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<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    Form 10-Q



Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
                                     of 1934

              For the second quarterly period ended June 30, 1997.




                        PIA MERCHANDISING SERVICES, INC.


               19900 MacArthur Blvd., Suite 900, Irvine, CA 92612

                  Registrant's telephone number: (714) 476-2200




                         Commission file number 0-27824

                 I.R.S. Employer Identification No.: 33-0684451

                        State of Incorporation: Delaware




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:  [ X ] Yes

On July 31, 1997, there were 5,392,558 shares of Common Stock outstanding.



<PAGE>

                        PIA Merchandising Services, Inc.

                                      Index


PART I:   FINANCIAL INFORMATION


Item 1:   Financial Statements

               Condensed Consolidated Balance 
               Sheets as of June 30, 1997 (Unaudited) 
               and December 31, 1996.........................................3

               Condensed Consolidated Statements of Operations
               (Unaudited) Three Months and Six Months Ended 
               June 30, 1997 and 1996........................................4

               Condensed Consolidated Statement of Cash 
               Flows(Unaudited) Six Months Ended
               June 30, 1997 and 1996........................................5

               Notes to Condensed Consolidated Financial

               Statements....................................................6



Item 2:   Management's Discussion and Analysis of Financial 
          Condition and Results of Operations................................8


          Risk Factors......................................................15



PART II:  OTHER INFORMATION


Item 4:   Submission of Matters to a Vote of Security Holders...............17



Item 6:   Exhibits and Reports on Form 8-K..................................18



SIGNATURES


                                       2

<PAGE>


                          PART I: FINANCIAL INFORMATION

                          Item 1: Financial Statements 


PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
(IN THOUSANDS)


<TABLE>
<CAPTION>

                                                        June 30       December 31,
                                                         1997             1996
                                                         ----             ----
                                                      (Unaudited)
<S>                                                   <C>             <C>
     ASSETS
CURRENT ASSETS:
Cash and cash equivalents                             $  17,706        $  19,519 
Accounts receivable, net of allowance for
   doubtful accounts of $909 and $583, respectively      17,834           22,630
Prepaid taxes                                             1,581            -    
Prepaid expenses and other current assets                   818              564
Deferred income taxes                                       669              669
                                                      ---------       ----------
    TOTAL CURRENT ASSETS                                 38,608           43,382
                                                      ---------       ----------
PROPERTY AND EQUIPMENT, NET (SEE NOTE 2)                  3,711            1,847
                                                      ---------       ----------

INVESTMENTS & OTHER ASSETS:
Investment in affiliate                                     375              322
Capitalized software development costs (see note 2)           -            1,987
Other assets                                                707              134
                                                      ---------       ----------
    TOTAL OTHER ASSETS                                    1,082            2,443
                                                      ---------       ----------
       TOTAL ASSETS                                   $  43,401        $  47,672
                                                      ---------       ----------
                                                      ---------       ----------

      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable                                       $    531        $     772
Other current liabilities (see note 3)                   11,868            9,762
Income taxes payable                                          -              111
                                                      ---------       ----------
    TOTAL CURRENT LIABILITIES                            12,399           10,645

LONG TERM LIABILITIES                                       309              309
                                                      ---------       ----------
    TOTAL LIABILITIES                                    12,708           10,954
                                                      ---------       ----------

STOCKHOLDERS' EQUITY:
Common stock & additional paid-in-capital                33,487           33,425
Less:  Treasury stock                                  (  2,977)              - 
Retained earnings                                           183            3,293
                                                      ---------       ----------
    TOTAL STOCKHOLDERS' EQUITY                           30,693           36,718
                                                      ---------       ----------

       TOTAL LIABILITIES AND
         STOCKHOLDERS' EQUITY                         $  43,401        $  47,672
                                                      ---------       ----------
                                                      ---------       ----------
</TABLE>


                             See accompanying notes.


                                       3

<PAGE>

PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
- -------------------------------------------------------------------------------
(UNAUDITED)


<TABLE>
<CAPTION>

                                                  Three Months Ended           Six Months Ended 
                                                  ------------------           ----------------
                                                        June 30                     June 30
                                                        -------                     -------
(In thousands, except per share amounts)          1997          1996           1997         1996
                                                  ----          ----           ----         ----
<S>                                           <C>            <C>            <C>          <C>
Net Revenues                                  $  31,643      $  26,855      $  60,999    $  53,114
                                              ---------      ---------      ---------    ---------
Operating Expenses:
Field  service costs                             29,638         21,845         56,007       42,108
Selling expenses                                  2,507          2,967          5,061        5,623
General and administrative expenses               2,236          1,853          4,685        3,593
Depreciation and amortization                       262            152            459          299
                                              ---------      ---------      ---------    ---------
    Total operating expenses                     34,643         26,817         66,212       51,623
                                              ---------      ---------      ---------    ---------

Operating Income (Loss)                         ( 3,000)            38        ( 5,213)       1,491

Other Income:
Interest income, net                                219            286            450          329
Equity in earnings of affiliate                      28              -             52           - 
Foreign currency transaction loss                   ( 1)             -            ( 1)          - 
                                              ---------      ---------      ---------    ---------
    Total other income                              246            286            501          329
                                              ---------      ---------      ---------    ---------

Income (Loss) Before Provision For Income 
Taxes                                           ( 2,754)           324        ( 4,712)       1,820

(Provision) Benefit For Income Taxes                812         ( 118)          1,602        ( 717)
                                              ---------      ---------      ---------    ---------
Net Income  (Loss)                            $ ( 1,942)     $    206       $ ( 3,110)   $   1,103
                                              ---------      ---------      ---------    ---------
                                              ---------      ---------      ---------    ---------
Net Income (Loss) Per Common And 
    Common Equivalent Share                   $ (  0.35)     $   0.03       $ (  0.54)   $    0.19
                                              ---------      ---------      ---------    ---------
                                              ---------      ---------      ---------    ---------
Weighted Average Common And 
    Common Equivalent Shares                      5,531         6,454           5,714        5,692
                                              ---------      ---------      ---------    ---------
                                              ---------      ---------      ---------    ---------
</TABLE>


                             See accompanying notes.


                                        4

<PAGE>

PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
- -------------------------------------------------------------------------------
(UNAUDITED)


<TABLE>
<CAPTION>
                                                                        For the Six Months Ended June 30,
                                                                        ---------------------------------
 (In thousands)                                                              1997             1996
                                                                             ----             ----
<S>                                                                      <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (Loss)                                                        $  (3,110)        $  1,103
Adjustments to reconcile net income to net cash provided by (used in) 
   operating activities:

    Depreciation and amortization                                              459              299
    Provision for doubtful receivables, net                                    326              169

Changes in operating assets and liabilities:
  (Increase) decrease in accounts receivable                                 4,470           (2,924)
  (Increase) decrease in prepaid expenses and other                         (2,468)            (679)
  Increase (decrease) in accounts payable and other liabilities              1,865             (123)
  Increase (decrease) in income taxes payable                                 (111)            (382)
                                                                         -----------        --------
    Net cash provided by (used in) operating activities                      1,431           (2,537)
                                                                         -----------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                      (163)            (194)
    Capitalization of software development costs (note 2)                     (166)            (200)
                                                                         -----------        --------
    Net cash provided by (used in) investing activities                       (329)            (394)
                                                                         -----------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of Treasury Stock                                                (2,977)               -
Payments of long term debt                                                       -           (3,400)
Proceeds from issuance of common stock, net                                     62           26,609
                                                                         -----------        --------
    Net cash used in financing activities                                   (2,915)          23,209
                                                                         -----------        --------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                   (1,813)          20,278

CASH AND CASH EQUIVALENTS, 
  Beginning of period                                                       19,519              185
                                                                         -----------        --------
  End of period                                                          $  17,706         $ 20,463
                                                                         -----------        --------
                                                                         -----------        --------
SUPPLEMENTAL DISCLOSURES OF CASH 
   FLOW INFORMATION:
   Cash paid for interest                                                         -               -

   Cash paid for income taxes                                            $       98        $  1,637
                                                                         -----------        --------
                                                                         -----------        --------
</TABLE>


                             See accompanying notes.


                                       5

<PAGE>

PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except per share amounts)

1.   Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
     been prepared in accordance with generally accepted accounting principles
     for interim financial information and with the instructions to Form 10-Q
     and Article 10 of Regulation S-X.  Accordingly, they do not include all of
     the information and footnotes required by generally accepted accounting
     principles for complete financial statements.  In the opinion of
     management, all adjustments (consisting of normal recurring accruals)
     considered necessary for a fair presentation have been included.  This
     financial information should be read in conjunction with the consolidated
     financial statements and notes thereto for the year ended December 31,
     1996, included in the Company's Annual Report on Form 10-K for the year
     ended December 31, 1996.  Operating results for the three month and six
     month periods ended June 30, 1997 are not necessarily indicative of the
     results that may be expected for the year ending December 31, 1997.

2.   Property and Equipment

     As of the year ended December 31, 1996, the Company capitalized certain
     software development costs per accounting policy.  These costs were 
     classified in the Other Assets balance sheet classification until software
     was ready for release.  In the second quarter of 1997, the Company released
     the software, including additions during the six months ended June 30, 
     1997, and has classified these costs as part of Property and Equipment, 
     reducing the amounts reported in Other Assets.  These costs are being 
     amortized over a five year period. The amounts in Property and Equipment 
     consist of:

                                                      June 30,    December 31,
                                                        1997          1996
                                                     ---------    ------------
          Equipment                                  $  3,493       $  3,343
          Furniture and fixtures                          642            641
          Leasehold improvements                          130            118
          Capitalized software development costs        2,153              - 
                                                     ---------     ---------
                                                        6,418          4,102
          Less:  Accumulated depreciation and
              amortization                             (2,707)        (2,255)
                                                     ---------     ---------
                                                     $  3,711       $  1,847
                                                     ---------     ---------
                                                     ---------     ---------


                                       6

<PAGE>

PIA MERCHANDISING SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except per share amounts)

3.   Other Current Liabilities

     Other current liabilities consist of the following:

                                                      June 30,     December 31,
                                                        1997           1996
                                                      --------     ------------
          Accrued salaries and other related costs    $   757        $   944
          Accrued payroll to third party                3,698          1,952
          Accrued insurance                             1,200            640
          Deferred revenue                              1,015          2,479
          Amounts held on behalf of third parties       1,641          1,055
          Accrued software costs                          203            603
          Accrued rebate                                1,906            788
          Other liabilities                             1,448          1,301
                                                      -------        -------
                                                      $11,868        $ 9,762
                                                      -------        -------
                                                      -------        -------


                                       7

<PAGE>


I
tem 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.

OVERVIEW

PIA Merchandising Services, Inc. (the Company or PIA) provides merchandising 
services to manufacturers and retailers principally in grocery, mass 
merchandiser and chain and deep discount drug stores.  For the quarter and 
six months ended June 30, 1997, the Company generated approximately 81% and 
85% of its net revenues from manufacturer clients and 19% and 15% from 
retailer clients, respectively.  The mix of the Company's business between 
manufacturer and retailer clients historically has not had a material impact 
on the Company's results of operations.

During the first half of 1997, the Company's profitability continued to be 
affected by a shift in its business away from syndicated services toward 
projects and dedicated services.  The Company's syndicated services business 
has historically required a significant fixed management and personnel 
infrastructure to manage and execute service contracts.  Due in part to 
industry consolidation and increased competition, the Company lost a number of 
syndicated services clients during 1996, causing a decrease in the 
profitability of that business segment in the last two quarters of the year and 
the first half of 1997.  PIA has not sold any sizable new syndicated business 
to offset for this loss.  The Company did not act quickly enough to align its 
cost structure with the changing mix of business during the first half of 1997. 
The Company believes that revenues in 1997 from syndicated services will 
continue to decline as a result of the wind-down of the lost business.  Because 
of the fixed nature of the associated costs, the loss of syndicated business 
has a material adverse effect on PIA's results of operations.

The Company continues to experience a significant increase in the demand for 
project services.  PIA's project revenues have grown from $9.3 million in the 
second quarter of 1996 to $13.5 million in the second quarter of 1997, a 45% 
increase, and from $17.9 million in the first half of 1996 to $22.4 million 
in the first half of 1997, a 25% increase.  This increase has required an 
investment in management infrastructure and systems to support this business.

The Company's dedicated services business is also increasing.  During the 
second quarter of 1997, revenues from dedicated services accounted for 
approximately 21% of total revenues, as compared to 8% in the second quarter 
of 1996.  For the first half of 1997, dedicated service revenue represented 
approximately 24% of total revenue, compared to 7% of total revenue in the 
first half of 1996.  In the dedicated services business, PIA provides each 
manufacturer or retailer client with an organization, including a management 
team, that works exclusively for that client.

PIA's quarterly results of operations are subject to certain variability 
related to the timing of retailer-mandated activity and the receipt of 
commissions. Retailer-mandated activity is typically higher in the second and 
third quarters of the year due to retailer scheduling of activity in off-peak 
shopping periods. In addition, new product introductions increase during such 
periods which require the reset of categories as the new products gain 
distribution.  The amount of commissions earned by PIA under its 
commission-based contracts varies seasonally, and


                                       8

<PAGE>

Management's Discussion and Analysis of Financial Condition and 
Results of Operations (continued)


generally corresponds to the peak selling seasons of the clients that have 
entered into these types of contracts.  Historically, the Company has 
recognized greater commission income in the first and fourth quarters.  See 
"Risk Factors -- Uncertainty of Commission Income."  The Company's quarterly 
results have in the past been subject to fluctuations and, thus, the 
operating results for any quarter are not necessarily indicative of results 
for any future period.

RESULTS OF OPERATIONS - SECOND QUARTER OF FISCAL 1997 COMPARED TO SECOND 
QUARTER OF FISCAL 1996:

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

                                              Three Months Ended June 30,
                                                  1997          1996
Net revenues                                      100.0%        100.0%
                                                 -------       -------
Operating expenses:
Field service costs                                93.7          81.3
Selling expenses                                    7.9          11.1
General and administrative expenses                 7.1           6.9
Depreciation and amortization                       0.8           0.6
                                                 -------       -------
Total operating expenses                          109.5          99.9
                                                 -------       -------
Operating income (loss)                            (9.5)          0.1
Interest income net                                 0.7           1.1
Equity in earnings of affiliate                     0.1           0.0
                                                 -------       -------
Income (loss) before provision for income taxes    (8.7)          1.2
Provision (benefit) for income taxes                2.6          (0.4)
                                                 -------       -------
Net income (loss)                                  (6.1%)         0.8%
                                                 -------       -------
                                                 -------       -------

Net revenue increased $4.8 million, or 18% to $31.6 million in the second 
quarter of 1997, from $26.9 in the second quarter of 1996.  The net increase in 
revenue resulted from an increase in revenue from new clients of $7.4 million, 
increased revenue from existing clients of $4.9 million, offset by a decrease 
in revenue of $7.5 million from clients no longer with the Company.

                                       9

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of 
Operations (continued)


For the second quarter of 1997, field service costs increased $7.8 million, or 
36%, to $29.6 million, as compared to $21.8 million in the second quarter of 
1996.  Field service costs are comprised principally of field labor and related 
costs and expenses required to provide both routed and dedicated coverage, 
project activities and related technology costs.  In addition, included are 
overhead costs incurred to support the activities of these groups of employees. 
 The increase in field service costs is due primarily to costs required to 
provide the management and supervision to support the increased business level 
of dedicated and project services.  As a percentage of net revenues, field 
service costs increased to 94% in 1997 from 81% in 1996 due to the negative 
leverage caused by the loss of syndicated services business and the impact of 
increased project and dedicated service business mentioned above.

Selling expenses decreased $0.5 million, or 16%, to $2.5 million in the second 
quarter of 1997, compared to $3.0 million in the same period last year.  As a 
percentage of net revenues, selling expenses decreased to 8% in the second 
quarter of 1997, from 11% in the second quarter of 1996.  This decrease in 
costs, both in absolute amount and as a percentage of revenue, is a result of 
lower staffing and travel costs.

General and administrative expenses increased $0.4 million, or 21%, to $2.2 
million in the second quarter of 1997 from $1.9 million in the same period of 
1996.  The increase in general and administrative costs were due primarily to 
increased staffing in recruitment and training and management information 
systems that were required to support overall business growth, including the 
increased project and dedicated service levels.  In addition, increased costs 
were experienced due to higher provisions for uncollectible accounts, 
termination costs, as well as salary increases in the ordinary course of 
business.  As a percentage of net revenues, general and administrative expenses 
remained at 7% in the second quarter of 1997, consistent with the second 
quarter of 1996.

Depreciation and amortization expenses increased as a result of depreciation 
on computer hardware and software development costs for shelf technology and 
for general business purposes.

Interest income decreased in the second quarter of 1997, as compared to the 
second quarter of 1996, due to lower cash balances available for investment in 
1997.  The second quarter of 1996 included interest income on the net proceeds 
from the Company's initial public offering on March 1, 1996.

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


                                      10

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of 
Operations (continued)


Income tax benefit was approximately $0.8 million in the second quarter of 
1997 compared to income tax expense of $0.1 million in the second quarter of 
1996, representing an effective rate of 29% and 36%, respectively.  The 
effective rate for the second quarter of 1997 includes a year to date 
adjustment in the rate to achieve a six month rate of 34%.

The Company incurred a net loss of approximately $1.9 million in the second 
quarter of 1997, compared to net income of approximately $0.2 million in the 
second quarter of 1996, primarily as a result of operating expenses 
increasing at a faster rate than revenues, as discussed above.

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS 
ENDED JUNE 30, 1996:

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

                                                  Six Months Ended June 30,
                                                     1997           1996
Net revenues                                        100.0%         100.0%
                                                   -------        -------
Operating expenses:
Field service costs                                  91.7           79.2
Selling expenses                                      8.3           10.6
General and administrative expenses                   7.7            6.8
Depreciation and amortization                         0.8            0.6
                                                   -------        -------
Total operating expenses                            108.5           97.2
                                                   -------        -------
Operating income (loss)                              (8.5)           2.8
Interest income net                                   0.7            0.6
Equity in earnings of affiliate                       0.1            0.0
                                                   -------        -------
Income (loss) before provision for income taxes      (7.7)           3.4
Provision Benefit for income taxes                    2.6           (1.3)
                                                   -------        -------
Net income (loss)                                    (5.1%)          2.1%
                                                   -------        -------
                                                   -------        -------

Net revenue increased $7.9 million, or 15% to $61.0 million in the first 
six months of 1997, from $53.1 in the corresponding period of 1996.  The net 
increase in revenue resulted from an increase in revenue from new clients of 
$10.2 million, an increase in revenue from existing clients of $11.5 million, 
offset by a decrease in revenue of $13.8 million from clients no longer with 
the Company.

                                      11

<PAGE>


Management's Discussion and Analysis of Financial Condition and Results of 
Operations (continued)

For the first six months of 1997, field service costs increased $13.9 million, 
or 33%, to $56.0 million, as compared to $42.1 million in the first six months 
of 1996.  The increase in field service costs is primarily due to costs 
required to execute the increased business level of dedicated and project 
services.  As a percentage of net revenues, field service costs increased to 
92% for the first six months of 1997 from 79% in the same period of 1996 due to 
the negative leverage caused by the loss of syndicated services business and 
the impact of increased project and dedicated service business.

Selling expenses decreased $0.6 million, or 10%, to $5.1 million in the first 
six months of 1997, compared to $5.6 million in the same period last year.  As 
a percentage of net revenues, selling expenses decreased to 8% in the first six 
months of 1997, from 11% in the first six months of 1996.  This decrease in 
costs, both in absolute amount and as a percentage of revenue, is a result of 
lower staffing and travel costs.

General and administrative expenses increased $1.1 million, or 30%, to $4.7 
million in the first six months of 1997 from $3.6 million in the same period of 
1996.  The increase in general and administrative costs were primarily due to 
increased staffing in recruitment and training and management information 
systems that were required to support overall business growth, including the 
increased project and dedicated service levels.  In addition, increased costs 
were experienced due to higher provisions for uncollectible accounts, workers 
compensation insurance reserves, termination costs, as well as salary increases 
in the ordinary course of business.  As a percentage of net revenues, general 
and administrative expenses were 8% in the first six months of 1997, compared 
to 7% in the first six months of 1996.

Depreciation and amortization expenses increased as a result of depreciation 
on computer hardware and software development costs for shelf technology and 
for general business purposes.

Interest income increased for the first six months of 1997, as compared to 
the first six months of 1996, due to investment of the net proceeds from the 
Company's initial public offering on March 1, 1996.

Equity in earnings of affiliate represents the Company's share of the 
earnings of Ameritel, Inc.  During 1996, the Company exercised its option to 
increase its ownership of Ameritel to 20%, and is now required to recognize 
its equity interest in Ameritel's earnings.


                                      12

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of 
Operations (continued)


Income tax benefit was $1.6 million for the first six months of 1997, 
compared to income tax expense of $0.7 million for the same period of 1996, 
representing an effective tax rate of 34% and 39%, respectively.

The Company incurred a net loss of approximately $3.1 million in the first half 
of 1997, compared to net income of approximately $1.1 million in the first half 
of 1996, primarily as a result of operating expenses increasing at a faster 
rate than revenues, as discussed above.

LIQUIDITY AND CAPITAL RESOURCES

On March 1, 1996, the Company completed an initial public offering of its 
Common Stock, raising $26.6 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.  
During the first half of 1997, the Company had a net decrease in cash balances 
of $1.8 million, resulting from the operating losses and the Common Stock 
repurchase program, offset partially by a reduction in accounts receivable of 
$4.4 million.

In January 1997, the Company entered into a new credit agreement with a bank, 
which provides for an unsecured line of credit in the maximum amount of $7.0 
million.  Borrowings under the line of credit bear interest at the bank's 
reference rate, unless the Company elects the specified offshore rate.  The 
credit agreement contains various covenants which, among other things, 
require compliance with certain financial tests such as working capital, 
tangible net worth, leverage and profitability.  In addition, the credit 
agreement imposes certain restrictions on the Company, including the 
incurrence of additional indebtedness, the payment of dividends and the 
ability to make acquisitions.  No borrowings are currently outstanding under 
this facility.

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 working capital.  As of July 14, 
1997, the Company repurchased an aggregate of 507,000 shares of Common Stock 
for an aggregate price of approximately $3.0 million.  No further repurchases 
are currently planned.


                                      13

<PAGE>

Management's Discussion and Analysis of Financial Condition and 
Results of Operations (continued)

Cash and cash equivalents totaled $17.8 million at June 30, 1997, compared with 
$19.5 million at December 31, 1996.  At June 30, 1997 and December 31, 1996, 
the Company had working capital of $26.2 million and $32.7 million, and current 
ratios of 3.1 and 4.1 respectively.

Net cash provided by operating activities for the six months ended June 30, 
1997 was $1.4 million compared to cash used by operating activities of $2.5 
million for the comparable period in 1996.  This increase in cash from 
operating activities for 1997 resulted primarily from a decrease in accounts 
receivable of $4.5 million, offset partially by net operating losses. Net 
cash used by investing activities for the six months ended June 30, 1997 was 
$0.3 million compared to net cash used by investing activities of $0.4 
million for the comparable period in 1996.  Net cash used in financing 
activities for the six months ended June 30, 1997 was $2.9 million compared 
to cash generated of $23.2 million for the same period in 1996.  In 1997, the 
Company repurchased 502,000 shares of its Common Stock for approximately $2.9 
million. In 1996, the Company received net proceeds from the issuance of 
Common Stock of $26.6 million and repaid long-term debt of $3.4 million.

The above activity resulted in a decrease in cash and cash equivalents of $1.8 
million for the six months ended June 30, 1997.

The Company is currently experiencing operating losses resulting from a change 
in its business mix and rising field costs and has announced a plan to 
restructure its corporate and field operations during the third quarter of 
1997.  While management is not currently able to estimate the amount of the 
restructure charge, or its effect on operational cash flow, it is expected that 
these charges will be reflected in the third quarter results.

The Company's current liquidity is provided by cash and cash equivalents and 
the timely collection of its receivables.  Management believes that this 
liquidity is sufficient to provide for on-going working capital needs and 
generally fund the on-going operations of the business.


                                      14

<PAGE>

RISK FACTORS

It is recommended that this Form 10-Q be read in conjunction with the Company's 
1996 Annual Report on Form 10-K.  The following risk factors should be carefully
reviewed in addition to the other information contained in this Quarterly Report
on Form 10-Q.

HISTORY OF LOSSES

During the years ended December 31, 1992 and 1993, the Company incurred 
significant losses and experienced substantial negative cash flow.  The Company 
had net losses of $3.2 million and $2.6 million for the years ended 
December 31, 1992 and 1993, respectively.  These losses resulted primarily from 
additional field service costs to provide syndicated coverage in grocery stores 
for relatively few clients in newly-opened regions during the Company's 
continuing national expansion in 1992 and 1993, and from the write-off of $1.7 
million in goodwill in 1992.  In addition, the Company incurred a net loss of 
$3.1 million for the first six months of 1997, and expects its 1997 operating 
results to be substantially less than the prior year.  There can be no 
assurance that the Company will not sustain further losses.

LOSS OF SYNDICATED BUSINESS

PIA's business mix has changed significantly over 1996 and the first half of 
1997, and is expected to continue to change during the balance of 1997. Due in 
part to industry consolidation and increased competition, the Company has lost a
substantial amount of syndicated services business over the last 18 months, and 
has not sold enough new syndicated  business to compensate for this loss.   This
business has historically required a significant fixed management and personnel 
infrastructure.  Accordingly, the loss of syndicated business, without 
offsetting gains, has a material adverse effect on the Company's results of 
operations.

INDUSTRY CONSOLIDATION; CONCENTRATED CLIENT BASE

The retail and manufacturing industries are undergoing a consolidation process 
that is resulting in fewer larger retailers and suppliers.  The Company's 
success is dependent in part upon its ability to maintain its existing clients 
and to obtain new clients.  As a result of industry consolidation, the Company 
has lost certain clients, and this trend could continue to have a negative 
effect on the Company's client base and results of operations.  The Company's 
ten largest clients generated approximately 68% and 69%, and 55% and 59%, of the
Company's net revenues for the quarter and six month periods ended June 30, 1997
and 1996, respectively.  During the second quarter, none of the Company's 
manufacturer or retailer clients accounted for greater than 10% of net revenues,
other than Buena Vista Home Video, S.C. Johnson and Eckerd Drug Company, which 
accounted for 19%, 12% and 11% of net revenues, respectively, for the quarter 
ended June 30, 1997.  For the six months ended June 30, 1997, only Buena Vista 
Home Video and S. C. Johnson accounted for greater than 10% of net revenues, 
with 23% and 11% respectively.  The Company's contracts with its clients have 
terms ranging from one to five years.  PIA believes that the uncollectibility of
amounts due from any of its large clients, would have a material adverse effect 
on the Company's results of operations.


                                      15

<PAGE>

UNCERTAINTY OF COMMISSION INCOME

Approximately 15% and 15% of the Company's net revenues for the quarter and six 
months ended June 30, 1997, respectively, was 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. 
Commissions paid to PIA under these contracts have had a significant effect on 
the Company's profitability in certain quarters.  Under 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.

In addition, the amount of commissions earned by the Company under these 
contracts varies seasonally, and generally corresponds to the peak selling 
seasons of the clients who have entered into these types of contracts. 
Historically, the Company has recognized greater commission income in its 
first and fourth quarters due to the timing of such clients' sales.


                                      16

<PAGE>


P
ART II:       OTHER INFORMATION


     Item 1:   Legal Proceedings
               None


     Item 2:   Changes in Securities
               None


     Item 3:   Defaults Upon Senior Securities
               None


     Item 4:   Submission of Matters to a Vote of Security Holders

               The Company's Annual Meeting of Stockholders was held on June 6,
               1997.  The stockholders elected a Board of six directors, 
               approved amendments to the Company's 1995 Stock Option Plan, 
               approved the adoption of the Employee Stock Purchase Plan and 
               ratified the appointment of Deloitte & Touche LLP as the 
               Company's independent auditors.

               Results of the voting in connection with each of the matters 
               submitted to the stockholders were as follows:

                    Board of Directors             For            Withheld
               ----------------------------  ----------------  ---------------
                   Clinton E. Owens             3,151,645         767,983
                   Joseph H. Coulombe           3,151,645         767,983
                   John A. Colwell              3,151,645         767,983
                   Edwin E. Epstein             3,151,645         767,983
                   Patrick C. Haden             3,151,645         767,983
                   J. Christopher Lewis         3,151,645         767,983


                                                    For       Against   Abstain
                                                 ----------   -------   -------
               Amend Company's 1995 Stock
                 Option Plan                      3,857,815    29,283    32,530
               Adopt Company's Employee
                 Stock Purchase Plan              3,866,065    21,633    31,930
               Ratification of the appointment
                 of Deloitte & Touche LLP as 
                 independent auditors             3,913,142     2,570     3,916


     Item 5:   Other Information
               None


                                      17

<PAGE>


    Item 6.   Exhibits and Reports on Form 8-K
              (a) EXHIBITS.

EXHIBIT
- -------
NUMBER    DESCRIPTION
- ------    -----------
3.1       Certificate of Incorporation of the Company (incorporated herein by
          reference to Exhibit 3.1 to the Company's Registration Statement on
          Form S-1, No. 33-80429).

3.2       By-laws of the Company (incorporated herein by reference to
          Exhibit 3.2 to the Company's Registration Statement on Form S-1,
          No. 33-80429).

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-Bankverein
          (incorporated herein by reference to Exhibit 4.2 to the Company's
          Registration Statement on Form S-1, No. 33-80429).

10.1      1990 Stock Option Plan (incorporated herein by reference to
          Exhibit 10.1 to the Company's Registration Statement on Form S-1,
          No. 33-80429).

10.2      1995 Stock Option Plan (incorporated herein by reference to
          Exhibit 10.2 to the Company's Registration Statement on Form S-1,
          No. 33-80429).

10.3      1995 Stock Option Plan for Nonemployee Directors (incorporated
          herein by reference to Exhibit 10.3 to the Company's Registration
          Statement on Form S-1, No. 33-80429).

10.4      Business Loan Agreement dated as of January 1, 1997 between the
          Company and Bank of America National Trust and Savings Association
          (incorporated herein by reference to Exhibit 10.4 to the Company's
          Annual Report on Form 10-K for the fiscal year ended December 31,
          1996).

10.5      Employment Agreement dated as of June 25, 1997 between the Company and
          Terry R. Peets.

27.1      Financial Data Schedule.

          (b)  REPORTS ON FORM 8-K.
          None.
 


                                      18

<PAGE>


                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                      PIA MERCHANDISING SERVICES, INC.
                                      (Registrant)



                                      By:  /s/  Cathy L. Wood 
                                           -------------------------------
                                           Cathy L. Wood
                                           Executive Vice President
                                           Chief Financial Officer



                                   By:  /s/  Stephen R. Christie 
                                        --------------------------------------
                                        Stephen R. Christie
                                        Vice President
                                        Corporate Controller


Dated:  August 14, 1997



                                      19






<PAGE>

EXHIBIT 10.5
                              EMPLOYMENT AGREEMENT



          This Employment Agreement (the "Agreement") is made effective as of
June 25, 1997 between PIA Merchandising Services, Inc., a Delaware corporation
(the "Corporation"), and Terry R. Peets (the "Executive").


                                  R E C I T A L

          WHEREAS, the Corporation desires to employ the Executive as its Chief
Executive Officer reporting to the Corporation's Board of Directors, and the
Executive desires to accept such employment; and

          WHEREAS, the Corporation desires to name the Executive as a member of
the Corporation's Board of Directors, and the Executive desires to accept such
position; and

          WHEREAS, the Corporation and the Executive desire to fix the terms of
the Executive's employment with the Corporation, and have agreed upon the terms
and conditions set forth below.


                                A G R E E M E N T

          NOW, THEREFORE, the parties hereby agree as follows:

          1.   EMPLOYMENT DUTIES.  The Corporation hereby hires the Executive,
and the Executive hereby accepts employment with the Corporation, on the terms
set forth below.  The Executive shall serve as Chief Executive Officer and shall
report to the Board of Directors.  The Executive shall perform all the duties
that are usual and customary for the office to which the Executive is
 appointed,
subject always to the policies set by the Board of Directors or Bylaws of the
Corporation.  The Executive shall perform said duties primarily at the Irvine,
California location of the Corporation and its environs.  No transfer or change
in location shall be made without Executive's prior consent.  The  parties
hereby acknowledge that the Executive will be required to travel in connection
with the performance of his duties hereunder.

          2.   TERM.  The Executive shall be employed at-will by the Corporation
beginning as of June 25, 1997, subject to Executive's current consulting
assignment, and ending on the date of notice of termination as provided for in
Paragraph 8 herein (the "Employment Term").

          3.   COMMITMENT OF EXECUTIVE.  The Executive shall work for the 
Corporation on a full-time basis and shall devote substantially all of his 
business time, attention, knowledge and skill to the performance of his 
duties herein throughout the Employment Term and shall at all times discharge 
said duties faithfully and to the best of his ability, experience and 
talents.  Notwithstanding the foregoing, the Corporation acknowledges and 
agrees that Executive may continue to serve as a director of other companies 
so long as such board memberships do not conflict with or adversely affect 
his performance at the Corporation.  At all times during the Employment Term, 
the Executive shall use his best efforts to observe and conform to all the 
laws and regulations applicable to the Corporation.

                                      1


<PAGE>

          4.   COMPENSATION AND EXPENSES.

               (a)  FIXED SALARY.  From June 25, 1997 through August 10, 1997,
the Executive shall receive a fixed salary of $1,200 per day.  The Executive
shall receive a fixed salary during the Employment Term at the rate of $20,834
per month for the remainder of the first 12 months, payable in accordance with
the Corporation's payroll practices for other executive officers of the
Corporation, as such practices may change time to time.  Such fixed salary shall
be adjusted on each anniversary date of this Agreement in accordance with the
percentage change in the Los Angeles-Long Beach-Anaheim Consumer Price Index for
the month of July compared to the index for the preceding July, in addition to
such other upward adjustments, if any, as may be approved by the Board of
Directors from time to time.  Executive acknowledges that the Corporation will
deduct and withhold from the fixed salary payable to Executive hereunder the
amount required to be deducted and withheld under the provisions of all
applicable statutes, regulations, ordinances or orders.

               (b)  BONUS.  The Executive shall receive a bonus, payable
annually within 15 days after receipt by the Board of Directors of the
Corporation's audited (or if no audit is prepared, unaudited) financial
statements for the applicable period, equal to 4.0% of the Corporation's annual
operating income, which is defined as earnings before interest, taxes and
amortization ("EBITA"),  up to a maximum of 100% of the Executive's annual fixed
salary set forth in Paragraph 4(a) (the "Bonus").  The EBITA will exclude the
operating earnings which are acquired as a result of the Corporation entering
into an acquisition or merger ("Acquired EBITA").  The Bonus shall be payable
with respect to each partial or complete fiscal year during the Employment Term
based on the Corporation's profits during such period, commencing with the
period from July 1, 1997 through December 31, 1997.

               (c)  STOCK OPTION GRANT.  On the date hereof, the Corporation
will grant to the Executive a stock option (the "Option") covering 250,000
shares of the Corporation's common stock, $.01 par value (the "Common Stock"),
pursuant to the Corporation's 1995 Stock Option Plan.  The Option will vest at
the rate of 25% per year on each of the first four anniversaries of the date
hereof.  The exercise price of the Option will be the closing price of the
Common Stock on the Nasdaq National Market on the date hereof.

               (d)  EXPENSES.  During the Employment Term, the Executive will be
reimbursed for his reasonable and necessary expenses incurred for the benefit of
the Corporation, but only in accordance with the general policy of the
Corporation as adopted by the Corporation from time to time.  With respect to
any expenses which are reimbursed by the Corporation to the Executive, the
Executive agrees to account to the Corporation in sufficient detail and with
sufficient documentary and other evidence to allow the Corporation to support a
claim for an income tax deduction for such paid item if such item is deductible.

               (e)  CAR ALLOWANCE.  The Corporation requires the Executive to
travel in and about the Los Angeles metropolitan area and to utilize his own
vehicle for such purpose.  Accordingly, during the Employment Term, the
Executive will receive an allowance for automobile expenses at a fixed rate of
$750.00 per month, payable on a monthly basis in arrears.

          5.   BENEFIT PLANS.  The Executive shall be entitled to participate in
group plans or programs maintained by the Corporation, if any, relating to
retirement, health, dental, vision, disability, life insurance and other related
benefits as in effect from time to time generally for the other executive
officers of the Corporation.  In addition to the benefit provided to other
senior executives, Executive shall receive the benefits specified in Exhibit A.

                                      2


<PAGE>

          6.   VACATION AND SICK LEAVE.  On an annual basis, the Executive shall
be entitled to as many paid vacation days and as much sick leave as the
Executive, in his best judgment, deems appropriate and reasonable.  The
Executive shall schedule and take such vacation days so as not to materially
disrupt or impair the operations of the Corporation.

          7.   COVENANT NOT TO COMPETE.

               (a)  GENERALLY.  The Executive acknowledges and agrees that
because of the special, unique, unusual and extraordinary nature of the services
the Executive is providing, it would substantially adversely affect the business
of the Corporation were the Executive to provide the same  substantially similar
services to any third party.  Therefore, during the Employment Term, the
Executive agrees to be bound by the covenant not to compete set forth herein. 
The Executive shall not, without the prior written consent of the Corporation,
at any time during the Employment Term in any state of the United States of
America, or in any other country or territory throughout the world, engage or
participate, directly or indirectly, in any business that is in competition in
any manner with that of the Corporation, whether as employee, agent, employer,
principal, partner, holder of equity securities (other than as a holder of less
than one percent of the outstanding equity securities of any publicly traded
company), creditor, corporate officer, corporate director or in any other
individual or representative capacity whatsoever.

               (b)  SEVERABLE COVENANTS.  It is intended that the preceding
covenant shall be construed as a series of separate covenants, one for each
county of each state of the United States of America.  If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants
included herein, then such unenforceable covenant shall be deemed eliminated
from these provisions for the purpose of those proceedings to the extent
necessary to permit the remaining separate covenants to be enforced.

          8.   TERMINATION OF EMPLOYMENT.

               (a)  FOR CAUSE.  The Corporation may terminate the employment of
the Executive for cause at any time.  Termination for cause shall be effective
from the date of notice thereof to the Executive.  Cause, as used herein, shall
be any one or more of the following acts of the Executive but no other act or
omission:  (i) conviction for fraud, embezzlement, or any felonious offense; and
(ii) a material violation of any of the provisions of this Agreement (including
without limitation violations of Section 1 by failure to follow written policies
set by the Board of Directors, violations of Section 3 by material neglect of
duties and violations of Section 7) which continues after written notice and
reasonable opportunity (not to exceed 15 days) in which to cure.  If the alleged
breach or default is of a type which cannot be cured within 15 days and the
Executive makes reasonable efforts to cure such alleged breach within such 15-
day period, then the time shall be extended as necessary to complete such cure. 
Upon termination in accordance with this Paragraph 8(a), the Executive shall be
entitled to no further compensation hereunder other than the fixed salary
accrued until the date written notice is delivered to the Executive and any
Bonus accrued until the date written notice is delivered to the Executive (such
accrued Bonus, if any, shall be determined in accordance with the terms of
Paragraph 4(b) except that such determination shall be based on the unaudited
EBITA less Acquired EBITA of the Corporation reported from the beginning of the
fiscal year in which such termination occurs through the date written notice is
delivered to the Executive).  The Corporation's exercise of its right to
terminate with cause shall be without prejudice to any other remedy to which it
may be entitled at law, in equity or under this Agreement.

                                      3


<PAGE>

               (b)  FOR DEATH OR INCAPACITY.  This Agreement shall automatically
terminate upon the death of the Executive.  In addition, if any disability or
incapacity of the Executive to perform his duties as the result of any injury,
sickness or physical, mental or emotional condition continues for a period of
180 days out of any 360 calendar day period, the Corporation may terminate the
Executive's employment upon 10 days written notice.  Upon termination in
accordance with this Paragraph 8(b), the Executive (or the Executive's estate,
as the case may be) shall be entitled to no further compensation hereunder other
than the fixed salary accrued until the date of death or, in the case of
disability, the date written notice is delivered to the Executive and any Bonus
accrued until such date (such accrued Bonus, if any, shall be determined in
accordance with the terms of Paragraph 4(b) except that such determination shall
be based on the unaudited EBITA less Acquired EBITA of the Corporation reported
from the beginning of the fiscal year in which such termination occurs through
such date).

               (c)  WITHOUT CAUSE.  The Corporation may terminate the employment
of the Executive without cause any time by serving prior written notice to the
Executive.  Upon termination in accordance with this Paragraph 8(c), the
Executive shall be entitled to no further compensation hereunder other than
(i) the fixed salary accrued hereunder until the effective date of termination
specified in the notice to the Executive (the "Termination Date"), (ii) any
Bonus accrued until the Termination Date (such accrued Bonus, if any, shall be
determined in accordance with the terms of Paragraph 4(b) except that such
determination shall be based on the unaudited EBITA less Acquired EBITA of the
Corporation reported from the beginning of the fiscal year in which such
termination occurs through the Termination Date), (iii) the fixed salary at the
rate paid as of the Termination Date during the twelve (12) month period
beginning on the Termination Date, such fixed salary to be paid in equal monthly
installments in advance during such twelve month period, and (iv) the benefits
to which the Executive was entitled pursuant to Paragraph 5 and Exhibit A during
the twelve (12) month period beginning on the Termination Date.

               (d)  VOLUNTARY TERMINATION OR RESIGNATION.  The Executive may
terminate or resign his employment at any time by serving no less than 30
business days' prior written notice to the Corporation.  Upon termination or
resignation in accordance with this Paragraph 8(d), the Executive shall be
entitled to no further compensation hereunder other than the fixed salary
accrued through the date of termination specified in the notice from the
Executive and any Bonus accrued until such date (such accrued Bonus, if any,
shall be determined in accordance with the terms of Paragraph 4(b) except that
such determination shall be based on the unaudited EBITA less Acquired EBITA of
the Corporation reported from the beginning of the fiscal year in which such
termination occurs through such date).

               (e)  TERMINATION FOR GOOD REASON.  The Executive may terminate or
resign his employment at any time for "good reason" (as defined below) by
serving no less than 30 business days' prior written notice to the Corporation. 
The Executive shall have the right to terminate or resign his employment for
"good reason" if the Corporation (or any successor thereto pursuant to Paragraph
9(b) hereof) breaches an obligation set forth in Paragraph 1, 4, 5 or 6 hereof. 
Upon termination in accordance with this Paragraph 8(e), a termination "without
cause" will be deemed to have occurred and the Executive shall be entitled to
the compensation set forth in Paragraph 8(c).

          9.   MISCELLANEOUS.

               (a)  AUTHORITY.  Executive represents and warrants to the
Corporation that Executive is free to enter into this Agreement and has full
right, power and authority to enter into this Agreement.  Executive represents
and warrants that the execution of this Agreement and the performance of the
terms and conditions hereof, will not violate any contract, agreement, document,
or understanding to which Executive is a party or by which Executive may be
bound

                                      4


<PAGE>

and that the execution of this Agreement and the performance of the terms and 
conditions hereof will not subject the Corporation to any claims, liabilities 
or litigation.  Except as set forth on Schedule 1 and the board memberships 
referenced in Paragraph 1, the Executive further represents that the 
Executive is not a party to or otherwise bound by any agreement or 
arrangement, or subject to any judgment, decree or order of any court or 
administrative agency, (i) that would conflict with the Executive's 
obligation to diligently promote and further the interest of the Corporation, 
or (ii) that would conflict with the Corporation's business as now conducted. 
The Corporation represents and warrants to the Executive that it has full 
right, power and authority to enter into this Agreement.

               (b)  ASSIGNMENT.  It is understood and the parties hereby agree
that the services to be performed by the Executive hereunder are personal,
special, unique, unusual and extraordinary in nature, and the obligations to
perform such services and the conditions and covenants of this Agreement cannot
be assigned by the Executive and any such attempted assignment is void.  This
Agreement, however, shall be assignable by the Corporation to any corporation or
other business entity which succeeds to all or substantially all of the business
of the Corporation through merger, consolidation, corporation reorganization or
by acquisition of all or substantially all of the assets of Corporation and
which assumes Corporation's obligations under this Agreement and binding on the
Corporation and its successors and assigns.

               (c)  ATTORNEYS' FEES, COSTS.  If any party shall bring an action
against the other party hereto by reason of the breach of any covenant,
warranty, representation or condition herein, or otherwise arising out of this
Agreement, whether for declaratory or other relief, the prevailing party in such
suit shall be entitled to such party's costs of suit and attorneys' fees, which
shall be payable whether or not such action is prosecuted to judgment.

               (d)  ENTIRE AGREEMENT.  This Agreement contains the entire
agreement of the parties hereto and supersedes and replaces all prior agreements
and understandings, whether oral or written, between the parties with respect to
the subject matter herein.

               (e)  SEVERABILITY.  In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision, provided that no such severability shall be
effective if it materially changes the economic benefit of the Agreement to any
party.

               (f)  HEADINGS.  The headings of paragraphs and
subparagraphs herein are used for convenience only and shall not affect the
meaning or contents hereof.

               (g)  NOTICE.  Any notice, payment, report or any other
communication required or permitted to be given by one party to the other party
by this Agreement shall be in writing and either (i) served personally on the
other party, (ii) sent by express, registered or certified first-class mail,
postage pre-paid, addressed to the other party at his address as indicated next
to his signature below, or to such other address as the addressee shall have
theretofore furnished to the other party by like notice or (iii) delivered by
commercial courier to the other party.  Notice shall be deemed given upon the
earlier of actual receipt or the third day after mailing if mailed pursuant to
clause (ii) above.

               (h)  APPLICABLE LAW.  This Agreement shall be construed and
interpreted in accordance with the laws of the State of California, as such laws
are interpreted, construed and applied with respect to disputes arising in such
state between residents thereof domiciled in such state.

                                      5


<PAGE>

          IN WITNESS WHEREOF, this Agreement has been executed by each of the
parties effective as of the day and year first above written.

                              CORPORATION:

                              PIA MERCHANDISING SERVICES, INC.


                              By:     /s/ Clinton E. Owens
                                   -----------------------------------
                                   Clinton E. Owens
                                   Chairman of the Board


                              EXECUTIVE:


                                 /s/ Terry R. Peets         
                              ----------------------------------------
                              Terry R. Peets

                              Address:
                              327 Coral Avenue
                              Balboa Island, California  92662

                                      6


<PAGE>

                                                                       EXHIBIT A
                                                         TO EMPLOYMENT AGREEMENT


                                  BENEFIT PLANS

1.   EXEC-U-CARE SUPPLEMENTAL MEDICAL.  Exec-U-Care provides covered executives
     with health and dental insurance over and above that offered to the
     Corporation's employees.  The standard health and dental plan requires
     employees to pay between $50 and $105 per month for health plan coverage
     for the employee and his family, and between $15 and $35 per month for
     dental coverage.

2.   TERM LIFE AND DISABILITY INSURANCE.  The Corporation shall provide a term
     life insurance policy and a disability insurance policy with policy limits
     consistent with the Corporation's Chairman of the Board.


                                      7


<PAGE>
                                                                      SCHEDULE 1
                                                         TO EMPLOYMENT AGREEMENT


                      RESTRICTIONS ON EMPLOYMENT ACTIVITIES

1.   For the five week period from Sunday, June 29, 1997, through Saturday,
     August 2, 1997, Executive will be unavailable to PIA on Monday, Tuesday and
     Wednesday of each week, due to a prior consulting commitment with Randalls
     Food Markets, Inc.,  Houston, Texas.

                                      8




<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-START>                             APR-01-1997
<PERIOD-END>                               JUN-30-1997
<CASH>                                          17,706
<SECURITIES>                                         0
<RECEIVABLES>                                   18,743
<ALLOWANCES>                                       909
<INVENTORY>                                          0
<CURRENT-ASSETS>                                38,608
<PP&E>                                           6,418
<DEPRECIATION>                                   2,707
<TOTAL-ASSETS>                                  43,401
<CURRENT-LIABILITIES>                           12,399
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            59
<OTHER-SE>                                      30,634
<TOTAL-LIABILITY-AND-EQUITY>                    43,401
<SALES>                                              0
<TOTAL-REVENUES>                                31,643
<CGS>                                                0
<TOTAL-COSTS>                                   29,638
<OTHER-EXPENSES>                                 5,005
<LOSS-PROVISION>                                   105
<INTEREST-EXPENSE>                               (219)
<INCOME-PRETAX>                                (2,754)
<INCOME-TAX>                                     (812)
<INCOME-CONTINUING>                            (1,942)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   (1,942)
<EPS-PRIMARY>                                   (0.35)
<EPS-DILUTED>                                   (0.35)
        

</TABLE>