QUINTEL ENTERTAINMENT INC, PREM14C, 1996-06-26

QUINTEL ENTERTAINMENT INC
PREM14C, 1996-06-26
AMUSEMENT & RECREATION SERVICES

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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14C INFORMATION

INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934

Check the appropriate box:

/X/ Preliminary Information Statement

/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))

/ / Definitive Information Statement
- --------------------------------------------------------------------------------
QUINTEL ENTERTAINMENT, INC.
(NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
- --------------------------------------------------------------------------------

Payment of Filing Fee (check the appropriate box):

/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).

/X/ Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.

1) Title of each class of securities to which transaction applies:

Common stock, par value $0.001 per share, of
QUINTEL ENTERTAINMENT, INC.

2) Aggregate number of securities to which transaction applies:

3,200,000 shares of common stock

3) Per-unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

The price per share is $11.31, which is the average of the bid and asked
price for the shares of common stock, par value $0.001 per share, of
Quintel Entertainment, Inc., as of June 20, 1996, as reported by the
NASDAQ National Market. Pursuant to Rule 0-11(c)(1), the filing fee of
$7,238.40 was calculated as 1/50 of 1% of $36,192,000, which is equal to
the sum of the product of $11.31 per share and 3,200,000 shares (the
number of shares to be purchased).

4) Proposed maximum aggregate value of transaction: $36,192,000

5) Total fee paid: $7,238.40

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule, or Registration Statement No.:

3) Filing Party:

4) Date Filed:
<PAGE> 2

QUINTEL ENTERTAINMENT, INC.
---------------------------
INFORMATION STATEMENT
---------------------------

WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY

INTRODUCTION

This Information Statement is being furnished to the holders of record as
of the close of business on May 9, 1996 of the common stock, par value $.001 per
share (the "Common Stock"), of Quintel Entertainment, Inc., a Delaware
corporation (the "Company"), in connection with the approval of the Acquisition
(the "Acquisition") by a subsidiary of the Company (NL Corp.), of Psychic
Readers Network Inc.'s ("PRN") 50% interest in New Lauderdale L.C. ("New
Lauderdale"), a Florida limited liability company, of which the Company's
subsidiary, Calling Card Co., Inc. currently owns the remaining 50% interest. In
consideration for the Acquisition, the Company will issue to PRN up to 3,200,000
shares of Common Stock (the "PRN Shares"). As of the date of this Information
Statement, it is anticipated that the closing of the Acquisition will occur on
or about July 26, 1996.

Pursuant to the By-Laws of the National Association of Securities Dealers,
Inc. ("NASDAQ"), the issuance of shares of common stock by any issuer whose
shares are traded on the NASDAQ National Market System requires stockholder
approval if the number of shares of common stock to be issued in a transaction
is or will be equal to or in excess of 20% of the number of shares of common
stock outstanding before such issuance. As of May 9, 1996, the Company had
approximately 15,225,000 shares of Common Stock outstanding. The 3,200,000 PRN
Shares to be issued in connection with the Acquisition represents 21% of the
number of shares of the Company's Common Stock outstanding prior to the issuance
of such shares. Therefore, stockholder approval is required.

Pursuant to Delaware law, the affirmative vote or written consent of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
is necessary to approve the Acquisition and the issuance of the PRN Shares. As
of May 9, 1996, approximately 15,225,000 shares of Common Stock were
outstanding, of which the five principal stockholders of the Company, who are
also the executive officers of the Company (the "Quintel Principals"), own in
the aggregate approximately 75%. The Quintel Principals have approved the
Acquisition by written consent without a meeting, pursuant to Delaware law.
ACCORDINGLY, UNDER DELAWARE LAW, THE ACQUISITION HAS BEEN APPROVED AND THE
TRANSACTIONS CONTEMPLATED IN CONNECTION THEREWITH MAY BE CONSUMMATED WITHOUT THE
AFFIRMATIVE VOTE OR CONSENT OF ANY OTHER STOCKHOLDERS. IN LIGHT OF THE
FOREGOING, THE COMPANY HAS DETERMINED NOT TO SOLICIT PROXIES OR CONSENTS FROM
ITS STOCKHOLDERS. YOU ARE ADVISED, HOWEVER, TO READ THE ATTACHED INFORMATION
STATEMENT IN ITS ENTIRETY FOR A DESCRIPTION OF THE ACQUISITION AND THE
TRANSACTIONS CONTEMPLATED THEREBY. THE COMPANY IS NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND A PROXY.
---------------------------

NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN, OR INCORPORATED BY REFERENCE IN,
THIS INFORMATION STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OTHER PERSON.

The date of this Information Statement is June 26, 1996. This Information
Statement is intended to be mailed to shareholders on or about July 6, 1996.

The Company's principal executive offices are located at One Blue Hill
Plaza, Suite 650, Pearl River, NY 10965, and its telephone number is (914)
620-1212.
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
INTRODUCTION.......................................................................... i
SUMMARY............................................................................... 1
THE PROPOSED NEW LAUDERDALE ACQUISITION............................................... 1
THE PARTIES.................................................................... 1
THE ACQUISITION................................................................ 2
APPROVAL OF THE BOARD OF DIRECTORS............................................. 2
OPINION OF FINANCIAL ADVISOR................................................... 3
ACCOUNTING TREATMENT........................................................... 3
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION................................ 3
MARKET PRICE OF THE COMPANY'S SECURITIES....................................... 3
SUMMARY HISTORICAL FINANCIAL INFORMATION.............................................. 4
THE COMPANY.................................................................... 4
Statement of Operations Data........................................... 4
Balance Sheet Data..................................................... 4
NEW LAUDERDALE................................................................. 4
Statement of Operations Data........................................... 4
Balance Sheet Data..................................................... 4
SUMMARY PRO FORMA CONSOLIDATED (UNAUDITED) FINANCIAL INFORMATION...................... 5
COMPARATIVE PER-SHARE DATA............................................................ 6
THE ACQUISITION....................................................................... 7
GENERAL........................................................................ 7
ISSUANCE OF SHARES OF COMMON STOCK............................................. 7
REGISTRATION OF THE PRN SHARES................................................. 8
RESTRICTION ON RESALE OF SHARES................................................ 8
LOANS TO PRN PRINCIPALS........................................................ 9
BACKGROUND OF THE ACQUISITION.................................................. 9
APPROVAL OF THE BOARD OF DIRECTORS AND REASONS FOR THE ACQUISITION............. 10
OPINION OF FINANCIAL ADVISOR................................................... 10
CERTAIN FEDERAL INCOME TAX CONSEQUENCES........................................ 14
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION................................ 15
ABSENCE OF REGULATORY FILINGS AND APPROVALS.................................... 15
ACCOUNTING TREATMENT........................................................... 15
DESCRIPTION OF COMMON STOCK.................................................... 15
RELATED AGREEMENTS............................................................. 16
Registration Rights Agreement.......................................... 16
Non-Competition and Right of First Refusal Agreement................... 16
Employment Agreement................................................... 16
Service Agreement...................................................... 16
Preliminary Letter Agreement........................................... 17
FORWARD LOOKING INFORMATION MAY PROVE INACCURATE............................... 18
PRICE RANGES OF THE COMPANY'S SECURITIES.............................................. 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY......... 19
SELECTED FINANCIAL DATA OF THE COMPANY................................................ 20
Statement of Operations Data........................................... 20
Balance Sheet Data..................................................... 21
</TABLE>

ii
<PAGE> 4

<TABLE>
<S> <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF THE COMPANY...................................................................... 22
OVERVIEW....................................................................... 22
RESULTS OF OPERATIONS.......................................................... 24
LIQUIDITY AND CAPITAL RESOURCES................................................ 26
SELECTED FINANCIAL DATA OF NEW LAUDERDALE............................................. 29
Statement of Operations Data........................................... 29
Balance Sheet Data..................................................... 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF NEW LAUDERDALE................................................................... 30
OVERVIEW....................................................................... 30
RESULTS OF OPERATIONS.......................................................... 30
LIQUIDITY AND CAPITAL RESOURCES................................................ 30
SELECTED PRO FORMA FINANCIAL DATA..................................................... 32
Pro Forma Condensed Consolidated Balance Sheet................................. 32
Pro Forma Condensed Consolidated Statement of Operations....................... 32
INFORMATION REGARDING THE COMPANY AND NEW LAUDERDALE.................................. 33
INTRODUCTION................................................................... 33
MARKET OVERVIEW................................................................ 33
TELEPHONE ENTERTAINMENT SERVICES............................................... 33
ENHANCED VOICE-MAIL NETWORK SERVICES........................................... 34
INCREASED CHARGEBACKS AND REGIONAL TELEPHONE CARRIER MATTERS................... 34
NEW LAUDERDALE................................................................. 36
ADVERTISING, MARKETING, AND PROMOTION.......................................... 37
Strategy............................................................... 37
Media Advertising and Promotion........................................ 37
Telemarketing.......................................................... 38
Direct Mail and Print Advertising...................................... 39
LIST RENTALS................................................................... 39
SERVICE BUREAUS................................................................ 39
COMPETITION.................................................................... 39
INSURANCE...................................................................... 40
GOVERNMENT REGULATION.......................................................... 40
EMPLOYEES...................................................................... 41
PROPERTIES..................................................................... 42
LEGAL PROCEEDINGS.............................................................. 42
FINANCIAL STATEMENTS AND RELATED SCHEDULES..................................... F-1
Independent Auditors' Report........................................... F-2
Independent Auditors's Authorization Letter............................ F-3
Consolidated Financial Statements for Quintel Entertainment, Inc. for
the Years Ended November 30, 1995, 1994 and 1993........................ F-4
Financial Statements for New Lauderdale, L.C., for the Period December
30, 1994 (Inception) to November 30, 1995............................... F-21
Consolidated Financial Statements for Quintel Entertainment, Inc. for
the Quarter Ended February 29, 1996..................................... F-31
Financial Statements for New Lauderdale, L.C., for the Quarter Ended
February 29, 1996....................................................... F-36
EXHIBITS
Acquisition Agreement............................................. Exhibit A
Opinion of Financial Advisor...................................... Exhibit B
</TABLE>

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<PAGE> 5

SUMMARY

The following summary is not intended to be complete and is qualified in
its entirety by the more detailed information contained in this Information
Statement and the Exhibits hereto. Stockholders are encouraged to carefully
review this entire Information Statement. Unless otherwise defined herein,
capitalized terms used in this summary are defined elsewhere in this Information
Statement.

THE PROPOSED NEW LAUDERDALE ACQUISITION

GENERAL

New Lauderdale L.C. ("New Lauderdale") is a Florida limited liability
company, 50% of which is currently owned by the Company's wholly owned
subsidiary, Calling Card Co., Inc. ("Calling Card"), and 50% by Psychic Readers
Network, Inc. ("PRN"). The Company, through its wholly owned subsidiary, NL
Corp., proposes to acquire PRN's 50% interest in New Lauderdale on the terms
described in the form of Acquisition Agreement, annexed hereto as Exhibit A (the
"Acquisition Agreement"). Upon the closing of the Acquisition (the "Acquisition
Closing"), the Company will issue to PRN 3,200,000 shares of the Company's
Common Stock (the "PRN Shares"), 1,200,000 shares of which are subject to
forfeiture in the event that New Lauderdale does not achieve certain levels of
pre-tax earnings during the fiscal year ending November 30, 1996. The Board of
Directors and the holders of approximately 75% of the outstanding shares of
Common Stock of the Company have already approved the Acquisition Agreement and
the transactions contemplated thereby. Subject to notification to NASDAQ of the
proposed Acquisition and issuance of the PRN Shares, no further corporate or
shareholder action is required in order to consummate the Acquisition. It is
anticipated that the Acquisition Closing will be on or about July 26, 1996.

THE PARTIES

The Company. The Company was formed in November 1993 under the name U.S.
Teleconnect, Inc. The Company has five wholly-owned subsidiaries, N.L. Corp.,
Calling Card, Creative Direct Marketing, Inc., Quintelco, Inc. and Quintel
Products, Inc.

The Company is engaged in developing and marketing telephone entertainment
services, consisting primarily of live conversation and pre-recorded horoscopes,
as well as tarot card readings and live psychic consultations. The Company also
offers enhanced voice-mail services which include various psychic, "personals,"
and other theme-related entertainment services.

The Company's entertainment services are accessed by dialing "500" and
"800" telephone numbers, as well as "900" numbers which are billed at premium
per-minute rates. The Company's principal direct marketing methods include
direct mail, the use of television infomercials and commercials featuring
celebrity endorsements and telemarketing, all designed to achieve a high level
of consumer awareness and appeal.

New Lauderdale. In March 1995, the Company and PRN formed New Lauderdale,
the successor to a joint venture between the Company and PRN established in
December 1994, for the purpose of creating, developing, and marketing
theme-related membership clubs and telephone entertainment services. The Company
and PRN each own a 50% interest in, and share in all profits and losses of, New
Lauderdale.

New Lauderdale currently develops and markets telephone entertainment
services similar to those provided by the Company and also furnishes enhanced
voice-mail services which include theme-related entertainment services covering
subjects similar to those offered with the Company's voice-mail services.
Pursuant to an agreement between the Company and PRN with respect to the
operations and management of New Lauderdale (the "NL Operating Agreement"), PRN
is responsible for providing psychic operators, creating and producing
commercials, and purchasing television media time. The Company is responsible
for developing, implementing, and managing marketing strategies, pre-recorded
program content, and database operations; creating and producing infomercials
and commercials; and managing billing and collections. The NL Operating
Agreement provided for the Company and PRN to furnish their respective services
to New Lauderdale at cost, and for New Lauderdale to pay to each of the Company
and PRN a monthly management

1
<PAGE> 6

fee of $50,000. Such monthly management fee was discontinued in February 1996,
although such services currently continue to be rendered to New Lauderdale. The
NL Operating Agreement would be terminated as of the Acquisition Closing and
replaced by an agreement between NL Corp. and Calling Card to comply with
provisions of Florida law which require a limited liability company to have at
least two members.

The Company and PRN are also parties to an agreement dated July 7, 1995,
initially effective until June 30, 1996, pursuant to which PRN provides the
Company with live psychic operator services in connection with the operation of
the Company's telephone entertainment programs (the "Service Agreement"); these
services are similar to the services provided by PRN to New Lauderdale pursuant
to the NL Operating Agreement. The services provided by PRN to the Company are
billed at a higher rate than the similar services provided by PRN to New
Lauderdale (which are billed at PRN's cost); in both cases billing is determined
by the number of minutes of live psychic services used by the telephone
entertainment programs conducted by the Company or New Lauderdale. Pursuant to
an amendment to the Service Agreement effective as of March 1, 1996, the term of
the Service Agreement was extended to May 31, 1997, and PRN agreed to bill the
Company at a reduced rate (which is lower than the rate being billed for such
services by PRN to New Lauderdale) for a portion of the service minutes provided
to the Company. The Company estimates that such fee reduction will result in an
approximate $2,600,000 reduction of the fees which would have been payable by
the Company to PRN for the period from March 1, 1996 through July 26, 1996 (the
anticipated date of the Acquisition Closing). In connection with the Acquisition
Closing, the Service Agreement will be further amended to provide for an
extension of its term for five (5) years following the date of the Acquisition
Closing, and to establish a fee schedule during the extended five (5) year term
at a rate which is higher than the rate charged by PRN to New Lauderdale under
the Operating Agreement but slightly lower than the rate charged by PRN to the
Company under the original Service Agreement dated July 7, 1995. In addition, as
part of the amendment to the Service Agreement to be entered into at the
Acquisition Closing, the PRN Principals will agree that Steven Feder ("Feder"),
currently a principal shareholder, director and general manager of PRN, will
continue to maintain control of PRN and manage its operations, including the
operation of the live psychic operator network used by the Company and New
Lauderdale in connection with their telephone entertainment programs, and in
order to secure the obligations of PRN, Feder and the other PRN Principals, PRN
will grant the Company a security interest in PRN's computer system hardware and
software operating PRN's caller distribution and psychic operators' scheduling
and all agreements, arrangements or understandings between PRN and its live
psychic operators.

New Lauderdale's offices are located at PRN's offices at 2455 East Sunrise
Boulevard, Fort Lauderdale, FL 33304, and its telephone number is (305)
563-7097.

THE ACQUISITION

Upon the Acquisition Closing, the Company will acquire, through its wholly
owned subsidiary, N.L. Corp., PRN's 50% interest in New Lauderdale in
consideration of the issuance of the PRN Shares. It is anticipated that the
Acquisition Closing will be on or about July 26, 1996. For a detailed discussion
of the terms and provisions of the Acquisition Agreement and the transactions
contemplated thereby, see "The Acquisition".

APPROVAL OF THE BOARD OF DIRECTORS

On May 9, 1996, the Board of Directors of the Company unanimously approved
the Acquisition and the transactions contemplated thereby. The Board of
Directors recommended that the stockholders vote for approval of the Acquisition
and the transactions contemplated thereby, including the issuance of the PRN
Shares. On January 3, 1996 the Board had approved the Company entering into a
preliminary letter agreement with PRN (the "Preliminary Agreement") in which the
Company agreed to acquire PRN's interest in New Lauderdale.

The recommendations of the Board of Directors were based upon its belief
that the Acquisition will result in economic benefits to the Company, through
the realization of all of the income of New Lauderdale and the agreement of
Steven Feder, a principal stockholder, director and general manager of PRN, to
be employed by

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the Company to manage the New Lauderdale business and to continue to manage the
operations of PRN on which the Company and New Lauderdale rely for the provision
of the live psychic operations necessary to conduct their telephone
entertainment programs, all for a five (5) year term commencing with the
Acquisition Closing. For a more detailed discussion of the factors considered by
the Board in making its recommendations, see "The Proposed
Acquisition -- Recommendations of the Board of Directors and Reasons for the
Acquisition."

OPINION OF FINANCIAL ADVISOR

On May 7, 1996, Heritage Capital Corp. ("Heritage") delivered its opinion
(the "Opinion") to the Board of Directors of the Company to the effect that,
based upon and subject to certain matters stated in its Opinion, the
consideration to be received by the shareholders of the Company pursuant to the
Acquisition Agreement is fair, from a financial point of view, to such
shareholders. A copy of Heritage's opinion is annexed hereto as Exhibit B and
should be read in its entirety for a complete description of the procedures
followed, factors considered and assumptions made by Heritage in rendering such
Opinion. See "The Acquisition -- Opinion of the Company's Financial Advisor."

ACCOUNTING TREATMENT

The Acquisition will be accounted for as a purchase as such term is used
under generally accepted accounting principles. Accordingly, from and after the
effective date of the Acquisition the Company will no longer account for New
Lauderdale's operations under the equity method of accounting, but instead will
treat New Lauderdale as a subsidiary and include its results of operations on a
consolidated basis in the Company's consolidated financial statements.

INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION

Upon the Acquisition Closing, Calling Card will enter into a five year
employment agreement with Steven Feder, one of the principal shareholders of
PRN, pursuant to which Mr. Feder will devote 50% of his working time to Calling
Card's business, for which he shall be paid (i) from the date of his employment
agreement until November 30, 1996, $187,000 per annum; and (ii) for each fiscal
year thereafter, an increase of 10% over and above his salary for the
immediately preceding fiscal year. See "Related Agreements Employment
Agreement."

Upon the Acquisition Closing, the Company, PRN and the principal
shareholders of PRN (the "PRN Principals") will enter into a Non-Competition and
Right of First Refusal Agreement, whereby PRN, which currently is a direct
competitor of the Company, and each of the PRN Principals, will agree, for a
period of five years after the Acquisition Closing, (i) not to engage in any
activities competitive with the Company, except for such business already
conducted by PRN as of the Acquisition Closing and (ii) provide the Company with
a right of first refusal with respect to any future business developed by them.
See "Related Agreements -- Non-Competition and Right of First Refusal
Agreement."

As contemplated by the Acquisition Agreement, upon the happening of certain
events, the PRN Principals shall be entitled to receive loans from the Company
and/or the Quintel Principals. For a complete discussion of such loans, see
"Loans to PRN Principals."

MARKET PRICE OF THE COMPANY'S SECURITIES

The Company's Common Stock is traded on the NASDAQ National Market System.
On January 17, 1996 (the last trading day prior to the public announcement of
the letter of intent relating to the Acquisition), the high and low sale prices
of the Common Stock were 7 3/4 (January 15, 1996) and 4 3/8 (December 18, 1995),
respectively.

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SUMMARY HISTORICAL FINANCIAL INFORMATION

The following summary historical financial information should be read in
conjunction with the consolidated financial statements of the Company, the
financial statements of New Lauderdale, and the pro forma financial information
giving effect to the Acquisition, all appearing elsewhere in this Information
Statement.

THE COMPANY

Statement of Operations Data

<TABLE>
<CAPTION>
AUGUST 1, 1992
THREE MONTHS ENDED YEAR ENDED NOVEMBER 30, (INCEPTION) TO
FEBRUARY 29, 1996 ------------------------------------- NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992
------------------ ---------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net revenue............. $16,018,571 $50,501,266 $22,771,465 $8,262,179 $1,700,322
Net income.............. 4,302,189 13,092,549 1,422,839 714,901 73,528
Net income per share.... $.28
Pro forma net
income(1)............. 7,679,768 642,537 380,450 73,528
Pro forma net income per
share(1).............. $.64 .05 .08 .02
Weighted average number
of shares
outstanding........... 15,446,043 12,000,000 12,000,000 5,008,219 4,000,000
</TABLE>

Balance Sheet Data

<TABLE>
<CAPTION>
NOVEMBER 30
FEBRUARY 29, 1996 ---------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992
----------------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Working Capital........... $15,382,936 $3,217,627 $ 494,738 $ 788,429 $147,056
Total Assets.............. 36,970,689 16,969,956 3,976,881 3,894,080 942,960
Total Liabilities......... 19,826,484 10,938,881 3,432,355 3,105,651 869,432
Stockholders' equity...... 17,144,205 6,031,075 544,526 788,429 73,528
</TABLE>

- ---------------
(1) The Company and its predecessor affiliated companies had elected to be
treated as S corporations and, accordingly, were not subject to federal
income taxes. Pro forma net income and pro forma per share amounts assume
that the Company was subject to federal income taxes and taxed at the rates
in effect for the periods presented. The Company has historically made S
corporation distributions of a significant portion of its earnings to its
stockholders. The Company's election to be treated as an S corporation
terminated in December 1995.

NEW LAUDERDALE

Statement of Operations Data

<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 30, 1994
FEBRUARY 29, 1996 (INCEPTION) TO
(UNAUDITED) NOVEMBER 30, 1995
------------------ -----------------
<S> <C> <C>
Net revenue................................................. $22,246,546 $28,248,093
Net income.................................................. 4,874,060 5,720,608
</TABLE>

Balance Sheet Data

<TABLE>
<CAPTION>
FEBRUARY 29, 1996
(UNAUDITED) NOVEMBER 30, 1995
------------------ -----------------
<S> <C> <C>
Working capital............................................. $3,064,668 $ 2,690,608
Total assets................................................ 20,437,784 11,205,559
Total liabilities........................................... 17,373,116 8,514,951
Members' equity............................................. 3,064,668 2,690,608
</TABLE>

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SUMMARY PRO FORMA CONSOLIDATED
(UNAUDITED) FINANCIAL INFORMATION

The following pro forma consolidated (unaudited) financial information
should be read in conjunction with the pro forma consolidated (unaudited)
financial information included elsewhere in this Information Statement,
including the assumptions for such presentation, and the separate historical
consolidated financial statements of the Company and financial statements of New
Lauderdale, and, in each case, the notes thereto included in this Information
Statement. The pro forma consolidated (unaudited) financial data are not
necessarily indicative of the operating results that would have been achieved
had the Acquisition been effective during the period presented or the results
that may be obtained in the future.

Pro Forma Statement of Operations Data

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
FEBRUARY 29, 1996 NOVEMBER 30, 1995
(UNAUDITED) (UNAUDITED)
------------------ -----------------
<S> <C> <C>
Pro forma Net Revenue....................................... $38,265,117 $78,749,359
Pro forma Net Income........................................ 3,843,655 8,594,653
</TABLE>

Pro Forma Balance Sheet Data:

<TABLE>
<CAPTION>
FEBRUARY 29, 1996 NOVEMBER 30, 1995
(UNAUDITED) (UNAUDITED)
------------------ -----------------
<S> <C> <C>
Pro Forma Working Capital................................... $16,915,270 $ 6,186,356
Pro Forma Total Assets...................................... 76,448,113 46,509,159
Pro Forma Total Liabilities................................. 36,503,908 19,366,640
Pro Forma Stockholders' Equity.............................. 39,944,205 27,314,394
</TABLE>

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COMPARATIVE PER-SHARE DATA

The following sets forth unaudited data concerning the historical net
income, dividends, and book value per share for the Company and New Lauderdale,
and the Company and New Lauderdale on a pro forma basis after giving effect to
the Acquisition.

<TABLE>
<CAPTION>
THREE MONTH
PERIOD ENDED YEAR ENDED
FEBRUARY 29, 1996 NOVEMBER 30, 1995
(UNAUDITED) (UNAUDITED)
----------------- -----------------
<S> <C> <C>
The Company (Quintel):
Earnings Per Common Share and Common Equivalent Share
Historical............................................... $0.28 $1.09
Pro forma................................................ N/A 0.64
Dividends Paid Per Share.................................... 0.43 0.63
Book Value Per Common Share................................. 1.13 0.50
</TABLE>

<TABLE>
<CAPTION>
THREE MONTH
PERIOD ENDED YEAR ENDED
FEBRUARY 29, 1996 NOVEMBER 30, 1995
(UNAUDITED) (UNAUDITED)
----------------- -----------------
<S> <C> <C>
New Lauderdale, L.C.:
Earnings Per Common Share and Common Equivalent Share....... N/A N/A
Total Dividends Paid........................................ $4,500,000 $3,080,000
Book Value Per Common Share................................. N/A N/A
</TABLE>

<TABLE>
<CAPTION>
THREE MONTH
PERIOD ENDED YEAR ENDED
FEBRUARY 29, 1996 NOVEMBER 30, 1995
(UNAUDITED) (UNAUDITED)
----------------- -----------------
<S> <C> <C>
Pro Forma Consolidated Earnings Per Common Share and Common
Equivalent Share............................................ $0.21 $0.58
Dividends Paid Per Share...................................... N/A 0.51
Book Value Per Common Share................................... 2.17 0.40
</TABLE>

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<PAGE> 11

THE ACQUISITION

GENERAL

The following is a brief summary of certain aspects of the Acquisition.
This summary does not purport to be complete and is qualified in its entirety by
reference to the Acquisition Agreement, which is attached to this Information
Statement as Exhibit A and incorporated herein by reference.

Upon the Acquisition Closing, the Company will acquire the 50% interest in
New Lauderdale owned by PRN in consideration of the issuance to PRN of 3,200,000
shares (the "PRN Shares") of the Company's Common Stock, 1,200,000 shares of
which are subject to forfeiture in the event that New Lauderdale does not
achieve certain levels of pre-tax earnings during the fiscal year ending
November 30, 1996.

ISSUANCE OF SHARES OF COMMON STOCK

Upon the Acquisition Closing, an aggregate of 3,200,000 shares of Common
Stock shall be issued to PRN. Two million of such shares of Common Stock will be
delivered on such date and issued to PRN's three stockholders, Steven Feder
("Feder"), Thomas Lindsey ("Lindsey") and Peter Stolz ("Stolz") (the "PRN
Principals"), and the remaining 1,200,000 shares of Common Stock (the "Escrow
Shares") will be placed into escrow with the Company's counsel, Feder,
Kaszovitz, Isaacson, Weber, Skala & Bass LLP, as escrow agent (the "Escrow
Agent"). Each of Feder and Lindsey is entitled to receive 44.5% of the PRN
Shares and Stolz is entitled to receive 11% of the PRN Shares. The Acquisition
Agreement provides that the Escrow Shares will be released and delivered to the
PRN Principals if New Lauderdale achieves certain pre-tax income levels, as
follows:

(1) All 1,200,000 Escrow Shares will be released to PRN if:

(a) New Lauderdale's pre-tax income for the fiscal year ending November
30, 1996 is at least $12,000,000; or

(b) New Lauderdale's pre-tax income for either the first or second
quarter of the fiscal year ending November 30, 1996 is at least
$5,000,000; or

(c) New Lauderdale's pre-tax income for the first and second quarters
of the fiscal year ending November 30, 1996 is at least $5,000,000
in the aggregate.

(2) 800,000 Escrow Shares will be released to PRN and 400,000 Escrow
Shares will be returned to the Company for cancellation if the above
conditions are not met but New Lauderdale's pre-tax income for either
the first or the second quarter of the fiscal year ending November 30,
1996 is at least $3,000,000.

(3) 400,000 Escrow Shares will be released to PRN and 800,000 Escrow
Shares will be returned to the Company for cancellation if the above
conditions are not met but New Lauderdale's pre-tax income for each of
the first and the second quarter of the fiscal year ending November 30,
1996 is more than $2,000,000 in the aggregate.

(4) 400,000 Escrow Shares will be released to PRN and 800,000 Escrow
Shares will be returned to the Company for cancellation if the above
conditions are not met but New Lauderdale's pre-tax income for either
the first or the second quarter of the fiscal year ending November 30,
1996 is more than $2,000,000.

(5) If New Lauderdale did not achieve any of the above conditions, PRN
would receive none of the Escrow Shares and all of such Escrow Shares
will be returned to the Company for cancellation.

New Lauderdale's pre-tax income for the first quarter of the fiscal year
ending November 30, 1996 was $4,883,056. Therefore, PRN Principals would be
entitled to receive 800,000 of the Escrow Shares at the Acquisition Closing,
leaving only 400,000 Shares to be held in escrow. If New Lauderdale's pre-tax
income for the second quarter of fiscal year ending November 30, 1996 is at
least $116,944, all of the Escrow Shares will be released.

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<PAGE> 12

REGISTRATION OF THE PRN SHARES

Promptly after the Acquisition Closing, pursuant to the terms of a
registration rights agreement executed simultaneously with the Acquisition
Agreement by and between the Company and PRN (the "Registration Rights
Agreement"), the Company will be required to use its best efforts to register
all of the PRN Shares in a Registration Statement filed pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and to qualify or
register such shares of Common Stock for offer and resale under the securities
laws of such states reasonably requested by PRN and/or the PRN Principals. Upon
registration of the PRN Shares, such shares will become freely tradeable without
restriction, except as otherwise provided in the Acquisition Agreement and/or
Registration Rights Agreement. See "Restriction on Resale of Shares."

RESTRICTION ON RESALE OF SHARES

(1) Two Year Lock-Up Period. The Acquisition Agreement provides that
during the two (2) years following the Acquisition Closing the PRN Principals
will not sell any of their shares of Common Stock except under the following
circumstances:

(a) In the event a Quintel Principal (the "Selling Quintel Principal")
elects to sell any of his or her shares of Common Stock, he or she shall
give written notice to the PRN Principals of such sale. The PRN
Principals shall then have the right to sell, in the aggregate, a
percent of the total shares owned by the PRN Principals equal to that
percent of the total shares of Common Stock owned by the Quintel
Principals being sold by the Selling Quintel Principal. Each PRN
Principal shall have the right, individually, to sell an amount of
shares of Common Stock equal to his or her proportionate ownership
interest in that amount permitted to be sold in the aggregate by the PRN
Principals;

(b) In the event the Acquisition is not treated as a tax-free transaction,
each PRN Principal may sell that number of shares of Common Stock
necessary to pay the "net tax liability" (as that term is defined in the
Acquisition Agreement) incurred by such PRN Principal as a result of the
Acquisition; or

(c) In the event a Quintel Principal makes a loan to a PRN Principal
pursuant to the provisions of the Acquisition Agreement and as discussed
in "Loans to PRN Principals" below, each PRN Principal may sell that
number of shares of Common Stock necessary to repay such loan.

(2) Restrictions on Sales by Quintel Principals and PRN Principals. From
the Acquisition Closing until September 5, 1996, the five existing principal
stockholders of the Company (the "Quintel Principals") and PRN and the PRN
Principals may not, as a group, sell, during any three-month period, more than
an aggregate of the greater of (a) 750,000 shares of Common Stock or (b) the
number of shares of Common Stock equal to the product of (i) the average weekly
trading volume of the Common Stock, as listed on NASDAQ, during the four
calendar weeks preceding the sale of such shares multiplied by (ii) five. Of the
shares permitted to be sold during such three-month period, each of the Quintel
Principals is entitled to sell one-sixth of such aggregate amount and the
holders of the PRN Shares are entitled to sell the remainder in proportion to
their respective ownership of the shares.

(3) Restrictions on Sales by PRN Principals. Pursuant to the Acquisition
Agreement, for as long as the PRN Principals as a group own 5% or more of
Quintel's outstanding shares of Common Stock, as promulgated under Rule 144(e)
of the Securities Act, the PRN Principals agree not to sell during any three
month period that number of Shares which, in the aggregate, exceeds the greater
of (a) 1% of the then outstanding shares of Common Stock or (b) the average
weekly trading volume of the Common Stock as listed on NASDAQ during the four
calendar weeks preceding the sale of such shares of Common Stock,
notwithstanding the fact that the shares owned by the PRN Principals may have
been registered for resale under the Securities Act or that each of the PRN
Principals may not be an "affiliate" as defined under such Rule 144(e).

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<PAGE> 13

LOANS TO PRN PRINCIPALS

(1) If a Selling Quintel Principal gives written notice to the PRN
Principals that he or she intends to sell certain of his or her shares of Common
Stock (the ratio that such number of shares to be sold by the Selling Quintel
Principal bears to the total number of shares owned by all of the Quintel
Principals shall be referred to in this "Loan to PRN Principals" section as the
"Ratio"), and at such time the PRN Shares have not yet been registered or, in
the opinion of counsel, are not exempt from the registration requirements of the
Securities Act, the PRN Principals shall have the right (the "Loan Right") to
require the Selling Quintel Principal to sell that number of shares of Common
Stock equal to the total shares of Common Stock owned by the PRN Principals
multiplied by the Ratio, and the Selling Quintel Principal shall be obligated to
loan 60% of the net proceeds from such sale to those PRN Principals who have
exercised their Loan Rights. Each loan shall be evidenced by a note jointly and
severally guaranteed by the PRN Principals and bearing monthly interest at the
rate of 50% of the Applicable Federal Rate (as that term is defined under
Section 7872 of the Internal Revenue Code). The note, with interest, must be
repaid within five business days of the date of registration of the PRN Shares
or when, in the opinion of counsel, the PRN Shares are exempt from such
registration requirements.

(2) The Acquisition Agreement obligates the Company to loan the PRN
Principals up to $2,500,000 in the aggregate to pay the PRN Principals' "Net Tax
Liability" (as such term is defined in the Acquisition Agreement) resulting from
the Acquisition, if the Company or the PRN Principals have been unable to
arrange for a loan from a third party in an amount equal to the PRN Principals'
Net Tax Liability and if either (i) the market price of the Company's Common
Stock on April 15, 1997 is not at least $5.70 per share or (ii) the PRN Shares
have not been registered or, in the opinion of counsel, are not exempt from the
registration requirements of the Securities Act. In the event the loan is made
pursuant to subparagraph (i) of this paragraph (2), such loan shall be repaid in
full on the earlier of (a) the date on which the closing bid price of the Common
Stock on NASDAQ has been at least $7 1/8 per share for five trading days during
any consecutive thirty-day period after the date of such loans or (b)
twenty-four months after the date of such loan. In the event the loan is made
pursuant to subparagraph (ii) of this paragraph (2), such loan shall be repaid
within five business days after the registration of the PRN Shares or the
receipt of an opinion of counsel that the PRN Shares are exempt from such
registration. Each such loan is to bear interest at an annual rate equal to the
"Applicable Federal Rate" determined under Section 7872 of the Internal Revenue
Code be secured by the shares of the PRN Principal to whom the loan is made, and
be guaranteed jointly and severally by the PRN Principals.

BACKGROUND OF THE ACQUISITION

Calling Card, the Company's wholly-owned subsidiary, and PRN are currently
New Lauderdale's only members, each holding a 50% equity interest in such
limited liability company. New Lauderdale's business is similar to the Company's
business, and the Company's and PRN's management jointly manage New Lauderdale's
operations along with PRN's management. See "Business of the Company."

The Company's management explores opportunities to increase the Company's
revenues and thereby its net income. Management considers the acquisition of
profitable businesses in the same industry an effective method by which to
achieve such goals. In January 1996, management of the Company initiated
negotiations with PRN to explore the possibility of acquiring PRN's interest in
New Lauderdale. These negotiations led to the execution of a preliminary letter
agreement (the "Preliminary Agreement") on January 17, 1996, by and among the
Company, PRN, Central Talk Management, Inc. ("CTM") (an affiliate of PRN), the
Quintel Principals, and the PRN Principals. In addition to the proposed terms of
the Acquisition, the Preliminary Agreement contained, among other things,
provisions for the transfer of the following to New Lauderdale effective as of
such date (and independent of the Acquisition Closing): (i) PRN's creative
department; (ii) CTM's media buying operations; (iii) PRN's infomercial talent
agreement with a certain celebrity; (iv) ownership of substantially all existing
and new infomercials under development by PRN as of December 1, 1995; and (v)
ownership of a certain "personals" network developed by PRN.

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<PAGE> 14

The Board of Directors of the Company unanimously approved the Preliminary
Agreement on January 3, 1996, and unanimously approved the Acquisition and the
issuance of PRN Shares on May 9, 1996.

APPROVAL OF THE BOARD OF DIRECTORS AND REASONS FOR THE ACQUISITION

The Company's Board of Directors believes that the Company's ownership of
100% of New Lauderdale's operations would provide significant benefits to the
Company.

After extensive evaluations of the business and financial consequences of
the Acquisition, the Board of Directors recommended the approval by the
stockholders of the proposed transaction, based principally upon the following
considerations:

- New Lauderdale had pre-tax income of approximately $6,000,000 during
its first year of operations (December 30, 1994 (inception) to November
30, 1995), which represented approximately 46% of Quintel's pre-tax
income for the fiscal year ended November 30, 1995. Following the
Acquisition, the Company will be entitled to 100% of the income
generated by New Lauderdale's operations;

- Both PRN, a company which currently is a direct competitor of the
Company, and the PRN Principals, who are its shareholders and
management, have agreed, for a period of five years after the
consummation of the Acquisition (i) not to engage in any activities
competitive with the Company, except for such business already conducted
by PRN as of the consummation of the Acquisition and (ii) provide the
Company with a right of first refusal with respect to any future
business developed by them.

- Upon the consummation of the Acquisition, Calling Card will enter
into a five year employment agreement with Steven Feder, a principal
stockholder of PRN who was responsible for management of its operations
and who managed the operation of New Lauderdale together with Quintel.
Mr. Feder will act as the General Manager of the business operated by
New Lauderdale and perform similar services for Quintel and its
subsidiaries, including supervision of psychics utilized in the
Company's telephone programs, the development of new programs and the
general development of the Company's business. Mr. Feder will agree to
devote at least 50% of his time to his employment by Calling Card and
shall be responsible for performing those services provided by him to
New Lauderdale prior to the Acquisition Closing. Calling Card will
obtain the rights to any venture, new business idea, product,
technology, or item of intellectual property developed by Mr. Feder in
the course of his employment with Calling Card, as well as a right of
first refusal with respect to any new business venture developed by Mr.
Feder with any third parties;

- The Company will no longer account for New Lauderdale's operations
under the equity method of accounting, but instead will treat New
Lauderdale as a subsidiary and include its results of operations on a
consolidated basis in the Company's consolidated financial statements.

In view of the nature and number of factors considered in connection with
its evaluation of the terms of the Acquisition, the Board of Directors did not
attempt to quantify or assign relative importance to such factors. THE BOARD OF
DIRECTORS HAS CONCLUDED THAT THE ACQUISITION IS IN THE BEST INTERESTS OF THE
COMPANY AND THAT THE TERMS OF THE ACQUISITION AGREEMENT ARE FAIR TO THE COMPANY
AND ITS STOCKHOLDERS.

OPINION OF FINANCIAL ADVISOR

The Board of Directors of the Company engaged Heritage Capital Corp.
("Heritage") to act as its financial advisor in connection with the Acquisition
and to render its opinion with respect to the fairness, from a financial point
of view, to the stockholders of the Company of the consideration to be paid to
PRN in the Acquisition.

At a meeting of the Board on May 7, 1996, at which the Board approved the
Acquisition Agreement, Heritage delivered its opinion to the effect that, based
upon and subject to certain matters as stated in its written opinion, the
consideration to be paid to PRN pursuant to the Acquisition is fair, from a
financial point of view, to the stockholders of the Company.

10
<PAGE> 15

The full text of Heritage's opinion (the "Opinion"), dated May 7, 1996, is
attached as Exhibit B to this Information Statement and sets forth assumptions
made, matters considered, procedures followed and limitations of review
undertaken. STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. The
summary of the Opinion set forth in this Information Statement is qualified in
its entirety by reference to the full text of such Opinion.

No limitations were imposed by the Company on the scope of Heritage's
investigation or the procedures to be followed by Heritage in rendering the
Opinion. Heritage was not requested to and did not make any recommendation to
the Board as to the form or amount of consideration to be offered to PRN, which
was determined by the Company and PRN through arm's length negotiations. In
arriving at the Opinion, Heritage did not ascribe a specific range of values to
the Company, but made its determination as to the fairness, from a financial
point of view, of the consideration to be received by PRN, on the basis of the
financial and comparative analyses summarized below. The Opinion is for the use
and benefit of the Board and is not to be and does not constitute a
recommendation to any stockholder of the Company with respect to the
Acquisition. Heritage was not requested to opine as to, and the Opinion does not
in any manner address, the Board's underlying business decision to proceed with
or effect the Acquisition.

In arriving at the Opinion, Heritage, among other things, reviewed and
analyzed (i) the Acquisition Agreement; (ii) certain publicly available business
and financial information relating to the Company; (iii) financial and operating
information with respect to the business, operations and prospects of the
Company and PRN furnished to Heritage by the Company, including certain
financial analyses and forecasts and certain pro forma financial projections
prepared by management of the Company and PRN; (iv) a comparison of the
historical financial results and present financial condition of the Company with
those of other companies Heritage deemed relevant; and (v) a comparison of the
financial terms of the Acquisition with the financial terms of certain other
recent transactions which Heritage deemed relevant. Heritage also had
discussions with management of the Company concerning the Company's and PRN's
business, operations, assets, financial condition and prospects and undertook
such other studies, analyses and investigations as it deemed appropriate.

In arriving at the Opinion, Heritage assumed and relied upon the accuracy
and completeness of the financial and other information furnished to it by the
Company and PRN and used by it without assuming any responsibility for
independent verification of such information. With respect to the financial
projections prepared by management of the Company, Heritage assumed that such
projections had been reasonably prepared on a basis reflecting the best then
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company and PRN, and Heritage relied
upon such projections in arriving at the Opinion. In arriving at the Opinion,
Heritage did not conduct a physical inspection of the properties and facilities
of the Company or PRN and did not make or obtain any evaluations or appraisals
of the assets or liabilities of the Company or PRN. The Opinion was necessarily
based upon market, economic and other conditions as they existed on, and could
be evaluated as of, the date of the Opinion.

The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial and comparative analysis
and the application of those readily susceptible to summary description.
Furthermore, in arriving at the Opinion, Heritage did not attribute any
particular weight to any one analysis or factor considered by it, but rather
made qualitative judgments as to the significance and relevance of each analysis
and factor. Accordingly, Heritage believed that its analyses must be considered
as a whole and that considering any portion of such analyses and of the factors
considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying the Opinion. In its
analyses, Heritage made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of the Company. Any estimates contained in those
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than as set
forth therein. In addition, analyses relating to the value of businesses did not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.

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<PAGE> 16

Escrow Shares. Heritage discussed the forfeiture provisions regarding the
Escrow Shares with the management of the Company. Based on these discussions,
Heritage believed that it was reasonable to put a high probability on the Escrow
Shares being earned by November 30, 1996. Accordingly, Heritage included
3,200,000 shares in its appropriate computations and conclusions.

Loans to PRN Principals. Heritage discussed the provisions for loans to
the PRN Principals in the Acquisition Agreement with the management of the
Company. Based on these discussions, Heritage believed it was reasonable to put
a low probability on such loans being made to the PRN Principals pursuant to
those provisions. Accordingly, Heritage did not calculate a possible value for
those provisions.

Discounted Cash Flow Analyses. Heritage performed various discounted cash
flow analyses of the Company and New Lauderdale which it prepared together with
the Company. To perform these analyses, Heritage used three sets of projections
based on a high case, a base case and a low case projected to the year 2000.
Heritage advised the Directors that the projections incorporated various
assumptions regarding chargebacks and related reserves. These and other
assumptions were discussed with the management of the Company who informed
Heritage that the management of the Company is of the opinion that the
assumptions were reasonable based on the Company's past experience and its
expectations regarding future events. Heritage prepared, together with the
Company, projected cash flows for (i) Quintel stand alone before the
Acquisition, (ii) New Lauderdale stand alone before the Acquisition and (iii)
Quintel consolidated after the Acquisition.

In the base case, Heritage utilized the existing Quintel marketing
projections for 1996 as the basis for the sales levels for Quintel stand alone
before the Acquisition, New Lauderdale stand alone before the Acquisition and
Quintel consolidated after the Acquisition. The sales levels for Quintel stand
alone before the Acquisition and New Lauderdale stand alone before the
Acquisition for 1997 through the year 2000 were adjusted upward to reflect an
assumed growth rate of 5% annually for the businesses. The cost of sales as a
percentage of sales assumption for Quintel stand alone before the Acquisition
and New Lauderdale stand alone before the Acquisition for 1996 was based on the
first quarter 1996 actual results. For 1997 and 1998, the cost of sales as a
percentage of sales for Quintel stand alone before the Acquisition declined to
match the cost of sales assumption for New Lauderdale stand alone before the
Acquisition and the cost of sales as a percentage of sales of both Quintel stand
alone before the Acquisition and New Lauderdale stand alone before the
Acquisition declined together to the year 2000.

The selling, general and administrative cost assumption as a percentage of
sales for 1996 for both Quintel stand alone before the Acquisition and New
Lauderdale stand alone before the Acquisition was based on the first quarter
1996 actual results and, in the case of New Lauderdale, adjusted upward to
reflect the increased staffing levels and higher administrative costs of doing
business at a higher sales level. The selling, general and administrative cost
as a percentage of sales were assumed to have remained constant for Quintel
stand alone before the Acquisition for 1996 through the year 2000 while the New
Lauderdale stand alone before the Acquisition selling, general and
administrative cost as a percentage of sales were assumed to have gradually
increased from the 1996 level to match Quintel's stand alone before the
Acquisition selling, general and administrative cost as a percentage of sales
for 1999 and the year 2000.

Projections for Quintel consolidated after the Acquisition reflected the
combination of revenues and operating costs of Quintel stand alone before the
Acquisition and New Lauderdale stand alone before the Acquisition but also
reflected a lower combined cost of sales as a percentage of sales for 1996
through the year 2000, incorporating the pricing amendments in the Amended and
Restated Live Operator Service Agreement as a reduced cost of doing business.

Based on historical operating experience and management's expectation,
Quintel stand alone before the Acquisition and New Lauderdale stand alone before
the Acquisition customer chargebacks or addbacks were projected for each company
at 15% of net sales for 1996, 12% of net sales for 1997, 11% of net sales for
1998, 10% of net sales for 1999 and 9% of net sales for the year 2000.

In the high case for Quintel stand alone before the Acquisition, New
Lauderdale stand alone before the Acquisition and Quintel consolidated after the
Acquisition, revenues for 1997 through the year 2000 were

12
<PAGE> 17

increased 5% over the base case. In the low case scenario, the revenues for 1997
through the year 2000 were lowered 5% annually over the base case.

Heritage discounted these cash flow projections at 14%, 16% and 18% plus
terminal values at exit multiples of twelve times the after tax net income
before net interest expenses, reflecting debt free companies, for Quintel stand
alone before the Acquisition, New Lauderdale stand alone before the Acquisition
and Quintel consolidated after the Acquisition. The net present values thus
excluded the debt and added back excess cash balances.

For New Lauderdale stand alone before the Acquisition, the exit multiple
was six times the after tax net income before net interest expense.

Heritage believed that a discount rate of 16% was appropriate and that the
base cases were the most reasonable.

Using the base case assumptions above (the "Base Case Assumptions") and a
discount rate of 16%, the present value per share of Quintel as provided in the
Opinion consolidated after the Acquisition pursuant to the Opinion was $11.18
and stand alone before the Acquisition was $7.91. The present value per share
consolidated after the Acquisition is $3.27 or 41% higher than the present value
per share stand alone before the Acquisition.

Using the Base Case Assumptions, Heritage computed the pro forma projected
income per share for the year ending November 30, 1996, for Quintel stand alone
before the Acquisition and consolidated after the Acquisition. Heritage again
advised the Directors that the calculation of the pro forma projected income per
share resulted, in part, from various assumptions regarding charge backs and
related reserves. These and other assumptions were discussed with the management
of the Company who informed Heritage that the Company was of the opinion that
the assumptions were reasonable based on the Company's past experience and its
expectations regarding future events. Pro forma projected income per share stand
alone before the Acquisition for the year ending November 30, 1996, pursuant to
the Opinion, was 41(-) per share and pro forma projected income per share
consolidated after the Acquisition was 64(-) per share, an increase of 56% over
pro forma projected net income per share stand alone before the Acquisition.

Using the Base Case Assumptions and a discount rate of 16%, Heritage also
compared the assumed market price per share of $7 1/8 paid to PRN to the Present
Value per share of New Lauderdale stand alone before the Acquisition. Heritage
noted that the Present Value per share of New Lauderdale stand alone before the
Acquisition exceeded the assumed market price per share by $4.28 or 60%.

Heritage noted that, of the 18,646,043 shares of common stock to be
outstanding immediately after the Acquisition (assuming that all 3,200,000 PRN
Shares are distributed to the PRN Principals at the consummation of the
Acquisition), the Quintel shareholders will have 15,446,043 shares or 82.8% and
the New Lauderdale shareholders will have 3,200,000 shares or 17.2%

Using the Base Case Assumptions and a discount rate of 16%, the present
value of the cash flows of Quintel stand alone before the Acquisition, pursuant
to the Opinion, was $122,176,000 and the present value of 50% of the cash flows
of New Lauderdale stand alone before the Acquisition was $36,501,000. The
combined present values of Quintel and 50% of New Lauderdale, both companies on
a stand alone before the Acquisition basis was $158,677,000 of which the Company
contributed 77% and New Lauderdale contributed 23%.

Using the Base Case Assumptions, Heritage also compared the projected pro
forma net incomes of Quintel stand alone before the Acquisition and 50% of New
Lauderdale stand alone before the Acquisition for the year ending November 30,
1996 and determined that the Company contributed 61.8% and New Lauderdale
contributed 38.2% of the combined projected pro forma net income of $10,242,000.

After a review of the balance sheets of Quintel stand alone before the
Acquisition and New Lauderdale stand alone before the Acquisition, Heritage
determined that the book values of the two companies was not a good indication
of relative value. However, Heritage noted that the Stockholders' Equity of
Quintel stand

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<PAGE> 18

alone before the Acquisition and 50% of the Members' Equity of New Lauderdale
stand alone before the Acquisition as of February 29, 1996, the most recent
available balance sheets, were $17,144,205 and $1,532,058 respectively, or a
total of $18,676,263 of which the Stockholders' Equity of Quintel stand alone
before the Acquisition and 50% of the Members' Equity of New Lauderdale stand
alone before the Acquisition represented 91.8% and 8.2%, respectively.

Comparison with Other Companies and Transactions. Heritage also reviewed
data on acquisition premiums and price/earnings ratios, but concluded that the
available information was not appropriate to be used for this analysis. After
discussions with the management of the Company and a review of certain publicly
traded companies in related businesses, Heritage determined that there were no
other publicly traded companies which could be used for comparison purposes. The
publicly traded companies Heritage reviewed either were not, upon further
analysis, comparable, were operating at a loss or had not disclosed recent
financial results. Accordingly, Heritage advised Quintel that it had determined
that a meaningful comparative analysis of price/earnings, price/cash flow,
price/revenues, price/book value or other such ratios could not be used.

In arriving at the Opinion, Heritage put no weight on comparable companies,
comparable acquisitions, market prices or control premiums. Heritage believed
that the best indication of the relative values of Quintel stand alone before
the Acquisition, New Lauderdale stand alone before the Acquisition and Quintel
consolidated after the Acquisition was the analysis of discounted cash flows
projected to 2000 and projected pro forma earnings for the year ending November
30, 1996.

In presenting this analysis, Heritage cautioned that the results were
highly dependent on the assumptions and the occurrence of one or more adverse or
favorable events could have a high degree of influence on the resulting net
income. Heritage stated that, in the context of these reservations and after
discussions with the management of the Company, it was most comfortable in using
the base cases because the revenue and other assumptions appeared to be
reasonable.

Engagement of Heritage. Heritage is an investment banking firm engaged in,
among other things, the valuation of businesses and their securities in
connection with mergers, acquisitions, and other valuations for corporate,
estate and other purposes. The Board selected Heritage to act as its financial
advisor because of its expertise, reputation, and familiarity with the
telecommunications industry in general and because its investment banking
professionals have substantial experience in transactions similar to the
Acquisition.

Pursuant to the terms of an engagement letter agreement dated April 22,
1996, the Company paid Heritage a fee of $35,000 in connection with its
preparation of the Opinion.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion of the federal income tax consequences to the
Company and its shareholders resulting from the Acquisition is for general
information only. This summary is based upon laws, regulations, rulings and
judicial decisions now in effect, all of which are subject to change. This
discussion does not cover all aspects of federal taxation that may be relevant
and it does not address state, local, foreign or other tax laws.

New Lauderdale is a Florida limited liability company classified as a
partnership for federal tax purposes. New Lauderdale is treated as a C
corporation in the State of Florida. New Lauderdale has two members, Calling
Card Co. Inc., a subsidiary of the Company, owning a 50% interest, and PRN,
owning the remaining 50% interest.

For federal tax purposes, PRN's sale of the 50% interest in the partnership
to the Company is deemed a taxable transaction to PRN. Accordingly, the
Company's tax basis in the partnership will be equal to the fair market value of
the purchase price.

Pursuant to Internal Revenue Code section 708(b)(1)(B), the Company's
purchase of PRN's 50% interest in New Lauderdale by Quintel's subsidiary, N.L.
Corp., will cause a deemed termination of the partnership. As such, N.L. Corp.
and Calling Card will be deemed to contribute the assets of New Lauderdale

14
<PAGE> 19

to a newly formed partnership. This new partnership will step up its basis in
the assets contributed to NL Corp. and Calling Card to fair market value.
Accordingly, the Company will be able to deduct in future periods the additional
depreciation and amortization attributable to the fair market value basis step
up.

For Florida state tax purposes, the transaction will have no effect on New
Lauderdale. Accordingly, there will be no tax basis adjustment for Florida
income tax purposes.

STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES AND RULES APPLICABLE TO THEM, INCLUDING THE
APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND STATE, LOCAL, OR
FOREIGN INCOME AND OTHER TAX LAWS.

INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION

As contemplated by the Acquisition Agreement, upon the Acquisition Closing,
Calling Card will enter into a five year employment agreement with Steven Feder,
one of the PRN Principals, pursuant to which he will devote 50% of his working
time to Calling Card's business, for which he shall be paid (i) from the date of
his employment agreement until November 30, 1996, $187,000 per annum; and (ii)
for each fiscal year thereafter, an increase of 10% over and above his salary
for the immediately preceding fiscal year. See "Related Agreements -- Employment
Agreement."

As of the Consummation of the Acquisition, the Company, PRN and the PRN
Principals will enter into a Non-Competition and Right of First Refusal
Agreement, whereby each of the PRN Principals (as well as PRN), agree, for a
period of five years, (i) not to engage in any activities competitive with the
Company, except for such business already conducted by PRN as of the
consummation of the Acquisition, and (ii) provide the Company with a right of
first refusal with respect to any future business developed by them.

ABSENCE OF REGULATORY FILINGS AND APPROVALS

With the exception of any required filings under the Exchange Act, there
are no Federal or State regulatory filing requirements or approvals in
connection with the Acquisition.

ACCOUNTING TREATMENT

DESCRIPTION OF COMMON STOCK

Holders of Common Stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders, including the election of
directors. The Certificate of Incorporation does not provide for cumulative
voting for the election of directors. Holders of Common Stock will be entitled
to receive ratably such dividends, if any, as may be declared from time to time
by the Board of Directors out of funds legally available therefor, and will be
entitled to receive, pro rata, all assets of the Company available for
distribution to such holders upon liquidation. Holders of Common Stock have no
preemptive, subscription, conversion or redemption rights. All outstanding
shares of Common Stock are, and the shares of Common Stock offered hereby, upon
issuance and when paid for, will be, duly authorized, validly issued, fully paid
and non-assessable.

15
<PAGE> 20

RELATED AGREEMENTS

The following are summaries of certain of the agreements which have been or
will be executed in connection with the Acquisition. All of such agreements are
exhibits to the Acquisition Agreement and are included in the Appendices to this
Information Statement. Each summary is qualified in its entirety by reference to
the full text of such agreement.

Registration Rights Agreement.

Promptly after the effective date of the Acquisition, pursuant to the terms
of a registration rights agreement (the "Registration Rights Agreement") by and
between the Company and PRN, the Company will be required to use its best
efforts to include all of the PRN Shares in a Registration Statement filed
pursuant to the Securities Act and to qualify or register such shares of Common
Stock for offer and sale under the securities laws of such states reasonably
requested by PRN and/or the PRN Principals. Upon the registration of such shares
of Common Stock pursuant to the Securities Act and the qualification or
registration in certain states, such shares will become freely tradeable without
restriction or further registration under the Securities Act, except as
otherwise provided in the Acquisition Agreement and/or Registration Rights
Agreement.

Non-Competition and Right of First Refusal Agreement.

Upon the consummation of the Acquisition, the Company, PRN and the PRN
Principals will enter into a Non-Competition and Right of First Refusal
Agreement, whereby PRN, which currently is a direct competitor of the Company,
and each of the PRN Principals, agree, for a period of five years, (i) not to
engage in any activities competitive with the Company, except for such business
already conducted by PRN as of the consummation of the Acquisition, and (ii)
provide the Company with a right of first refusal with respect to any future
business developed by them.

Employment Agreement.

Upon the effective date of the Acquisition, Calling Card will enter into an
employment agreement with Steven Feder, a principal stockholder of PRN and the
person responsible for its day-to-day operations. Pursuant to the terms of such
employment agreement, Mr. Feder agrees to serve as the General Manager of the
business operated by New Lauderdale until April 30, 2001. Mr. Feder agrees to
devote at least 50% of his time to this employment and shall be responsible for
performing those services provided by him to New Lauderdale prior to the
effective date of the Acquisition. Calling Card will obtain the rights to any
venture, new business idea, product, technology, or item of intellectual
property developed by Mr. Feder in the course of his employment with Calling
Card, as well as a right of first refusal with respect to any new business
venture developed by Mr. Feder with any third parties.

Service Agreement.

16
<PAGE> 21

of the Acquisition Closing and replaced by an agreement between NL Corp. and
Calling Card to comply with provisions of Florida law which require a limited
liability company to have at least two members.

The Company and PRN are also parties to an agreement dated July 7, 1995,
initially effective until June 30, 1996, pursuant to which PRN provides the
Company with live psychic operator services in connection with the operation of
the Company's telephone entertainment programs (the "Service Agreement"); these
services are similar to the services provided by PRN to New Lauderdale pursuant
to the NL Operating Agreement. The services provided by PRN to the Company are
billed at a higher rate than the similar services provided by PRN to New
Lauderdale (which are billed at PRN's cost); in both cases billing is determined
by the number of minutes of live psychic services used by the telephone
entertainment programs conducted by the Company or New Lauderdale. Pursuant to
an amendment to the Service Agreement effective as of March 1, 1996, the term of
the Service Agreement was extended to May 31, 1997, and PRN agreed to bill the
Company at a reduced rate (which is lower than the rate being billed for such
services by PRN to New Lauderdale) for a portion of the service minutes provided
to the Company. The Company estimates that such fee reduction will result in an
approximate $2,600,000 reduction of the fees which would have been payable by
the Company to PRN for the period from March 1, 1996 through July 26, 1996 (the
anticipated date of the Acquisition Closing). In connection with the Acquisition
Closing, the Service Agreement will be further amended to provide for an
extension of its term for five (5) years following the date of the Acquisition
Closing, and to establish a fee schedule during the extended five (5) year term
at a rate which is higher than the rate charged by PRN to New Lauderdale under
the Operating Agreement but slightly lower than the rate charged by PRN to the
Company under the original Service Agreement dated July 7, 1995. In addition, as
part of the amendment to the Service Agreement to be entered into at the
Acquisition Closing, the PRN Principals will agree that Steven Feder will
continue to maintain control of PRN and manage its operations, including the
operation of the live psychic operator network used by the Company and New
Lauderdale in connection with their telephone entertainment programs, and in
order to secure the obligations of PRN, Feder and the other PRN Principals, PRN
will grant the Company a security interest in PRN's computer system hardware and
software operating PRN's caller distribution and psychic operators' scheduling
and all agreements, arrangements or understandings between PRN and its live
psychic operators.

Preliminary Letter Agreement.

In January 1996, management of the Company initiated negotiations with PRN
to explore the possibility of acquiring PRN's interest in New Lauderdale. These
negotiations led to the execution of a preliminary letter agreement (the
"Preliminary Agreement") on January 17, 1996, by and among the Company, PRN,
Central Talk Management, Inc. ("CTM") (an affiliate of PRN), the Quintel
Principals, and the PRN Principals, pursuant to which the Company agreed to
issue 3,200,000 shares of its Common Stock in consideration for the transfer by
PRN of its interest in New Lauderdale.

The definitive agreements to be executed at the Acquisition Closing differ
in certain respects from the terms of the Acquisition set forth in the
Preliminary Agreement, including providing for an extension of the term of the
Service Agreement between PRN and the Company for a period of five (5) years
from the Acquisition Closing date; agreement by the PRN Principals that Steven
Feder will maintain control of PRN and continue to manage its operations during
the five (5) year extended term; granting the Company a security interest in
PRN's computer systems and related assets pertaining to the operation of its
live psychic operator network to secure performance by PRN and the PRN
Principals under the amended Service Agreement; and agreement that PRN will
continue to be entitled to receive a fifty (50%) percent share of New
Lauderdale's retained earnings through the Acquisition Closing Date (rather than
only through January 17, 1996 as provided in the Preliminary Agreement).

PRN and the Company's subsidiary, Calling Card, also entered into an
amendment, effective March 1, 1996, to the Service Agreement dated July 7, 1995,
extending its term to May 31, 1997. Such amendment further provides for billing
of the Company at a reduced rate, which is lower than the rate being billed for
such services by PRN to New Lauderdale, for a portion of the service minutes
provided to the Company, exclusive of the service minutes provided by PRN to New
Lauderdale. Such amendment was not conditioned on the

17
<PAGE> 22

occurrence of the Acquisition Closing. The Company estimates that such fee
reduction will result in an approximate $2,600,000 reduction in the fees which
would have been payable by the Company to PRN for the period from March 1, 1996
through July 26, 1996 (the anticipated date of the Acquisition Closing). At the
Acquisition Closing, the Company will enter into a further amendment of the
Service Agreement, which will govern the relationship between PRN and the
Company (including New Lauderdale) after the Acquisition Closing. See "Related
Agreements -- Service Agreement".

In addition to the proposed terms of the Acquisition, the Preliminary
Agreement contained provisions for the transfer of the following to New
Lauderdale effective as of such date (and independent of the Acquisition
Closing): (i) PRN's creative department; (ii) CTM's media buying operations;
(iii) PRN's infomercial talent agreement with a certain celebrity; (iv)
ownership of substantially all existing and new infomercials under development
by PRN as of December 1, 1995; and (v) ownership of a certain "personals"
network developed by PRN.

FORWARD LOOKING INFORMATION MAY PROVE INACCURATE

This Information Statement contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of management,
as well as assumptions made by and information currently available to the
Company and/or PRN management. When used in this document, the words
"anticipate," "believe," "estimate," and "expect" and similar expressions, as
they relate to the Company, PRN, Calling Card or New Lauderdale management, are
intended to identify forward-looking statements. Such statements reflect the
current views of the Company and/or PRN with respect to future events and are
subject to certain risks, uncertainties and assumptions, including those
described in this Information Statement. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. Neither the Company nor PRN intends to update
these forward-looking statements.

PRICE RANGES OF THE COMPANY'S SECURITIES

The high and low sale prices of the Company's Common Stock as listed on
NASDAQ as of January 16, 1996, the date preceding the public announcement of the
proposed Acquisition, was 7 3/4 (January 15, 1996) and $4 3/8 (December 18,
1995), respectively.

18
<PAGE> 23

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF THE COMPANY

The following table sets forth information, as of May 9, 1996, based upon
information obtained from the persons named below, regarding beneficial
ownership of the Company's Common Stock by (i) each person who is known by the
Company to own beneficially more than 5% of the outstanding shares of its Common
Stock, (ii) each director of the Company, (iii) each of the executive officers
and (iv) all executive officers and directors of the Company as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
BENEFICIALLY OWNED OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER (1) (2) (2)
- ------------------------------------------------------- --------------------- -----------
<S> <C> <C>
Jay Greenwald.......................................... 3,145,782(3) 20.6%
Jeffrey L. Schwartz.................................... 2,625,652(4) 17.2
Michael G. Miller...................................... 2,630,652(5) 17.2
Claudia Newman......................................... 2,105,521(6) 13.8
Andrew Stollman........................................ 1,180,843(7) 7.7
Murray L. Skala
750 Lexington Avenue
New York, NY 10022..................................... 38,000(8) *
Mark Gutterman
280 Plandome Road
Manhasset, NY 11030.................................... 35,000(9) *
Edwin A. Levy
767 Third Avenue
New York, NY 10017..................................... 40,500(10) *
Vincent Tese
245 Park Avenue
New York, NY 10........................................ 25,000(11) *
All executive officers and directors as a group (nine
persons)............................................. 11,826,950(12) 77.7%
</TABLE>

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

* Less than 1% of the Company's outstanding shares.
(1) Unless otherwise provided, such person's address is the same as the
Company's address.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus
upon the exercise of options or warrants. Each beneficial owner's
percentage of ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
that are exercisable within 60 days from the date of this Information
Statement have been exercised. Unless otherwise noted, the Company believes
the persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(3) Includes 25,000 shares of Common Stock issuable upon the exercise of an
option held by Mr. Greenwald.
(4) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Schwartz.
(5) Includes 30,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Miller.
(6) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Ms. Newman.
(7) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Stollman.
(8) Includes 30,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Skala.
(9) Includes 30,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Gutterman.
(10) Includes 30,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Levy.
(11) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Tese.
(12) See footnotes (3) through (11) above.

19
<PAGE> 24

SELECTED FINANCIAL DATA OF THE COMPANY

The following table presents selected historical financial data of the
Company for the period from August 1, 1992 (inception) to November 30, 1992, for
each of the three fiscal years through November 30, 1995, and for the fiscal
quarter ended February 29, 1996. The following selected financial data for the
years ended November 30, 1993, 1994 and 1995 and for the quarter ended February
29, 1996, are derived from the financial statements of the Company appearing
elsewhere herein. The financial data set forth should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements of the Company.

Statement of Operations Data:

<TABLE>
<CAPTION>
AUGUST 1, 1992
(INCEPTION) TO
YEAR ENDED NOVEMBER 30, NOVEMBER 30,
-------------------------------------- -----------------
1995 1994 1993 1992
FOR THE THREE ----------- ----------- ---------- -----------------
MONTHS ENDED
FEBRUARY 29, 1996
-----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue.................. $16,018,571 $50,501,266 $22,771,465 $8,262,179 $ 1,700,322
Costs of sales............... 12,677,980 36,732,610 17,521,985 5,778,706 986,319
Gross profit................. 3,340,591 13,768,656 5,249,480 2,483,473 714,003
Selling, general and
administrative expenses.... 2,073,374 3,467,008 3,012,588 1,801,330 448,036
----------------- ----------- ----------- ---------- -----------------
Income from operations....... 1,267,217 10,301,648 2,236,892 682,143 265,967
Interest expense............. (139,961) (334,318) (759,211) (117,460) (6,917)
Other income, net............ 366,110 35,250 -- -- --
Management fee income........ -- 450,000 -- -- --
Equity in earnings of joint
venture.................... 2,437,030 2,860,304 -- -- --
----------------- ----------- ----------- ---------- -----------------
Income before provision for
income tax and minority
interest................... 3,930,396 13,312,884 1,477,681 564,683 259,050
Provision (benefit) for
income taxes............... (371,793) 220,335 54,842 (76,690) 111,994
----------------- ----------- ----------- ---------- -----------------
Income before minority
interest................... 4,302,189 13,092,549 1,422,839 641,373 147,056
Minority interest in net
(income) loss.............. -- -- -- 73,528 (73,528)
----------------- ----------- ----------- ---------- -----------------
Net income(1)................ $ 4,302,189 $13,092,549 $ 1,422,839 $ 714,901 $ 73,528
================== ============ ============ ========== ====================
Net Income per share......... .28
==================
Income before pro forma
adjustments and minority
interest................... N/A $13,312,884 $ 1,477,681 $ 564,683 $ 259,050
Pro forma income tax
provision.................. N/A 5,633,116 835,144 257,761 111,994
----------------- ----------- ----------- ---------- -----------------
Pro forma income before
minority interest.......... N/A 7,679,768 642,537 306,922 147,056
Minority interest in net
(income) loss.............. -- -- -- 73,528 (73,528)
----------------- ----------- ----------- ---------- -----------------
Pro forma net income(1)...... $ 7,679,768 $ 642,537 $ 380,450 $ 73,528
================== ============ ============ ==========
Pro forma net income per
share...................... $ .64 $ .05 $ .08 $ .02
================== ============ ============ ==========
Weighted average number of
common and common
equivalent shares
outstanding................ 15,446,043 12,000,000 12,000,000 5,008,219 4,000,000
</TABLE>

20
<PAGE> 25

Balance Sheet Data:

<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------------------------------
1995 1994 1993 1992
FEBRUARY 29, 1996 ----------- ---------- ---------- --------
-----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Working Capital....... $15,382,936 $ 3,217,627 $ 494,738 $ 788,429 $147,056
Total Assets.......... 36,970,689 16,969,956 3,976,881 3,894,080 942,960
Total Liabilities..... 19,826,484 10,938,881 3,432,355 3,105,651 869,432
Stockholders'
equity.............. 17,144,205 6,031,075 544,526 788,429 73,528
</TABLE>

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

(1) The Company and its predecessor affiliated companies had elected to be
treated as S corporations and, accordingly, were not subject to federal
income taxes. Pro forma net income and pro forma per share amounts assume
that the Company was subject to federal income taxes and taxed at the rates
in effect for the periods presented. The Company has historically made S
corporation distributions of a significant portion of its earnings to its
stockholders. The Company's election to be treated as an S corporation
terminated in December 1995.

21
<PAGE> 26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY

OVERVIEW

The Company commenced operations in August 1992 by providing telephone
entertainment services through the use of "900" numbers advertised by direct
mail campaigns. In September 1993, the Company commenced providing such services
through a billable "800" number platform. In February 1994, the Company expanded
its marketing efforts to include the use of broadcast media and has increasingly
emphasized such marketing method. From September 1993 to July 1994, the
Company's "800" number billing arrangements accounted for substantially all of
the Company's net revenues.

In light of carrier termination of certain "800" number billing platforms,
in August 1994, the Company discontinued the use of billable "800" numbers and
resumed providing all of its telephone entertainment services through "900"
numbers. Billing for club membership services ("Club Product"), which commenced
in August 1994, was subsequently modified from July 1995 to September 1995, by
offering club membership as part of enhanced voice-mail services. Currently, all
club membership services are marketed and billed as voice-mail network services
("VM Product").

In December 1994, the Company entered into a joint venture agreement with
PRN for the purpose of expanding its original club membership concept and its
"900" number services. The joint venture commenced operations in January 1995
and was subsequently reorganized as a limited liability company in March 1995
under the name New Lauderdale L.C. The Company accounts for New Lauderdale's
operations under the equity method and, accordingly, reports its 50% share of
New Lauderdale's income or loss. The Company's net revenue and expenses do not
include net revenue and expenses of New Lauderdale. In the event that the
Company acquires the remaining 50% interest in New Lauderdale, as is presently
contemplated, the Company will no longer account for New Lauderdale's operations
under the equity method of accounting, but instead will treat New Lauderdale as
a subsidiary and include its results of operations on a consolidated basis in
the Company's consolidated financial statements. See "Business -- New
Lauderdale."

During the quarter ended February 29, 1996, the Company increased marketing
activities and experienced high enrollments of new customers which caused the
Company to experience a high level of acceptance difficulties with its VM
Product. For the quarter ended February 29, 1996, the VM Product accounted for
approximately 45% of the Company's net revenues. These acceptance difficulties
occurred at two levels, consumer and regional telephone carrier.

At the consumer level, customers did not always relate the VM Product
billing description on their telephone bills to the entertainment service that
they purchased. This prompted an increase in customer service inquiries to both
the Company and ESBI, the billing service bureau conduit to the regional
telephone carriers and telephone companies, which resulted in a high level of
customer cancellations and chargebacks relating to the Company's $19.95 per
month VM Product during the first quarter of 1996. Management believes that its
VM Product can be successfully modified and repositioned with shifts in emphasis
as part of the marketing process. Moreover, the Company anticipates the VM
Product will contribute less than 45% of net revenues during the remainder of
the fiscal year ending November 30, 1996 as the product is modified and
repositioned. Such reduction in VM Product contributions to total net revenues
is not expected to be material for the current fiscal year as these shifts in
marketing will also include strategies that will increase the Company's "900"
business net revenues, both absolutely and in relation to the VM Product. For
the VM Product, telemarketing efforts during the second quarter were reduced.
The Company and ESBI recently expanded their customer service departments to
better educate the consumer about the product. The Company believes that such
marketing efforts and changes will result in reduced customer cancellations and
chargebacks for the VM Product; however, no assurances can be given that such
projections will prove to be accurate.

22
<PAGE> 27

services to VM Product customers in the regions serviced by the carriers. The
Company did not anticipate the increase in customer service calls and was not
able to adequately handle the increased customer service call volume. As stated
above, both the Company and ESBI recently expanded their customer service
departments in response to such needs. Four of such five carriers, in reaching
their decision, specifically addressed the Company's VM Product. The remaining
carrier addressed the billing platform that encompasses the Company's VM
Product. The Company has already resumed billing the VM Product with three of
the carriers that specifically addressed the difficulties associated with the VM
Product. For the carrier that addressed the difficulties associated with the
billing platform, the Company resumed billing through an alternate platform with
another service bureau. For the four carriers that resumed billings, the
suspensions each lasted less than sixty (60) days and did not have a material
impact on the Company's cash flows and operations.

The Company believes that negotiations with the final carrier that
suspended VM Product billings will eventually lead to resumption of such
billings. However, delays in this process will result in lost revenues. During
the first quarter of 1996, VM Product net revenues billed through this carrier
approximated 10% of total net revenues. As already discussed, marketing shifts
between the VM Product and "900" business are expected to minimize the impact of
this carrier's suspension. Though the full amount of the impact is presently not
known, the impact on net revenues and profits is expected to be less than 5% of
such amounts for the fiscal year ending November 30, 1996. However, no assurance
can be given that such projections will prove to be accurate.

The VM Product is independent of the Company's "900" number entertainment
services and these difficulties do not impact the "900" number portion of the
Company's business. The carrier billing suspensions of the VM Product are also
limited to the geographic regions serviced by the individual carriers.

The Company intends to continue its promotion of its voice-mail services
concept and/or similar concepts. However, as discussed above, the Company
expects that revenues from voice-mail subscribers will account for a decreasing
portion of the Company's net revenues in the future. Total net revenues are
expected to increase as marketing shifts increase the Company's "900" business.

The Company recognizes revenues from "900" number services net of provision
for chargebacks at the time service is accessed. As a result of the delay
between the time funds are billed until they are collected (due to normal
telephone billing and collection practices), the Company obtained a $4,000,000
line of credit from West and a $7,000,000 line of credit from ESBI to finance
its receivables. The Company recognizes revenues from new subscriptions to
voice-mail networks at the time a prospective customer subscribes to the
network, subject to a two week processing delay, and currently as fees are
billed each month. The Company has also entered into an agreement with ESBI to
finance its network receivables. See "Liquidity and Capital Resources."

23
<PAGE> 28

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percentage of
net revenue represented by certain items reflected in the Company's statement of
income. The statements of income contained in the Company's financial statements
and the following table include pro forma adjustments for income taxes.

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------
1995 1994 1993
FOR THE THREE ------ ------ ------
MONTHS ENDED
FEBRUARY 29, 1996
-----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue................................. 100.0% 100.0% 100.0% 100.0%
================ ====== ====== ======
Cost of sales............................... 79.1 72.7 76.9 69.9
-------- ------ ------ ------
Gross Profit................................ 20.9 27.3 23.1 30.1
Selling, general and administrative
expenses.................................. 12.9 6.9 13.2 21.8
Interest expense.......................... 0.9 0.7 3.3 1.4
Management fee income..................... -- 0.9 -- --
Other income, net........................... 2.3
Equity in earnings of joint venture....... 15.2 5.7 -- --
Net income.................................. 26.8 25.9 6.2 8.6
Pro forma net income........................ -- 15.2 2.8 4.6
</TABLE>

Quarter Ended February 29, 1996 Compared to Quarter Ended February 28, 1995

Net revenue for the quarter ended February 29, 1996 was $16,018,571, an
increase of $7,803,572 or 95%, as compared to $8,214,999 for the quarter ended
February 28, 1995. The increase in net revenue was attributable to increased
enrollments in the Company's enhanced voice mail network services products,
which were originally marketed as membership clubs and increased calls to the
Company's "900" number entertainment services. For the quarter ended February
29, 1996, VM Product net revenues approximated 45% of net revenues and "900"
number entertainment services approximated 55% of net revenues. For the quarter
ended February 28, 1995, VM Product (marketed as Club product in such quarter)
net revenues approximated 43% of net revenues and "900" number entertainment
services approximated 57% of net revenues. The provision for chargebacks for the
quarter ended February 29, 1996 was $9,672,961, an increase of $6,744,866, or
230%, as compared to $2,928,095 for the quarter ended February 28, 1995. The
increase in sales has been offset by the amount of consumer chargebacks. A
discussion of the chargeback matter appears in the Overview Section.

Cost of sales for the quarter ended February 29, 1996 was $12,677,980, an
increase of $5,868,779, or 86%, as compared to $6,809,201 for the quarter ended
February 28, 1995. The increase was primarily attributable to increased service
bureau fees and increases in advertising expenditures for television commercials
and infomercials and telemarketing. Cost of sales as a percentage of net revenue
decreased to approximately 79% from approximately 83% for these periods,
primarily as a result of VM Product renewal billings which do not incur the
initial acquisition costs associated with new customers. As the customer mix is
increased in favor of the VM Product, cost of sales as a percentage of net
revenue declined proportionately.

Selling, general and administrative expense for the quarter ended February
29, 1996 were $2,073,374, an increase of $1,577,127, or 318%, as compared to
$496,247 for the quarter ended February 28, 1995. This increase was primarily
attributable to a substantial increase in the Company's personnel and the
Company's relocation to larger office space to accommodate the growth of its
operations.

Interest income of $144,962 for the quarter ended February 29, 1996 related
to the investing in short term securities of the proceeds of the initial public
offering of the Company's common stock.

For the quarter ended February 29, 1996, the Company recognized equity in
earnings of the New Lauderdale joint venture of $2,437,030, of which $2,250,000
was distributed to the Company during such quarter. This reflects the Company's
50% interest in New Lauderdale's income for such period. New Lauderdale
commenced operations during the quarter ended February 28, 1995 and the Company
recognized

24
<PAGE> 29

equity in earnings of joint venture of $157,788 for such quarter. In the event
that the Company acquires the remaining 50% interest in New Lauderdale. as is
presently being negotiated, the Company will no longer account for New
Lauderdale's operations under the equity method of accounting, but instead will
treat New Lauderdale as a subsidiary and include its results of operations on a
consolidated basis in the Company's consolidated financial statements from the
date of acquisition.

The net tax benefit of $371,793 as of February 29, 1996 was comprised of
$2,446,544 relating to the benefit received when the Company converted to the
accrual basis of accounting and terminated its S corporation status, as well as
increases in the reserves for customer chargebacks. This benefit was partially
offset by a current tax provision of $2,074,751, calculated using C corporation
statutory rates.

Net income increased to $4,302,189 for the quarter ended February 29, 1996
from $1,046,519 for the prior comparable period, an increase of $3,255,670, or
311% This increase was primarily due to the increase of $1,886,471 in income
attributable to the Company's 50% equity interest in New Lauderdale, the
increase in income from operations of $357,666 and the net tax benefit of
$371,793.

Year Ended November 30, 1995 Compared to Year Ended November 30, 1994

Net revenue for the year ended November 30, 1995 was $50,501,266, an
increase of $27,729,801, or 122%, as compared to $22,771,465 for the year ended
November 30, 1994. The increase in net revenue was attributable primarily to the
introduction of the Company's original membership clubs commencing in late 1994,
which accounted for $21,803,903 of net revenue. Chargebacks for the year ended
November 30, 1995 were $19,065,077, an increase of $8,223,503, or 76%, as
compared to $10,841,574 for the year ended November 30, 1994. This increase was
primarily attributable to the increase in the amount of services provided by the
Company and the corresponding increase in gross revenue between the comparable
periods. Such increase in chargebacks was partially offset by the change of the
Company's telephone entertainment services from billable "800" numbers to "900"
numbers and the addition of the original membership clubs, both of which have
historically lower chargeback rates, as well as the Company's more efficient
utilization of database management systems designed to reduce the number of
unbillable records.

Cost of sales for the year ended November 30, 1995 was $36,732,610, an
increase of $19,210,625, or 110%, as compared to $17,521,985 for the year ended
November 30, 1994. The increase was primarily attributable to increased service
bureau fees and increases in advertising expenditures for television commercials
and infomercials and telemarketing. Cost of sales as a percentage of net revenue
decreased to approximately 73% from approximately 77% for these periods,
primarily as a result of the lower costs associated with the Company's original
club membership services compared to its "900" number entertainment services.
Such decrease was partially offset by increased service bureau and advertising
costs.

Selling, general and administrative expenses for the year ended November
30, 1995 were $3,467,008, an increase of $454,420, or 15%, as compared to
$3,012,588 for the year ended November 30, 1994. This increase was primarily
attributable to a substantial increase in the Company's personnel in 1995 and
the Company's relocation to larger office space to accommodate the growth of its
operations. Such increases were partially offset by decreases in officers'
salaries of approximately $540,000.

Interest expense decreased by $424,893, or 56%, to $334,318 for the year
ended November 30, 1995, as compared to $759,211 for the year ended November 30,
1994. The decrease was due to lower interest rates under financing arrangements.

For the year ended November 30, 1995, the Company, for the first time,
received management fee income in an aggregate amount of $450,000 from New
Lauderdale. Such management fees were discontinued in February 1996, although
such services currently continue to be rendered to New Lauderdale.

For the year ended November 30, 1995, the Company recognized equity in
earnings of joint venture of $2,860,304, $1,540,000 of which was distributed to
the Company during such year. This reflects the Company's 50% interest in the
income from New Lauderdale's operations for such period. In the event that the
Company acquires the remaining 50% interest in New Lauderdale, as is presently
contemplated, the Company will no longer account for New Lauderdale's operations
under the equity method of accounting, but

25
<PAGE> 30

instead will treat New Lauderdale as a subsidiary and include its results of
operations on a consolidated basis in the Company's consolidated financial
statements.

Net income increased to $13,092,549 for the year ended November 30, 1995
from $1,422,839 for the prior comparable period, an increase of $11,669,710, or
820%. This increase was primarily due to an increase of $8,064,756 in the
Company's income from operations directly attributable to the growth of the
Company's business, an aggregate increase of $2,860,304 of net income
attributable to the Company's 50% equity interest in New Lauderdale, and a
reduction in interest expense of $424,893. Net income after giving effect to pro
forma income tax provisions would have been $7,679,768 and $642,537 for the
years ended November 30, 1995 and 1994, respectively.

Year Ended November 30, 1994 Compared to Year Ended November 30, 1993

Net revenue for the year ended November 30, 1994 was $22,771,465, an
increase of $14,509,286, or 175.6%, as compared to $8,262,179 for the year ended
November 30, 1993. The increase was attributable to the growth of the Company's
telephone entertainment services. Chargebacks for the year ended November 30,
1994 were $10,841,574, an increase of $8,021,172, or 284.4%, as compared to
$2,820,402 for the year ended November 30, 1993. This increase was primarily
attributable to the growth of the Company's telephone entertainment services.

Cost of sales for the year ended November 30, 1994 were $17,521,985 an
increase of $11,743,279 or 203.2%, as compared to $5,778,706 for the year ended
November 30, 1993. Cost of sales also increased as a percentage of net revenue
from 69.9% to 76.9% during such periods. Such increases were attributable
primarily to an increase in the Company's advertising expenses of approximately
$4,654,000, including $912,000 resulting from the Company's commencement of
television advertising in early 1994 and $3,742,000 resulting from increases in
direct mail expenses, as well as increases in service bureau and live operator
costs of approximately $6,500,000.

Selling, general and administrative expenses increased by $1,211,258, or
67.2%, from 1993 to 1994. Such increase was primarily attributable to increased
personnel and other costs resulting from the Company's increased levels of
operations. Such increase was partially offset by a reduction of approximately
$1,190,000 in management fees paid to a related party.

Interest expense increased by $641,751 in 1994 from 1993, as a result of
increased levels of advances and higher interest rates under the Company's
financing arrangements with service bureaus.

Net income increased to $1,422,839 in 1994 from $714,901 in 1993, an
increase of $707,938, or 99.0%. This increase was primarily attributable to the
increase in net revenue in 1994. Net income after giving effect to pro forma
income tax provisions would have been $642,537 and $380,450 for the years ended
November 1994 and 1993, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company had working capital of $15,382,936 at February 29, 1996. This
significant increase from November 30, 1995 was primarily attributable to net
proceeds of approximately $13,402,000 received from the initial public offering
of its shares of Common Stock.

At November 30, 1995, the Company had working capital of $3,217,627 as
compared to working capital of $494,738 at November 30, 1994. Such increase was
attributable to an increase in accounts receivable and cash, offset in part, by
increases in accounts payable, reserves for customer chargebacks and loans
payable. The Company has historically financed its working capital requirements
principally through cash flow from operations and receivable financing. In
December 1995, the Company received net proceeds of approximately $13,402,000
from an initial public offering of its shares of Common Stock, a portion of
which may also be used for working capital purposes.

Net cash provided by operating activities was $7,717,634 for the year ended
November 30, 1995. The increase in cash provided by operating activities, during
the year ended November 30, 1995, was attributable

26
<PAGE> 31

to net income and an increase in reserve for customer chargebacks, which was
partially offset by equity interest in earnings of joint venture, net of
dividends received and an increase in accounts receivable. Net cash used in
investing activities for the year ended November 30, 1995 was $165,761 and
reflects the Company's investment of $25,000 in New Lauderdale and purchases of
property and equipment. Net cash used in financing activities for the year ended
November 30, 1995 was $4,962,478 and reflects distributions to stockholders of
$7,606,000, which was partially offset by proceeds from accounts receivable
financing arrangements of $2,643,522. At November 30, 1995, the Company had cash
and cash equivalents of $3,570,468.

The Company is dependent upon its "900" number services and fees generated
from its voice-mail network services for substantially all of its revenues and
is subject to the risk that "900" number charges and fees for voice-mail network
services may not be paid by consumers. Regulation in the United States provides
that a consumer's telephone service may not be discontinued for failure to pay
for "900" service or voice-mail fees. In the event of nonpayment by consumers or
the provision of refunds or credits by carriers, the Company is nevertheless
obligated to pay the service bureau engaged for such service, which in turn is
obligated to pay the carrier. The Company maintains a reserve for consumer
chargebacks which was $4,025,130 at November 30, 1995. Such reserve is estimated
based on the amount of historical chargebacks which includes refunds, credits
and uncollectible charges. Due to the Company's limited experience to date in
new "900" markets and voice-mail networks, there can be no assurance that the
Company's reserves will be adequate to cover actual chargebacks. The Company
recognizes revenues net of the provision for consumer chargebacks for "900"
number services and voice-mail network services at the time consumers access
service, subscribe or continue to use such voice-mail services. Since reserves
are established prior to the periods in which chargebacks are ultimately
determined, the Company's revenues may be reduced in later periods in the event
that the Company's reserves prove to be insufficient. Any significant sustained
increase in the level of consumer chargebacks would have a material adverse
effect on the Company's financial condition and results of operations.

The Company has a financing arrangement with West which currently provides
for a $4,000,000 line of credit payable on demand. The line of credit provides
for weekly advances in an amount equal to 50% of a borrowing base, which is
approximately 70% of gross sales from "900" number services accessed during the
prior week. The Company is entitled to receive the balance of amounts due within
thirty days of the end of the month during which service is accessed. Amounts
advanced under the line of credit bear interest at the prime rate plus 3% and
are collateralized by accounts receivable relating to "900" number services. The
financing arrangement with West terminates in May 1996. At November 30, 1995,
$600,000 was outstanding under the line of credit. All outstanding advances
under this credit line were repaid in December 1995 and the Company is not
currently utilizing said facility. West may terminate the line of credit at any
time upon thirty days written notice. The Company renewed its credit line in May
1996, which has extended the availability of such line for an additional year.

The Company also has a financing arrangement with ESBI which currently
provides for a $7,000,000 line of credit. Such arrangement provides for ESBI's
purchase, with full recourse, of the Company's accounts receivable relating to
fees payable for voice-mail network services. Advances under the arrangement
equal approximately 50% of approved accounts and are made within 30 days of
approval by ESBI. The Company receives the balance of amounts due within 90 and
120 days, after deduction of charges, expenses and reserves. Amounts advanced
under the financing arrangement bear interest at the prime rate plus 6% and are
collateralized by accounts receivable relating to fees for voice-mail network
services. At November 30, 1995, $2,043,522 was outstanding under this
arrangement. During the second quarter of the fiscal year ending November 30,
1996, all amounts outstanding under such agreement were reduced to zero. The
financing arrangement with ESBI may be terminated by the Company or ESBI on 30
days written notice.

The Company and its predecessor affiliated companies had elected to be
taxed as S corporations and, accordingly, were not subject to federal income
taxes. Net income, prior to December 5, 1995, had been taxed for federal income
tax purposes directly to the Company's stockholders. For the year ended November
30, 1995, the Company made S corporation distributions to its stockholders in
the aggregate amount of $7,606,000. On December 4, 1995 the Company declared a
final S corporation distribution in the approximate

27
<PAGE> 32

amount of $5,000,000, representing all of its retained earnings in excess of
$575,000, $3,000,000 of which was paid to the Company's stockholders on such
date. Such stockholders were issued promissory notes (the "Stockholder Notes")
in the aggregate principal amount of the remaining portion of such S corporation
distribution, which Stockholder Notes bear interest at the rate of 9% per annum,
and are payable in aggregate minimum monthly payments of principal of $500,000
plus 25% of monthly cash flow in excess of $1,000,000. The Company paid three
installments of the Stockholder Notes in January, February and April 1996, in
the approximate amounts of $585,000, $938,000 and $1,417,000, respectively.
Current estimates of the December 4, 1995 retained earnings have increased the
original estimated S corporation distribution by approximately $1,500,000.
Approximately $675,000 currently remains outstanding under the Stockholder
Notes. Such amount will be retained by the Company until the actual amount of
the final S corporation distribution has been determined by the Company.

The Company's primary cash requirements have been to fund the cost of
advertising and promotion. Other than the purchase of equipment in connection
with the establishment of in-house telemarketing operations and the expansion of
its customer service department, the Company currently has no plans or material
commitments for capital expenditures. The Company anticipates, based on
currently proposed plans and assumptions relating to its operations (including
the substantial costs associated with its proposed advertising and marketing
activities), that projected cash flow from operations and available cash
resources, including its financing arrangements with service bureaus, will be
sufficient to satisfy its anticipated cash requirements for at least the next
twelve months. The Company does not have any long-term obligations and does not
currently intend to incur any such obligations in the future.

28
<PAGE> 33

SELECTED FINANCIAL DATA OF NEW LAUDERDALE

The following table presents selected historical financial data of New
Lauderdale for the three months ended February 29, 1996 and the period from
December 30, 1994 (inception) to November 30, 1995 and is derived from the
financial statements of New Lauderdale appearing elsewhere herein. The financial
data set forth should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations of New Lauderdale" and
the financial statements of New Lauderdale.

Statement of Operations Data:

<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 30, 1994
FEBRUARY 29, 1996 (INCEPTION) TO
(UNAUDITED) NOVEMBER 30, 1995
------------------ -----------------
<S> <C> <C>
Net Revenue....................................... $ 22,246,546 $28,248,093
Cost of Sales..................................... 16,401,484 20,193,763
Gross profits..................................... 5,845,062 8,054,330
Selling, general and administrative expenses...... 905,570 1,879,530
------------------ -----------------
Income from operations............................ 4,939,492 6,174,800
Interest expense.................................. 76,192 136,521
Other income...................................... 19,726 15,274
------------------ -----------------
Income before provision for income taxes.......... 4,883,056 6,053,553
Provision for state income taxes.................. 8,996 332,945
------------------ -----------------
Net income........................................ $ 4,874,060 $ 5,720,608
=================== ==================
</TABLE>

Balance Sheet Data:

<TABLE>
<CAPTION>
FEBRUARY 29, 1996
(UNAUDITED) NOVEMBER 30, 1995
------------------ -----------------
<S> <C> <C>
Working capital................................... $ 3,064,668 $ 2,690,608
Total assets...................................... 20,437,784 11,205,559
Total liabilities................................. 17,373,116 8,514,951
Members' equity................................... 3,064,668 2,690,608
</TABLE>

29
<PAGE> 34

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF NEW LAUDERDALE

OVERVIEW

New Lauderdale was formed in December 1994 under a joint venture agreement
with PRN. The joint venture commenced operations in January 1995 and was
subsequently reorganized as a limited liability company in March 1995 under the
name New Lauderdale, L.C.

New Lauderdale offers entertainment services which are accessed by dialing
"900" telephone numbers that are billed at premium per minute rates. New
Lauderdale recognizes revenues from "900" number services net of chargebacks at
the time service is accessed. New Lauderdale also offers theme related enhanced
voice mail network service products for a monthly fee. New Lauderdale recognizes
revenues from new VM enrollments at the time a prospective member applies for
membership, subject to a two week processing delay, and currently as members
renew each month. New Lauderdale has also entered into an agreement with a
service bureau to finance its VM Product receivables. See "Liquidity and Capital
Resources."

RESULTS OF OPERATIONS

Net revenues for the initial year ended November 30, 1995 was $28,248,093
and for the quarter ended February 29, 1996 was $22,246,546. Net revenue was
attributable to New Lauderdale's enhanced voice mail network service products
and the Company's "900" number entertainment services. For the initial year
ended November 30, 1995, and the quarter ended February 29, 1996, VM Product net
revenues were $7,754,422 or 28%, and $9,756,064 or 44%, respectively, of net
revenues and "900" number entertainment services were $20,493,671, or 72% and
$12,490,482 or 56%, respectively of net revenues. The provision for chargebacks
for the initial year ended November 30, 1995 and for the quarter ended February
29, 1996, was $11,741,854 and $12,853,376, respectively.

Cost of sales for the initial year ended November 30, 1995 and the quarter
ended February 29, 1996 was $20,193,763, or 72% and $16,401,484, or 74%,
respectively, of net revenues. Cost of sales is comprised of service bureau
fees, advertising expenditures for television commercials and infomercials and
telemarketing. The above referenced costs accounted for 95% of the initial year
ended November 30, 1995's cost of sales and 95% of the quarter ended February
29, 1996's cost of sales.

Selling, general and administrative expenses for the initial year ended
November 30, 1995 and the quarter ended February 29, 1996 were $1,879,530 and
$905,570, respectively. The primary components of New Lauderdale's selling,
general and administrative expenses are management fees, office administration
costs and professional fees. The above referenced expenses accounted for 60% of
the year's and 59% of the quarter's selling, general and administrative
expenses.

Interest expense for the initial year ended November 30, 1995 and for the
quarter ended February 29, 1996 was $136,521, and $76,192, respectively, of
which $67,848 and $64,450, respectively, was related to the financing of New
Lauderdale's VM Product receivables and $68,673 and $4,701, respectively, was
related to the New Lauderdale's financing of its "900" number entertainment
receivables.

Net income for the initial year ended November 30, 1995 was $5,720,608 or
20% of net revenue. Net income for the quarter ended February 29, 1996 was
$4,874,060 or 22% of net revenue.

LIQUIDITY AND CAPITAL RESOURCES

New Lauderdale had working capital of $2,690,608 at November 30, 1995 and
$3,064,668 at February 29, 1996. Since inception (December 1994) New Lauderdale
has financed its working capital requirements principally through cash flow from
operations and receivables financing.

New Lauderdale's primary cash requirements have been to fund the cost of
advertising and promotion. Currently, New Lauderdale has no plans or commitments
for capital expenditures. New Lauderdale

30
<PAGE> 35

anticipates, based on currently proposed plans and assumptions relating to its
operations, that projected cash flow from operations and available cash
resources, including its financing arrangements with service bureaus, will be
sufficient to satisfy its anticipated cash requirements for at least the next
twelve months. New Lauderdale does not currently have any long-term obligations
and does not intend to incur any such obligations in the future.

During the quarter ended February 29, 1996, New Lauderdale increased
marketing and experienced high enrollments of new customers which caused New
Lauderdale to experience a high level of acceptance difficulties with its VM
Product. For the quarter ended February 29, 1996, the VM Product accounted for
approximately 44% of New Lauderdale's net revenues. These acceptance
difficulties occurred at two levels, consumer and regional telephone carrier.

At the consumer level, customers did not always relate the VM Product
billing description on their telephone bills to the entertainment service that
they purchased. This prompted an increase in customer service inquiries to both
New Lauderdale and ESBI, the billing service bureau conduit to the regional
telephone carriers and telephone companies, which resulted in a high level of
customer cancellations and chargebacks relating to the $19.95 per month VM
Product during the first quarter of 1996. Management believes that the VM
Product can be successfully modified and repositioned with shifts in emphasis as
part of the marketing process. Moreover, Management anticipates the VM Product
will contribute less than 44% of net revenues during the remainder of the fiscal
year ending November 30, 1996 as the product is modified and repositioned. Such
reduction in VM Product contributions to total net revenues is not expected to
be material for the current fiscal year as these shifts in marketing will also
include strategies that will increase New Lauderdale's "900" business net
revenues, both absolutely and in relation to the VM Product. For the VM Product,
telemarketing efforts during the second quarter have been reduced. New
Lauderdale and ESBI recently expanded their customer service departments to
better educate the consumer about the product. Management believes that such
marketing efforts and changes of New Lauderdale will result in reduced customer
cancellations and chargebacks for the VM Product, however no assurances can be
given that such projections will prove to be accurate.

At the regional telephone carrier level, five of the regional telephone
carriers suspended billing of New Lauderdale's VM Product at different times
during the first and second quarters of 1996. The suspensions were the result of
the carriers' belief that New Lauderdale and ESBI were unable to provide
adequate customer services to VM Product customers in the regions serviced by
the carriers. New Lauderdale did not anticipate the increase in customer service
calls and was not able to adequately handle the increased customer service call
volume. As stated above, both New Lauderdale and ESBI recently expanded their
customer service departments in response to such needs. Four of such five
carriers, in reaching their decision, specifically addressed the VM Product. The
remaining carrier addressed the billing platform that encompasses the VM
Product. New Lauderdale has already resumed billing the VM Product with three of
the carriers that specifically addressed the difficulties associated with the VM
Product. For the carrier that addressed the difficulties associated with the
billing platform, New Lauderdale resumed billing through an alternate platform
with another service bureau. For the four carriers that resumed billings, the
suspensions each lasted under sixty (60) days and did not have a material impact
on New Lauderdale's cash flows and operations.

Management believes that negotiations with the final carrier that suspended
VM Product billings will eventually lead to resumption of such billings on New
Lauderdale's behalf. However, delays in this process will result in lost
revenues to New Lauderdale. During the first quarter of 1996, VM Product net
revenues billed through this carrier approximated 10% of New Lauderdale's total
net revenues. As already discussed, marketing shifts between the VM Product and
"900" business are expected to minimize the impact of this carrier's suspension.
Though the full amount of the impact is presently not known, the impact on net
revenues and profits is expected to be less than 5% of such amounts for New
Lauderdale's fiscal year ending November 30, 1996. However, no assurance can be
given that such projections will prove to be accurate.

The VM Product is independent of New Lauderdale's "900" number
entertainment services and these difficulties do not impact the "900" number
portion of New Lauderdale's business. The carrier billing suspensions of the VM
Product are also limited to the geographic regions serviced by the individual
carriers.

31
<PAGE> 36

SELECTED PRO FORMA FINANCIAL DATA

The following table presents selected unaudited consolidated financial data
of Quintel Entertainment, Inc. and subsidiaries and of New Lauderdale, L.C., for
the three months ended February 29, 1996 and for the year ended November 30,
1995 and is derived from the pro forma Consolidated Financial Statements
appearing elsewhere herein. The financial data set forth should be read in
conjunction with the selected pro forma financial data and related notes to the
unaudited pro forma financial information, also included elsewhere herein.

Pro Forma Condensed Consolidated Balance Sheet

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FEBRUARY 29,
1996
(UNAUDITED)
---------------
<S> <C>
Pro Forma Working Capital.......................................... $16,915,270
Pro Forma Total Assets............................................. 76,448,113
Pro Forma Total Liabilities........................................ 36,503,908
Pro Forma Stockholders' Equity..................................... 39,944,205
</TABLE>

Pro Forma Condensed Consolidated Statement of Operations

<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
FEBRUARY 29, NOVEMBER 30,
1996 1995
(UNAUDITED) (UNAUDITED)
--------------- --------------
<S> <C> <C>
Pro forma Net Revenue....................................... $38,265,117 $ 78,749,359
Pro forma Net Income........................................ 3,843,655 8,594,653
</TABLE>

32
<PAGE> 37

INFORMATION REGARDING THE COMPANY AND NEW LAUDERDALE

INTRODUCTION

The Company is engaged in developing and marketing telephone entertainment
services, consisting primarily of live conversation and pre-recorded horoscopes
and tarot card readings and live psychic consultations. The Company also offers
enhanced voice-mail services which include various psychic, "personals" and
other theme-related entertainment services.

MARKET OVERVIEW

The premium billed telephone entertainment services industry emerged during
the late 1980's as an information service designed to increase telephone usage.
Early information services developed by regional carriers consisted primarily of
weather and time announcements. Business enterprises known as "information
providers" soon developed and commercialized additional information and
entertainment services, which were marketed directly to consumers at premium
rates. Entertainment services were initially transmitted exclusively by carriers
in regional markets. By 1989, long distance carriers commenced providing such
services, permitting information providers to expand their potential markets and
customer base nationally and internationally.

Markets for telephone entertainment and information services have grown
steadily in recent years. According to Telemedia News and Views, an industry
publication, revenues from "900" number entertainment and information services
in the United States increased from approximately $590 million in 1993 to
approximately $670 million in 1994, and are expected to reach approximately $1.4
billion by 2000. Since inception, the Company has sought to capitalize on
opportunities arising from these expanding markets, focusing its efforts
primarily on developing and expanding its psychic and astrology related
entertainment services, a fast-growing segment of the industry. As a result of
such efforts, the Company has achieved increasing levels of revenues and
profitability.

TELEPHONE ENTERTAINMENT SERVICES

The Company's telephone entertainment services are accessed by dialing
"900" telephone numbers that are billed at premium per-minute rates.
Entertainment services consist primarily of live conversation and pre-recorded
horoscopes and tarot card readings and live psychic consultations designed to
capitalize on the current popularity of "new age" themes. "New age" refers to
astrological and psychic phenomena which can be explained through the use of
horoscopes, tarot card and psychic readings and prognostications. The Company
currently markets approximately twenty "900" number entertainment services, each
offering programs with distinct features. For the years ended November 30, 1995
and 1994, the Company's telephone entertainment services accounted for
approximately 57% and 99%, respectively, of the Company's net revenues. For the
quarters ended February 29, 1996 and February 28, 1995, the Company's telephone
entertainment services accounted for approximately 55% and 57% respectively of
the Company's net revenues.

The Company's live psychic entertainment services permit callers to engage
in live one-on-one conversations with psychic operators and to receive
personalized information responsive to the caller's requests. The Company also
provides live tarot card entertainment services which permit callers to receive
a live tarot card reading. The Company's live conversation "900" entertainment
services are currently billed at a rate of either $3.49 or $3.99 per minute
depending on the service; provided, however, that the first two to three minutes
of some calls to such live conversation lines are provided to the customer
without charge. For the year ended November 30, 1995, the Company's live
conversation "900" entertainment services accounted for approximately 45% of the
Company's net revenues. This percentage relationship remained unchanged for the
quarter ended February 29, 1996.

Psychic Readers Network, Inc. ("PRN"), an unaffiliated company which owns a
50% interest in New Lauderdale L.C. ("New Lauderdale"), a Florida limited
liability company, of which the Company owns the remaining 50% interest,
currently provides the Company with substantially all of its psychic operators
and monitors and supervises the quality of independent psychic operators
provided to the Company. The Company

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pays PRN a per minute fee based on caller connection time. For the years ended
November 30, 1995 and 1994, the Company paid aggregate fees of approximately
$3,993,000 and $186,000, respectively, to PRN for such services. For the quarter
ended February 29, 1996, approximately $1,800,000 was incurred for such
services.

The Company offers several pre-recorded entertainment services, including
horoscopes, tarot card readings and numerology services. Some of such services
contain interactive features which permit callers to access a variety of
services by responding to prerecorded messages, such as prompts for birthdates.
The Company's pre-recorded "900" entertainment services are currently billed at
rates up to $3.99 per minute; provided, however, that the first two to three
minutes of some calls to such pre-recorded programs are provided to the customer
without charge. For the year ended November 30, 1995, the Company's pre-recorded
entertainment services accounted for approximately 13% of the Company's net
revenues. This percentage relationship remained unchanged for the quarter ended
February 29, 1996.

The Company solicits consumers for its "900" number services by providing
access to toll-free "800" numbers for subjects of general interest and as an
introduction to the Company's "900" services. The Company's entertainment
services are available by calling designated "900" numbers from any telephone,
provided that "900 blocking" has not been ordered or imposed for such services
from such telephone. The Company's per-minute rates on telephone services are
subject to applicable limitations imposed by carriers, including the limitation
currently imposed by AT&T, the Company's primary long distance carrier, of $10
per minute.

ENHANCED VOICE-MAIL NETWORK SERVICES

The Company also currently offers enhanced voice-mail services which
provide customers with a network of theme-related entertainment services. The
Company currently offers voice-mail networks which include astrological and
psychic related entertainment services. These services, which include a variety
of live and pre-recorded programs, newsletters and gifts are made available to
each subscriber with his or her subscription to the Company's enhanced
voice-mail network. For a monthly fee, subscribers are assigned personal voice
mailboxes which can be used to communicate with other subscribers, friends and
family, as well as receive information pertaining to network services. Voice
mailboxes are accessed by dialing designated "500" numbers at an average price
of $1.00 per call or "800" numbers which are toll-free. Fees are billed on a
monthly basis by regional carriers on the subscribers' telephone statements.
Approximately 180,000 persons are currently participating in the Company's
voice-mail networks. For the years ended November 30, 1995 and 1994, club
membership and voice-mail network fees accounted for approximately 43% and 1%,
respectively, of the Company's net revenues. For the quarters ended February 29,
1996 and February 28, 1995, club membership fees for voice mail network services
accounted for approximately 45% and 43% respectively, of the Company's net
revenues.

From August 1994 until late 1995, the Company offered entertainment
services similar to those provided with its voice-mail services in a membership
club format, pursuant to which members were enrolled in theme-related membership
clubs and billed monthly for the term of their membership. Enrollment in the
Company's membership clubs increased significantly since their inception in
August 1994. As a result of such increase, consumer complaints have also
increased, causing certain regional and local telephone carriers to terminate
billings under the membership club format. In response to actions by such
carriers, the Company repositioned the marketing of its membership club services
and has replaced such membership clubs with its VM Product. The Company also
continues to explore new billing platforms for its entertainment services in
order to assure continued acceptance by telephone carriers in the future. In
addition, the Company has taken several steps to expand its customer service
operations. The Company additionally has outsourced the majority of its customer
service operations.

INCREASED CHARGEBACKS AND REGIONAL TELEPHONE CARRIER MATTERS

During the quarter ended February 29, 1996, the Company increased marketing
and experienced high enrollments of new customers which caused the Company to
experience a high level of acceptance difficulties

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with its VM Product. For the quarter ended February 29, 1996, the VM Product
accounted for approximately 45% of the Company's net revenues. These acceptance
difficulties occurred at two levels, consumer and regional telephone carrier.

At the consumer level, customers did not always relate the VM Product
billing description on their telephone bills to the entertainment service that
they purchased. This prompted an increase in customer service inquiries to both
the Company and ESBI, the billing service bureau conduit to the regional
telephone carriers and telephone companies, which resulted in a high level of
customer cancellations and chargebacks relating to the Company's $19.95 per
month VM Product during the first quarter of 1996. Management believes that its
VM Product can be successfully modified and repositioned with shifts in emphasis
as part of the marketing process. Moreover, the Company anticipates the VM
Product will contribute less than 45% of net revenues during the remainder of
the fiscal year ending November 30, 1996 as the product is modified and
repositioned. Such reduction in VM Product contributions to total net revenues
is not expected to be material for the current fiscal year as these shifts in
marketing will also include strategies that will increase the Company's "900"
business net revenues, both absolutely and in relation to the VM Product. For
the VM Product, telemarketing efforts during the second quarter have been
reduced. The Company and ESBI recently expanded their customer service
departments to better educate the consumer about the product. The Company
believes that such marketing efforts and changes will result in reduced customer
cancellations and chargebacks for the VM Product, however no assurances can be
given that such projections will prove to be accurate.

At the regional telephone carrier level, five of the regional telephone
carriers suspended billing of the Company's VM Product at different times during
the first and second quarters of 1996. The suspensions were the result of the
carriers' belief that the Company and ESBI were unable to provide adequate
customer services to VM Product customers in the regions serviced by the
carriers. The Company did not anticipate the increase in customer service calls
and was not able to adequately handle the increased customer service call
volume. As stated above, both the Company and ESBI recently expanded their
customer service departments in response to such needs. Four of such five
carriers, in reaching their decision, specifically addressed the VM Product. The
remaining carrier addressed to the billing platform that encompasses the
Company's VM Product. The Company has already resumed billing the VM Product
with three of the carriers that specifically addressed the difficulties
associated with the VM Product. For the carrier that addressed the difficulties
associated with the billing platform, the Company resumed billing through an
alternate platform with another service bureau. For the four carriers that
resumed billings, the suspensions each lasted under sixty (60) days and did not
have a material impact on the Company's cash flows and operations.

The Company's first membership club, the Astrological Society of America,
("ASA"), which was introduced in August 1994, ceased marketing to new members in
late 1995, and was replaced by the Psychic Enrichment Network ("PEN"), an
alternative voice-mail network, which was an expanded and updated version of
ASA. ASA members, who are now also provided with and billed for the Company's
voice-mail services, are billed at a monthly rate of $9.95. For such monthly
fee, members received a kit consisting of tarot cards and a newsletter, upon
enrollment, and a monthly three-minute live psychic reading. ASA members are

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also given access to designated "900" number entertainment services at special
rates. Use of such "900" number entertainment services by members generates
additional net revenues for the Company.

PEN provides approximately 200,000 current subscribers with voice-mail
services and astrological and psychic related entertainment services for a
monthly fee of $19.95. Subscribers receive unlimited access to pre-recorded and
interactive programs, which are accessed by calling designated "500" and "800"
numbers. PEN subscribers received, upon joining the network, a personal stereo
headset cassette player and inspirational tape, at no additional charge, and a
monthly five-minute live psychic reading. Unlike ASA, PEN subscribers do not
receive access to special "900" number entertainment services.

NEW LAUDERDALE

In March 1995, the Company and PRN formed New Lauderdale L.C., a Florida
limited liability company, the successor to a joint venture established in
December 1994, for the purpose of creating, developing and marketing
theme-related membership clubs and related telephone entertainment services.
Pursuant to the terms of the agreement governing the operations of New
Lauderdale, each of PRN and the Company are entitled to share equally in profits
and losses from New Lauderdale's telephone entertainment services and voice-mail
subscriber fees. The agreement provides for the Company and PRN to furnish their
respective services to New Lauderdale at cost, and for New Lauderdale to pay to
each of the Company and PRN a monthly management fee of $50,000. Such monthly
management fee was discontinued in February 1996, although such services
currently continue to be rendered to New Lauderdale. Under the agreement, PRN is
responsible for providing psychic operators, creating and producing commercials
and purchasing television media time. The Company is responsible for developing,
implementing and managing marketing strategies, pre-recorded program content and
database operations, as well as creating and producing infomercials and
commercials and managing billing and collections.

The Company and PRN each contributed $25,000 to the capital of New
Lauderdale upon its formation. The Company and PRN agreed that either party may
elect at any time to cause a distribution in an amount up to 80% of New
Lauderdale's net cash. The agreement provides that the Company and PRN and their
respective affiliates may engage in other activities, whether or not such
activities are competitive with New Lauderdale or each other. The Company and
PRN have also agreed that in the event either party elects not to fund its
portion of advertising for a particular service, membership club or voice-mail
network, the other party shall have the right to pursue such opportunity
independently. PRN is also engaged in the business of providing live psychic and
other telephone entertainment services and is a direct competitor of the
Company. See "Competition."

To date, New Lauderdale has introduced two membership clubs and four
voice-mail networks. Both of such membership clubs were modified to voice-mail
networks in late 1995. The services provided pursuant to such networks are
similar to those provided pursuant to the Company's voice-mail services. New
Lauderdale's first membership club, the Philip Michael Thomas Membership
Club("PMT"), which was introduced in January 1995, ceased marketing to new
members in late 1995, and was replaced by the Joyce Jillson Psychic Astrology
Network, a new voice-mail network, which is an expanded and updated version of
PMT. In June 1995, New Lauderdale introduced La Sociedad Astrologica de America,
a Spanish language version of ASA ("La Sociedad Astrologica") designed to appeal
to the Hispanic population, which currently has approximately 6,000 subscribers.
Although each of these services was initially offered for a monthly fee of
$9.95, new La Sociedad Astrologica subscribers were accepted pursuant to the new
format (i.e., voice mail without special "900" number entertainment services)
for a fee of $19.95 per month.

In October 1995, New Lauderdale introduced the Joyce Jillson Psychic
Astrology Network, featuring Joyce Jillson, a nationally syndicated columnist
and author of books on the subject of astrology, which currently has
approximately 136,000 subscribers. Such network is offered to subscribers at
$19.95 per month.

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New Lauderdale also introduced the Perfect Match Network in late 1995, a
personals and dating network, which currently has approximately 6,000
subscribers. Such network is offered to subscribers at $19.95 per month.
Subscribers are able to leave "personals ads" on the voice-mail network and to
retrieve "personals ads" submitted by other subscribers. In addition, New
Lauderdale is continuing to test a diet network.

Subscribers to all of New Lauderdale's voice-mail networks receive
unlimited access to several pre-recorded and interactive programs, which are
accessed by calling designated "500" and "800" numbers, in addition to various
gifts.

For the year ended November 30, 1995, income from New Lauderdale's
operations accounted for approximately 21% of the Company's income before
provision for income taxes, substantially all of which was derived from Philip
Michael Thomas Membership Club fees and revenues from "900" numbers.

For the quarter ended February 29, 1996, income from New Lauderdale's
operations accounted for approximately 62% of the Company's income before
provision for income taxes.

ADVERTISING, MARKETING, AND PROMOTION

Strategy

The Company intends to actively pursue a strategy of growth by expanding
its "900" entertainment service consumer markets, primarily through the use of
telemarketing, direct mail, print advertising, and infomercials and other
television advertising. Consistent with its aggressive growth strategy, the
Company intends to produce, in 1996, at least one 30-minute infomercial and up
to ten commercials, expand its telemarketing activities, increase its levels of
syndicated television advertising, and expand its direct mail marketing
programs.

Media Advertising and Promotion

The Company focuses its efforts on direct response marketing which is
designed to capture the highest percentage of calls and maximize revenues. The
Company's principal direct marketing methods include the use of television
infomercials and commercials featuring celebrity endorsements designed to
achieve a high level of consumer awareness and appeal. The Company believes that
consumer awareness and demand for telephone entertainment services has been
increasing due principally to the use of television commercials and
infomercials. Infomercials typically feature in-depth interviews and information
designed to motivate viewers to place telephone calls to access the Company's
services. Infomercials generally take approximately six weeks to write and
produce, and the Company's production costs generally range from approximately
$250,000 to $300,000. The Company's ability to efficiently produce and air an
infomercial is essential to its marketing strategy.

To date, the Company has produced two infomercials. New Lauderdale has
produced two infomercials, one of which stars Philip Michael Thomas, first aired
in June 1995, which was designed to promote the Company's club membership
concept. These infomercials feature programs intended to encourage viewers to
call the Company's "900" numbers to access live psychic operators or
astrology-related information.

The Company has created and produced twenty commercials in connection with
the promotion of "900" number services, its membership clubs and voice-mail
network services. New Lauderdale has created and produced 31 commercials
principally in connection with the promotion of "900" number services,
membership clubs and voice-mail services. The Company and New Lauderdale have
also jointly created and produced 26 commercials. CTM, an affiliate of PRN, has
created and produced a significant portion of the Company's commercials and
provides such services to New Lauderdale. In connection with its production
services, the Company has agreed to pay to CTM $10,000 per month in
consideration of such services and between $4,000 and $12,000 per month for
media purchases related to the Company's voice-mail services. In January 1996,
pursuant to an agreement between the Company, PRN and CTM, all of CTM's creative
and production personnel (approximately 35 persons) terminated their employment
with CTM and commenced full-time employment with New Lauderdale. As a result,
all production services previously provided to the Company by CTM are currently
rendered by New Lauderdale. Such services are performed on terms and at costs no
less

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favorable than those previously provided by CTM. New Lauderdale has also agreed
to provide similar production services to PRN on the same terms applicable to
the Company until terminated by mutual agreement of the parties.

The Company has increasingly emphasized the marketing and promotion of its
"900" number services through celebrity endorsements. The Company and New
Lauderdale actively seek to engage celebrity hosts to promote and advertise new
telephone entertainment services. The Company has engaged the services of Dennis
Rodman, a National Basketball Association star and Rhonda Shear, a television
entertainer, to promote the Company's telephone entertainment and voice-mail
services. New Lauderdale has also entered into agreements with celebrities
including Philip Michael Thomas, Joyce Jillson, Catherine Oxenberg, a model and
star of the 1980s television series Dynasty, Billy Dee Williams, a television
and film actor, and Fernando Allende, a Latin American television actor, to
appear in commercials promoting New Lauderdale's various telephone entertainment
and voice-mail services. Agreements with celebrities are generally for a term of
one year, which may be extended under certain circumstances, and grant worldwide
rights to use an individual's name and likeness in connection with services
promoted by commercials. Compensation varies by individual and generally
consists of an advance payment and royalties for each minute of "900" number
calls or a percentage of monthly voice-mail subscription fees.

The Company believes that the quality of media time purchased by the
Company is a critical element in a successful direct marketing effort.
Accordingly, the Company seeks to purchase blocks of quality broadcast and cable
television media in order to assure meaningful coverage of its infomercials and
commercials in selected time slots and geographic markets, through
media-purchasing agencies. The Company has an arrangement with DM Media
Management ("DM") pursuant to which DM purchases syndicated advertising time for
the Company nationally. For the year ended November 30, 1995, the Company
incurred fees of approximately $200,000 for DM's services. The Company has also
entered into an agreement with CTM to purchase a portion of the Company's local
media time in geographic regions throughout the United States. For the year
ended November 30, 1995, the Company incurred fees of approximately $84,000 for
CTM's services. In January 1996, New Lauderdale acquired the media business
operated by CTM, including all media contracts and other arrangements, as well
as all of CTM's employees. Until the date the Company acquires PRN's 50%
interest in New Lauderdale, if such acquisition is consummated, New Lauderdale
has agreed to provide such media buying services to the Company on terms and at
costs no less favorable than those previously provided by CTM to the Company.
New Lauderdale has also agreed to furnish such services to PRN on the same terms
applicable to the Company until terminated by the mutual agreement of the
parties.

Telemarketing

The Company currently retains West Interactive, Inc. ("West"), to perform
inbound telemarketing activities. West provides an aggregate of between 100 and
1,000 telephone operators on an ongoing basis, depending upon the Company's
planned marketing efforts, to respond to incoming telephone calls from viewers
of the Company's infomercials and commercials who are interested in subscribing
to the Company's voice-mail networks or are inquiring about such networks. The
Company pays an average of $4.50 per subscription for each live order in
connection with such services. The Company believes that an integral part of
inbound telemarketing is the opportunity to increase revenues by offering or
introducing additional or selected services, such as "900" number services, with
a voice-mail subscription.

The Company currently engages West Telemarketing Outbound, Inc. ("West
Outbound"), National Market Share, Inc., JDR Marketing ("JDR"), and Optima
Direct, Inc. to perform substantially all outbound telemarketing activities. The
Company utilizes outbound telemarketing on a regular basis to promote its
telephone entertainment services and voice-mail networks. These agencies provide
an aggregate of between 50 and 200 telephone operators on an ongoing basis,
depending upon the Company's current marketing efforts, to place telephone calls
to prospective customers using consumer information and data obtained from the
Company's inbound telemarketing activities and mailing lists. The Company pays
such agencies an average of $27 per hour for each operator. The Company also
intends to establish its own in-house telemarketing capabilities. The Company
believes that establishing such capabilities will allow it to increase call
volume and reduce costs relating to telemarketing activities, thereby maximizing
efficiency and revenues.

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Direct Mail and Print Advertising

The Company also engages in direct mail and print advertising campaigns
designed to promote entertainment services, consisting of notifications,
promotions, periodicals and subscription kits. The Company has, in the past,
engaged advertising agencies, principally Jami Direct, Inc., an affiliate of the
Company, to create and design print ads, direct mailings, newsletters and other
communications with subscribers. Since July 1995, the Company has performed such
creative activities in-house.

LIST RENTALS

The Company also rents its mailing lists to third parties through Jami
Marketing Services, Inc. ("Jami Marketing"), an affiliate of the Company.
Pursuant to a list management agreement, dated June 1, 1993, between the Company
and Jami Marketing, Jami Marketing serves as exclusive manager in connection
with renting the Company's mailing list. The Company pays to Jami Marketing a
management fee equal to 10% of rental revenue to manage its list, plus fees in
connection with processing the mailing list. Revenues from mailing list rentals
have not been material to date.

SERVICE BUREAUS

The Company has engaged West and ESBI as the primary vendors to provide
billing and collection services and accounts receivable financing in connection
with the Company's "900" number services and voice-mail networks. In addition,
West provides other services, including call processing, in-bound telemarketing
and production of pre-recorded programs. The Company is dependent upon West and
ESBI to provide quality services on a timely basis and on favorable terms.
Failure by West or ESBI to provide such services could result in material
interruptions in the Company's operations.

COMPETITION

The Company faces intense competition in the marketing of its telephone
entertainment services and voice-mail networks. The Company competes primarily
on the basis of media placements on television and through direct mail
solicitations for similar "new age" services and network themes. The Company's
telephone entertainment services and voice-mail networks compete for consumer
recognition with services which have achieved significant, national, regional
and local consumer loyalty. Many of these entertainment services are marketed by
companies which are well-established, have reputations for success in the
development and marketing of services, have extensive experience in creating and
producing infomercials and commercials featuring high profile celebrities, and
may have significantly greater financial, marketing, distribution, personnel and
other resources than the Company. These financial and other capabilities permit
such companies to implement extensive advertising and promotional campaigns,
both generally and in response to efforts by additional competitors to enter
into new markets and introduce new services.

Certain of these competitors, including Inphomation Inc. and Gold Coast
Media, dominate the industry and have the financial resources to enable them to
withstand substantial price competition, which is expected to increase.
Inphomation Inc. is the operator of "Psychic Friends Network," a highly
successful "900" telephone entertainment service marketed through frequently
broadcast infomercials and commercials featuring Dionne Warwick, as well as
other "900" number services. Gold Coast Media is also the operator of a highly
successful "900" number psychic related telephone entertainment service marketed
through infomercials and commercials featuring Kenny Kingston. Also, PRN is
primarily engaged in the business of providing live psychic and other telephone
entertainment services and is a direct competitor of the Company.

In addition, because the telephone entertainment services industry has no
substantial barriers to entry, competition from smaller competitors in the
Company's target markets and from direct response marketing companies not
currently offering telephone entertainment services and services similar to the
Company's voice-mail network services are also expected to continue to increase
significantly. The Company expects that direct marketing companies that have
developed or are developing new marketing strategies, as well as other companies
that have the expertise that would encourage them to seek to develop direct
marketing capabilities, may attempt to enter the telephone entertainment
services industry or develop voice-mail services similar

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those provided by the Company's voice-mail networks, which would compete with
the Company's services. The Company is also aware of other companies that have
developed and introduced or are developing "900" number programs with a concept
similar to the Company's voice-mail networks, certain of which are psychic
related. It is also possible for a small company to introduce a service or
program with limited financial and other resources through the use of
third-party agencies. Any such company having the potential for success may
achieve rapid and significant growth as a result of the success of a single
infomercial.

The Company's services and networks also compete with numerous other
services and products which provide similar entertainment value, such as
in-person psychic consultation and tarot card readings, newspapers, magazines,
books and audio and video cassettes featuring "new age" themes, on-line computer
programs and various other forms of entertainment which may be less expensive or
provide other advantages to consumers.

INSURANCE

The Company may be subject to substantial liability as a result of claims
made by consumers arising out of services provided by the Company's independent
contractors and employees. The Company is aware that claims have been made
against other companies engaged in providing telephone entertainment services on
the basis of advice or prognostications disseminated through such services. The
Company and New Lauderdale each currently maintain a general liability insurance
policy that is subject to a per occurrence limit of $1,000,000, with a
$2,000,000 aggregate limit and an umbrella policy covering an additional
$3,000,000 of liability. In addition, the Company and New Lauderdale each have
errors and omissions insurance with limits of $2,000,000. Such insurance may not
be sufficient to cover all potential future claims and additional insurance may
not be available in the future at reasonable costs. The Company seeks to limit
any such potential liability by providing disclaimers in connection with its
services and regards its "900" services and the services provided pursuant to
its voice-mail networks as "entertainment."

GOVERNMENT REGULATION

The telephone entertainment services industry is subject to extensive,
stringent and frequently changing federal, state and local laws and substantial
regulation under these laws by governmental agencies, including the Federal
Communications Commission ("FCC"), the Federal Trade Commission ("FTC"), the
Department of Justice, the United States Postal Service, various state Attorneys
General and state and local consumer protection agencies. Regulations applicable
to carriers and providers of telephone entertainment services are interpreted
and enforced by regulatory authorities with broad discretion and impose
significant compliance burdens and risks on the Company.

The FCC regulates carriers that transmit calls and bill and collect
charges, as well as the broadcast and cable television industry, including
networks and stations that carry the Company's infomercials and commercials. The
FTC, which is the regulatory authority with primary jurisdiction over the
advertising of "900" number services, is responsible for enforcing various
federal laws intended to protect consumers against deceptive trade practices,
and false and misleading advertising, and has promulgated regulations governing,
among other things, advertising disclosures for telephone entertainment
services. In response to substantial complaints by consumers regarding
fraudulent telemarketing activities, the FTC has recently enacted additional
regulations governing telemarketing activities which, among other things, impose
various mandatory disclosure requirements on inbound and outbound telemarketing
calls, prohibit the telemarketer from making false representations, and prohibit
certain deceptive and abusive telemarketing acts and practices. Such regulations
also restrict telemarketing calls from being placed between 9:00 p.m. and 8:00
a.m. without the prior consent of the person being called. The FTC can impose
substantial penalties for fraudulent telemarketing activities and, require the
telemarketer to disclose the product or service being offered, the cost of such
product or service, any restrictions that may apply before asking for a credit
card or bank information and, if there is a no refund policy, to disclose such
policy. In addition, the FTC has empowered state Attorneys General to seek
injunctions in federal courts for fraudulent telemarketing activities. The
Department of Justice and the United States Postal Service also enforce various
federal laws intended to prevent the use of wires or mail for fraudulent or
deceptive purposes.

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The principal federal regulation governing pay-per-call operations is the
Telephone Disclosure and Dispute Resolution Act of 1992 ("TDDRA"). Among other
things, TDDRA provides guidelines with respect to pricing and marketing of
telephone entertainment services, including services offered through "800" and
"900" numbers. The recently enacted Telecommunications Act of 1996 (the "TCA")
amends TDDRA by requiring that billing authorization for pay-per-call "800"
number services be in writing and specifically requires: disclosure to consumers
of pricing information, disclosure of information relating to the provider, a
provider's agreement to notify the customer of changes in billing rates in
advance, disclosure of customer payment options, and the customer's signature to
create an obligation to pay for such "800" number services. The Company utilizes
toll-free "800" numbers in connection with the marketing of voice-mail services
and consumer solicitation. Management believes that the new requirements set
forth in the provisions of the TCA are not applicable to the Company's
operations, based on its belief that its "800" number services are not pay-
per-call services, as such term is defined under TDDRA, as amended by the TCA.
Pursuant to the TCA, the FTC is empowered to adopt rules that expand the
definition of pay-per-call to encompass additional services. The FTC is
currently expected to initiate a rule-making concerning the definition, as well
as other pay-per-call reforms later this year. There can be no assurance that
federal or state governmental agencies will not interpret the existing
provisions of the TDDRA, or that the FTC will not revise the definition of
pay-per-call in a manner which would make it applicable to the Company's "800"
number services, in which event, the Company may be required to materially
change the method in which it markets certain of its entertainment services.
Compliance with such requirements, if determined to be applicable, could have a
material adverse effect on the Company's business.

The Company's operations in Canada are also subject to Canadian regulations
governing "900" number services and consumer protection regulations which govern
advertising and other business activities.

All of the Company's entertainment services and advertisements are reviewed
by the Company's regulatory counsel, and management believes that the Company is
in substantial compliance with all material federal and state laws and
regulations governing its provision of "500," "800" and "900" number
entertainment services, all of its billing and collection practices and the
advertising of its services and has obtained or is in the process of obtaining
all licenses and permits necessary to engage in telemarketing activities.
Although the Company from time to time receives requests for information from,
or is forwarded consumer complaints by, regulatory authorities, the Company has
not been subject to any enforcement actions by any regulatory authority.
Nevertheless, civil investigative demands have been received from the Attorneys'
General of the States of Idaho. Missouri, Pennsylvania and Texas, as well as
from the Tennessee Public Service Commission, seeking certain information
relating to the Company. Certain information relating to the Company's programs
also has been subpoenaed by the Attorney General of the State of Texas from West
Outbound and from the Attorneys' General of the States of Texas and Idaho from
ESBI. The Company believes that the information has been sought as part of
pending investigations in connection with certain of the Company's marketing
activities. The Pennsylvania Attorney General's investigation has concluded with
issuance of a warning letter to the Company. While management believes that
these other investigations will not result in enforcement actions or claims
which would have a material adverse effect on the Company, there can be no
assurance that this will be the case. Amendments to or interpretations and
enforcement of existing statutes and regulations, adoption of new statutes and
regulations and the Company's expansion into new jurisdictions and "900" number
services could require the Company to continually alter methods of operations,
modify the content or use of its services or the manner in which it markets it
services, which could result in material interruptions in its operations.
Failure to comply with applicable laws and regulations could subject the Company
to civil remedies, including substantial fines, penalties and injunctions, as
well as possible criminal sanctions, which could have a material adverse effect
on the Company.

EMPLOYEES

The Company currently employs 38 full-time employees, including five
executive officers and 20 part-time employees, primarily employed in customer
service, all of which are located at the Company's principal executive offices
in Pearl River, New York. The Company believes that its relations with its
employees are satisfactory. None of the Company's employees are represented by a
union.

41
<PAGE> 46

PROPERTIES

The Company leases approximately 6,000 square feet of space at One Blue
Hill Plaza, Pearl River, New York, all of which is currently used for the
Company's principal executive offices. The lease for such premises expires on
April 30, 2005. The current monthly base rent is $7,562.50, which amount will be
increased to $8,937.50 per month commencing on May 1, 1997, and further
increased to $9,854.17 per month commencing on May 1, 2000, for the remainder of
the term of the lease. The Company recently entered into a new ten-year lease
for 15,000 square feet of space in the same building to replace its existing
lease. Such lease provides for a monthly base rent of $11,875 for the initial 15
months, which amount will be increased to $21,875 per month for the next 45
months, and further increased to $26,875 per month for the remainder of the term
of such lease. The Company intends to move into the new space by the third
quarter of 1996.

LEGAL PROCEEDINGS

In October 1995, ESBI was served with a notice of violation under
California's Consumer Legal Remedies Act by an individual acting in her own
right and for others similarly situated, relating to certain billing practices,
including ESBI's alleged billing for one of the Company's "800" numbers which
the Company allegedly advertised to consumers as a free call. Such notice
demands that the class of claimants represented therein be compensated for
violations of such consumer laws.

On April 2, 1996, a complaint was filed in the Superior Court of
California, County of Los Angeles, which seeks class action certification
pursuant to California Civil Code sec. 1770, et. sec., on behalf of all
consumers alleged to have been damaged by billings for services advertised as
free. The complaint seeks injunctive relief, general damages and punitive
damages arising from alleged fraudulent and misleading advertising practices.
ESBI has not been formally served with the complaint. While the Company has not
been named as a party in the complaint, certain of the allegations raised in the
complaint pertain to services of the Company billed by ESBI. Management believes
that such claims are without merit and will not have a material impact on the
Company. ESBI has sought indemnification from the Company pursuant to the terms
of the billing agreement. Accordingly, the Company has notified its insurance
carrier of the potential claims.

The Company has been advised that a claim was asserted on or about February
7, 1996 against New Lauderdale and certain other defendants by Gold Coast Media,
Inc. ("Gold Coast"), one of the Company's competitors. Gold Coast seeks to
enforce an alleged non-competition agreement with a former employee, has
asserted a claim for tortious interference against New Lauderdale and the other
named corporate defendants, and seeks unspecified monetary damages. Although the
Company is not a named defendant in this action, it is possible that Gold Coast
could, in the future, amend its complaint to add the Company as a defendant. New
Lauderdale has advised the Company that it believes such claim is without merit
and will not have a material impact on New Lauderdale.

42
<PAGE> 47

FINANCIAL STATEMENTS

AND

RELATED SCHEDULES

F-1
<PAGE> 48

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Quintel Entertainment, Inc.:

We have audited the accompanying consolidated balance sheets of Quintel
Entertainment, Inc. and Subsidiaries (the "Company"), as more fully described in
Note 1, as of November 30, 1995 and 1994 and the related consolidated statements
of income, shareholders' equity and cash flows for each of the years in the
three year period ended November 30, 1995. Our audits also included the
financial statement schedule included in the index of Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Quintel
Entertainment, Inc. and Subsidiaries as of November 30, 1995 and 1994 and the
consolidated results of their operations and their cash flows for each of the
years in the three year period ended November 30, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

COOPERS & LYBRAND L.L.P.

Melville, New York
February 19, 1996.

F-2
<PAGE> 49

[COOPERS & LYBRAND LETTERHEAD]

To the Board of Directors of
Quintel Entertainment, Inc.

We have read a copy of your preliminary information statement filed under
Section 14C dated June 20, 1996 and we are prepared to permit the use therein of
our report dated February 19, 1996 with respect to the following financial
statements:

- - Consolidated Financial Statements of Quintel Entertainment, Inc. as of
November 30, 1995 and 1994, and for the three years in the period ended
November 30, 1995.

- - New Lauderdale L.C. as of November 30, 1995 and for the period December 31,
1994 (inception date) to November 30, 1995.

It should be understood that our reading of the aforementioned proxy
material was not for the purpose of expressing any opinion on the completeness
or adequacy of the textual disclosures therein, and this letter should not be
relied on for that purpose.

A copy of this letter may be furnished to the Securities and Exchange
Commission, pursuant to the provisions of Securities Exchange Act Release No.
8881.

COOPERS & LYBRAND LLP

Melville, New York
June 21, 1996.

F-3
<PAGE> 50

QUINTEL ENTERTAINMENT, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993

F-4
<PAGE> 51

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Report of Independent Accountants............................................... F-6
Consolidated Balance Sheets as of November 30, 1995 and 1994.................... F-7
Consolidated Statements of Income for the years ended November 30, 1995, 1994 F-8
and 1993......................................................................
Consolidated Statements of Shareholders' Equity for the years ended November 30, F-9
1995, 1994 and 1993...........................................................
Consolidated Statements of Cash Flows for the years ended November 30, 1995, F-10
1994 and 1993.................................................................
Notes to Consolidated Financial Statements...................................... F-11 - F-19
Schedule II -- Valuation and Qualifying Accounts and Reserves................... F-20
</TABLE>

F-5
<PAGE> 52

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Quintel Entertainment, Inc.:

COOPERS & LYBRAND L.L.P.

Melville, New York
February 19, 1996.

F-6
<PAGE> 53

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
as of November 30, 1995 and 1994

<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents...................................... $3,570,468 $ 981,073
Accounts receivable, trade..................................... 10,097,629 2,814,095
Deferred tax asset............................................. 39,957 9,281
Due from related parties....................................... 67,162
Prepaid expenses and other current assets...................... 381,292 122,644
----------- ------------
Total current assets........................................ 14,156,508 3,927,093
Property and equipment, at cost, net of accumulated
depreciation................................................... 142,369 16,530
Investment in joint venture, at equity........................... 1,345,304
Other assets..................................................... 1,325,775 33,258
----------- ------------
$16,969,956 $3,976,881
=========== ============
LIABILITIES:
Current liabilities:
Accounts payable............................................... $1,269,647 $ 442,458
Accrued expenses............................................... 2,351,644 1,506,356
Reserve for customer chargebacks............................... 4,025,130 1,176,902
Loans payable.................................................. 2,643,522
Due to related parties......................................... 354,751 205,691
Income taxes payable........................................... 294,187 68,368
Other current liabilities...................................... 32,580
----------- ------------
Total liabilities........................................... 10,938,881 3,432,355
----------- ------------
Commitments and contingencies (Note 8)
SHAREHOLDERS' EQUITY:
Preferred stock -- $.001 par value; 1,000,000 shares authorized;
none issued and outstanding....................................
Common stock -- $.001 par value; authorized 50,000,000 shares;
issued and outstanding 12,000,000 shares....................... 12,000 12,000
Additional paid-in capital....................................... 441,258 441,258
Retained earnings................................................ 5,597,817 111,268
Less subscriptions receivable.................................... (20,000 ) (20,000)
----------- ------------
Total shareholders' equity.................................. 6,031,075 544,526
----------- ------------
$16,969,956 $3,976,881
=========== ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 54

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
for the years ended November 30, 1995, 1994 and 1993

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Net revenue............................................ $50,501,266 $22,771,465 $8,262,179
Cost of sales.......................................... 36,732,610 17,521,985 5,778,706
----------- ----------- ----------
Gross profit......................................... 13,768,656 5,249,480 2,483,473
Selling, general and administrative expenses........... 3,467,008 3,012,588 1,801,330
----------- ----------- ----------
Income from operations............................... 10,301,648 2,236,892 682,143
Interest expense....................................... (334,318) (759,211) (117,460)
Management fee income.................................. 450,000
Other income, net...................................... 35,250
Equity in earnings of joint venture.................... 2,860,304
----------- ----------- ----------
Income before provision for income taxes and minority
interest.......................................... 13,312,884 1,477,681 564,683
Provision (benefit) for income taxes................... 220,335 54,842 (76,690)
----------- ----------- ----------
Income before minority interest...................... 13,092,549 1,422,839 641,373
Minority interest in net loss of subsidiary............ 73,528
----------- ----------- ----------
Net income........................................... $13,092,549 $ 1,422,839 $ 714,901
=========== =========== ==========
Pro Forma Data (Note 1):
Income before pro forma adjustments and minority
interest.......................................... $13,312,884 $ 1,477,681 $ 564,683
Pro forma income tax provision......................... 5,633,116 835,144 257,761
----------- ----------- ----------
Pro forma income before minority interest.............. 7,679,768 642,537 306,922
Minority interest in net loss of subsidiary.......... 73,528
----------- ----------- ----------
Pro forma net income................................. $ 7,679,768 $ 642,537 $ 380,450
=========== =========== ==========
Pro forma net income per share......................... $ .64 $ .05 $ .08
=========== =========== ==========
Weighted average common shares outstanding............. 12,000,000 12,000,000 5,008,219
=========== =========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-8
<PAGE> 55

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended November 30, 1995, 1994 and 1993

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------- PAID-IN RETAINED SUBSCRIPTIONS SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE EQUITY
---------- -------- --------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 30, 1992...... 4,000,000 $ 4,000 $ 6,000 $ 73,528 $ (10,000) $ 73,528
Net income for the year....... 714,901 714,901
Issuance of common stock...... 4,000,000 4,000 396,000 (400,000)
---------- ------- -------- ---------- -------- ----------
Balance, November 30, 1993...... 8,000,000 8,000 402,000 788,429 (410,000) 788,429
Net income for the year....... 1,422,839 1,422,839
Purchase of minority
interest.................... 33,258 33,258
Distributions to
shareholders................ (2,100,000 ) (2,100,000 )
Issuance of common stock...... 4,000,000 4,000 6,000 (10,000)
Collections on subscriptions
receivable.................. 400,000 400,000
---------- ------- -------- ---------- -------- ----------
Balance, November 30, 1994...... 12,000,000 12,000 441,258 111,268 (20,000) 544,526
Net income for the year....... 13,092,549 13,092,549
Distributions to
shareholders................ (7,606,000 ) (7,606,000 )
---------- ------- -------- ---------- -------- ----------
Balance, November 30, 1995...... 12,000,000 $12,000 $441,258 $ 5,597,817 $ (20,000) $ 6,031,075
========== ======= ======== ========== ======== ==========
</TABLE>

See accompanying notes to consolidated financial statements

F-9
<PAGE> 56

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended November 30, 1995, 1994 and 1993

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $13,092,549 $ 1,422,839 $ 714,901
Items not affecting cash:
Depreciation and amortization.................... 21,574 1,480
Reserve for customer chargebacks................. 2,848,228 78,767 946,975
Deferred income taxes............................ (30,676) (9,281) 44,167
Equity in net earnings of joint venture, net of
dividends received............................. (1,320,304)
Minority interest................................ (73,528)
Changes in assets and liabilities:
Accounts receivable.............................. (7,283,534) 797,466 (3,087,409)
Due from related parties......................... (67,162)
Prepaid expenses and other current assets........ (258,648) (39,599) (38,915)
Other assets..................................... (521,135)
Accounts payable................................. 827,189 264,263 178,195
Income tax payable............................... 225,819 68,368 (156,161)
Accrued expenses................................. 67,254 1,000,214 506,142
Due to related parties........................... 149,060 31,944 (172,593)
Other current liabilities........................ (32,580) 32,580
----------- ---------- ----------
Net cash provided by (used in) operating
activities................................ 7,717,634 3,649,041 (1,138,226)
----------- ---------- ----------
Cash flows from investing activities:
Investment in joint venture......................... (25,000)
Capital expenditures................................ (140,761) (18,010)
----------- ---------- ----------
Net cash used in investing activities....... (165,761) (18,010)
----------- ---------- ----------
Cash flows from financing activities:
Loans payable, net.................................. 2,643,522 (1,149,432) 1,007,189
Proceeds from collections on common stock
subscriptions.................................... 400,000
Distributions to shareholders....................... (7,606,000) (2,100,000)
----------- ---------- ----------
Net cash provided by (used in) financing
activities................................ (4,962,478) (2,849,432) 1,007,189
----------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents......................................... 2,589,395 781,599 (131,037)
Cash and cash equivalents, beginning of year.......... 981,073 199,474 330,511
----------- ---------- ----------
Cash and cash equivalents, end of year................ $ 3,570,468 $ 981,073 $ 199,474
=========== ========== ==========
Supplemental disclosures:
Cash paid during the year for:
Interest......................................... $ 334,318 $ 785,093 $ 117,673
Income taxes..................................... 50,010 2,902 26,737
Noncash investing activities:
Repurchase of minority interest..................... $ 33,258
</TABLE>

See accompanying notes to consolidated financial statements.

F-10
<PAGE> 57

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements of Quintel Entertainment, Inc. (the
"Company") include the accounts of its wholly-owned subsidiaries, Creative
Direct Marketing, Inc. (""CDM") and Calling Card Co., Inc. ("CCCI"), which,
prior to the reorganization, were predecessor entities under common control. All
intercompany transactions and balances have been eliminated in consolidation.

Reorganization and Basis of Presentation

The Company was organized under the laws of the State of Delaware in
November 1993, under the name U.S. Teleconnect, Inc. Pursuant to a plan of
reorganization, as of December 5, 1995, the effective date of a public offering
(see Note 10) the accompanying financial statements have been prepared to
retroactively reflect the foregoing reorganization on a consolidated basis to
present more meaningfully the ongoing organization and equity capitalization as
follows: (i) the stockholders of CDM and CCCI contributed their respective
shares of common stock to the Company and the companies became wholly-owned
subsidiaries of the Company, (ii) the Company effected a 60,000-for-one stock
split, and (iii) the Company changed its name to Quintel Entertainment, Inc. and
Subsidiaries.

Pro forma presentation

As a result of the historical presentation and change in tax status in
connection with the public offering (see Note 10), historical results of
operations, including income taxes, may not in all cases be comparable to or
indicative of current and future results. Therefore, pro forma information,
which presents results as if the Company had always been C corporations, is
presented on the face of the accompanying statements of income.

Nature of business

The Company is primarily engaged in providing a variety of telephone
entertainment services to the general public. These services are provided using
several billing platforms (billing and collection vehicles) over the telephone
lines of various local telephone companies and long distance carriers. These
services include various programs such as live psychic readings, tarot card
readings and daily horoscope and astrology readings. A major program provided by
the Company is an entertainment membership club, the Astrological Society of
America. This club enables all members to enjoy certain monthly club services
for a flat monthly rate and have access to other Company services at preferred
rates.

All consumers are solicited by the Company through a variety of marketing
techniques including television commercials and infomercials, print advertising,
direct mail, telemarketing, and premium gift offerings. The Company has
contracts with service bureaus for the purpose of call processing, billing and
collection. Under these contracts, the bureaus process and accumulate call data,
summarize the information, and forward the data to the local telephone companies
and/or long distance carriers for the ultimate billing to and collection from
the Company's customers.

The Company also contracts with numerous organizations, including Psychic
Readers Network, Inc. (see Note 9), and with individuals to provide live
psychics, live operator services, computer services, media purchasing,
telemarketing and other services necessary to establish and maintain the
Company's programs.

Revenue recognition

F-11
<PAGE> 58

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Continuing club member fees are recognized as members automatically renew
each month. All revenues are recognized net of provision for customer
chargebacks, which include refunds, credits, and uncollectible amounts. The
Company estimates the reserve for customer chargebacks monthly based on updated
chargeback history. New platforms without a history are reserved based on
experience with similar platforms and adjusted as experience dictates.
Accordingly, it is reasonably possible that these estimates will change in the
near term. Since reserves are established prior to the periods in which
chargebacks are actually incurred, the Company's revenues may be reduced in
later periods in the event that the Company's reserves prove to be insufficient.
For the years ended November 30, 1995, 1994 and 1993 provision for chargebacks
were $19,065,077, $10,841,574 and $2,820,402, respectively.

Included in chargebacks for the year ended November 30, 1995 were
approximately $1.4 million of refunds and credits issued relating to a billing
platform that was terminated by the Company in late fiscal 1994. This write-off
was the direct result of published third party public awareness reports issued
primarily during 1995 as to the availability of refunds and credits for
telephone charges billed under this discontinued platform.

Accounts receivable

The Company has agreements with two service bureaus that provide advances
against accounts receivable collections at interest rates calculated primarily
at prime plus increments up to 6%. Amounts advanced under the agreements are on
a revolving basis and are limited to 50% of a defined borrowing base, net of
related service fees and costs, as applicable. Certain advances under the
agreements are due on demand and all are collateralized by the accounts
receivable collected by the service bureaus. During fiscal 1995 and 1994, the
gross advances and weighted average interest rate on the borrowings received
were approximately $23,029,599 and $15,837,400, respectively, and 14.75% and
14.50%, respectively.

Concentration of credit risk

Financial instruments which potentially subject the Company to
concentration of credit risk consist of accounts receivable and cash deposits.

All of the Company's collections are received through two service bureaus
which process and collect all of the Company's billings. In conjunction with
servicing the accounts receivable, the service bureaus advance amounts based on
eligible accounts receivable and withhold certain cash receipts as a reserve. As
a result, the Company's exposure to the concentration of credit risk primarily
relates to all collections on behalf of the Company by the service bureaus.

Cash balances are held principally at one financial institution and may, at
times, exceed insurable amounts. The Company believes it mitigates its risks by
investing in or through major financial institutions. Recoverability is
dependent upon the performance of the institution.

Cash and cash equivalents

All short-term investments with an original maturity of three months or
less are considered to be cash equivalents.

Minority interest

Through July 30, 1994, an unrelated party held a minority interest in CDM.
The financial statements reflect the proportionate share of such interest in
CDM's income and losses to the extent of its basis.

F-12
<PAGE> 59

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

On July 31, 1994, certain shareholders of the Company repurchased such
minority interest. The excess of the cost over the minority interest at July 31,
1994 of $33,258 has been included in other assets as "goodwill" and is being
amortized over a five-year period.

Property, plant and equipment

Property, plant and equipment are stated at cost. Expenditures for
maintenance and repairs are expensed as incurred while renewals and betterments
are capitalized. Depreciation and amortization have been provided using the
straight-line method over a five to seven year useful life depending on the
nature of the asset.

Upon retirement or disposal, the asset cost and related accumulated
depreciation and amortization are eliminated from the respective accounts and
the resulting gain or loss, if any, is included in the results of operations for
the period.

Deferred offering costs

At November 30, 1995, the Company has incurred costs aggregating $1,224,962
in connection with the public offering of its equity securities (see Note 10).
These costs are being deferred, and are included in other assets and will be
charged against paid-in capital as of the effective date of the offering.

Income taxes

Prior to the reorganization described above, the Company and CDM had
elected treatment as S corporations for Federal and state income taxation as of
November 1, 1994 and August 1, 1994, respectively. CCCI elected treatment as an
S corporation for federal and state income taxation since inception. S
corporation taxable income, whether distributed or not, is passed through and
taxed at the shareholder level. Accordingly, no provision for Federal income
taxes is included in the accompanying statements of operations. For New York and
New Jersey income tax purposes, a corporate level surcharge is imposed on the
Company's allocable income, calculated using an effective rate primarily
representing the difference between the subchapter C corporation level tax and
the highest state personal income tax rate.

On or prior to the closing of the public offering, the Company's income tax
status as an S corporation will terminate. The Company will convert to a C
corporation, adopt the accrual basis of accounting which will be effective as of
the beginning of the fiscal year and will be subject to both federal and state
income taxes. Any income tax adjustment required as a result of the conversion
will be reflected in the period it becomes effective.

Effective December 1, 1993, the Company adopted statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under
this method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.

Earnings per share

Net earnings per share has been computed by dividing pro forma net earnings
by the weighted average number of common and common equivalent shares
outstanding during the period, computed in accordance with the treasury stock
method. Retroactive restatement has been made to all share and per share amounts
for the reorganization discussed in Note 1.

Advertising expenses

TheCompany presently expenses all advertising costs during the year in
which they are incurred. Total advertising expenses incurred for fiscal 1995,
1994, and 1993 were approximately $15,325,600, $7,282,000 and

F-13
<PAGE> 60

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

$2,628,000, respectively. Included in prepaid expenses and other current assets
is approximately $259,000 relating to prepaid advertising at November 30, 1995.

Newly Issued Accounting Standards

In October, 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS No. 123"). The Statement, which becomes effective in
fiscal 1996, allows companies to measure compensation cost in connection with
employee stock compensation plans using a fair value based method or to continue
to use an intrinsic value based method, which generally does not result in
compensation cost. The Company has not yet decided which method it will utilize
relating to its stock-based employee plans.

Other

The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's 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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform with the
current period presentation.

2. ACCOUNTS RECEIVABLE:

Accounts receivable for the years ended November 30, 1995 and 1994 consists
of the following:

<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Receivable from billing and collection companies............ $10,097,629 $ 687,685
Receivable from local exchange carriers..................... 2,084,197
Receivable from list rentals................................ 42,213
----------- ----------
$10,097,629 $2,814,095
=========== ==========
</TABLE>

3. RELATED PARTY TRANSACTIONS:

The Company purchased various mailing lists and design, copyrighting and
artistic development services from related entities owned by the Company's
shareholders. The agreements require the Company to pay fees equal to 20% of
rental revenues and a management fee of 10%, plus any fees in connection with
processing and mailing lists. During fiscal 1995, 1994 and 1993, costs of
approximately $160,000, $871,400 and $1,900,000, respectively, were incurred by
the Company for such services.

The Company incurred approximately $168,000, $140,000 and $24,000,
respectively, during fiscal 1995, 1994 and 1993, in accounting fees to a firm
having a member who is also a director of the Company. In addition, the Company
incurred approximately $140,000, $89,000 and $4,000, respectively, during fiscal
1995, 1994 and 1993, in legal fees to a firm having a member who is also a
director of the Company.

The Company received $450,000 in management fee income from a joint venture
it entered into during fiscal 1995 (see Note 9) and for the years ended November
30, 1995 and 1994, paid aggregate fees of approximately $3,993,000 and $186,000,
respectively, to the other joint venture for psychic operator services.

F-14
<PAGE> 61

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. PROPERTY AND EQUIPMENT:

Property and equipment for the years ended November 30, 1995 and 1994
consists of the following:

<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Furniture and fixtures......................................... $ 55,329 $11,235
Machinery and equipment........................................ 73,527 6,775
Telephone and facsimile........................................ 29,915
-------- -------
158,771 18,010
Less, accumulated depreciation................................. 16,402 1,480
-------- -------
$142,369 $16,530
======== =======
</TABLE>

5. ACCRUED EXPENSES:

Accrued expenses for the years ended November 30, 1995 and 1994 consist of
the following:

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Service fees and related costs............................... $ 885,308 $ 808,284
Compensation................................................. 24,386 566,514
Professional fees............................................ 314,035 131,558
Underwriter fees............................................. 522,000
Advertising.................................................. 506,038
Other........................................................ 99,877
---------- ----------
$2,351,644 $1,506,356
========== ==========
</TABLE>

6. INCOME TAXES:

The provision (credit) for Federal and state income taxes for the years
ended November 30, 1995, 1994 and 1993 consists of the following:

<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- ---------
<S> <C> <C> <C>
Current:
Federal........................................... $(111,611)
State............................................. $283,829 $ 87,566 (32,689)
-------- -------- --------
283,829 87,566 (144,300)
-------- -------- --------
Deferred:
Federal........................................... 35,033
State............................................. (63,494) (32,724 ) 32,577
-------- -------- --------
(63,494) (32,724 ) 67,610
-------- -------- --------
$220,335 $ 54,842 $ (76,690)
======== ======== ========
</TABLE>

Deferred taxes primarily consist of reserves for chargebacks not recognized
for tax purposes.

7. REGULATORY ISSUES AND OTHER RISK CONSIDERATIONS:

The Company's primary contact with its customers is over the telephone
lines and services of numerous local telephone companies and long distance
carriers. The Company cannot predict the impact, if any, of changes in various
regulations affecting the Company, directly, or through one of the telephone
companies. There can be no assurance that the Company will be able, for
financial or other reasons, to comply with applicable laws and regulations or
that regulatory authorities will not take action to limit or prevent the

F-15
<PAGE> 62

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Company from advertising, marketing or promoting its services and membership
clubs or otherwise require the Company to discontinue or substantially modify
the content of its services.

If the financial condition of a service bureau should change adversely, the
Company has identified alternative service bureaus. If required, Company
management does not believe that a change herein would have a material adverse
effect on the Company's results of operations or its financial position.

8. COMMITMENTS AND CONTINGENCIES:

Leases

The Company is obligated under noncancelable real property operating lease
agreements that expire at various times through fiscal 2005. Future minimum
rents, by the year and in the aggregate, consist of the following at November
30, 1995:

<TABLE>
<S> <C>
1996.................................................................... $ 107,750
1997.................................................................... 86,625
1998.................................................................... 115,500
1999.................................................................... 115,500
2000.................................................................... 121,000
Thereafter.............................................................. 558,709
-----------
$1,105,084
===========
</TABLE>

The long-term lease contains escalation clauses with respect to real estate
taxes and related operating costs. The short-term lease commenced November 1,
1995 and expires May 5, 1996. The accompanying financial statements reflect rent
expense on a straight-line basis over the terms of the lease as required by
generally accepted accounting principles. The Company is presently negotiating a
lease on a new facility. Rent expense was $96,834, $28,800 and $29,040 for
fiscal 1995, 1994 and 1993, respectively.

Employment Agreements and Consulting

The Company has executed employment agreements, expiring November 30, 1998,
with certain executive officers of the Company. Minimum future payments under
such agreements are as follows:

Commencing with fiscal year ending November 30, 1996, in the event the
Company achieves pre-tax earnings of $10,000,000 or more for any such fiscal
year, the Company may grant bonuses to such persons, subject to approval of the
Compensation Committee of the Board of Directors, in an aggregate amount not to
exceed 5% of pre-tax earnings for such year.

The Company has also entered into a consulting agreement with a
shareholder, expiring on November 30, 1998. Under the terms of such agreement,
the shareholder is to provide services in connection with identification and
engagement of celebrities to endorse the Company's services, engagement of
independent producers to produce commercials and infomercials and the
development of new entertainment services. In addition, he has the right to
become a full-time employee of the Company under certain circumstances, and to
receive an initial base salary at the rate of $200,000 per annum with 10% annual
increases. Upon

F-16
<PAGE> 63

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

commencement of such full-time employment he is entitled to share in the 5%
bonus with the other executive officers described above. Minimum future payments
under the consulting arrangement are as follows:

Had these employment and consulting agreements been in effect for the
fiscal years ending November 30, 1995 and 1994, selling, general and
administrative expense would have increased (decreased) by approximately
$140,000 and ($575,000) for the years ended November 30, 1995 and 1994,
respectively.

Other

The indebtedness of New Lauderdale to two service bureaus of $1,770,000 as
of November 30, 1995 (see Note 9) is guaranteed by both parties to the joint
venture. The Company is of the opinion that the joint venture will be able to
perform under its respective payment obligations in connection with such
guaranteed indebtedness and that no payments will be required and no losses will
be incurred by the Company under such guarantees.

There are pending claims and litigations against the Company arising in the
ordinary course of business. Management believes, on the basis of its
understanding and consideration of these matters, that these actions will not
result in payment of amounts, if any, which would have a material adverse effect
on the Company's financial statements.

9. FORMATION OF JOINT VENTURE:

In December 1994, the Company entered into an agreement with Psychic
Readers Network, Inc. ("PRN"), an unrelated entity, that established a joint
venture known as New Lauderdale, L.C. ("N.L.") which engages in telephone
entertainment service dealing in membership clubs and other programs. Under the
terms of the agreement, the Company has invested $25,000 for a 50% membership in
N.L. The joint venture commenced operations in January 1995 and was reorganized
as a Florida Limited Liability Company in March 1995.

The parties also entered into an agreement which requires each party to the
joint venture to provide management, consulting and financial services for a
monthly fee of $50,000. Such services include, but are not necessarily limited
to, advice and assistance concerning any and all aspects of the operations,
planning and financing all aspects of the venture's operations. The fee
provision of the agreement was terminated effective February 1, 1996. Services
by the parties joint venture will continue to be rendered.

The Company has recognized income from N.L. of $2,860,304 and received
distributions of $1,540,000 for the year ended November 30, 1995. Income
includes 50% of the N.L.'s earnings which are net of normal costs of its
operations and the fees referred to above.

F-17
<PAGE> 64

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Following is condensed financial data for the joint venture:

<TABLE>
<CAPTION>
AS OF
NOVEMBER
30,
1995
-----------
<S> <C>
Current assets (principally accounts receivable)....................... $11,205,559
Current liabilities (principally reserve for customer chargebacks)..... 8,514,951
Members' equity........................................................ 2,690,608
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER
30,
1995
-----------
<S> <C>
Net revenues........................................................... $28,248,093
Gross profit........................................................... 8,054,330
Net income............................................................. 5,720,608
</TABLE>

10. SUBSEQUENT EVENTS:

On December 5, 1995, the Company completed an initial public offering (the
"Offering") of 3,225,000 shares of common stock with net proceeds received of
approximately $13,640,000. If the offering had occurred as of the beginning of
the fiscal year, pro forma net income per share would have been $.50.

In connection with the terms of the offering, the Company has declared a
final S corporation distribution to its shareholders in the amount of its
aggregate undistributed taxable income, determined on the GAAP basis, except for
$575,000. The distribution will be funded through a series of shareholder notes,
bearing interest at 9% and will provide for aggregate minimum monthly payments
of principal of $500,000, plus 25% of cash flow in excess of $1,000,000,
commencing one month after the effective date.

On January 17, 1996, the Company entered into a letter of intent to acquire
the remaining 50% interest of New Lauderdale, L.C. from PRN. In payment for the
interest being acquired, the Company has agreed to issue to PRN 3,200,000 shares
of its common stock. Shares totalling up to 1,200,000 shall be subject to
forfeiture in the event New Lauderdale's programs do not achieve certain
agreed-upon pre-tax earning levels for 1996 or the first and second quarters of
that year.

In addition, the Company may make available to PRN's shareholders
interest-bearing loans not to exceed $2,500,000, which will be collateralized by
the shares issued to cover a portion of their tax liability attributable to the
transaction in the event that the Company's stock trades below certain levels.
The loan shall be due and payable no later than two years from the date it is
made, or sooner if the Company's stock trades at certain levels.

Consummation of this transaction is subject to the parties completing due
diligence, securing requisite corporate and other approvals and the execution of
definitive acquisition agreements.

11. STOCK OPTION PLAN:

During fiscal 1995, the Company implemented the 1995 Stock Option Plan (the
"Stock Option Plan") effective as of October 1995. The Stock Option Plan
provides for the grant of options to purchase up to 750,000 shares of the
Company's common stock that are intended to qualify either as incentive stock
options ("Incentive Stock Options") within the meaning of Section 422 of the
United States Internal Revenue Code or as options that are not intended to meet
the requirements of such section ("Nonstatutory Stock Options"). Options to
purchase shares may be granted under the Stock Option Plan to persons who, in
the case of Incentive Stock Options, are employees (including officers) of the
Company, or, in the case of Nonstatutory

F-18
<PAGE> 65

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Stock Options, are employees (including officers), consultants or nonemployee
directors of the Company to the Company.

The exercise price of options granted under the Stock Option Plan must be
at least equal to the fair market value of such shares on the date of grant, or,
in the case of Incentive Stock Options granted to the holder of 10% or more of
the Company's Common Stock, at least 110% of the fair market value of such
shares on the date of grant. The maximum exercise period for which Incentive
Stock Options may be granted is ten years from the date of grant (five years in
the case of an individual owning more than 10% of the Company's common stock).
The aggregate fair market value (determined at the date the option is granted)
of shares with respect to which Incentive Stock Options are exercisable for the
first time by the holder of the option during any calendar year shall not exceed
$100,000. If such amount exceeds $100,000, the Board of Directors or the
Committee may, when the Options are exercised and the shares transferred to an
employee, designate those shares that will be treated as Incentive Stock Options
and those that will be treated as Nonstatutory Stock Options.

In addition, the Company's Stock Option Plan provides for certain automatic
grants of options to the Company's non-employee directors in consideration for
their services performed as directors of the Company and for attendance at
meetings. It provides for a one-time automatic grant of an option to purchase
25,000 shares of common stock at market value to those directors who were
serving on the Board of Directors at the inception of the Stock Option Plan and
also to those persons who become nonemployee directors of the Company in the
future, upon their appointment or election as directors of the Company. In
addition, the Stock Option Plan provides for an annual grant to each
non-employee director of the Company of options to purchase 5,000 shares of
common stock at the market value on the date of each grant.

12. FOURTH QUARTER ADJUSTMENTS:

During the fourth quarter of 1995, the Company and New Lauderdale reflected
adjustments based upon new information from their service bureaus of $228,418
($109,927: N.L.) to its provision for chargebacks of which approximately
$182,000 ($60,400: N.L.) relates to activity for previous quarters.

F-19
<PAGE> 66

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
COL. C
--------------------------
ADDITIONS
COL. B -------------------------- COL. E
---------- CHARGED TO COL. D ----------
COL. A BALANCE AT CHARGED TO OTHER ----------- BALANCE AT
- ----------------------------------------- BEGINNING COSTS AND ACCOUNTS DEDUCTIONS- END OF
DESCRIPTION OF PERIOD EXPENSES RECEIVABLE DESCRIBE(1) PERIOD
- ----------------------------------------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 30, 1995
Reserve for customer chargebacks....... $1,176,902 $19,065,077 -- $16,216,849 $4,025,130
========== =========== ========== =========== ==========
YEAR ENDED NOVEMBER 30, 1994
Reserve for customer chargebacks....... $1,098,135 $10,841,574 -- $10,762,807 $1,176,902
========== =========== ========== =========== ==========
YEAR ENDED NOVEMBER 30, 1993
Reserve for customer chargebacks....... $ 151,160 $ 2,820,403 -- $1,873,428 $1,098,135
========== =========== ========== =========== ==========
</TABLE>

- ---------

(1) Chargebacks refunded during the year

F-20
<PAGE> 67

NEW LAUDERDALE, L.C.

FINANCIAL STATEMENTS

FOR THE PERIOD DECEMBER 30, 1994 (INCEPTION)
TO NOVEMBER 30, 1995

F-21
<PAGE> 68

REPORT OF INDEPENDENT ACCOUNTANTS

To the Members of
New Lauderdale, L.C.:

We have audited the accompanying statement of financial position of New
Lauderdale, L.C. (the "Company"), as of November 30, 1995 and the related
statement of operations, members' equity and cash flows for the period December
30, 1994 (inception date) to November 30, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of New Lauderdale, L.C. as of
November 30, 1995 and the results of its operations and its cash flows for the
period December 30, 1994 (inception date) to November 30, 1995, in conformity
with generally accepted accounting principles.

Melville, New York
February 19, 1996.

F-22
<PAGE> 69

NEW LAUDERDALE, L.C.

STATEMENT OF FINANCIAL POSITION
as of November 30, 1995

<TABLE>
<S> <C>
ASSETS:
Cash and cash equivalents...................................................... $ 3,831,552
Accounts receivable, trade..................................................... 6,915,151
Due from related party......................................................... 191,909
Prepaid expenses............................................................... 266,947
-----------
$11,205,559
-----------
LIABILITIES AND MEMBERS' EQUITY:
Accrued expenses............................................................... $ 1,489,551
Reserve for customer chargebacks............................................... 4,665,912
Loans payable.................................................................. 1,769,678
Due to related parties......................................................... 256,865
Income taxes payable........................................................... 332,945
-----------
8,514,951
-----------
Commitments and contingencies (Note 5)
Members' equity, as annexed.................................................... 2,690,608
-----------
$11,205,559
-----------
</TABLE>

See accompanying notes to financial statements.

F-23
<PAGE> 70

NEW LAUDERDALE, L.C.

STATEMENT OF OPERATIONS
for the period December 30, 1994 (inception date) to November 30, 1995 (Note 1)

<TABLE>
<S> <C>
Net revenue.................................................................... $28,248,093
Cost of sales.................................................................. 20,193,763
-----------
Gross profit.............................................................. 8,054,330
Selling, general and administrative expenses................................... 1,879,530
-----------
Income from operations.................................................... 6,174,800
Interest expense............................................................... 136,521
Other income................................................................... 15,274
-----------
Income before provision for income taxes.................................. 6,053,553
Provision for state income taxes............................................... 332,945
-----------
Net income................................................................ $ 5,720,608
-----------
</TABLE>

See accompanying notes to financial statements.

F-24
<PAGE> 71

NEW LAUDERDALE, L.C.

STATEMENT OF MEMBERS' EQUITY
for the period December 30, 1994 (inception date) to November 30, 1995 (Note 1)

<TABLE>
<CAPTION>
CAPITAL UNDISTRIBUTED
CONTRIBUTED EARNINGS TOTAL
----------- ------------- -----------
<S> <C> <C> <C>
Balance, December 30, 1994 (inception).................. $-- $ -- $ --
Capital contributed..................................... 50,000 50,000
Net income.............................................. 5,720,608 5,720,608
Distributions........................................... (3,080,000) (3,080,000)
------- ----------- -----------
Balance, November 30, 1995.............................. $50,000 $ 2,640,608 $ 2,690,608
------- ----------- -----------
</TABLE>

See accompanying notes to financial statements.

F-25
<PAGE> 72

NEW LAUDERDALE, L.C.

STATEMENT OF CASH FLOWS
for the period December 30, 1994 (inception date) to November 30, 1995 (Note 1)

<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................................... $ 5,720,608
Items not affecting cash:
Reserve for customer chargebacks.......................................... 4,665,912
Changes in assets and liabilities:
Accounts receivable....................................................... (6,915,151)
Prepaid expenses.......................................................... (266,947)
Income tax payable........................................................ 332,945
Accrued expenses.......................................................... 1,489,551
Due to related parties.................................................... 64,956
-----------
Net cash provided by operating activities............................... 5,091,874
-----------
Cash flows from financing activities:
Loans payable, net........................................................... 1,769,678
Capital contributions by Members............................................. 50,000
Distributions to Members..................................................... (3,080,000)
-----------
Net cash used in financing activities................................... (1,260,322)
-----------
Net increase in cash and cash equivalents...................................... 3,831,552
Cash and cash equivalents, beginning of year................................... --
-----------
Cash and cash equivalents, end of year......................................... $ 3,831,552
-----------
Supplemental disclosures:
Cash paid during the year for:
Interest.................................................................. $ 136,521
</TABLE>

See accompanying notes to financial statements.

F-26
<PAGE> 73

NEW LAUDERDALE, L.C.

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF BUSINESS

New Lauderdale, L.C. (the "Company") is a joint venture organized December
1994 between Calling Card Co., Inc. ("CCCI") and Psychic Readers Network, Inc.
("PRN"). Under the terms of the agreement each party to the joint venture
invested $25,000 for a 50% membership in the Company. The joint venture
commenced operations in January 1995 and was reorganized as a Florida Limited
Liability Company in March 1995.

The agreement also requires each party to the joint venture to provide
services to the Company at cost, and for the Company to pay to each a monthly
management fee of $50,000. Such services include, but are not necessarily
limited to, advice and assistance concerning all aspects of the operations,
planning and financing. The fee provision of the agreement was terminated
effective February 1, 1996. Services by the parties to the joint venture will
continue to be rendered.

The Company is primarily engaged in providing a variety of telephone
entertainment services to the general public. These services are provided using
several billing platforms (billing and collection vehicles) over the telephone
lines of various local telephone companies and long distance carriers. These
services include various programs such as live psychic readings, tarot card
readings and daily horoscope and astrology readings. Two major programs provided
by the Company are entertainment membership clubs, the Philip Michael Thomas
Membership Club and the Joyce Jillson Psychic Astrology Network. These clubs
enable all members to enjoy certain monthly club services for a flat monthly
rate and have access to other Company services at preferred rates.

Consumers are solicited by the Company through a variety of marketing
techniques including television commercials and infomercials, print advertising,
direct mail, telemarketing, and premium gift offerings. Additional consumers are
obtained by solicitation by PRN. The Company has contracts with service bureaus
for the purpose of call processing, billing and collection. Under these
contracts, the bureaus process and accumulate call data, summarize the
information, and forward the data to the local telephone companies and/or long
distance carriers for the ultimate billing to and collection from the Company's
customers.

The Company also contracts with numerous organizations, including PRN (see
Note 2), and with individuals to provide live psychics, live operator services,
computer services, media purchasing, telemarketing and other services necessary
to establish and maintain the Company's programs.

REVENUE RECOGNITION

Revenues from all billable platforms are recorded at the time the customer
initiates a billable transaction, except for club membership fees. New club
membership fees are recognized upon approved enrollment. Continuing club member
fees are recognized as members automatically renew each month. All revenues are
recognized net of provision for customer chargebacks, which include refunds,
credits, and uncollectible amounts. The Company estimates the reserve for
customer chargebacks monthly based on updated chargeback history. New platforms
without a history are reserved based on experience with similar platforms and
adjusted as experience dictates. Accordingly, it is reasonably possible that
this estimate will change in the near term. Since reserves are established prior
to the periods in which chargebacks are actually incurred, the Company's
revenues may be reduced in later periods in the event that the Company's
reserves prove to be insufficient. For the year ended November 30, 1995,
provision for all chargebacks were $11,742,474.

F-27
<PAGE> 74

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

ACCOUNTS RECEIVABLE

The Company has agreements with service bureaus that provide advances
against accounts receivable collections at interest rates calculated primarily
at prime plus increments up to 6%. Amounts advanced under the agreements are on
a revolving basis and are limited to 50% of a defined borrowing base, net of
related service fees and costs, as applicable. Certain advances under the
agreements are due on demand and all are collateralized by the accounts
receivable collected by the service bureaus. During fiscal 1995, the gross
advances received approximated $9,820,787.

LOANS PAYABLE

The indebtedness of the Company is guaranteed by both parties to the joint
venture. The Company is of the opinion that it will be able to perform under its
respective payment obligations in connection with such indebtedness and that no
payments will be required by either member of the joint venture under such
guarantees.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentration of credit risk consist of accounts receivable and cash deposits.

All of the Company's collections are received through service bureaus which
process and collect all of the Company's billings. In conjunction with servicing
the accounts receivable, the service bureaus advance amounts based on eligible
accounts receivable and withhold certain cash receipts as a reserve. As a
result, the Company's exposure to the concentration of credit risk primarily
relates to all collections on behalf of the Company by the service bureaus.

CASH AND CASH EQUIVALENTS

All short-term investments with an original maturity of three months or
less are considered to be cash equivalents.

INCOME TAXES

The Company was formed as a limited liability company ("LLC") under the
laws of the State of Florida. Florida taxes all limited liability companies as C
corporations. However, for Federal income tax purposes the LLC is taxed as a
partnership. Accordingly, taxable income, deductions and tax credits are passed
through to, and included in, the members' respective income tax returns and no
provision for Federal income taxes is included in the accompanying statements of
operations.

Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.

ADVERTISING EXPENSES

The Company expenses all advertising costs during the year in which they
are incurred, except for certain media costs. Media costs are expensed as the
advertising occurs, resulting in prepaid costs which are included in prepaid
expense. Such costs approximated $68,000 at November 30, 1995. Total advertising
expense incurred for fiscal 1995 were approximately $8,029,100.

F-28
<PAGE> 75

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. RELATED PARTY TRANSACTIONS:

The Company paid PRN approximately $3,418,000 during fiscal 1995 for
providing psychic operators and telemarketers and purchasing television media
time. In addition, payments of approximately $113,000 were made to CCCI for
managing billing and collections during fiscal 1995.

The Company purchased various mailing lists and design, copyrighting and
artistic development services from related entities owned by CCCI's
shareholders. During fiscal 1995, costs of approximately $5,200 were incurred by
the Company for such services.

The Company paid management fees of $50,000 a month, beginning March 1,
1995, to each of CCCI and PRN.

Certain service bureau transactions are consummated for the Company through
Quintel Entertainment, Inc., the parent company of CCCI. All such transactions
are consummated at cost.

3. ACCRUED EXPENSES:

Accrued expenses at November 30, 1995 consist of the following:

<TABLE>
<S> <C>
Service fees and related costs.................................. $ 903,805
Advertising expenses............................................ 402,999
Professional fees............................................... 124,314
Other........................................................... 58,433
----------
$1,489,551
----------
</TABLE>

4. REGULATORY ISSUES AND OTHER RISK CONSIDERATIONS:

There can be no assurance that the Company will be able, for financial or
other reasons, to comply with applicable laws and regulations or that regulatory
authorities will not take action to limit or prevent the Company from
advertising, marketing or promoting its services and membership clubs or
otherwise require the Company to discontinue or substantially modify the content
of its services.

5. COMMITMENTS AND CONTINGENCIES:

The Company has entered into agreements with various celebrities to promote
its telephone entertainment services. These agreements are generally for a term
of one year, which may be extended under certain circumstances, and grant
worldwide rights to use an individual's name and likeness in connection with
services promoted by advertisements. Compensation varies by individual and
generally consists of an advance payment and royalties based on defined revenues
earned by the Company. Total royalty expenses incurred for fiscal 1995 were
$434,468.

6. SUBSEQUENT EVENTS:

On January 17, 1995, PRN entered into a letter of intent with Quintel
Entertainment, Inc., the parent company of CCCI, to acquire the remaining 50%
interest of N.L. Consummation of the transaction is subject

F-29
<PAGE> 76

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

to the parties completing due diligence, securing requisite corporate and other
approvals and the execution of definitive acquisition agreements.

In a separate transaction effective January 17, 1995, PRN transferred its media
departments and staff to N.L. and a principal of PRN will also be retained by
the Company as a consultant.

F-30
<PAGE> 77

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
FEBRUARY
29,
1996 NOVEMBER 30,
(UNAUDITED) 1995
----------- ------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents........................................ $15,968,372 $ 3,570,468
Accounts receivable, trade....................................... 13,975,411 10,097,629
Deferred tax asset............................................... 2,486,501 39,957
Due from related parties......................................... 637,205 67,162
Prepaid expenses and other current assets........................ 2,141,931 381,292
----------- -----------
Total current assets.......................................... 35,209,420 14,156,508
Property and equipment, at cost, net of accumulated depreciation... 184,622 142,369
Investment in joint venture, at equity............................. 1,532,334 1,345,304
Other assets....................................................... 44,313 1,325,775
----------- -----------
$36,970,689 $ 16,969,956
=========== ===========
LIABILITIES:
Current liabilities:
Accounts payable................................................. $ 2,857,441 $ 1,269,647
Accrued expenses................................................. 2,017,329 2,351,644
Reserve for customer chargebacks................................. 6,253,110 4,025,130
Loans payable.................................................... 3,293,806 2,643,522
Due to related parties........................................... 949,400 354,751
Income taxes payable............................................. 2,354,058 294,187
Note payable..................................................... 2,101,340
----------- -----------
Total liabilities............................................. 19,826,484 10,938,881
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock -- $.001 par value; 1,000,000 shares authorized;
none issued and outstanding......................................
Common stock -- $.001 par value; authorized 50,000,000 shares;
issued and outstanding 15,225,000 and 12,000,000 shares,
respectively..................................................... 15,225 12,000
Additional paid-in capital......................................... 14,415,108 441,258
Retained earnings.................................................. 2,713,872 5,597,817
Less subscriptions receivable...................................... (20,000)
----------- -----------
Total stockholders' equity.................................... 17,144,205 6,031,075
----------- -----------
$36,970,689 $ 16,969,956
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-31
<PAGE> 78

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Net revenue........................................................ $ 16,018,571 $ 8,214,999
Cost of sales...................................................... 12,677,980 6,809,201
----------- -----------
Gross profit.................................................. 3,340,591 1,405,798
Selling, general and administrative expenses....................... 2,073,374 496,247
----------- -----------
1,267,217 909,551
Interest expense................................................... (139,961) (18,685)
Other income, net.................................................. 366,110
Equity in earnings of joint venture................................ 2,437,030 157,788
----------- -----------
3,930,396 1,048,654
Provision (benefit) for income taxes............................... (371,793) 2,135
----------- -----------
Net income.................................................... $ 4,302,189 $ 1,046,519
=========== ===========
Net earnings per share............................................. $ 0.28 $ 0.09
=========== ===========
Weighted average shares outstanding................................ 15,446,043 12,000,000
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-32
<PAGE> 79

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 4,302,189 $ 1,046,519
Items not affecting cash:
Depreciation and amortization................................. 9,639 2,676
Reserve for customer chargebacks.............................. 2,227,980 965,126
Deferred income taxes......................................... (2,446,544) (15,061)
Equity in net earnings of joint venture, net of dividends
received..................................................... (187,030) (157,788)
Changes in assets and liabilities:
Accounts receivable........................................... (3,877,782) (3,102,994)
Prepaid expenses and other current assets..................... (1,760,639) (1,080,227)
Accounts payable.............................................. 1,587,794 606,216
Income tax payable............................................ 2,059,871 (41,891)
Due to related parties........................................ 24,606 647,479
Other, principally accrued expenses........................... 945,485 (878,091)
Net cash provided by (used in) operating activities......... 2,885,569 (2,008,036)
----------- -----------
Cash flows from investing activities:
Investment in joint venture...................................... (25,000)
Capital expenditures............................................. (50,229)
----------- -----------
Net cash used in investing activities....................... (50,229) (25,000)
----------- -----------
Cash flows from financing activities:
Proceeds from collection of common stock subscription............ 20,000
Proceeds from issuance of common stock, net...................... 13,402,075
Distributions to shareholders.................................... (3,000,000)
Principal payments on notes payable to shareholders.............. (1,509,795)
Loans payable, net............................................... 650,284 2,082,289
----------- -----------
Net cash provided by (used in) financing activities......... 9,562,564 2,082,289
----------- -----------
Net increase in cash and cash equivalents.......................... 12,397,904 49,253
Cash and cash equivalents, beginning of period..................... 3,570,468 981,073
----------- -----------
Cash and cash equivalents, end of period........................... $ 15,968,372 $ 1,030,326
=========== ===========
Non-cash financing activities:
Notes payable to shareholders of undistributed S corporation
earnings...................................................... $ 3,611,135
Contribution of capital from S corporation....................... 575,000
</TABLE>

See accompanying notes to consolidated financial statements.

F-33
<PAGE> 80

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL:

The consolidated financial statements for the three month periods ended
February 29, 1996 and February 28, 1995 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim period. The consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto, together with management's discussion
and analysis of financial condition and results of operations, contained in the
Company's Annual Report on Form 10-K for the fiscal year ended November 30,
1995. The results of operations for the three months ended February 29, 1996 are
not necessarily indicative of the results for the entire fiscal year ending
November 30, 1996.

2. EARNINGS PER SHARE:

Net earnings per share have been computed by dividing net earnings by the
weighted average number of common and common equivalent shares outstanding
during the period, computed in accordance with the treasury stock method.

3. ADVERTISING EXPENSES:

The Company expenses all advertising costs during the year in which they
are incurred, except for certain media and telemarketing costs. For interim
purposes, telemarketing expenses are deferred and charged to operations over a
four month period, while media costs are expensed as the advertising occurs,
resulting in deferred telemarketing expense and prepaid advertising expenses.
Included in prepaid expenses and other current assets is approximately
$1,335,000 relating to deferred telemarketing and prepaid advertising at
February 29, 1996. All costs will be expensed prior to year end. Total
advertising expense incurred for the three months ended February 29, 1996 and
February 28, 1995 were $5,552,249 and $1,175,329, respectively.

4. STOCKHOLDERS' EQUITY:

On December 5, 1995, the Company completed an initial public offering ("the
Offering") of 3,225,000 shares of common stock with a $.001 par value. Net
proceeds received were approximately $13,402,000.

In connection with the terms of the Offering, a $3,000,000 S corporation
distribution was made on December 4, 1995 and shareholder promissory notes were
issued for the balance of the aggregate undistributed earnings of the former S
corporation, except for $575,000. During the quarter ended February 29, 1996,
payments of approximately $1,510,000 were made on these notes. As of February
29, 1996, approximately $2,100,000, plus accrued interest at 9% per annum,
remains outstanding on these notes.

F-34
<PAGE> 81

QUINTEL ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. STOCKHOLDERS' EQUITY (CONTINUED)
A summary of the changes in stockholders' equity for the three months ended
February 29, 1996 is as follows:

<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED SUBSCRIPTIONS
STOCK CAPITAL EARNINGS RECEIVABLE TOTAL
------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1995................... $12,000 $ 441,258 $ 5,597,817 $ (20,000) $ 6,031,075
Collections on subscriptions receivable...... 20,000 20,000
Distributions to shareholders................ (3,000,000) (3,000,000)
Issuance of shareholder promissory notes..... (3,611,134) (3,611,134)
Issuance of common stock..................... 3,225 13,398,850 13,402,075
Contributed capital.......................... 575,000 (575,000)
Net income................................... 4,302,189 4,302,189
-------
---
----------- ----------- --------- -----------
$15,225 $14,415,108 $ 2,713,872 $ -- $17,144,205
======= =========== =========== ========= ===========
</TABLE>

5. NEW LAUDERDALE:

In addition, the Company may make available to PRN's shareholders an
interest-bearing loan secured by the shares issued to cover a portion of their
tax liability attributable to the transaction in the event that the Company's
stock trades below certain levels. The loan shall be due and payable no later
than two years from the date it is made, or sooner, if the Company's stock
trades at certain levels.

Consummation of this transaction is subject to the parties completing due
diligence, securing requisite corporate and other approvals and the execution of
definitive acquisition agreements.

The following is condensed financial data for New Lauderdale:

<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Net revenues................................................. $ 22,246,546 $ 1,298,539
Gross profit................................................. 5,845,062 385,186
Net income................................................... 4,874,060 315,576
</TABLE>

6. NEWLY ISSUED ACCOUNTING STANDARDS:

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS No. 123"). SFAS No. 123, which becomes effective in fiscal
1997, allows companies to measure compensation cost in connection with employee
stock compensation plans using a fair value based method or to continue to use
an intrinsic value based method, which generally does not result in compensation
cost. The Company has not yet decided which method it will utilize relating to
its stock-based employee plans.

F-35
<PAGE> 82

NEW LAUDERDALE, L.C.

STATEMENT OF FINANCIAL POSITION

FEBRUARY 29, 1996

<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents...................................................... $ 1,237,038
Accounts receivable, trade..................................................... 17,932,220
Deferred tax asset............................................................. 141,551
Due from related parties....................................................... 58,487
Prepaid expenses............................................................... 1,068,488
-----------
$20,437,784
===========
LIABILITIES AND MEMBERS' EQUITY
Accrued expenses............................................................... $ 3,084,891
Reserve for customer chargebacks............................................... 9,092,378
Loans payable.................................................................. 4,712,355
Income taxes payable........................................................... 483,492
-----------
17,373,116
-----------
Members' equity, as annexed.................................................... 3,064,668
-----------
$20,437,784
===========
</TABLE>

F-36
<PAGE> 83

NEW LAUDERDALE, L.C.

STATEMENT OF OPERATIONS

FEBRUARY 29, 1996

<TABLE>
<S> <C>
Net Revenue.................................................................... $22,246,546
Cost of Sales.................................................................. 16,401,484
-----------
Gross Profit.............................................................. 5,845,062
Selling, General and administrative expenses................................... 905,570
-----------
Income from Operations.................................................... 4,939,492
Interest Expense............................................................... (76,162)
Other Income................................................................... 19,726
-----------
Income Before Provision for Income Taxes.................................. 4,883,056
Provision for State Income Taxes.......................................... 8,996
-----------
Net Income................................................................ $ 4,874,060
===========
</TABLE>

F-37
<PAGE> 84

NEW LAUDERDALE, L.C.

STATEMENT OF CASH FLOWS

FOR THE THREE MONTH PERIOD ENDED FEBRUARY 29, 1996

<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net income............................................................... $ 4,874,060
Items not affecting cash:
Reserve for customer chargebacks.................................... 4,426,466
Deferred income taxes............................................... (141,551)
Changes in assets and liabilities:
Accounts receivable................................................. (11,017,069)
Due from related parties............................................ 133,422
Prepaid expenses.................................................... (801,541)
Accrued expenses.................................................... 1,595,340
Due to related parties.............................................. (256,865)
Income taxes payable................................................ 150,547
------------
Net Cash Used In Operating Activities............................... (1,037,191)
------------
Cash Flows from Financing Activities:
Loans payable, net....................................................... 2,942,677
Distributions to members................................................. (4,500,000)
------------
Net Cash Used In Financing Activities............................... (1,557,323)
------------
Net Decrease in Cash and Cash Equivalents..................................... (2,594,514)
Cash and Cash Equivalents, Beginning of Period................................ 3,831,552
------------
Cash and Cash Equivalents, End of Period...................................... $ 1,237,038
============
Supplemental Disclosures:
Cash paid for interest................................................... $ 69,151
============
</TABLE>

F-38
<PAGE> 85

NEW LAUDERDALE, L.C.

STATEMENT MEMBERS' EQUITY

FOR THE THREE MONTH PERIOD ENDED FEBRUARY 29, 1996

<TABLE>
<CAPTION>
CAPITAL UNDISTRIBUTED
CONTRIBUTED EARNINGS TOTAL
----------- ------------- -----------
<S> <C> <C> <C>
Balance, November 30, 1995............................... $50,000 $ 2,640,608 $ 2,690,608
Net income............................................... 4,874,060 4,874,060
Distributions............................................ (4,500,000) (4,500,000)
------- ----------- -----------
Balance, February 29, 1996............................... $50,000 $ 3,014,668 $ 3,064,668
======= =========== ===========
</TABLE>

F-39
<PAGE> 86

EXHIBIT A

AGREEMENT

BETWEEN

QUINTEL ENTERTAINMENT, INC.,

CALLING CARD CO, INC.,

AND

PSYCHIC READERS NETWORK, INC.
DATED: AS OF JANUARY 17, 1996
<PAGE> 87

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
ARTICLE 1: DEFINITIONS............................................................... 1
1.1 AMENDED AND RESTATED SERVICE AGREEMENT.................................... 1
1.2 CLOSING................................................................... 1
1.3 CLOSING DATE.............................................................. 1
1.4 CLOSING MARKET PRICE...................................................... 1
1.5 COMMISSION................................................................ 1
1.6 COMMON STOCK.............................................................. 1
1.7 EBIT...................................................................... 1
1.8 EMPLOYMENT AGREEMENT...................................................... 1
1.9 ESCROW AGREEMENT.......................................................... 1
1.10 ESCROWEE.................................................................. 2
1.11 FEDER..................................................................... 2
1.12 FYE....................................................................... 2
1.13 LINDSEY................................................................... 2
1.14 GAAP...................................................................... 2
1.15 NON-COMPETITION AND RIGHT OF FIRST REFUSAL AGREEMENT...................... 2
1.16 OTHER DOCUMENTS........................................................... 2
1.17 PERSON.................................................................... 2
1.18 PRN PRINCIPALS............................................................ 2
1.19 QUINTEL ACCOUNTANTS....................................................... 2
1.20 QUINTEL PRINCIPALS........................................................ 2
1.21 REGISTER; REGISTERED; REGISTRATION........................................ 2
1.22 REGISTRATION RIGHTS AGREEMENT............................................. 2
1.23 SECURITIES ACT............................................................ 2
1.24 SHARES.................................................................... 3
1.25 STOLZ..................................................................... 3
ARTICLE 2: TRANSFER OF NL INTEREST................................................... 3
2.1 TRANSFER OF NL INTEREST................................................... 3
2.2 THE SHARES................................................................ 3
2.3 FORFEITURE PROVISIONS REGARDING THE ESCROW SHARES......................... 3
2.4 DELIVERY AND RELEASE OF CERTIFICATES FOR THE ESCROW SHARES................ 4
2.5 DETERMINATION OF EBIT..................................................... 4
2.6 CLOSING................................................................... 4
2.6.1 DELIVERIES BY PRN AT CLOSING.............................................. 4
2.6.2 DELIVERIES BY QUINTEL AT CLOSING.......................................... 5
2.6.3 DELIVERIES BY CALLING CARD AT CLOSING..................................... 5
2.6.4 OTHER DELIVERIES AT CLOSING............................................... 5
2.6.5 DISTRIBUTION OF NL'S RETAINED EARNING..................................... 5
ARTICLE 3: REGISTRATION OF SHARES; LOCK-UP AGREEMENTS................................ 6
3.1 REGISTRATION OF SHARES.................................................... 6
3.2 LOCK UP AGREEMENTS: TREATMENT OF PRN PRINCIPALS AS "AFFILIATES";
LIMITATION ON SALE OF SHARES BY QUINTEL PRINCIPALS AND PRN PRINCIPALS
THROUGH SEPTEMBER 5, 1996............................................... 6
3.3 ADDITIONAL LOCK UP AGREEMENT BY PRN PRINCIPALS DURING TWO YEAR PERIOD
FOLLOWING CLOSING....................................................... 7
3.4 LOANS TO PRN PRINCIPALS................................................... 8
</TABLE>

i
<PAGE> 88

<TABLE>
<S> <C> <C>
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PRN..................................... 10
4.1 EXISTENCE AND GOOD STANDING............................................... 10
4.2 CAPITAL STOCK............................................................. 10
4.3 FINANCIAL STATEMENTS...................................................... 10
4.4 TITLE TO NL INTEREST; ENCUMBRANCES........................................ 11
4.5 LITIGATION................................................................ 11
4.6 LIABILITIES............................................................... 11
4.7 COMPLIANCE WITH LAWS...................................................... 11
4.8 LICENSES.................................................................. 11
4.9 NO CHANGES SINCE THE BALANCE SHEET DATE................................... 11
4.10 VALID AGREEMENTS; RESTRICTIVE DOCUMENTS................................... 12
4.11 REQUIRED APPROVALS, NOTICES AND CONSENTS.................................. 12
4.12 DISCLOSURE................................................................ 12
ARTICLE 5: REPRESENTATIONS OF QUINTEL AND CALLING CARD............................... 13
5.1 EXISTENCE AND GOOD STANDING............................................... 13
5.2 SHARES.................................................................... 13
5.3 FINANCIAL STATEMENTS...................................................... 13
5.4 LITIGATION................................................................ 13
5.5 LIABILITIES............................................................... 13
5.6 COMPLIANCE WITH LAWS...................................................... 13
5.7 LICENSES.................................................................. 14
5.8 NO CHANGES SINCE THE BALANCE SHEET DATE................................... 14
5.9 VALID AGREEMENTS; RESTRICTIVE DOCUMENTS................................... 14
5.10 REQUIRED APPROVALS, NOTICES AND CONSENTS.................................. 15
5.11 DISCLOSURE................................................................ 15
ARTICLE 6: COVENANTS................................................................. 15
6.1 FURTHER ASSURANCES........................................................ 15
6.2 NO BROKERS................................................................ 15
ARTICLE 7: SURVIVAL OF REPRESENTATIONS; INDEMNITY.................................... 16
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF PRN AND THE PRN
PRINCIPALS.............................................................. 16
7.2 OBLIGATION OF PRN AND THE PRN PRINCIPALS TO INDEMNIFY..................... 16
7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF QUINTEL AND CALLING CARD.... 16
7.4 OBLIGATION OF QUINTEL AND CALLING CARD TO INDEMNIFY....................... 16
7.5 NOTICE AND OPPORTUNITY TO DEFEND.......................................... 16
7.5.1 NOTICE OF ASSERTED LIABILITY.............................................. 16
7.5.2 OPPORTUNITY TO DEFEND..................................................... 17
7.5.3 SETTLEMENT................................................................ 17
ARTICLE 8: MISCELLANEOUS............................................................. 18
8.1 EXPENSES.................................................................. 18
8.2 GOVERNING LAW............................................................. 18
8.3 JURISDICTION.............................................................. 18
8.4 "KNOWLEDGE" DEFINED....................................................... 18
8.5 DUTIES AND LIABILITIES OF ESCROWEE........................................ 18
8.6 CAPTIONS.................................................................. 18
8.7 NOTICES................................................................... 18
8.8 SCHEDULES................................................................. 19
</TABLE>

ii
<PAGE> 89

<TABLE>
<S> <C> <C>
8.9 PARTIES IN INTEREST....................................................... 19
8.10 SEVERABILITY.............................................................. 19
8.11 COUNTERPARTS.............................................................. 19
8.12 ENTIRE AGREEMENT.......................................................... 19
8.13 AMENDMENTS................................................................ 19
8.14 THIRD-PARTY BENEFICIARIES................................................. 19
</TABLE>

iii
<PAGE> 90

AGREEMENT dated as of January 17, 1996 by and between QUINTEL
ENTERTAINMENT, INC., a corporation organized under the laws of Delaware with
offices at One Blue Hill Plaza, Pearl River, New York 10956 (hereafter referred
to as "QUINTEL"), CALLING CARD CO, INC., a corporation organized under the laws
of New York with offices at One Blue Hill Plaza, Pearl River, New York 10956
(hereafter referred to as "Calling Card"), and PSYCHIC READERS NETWORK, INC., a
Florida corporation with offices at 2455 E. Sunrise Boulevard, Fort Lauderdale,
Florida 33304 (hereafter referred to as "PRN").

WITNESSETH:

WHEREAS, the parties wish to confirm the terms upon which QUINTEL has
agreed to acquire from PRN one hundred percent (100%) of the interest of PRN
(the "NL Interest") in NEW LAUDERDALE, L.C. ("NL"), a Florida limited liability
company.

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

ARTICLE 1: DEFINITIONS.

Capitalized terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article 1. Certain
additional defined terms are set forth elsewhere in this Agreement.

1.1 AMENDED AND RESTATED SERVICE AGREEMENT.

"Amended and Restated Service Agreement" means the Agreement among PRN,
Quintel and Calling Card in the form annexed hereto as Schedule 1.1.

1.2 CLOSING.

"Closing" shall mean the consummation of the transfer of the NL Interest.

1.3 CLOSING DATE.

"Closing Date" shall mean the date on which the Closing occurs.

1.4 CLOSING MARKET PRICE.

"Closing Market Price" shall mean $7.125 ($7 1/8), the closing price of the
Common Stock on January 17, 1996.

1.5 COMMISSION.

"Commission" means the United States Securities and Exchange Commission.

1.6 COMMON STOCK.

"Common Stock" means the shares of common stock par value U.S.$.001 per
share of QUINTEL.

1.7 EBIT.

"EBIT" shall mean earnings before interest and taxes.

1.8 EMPLOYMENT AGREEMENT.

"Employment Agreement" means the agreement between Steven L. Feder and
Calling Card in the form annexed hereto as Schedule 1.8.

1.9 ESCROW AGREEMENT.

"Escrow Agreement" means the agreement in the form annexed hereto as
Schedule 1.9.

1
<PAGE> 91

1.10 ESCROWEE.

"Escrowee" means the firm of Feder, Kaszovitz, Isaacson, Weber, Skala &
Bass LLP, attorneys for QUINTEL and Calling Card.

1.11 FEDER.

"Feder" means Steven L. Feder, one of the shareholders of PRN.

1.12 FYE.

"FYE" means Fiscal Year Ending.

1.13 LINDSEY.

"Lindsey" means Thomas H. Lindsey, one of the shareholders of PRN.

1.14 GAAP.

"GAAP" shall mean generally accepted accounting principles, consistently
applied.

1.15 NON-COMPETITION AND RIGHT OF FIRST REFUSAL AGREEMENT.

"Non-Competition and Right of First Refusal Agreement" means the agreement
in the form annexed hereto as Schedule 1.15.

1.16 OTHER DOCUMENTS.

"Other Documents" shall mean all Schedules and Exhibits to this Agreement
and all other instruments, agreements and documents executed or to be executed
by any party hereto in connection with the transactions contemplated hereby.

1.17 PERSON.

"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or other department or agency thereof.

1.18 PRN PRINCIPALS.

"PRN Principals" shall mean each of Steven L. Feder, Peter Stolz and Thomas
H. Lindsey.

1.19 QUINTEL ACCOUNTANTS.

"QUINTEL Accountants" shall mean Feldman Gutterman Meinberg & Co. while
they continue to act as one of QUINTEL's accounting firms, or, if they are no
longer acting in such capacity, such other firm of certified public accountants
then acting as accountants for QUINTEL.

1.20 QUINTEL PRINCIPALS.

"QUINTEL Principals" shall mean each of Jeffrey L. Schwartz, Michael G.
Miller, Jay Greenwald, Claudia Newman Hirsch and Andrew Stollman.

1.21 REGISTER; REGISTERED; REGISTRATION.

The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a Registration Statement with the
Commission in compliance with the Securities Act and/or the Securities and
Exchange Act of 1934, and applicable rules and regulations under either such
Act, and the declaration or ordering of the effectiveness of such Registration
Statement.

1.22 REGISTRATION RIGHTS AGREEMENT.

"Registration Rights Agreement" means the agreement in the form of Schedule
1.22 annexed hereto.

1.23 SECURITIES ACT.

"Securities Act" shall mean the Securities Act of 1933, as amended.

2
<PAGE> 92

1.24 SHARES.

"Shares" shall mean the shares of QUINTEL's Common Stock delivered to PRN
in exchange for the NL Interest.

1.25 STOLZ.

"Stolz" means Peter Stolz, one of the shareholders of PRN.

ARTICLE 2: TRANSFER OF NL INTEREST.

2.1 TRANSFER OF NL INTEREST.

QUINTEL and PRN hereby confirm in this Agreement the terms and conditions
pursuant to which PRN has agreed to sell and transfer to NL Corp., a Delaware
corporation which is a subsidiary of QUINTEL, and NL Corp. shall acquire PRN's
NL Interest from PRN in consideration for the Shares upon the terms set forth in
this Agreement.

2.2 THE SHARES.

The Shares will consist of three million two hundred thousand (3,200,000)
shares of QUINTEL's common stock par value $.001 per share.

2.2.1 The certificates representing the Shares will bear the
following legend:

"Any transfer or other disposition of the shares represented by this
certificate is subject to the provisions of an Agreement dated as of
January 17, 1996 among Quintel Entertainment, Inc. (the "Corporation"),
Calling Card Co., Inc., Psychic Readers Network, Inc., Steven L. Feder,
Thomas H. Lindsey, Jay Greenwald, Michael Miller, Claudia Newman,
Jeffrey Schwartz, Andrew Stollman and Peter Stolz. The shares of stock
represented by this certificate have not been registered under the
United States Securities Act of 1933, as amended (the "Act") and may be
transferred only if (i) registered under the Act and if the requirements
of any state having jurisdiction are complied with or (ii) the transfer
is exempt from such registration and state requirements and counsel
reasonably acceptable to the Corporation has delivered to the
Corporation a written opinion reasonably acceptable to the Corporation
setting forth the basis for such exemption."

2.3 FORFEITURE PROVISIONS REGARDING THE ESCROW SHARES.

One million two hundred thousand (1,200,000) of the Shares (hereafter
referred to as the "Escrow Shares") shall be subject to forfeiture as set forth
below:

i. None of the 1,200,000 Escrow Shares shall be forfeited and all of
the Escrow Shares shall be delivered to PRN, if (1) NL's EBIT for the
entire FYE 11/30/96 is at least twelve million ($12,000,000) dollars, or
(2) NL's EBIT for the first or second quarters of FYE 11/30/96 is at least
five million ($5,000,000) dollars, or (3) NL's aggregate EBIT for the first
and second quarters of FYE 11/30/96 is at least five million ($5,000,000)
dollars;

ii. If none of the conditions set forth in subparagraph 2.3-i. is
satisfied, but NL's EBIT for either the first quarter of FYE 11/30/96 or
the second quarter of FYE 11/30/96 is at least three million ($3,000,000)
dollars, then 400,000 Escrow Shares shall be forfeited and delivered to
QUINTEL, and 800,000 Escrow Shares shall be delivered to PRN;

iii. If none of the conditions set forth in subparagraphs 2.3-i or
2.3-ii is satisfied, but if NL's EBIT in each of the first quarter of FYE
11/30/96 and the second quarter of FYE 11/30/96 is more than two million
($2,000,000) dollars, then 400,000 Escrow Shares shall be forfeited and
delivered to QUINTEL, and 800,000 Escrow Shares shall be delivered to PRN;
and

iv. If none of the conditions set forth in subparagraphs 2.3-i.,
2.3-ii. or 2.3-iii. is satisfied, but if NL's EBIT for either the first
quarter of FYE 11/30/96 or the second quarter of FYE 11/30/96 is more than
two million ($2,000,000) dollars, then 800,000 Escrow Shares shall be
forfeited and delivered to QUINTEL, and 400,000 Escrow Shares shall be
delivered to PRN; and

3
<PAGE> 93

v. If none of the conditions set forth in subparagraphs 2.3-i.,
2.3-ii., 2.3-iii., or 2.3-iv. is satisfied, then all of the 1,200,000
Escrow Shares shall be forfeited and delivered to QUINTEL.

2.4 DELIVERY AND RELEASE OF CERTIFICATES FOR THE ESCROW SHARES.

At the Closing, the certificates representing the Escrow Shares shall be
delivered to QUINTEL's counsel as Escrowee, and shall be held by Escrowee
pursuant to the terms of the Escrow Agreement. Upon the determination of EBIT
for a fiscal quarter, certificates representing the number of Escrow Shares, if
any, to which PRN would then be entitled shall be promptly delivered to the PRN
Principals (allocated among them in the same proportion as the Shares were
allocated among them). No Escrow Shares shall be forfeited and delivered to
Quintel until the determination of EBIT for the entire FYE 11/30/96.

2.5 DETERMINATION OF EBIT.

The determination of EBIT for any period shall be made by the QUINTEL
Accountants in accordance with GAAP and consistent with past practices in
connection with the preparation of NL's financial statements. In the event PRN
disagrees with the QUINTEL Accountant's treatment of any item of income or
expense in determining EBIT, PRN shall have the right to appoint its own firm of
certified public accountants (the "PRN Accountants") to examine the issue within
fifteen (15) business days following receipt of the QUINTEL Accountants'
determination, and if the PRN Accountants and the QUINTEL Accountants cannot
resolve the issue within thirty (30) days, then a third accountant will be
selected by PRN's Accountants and the QUINTEL Accountants and the decision of a
majority of the three accounting firms (which shall be in accordance with GAAP
and consistent with past practices in connection with the preparation of NL's
financial statements) shall be final and binding upon the parties. Each party
shall bear the cost of its own accountant, but in the event of the appointment
of a third accountant, the party against whom the issue is resolved shall bear
the cost of the third accountant.

2.6 CLOSING.

The Closing shall take place concurrently with the execution of this
Agreement at the offices of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP,
750 Lexington Avenue, New York, New York.

2.6.1 DELIVERIES BY PRN AT CLOSING.

At Closing, PRN shall deliver to QUINTEL:

i. documents transferring and assigning the NL Interest to QUINTEL
or its subsidiary acquiring the NL Interest;

ii. the Escrow Agreement executed by PRN;

iii. the Non-Competition and Right of First Refusal Agreement to be
executed by PRN and the PRN Principals;

iv. an opinion letter of PRN's counsel Holland & Knight;

v. the Amended and Restated Service Agreement, and the Letter of
Instruction referred to therein;

vi. a copy of PRN's Certificate of Incorporation, including all
amendments, certified by the Secretary of State of Florida;

vii. a certificate from Florida to the effect that such corporation
is in good standing in Florida.

viii. such other documents or instruments as may be necessary in
order to consummate the transactions described in this Agreement.

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2.6.2 DELIVERIES BY QUINTEL AT CLOSING.

At Closing, QUINTEL shall deliver to PRN:

i. certificates representing Two Million (2,000,000) Shares divided
among the PRN Principals as follows:

890,000 Shares to
Feder 44.5%
890,000 Shares to
Lindsey 44.5%
220,000 Shares to
Stolz 11 %

ii. the Escrow Agreement executed by QUINTEL;

iii. the Non-Competition and Right of First Refusal Agreements
executed by QUINTEL;

iv. the opinion of QUINTEL's counsel Feder, Kaszovitz, Isaacson,
Weber, Skala & Bass LLP;

v. a certificate from the Secretary of State of the State of
Delaware to the effect that QUINTEL is in good standing in such state.

vi. such other documents or instruments as may be necessary in
order to consummate the transactions described in this Agreement.

2.6.3 DELIVERIES BY CALLING CARD AT CLOSING.

At Closing, Calling Card shall deliver:

i. the Employment Agreement executed by Calling Card;

ii. such other documents or instruments as may be necessary in
order to consummate the transactions described in this Agreement.

2.6.4 OTHER DELIVERIES AT CLOSING.

At Closing, the following shall be delivered:

i. the Employment Agreement executed by Feder shall be delivered by
Feder;

ii. the Non-Competition and Right of First Refusal Agreements
executed by the PRN Principals shall be delivered by each of them;

iii. a certificate representing the Escrow Shares will be delivered
by Quintel to the Escrow Agent.

iv. the Letter of Direction and Stock Powers referred to in Section
3.4.1.1.

2.6.5 DISTRIBUTION OF NL'S RETAINED EARNING.

At Closing PRN will be entitled to receive fifty (50%) percent of NL's
retained earnings, for the period from February 1, 1996 through the Closing
Date, plus the Deferred Tax Asset (as such term is defined in this paragraph);
PRN's share of the retained earnings plus the Deferred Tax Asset shall be
collectively referred to in this paragraph as "PRN's Retained Earnings
Distribution". The term "Deferred Tax Asset" shall mean an amount equal to forty
(40%) percent of the difference between (i) PRN's share of NL's Retained
Earnings determined under GAAP as at Closing and (ii) the amount of NL's
Retained Earnings allocable to PRN for tax purposes from the inception of NL
through the Closing.

PRN's Retained Earnings Distribution shall be determined by QUINTEL's
Accountants in accordance with GAAP based upon a review of NL's financial
statements as of the Closing Date. In the event of any disagreement between
QUINTEL and PRN regarding the treatment of any item of income or expense or any
other item bearing upon the special determination, the dispute shall be resolved
in the same manner provided for in paragraph 2.5. PRN's Retained Earnings
Distribution shall be paid to it within five (5) business days after delivery of
the QUINTEL's Accountant's determination (subject to adjustment in the event of
dispute upon resolution of the dispute in accordance with the procedure
described in paragraph 2.5), provided,

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however, that to the extent that NL's available cash is insufficient to pay
PRN's Retained Earnings Distribution as of such payment date, the amount of such
shortfall shall be paid by NL in equal amounts to PRN, with interest at the
prime rate and such obligation shall evidenced by an Earnings Distribution Note
in the form annexed as Schedule 2.6, which will provide for aggregate monthly
minimum payments of principal of $75,000.00 plus 50% of cash flow in excess of
$500,000.00.

ARTICLE 3: REGISTRATION OF SHARES; LOCK-UP AGREEMENTS.

3.1 REGISTRATION OF SHARES.

3.1.1 QUINTEL agrees that it will, as promptly as practicable after
the Closing, file, and use its best efforts to cause to become effective
under the Securities Act, a registration statement covering the Shares (the
"Registration Statement") to permit the public distribution, which shall
include the resale on a continuing basis, of the Shares by the PRN
Principals, in accordance with the Registration Rights Agreement.

3.2 LOCK UP AGREEMENTS: TREATMENT OF PRN PRINCIPALS AS "AFFILIATES";
LIMITATION ON SALE OF SHARES BY QUINTEL PRINCIPALS AND PRN
PRINCIPALS THROUGH SEPTEMBER 5, 1996.

3.2.1 The PRN Principals by their execution of this Agreement agree
that for as long as the PRN Principals as a group hold Shares which in the
aggregate constitute five (5%) percent or more of the total voting shares
of common stock of QUINTEL, the PRN Principals will not sell or otherwise
dispose of that number of their Shares which in the aggregate exceed the
number of shares which could be sold if the provisions of Rule 144-e(1) (as
in effect on the date of this Agreement) promulgated under the Securities
Act, applied to each PRN Principal as if the Shares were "restricted
securities" as defined in Rule 144(a)(3) notwithstanding the fact that the
Shares may have been registered for sale under the Securities Act or that
each of the PRN Principals may not be an "affiliate" as defined in Rule
144(a)(1); provided, however, that if a PRN Principal's Shares are not in
fact "restricted securities" as defined in Rule 144(a)(3), such PRN
Principal shall be permitted to sell that number of Shares whose net
proceeds (deducting brokerage commissions only) is equal to (x) the
principal amount of a loan made by Quintel to a PRN Principal pursuant to
Section 3.4.2 of this Agreement or (y) to pay the PRN Principal's Net Tax
Liability (as such term is defined below), if any.

3.2.1.1 The term "Net Tax Liability" shall apply only if the
acquisition of the NL Interest is not treated as a tax-free transaction,
and shall mean, in such event,

A. Twenty eight (28%) percent (or such lesser percentage at which
the capital gain from the sale of the NL Interest is taxed under the
Internal Revenue Code) of the sum of:

(i) the Closing Market Price of all of such PRN Principal's
Shares multiplied by One minus the Appraisal Discount (defined
below), and

(ii) the proceeds, if any, realized by the PRN Principal from
the sale of Shares prior to the date of any loan provided for herein
or the due date of a PRN Principal's Net Tax Liability;

less:

B. Sixty (60%) percent of the product obtained by multiplying

(1) NL's retained earnings through the Closing Date distributed
to PRN by

(2) the PRN Principal's equity interest in PRN.

3.2.1.2 The term "Appraisal Discount" means the discount applied
by the PRN Principals' expert in valuing the Shares for tax purposes.

3.2.2 Each PRN Principal and each QUINTEL Principal agrees that from
the Closing Date until September 5, 1996 they will not sell among them
during any three (3) month period occurring prior to September 5, 1996 that
number of shares of Common Stock which exceeds the greater of (1) 750,000

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shares of Common Stock or (2) that number of shares of Common Stock equal
to the product of (x) the average weekly trading volume of the Common Stock
during the four calendar weeks preceding a sale of shares of Common Stock
multiplied by (y) five (5).

3.2.2.1 In determining the number of shares of Common Stock which
may be sold by each PRN Principal and QUINTEL Principal during any three
(3) month period referred to in Section 3.2.2, the PRN Principals shall
be entitled to sell among them in the aggregate one-sixth (1/6) of the
aggregate number of shares of Common Stock which may be sold by all of
the PRN Principals and QUINTEL Principals during such period, and each
QUINTEL Principal shall be entitled to sell one-sixth (1/6) of the
aggregate number of shares of Common Stock which may be sold by all of
the PRN Principals and QUINTEL Principals during such period.

3.3 ADDITIONAL LOCK UP AGREEMENT BY PRN PRINCIPALS DURING TWO YEAR PERIOD
FOLLOWING CLOSING.

In addition to the lock up agreements provided for in Section 3.2 of this
Agreement, the PRN Principals agree that during the two (2) year period
following the Closing (hereafter referred to as the "Section 3.3 Lock Up
Period") the PRN Principals will not sell or otherwise dispose of their shares
of Common Stock (including any shares of Common Stock which they may acquire in
addition to the Shares but excluding 86,000 shares of Common Stock owned by the
PRN Principals as of the date hereof) except as provided in this Section 3.3.

3.3.1 If a QUINTEL Principal decides to sell any Common Stock, the
QUINTEL Principal shall give notice to the PRN Principals and each other
QUINTEL Principal of his or her intention to sell shares of Common Stock
not later than twenty-four (24) hours prior to the date on which the
QUINTEL Principal wishes to commence such sale (such notice of sale is
referred to as the "Sale Notice" and a QUINTEL Principal giving a Sale
Notice is referred to as the "Selling QUINTEL Principal"). The Sale Notice
shall:

i. set forth the number of shares of Common Stock which the Selling
QUINTEL Principal wishes to sell (the number of shares identified in a
Sale Notice is referred to as the "Base Shares");

ii. the date on which the Selling QUINTEL Principal proposes to
commence selling such shares (such date is referred to as the "First
Sale Date").

The First Sale Date shall not be earlier than forty-eight (48) hours
following the giving of the Sale Notice by the Selling QUINTEL
Principal. The PRN Principals shall then have the right to sell that
number of their shares of Common Stock (the "Aggregate PRN Shares")
equal to the product of the number of shares of Common Stock owned by
all of the PRN Principals at the date of the Sale Notice multiplied by a
fraction (hereafter referred to as the "QUINTEL Calculation Fraction"),
the numerator of which is the number of Base Shares identified in the
Sale Notice by the Selling QUINTEL Principal and the denominator of
which is the total number of shares of Common Stock owned by all of the
QUINTEL Principals as of the date of the Sale Notice. As among them, the
PRN Principals shall each have the right to then sell that number of
shares of Common Stock equal to the Aggregate PRN Shares multiplied by a
fraction (hereafter referred to as the "PRN Calculation Fraction"), the
numerator of which is the number of shares of Common Stock owned by the
PRN Principal and the denominator of which is the total number of shares
of Common Stock owned by all of the PRN Principals.

3.3.1.1 Each PRN Principal may give written notice to any other
PRN Principal that the PRN Principal does not wish to sell all or a
portion of his allocated portion of the Aggregate PRN Shares (hereafter
such number of shares of Common Stock of the Aggregate PRN Shares which
a PRN Principal would be entitled to sell but determines not to sell is
referred to as the "Waived Shares"), in which event the other PRN
Principals shall have the right to sell an additional number of shares
of Common Stock equal to the product of the Waived Shares multiplied by
a fraction, the numerator of which is the number of shares of Common
Stock owned by such PRN Principal and the denominator of which is the
total number of shares of Common Stock owned by the PRN Principals other
than the PRN Principal giving notice of his election not to sell the
Waived Shares.

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Any Waived Shares which any other PRN Principal decides not to sell, may
then be sold by the remaining PRN Principal.

3.3.1.2 The lock-up agreement set forth in this Section 3.3 shall
not apply to the sale by the PRN Principals of that number of shares of
Common Stock which equals (A) the result obtained by dividing (i) the
Net Tax Liability by (ii) the market price of the Common Stock on April
14, 1997, or (B) the result obtained by dividing (i) the principal
balance of a loan made pursuant to Section 3.4 which has come due by
(ii) the market price of the Common Stock on the date preceding such due
date. In the event of a sale by a PRN Principal pursuant to the
exception provided for in this subsection 3.3.1.2, the QUINTEL
Principals shall be free to sell that number of shares of Common Stock
which equals the product obtained by multiplying the total number of
shares of Common Stock owned by the QUINTEL Principals by a fraction,
the numerator of which is the number of shares of Common Stock sold by
the PRN Principals pursuant to the exception provided for in this
subsection 3.3.1.2. and the denominator of which is the total number of
shares of Common Stock owned by the PRN Principals prior to such sale.

3.3.1.3 The PRN Principals and the QUINTEL Principals agree that
any Sale Notice for purposes of this Section 3.3 or Section 3.4 shall be
effective as to that PRN Principal or QUINTEL Principal if it is given
orally by telephone or in person, followed immediately by written notice
given by facsimile or overnight delivery or mail to the addresses and
facsimile numbers set forth under each person's signature at the end of
this Agreement, or to such other address or fax number which is given in
writing to all parties to this Agreement.

3.4 LOANS TO PRN PRINCIPALS.

3.4.1 If at the time a Selling QUINTEL Principal gives a Sale Notice
during the Section 3.3 Lock Up Period, a Registration Statement covering
the Shares has not become effective under the Securities Act and, in the
opinion of counsel to QUINTEL, the sale of the Shares is not permitted
under an applicable exemption from the registration requirements under the
Securities Act and applicable state law requirements, then the PRN
Principals shall have the right to require the Selling Quintel Principal to
sell that number of additional shares of Common Stock (such additional
number of shares is referred to as the "Aggregate Additional Shares") equal
to the number of shares of Common Stock owned by the PRN Principals
multiplied by the Quintel Calculation Fraction and to loan the Net
Additional Sale Proceeds (as defined in Section 3.4.1.3) to the PRN
Principals exercising their Section 3.4.1 Loan Right (as such term is
defined herein). Each PRN Principal shall have a Section 3.4.1 Loan Right
as to that number of shares of Common Stock equal to the product of the
Aggregate Additional Shares multiplied by the PRN Calculation Fraction. The
right of a PRN Principal to require a Selling QUINTEL Principal to sell
additional shares of Common Stock pursuant to this Section 3.4.1 and make
the loan required under this Section 3.4.1 is referred to as the "Section
3.4.1 Loan Right".

3.4.1.1 A Section 3.4.1 Loan Right may only be exercised by a PRN
Principal if a PRN Principal gives notice of exercise (the "Exercise
Notice") to the Selling QUINTEL Principal not later than twenty-four
(24) hours prior to the First Sale Date, and if certificates
representing the shares of Common Stock as to which the Section 3.4.1
Loan Right is being exercised (hereafter the number of shares as to
which a Section 3.4.1 Loan Right is exercised by a PRN Principal are
referred to as the "Section 3.4.1 Shares"), together with stock powers
signed in blank in form for transfer of the Section 3.4.1 Sale Shares
are delivered to the Selling QUINTEL Principal not later than the First
Sale Date to secure repayment of the loan made pursuant to this Section
3.4.1 (hereafter referred to as "Section 3.4.1 Loan"). Time shall be of
the essence with respect to the deliveries required under this Paragraph
3.4.2.1. At Closing, the PRN Principals shall deliver to the Escrowee
certificates representing [ ] shares of Common Stock, together
with stock powers signed in blank in form for transfer, and a Letter of
Direction authorizing and directing the Quintel Principals to sell the
Aggregate Additional Shares pursuant to this Section 3.4.1 and agreeing
to accept the resulting Section 3.4.1 Loan and execute the Loan
Documents referred to in Section 3.4.1.4, and granting the Quintel
Principals a power of attorney to execute the Loan Documents.

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The Letter of Direction shall be effective from the Closing until
revoked by a PRN Principal by notice to the Escrowee and the Chairman of
Quintel. Upon such revocation, any certificates for shares of Common
Stock which have not been sold as provided for herein shall be returned
to the PRN Principals.

3.4.1.2 The Selling QUINTEL Principal shall increase the number of
shares offered for sale pursuant to a Sale Notice by the number of the
Section 3.4.1 Shares identified in the Exercise Notice (the sum of the
Base Shares and the Section

3.4.1 Shares is referred to as the "Covered Shares"). Any Covered
Shares not sold by the Selling QUINTEL Principal within five (5) trading
days following the expiration of the Exercise Period resulting from a Sale
Notice (such five (5) day period is referred to as the "Sale Period") shall
be allocated between the PRN Principal and the Selling Quintel Principal in
the same ratio as the original number of Base Shares bears to the original
number of Section 3.4.1 Shares, and certificates representing the number of
Covered Shares so allocated to the PRN Principal shall be promptly returned
to the PRN Principal and any sale of such number of Shares shall require
the delivery of a new Sale Notice and give rise to a new Section 3.4.1 Loan
Right for each PRN Principal.

3.4.1.3 The amount of the Section 3.4.1 Loan by the Selling Quintel
Principal to the PRN Principal exercising a Section 3.4.1 Loan Right
shall be equal to (A) one (1) minus the combined marginal federal and
state income tax rate of the Quintel Principal multiplied by (B) the
average price per share of the Covered Shares which the Selling QUINTEL
Principal sells pursuant to the Sale Notice (such amount is referred to
as the "Net Additional Sale Proceeds") during the Sale Period.

3.4.1.4 The Section 3.4.1 Loan shall be made to the PRN Principals
exercising their Section 3.4.1 Loan Right within five (5) business days
after expiration of the Sale Period. Each Section 3.4.1 Loan shall be
evidenced by a Note in the form annexed hereto as Schedule 3.4.1(A) (the
"Section 3.4.1 Note"), which will be executed and delivered upon the
making of the Section 3.4.1 Loan, and repayment shall be secured by a
pledge of the Section 3.4.1 Sale Shares pursuant to the Security
Agreement in the form annexed hereto as Schedule 3.4.1(B) (the "Security
Agreement"), and shall be jointly and severally guaranteed by the PRN
Principals pursuant to a guaranty in the form annexed hereto as Schedule
3.4.1-(C) (the "Guaranty"). Each Section 3.4.1 Note shall bear interest
at the rate equal to the minimum "Applicable Federal Rate" required by
Section 7872 of the Internal Revenue Code on the date the loan is made,
with such interest payable monthly and the entire balance of interest
and principal shall be repayable in full within five (5) business days
after the first to occur of (i) the date a Registration permitting the
sale of the Shares under the Securities Act becomes effective or (ii)
the sale of the Shares is exempt from such registration and applicable
state law requirements in the opinion of counsel to Quintel.

3.4.2 QUINTEL agrees that, in the event that (i) the market price of
QUINTEL's Common Stock on April 15, 1997 is not at least eighty (80%)
percent of the Closing Market Price of the Common Stock, or (ii) a
Registration Statement covering the Shares has not become effective under
the Securities Act and, in the opinion of counsel to QUINTEL, the sale of
the Shares is not permitted under an applicable exemption from the
registration requirements under the Securities Act and applicable state law
requirements, and if QUINTEL or the PRN Principals have been unable to
arrange for a loan, secured by the Shares, in an amount equal to the PRN
Principal's Net Tax Liability, then QUINTEL shall, on or about April 15,
1997, at the request of the PRN Principals, make a loan to each PRN
Principal requesting a loan in an amount equal to the PRN Principal's Net
Tax Liability, provided, however, that in no event shall the total amount
of all loans made to the PRN Principals exceed two million five hundred
thousand ($2,500,000.00) dollars in the aggregate.

3.4.2.1 Each loan to a PRN Principal by QUINTEL pursuant to this
Section 3.4.2 (a "Section 3.4.2 Loan") will be evidenced by a Promissory
Note in the form annexed hereto as Schedule 3.4.2 (each referred to as a
"Section 3.4.2 Note") and secured by a pledge of all of the Holder's
Shares pursuant to the Security Agreement, and shall be jointly and
severally guaranteed

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by the PRN Principals pursuant to the Guaranty, which documents shall be
executed by the PRN Principal upon the making of the loan. Each Section
3.4.2. Loan shall be repayable upon the earlier of (x) 24 months after
the loan is made or (y) if the Section 3.4.2 Loan was made pursuant to
subclause (i) of this Section 3.4.2, in the event that the Common Stock
trades at the Closing Market Price or higher for five (5) days during
any consecutive thirty (30) day period after the date of the Section
3.4.2. Loan, on the date which is five (5) business days following such
event, or (z) if the Section 3.4.2 Loan was made pursuant to subclause
(ii) of this Section 3.4.2, within five (5) business days after the
first to occur of (xx) the date a Registration permitting the sale of
the Shares under the Securities Act becomes effective or (yy) the sale
of the Shares is exempt from such registration and applicable state law
requirements in the opinion of counsel to Quintel.

ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PRN.

PRN and by their signatures at the end of this Agreement, the PRN
Principals jointly and severally represent, warrant and covenant to QUINTEL and
Calling Card the following:

4.1 EXISTENCE AND GOOD STANDING.

PRN is a corporation validly existing under the laws of Florida, and has
all requisite power and authority to own, lease and operate all its properties
and to carry on its business as now being conducted.

4.2 CAPITAL STOCK.

PRN has an authorized capitalization consisting of One Thousand (1,000)
shares par value $1.00, of which four hundred and forty five (445) shares are
issued to Feder, one hundred and ten (110) shares are issued to Stolz and four
hundred and forty five (445) shares are issued to Lindsey. All such outstanding
shares have been duly authorized and validly issued and are fully paid and
non-assessable, and have not been issued in violation of any preemptive rights
of stockholders. No other class of capital stock of PRN is authorized or
outstanding. There are no outstanding options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements of
any character providing for the purchase, issuance or sale of any shares of the
capital stock of PRN.

4.3 FINANCIAL STATEMENTS.

4.3.1 PRN and the PRN Principals have reviewed the following financial
statements (the "Financial Statements"):

(i) balance sheet (the "Balance Sheet") of NL as at November 30, 1995
(the "Balance Sheet Date") and the related statements of operations, cash
flows and supporting schedules for the year ended November 30, 1995;

(ii) balance sheet of NL as at 02/29/96, and the related statements of
operations, cash flows and supporting schedules for the three months ended
02/29/96.

4.3.2 The Financial Statements are true and correct and, except as
stated therein, have been be prepared in accordance with GAAP throughout
the periods indicated. Each of the balance sheets fairly presents the
financial condition of NL at the date thereof and, except as indicated
therein, reflects all claims against and all debts and liabilities of NL,
fixed or contingent, as at the date thereof, required to be shown thereon
under GAAP and the related statements of operations and cash flows
accurately present the results of operation of NL and cash flows for the
period indicated.

4.3.3 Since the Balance Sheet Date, except as set forth on Schedule
4.3.3 to this Agreement, there has been (a) no material adverse change in
the assets or liabilities, or in the business or financial condition, the
results of operations, or to the best knowledge, information and belief of
PRN and the PRN Principals, in the prospects, of NL and (b) no change in
the assets or liabilities, or in the business or financial condition, or
the results of operations, of NL except in the ordinary course of business;
and no fact or condition exists or, to the best knowledge, information and
belief of PRN or the PRN Principals is contemplated, or threatened, which
might cause such a material adverse change in the future.

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4.4 TITLE TO NL INTEREST; ENCUMBRANCES.

PRN has good and marketable title to the NL Interest, subject to no
encumbrance, lien, charge or other restriction of any kind or character.

4.5 LITIGATION.

Except as set forth in Schedule 4.5 to this Agreement, to their best
knowledge, information and belief, there is no action, suit, proceeding at law
or in equity by any Person, or any arbitration or any administrative or other
proceeding by or before any governmental or other instrumentality or agency,
pending, threatened, against or affecting NL, or any of its properties or
rights, and they do not know of any valid basis for any such action, proceeding
or investigation. Except as set forth on Schedule 4.5, neither PRN, the PRN
Principals nor NL is subject to any judgment, order or decree entered in any
lawsuit or proceeding which would prevent or interfere with the consummation of
the transactions contemplated hereby.

4.6 LIABILITIES.

NL has no outstanding claims against it or liabilities or indebtedness,
contingent or otherwise, except as set forth in the Balance Sheet or referred to
in the footnotes thereto, other than (i) liabilities incurred subsequent to the
Balance Sheet Date in the ordinary course of business and consistent with past
practice and other liabilities, which individually or in the aggregate, are not
material to the business prospects, operation, properties, income or condition
(financial or otherwise) of NL or (ii) liabilities set forth on any Schedule
hereto.

4.7 COMPLIANCE WITH LAWS.

To the best of their knowledge, information and belief, NL is in compliance
in all material respects with all applicable foreign, federal, state and local
laws, regulations and orders and all other applicable requirements of any
governmental, regulatory or administrative agency or authority or court or other
tribunal having jurisdiction, the violation of which, individually or in the
aggregate, would have a material adverse effect on NL's business or its
financial conditions or prospects. To the best of their knowledge, information
and belief, NL is not now charged with, and is not now under individual
investigation with respect to, any violation of any law, regulations, or order
affecting its business, and NL has filed all reports required to be filed with
any governmental, regulatory or administrative agency.

4.8 LICENSES.

To the best of their knowledge, information and belief, NL has all licenses
and permits and other governmental certificates, authorizations and approvals
(collectively, "Licenses") required by any governmental or regulatory body for
the operation of its business and the use of its properties as presently
operated or used, except where the failure to have such Licenses would not have
a material and adverse effect on the financial condition, results of operations,
assets, properties or business of NL. All of the Licenses are in full force and
effect and no action or claim is pending, nor to the best of their knowledge,
information and belief is threatened, to revoke or terminate any of the Licenses
or declare any License invalid in any material respect.

4.9 NO CHANGES SINCE THE BALANCE SHEET DATE.

Since the Balance Sheet Date, except as specifically stated on Schedule 4.9
to this Agreement, PRN has not

(a) incurred on behalf of NL any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise), except in the
ordinary course of business;

(b) permitted any of NL's assets to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any
kind;

(d) amended or terminated any agreement which is material to the
business of NL;

11
<PAGE> 101

(e) agreed, whether or not in writing, to do any of the foregoing.

4.10 VALID AGREEMENTS; RESTRICTIVE DOCUMENTS.

PRN and the PRN Principals each has the full legal right and capacity to
execute, deliver and perform this Agreement and the Other Documents and the
transactions contemplated thereby, each of which has been duly authorized by all
necessary corporate action of PRN. This Agreement and the Other Documents have
been duly executed and delivered by PRN and the PRN Principals and constitute
the valid and binding obligation of each of them enforceable against each in
accordance with their terms except as the enforcement thereof may be limited by
bankruptcy, reorganization, moratorium, insolvency and other laws of general
applicability relating to or affecting creditors' rights or general principles
of equity. None of PRN or the PRN Principals is subject to, or a party to, any
charter, by-law, mortgage, lien, lease, license, permit, agreement, contract,
instrument, law, rule, ordinance, regulation, order, judgment or decree, or any
other restriction of any kind or character, which would prevent consummation of
the transactions contemplated by this Agreement or compliance by them with the
terms, conditions and provisions of this Agreement and the Other Documents. The
execution, delivery and performance of this Agreement and the Other Documents
and the consummation of the transactions contemplated thereby will not

(i) violate, conflict with or result in the breach of any provision of
the charter documents or by-laws of PRN;

(ii) violate, conflict with or result in the breach or material
modification of any of the terms of, or constitute (or with notice or lapse
of time or both constitute) a default under, or otherwise give any other
contracting party the right to accelerate or terminate, any obligation,
contract, agreement, lien, judgment, decree or other instrument to which
PRN or any of the PRN Principals is a party or by or to which any of them
or any of their assets or properties may be bound or subject;

(iii) violate any order, writ, judgment, injunction, award or decree
of any court, arbitrator or governmental or regulatory body against, or
binding upon, PRN or any of the PRN Principals or upon any of their assets;
or

(iv) violate any statute, law or regulation of any jurisdiction.

4.11 REQUIRED APPROVALS, NOTICES AND CONSENTS.

No consent or approval of, other action by, or notice to, any governmental
body or agency, domestic or foreign, or any third party is required in
connection with the execution and delivery by PRN and the PRN Principals of this
Agreement and the Other Documents or the consummation by PRN and the PRN
Principals of the transactions contemplated thereby.

4.12 DISCLOSURE.

None of this Agreement, the Financial Statements, any Schedule hereto, or
any certificate, document or written statement to be delivered as required under
this Agreement by or on behalf of PRN or the PRN Principals contains, or will
contain, any untrue statement of a material fact, or omits, or will omit, any
statement of a material fact required to be stated or necessary in order to make
the statements contained herein or therein not misleading. There is no fact
known to PRN or the PRN Principals which materially and adversely affects the
business, prospects or financial condition of NL or its properties or assets,
which has not been, or will not be, set forth in this Agreement or any Schedule
hereto, or in the certificates, documents or statements in writing to be
delivered at the Closing.

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<PAGE> 102

ARTICLE 5: REPRESENTATIONS OF QUINTEL AND CALLING CARD.

QUINTEL and Calling Card jointly and severally represent, warrant and
covenant to PRN as follows:

5.1 EXISTENCE AND GOOD STANDING.

QUINTEL is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Calling Card is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Calling Card is a wholly owned subsidiary of QUINTEL.

5.2 SHARES.

The Shares delivered at Closing have been duly authorized and validly
issued and are fully paid and non-assessable and have not been issued in
violation of any preemptive rights of stockholders.

5.3 FINANCIAL STATEMENTS.

5.3.1 QUINTEL has reviewed the Financial Statements.

5.3.2 The Financial Statements are true and correct and, except as
stated therein, have been prepared in accordance with GAAP throughout the
periods indicated. Each of the balance sheets fairly presents the financial
condition of NL at the date thereof and, except as indicated therein,
reflects all claims against and all debts and liabilities of NL, fixed or
contingent, as at the date thereof, required to be shown thereon under GAAP
and the related statements of operations and cash flows accurately present
the results of operation of NL and cash flows for the period indicated.

5.3.3 Since the Balance Sheet Date, except as set forth on Schedule
4.3.3 to this Agreement, there has been (a) no material adverse change in
the assets or liabilities, or in the business or financial condition, the
results of operations, or to the best knowledge, information and belief of
QUINTEL in the prospects, of NL and (b) no change in the assets or
liabilities, or in the business or financial condition, or the results of
operations, of NL except in the ordinary course of business; and no fact or
condition exists to the best knowledge, information and belief of QUINTEL,
or is contemplated or threatened, which might cause such a material adverse
change in the future.

5.4 LITIGATION.

Except as set forth in Schedule 4.5 to this Agreement, to its best
knowledge, information and belief, there is no action, suit, proceeding at law
or in equity by any Person, or any arbitration or any administrative or other
proceeding by or before any governmental or other instrumentality or agency,
pending, threatened, against or affecting NL, or any of its properties or
rights, and it does not know of any valid basis for any such action, proceeding
or investigation. Except as set forth on Schedule 4.5, neither QUINTEL nor NL is
not subject to any judgment, order or decree entered in any lawsuit or
proceeding which would prevent or interfere with the consummation of the
transactions contemplated hereby.

5.5 LIABILITIES.

NL has no outstanding claims against it or liabilities or indebtedness,
contingent or otherwise, except as set forth in the Balance Sheet or referred to
in the footnotes thereto, other than (i) liabilities incurred subsequent to the
Balance Sheet Date in the ordinary course of business and consistent with past
practice and other liabilities which individually or in the aggregate, are not
material to the business prospects, operation, properties, income or condition
(financial or otherwise) of NL or (ii) liabilities set forth on any Schedule
hereto or which are not required to be set forth on any Schedule hereto because
such liabilities are specifically excluded from disclosure on the Schedules
provided for by the provisions of this Agreement.

5.6 COMPLIANCE WITH LAWS.

To the best of its knowledge, information and belief, NL is in compliance
in all material respects with all applicable foreign, federal, state and local
laws, regulations and orders and all other applicable requirements of any
governmental, regulatory or administrative agency or authority or court or other
tribunal having jurisdiction, the violation of which, individually or in the
aggregate, would have a material adverse effect on

13
<PAGE> 103

NL's business or its financial conditions or prospects. To the best of its
knowledge, information and belief, NL is not now charged with, and is not now
under individual investigation with respect to, any violation of any law,
regulations, or order affecting its business, and NL has filed all reports
required to be filed with any governmental, regulatory or administrative agency.

5.7 LICENSES.

To the best of its knowledge, information and belief, NL has all Licenses
required by any governmental or regulatory body for the operation of its
business and the use of its properties as presently operated or used, except
where the failure to have such Licenses would not have a material and adverse
effect on the financial condition, results of operations, assets, properties or
business of NL. All of the Licenses are in full force and effect and no action
or claim is pending, nor to the best knowledge, information and belief of
QUINTEL, is threatened to revoke or terminate any of the Licenses or declare any
License invalid in any material respect.

5.8 NO CHANGES SINCE THE BALANCE SHEET DATE.

Since the Balance Sheet Date, except as specifically stated on Schedule 4.9
to this Agreement, QUINTEL has not

(a) incurred on behalf of NL any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise), except in
the ordinary course of business;

(b) permitted any of NL's assets to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or
charge of any kind;

(d) amended or terminated any agreement which is material to the
business of NL;

(e) agreed, whether or not in writing, to do any of the foregoing.

5.9 VALID AGREEMENTS; RESTRICTIVE DOCUMENTS.

QUINTEL and Calling Card each has the full authority to execute, deliver
and perform this Agreement and the Other Documents and the transactions
contemplated thereby. This Agreement and the Other Documents have been duly and
validly authorized, executed and delivered by QUINTEL and Calling Card,
constitute a valid and binding agreement of QUINTEL and Calling Card enforceable
against QUINTEL and Calling Card, as the case may be, in accordance with their
respective terms, except as the enforcement thereof may be limited by
bankruptcy, reorganization, moratorium, insolvency and other laws of general
applicability relating to or affecting creditors' rights or general principles
of equity. Except as set forth in Schedule 5.9 to this Agreement, neither
QUINTEL nor Calling Card is subject to, or a party to, any mortgage, lien,
lease, license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which would prevent consummation of the transactions contemplated by
this Agreement and the Other Documents or compliance by the QUINTEL or Calling
Card with the terms, conditions and provisions of this Agreement and the Other
Documents. The execution, delivery and performance of this Agreement and the
Other Documents and the consummation of the transactions contemplated thereby
will not

(i) violate, conflict with or result in the breach of any provision of
the charter documents or by-laws of Quintel or Calling Card;

(ii) violate, conflict with or result in the breach or material
modification of any of the terms of, or constitute (or with notice or lapse
of time or both constitute) a default under, or otherwise give any other
contracting party the right to accelerate or terminate, any obligation,
contract, agreement, lien, judgment, decree or other instrument to which
QUINTEL or Calling Card is a party or by or to which QUINTEL or Calling
Card may be bound or subject;

14
<PAGE> 104

(iii) violate any order, writ, judgment, injunction, award or decree
of any court, arbitrator or governmental or regulatory body against, or
binding upon, QUINTEL or Calling Card or their respective assets; or

(iv) violate any statute, law or regulation of any jurisdiction.

5.10 REQUIRED APPROVALS, NOTICES AND CONSENTS.

No consent or approval of, other action by, or notice to, any governmental
body or agency, domestic or foreign, or any third party is required in
connection with the execution and delivery by QUINTEL or Calling Card of this
Agreement and the Other Documents or the consummation by QUINTEL or Calling Card
of the transactions contemplated thereby.

5.11 DISCLOSURE.

None of this Agreement, the Financial Statements, or any Schedule as to
which a representation and warranty is made by QUINTEL in this Section 5, or any
certificate, document or written to be delivered as required under this
Agreement by or on behalf of QUINTEL contains, or will contain, any untrue
statement of a material fact, or omits, or will omit, any statement of a
material fact required to be stated or necessary in order to make the statements
contained herein or therein not misleading. There is no fact known to QUINTEL
which materially and adversely affects the business, prospects or financial
condition of NL or its properties or assets, which has not been, or will not be,
set forth in this Agreement or any Schedule hereto, or in the certificates,
documents or statements in writing to be delivered at the Closing.

ARTICLE 6: COVENANTS.

6.1 FURTHER ASSURANCES.

The parties shall execute such documents and other papers and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and transactions contemplated hereby.

6.2 NO BROKERS.

6.2.1 PRN and the PRN Principals represent and warrant to QUINTEL and
Calling Card that no broker, finder, agent or similar intermediary has
acted on behalf of PRN or the PRN Principals in connection with this
Agreement or the transactions contemplated hereby, and that there are no
brokerage commissions, finder's fees or similar fees or commissions payable
in connection therewith based on any agreement, arrangement or
understanding with any of them, or any action taken by any of them. PRN and
the PRN Principals agree to jointly and severally indemnify and save
QUINTEL and Calling Card and their respective officers, directors,
employees and agents harmless from any claim or demand for commission or
other compensation by any broker, finder, agent or similar intermediary
claiming to have been employed by or on behalf of PRN or the PRN
Principals, and to bear the cost of legal expenses incurred in defending
against any such claim.

6.2.2 QUINTEL and Calling Card each represents and warrants to PRN and
the PRN Principals that no broker, finder, agent or similar intermediary
has acted on behalf of QUINTEL or Calling Card in connection with this
Agreement or the transactions contemplated hereby, and that there are no
brokerage commissions, finders' fees or similar fees or commissions payable
in connection therewith based on any agreement, arrangement or
understanding with QUINTEL or Calling Card or any action taken by QUINTEL
or Calling Card. QUINTEL and Calling Card agree to jointly and severally
indemnify and save PRN and its officers, directors, employees and agents
and the PRN Principals harmless from any claim or demand for commission or
other compensation by any broker, finder, agent or similar intermediary
claiming to have been employed by or on behalf of the QUINTEL or Calling
Card, and to bear the cost of legal expenses incurred in defending against
any such claim.

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<PAGE> 105

ARTICLE 7: SURVIVAL OF REPRESENTATIONS; INDEMNITY.

7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF PRN AND THE PRN
PRINCIPALS.

Notwithstanding any right of QUINTEL or Calling Card fully to investigate
the affairs of NL, PRN and the PRN Principals and notwithstanding any knowledge
of facts determined or determinable by QUINTEL or Calling Card pursuant to such
investigation or right of investigation, QUINTEL and Calling Card shall have the
right to rely fully upon the representations and warranties of PRN and the PRN
Principals contained in this Agreement and any of the Other Documents. All such
representations and warranties and the indemnification obligations under Section
9.2 shall survive the execution and delivery of this Agreement and the Other
Documents and the Closing hereunder for a period of three (3) years following
the Closing Date, except as to the representations and warranties made in
Section 4.4 and the obligation to indemnify as to same, which shall survive the
execution of this Agreement and the Other Documents and the Closing hereunder
until the date of expiration of the relevant federal, state or other statute of
limitations; except as to matters as to which any Indemnitee has made a claim
for indemnification or given a Claims Notice under Section 9.5 on or prior to
the expiration of the applicable period aforesaid, in which case the right to
indemnification with respect thereto shall survive the expiration of any such
period until such claim is finally resolved and any obligations with respect
thereto are fully satisfied.

7.2 OBLIGATION OF PRN AND THE PRN PRINCIPALS TO INDEMNIFY.

In addition to the indemnification provisions contained in Schedule 3.1 to
this Agreement, PRN and the PRN Principals agree to jointly and severally
indemnify, defend and hold harmless QUINTEL and Calling Card, and their
respective officers, directors, employees and agents, and any of their
successors and assigns from and against any and all losses, liabilities,
damages, deficiencies, demands, claims, actions, judgments or causes of action,
assessments, costs or expenses (including, without limitation, interest,
penalties and reasonable attorneys' fees and disbursements) ("Claims"), whether
such Claims are incurred in disputes with PRN or the PRN Principals or involving
third-party claims against the QUINTEL or Calling Card based upon, arising out
of or otherwise in respect of any inaccuracy in or any breach of any
representation or warranty of PRN or any of the PRN Principals contained in this
Agreement.

7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF QUINTEL AND CALLING CARD.

Notwithstanding any knowledge of facts determined or determinable by PRN
pursuant to any investigation or right of investigation of the affairs of the
QUINTEL or Calling Card, PRN and the PRN Principals shall have the right to rely
fully upon the representations and warranties of the QUINTEL or Calling Card
contained in this Agreement and the Other Documents. All such representations
and warranties and the indemnification obligations under Section 9.4 shall
survive the execution and delivery of this Agreement and the Other Documents and
the Closing hereunder for a period of three (3) years following the Closing
Date; except as to matters as to which any Indemnitee has made a claim for
indemnification or given a Claims Notice under Section 9.5 on or prior to the
expiration of the applicable period aforesaid, in which case the right to
indemnification with respect thereto shall survive the expiration of any such
period until such claim is finally resolved and any obligations with respect
thereto are fully satisfied.

7.4 OBLIGATION OF QUINTEL AND CALLING CARD TO INDEMNIFY.

In addition to the indemnification provisions contained in Schedule 3.1 to
this Agreement, QUINTEL and Calling Card each agrees to indemnify, defend and
hold harmless PRN and its successors and assigns from and against any and all
Claims based upon, arising out of or otherwise in respect of any Assumed
Liability or any inaccuracy in or any breach of any representation or warranty
of QUINTEL or Calling Card contained in this Agreement.

7.5 NOTICE AND OPPORTUNITY TO DEFEND.

7.5.1 NOTICE OF ASSERTED LIABILITY.

Promptly after receipt of any party hereto (the "Indemnitee") of
notice of any demand, claim or circumstances which, with the lapse of time,
would or might give rise to a claim or the commencement

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<PAGE> 106

(or threatened commencement) of any action, proceeding or investigation (an
"Asserted Liability") that may result in any Claims, the Indemnitee shall
promptly give notice thereof (the "Claims Notice") to the party obligated
to provide indemnification pursuant to Section 9.2 or 9.4 (the
"Indemnifying Party"); provided, however, that the failure of any
Indemnitee to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under paragraph (a) or (b), except to
the extent that the Indemnifying Party is actually prejudiced by such
failure to give notice. The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated,
if necessary and to the extent feasible) of the Claims that have been or
may be suffered by the Indemnitee.

7.5.2 OPPORTUNITY TO DEFEND.

The Indemnifying Party may elect to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall
within thirty (30) days (or sooner, if the nature of the Asserted Liability
so requires) notify the Indemnitee of its intent to do so, and the
Indemnitee shall cooperate, at the expense of the Indemnifying Party, in
the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted
Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability at the
expense of the Indemnifying Party (if the Indemnifying Party is found
obligated to indemnify the Indemnitee with respect to the Claim). Subject
to the limitations contained in Section 9.5.3 on the obligations of the
Indemnifying Party in respect of proposed settlements, the Indemnitee shall
have the right to employ its own counsel with respect to any Asserted
Liability, but the fees and expenses of such counsel shall be at the
expense of such Indemnitee unless (a) the employment of such counsel shall
have been authorized in writing by the Indemnifying Party in connection
with the defense of such action, or (b) such Indemnifying Party shall not
have, as provided above, promptly employed counsel reasonably satisfactory
to the Indemnitee to take charge of the defense of such action, or (c) the
Indemnitee shall have reasonably concluded based on an opinion of counsel
that there may be one or more legal defenses available to it which are
different from or additional to those available to such Indemnifying Party,
in any of which events such reasonable fees and expenses shall be borne by
the Indemnifying Party and the Indemnifying Party shall not have the right
to direct the defense of such action on behalf of the Indemnitee in respect
of such different or additional defenses. If the Indemnifying Party chooses
to defend any claim, the Indemnitee shall make available to the
Indemnifying Party any books, records or other documents within its control
that are necessary or appropriate for such defense. If the Indemnifying
Party elects not to assume the defense of a Claim, it will not be obligated
to pay the fees and expenses of more than one counsel for all Indemnitees
with respect to such claim, unless in the reasonable judgment of an
Indemnitee, and in the opinion of such Indemnitee's counsel, a conflict of
interest may exist between such Indemnitee and any other of such
Indemnitees with respect to such claim, in which event the Indemnifying
Party shall be obligated to pay the fees and expenses of such additional
counsel or counsels.

7.5.3 SETTLEMENT.

Notwithstanding the provisions of Section 9.5.2., neither the
Indemnifying Party nor the Indemnitee may settle or compromise any claim
for which indemnification has been sought and is available hereunder, over
the objection of the other; provided, however, that consent to settlement
or compromise shall not be unreasonably withheld or delayed. If, however,
the Indemnitee refuses to consent to a bona fide offer of settlement which
the Indemnifying Party wishes to accept, the Indemnitee may continue to
pursue such matter, free of any participation by the Indemnifying Party, at
the sole expense of the Indemnitee. In such event, the obligation of the
Indemnifying Party to the Indemnitee shall be equal to the lesser of (i)
the amount of the offer of settlement which the Indemnitee refused to
accept plus the costs and expenses of the Indemnitee prior to the date the
Indemnifying Party notified the Indemnitee of the offer of settlement, or
(ii) the actual out-of-pocket amount the Indemnitee is obligated to pay as
a result of the Indemnitee's continuing to pursue such matter. No party
will be required to consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such party of a release from all
liability in respect to the Claim.

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<PAGE> 107

ARTICLE 8: MISCELLANEOUS.

8.1 EXPENSES.

Except as otherwise provided herein, the parties hereto shall pay all of
their own expenses relating to the transactions contemplated by this Agreement
the Other Documents, including, without limitation, the fees and expenses of
their respective counsel and financial advisers.

8.2 GOVERNING LAW.

The interpretation and construction of the Documents, and all matters
relating hereto, shall be governed by the law of the State of New York, U.S.A.,
without reference to its conflict of laws provisions.

8.3 JURISDICTION.

Any judicial proceeding brought against any of the parties to this
Agreement on any dispute arising out of this Agreement or any matter related
hereto shall be brought in the courts of the State of New York in New York
County or in the United States District Court for the Southern District of New
York, and, by execution and delivery of this Agreement, each of the parties to
this Agreement accepts for itself the jurisdiction of the aforesaid courts,
irrevocably consents to the service of any and all process in any action or
proceeding by the mailing of copies of such process to such party at its address
as set forth in Section 10.7 hereafter, and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Agreement. Each party
hereto irrevocably waives to the fullest extent permitted by law any objection
that it may now or hereafter have to the laying of the venue of any judicial
proceeding brought in such courts and any claim that any such judicial
proceeding has been brought in an inconvenient forum.

8.4 "KNOWLEDGE" DEFINED.

Where any representation and warranty contained in this Agreement is
expressly qualified by reference to knowledge, information and belief of any
party, such party confirms that it has made such due and diligent inquiry as to
the matters that are the subject of such representations and warranties as shall
be reasonable under the circumstances.

8.5 DUTIES AND LIABILITIES OF ESCROWEE.

The Escrowee shall have no duties or responsibilities except those
expressly set forth herein. The Escrowee shall have no liability hereunder
except for its own gross negligence or willful misconduct. It may rely on any
notice, instruction, certificate, statement, request, consent, confirmation,
agreement or other instrument which it reasonably believes to be genuine and to
have be signed or presented by a proper person or persons. Nothing contained in
this Agreement or in the Other Documents shall prevent the Escrowee from
representing the Purchaser as counsel in this transaction, and to continue to
represent the Purchaser as its counsel in the future.

8.6 CAPTIONS.

The article and section captions used herein are for reference purposes
only, and shall not in any way affect the meaning or interpretation of this
Agreement.

8.7 NOTICES.

Any notice or other communications required or permitted hereunder shall be
in writing and shall be deemed effective (a) upon personal delivery, if
delivered by hand and followed by notice by mail or facsimile transmission; (b)
one day after the date of delivery by Federal Express or other nationally
recognized courier service, if delivered by priority overnight delivery between
any two points within the United States; or (c) five days after deposit in the
mails, if mailed by certified or registered mail (return receipt requested)
between any two points within the United States, and in each case of mailing,
postage prepaid, addressed to a party at its address first set forth above, or
such other address as shall be furnished in writing by like notice by any such
party.

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8.8 SCHEDULES.

The Schedules to this Agreement constitute an integral part of this
Agreement and are incorporated in this Agreement as if they were set forth in
the body of this Agreement

8.9 PARTIES IN INTEREST.

This Agreement and the Other Documents and the rights and obligations of
the respective parties thereunder may not be transferred, assigned, pledged or
hypothecated by any party hereto, other than by operation of law. This Agreement
and the Other Documents shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.

8.10 SEVERABILITY.

In the event any provision of this Agreement or the Other Documents is
found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement or such Other Documents shall
nevertheless be binding upon the parties with the same effect though the void or
unenforceable part had been severed and deleted.

8.11 COUNTERPARTS.

This Agreement may be executed in two or more counterparts, all of which
taken together shall constitute one instrument.

8.12 ENTIRE AGREEMENT.

This Agreement, and the Other Documents, contain the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement incorporates the terms set forth in Section 1 of the
letter agreement dated January 17, 1996 executed by QUINTEL, Calling Card, PRN,
the QUINTEL Principals and the PRN Principals and to the extent of any
inconsistency between the terms of this Agreement and the terms of such letter
agreement the terms of this Agreement shall prevail, and this Agreement
supersedes any other prior agreements and understandings between the parties
with respect to such subject matter. The provisions of Section 2 of the
aforesaid letter agreement shall survive the execution and delivery of this
Agreement.

8.13 AMENDMENTS.

This Agreement may not be changed orally, but only by an agreement in
writing signed by the party or parties to be charged thereby.

8.14 THIRD-PARTY BENEFICIARIES.

Each party hereto intends that this Agreement shall not benefit or create
any right or cause of action in or on behalf of any Person other than the
parties hereto and the other persons executing this Agreement.

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IN WITNESS WHEREOF, QUINTEL, Calling Card and PRN has each caused its
corporate name to be hereunto subscribed by its duly authorized officer on the
date written below.

QUINTEL ENTERTAINMENT, INC.

By:
--------------------------------------

CALLING CARD CO., INC.

By:
--------------------------------------

PSYCHIC READERS NETWORK, INC.

By:
--------------------------------------

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Each of the undersigned agrees to be bound by the provisions of Paragraph
3.2 and 3.3 applicable to him or her.

<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
Jeffrey Schwartz Michael G. Miller
Address: Quintel Entertainment, Inc. Address: Quintel Entertainment, Inc.
One Blue Hill Plaza One Blue Hill Plaza
Pearl River, NY 10956 Pearl River, NY 10956
Fax Number: 914-620-1885 Fax Number: 914-620-1885
- --------------------------------------------- ---------------------------------------------
Jay Greenwald Claudia Newman Hirsch
Address: Quintel Entertainment, Inc. Address: Quintel Entertainment, Inc.
One Blue Hill Plaza One Blue Hill Plaza
Pearl River, NY 10956 Pearl River, NY 10956
Fax Number: 914-620-1717 Fax Number: 914-620-1717
- --------------------------------------------- ---------------------------------------------
Andrew Stollman Steven L. Feder
Address: Quintel Entertainment, Inc. Address: Psychic Reader's Network, Inc.
One Blue Hill Plaza 2455 E. Sunrise Boulevard
Pearl River, NY 10956 Fort Lauderdale, Florida 33304
Fax Number: 914-620-1717 Fax Number: 954-563-5464
- --------------------------------------------- ---------------------------------------------
Peter Stolz Thomas H. Lindsey
Address: Psychic Reader's Network, Inc. Address: Psychic Reader's Network, Inc.
2455 E. Sunrise Boulevard 2455 E. Sunrise Boulevard
Fort Lauderdale, Florida 33304 Fort Lauderdale, Florida 33304
Fax Number: 954-563-5464 Fax Number: 954-563-5464
</TABLE>

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<PAGE> 111

SCHEDULE 1.1 AMENDED AND RESTATED SERVICE AGREEMENT

AMENDED AND RESTATED PSYCHIC READERS NETWORK
LIVE OPERATOR SERVICE AGREEMENT

AGREEMENT entered into this day of 1996 by and among
PSYCHIC READERS NETWORK, INC., a Florida corporation with offices at 2455 E.
Sunrise Boulevard, Fort Lauderdale, Florida 33304 (hereafter referred to as
"PRN"), QUINTEL ENTERTAINMENT, INC., a corporation organized under the laws of
Delaware with offices at One Blue Hill Plaza, Pearl River, New York 10956
(hereafter referred to as "Quintel"), and CALLING CARD CO., INC., a corporation
organized under the laws of New York with offices at One Blue Hill Plaza, Pearl
River, New York 10956 (hereafter referred to as "CC").

WHEREAS, PRN and CC entered into an agreement dated July 7, 1995 entitled
"Psychic Readers Network Live Operator Service Agreement", which was amended by
an agreement dated May , 1996 (the "Service Agreement").

WHEREAS, prior to the date hereof PRN and CC each owned a fifty percent
interest in New Lauderdale L.C., a Florida limited liability company ("NL").

WHEREAS, concurrently herewith, CC's parent corporation, Quintel has issued
and delivered to PRN 3,200,000 shares of Quintel's common stock (the "Shares")
in order for Quintel's subsidiary , Inc. to acquire all of PRN's
interest in NL (the "NL Interest").

WHEREAS, in further consideration for Quintel's acquisition of the NL
Interest and issuance of the Shares, PRN and CC have agreed to amend the Service
Agreement in its entirety.

NOW, THEREFORE, for good and valuable consideration, receipt of which is
acknowledged by the parties, it is hereby agreed as follows:

1. SERVICES:

a. PRN agrees to continue to provide live psychic operator services to CC,
and to Quintel or any other subsidiary, entity or venture owned and controlled
by Quintel (hereinafter referred to as a "Quintel Affiliate"), and to administer
and supervise the provision of such services by individuals arranged, screened
and provided by PRN; hereafter Quintel or such other subsidiary, entity or
venture requesting the psychic services from PRN shall be referred to as the
"Client" and all of the foregoing services provided by PRN to Client under this
Agreement shall be referred to as the "Services".

b. Quintel, for itself and each Quintel Affiliate, agrees that PRN shall be
the exclusive provider of all live psychic operator services utilized by Quintel
and the Quintel Affiliates during the term of this Agreement provided that PRN
and the PRN Principals are not in default in the performance of their material
obligations under this Agreement and are able to provide the amount and type of
psychic Services requested by the Client.

2. TERM: This term of this agreement will commence on the date hereof and
end on , 2001, unless sooner terminated in accordance with the
provisions of this Agreement.

3. TERMINATION: This Agreement may be terminated by PRN upon thirty (30)
days prior written notice in the event that the Company is in default in the
performance of any of the Company's material obligations under this Agreement
which is not cured within such thirty (30) day period, provided, however, any
default in payment must be cured within ten (10) days after written notice of
such default is given by PRN, and if such default in payment is not cured within
such ten (10) day period, then PRN may terminate this Agreement by PRN at the
end of such ten (10) day period by notice to the Company. This Agreement may be
terminated by Quintel on behalf of the Company upon thirty (30) days prior
written notice to PRN in the event that PRN is in default in the performance of
any of PRN's material obligations under this Agreement which is not cured within
such thirty (30) day period. Any such termination by either party shall not
relieve the other of liability for obligations which have accrued prior to the
date of termination.
<PAGE> 112

4. FEES: PRN's Live Psychic Fees for psychic Services provided by PRN to a
Client shall be billed by PRN at the rate of [the balance of this sentence has
been omitted to maintain confidential treatment] during the term of this
Agreement.

The term "minutes" shall mean the per minute charge determined by the
accounting provided by West Interactive or other billing service bureau of total
connected minutes provided to Client by PRN. The fees due PRN shall be paid
bi-monthly upon submission of an invoice sent by fax to Client, and shall be
paid within two (2) business days after rendering of such invoice. Each
bi-monthly billing period shall begin on the fifteenth (15th) day of the month,
or the next succeeding business day thereafter. Client will wire payment in full
to PRN's bank account in accordance with wire transfer instructions provided by
PRN or pay by check delivered on the next business day following transmittal.

It is acknowledged by PRN that in calculating the Fees under this
Agreement, PRN has provided Quintel with information concerning the expenses
included by PRN in calculating its costs in providing the Services and has
included in such costs depreciation of its computer equipment. A schedule of the
computer equipment included in such costs is annexed hereto as Schedule 1
(hereafter all such equipment is referred to as the "Included Computer
Equipment"). In consideration for Quintel's agreement to pay the Fees at the
rate provided for in this Agreement, PRN hereby grants Quintel the option (the
"Option") to acquire the Included Computer Equipment from PRN free of all liens,
claims and encumbrances for a purchase price of One Hundred Dollars ($100.00).
PRN shall give notice to Quintel in the event that PRN purchases or acquires
additional computer equipment used in connection with the Services, and if
requested to do so by Quintel, PRN shall negotiate in good faith with Quintel
concerning an amendment to the Option provided for in this paragraph to include
such additional equipment in the Included Computer Equipment subject to the
Option and any appropriate modification to the Fees to reflect the depreciation
of such additional equipment. The Option shall be exercisable by Quintel only in
the event that this Agreement terminates for any reason other than as a result
of a default by Quintel in the performance of its material obligations in
accordance with the provisions of Section 3 of this Agreement, and if the Option
is exercisable, then it may be exercised by Quintel giving notice of such
exercise to PRN (the "Exercise Notice") not later than thirty (30) days
following the termination of this Agreement, in which event the closing of the
sale and purchase of the Included Computer Equipment (the "Option Closing")
shall occur on the date identified in the Exercise Notice which shall be not
earlier than three (3) business days following the giving of the Exercise Notice
at the principal offices of Quintel or its attorneys. At the Option Closing, PRN
shall deliver or cause to be delivered to Quintel or its nominee the Included
Computer Equipment free and clear of all liens, claims and encumbrances, Quintel
shall deliver the purchase price therefor to PRN and PRN shall execute such
bills of sale and other documents, and cause to be delivered such releases of
lien as may be necessary to convey good and marketable title to the Included
Computer Equipment to Quintel or its nominee, free and clear of all liens,
claims and encumbrances.

5. WARRANTY: PRN warrants to Quintel that it will provide the Services
described in this Agreement. In no event shall PRN be liable to a Client for any
claims or demands made against Client by any third party as a result of such
party's use of the psychic Services provided by PRN to Client, except for claims
arising out of PRN's gross negligence or wilful misconduct. PRN assumes no
responsibility to Client for any interruption of Services which is caused by
malfunction or failure of equipment which does not result from PRN's negligence
or wilful misconduct, or any other circumstances beyond the control of PRN.

6. CONTROL OF PRN: Stephen Feder ("Feder"), Thomas H. Lindsey and Peter
Stolz (collectively referred to as the "PRN Principals") acknowledge and agree
by their signatures at the end of this Agreement that Feder presently controls
PRN's operations, that it is an essential element of Quintel's agreement to
acquire the NL Interest and issue the Shares in consideration for such transfer
that Feder maintain control of PRN's operations and continue to manage the
performance by PRN of its Services under this Agreement, and Feder hereby agrees
to do so during the term and the other PRN Principals agree to continue to
permit Feder to exercise such control during the term. The PRN Principals agree
that they will not, without Quintel's consent (i) sell, pledge, hypothecate or
otherwise transfer at any time during the term of this Agreement shares of stock
of PRN which constitute in the aggregate more than forty-nine (49%) percent or
more of their shares of stock of PRN as of the date hereof, or (ii) take any
action to authorize, and PRN agrees that it will

2
<PAGE> 113

not issue without Quintel's consent, securities of any class or securities
convertible into securities of any class, which after such issuance will result
in the PRN Principals owning in the aggregate less than fifty-one (51%) percent
of the issued and outstanding shares of stock of all classes of PRN or result in
Feder not controlling PRN.

7. RESPONSIBILITIES OF PARTIES: The respective responsibilities of Client
and PRN under this Agreement are as follows:

a. RESPONSIBILITIES OF PRN:

1. PRN will provide live psychic Services on a 24 hour a day basis.

2. In assigning psychic operators to respond to callers, PRN will give
the same priority to responding to callers to Quintel's programs as in
responding to callers to PRN's programs, and will assign live psychic
operators to answer calls to PRN and Quintel programs on a random basis.

3. PRN will, to the best of its ability, hire only qualified psychics
who have been tested and interviewed by PRN, not "chat" operators.

4. All live psychic operators will work out of their respective homes
or offices, not from "telemarketing rooms", unless otherwise agreed by the
parties.

5. PRN will provide the staff required to monitor and manage the
quality of the live psychics responding to calls. The ratio of such staff
to the live psychic operators shall be no less favorable than the ratio as
of the date hereof, and the level of quality control exercised over the
operations of the live psychics shall be no less than the level in
existence as of the date hereof.

6. PRN will coordinate with West Interactive, Inc. or such other
billing service bureau (hereafter West Interactive or such other service
bureau is referred to as a "service bureau") utilized by Client to assure
that the system is properly connected and operating as expected.

7. PRN will cause its psychic operators to follow all program scripts
and instructions provided by CC to comply with all Federal, state, local
and telephone company guidelines with respect to provision of 900, 800
line, live psychic Services.

8. PRN will obtain the name, address, telephone number and other
pertinent information which Client reasonably requests PRN to obtain from
each caller and transmit same to the service bureau as required. The
telephone numbers of the callers will be transmitted to Client
electronically on a daily basis. PRN will provide Client with the name,
address and other information obtained from the callers when such
information is entered into PRN's data base, which processing will be
completed in no less time than currently occurs (which is on average within
seven (7) days after the call occurs).

PRN shall also provide Quintel with the names and addresses (the "PRN
Names") and the telephone numbers (the "PRN Numbers") of all callers to the
telephone programs sponsored or conducted by PRN, in addition to providing
such information regarding callers to the programs sponsored or conducted
by Quintel and the Quintel Affiliates (the "Quintel Programs") for which
PRN provides Services hereunder. The PRN Names and Numbers shall be
provided to Quintel in the same manner and at the same frequency as PRN is
required to provide Quintel with the names, addresses and telephone numbers
of the callers to the Quintel Programs.

In further amplification of the provisions of Section 2(g) of the
letter agreement dated January 17, 1996 among the parties to this
Agreement, PRN and Quintel and the Quintel Affiliates shall all have the
right to make direct mail and print advertising solicitations to the PRN
Names in the conduct of their respective business operations. Quintel and
the Quintel Affiliates shall have the exclusive right to conduct
telemarketing activities of the PRN Names and PRN Numbers, and PRN shall
not conduct any telemarketing activities in connection with the operation
of its business.

9. If requested by Client, PRN will instruct its live psychic
operators to include information about Client's other programs during the
course of the response to callers to Client's programs.

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<PAGE> 114

10. PRN shall not terminate the live psychic service connection and
billing services provided by any service bureau without Quintel's consent,
and will not change or add a service bureau without Quintel's consent.
Concurrently herewith, PRN has delivered to Quintel an irrevocable letter
of instruction addressed to each service bureau with which PRN is doing
business, confirmed by each such service bureau, instructing the service
bureau not to terminate its services for a Client's customers except upon
the joint written instruction of PRN and Client.

b. RESPONSIBILITIES OF CLIENT:

1. Client will follow all Federal, state, local and telephone company
guidelines with respect to provision of 900, 800 line, live psychic
services in the design of its programs.

2. Client will be responsible for the promotion of its programs, and
will provide PRN with a media schedule and call volume expectations.

3. Client will be responsible for informing PRN at least one (1) week
in advance of any significant change in the promotion of its programs which
is expected to substantially increase or decrease call volume.

4. Client will instruct the service bureau to provide PRN with daily
call reports.

5. In advertising psychic services for the programs utilizing the
Services provided by PRN to Client under this Agreement, Client will
describe the services provided by the programs only as live psychic
services.

8. CONFIDENTIALITY OF CLIENT INFORMATION:

a. PRN shall hold in strictest confidence, and shall not directly or
indirectly use for its own benefit, or for the benefit of anyone else, all
information relating to the transactions processed by it for each Client and all
information it receives regarding the business affairs of each Client.

b. PRN shall not reveal, divulge or make known to any person, firm,
corporation or other business organization, and shall not directly or indirectly
use for its own benefit, or for the benefit of anyone else, any secret or
confidential information used by each Client in its business, including, without
limitation, (i) pricing information, (ii) the terms of each Client's existing
contracts with suppliers, service bureaus, licensors, performers or vendors,
(iii) any information pertaining to each Client's customers and their
requirements, (iv) the programs developed by each Client and any derivative
works based thereon, and (v) any other of each Client's trade secrets, all of
which shall be collectively referred to hereafter as the "Client Confidential
Information."

c. Client Confidential information shall be held in strictest confidence
and each party shall take all reasonable and necessary steps to maintain such
confidentiality. All Client records and Client Confidential Information shall be
returned to Client upon termination of this Agreement for any reason whatsoever.

9. CONFIDENTIALITY OF PRN INFORMATION: Each Client shall hold in strictest
confidence, not shall not reveal, divulge or make known to any person, firm,
corporation or other business organization, and shall not directly or indirectly
use for its own benefit, or for the benefit of anyone else, any secret or
confidential information used by PRN in the conduct of its business which
becomes known to Client (hereafter referred to as the "Confidential
Information"). PRN'S Confidential information shall be held in strictest
confidence and each party shall take all reasonable and necessary steps to
maintain such confidentiality. PRN acknowledges that its computer system
software operating PRN's caller distribution and psychic operators' backend
scheduling and the operations of the live operator service are not confidential
or proprietary.

10. SECURITY AGREEMENT: It is agreed that it is an essential element of
Quintel's agreement to acquire the NL Interest and issue its shares in
consideration for the transfer thereof that PRN continue to provide Quintel and
each Client with the Services at the fees described in this Agreement, and that
Feder continue to maintain control of PRN's operations and manage the
performance of its obligations under this Agreement. In order to secure such
obligations of PRN and Feder and the other PRN Principals, and the obligation of
PRN to sell Quintel or its nominee the Included Computer Equipment upon exercise
of the Option referred to in

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<PAGE> 115

Section 4 of this Agreement (hereafter all such obligations are referred to as
the "Obligations"), PRN hereby grants to Quintel and each Client a security
interest in the following (all of which shall be referred to as the
"Collateral") (i) all of PRN's Confidential Information, and all documents,
instruments, computer software, object codes, computer hardware, and intangibles
in which such Confidential Information is maintained, stored, or embodied, (ii)
the computer system hardware and software operating PRN's caller distribution
and psychic operators' backend scheduling; (iii) all systems, information, data,
software, records and documents regarding the operations of the live operator
service and all research and development regarding the foregoing and the
business affairs of PRN, its employees, contractors, subcontractors,
subsidiaries, affiliates or agents; (iv) all agreements, arrangements or
understandings between PRN and its live psychic operators, and (v) all
replacements and proceeds of the foregoing. A UCC-3 termination statement
terminating the security interest in the Collateral shall be delivered to PRN at
such time as no Obligations remain to be performed. This Agreement shall
constitute a security agreement within the meaning of the Uniform Commercial
Code of Florida, New York and Delaware (collectively, "UCC"). In the event of
any breach by PRN of its obligations under this Agreement, Quintel and each
Client shall have all of the rights of a secured creditor under the UCC. Quintel
and each Client shall have the right to file without PRN's signature a financing
statement and any continuation statement or amendment thereto necessary or
advisable in order to perfect and maintain the perfection of the foregoing
security interest.

11. INDEMNIFICATION: Each party shall indemnify the other party, and its
successors and assigns, against any claim and hold the other harmless from any
liability, suits, proceedings, cost or expense (hereafter collectively referred
to as a "Claim") arising out of a breach by the party against whom
indemnification is sought of its obligations under this agreement, provided that
no party shall be indemnified against Claim arising out of that party's wilful
misconduct or gross negligence.

12. NOTICES: Any notice required or permitted to be given pursuant to this
Agreement shall be deemed given one (1) business day after delivery by a
nationally recognized overnight courier or three (3) business days after such
notice is mailed by certified mail, return receipt requested, addressed as
follows: (i) if to PRN, at 2455 E. Sunrise Boulevard, Fort Lauderdale, Florida
33304 and (ii) if to any Client, at Quintel Entertainment, Inc., One Blue Hill
Plaza, Pearl River, New York 10965, Attention: Chief Executive Officer or at
such other address as any such party shall designate by written notice to the
other party.

13. MISCELLANEOUS:

a. This agreement supersedes the agreement between the parties dated July
7, 1995 and the amendment dated May , 1996.

b. PRN may not assign its rights and obligations under this Agreement
without the consent of Quintel. Quintel may assign its rights and obligations
under this Agreement to any subsidiary or affiliate controlled by Quintel, or in
connection with the sale of all or substantially all of the assets of Quintel or
another Client or a merger or consolidation of Quintel or a Client with another
entity.

c. No waiver by a party of any breach of this Agreement by the other shall
be deemed to be a waiver of any preceding or subsequent breach.

d. This agreement does not constitute a joint venture or partnership by the
parties, and each party is entering into this Agreement as a principal and not
as an agent of the other.

e. If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and not in any way affect or render invalid or unenforceable any other
provisions of this Agreement, and this Agreement shall be carried out as if such
invalid or unenforceable provisions were not embodied therein.

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<PAGE> 116

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

QUINTEL ENTERTAINMENT, INC.

By:

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

CALLING CARD CO., INC.

By:

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

PSYCHIC READERS NETWORK, INC.

By:

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

The undersigned agree to be personally bound by the provisions of Section 6
of the foregoing Agreement and consent as stockholders and directors of Psychic
Readers Network, Inc. to all other provisions of the foregoing Agreement.

<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
Steven L. Feder Thomas H. Lindsey
- ---------------------------------------------
Peter Stolz
</TABLE>

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<PAGE> 117

SCHEDULE 1.8 EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated ,
1996 by and between CALLING CARD CO.,
INC., a New York corporation (the
"Company"),
and STEVEN L. FEDER (the "Employee").
------------------------

The parties hereto desire to provide for the Employee's retention as a
Employee to the Company in accordance with the terms and provisions set forth
below:

NOW, THEREFORE, the parties agree as follows:

1. TERM.

The Company hereby retains the Employee, and the Employee agrees to work
for the Company until April 30, 2001 unless sooner terminated in accordance with
Section 7 hereof. Such period, together with the period of any extension or
renewal of such term, is referred to herein as the "Employment Period."

2. DUTIES.

On the date hereof, the Company acquired all of the interest of Psychic
Reader's Network, Inc. ("PRN") in New Lauderdale L.C., a Florida limited
liability company ("New Lauderdale") which was owned by PRN and the Company
prior to such acquisition. During the Employment Period, the Employee shall
serve as the General Manager for the Company of the business operated by New
Lauderdale prior to the date hereof, and perform services comparable to the
services he performed with respect to New Lauderdale's business prior to the
date hereof for the businesses of the Company and its parent corporation,
Quintel Entertainment, Inc. ("Quintel"), including supervision of psychics
utilized in the telephone entertainment programs marketed by the Company,
Quintel and their respective subsidiaries and affiliates, the development of new
telephone programs, and consultation with the Company and Quintel concerning the
management and development of such entities' business and affairs, and Employee
shall perform such further duties as shall, from time to time, be reasonably
delegated or assigned to the Employee by the Board of Directors of the Company
or Quintel.

3. DEVOTION OF TIME.

During the Employment Period, the Employee shall: (i) expend not less than
fifty percent (50%) of his working time for the Company, provided that the
Company hereby acknowledges that the Employee is also employed by Psychic
Readers Network, Inc. ("PRN") and that he shall continue to devote a portion of
his working time to PRN while retained by the Company; (ii) subject to the
foregoing, devote his best efforts, energy and skill to the services of the
Company and the promotion of its interests; and (iii) not take part in
activities known by the Employee to be detrimental to the best interests of the
Company. As used herein, the term Company also refers to Quintel and its
subsidiaries and affiliates.

Any venture, new business idea, product, technology or item of intellectual
property developed by the Employee in the course of his employment by the
Company shall be the property of the Company. The Company and the Employee
recognize that because the Employee is only obligated to spend fifty (50%)
percent of his working time in the performance of his duties for the Company,
and the balance of his working time in the performance of duties for PRN, the
Employee may become involved in the development of new business ideas with third
parties other than in connection with his employment by the Company. Employee
agrees that Quintel shall have a right of first refusal with respect to any new
business venture developed by him with any third parties or in the management,
ownership or development of which he becomes involved (any such venture is
referred to as a "New Venture") . In the event Employee becomes involved in the
development of a New Venture, Employee shall give written notice to Quintel of
the nature thereof, and Quintel, or any of its subsidiaries or affiliates shall
have the right at its option, exercised by written notice to Employee given
within thirty (30) days after receipt of Employee's notice, to negotiate the
terms of such New
<PAGE> 118

Venture with the other parties involved with such New Venture within the sixty
(60) day period following receipt of Employee's notice, and during such sixty
(60) day period the parties will negotiate in good faith regarding such terms.
If Quintel and such third parties are unable to reach agreement during such
sixty (60) day period, Employee may enter into such New Venture with such third
parties on terms no less favorable than the last terms, if any, proposed by
Quintel to such third parties, or if no such terms were proposed, on terms no
more favorable than the last terms, if any, proposed by such third parties to
Quintel. If Employee and the third parties do not conclude a definitive, binding
agreement with respect to the New Venture within six (6) months thereafter, then
prior to entering into an agreement with other parties with respect to such New
Venture, Employee shall again give notice to Quintel of his determination to
enter into such New Venture, and Quintel shall again have the right of first
refusal described in this paragraph with respect to the New Venture.

4. COMPENSATION.

4.1 In consideration for the services to be performed by the Employee
during the Employment Period hereunder, the Company shall compensate the
Employee with base compensation at the following rates, paid at the same
intervals as other executive officers of the Company, during the Employment
Period:

(a) From the date of this Agreement until November 30, 1996, the
Employee shall be paid a salary at the rate of $187,500 per annum; and

(b) With respect to each fiscal year thereafter, the Employee's salary
shall be increased by ten percent (10%) over and above his salary for the
immediately preceding fiscal year.

5. REIMBURSEMENT OF EXPENSES; ADDITIONAL BENEFITS.

5.1 The Company shall pay directly, or reimburse the Employee for, all
reasonable and necessary expenses and disbursements incurred by him for and on
behalf of the Company in the performance of his duties under this Agreement. For
such purposes, the Employee shall submit to the Company itemized reports of such
expenses in accordance with the Company's policies.

5.2 The Employee shall be entitled to paid vacations during the Employment
Period in accordance with the Company's then prevalent practices for executive
employees; provided, however, that the Employee shall be entitled to such paid
vacations for not less than four (4) weeks per annum.

5.3 The Employee shall be entitled to participate in, and to receive
benefits under, any employee benefit plans of the Company (including, without
limitation, pension, profit sharing, group life insurance and group medical
insurance plans) as may exist from time to time for its executive employees.

6. RESTRICTIVE COVENANT.

6.1 During the Employment Period and thereafter, the Employee shall not
reveal, divulge or make known to any person, firm, corporation or other business
organization, and shall not directly or indirectly use for his own benefit, or
for the benefit of anyone else, any secret or confidential information used by
the Company in its business, including, without limitation, (i) pricing
information, (ii) the terms of the Company's existing contracts with suppliers,
service bureaus or vendors (iii) any information pertaining to the Company's
customers and their requirements and (iv) any other of the Company's trade
secrets, all of which shall be collectively referred to hereafter as the
"Confidential Information."

6.2 The services of the Employee are unique, extraordinary and essential to
the business of the Company, particularly in view of the Employee's access to
the Confidential Information. Accordingly, the Employee agrees that he will not
at any time during the Employment Period and for a period of two (2) years
thereafter, without the prior written approval of the Board of Directors of the
Company, directly or indirectly, engage in any business activity competitive
with the business of the Company.

For the purposes of this Agreement any business which (i) provides
telephone entertainment services of the type provided by the Company, or (ii)
which the Company is considering or has in the past twelve months

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<PAGE> 119

considered, or (iii) which markets and/or operates theme related telephone
service programs, voice-mail or membership clubs pertaining to astrology,
psychics, diet services, personals or any other subject matter with which the
Company is now actively engaged in or has been engaged during the preceding
twelve months, or becomes engaged during the period in which the restrictions of
this Section 6 apply, will constitute a business activity competitive with the
business of the Company. Furthermore, the Employee agrees that, during such
period, he shall not solicit, directly or indirectly, or affect to the Company's
detriment any relationship of the Company with any customer, supplier, service
bureau, vendor or employee of the Company or cause any customer, supplier,
service bureau or vendor to refrain from entrusting additional business to the
Company.

As used herein, the term "customer" shall mean (i) anyone who is a customer
of the Company at the time of the alleged prohibited conduct; (ii) anyone who
was a customer of the Company at any time during the two year period immediately
preceding the alleged prohibited conduct; (iii) any prospective customers to
whom the Company had made a presentation (or similar offering of services)
within a period of 360 days immediately preceding the alleged prohibited conduct
or, if the alleged prohibited conduct occurs after the end of the restrictive
period described in the first paragraph of this Section 6.2, within a period of
360 days immediately preceding such termination; and (iv) any customer for which
Company, renders or has provided programs or services within the time periods
set forth above.

Notwithstanding the provisions of this Section 6.2, Employee shall be
permitted to continue to render services to PRN with respect to the conduct of
PRN's existing business as of the date hereof following its transfer of its
interest in New Lauderdale to the Company in accordance with the provisions of
Section 3 of this Agreement. PRN'S existing business as of the date hereof means
the business of providing pay-per-call astrology and psychics telephone
entertainment in the manner in which PRN is providing such services as of the
date hereof.

6.3 The Employee acknowledges that the business of the Company extends
beyond the geographic area of the States of New York and Florida and
accordingly, it is reasonable that the restrictive covenants set forth above are
not limited by specific geographic area but by the location of the customers of
the Company. In the event that any of the provisions of Sections 6.1 and 6.2
hereof shall be adjudicated to exceed the time, geographic or other limitations
permitted by applicable law in any jurisdiction, then such provision shall be
deemed reformed in any such jurisdiction to the maximum time, geographic or
other limitations permitted by applicable law.

6.4 The Employee acknowledges that Company and the Employee intend to and
hereby confer jurisdiction to enforce the covenants contained in this Agreement
upon the courts of any state within the geographical scope of such covenants. In
the event that the courts of one or more of such states shall hold such
covenants wholly unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the right of the Company to the relief provided above
in the courts of any other states within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states, the
above covenants as they relate to each state being, for this purpose, severable
into diverse and independent covenants. Notwithstanding the foregoing, no action
will be commenced in more than one jurisdiction at a time unless one or more of
the provisions of this Agreement can only be enforced if an action is brought in
another jurisdiction or jurisdictions.

6.5 As used in this Section 6, the term "Company" shall mean and include
any and all corporations, partnerships, joint ventures or limited liability
companies affiliated with the Company or Quintel, which either now exist or
which may hereafter be organized.

6.6 The Employee hereby acknowledges and agrees that, in the event he shall
violate any provisions of this Section 6 the Company will be without an adequate
remedy at law and accordingly, will be entitled to enforce such restrictions by
temporary or permanent injunctive or mandatory relief obtained in any action or
proceeding instituted in any court of competent jurisdiction without the
necessity of proving damages or posting a bond, and without prejudice to any
other remedies which it may have at law or in equity.

3
<PAGE> 120

7. EARLIER TERMINATION.

7.1 The Employee's employment hereunder shall automatically be terminated
upon the death of the Employee or the Employee's voluntarily leaving the employ
of the Company and, in addition, may be terminated, at the sole discretion of
the Company, as follows:

(a) Upon thirty (30) days' prior written notice by the Company, in the
event of the Employee's disability as set forth in Section 7.2 below; or

(b) Upon thirty (30) days' prior written notice by the Company, in the
event that the Company terminates the Employee's employment hereunder for
cause as set forth in Section 7.3 below.

7.2 The Employee shall be deemed disabled hereunder, if in the opinion of
the Board of Directors of the Company, as confirmed by competent medical advice,
he shall become physically or mentally unable to perform his duties for the
Company hereunder and such incapacity shall have continued for any period of six
(6) consecutive months.

7.3 For purposes hereof, "cause" shall include, but not be limited to, the
following: (a) the Employee's willful malfeasance or gross negligence; (b) any
material misrepresentation or concealment of a material fact made by the
Employee in connection with this Agreement; or (c) the material breach of any
covenant made by the Employee hereunder, and the Employee's failure to cure such
conduct or event constituting "cause" within 30 days after written notice
thereof.

7.4 In the event that this Agreement is terminated by the Company without
cause, the Employee shall continue to receive all payments which would otherwise
be due to him under this Agreement.

8. NO REQUIREMENT OF RELOCATION.

The Company expressly agrees that the Employee, as a condition of his
employment, need not relocate his residence from the community in which he
presently resides. Any demand or requirement by the Company that the Employee
principally perform his duties at a location or office that requires more than
an additional hour of one-way commutation time than the Employee currently
experiences shall, in the absence of the Employee's consent (which may be
withheld for any reason), constitute a termination without cause by the Company
of the Employee's engagement hereunder.

9. SERVICE AS DIRECTOR.

During the Employment Period, the Employee shall, if elected or appointed,
serve as a Director of the Company, Quintel and/or any subsidiary of Quintel or
the Company upon such terms as shall be mutually agreed upon by the Employee and
the Company.

10. KEY MAN INSURANCE.

Quintel or the Company shall have the right to obtain life insurance on the
Employee's life in such amount as either determines. Employee shall cooperate
with Quintel and the Company in applying for the policy, will submit to a
physical examination, supply all information required by the insurance company
or companies to which application is made, and execute and deliver all necessary
documents required in such connection. Quintel or the Company, as the case may
be, shall be the sole owner of the policy, be entitled at all times to its
physical possession and Quintel or the Company shall be the beneficiary of the
policy and entitled to all rights and privileges thereunder. Quintel or the
Company may at any time pledge the entire policy with the insurance company or
with others as collateral for any loan, for which Employee shall have no
responsibility or liability. Quintel or the Company shall have the sole right to
determine in their exclusive discretion whether to continue, renew or cancel the
policy, and neither Employee nor Employee's heirs, executors, successors or
assigns shall have any rights to any part of the policy, its value or its
proceeds. After the initial policy is obtained, Employee shall cooperate with
Quintel or the Company in the manner provided in this paragraph in connection
with applications to other insurance companies in connection with additional or
replacement policies.

4
<PAGE> 121

11. ASSIGNMENT.

This Agreement, as it relates to the Company's employment of the Employee,
is a personal contract and the rights and interests of the Employee hereunder
may not be sold, transferred, assigned, pledged or hypothecated, except as
otherwise set forth herein. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns, including without
limitation, any corporation or other entity into which the Company or Quintel is
merged or which acquires all of the outstanding shares of Quintel's or the
Company's capital stock, or all or substantially all of the assets of Quintel or
the Company.

12. RIGHT TO PAYMENTS.

The Employee shall not under any circumstances have any option or right to
require payments hereunder otherwise than in accordance with the terms hereof.
To the extent permitted by law, the Employee shall not have any power of
anticipation, alienation or assignment of payments contemplated hereunder, and
all rights and benefits of the Employee shall be for the sole personal benefit
of the Employee, and no other person shall acquire any right, title or interest
hereunder by reason of any sale, assignment, transfer, claim or judgment or
bankruptcy proceedings against the Employee.

13. NOTICES.

Any notice required or permitted to be given pursuant to this Agreement
shall be deemed given one (1) business day after personally delivered or
delivered by a nationally recognized overnight courier or five (5) business days
after such notice is mailed by certified mail, return receipt requested,
addressed as follows: (i) if to Employee, at 2455 E. Sunrise Boulevard, Fort
Lauderdale, Florida 33304 and (ii) if to the Company, at One Blue Hill Plaza,
Pearl River, New York 10965, Attention: Chief Executive Officer or at such other
address as any such party shall designate by written notice to the other party.
Copies of all notices shall also be provided to Feder, Kaszovitz, Isaacson,
Weber, Skala & Bass LLP, 750 Lexington Avenue, New York, New York 10022-1200.

14. GOVERNING LAW.

This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of New York.

15. WAIVER.

The waiver by either party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other breach.

16. SEVERABILITY.

If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and not in any way affect or render invalid or unenforceable any other
provisions of this Agreement, and this Agreement shall be carried out as if such
invalid or unenforceable provisions were not embodied therein.

17. ENTIRE AGREEMENT.

This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and there are no representations,
warranties or commitments except as set forth herein. This Agreement supersedes
any other prior and contemporaneous agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
transactions contemplated by this Agreement. This Agreement may be amended only
in a writing executed by the parties hereto affected by such amendment.

5
<PAGE> 122

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.

CALLING CARD CO., INC.

By:
--------------------------------------
Jeffrey L. Schwartz

--------------------------------------
STEVEN L. FEDER

6
<PAGE> 123

SCHEDULE 1.9 ESCROW AGREEMENT

, 1996

ESCROW AGREEMENT

Re: ACQUISITION AGREEMENT (THE "ACQUISITION AGREEMENT") BETWEEN QUINTEL
ENTERTAINMENT, INC. ("QUINTEL"), CALLING CARD CO., INC. ("CCCI") AND PSYCHIC
READERS NETWORK, INC. ("PRN") AND A PLEDGE OF SHARES AGREEMENT BETWEEN
QUINTEL, PRN, STEVEN L. FEDER ("FEDER"), THOMAS H. LINDSEY ("LINDSEY") AND
PETER STOLZ ("STOLZ") ("PLEDGE AGREEMENT") OF EVEN DATE HEREWITH.

1. The undersigned, Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP (the
"Escrow Agent"), hereby acknowledges receipt of the following documents
(hereafter such documents are collectively referred to as the "Collateral")
pursuant to the provisions of the Acquisition Agreement and Pledge Agreement:

i. three (3) certificates, representing in the aggregate Four Hundred
Thousand (400,000) shares of the common stock of Quintel, in the respective
names of Feder, Lindsey and Stolz, with such three certificates being in
the following amounts:

Feder --
shares
Lindsey --
shares
Stolz -- shares;

ii. stock powers signed in blank by Feder, Lindsey and Stolz in form
for transferring their respective shares to Quintel.

2. Capitalized terms not otherwise defined in this Agreement shall have the
meaning ascribed thereto in the Acquisition Agreement.

3. The Escrow Agent shall hold the Collateral received by it in escrow and
shall dispose of the Collateral only in accordance with the provisions of this
Agreement and the Acquisition Agreement.

4. The Escrow Agent may assume the genuineness of any document or signature
which appears to it to be genuine (whether or not original or photocopy) if such
document or signature is presented to it. The Escrow Agent shall have no
obligations other than those specifically set forth herein. The Escrow Agent
shall be entitled to rely on written instructions signed by all of Quintel,
Feder, Lindsey, Stolz and PRN with respect to the delivery of the Collateral.

5. Any notice or other communication hereunder shall be addressed to the
parties as provided in the Acquisition Agreement.

6. Quintel, Feder, Lindsey, Stolz and PRN acknowledge that the Collateral has
been pledged to secure the obligations of Feder, Lindsey, Stolz and/or PRN under
the Acquisition Agreement and that the Collateral has been delivered to the
Escrow Agent as agent for Quintel as secured party.

7. The Escrow Agent shall not be obligated to, but may, institute legal
proceedings (which, if instituted, shall be in a court in the City and State of
New York) to determine its obligations hereunder or to seek permission to
deposit the Collateral or any portion thereof in court, upon which act the
Escrow Agent shall be relieved of any further obligations hereunder with respect
to such Collateral.

8. The Escrow Agent shall have no liability to any party except for the Escrow
Agent's willful misconduct or gross negligence. Upon disposing of the Collateral
held by the Escrow Agent in the manner provided in this Agreement, the Escrow
Agent shall be released, discharged, and acquitted of all obligations and
liabilities hereunder and any claims or surcharges made by or on behalf of any
party to this Agreement.

9. The Escrow Agent may resign at any time on thirty (30) days' written notice
to all the parties hereto, in which event Quintel shall have the right to name a
substitute escrow agent, who shall be an attorney admitted
<PAGE> 124

to the practice of law in the State of New York. If a substitute escrow agent is
not appointed at the end of such period, the Escrow Agent may appoint a
substitute escrow agent.

10. Feder, Lindsey, Stolz and PRN each acknowledge that the Escrow Agent has
acted as counsel to Quintel in connection with the negotiation and conclusion of
the Acquisition Agreement and the consummation of the transactions contemplated
thereby. In the event of any dispute between Feder, Lindsey, Stolz and/or PRN
and Quintel in connection with the Acquisition Agreement or the transactions
contemplated thereby, including the transactions described in this Escrow
Agreement, Feder, Lindsey, Stolz and PRN consent to the Escrow Agent acting as
counsel to Quintel in connection with such dispute.

11. This Agreement cannot be changed or terminated orally.

<TABLE>
<S> <C>
FEDER, KASZOVITZ, ISAACSON, WEBER, SKALA &
BASS LLP
By:
- --------------------------------------------
QUINTEL ENTERTAINMENT, INC. CALLING CARD CO., INC.
By: By:
- -------------------------------------------- --------------------------------------------
PSYCHIC READERS NETWORK, INC.
By:
- --------------------------------------------
--------------------------------------------
- --------------------------------------------
STEVEN L. FEDER THOMAS H. LINDSEY
- --------------------------------------------
PETER STOLZ
</TABLE>

2
<PAGE> 125

SCHEDULE 1.15 NON-COMPETITION AND RIGHT OF FIRST REFUSAL AGREEMENTS

NON-COMPETITION AND RIGHT OF FIRST
REFUSAL AGREEMENT dated ,
1996 by and between QUINTEL
ENTERTAINMENT, INC., a Delaware
corporation ("Quintel") and
("Obligor").
------------------------

R E C I T A L :

Quintel has concurrently with the execution and delivery of this Agreement
acquired all of the interest (the "NL Interest") in New Lauderdale L.C., a
Florida limited liability company ("New Lauderdale") owned by Psychic Readers
Network, Inc., a Florida corporation of which Obligor is a shareholder, in
consideration for 3,200,000 shares of Quintel's common stock, of which
shares have been distributed to Obligor.

NOW, THEREFORE, the parties agree as follows:

1. As an inducement to Quintel's acquisition of the NL Interest and
issuance of its shares in consideration for the transfer of the NL Interest, the
Obligor hereby covenants and agrees that from the date hereof through
, 2001 (the "Restrictive Period"), he will not, without the prior
written approval of the Board of Directors of Quintel, directly or indirectly,
engage in any business activity competitive (i) with the business of New
Lauderdale acquired by Quintel or (ii) competitive with any other business
conducted by Quintel or any of its subsidiaries or affiliates, including New
Lauderdale during the Restrictive Period (Quintel and its subsidiaries and
affiliates are collectively referred to as the "Company"). The term "affiliate"
shall mean any entity or venture in which Quintel has an interest.

For the purposes of this Agreement any business which (i) provides
telephone entertainment services of the type provided by the Company, or (ii)
which New Lauderdale is considering or has in the past twelve months considered,
or (iii) which markets and/or operates theme related telephone service programs,
voice-mail programs or membership clubs pertaining to astrology, psychics, diet
services, personals or any other subject matter with which the Company is now
actively engaged in or has been engaged during the preceding twelve months, or
becomes engaged during the Restrictive Period will constitute a business
activity competitive with the business of the Company. Furthermore, the Obligor
agrees that, during such period, he shall not (i) directly or indirectly employ
or attempt to employ or assist anyone else to employ any person (except on
behalf of the Company) who is then, or at any time during the preceding twelve
months was, in the employ of the Company, or (ii) solicit, directly or
indirectly, or affect to the Company's detriment any relationship of the Company
with any customer, supplier, service bureau, vendor or employee of the Company
or cause any customer, supplier, service bureau or vendor of the Company to
refrain from entrusting additional business to the Company. Nothing herein shall
prevent or limit PRN in the conduct of its existing business as defined herein.

Notwithstanding the provisions of this Section 1, Obligor shall be
permitted to continue to render services to PRN with respect to the conduct of
its existing business as of the date hereof following PRN's transfer of the NL
Interest to the Company. PRN'S existing business as of the date hereof means the
business of providing pay-per-call astrology and psychics telephone
entertainment in the manner in which PRN is providing such services as of the
date hereof.

2. As used herein, the term "customer" shall mean (i) anyone who is a
customer of the Company at the time of the alleged prohibited conduct; (ii)
anyone who was a customer of the Company at any time during the two year period
immediately preceding the alleged prohibited conduct; (iii) any prospective
customers to whom the Company had made a presentation (or similar offering of
services) within a period of 360 days immediately preceding the alleged
prohibited conduct or, if the alleged prohibited conduct occurs after the end of
the Restrictive Period, within a period of 360 days immediately preceding such
termination; and
<PAGE> 126

(iv) any customer for which Company, renders or has provided programs or
services within the time periods set forth above.

3. As a further inducement to Quintel's acquisition of the NL Interest and
issuance of its shares in consideration for the transfer thereof, the Obligor
agrees that the Company shall have a right of first refusal with respect to any
new business venture (any such venture is referred to as a "New Venture")
developed by him with any third parties or in the management, ownership or
development of which he becomes involved. In the event Obligor becomes involved
in the development of a New Venture, Obligor shall give written notice to the
Quintel of the nature thereof, and the Quintel, Quintel or any of their
respective subsidiaries or affiliates shall have the right at their option,
exercised by written notice to Obligor given within thirty (30) days after
receipt of Obligor's notice, to negotiate the terms of such New Venture with the
other parties involved with such New Venture within the sixty (60) day period
following receipt of Obligor's notice, and during such sixty (60) day period the
parties will negotiate in good faith regarding such terms. If the Quintel and
such third parties are unable to reach agreement during such sixty (60) day
period, Obligor may enter into such New Venture with such third parties on terms
no less favorable than the last terms, if any, proposed by the Quintel to such
third parties, or if no such terms were proposed, on terms no more favorable
than the last terms, if any, proposed by such third parties to the Quintel. If
Obligor and the third parties do not conclude a definitive, binding agreement
with respect to the New Venture within six (6) months thereafter, then prior to
entering into an agreement with other parties with respect to such New Venture,
Obligor shall again give notice to the Quintel of his determination to enter
into such New Venture, and the Quintel shall again have the right of first
refusal described in this paragraph with respect to the New Venture.

4. The Obligor acknowledges that the restrictive covenants above are
necessary in order to protect and maintain the asset acquired by the Quintel
from PRN and to prevent the usurpation by the Obligor (an employee of and a
stockholder of PRN) of all or any portion of the asset acquired by Quintel. The
Obligor acknowledges that the business of the Company extends beyond the
geographic area of the States of New York and Florida and accordingly, it is
reasonable that the restrictive covenants set forth above are not limited by
specific geographic area but by the location of the customers of the Company.

5. The Obligor acknowledges that the remedy at law for any breach of this
Agreement by the Obligor will be inadequate and that, accordingly, Company
shall, in addition to all other available remedies (including without limitation
seeking such damages as it can show it has sustained by reason of such breach),
be entitled to injunctive relief without being required to post bond or other
security and without having to prove the inadequacy of the available remedies at
law.

6. The Obligor acknowledges that the type and periods of restriction
imposed herein are fair and reasonable and are reasonably required for the
protection of the Company and New Lauderdale, and are given as an integral part
of the acquisition by Quintel of the NL Interest from PRN. If any of the
covenants contained in this Agreement, or any part thereof, is hereinafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions. If any of the covenants contained in
this Agreement, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or geographic area of such provision and, in its reduced form, said
provision shall then be enforceable.

7. The Obligor acknowledges that Company and the Obligor intend to and
hereby confer jurisdiction to enforce the covenants contained in this Agreement
upon the courts of any state within the geographical scope of such covenants. In
the event that the courts of one or more of such states shall hold such
covenants wholly unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the right of the Company to the relief provided above
in the courts of any other states within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states, the
above covenants as they relate to each state being, for this purpose, severable
into diverse and independent covenants. Notwithstanding the foregoing, no action
will be commenced in more than one jurisdiction at a time unless one or more of
the provisions of this Agreement can only be enforced if an action is brought in
another jurisdiction or jurisdictions.

2
<PAGE> 127

8. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.

9. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
entirely within New York.

10. In the event any provision of this Agreement is found to be void and
unenforceable by a court of competent jurisdiction or arbitration panel, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties hereto with the same effect as though the void or unenforceable part had
been severed and deleted.

11. This Agreement may not be changed orally, but only by an agreement in
writing signed by the Company and the Obligor.

QUINTEL ENTERTAINMENT, INC.

By:

------------------------------------
Jeffrey L. Schwartz

OBLIGOR:

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

3
<PAGE> 128

NON-COMPETITION AND RIGHT OF FIRST
REFUSAL AGREEMENT dated ,
1996
by and between QUINTEL ENTERTAINMENT,
INC., a Delaware corporation
("Quintel") and
PSYCHIC READERS NETWORK, INC., a
Florida
corporation ("PRN" or "Obligor").
------------------------

R E C I T A L:

NOW, THEREFORE, in order to induce Quintel to issue its shares of stock in
consideration for the transfer of the NL Interest, and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
agree as follows:

1. As an inducement to Quintel's acquisition of the NL Interest and
issuance of its shares in consideration for the transfer of the NL Interest, the
Obligor hereby covenants and agrees that from the date hereof through
, 2001 (the "Restrictive Period"), it will not, without the prior
written approval of the Board of Directors of Quintel, directly or indirectly,
engage in any business activity competitive (i) with the business of New
Lauderdale acquired by Quintel or (ii) competitive with any other business
conducted by Quintel or any of its subsidiaries or affiliates during the
Restrictive Period (Quintel and its subsidiaries and affiliates are collectively
referred to as the "Company"). The term "affiliate" shall mean any entity or
venture in which Quintel has an interest.

For the purposes of this Agreement any business which (i) provides
telephone entertainment services of the type provided by New Lauderdale or the
Company, or (ii) which the Company or New Lauderdale is considering or has in
the past twelve months considered, or (iii) which markets and/or operates theme
related telephone service programs or membership clubs pertaining to astrology,
psychics, diet services, personals or any other subject matter with which
Quintel or New Lauderdale is now actively engaged in or has been engaged during
the preceding twelve months, or becomes engaged during the Restrictive Period
will constitute a business activity competitive with the business of the Company
or New Lauderdale, as the case may be. Furthermore, the Obligor agrees that,
during such period, it shall not (i) directly or indirectly employ or attempt to
employ or assist anyone else to employ any person who is then, or at any time
during the preceding twelve months was, in the employ of the Company, other than
Stephen Feder, or (ii) solicit, directly or indirectly, or affect to the
Company's detriment any relationship of the Company with any customer, supplier,
service bureau, vendor or employee of the Company or New Lauderdale or cause any
customer, supplier, service bureau or vendor of the Company or New Lauderdale to
refrain from entrusting additional business to the Company or New Lauderdale.
Notwithstanding the provisions of this Section 1, Obligor shall be permitted to
continue to conduct its existing business as of the date hereof following its
transfer of the NL Interest to the Company. PRN'S existing business as of the
date hereof means the business of providing pay-per-call astrology and psychics
telephone entertainment in the manner in which PRN is providing such services as
of the date hereof.

2. As used herein, the term "customer" shall mean (i) anyone who is a
customer of the Company at the time of the alleged prohibited conduct; (ii)
anyone who was a customer of the Company or NL at any time during the two year
period immediately preceding the alleged prohibited conduct; (iii) any
prospective customers to whom the Company had made a presentation (or similar
offering of services) within a period of 360 days immediately preceding the
alleged prohibited conduct or, if the alleged prohibited conduct occurs after
the end of the Restrictive Period, within a period of 360 days immediately
preceding such termination; and (iv) any customer for which the Company renders
or has provided programs or services within the time periods set forth above.
<PAGE> 129

3. As a further inducement to Quintel's acquisition of the NL Interest and
issuance of its shares in consideration for the transfer thereof, the Obligor
agrees that the Company shall have a right of first refusal with respect to any
new business venture (any such venture is referred to as a "New Venture")
developed by PRN with any third parties or in the management, ownership or
development of which it becomes involved. In the event Obligor becomes involved
in the development of a New Venture, Obligor shall give written notice to the
Quintel of the nature thereof, and the Quintel, Quintel or any of their
respective subsidiaries or affiliates shall have the right at their option,
exercised by written notice to Obligor given within thirty (30) days after
receipt of Obligor's notice, to negotiate the terms of such New Venture with the
other parties involved with such New Venture within the sixty (60) day period
following receipt of Obligor's notice, and during such sixty (60) day period the
parties will negotiate in good faith regarding such terms. If the Quintel and
such third parties are unable to reach agreement during such sixty (60) day
period, Obligor may enter into such New Venture with such third parties on terms
no less favorable than the last terms, if any, proposed by the Quintel to such
third parties, or if no such terms were proposed, on terms no more favorable
than the last terms, if any, proposed by such third parties to the Quintel. If
Obligor and the third parties do not conclude a definitive, binding agreement
with respect to the New Venture within six (6) months thereafter, then prior to
entering into an agreement with other parties with respect to such New Venture,
Obligor shall again give notice to the Quintel of its determination to enter
into such New Venture, and the Quintel shall again have the right of first
refusal described in this paragraph with respect to the New Venture.

4. The Obligor acknowledges that the restrictive covenants above are
necessary in order to protect and maintain the asset acquired by Quintel from
PRN and to prevent the usurpation by the Obligor of all or any portion of the
asset acquired by Quintel. The Obligor acknowledges that the business of NL and
the Company extends beyond the geographic area of the States of New York and
Florida and accordingly, he is reasonable that the restrictive covenants set
forth above are not limited by specific geographic area but by the location of
the customers of the Company and NL.

6. The Obligor acknowledges that the type and periods of restriction
imposed herein are fair and reasonable and are reasonably required for the
protection of the Company and New Lauderdale and are given as an integral part
of the acquisition by Quintel of the NL Interest from PRN. If any of the
covenants contained in this Agreement, or any part thereof, is hereinafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions. If any of the covenants contained in
this Agreement, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or geographic area of such provision and, in its reduced form, said
provision shall then be enforceable.

8. In order to secure its obligations under this Agreement, PRN hereby
grants the Quintel a security interest in all of the following (all of which
shall be referred to as the "Collateral") (i) all of PRN's

2
<PAGE> 130

Confidential Information, and all documents, instruments, computer software,
object codes, computer hardware, and intangibles in which such Confidential
Information is maintained, stored, or embodied, (ii) the computer system
hardware and software operating PRN's caller distribution and psychic operators'
backend scheduling; (iii) all systems, information, data, software, records and
documents regarding the operations of the live operator service and all research
and development regarding the foregoing and the business affairs of PRN, its
employees, contractors, subcontractors, subsidiaries, affiliates or agents; (iv)
all agreements, arrangements or understandings between PRN and its live psychic
operators, and (v) all replacements and proceeds of the foregoing. The term
"Confidential Information" means any secret or confidential information used by
PRN in the conduct of its business. This Agreement shall constitute a security
agreement within the meaning of the Uniform Commercial Code of Florida, New York
and Delaware (collectively, "UCC"). In the event of any breach by PRN of its
obligations under this Agreement, Quintel shall have all of the rights of a
secured creditor under the UCC. Quintel shall have the right to file without
PRN's signature a financing statement and any continuation statement or
amendment thereto necessary or advisable in order to perfect and maintain the
perfection of the foregoing security interest. A UCC-3 termination statement
terminating the security interest in the Collateral shall be delivered to PRN at
such time as no further obligations remain to be performed hereunder by PRN.

9. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.

10. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed entirely within the state of New York.

11. In the event any provision of this Agreement is found to be void and
unenforceable by a court of competent jurisdiction or arbitration panel, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties hereto with the same effect as though the void or unenforceable part had
been severed and deleted.

12. This Agreement may not be changed orally, but only by an agreement in
writing signed by the Company and PRN.

QUINTEL ENTERTAINMENT, INC.

By:
--------------------------------------
Jeffrey L. Schwartz

PSYCHIC READERS NETWORK, INC.

By:
--------------------------------------

3
<PAGE> 131

SCHEDULE 1.22 REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated , 1996, by
and among QUINTEL ENTERTAINMENT, INC., a Delaware corporation (the "Company"),
and PSYCHIC READERS NETWORK, INC., a Florida corporation ("PRN").

WHEREAS, PRN has sold to the Company's subsidiary its interest in New
Lauderdale L.C. in consideration of the issuance to PRN by the Company of Three
Million Two Hundred Thousand (3,200,000) shares of Common Stock, par value $.001
per share, of the Company (the "Registrable Securities"); and

WHEREAS, PRN has distributed a portion of the Registrable Securities to its
three stockholders (PRN and/or such persons are hereinafter referred to
collectively as the "Holders" or each as a "Holder");

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

1. Registration of Registrable Securities. As promptly as practicable
after the date of this Agreement, the Company will file and use its best efforts
to cause to become effective under the Securities Act of 1933, as amended (the
"Act"), a registration statement covering the Registrable Securities to permit
the public distribution, which shall include the resale on a continuing basis,
of the Registrable Securities by the Holders. The Company will use its
reasonable efforts to maintain in effect such registration statement for (i) two
(2) years following the date hereof or, if sooner, (ii) until, in the opinion of
counsel for the Company, the Registrable Securities may be publicly sold in
accordance with the provisions of Rule 144 (or any successor or supplemental
rule) under the Act or otherwise without registration under the Act.

2. Inclusion of Other Securities in Registration Statement. The Company
shall have the right to include in any registration statement filed pursuant to
Section 1 hereof any other securities of the Company for sale for its own
account or for the account of any other person. If any such other securities
shall be offered in an underwritten offering, at the request of the managing
underwriter, the Holders shall sell the Registrable Securities to or through the
underwriters on the same terms as such other securities are being offered and
sold by such underwriters, and each Holder will enter into an underwriting
agreement with such underwriters which shall be substantially similar to the
underwriting agreement between the Company or such other persons selling
securities and the underwriters, provided that the Holders shall not be required
to make any representations or warranties to the underwriters other than as
relate to such Holder and such Holder's Registrable Securities.

3. Registration Procedures. In connection with the registration of the
Registrable Securities pursuant to this Agreement, the Company will as
expeditiously as practicable:

(a) prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement with respect to such securities on
such appropriate registration form of the Commission as shall be selected
by the Company and use its reasonable efforts to cause such registration
statement to become effective;

(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and current, and to comply with the provisions of the
Act with respect to the disposition of the securities covered by such
registration statement, for the period during which the Company is required
to keep the registration statement in effect as provided in Section 1
hereof;

(c) furnish to the Holder and each underwriter, if any, of such
securities such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Act, in conformity with the requirements of the Act, and such other
documents, as such Holder or such underwriter may reasonably request in
order to facilitate the disposition of the securities owned by such Holder,
but only while the Company is required under the provisions hereof to cause
the registration statement to remain in effect;
<PAGE> 132

(d) use reasonable efforts to register or qualify the Registrable
Securities covered by such registration statement under such securities or
blue sky laws of such jurisdictions where an exemption is not available and
as the Holders of Registrable Securities covered by such registration
statement shall reasonably request, and to take any and all other action
which may be necessary or advisable to enable such Holders to consummate
the disposition in such jurisdictions of the Registrable Securities owned
by such Holders; provided, however, that the Company shall not for any such
purpose be required (A) to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not, but for the
requirements of this paragraph (d) be obligated to be so qualified, (B) to
conform the composition of its assets at the time to the securities or blue
sky laws of any jurisdiction, (C) to subject itself to taxation in any such
jurisdiction, or (D) to consent to general service of process in any such
jurisdiction;

(e) notify the Holder at any time when a prospectus relating thereto
is required to be delivered under the Act, of the happening of any event as
a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
then existing (whereupon the Holder shall forthwith discontinue use of such
prospectus until receipt of notice from the Company that use of such
prospectus may be resumed or receipt of a prospectus supplement or
amendment hereinafter referred to), and, at the request of the Holder,
promptly prepare and file with the Commission and furnish to the Holder and
each underwriter, if any, a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances the
existing;

(f) use reasonable efforts to list all Registrable Securities covered
by such registration statement on any national securities exchange on which
the Company's securities of the same class are then listed or, if not so
listed, to qualify for trading on NASDAQ-NMS or NASDAQ, if eligible and if
securities of the same class are then so traded, if such securities are not
already so listed or qualified and if such listing or qualification is then
permitted under the rules of such exchange or market system.

The Company may require each Holder of Registrable Securities as to which
any registration is being effected to furnish the Company with such information
regarding such Holder and the intended method of distribution of such
Registrable Securities as the Company may from time to time reasonably request
in writing and as shall be required by law in connection therewith, including,
without limitation, notice of sales effected by such Holders under such
registration statement.

In the event that a registration statement pursuant to this Agreement does
not become effective notwithstanding the Company's compliance with the
procedures contained in this Section 3, the Company shall not be liable in any
manner whatsoever to the Holder with respect to the same.

4. Reasonable Investigation. In connection with the preparation and filing
of the registration statement pursuant to this Agreement, the Company will give
the Holders, their respective underwriters, if any, and their respective counsel
and accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and, to the extent practicable, each amendment thereof or supplement
thereof, and will give each of them (provided such Holder agrees not to use any
information so obtained for any purpose other than preparation of the
registration statement except to the extent the Holders would be entitled to
receive such information without restriction as stockholders of the Company
under applicable provisions of Delaware law) such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such Holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Act.

5. Expenses. The Company will pay all expenses incident to the Company's
performance of or compliance with Section 3 of this Agreement. The Holders will
pay any and all fees and expenses of their respective counsel, accountants and
advisors, underwriters' and brokers' discounts, commissions, fees and expenses,
and transfer taxes, if any, in respect of the Registrable Securities.

2
<PAGE> 133

6. Indemnification.

(a) Indemnification by the Company. With respect to the registration of
Registrable Securities pursuant to this Agreement, the Company will, and hereby
does, indemnify and hold harmless each Holder, its directors, officers,
partners, agents and affiliates, if any, and each other person who participates
as an underwriter in the offering or sale of such Registrable Securities and
each other person, if any, who controls such Holder or any such underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which such Holder or any such director,
officer, partner, agent or affiliate or participating or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities were registered under the Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and the Company will reimburse such
Holder and each such director, officer, partner, agent, affiliate, participating
person and controlling person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder or such underwriter, as the case may be;
and provided, further, that the Company shall not be liable to the Holder or any
person who participates as an underwriter in the offering or sale of Registrable
Securities or any other person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act, in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Holder's or person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of the
sale of Registrable Securities to such person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such Holder
or any such director, officer, partner, agent, affiliate, participating person
or controlling person and shall survive the transfer of such securities by such
Holder.

(b) Indemnification by the Holder. Each Holder will indemnify and hold
harmless (in the same manner and to the same extent as set forth in section (a)
above) the Company, each director of the Company, each officer of the Company,
each other person, if any, who controls the Company within the meaning of the
Securities Act and any underwriter of the Registrable Securities, with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Holder or such underwriter, as the case may be.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of such Registrable
Securities by the Holder.

(c) Notices of Claims, etc. Promptly after receipt of any party entitled
to indemnification under this Agreement (the "Indemnitee") of notice of any
demand, claim or circumstances which, with the lapse of time, would or might
give rise to a claim or the commencement (or threatened commencement) of any
action, proceeding or investigation (an "Asserted Liability") that may result in
any claims referred to in paragraph (a) or (b) hereof, the Indemnitee shall
promptly give notice thereof (the "Claims Notice") to the party obligated to
provide indemnification pursuant to Section 9.2 or 9.4 (the "Indemnifying
Party"); provided, however, that the failure of any Indemnitee to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under paragraph (a) or (b), except to the extent that the Indemnifying

3
<PAGE> 134

Party is actually prejudiced by such failure to give notice. The Claims Notice
shall describe the Asserted Liability in reasonable detail, and shall indicate
the amount (estimated, if necessary and to the extent feasible) of the Claims
that have been or may be suffered by the Indemnitee. The Indemnifying Party may
elect to compromise or defend, at its own expense and by its own counsel, any
Asserted Liability. If the Indemnifying Party elects to compromise or defend
such Asserted Liability, it shall within thirty (30) days (or sooner, if the
nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability at the expense
of the Indemnifying Party (if the Indemnifying Party is found obligated to
indemnify the Indemnitee with respect to the Claim). Subject to the limitations
contained in paragraph (d) on the obligations of the Indemnifying Party in
respect of proposed settlements, the Indemnitee shall have the right to employ
its own counsel with respect to any Asserted Liability, but the fees and
expenses of such counsel shall be at the expense of such Indemnitee unless (a)
the employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such action, or (b) such
Indemnifying Party shall not have, as provided above, promptly employed counsel
reasonably satisfactory to the Indemnitee to take charge of the defense of such
action, or (c) the Indemnitee shall have reasonably concluded based on an
opinion of counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to such Indemnifying
Party, in any of which events such reasonable fees and expenses shall be borne
by the Indemnifying Party and the Indemnifying Party shall not have the right to
direct the defense of such action on behalf of the Indemnitee in respect of such
different or additional defenses. If the Indemnifying Party chooses to defend
any claim, the Indemnitee shall make available to the Indemnifying Party any
books, records or other documents within its control that are necessary or
appropriate for such defense. If the Indemnifying Party elects not to assume the
defense of a Claim, it will not be obligated to pay the fees and expenses of
more than one counsel for all Indemnitees with respect to such claim, unless in
the reasonable judgment of an Indemnitee, and in the opinion of such
Indemnitee's counsel, a conflict of interest may exist between such Indemnitee
and any other of such Indemnitees with respect to such claim, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.

Neither the Indemnifying Party nor the Indemnitee may settle or compromise
any claim for which indemnification has been sought and is available hereunder,
over the objection of the other; provided, however, that consent to settlement
or compromise shall not be unreasonably withheld or delayed. If, however, the
Indemnitee refuses to consent to a bona fide offer of settlement which the
Indemnifying Party wishes to accept, the Indemnitee may continue to pursue such
matter, free of any participation by the Indemnifying Party, at the sole expense
of the Indemnitee. In such event, the obligation of the Indemnifying Party to
the Indemnitee shall be equal to the lesser of (i) the amount of the offer of
settlement which the Indemnitee refused to accept plus the costs and expenses of
the Indemnitee prior to the date the Indemnifying Party notified the Indemnitee
of the offer of settlement, and (ii) the actual out-of-pocket amount the
Indemnitee is obligated to pay as a result of the Indemnitee's continuing to
pursue such matter. No party will be required to consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such party of a release
from all liability in respect to the Claim.

(d) Contribution. If the indemnification provided for in this section 6
from the Indemnifying Party is unavailable to an Indemnitee hereunder in respect
of any losses, claims, damages or liabilities referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnitee, shall contribute to
the amount paid or payable by such Indemnitee as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of such Indemnifying Party and Indemnitees in connection with
the actions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations or, if the allocation
provided above is not permitted by applicable law, in such proportion as shall
be appropriate to reflect the relative benefits received by the Indemnifying
Party and the Indemnitees from the offering of the securities covered by the
registration statement that gave rise to the indemnification

4
<PAGE> 135

claim. The relative fault of such Indemnifying Party and Indemnitees shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such Indemnifying Party or Indemnitees and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages and liabilities referred to above shall be deemed to
include, subject to the limitations set forth in this Section 6, any legal or
other fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this paragraph (d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this paragraph (d). No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In addition, no person shall be
obligated to contribute hereunder any amounts in payment for any settlement of
any action or claim effected without such person's consent (which consent shall
not be unreasonably withheld).

7. Substitute Registration Statement on Form S-3. Notwithstanding anything
to the contrary provided herein, to the extent permitted by the Act and the
rules and regulations of the Commission thereunder, if the Company may effect or
continue in effect the registration of Registrable Securities (during such
period as the Company may be required to keep a registration statement in effect
pursuant to this Agreement) on Form S-3 (or any successor form), the Company may
deregister any Registrable Securities registered pursuant to this Agreement on a
form other than Form S-3 and remaining unsold and re-register such Registrable
Securities on Form S-3 (or any successor form).

8. Notices. All notices or communications provided for hereunder shall be
in writing (including facsimile transmission) and shall be addressed as follows:

(a) If to the Company:

Quintel Entertainment, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Attn: Jeffrey L. Schwartz, Chief Executive Officer

Copy to:

Murray L. Skala, Esq.
Feder, Kaszovitz, Isaacson,
Weber, Skala & Bass LLP
750 Lexington Avenue
New York, New York 10022

(b) If to the Holders:

c/o Psychic Readers Network, Inc.
2455 E. Sunrise Boulevard
Fort Lauderdale, Florida 33304

Copy to:

Donn Beloff, Esq.
Holland & Knight
One East Broward Boulevard
Fort Lauderdale, Florida 33301

Notices given by mail shall be deemed to have been given no later than
three business days after the date sent, if sent by registered or certified
mail, postage repaid, and addressed to the applicable party at the address shown
above (or such other address designated by such party subsequent to the date
hereof. Notices given by

5
<PAGE> 136

facsimile or hand delivery transmission shall be deemed to have been given when
sent or delivered, if properly addressed to the party to whom sent or delivered.
Any party may, by notice to the other party given in accordance with this
Section 8, designate another address or person for receipt of notices or
communications hereunder.

9. Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the matters described herein,
and supersedes all prior discussions, agreements and undertakings, written or
oral, of any and every nature with respect thereto.

10. Waiver and Amendments. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by or on behalf of the parties. No such written
instrument shall be effective unless it expressly recites that it is intended to
amend, supersede, cancel, renew or extend this Agreement or to waive compliance
with one or more of the terms hereof, as the case may be. No delay on the part
of any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, preclude any further exercise thereof or the exercise
of any other such right, power or privilege.

11. Governing Law. This Agreement shall be governed in all respects,
including validity, construction, interpretation and effect, by the laws of the
State of New York without giving effect to the conflict of laws provisions
thereof. To the extent permitted by law, each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of New York and of the United States of America
located in the City of New York for any actions, suits or proceedings arising
out of or relating to this Agreement and the transaction contemplated hereby
(and agrees not to commence any action, suit or proceeding relating thereto
except in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in Section 8 shall be effective service of process of any action, suit or
proceeding brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transaction contemplated hereby, in the courts of the State of New York or the
United States of America located in the City of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.

12. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. The rights of a Holder under this Agreement may not be
assigned or transferred.

13. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts which together shall constitute one and the same
instrument.

14. Further Assurances. Each party shall, at the request of any other
party hereto, at any time and from time to time following the date of this
Agreement promptly execute and deliver, or cause to be executed and delivered,
to such requesting party all such further instruments and take all such further
action as may be reasonably necessary or appropriate to confirm or carry out the
provisions and intents of this Agreement.

15. Captions. All Section titles or captions contained in this Agreement
are for convenience only, shall not be deemed a part of this Agreement and shall
not affect the meaning or interpretation of this Agreement. All references
herein to Sections and paragraphs shall be deemed references to such parts of
this Agreement, unless the context shall otherwise require.

6
<PAGE> 137

IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as
of the date first written above.

QUINTEL ENTERTAINMENT, INC.

By:

------------------------------------
Name: Jeffrey L. Schwartz
Title: Chairman and Chief Executive
Officer

PSYCHIC READERS NETWORK, INC.

By:

------------------------------------
Name: Steven L. Feder
Title:

------------------------------------
Steven L. Feder

------------------------------------
Peter Stolz

------------------------------------
Thomas H. Lindsey

7
<PAGE> 138

SCHEDULE 2.6 FORM OF EARNINGS DISTRIBUTION NOTE

NEW LAUDERDALE, L.C.
PROMISSORY NOTE

$ , 1996

FOR VALUE RECEIVED, the undersigned, NEW LAUDERDALE, L.C., a Florida
limited liability company (the "Maker"), having a place of business at One Blue
Hill Plaza, Pearl River, New York 10965, hereby promises to pay to the order of
(the "Holder"), having an address at
the principal sum of Dollars and
Cents ($ ), with interest thereon at the rate of
( %) per annum [the Applicable Federal Rate
determined under Section 7872 of the Internal Revenue Code].

This Note is one of a series of notes being issued to the three
stockholders of Psychic Readers Network, Inc., a Florida corporation ("PRN") in
the aggregate amount of $ , in payment of an amount due to PRN by
Maker. This Note shall rank pari passu with all other such notes of this series.

The principal amount outstanding under this Note shall be payable by the
Maker to the Holder commencing on , 1996, and each month thereafter,
until the date on which all amounts outstanding under this Note have been paid
in full (the "Final Payment Date"). Such monthly installments shall be equal to
the aggregate of:

(i) A minimum payment in the amount of $ [[$75,000 multiplied
by the holder's percentage ownership of PRN Shares]]; and

(ii) percent [[holder's percentage ownership of PRN Shares]]
multiplied by fifty (50%) percent of the Company's cash flow in excess of
$500,000 for the month immediately preceding.

Interest shall accrue and be payable in full on the Final Payment Date.
Interest at the rate of twelve percent (12%) per annum shall accrue upon any
installment not paid when due, or, after acceleration, upon the entire balance,
until paid in full.

This Note may be prepaid in whole or in part at any time without premium or
penalty.

IT IS FURTHER EXPRESSLY AGREED, that in the event of the failure of Maker
to pay any installment due under this Note after its due date, or then the
entire amount due under this Note shall upon five (5) days written notice given
to Maker and failure to cure such failure within such five (5) day period become
immediately due and payable at the option of the Holder without further notice
or demand.

The undersigned agrees to pay, in addition to the principal and interest,
all costs of collection, including attorneys' fees and disbursements.

If a law which applies to this Note, and which sets maximum rates of
interest which may be charged, is finally interpreted so that the interest
collected or to be collected pursuant to this Note exceeds the permitted limits,
then: (i) such interest shall be reduced by the amount necessary to reduce the
interest to the permitted limit; and (ii) any sums already collected from the
person or persons as to whom such interest is determined to have exceeded the
permitted limits will be refunded to such person or persons. The Holder may
choose to make this refund by reducing the principal amount owed under this Note
or by making a direct payment to such person or persons. If a refund reduces
principal, the reduction will be treated as a partial prepayment.

The undersigned waives presentment, demand for payment, notice of dishonor
and any or all notices or demands in connection with the delivery, acceptance,
performance, default or enforcement of this Promissory Note and consents to any
or all delays, extensions of time, renewals, releases of any party to this
Promissory Note and of any available security therefor to any party to this
Promissory Note or to the actual holder thereof and any and all waivers or
modifications that may be granted or consented to by the Holder with regard to
the time of payment or with respect to any other provisions of this Note and
agrees that no such action or failure
<PAGE> 139

to act on the part of the Holder shall be construed as a waiver by the Holder
of, or otherwise affect, its right to avail itself of any remedy with respect
thereto.

This Note shall be governed by and construed under the law of the State of
New York. Unless applicable law requires a different method, any notice that
must be given to the undersigned under this Note will be given by delivering it
or mailing it by first class mail to the undersigned at the address set forth at
the beginning of this Note or at such other address as such person may give
notice of to the Holder. Any notice to the Holder will be given by mailing it
first class mail to the Holder at the address for the Holder set forth at the
beginning of this Note or at such other address as the Holder may give notice of
to the Maker.

Any action brought to enforce this Note may be brought in the State of New
York, and Maker hereby consents to the personal jurisdiction of the federal and
state courts located in the State of New York, and agrees that unless applicable
law requires a different method, service of process in any such action may be
made by first class mail upon the Maker at the address set forth in the
beginning of this Note or at such other address as the Maker shall advise the
Holder by written notice to the address at which payments due under this Note
are to be sent pursuant to the first paragraph of this Note.

NEW LAUDERDALE L.C.

By: CALLING CARD CO., INC., a member

By:
--------------------------------------

2
<PAGE> 140

SCHEDULE 3.4.1(A) FORM OF SECTION 3.4.1 NOTE

PROMISSORY NOTE

$ , 199

FOR VALUE RECEIVED, , an individual resident of the State of
Florida residing at , Florida 33 , (the "Maker") promises to pay
to (the "Holder"), or order, at , or such
other place as the holder hereof may from time to time designate in writing, the
principal sum of ($ ) DOLLARS, with interest at an annual
rate of ( %) percent, as follows:

(1) interest shall be payable commencing on , 199 and on
the first day of each month thereafter until the due date hereunder; and

(2) the balance of principal and interest to be repaid in full within
five (5) business days after a registration statement under the Securities
Act of 1933, as amended, permitting the sale of the Maker's shares of
common stock of Quintel Entertainment, Inc. ("Quintel"), pledged by the
Maker to the Holder as a security interest pursuant to the provisions of
the Pledge of Shares Agreement (defined below), becoming effective or, in
the opinion of Quintel's counsel, the sale of such shares becomes exempt
from registration and applicable state law requirements.

This Note is secured by a Pledge of Shares Agreement of even date herewith
between the Maker as Pledgor and the Holder as Secured Party.

IT IS FURTHER EXPRESSLY AGREED, that in the event of the failure of Maker
to (i) pay any installment of principal or interest due under this Note on its
due date, or (ii) perform its obligations or pay any amount due under the Pledge
of Shares Agreement, then the entire amount due under this Note shall, upon five
(5) days written notice given to Maker and failure to cure such failure within
such five (5) day period, become immediately due and payable at the option of
the Holder without further notice or demand.

Interest at the rate of nine percent (9%) per annum shall accrue upon any
installment not paid when due, or, after acceleration, upon the entire balance,
until paid in full.

This Note may be prepaid in whole or in part at any time without premium or
penalty.

The undersigned agrees to pay, in addition to the principal and interest,
all costs of collection, including attorneys' fees and disbursements.

If a law which applies to this Note, and which sets maximum rates of
interest which may be charged, is finally interpreted so that the interest
collected or to be collected pursuant to this Note exceeds the permitted limits,
then: (i) such interest shall be reduced by the amount necessary to reduce the
interest to the permitted limit; and (ii) any sums already collected from the
person or persons as to whom such charged is determined to have exceeded the
permitted limits will be refunded to such person or persons. The Holder may
choose to make this refund by reducing the principal amount owed under this Note
or by making a direct payment to such person or persons. If a refund reduces
principal, the reduction will be treated as a partial prepayment.

by delivering it or mailing it by first class mail to the undersigned at the
address set forth at the beginning of this Note or at such other address as such
person may give notice of to the Holder. Any notice to the Holder will be given
by mailing it first class mail to the Holder at the address for the Holder set
forth at the beginning of this Note or at such other address as the Holder may
give notice of to the Maker.

If more than one person signs this Note, each person is fully and
personally obligated to keep all of the promises made in this Note, including
the promise to pay the full amount owed. Any person who is a guarantor, surety
or endorser of this Note is also obligated to perform such obligations. Any
person who takes over these obligations, including the obligations of a
guarantor, surety or endorser of this Note, is also obligated to keep all of the
promises made in this Note. The Holder may enforce its rights under this Note
against each person individually or against all of persons who sign this Note
together. This means that any one of the undersigned may be required to pay all
of the amounts owed under this Note.

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

WITNESS:

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

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SCHEDULE 3.4.1(B) FORM OF SECURITY AGREEMENT

PLEDGE OF SHARES AGREEMENT

THIS AGREEMENT, made as of the day of by and between
an individual residing at (hereinafter
referred to as the "Shareholder") and , an individual residing at
(hereinafter referred to as the "Secured Party").

BACKGROUND

A. The Shareholder is the owner of shares of common stock (the
"Shares") of QUINTEL ENTERTAINMENT, INC. (the "Company");

B. The Shareholder has been loaned $ by the Secured Party, with
such loan evidenced by a note (the "Note"), a copy of which is annexed hereto as
Schedule A.

C. The Shareholder desires, by the execution and delivery of this
Agreement, to grant to the Secured Party on the terms and conditions contained
herein, a valid and enforceable lien on and security interest in the Shares, as
security for the due performance and the payment of the amounts due under the
Note and the obligations described in this Agreement.

ARTICLE 1.

PLEDGE OF SHARES

1.1 Pledge of Shares. The Shareholder hereby grants to Secured Party a
security interest in, and assigns, transfers and pledges to Secured Party, the
Shares, together with any stock rights, subscription rights, liquidating
dividends, stock dividends, dividends paid in stock or money, new securities or
other property which the Shareholder is, or may hereafter become, entitled to
receive on account of the Shares.

1.2 Delivery of Share Certificates. The Shareholder hereby delivers to
Secured Party, and by executing this Agreement Secured Party acknowledges
receipt of, a certificate or certificates representing
( ) shares of stock of the Company (the "Share
Certificates") accompanied by a stock power which the Shareholder has duly
endorsed to make Secured Party a holder thereof.

1.3 Obligations Secured; Future Advances. The Shares shall be referred to
as the "Security".

The Security constitutes and will constitute security for the payment as
and when due of all indebtedness and the performance of all obligations under
the Note, and for the payment of costs, fees, charges, and expenses which may be
due or owing in connection therewith, all of which shall be and remain
additional liens on the Security until each and all of the same have been fully
paid, satisfied, and discharged. Hereafter all of the payment and performance
obligations described in this paragraph shall be referred to collectively as the
"Obligations".

ARTICLE 2.

WARRANTIES AND REPRESENTATIONS

The Shareholder represents and warrants that the matters contained in each
of the following paragraphs are true and correct.

2.1 Title to Shares. Except as provided in this Agreement or the
Acquisition Agreement, Shareholder owns the Shares free and clear of any liens,
security agreements, equities, options, restrictions, encumbrances or charges
whatsoever and the ownership of the Shares by Shareholder is not subject to any
other agreement, trust or adverse claim. Shareholder has lawful, valid
marketable and indefeasible title to the Shares and has full right, power and
authority, without the prior or subsequent approval of any person, governmental
body or court, to pledge, transfer, assign and deliver the Shares as provided in
this Agreement, and such delivery will
<PAGE> 143

convey to Secured Party a lawful, valid, and perfected security interest in the
Shares, free and clear of any other liens, claims, encumbrances or restrictions
of whatever nature.

2.2 Other Laws or Agreements. The execution, delivery and performance of
this Agreement by Shareholder, and the endorsement and delivery of the Share
Certificates will not violate (1) any provision of law, any order of any court
or other agency of government, or (2) any indenture, agreement or other
instrument to which Shareholder is a party or by which it is bound.

ARTICLE 3.

COVENANTS

Shareholder and the Company covenant that each will perform the obligations
contained in each of the following paragraphs in accordance with the terms and
conditions thereof.

3.1 Recording of Pledge. To the extent that it may be required by law or
the By-Laws of the Company or upon the demand of Secured Party, the Shareholder
shall cause the Company to record the pledge of Shares created by this Agreement
in its register of share holders or other corporate records as appropriate in
order to protect the interests of Secured Party hereunder.

3.2 Filing of Financing Statements. The Shareholder shall, at his own cost
and expense, promptly and duly execute, record and file financing statements and
this Agreement, and all other security agreements pertaining to the Shares and
all such instruments and documents of further assurances including, but not
limited to, supplemental security agreements, financing statements and
continuation statements, and take such other action, as the Secured Party may
require in order that, in Secured Party's opinion, a valid lien on and security
interest in the collateral in favor of Secured Party will be established,
perfected and continued in effect at all times. The Shareholder hereby
authorizes Secured Party to effect such recording and filing as aforesaid
(including, where permissible, the filing of any financing statements or
continuation statements without the signature of the Shareholder and the filing
of a carbon, photographic or other reproduction of the Agreement or financing
statement as a financing statement).

3.3 Further Assurances. Shareholder shall execute and deliver to Secured
Party from time to time, at Secured Party's request, such documents and
instruments, and take such action, as Secured Party may deem necessary or proper
to perfect or otherwise protect the security interests created hereby.

3.4 Defense of Security Interest. Shareholder shall appear in and defend,
without cost to Secured Party, any action or proceeding purporting to affect the
security interest hereunder or the rights or powers of Secured Party and, when
requested by Secured Party, shall commence and maintain any action or proceeding
necessary to protect such security interest and such rights or powers, and to
pay all the costs and expenses, including without limitation attorneys, fees,
which Secured Party may incur in the event that Secured Party elects to appear
in, defend or commence and maintain any such action or proceeding.

3.5 Payment of Secured Party's Expenses. The Shareholder shall pay,
immediately and without demand, all sums expended by Secured Party in the
enforcement and protection of Secured Party's rights pursuant to this
instrument, including without limitation attorney's fees and disbursements, with
interest from date of expenditure at the rate equal to nine percent per annum.
All such sums expended shall be a lien on the Shares and shall be deemed to be
secured hereby.

3.6 Limitation. The liability of Shareholder under Sections 3.3 and 3.4
shall be limited to actions purporting to challenge the validity of the security
interest and its priority over any other liens or encumbrances.

2
<PAGE> 144

ARTICLE 4.

RIGHTS OF SECURED PARTY

In addition to those rights set forth elsewhere in this Agreement, Secured
Party has the rights contained in each of the following paragraphs.

4.1 Secured Party's Right to Act For Shareholder. If there occurs an event
of default or an event which, with the giving of notice or passage of time, or
both, would constitute an event of default hereunder, then Secured Party has the
right, but not the obligation, without notice and without in any way releasing
the Shareholder from any of the Obligations to do any or all of the following:

(i) make the payment or do the act in such manner and to such extent
as Secured Party may deem necessary to protect the Security;

(ii) appear in and defend any action or proceeding purporting to
affect the Security or the rights or powers of Secured Party;

(iii) pay, purchase, contest or compromise any encumbrance, charge, or
lien which in the judgment of Secured Party appears to affect the Security;

(iv) incur any liability and expend such amounts as Secured Party, in
its absolute discretion, may deem necessary to accomplish any of the
matters described in (i) through (iii) above, including without limitation
paying necessary expenses, employing counsel and paying counsel's fees.

4.2 Receipt of Dividends. At all times while Secured Party has possession
of any of the Share Certificates hereunder, Secured Party is entitled to receive
all dividends and other distributions, whether in stock, cash, or other
property, which may be declared on or with respect to the Shares, as additional
collateral for the obligations of Shareholder secured hereunder; provided,
however, that such dividends shall be held segregated from the other assets of
Secured Party, and if in the form of cash, shall be held in an interest bearing
account at a bank. The location of any such property, and the identity and
location of any such bank shall be promptly provided to the Shareholder.
NOTWITHSTANDING THE FOREGOING, HOWEVER, until the occurrence of an event of
default as defined in Article 6 below, Shareholder shall be entitled to receive
all cash dividends which may be declared on or with respect to the Shares.

ARTICLE 5.

OBLIGATIONS OF SECURED PARTY

5.1 Return of Shares. Secured Party shall deliver to Shareholder, or such
person as Shareholder may designate, all of the Share Certificates which Secured
Party then possesses, duly endorsed for transfer, upon payment and performance
in full of all of the Obligations.

5.2 Sale of Shares. Upon receipt of written instructions from Shareholder,
Secured Party shall sell the shares and apply the net proceeds thereof to the
payment of the amounts due under the Note; provided, however, that prior to any
such sale, a registration statement including the shares shall have been
declared effective by the Securities and Exchange Commission or, in the opinion
of counsel for the Company, the shares may be publicly sold without
registration.

ARTICLE 6.

DEFAULT

6.1 Events of Default. The happening of any of the following shall
constitute an event of default under this Agreement:

(i) failure to pay the principal or any installment of interest on the
Note when due or the occurrence of any other default under the Note; or

3
<PAGE> 145

(ii) the Shareholder defaults in any of his obligations under this
Agreement.

6.2 Remedies Upon Default. If an event of default as described in
paragraph 6.1 occurs, Secured Party, after five (5) days written notice to the
Shareholder and failure to cure the default within such five (5) day period, may
at its option and in addition to all the rights and remedies of a secured party
under the Uniform Commercial Code, which rights and remedies are cumulative and
not exclusive or enforceable alternatively, successively or concurrently, take
any or all of the actions described in the following subparagraphs, at the same
time or at different times:

(i) sell, assign and deliver, grant options for, or otherwise dispose
of any part or all of the Shares, at a public or private sale in the manner
provided in paragraph 6.3;

(ii) commence a legal action, or initiate such other proceeding as
Secured Party may decide, on the basis of the default.

6.3 Conduct of Sale of Security. In the event that Secured Party elects,
under the provisions of paragraph 6.2, to sell any part or all of the Security,
on one or more occasions, the following shall apply with regard to such sale in
addition to those rights and remedies applicable under the Uniform Commercial
Code.

(a) The sale of any part or all of the Security shall have been made
in a commercially reasonable manner as long as it is made in conformity
with reasonable commercial practices for the disposition of similar
property. The sale may be conducted at such place and time, to such person,
for such price, and upon such terms as Secured Party deems best, all
without demand for performance or notice or advertisement other than as may
be required under the laws regulating the sale of securities.

(b) If applicable law requires reasonable notice of sale or other
disposition, Shareholder hereby agrees that the sending of ten (10)
business days, notice to Shareholder, in the manner provided in paragraph
7.2, of the place and time of any public sale or of the time after which
any private sale or other intended disposition is to be made shall be
deemed reasonable notice thereof.

(c) Secured Party may bid for and purchase, at any sale, the Shares
offered for sale, or any part thereof, and thereby become the owner
thereof. Secured Party may make payment for any of the Shares so purchased
by any means.

6.4 Application of Proceeds of Sale, Deficiencies. Secured Party may apply
the cash proceeds from any sale or other disposition of the Security firstly to
the reasonable expenses of retaking, holding, preparing for sale, and selling
the Security, including without limitation broker's fees; secondly to reasonable
attorney's fees and all legal expenses, travel and other expenses which may be
incurred by Secured Party in attempting to collect the Obligations or enforce
this Agreement or in the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement; and thirdly to all unpaid
Obligations. Any surplus shall be paid to the Shareholder subject to any duty of
Secured Party imposed by law to the holder of any subordinate security interest
in the Security known to Secured Party. The Shareholder shall remain liable for
any deficiency.

ARTICLE 7.

GENERAL PROVISIONS

7.1 Power of Attorney. To effectuate the terms and provisions hereof,
Shareholder hereby designates and appoints Secured Party and its designees or
agents as attorneys-in-fact of Shareholder irrevocably and with power of
substitution, with authority for each and every of the following acts in the
event of a default hereunder:

(i) to sell, assign and deliver, grant options for, or otherwise
dispose of any part or all of the Shares, at public or private sale at the
option of Secured Party; and

(ii) to do all other acts and things necessary and advisable in the
sole discretion of Secured Party to carry out and enforce this Agreement.
All acts of said attorney or designee are hereby ratified and

4
<PAGE> 146

approved. Said attorney or designee shall not be liable for any acts of
commission or omission or for any error of judgment or mistake of act or
law.

This power of attorney, being coupled with an interest, is irrevocable
while any of the Obligations are due or not satisfied or fully performed.

7.2 Notices. All notices which are to be given by one party to the other
party hereunder shall be in a writing which shall be sent by certified or
registered mail, postage prepaid, return receipt requested, or by Federal
Express or Express Mail, where available, or by a means of telex or telefax
followed by a confirmation letter sent by certified or registered mail, postage
prepaid, return receipt requested, addressed to each party at the address first
written above or such other address as shall be provided in accordance with this
paragraph.

7.3 Modifications. No supplement, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by the party thereto
to be bound.

7.4 Waivers. Any term or condition of this Agreement may be waived by
either party only if that party signs a writing to such effect. No waiver of any
of the provisions of this Agreement shall be deemed a waiver of any other
provision, irrespective of similarity, or shall constitute a continuing waiver
unless otherwise expressly provided. No failure or delay on the part of Secured
Party in exercising any right, power or privilege under the Note shall operate
as a waiver thereof or hereof, nor shall a single or partial exercise preclude
any other or further exercise of any other right, power or privilege.

7.5 Assignment. Secured Party may assign this Agreement or any of its
rights and powers hereunder, and transfer possession of the Shares, and, in the
event of such assignment, the assignee hereof or of such rights and powers shall
have the same rights and remedies as if originally named herein in place of
Secured Party.

7.6 Survival of Contents. All covenants, agreements, representations and
warranties made herein shall survive the execution and delivery to Secured Party
of this Agreement and shall continue in full force and effect so long as all or
any portion of the indebtedness under the Note is outstanding and unpaid or any
other Obligation remains to be performed under the Note or this Agreement.

7.7 Severability. In the event any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, and this Agreement
shall be interpreted and construed as if such provision, to the extent the same
shall have been held invalid, illegal, or unenforceable, had never been
contained herein.

7.8 Interpretation, Headings. This Agreement shall be given its plain and
simple meaning consistent with performance thereof by the parties. Whenever the
content of this Agreement so requires, the singular shall include the plural.
The headings of the articles and paragraphs contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.

7.9 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

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

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

5
<PAGE> 147

SCHEDULE 3.4.1(C) FORM OF GUARANTEE

GUARANTEE

The undersigned hereby jointly and severally guarantee prompt and full
performance and payment of all amounts due under the within Note, to the holder
hereof, and authorize any holder hereof to proceed against the undersigned, for
the full amount due including reasonable attorneys' fees and other costs of
collection, and hereby waive presentment, demand, protest, notice of protest,
notice of dishonor and any and all other notices or demands of whatever
character to which the undersigned might otherwise be entitled. The undersigned
further consent that at any time, without notice to the undersigned, payment of
any sums payable on the Note, or any of the collateral therefore, may be
renewed, compromised, extended, increased or accelerated, in whole or in part,
or any of such collateral may be exchanged, surrendered, enforced or waived, as
the holder of the Note may determine. The undersigned further consent that the
holder of this Note may apply such collateral and direct the order or manner of
sale thereof as the holder of this Note may determine. The foregoing obligations
are joint and several upon the undersigned. The holder of this Note may, without
notice, assign all or part of this Note and Guarantee.

- ------------------------------- ---------------------------------
<PAGE> 148

SCHEDULE 3.4.2 FORM OF SECTION 3.4.2 NOTE

PROMISSORY NOTE

$ , 199

FOR VALUE RECEIVED, , an individual resident of the State of
Florida residing at , Florida (the "Maker") promises to pay
to Quintel Entertainment, Inc., a Delaware corporation (the "Holder" or
"Quintel"), or order, at One Blue Hill Plaza, Pearl River, New York 10965, or
such other place as the holder hereof may from time to time designate in
writing, the principal sum of ($ ) DOLLARS, with interest at an
annual rate of ( %) per annum [the Applicable Federal Rate
determined under Section 7872 of the Internal Revenue Code], on the earlier of
the following:

(1) twenty-four months from the date hereof; or

(2) [IN THE EVENT THE PRINCIPAL SUM OF THIS NOTE WAS LOANED TO THE
MAKER PURSUANT TO SECTION 3.4.2(I) OF THE ACQUISITION AGREEMENT, INSERT THE
FOLLOWING LANGUAGE FOR THIS PARAGRAPH 2:]

"upon the date which is five (5) business days after the date on which
the closing bid price of Quintel's common stock has been at least 7 1/8 per
share for five trading days during any consecutive thirty day period after
the date of such loan."

[IN THE EVENT THE PRINCIPAL SUM OF THIS NOTE WAS LOANED TO THE MAKER
PURSUANT TO SECTION 3.4.2(II) OF THE ACQUISITION AGREEMENT, INSERT THE
FOLLOWING LANGUAGE FOR THIS PARAGRAPH 2:]

"within five (5) business days after a registration statement under
the Securities Act of 1933, as amended, permitting the sale of the Maker's
shares of Common Stock of Quintel becoming effective or, in the opinion of
Quintel's counsel, the sale of such shares is exempt from registration and
applicable state law requirements."

This Note is secured by a Pledge of Shares Agreement of even date herewith
between Maker as Pledgor and Quintel as Secured Party.

IT IS FURTHER EXPRESSLY AGREED, that in the event of the failure of Maker
to (i) pay any installment due under this Note after its due date, or (ii)
perform its obligations or pay any amount due under the Pledge of Shares
Agreement, then the entire amount due under this Note shall upon five (5) days
written notice given to Maker and failure to cure such failure within such five
(5) day period become immediately due and payable at the option of the Holder
without further notice or demand.

Interest at the rate of twelve percent (12%) per annum shall accrue upon
any installment not paid when due, or, after acceleration, upon the entire
balance, until paid in full.

This Note may be prepaid in whole or in part at any time without premium or
penalty.

The undersigned agrees to pay, in addition to the principal and interest,
all costs of collection, including attorneys' fees and disbursements.

Note and of any available security therefor to any party to this Promissory Note
or to the actual holder thereof and any and all waivers or modifications that
may be granted or consented to by the Holder with regard to the time of payment
or with respect to any other provisions of this Note and agrees that no such
action or failure to act on the part of the Holder shall be construed as a
waiver by the Holder of, or otherwise affect, its right to avail itself of any
remedy with respect thereto.

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

WITNESS:

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

2
<PAGE> 150

SCHEDULE 4.3.3 TO ACQUISITION AGREEMENT

MATERIAL CHANGES TO NL SINCE BALANCE SHEET DATE

Billing of New Lauderdale voice mail programs was suspended by five of the
Regional Bell Companies during the first three months of 1996 as a result of an
increased level of customer complaints and chargebacks; the marketing and format
of the voice mail programs has been modified. Billing of voice mail programs has
been reinstated by three of the five RBOC's but billing by US West and Bell
South remains suspended.

3
<PAGE> 151

SCHEDULE 4.5 TO ACQUISITION AGREEMENT

LITIGATION

A class action entitled Gray v. Enhanced Services Billing, Inc. has been
commenced in Superior Court of California, Los Angeles County, against New
Lauderdale's billing service, ESBI, and ESBI has requested indemnification from
New Lauderdale; the class has not been certified, but the complaint alleges that
the plaintiffs have been billed by ESBI for club services without proper
authorization from the customer. In addition, New Lauderdale has received notice
that the offices of the attorneys general in the states of Texas, Missouri and
Idaho and the public service commission of the state of Tennessee are conducting
investigations of the company's activities in response to customer complaints,
and have requested documents from the company.

4
<PAGE> 152

EXHIBIT B
OPINION OF FINANCIAL ADVISOR
<PAGE> 153

[HERITAGE CAPITAL LETTERHEAD]

May 7, 1996

Board of Directors
Quintel Entertainment, Inc.
One Blue Hill Plaza
Pearl River, NY 10965

Dear Directors,

The Board of Directors (the "Directors") of Quintel Entertainment, Inc.
("Quintel") engaged Heritage Capital Corp. ("Heritage") on April, 19 1996 as
financial advisor to analyze and render its opinion (the "Opinion") concerning
the fairness from a financial point of view to the common shareholders of
Quintel (the "Shareholders") of the consideration to be paid to Psychic Readers
Network, Inc. ("PRN") in a transaction whereby Calling Card Co. Inc., a wholly
owned subsidiary of Quintel, will acquire from PRN one hundred percent (100%) of
the interest of PRN in New Lauderdale, L.C. ("NL") for up to 3,200,000 shares of
common stock of Quintel (the "Merger"). On May 7, 1996 Heritage delivered to the
Directors its Opinion that the Merger as described immediately above was fair
from a financial point of view to the Shareholders of Quintel. The full text of
the Opinion, which sets forth assumptions made, matters considered and
procedures followed by Heritage is attached as Exhibit I. The Directors are
urged to read the Opinion in its entirety.

Heritage is an experienced investment banking firm and is continually
engaged in the valuation of businesses and their securities in connection with
mergers, acquisitions and financings and other valuations for corporate, estate
and other purposes. The background of Heritage is set forth in Exhibit II.

No limitations were imposed by Quintel on Heritage concerning the
investigations made or the procedures followed by Heritage in rendering the
Opinion. Heritage provided the Directors with certain written analyses used in
its presentation. Among other things, Heritage addressed the following matters.

1. Heritage has discussed the forfeiture provisions regarding the escrow shares
with the management of Quintel. Based on these discussions, Heritage
believes that it is reasonable to put a high probability on the escrow
shares being earned by November 30, 1996. Accordingly, Heritage has used
3,200,000 shares in the appropriate instances below.

2. Heritage has discussed the provisions for loans to the PRN Principals with
the management of Quintel. Based on these discussions, Heritage believes it
is reasonable to put a low probability on such loans being made to the PRN
Principals pursuant to these provisions. Accordingly, Heritage has not
calculated a possible value for these provisions.

3. Heritage performed various discounted cash flow analyses of Quintel and NL
which it prepared together with Quintel. To perform these analyses, Heritage
used three sets of projections based on a high case, a base case and a low
case projected to the year 2000. Heritage advised the Directors that the
projections incorporated various assumptions regarding charge backs and
related reserves. These and other assumptions were discussed with the
management of Quintel who have informed Heritage that the management of
Quintel is of the opinion that the assumptions are reasonable based on
Quintel's past experience and its expectations regarding future events.
Heritage prepared, together with Quintel, projected cash flows for (i)
Quintel stand alone before the Merger, (ii) NL stand alone before the Merger
and (iii) Quintel consolidated after the Merger.

In the base case, Heritage utilized the existing Quintel marketing
projections for 1996 as the basis for the sales levels for Quintel stand
alone before the Merger, NL stand alone before the Merger and Quintel
consolidated after the Merger. The sales levels for Quintel stand alone
before the Merger and NL stand alone before the Merger for 1997 through the
year 2000 were adjusted upward to reflect a growth rate of 5% annually for
the businesses. The cost of sales as a percentage of sales assumption for
Quintel
<PAGE> 154

stand alone before the Merger and NL stand alone before the Merger for 1996
was based on the first quarter 1996 actual results. For 1997 and 1998, the
cost of sales as a percentage of sales for Quintel stand alone before the
Merger declines to match the cost of sales assumption for NL stand alone
before the Merger and then the cost of sales as a percentage of sales of
both Quintel stand alone before the Merger and NL stand alone before the
Merger decline together to the year 2000.

The selling, general and administrative cost assumption as a
percentage of sales for 1996 for both Quintel stand alone before the Merger
and NL stand alone before the Merger was based on the first quarter 1996
actual results and, in the case of NL, adjusted upward to reflect the
increased staffing levels and higher administrative costs of doing business
at a higher sales level. The selling, general and administrative cost as a
percentage of sales remained constant for Quintel stand alone before the
Merger for 1996 through the year 2000 while the NL stand alone before the
Merger selling, general and administrative cost as a percentage of sales
gradually increased from the 1996 level to match Quintel's stand alone
before the Merger selling, general and administrative cost as a percentage
of sales for 1999 and the year 2000.

Projections for Quintel consolidated after the Merger reflect the
combination of revenues and operating costs of Quintel stand alone before
the Merger and NL stand alone before the Merger but also reflect a lower
combined cost of sales as a percentage of sales for 1996 through the year
2000, incorporating the pass along rebate from PRN as a reduced cost of
doing business.

Based on historical operating experience and management's expectation,
Quintel stand alone before the Merger and NL stand alone before the Merger
customer charge backs or addbacks are projected for each company at 15% of
net sales for 1996, 12% of net sales for 1997, 11% of net sales form 1998,
10% or net sales for 1999 and 9% of net sales for the year 2000.

In the high case for Quintel stand alone before the Merger, NL stand
alone before the Merger and Quintel consolidated after the Merger, revenues
for 1997 through the year 2000 were increased 5% over the base case. In the
low case scenario, the revenues for 1997 through the year 2000 were lowered
5% annually over the base case.

Heritage discounted these cash flow projections at 14%, 16% and 18%
plus terminal values at exit multiples of twelve times the after tax net
income before net interest expenses, reflecting debt free companies, for
Quintel stand alone before the Merger, NL stand alone before the Merger and
Quintel consolidated after the Merger. The net present values thus excluded
the debt and added back excess cash balances.

For NL stand alone before the Merger, the exit multiple was six times
the after tax net income before net interest expense.

Heritage believes that a discount rate of 16% is appropriate and that
the base cases are the most reasonable.

4. Using the base case assumptions in (3) above and a discount rate of 16%, the
present value per share of Quintel consolidated after the Merger is $11.18
and stand alone before the Merger is $7.91. The present value per share
consolidated after the Merger is $3.27 or 41% higher than the present value
per share stand alone before the Merger.

5. Using the base case assumptions in (3) above, Heritage computed the pro
forma projected income per share for the year ending November 30, 1996, for
Quintel stand alone before the Merger and consolidated after the Merger.
Heritage again advised the Directors that the calculation of the pro forma
projected income per share results, in part, from various assumptions
regarding charge backs and related reserves These and other assumptions were
discussed with the management of Quintel who have informed Heritage that
Quintel is of the opinion that the assumptions are reasonable based on
Quintel's past experience and its expectations regarding future events. Pro
forma projected income per share stand alone before the Merger for the year
ending November 30, 1996 is 41 (cent) per share and pro forma projected

2
<PAGE> 155

income per share consolidated after the Merger is 64 (cent), an increase of
56% over pro forma projected net income per share stand alone before the
Merger.

6. Using the base case assumptions in (3) above and a discount rate of 16%,
Heritage also compared the assumed market price per share of $7 1/8 paid to
PRN to the Present Value per share of NL stand alone before the Merger.
Heritage noted that the Present Value per share of NL stand alone before the
Merger exceeds the assumed market price per share by $4.28 or 60%.

7. Heritage noted that, of the 18,646,043 shares of common stock to be
outstanding immediately after the Merger (assuming that all 3,200,000 shares
of common stock are distributed to NL shareholders at the closing of the
Merger), the Quintel Shareholders will have 15,446,043 shares or 82.8% and
the NL shareholders will have 3,200,000 shares 17.2%.

8. Using the base case assumptions in (3) above and a discount rate of 16%, the
present value of the cash flows of Quintel stand alone before the Merger is
$122,176,000 and the present value of 50% of the cash flows of NL stand
alone before the Merger is $36,501,000. The combined present values of
Quintel and 50% of NL, both companies on a stand alone before the Merger
basis, is $158,677,000 of which Quintel contributed 77% and NL contributed
23%.

9. Using the base case assumptions in (3) above, Heritage also compared the
projected pro forma net incomes of Quintel stand alone before the Merger and
50% of NL stand alone before the Merger for the year ending November 30,
1996 and determined that Quintel contributed 61.8% and NL contributed 38.2%
of the combined projected pro forma net income of $10,242,000

10. After a review of the balance sheets of Quintel stand alone before the
Merger and NL stand alone before the Merger, Heritage determined that the
book values of the two companies was not a good indication of relative
value. However, Heritage noted that the Stockholders' Equity of Quintel
stand alone before the Merger and 50% of the Members' Equity of NL stand
alone before the Merger as of February 29, 1996, the most recent available
balance sheets, were $17,144,205 and $1,532,058 respectively, or a total of
$18,676,263 of which the Stockholders' Equity of Quintel stand alone before
the Merger and 50% of the Members' Equity of NL stand alone before the
Merger represented 91.8% and 8.2%, respectively.

11. After discussions with the management of Quintel and a review of certain
publicly traded companies in related businesses, Heritage determined that
there were no other publicly traded companies which could be used for
comparison purposes. The publicly traded companies Heritage reviewed either
were not, upon further analysis, comparable, were operating at a loss or had
not disclosed recent financial results. Accordingly, Heritage advised
Quintel that it had determined that a meaningful comparative analysis of
price/earnings, price/cash flow, price/revenues, price/book value or other
such ratios could not be used. However, Heritage also reviewed data on
acquisition premiums and price earnings ratios provided in Mergerstat Review
1995 ("Mergerstat"), an annual compilation of statistics on publicly
announced mergers and acquisitions where the purchase price was at least
$1,000,000, at least 10% of a company's equity was transferred and at least
one of the parties was a U.S. entity. While there was data provided on an
industry basis, the data on communications industry premiums and
price/earnings ratios was not strictly comparable. The average
price/earnings ratio was 32.9 and the average acquisition premium offered
was 51.9%. In analyzing these premiums and price earnings ratios, Heritage
has concluded that the industry sector was too wide to be meaningful since
it included telephone communications equipment manufacturers, paging
services, telephone communications providers, cellular telephone services
and mobile radio wireless communications providers. Accordingly, the
Mergerstat information was not appropriate to be used for this analysis.

In arriving at the Opinion, Heritage put no weight on comparable companies,
comparable acquisitions, market prices or control premiums. Heritage believes
that the best indication of the relative values of Quintel stand alone before
the Merger, NL stand alone before the Merger and Quintel consolidated after the
Merger is the analysis of discounted cash flows projected to 2000 and projected
pro forma earnings for the year ending November 30, 1996.

3
<PAGE> 156

In presenting this analysis, Heritage cautioned that the results were
highly dependent on the assumptions and the occurrence of one or more adverse or
favorable events could have a high degree of influence on the resulting net
income. Heritage stated that, in the context of these reservations and after
discussions with the management of Quintel, it was most comfortable in using the
base cases because the revenue and other assumptions appeared to be reasonable.

Heritage believes that this analysis must be considered as a whole and that
selecting portions of its analysis or the factors considered by it, without
considering all of the analysis and factors, could create an incomplete view of
the processes underlying its analysis and Opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or a summary description. In preparing its analysis, Heritage made
numerous assumptions about industry performance, general business and economic
conditions and other matters including terminal values and discount rates, many
of which are beyond the control of Quintel. Heritage also relied on all the
financial and other information provided to it by Quintel and the information
that was publicly available, and did not attempt independently to verify any
such information. Any estimates contained in such analysis are not necessarily
indicative of actual values or prices for which assets may actually be sold,
which may be significantly more or less favorable than as set forth in the
analysis. Because such estimates are inherently subject to uncertainty, none of
Quintel or Heritage or any other person assumes responsibility for their
accuracy.

Finally, we have not been asked to consider, and the Opinion does not
address, the relative merits of the Merger as compared to any alternative
business strategy that might exist.

Except for its services in connection with the Opinion, Heritage has not
rendered any other financial advisory or investment banking services to Quintel
or to related entities.

Sincerely yours,

/s/ GEORGE H. SPENCER
- ---------------------------------------------
George H. Spencer
Chairman

GHS:ec

4
<PAGE> 157

[HERITAGE CAPITAL LETTERHEAD]

EXHIBIT I

May 7, 1996

Board of Directors
Quintel Entertainment, Inc.
One Blue Hill Plaza
Pearl River, NY 10965

Dear Directors,

The Board of Directors of Quintel Entertainment, Inc. ("Quintel") has
requested our opinion (the "Opinion") as to the fairness, from a financial point
of view, to the common shareholders of Quintel of the consideration to be paid
to Psychic Readers Network, Inc. ("PRN") in a transaction whereby Calling Card
Co. Inc., a wholly owned subsidiary of Quintel, will acquire from PRN one
hundred percent (100%) of the interest of PRN in New Lauderdale, L.C. ("NL") for
up to 3,200,000 shares of common stock of Quintel.

In arriving at our Opinion, we reviewed the financial terms of the
Agreement between Quintel Entertainment, Inc., Calling Card Co., Inc. and
Psychic Readers Network, Inc. dated as of January 17, 1996 (the "Agreement") and
discussed with certain senior officers, representatives and advisors of Quintel
the business, operations and prospects of Quintel and NL. We examined certain
publicly available business and financial information relating to Quintel as
well as certain financial forecasts and other data for Quintel and NL that were
provided to us by Quintel. We reviewed the financial terms of the Merger as set
forth in the Agreement in relation to, among other things: current and
historical market prices of the common stock of Quintel; the income and net
asset value per share of Quintel and NL and the capitalization and financial
condition of Quintel and NL. We considered, to the extent publicly available,
(i) the financial terms of certain other transactions in the communications
sector recently completed and (ii) financial and business information regarding
certain publicly traded communications companies. In addition to the foregoing,
we conducted such other analyses and examinations and considered such other
financial, economic and market criteria as we deemed necessary in arriving at
our Opinion.

In rendering our Opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
publicly available information furnished to or otherwise reviewed by or
discussed with us. We have not undertaken an independent appraisal or evaluation
of the assets or liabilities of Quintel or NL. With respect to financial
forecasts and other information provided to or otherwise reviewed by or
discussed with us, we have been advised by the management of Quintel that such
forecasts and other information were reasonably prepared on bases reflecting the
best currently available estimates and judgements of the management of Quintel
as to the future financial performance of Quintel and NL and the strategic
implications and operations anticipated from the Merger. We have not been asked
to consider, and our Opinion does not address, the relative merits of the Merger
described in the Agreement as compared to any alternative business strategies
that might exist for Quintel. We are not expressing any opinion as to what the
value of Quintel's shares actually will be or will trade subsequent to the
Merger. Our Opinion herein is necessarily based upon financial, stock market and
other conditions and circumstances existing and disclosed to us as of the date
hereof and it should be understood that subsequent developments may affect this
Opinion and that we do not have any obligation to update, revise or reaffirm
this opinion.

The Opinion expressed herein is provided solely for the use of the the
Board of Directors of Quintel in evaluating the Merger. Our Opinion may not be
published or otherwise used or referred to without our prior written consent.
<PAGE> 158

Based upon and subject to the foregoing, our experience as investment
bankers and other factors we deemed relevant, we are of the Opinion that, as of
the date hereof, the Merger is fair, from a financial point of view, to the
common shareholders of Quintel.

Very truly yours,

/s/ HERITAGE CAPITAL CORP.
- ---------------------------------------------
Heritage Capital Corp.

2
<PAGE> 159

BASE CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $ 50,501 $16,018 $49,216 $51,677 $54,261 $56,974 $59,823
Cost of Sales.................. $ 36,732 $38,955 $38,758 $40,696 $42,161 $43,072
Gross Profit................... $ 13,769 $ 3,340 $10,262 $12,919 $13,565 $14,813 $16,750
Selling, General &
Administrative Expenses...... $ 3,467 $ 2,073 $ 6,369 $ 6,687 $ 7,021 $ 7,372 $ 7,741
Income From Operations......... $ 10,301 $ 1,267 $ 3,893 $ 6,232 $ 6,544 $ 7,441 $ 9,009
Interest Expense............... $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net.............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income.......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*..................... $ 3,026 $ 2,442 $ 6,868 $ 6,234 $ 6,103 $ 5,972 $ 7,296
Income before taxes............ $ 13,479 $ 3,935 $11,100 $12,636 $12,817 $13,582 $16,476
Provision for income taxes..... $ 5,633 $ 1,692 $ 4,773 $ 5,434 $ 5,511 $ 5,840 $ 7,085
Net income..................... $ 7,846 $ 2,243 $ 6,327 $ 7,203 $ 7,306 $ 7,742 $ 9,391
Plus Depreciation &
Amortization................. $ 22 $ 10 $ 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks..................... $ 2,848 $ 2,228 $ 7,382 $ 6,201 $ 5,969 $ 5,697 $ 5,384
Less Capex..................... $ 141 $ 50 $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............... $ 4,575 $(1,575) $ (212) $ 406 $ 426 $ 448 $ 470
Plus Quintel's Share of NL's
Net Changes in Working
Capital...................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow...................... $ 5,999 $ 6,006 $15,468 $17,652 $17,209 $17,025 $17,975
M/Y Disc Rate at 14%........... 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at 14%........... 0.877 0.769 0.675 0.592 0.519
PV Cash Flows.................. $14,525 $14,528 $12,425 $10,794 $ 9,994
PV Terminal Value.............. $57,884
Total PV Cash Flow............. $ 62,266
PV Terminal Value.............. $ 57,884
Total Present Value............ $120,150
Plus Cash Balance.............. $ 12,500
Total Present Value............ $132,650
Minus Debt..................... $ 3,300
Total Present Value............ $129,350
Total Present Value per Share
(Based on 15,446,043
shares)...................... $ 8.37
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.
<PAGE> 160

BASE CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $ 50,501 $16,018 $49,216 $51,677 $54,261 $56,974 $59,823
Cost of Sales.................. $ 36,732 $38,955 $38,758 $40,696 $42,161 $43,072
Gross Profit................... $ 13,769 $ 3,340 $10,262 $12,919 $13,565 $14,813 $16,750
Selling, General &
Administrative Expenses...... $ 3,467 $ 2,073 $ 6,369 $ 6,687 $ 7,021 $ 7,372 $ 7,741
Income From Operations......... $ 10,301 $ 1,267 $ 3,893 $ 6,232 $ 6,544 $ 7,441 $ 9,009
Interest Expense............... $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net.............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income.......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*..................... $ 3,026 $ 2,442 $ 6,868 $ 6,234 $ 6,103 $ 5,972 $ 7,296
Income before taxes............ $ 13,479 $ 3,935 $11,100 $12,636 $12,817 $13,582 $16,476
Provision for income taxes..... $ 5,633 $ 1,692 $ 4,773 $ 5,434 $ 5,511 $ 5,840 $ 7,085
Net income..................... $ 7,846 $ 2,243 $ 6,327 $ 7,203 $ 7,306 $ 7,742 $ 9,391
Plus Depreciation &
Amortization................. $ 22 $ 10 $ 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks..................... $ 2,848 $ 2,228 $ 7,382 $ 6,201 $ 5,969 $ 5,697 $ 5,384
Less Capex..................... $ 141 $ 50 $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............... $ 4,575 $(1,575) $ (212) $ 406 $ 426 $ 448 $ 470
Plus Quintel's Share of NL's
Net Changes in Working
Capital...................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow...................... $ 5,999 $ 6,006 $15,468 $17,652 $17,209 $17,025 $17,975
M/Y Disc Rate at 16%........... 0.939 0.823 0.692 0.597 0.514
Y/E Disc Rate at 16%........... 0.862 0.743 0.611 0.552 0.476
PV Cash Flows.................. $14,401 $14,175 $11,909 $10,104 $ 9,239
PV Terminal Value.............. $53,089
Total PV Cash Flow............. $ 59,888
PV Terminal Value.............. $ 53,089
Total Present Value............ $112,976
Plus Cash Balance.............. $ 12,500
Total Present Value............ $125,476
Minus Debt..................... $ 3,300
Total Present Value............ $122,176
Total Present Value per Share
(Based on 15,446,043
shares)...................... $ 7.91
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.
<PAGE> 161

BASE CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $ 50,501 $16,018 $49,216 $51,677 $54,261 $56,974 $59,823
Cost of Sales.................. $ 36,732 $38,955 $38,758 $40,696 $42,161 $43,072
Gross Profit................... $ 13,769 $ 3,340 $10,262 $12,919 $13,565 $14,813 $16,750
Selling, General &
Administrative Expenses...... $ 3,467 $ 2,073 $ 6,369 $ 6,687 $ 7,021 $ 7,372 $ 7,741
Income From Operations......... $ 10,301 $ 1,267 $ 3,893 $ 6,232 $ 6,544 $ 7,441 $ 9,009
Interest Expense............... $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net.............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income.......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*..................... $ 3,026 $ 2,442 $ 6,868 $ 6,234 $ 6,103 $ 5,972 $ 7,296
Income before taxes............ $ 13,479 $ 3,935 $11,100 $12,636 $12,817 $13,582 $16,476
Provision for income taxes..... $ 5,633 $ 1,692 $ 4,773 $ 5,434 $ 5,511 $ 5,840 $ 7,085
Net income..................... $ 7,846 $ 2,243 $ 6,327 $ 7,203 $ 7,306 $ 7,742 $ 9,391
Plus Depreciation &
Amortization................. $ 22 $ 10 $ 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks..................... $ 2,848 $ 2,228 $ 7,382 $ 6,201 $ 5,969 $ 5,697 $ 5,384
Less Capex..................... $ 141 $ 50 $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............... $ 4,575 $(1,575) $ (212) $ 406 $ 426 $ 448 $ 470
Plus Quintel's Share of NL's
Net Changes in Working
Capital...................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow...................... $ 5,999 $ 6,006 $15,468 $17,652 $17,209 $17,025 $17,975
M/Y Disc Rate at 18%........... 0.924 0.783 0.664 0.561 0.477
Y/E Disc Rate at 18%........... 0.847 0.718 0.609 0.516 0.437
PV Cash Flows.................. $14,293 $13,822 $11,427 $ 9,585 $ 8,574
PV Terminal Value.............. $48,739
Total PV Cash Flow............. $ 57,701
PV Terminal Value.............. $ 48,739
Total Present Value............ $106,440
Plus Cash Balance.............. $ 12,500
Total Present Value............ $116,940
Minus Debt..................... $ 3,300
Total Present Value............ $115,640
Total Present Value per Share
(Based on 15,446,043
shares)...................... $ 7.49
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.
<PAGE> 162

HIGH CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $ 50,501 $16,018 $49,216 $54,261 $59,823 $65,954 $72,715
Cost of Sales.................. $ 36,732 $12,678 $38,955 $40,696 $44,867 $48,806 $52,355
Gross Profit................... $ 13,769 $ 3,340 $10,262 $13,565 $14,956 $17,148 $20,360
Selling, General &
Administrative Expenses...... $ 3,467 $ 2,073 $ 6,369 $ 7,021 $ 7,741 $ 8,534 $ 9,409
Income From Operations......... $ 10,301 $ 1,267 $ 3,893 $ 6,544 $ 7,215 $ 8,614 $10,951
Interest Expense............... $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net.............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income.......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*..................... $ 3,026 $ 2,442 $ 6,868 $ 6,561 $ 6,761 $ 6,962 $ 8,936
Income before taxes............ $ 13,479 $ 3,935 $11,100 $13,275 $14,145 $15,746 $20,057
Provision for income taxes..... $ 5,633 $ 1,692 $ 4,773 $ 5,708 $ 6,083 $ 6,771 $ 8,625
Net income..................... $ 7,846 $ 2,243 $ 6,327 $ 7,567 $ 8,063 $ 8,975 $11,432
Plus Depreciation &
Amortization................. $ 22 $ 10 $ 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks..................... $ 2,848 $ 2,228 $ 7,382 $ 6,511 $ 6,580 $ 6,595 $ 6,544
Less Capex..................... $ 141 $ 50 $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............... $ 4,575 ($1,575) ($ 212) $ 832 $ 918 $ 1,012 $ 1,115
Plus Quintel's Share of NL's
Net Changes in Working
Capital...................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow...................... $ 5,999 $ 6,006 $15,468 $17,900 $18,087 $18,593 $20,532
M/Y Disc Rate at 14%........... 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at 14%........... 0.877 0.769 0.675 0.592 0.519
PV Cash Flows.................. $14,525 $14,732 $13,058 $11,788 $11,416
PV Terminal Value.............. $70,598
Total PV Cash Flow............. $ 65,518
PV Terminal Value.............. $ 70,598
Total Present Value............ $136,116
Plus Cash Balance.............. $ 12,500
Total Present Value............ $148,616
Minus Debt..................... $ 3,300
Total Present Value............ $145,316
Total Present Value per Share
(Based on 15,446,043
shares)...................... $ 9.41
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.
<PAGE> 163

HIGH CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $ 50,501 $16,018 $49,216 $54,261 $59,823 $65,954 $72,715
Cost of Sales.................. $ 36,732 $12,678 $38,955 $40,696 $44,867 $48,806 $52,355
Gross Profit................... $ 13,769 $ 3,340 $10,262 $13,565 $14,956 $17,148 $20,360
Selling, General &
Administrative Expenses...... $ 3,467 $ 2,073 $ 6,369 $ 7,021 $ 7,741 $ 8,534 $ 9,409
Income From Operations......... $ 10,301 $ 1,267 $ 3,893 $ 6,544 $ 7,215 $ 8,614 $10,951
Interest Expense............... $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net.............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income.......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*..................... $ 3,026 $ 2,442 $ 6,868 $ 6,561 $ 6,761 $ 6,962 $ 8,936
Income before taxes............ $ 13,479 $ 3,935 $11,100 $13,275 $14,145 $15,746 $20,057
Provision for income taxes..... $ 5,633 $ 1,692 $ 4,773 $ 5,708 $ 6,083 $ 6,771 $ 8,625
Net income..................... $ 7,846 $ 2,243 $ 6,327 $ 7,567 $ 8,063 $ 8,975 $11,432
Plus Depreciation &
Amortization................. $ 22 $ 10 $ 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks..................... $ 2,848 $ 2,228 $ 7,382 $ 6,511 $ 6,580 $ 6,595 $ 6,544
Less Capex..................... $ 141 $ 50 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............... $ 4,575 $(1,575) $ (212) $ 832 $ 918 $ 1,012 $ 1,115
Plus Quintel's Share of NL's
Net Changes in Working
Capital...................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow...................... $ 5,999 $ 6,006 $15,468 $17,900 $18,087 $18,593 $20,532
M/Y Disc Rate at 16%........... 0.931 0.803 0.692 0.597 0.514
Y/E Disc Rate at 16%........... 0.862 0.743 0.641 0.552 0.476
PV Cash Flows.................. $14,401 $14,374 $12,516 $11,100 $10,553
PV Terminal Value.............. $64,749
Total PV Cash Flow............. $ 62,944
PV Terminal Value.............. $ 64,749
Total Present Value............ $127,692
Plus Cash Balance.............. $ 12,500
Total Present Value............ $140,192
Minus Debt..................... $ 3,300
Total Present Value............ $136,892
Total Present Value per Share
(Based on 15,446,043
shares)...................... $ 8.86
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.
<PAGE> 164

HIGH CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $ 50,501 $16,018 $49,216 $54,261 $59,823 $65,954 $72,715
Cost of Sales.................. $ 36,732 $12,678 $38,955 $40,696 $44,867 $48,806 $52,355
Gross Profit................... $ 13,769 $ 3,340 $10,262 $13,565 $14,956 $17,148 $20,360
Selling, General &
Administrative Expenses...... $ 3,467 $ 2,073 $ 6,369 $ 7,021 $ 7,741 $ 8,534 $ 9,409
Income From Operations......... $ 10,301 $ 1,267 $ 3,893 $ 6,544 $ 7,215 $ 8,614 $10,951
Interest Expense............... $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net.............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income.......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*..................... $ 3,026 $ 2,442 $ 6,868 $ 6,561 $ 6,761 $ 6,962 $ 8,936
Income before taxes............ $ 13,479 $ 3,935 $11,100 $13,275 $14,145 $15,746 $20,057
Provision for income taxes..... $ 5,633 $ 1,692 $ 4,773 $ 5,708 $ 6,083 $ 6,771 $ 8,625
Net income..................... $ 7,846 $ 2,243 $ 6,327 $ 7,567 $ 8,063 $ 8,975 $11,432
Plus Depreciation &
Amortization................. $ 22 $ 10 $ 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks..................... $ 2,848 $ 2,228 $ 7,382 $ 6,511 $ 6,580 $ 6,595 $ 6,544
Less Capex..................... $ 141 $ 50 $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............... $ 4,575 $(1,575) $ (212) $ 832 $ 918 $ 1,012 $ 1,115
Plus Quintel's Share of NL's
Net Changes in Working
Capital...................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow...................... $ 5,999 $ 6,006 $15,468 $17,900 $18,087 $18,593 $20,532
M/YDisc Rate at 18%............ 0.924 0.783 0.664 0.563 0.477
Y/E Disc Rate at 18%........... 0.847 0.718 0.609 0.516 0.437
PV Cash Flows.................. $14,293 $14,016 $12,009 $10,468 $ 9,794
PV Terminal Value.............. $59,444
Total PV Cash Flow............. $ 60,579
PV Terminal Value.............. $ 59,444
Total Present Value............ $120,023
Plus Cash Balance.............. $ 12,500
Total Present Value............ $132,523
Minus Debt..................... $ 3,300
Total Present Value............ $129,223
Total Present Value per Share
(Based on 15,446,043
shares)...................... $ 8.37
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.
<PAGE> 165

LOW CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $ 50,501 $16,018 $49,216 $49,093 $48,970 $48,848 $48,726
Cost of Sales.................. $ 36,732 $12,678 $38,955 $36,820 $36,728 $36,148 $35,083
Gross Profit................... $ 13,769 $ 3,340 $10,262 $12,273 $12,243 $12,700 $13,643
Selling, General &
Administrative Expenses...... $ 3,467 $ 2,073 $ 6,369 $ 6,353 $ 6,337 $ 6,321 $ 6,305
Income From Operations......... $ 10,301 $ 1,267 $ 3,893 $ 5,921 $ 5,906 $ 6,380 $ 7,338
Interest Expense............... $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net.............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income.......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*..................... $ 3,026 $ 2,442 $ 6,868 $ 5,907 $ 5,478 $ 5,075 $ 5,885
Income before taxes............ $ 13,479 $ 3,935 $11,100 $11,997 $11,554 $11,625 $13,393
Provision for income taxes..... $ 5,633 $ 1,692 $ 4,773 $ 5,159 $ 4,968 $ 4,999 $ 5,759
Net income..................... $ 7,846 $ 2,243 $ 6,327 $ 6,839 $ 6,586 $ 6,626 $ 7,634
Plus Depreciation &
Amortization................. $ 22 $ 10 $ 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks..................... $ 2,848 $ 2,228 $ 7,382 $ 5,891 $ 5,387 $ 4,885 $ 4,385
Less Capex..................... $ 141 $ 50 $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............... $ 4,575 $(1,575) $ (212) $ (20) $ (20) $ (20) $ (20)
Plus Quintel's Share of NL's
Net Changes in Working
Capital...................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow...................... $ 5,999 $ 6,006 $15,468 $17,404 $16,353 $15,565 $15,710
M/Y Disc Rate at 14%........... 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at 14%........... 0.877 0.769 0.675 0.592 0.519
PV Cash Flows.................. $14,525 $14,324 $11,807 $ 9,868 $ 8,735
PV Terminal Value.............. $46,941
Total PV Cash Flow............. $ 59,258
PV Terminal Value.............. $ 46,941
Total Present Value............ $106,200
Plus Cash Balance.............. $ 12,500
Total Present Value............ $118,700
Minus Debt..................... $ 3,300
Total Present Value............ $115,400
Total Present Value per Share
(Based on 15,446,043
shares)...................... $ 7.47
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.
<PAGE> 166

LOW CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $ 50,501 $16,018 $49,216 $49,093 $48,970 $48,848 $48,726
Cost of Sales.................. $ 36,732 $12,678 $38,955 $36,820 $36,728 $36,148 $35,083
Gross Profit................... $ 13,769 $ 3,340 $10,262 $12,273 $12,243 $12,700 $13,643
Selling, General &
Administrative Expenses...... $ 3,467 $ 2,073 $ 6,369 $ 6,353 $ 6,337 $ 6,321 $ 6,305
Income From Operations......... $ 10,301 $ 1,267 $ 3,893 $ 5,921 $ 5,906 $ 6,380 $ 7,338
Interest Expense............... $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net.............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income.......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*..................... $ 3,026 $ 2,442 $ 6,868 $ 5,907 $ 5,478 $ 5,075 $ 5,885
Income before taxes............ $ 13,479 $ 3,935 $11,100 $11,997 $11,554 $11,625 $13,393
Provision for income taxes..... $ 5,633 $ 1,692 $ 4,773 $ 5,159 $ 4,968 $ 4,999 $ 5,759
Net income..................... $ 7,846 $ 2,243 $ 6,327 $ 6,839 $ 6,586 $ 6,626 $ 7,634
Plus Depreciation &
Amortization................. $ 22 $ 10 $ 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks..................... $ 2,848 $ 2,228 $ 7,382 $ 5,891 $ 5,387 $ 4,885 $ 4,385
Less Capex..................... $ 141 $ 50 $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............... $ 4,575 $(1,575) $ (212) $ (20) $ (20) $ (20) $ (20)
Plus Quintel's Share of NL's
Net Changes in Working
Capital...................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow...................... $ 5,999 $ 6,006 $15,468 $17,404 $16,353 $15,565 $15,710
M/Y Disc Rate at 16%........... 0.931 0.803 0.692 0.597 0.514
Y/E Disc Rate at 16%........... 0.862 0.743 0.641 0.552 0.476
PV Cash Flows.................. $14,401 $13,976 $11,317 $ 9,292 $ 8,075
PV Terminal Value.............. $43,052
Total PV Cash Flow............. $ 57,060
PV Terminal Value.............. $ 43,052
Total Present Value............ $100,112
Plus Cash Balance.............. $ 12,500
Total Present Value............ $112,612
Minus Debt..................... $ 3,300
Total Present Value............ $109,312
Total Present Value per Share
(Based on 15,446,043
shares)...................... $ 7.08
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.
<PAGE> 167

LOW CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $ 50,501 $16,018 $49,216 $49,093 $48,970 $48,848 $48,726
Cost of Sales.................. $ 36,732 $12,678 $38,955 $36,820 $36,728 $36,148 $35,083
Gross Profit................... $ 13,769 $ 3,340 $10,262 $12,273 $12,243 $12,700 $13,643
Selling, General &
Administrative Expenses...... $ 3,467 $ 2,073 $ 6,369 $ 6,353 $ 6,337 $ 6,321 $ 6,305
Income From Operations......... $ 10,301 $ 1,267 $ 3,893 $ 5,921 $ 5,906 $ 6,380 $ 7,338
Interest Expense............... $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net.............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income.......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*..................... $ 3,026 $ 2,442 $ 6,868 $ 5,907 $ 5,478 $ 5,075 $ 5,885
Income before taxes............ $ 13,479 $ 3,935 $11,100 $11,997 $11,554 $11,625 $13,393
Provision for income taxes..... $ 5,633 $ 1,692 $ 4,773 $ 5,159 $ 4,968 $ 4,999 $ 5,759
Net income..................... $ 7,846 $ 2,243 $ 6,327 $ 6,839 $ 6,586 $ 6,626 $ 7,634
Plus Depreciation &
Amortization................. $ 22 $ 10 $ 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks..................... $ 2,848 $ 2,228 $ 7,382 $ 5,891 $ 5,387 $ 4,885 $ 4,385
Less Capex..................... $ 141 $ 50 $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............... $ 4,575 $(1,575) $ (212) $ (20) $ (20) $ (20) $ (20)
Plus Quintel's Share of NL's
Net Changes in Working
Capital...................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow...................... $ 5,999 $ 6,006 $15,468 $17,404 $16,353 $15,565 $15,710
M/Y Disc Rate at 18%........... 0.924 0.783 0.664 0.563 0.477
Y/E Disc Rate at 18%........... 0.847 0.718 0.609 0.516 0.437
PV Cash Flows.................. $14,293 $13,628 $10,859 $ 8,763 $ 7,494
PV Terminal Value.............. $39,525
Total PV Cash Flow............. $ 55,035
PV Terminal Value.............. $ 39,525
Total Present Value............ $ 94,560
Plus Cash Balance.............. $ 12,500
Total Present Value............ $107,060
Minus Debt..................... $ 3,300
Total Present Value............ $103,760
Total Present Value per Share
(Based on 15,446,043
shares)...................... $ 6.72
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.
<PAGE> 168

BASE CASE

NEW LAUDERDALE, L.C.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST QTR.
1995 1996 1996 1997 1998 1999 2000
------- -------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $28,248 $ 22,246 $83,132 $87,289 $91,653 $96,236 $101,048
Cost of Sales.................. $20,194 $ 16,401 $61,289 $65,467 $68,740 $71,214 $ 72,754
Gross Profit................... $ 8,054 $ 5,845 $21,843 $21,822 $22,913 $25,021 $ 28,293
Selling, General &
Administrative Expenses...... $ 1,880 $ 906 $ 7,482 $ 8,729 $10,082 $12,453 $ 13,076
Income From Operations......... $ 6,174 $ 4,939 $14,361 $13,093 $12,831 $12,568 $ 15,218
Interest Expense............... $ 136 $ 76 $ 650 $ 650 $ 650 $ 650 $ 650
Other Income, Net.............. $ 15 $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Income before taxes............ $ 6,053 $ 4,883 $13,736 $12,468 $12,206 $11,943 $ 14,593
Provision for Income taxes*.... $ 2,603 $ 2,100 $ 5,907 $ 5,361 $ 5,249 $ 5,136 $ 6,275
Net income..................... $ 3,450 $ 2,783 $ 7,830 $ 7,107 $ 6,958 $ 6,808 $ 8,318
Plus Inc. in Customer
Addbacks..................... $ 4,665 $ 4,427 $12,470 $10,475 $10,082 $ 9,624 $ 9,094
Less Inc. in W/C............... $ 7,356 $ 4,800 $ 9,056 $ 686 $ 720 $ 756 $ 794
Cash Flow...................... $ 759 $ 2,410 $11,243 $16,896 $16,319 $15,675 $ 16,618
M/Y Disc Rate at 14%........... 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at 14%........... 0.877 0.769 0.675 0.592 0.519
PV Cash Flows.................. $10,558 $13,905 $11,783 $ 9,938 $ 9,240
PV Terminal Value.............. $ 27,011
Total PV Cash Flow............. $55,423
PV Terminal Value.............. $27,011
Total Present Value............ $82,434
Minus Debt..................... $ 5,000
Total Present Value............ $77,434
Quintel's Share -- 50%......... $38,717
Per Share Present Value Based
on 3,200,000 Shares Purchase
Price to be Paid by
Quintel...................... $ 12.10
</TABLE>

- ---------------
* Fully taxed.
<PAGE> 169

BASE CASE

NEW LAUDERDALE, L.C.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST QTR.
1995 1996 1996 1997 1998 1999 2000
------- -------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................... $28,248 $ 22,246 $83,132 $87,289 $91,653 $96,236 $101,048
Cost of Sales.................. $20,194 $ 16,401 $61,289 $65,467 $68,740 $71,214 $ 72,754
Gross Profit................... $ 8,054 $ 5,845 $21,843 $21,822 $22,913 $25,021 $ 28,293
Selling, General &
Administrative Expenses...... $ 1,880 $ 906 $ 7,482 $ 8,729 $10,082 $12,453 $ 13,076
Income From Operations......... $ 6,174 $ 4,939 $14,361 $13,093 $12,831 $12,568 $ 15,218
Interest Expense............... $ 136 $ 76 $ 650 $ 650 $ 650 $ 650 $ 650
Other Income, Net.............. $ 15 $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Income before taxes............ $ 6,053 $ 4,883 $13,736 $12,468 $12,206 $11,943 $ 14,593
Provision for Income taxes*.... $ 2,603 $ 2,100 $ 5,907 $ 5,361 $ 5,249 $ 5,136 $ 6,275
Net income..................... $ 3,450 $ 2,783 $ 7,830 $ 7,107 $ 6,958 $ 6,808 $ 8,318
Plus Inc. in Customer
Addbacks..................... $ 4,665 $ 4,427 $12,470 $10,475 $10,082 $ 9,624 $ 9,094
Less Inc. in W/C............... $ 7,356 $ 4,800 $ 9,056 $ 686 $ 720 $ 756 $ 794
Cash Flow...................... $ 759 $ 2,410 $11,243 $16,896 $16,319 $15,675 $ 16,618
M/Y Disc Rate at 16%........... 0.931 0.803 0.692 0.597 0.514
Y/E Disc Rate at 16%........... 0.862 0.743 0.641 0.552 0.476
PV Cash Flows.................. $10,468 $13,567 $11,293 $ 9,358 $ 8,542
PV Terminal Value.............. $ 24,773
Total PV Cash Flow............. $53,228
PV Terminal Value.............. $24,773
Total Present Value............ $78,001
Minus Debt..................... $ 5,000
Total Present Value............ $73,001
Quintel's Share -- 50%......... $36,501
Per Share Present Value Based
on 3,200,000 Shares Purchase
Price to be Paid by
Quintel...................... $ 11.41
</TABLE>

- ---------------
* Fully taxed.
<PAGE> 170

BASE CASE

NEW LAUDERDALE, L.C.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue........ $28,248 $22,246 $83,132 $87,289 $91,653 $96,236 $101,048
Cost of Sales...... $20,194 $16,401 $61,289 $65,467 $68,740 $71,214 $ 72,754
Gross Profit....... $ 8,054 $ 5,845 $21,843 $21,822 $22,913 $25,021 $ 28,293
Selling, General &
Administrative
Expenses......... $ 1,880 $ 906 $ 7,482 $ 8,729 $10,082 $12,453 $ 13,076
Income From
Operations....... $ 6,174 $ 4,939 $14,361 $13,093 $12,831 $12,568 $ 15,218
Interest Expense... $ 136 $ 76 $ 650 $ 650 $ 650 $ 650 $ 650
Other Income,
Net.............. $ 15 $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Income before
taxes............ $ 6,053 $ 4,883 $13,736 $12,468 $12,206 $11,943 $ 14,593
Provision for
Income taxes*.... $ 2,603 $ 2,100 $ 5,907 $ 5,361 $ 5,249 $ 5,136 $ 6,275
Net income......... $ 3,450 $ 2,783 $ 7,830 $ 7,107 $ 6,958 $ 6,808 $ 8,318
Plus Inc. in
Customer
Addbacks......... $ 4,665 $ 4,427 $12,470 $10,475 $10,082 $ 9,624 $ 9,094
Less Inc. in W/C... $ 7,356 $ 4,800 $ 9,056 $ 686 $ 720 $ 756 $ 794
Cash Flow.......... $ 759 $ 2,410 $11,243 $16,896 $16,319 $15,675 $ 16,618
M/Y Disc Rate at
18%.............. 0.924 0.783 0.664 0.563 0.477
Y/E Disc Rate at
18%.............. 0.847 0.718 0.609 0.516 0.437
PV Cash Flows...... $10,389 $13,229 $10,836 $ 8,825 $ 7,927
PV Terminal
Value............ $ 22,744
Total PV Cash
Flow............. $51,206
PV Terminal
Value............ $22,744
Total Present
Value............ $73,950
Minus Debt......... $ 5,000
Total Present
Value............ $68,950
Quintel's Share --
50%.............. $34,475
Per Share Present
Value Based on
3,200,000 Shares
Purchase Price to
be Paid by
Quintel.......... $ 10.77
</TABLE>

- ---------------
* Fully taxed
<PAGE> 171

HIGHCASE

NEW LAUDERDALE, L.C.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST.
QTR.
1995 1996 1996 1997 1998 1999 2000
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue...... $28,248 $22,246 $83,132 $91,653 $101,048 $111,405 $122,824
Cost of Sales.... $20,194 $16,401 $61,289 $68,740 $ 75,786 $ 82,440 $ 88,433
Gross Profit..... $ 8,054 $ 5,845 $21,843 $22,913 $ 25,262 $ 28,965 $ 34,391
Selling, General
&
Administrative
Expenses....... $ 1,880 $ 906 $ 7,482 $ 9,165 $ 11,115 $ 14,416 $ 15,893
Income From
Operations..... $ 6,174 $ 4,939 $14,361 $13,748 $ 14,147 $ 14,549 $ 18,497
Interest
Expense........ $ 136 $ 76 $ 650 $ 650 $ 650 $ 650 $ 650
Other Income,
Net............ $ 15 $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Income before
taxes.......... $ 6,053 $ 4,883 $13,736 $13,123 $ 13,522 $ 13,924 $ 17,872
Provision for
Income
taxes*......... $ 2,603 $ 2,100 $ 5,907 $ 5,643 $ 5,814 $ 5,988 $ 7,685
Net income....... $ 3,450 $ 2,783 $ 7,830 $ 7,480 $ 7,707 $ 7,937 $ 10,187
Plus Inc. in
Customer
Addbacks....... $ 4,665 $ 4,427 $12,470 $10,998 $ 11,115 $ 11,140 $ 11,054
Less Inc. in
W/C............ $ 7,356 $ 4,800 $ 9,056 $ 1,406 $ 1,550 $ 1,709 $ 1,884
Cash Flow........ $ 759 $ 2,410 $11,243 $17,072 $ 17,272 $ 17,368 $ 19,357
M/Y Disc Rate at
14%............ 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at
14%............ 0.877 0.769 0.675 0.592 0.519
PV Cash Flows.... $10,558 $14,051 $ 12,471 $ 11,012 $ 10,763
PV Terminal
Value.......... $ 32,832
Total PV Cash
Flow........... $58,853
PV Terminal
Value.......... $32,832
Total Present
Value.......... $91,686
Minus Debt....... $ 5,000
Total Present
Value.......... $86,686
Quintel's
Share -- 50%... $43,343
Per Share Present
Value Based on
3,200,000
Shares Purchase
Price to be
Paid by
Quintel........ $ 13.54
</TABLE>

- ---------------
* Fully taxed
<PAGE> 172

HIGHCASE

NEW LAUDERDALE, L.C.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST QTR.
1995 1996 1996 1997 1998 1999 2000
------- -------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................. $28,248 $ 22,246 $83,132 $91,653 $101,048 $111,405 $122,824
Cost of Sales................ $20,194 $ 16,401 $61,289 $68,740 $ 75,786 $ 82,440 $ 88,433
Gross Profit................. $ 8,054 $ 5,845 $21,843 $22,913 $ 25,262 $ 28,965 $ 34,391
Selling, General &
Administrative Expenses.... $ 1,880 $ 906 $ 7,482 $ 9,165 $ 11,115 $ 14,416 $ 15,893
Income From Operations....... $ 6,174 $ 4,939 $14,361 $13,748 $ 14,147 $ 14,549 $ 18,497
Interest Expense............. $ 136 $ 76 $ 650 $ 650 $ 650 $ 650 $ 650
Other Income, Net............ $ 15 $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Income before taxes.......... $ 6,053 $ 4,883 $13,736 $13,123 $ 13,522 $ 13,924 $ 17,872
Provision for Income
taxes*..................... $ 2,603 $ 2,100 $ 5,907 $ 5,643 $ 5,814 $ 5,988 $ 7,685
Net income................... $ 3,450 $ 2,783 $ 7,830 $ 7,480 $ 7,707 $ 7,937 $ 10,187
Plus Inc. in Customer
Addbacks................... $ 4,665 $ 4,427 $12,470 $10,998 $ 11,115 $ 11,140 $ 11,054
Less Inc. in W/C............. $ 7,356 $ 4,800 $ 9,056 $ 1,406 $ 1,550 $ 1,709 $ 1,884
Cash Flow.................... $ 759 $ 2,410 $11,243 $17,072 $ 17,272 $ 17,368 $ 19,357
M/Y Disc Rate at 16%......... 0.931 0.803 0.692 0.597 0.514
Y/E Disc Rate at 16%......... 0.862 0.743 0.641 0.552 0.476
PV Cash Flows................ $10,468 $13,709 $ 11,953 $ 10,369 $ 9,950
PV Terminal Value............ $ 30,112
Total PV Cash Flow........... $56,448
PV Terminal Value............ $30,112
Total Present Value.......... $86,560
Minus Debt................... $ 5,000
Total Present Value.......... $81,560
Quintel's Share -- 50%....... $40,780
Per Share Present Value Based
on 3,200,000 Shares
Purchase Price to be Paid
by Quintel................. $ 12.74
</TABLE>

- ---------------
* Fully taxed
<PAGE> 173

HIGHCASE

NEW LAUDERDALE, L.C.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST QTR.
1995 1996 1996 1997 1998 1999 2000
------- -------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.................. $28,248 $ 22,246 $83,132 $91,653 $101,048 $111,405 $122,824
Cost of Sales................ $20,194 $ 16,401 $61,289 $68,740 $ 75,786 $ 82,440 $ 88,433
Gross Profit................. $ 8,054 $ 5,845 $21,843 $22,913 $ 25,262 $ 28,965 $ 34,391
Selling, General &
Administrative Expenses.... $ 1,880 $ 906 $ 7,482 $ 9,165 $ 11,115 $ 14,416 $ 15,893
Income From Operations....... $ 6,174 $ 4,939 $14,361 $13,748 $ 14,147 $ 14,549 $ 18,497
Interest Expense............. $ 136 $ 76 $ 650 $ 650 $ 650 $ 650 $ 650
Other Income, Net............ $ 15 $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Income before taxes.......... $ 6,053 $ 4,883 $13,736 $13,123 $ 13,522 $ 13,924 $ 17,872
Provision for Income
taxes*..................... $ 2,603 $ 2,100 $ 5,907 $ 5,643 $ 5,814 $ 5,988 $ 7,685
Net income................... $ 3,450 $ 2,783 $ 7,830 $ 7,480 $ 7,707 $ 7,937 $ 10,187
Plus Inc. in Customer
Addbacks................... $ 4,665 $ 4,427 $12,470 $10,998 $ 11,115 $ 11,140 $ 11,054
Less Inc. in W/C............. $ 7,356 $ 4,800 $ 9,056 $ 1,406 $ 1,550 $ 1,709 $ 1,884
Cash Flow.................... $ 759 $ 2,410 $11,243 $17,072 $ 17,272 $ 17,368 $ 19,357
M/Y Disc Rate at 18%......... 0.924 0.783 0.664 0.563 0.477
Y/E Disc Rate at 18%......... 0.847 0.718 0.609 0.516 0.437
PV Cash Flows................ $10,389 $13,368 $ 11,469 $ 9,778 $ 9,233
PV Terminal Value............ $ 27,645
Total PV Cash Flow........... $54,238
PV Terminal Value............ $27,645
Total Present Value.......... $81,882
Minus Debt................... $ 5,000
Total Present Value.......... $76,882
Quintel's Share -- 50%....... $38,441
Per Share Present Value Based
on 3,200,000 Shares
Purchase Price to be Paid
by Quintel................. $ 12.01
</TABLE>

- ---------------
* Fully Taxed
<PAGE> 174

LOW CASE

NEW LAUDERDALE, L.C.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST.
QTR.
1995 1996 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue......... $28,248 $22,246 $83,132 $82,924 $82,717 $82,510 $82,304
Cost of Sales....... $20,194 $16,401 $61,289 $62,193 $62,038 $61,058 $59,259
Gross Profit........ $ 8,054 $ 5,845 $21,843 $20,731 $20,679 $21,453 $23,045
Selling, General &
Administrative
Expenses.......... $ 1,880 $ 906 $ 7,482 $ 8,292 $ 9,099 $10,677 $10,650
Income From
Operations........ $ 6,174 $ 4,939 $14,361 $12,439 $11,580 $10,776 $12,395
Interest Expense.... $ 136 $ 76 $ 650 $ 650 $ 650 $ 650 $ 650
Other Income, Net... $ 15 $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Income before
taxes............. $ 6,053 $ 4,883 $13,736 $11,814 $10,955 $10,151 $11,770
Provision for Income
taxes*............ $ 2,603 $ 2,100 $ 5,907 $ 5,080 $ 4,711 $ 4,365 $ 5,061
Net income.......... $ 3,450 $ 2,783 $ 7,830 $ 6,734 $ 6,245 $ 5,786 $ 6,709
Plus Inc. in
Customer
Addbacks.......... $ 4,665 $ 4,427 $12,470 $ 9,951 $ 9,099 $ 8,251 $ 7,407
Less Inc. in W/C.... $ 7,356 $ 4,800 $ 9,056 $ (34) $ (34) $ (34) $ (34)
Cash Flow........... $ 759 $ 2,410 $11,243 $16,719 $15,378 $14,071 $14,150
M/Y Disc Rate at
14%............... 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at
14%............... 0.877 0.769 0.675 0.592 0.519
PV Cash Flows....... $10,558 $13,760 $11,103 $ 8,921 $ 7,868
PV Terminal Value... $22,001
Total PV Cash
Flow.............. $52,209
PV Terminal Value... $22,001
Total Present
Value............. $74,209
Minus Debt.......... $ 5,000
Total Present
Value............. $69,209
Quintel's
Share -- 50%...... $34,605
Per Share Present
Value Based on
3,200,000 Shares
Purchase Price to
be Paid by
Quintel........... $ 10.81
</TABLE>

- ---------------
* Fully taxed
<PAGE> 175

LOW CASE

NEW LAUDERDALE, L.C.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST.
QTR.
1995 1996 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue......... $28,248 $22,246 $83,132 $82,924 $82,717 $82,510 $82,304
Cost of Sales....... $20,194 $16,401 $61,289 $62,193 $62,038 $61,058 $59,259
Gross Profit........ $ 8,054 $ 5,845 $21,843 $20,731 $20,679 $21,453 $23,045
Selling, General &
Administrative
Expenses.......... $ 1,880 $ 906 $ 7,482 $ 8,292 $ 9,099 $10,677 $10,650
Income From
Operations........ $ 6,174 $ 4,939 $14,361 $12,439 $11,580 $10,776 $12,395
Interest Expense.... $ 136 $ 76 $ 650 $ 650 $ 650 $ 650 $ 650
Other Income, Net... $ 15 $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Income before
taxes............. $ 6,053 $ 4,883 $13,736 $11,814 $10,955 $10,151 $11,770
Provision for Income
taxes*............ $ 2,603 $ 2,100 $ 5,907 $ 5,080 $ 4,711 $ 4,365 $ 5,061
Net income.......... $ 3,450 $ 2,783 $ 7,830 $ 6,734 $ 6,245 $ 5,786 $ 6,709
Plus Inc. in
Customer
Addbacks.......... $ 4,665 $ 4,427 $12,470 $ 9,951 $ 9,099 $ 8,251 $ 7,407
Less Inc. in W/C.... $ 7,356 $ 4,800 $ 9,056 $ (34) $ (34) $ (34) $ (34)
Cash Flow........... $ 759 $ 2,410 $11,243 $16,719 $15,378 $14,071 $14,150
M/Y Disc Rate at
16%............... 0.931 0.803 0.692 0.597 0.514
Y/E Disc Rate
at 16%............ 0.862 0.743 0.641 0.552 0.476
PV Cash Flows....... $10,468 $13,425 $10,641 $ 8,400 $ 7,273
PV Terminal Value... $20,178
Total PV Cash
Flow.............. $50,208
PV Terminal Value... $20,178
Total Present
Value............. $70,386
Minus Debt.......... $ 5,000
Total Present
Value............. $65,386
Quintel's Share --
50%............... $32,693
Per Share Present
Value Based on
3,200,000 Shares
Purchase Price to
be Paid by
Quintel........... $ 10.22
</TABLE>

- ---------------
* Fully taxed
<PAGE> 176

LOW CASE

NEW LAUDERDALE, L.C.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST.
QTR.
1995 1996 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue................... $28,248 $22,246 $83,132 $82,924 $82,717 $82,510 $82,304
Cost of Sales................. $20,194 $16,401 $61,289 $62,193 $62,038 $61,058 $59,259
Gross Profit.................. $ 8,054 $ 5,845 $21,843 $20,731 $20,679 $21,453 $23,045
Selling, General &
Administrative Expenses..... $ 1,880 $ 906 $ 7,482 $ 8,292 $ 9,099 $10,677 $10,650
Income From Operations........ $ 6,174 $ 4,939 $14,361 $12,439 $11,580 $10,776 $12,395
Interest Expense.............. $ 136 $ 76 $ 650 $ 650 $ 650 $ 650 $ 650
Other Income, Net............. $ 15 $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Income before taxes........... $ 6,053 $ 4,883 $13,736 $11,814 $10,955 $10,151 $11,770
Provision for Income taxes*... $ 2,603 $ 2,100 $ 5,907 $ 5,080 $ 4,711 $ 4,365 $ 5,061
Net income.................... $ 3,450 $ 2,783 $ 7,830 $ 6,734 $ 6,245 $ 5,786 $ 6,709
Plus Inc. in Customer
Addbacks.................... $ 4,665 $ 4,427 $12,470 $ 9,951 $ 9,099 $ 8,251 $ 7,407
Less Inc. in W/C.............. $ 7,356 $ 4,800 $ 9,056 $ (34) $ (34) $ (34) $ (34)
Cash Flow..................... $ 759 $ 2,410 $11,243 $16,719 $15,378 $14,071 $14,150
M/Y Disc Rate at 18%.......... 0.924 0.783 0.664 0.563 0.477
Y/E Disc Rate at 18%.......... 0.847 0.718 0.609 0.516 0.437
PV Cash Flows................. $10,389 $13,091 $10,211 $ 7,922 $ 6,750
PV Terminal Value............. $18,525
Total PV Cash Flow............ $48,362
PV Terminal Value............. $18,525
Total Present Value........... $66,887
Minus Debt.................... $ 5,000
Total Present Value........... $61,887
Quintel's Share -- 50%........ $30,944
Per Share Present Value Based
on 3,200,000 Shares Purchase
Price to be Paid by
Quintel..................... $ 9.67
</TABLE>

- ---------------
* Fully taxed
<PAGE> 177

BASE CASE

QUINTEL ENTERTAINMENT, INC.
CONSOLIDATED
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Revenue......................... $132,348 $138,966 $145,914 $153,210 $160,870
Cost of Sales....................... $ 95,031 $ 98,805 $103,745 $107,480 $109,804
Gross Profit........................ $ 37,317 $ 40,161 $ 42,169 $ 45,730 $ 51,067
Selling, General & Administrative
Expenses.......................... $ 13,850 $ 14,645 $ 16,248 $ 18,834 $ 19,776
Income From Operations.............. $ 23,467 $ 25,516 $ 25,921 $ 26,896 $ 31,291
Interest Expense.................... $ 1,053 $ 980 $ 980 $ 980 $ 980
Other Income, Net................... $ 666 $ 525 $ 525 $ 525 $ 525
Management fee income............... 100
Deduction for NL Goodwill........... 2,127 2,127 2,127 2,127 2,127
Income before taxes................. $ 21,053 $ 22,934 $ 23,339 $ 24,314 $ 28,709
Provision for income taxes.......... $ 9,053 $ 9,862 $ 10,036 $ 10,455 $ 12,345
Net income.......................... $ 12,000 $ 13,072 $ 13,303 $ 13,859 $ 16,364
Plus Addback of Goodwill............ 2,127 2,127 2,127 2,127 2,127
Plus Increase in Customer
Addbacks.......................... $ 19,852 $ 16,676 $ 16,051 $ 15,321 $ 14,478
Plus Depreciation and
Amortization...................... $ 40 $ 60 $ 80 $ 100 $ 120
Less Capex.......................... $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C.................... $ 8,844 $ 1,092 $ 1,146 $ 1,204 $ 1,264
Cash Flow........................... $ 24,976 $ 30,543 $ 30,014 $ 29,703 $ 31,225
M/Y Disc Rate at 14%................ 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at 14%................ 0.877 0.769 0.675 0.592 0.519
PV Cash Flows....................... $ 23,452 $ 25,137 $ 21,670 $ 18,832 $ 17,361
PV Terminal Value................... $111,081
Total PV Cash Flow.................. $106,453
PV Terminal Value................... $111,081
Total Present Value................. $217,534
Minus Debt.......................... $ 8,300
Plus Cash Balance................... $ 12,500
Total Present Value................. $221,734
Total Present Value pre Share (Based
on 18,646,043 shares)............. $ 11.89
</TABLE>
<PAGE> 178

BASE CASE

QUINTEL ENTERTAINMENT, INC.
CONSOLIDATED
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Revenue......................... $132,348 $138,966 $145,914 $153,210 $160,870
Cost of Sales....................... $ 95,031 $ 98,805 $103,745 $107,480 $109,804
Gross Profit........................ $ 37,317 $ 40,161 $ 42,169 $ 45,730 $ 51,067
Selling, General & Administrative
Expenses.......................... $ 13,850 $ 14,645 $ 16,248 $ 18,834 $ 19,776
Income From Operations.............. $ 23,467 $ 25,516 $ 25,921 $ 26,896 $ 31,291
Interest Expense.................... $ 1,053 $ 980 $ 980 $ 980 $ 980
Other Income, Net................... $ 666 $ 525 $ 525 $ 525 $ 525
Management fee income............... 100
Deduction for NL Goodwill........... 2,127 2,127 2,127 2,127 2,127
Income before taxes................. $ 21,053 $ 22,934 $ 23,339 $ 24,314 $ 28,709
Provision for income taxes.......... $ 9,053 $ 9,862 $ 10,036 $ 10,455 $ 12,345
Net income.......................... $ 12,000 $ 13,072 $ 13,303 $ 13,859 $ 16,364
Plus Addback of Goodwill............ 2,127 2,127 2,127 2,127 2,127
Plus Increase in Customer
Addbacks.......................... $ 19,852 $ 16,676 $ 16,051 $ 15,321 $ 14,478
Plus Depreciation and
Amortization...................... $ 40 $ 60 $ 80 $ 100 $ 120
Less Capex.......................... $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C.................... $ 8,844 $ 1,092 $ 1,146 $ 1,204 $ 1,264
Cash Flow........................... $ 24,976 $ 30,543 $ 30,014 $ 29,703 $ 31,225
M/Y Disc Rate at 16%................ 0.931 0.803 0.692 0.597 0.514
Y/E Disc Rate at 16%................ 0.862 0.743 0.641 0.552 0.476
PV Cash Flows....................... $ 23,252 $ 24,526 $ 20,770 $ 17,733 $ 16,050
PV Terminal Value................... $101,878
Total PV Cash Flow.................. $102,331
PV Terminal Value................... $101,878
Total Present Value................. $204,209
Minus Debt.......................... $ 8,300
Plus Cash Balance................... $ 12,500
Total Present Value................. $208,409
Total Present Value per Share (Based
on 18,646,043 shares)............. $ 11.18
</TABLE>
<PAGE> 179

BASE CASE

QUINTEL ENTERTAINMENT, INC.
CONSOLIDATED
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Revenue......................... $132,348 $138,966 $145,914 $153,210 $160,870
Cost of Sales....................... $ 95,031 $ 98,805 $103,745 $107,480 $109,804
Gross Profit........................ $ 37,317 $ 40,161 $ 42,169 $ 45,730 $ 51,067
Selling, General & Administrative
Expenses.......................... $ 13,850 $ 14,645 $ 16,248 $ 18,834 $ 19,776
Income From Operations.............. $ 23,467 $ 25,516 $ 25,921 $ 26,896 $ 31,291
Interest Expense.................... $ 1,053 $ 980 $ 980 $ 980 $ 980
Other Income, Net................... $ 666 $ 525 $ 525 $ 525 $ 525
Management fee income............... 100
Deduction for NL Goodwill........... 2,127 2,127 2,127 2,127 2,127
Income before taxes................. $ 21,053 $ 22,934 $ 23,339 $ 24,314 $ 28,709
Provision for income taxes.......... $ 9,053 $ 9,862 $ 10,036 $ 10,455 $ 12,345
Net income.......................... $ 12,000 $ 13,072 $ 13,303 $ 13,859 $ 16,364
Plus Addback of Goodwill............ 2,127 2,127 2,127 2,127 2,127
Plus Increase in Customer
Addbacks.......................... $ 19,852 $ 16,676 $ 16,051 $ 15,321 $ 14,478
Plus Depreciation and
Amortization...................... $ 40 $ 60 $ 80 $ 100 $ 120
Less Capex.......................... $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C.................... $ 8,844 $ 1,092 $ 1,146 $ 1,204 $ 1,264
Cash Flow........................... $ 24,976 $ 30,543 $ 30,014 $ 29,703 $ 31,225
M/Y Disc Rate at 18%................ 0.924 0.783 0.664 0.563 0.477
Y/E Disc Rate at 18%................ 0.847 0.718 0.609 0.516 0.437
PV Cash Flows....................... $ 23,078 $ 23,915 $ 19,930 $ 16,723 $ 14,895
PV Terminal Value................... $ 93,531
Total PV Cash Flow.................. $ 98,540
PV Terminal Value................... $ 93,531
Total Present Value................. $192,071
Minus Debt.......................... $ 8,300
Plus Cash Balance................... $ 12,500
Total Present Value................. $196,271
Total Present Value per Share (Based
on 18,646,043 shares)............. $ 10.53
</TABLE>
<PAGE> 180

HIGH CASE

QUINTEL ENTERTAINMENT, INC.
CONSOLIDATED
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Revenue................................. $132,348 $145,914 $160,870 $177,359 $195,539
Cost of Sales............................... $ 95,031 $103,745 $114,379 $124,421 $133,467
Gross Profit................................ $ 37,317 $ 42,169 $ 46,491 $ 52,938 $ 62,072
Selling, General & Administrative
Expenses.................................. $ 13,850 $ 15,377 $ 17,913 $ 21,803 $ 24,038
Income From Operations...................... $ 23,467 $ 26,792 $ 28,578 $ 31,135 $ 38,034
Interest Expense............................ $ 1,053 $ 980 $ 980 $ 980 $ 980
Other Income, Net........................... $ 666 $ 525 $ 525 $ 525 $ 525
Management fee income....................... 100
Deduction for NL Goodwill................... 2,127 2,127 2,127 2,127 2,127
Income before taxes......................... $ 21,053 $ 24,210 $ 25,996 $ 28,553 $ 35,452
Provision for income taxes.................. $ 9,053 $ 10,410 $ 11,178 $ 12,278 $ 15,244
Net income.................................. $ 12,000 $ 13,800 $ 14,818 $ 16,275 $ 20,208
Plus Addback of Goodwill.................... 2,127 2,127 2,127 2,127 2,127
Plus Increase in Customer Addbacks.......... $ 19,852 $ 17,510 $ 17,696 $ 17,736 $ 17,598
Plus Depreciation and Amortization.......... $ 40 $ 60 $ 80 $ 100 $ 120
Less Capex.................................. $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............................ $ 8,844 $ 2,238 $ 2,468 $ 2,721 $ 3,000
Cash Flow................................... $ 24,976 $ 30,958 $ 31,853 $ 33,018 $ 36,454
M/Y Disc Rate at 14%........................ 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at 14%........................ 0.877 0.769 0.675 0.592 0.519
PV Cash Flows............................... $ 23,452 $ 25,478 $ 22,998 $ 20,933 $ 20,268
PV Terminal Value........................... $135,020
Total PV Cash Flow.......................... $113,130
PV Terminal Value........................... $135,020
Total Present Value......................... $248,150
Minus Debt.................................. $ 8,300
Plus Cash Balance........................... $ 12,500
Total Present Value......................... $252,350
Total Present Value per Share (Based on
18,646,043 shares)........................ $ 13.53
</TABLE>
<PAGE> 181

HIGH CASE

QUINTEL ENTERTAINMENT, INC.
CONSOLIDATED
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Revenue................................. $132,348 $145,914 $160,870 $177,359 $195,539
Cost of Sales............................... $ 95,031 $103,745 $114,379 $124,421 $133,467
Gross Profit................................ $ 37,317 $ 42,169 $ 46,491 $ 52,938 $ 62,072
Selling, General & Administrative
Expenses.................................. $ 13,850 $ 15,377 $ 17,913 $ 21,803 $ 24,038
Income From Operations...................... $ 23,467 $ 26,792 $ 28,578 $ 31,135 $ 38,034
Interest Expense............................ $ 1,053 $ 980 $ 980 $ 980 $ 980
Other Income, Net........................... $ 666 $ 525 $ 525 $ 525 $ 525
Management fee income....................... 100
Deduction for NL Goodwill................... 2,127 2,127 2,127 2,127 2,127
Income before taxes......................... $ 21,053 $ 24,210 $ 25,996 $ 28,553 $ 35,452
Provision for income taxes.................. $ 9,053 $ 10,410 $ 11,178 $ 12,278 $ 15,244
Net income.................................. $ 12,000 $ 13,800 $ 14,818 $ 16,275 $ 20,208
Plus Addback of Goodwill.................... 2,127 2,127 2,127 2,127 2,127
Plus Increase in Customer Addbacks.......... $ 19,852 $ 17,510 $ 17,696 $ 17,736 $ 17,598
Plus Depreciation and Amortization.......... $ 40 $ 60 $ 80 $ 100 $ 120
Less Capex.................................. $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............................ $ 8,844 $ 2,238 $ 2,468 $ 2,721 $ 3,000
Cash Flow................................... $ 24,976 $ 30,958 $ 31,853 $ 33,018 $ 36,454
M/Y Disc Rate at 16%........................ 0.931 0.803 0.692 0.597 0.514
Y/E Disc Rate at 16%........................ 0.862 0.743 0.641 0.552 0.476
PV Cash Flows............................... $ 23,252 $ 24,859 $ 22,042 $ 19,712 $ 18,737
PV Terminal Value........................... $123,833
Total PV Cash Flow.......................... $108,602
PV Terminal Value........................... $123,833
Total Present Value......................... $232,436
Minus Debt.................................. $ 8,300
Plus Cash Balance........................... $ 12,500
Total Present Value......................... $236,636
Total Present Value per Share (Based on
18,646,043 shares)........................ $ 12.69
</TABLE>
<PAGE> 182

LOW CASE

QUINTEL ENTERTAINMENT, INC.
CONSOLIDATED
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Revenue................................. $132,348 $132,017 $131,687 $131,358 $131,030
Cost of Sales............................... $ 95,031 $ 93,864 $ 93,630 $ 92,150 $ 89,436
Gross Profit................................ $ 37,317 $ 38,153 $ 38,058 $ 39,208 $ 41,594
Selling, General & Administrative
Expenses.................................. $ 13,850 $ 13,913 $ 14,664 $ 16,148 $ 16,107
Income From Operations...................... $ 23,467 $ 24,240 $ 23,394 $ 23,060 $ 25,487
Interest Expense............................ $ 1,053 $ 980 $ 980 $ 980 $ 980
Other Income, Net........................... $ 666 $ 525 $ 525 $ 525 $ 525
Management fee income....................... 100
Deduction for NL Goodwill................... 2,127 2,127 2,127 2,127 2,127
Income before taxes......................... $ 21,053 $ 21,658 $ 20,812 $ 20,478 $ 22,905
Provision for income taxes.................. $ 9,053 $ 9,313 $ 8,949 $ 8,806 $ 9,849
Net income.................................. $ 12,000 $ 12,345 $ 11,863 $ 11,672 $ 13,056
Plus Addback of Goodwill.................... 2,127 2,127 2,127 2,127 2,127
Plus Increase in Customer Addbacks.......... $ 19,852 $ 15,842 $ 14,486 $ 13,136 $ 11,793
Plus Depreciation & Amortization............ $ 40 $ 60 $ 80 $ 100 $ 120
Less Capex.................................. $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............................ $ 8,844 $ (55) $ (54) $ (54) $ (54)
Cash Flow................................... $ 24,976 $ 30,129 $ 28,210 $ 26,590 $ 26,549
M/Y Disc Rate at 14%........................ 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at 14%........................ 0.877 0.769 0.675 0.592 0.519
PV Cash Flows............................... $ 23,452 $ 24,796 $ 20,367 $ 16,858 $ 14,762
PV Terminal Value........................... $ 90,476
Total PV Cash Flow.......................... $100,235
PV Terminal Value........................... $ 90,476
Total Present Value......................... $190,711
Minus Debt.................................. $ 8,300
Plus Cash Balance........................... $ 12,500
Total Present Value......................... $194,911
Total Present Value per Share (Based on
18,646,043 shares)........................ $ 10.45
</TABLE>
<PAGE> 183

HIGH CASE

QUINTEL ENTERTAINMENT, INC.
CONSOLIDATED
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Revenue................................. $132,348 $145,914 $160,870 $177,359 $195,539
Cost of Sales............................... $ 95,031 $103,745 $114,379 $124,421 $133,467
Gross Profit................................ $ 37,317 $ 42,169 $ 46,491 $ 52,938 $ 62,072
Selling, General & Administrative
Expenses.................................. $ 13,850 $ 15,377 $ 17,913 $ 21,803 $ 24,038
Income From Operations...................... $ 23,467 $ 26,792 $ 28,578 $ 31,135 $ 38,034
Interest Expense............................ $ 1,053 $ 980 $ 980 $ 980 $ 980
Other Income, Net........................... $ 666 $ 525 $ 525 $ 525 $ 525
Management fee income....................... 100
Deduction for NL Goodwill................... 2,127 2,127 2,127 2,127 2,127
Income before taxes......................... $ 21,053 $ 24,210 $ 25,996 $ 28,553 $ 35,452
Provision for income taxes.................. $ 9,053 $ 10,410 $ 11,178 $ 12,278 $ 15,244
Net income.................................. $ 12,000 $ 13,800 $ 14,818 $ 16,275 $ 20,208
Plus Addback of Goodwill.................... 2,127 2,127 2,127 2,127 2,127
Plus Increase in Customer Addbacks.......... $ 19,852 $ 17,510 $ 17,696 $ 17,736 $ 17,598
Plus Depreciation & Amortization............ $ 40 $ 60 $ 80 $ 100 $ 120
Less Capex.................................. $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............................ $ 8,844 $ 2,238 $ 2,468 $ 2,721 $ 3,000
Cash Flow................................... $ 24,976 $ 30,958 $ 31,853 $ 33,018 $ 36,454
M/Y Disc Rate at 18%........................ 0.924 0.783 0.664 0.563 0.477
Y/E Disc Rate at 18%........................ 0.847 0.718 0.609 0.516 0.437
PV Cash Flows............................... $ 23,078 $ 24,240 $ 21,150 $ 18,589 $ 17,388
PV Terminal Value........................... $113,687
Total PV Cash Flow.......................... $104,445
PV Terminal Value........................... $113,687
Total Present Value......................... $218,132
Minus Debt.................................. $ 8,300
Plus Cash Balance........................... $ 12,500
Total Present Value......................... $222,332
Total Present Value per Share (Based on
18,646,043 shares)........................ $ 11.92
</TABLE>
<PAGE> 184

LOW CASE

QUINTEL ENTERTAINMENT, INC.
CONSOLIDATED
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Revenue................................. $132,348 $132,017 $131,687 $131,358 $131,030
Cost of Sales............................... $ 95,031 $ 93,864 $ 93,630 $ 92,150 $ 89,436
Gross Profit................................ $ 37,317 $ 38,153 $ 38,058 $ 39,208 $ 41,594
Selling, General & Administrative
Expenses.................................. $ 13,850 $ 13,913 $ 14,664 $ 16,148 $ 16,107
Income From Operations...................... $ 23,467 $ 24,240 $ 23,394 $ 23,060 $ 25,487
Interest Expense............................ $ 1,053 $ 980 $ 980 $ 980 $ 980
Other Income, Net........................... $ 666 $ 525 $ 525 $ 525 $ 525
Management fee income....................... 100
Deduction for NL Goodwill................... 2,127 2,127 2,127 2,127 2,127
Income before taxes......................... $ 21,053 $ 21,658 $ 20,812 $ 20,478 $ 22,905
Provision for income taxes.................. $ 9,053 $ 9,313 $ 8,949 $ 8,806 $ 9,849
Net income.................................. $ 12,000 $ 12,345 $ 11,863 $ 11,672 $ 13,056
Plus Addback of Goodwill.................... 2,127 2,127 2,127 2,127 2,127
Plus Increase in Customer Addbacks.......... $ 19,852 $ 15,842 $ 14,486 $ 13,136 $ 11,793
Plus Depreciation &Amortization............. $ 40 $ 60 $ 80 $ 100 $ 120
Less Capex.................................. $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............................ $ 8,844 $ (55) $ (54) $ (54) $ (54)
Cash Flow................................... $ 24,976 $ 30,129 $ 28,210 $ 26,590 $ 26,549
M/Y Disc Rate at 16%........................ 0.931 0.803 0.692 0.597 0.514
Y/E Disc Rate at 16%........................ 0.862 0.743 0.641 0.552 0.476
PV Cash Flows............................... $ 23,252 $ 24,193 $ 19,521 $ 15,874 $ 13,646
PV Terminal Value........................... $ 82,980
Total PV Cash Flow.......................... $ 96,487
PV Terminal Value........................... $ 82,980
Total Present Value......................... $179,468
Minus Debt.................................. $ 8,300
Plus Cash Balance........................... $ 12,500
Total Present Value......................... $183,668
Total Present Value per Share (Based on
18,646,043 shares)........................ $ 9.85
</TABLE>
<PAGE> 185

LOW CASE

QUINTEL ENTERTAINMENT, INC.
CONSOLIDATED
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Revenue................................. $132,348 $132,017 $131,687 $131,358 $131,030
Cost of Sales............................... $ 95,031 $ 93,864 $ 93,630 $ 92,150 $ 89,436
Gross Profit................................ $ 37,317 $ 38,153 $ 38,058 $ 39,208 $ 41,594
Selling, General & Administrative
Expenses.................................. $ 13,850 $ 13,913 $ 14,664 $ 16,148 $ 16,107
Income From Operations...................... $ 23,467 $ 24,240 $ 23,394 $ 23,060 $ 25,487
Interest Expense............................ $ 1,053 $ 980 $ 980 $ 980 $ 980
Other Income, Net........................... $ 666 $ 525 $ 525 $ 525 $ 525
Management fee income....................... 100
Deduction for NL Goodwill................... 2,127 2,127 2,127 2,127 2,127
Income before taxes......................... $ 21,053 $ 21,658 $ 20,812 $ 20,478 $ 22,905
Provision for income taxes.................. $ 9,053 $ 9,313 $ 8,949 $ 8,806 $ 9,849
Net income.................................. $ 12,000 $ 12,345 $ 11,863 $ 11,672 $ 13,056
Plus Addback of Goodwill.................... 2,127 2,127 2,127 2,127 2,127
Plus Increase in Customer Addbacks.......... $ 19,852 $ 15,842 $ 14,486 $ 13,136 $ 11,793
Plus Depreciation & Amortization............ $ 40 $ 60 $ 80 $ 100 $ 120
Less Capex.................................. $ 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C............................ $ 8,844 $ (55) $ (54) $ (54) $ (54)
Cash Flow................................... $ 24,976 $ 30,129 $ 28,210 $ 26,590 $ 26,549
M/Y Disc Rate at 18%........................ 0.924 0.783 0.664 0.563 0.477
Y/E Disc Rate at 18%........................ 0.847 0.718 0.609 0.516 0.437
PV Cash Flows............................... $ 23,078 $ 23,591 $ 18,731 $ 14,970 $ 12,664
PV Terminal Value........................... $ 76,181
Total PV Cash Flow.......................... $ 93,034
PV Terminal Value........................... $ 76,181
Total Present Value......................... $169,215
Minus Debt.................................. $ 8,300
Plus Cash Balance........................... $ 12,500
Total Present Value......................... $173,415
Total Present Value per Share (Based on
18,646,043 shares)........................ $ 9.30
</TABLE>
<PAGE> 186

BASE CASE

QUINTEL ENTERTAINMENT, INC.
STAND ALONE
FIVE YEAR PRO FORMA OPERATING P&L AND CASH FLOW
FISCAL YEAR ENDING NOVEMBER 30
(IN THOUSANDS)

<TABLE>
<CAPTION>
1ST
QTR.
1995 1996 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue................... $50,501 $16,018 $49,216 $51,677 $54,261 $56,974 $59,823
Cost of Sales................. $36,732 $38,955 $38,758 $40,696 $42,161 $43,072
Gross Profit.................. $13,769 $ 3,340 $10,262 $12,919 $13,565 $14,813 $16,750
Selling, General &
Administrative Expenses..... $ 3,467 $ 2,073 $ 6,369 $ 6,687 $ 7,021 $ 7,372 $ 7,741
Income From Operations........ $10,301 $ 1,267 $ 3,893 $ 6,232 $ 6,544 $ 7,441 $ 9,009
Interest Expense.............. $ 334 $ 140 $ 403 $ 330 $ 330 $ 330 $ 330
Other Income, Net............. $ 35 $ 266 $ 641 $ 500 $ 500 $ 500 $ 500
Management fee income......... $ 450 $ 100 $ 100
Equity in earnings of joint
venture*.................... $ 3,026 $ 2,442 $ 6,868 $ 6,234 $ 6,103 $ 5,972 $ 7,296
Income before taxes........... $13,479 $ 3,935 $11,100 $12,636 $12,817 $13,582 $16,476
Provision for income taxes.... $ 5,633 $ 1,692 $ 4,773 $ 5,434 $ 5,511 $ 5,840 $ 7,085
Net income.................... $ 7,846 $ 2,243 $ 6,327 $ 7,203 $ 7,306 $ 7,742 $ 9,391
Plus Depreciation &
Amortization................ $ 22 $ 10 40 $ 60 $ 80 $ 100 $ 120
Plus Increase in Customer
Addbacks.................... $ 2,848 $ 2,228 $ 7,382 $ 6,201 $ 5,969 $ 5,697 $ 5,384
Less Capex.................... $ 141 $ 50 200 $ 300 $ 400 $ 500 $ 600
Less Inc. in W/C.............. $ 4,575 $(1,575) $ (212) $ 406 $ 426 $ 448 $ 470
Plus Quintel's Share of NL's
Net Changes in Working
Capital..................... $ 1,707 $ 4,894 $ 4,681 $ 4,434 $ 4,150
Cash Flow..................... $ 5,999 $ 6,006 $15,468 $17,652 $17,209 $17,025 $17,975
M/Y Disc Rate at 14%.......... 0.939 0.823 0.722 0.634 0.556
Y/E Disc Rate at 14%.......... 0.877 0.769 0.675 0.592 0.519
PV Cash Flows................. $14,525 $14,528 $12,425 $10,794 $ 9,994
PV Terminal Value............. $57,884
Total PV Cash Flow............ $62,266
PV Terminal Value............. $57,884
Total Present Value........... $120,150
Plus Cash Balance............. $12,500
Total Present Value........... $132,650
Minus Debt.................... $ 3,300
Total Present Value........... $129,350
Total Present Value per Share
(Based on 15,446,043
shares)..................... $ 8.37
</TABLE>

- ---------------
* Assumes dividends are rec'd. by Quintel equal to the equity in earnings of
j/v.