware and SAI;

        (b) by PIA Delaware, on forty eight (48) hours' written notice to SAI,
if there is a breach of any of the representations and warranties of any SPAR
Party (other than as a result of (i) the conduct of their businesses as
permitted and required hereunder, (ii) the culmination of any proposed or
pending transactions described in the SPAR Disclosure Letter, this Agreement and
the SPAR Premerger Agreements, or (iii) any adverse change(s) in the overall
economy or in the market segments in which such parties do business), or if any
SPAR Party fails to comply after notice with any of its covenants or agreements
contained herein, which breaches or failures, as the case may be, are, in the
aggregate, material in the context of the transactions contemplated by this
Agreement and cannot reasonably be anticipated to be cured within thirty (30)
days of the date of such notice;

        (c) by SAI, on forty eight (48) hours' written notice to PIA Delaware,
if there is a breach of any of the representations and warranties of any PIA
Party (other than as a result of (i) the conduct of their businesses as
permitted and required hereunder, (ii) the culmination of any proposed or
pending transactions described in the PIA Disclosure Letter and this Agreement,
or (iii) any adverse change(s) in the overall economy or in the market segments
in which such parties do business), or if any PIA Party fails to comply after
notice with any of its covenants or agreements contained herein, which breaches
or failures, as the case may be, are, in the aggregate, material in the context
of the transactions contemplated by this Agreement and cannot reasonably be
anticipated to be cured within thirty (30) days of the date of such notice;

        (d) by PIA Delaware on written notice to SAI, if (i) an Acquisition
Proposal has been made and not withdrawn, (ii) a majority of disinterested
members of the PIA Delaware Board determines in good faith (with the advice of
independent financial advisors and legal counsel) that such Acquisition Proposal
is superior for PIA Delaware's stockholders to the transaction contemplated by
this Agreement, (iii) PIA Delaware has notified SAI in writing of the
determination described in clause (ii) above, (iv) at least five (5) business
days have elapsed following receipt by SAI of such written notice and (taking
into account any revised proposal made by SAI since receipt of such written
notice) such Acquisition Proposal remains an Acquisition Proposal and a majority
of the disinterested directors of the PIA Delaware Board has again made the
determination referred to in clause (ii) above, (v) the PIA Delaware Board
concurrently approves, and (vii) PIA Delaware concurrently enters into a
definitive agreement providing for the implementation of such Acquisition
Proposal, subject to the payment by the PIA Parties of the breakup fee and
expense reimbursement as provided below in Section 8.03;

        (e) by either PIA Delaware or SAI, on written notice to the other, if
the Merger shall not have been consummated on or before June 30, 1999; provided,
however, that (i) PIA Delaware may not terminate this Agreement pursuant to this
clause (e) if such failure to consummate the Merger is the result of a failure
to satisfy any of the conditions to the obligation of the SPAR Parties to effect
the Merger set forth in Section 6.02 and (ii) SAI may not terminate this
Agreement pursuant to this clause (e) if such failure to consummate the Merger
is the result of a failure to satisfy any of the conditions to PIA Delaware's
obligation to effect the Merger set forth in Section 6.03;

        (f) by either PIA Delaware or SAI, on written notice to the other, if a
Governmental Entity shall have enacted, issued, promulgated, enforced, or
entered any law, rule, regulation, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and has the effect of making illegal
or otherwise prohibiting the consummation of the transactions contemplated by
this Agreement; and


                                      -39-


<PAGE>   45

        (g) by SAI or PIA Delaware, if upon a vote at the PIA Stockholders
Meeting, PIA Delaware's stockholders do not approve, (i) the Share Issuance as
required under the Nasdaq Rules or (ii) the Proposed PIA Certificate of
Amendment as required under the DGCL.

        Section 8.02. Effect of Termination. Except as otherwise provided in
Section 8.03 with respect to any termination by PIA Delaware pursuant to
subsection (d) of Section 8.01, in the event of any termination of this
Agreement pursuant to subsection (a), (d), (e), (f) or (g) or of Section 8.01,
no Party hereto (or any of its directors or officers) shall have any liability
or further obligation to any other Party to this Agreement. In the event of any
termination of this Agreement pursuant to clauses (b) or (c) of Section 8.01,
such termination shall not limit or affect in any way the ability of the
non-breaching Parties to seek damages from the breaching Parties for any breach
of this Agreement.

        Section 8.03. Breakup Fee. In the event of any termination of this
Agreement pursuant to Section 8.01(d) by PIA Delaware, PIA Delaware shall within
five Business Days pay (or cause to be paid) to the SPAR Parties (a) a breakup
fee equal to the product of (i) 0.035 times (ii) the Value Per Share (as defined
below) times the number of shares of PIA Delaware Stock then outstanding
(without giving effect to any shares of PIA Delaware Stock to be issued in such
transaction), and (b) the amount of the reasonable costs and expenses of the
SPAR Parties and the SPAR Principals incurred in connection with the
preparation, negotiation, execution and performance of this Agreement and all
related instruments and documents and all securities, anti-trust and other
governmental filings, including (without limitation) the reasonable fees,
disbursements and expenses of attorneys, accountants and other professionals,
subject to receipt of appropriate invoices and other documentation therefor.
"Value Per Share" shall mean (A) the cash purchase price per share of PIA
Delaware Stock where all or a majority of the outstanding shares of PIA Delaware
Stock are to be purchased for cash, or (B) in all other cases, the value of each
share of PIA Delaware Stock, as valued in good faith by the Board of Directors
of PIA Delaware (based on the fairness opinion or other valuation furnished to
them by the investment bankers or others providing comfort to the PIA Delaware
Board in connection with the alternative Acquisition Proposal), but in any event
not less than the average of the last sale price for PIA Delaware Stock on the
Nasdaq Stock Market for the five trading days preceding the effective date of
the termination of this Agreement.


                                   ARTICLE IX

                                     GENERAL

        Section 9.01. Successors and Assigns; Assignment. Whenever in this
Agreement or any other Merger Document reference is made to any Party or other
person, such reference shall be deemed to include the successors, assigns, heirs
and legal representatives of such person, and, without limiting the generality
of the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that the rights of a Party hereunder may not be assigned without the
consent of the other parties hereto.

        Section 9.02. No Third Party Rights. The representations, warranties and
other terms and provisions of this Agreement and the other Merger Documents are
for the exclusive benefit of the Parties hereto, and, except as otherwise
expressly provided herein or therein, no other person, including creditors of
any Party hereto, shall have any right or claim against any Party by reason of
any of those terms and provisions or be entitled to enforce any of those terms
and provisions against any Party.

        Section 9.03. Counterparts. This Agreement may be executed in two or
more counterpart copies of the entire document or of signature pages to the
document, each of which may be executed by one or more of the parties hereto,
but all of which, when taken together, shall constitute a single agreement
binding upon all of the parties hereto.


                                      -40-


<PAGE>   46

        Section 9.04. Expenses. Except as otherwise expressly provided herein,
whether or not the transactions herein contemplated shall be consummated, (i)
the PIA Parties shall pay the fees, expenses and disbursements of the PIA
Parties and their respective agents, representatives, accountants and counsel
incurred in connection with the preparation and negotiation of this Agreement
and the consummation of the transactions contemplated hereby and (ii) the SPAR
Parties shall pay the fees, expenses and disbursements of the SPAR Parties and
the SPAR Principals and their respective agents, representatives, accountants
and counsel incurred in connection with the preparation and negotiation of this
Agreement and the consummation of the transactions contemplated hereby. The PIA
Parties and the SPAR Parties shall each pay one-half of the filing fee required
to be paid in connection with any filings required to be made by any Party under
the HSR Act with respect to the Merger.

        Section 9.05. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be sent, delivered or mailed as follows:

        (a)   If to any PIA Party:
              Terry R. Peets, President and Chief Executive Officer
              PIA Merchandising Services, Inc.
              19900 MacArthur Blvd., Suite 900
              Irvine, California 92612
              Telephone:              (949) 474-3506
              Telecopier:             (949) 474-3570
              E-Mail:                 Terry.Peets@PIAmerch.com

              with a copy to:
              James W. Loss, Esq.
              Riordan & McKinzie
              695 Town Center Drive, Suite 1500
              Costa Mesa, CA  92626
              Telephone:              (714) 433-2900
              Telecopier:             (714) 549-3244
              E-Mail:                 jwl@riordan.com

              And a copy to:
              Lawrence David Swift, Esq.
              Parker Chapin Flattau & Klimpl, LLP
              1211 Avenue of the Americas
              New York, NY 10036-8735
              Telephone:              (212) 704-6147
              Telecopier:             (212) 704-6159
              E-Mail:                 LDSwift@PCFK.com

        (b)   If to any SPAR Party:
              Robert G. Brown, Chairman and Chief Executive Officer
              SPAR Marketing Force, Inc.
              303 South Broadway, Suite 140
              Tarrytown, New York 10591
              Telephone:              (914) 332-4100
              Telefax:                (914) 332-0741
              E-Mail:                 RBrown@MSN.com


                                      -41-


<PAGE>   47

              With a copy to:
              William H. Bartels, Vice Chairman and Senior Vice President
              SPAR Marketing Force, Inc.
              303 South Broadway, Suite 140
              Tarrytown, New York 10591
              Telephone:              (914) 332-4100
              Telefax:                (914) 332-0741
              E-Mail:                 BBartels@SPARinc.com

              with a copy, in either case, to:
              Lawrence David Swift, Esq.
              Parker Chapin Flattau & Klimpl, LLP
              121 1 Avenue of the Americas
              New York, NY 10036-8735
              Telephone:              (212) 704-6147
              Telecopier:             (212) 704-6159
              E-Mail:                 LDSwift@PCFK.com

Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telecopier, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section (or in accordance with the latest
unrevoked written direction from such Party) and (ii) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified in this
Section (or in accordance with the latest unrevoked written direction from such
Party), and the appropriate confirmation is received.

        Section 9.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the Applicable Laws pertaining in the State of New
York (other than those laws that would defer to the substantive laws of another
jurisdiction); provided, however, that the approval by the Constituent
Corporations, the Articles of Merger and filing, the effects of the Merger, and
other corporate organization and governance matters pertaining to the
Constituent Corporations shall be governed by and construed in accordance with
the Applicable Laws pertaining in the State of Nevada. Without in any way
limiting the preceding choice of law, the parties intend (among other things) to
thereby avail themselves of the benefit of Section 5-1401 of the General
Obligations Law of the State of New York.

        Section 9.07. Consent to Jurisdiction, Etc. The Parties each hereby
consent and agree that the Supreme Court of the State of New York for the County
of Westchester and the United States District Court for Westchester County, New
York, and the Superior Court of the County of Orange, California, and the United
States District Court for the Central District of California, each shall have
personal jurisdiction and proper venue with respect to any dispute between the
Parties; provided that the foregoing consent shall not deprive any Party of the
right to voluntarily commence or participate in any action, suit or proceeding
in any other court having jurisdiction and venue over the other Parties. In any
dispute with the SPAR Parties, the PIA Parties will not raise, and each hereby
expressly waives, any objection or defense to any such New York jurisdiction as
an inconvenient forum. Without in any way limiting the preceding consents to
jurisdiction and venue, the parties intend (among other things) to thereby avail
themselves of the benefit of Section 5-1402 of the General Obligations Law of
the State of New York.

        Section 9.08. Waiver of Jury Trial. In any action, suit or proceeding in
any jurisdiction, the Parties each hereby expressly waive trial by jury.

        Section 9.09. Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay of or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default by any other
Party under this Agreement shall impair any such right, power or remedy, nor
shall it be construed as a


                                      -42-


<PAGE>   48

waiver of or acquiescence in any such breach or default, or of any similar
breach or default occurring later. No waiver of any single breach or default
shall be deemed a waiver of any other breach or default occurring before or
after such waiver.

        Section 9.10. Reformation and Severability. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision shall be severed from this
Agreement, and in either case, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.

        Section 9.11. Remedies Cumulative. No right, remedy or election given by
any term of this Agreement shall be deemed exclusive, but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.

        Section 9.12. Captions. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.

        Section 9.13. Amendments. This Agreement may be modified or amended only
by a written instrument executed by the SPAR Parties and the PIA Parties.




                                      -43-


<PAGE>   49

        Section 9.14. Entire Agreement. This Agreement, the SPAR Disclosure
Letter, the PIA Disclosure Letter, and the other Merger Documents constitute the
entire agreement and understanding among the parties, and supersede any prior
agreements and understandings, relating to the subject matter of this Agreement
and the other Merger Documents.

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.


PIA Merchandising Services, Inc.            SPAR Acquisition, Inc.


By: /s/ Terry R. Peets                      By: /s/ Robert G. Brown
    ------------------------------------        --------------------------------
    Name: Terry R. Peets                        Name: Robert G. Brown
    Title: President and Chief Executive        Title: Chairman, Chief Executive
           Officer                                     Officer and President

SG Acquisition, Inc.                        SPAR Marketing Force, Inc.


By: /s/ Terry R. Peets                      By: /s/ Robert G. Brown
    ------------------------------------        --------------------------------
    Name: Terry R. Peets                        Name: Robert G. Brown
    Title: President and Chief Executive        Title: Chairman, Chief Executive
           Officer                                     Officer and President

PIA Merchandising Co., Inc.                 SPAR, Inc., a Delaware corporation


By: /s/ Terry R. Peets                      By: /s/ Robert G. Brown
    ------------------------------------        --------------------------------
    Name: Terry R. Peets                        Name: Robert G. Brown
    Title: President and Chief Executive        Title: Chairman, Chief Executive
           Officer                                     Officer and President

SPAR/Burgoyne Retail Services, Inc.         SPAR Marketing, Inc.


By: /s/ Robert G. Brown                     By: /s/ Robert G. Brown
    ------------------------------------        --------------------------------
    Name: Robert G. Brown                   Name: Robert G. Brown
    Title: Chairman, Chief Executive        Title: Chairman, Chief Executive
           Officer and President                   Officer and President



                                      -44-


<PAGE>   50


SPAR Incentive Marketing, Inc.             SPAR MCI Performance Group, Inc.


By: /s/ Robert G. Brown                    By: /s/ Robert G. Brown
    -----------------------------------        --------------------------------
    Name: Robert G. Brown                      Name: Robert G. Brown
    Title: Chairman, Chief Executive           Title: Chairman and Chief
           Officer and President                      Executive Officer

SPAR Trademarks, Inc.                      SPAR Marketing, Inc., a Nevada
                                           corporation

By: /s/ Robert G. Brown                    By:  /s/ Robert G. Brown
    -----------------------------------         --------------------------------
    Name: Robert G. Brown                       Name: Robert G. Brown
    Title: Chairman, Chief Executive            Title: Chairman, Chief Executive
           Officer and President                       Officer and President



                                      -45-


<PAGE>   51

                                                                       EXHIBIT A


                               ARTICLES OF MERGER

                                       OF

                              SG ACQUISITION, INC.

                                       AND

                             SPAR ACQUISITION, INC.



To the Secretary of State, State of Nevada

        Pursuant to the provisions of Chapters 78 and 92A, Nevada Revised
Statutes, the domestic corporations herein named do hereby adopt the following
Articles of Merger.

        FIRST: Effective upon the filing of these Articles of Merger, SG
Acquisition, Inc. ("SG Acquisition"), a corporation for profit organized under
the laws of the State of Nevada, shall merge into SPAR Acquisition, Inc. ("SPAR
Acquisition"), a corporation for profit organized under the laws of the State of
Nevada, pursuant to and in accordance with the Agreement and Plan of Merger,
dated as of February 28, 1999 (the "Agreement and Plan of Merger"), made by and
among SPAR Acquisition, SG Acquisition, PIA Merchandising Services, Inc., a
Delaware corporation ("PIA Delaware"), PIA Merchandising Co., Inc., a California
corporation ("PIA California"), SPAR Marketing, Inc., a Delaware corporation
("SMI"), SPAR Marketing, Inc., a Nevada corporation ("SMNEV"), SPAR Marketing
Force, Inc., a Nevada corporation ("SMF"), SPAR, Inc., a Nevada corporation
("SINC"), SPAR/Burgoyne Retail Services, Inc., an Ohio corporation ("SBRS"),
SPAR Incentive Marketing, Inc., a Delaware corporation ("SIM"), SPAR MCI
Performance Group, Inc., a Delaware corporation ("SMCI"), and SPAR Trademarks,
Inc., a Nevada corporation ("STM").

        SECOND: SPAR Acquisition is the surviving corporation.

        THIRD: The complete, executed Agreement and Plan of Merger is on file at
the office of the registered agent of SPAR Acquisition located at Capitol
Document Services, Inc., 202 South Minnesota Street, Carson City, Nevada 89703
and at 303 South Broadway, Suite 140, Tarrytown, NY 10591.

        FOURTH: The said Agreement and Plan of Merger has been adopted by the
unanimous consent of the Board of Directors of each of SG Acquisition and SPAR
Acquisition.

        FIFTH: The said Agreement and Plan of Merger was approved by the
unanimous consents of the stockholders of each of SG Acquisition and SPAR
Acquisition, pursuant to the provisions of Chapter 78, Nevada Revised Statutes.

        SIXTH: The Articles of Incorporation and By-laws of SPAR Acquisition
shall be the Articles of Incorporation and By-laws of the surviving corporation
upon the effectiveness of the merger herein provided for.


                                       A-1



<PAGE>   52

        SEVENTH: Each of the issued and outstanding shares of common stock of SG
Acquisition shall be converted into one share of common stock of the surviving
corporation upon the effectiveness of the merger herein provided for.


Executed on this __ day of _________, 1999.


SG Acquisition, Inc.                          SPAR Acquisition, Inc.


By:                                           By:
   ------------------------------------          -------------------------------
   Terry R. Peets, President                     Robert G. Brown, President


By:                                           By:
   ------------------------------------          -------------------------------
   Cathy L. Wood, Secretary                      William H. Bartels, Secretary




                                       A-2



<PAGE>   53

STATE OF             )
                     )SS.:
COUNTY OF            )

        On the _____ day of _________ in the year 1999 before me, the
undersigned, a Notary Public in and for said State, personally appeared Terry R.
Peets, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his capacity (i.e., as
President), and that by his signature on the instrument, the person upon behalf
of which the individual acted (i.e., SG Acquisition, Inc.), executed the
instrument.

                     -----------------------------------------------------------
                     (Signature and office of individual taking acknowledgment.)

STATE OF             )
                     )SS.:
COUNTY OF            )

        On the _____ day of _________ in the year 1999 before me, the
undersigned, a Notary Public in and for said State, personally appeared Cathy L.
Wood, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his capacity (i.e., as
Secretary), and that by his signature on the instrument, the person upon behalf
of which the individual acted (i.e., SG Acquisition, Inc.), executed the
instrument.

                     -----------------------------------------------------------
                     (Signature and office of individual taking acknowledgment.)


STATE OF             )
                     )SS.:
COUNTY OF            )

        On the _____ day of _________ in the year 1999 before me, the
undersigned, a Notary Public in and for said State, personally appeared Robert
G. Brown, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his capacity (i.e., as
President), and that by his signature on the instrument, the person upon behalf
of which the individual acted (i.e., SPAR Acquisition, Inc.), executed the
instrument.

                     -----------------------------------------------------------
                     (Signature and office of individual taking acknowledgment.)


STATE OF             )
                     )SS.:
COUNTY OF            )

        On the _____ day of _________ in the year 1999 before me, the
undersigned, a Notary Public in and for said State, personally appeared William
H. Bartels, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his capacity (i.e., as
Secretary), and that by his signature on the instrument, the person upon behalf
of which the individual acted (i.e., SPAR Acquisition, Inc.), executed the
instrument.

                     -----------------------------------------------------------
                     (Signature and office of individual taking acknowledgment.)


                                       A-3


<PAGE>   54

                                                                       EXHIBIT B


                        PIA MERCHANDISING SERVICES, INC.

                        SPECIAL PURPOSE STOCK OPTION PLAN

        Section 1. Description and Purpose of this Plan. This is the Special
Purpose Stock Option Plan of PIA Merchandising Services, Inc., a Delaware
corporation (the "Company"). This Plan has been created to provide for the
issuance of substitute options ("Substitute Options") to the holders of
outstanding stock options ("SAI Options") granted by SPAR Acquisition, Inc., a
Nevada corporation ("SAI"), as required by the terms of that certain Agreement
and Plan of Merger dated as of February 28, 1999 by and among the Company, SAI
and certain other parties named therein (the "Merger Agreement"). Substitute
Options granted under this Plan will not qualify as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

        Section 2. Issuance of Substitute Options. As required by Section 2.04
of the Merger Agreement, the Company shall, promptly following the Effective
Time (as such term is defined in the Merger Agreement) execute and deliver to
each holder of an SAI Option, against delivery and cancellation of such SAI
Option, a Substitute Option containing substantially the same provisions as the
SAI Option being canceled, including, without limitation, (i) the same per share
exercise price and (ii) providing for the right to purchase such number of
shares of the Company's common stock ("Common Stock") as shall be equal to the
number of shares of SAI's common stock that such holder was entitled to purchase
pursuant to the SAI Option being surrendered (a "Substitute Option Agreement").
The persons receiving Substitute Options under this Plan are hereinafter
referred to as the "Participants.") The Company shall have no obligations to
issue any Substitute Options to any Participant prior to the Effective Time.
This Plan shall terminate immediately upon the termination of the Merger
Agreement in accordance with its terms.

        Section 3. Shares Subject to this Plan. The number of shares of Common
Stock in respect of which Substitute Options may be granted under this Plan is
___________, subject to adjustment as provided in Section 6 hereof. After the
initial grant of Substitute Options as provided in the Merger Agreement, no
further Substitute Options may be granted under this Plan.

        Section 4. Administration. This Plan shall be administered by the Board
of Directors of the Company (the "Board"). The Board shall have the exclusive
and binding right to (i) interpret this Plan, (ii) prescribe, amend and rescind
rules relating to this Plan; (iii) authorize any person to execute on behalf of
the Company any instrument required to effectuate the grant of an Substitute
Option; (iv) determine the rights and obligations of Participants under this
Plan; and (v) make all other determinations deemed necessary or advisable for
the administration of this Plan. The good faith interpretation and construction
by the Board of any provision of this Plan or of any Substitute Option shall be
final, conclusive and binding. No member of the Board shall be liable for any
action or determination made in good faith with respect to this Plan or any
Substitute Option.

        Section 5. Issuance of Common Stock. The Company's obligation to issue
shares of its Common Stock upon exercise of a Substitute Option by any
Participant is expressly conditioned upon the compliance by the Company with any
registration or other qualification obligations with respect to such shares
under any state or federal law or rulings and regulations of any government
regulatory body and the making of such investment representations or other
representations and undertakings by such Participant (or such Participant's
legal representative, heir or legatee, as the case may be) in order to comply
with the requirements of any exemption from any such registration or other
qualification obligations with respect to such shares which the Company in its
sole discretion shall deem necessary or advisable. Such required representations
and undertakings may include representations and agreements that such
Participant (or such Participant's legal representative, heir or legatee) (i) is
purchasing such shares for investment and not with any present intention of
selling or otherwise disposing of such shares and (ii) agrees to have a legend
placed upon the face and reverse of any certificates evidencing such shares (or,
if applicable, an appropriate data entry made in the ownership records of the
Company) setting forth (A) any representations and undertakings


                                       B-1


<PAGE>   55

which such Participant has given to the Company or a reference thereto, and (B)
that, prior to effecting any sale or other disposition of any such shares, such
Participant must furnish to the Company an opinion of counsel, satisfactory to
the Company and its counsel, to the effect that such sale or disposition will
not violate the applicable requirements of state and federal laws and regulatory
agencies; provided, however, that any such legend or data entry shall be removed
when no longer applicable. The Company, during the term of this Plan, will at
all times reserve and keep available, and will use its reasonable efforts to
obtain from any regulatory body having jurisdiction any requisite authority in
order to issue and sell such number of shares of Common Stock as shall be
sufficient to satisfy the requirements of this Plan. The inability of the
Company to obtain, from any regulatory body having jurisdiction, authority
reasonably deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect of the non-issuance or sale of such shares as to which such
requisite authority shall not have been obtained.

        Section 6. Adjustments Upon Capitalization and Corporate Changes. If the
outstanding shares of the Common Stock are changed into, or exchanged for, a
different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization or reclassification, or if the number
of outstanding shares is changed through a stock split, stock dividend, stock
consolidation or like capital adjustment, or if the Company makes a distribution
in partial liquidation or any other comparable extraordinary distribution with
respect to its Common Stock, an appropriate adjustment shall be made by the
Board in the number, kind or exercise price of shares with respect to which
unexercised Substitute Options have been granted; provided, however, that in no
event shall the exercise price be less than the par value of the Common Stock at
such time. In making such adjustments, or in determining that no such
adjustments are necessary, the Board may rely upon the advice of counsel and
accountants to the Company, and the good faith determination of the Board shall
be final, conclusive and binding.

        Section 7. Rights as a Stockholder. A Participant shall have no rights
as a stockholder with respect to any shares covered by a Substitute Option until
the date of an entry evidencing such ownership is made in the stock transfer
books of the Company (the "Exercise Date"). Except as otherwise provided in
Section 6, no adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the Exercise Date. Upon (i) the
dissolution, liquidation or sale of all or substantially all of the business,
properties and assets of the Company, (ii) upon any reorganization, merger or
consolidation in which the Company does not survive, (iii) upon any
reorganization, merger, consolidation or exchange of securities in which the
Company does survive and any of the Company's stockholders have the opportunity
to receive cash, securities of another corporation and/or other property in
exchange for their capital stock of the Company, or (iv) upon any acquisition by
any person or group (as defined in Section 13(d) of the Securities Act of 1934)
of beneficial ownership of more than fifty percent (50%) of the Company's then
outstanding shares of Common Stock (each of the events described in clauses (i),
(ii), (iii) or (iv) is referred to herein individually as an "Extraordinary
Event"), this Plan and each outstanding Substitute Option shall terminate. In
such event each Participant shall have the right until 10 days before the
effective date of the Extraordinary Event to exercise, in whole or in part, any
unexpired Substitute Option held by such Participant to the extent that such
Substitute Option is then vested and exercisable pursuant to the provisions
thereof.

        Section 8. Withholding of Taxes. The Company, or a Subsidiary, as the
case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to any Participant the requisite
tax upon the amount of taxable income, if any, recognized by such Participant in
connection with the exercise in whole or in part of any Substitute Option, or
the sale of Common Stock issued to any Participant upon the exercise of any
Substitute Option, as may be required from time to time under any federal or
state tax laws and regulations. This withholding of tax shall be made from the
Company's (or such Subsidiary's) concurrent or next payment of wages, salary,
bonus or other income to such Participant or by payment to the Company (or such
Subsidiary) by such Participant of the required withholding tax, as the Board
may determine.

        Section 9. Amendment of this Plan. The Board may (a) make such changes
in the terms and conditions of outstanding Substitute Options as it deems
advisable, provided each Participant adversely affected by such


                                       B-2


<PAGE>   56

change consents thereto, and (b) make such amendments to this Plan as it deems
advisable. The Board may obtain shareholder approval of any amendment to this
Plan for any reason (including in order to take advantage of certain exemptions
under Code Section 162(m)), but shall not be required to do so unless required
by law or by the rules of the Nasdaq National Market or any stock exchange on
which the Common Stock may then be listed.

        Section 10. Governing Law. This Plan and any Substitute Option granted
pursuant to this Plan shall be construed under and governed by the laws of the
State of Delaware without regard to conflict of law provisions thereof.

        Section 11. Not an Employment or Other Agreement. Nothing contained in
this Plan or in any Substitute Option Agreement shall confer, intend to confer
or imply any rights of employment or any rights to any other relationship or
rights to continued employment by, or rights to a continued consulting
relationship with, the Company or any Subsidiary in favor of any Participant or
limit the ability of the Company or any Subsidiary to terminate, with or without
cause, in its sole and absolute discretion, the employment of, or relationship
with, any Participant, subject to the terms of any written employment or other
agreement to which such Participant is a party.

        Section 12. Indemnification. In addition to such other rights of
indemnification as they may have as directors, the members of the Board shall be
indemnified by the Company to the fullest extent permitted by law against the
reasonable expenses, including reasonable attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with this Plan or any Substitute Option granted hereunder, and
against all amounts paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Board member is not
entitled to indemnification under applicable law.


                                       B-3


<PAGE>   57

                                                                       EXHIBIT C


                           TRADEMARK LICENSE AGREEMENT

                                  Introduction

        This Trademark License Agreement, dated as of ________ __, 1999 (as the
same may be supplemented, modified, amended, restated or replaced from time to
time in the manner provided herein, this "Agreement"), is by and between SPAR
Infotech, Inc., a Nevada corporation currently having an address at 303 South
Broadway, Suite 140, Tarrytown, New York 10591(the "Licensee"), and SPAR
Trademarks, Inc., a Nevada corporation currently having an address at 303 South
Broadway, Suite 140, Tarrytown, New York 10591 (the "Licensor"). The Licensor
and the Licensee are sometimes referred to herein individually as a "Party" and
collectively as the "Parties".

                                    Recitals

        The Licensor is the owner of the Trademarks (as these and the other
capitalized terms used in these Recitals are defined in Section 1, below) with
respect to the Products and Services, amd the Licensee desire to use the
Trademarks in the Territory in connection with the Products and Services. The
Licensor is willing to grant to the Licensee the nonexclusive right and license
to use the Trademarks on and in connection with the Products and Services in the
Territory, all upon the terms and provisions and subject to the conditions set
forth in this Agreement.

                                    Agreement

        In consideration of the foregoing, the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration (the receipt
and adequacy of which is hereby acknowledged by the Parties), the Parties hereto
hereby agree as follows:

        Section 1. Definitions. Each use in this Agreement of a neuter pronoun
shall be deemed to include references to the masculine and feminine variations
thereof, and vice versa, and a singular pronoun shall be deemed to include a
reference to the plural variation thereof, and vice versa, in each case as the
context may permit or require. As used in this Agreement, the following
capitalized terms and non-capitalized words and phrases shall have the meanings
respectively assigned to them below, which meanings shall be applicable equally
to the singular and plural forms of the terms so defined:

        (a) "Business Competitive With the Licensee" shall mean any substantial
business activity in collecting, analyzing and/or disseminating scanner data,
ex-factory shipment data and/or other similar information.

        (b) "Business Competitive With Marketing Force" shall mean any
substantial business activity conducted by any person that is competitive with
any substantial business activity conducted by any SPAR Company or PIA Company
at the Merger Effective Time (whether or not such person's activity is actually
conducted in competition with any SPAR Company or PIA Company), excluding,
however, any Business Competitive With the Licensee (whether or not so conducted
by any SPAR Company or PIA Company).

        (c) "Merger Effective Time" shall mean the "Effective Time" under (and
as defined in) the Agreement and Plan of Merger dated as of February 28, 1999,
among the SPAR Companies and the PIA Companies (which is the time the merger
thereunder takes effect and the SPAR Companies and PIA Companies come under
common control), as the same may be supplemented, modified, amended, restated or
replaced from time to time in the manner provided therein.

        (d) "PIA Company" and "PIA Companies" shall respectively mean any one or
more of PIA Merchandising Services, Inc., a Delaware corporation, SG
Acquisition, Inc., a Nevada corporation (which is merging into SPAR Acquisition,
Inc.), PIA Merchandising Co., Inc., a California corporation, and their
respective subsidiaries as of the Merger Effective Time.


                                       C-1



<PAGE>   58



        (e) "Products" shall mean the products claimed in the registrations for
the Trademarks listed in Exhibit A hereto and any other products for which the
Licensor has such Trademark rights.

        (f) "Representative" of any Party shall mean any of its directors,
officers, employees, attorneys, heirs, executors, administrators, or agents, any
of such Party's sublicensees, affiliates, successors and assigns, or any of
their respective directors, officers, employees, attorneys, heirs, executors,
administrators, or agents.

        (g) "Services" shall mean the services claimed in the registrations for
the Trademarks listed in Exhibit A hereto and any other services for which the
Licensor has such Trademark rights.

        (h) "SPAR Company" and "SPAR Companies" shall respectively mean any one
or more of SPAR Acquisition, Inc., a Nevada corporation, SPAR Marketing, Inc., a
Delaware corporation, SPAR Marketing, Inc., a Nevada corporation, SPAR Marketing
Force, Inc., a Nevada corporation, SPAR, Inc., a Nevada corporation,
SPAR/Burgoyne Retail Services, Inc., an Ohio corporation, SPAR Incentive
Marketing, Inc., a Delaware corporation, SPAR MCI Performance Group, Inc., a
Delaware corporation, and SPAR Trademarks, Inc., a Nevada corporation.

        (i) "Territory" shall mean the United States and Canada.

        (j) "Trademark" and "Trademarks" shall respectively mean any and all of
the registered trademarks of the Licensor registered in the United States and
Canada listed in Exhibit A hereto, any additional registered trademarks of the
Licensor deriving or containing any Trademark, and any and all renewals thereof.

        Section 2. Grant of License and Affiliate Sublicenses; Limits on Use.

        (a) License. Subject to the terms and conditions herein contained, the
Licensor hereby grants to the Licensee a royalty-free, nonexclusive license to
use: (i) the Trademarks (alone or as part of other words or phrases) on and in
connection the Products and Services in the Territory; and (ii) to the extent
the Licensor has any right, title or interest therein, the name "SPAR" (alone or
as part of other words or phrases) in its legal and/or trade name and on or in
connection with any products or services other than the Products and Services.

        (b) Sublicenses. The Licensee from time to time may add one or more
subsidiaries or affiliates (but only those under common ownership and control
with the Licensee) as a sublicensee under this Agreement (each a "Sublicensee"
and collectively "Sublicensees"). Each Sublicensee hereby assumes and agrees to
be bound by the terms, provisions and conditions as set forth in this Agreement
as if it were the "Licensee" and a "Party" hereunder. In the event the control
or ownership of any Sublicensee, its business or substantially all of its assets
are sold or transferred so that such Sublicensee, business or assets cease to be
under common ownership and control with the Licensee, such subsidiary or
affiliate shall automatically cease to be a Sublicensee hereunder from and after
such sale or transfer, without, however, relieving or otherwise affecting any of
the obligations of such former Sublicensees with respect to its obligations with
respect to actions or events arising prior to such sale or transfer.

        (c) License May Follow Group Sale. In the event that the control or
ownership of all or substantially all of the Licensee and Sublicensees or all or
substantially all of their businesses or assets are sold or transferred (a
"Group Sale"), this Agreement may be transferred (in whole) as part of such
Group Sale by written notice to the Licensor and (if an asset sale) the
assumption of this Agreement by the purchasers by the delivery to the Licensor
of an assumption agreement in form and substance reasonably acceptable to the
Licensor, duly executed by the new Licensee; provided, however, that this
Agreement may not be so transferred to anyone whose business is in any material
respect a Business Competitive With Marketing Force. Any entity not included in
the Group Sale shall automatically cease to be a Licensee or Sublicensee
hereunder from and after such sale or transfer, without, however, relieving or
otherwise affecting any of its obligations with respect to actions or events
arising prior to such sale or transfer.

        (d) Limits on the Licensee's Use of Trademarks. Neither the Licensee nor
any of its Sublicensees shall use any Trademark in any material respect in any
Business Competitive With Marketing Force.


                                       C-2


<PAGE>   59

        (e) No Unpermitted Users. No Party shall cause, suffer, or permit any of
its affiliates or cause any other person to use any Trademark in any material
respect unless such person is a permitted Licensee or Sublicensee hereunder.

        Section 3. Term. The term of this Agreement shall commence on the date
of this Agreement and continue through December 31, 2098 (as and if extended
pursuant to this Section, the "Term"). The Term of this Agreement is
automatically renewable for additional consecutive ninety-nine year terms. If
the Licensee (in the Licensee's sole and absolute discretion) chooses not to
renew, a written request from the Licensee seeking termination must be received
by the Licensor at least 90 days prior to the scheduled end of the then current
Term. The Term is also subject to earlier termination as provided in this
Agreement. Upon the termination of this Agreement by the Licensee, (i) the right
and license to use the Trademarks granted to the Licensee hereunder shall
forthwith terminate, (ii) the Licensee shall promptly thereafter shall cease and
desist from using the marks on or in connection with the Products or Services,
and (iii) the Licensee shall, promptly upon receipt of the written request of
the Licensor, without charge, execute any and all documents, and record them
with any and all appropriate governmental agencies within the Territory, as may
be necessary to remove the Trademarks from its company name and to otherwise
reasonably evidence that the Licensee no longer has the right and license to use
the Trademarks; provided, however, that upon such termination of this Agreement,
the Licensee shall have the right to continue to sell any existing inventory of
the Products and to use the Trademarks in connection with such sale for a period
of up to three months after the effective date of termination of this Agreement.

        Section 4. Non-Exclusivity of License; Limits on Licensor's Use and
Licensing Rights: Validity of Trademarks.

        (a) Retained Rights and Limits on Use. The Licensee acknowledges and
agrees that, all rights in the Trademarks, other than those specifically granted
in this Agreement, are reserved by the Licensor, and the Licensor may (during
the Term or thereafter) specifically grant other licenses to use the Trademarks
on or in connection with (i) any one or more of the Products and Services within
or outside the Territory or (ii) any other products or services within or
outside the Territory to the extent it has rights therein; provided, however,
that the Licensor covenants and agrees that neither the Licensor nor any of its
affiliates (as sublicensees or otherwise) shall (A) use any Trademark in any
material respect in any Business Competitive With the Licensee, or (B) license
or otherwise grant any rights in or to any Trademark to any person whose
business is in any material respect a Business Competitive With the Licensee.

        (b) Ownership and Validity of Trademarks. The Licensee acknowledges and
agrees that the Licensor is the legal, valid and exclusive owner of the
Trademarks. The Licensee covenants and agrees that it will not, individually or
with any other licensee or person, at any time during the term of this Agreement
or thereafter, directly or indirectly, challenge, contest or aid in challenging
or contesting (i) the legality or validity of any of the Trademarks, (ii) the
ownership by the Licensor of any of the Trademarks, or (iii) the title of or
registration by the Licensor of any of the Trademarks, in each case whether such
Trademarks are now existing or hereafter acquired, created or obtained and all
renewals thereof.

        Section 5. Compliance with Applicable Law. The Licensee covenants and
agrees with the Licensor that, during the Term of this Agreement, unless the
Licensor (in its sole and absolute discretion) consents otherwise in writing,
the Licensee shall comply with all applicable laws, rules, regulations and
ordinances in effect at any time and from time to time in the Territory in
connection with the Products and Services utilizing any of the Trademarks if the
non-compliance therewith would materially impair the prestige and goodwill of
the Trademarks.

        Section 6. Standards of Quality. The Licensee acknowledges to and
covenants and agrees with the Licensor that, during the Term of this Agreement,
unless the Licensor (in its sole and absolute discretion) consents otherwise in
writing: (a) none of the Products or Services shall fail in any material respect
to meet the standards of quality with respect to the Trademarks in place at the
time of commencement of this Agreement ("Standards of Quality") if such failure
would materially impair the prestige and goodwill of the Trademarks; and (b)
none of the Products or Services of the Licensee shall otherwise materially
impair the prestige and goodwill of the Trademarks.


                                      C-3

<PAGE>   60

        Section 7. Registration for the Trademarks in the Territory.

        (a) Registration Maintainence. During the term of this Agreement, the
Licensor shall undertake, in its own name, to renew and maintain registration
for the Trademarks in the Territory. The Licensee shall cooperate with the
Licensor in the execution, filing and prosecution of any such instrument(s) or
document(s) as the Licensor from time to time may reasonably request (i) to
obtain renewal and/or maintain registration for the Trademarks in the Territory
and (ii) to confirm the Licensor's ownership rights therein. The Licensor makes
no representation or warranty hereby that the registrations for the Trademarks
will be renewable or maintainable in the Territory, and the failure to renew or
maintain the registrations thereof shall not be deemed a breach hereof by the
Licensor.

        (b) Costs and Expenses. Any and all costs and expenses (including,
without limitation, the fees and expenses of attorneys and other professionals)
incurred by the Licensor in the renewal or maintenance of any of the Trademarks
in the Territory shall be borne by the Licensor.

        Section 8. Royalties. The license granted under this Agreement is
royalty-free. The Licensee shall not be required to account to the Licensor with
respect to its use of the Trademarks.

        Section 9. Representations and Warranties Respecting the Licensee. The
Licensee represents and warrants to the Licensor that, as of the date hereof and
as of the date of each amendment, renewal or extension hereof or assumption
hereof, except as otherwise disclosed to the Licensor in writing: (a) the
Licensee is a corporation duly incorporated, validly existing and in good
standing under the laws its state of incorporation; (b) the Licensee has the
legal capacity, power, authority and unrestricted right to execute and deliver
this Agreement and to perform all of its obligations hereunder; (c) the
execution and delivery by the Licensee of this Agreement and the performance by
the Licensee of all of its obligations hereunder will not violate or be in
conflict with any term or provision of (i) any applicable law, (ii) any
judgment, order, writ, injunction, decree or consent of any court or other
judicial authority applicable to the Licensee or any material part of the
Licensee's assets and properties, (iii) any of its organizational documents, or
(iv) any material agreement or document to which it is a party or subject or
that applies to any material part of the Licensee's assets and properties; (d)
no consent, approval or authorization of, or registration, declaration or filing
with, any governmental authority or other person is required as a condition
precedent, concurrent or subsequent to or in connection with the due and valid
execution, delivery and performance by the Licensee of this Agreement or the
legality, validity, binding effect or enforceability of any of the terms and
provisions of this Agreement; and (e) this Agreement is a legal, valid and
binding obligation of the Licensee, enforceable against the Licensee in
accordance with its terms and provisions.

        Section 10. Representations and Warranties Respecting the Licensor. The
Licensor represents and warrants to the Licensee that, as of the date hereof and
as of the date of each amendment, renewal or extension hereof or assumption
hereof, except as otherwise disclosed to the Licensee in writing: (a) the
Licensor is a corporation duly incorporated, validly existing and in good
standing under the laws its state of incorporation; (b) the Licensor has the
legal capacity, power, authority and unrestricted right to execute and deliver
this Agreement and to perform all of its obligations hereunder; (c) the
execution and delivery by the Licensor of this Agreement and the performance by
the Licensor of all of its obligations hereunder will not violate or be in
conflict with any term or provision of (i) any applicable law, (ii) any
judgment, order, writ, injunction, decree or consent of any court or other
judicial authority applicable to the Licensor or any material part of the
Licensor's assets and properties, (iii) any of its organizational documents, or
(iv) any material agreement or document to which it is a party or subject or
that applies to any material part of the Licensor's assets and properties; (d)
no consent, approval or authorization of, or registration, declaration or filing
with, any governmental authority or other person is required as a condition
precedent, concurrent or subsequent to or in connection with the due and valid
execution, delivery and performance by the Licensor of this Agreement or the
legality, validity, binding effect or enforceability of any of the terms and
provisions of this Agreement; (e) this Agreement is a legal, valid and binding
obligation of the Licensor, enforceable against the Licensor in accordance with
its terms and provisions; (f) the Licensor is the registered, legal and
beneficial owner of the Trademarks; (g) the Licensor has full power and
authority and the unristricted right to grant the licenses contemplated
hereunder; (h) the license of the Tradmarks hereunder is made free and clear of
any and all liens or encumbrances; (i) the Trademark registrations are in full
force and effect; and (j) the Licensor has no knowledge of any infringements or
competing claims with respect to any Trademark.


                                      C-4


<PAGE>   61

        Section 11. Termination.

        (a) Termination for Cause. The Licensor shall have the right to
terminate this Agreement (and the licenses and other rights, remedies and
interests granted to the Licensee hereunder), and end the Term, by written
notice to the Licensee in the event the Licensee shall default in the
performance or satisfaction of any of the terms and provisions of this
Agreement, which violation or failure shall have continued for more than thirty
(30) days after notice thereof by the Licensor to the Licensee and which
violation or failure has materially impaired the prestige and goodwill of the
Trademarks, provided, however, that if such default is capable of being cured
and if the Licensee shall have commenced to cure such default within such period
and shall proceed continuously in good faith and with due diligence to cure such
default, then such thirty day period shall instead be such longer period as may
be reasonably necessary to effect such cure (not to exceed 180 days).

        (b) Termination Without Prejudice; Certain Continuing Provisions. The
termination of this Agreement (and the licenses and other rights, remedies and
interests granted to the Licensee hereunder), for any reason, shall be without
prejudice to any other right or remedy the Licensor may have, including (without
limitation) the right of the Licensor to recover from the Licensee any and all
(i) damages to which it may be entitled by reason of the happening of the event
giving rise to such termination or any other event and (ii) reimbursements,
indemnifications and other amounts that remain unsatisfied by the Licensors
hereunder, which rights and remedies all shall survive any such termination
hereunder. In addition, the terms and provisions of this subsection and Sections
12 through 21 hereof shall survive any such termination hereunder.

        Section 12. Infringement.

        (a) Defense of Infringements. In the event that legal proceeding shall
be instituted by any third party with respect to the alleged infringement by the
Trademarks on the rights of any third party, the Licensor shall have the right,
at its option and expense and either in its name, in the name of the Licensee,
or in the name of both the Licensor and the Licensee, to be represented by
counsel selected by the Licensor, and to defend against, negotiate, settle or
otherwise deal with such proceeding. The Licensee may participate in or (if the
Licensor elects not to do so) defend any such proceeding at its own cost and
expense (subject to reimbursement by the Licensor of reasonable costs and
expenses if the Licensee prevails in such proceeding) and with counsel of its
choice; provided, however, that if the Licensor defends the proceeding, the
Licensor shall control such proceeding. The Licensee shall not settle such
proceeding, or any claim or demand, admit liability or take any action with
respect thereto without the prior written consent of the Licensor, which shall
not be unreasonably withheld.

        (b) No Liability for Continuing Unauthorized Use. If any of the
Trademarks shall be declared by a court of competent jurisdiction to be an
infringement on the rights of any third party so that the Licensee may not
thereafter continue in the use thereof, or if the Licensee shall unlawfully use
any of the Trademarks after the Term, the Licensor shall not be liable to the
Licensee or any other person or entity for any damages or otherwise as a result
of continuing use by the Licensee after such declaration or the end of the Term.

        (c) Notice and Prosecution of Infringement. The Licensee shall promptly
notify the Licensor of any infringement, counterfeiting or passing-off of any of
the Trademarks of which it has actual knowledge, whether by the use of any of
the Trademarks or otherwise, but shall not take any action, legal or otherwise,
with respect to such infringement, counterfeiting or passing-off without prior
notice to the Licensor. In the event that the Licensee deems legal proceedings
to be reasonably necessary to enjoin any third party with respect to the alleged
infringement, counterfeiting or passing-off of any of the Trademarks, the
Licensor shall have the right, at its option and expense and either in its name,
in the name of the Licensee, or in the name of both the Licensor and the
Licensee, to be represented by counsel selected by the Licensor, and to
prosecute, negotiate, settle or otherwise deal with such proceeding. The
Licensee may participate in or (if the Licensor elects not to do so) prosecute
any such proceeding at its own cost and expense (subject to reimbursement by the
Licensor of reasonable costs and expenses if the Licensee prevails in such
proceeding) and with counsel of its choice; provided, however, that if the
Licensor prosecutes the proceeding, the Licensor shall control such proceeding.
The Licensee shall not settle such proceeding, or any claim or demand, release
any liability or take any action with respect thereto without the prior written
consent of the Licensor, which shall not be unreasonably withheld.


                                      C-5



<PAGE>   62

        (d) Licensee and Licensor Cooperation. The Licensee will cooperate fully
with the Licensor at the Licensor's expense in any such action the Licensor may
decide to take, and, if requested by the Licensor, shall join with the Licensor
in such actions as the Licensor may deem advisable for the protection of the
Trademarks or the Licensor's rights. The Licensor will cooperate fully with the
Licensor at the Licensee's expense (subject to reimbursement as provided above)
in any such permitted action the Licensee may decide to take, and, if requested
by the Licensee, shall join with the Licensee in such actions as the Licensor
may deem advisable for the protection of the Trademarks or the Licensee's
rights.

        (e) Costs and Expenses. Except as otherwise provided above, any and all
costs and expenses (including, without limitation, the fees and expenses of
attorneys and other professionals) incurred in the protection or defense of any
of the Trademarks in the Territory, or the defense of any use or application of
the Trademarks, shall be borne by the Licensor.

        Section 13. Expenses of and Indemnity by the Licensee.

        (a) The Licensee will pay and discharge, at its own expense, any and all
expenses, charges, fees and taxes (other than as provided in subsection (b) of
this Section and Section 6 hereof) arising out of or incidental to the carrying
on of the Licensee's business, and the Licensee will indemnify and hold the
Licensor harmless from any and all claims that may be imposed on the Licensor
for such expenses, charges, fees and taxes.

        (b) Except as otherwise provided in Section 10 hereof, the Licensee
shall indemnify, defend (with counsel selected by the Licensee and reasonably
acceptable to the Licensor) and hold the Licensor and its representatives and
agents harmless from, against and with respect to any claim, suit, loss, damage,
demands, injuries or expense (including the reasonable fees and expenses of
attorneys and other professionals) arising out of or related directly or
indirectly to any Product, Service, or other Trademark bearing item sold or
provided by the Licensee or any other act or omission of the Licensee, except to
the extent attributable to the bad faith, negligence or willful misconduct of
the Licensor or its representatives.

        Section 14. Relationship between the Parties. The rights, powers,
privileges, remedies and interests accorded to the Licensor under this Agreement
and applicable law are for the protection of the Licensor, not the Licensee, and
no term or provision of this Agreement is intended (or shall be deemed or
construed) to impose on the Licensor any duty or obligation to the Licensee to
monitor or police any of the activities of the Licensee. No term or provision of
this Agreement is intended to create, nor shall any such term or provision be
deemed or construed to have created, any employment, joint venture, partnership,
trust, agency or other fiduciary relationship between the Licensee and the
Licensor or constitute the Licensee as an employee, joint venturer, partner,
trustee, agent or other representative for or of the Licensor. The Licensee
shall not be entitled or have any power or authority to bind or obligate the
Licensor in any manner whatsoever or to hold itself out as an employee, joint
venturer, partner, trustee, agent or other representative for or of the
Licensor.

        Section 15. Waiver of Jury Trial. In any action, suit or proceeding in
any jurisdiction brought against any Party by any other Party, each Party hereby
irrevocably waives trial by jury.

        Section 16. Consent to New York Jurisdiction and Venue, Etc. Each Party
hereby consents and agrees that the Supreme Court of the State of New York for
the County of Westchester and the United States District Court for the Southern
District of New York each shall have personal jurisdiction and proper venue with
respect to any dispute between the Parties; provided that the foregoing consent
shall not deprive any Party of the right in its discretion to voluntarily
commence or participate in any other forum having jurisdiction and venue. In any
dispute, no Party will raise, and each Party hereby expressly and irrevocably
waives, any objection or defense to any such jurisdiction as an inconvenient
forum.

        Section 17. Notices. Except as otherwise expressly provided, any notice,
request, demand or other communication permitted or required to be given under
this Agreement shall be in writing, shall be sent by one of the following means
to the addressee at the address set forth above (or at such other address as
shall be designated hereunder by notice to the other parties and persons
receiving copies, effective upon actual receipt) and shall be


                                      C-6



<PAGE>   63

deemed con clusively to have been given: (i) on the first Business Day following
the day timely deposited with Federal Express (or other equivalent national
overnight courier) or United States Express Mail, with the cost of delivery
prepaid or for the account of the sender; (ii) on the fifth Business Day
following the day duly sent by certified or registered United States mail,
postage prepaid and return receipt requested; or (iii) when otherwise actually
received by the addressee on a Business Day (or on the next Business Day if
received after the close of normal business hours or on any non-business day).

        Section 18. Further Assurances. Each Party agrees to do such further
acts and things and to execute and deliver such statements, assignments,
agreements, instruments and other documents as the other Party from time to time
reasonably may request in order to (a) evidence or confirm the transfer or
issuance of any stock or Asset or (b) effectuate the purpose and the terms and
provisions of this Agreement, each in such form and substance as may be
acceptable to the Parties.

        Section 19. Interpretation, Headings, Severability, Etc. The parties
acknowledge and agree that the terms and provisions of this Agreement have been
negotiated, shall be construed fairly as to all parties hereto, and shall not be
construed in favor of or against any party. The section headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement. In the event that any term or provision of
this Agreement (other than Section 1 hereof) shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable pursuant to applicable
law by a governmental authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability (a) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted or reduced pursuant to the next sentence, as
applicable, or (b) by or before any other authority of any of the terms and
provisions of this Agreement. If any term or provision of this Agreement is held
to be unenforceable because of the scope or duration of any such provision, the
parties agree that any court making such determination shall have the power, and
is hereby requested, to reduce the scope or duration of such term or provision
to the maximum permissible under applicable law so that said term or provision
shall be enforceable in such reduced form.

        Section 20. Successors and Assigns; Assignment; Intended Beneficiaries.
Whenever in this Agreement reference is made to any person, such reference shall
be deemed to include the successors, assigns, heirs and legal representatives of
such person, and, without limiting the generality of the foregoing, all
representations, warranties, covenants and other agreements made by or on behalf
of any Party in this Agreement shall inure to the benefit of the successors,
assigns, heirs and legal representatives of each other Party; provided, however,
that nothing herein shall be deemed to authorize or permit the Licensee to
assign any of its rights or obligations under this Agreement to any other
person, and the Licensee covenants and agrees that it shall not make any such
assignment, except as otherwise provided in Section 1 hereof or with the prior
written consent of the Licensor. The representations, warranties and other terms
and provisions of this Agreement are for the exclusive benefit of the Parties
hereto, and, except as otherwise expressly provided herein, no other person
(including creditors of any party hereto) shall have any right or claim against
any Party by reason of any of those terms and provisions or be entitled to
enforce any of those terms and provisions against any Party.

        Section 21. No Waiver by Action, Etc. Any waiver or consent respecting
any representation, warranty, covenant or other term or provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given and shall not be deemed, regardless of frequency given,
to be a further or continuing waiver or consent. The failure or delay of a Party
at any time or times to require performance of, or to exercise its rights with
respect to, any representation, warranty, covenant or other term or provision of
this Agreement in no manner (except as otherwise expressly provided herein)
shall affect its right at a later time to enforce any such provision. No notice
to or demand on any Party in any case shall entitle such Party to any other or
further notice or demand in the same, similar or other circumstances. All
rights, powers, privileges, remedies and other interests of each Party hereunder
are cumulative and not alternatives, and they are in addition to and shall not
limit (except as other wise expressly provided herein) any other right, power,
privilege, remedy or other interest of such Party under this Agreement or
applicable law.


                                      C-7



<PAGE>   64

        Section 22. Counterparts; New York Governing Law; Amendments; Entire
Agreement. This Agreement shall be effective as of the date first written above
when executed by Parties and delivered to the Licensor. This Agreement may have
been executed in two or more counterpart copies of the entire document or of
signature pages to the document, each of which may be executed by one or more of
the Parties hereto, but all of which, when taken together, shall constitute a
single agreement binding upon all of the Parties hereto. This Agreement shall be
governed by and construed in accordance with the applicable laws pertaining in
the State of New York (other than those that would defer to the substantive laws
of another jurisdiction). Each and every modification and amendment of this
Agreement shall be in writing and signed by all of the Parties, and each and
every waiver of, or consent to any departure from, any representation, warranty,
covenant or other term or provision of this Agreement shall be in writing and
signed by each affected Party. This Agreement contains the entire agreement of
the parties and supersedes all prior and other representations, agreements and
understandings (oral or otherwise) between the parties with respect to the
matters contained herein.

        IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Agreement as of the date first above written.

                                          SPAR Infotech, Inc.


                                          By: __________________________________
                                              Title:



                                          SPAR Trademarks, Inc.


                                          By: __________________________________
                                              Title:



                                       C-8


<PAGE>   65

                                   SCHEDULE A


<TABLE>
<CAPTION>

United States

Mark                          Reg. No.                      Reg. Date
- ----                          --------                      ---------
<S>                          <C>                            <C> 

SPAR                         1,357,128                      August 27, 1985
SPAR & design                1,357,132                      August 27, 1985
SPAR & design                1,387,743                      March 25, 1986
SPAR                         1,441,909                      June 9, 1987
SPAR                         1,597,275                      May 22, 1990
</TABLE>



<TABLE>
<CAPTION>

Canada

Mark                          Reg. No.                      Reg. Date
- ----                          --------                      ---------
<S>                           <C>                           <C>
SPAR                          337,986                       March 11, 1988
SPAR & design                 337,987                       March 11, 1988
SPAR & design                 341,996                       June 23, 1988
SPAR                          349,073                       December 16, 1988
SPAR & design                 390,182                       November 15, 1991
</TABLE>



                                       C-9


<PAGE>   66

                                                                       EXHIBIT D


                           BUSINESS MANAGER AGREEMENT

                                  Introduction

        This Business Manager Agreement, dated as of ________ __, 1999 (as the
same may be supplemented, modified, amended, restated or replaced from time to
time in the manner provided herein, this "Agreement"), is by and between SPAR
Infotech, Inc., a Nevada corporation currently having an address at 303 South
Broadway, Suite 140, Tarrytown, New York 10591 ("Infotech"), SPAR Marketing
Force, Inc., a Nevada corporation currently having an address at 303 South
Broadway, Suite 140, Tarrytown, New York 10591 ("Marketing Force"), and SPAR
Marketing Services, Inc.,a Nevada corporation currently having an address at 303
South Broadway, Suite 140, Tarrytown, New York 10591 ("SMS"). The above entities
are sometimes referred to herein individually as a "Party" and collectively as
the "Parties".

                                    Recitals

        The efforts of the Parties prior to the date of this Agreement resulted
in the creation of certain Confidential Information, Software and Program
Documentation (collectively referred to herein as the "Joint Works"). The
Parties have determined that it is in their best interests to resolve any
existing or potential disputes concerning their respective rights in the Joint
Works, all upon the terms and provisions and subject to the conditions set forth
in this Agreement.

                                    Agreement

        In consideration of the foregoing, the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration (the receipt
and adequacy of which is hereby acknowledged by the Parties), the Parties hereto
hereby agree as follows:

        Section 1. Definitions. Each use in this Agreement of a neuter pronoun
shall be deemed to include references to the masculine and feminine variations
thereof, and vice versa, and a singular pronoun shall be deemed to include a
reference to the plural variation thereof, and vice versa, in each case as the
context may permit or require. As used in this Agreement, the following
capitalized terms and non-capitalized words and phrases shall have the meanings
respectively assigned to them below, which meanings shall be applicable equally
to the singular and plural forms of the terms so defined:

        (a) "Business Competitive With Infotech" shall mean any substantial
business activity in collecting, analyzing and/or disseminating scanner data,
ex-factory shipment data and/or other similar information.

        (b) "Business Competitive With Marketing Force" shall mean any
substantial business activity conducted by any person that is competitive with
any substantial business activity conducted by any SPAR Company or PIA Company
at the Merger Effective Time (whether or not such person's activity is actually
conducted in competition with any SPAR Company or PIA Company), excluding,
however, any Business Competitive With Infotech (whether or not so conducted by
any SPAR Company or PIA Company).

        (c) "Confidential Information" includes all field and file definitions
and source code relating to the Software and the Program Documentation (as each
are hereinafter defined), including (without limitation) the designs, methods,
layouts, processing procedures, programming techniques used or employed by the
Parties, including combinations thereof, in conjunction therewith, and encompass
interactive data entry, file handling, report generation and all other aspects
of operation.

        (d) "Merger Effective Time" shall mean the "Effective Time" under (and
as defined in) the Agreement and Plan of Merger dated as of February 28, 1999,
among the SPAR Companies and the PIA Companies (which is the time the merger
thereunder takes effect and the SPAR Companies and PIA Companies come under
common control), as the same may be supplemented, modified, amended, restated or
replaced from time to time in the manner provided therein.


                                       D-1


<PAGE>   67

        (e) "PIA Company" and "PIA Companies" shall respectively mean any one or
more of PIA Merchandising Services, Inc., a Delaware corporation, SG
Acquisition, Inc., a Nevada corporation (which is merging into SPAR Acquisition,
Inc.), PIA Merchandising Co., Inc., a California corporation, and their
respective subsidiaries as of the Merger Effective Time.

        (f) "Program Documentation" means the user manuals, handbooks and other
written materials relating to the Software, and any subsequent updates or
revisions to such scheduling software.

        (g) "Representative" of any Party shall mean any of its directors,
officers, employees, attorneys, heirs, executors, administrators, or agents, any
of such Party's sublicensees, affiliates, successors and assigns, or any of
their respective directors, officers, employees, attorneys, heirs, executors,
administrators, or agents.

        (h) "Software" means the application software program(s) respecting the
"Business Manager" Internet scheduling software consisting of executable object
code programs for such scheduling software and related screen formats programmed
to operate on the systems of the Parties, and any subsequent updates or
revisions to such scheduling software.

        (i) "SPAR Company" and "SPAR Companies" shall respectively mean any one
or more of SPAR Acquisition, Inc., a Nevada corporation, SPAR Marketing, Inc., a
Delaware corporation, SPAR Marketing, Inc., a Nevada corporation, SPAR Marketing
Force, Inc., a Nevada corporation, SPAR, Inc., a Nevada corporation,
SPAR/Burgoyne Retail Services, Inc., an Ohio corporation, SPAR Incentive
Marketing, Inc., a Delaware corporation, SPAR MCI Performance Group, Inc., a
Delaware corporation, and SPAR Trademarks, Inc., a Nevada corporation.

        Section 2. The Joint Works; Future Development; Sublicenses; Limits on
Use.

        (a) The Parties as Co-Owners of the Joint Works. In consideration for
the promises made to it under this Agreement, each Party hereby grants and
conveys to the other any and all right, title and interest in and to the Joint
Works that it may have as may be required to render any other Party a co-owner
of the Joint Works. Each party hereby acknowledges and agrees that each party is
now and at all times has been a co-owner of all right, title and interest in and
to the Joint Works, including (without limitation), the United States and
international copyright interests therein, and any and all moral rights in the
Joint Works recognized by applicable law, such that the Parties each has and
shall each continue to have, for any and all purposes, the right to transfer,
develop, license, control and otherwise exploit the Joint Works, in whole or in
any part, as each of them may see fit, in any and all media subject to the terms
and conditions set forth in this Agreement. Each party covenants and agrees that
it shall in all future publications of the Joint Works, refer to its author as
"SPAR Infotech, Inc., SPAR Marketing Force, Inc. and SPAR Marketing Services,
Inc." and state its copyright as "(C) [Date of Publication] SPAR Infotech, Inc.,
SPAR Marketing Force, Inc. and SPAR Marketing Services, Inc." "All rights
reserved."

        (b) Waiver of Claims and Rights of Participation and Accounting. Each of
the Parties hereby knowingly and intentionally waives whatever claims it may now
have or may ever have against the other Parties and their respective
Representatives for any claim related to rights of exploitation of the Joint
Works, including (without limitation) claims for authorship or copyright
infringement. Each of the Parties knowingly and intentionally waives any and all
claims or rights that it may have or may ever have against the other Parties and
their respective Representatives for any right of participation in, or
accounting for, the revenues that the other party may derive from its use or
exploitation of the Joint Works, in whole or in part, without limitation.

        (c) Future Development. The Parties acknowledge and agree that any Party
may engage any other Party from time to time to provide programming services,
system work and other assistance in developing, revising and improving the
Software and/or the Program Documentation, which shall be deemed and construed
to be for the benefit of all of the Parties. The Parties agree that their
respective contributions to all such improvements, revisions and developments
shall be included within the scope of the term "Software" and the term "Program
Documentation," respectively, as such terms are used in this Agreement and shall
not be the sole property of any Party hereto.


                                       D-2


<PAGE>   68

        (d) Sublicenses. Each Party from time to time may add one or more
subsidiaries or affiliates (but only those under common ownership and control
with the Parties) as a sublicensee under this Agreement (each a "Sublicensee"
and collectively "Sublicensees"). Each Sublicensee hereby assumes and agrees to
be bound by the terms, provisions and conditions as set forth in this Agreement
as if it were a "Party" hereunder. In the event the control or ownership of any
Sublicensee, its business or substantially all of its assets are sold or
transferred so that such Sublicensee, business or assets cease to be under
common ownership and control with the sublicensing Party, such subsidiary or
affiliate shall automatically cease to be a Sublicensee hereunder from and after
such sale or transfer, without, however, relieving or otherwise affecting any of
the obligations of such former Sublicensees with respect to its obligations with
respect to actions or events arising prior to such sale or transfer.

        (e) Certain Limits on Use by Parties. Neither Infotech nor any of its
Sublicensees shall use the Software or the Program Documentation in any material
respect in any Business Competitive With Marketing Force; and neither Marketing
Force nor SMS nor any of their respective Sublicensees shall use the Software or
the Program Documentation in any material respect in any Business Competitive
With Infotech. The Parties acknowledge and agree that such limitation shall not
preclude any Party or its Sublicensees from using the Software and the Program
Documentation for any other purpose whatsoever (subject to the licensing
limitations of Section 5 hereof).

        (f) No Unpermitted Users. No Party shall cause, suffer or permit any of
its affiliates or cause or enable any other person to use the Software or the
Program Documentation in any material respect unless such person is a permitted
Licensee or Sublicensee hereunder.

        Section 3. Term. The term of this Agreement shall be perpetual.

        Section 4. Mutual Exculpation and Release. No Party nor any of its
Representatives shall incur any liability to any other Party or any of its
Representatives for any acts or omissions arising out of or related directly or
indirectly to any of the Software, Program Documentation or Confidential
Information, any license, use or application thereof, or any claims or actions
(including, without limitation, claims for malfunction or infringement) and any
resulting losses or expenses with respect thereto of any Party or any of their
respective Representatives of any kind or nature whatsoever, whether known or
unknown, in law or equity or otherwise; and each Party (on behalf of itself and
each of its Representatives) hereby expressly waives any and all such claims,
actions, losses and expenses against each of the releasing Party and its
Representatives ever had, now have or hereafter can, shall or may have, against
the each other Party and its Representatives by reason of any matter, cause or
thing whatsoever from the beginning to the end of the world; provided, however,
that the foregoing release shall not apply to the Parties' respective
obligations set forth in this Agreement.

        Section 5. Third Party Licensing.. Subject to the terms and conditions
herein contained, each Party (but not its Sublicensees) may grant licenses to
make, use or sell the Software and Program Documentation (a "License") to one or
more third parties (each a "Licensee" and collectively "Licensees") on such
terms and conditions as such Party may elect, provided, however, that (a)
Infotech shall not grant any License to make, use or sell the Software or the
Program Documentation to any Licensee whose business is a Business Competitive
With Marketing Force; and (b) neither Marketing Force nor SMS shall grant any
License to make, use or sell the Software or the Program Documentation to any
Licensee whose business is a Business Competitive With Infotech.

        Section 6. Representations and Warranties Respecting the Parties. Each
Party represents and warrants to the each of the other Parties that, as of the
date hereof that: (a) such Party is a corporation duly incorporated, validly
existing and in good standing under the laws its state of incorporation; (b)
such Party has the legal capacity, power, authority and unrestricted right to
execute and deliver this Agreement and to perform all of its obligations
hereunder; (c) the execution and delivery by such Party of this Agreement and
the performance by such Party of all of its obligations hereunder will not
violate or be in conflict with any term or provision of (i) any applicable law,
(ii) any judgment, order, writ, injunction, decree or consent of any court or
other judicial authority applicable to such Party or any material part of such
Party's assets and properties, (iii) any of its organizational documents, or
(iv) any material agreement or document to which such Party is a party or
subject or that applies to any material part of such Party's assets and
properties; (d) no consent, approval or authorization of, or registration,
declaration or filing with, any governmental authority or other person is
required as a condition precedent, concurrent or subsequent to or in connection
with the due and valid execution, delivery and performance by such Party of this
Agreement or the legality, validity, binding effect or enforceability of any


                                       D-3



<PAGE>   69

of the terms and provisions of this Agreement; and (e) this Agreement is a
legal, valid and binding obligation of such Party, enforceable against such
Party in accordance with its terms and provisions.

        Section 7. Relationship Among the Parties. No term or provision of this
Agreement is intended to create, nor shall any such term or provision be deemed
or construed to have created, any employment, joint venture, partnership, trust,
agency or other fiduciary relationship between the Parties and no Party shall be
considered as an employee, joint venturer, partner, trustee, agent or other
representative for or of any other Party. No Party shall not be entitled or have
any power or authority to bind or obligate any other Party in any manner
whatsoever or to hold itself out as an employee, joint venturer, partner,
trustee, agent or other representative of any other Party.

        Section 8. Waiver of Jury Trial. In any action, suit or proceeding in
any jurisdiction brought against any Party by any other Party, each Party hereby
irrevocably waives trial by jury.

        Section 9. Consent to New York Jurisdiction and Venue, Etc. Each Party
hereby consents and agrees that the Supreme Court of the State of New York for
the County of Westchester and the United States District Court for the Southern
District of New York each shall have personal jurisdiction and proper venue with
respect to any dispute between the Parties; provided that the foregoing consent
shall not deprive any Party of the right in its discretion to voluntarily
commence or participate in any other forum having jurisdiction and venue. In any
dispute, no Party will raise, and each Party hereby expressly and irrevocably
waives, any objection or defense to any such jurisdiction as an inconvenient
forum.

        Section 10. Notices. Except as otherwise expressly provided, any notice,
request, demand or other communication permitted or required to be given under
this Agreement shall be in writing, shall be sent by one of the following means
to the addressee at the address set forth above (or at such other address as
shall be designated hereunder by notice to the other parties and persons
receiving copies, effective upon actual receipt) and shall be deemed
conclusively to have been given: (i) on the first business day following the day
timely deposited with Federal Express (or other equivalent national overnight
courier) or United States Express Mail, with the cost of delivery prepaid or for
the account of the sender; (ii) on the fifth business day following the day duly
sent by certified or registered United States mail, postage prepaid and return
receipt requested; or (iii) when otherwise actually received by the addressee on
a business day (or on the next business day if received after the close of
normal business hours or on any non-business day).

        Section 11. Further Assurances. Each Party agrees to do such further
acts and things and to execute and deliver such statements, assignments,
agreements, instruments and other documents as the other Party from time to time
reasonably may request in order to effectuate the purpose and the terms and
provisions of this Agreement, each in such form and substance as may be
acceptable to the Parties. Without limiting the generality of the foregoing,
each Party hereto will provide each other Party hereto, at such other Party's
request and expense, with copies of the source or object code version of the
Software and any and all related documentation to enable such requesting Party
to develop and enhance the Software and the Program Documentation.

        Section 12. Interpretation, Headings, Severability, Etc. The Parties
acknowledge and agree that the terms and provisions of this Agreement have been
negotiated, shall be construed fairly as to all parties hereto, and shall not be
construed in favor of or against any party. The section headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement. In the event that any term or provision of
this Agreement (other than Section 1 hereof) shall be finally determined to be
superseded, invalid, illegal or otherwise unenforceable pursuant to applicable
law by a governmental authority having jurisdiction and venue, that
determination shall not impair or otherwise affect the validity, legality or
enforceability (a) by or before that authority of the remaining terms and
provisions of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted or reduced pursuant to the next sentence, as
applicable, or (b) by or before any other authority of any of the terms and
provisions of this Agreement. If any term or provision of this Agreement is held
to be unenforceable because of the scope or duration of any such provision, the
Parties agree that any court making such determination shall have the power, and
is hereby requested, to reduce the scope or duration of such term or provision
to the maximum permissible under applicable law so that said term or provision
shall be enforceable in such reduced form.


                                       D-4


<PAGE>   70

        Section 13. Successors and Assigns; Assignment; Intended Beneficiaries.
Whenever in this Agreement reference is made to any person, such reference shall
be deemed to include the successors, assigns, heirs and legal representatives of
such person, and, without limiting the generality of the foregoing, all
representations, warranties, covenants and other agreements made by or on behalf
of any Party in this Agreement shall inure to the benefit of the successors,
assigns, heirs and legal representatives of each other Party; provided, however,
that nothing herein shall be deemed to authorize or permit any Party to assign
any of its rights or obliga tions under this Agreement to any other person, and
each Party covenants and agrees that it shall not make any such assignment,
except as otherwise provided in Section 5 hereof or with the prior written
consent of the other Parties. The representations, warranties and other terms
and provisions of this Agreement are for the exclusive benefit of the Parties
hereto, and, except as otherwise expressly provided herein, no other person
(including creditors of any party hereto) shall have any right or claim against
any Party by reason of any of those terms and provisions or be entitled to
enforce any of those terms and provisions against any Party.

        Section 14. No Waiver by Action, Etc. Any waiver or consent respecting
any representation, warranty, covenant or other term or provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given and shall not be deemed, regardless of frequency given,
to be a further or continuing waiver or consent. The failure or delay of a Party
at any time or times to require performance of, or to exercise its rights with
respect to, any representation, warranty, covenant or other term or provision of
this Agreement in no manner (except as otherwise expressly provided herein)
shall affect its right at a later time to enforce any such provision. No notice
to or demand on any Party in any case shall entitle such Party to any other or
further notice or demand in the same, similar or other circumstances. All
rights, powers, privileges, remedies and other interests of each Party hereunder
are cumulative and not alternatives, and they are in addition to and shall not
limit (except as otherwise expressly provided herein) any other right, power,
privilege, remedy or other interest of such Party under this Agreement or
applicable law.

        Section 15. Counterparts; New York Governing Law; Amendments; Entire
Agreement. This Agreement shall be effective as of the date first written above
when executed by all of the Parties. This Agreement may have been executed in
two or more counterpart copies of the entire document or of signature pages to
the document, each of which may be executed by one or more of the Parties
hereto, but all of which, when taken together, shall constitute a single
agreement binding upon all of the Parties hereto. This Agreement shall be
governed by and construed in accordance with the applicable laws pertaining in
the State of New York (other than those that would defer to the substantive laws
of another jurisdiction). Each and every modification and amendment of this
Agreement shall be in writing and signed by all of the Parties, and each and
every waiver of, or consent to any departure from, any representation, warranty,
covenant or other term or provision of this Agreement shall be in writing and
signed by each affected Party. This Agreement contains the entire agreement of
the parties and supersedes all prior and other representations, agreements and
understandings (oral or otherwise) between the parties with respect to the
matters contained herein.


                                       D-5



<PAGE>   71

                 [Signature Page to Business Manager Agreement]


        IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Agreement as of the date first above written.


                                        SPAR Infotech, Inc.


                                        By:____________________________________
                                           Title:



                                        SPAR Marketing Force, Inc.


                                        By:___________________________________
                                           Title:



                                        SPAR Marketing Services, Inc.


                                        By:___________________________________
                                           Title:




                                       D-6



<PAGE>   72

                                                                       EXHIBIT E



                            CERTIFICATE OF AMENDMENT
                                       OF
                          CERTIFICATE OF INCORPORATION
                                       OF
                        PIA MERCHANDISING SERVICES, INC.


        The undersigned corporation, organized and existing under and by virtue
of the General Corporation Law of the State of Delaware does hereby certify as
follows:

        1. That Cathy L. Wood is the duly elected and acting Secretary and Chief
Financial Officer of PIA Merchandising Services, Inc., a Delaware corporation
(the "Corporation").

        2. That Article FIRST of the Certificate of Incorporation of the
Corporation is amended to read in full as follows:

        "FIRST: The name of the Corporation is SPAR Group, Inc."

        3. That Article FOURTH of the Certificate of Incorporation of the
Corporation is amended to read in full as follows:

        "FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is 50,000,000, consisting of 47,000,00 shares of
common stock, par value $.01 per share, and 3,000,000 shares of preferred stock,
par value $.01 per share. The preferred stock may be issued at any time, and
from time to time, in one or more series pursuant hereto or to a resolution or
resolutions providing for such issue duly adopted by the board of directors (the
"Board") of the Corporation (authority to do so being hereby expressly vested in
the Board), and such resolution or resolutions shall also set forth the voting
powers, full or limited, or none, of each such series of preferred stock and
shall fix the designations, preferences and relative, participating, optional or
other special rights and qualifications, limitations or restrictions of each
such series of preferred stock."

        4. That Article TENTH of the Certificate of Incorporation of the 
Corporation is hereby deleted and Article ELEVENTH is hereby renumbered as 
Article TENTH.

        5. That this Certificate of Amendment of Certificate of Incorporation
has been duly approved by the Board of Directors of the Corporation.

        6. That this Certificate of Amendment of Certificate of Incorporation 
has been duly approved by the holders of a majority of the outstanding shares of
common stock, $.01 par value per share, of the Corporation in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.

        IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Cathy L. Wood this __ day of _____________ 1999.


                                       PIA MERCHANDISING SERVICES, INC.


                                       By:
                                           -------------------------------------
                                           Cathy L. Wood,
                                           Secretary and Chief Financial Officer


                                       E-1



<PAGE>   73


                                                                       EXHIBIT F


                        PIA MERCHANDISING SERVICES, INC.

                   AMENDED AND RESTATED 1995 STOCK OPTION PLAN

        Section 1. Description of this Plan. This is the 1995 Stock Option Plan,
dated December 5, 1995, as amended and restated effective as of February 28,
1999 (this "Plan"), of PIA Merchandising Services, Inc., a Delaware corporation
(the "Company"). Under this Plan, officers, directors, key employees and
consultants of the Company or its wholly-owned Subsidiaries (as defined below),
and other persons directly or indirectly providing valuable services to the
Company and the Subsidiaries, to be selected as set forth below, may be granted
options ("Options") to purchase shares of the common stock, par value $0.01 per
share, of the Company ("Common Stock"). This Plan permits the granting of both
Options that qualify for treatment as incentive stock options ("Incentive Stock
Options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and Options that do not qualify as Incentive Stock Options
("Nonqualified Stock Options"). For purposes of this Plan, the term "Subsidiary"
shall mean any corporation or other entity of which 50% or more of the voting
stock (or equivalent thereof) is owned by the Company or by another Subsidiary
(as so defined) of the Company.

        Section 2. Purpose of this Plan. The purpose of this Plan and of
granting Options to specified persons is to further the growth, development and
financial success of the Company and the Subsidiaries by providing additional
incentives to certain officers, directors, key employees and consultants of, and
other persons directly or indirectly providing valuable services to, the Company
and the Subsidiaries. By assisting such persons in acquiring shares of Common
Stock, the Company can ensure that such persons will themselves benefit directly
from the Company's and the Subsidiaries' growth, development and financial
success.

        Section 3. Eligibility. The persons who shall be eligible to receive
grants of Options under this Plan shall be, at the time of the grant, the
officers, directors, key employees and consultants of, and other persons
directly or indirectly providing valuable services to, the Company and the
Subsidiaries. Notwithstanding the preceding sentence, only persons who are
employees of the Company and the Subsidiaries shall be eligible to receive
grants of Incentive Stock Options under this Plan. A person who holds an Option
is herein referred to as a "Participant." More than one Option may be granted to
any Participant, grants of Options may be made on more than one occasion to any
Participant and any individual Participant may receive grants of Options on up
to 1,000,000 shares of Common Stock. Such grants of Options under this Plan may
include an Incentive Stock Option, Nonqualified Stock Option, or any combination
thereof.

        Section 4. Administration. This Plan shall be administered by the Board
of Directors (the "Board") or by the Compensation Committee established by the
Board. (The entity actually administering this Plan at any time, whether the
Board or the Compensation Committee, is referred to herein as the "Committee.")
If the Compensation Committee is authorized to administer this Plan at any time,
it shall, if possible, be composed solely of two or more Non-Employee Directors,
as such term is defined in Rule 16b-3(b)(3) under the Securities Exchange Act of
1934 (the "Exchange Act") and of persons who are "outside directors" within the
meaning of Code Section 162(m). The Committee shall meet at such times and
places as it determines and may meet through a telephone conference call. A
majority of its members shall constitute a quorum, and the decision of a
majority of those present at any meeting at which a quorum is present shall
constitute the decision of the Committee. A memorandum signed by all the members
of the Committee shall constitute the decision of the Committee without
necessity, in such event, for holding an actual meeting. The Committee is
authorized and empowered to administer this Plan and, subject to this Plan (a)
to select the Participants, to specify the number of shares of Common Stock with
respect to which Options are granted to each Participant, to specify the terms
of the Options and whether such Options shall be Incentive Stock Options or
Nonqualified Stock Options, and in general to grant Options; (b) to determine
the dates upon which Options shall be granted and the terms and conditions
thereof in a manner consistent with this Plan, which terms and conditions need
not be identical as to the various Options granted; (c) to interpret this Plan;
(d) to prescribe, amend and rescind rules relating to this Plan; (e) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option previously granted by the Committee; (f) to
determine the rights and obligations of Participants under this Plan; (g) to
specify the Option Price (as hereinafter defined); (h) to accelerate the time
during which an Option may be exercised, including, but not limited to, upon a
change of control of the Company, and to otherwise accelerate the time or extend
the post-termination exercise period during which an Option may be exercised, in
each case notwithstanding the provisions in the Option Agreement (as defined in
Section 13) stating the time during which it may be exercised; and (i) to make
all other determinations deemed necessary or advisable for the administration of
this Plan. The good faith interpretation and construction by the Committee of
any provision of this Plan or of any Option granted under it shall be final,
conclusive and binding. No member of the Committee shall be liable for any
action or determination made in good faith with respect to this Plan or any
Option granted under it.


                                      F-1


<PAGE>   74
        Section 5. Shares Subject to this Plan. The number of shares of Common
Stock in respect of which Options may be granted under this Plan is 3,500,000,
subject to adjustment as provided in Section 12 hereof. Upon the expiration,
termination or cancellation, in whole or in part, for any reason of an
outstanding Option or any portion thereof which shall not have vested or shall
not have been exercised in full, any shares of Common Stock then remaining
unissued which shall have been reserved for issuance upon such exercise shall
again become available for the granting of additional Options under this Plan.
Notwithstanding the foregoing, shares subject to a terminated Option shall
continue to be considered to be outstanding for purposes of determining the
maximum number of shares that may be issued to a Participant. Similarly, the
repricing of an Option will be considered the grant of a new Option for this
purpose.

        Section 6. Option Price. Except as provided in Section 12 hereof, the
purchase price per share (the "Option Price") of the shares of Common Stock
underlying each Incentive Stock Option shall be not less than the fair market
value of such shares on the date of granting of the Incentive Stock Option;
provided, however, that if the Participant is a ten percent (10%) stockholder of
the Company as detailed in Code Section 422(b)(6) at the time such Option is
granted (determined after taking into account the constructive ownership rules
of Section 424(d) of the Code), the Option Price shall be not less than 110
percent (110%) of said fair market value. The Option Price of the shares of
Common Stock underlying each Nonqualified Stock Option shall be not less than
eighty-five percent (85%) of the fair market value of such shares on the date of
granting of the Nonqualified Stock Option; provided, however, that with respect
to any Nonqualified Stock Option granted to a "covered employee" (as such term
is defined in Section 162(m) of the Code), the Option Price of the shares of
Common Stock underlying such Nonqualified Stock Option shall be not less than
the fair market value of such shares on the date of granting of such
Nonqualified Stock Option. The fair market value of such shares shall, unless
otherwise expressly determined by the Committee for good reason, shall be (i)
the last reported sale price of the Common Stock on the Nasdaq National Market,
if the Common Stock is quoted on the Nasdaq National Market, (ii) the last
reported sale price of the Common Stock on a national securities exchange, if
the Common Stock is listed on a national securities exchange, or (iii) if the
Common Stock is not so reported or listed, the average of the last reported bid
and asked price of the Common Stock in such market as the Common Stock may be
traded.

        Section 7. Restrictions on Grants; Vesting of Options. Notwithstanding
any other provisions set forth herein or in any Option Agreement, no Options may
be granted under this Plan subsequent to December 5, 2005. All Options granted
pursuant to this Plan shall be granted pursuant to Option Agreements, as
described in Section 13 hereof. The vesting of all Options may be based on the
Company's attaining of performance criteria as specified at the time of the
granting thereof and/or may also be based on the passage of time. The Committee
shall determine the performance criteria, the performance measurement period and
the vesting schedule applicable to each Option or group of Options in a
schedule, a copy of which shall be filed with the records of the Committee and
attached to each Option Agreement to which the same applies. The performance
criteria, the performance measurement period and the vesting schedule and period
of exercisability need not be identical for all Options granted hereunder.
Following the conclusion of each applicable performance measurement period, the
Committee shall determine, in its sole good faith judgment, the extent, if at
all, that each Option subject thereto shall have vested based upon the
applicable performance criteria and vesting schedule. To the extent any Option
shall not have vested, because the applicable performance criteria has not been
met, and does not also vest based on the passage of time, it shall, to that
extent, automatically terminate and cease to be exercisable to such extent
notwithstanding the stated term during which it may be exercised. The Committee
shall promptly notify each affected Participant of such determination. The
Committee may periodically review the performance criteria applicable to any
Option or Options and, in its sole good faith judgment, may adjust the same to
reflect unanticipated major events, such as catastrophic occurrences, mergers,
acquisitions and the like.

        Section 8. Special Limitations on Incentive Stock Options. To the extent
that the aggregate fair market value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during any calendar year under all incentive stock option plans of the Company
and the Subsidiaries exceeds $100,000, or such other limit as may be required by
the Code, such excess Incentive Stock Options shall be treated as Nonqualified
Stock Options. The Committee shall determine, in accordance with applicable
provisions of the Code, Treasury Regulations and other administrative
pronouncements, which of a Participant's Incentive Stock Options will not
constitute Incentive Stock Options because of such limitation and shall notify
the Participant of such determination as soon as practicable after such
determination.

        Section 9. Exercise of Options. Subject to all other provisions of this
Plan, once vested, each Option shall be exercisable for the full number of
shares of Common Stock subject thereto, or any part thereof, in such
installments and at such intervals as the Committee may determine in granting
such Option, provided that no option may be exercisable subsequent to its
termination date. Once vested, and prior to its termination date, an Option may
be exercised by the Participant by giving written notice to the Company
specifying the number of full shares to be purchased and accompanied by payment
of the full purchase price therefor in cash, by check or in such other form of
lawful consideration as the Committee may approve from time to time, including,
without limitation and in the sole discretion of the Committee, the assignment
and transfer by the Participant to the Company of outstanding shares of Common
Stock theretofore held by the Participant. In connection with such assignment
and transfer, the Company shall have the right to deduct any 

                                       F-2

<PAGE>   75
fractional share to be paid to the Participant. Once vested, and prior to its
termination date, an Option may only be exercised by the Participant or, in the
event of death of the Participant, by the person or persons (including the
deceased Participant's estate) to whom the deceased Participant's rights under
such Option shall have passed by will or the laws of descent and distribution.
Notwithstanding the foregoing in the immediately preceding sentence, in the
event of disability (within the meaning of Section 22(e)(3) of the Code) of a
Participant, a designee, or if the Participant has no designee, the legal
representative, of such Participant may exercise the Option on behalf of such
Participant (provided such Option would have been exercisable by such
Participant) until the right to exercise such Option expires, as set forth in
such Participant's particular Option Agreement.

        Section 10. Issuance of Common Stock. The Company's obligation to issue
shares of its Common Stock upon exercise of an Option is expressly conditioned
upon the compliance by the Company with any registration or other qualification
obligations with respect to such shares under any state or federal law or
rulings and regulations of any government regulatory body and the making of such
investment representations or other representations and undertakings by the
Participant (or the Participant's legal representative, heir or legatee, as the
case may be) in order to comply with the requirements of any exemption from any
such registration or other qualification obligations with respect to such shares
which the Company in its sole discretion shall deem necessary or advisable. Such
required representations and undertakings may include representations and
agreements that such Participant (or the Participant's legal representative,
heir or legatee): (a) is purchasing such shares for investment and not with any
present intention of selling or otherwise disposing of such shares; and (b)
agrees to have a legend placed upon the face and reverse of any certificates
evidencing such shares (or, if applicable, an appropriate data entry made in the
ownership records of the Company) setting forth (i) any representations and
undertakings which such Participant has given to the Company or a reference
thereto, and (ii) that, prior to effecting any sale or other disposition of any
such shares, the Participant must furnish to the Company an opinion of counsel,
satisfactory to the Company and its counsel, to the effect that such sale or
disposition will not violate the applicable requirements of state and federal
laws and regulatory agencies; provided, however, that any such legend or data
entry shall be removed when no longer applicable. The Company, during the term
of this Plan, will at all times reserve and keep available, and will use its
reasonable efforts to obtain from any regulatory body having jurisdiction any
requisite authority in order to issue and sell such number of shares of Common
Stock as shall be sufficient to satisfy the requirements of this Plan. The
inability of the Company to obtain, from any regulatory body having
jurisdiction, authority reasonably deemed by the Company's counsel to be
necessary for the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the non-issuance or sale of such
shares as to which such requisite authority shall not have been obtained.

        Section 11. Non-transferability. Except as otherwise provided below, an
Option may not be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent or distribution.
The Committee may, in its discretion, authorize all or a portion of any
Nonqualified Stock Option granted to a Participant to be on terms which permit
transfer by such Participant to (a) the spouse, children or grandchildren of the
optionee ("Immediate Family Members"), (b) a trust or trusts for the exclusive
benefit of such Immediate Family Members, or (c) a partnership in which such
Immediate Family Members are the only partners, provided that (i) there may be
no consideration for any such transfer, and (ii) the Option Agreement (defined
below) pursuant to which such Options are granted must be approved by the
Committee, and must expressly provide for transferability in a manner consistent
with this Section 11. Following transfer, any such Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Sections 9 and 10 hereof the term
"Participants" shall be deemed to refer to the transferee. The events of
termination of employment of Section 25 hereof shall continue to be applied with
respect to the original Participant, following which the Options shall be
exercisable by the transferee only to the extent, and for the periods specified
in the Option Agreement. Any permitted transferee shall be required prior to any
transfer of an Option or shares of Common Stock acquired pursuant to the
exercise of an Option to execute a written undertaking to be bound by the
provisions of the applicable Option Agreement.

        Section 12. Adjustments Upon Capitalization and Corporate Changes;
Substitute Options. Subject to Section 15(b) hereof, if the outstanding shares
of the Common Stock of the Company are changed into, or exchanged for, a
different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization or reclassification, or if the number
of outstanding shares is changed through a stock split, stock dividend, stock
consolidation or like capital adjustment, or if the Company makes a distribution
in partial liquidation or any other comparable extraordinary distribution with
respect to its Common Stock, an appropriate adjustment shall be made by the
Committee in the number, kind or Option Price of shares as to which Options may
be granted. A corresponding adjustment shall likewise be made in the number,
kind or Option Price of shares with respect to which unexercised Options have
theretofore been granted. Any such adjustment in an outstanding Option, however,
shall be made without change in the total price applicable to the unexercised
portion of the Option but with a corresponding adjustment in the price for each
share covered by the Option. In making such adjustments, or in determining that
no such adjustments are necessary, the Committee may rely upon the advice of
counsel and accountants to the Company, and the good faith determination of the
Committee shall be final, conclusive and binding. No fractional shares of stock
shall be issued under this Plan on account of any such adjustment.


                                      F-3

<PAGE>   76

        If the Company at any time should succeed to the business of another
corporation through a merger or consolidation, or through the acquisition of
stock or assets of such corporation or its subsidiaries, Options may be granted
under this Plan to option holders of such corporation or its subsidiaries, in
substitution for options to purchase stock of such corporation held by them at
the time of succession. The Committee, in its sole and absolute discretion,
shall determine the extent to which such substitute Options shall be granted (if
at all), the person or persons to receive such substitute Options (who need not
be all option holders of such corporation), the number of Options to be received
by each such person, the Option Price of such Option (which may be determined
without regard to Section 6 hereof) and the terms and conditions of such
substitute Options; provided, however, that the Option Price of each such
substituted Option which is an Incentive Stock Option shall be an amount such
that, in the sole and absolute judgment of the Committee (and in compliance with
Section 424(a) of the Code in the case of an Incentive Stock Option), the
economic benefit provided by such Option is not greater than the economic
benefit represented by the option in the acquired corporation as of the date of
the Company's acquisition of such corporation.

        Section 13. Option Agreement. Each Option granted under this Plan shall
be evidenced by a written stock option agreement (an "Option Agreement")
executed by the Company and the Participant which (a) shall contain each of the
provisions and agreements herein specifically required to be contained therein,
(b) shall indicate whether such Option is to be an Incentive Stock Option or a
Nonqualified Stock Option, and if an Incentive Stock Option, shall contain terms
and conditions permitting such Option to qualify for treatment as an incentive
stock option under Section 422 of the Code, and (c) may contain such other terms
and conditions as the Committee deems desirable and which are not inconsistent
with this Plan.

        Section 14. Rights as a Stockholder. A Participant or permitted
transferee of a Participant shall have no rights as a stockholder with respect
to any shares covered by an Option until the date of an entry evidencing such
ownership is made in the stock transfer books of the Company (the "Exercise
Date"). No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the Exercise Date.

        Section 15. Termination of Options, Acceleration of Options.

        (a) Each Option shall terminate and expire, and shall no longer be
subject to exercise, as the Committee may determine in granting such Option, and
each Option granted under this Plan shall set forth a termination date thereof,
which, subject to earlier termination as set forth in Section 7 hereof or this
Section 15, or as otherwise set forth in any particular Option Agreement, with
respect to Nonqualified Stock Options, shall be no later than ten years from the
date such Option is granted, and with respect to Incentive Stock Options, shall
also be no later than ten years from the date such Option is granted unless the
Participant is a ten percent (10%) stockholder of the Company (as described in
Section 422(b)(6) of the Code, and determined after taking into account the
constructive ownership rules of Section 424(d) of the Code) at the time such
Option is granted, in which case the Option shall terminate and expire no later
than five years from the date of the grant thereof. An Incentive Stock Option
shall contain any additional termination events required by Section 422 of the
Code.

        (b) Subject to Section 15(c) hereof, unless the Committee shall, in its
sole discretion, determine otherwise, upon (i) the dissolution, liquidation or
sale of all or substantially all of the business, properties and assets of the
Company, (ii) upon any reorganization, merger or consolidation in which the
Company does not survive, (iii) upon any reorganization, merger, consolidation
or exchange of securities in which the Company does survive and any of the
Company's stockholders have the opportunity to receive cash, securities of
another corporation and/or other property in exchange for their capital stock of
the Company, or (iv) upon any acquisition by any person or group (as defined in
Section 13(d) of the Securities Act of 1934) of beneficial ownership of more
than fifty percent (50%) of the Company's then outstanding shares of Common
Stock (each of the events described in clauses (i), (ii), (iii) or (iv) is
referred to herein individually as an "Extraordinary Event"), this Plan and each
outstanding Option shall terminate. In such event each Participant shall have
the right until 10 days before the effective date of the Extraordinary Event to
exercise, in whole or in part, any unexpired Option or Options issued to the
Participant, to the extent that said Option is then vested and exercisable
pursuant to the provisions of said Option or Options and of Section 7 hereof.
The termination of employment of, or the termination of a consulting or other
relationship with, a Participant for any reason shall not accelerate or
otherwise affect the number of shares with respect to which an Option may be
exercised; provided, however, that the Option may only be exercised with respect
to that number of shares which could have been purchased under the Option had
the Option been exercised by the Participant on the date of such termination.

        (c) Notwithstanding the provisions of Section 7 or paragraphs (a) or (b)
of this Section 15, or any provision to the contrary contained in a particular
Option Agreement, the Committee, in its sole discretion, at any time, or from
time to time, may elect to accelerate the vesting of all or any portion of any
Option then outstanding. The decision by the Committee to accelerate an Option
or to decline to accelerate an Option shall be final, conclusive and binding. In
the event of the acceleration of the exercisability of Options as the result of
a decision by the Committee pursuant to this 


                                       F-4



<PAGE>   77

Section 15(c), each outstanding Option so accelerated shall be exercisable for a
period from and after the date of such acceleration and upon such other terms
and conditions as the Committee may determine in its sole discretion; provided,
however, that such terms and conditions (other than terms and conditions
relating solely to the acceleration of exercisability and the related
termination of an Option) may not adversely affect the rights of any Participant
without the consent of the Participant so adversely affected. Any outstanding
Option which has not been exercised by the holder at the end of such stated
period shall terminate automatically and become null and void.

        Section 16. Withholding of Taxes. The Company, or a Subsidiary, as the
case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company or such Subsidiary to the Participant the requisite
tax upon the amount of taxable income, if any, recognized by the Participant in
connection with the exercise in whole or in part of any Option, or the sale of
Common Stock issued to the Participant upon the exercise of an Option, as may be
required from time to time under any federal or state tax laws and regulations.
This withholding of tax shall be made from the Company's (or such Subsidiaries')
concurrent or next payment of wages, salary, bonus or other income to the
Participant or by payment to the Company (or such Subsidiaries) by the
Participant of the required withholding tax, as the Committee may determine. The
Company may permit the Participant to elect to surrender, or authorize the
Company to withhold, shares of Common Stock (valued at their fair market value
on the date of surrender or withholding of such shares) in satisfaction of the
Company's withholding obligation, however, no fractional shares of Common Stock
shall be delivered, nor shall any cash in lieu of fractional shares be paid, by
the Company. The Company shall have the right to deduct fractional shares to be
paid to the Participant as a result of such surrender or withholding of shares.

        Section 17. Effectiveness and Termination of this Plan. This Plan became
effective on the date on which it was adopted by the Board and was approved by
approved by the stockholders of the Company within 12 months of December 5,
1995. This Plan shall terminate at the earliest of the time when all shares of
Common Stock which may be issued hereunder have been so issued, or at such time
as set forth in Section 15(b) hereof; provided, however, that the Board may in
its sole discretion terminate this Plan at any other time. Unless earlier
terminated by the Board, this Plan shall terminate on December 5, 2005. Subject
to Section 15(b) hereof, no such termination shall in any way affect any Option
then outstanding.

        Section 18. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Notice of the determination shall be given
to each Participant to whom an Option is so granted within a reasonable time
after the date of such grant.

        Section 19. Amendment of this Plan. The Board may (a) make such changes
in the terms and conditions of granted Options as it deems advisable, provided
each Participant adversely affected by such change consents thereto, and (b)
make such amendments to this Plan as it deems advisable. Such amendments and
changes shall include, but not be limited to, acceleration of the time at which
an Option may be exercised. The Board may obtain stockholder approval of any
amendment to this Plan for any reason (including in order to take advantage of
certain exemptions under Code Section 162(m) or Code Section 422), but shall not
be required to do so unless required by law or by the rules of the Nasdaq
National Market or any stock exchange on which the Common Stock may then be
listed.

        Section 20. Transfers and Leaves of Absence. For purposes of this Plan,
(a) a transfer of a Participant's employment or consulting relationship, without
an intervening period, between the Company and a Subsidiary shall not be deemed
a termination of employment or a termination of a consulting relationship, and
(b) a Participant who is granted in writing a leave of absence shall be deemed
to have remained in the employ of, or in a consulting relationship with, the
Company (or a Subsidiary, whichever is applicable) during such leave of absence.
Notwithstanding the foregoing, for purposes of determining the exercisability of
an Incentive Stock Option, a Participant who is on a leave of absence that
exceeds 90 days will be considered to have terminated his or her employment on
the 91st day of the leave of absence, unless the Participant's rights to
reemployment are guaranteed by statute or contract.

        Section 21. No Obligation to Exercise Option. The granting of an Option
shall impose no obligation on the Participant to exercise such Option.

        Section 22. Governing Law. This Plan and any Option granted pursuant to
this Plan shall be construed under and governed by the laws of the State of
Delaware without regard to conflict of law provisions thereof.

        Section 23. Not an Employment or Other Agreement. Nothing contained in
this Plan or in any Option Agreement shall confer, intend to confer or imply any
rights of employment or any rights to any other relationship or rights to
continued employment by, or rights to a continued consulting relationship with,
the Company or any Subsidiaries in favor of any Participant or limit the ability
of the Company or any Subsidiaries to terminate, with or without cause, in its
sole and absolute discretion, the employment of, or relationship with, any
Participant, subject to the terms of any written employment or other agreement
to which a Participant is a party.


                                      F-5



<PAGE>   78

        Section 24. Termination of Employment. The terms and conditions under
which an Option may be exercised after a Participant's termination of employment
shall be determined by the Committee and shall be specified in the Option
Agreement. The conditions under which such post-termination exercises shall be
permitted with respect to Incentive Stock Options shall be determined in
accordance with the provisions of Section 422 of the Code.

        Section 25. Indemnification. In addition to such other rights of
indemnification as they may have as directors, the members of the Committee
shall be indemnified by the Company to the fullest extent permitted by law
against the reasonable expenses, including reasonable attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with this Plan or any Option granted thereunder, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member is not entitled to
indemnification under applicable law; provided that within 60 days after
institution of any such action, suit or proceeding such Committee member shall
in writing offer the Company the opportunity, at the Company's expense, to
handle and defend the same.




                                       F-6



<PAGE>   79

                                                                       EXHIBIT G


                        LIMITED INDEMNIFICATION AGREEMENT

                                  Introduction

        This Limited Indemnification Agreement, dated as of ______ __, 1999 (as
the same may be supplemented, modified, amended, restated or replaced from time
to time in the manner provided herein, this "Agreement"), is by and among PIA
Merchandising Services, Inc., a Delaware corporation ("PIA Delaware"), SG
Acquisition, Inc., a Nevada corporation ("PIA Acquisition"), PIA Merchandising
Co., Inc., a California corporation ("PIA California") (PIA Delaware, PIA
Acquisition and PIA California are sometimes referred to herein individually as
a "PIA Party" and collectively as the "PIA Parties"), SPAR Acquisition, Inc., a
Nevada corporation ("SAI"), SPAR Marketing, Inc., a Delaware corporation
("SMI"), SPAR Marketing, Inc., a Nevada Corporation ("SMNEV"), SPAR Marketing
Force, Inc., a Nevada corporation ("SMF"), SPAR, Inc., a Nevada corporation
("SINC"), SPAR/Burgoyne Retail Services, Inc., an Ohio corporation ("SBRS"),
SPAR Incentive Marketing, Inc., a Delaware corporation ("SIM"), SPAR Trademarks,
Inc. ("STM") and SPAR MCI Performance Group, Inc., a Delaware corporation
("SMCI") (SAI, SMI, SMNEV, SMF, SINC, SBRS, SIM, STM and SMCI are sometimes
referred to herein individually as a "SPAR Party" and collectively as the "SPAR
Parties"), and Robert G. Brown and William H. Bartels (each a "SPAR
Principal,"and collectively the "SPAR Principals"). SMNEV, SMF, SINC and SBRS
are sometimes referred to herein individually as a "SPAR Marketing Company" and
collectively as the "SPAR Marketing Companies". The PIA Parties and the SPAR
Parties are sometimes referred to herein individually as a "Merger Party" and
collectively as the "Merger Parties". The Merger Parties and the SPAR Principals
are sometimes referred to herein individually as a "Party" and collectively as
the "Parties".

                                    Recitals

        A. The PIA Parties have entered into the Merger Agreement with the SPAR
Parties (as "Merger Agreement" and the other capitalized terms used and not
otherwise defined in these Recitals are defined in Article I, below).

        B. The SPAR Principals collectively own a majority of the issued and 
outstanding shares of capital stock of the SPAR Parties.

        C. The SPAR Principals also own all of the issued and outstanding shares
of capital stock, and are officers and directors, of SPAR Marketing Services,
Inc. ("SMS"), which provides certain field services to the SPAR Marketing
Companies pursuant to the Field Service Agreement. SMS is not a party to the
Merger Agreement, will remain an independent company, and will continue to
provide certain field services to the SPAR Marketing Companies pursuant to the
Field Services Agreement.

        D. SMS has historically provided certain field services to the SPAR
Marketing Companies though persons classified by SMS as independent contractors.
The IRS has sought to reclassify certain independent contractors of SMS to
employees, which SMS believes inconsistent with law and fact and is vigorously
contesting.

        E. SMF is the issuer of the ADVO Note, which is "payable in an amount
equal to ten percent (10.00%) of, and solely out of, any Equity Proceeds raised
through December 31, 1999, up to a maximum contingent payment of
$3,000,000.00...", with "Equity Proceeds" defined as "the net proceeds raised in
any public offerings or private placements of equity securities issued by..."
SMF.

        F. In order to induce the Merger Parties to enter into the Merger
Agreement, to permit the SPAR Principals to continue to contest the
reclassification of certain independent contractors of SMS sought by the IRS,
and to permit the SPAR Principals to contest any claim for payment under the
ADVO Note, the SPAR Principals have agreed to indemnify the Merger Parties under
certain circumstances, all upon the terms and provisions and subject to the
conditions set forth herein.

                                    Agreement

        In consideration of the foregoing, the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration (the receipt
and adequacy of which is hereby acknowledged by the Parties), the Parties hereto
hereby agree as follows:


                                       G-1


<PAGE>   80

                                   ARTICLE I

                                  DEFINITIONS

        Capitalized terms used and not otherwise defined herein shall have the
meanings respectively assigned to them in the Merger Agreement. Each use in this
Agreement of a neuter pronoun shall be deemed to include references to the
masculine and feminine variations thereof, and vice versa, and a singular
pronoun shall be deemed to include a reference to the plural variation thereof,
and vice versa, in each case as the context may permit or require. As used in
this Agreement, the following capitalized terms and non-capitalized words and
phrases shall have the meanings respectively assigned to them below, which
meanings shall be applicable equally to the singular and plural forms of the
terms so defined:

        "ADVO Claim" shall have the meaning assigned to it in Section 3.03
hereof.

        "ADVO Defense Expense" shall mean any cost or expense of any SPAR
Principal or any other person authorized by any SPAR Principal incurred in any
ADVO Defense Proceeding, including (without limitation) any and all reasonable
fees, disbursements and expenses of attorneys, accountants and other
professionals and expenses of investigation.

        "ADVO Note" shall mean the Amended and Restated Contingent Subordinated
Promissory Note in the maximum principal amount of $3,000,000.00 dated as of
June 30, 1997, issued by SMF to the MF Sellers to evidence the remaining
deferred portion of the "Cash Purchase Price" payable under (and as defined in)
Section 1(C) and 1 (D) of the ADVO Purchase Amendment, as the same may be
modified, amended or restated from time to time in the manner provided therein.

        "ADVO Note Claim" shall have the meaning assigned to it in Section 3.02
hereof.

        "ADVO Defense Proceeding" shall mean any effort by any SPAR Principal or
any other person authorized by any SPAR Principal (i) to oppose or otherwise
contest any legal proceeding by any MF Seller to enforce any claim for payment
under the ADVO Note or (ii) to seek a declaratory judgment that no amount is due
or owing under the ADVO Note, including (without limitation) proceedings
declaratory judgments and similar relief.

        "ADVO Purchase Agreement" shall mean the Asset Purchase and Sale
Agreement dated as of March 1, 1996, among Stighen, Inc., a Delaware
corporation, ADVO Investment Company, Inc., a Delaware corporation, and ADVO,
Inc., a Delaware corporation (each a "MF Seller" and collectively the "MF
Sellers"), and SMF as purchaser, as amended by the ADVO Purchase Amendment, and
as the same may be supplemented, modified, amended, restated or replaced from
time to time in the manner provided therein.

        "ADVO Purchase Amendment" shall mean the First Amendment to Asset
Purchase and Sale Agreement among the MF Sellers and SMF dated as of June 30,
1997.

        "Applicable Law" shall mean any applicable law, ordinance, or
governmental rule or regulation.

        "Authority" shall mean the Internal Revenue Service, any state tax
authority, the Pension Benefit Guaranty Corporation, any federal or state court,
or any other governmental authority having jurisdiction over any SMS Employment
Tax or SMS Benefit Claim.

        "Benefit Plan" of a referenced party shall mean each Pension Plan,
Welfare Plan and Other ERISA Benefit of the referenced party.

        "Code" shall mean the Internal Revenue Code of 1986, as amended, , and
the rules and regulations promulgated thereunder, as the same may be
supplemented, modified, amended, restated or replaced from time to time.

        "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder, as the same
may be supplemented, modified, amended, restated or replaced from time to time.

        "Field Service Agreement" shall mean the Service Agreement between SMF
and SMS dated as of January 4, 1999, as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided therein.

        "Losses" shall mean any and all claims, damages, losses, liabilities,
actions, suits, proceedings, demands, assessments, adjustments, costs and
expenses, including (without limitation) reasonable fees, disbursements and
expenses


                                       G-2


<PAGE>   81

of attorneys, accountants and other professionals and expenses of investigation
(including, without limitation, all reasonable fees, disbursements and expenses
incurred in seeking to enforce any provision of this Agreement), but excluding
any consequential, special and punitive damages.

        "Merger Agreement" shall mean the Agreement and Plan of Merger among the
PIA Parties and the SPAR Parties dated as of February [date], 1999, as the same
may be supplemented, modified, amended, restated or replaced from time to time
in the manner provided therein.

        "Merger Party" and "Merger Parties" shall have the meanings respectively
assigned to them in the Introduction, above.

        "Merger Party Benefit Claim" shall have the meaning assigned to it in
Section 2.03(b) hereof.

        "Merger Party Claim" shall have the meaning assigned to it in Section
2.05(b) hereof.

        "Merger Party Expense Claim" shall have the meaning assigned to it in
Section 2.04(b) hereof.

        "Merger Party Plan" shall mean any Benefit Plan or the assets of any
Benefit Plan sponsored or maintained after the Closing by any of the Merger
Parties or their affiliates.

        "Merger Party Tax Claim" shall have the meaning assigned to it in
Section 2.02(b) hereof.

        "Other ERISA Benefit" of a referenced party shall mean any material plan
or agreement governed by ERISA or the Code of the referenced party relating to
deferred compensation, bonus and performance compensation (other than salesmen
commissions), stock purchase, stock option, stock appreciation, severance,
vacation, sick leave, holiday fringe benefits, personnel policy, reimbursement
program, insurance, welfare or similar plan, program, policy or arrangement.

        "Pension Plan" of a referenced party shall mean each material "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) of the referenced
party.

        "PIA Acquisition" shall have the meaning assigned to it in the
Introduction, above.

        "PIA Delaware" shall have the meaning assigned to it in the
Introduction, above.

        "PIA California" shall have the meaning assigned to it in the
Introduction, above.

        "PIA Party" and "PIA Parties" shall have the meanings respectively
assigned to them in the Introduction, above.

        "Representatives" shall mean any and all of a referenced person's
officers, directors, employees, stockholders, subsidiaries, affiliates,
attorneys, agents, successors and assigns.

        "SAI" shall have the meaning assigned to it in the Introduction, above.

        "SBRS" shall have the meaning assigned to it in the Introduction, above.

        "SIM" shall have the meaning assigned to it in the Introduction, above.

        "SINC" shall have the meaning assigned to it in the Introduction, above.

        "SMF" shall have the meaning assigned to it in the Introduction, above.

        "SMI" shall have the meaning assigned to it in the Introduction, above.

        "SMNEV" shall have the meaning assigned to it in the Introduction, 
above.

        "SMS" shall have the meaning assigned to it in the Recitals, above.

        "SMS Benefit Claim" shall have the meaning assigned to it in Section
2.03(a) hereof.

        "SMS Benefit Liability" shall mean any liability with respect to any SMS
Benefit Plan imposed under the Code, ERISA or any other Applicable Law on SMS,
the SPAR Marketing Companies, any pre-merger affiliate of any of the SPAR
Parties, or the SPAR Principals (as stockholders of SMS) with respect to any
period (or partial period) ending on or prior to the Closing Date as a result of
any SMS Field Reclassification.


                                       G-3


<PAGE>   82

        "SMS Benefit Plan" shall mean any Benefit Plan of SMS, the SPAR
Marketing Companies, any pre- merger affiliate of any of the SPAR Parties;
excluding, however, any and all employee stock options disclosed or issued
pursuant to the Merger Agreement.

        "SMS Claim" shall have the meaning assigned to it in Section 2.05(a)
hereof.

        "SMS Defense Expense" shall mean any cost or expense of SMS, any SPAR
Principal or any other person authorized by SMS or any SPAR Principal incurred
in any SMS Tax Proceeding, including (without limitation) any and all reasonable
fees, disbursements and expenses of attorneys, accountants and other
professionals and expenses of investigation.

        "SMS Employment Tax" shall mean any Tax imposed under the Code or any
other Applicable Law (including, without limitation, any social security (FICA),
federal or state unemployment (FUTA), federal or state withholding or payroll,
or any similar tax) on SMS, the SPAR Marketing Companies, any pre-merger
affiliate of any of the SPAR Parties, or the SPAR Principals (as stockholders of
SMS) with respect to any Tax period (or partial period) ending on or prior to
the Closing Date.

        "SMS Expense Claim" shall have the meaning assigned to it in Section
2.04(a) hereof.

        "SMS Field Reclassification" shall mean any reclassification of the
independent contractors engaged as field representatives by SMS from independent
contractors to employees of SMS, whether such change was to apply either
prospectively or retroactively, and whether such change in status would affect
periods before or after the Closing Date.

        "SMS Tax Claim" shall have the meaning assigned to it in Section 2.02(a)
hereof.

        "SMS Tax Proceeding" shall mean any efforts by SMS, any SPAR Principal
or any other person authorized by SMS or any SPAR Principal to oppose or
otherwise contest any efforts by the IRS or any other Authority (i) to effect an
SMS Field Reclassification or (ii) to impose any SMS Employment Tax or SMS
Benefit Liability that would result from an SMS Field Reclassification,
including (without limitation) proceedings seeking refunds, declaratory
judgments and similar relief.

        "SMCI" shall have the meaning assigned to it in the Introduction, above.

        "SPAR Marketing Company" and "SPAR Marketing Companies" shall have the
meanings respectively assigned to them in the Introduction, above.

        "SPAR Party" and "SPAR Parties" shall have the meanings respectively
assigned to them in the Introduction, above.

        "STM" shall have the meaning assigned to it in the Introduction, above.

        "Tax" and "Taxes" shall respectively mean any and all federal, state,
local or foreign taxes, assessments, interest, fines, penalties, deficiencies,
fees and other governmental charges or impositions (including without limitation
all income tax, unemployment compensation, social security, payroll,
withholding, sales and use, excise, privilege, property, ad valorem, franchise,
license, school and any other tax or similar governmental charge or imposition),
and interest and penalties therein, under the Applicable Laws of the United
States or any state or Municipal or political subdivision thereof or any foreign
country or political subdivision thereon.

        "Tax Return" shall mean any federal, state, local or foreign tax return,
report, statement or other similar filing required to be filed by any SPAR Party
with respect to any Tax.

        "Welfare Plan" of a referenced party shall mean each material "employee
welfare benefit plan" (as defined in Section 3(i) of ERISA) of the referenced
party.


                                   ARTICLE II

                   SMS FIELD RECLASSIFICATION INDEMNIFICATION

        From and after the Closing Date (but if and only if the Merger shall
have occurred under the Merger Agreement):


                                       G-4



<PAGE>   83

        Section 2.01. Indemnification by the SPAR Principals respecting a SMS
Field Reclassification. The SPAR Principals, jointly and severally, shall
indemnify, defend and hold harmless the Merger Parties and their respective
Representatives from and against any and all Taxes and related Losses incurred
by any of them with respect to any period (or partial period) ending on or
before the Closing Date as a result of any SMS Employment Tax, SMS Benefit
Liability or SMS Defense Expense not paid or otherwise satisfied by SMS or the
SPAR Principals (as the case may be) to the extent finally determined to be due
as a result of or related to any applicable SMS Field Reclassification or
related SMS Tax Proceeding. The SPAR Principals' obligation to indemnify, defend
or hold harmless the Merger Parties and their respective Representatives from
any such liability shall terminate 30 days after the expiration of the
applicable statute of limitations in respect of such liability (other than with
respect to proceedings pending at the time of expiration, which shall continue
with respect to such proceedings until such proceedings are finally resolved).

        Section 2.02. Notice of Indemnifiable Employment Tax Claims

        (a) If a claim by any taxing Authority should be made against SMS or any
other entity that is or was under common control at any time with SMS or any of
the SPAR Parties seeking, if and to the extent determined adversely to SMS, a
SMS Field Reclassification and resulting payment of any SMS Employment Taxes
(including any such claims existing on the Closing Date, a "SMS Tax Claim"), the
SPAR Principals shall promptly (but in any event within ten Business Days) give
written notice to PIA Delaware of such claim (except for the continuation of the
SMS Tax Claim and related proceedings disclosed in the SPAR Disclosure Letter);
provided, however, that the failure to give such notice shall not affect the
indemnification provided hereunder except to the extent the Merger Parties have
actually been prejudiced as a result of such failure.

        (b) If a claim should be made against any of the Merger Parties or their
subsidiaries by any taxing Authority for payment by any Merger Party of any SMS
Employment Taxes that, if and to the extent determined adversely to such Merger
Party, would result in an indemnity payment to the Merger Parties or any of
their affiliates pursuant to Section 2.01 hereof (a "Merger Party Tax Claim"),
the Merger Parties shall give written notice to the SPAR Principals of such
claim within ten Business Days; provided, however, that the failure to give such
notice shall not affect the indemnification provided hereunder except to the
extent the SPAR Principals have actually been prejudiced as a result of such
failure.

        Section 2.03. Notice of Indemnifiable Benefit Plan Claims.

        (a) If a claim by any taxing Authority or other person(s) should be made
against SMS or any other any other entity that is or was under common control at
any time with any of the SPAR Parties seeking, if and to the extent determined
adversely to SMS, a SMS Field Reclassification with respect to any SMS Benefit
Plan and resulting payment of any SMS Benefit Liability (a "SMS Benefit Claim"),
the SPAR Principals shall promptly (but in any event within ten Business Days)
give written notice to PIA Delaware of such claim; provided, however, that the
failure to give such notice shall not affect the indemnification provided
hereunder except to the extent the Merger Parties have actually been prejudiced
as a result of such failure.

        (b) If a claim should be made against any of the Merger Parties or their
subsidiaries, or against any Merger Party Plan, by any taxing Authority or other
person(s) for payment by any Merger Party or Merger Party Plan of any SMS
Benefit Liability that, if and to the extent determined adversely to such Merger
Party or Merger Party Plan, would result in an indemnity payment to the Merger
Parties or any of their affiliates pursuant to Section 2.01 hereof (a "Merger
Party Benefit Claim"), the Merger Parties shall give written notice to the SPAR
Principals of such claim within ten Business Days; provided, however, that the
failure to give such notice shall not affect the indemnification provided
hereunder except to the extent the SPAR Principals have actually been prejudiced
as a result of such failure.

        Section 2.04. Notice of Indemnifiable SMS Defense Expense Claims

        (a) If a claim by any person should be made against SMS or the SPAR
Principals seeking legal enforcement of any unpaid bona fide SMS Defense Expense
amount contested by SMS or the SPAR Principals (including any such claims
existing on the Closing Date, a "SMS Expense Claim"), the SPAR Principals shall
promptly (but in any event within ten Business Days) give written notice to PIA
Delaware of such claim; provided, however, that the failure to give such notice
shall not affect the indemnification provided hereunder except to the extent the
Merger Parties have actually been prejudiced as a result of such failure.

        (b) If a claim should be made seeking collection or legal enforcement
against any Merger Party of any unpaid bona fide SMS Defense Expense amount not
paid by SMS or the SPAR Principals that, if and to the extent determined
adversely to such Merger Party, would result in an indemnity payment to the
Merger Parties or any of their affiliates pursuant to Section 2.01 hereof (a
"Merger Party Expense Claim"), the Merger Parties shall give written notice to
the SPAR Principals of such claim within ten Business Days; provided, however,
that the failure to give such notice shall


                                       G-5


<PAGE>   84

not affect the indemnification provided hereunder except to the extent the SPAR
Principals have actually been prejudiced as a result of such failure.

        Section 2.05. Procedures regarding SMS Tax and Benefit Claims

        (a) With respect to any SMS Tax Claim, SMS Benefit Claim or SMS Expense
Claim (each an "SMS Claim") and each Merger Party Tax Claim, Merger Party
Benefit Claim or Merger Party Expense Claim (each a "Merger Party Claim"), the
SPAR Principals (i) shall control all proceedings, (ii) shall make all decisions
taken in connection with such SMS Claim or Merger Party Claim, including
(without limitation) selection of counsel and whether to pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with any
taxing Authority with respect thereto, (iii) shall decide whether (A) to pay any
or otherwise satisfy any Tax or benefit claimed, (B) to settle such SMS Claim or
Merger Party Claim (subject to subsection (b) of this Section, below), (C) to
sue for a refund where applicable law permits such refund suits, or (D) to
contest the SMS Claim or Merger Party Claim in any permissible manner, and (iv)
shall pay or otherwise settle any and all bonafide SMS Defense Expenses, and the
costs of contesting or settling the same, not paid by SMS. This provision will
not reduce or otherwise alter the Merger Parties' rights or the SPAR Principals'
obligations regarding indemnification of any Merger Party pursuant to Section
2.01 or 2.02 hereof, respectively.

        (b) If SMS or the SPAR Principals desire to enter into a settlement or
resolution with the relevant taxing Authority regarding any Merger Party Claim
and are permitted to do so, or not restricted from doing so, under this Section,
SMS or the SPAR Principals may enter such settlement or resolve such Merger
Party Claim if the terms of such settlement or resolution (1) provides that no
person (other than any person that was engaged as an independent contractor,
notwithstanding any reclassification of status, by SMS with respect to his or
her own Taxes and SMS pursuant to such settlement) shall have any further
obligation to the taxing Authority with respect to such Merger Party Claim, (2)
requires that SMS or the SPAR Principals pay the taxing Authority any amounts
due under the terms of the settlement or resolution, and (3) does not purport to
bind any Merger Party to act in any manner, including (without limitation)
requiring any Merger to reclassify as an employee any person engaged by it as an
independent contractor, unless such Merger Party has agreed to be so bound in
such Merger Party's sole discretion.

        (c) PIA Delaware shall have the right to join in the defense of any
Merger Party Claim at its own expense. The SPAR Principals shall make available
to PIA Delaware all documents and any other items or information reasonably
requested by it for full and active participation in such defense by PIA
Delaware.

        (d) The Merger Parties shall not pay or offer or agree to pay, settle or
otherwise resolve any Merger Party Claim without the SPAR Principals' express
written consent, which consent shall not be withheld unreasonably. If PIA
Delaware gives written notice to the SPAR Principals of the Merger Parties'
desire to accept a settlement or resolution of any Merger Party Claim, and the
SPAR Principals elect not to approve or enter into such settlement or resolution
(as applicable), then: (i) the SPAR Principals shall have two years from the
date of receipt by the SPAR Principals of the notice to settle or otherwise
resolve the Merger Party Claim; and (ii) if after the expiration of such two
year period the SPAR Principals have not resolved such Merger Party Claim, PIA
Delaware shall be permitted to settle such Merger Party Claim if the terms of
such settlement or resolution (1) does not concede or agree to a SMS Field
Reclassification, (2) are on terms substantially similar (but including any
additional interest and penalties accrued during the two year period) to those
offered at the time PIA Delaware provided notice to the SPAR Principals of PIA
Delaware's desire to settle, and (3) requires that PIA Delaware pay the taxing
Authority any amounts due under the terms of the settlement or resolution,
subject to its right to indemnification hereunder. This provision will not
reduce or otherwise alter the Merger Parties' rights or the SPAR Principals'
obligations regarding indemnification of any Merger Party pursuant to Section
2.01 hereof.

        (e) No Effect on the Parties. This Agreement is not intended to, and
shall not be construed to, limit in any way the right of any Party to conduct
its business in any manner it may elect, including (without limitation)
classifying persons engaged by such Party to provide services as employees or
independent contractors as such Party may deem appropriate.


                                   ARTICLE III

                            ADVO NOTE INDEMNIFICATION

        From and after the Closing Date (but if and only if the Merger shall
have occurred under the Merger Agreement):

        Section 3.01. ADVO Note Indemnification. The SPAR Principals, jointly
and severally, shall indemnify, defend and hold harmless the Merger Parties and
their respective Representatives from and against any and all Losses incurred by
any of them as a result of any ADVO Note Claim or ADVO Expense Claim not paid or
otherwise


                                       G-6


<PAGE>   85

satisfied by SMS or the SPAR Principals (as the case may be) to the extent and
in the amount finally determined to be due (if and to the extent determined
adversely to SMS). The SPAR Principals' obligation to indemnify, defend or hold
harmless the Merger Parties and their respective Representatives from any such
liability shall terminate 30 days after the expiration of the applicable statute
of limitations in respect of such liability (other than with respect to
proceedings pending at the time of expiration, which shall continue with respect
to such proceedings until such proceedings are finally resolved).

        Section 3.02. Notice of ADVO Note Claim.

        (a) If a claim should be made by any MF Seller seeking collection or
legal enforcement against any Merger Party of any amount under the ADVO Note not
paid or otherwise satisfied by SMS or the SPAR Principals (an "ADVO Note
Claim"), the Merger Parties shall give written notice to the SPAR Principals of
such claim within ten Business Days; provided, however, that the failure to give
such notice shall not affect the indemnification provided hereunder except to
the extent the SPAR Principals have actually been prejudiced as a result of such
failure.

        (b) If a claim should be made seeking collection or legal enforcement
against any Merger Party of any bona fide ADVO Defense Expense amount not paid
or otherwise satisfied by SMS or the SPAR Principals (an "ADVO Expense Claim"),
the Merger Parties shall give written notice to the SPAR Principals of such
claim within ten Business Days; provided, however, that the failure to give such
notice shall not affect the indemnification provided hereunder except to the
extent the SPAR Principals have actually been prejudiced as a result of such
failure.

        Section 3.03 Procedures regarding ADVO Note Claims.

        (a) The SPAR Principals (i) shall control all proceedings, (ii) shall
make all decisions taken in connection with any ADVO Note Claim or ADVO Expense
Claim (each an "ADVO Claim"), including (without limitation) selection of
counsel and whether to pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any court or other judicial Authority
with respect thereto, (iii) shall decide whether (A) to pay any or otherwise
satisfy any amount claimed, (B) to settle such ADVO Claim, or (C) to contest the
ADVO Claim in any permissible manner, and (iv) shall pay or otherwise settle any
and all bonafide ADVO Defense Expenses, and the costs of contesting or settling
the same, not paid by SMS. This provision will not reduce or otherwise alter the
Merger Parties' rights or the SPAR Principals' obligations regarding
indemnification of any Merger Party pursuant to Section 3.01 hereof.

        (b) If SMS or the SPAR Principals desire to enter into a settlement or
resolution with the relevant MF Sellers, SMS or the SPAR Principals may enter
such settlement or resolve such ADVO Claim if the terms of such settlement or
resolution (1) provides that no person shall have any further obligation to the
MF Sellers with respect to the ADVO Claim or the ADVO Note, and (2) requires
that SMS or the SPAR Principals pay any amounts due under the terms of the
settlement or resolution.

        (c) PIA Delaware shall have the right to join in the defense of any ADVO
Claim at its own expense. The SPAR Principals shall make available to PIA
Delaware all documents and any other items or information reasonably requested
by it for full and active participation in such defense by PIA Delaware.

        (d) The Merger Parties shall not pay or offer or agree to pay, settle or
otherwise resolve any ADVO Claim without the SPAR Principals' express written
consent, which consent shall not be withheld unreasonably.


                                   ARTICLE IV

                           LIMITS ON INDEMNIFICATIONS

        Notwithstanding the provisions of Articles II and III hereof:

        Section 4.01. Related Group as Single Indemnified Party. For purposes of
this Agreement, the Merger Parties and their Representatives (collectively, the
"Indemnified Parties") shall be considered to be a single indemnified Party.


                                       G-7


<PAGE>   86

                                    ARTICLE V

                                     GENERAL

        Section 5.01. Successors and Assigns; Assignment. Whenever in this
Agreement reference is made to any Party or other person, such reference shall
be deemed to include the successors, assigns, heirs and legal representatives of
such person, and, without limiting the generality of the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the Parties
hereto and their respective successors and assigns; provided that the rights of
a Party hereunder may not be assigned without the consent of the other Parties
hereto.

        Section 5.02. No Third Party Rights. The representations, warranties and
other terms and provisions of this Agreement are for the exclusive benefit of
the Parties hereto and the persons entitled to indemnification hereunder, and,
except as otherwise expressly provided herein or therein, no other person,
including creditors of any Party or any such indemnifiable person, shall have
any right or claim against any Party by reason of any of those terms and
provisions or be entitled to enforce any of those terms and provisions against
any Party.

        Section 5.03. Counterparts. This Agreement may be executed in two or
more counterpart copies of the entire document or of signature pages to the
document, each of which may be executed by one or more of the Parties hereto,
but all of which, when taken together, shall constitute a single agreement
binding upon all of the Parties hereto.

        Section 5.04. Expenses. The PIA Parties shall pay the fees, expenses and
disbursements of the PIA Parties and their respective Representatives incurred
in connection with the preparation and negotiation of this Agreement; and the
SPAR Principals shall pay the fees, expenses and disbursements of the SPAR
Principals and their respective Representatives incurred in connection with the
preparation and negotiation of this Agreement.

        Section 5.05. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be sent, delivered or mailed as follows:

        (a)         If to any PIA Party:
                    Terry R. Peets, President and Chief Executive Officer
                    PIA Merchandising Services, Inc.
                    19900 MacArthur Blvd., Suite 900
                    Irvine, California 92612
                    Telephone:              (949) 474-3506
                    Telecopier:             (949) 474-3570
                    E-Mail:                 Terry.Peets@PIAmerch.com

                    with a copy to:
                    James W. Loss, Esq.
                    Riordan & McKinzie
                    695 Town Center Drive, Suite 1500
                    Costa Mesa, CA  92626
                    Telephone:              (714) 433-2900
                    Telecopier:             (714) 549-3244
                    E-Mail:                 jwl@riordan.com

                    And a copy to:
                    Lawrence David Swift, Esq.
                    Parker Chapin Flattau & Klimpl, LLP
                    1211 Avenue of the Americas
                    New York, NY 10036-8735
                    Telephone:              (212) 704-6147
                    Telecopier:             (212) 704-6159
                    E-Mail:                 LDSwift@PCFK.com


                                       G-8


<PAGE>   87

        (b)         If to any SPAR Party:
                    Robert G. Brown, Chairman, Chief Executive Officer
                    SPAR Marketing Force, Inc.
                    303 South Broadway, Suite 140
                    Tarrytown, New York 10591
                    Telephone:              (914) 332-4100
                    Telefax:                (914) 332-0741
                    E-Mail:                 RBrown@MSN.com

                    With a copy to:
                    William H. Bartels, Vice Chairman and Senior Vice President
                    SPAR Marketing Force, Inc.
                    303 South Broadway, Suite 140
                    Tarrytown, New York 10591
                    Telephone:              (914) 332-4100
                    Telefax:                (914) 332-0741
                    E-Mail:                 BBartels@SPARinc.com

                    and a copy to:
                    Lawrence David Swift, Esq.
                    Parker Chapin Flattau & Klimpl, LLP
                    121 1 Avenue of the Americas
                    New York, NY 10036-8735
                    Telephone:              (212) 704-6147
                    Telecopier:             (212) 704-6159
                    E-Mail:                 LDSwift@PCFK.com

        (c)         If to Robert G. Brown:
                    Robert G. Brown, Chairman, Chief Executive Officer
                     c/o SPAR Marketing Force, Inc.
                    303 South Broadway, Suite 140
                    Tarrytown, New York 10591
                    Telephone:              (914) 332-4100
                    Telefax:                (914) 332-0741
                    E-Mail:                 RBrown@MSN.com


                    If to William H. Bartels:
                    William H. Bartels, Vice Chairman and Senior Vice President
                    SPAR Marketing Force, Inc.
                    303 South Broadway, Suite 140
                    Tarrytown, New York 10591
                    Telephone:              (914) 332-4100
                    Telefax:                (914) 332-0741
                    E-Mail:                 BBartels@SPARinc.com

                    with a copy, in either case, to:

                    Lawrence David Swift, Esq.
                    Parker Chapin Flattau & Klimpl, LLP
                    1211 Avenue of the Americas
                    New York, NY 10036-8735
                    Telephone:              (212) 704-6147
                    Telecopier:             (212) 704-6159

Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telecopier, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section (or in accordance with the latest
unrevoked written direction from such Party) and (ii) if given by telecopier,
when such telecopy is transmitted to the telecopier number specified in this
Section (or in accordance with the latest unrevoked written direction from such
Party), and the appropriate confirmation is received.


                                       G-9


<PAGE>   88

        Section 5.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the Applicable Laws pertaining in the State of New
York (other than those laws that would defer to the substantive laws of another
jurisdiction). Without in any way limiting the preceding choice of law, the
parties intend (among other things) to thereby avail themselves of the benefit
of Section 5-1401 of the General Obligations Law of the State of New York.

        Section 5.07. Consent to Jurisdiction, Etc. The Parties each hereby
consent and agree that the Supreme Court of the State of New York for the County
of Westchester and the United States District Court for Westchester County, New
York, each shall have personal jurisdiction and proper venue with respect to any
dispute between the Parties; provided that the foregoing consent shall not
deprive any Party of the right to voluntarily commence or participate in any
action, suit or proceeding in any other court having jurisdiction and venue over
the other Parties. In any dispute with the SPAR Principals, the PIA Parties will
not raise, and each hereby expressly waives, any objection or defense to any
such New York jurisdiction as an inconvenient forum. Without in any way limiting
the preceding consents to jurisdiction and venue, the parties intend (among
other things) to thereby avail themselves of the benefit of Section 5-1402 of
the General Obligations Law of the State of New York.

        Section 5.08. Waiver of Jury Trial. In any action, suit or proceeding in
any jurisdiction, the Parties each hereby expressly waive trial by jury.

        Section 5.09. Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay of or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default by any other
Party under this Agreement shall impair any such right, power or remedy, nor
shall it be construed as a waiver of or acquiescence in any such breach or
default, or of any similar breach or default occurring later. No waiver of any
single breach or default shall be deemed a waiver of any other breach or default
occurring before or after such waiver.

        Section 5.10. Reformation and Severability. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision shall be severed from this
Agreement, and in either case, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.

        Section 5.11. Remedies Cumulative. No right, remedy or election given by
any term of this Agreement shall be deemed exclusive, but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.

        Section 5.12. Captions. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.

        Section 5.13. Amendments. This Agreement may be modified or amended only
by a written instrument executed by the SPAR Principals and the PIA Parties.




                                      G-10

<PAGE>   89

        Section 5.14. Entire Agreement. This Agreement and the other Merger
Documents to which the Parties are a party constitute the entire agreement and
understanding among the Parties, and supersede any prior agreements and
understandings, relating to the subject matter of this Agreement.

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.


PIA Merchandising Services, Inc.          SPAR Acquisition, Inc.


By:                                       By:
    ----------------------------------        ----------------------------------
    Name: AAA                                 Name: Robert G. Brown
    Title: President and Chief Executive      Title: Chairman, Chief Executive 
           Officer                                   Officer and President

SG Acquisition, Inc.                          SPAR Marketing Force, Inc.


By:                                       By:
    ----------------------------------        ----------------------------------
    Name: Terry R. Peets                      Name: Robert G. Brown
    Title: President and Chief Executive      Title: Chairman, Chief Executive 
           Officer                                   Officer and President

PIA Merchandising Co., Inc.               SPAR, Inc.


By:                                       By:
    ----------------------------------        ----------------------------------
    Name: Terry R. Peets                      Name: Robert G. Brown
    Title: President and Chief Executive      Title: Chairman, Chief Executive 
           Officer                                   Officer and President

SPAR/Burgoyne Retail Services, Inc.       SPAR Marketing, Inc., a Delaware 
                                          corporation


By:                                       By:
    ----------------------------------        ----------------------------------
    Name: Robert G. Brown                     Name: Robert G. Brown
    Title: Chairman, Chief Executive          Title: Chairman, Chief Executive 
           Officer and President                     Officer and President

SPAR MCI Retail Services, Inc.            SPAR Trademarks, Inc.


By:                                       By:
    ----------------------------------        ----------------------------------
    Name: Robert G. Brown                     Name: Robert G. Brown
    Title: Chairman, Chief Executive          Title: Chairman, Chief Executive 
           Officer and President                     Officer and President


SPAR Marketing, Inc., a Nevada corporation


By:                                      
    ----------------------------------   
    Name: Robert G. Brown                
    Title: Chairman and Chief Executive     
           Officer         



- ---------------------------------------    -------------------------------------
          Robert G. Brown                             William H. Bartels


                                      G-11



<PAGE>   90
                                                                       EXHIBIT H

                           INDEMNITY ESCROW AGREEMENT


                                  Introduction

        This Indemnity Escrow Agreement, dated as of [Closing Date], 1999 (as
the same may be supplemented, modified, amended, restated or replaced from time
to time in the manner provided herein, this "Agreement"), is by and among PIA
MERCHANDISING SERVICES, INC., a Delaware corporation ("PIA Delaware"), SG
ACQUISITION, INC., a Nevada corporation ("PIA Acquisition"), PIA MERCHANDISING
CO., INC., a California corporation ("PIA California") (PIA Delaware, PIA
Acquisition and PIA California are sometimes referred to herein individually as
a "PIA Party" and collectively as the "PIA Parties"), SPAR ACQUISITION, INC., a
Nevada corporation ("SAI"), SPAR MARKETING, INC., a Delaware corporation
("SMI"), SPAR Marketing, Inc., a Nevada corporation ("SMNEV"), SPAR MARKETING
FORCE, INC., a Nevada corporation ("SMF"), SPAR, INC., a Nevada corporation
("SINC"), SPAR/BURGOYNE RETAIL SERVICES, INC., an Ohio corporation ("SBRS"),
SPAR INCENTIVE MARKETING, INC., a Delaware corporation ("SIM"), SPAR MCI
PERFORMANCE GROUP, INC., a Delaware corporation ("SMCI"), and SPAR TRADEMARKS,
INC., a Nevada Corporation ("STM") (SAI, SMI, SMNEV, SMF, SINC, SBRS, SIM, SMCI
and STM are sometimes referred to herein individually as a "SPAR Party" and
collectively as the "SPAR Parties"), and ROBERT G. BROWN and WILLIAM H. BARTELS
(each a "SPAR Principal,"and collectively the "SPAR Principals"), and PARKER
CHAPIN FLATTAU & KLIMPL, LLP, a New York limited liability partnership having an
address at 1211 Avenue of the Americas, New York, New York 10036, as Escrow
Agent (the "Indemnity Escrow Agent"). The PIA Parties and the SPAR Parties are
sometimes referred to herein individually as a "Merger Party" and collectively
as the "Merger Parties". The Merger Parties and the SPAR Principals are
sometimes referred to herein individually as a "Beneficiary" and collectively as
the "Beneficiaries". The Beneficiaries and the Indemnity Escrow Agent are
sometimes referred to herein individually as a "Party" and collectively as the
"Parties".


                                    RECITALS

        A. The Merger Parties have entered into the Agreement and Plan of Merger
dated as of February 28, 1999 (as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided therein,
the "Merger Agreement"), and the Merger Parties and the SPAR Principals (I.E.,
the Beneficiaries) have entered into the Limited Indemnification Agreement dated
as of [Closing Date], 1999 (as the same may be supplemented, modified, amended,
restated or replaced from time to time in the manner provided therein, the
"Limited Indemnification Agreement").

        B. The Beneficiaries desire to have shares of common stock of PIA
Delaware ("PIA Delaware Stock") deposited in escrow in accordance with Section
2.02 of the Merger Agreement and held and disbursed by the Indemnity Escrow
Agent in accordance with this Agreement in order to secure the obligations of
the SPAR Principals to the Merger Parties under the Limited Indemnification
Agreement, and the Indemnity Escrow Agent has agreed to receive, hold and
disburse such stock, all upon the terms and subject to the conditions
hereinafter set forth.


                                    AGREEMENT

        In consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:

        Section 1. Escrow of Instruments. (a) In accordance with the provisions
of Section 2.02 of the Merger Agreement, (i) PIA Delaware shall cause ten
percent (10%) of the shares of PIA Delaware Stock that each SPAR Principal and
their Family Members (as defined in the Merger Agreement) would otherwise have
had the right to receive pursuant to Section 2.01(a) (the "Share Escrow Amount")
of the Merger Agreement (the "Escrow Shares") to be registered in the name of
the applicable SPAR Principal and delivered to the Indemnity Escrow Agent,
provided however that the Share Escrow Amount may be satisfied by the shares of
the SPAR Principals as opposed to the shares of such Family Members; and (ii)
each SPAR Principal shall deposit with the Indemnity Escrow Agent four stock
powers (separate from the


                                       H-1


<PAGE>   91

certificates) endorsed to PIA Delaware, all of which shall be held in accordance
with the provisions of the Limited Indemnity Agreement and this Agreement.

        (b) The SPAR Principals shall be entitled to vote the Escrow Shares in
accordance with their respective interests therein on all matters submitted to a
vote of the stockholders of PIA Delaware so long as such Escrow Shares are held
in escrow pursuant to the term of this Agreement.

        (c) Capitalized terms used and not otherwise defined herein shall have
the meanings respectively assigned to them in the Merger Agreement or the
Limited Indemnification Agreement, as applicable. However, no reference to the
Merger Agreement or the Limited Indemnification Agreement or any other
instrument or document shall be deemed to incorporate any term or provision
thereof into this Agreement unless expressly so provided.

        Section 2. Investment of Funds. The Indemnity Escrow Agent may invest or
deposit any dividends or other distributions paid with respect to the Escrow
Shares (the "Escrow Funds"; collectively, with the Escrow Shares, the "Escrow
Deposit"), in (a) one of its normal interest bearing escrow deposit accounts
with Citibank, N.A., The Chase Manhattan Bank, or their respective affiliates,
(b) securities issued or guarantied by the United States of America, or (c)
other interest bearing deposit accounts in, or certificates of deposit,
commercial paper or similar products of, or money market mutual funds affiliated
with, (i) domestic commercial banks that have, or are members of a group of
domestic commercial banks that has, consolidated total assets of at least
$1,000,000,000, or (ii) such other banks or other financial institutions as may
be acceptable to the Beneficiaries.

        Section 3. Release of Funds and Documents. The Indemnity Escrow Agent
shall release the Escrow Shares and other property in the escrow created
hereunder as follows:

(a)     the Indemnity Escrow Agent shall release all of the then remaining
        Escrow Shares and other property in the Escrow Deposit to the SPAR
        Principals, in accordance with their respective interests therein, on
        the second Business Day after receipt by the Indemnity Escrow Agent of
        written notice from PIA Delaware certifying that the obligations of the
        SPAR Principals under the Limited Indemnity Agreement have been
        satisfied in full;

(b)     the Indemnity Escrow Agent shall release all of the then remaining
        Escrow Shares and other property in the Escrow Deposit to the SPAR
        Principals, in accordance with their respective interests therein, on
        the eleventh Business Day after receipt by the Indemnity Escrow Agent of
        written notice (a "Release Notice") from any SPAR Principal certifying
        that the obligations of the SPAR Principals under the Limited Indemnity
        Agreement have been satisfied in full and certifying that PIA Delaware
        has concurrently been given a copy of such Release Notice; provided,
        however, that the Escrow Deposit shall not be so released if PIA
        Delaware delivers written objection to such release to the Indemnity
        Escrow Agent prior to the close of business on the tenth Business Day
        after the Indemnity Escrow Agent's receipt of such Release Notice, in
        which event the Parties shall resolve such dispute in the manner
        provided in Section 7 hereof;

(c)     the Indemnity Escrow Agent shall release such portion of the Escrow
        Shares and/or other property then held in the Escrow Deposit to PIA
        Delaware as shall be specified by written notice from PIA Delaware, on
        the eleventh Business Day following receipt by the Indemnity Escrow
        Agent of such written request from PIA Delaware, acting in its own name
        or as agent for any other Beneficiary (an "Indemnity Claim Notice"),
        which notice shall (i) concurrently be delivered to the SPAR Principals
        and the Indemnity Escrow Agent (and shall include a certification to
        such effect), (ii) state that the Escrow Shares and other property
        requested to be released are required to satisfy an unpaid claim for
        indemnification under the Limited Indemnification Agreement, (iii) set
        forth the dollar amount of the claim for indemnification, and (iv)
        contain such facts and information as are then reasonably available
        concerning the basis for the claim for indemnification; provided,
        however, that the Indemnity Escrow Agent shall not release such Escrow
        Shares or other property as requested if one or both of the SPAR
        Principals has delivered written objection to such release to the
        Indemnity Escrow Agent prior to the close of business on the tenth
        Business Day following the receipt of such Indemnity Claim Notice, in
        which event the Parties shall resolve such dispute in the manner
        provided in Section 7 hereof;


                                       H-2


<PAGE>   92

(d)     the Indemnity Escrow Agent shall release one half of the then remaining
        Escrow Shares and Escrow Funds and other property attributable thereto
        in the Escrow Deposit to the SPAR Principals, in accordance with their
        respective interests therein, if by the close of business on March 31,
        2000, the Indemnity Escrow Agent has not received an Indemnity Claim
        Notice under Article III of the Limited Indemnification Agreement that
        then to its knowledge remains unsatisfied or in dispute (which the
        Indemnity Escrow Agent may in its discretion confirm through notices to
        the Beneficiaries); provided, however, that the Escrow Deposit shall not
        be so released if PIA Delaware delivers written objection to such
        release and an Indemnity Claim Notice under Article III of the Limited
        Indemnification Agreement to the Indemnity Escrow Agent prior to the
        close of business on March 29, 2000, in which event the Parties shall
        resolve such dispute in the manner provided in Section 7 hereof;

(e)     the Board of Directors of PIA Delaware shall in their board meetings
        preceding the second, third and fourth anniversaries of the date of this
        Agreement evaluate the amount of collateral reasonably necessary to
        continue to secure the SPAR Principals' obligations under the Limited
        Indemnification Agreement (the "Continuing Amount"), not to exceed
        $1,500,000, and give written notice to the Indemnity Escrow Agent of the
        Continuing Amount; and the Indemnity Escrow Agent shall retain Escrow
        Shares having a Fair Market Value (as hereinafter defined) equal to the
        Continuing Amount and release all the then remaining Escrow Shares and
        other property in the Escrow Deposit in excess of the Continuing Amount
        to the SPAR Principals, in accordance with their respective interests
        therein, if the Indemnity Escrow Agent has received that notice and the
        Indemnity Escrow Agent has not received an Indemnity Claim Notice under
        Article II of the Limited Indemnification Agreement that then to its
        knowledge remains unsatisfied or in dispute (which the Indemnity Escrow
        Agent may in its discretion confirm through notices to the
        Beneficiaries); provided, however, that the Escrow Deposit shall not be
        so released if PIA Delaware delivers written objection to such release
        and an Indemnity Claim Notice under Article II of the Limited
        Indemnification Agreement to the Indemnity Escrow Agent prior to the
        close of business on the tenth Business Day prior to the applicable
        anniversary of the date hereof, in which event the Parties shall resolve
        such dispute in the manner provided in Section 7 hereof; and

(f)     the Indemnity Escrow Agent shall release all of the then remaining
        Escrow Shares and other property in the Escrow Deposit to the SPAR
        Principals, in accordance with their respective interests therein, if by
        the close of business on the eleventh Business Day following the fifth
        anniversary of the date of this Agreement the Indemnity Escrow Agent has
        not received an Indemnity Claim Notice under Article II of the Limited
        Indemnification Agreement that then to its knowledge remains unsatisfied
        or in dispute (which the Indemnity Escrow Agent may in its discretion
        confirm through notices to the Beneficiaries); provided, however, that
        the Escrow Deposit shall not be so released if PIA Delaware delivers
        written objection to such release and an Indemnity Claim Notice under
        Article II of the Limited Indemnification Agreement to the Indemnity
        Escrow Agent prior to the close of business on the tenth Business Day
        after the fifth anniversary of the date of this Agreement, in which
        event the Parties shall resolve such dispute in the manner provided in
        Section 7 hereof.

In determining the number of Escrow Shares to be transferred in satisfaction of
any claim against the Escrow Property pursuant to the foregoing clause (c) or
retained in escrow (if any) under the foregoing clause (e), each Escrow Share
shall be valued at the average last sale price on the Nasdaq National Market for
the PIA Delaware Stock for the twenty (20) trading days ending two trading days
prior to the date on which such shares are to be transferred or released (the
"Fair Market Value"). PIA Delaware shall notify the Indemnity Escrow Agent in
writing of the appropriate valuation for the Escrow Shares for such purposes.
Each of the SPAR Principals and other Beneficiaries hereby expressly authorizes
and instructs the Indemnity Escrow Agent to take any and all action required to
effect any transfer of Escrow Shares and/or other property pursuant to the terms
of this Agreement, including, without limitation, completing and delivering one
or more of the executed stock powers delivered to the Indemnity Escrow Agent
pursuant to Section 1.

        Section 4. Substitution of Cash for Escrow Shares. The SPAR Principals
shall have the right at any time and from time to time to substitute cash for
Escrow Shares as follows: (i) the SPAR Principals shall give written notice to
the Indemnity Escrow Agent and the Merger Parties at least ten days prior to any
requested substitution; (ii) on or before the proposed substitution date, the
SPAR Principals shall deliver $_____ [THE PER SHARE FAIR MARKET VALUE AS OF THE
EFFECTIVE TIME] per share in immediately available funds to the Indemnity Escrow
Agent for each share of PIA Delaware Stock to be released in substitution,
provided, however, that to the extent the amount of the Escrow Shares has been
reduced pursuant to Section 3(e) hereof, the per share substitution price for
the each share of PIA


                                       H-3


<PAGE>   93

Delaware Stock in the Continuing Amount shall instead be the Fair Market Value
as of the business day immediately preceding the day such written notice is
sent; and (iii) upon receipt of such funds by the Indemnity Escrow Agent, the
Indemnity Escrow Agent shall release the corresponding shares of PIA Delaware
Stock to the SPAR Principals, in accordance with their respective interests
therein, whether or not any Indemnity Claim Notice has been received by the
Indemnity Escrow Agent.

        Section 5. Further Assurances. Each Beneficiary agrees to do such
further acts and things and to execute and deliver such statements, assignments,
agreements, instruments and other documents as the Indemnity Escrow Agent from
time to time reasonably may request in order to effectuate the purpose and the
terms and provisions of this Agreement, each in such form and substance as may
be acceptable to the Indemnity Escrow Agent.

        Section 6. Invalidation of Distributions, Etc. In the event any amount
or document released to any Beneficiary under this Agreement is invalidated,
declared to be fraudulent or preferential or must otherwise be restored or
returned by the Indemnity Escrow Agent in connection with the insolvency,
bankruptcy or reorganization of any Beneficiary or other person, whether by
order of or settlement before any court or other authority or otherwise: (a)
each Beneficiary shall contribute back to the Indemnity Escrow Agent an amount
received by it such that each Beneficiary will be affected by that invalidation,
declaration, restoration or return ratably in proportion to the distributions it
received under this Agreement; and (b) each Beneficiary will return any document
so affected, together with any related assignment, release or other instrument
or document the Indemnity Escrow Agent may request to restore the status quo
ante.

        Section 7. Conflicting Demands.

        (a) In the event that one or both of the SPAR Principals or PIA Delaware
timely objects to any requested release of or claim against any of the Escrow
Shares or other property pursuant to Section 3, then PIA Delaware and the SPAR
Principals shall, for a period of at least thirty days, negotiate in good faith
in an effort to resolve such dispute. If PIA Delaware and the SPAR Principals
are unable to resolve such dispute within such thirty day period (or such longer
period as they may mutually agree upon), then the Beneficiaries may pursue
non-binding mediation if they mutually agree, or any Beneficiary may commence an
action, to finally resolve any conflicting claims hereunder. The final decision
of any court proceeding shall be furnished in writing to the Indemnity Escrow
Agent.

        (b) If conflicting or adverse claims or demands are made or notices
served upon the Indemnity Escrow Agent with respect to the escrow provided for
herein, the Beneficiaries agree that the Indemnity Escrow Agent shall be
entitled to refuse to comply with any such claim or demand and to withhold and
stop all further performance of this escrow so long as such disagreement shall
continue. In so doing, the Indemnity Escrow Agent shall not be or become liable
for damages, losses, expenses or interest to any Beneficiary or any other person
for its failure to comply with such conflicting or adverse demands. The
Indemnity Escrow Agent shall be entitled to continue to so refrain and refuse to
so act until: (a) the rights of the adverse claimants have been finally
adjudicated in a court assuming and having jurisdiction and venue over the
parties and/or the documents, instruments or funds involved herein or affected
hereby; and/or (b) the Indemnity Escrow Agent shall have received an executed
copy of a dispositive settlement agreement to which the Beneficiaries and all
other adverse claimants, if any, are parties and signatories.

        (c) If conflicting or adverse claims or demands are made or notices
served upon the Indemnity Escrow Agent with respect to the escrow provided for
herein, the Beneficiaries agree that the Indemnity Escrow Agent also may elect
to commence an interpleader or other action for declaratory judgment for the
purpose of having the respective rights of the claimants adjudicated, and may
deposit with the court all funds and documents held hereunder pursuant to this
Agreement; and if it so commences and deposits, the Indemnity Escrow Agent shall
be relieved and discharged from any further duties and obligations under this
Agreement. PIA Delaware shall pay all costs, expenses and attorneys' fees and
expenses incurred by the Indemnity Escrow Agent in seeking any such judgment.

        Section 8. Consent to Jurisdiction, Etc. Each Beneficiary hereby
covenants and agrees that the Supreme Court of the State of New York for the
County of Westchester or (in a case involving diversity of citizenship) the
United States District Court for the Southern District of New York shall have
personal jurisdiction and proper venue over any dispute with the Indemnity
Escrow Agent; provided that the foregoing consent to jurisdiction and venue by
the other parties shall not deprive the Indemnity Escrow Agent of the right in
its discretion to voluntarily commence or participate


                                       H-4


<PAGE>   94

in any action, suit or proceeding in any other court having jurisdiction and
venue over the Beneficiaries. In any dispute with the Indemnity Escrow Agent, no
Beneficiary will raise, and each Beneficiary hereby expressly waives, any
objection or defense to any such jurisdiction as an inconvenient forum. Without
in any way limiting the preceding consents to jurisdiction and venue, the
parties intend (among other things) to thereby avail themselves of the benefit
of Section 5-1402 of the General Obligations Law of the State of New York. In
addition to (and without limitation of) any delivery permitted under applicable
law, each Beneficiary agrees that service of process may be made at his or its
office in Westchester County, New York.

        Section 9. Waiver of Jury Trial. In any action or proceeding involving
the Indemnity Escrow Agent in any jurisdiction, the Parties each waive trial by
jury.

        Section 10. Expenses of the Indemnity Escrow Agent. PIA Delaware shall
pay any and all costs and expenses incurred by the Indemnity Escrow Agent in
connection with the administration and holding of the Escrow Deposit and the
investment of any Escrow Funds, and the enforcement, protection and adjudication
of the parties' rights hereunder by the Indemnity Escrow Agent, including,
without limitation, the disbursements, expenses and fees of the Indemnity Escrow
Agent itself and those of other attorneys it may retain, if any.

        Section 11. Reliance on Documents and Experts. The Indemnity Escrow
Agent shall be entitled to rely upon any notice, consent, certificate,
affidavit, statement, paper, document, writing or communication (which to the
extent permitted hereunder may be by telegram, cable, telex, telecopier, or
telephone) reasonably believed by it to be genuine and to have been signed, sent
or made by the proper person or persons, and upon opinions and advice of legal
counsel (including itself or counsel for any party hereto), independent public
accountants and other experts selected by the Indemnity Escrow Agent.

        Section 12. Status of the Indemnity Escrow Agent, Etc. The Indemnity
Escrow Agent is acting under this Agreement as a stakeholder only and shall be
considered an independent contractor with respect to each Beneficiary. No term
or provision of this Agreement is intended to create, nor shall any such term or
provision be deemed to have created, any principal-agent, trust, joint venture,
partnership, debtor-creditor or attorney-client relationship between or among
the Indemnity Escrow Agent and any of the Beneficiaries. This Agreement shall
not be deemed to prohibit or in any way restrict the Indemnity Escrow Agent's
representation of any Beneficiary, who may be advised by the Indemnity Escrow
Agent on any and all matters pertaining to this Agreement and the Escrow
Deposit. To the extent one or more of the Beneficiaries have been, are and/or
will be represented by the Indemnity Escrow Agent, each such Beneficiary hereby
waives any conflict of interest and irrevocably authorizes and directs the
Indemnity Escrow Agent to carry out the terms and provisions of this Agreement,
in each case without regard to any representation of any such Beneficiary, with
deference to no party and fairly as to all parties, and irrespective of the
impact upon or any conflicting communication from any such Beneficiary. The
Indemnity Escrow Agent's only duties are those expressly set forth in this
Agreement, and each Beneficiary authorizes the Indemnity Escrow Agent to perform
those duties in accordance with its usual practices in holding funds and
documents of its own or those of other escrows. The Indemnity Escrow Agent may
exercise or otherwise enforce any of its rights, powers, privileges, remedies
and interests under this Agreement and applicable law or perform any of its
duties under this Agreement by or through its directors, officers, partners,
employees, attorneys, agents or designees.

        Section 13. Exculpation. The Indemnity Escrow Agent and its designees,
and their respective directors, officers, partners, counsel, employees,
attorneys and agents, shall not incur any liability whatsoever for (a) the
investment or disposition of funds, the holding or delivery of documents or the
taking of any other action, in each case in accordance with the terms and
provisions of this Agreement, (b) any mistake or error in judgment, (c)
compliance with any applicable law or any attachment, order or other directive
of any court or other authority (irrespective of any conflicting term or
provision of this Agreement), or (d) any other act or omission of any other
independent person engaged by the Indemnity Escrow Agent in connection with this
Agreement; and each Beneficiary hereby waives any and all claims and actions
whatsoever against the Indemnity Escrow Agent and its designees, and their
respective directors, officers, partners, employees, attorneys and agents,
arising out of or related directly or indirectly to any and all of the foregoing
acts, omissions and circumstances. Furthermore, the Indemnity Escrow Agent and
its designees, and their respective directors, officers, partners, employees,
attorneys and agents, shall not incur any liability (other than for a person's
own acts or omissions breaching a duty or contractual obligation owed to the
claimant and amounting to gross negligence or willful


                                       H-5


<PAGE>   95

misconduct as finally determined pursuant to applicable law by a governmental
authority having jurisdiction) for other acts and omissions arising out of or
related directly or indirectly to this Agreement or the Escrow Deposit; and each
Beneficiary hereby expressly waives any and all claims and actions (other than
those attributable to a person's own acts or omissions breaching a duty or
contractual obligation owed to the claimant and amounting to gross negligence or
willful misconduct as finally determined pursuant to applicable law by a
governmental authority having jurisdiction) against the Indemnity Escrow Agent
and its designees, and their respective directors, officers, partners,
employees, attorneys and agents, arising out of or related directly or
indirectly to any and all of the foregoing acts, omissions and circumstances.

        Section 14. Indemnification. The Indemnity Escrow Agent and its
designees, and their respective directors, officers, partners, employees,
attorneys and agents, shall be indemnified, reimbursed, held harmless and, at
the request of the Indemnity Escrow Agent, defended by the Beneficiaries,
jointly and severally, from and against any and all claims, liabilities, losses
and expenses (including, without limitation, the disbursements, expenses and
fees of their respective attorneys) that may be imposed upon, incurred by, or
asserted against any of them, or any of their respective directors, officers,
partners, employees, attorneys or agents, arising out of or related directly or
indirectly to this Agreement or the Escrow Deposit, except such as are
occasioned by the indemnified person's own acts and omissions breaching a duty
or contractual obligation owed to the claimant and amounting to gross negligence
or willful misconduct as finally determined pursuant to applicable law by a
governmental authority having jurisdiction.

        Section 15. Notice. Any notice, request, demand or other communication
permitted or required to be given hereunder shall be in writing, shall be signed
by the party giving it, shall be sent by one of the following means to the
addressee at the address set forth above (or at such other address as shall be
designated hereunder by notice to the other parties and persons receiving
copies, effective upon actual receipt) and shall be deemed conclusively to have
been given: (i) on the first business day following the day timely deposited
with Federal Express (or other equivalent national overnight courier) or United
States Express Mail for overnight delivery, with the cost of overnight delivery
prepaid or for the account of the sender; (ii) on the fifth business day
following the day duly sent by certified or registered United States mail,
postage prepaid and return receipt requested, or (iii) when otherwise actually
received by the addressee on a business day (or on the next business day if
received after the close of normal business hours or on any non-business day).
Any notice, request, demand or other communication instead may be sent by
telecopy, with the cost of transmission prepaid or for the account of the
sender, and shall be deemed conclusively to have been given on the first
business day following the day duly sent, provided that the giving party also
sends a copy thereof by one of the other means referenced above. Refusal to
accept delivery of any item shall be deemed to be receipt of such item by the
refusing party. Copies may be sent by regular first-class mail, postage prepaid,
to such person(s) as a party may direct from time to time by notice to the
others, but failure or delay in sending copies shall not affect the validity of
any such notice, request, demand or other communication so given to a party.

        Section 16. Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.

        Section 17. Governing Law. This Agreement: has been executed and
delivered in the State of New York; and shall be governed by and construed in
accordance with the applicable laws pertaining in the State of New York (other
than those that would defer to the substantive laws of another jurisdiction).
Without in any way limiting the preceding choice of law, the parties intend
(among other things) to thereby avail themselves of the benefit of Section 5-
1401 of the General Obligations Law of the State of New York.

        Section 18. Severability. In the event that any term or provision of
this Agreement shall be finally determined to be superseded, invalid, illegal or
otherwise unenforceable pursuant to applicable law by a governmental authority
having jurisdiction and venue, that determination shall not impair or otherwise
affect the validity, legality or enforceability (a) by or before that authority
of the remaining terms and provisions of this Agreement, which shall be enforced
as if the unenforceable term or provision were deleted, or (b) by or before any
other authority of any of the terms and provisions of this Agreement.

        Section 19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, shall constitute but one
agreement binding upon all of the parties hereto.


                                       H-6


<PAGE>   96

        Section 20. Effective Date. This Agreement shall be effective on the
date as of which this Agreement shall be executed by all the parties hereto and
delivered to the Indemnity Escrow Agent.

        Section 21. Successors and Assigns; Assignment. Whenever in this
Agreement reference is made to any party, such reference shall be deemed to
include the successors, assigns, heirs and legal representatives of such party,
and, without limiting the generality of the foregoing, all representations,
warranties, covenants and other agreements made by or on behalf of each
Beneficiary in this Agreement shall inure to the benefit of the successors and
assigns of the Indemnity Escrow Agent; provided, however, that nothing herein
shall be deemed to authorize or permit any Beneficiary to assign any of its
rights or obligations hereunder to any other person (whether or not an affiliate
of the Beneficiary), and each Beneficiary covenants and agrees that it shall not
make any such assignment.

        Section 22. No Third Party Rights. The representations, warranties and
other terms and provisions of this Agreement are for the exclusive benefit of
the parties hereto, and no other person, including creditors of any Beneficiary,
shall have any right or claim against any party by reason of any of those terms
and provisions or be entitled to enforce any of those terms and provisions
against any party.

        Section 23. No Waiver by Action, Etc. Any waiver or consent respecting
any representation, warranty, covenant or other term or provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given and shall not be deemed, regardless of frequency given,
to be a further or continuing waiver or consent. The failure or delay of a party
at any time or times to require performance of, or to exercise its rights with
respect to, any representation, warranty, covenant or other term or provision of
this Agreement in no manner (except as otherwise expressly provided herein)
shall affect its right at a later time to enforce any such term or provision. No
notice to or demand on any Party in any case shall entitle such party to any
other or further notice or demand in the same, similar or other circumstances.
All rights, powers, privileges, remedies and interests of the Indemnity Escrow
Agent under this Agreement are cumulative and not alternatives, and they are in
addition to and shall not limit (except as otherwise expressly provided herein)
any other right, power, privilege, remedy or interest of the Indemnity Escrow
Agent under this Agreement or applicable law.

        Section 24. Modification, Amendment, Etc. Each and every modification
and amendment of this Agreement shall be in writing and signed by all of the
parties hereto, and each and every waiver of, or consent to any departure from,
any covenant, representation, warranty or other provision of this Agreement
shall be in writing and signed by each party affected thereby.



                                       H-7


<PAGE>   97

        Section 25. Entire Agreement. This Agreement contains the entire
agreement of the parties and supersedes all other representations, agreements
and understandings, oral or otherwise, among the parties with respect to the
matters contained herein.

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

THE BENEFICIARIES:                         PIA MERCHANDISING SERVICES, INC.


                                           By: _________________________________
                                               Name:
                                               Title:


                                           SG ACQUISITION, INC.


                                           By: _________________________________
                                               Name:
                                               Title:


                                           PIA MERCHANDISING CO., INC.


                                           By: _________________________________
                                               Name:
                                               Title:


                                           SPAR ACQUISITION, INC., a Delaware 
                                           corporation


                                           By: _________________________________
                                               Name:
                                               Title:


                                           SPAR MARKETING, INC., a Delaware 
                                           corporation


                                           By: _________________________________
                                               Name:
                                               Title:


                                           SPAR MARKETING FORCE, INC.


                                           By: _________________________________
                                               Name:
                                               Title:



                                       H-8


<PAGE>   98


                                           SPAR, INC.


                                           By: _________________________________
                                               Name:
                                               Title:


                                           SPAR/BURGOYNE RETAIL SERVICES, INC.


                                           By: _________________________________
                                               Name:
                                               Title:


                                           SPAR  MARKETING, INC.,
                                           a Nevada corporation


                                           By: _________________________________
                                               Name:
                                               Title:


                                           SPAR INCENTIVE MARKETING, INC.


                                           By: _________________________________
                                               Name:
                                               Title:


                                           SPAR MCI PERFORMANCE GROUP, INC.


                                           By: _________________________________
                                               Name:
                                               Title:


                                           SPAR TRADEMARKS, INC.


                                           By: _________________________________
                                               Name:
                                               Title:



                                               _________________________________
                                                        ROBERT G. BROWN


                                               _________________________________
                                                       WILLIAM H. BARTELS


                                       H-9


<PAGE>   99

THE INDEMNITY ESCROW AGENT:                PARKER CHAPIN FLATTAU & KLIMPL, LLP


                                           By:__________________________________


                                           ___________________________________
                                                      ROBERT G. BROWN


                                           ___________________________________
                                                    WILLIAM H. BARTELS


THE INDEMNITY ESCROW AGENT:                PARKER CHAPIN FLATTAU & KLIMPL, LLP


                                           By: _______________________________



                                      H-10




<PAGE>   1

                                                                   EXHIBIT 10.11


                                VOTING AGREEMENT

                                  INTRODUCTION

        THIS VOTING AGREEMENT, dated as of February 28, 1999 (as the same may be
supplemented, modified, amended, restated or replaced from time to time in the
manner provided herein, this "Agreement"), is made by and among CLINTON E.
OWENS, an individual ("Owens") and RVM/PIA, a California limited partnership
("RVM/PIA") (Owens and RVM/PIA may be referred to individually as a "PIA
Stockholder" and collectively as the "PIA Stockholders"), PIA MERCHANDISING
SERVICES, INC., a Delaware corporation ("PIA Delaware"), ROBERT G. BROWN, an
individual ("Brown") and WILLIAM H. BARTELS, an individual ("Bartels") (Brown
and Bartels may be referred to individually as a "SPAR Stockholder" and
collectively as the "SPAR Stockholders"), and SPAR ACQUISITION, INC., a Nevada
corporation (the "SPAR Acquisition"). The PIA Stockholders, PIA Delaware, the
SPAR Stockholders and SPAR Acquisition are sometimes referred to herein
individually as a "Party" and collectively as the "Parties".

                                    RECITALS

        PIA Delaware and certain of its subsidiaries and SPAR Acquisition and
certain of its affiliates (which will be subsidiaries at closing) are parties to
an Agreement and Plan of Merger dated as of February 28, 1999 (as the same may
be supplemented,
 modified, amended, restated or replaced from time to time in
the manner provided therein, the "Merger Agreement"). SPAR Acquisition and the
SPAR Stockholders are parties to a Reorganization Agreement dated as of February
28, 1999 (as the same may be supplemented, modified, amended, restated or
replaced from time to time in the manner provided therein, the "Reorganization
Agreement"). "PIA Stock" shall mean the shares of common stock, par value $0.01
per share, issued by PIA Delaware. "SPAR Stock" shall mean the shares of common
stock, par value $0.01 per share, issued by SPAR Acquisition. Capitalized terms
used and not otherwise defined herein shall have the meanings respectively
assigned to them in the Merger Agreement or the Reorganization Agreement, as
applicable.

        The PIA Stockholders own of record certain shares of PIA Stock (all such
shares, together with all other shares of PIA Stock that any PIA Stockholder
currently has or hereafter acquires record ownership of, are collectively
referred to as the "PIA Shares"). The SPAR Stockholders own of record certain
shares of SPAR Stock (all such shares, together with all other shares of SPAR
Stock that any SPAR Stockholder currently has or hereafter acquires beneficial
ownership of, are collectively referred to as the "SPAR Shares").

        Pursuant to the Merger Agreement, PIA Delaware and SPAR Acquisition have
agreed to merge SG Acquisition, Inc., a subsidiary of PIA Delaware, into and
with SPAR Acquisition, in return for the issuance of PIA Stock to the SPAR
Stockholders and other consideration as more fully described, on the terms and
provisions and subject to the conditions in the Merger Agreement (the "Merger").


                                       -1-


<PAGE>   2

        As PIA Delaware and SPAR Acquisition have incurred, and may be required
to incur additional, substantial expenses in connection with the negotiation,
execution, stockholder approval, proxy disclosure and performance of the Merger
Agreement, PIA Delaware has requested, as a condition to its willingness to
enter into the Merger Agreement, that the SPAR Stockholders agree to certain
matters with respect to the voting of the SPAR Shares by the SPAR Stockholders,
and SPAR Acquisition has requested, as a condition to its willingness to enter
into the Merger Agreement, that the PIA Stockholders agree to certain matters
with respect to the voting of the PIA Shares by the PIA Stockholders, all upon
the terms and provisions and subject to the conditions hereinafter set forth.

                                    AGREEMENT

        In consideration of the foregoing, the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration (the receipt
and adequacy of which is hereby acknowledged by the Parties), the Parties hereto
hereby agree as follows:

        Section 1. PIA Stockholder Voting. Until the earlier of the termination
or closing of the Merger Agreement in accordance with its terms, subject to the
receipt of proper notice and the absence of a preliminary or permanent
injunction or other final order by any United States federal court or state
court barring such action, each PIA Stockholder shall do the following:

(a)     be present, in person or represented by proxy, at each meeting (whether
        annual or special, and whether or not an adjourned or postponed meeting)
        of the stockholders of PIA Delaware, however called, or in connection
        with any written consent of stockholders of PIA Delaware, so that all
        PIA Shares then entitled to vote may be counted for the purposes of
        determining the presence of a quorum at such meeting; and

(b)     vote or cause the vote of the PIA Shares held of record by such PIA
        Stockholder, at each such meeting held before the Effective Time and
        with respect to each written consent, (i) to approve the Merger
        Agreement and the Merger, the Proposed Restated Certificate, the
        Proposed Plan Amendment, and any action in furtherance thereof, (ii)
        except as otherwise approved in writing in advance by SPAR Acquisition
        (which approval may be granted, withheld, conditioned or delayed in its
        sole discretion), against any Acquisition Proposal (other than the
        Merger), and (iii) in favor of any amendment to or restatement of the
        charter or by-laws of PIA Delaware required by the Merger Agreement, and
        except as otherwise approved in writing in advance by SPAR Acquisition
        (which approval may be granted, withheld, conditioned or delayed in its
        sole discretion), against any other amendment to or restatement of the
        charter or by-laws of PIA Delaware.

        Section 2. SPAR Stockholder Voting. Until the earlier of the termination
or closing of the Merger Agreement in accordance with its terms, subject to the
receipt of proper notice and the absence of a preliminary or permanent
injunction or other final order by any United States federal court or state
court barring such action, each SPAR Stockholder shall do the following:

(a)     be present, in person or represented by proxy, at each meeting (whether
        annual or special, and whether or not an adjourned or postponed meeting)
        of the stockholders of SPAR Acquisition, however called, or in
        connection with any written consent of stockholders of SPAR Acquisition,


                                       -2-


<PAGE>   3

        so that all SPAR Shares then entitled to vote may be counted for the 
        purposes of determining the presence of a quorum at such meeting; and

(b)     vote or cause the vote of the SPAR Shares, at each such meeting held
        before the Effective Time and with respect to each written consent, (i)
        to approve the Merger Agreement and the Merger and any action in
        furtherance thereof, (ii) except as otherwise approved in writing in
        advance by PIA Delaware (which approval may be granted, withheld,
        conditioned or delayed in its sole discretion), against any Acquisition
        Proposal (other than the Merger), and (iii) in favor of any amendment to
        or restatement of the charter or by-laws of SPAR Acquisition required by
        the Merger Agreement, and except as otherwise approved in writing in
        advance by PIA Delaware (which approval may be granted, withheld,
        conditioned or delayed in its sole discretion), against any other
        amendment to or restatement of the charter or by-laws of SPAR
        Acquisition.

        Section 3. Representations and Warranties of the PIA Stockholders. Each
PIA Stockholder hereby severally represents and warrants (with respect to such
PIA Stockholder and the PIA Shares held of record by such PIA Stockholder) to
SPAR Acquisition that:

        (a) Such PIA Stockholder has the full right, power and authority to
enter into this Agreement.

        (b) The execution, delivery and performance of this Agreement by such
PIA Stockholder and the consummation of the transactions contemplated hereby do
not and will not, with or without the giving of notice or the passage of time,
(i) violate any applicable law or any judgment, injunction or order of any
court, arbitrator or governmental agency applicable to such PIA Stockholder, or
(ii) constitute a breach or default or require the consent of any third party
under any agreement, instrument, judgment, order or decree to which such PIA
Stockholder is a party or by which such PIA Stockholder or the PIA Shares held
of record by such PIA Stockholder may be bound or subject.

        (c) This Agreement has been duly and validly executed and delivered by
such PIA Stockholder and is the legal, valid and binding obligation of such PIA
Stockholder, enforceable against such PIA Stockholder in accordance with its
terms and provisions, except as enforcement may be limited by the Bankruptcy
Exceptions.

        Section 4. Additional Covenants of the PIA Stockholders. Each PIA
Stockholder hereby covenants and agrees with SPAR Acquisition that, until the
termination of this Agreement as provided below, unless waived by SPAR
Acquisition in writing (in its sole and absolute discretion):

        (a) Such PIA Stockholder shall not enter into any transaction, take any
action, or by inaction permit any event to occur, that would result in any of
the representations or warranties of such PIA Stockholder herein contained not
being true and correct at and as of the time immediately after the occurrence of
such transaction, action or event.

        (b) Such PIA Stockholder shall not, whether directly, indirectly, or
through any employee, agent or otherwise (i) solicit or initiate any inquiry or
submission of a proposal or an offer from any person, corporation,
unincorporated organization, partnership, association, joint venture, trust or
any other entity (a "Third Party") relating to any Acquisition Proposal, or (ii)
participate in any


                                       -3-


<PAGE>   4

discussions or negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way or assist or
facilitate any Acquisition Proposal by any Third Party except to the extent that
PIA Delaware is permitted to do so pursuant to the Merger Agreement.

        (c) Such PIA Stockholder shall not, directly or indirectly, (i) grant
any proxies or enter into any voting trust or other agreement or arrangement
with respect to the voting of any of the PIA Shares held of record by such PIA
Stockholder, (ii) acquire, sell, assign, transfer, encumber or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the direct or indirect acquisition or sale, assignment,
transfer, encumbrance or other disposition of, any of such PIA Shares, or (iii)
seek or solicit any such acquisition or sale, assignment, transfer encumbrance
or other disposition or any such contract, option or other arrangement or
assignment or understanding.

        (d) Such PIA Stockholder shall execute and deliver any additional
documents reasonably requested by SPAR Acquisition as necessary or desirable to
implement and effect the provisions of this Agreement, each in form and
substance reasonably acceptable to such PIA Stockholder.

        Section 5. Representations and Warranties of the SPAR Stockholders. Each
SPAR Stockholder hereby severally represents and warrants (with respect to such
SPAR Stockholder and the SPAR Shares owned of record by such SPAR Stockholder)
to PIA Delaware that:

        (a) Such SPAR Stockholder has the full right, power and authority to
enter into this Agreement.

        (b) The execution, delivery and performance of this Agreement by such
SPAR Stockholder and the consummation of the transactions contemplated hereby do
not and will not, with or without the giving of notice or the passage of time,
(i) violate any applicable law or any judgment, injunction or order of any
court, arbitrator or governmental agency applicable to such SPAR Stockholder, or
(ii) constitute a breach or default or require the consent of any third party
under any agreement, instrument, judgment, order or decree to which such SPAR
Stockholder is a party or by which such SPAR Stockholder or the SPAR Shares held
of record by such SPAR Stockholder may be bound or subject.

        (c) This Agreement has been duly and validly executed and delivered by
such SPAR Stockholder and is the legal, valid and binding obligation of such
SPAR Stockholder, enforceable against him in accordance with its terms and
provisions, except as enforcement may be limited by the Bankruptcy Exceptions.

        Section 6. Additional Covenants of the SPAR Stockholders. Each SPAR
Stockholder hereby covenants and agrees with PIA Delaware that, until the
termination of this Agreement as provided below, unless waived by PIA Delaware
in writing (in its sole and absolute discretion):

        (a) Such SPAR Stockholder shall not enter into any transaction, take any
action, or by inaction permit any event to occur, that would result in any of
the representations or warranties of


                                       -4-


<PAGE>   5

such SPAR Stockholder herein contained not being true and correct at and as of
the time immediately after the occurrence of such transaction, action or event.

        (b) Such SPAR Stockholder shall not, directly or indirectly, (i) grant
any proxies or enter into any voting trust or other agreement or arrangement
with respect to the voting of any of the SPAR Shares held of record by such SPAR
Stockholder, (ii) acquire, sell, assign, transfer, encumber or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the direct or indirect acquisition or sale, assignment,
transfer, encumbrance or other disposition of, any of such SPAR Shares except
for transfers or sales either directly or indirectly to Family Members (as
defined in the Merger Agreement) of the SPAR Stockholders, or (iii) seek or
solicit any such acquisition or sale, assignment, transfer encumbrance or other
disposition or any such contract, option or other arrangement or assignment or
understanding.

        (c) Such SPAR Stockholder shall execute and deliver any additional
documents reasonably requested by PIA Delaware as necessary or desirable to
implement and effect the provisions of this Agreement, each in form and
substance reasonably acceptable to such SPAR Stockholder.

        Section 7. Represents and Warranties of PIA Delaware. PIA Delaware
hereby represents and warrants to SPAR Acquisition that:

        (a) PIA Delaware has all requisite power and authority to enter into and
perform all of its obligations under this Agreement. The execution, delivery and
performance of this Agreement and all of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of PIA Delaware.

        (b) The execution, delivery and performance of this Agreement by the PIA
Delaware and the consummation of the transactions contemplated hereby do not and
will not, with or without the giving of notice or the passage of time, (i)
violate the organizational documents of PIA Delaware, (ii) violate any
applicable law or any judgment, injunction or order of any court, arbitrator or
governmental agency applicable to PIA Delaware, or (iii) constitute a breach or
default or require the consent of any third party under any agreement,
instrument, judgment, order or decree to which PIA Delaware is a party or by
which PIA Delaware may be bound or subject.

        (c) This Agreement has been duly executed and delivered by PIA Delaware
and is the legal, valid and binding obligation of PIA Delaware, enforceable
against it in accordance with its terms and provisions, except as enforcement
may be limited by the Bankruptcy Exceptions.

        Section 8. Represents and Warranties of SPAR Acquisition. SPAR
Acquisition hereby represents and warrants to PIA Delaware that:

        (a) SPAR Acquisition has all requisite power and authority to enter into
and perform all of its obligations under this Agreement. The execution, delivery
and performance of this Agreement and all of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of SPAR
Acquisition.

        (b) The execution, delivery and performance of this Agreement by the
SPAR Acquisition and the consummation of the transactions contemplated hereby do
not and will not, with or


                                       -5-


<PAGE>   6

without the giving of notice or the passage of time, (i) violate the
organizational documents of SPAR Acquisition, (ii) violate any applicable law or
any judgment, injunction or order of any court, arbitrator or governmental
agency applicable to SPAR Acquisition, or (iii) constitute a breach or default
or require the consent of any third party under any agreement, instrument,
judgment, order or decree to which SPAR Acquisition is a party or by which SPAR
Acquisition may be bound or subject.

        (c) This Agreement has been duly executed and delivered by SPAR
Acquisition and is the legal, valid and binding obligation of SPAR Acquisition,
enforceable against it in accordance with its terms and provisions, except as
enforcement may be limited by the Bankruptcy Exceptions.

        Section 9. Termination. This Agreement shall terminate upon the first to
occur of (a) the consummation of the Merger pursuant to Merger Agreement and (b)
the termination of the Merger Agreement in accordance with its terms.

        Section 10. Equitable Relief. Each Party acknowledges and agrees that it
may be impossible to measure in money the damage to the other Parties in the
event of a breach of or default under any of the terms and provisions of this
Agreement, and that, in the event of any such breach or default, PIA Delaware or
SPAR Acquisition, as the case may be, in addition to all other rights, powers,
privileges and remedies that it may have, shall be entitled to injunctive
relief, specific performance or such other equitable relief as such Party may
request to exercise or otherwise enforce any of the terms and provisions of this
Agreement and to enjoin or otherwise restrain any act of any SPAR Stockholder or
PIA Stockholder (respectively) prohibited thereby, and the Parties will not
raise and each Party hereby expressly waives any objection or defense that there
is an adequate remedy available at law.

        Section 11. Waiver of Jury Trial. In any action, suit or proceeding in
any jurisdiction brought against any Party by any other Party, each Party hereby
irrevocably waives trial by jury.

        Section 12. Notice. Except as otherwise expressly provided, any notice,
request, demand or other communication permitted or required to be given under
this Agreement shall be in writing, shall be sent by one of the following means
to the addressee at the address set forth above (or at such other address as
shall be designated hereunder by notice to the other parties and persons
receiving copies, effective upon actual receipt) and shall be deemed
conclusively to have been given: (i) on the first Business Day following the day
timely deposited with Federal Express (or other equivalent national overnight
courier) or United States Express Mail, with the cost of delivery prepaid or for
the account of the sender; (ii) on the fifth Business Day following the day duly
sent by certified or registered United States mail, postage prepaid and return
receipt requested; or (iii) when otherwise actually received by the addressee on
a Business Day (or on the next Business Day if received after the close of
normal business hours or on any non-Business Day).

        Section 13. Further Assurances. Each Party agrees to do such further
acts and things and to execute and deliver such statements, assignments,
agreements, instruments and other documents as the other Party from time to time
reasonably may request in order to effectuate the purpose and the terms and
provisions of this Agreement, each in such form and substance as may be
acceptable to the Parties.


                                       -6-


<PAGE>   7

        Section 14. Interpretation, Headings, Severability, Etc. The parties
acknowledge and agree that the terms and provisions of this Agreement have been
negotiated, shall be construed fairly as to all parties hereto, and shall not be
construed in favor of or against any party. The section headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement. In the event that any term or provision of
this Agreement shall be finally determined to be superseded, invalid, illegal or
otherwise unenforceable pursuant to applicable law by a governmental authority
having jurisdiction and venue, that determination shall not impair or otherwise
affect the validity, legality or enforceability (a) by or before that authority
of the remaining terms and provisions of this Agreement, which shall be enforced
as if the unenforceable term or provision were deleted or reduced pursuant to
the next sentence, as applicable, or (b) by or before any other authority of any
of the terms and provisions of this Agreement. If any term or provision of this
Agreement is held to be unenforceable because of the scope or duration of any
such provision, the parties agree that any court making such determination shall
have the power, and is hereby requested, to reduce the scope or duration of such
term or provision to the maximum permissible under applicable law so that said
term or provision shall be enforceable in such reduced form.

        Section 15. Successors and Assigns; Assignment; Intended Beneficiaries.
Whenever in this Agreement reference is made to any person, such reference shall
be deemed to include the successors, assigns, heirs and legal representatives of
such person, and, without limiting the generality of the foregoing, all
representations, warranties, covenants and other agreements made by or on behalf
of any Party in this Agreement shall inure to the benefit of the successors,
assigns, heirs and legal representatives of each other Party; provided, however,
that nothing herein shall be deemed to authorize or permit any Party to assign
any of its rights or obligations under this Agreement to any other person, and
each Party covenants and agrees that it shall not make any such assignment,
without the prior written consent of the other Parties. The representations,
warranties and other terms and provisions of this Agreement are for the
exclusive benefit of the Parties hereto, and, except as otherwise expressly
provided herein, no other person (including creditors of any party hereto) shall
have any right or claim against any Party by reason of any of those terms and
provisions or be entitled to enforce any of those terms and provisions against
any Party.

        Section 16. No Waiver by Action, Etc. Any waiver or consent respecting
any representation, warranty, covenant or other term or provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given and shall not be deemed, regardless of frequency given,
to be a further or continuing waiver or consent. The failure or delay of a Party
at any time or times to require performance of, or to exercise its rights with
respect to, any representation, warranty, covenant or other term or provision of
this Agreement in no manner (except as otherwise expressly provided herein)
shall affect its right at a later time to enforce any such provision. No notice
to or demand on any Party in any case shall entitle such Party to any other or
further notice or demand in the same, similar or other circumstances. All
rights, powers, privileges, remedies and other interests of each Party hereunder
are cumulative and not alternatives, and they are in addition to and shall not
limit (except as otherwise expressly provided herein) any other right, power,
privilege, remedy or other interest of such Party under this Agreement or
applicable law.



                                       -7-


<PAGE>   8

        Section 17. Counterparts; New York Governing Law; Amendments; Entire
Agreement. This Agreement shall be effective as of the date first written above
when executed by all of the Parties. This Agreement may be executed in two or
more counterpart copies of the entire document or of signature pages to the
document, each of which may be executed by one or more of the Parties, but all
of which, when taken together, shall constitute a single agreement binding upon
all of the Parties. This Agreement shall be governed by and construed in
accordance with the applicable laws pertaining in the State of New York (other
than those that would defer to the substantive laws of another jurisdiction).
Each and every modification and amendment of this Agreement shall be in writing
and signed by all of the Parties, and each and every waiver of, or consent to
any departure from, any representation, warranty, covenant or other term or
provision of this Agreement shall be in writing and signed by each affected
Party. This Agreement and the other Merger Documents contain the entire
agreement of the parties and supersede all prior and other representations,
agreements and understandings (oral or otherwise) between the parties with
respect to the matters contained herein.

        IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first written above.


                                        PIA MERCHANDISING SERVICES, INC.


/s/ Clinton E. Owens                    By: /s/ Terry R. Peets
- ----------------------------------          ------------------------------------
    CLINTON E. OWENS                        Name: Terry R. Peets
                                            Title: President and Chief Executive
                                                   Officer

RVM/PIA, A CALIFORNIA LIMITED           SPAR ACQUISITION, INC.
  PARTNERSHIP

By:  Riordan, Lewis & Haden             By: /s/ Robert G. Brown
     Its: General Partner                   ------------------------------------
                                            Name: Robert G. Brown
                                            Title: Chairman, Chief Executive
                                                   Officer and President

By: /s/ Patrick C. Haden
    ------------------------------
    Name: Patrick C. Haden
    Its: General Partner





/s/ Robert G. Brown                      /s/ William H. Bartels
- -----------------------------------     ---------------------------------------
    ROBERT G. BROWN                          WILLIAM H. BARTELS



                                       -8-




<PAGE>   1

                                                                   EXHIBIT 23.1


                        INDEPENDENT AUDITOR'S CONSENT


We consent to the incorporation by reference in Registration Statement No.
333-07377 of PIA Merchandising Services, Inc. on Form S-8 of our report dated
February 18, 1999 appearing in this Annual Report on Form 10-K of PIA
Merchandising Services, Inc. for the year ended January 1, 1999.



Deloitte & Touche LLP

Costa Mesa, California
March 26, 1999







<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          JAN-01-1999
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               JAN-01-1999
<CASH>                                          11,064
<SECURITIES>                                         0
<RECEIVABLES>                                   12,043
<ALLOWANCES>                                       821
<INVENTORY>                                          0
<CURRENT-ASSETS>                                23,079
<PP&E>                                           5,833
<DEPRECIATION>                                   3,842
<TOTAL-ASSETS>                                  26,054
<CURRENT-LIABILITIES>                            9,235
<BONDS>                                          2,000
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            60
<OTHER-SE>                                      14,664
<TOTAL-LIABILITY-AND-EQUITY>                    26,054
<SALES>                                              0
<TOTAL-REVENUES>                               121,788
<CGS>                                                0
<TOTAL-COSTS>                                  105,448
<OTHER-EXPENSES>                                21,162
<LOSS-PROVISION>                                    50
<INTEREST-EXPENSE>                                  25
<INCOME-PRETAX>                                (4,211)
<INCOME-TAX>                                        55
<INCOME-CONTINUING>                            (4,266)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   (4,266)
<EPS-PRIMARY>                                   (0.78)
<EPS-DILUTED>                                   (0.78)
        

</TABLE>