BIG FLOWER HOLDINGS INC/
8-K, 1998-03-27
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<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

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


                                    FORM 8-K

                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

        Date of report (Date of earliest event reported): March 13, 1998

                            BIG FLOWER HOLDINGS, INC.
               (Exact Name of Registrant as Specified in Charter)

Delaware                           0-29474                  13-397-1556
(State or Other Jurisdiction     (Commission                (IRS Employer
of Incorporation)                File Number)             Identification No.)

3 East 54th Street, New York, New York                          10022
(Address of Principal Executive Offices)                      (Zip Code)

       Registrant's telephone number, including area code: (212) 521-1600



         --------------------------------------------------------------
             (Former Name or Address, if changed Since Last Report)

                                      Page 1 of 92

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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.

        Pursuant to an Agreement, dated March 13, 1998 (the "Agreement"), the
Registrant, through a wholly-owned subsidiary, acquired all of the issued and
outstanding shares of capital stock of Troypeak Limited (Production Response 
Systems)and Pismo Limited (Lifeboat Matey) from the respective stockholders 
of Troypeak Limited and Pismo Limited. The Registrant paid an aggregate of 
(pound)13,586,800 (approximately $ 20.4 million) in cash in consideration for 
these shares, which purchase price was determined through arms-length 
negotiations and is subject to certain adjustments based upon post-closing 
performance of the acquired companies. On March 17, 1998, theRegistrant issued 
a press release, a copy of which is attached as an exhibit hereto and is 
incorporated herein by reference in its entirety, announcing the acquisition.

        Troypeak Limited, headquartered in London, England, specializes in
providing full digital premedia services, including digital photography, graphic
assembly and digital distribution to advertising agencies and publishers. Pismo
Limited is a London - based provider of design and electronic post-production
services to advertising agencies. The acquired companies will do business as The
Fusion Group.

        The source of the cash consideration was general working capital, as
well as proceeds from a (pound) 50.0 million revolving credit facility.

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

        (a) & (b) It is impracticable to provide this information at
                  this time. The required information will be filed as soon
                  as practicable, but not later than 60 days after the date
                  of filing of this report on Form 8-K.

        (c)       The following exhibits are filed herewith:

        EXHIBIT
        NUMBER    DESCRIPTION

        2.1       Agreement, dated March 13, 1998, among Big Flower Digital
                  Services Limited, the holders of capital stock of Troypeak
                  Limited and Pismo Limited, Troypeak Limited and Pismo Limited.

        99.1      Registrant's press release, dated March 17, 1998.


                                       Page 2 of 92
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                                   SIGNATURES

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

                                    BIG FLOWER  HOLDINGS, INC.

Date: March 27, 1998                        By:    /s/ Irene B. Fisher
                                                   -----------------------------
                                            Name:  Irene B. Fisher
                                            Title: Vice President and
                                                   Associate General Counsel


                                    Page 3 of 92
<PAGE>


                                  EXHIBIT INDEX

                                                                 SEQUENTIALLY
EXHIBIT NO.    DESCRIPTION                                       NUMBERED PAGE

2.1            Agreement, dated March 13, 1998, among Big               5
               Flower Digital Services Limited, the holders of
               capital stock of Troypeak Limited and Pismo
               Limited, Troypeak Limited and Pismo Limited.

99.1           Registrant's press release, dated March 17, 1998.        90




                                      Page 4 of 92

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                                                           Exhibit 2.1




                               DATED 13 MARCH 1998

                     (1) BIG FLOWER DIGITAL SERVICES LIMITED

                                     - and -

                             (2) C G BUDD AND OTHERS

                                     - and -

                     (3) TROYPEAK LIMITED AND PISMO LIMITED

                                     - and -

                      (4) J. WALTER THOMPSON GROUP LIMITED

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

                                    AGREEMENT

                     for the sale and purchase of all of the
                   issued shares of Troypeak Limited and Pismo

                                     Limited

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







                              ASHURST MORRIS CRISP

                                 Broadwalk House
                                 5 Appold Street
                                 London EC2A 2HA

                               Tel: 0171-638 1111
                               Fax: 0171-972 7990

                                JAS/CXG/566B00051


                                      Page 5 of 92

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                                    CONTENTS

CLAUSE

                                                                        PAGE

1. INTERPRETATION..........................................................1
2. SALE AND PURCHASE.......................................................5
3. COMPLETION.............................................................13
4. VENDORS' WARRANTIES AND INDEMNITIES....................................16
5. PURCHASER'S WARRANTIES.................................................20
6. PROTECTION OF GOODWILL.................................................20
7. CONFIDENTIAL INFORMATION...............................................22
8. ANNOUNCEMENTS..........................................................23
9. COSTS..................................................................23
10. EFFECT OF COMPLETION..................................................23
11. FURTHER ASSURANCES....................................................24
12. ENTIRE AGREEMENT......................................................24
13. VARIATIONS............................................................25
14. WAIVER................................................................25
15. INVALIDITY............................................................25
16. NOTICES...............................................................25
17. COUNTERPARTS..........................................................27
18. GOVERNING LAW AND JURISDICTION........................................27
19. ASSIGNMENT............................................................27

SCHEDULE 1................................................................28
The Vendors...............................................................28
SCHEDULE 2................................................................31
Particulars relating the Companies........................................31
SCHEDULE 3................................................................34
Part I....................................................................34
Particulars relating to the Troypeak Subsidiaries.........................34
Part II...................................................................36
Particulars relating to the Pismo Subsidiaries............................36
SCHEDULE 4................................................................40
[Deleted].................................................................40
SCHEDULE 5................................................................41
The Warranties............................................................41
SCHEDULE 6.................................................................1
Limitations on Warrantors' Liability.......................................1
SCHEDULE 7......................................Error! Bookmark not defined.
Tax Deeds.......................................Error! Bookmark not defined.
SCHEDULE 8......................................Error! Bookmark not defined.
The Properties..................................Error! Bookmark not defined.
SCHEDULE 9......................................Error! Bookmark not defined.
Service Contracts...............................Error! Bookmark not defined.


                                      Page 6 of 92

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THIS AGREEMENT is made on  13 March 1998

BETWEEN:-

(1)     BIG FLOWER DIGITAL SERVICES LIMITED (No. 3526757) whose registered
        office is at Broadwalk House, 5 Appold Street, London EC2A 2HA (the
        "PURCHASER");

(2)     The persons whose names and addresses are set out in column 1 of
        schedule 1 (together the "VENDORS");

(3)     TROYPEAK LIMITED ("TROYPEAK") (No. 3030868) whose registered office is
        at P.O. Box 18, Marsh House, Bristol, Avon S99 B7BB and PISMO LIMITED
        ("PISMO") (No. 2685981) whose registered office is at 50/54 Beak Street,
        London W1R 3DH (together, the "COMPANIES"); and

(4)     J. WALTER THOMPSON GROUP LIMITED ("JWT") (No. 1660783) whose registered
        office is at 40, Berkeley Square, London W1X 6AD.

THE PARTIES AGREE AS FOLLOWS:-

1.      INTERPRETATION

1.1     In this agreement the following words and expressions and abbreviations
        have the following meanings, unless the context otherwise requires:-

"ACCOUNTS DATE" means 30 September 1997 for Troypeak and its Subsidiaries and 31
        March 1997 for Pismo;

"ASSOCIATED COMPANY" has the meaning given to it in sections 416 et seq. TA;

"BBH" means BBH Communications Limited (No. 2352341);

"BUSINESS DAY" means a day (excluding Saturdays) on which banks generally are
        open in London for the transaction of normal banking business;

"COMPLETION" means the completion of the sale and purchase of the Shares in
        accordance with clause 3;

"COMPLETION DATE" means the date hereof;

"CONFIDENTIAL INFORMATION" means all information relating to any Group Company's
        business, or financial or other affairs (including future plans and
        targets of any Group Company) which is not in the public domain;

"DISCLOSURE LETTERS" means the respective letters of today's date together with
        the attachments thereto addressed by the Troypeak Vendors except NatWest
        to the 



                                      Page 7 of 92

<PAGE>

        Purchaser and by the Pismo Vendors to the Purchaser, disclosing
        exceptions to the Warranties;

"ENCUMBRANCE" means any mortgage, charge (fixed or floating), pledge, lien,
        hypothecation, trust, right of set off or other third party right or
        interest (legal or equitable) including any right of pre-emption,
        assignment by way of security, reservation of title or any other
        security interest of any kind however created or arising or any other
        agreement or arrangement (including a sale and repurchase arrangement)
        having similar effect;

"GROUP" means, in relation to Troypeak, Troypeak and the Troypeak Subsidiaries
        and, in relation to Pismo, means Pismo and the Pismo Subsidiaries and
        "GROUP COMPANY" shall be construed accordingly;

"LOAN   NOTE INSTRUMENT" means the instrument in agreed terms constituting Loan
        Notes, made by the Purchaser and dated the same as this agreement;

"LOAN   NOTES" means the redeemable unsecured loan notes to be issued pursuant
        to the Loan Note Instrument;

"INTELLECTUAL PROPERTY" means any and all patents, trade marks, rights in
        designs, get-up, trade, business or domain names, copyrights, and
        topography rights, (whether registered or not and any applications to
        register or rights to apply for registration of any of the foregoing),
        rights in inventions, know how, trade secrets and other confidential
        information, rights in databases and all other intellectual property
        rights of a similar or corresponding character which may now or in the
        future subsist in any part of the world;

"LONDON STOCK EXCHANGE" means the London Stock Exchange Limited;

"NATWEST" means NatWest Ventures Investments Limited (No. 2106408);

"PERMIT"means a permit, licence, consent, approval, certificate, qualification,
        specification, registration and other authorisation and a filing of a
        notification report or assessment necessary in any jurisdiction for the
        proper and efficient operation of each Group Company's business, its
        ownership, possession, occupation or use of an asset or the execution
        and performance of this agreement;

"PISMO  SUBSIDIARIES" means Matelot Productions Limited and Flitclaim Limited
        (proposed to be renamed The Watershed Limited), further details of which
        are set out in schedule 3;

"PISMO VENDORS" means those persons listed in part II of schedule 1;

"PROPERTIES" means the properties described in schedule 8 or any part or parts
        thereof and "PROPERTY" shall mean any one of them;



                                      Page 8 of 92

<PAGE>

"PURCHASER'S GROUP" means the Purchaser, its holding companies and the
        subsidiary undertakings from time to time of it (including Pismo, the
        Pismo Group, Troypeak and the Troypeak Group) and of such holding
        companies, all of them and each of them as the context admits;

"PURCHASER'S SOLICITORS" means Ashurst Morris Crisp of Broadwalk House, 5 Appold
        Street, London EC2A 2HA;

"QUEEN'S COUNSEL" means a Queen's Counsel experienced in advising on warranty
        claims who has not previously advised the Purchaser in relation to the
        relevant claim and whose identity is approved by the Vendors'
        Solicitors, provided that, if neither approval nor objection has been
        received within seven days of a request for approval, such approval
        shall be deemed to have been given and provided further that if an
        objection is made within such seven day period, the Purchaser may
        instruct another Queen's Counsel experienced in advising on warranty
        claims who has not previously advised the Purchaser in relation to that
        claim, without the approval of the Vendors' Solicitors;

"RELATED PERSON" means in relation to any party its holding companies and the
        subsidiary undertakings and associated companies from time to time of it
        and any such holding company, all of them and each of them as the
        context admits;

"SERVICE AGREEMENTS" means service agreements to be entered into on Completion
        between Production Response Limited and Pismo Limited and the persons
        named in clause 3.2(i) respectively in the form set out in schedule 9;

"SHARES" means all of the issued shares in the capital of Troypeak or of Pismo,
        as the case may be;

"SUBSIDIARY" means a subsidiary undertaking of Troypeak or Pismo specified in
        schedule 3 and "SUBSIDIARIES" means all those subsidiary undertakings;

"TA" means the Income and Corporation Taxes Act 1988;

"TAX DEEDS" means the deeds of indemnity in the form set out in schedule 7;

"TROYPEAK VENDORS" means those persons listed in part I of schedule 1;

"TROYPEAK SUBSIDIARIES" means Production Response Limited and Eric Studio
        Limited, further details of which are set out in schedule 3;

"VENDORS' SOLICITORS" means Edge & Ellison of 18, Southampton Place, London WC1A
        2AJ;

"WARRANTIES" means the warranties and representations set out in schedule 5;



                                      Page 9 of 92

                                     
<PAGE>

"WARRANTORS" means all of the Troypeak Vendors except NatWest (in relation to
        Troypeak and the Subsidiaries) and all of the Pismo Vendors (in relation
        to Pismo);

"WARRANTORS' SOLICITORS" means Edge & Ellison of 18, Southampton Place, London
        WC1A 2AJ;

"WPP" means WPP Group plc (No. 1003653).

1.2     In this agreement unless otherwise specified, reference to:-

        (a)    a "SUBSIDIARY UNDERTAKING" is to be construed in accordance with
               section 258 of the Companies Act 1985 and a "SUBSIDIARY" or
               "HOLDING COMPANY" is to be construed in accordance with section
               736 of that Act;

        (b)    a document in the "AGREED TERMS" is a reference to that document
               in the form approved and for the purposes of identification
               signed by or on behalf of each party;

        (c)    "FA" followed by a stated year means the Finance Act of that
               year;

        (d)    "INCLUDES" and "INCLUDING" shall mean including without
               limitation;

        (e)    a "PARTY" means a party to this agreement and includes its
               assignees (if any) and/or the successors in title to
               substantially the whole of its undertaking [and, in the case of
               an individual, to his or her estate and personal
               representatives];

        (f)    a "PERSON" includes any person, individual, company, firm,
               corporation, government, state or agency of a state or any
               undertaking (whether or not having separate legal personality and
               irrespective of the jurisdiction in or under the law of which it
               was incorporated or exists);

        (g)    a "STATUTE" or "STATUTORY INSTRUMENT" or "ACCOUNTING STANDARD" or
               any of their provisions is to be construed as a reference to that
               statute or statutory instrument or accounting standard or such
               provision as the same may have been amended or re-enacted before
               the date of this agreement;

        (h)    "CLAUSES", "PARAGRAPHS" or "SCHEDULES" are to clauses and
               paragraphs of and schedules to this agreement;

        (i)    "WRITING" includes any methods of representing words in a legible
               form other than writing on an electronic or visual display screen
               or in other non-transitory form;

        (j)    words denoting the singular shall include the plural and vice
               versa and words denoting any gender shall include all genders;
               and


                                      Page 10 of 92

                                      
<PAGE>

        (k)    any statute, statutory instrument, regulation, by-law or other
               requirement of English law and to any English legal term for any
               action, remedy, method of judicial proceeding, legal document,
               legal status, procedure, court, official or any legal concept or
               doctrine or other expression shall in respect of any jurisdiction
               other than England be deemed to include that which most nearly
               approximates in that jurisdiction to the English term.

1.3     The schedules form part of the operative provisions of this agreement
        and references to this agreement shall, unless the context otherwise
        requires, include references to the schedules.

1.4     The index to and the headings and the descriptive notes in brackets
        relating to provisions of taxation statutes in this agreement are for
        information only and are to be ignored in construing the same.

1.5     The obligations and liabilities of the Troypeak Vendors, except NatWest,
        under this agreement shall be joint and several and the obligations and
        liabilities of the Pismo Vendors under this agreement shall be joint and
        several save where otherwise stated PROVIDED that where any obligation
        in this agreement is expressed to be an obligation of the Vendors, then
        no Troypeak Vendor shall be liable in respect of any breach by a Pismo
        Vendor and vice versa.

1.6     Any question of whether a person is connected with another shall be
        determined in accordance with section 839 of the TA (except that in
        construing section 839 "CONTROL" has the meaning given by section 840 or
        section 416 of the TA so that there is control whenever section 840 or
        416 requires) which shall apply in relation to this agreement as it
        applies in relation to the TA.

2.      SALE AND PURCHASE

2.1     Upon the terms and subject to the conditions of this agreement, the
        Troypeak Vendors shall sell and the Purchaser shall purchase the numbers
        of Shares in Troypeak of which each of the Troypeak Vendors is the
        registered holder and beneficial owner being set out opposite each of
        the Troypeak Vendors' names in column 2 of part I of schedule 1, and the
        Pismo Vendors shall sell and the Purchaser shall purchase the numbers of
        shares in Pismo of which each of the Pismo Vendors is the registered
        holder and beneficial owner being set out opposite each of the Pismo
        Vendors' names in column 2 of part II of schedule 1 (in each case) with
        effect from the commencement of business on the Completion Date.

Each Vendor hereby represents, warrants, covenants and undertakes with the
        Purchaser as follows:-

        (a)    that he has the right to dispose of the Shares which he is
               purporting to sell; and



                                      Page 11 of 92

                                     
<PAGE>

        (b)    that the Shares he is selling are sold free from any Encumbrance
               and together with all rights now or hereafter attaching thereto,
               including the right to all dividends and other distributions (if
               any) declared, made or paid after the Accounts Date other than
               total dividends of (pound)1,112,000 to the shareholders of Pismo.

2.2     The Vendors waive or agree to procure the waiver of any rights or
        restrictions conferred upon any of them or any other person which may
        exist in relation to the transfer of Shares under the articles of
        association of the Companies or otherwise.

The Purchaser shall not be obliged to complete the purchase of any of the
        Shares unless the Vendors complete the sale of all of the Shares
        simultaneously, but completion of the purchase of some Shares shall not
        affect the rights of the Purchaser with respect to its rights to the
        other Shares.

2.3     Subject to clause 2.5 the consideration for such sale and purchase of
        shares in Troypeak shall be (pound)6,652,750 and for such sale and
        purchase of shares in Pismo shall be (pound)6,934,050 to be apportioned
        amongst the Vendors as shown in column 3 of Part I and II of schedule 1.

2.4     The consideration for such sale shall be satisfied at Completion by the
        payment in cash to the Vendors' Solicitors on behalf of the Vendors of
        the amounts set out opposite their respective names in column 3 of
        schedule 1.

2.5       (a)    In this clause and clause 2.6:

        "ACCOUNTS" means financial statements of Pismo and of Troypeak and of
        any subsidiary undertaking of either of them at the end of the relevant
        financial year, comprising the balance sheets, profit and loss accounts
        together with the notes thereon as at and for the financial period
        specified;

        "1997 ACCOUNTS" means the audited accounts of Pismo and of Troypeak and
        the Subsidiaries as at and for the financial period ended on the 1997
        Accounts Date together with the cash flow statements, the directors'
        report and auditors' report;

        "1998 ACCOUNTS" means the Accounts as at and for the financial period
        commencing 1 January 1998 and ending 31 December 1998 prepared in
        accordance with clause 2.6;

        "1999 ACCOUNTS" means the Accounts as at and for the financial period
        commencing 1 January 1999 and ending 31 December 1999 prepared in
        accordance with clause 2.6;

        "2000 ACCOUNTS" means the Accounts as at and for the financial period
        commencing 1 January 2000 and ending 31 December 2000 prepared in
        accordance with clause 2.6;



                                      Page 12 of 92

                                      
<PAGE>

        "1997 ACCOUNTS DATE" means 31 March 1997 in the case of Pismo and 30
        September 1997 in the case of Troypeak and the Troypeak Subsidiaries;

        "ADJUSTMENT ACCOUNTS" means one or more than one or all of the 1998 1999
        and 2000 Accounts (as the context may require);

        "ADJUSTMENT PAYMENT DATE" means the date set out for payment of the
        Adjustment Payment in clause 2;

        "ADJUSTMENT PAYMENT" means the sums payable pursuant to clause 2.5(b);

        "ADJUSTMENT VENDORS" means the Troypeak Vendors (except NatWest) and the
        Pismo Vendors (except BBH and WPP)

        "AGREED RATE" means the base rate from time to time of National
        Westminster Bank plc

        "AUDITORS" means Coopers & Lybrand;

        "PRE-TAX PROFITS" means the profit on ordinary activities before
        taxation of each of Pismo, Troypeak and their subsidiary undertakings
        (excluding extraordinary or exceptional profits and losses and profits
        and losses of a capital nature) for the financial period in question as
        drawn from the relevant Adjustment Accounts:-

               (i)   before crediting interest receivable and similar income,
                     income from shares in group undertakings, and income from
                     fixed asset investments (not being participating
                     interests);

               (ii)  before deducting interest payable and similar charges;

               (iii) before deducting Taxation;

               (iv)  after adding back any charge for depreciation of goodwill
                     (whether or not arising on consolidation or combination);

               (v)   after adding back any charge for the costs of the Auditors
                     in respect of their work under paragraph 2.6(b) or of the
                     Auditors or any valuers in respect of the statutory audit
                     of the Troypeak Group for the period ended 31 December
                     1997;

               (vi)  before taking into account (whether by way of a deduction,
                     provision or otherwise) to the extent that the same shall
                     have been satisfied, any matter giving rise to a claim
                     which shall be made under the Warranties or clause 4.11,
                     provided that any such matter is of a non-recurring 



                                      Page 13 of 92

                                      
<PAGE>

                     nature which does not have a lasting effect on the profit
                     potential to the Group;

               (vii) after making such adjustment as is fair and reasonable to
                     reflect any relevant non arm's length transaction affecting
                     Pismo, Troypeak and their subsidiary undertakings which
                     would not have occurred had such companies not been in the
                     Purchaser's Group or any change in accounting policies and
                     bases from those adopted in the 1997 Accounts and after
                     making such deduction as is fair and reasonable to take
                     account of any sums paid from the Production Response
                     Limited Employee Benefit Trust to employees, insofar as
                     bonuses or other remuneration which would otherwise have
                     become payable to them by the Group are not (as a result of
                     the payment by such trust) so payable by the Group (taking
                     into account past policies and practices of the Group);

        and combined by applying normal principles of consolidation as if all
        the said companies formed a group (less any such Pre Tax Profits as is
        attributable to minority interests) and agreed or determined as such
        pursuant to clause 2.6;

        "1998 PRE-TAX PROFITS" means the Pre-Tax Profits in respect of the
        financial period commencing 1 January 1998 and ending 31 December 1998;

        "1999 PRE-TAX PROFITS" means the Pre-Tax Profits in respect of the
        financial period ending 31 December 1999;

        "2000 PRE-TAX PROFITS" means the Pre-Tax Profits in respect of the
        financial period ending 31 December 2000;

        "3 YEAR PROFITS" means the sum (treating losses as a negative amount) of
        the 1998 Pre-Tax Profits, the 1999 Pre-Tax Profits and the 2000 Pre-Tax
        Profits;

        "VENDORS' ACCOUNT" means the account of the Vendors' Solicitors referred
        to in clause 3.5(a);

        "VENDORS' REPRESENTATIVE" means either CG Budd or PJ Hughes and A Tout
        or such other person(s) as may be appointed from time to time by service
        of a notice in writing on the Purchaser specifying such other person(s)
        duly signed by persons who are entitled to a majority of the Adjustment
        Payment.

        (b)  The consideration for the Shares sold by each Adjustment Vendor 
             shall:

             (i)   be increased by his percentage of(pound)4,138,000 if the 3
                   Year Profits are greater than or equal to(pound)X;



                                      Page 14 of 92

                                      
<PAGE>

            (ii)   be increased by his percentage of the sum of (i)
                   (pound)880,000 and (ii) [(pound)4,138,000 minus
                                                 3 YEAR PROFITS - Y
                   (pound)880,000] multiplied by ------------------
                                                       X - Y

                   if the 3 Year Profits are greater than or equal to (pound)Y
                   but less Than (pound)X;

           (iii)   be further increased (in addition to the increase in (i)
                   above) by his percentage of 16.7 per cent of (3 year Profits
                   - X) if the 3 Year Profits are greater than (pound)X provided
                   that the maximum increase under this paragraph (iii) shall be
                   his percentage of (pound)450,000;

            (iv)   not be increased at all (or decreased) if the 3 Year Profits
                   are less than (pound)Y;

        PROVIDED that none of the increases set out above will be applicable to
        any Adjustment Vendor ("a Departing Vendor") who has ceased to be
        employed by Pismo, Troypeak or any subsidiary undertaking of either of
        them prior to 31 December 2000, unless that cessation is as a result of
        his death, ill health, injury, disability or wrongful dismissal or
        termination by due notice by the employing company other than in
        circumstances justifying summary dismissal or termination.

        One half of the entitlement of any Departing Vendor who has ceased to
        have a right to receive any part of the Adjustment Payment will be paid
        to the other Adjustment Vendors who have not become Departing Vendors at
        the same time and in the same manner as the Adjustment Payment due to
        them, apportioned pro rata to the Adjustment Payment which they would
        have received ignoring this paragraph.

        References to X are to (pound)8,795,000 and to Y are to 
        (pound)7,745,000.

        References above to "his percentage" are to the percentages shown in
        column (4) of Parts I and II of Schedule 1.

        The figures of X and Y will be amended as agreed between the Purchaser
        and the Adjustment Vendors in the event that Pismo or Troypeak acquire
        any business or shares in a company after the date hereof, such
        amendment to be agreed prior to Pismo or Troypeak making any such
        acquisition but so that if no agreement can be reached no amendment will
        be made to such figures and the business or company so acquired will be
        excluded in calculating the 3 Year Profits.

        (c)    Any amounts payable pursuant to clause 2.5(b) shall be paid
               within five Business Days after the date on which the 3 Year
               Profits shall be agreed or determined pursuant to clause 2.6 and
               shall be satisfied by the allotment by the Purchaser of such
               nominal amount of Loan Notes (to be constituted by an instrument
               in the form of the draft in the agreed terms) as equals the
               Adjustment Payment to which the relevant Adjustment Vendor would
               have been entitled had the Adjustment Payment been satisfied in
               cash.



                                      Page 15 of 92

                                      
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        (d)    The Vendors' Representative is irrevocably authorised to act on
               behalf of the Vendors for the purpose of giving any consent or
               approval pursuant to or approving any amendment of any of the
               provisions of this agreement relating to or having a bearing on
               the calculation of the amount of the Adjustment Payment or
               resolving with the Purchaser any dispute as to the interpretation
               of this agreement relating to or having a bearing on the same.

2.6     (a)    For the purpose of determining the Pre-Tax Profits the Purchaser
               shall cause the Companies and the Subsidiaries to prepare and
               deliver to each party and the Auditors, as soon as practicable
               following 31 December 2000, but in any event within 2 months
               after such date, draft Adjustment Accounts and a draft figure of
               the 3 Year Profits. The Adjustment Accounts shall be prepared in
               accordance with the Companies Acts and generally accepted
               accounting principles and practices in the United Kingdom which
               are extant at the time of preparation including in particular
               (but without limitation) the Financial Reporting Standards issued
               by the ASB and Statements of Standard Accounting Practice issued
               by the member bodies of the Consultative Committee of Accounting
               Bodies which are extant at the time and, subject to conforming
               therewith, on the same bases, adopting the same accounting
               practices and using the same accounting principles as the 1997
               Accounts.

        (b)    Immediately following preparation of the relevant draft
               Adjustment Accounts by the Companies and the Subsidiaries, the
               Purchaser shall instruct the Auditors to review the same and to
               determine the 3 Year Profits as soon as possible and in any event
               not later than 90 days after the end of the period to which the
               relevant Adjustment Accounts relate. The costs of the Auditors
               incurred in such review and determination of the draft 3 Year
               Profits statement shall be borne by the Purchaser.

        (c)    Immediately following the Auditors' determination of the 3 Year
               Profits and, in any event, prior to 31 March 2000 there shall be
               supplied to the Purchaser and the Vendors' Representative a
               statement of the 3 Year Profits determined by the Auditors
               together with the draft Adjustment Accounts. The Purchaser and
               the Vendors' Representative shall have a period of 30 days (the
               "PROFIT AGREEMENT PERIOD") in which to review and agree or
               dispute the Auditors' determination of the 3 Year Profits.

        (d)    In the event that the 3 Year Profits have not been agreed by the
               termination of the Profit Agreement Period the determination of
               the 3 Year Profits shall be referred to an independent firm of
               chartered accountants (the "EXPERT") appointed by agreement by
               the Vendors' Representative and Purchaser or, in default of
               agreement on such appointment within ten Business Days of the
               expiry of the Profit Agreement Period, on the application of
               either the Purchaser or the Vendors' Representative by the
               President for the time being of the Institute of Chartered
               Accountants in England and Wales, or his duly appointed deputy.
               In such case the Expert shall be one of Coopers & Lybrand, KPMG,
               Price Waterhouse, Deloitte & Touche, Ernst & Young and 



                                      Page 16 of 92

                                      
<PAGE>

               Arthur Andersen (or their successors in business) but not any of
               the foregoing who in the period of 24 months prior to their
               appointment have received fees exceeding(pound)10,000 from either
               the Purchaser or any Adjustment Vendor unless this restriction is
               waived by the party not having paid such fees. In making such
               determination the Expert shall act as an expert and not as an
               arbitrator and his decision shall (in the absence of manifest
               error (and the Expert shall give reasons for his determination))
               be final and binding on the parties. Each party shall bear the
               costs and expenses of all counsel and other advisers, witnesses
               and employees retained by it and the costs and expenses of the
               Expert shall be borne by the parties in the proportions he may
               direct or, in the absence of direction, equally. Subject to any
               rule of law or of any regulatory body or any provision of any
               contract or arrangement entered into prior to the date of this
               agreement to the contrary, the Purchaser and the Vendors shall
               afford as soon as reasonably practicable upon request to the
               other and their respective agents and to the Expert all
               facilities and access to, in the case of the Vendors their and in
               the case of the Purchaser the Companies and Subsidiaries
               premises, personal papers, books, accounts, records, returns and
               other documents as may be in their or the Companies or the
               Subsidiaries (as the case may be) possession or control as may be
               required by the Expert to make his determination.

        (e)    The Adjustment Vendors shall and the Purchaser shall procure that
               the Companies and Subsidiaries shall, promptly provide each
               other, their respective advisers and the Auditors with all
               information (in their respective possession or control) relating
               to the operations of the Companies and their subsidiary
               undertakings as the case may be, including access at all
               reasonable times to all books and records, and all co-operation
               and assistance as may be reasonably required to:-

               (i)   enable the production of the Adjustment Accounts; and

               (ii)  enable the Auditors (or any independent firm of chartered
                     accountants appointed pursuant to this clause) to determine
                     the 3 Year Profits.

        (f)    In the event that prior to any Adjustment Payment Date the
               Purchaser shall have given notice to the Vendors' Representative
               of a claim or claims under the Warranties or clause 4 of this
               agreement or the Tax Deeds then the following provisions shall
               apply, at the sole option of the Purchaser:-

             (i)   to the extent that the amount of any such claim or claims
                   shall have been finally determined in accordance with clause
                   2.6(g) but shall not have been paid by or on behalf of the
                   Vendors prior to the Adjustment Payment Date, the Purchaser
                   shall be entitled to treat its obligations hereunder to
                   satisfy the Adjustment Payment to the Adjustment Vendors as
                   being reduced by the amount in which the claim or claims have
                   been finally determined.



                                      Page 17 of 92

                                      
<PAGE>

             (ii)  to the extent that the amount of any such claim or claims
                   shall not have been finally determined, then the Purchaser
                   shall be entitled to set off the Purchaser's reasonable
                   estimate of the aggregate amounts it will recover
                   (disregarding, for this purpose, the provisions of Schedule 6
                   paragraph 2) in respect of the claim or claims aforesaid
                   against the Adjustment Payment. Following final determination
                   of the claim(s) if the amount of the set-off exceeds the
                   amount finally determined the excess together with interest
                   thereon (subject to deduction of tax if required by law) at
                   the Agreed Rate in respect of the period from the Adjustment
                   Payment Date down to the date of payment shall be payable in
                   the manner referred to in clause 2.5(c), within seven days of
                   such final determination.

        All reductions set offs and payments of excess under this paragraph (f)
        shall be apportioned amongst the Adjustment Vendors who held shares in
        Troypeak or in Pismo as the case may be (as appropriate having regard as
        to whether the relevant claim(s) was against the Troypeak Vendors
        (except NatWest) or the Pismo Vendors)pro rata to their entitlements to
        an Adjustment Payment.

        (g)    The amount of a claim shall be regarded as finally determined for
               the purposes of clause 2.6(f) if either:-

             (i)   the Vendors' Representative and the Purchaser (or their
                   respective solicitors) shall so agree in writing; or

             (ii)  a court has awarded judgment in respect of the amount claimed
                   and no right of appeal lies in respect of such judgment or
                   the parties are debarred whether by the passage of time or
                   otherwise from exercising any such right of appeal.

        (h)    For the purposes of clause 2.6(f) only and unless otherwise
               agreed by the Vendors Representative:-

             (i)   a claim under the Warranties or Tax Deeds shall be deemed to
                   have been finally determined in favour of the Adjustment
                   Vendors unless prior to the Adjustment Payment Date, the
                   Purchaser provides to the Vendors' Solicitors an opinion of
                   Queen's Counsel instructed by or on behalf of the Purchaser
                   to the effect that the Purchaser has an arguable claim for at
                   least the amount so claimed by the Purchaser in respect of
                   that claim;

             (ii)  any claim under the Warranties or Tax Deeds in respect of
                   which notice shall have been given in accordance with
                   paragraph 1.1 of schedule 6 shall be deemed to have been
                   finally determined in favour of the Adjustment Vendors if
                   legal proceedings in respect of such claim have 



                                      Page 18 of 92

                                      
<PAGE>

                   not been issued and served not later than the expiry of the
                   period of six months after the date of the said notice (or 9
                   months after the date of the said notice, if the claim
                   relates to tax).

        (i)    For the avoidance of doubt nothing contained in clause 2.6(f)
               shall prejudice the right of the Purchaser to recover against the
               Vendors otherwise than pursuant to clause 2.6(f) or to make any
               claim against the Vendors in respect of any breach of the
               Warranties clause 4 of this agreement and/or under the Tax Deed
               whether before or after the Adjustment Payment Date whether in
               accordance with the procedure specified in clause 2.6(f) or
               otherwise.

        (j)    The Purchaser shall not be entitled to set off against the
               Adjustment Payment otherwise due to the Vendors pursuant to this
               agreement the amount of any claims made under this agreement save
               in accordance with this clause 2.6.

2.7       (a)    The Purchaser acknowledges for the benefit of the Adjustment
                 Vendors that having regard to the manner in which the
                 Adjustment Payment is to be calculated the said Vendors have a
                 legitimate interest in ensuring that the amount of the 3 Year
                 Profits shall be as great as is fair and reasonable.
                 Accordingly, the Purchaser agrees with such Vendors that it
                 will in the period to 31 December 2000 (save with the written
                 consent of the Vendors Representative (in the case of clause
                 2.7(a)(ii) or 2.7(a)(iii) such consent not to be unreasonably
                 withheld)).

               (i)   refrain from any act the main or sole purpose of which is
                     to have a material adverse effect on the Group's ability to
                     achieve 3 Year Profits in excess of (pound)X;

               (ii)  not sell transfer or otherwise dispose of the whole or part
                     of the share capital of any Group Company or any interest
                     therein to any company which is not a member of the
                     Purchaser's Group (the provisions of this clause 2.7(a)(ii)
                     also applying to any such transferee mutatis mutandis);

               (iii) procure that no Group Company shall:

                     (A)    pass any resolution in general meeting for members'
                            voluntary winding up nor will steps be taken by any
                            member of the Purchaser's Group to make any Group
                            Company subject to any other insolvency proceedings;

                     (B)    enter into any agreements to dispose of the whole or
                            substantially the whole of its business undertaking
                            or assets.

3.      COMPLETION

3.1     Completion shall take place at the offices of the Purchaser's Solicitors
        immediately after the execution of this agreement.



                                      Page 19 of 92

                                      
<PAGE>

3.2     On Completion the Troypeak Vendors and the Pismo Vendors shall
        respectively deliver to or, if the Purchaser shall so agree, make
        available to the Purchaser:-

        (a)    transfers in common form relating to all the Shares in Troypeak
               and the Shares in Pismo duly executed in favour of the Purchaser
               (or as it may direct);

        (b)    share certificates relating to the respective Shares;

        (c)    any waivers or consents by members of any Group Company or other
               persons which the Purchaser has specified prior to Completion so
               as to enable the Purchaser or its nominees to be registered as
               the holders of the Shares and any shares of Subsidiaries;

        (d)    the written resignations of the auditors of each Group Company
               containing an acknowledgement that they have no claim against any
               Group Company for compensation for loss of office, professional
               fees or otherwise and a statement under section 394(1) of the
               Companies Act 1985;

        (e)    the common seals, certificates of incorporation and statutory
               books and share certificate books of each Group Company;

        (f)    the Tax Deeds duly executed by the Vendors (except NatWest);

        (g)    all land certificates, charge certificates, leases, title deeds
               and other documents relating to the Properties (except to the
               extent that the same are in the possession of mortgagees pursuant
               to mortgages disclosed in schedule 8);

        (h)    share certificates relating to all of the issued shares in the
               capital of each of the Subsidiaries;

        (i)    the Service Agreements duly executed by Messrs. P.C. Blowes, A.J.
               Brady, C.G. Budd, A.W. Edwards, P.J. Hughes, R.C. Penfold, R.M.
               Potts, A. Tout, R. Leach, D.P. Whittall and M.B. Kennedy; and

        (j)    duly executed deed of waiver of dividends by NatWest in the
               agreed form.

3.3     At or prior to Completion the Vendors shall procure the passing of board
        resolutions of each Group Company:-

        (a)    sanctioning for registration (subject where necessary to due
               stamping) the transfers in respect of the Shares and any shares
               to which clause 3.2(k) refers;

        (b)    appointing such persons as the Purchaser directs to be the
               directors and secretary of each Group Company;




                                      Page 20 of 92

                                      
<PAGE>

        (c)    revoking all mandates to bankers and giving authority in favour
               of the directors appointed under clause 3.3(b) or such other
               persons as the Purchaser may nominate to operate the bank
               accounts thereof;

        (d)    resolving that the registered office of each Group Company be
               changed as the Purchaser directs;

        (e)    changing the accounting reference date of each Group Company to
               31 December;

        (f)    resolving that Production Response Limited and Pismo as the case
               may be enter into the Service Agreements with the respective
               persons named in clause 3.2(i).

3.4     The Vendors shall procure that at Completion:-

        (a)    there is repaid all sums (if any) owing to any Group Company by
               any of the Vendors or any of their connected persons (other than
               another Group Company) or by the directors of any Group Company
               and whether or not such sums are due for repayment other than
               loans to any of the Vendors for the purposes of travel season
               tickets of not greater than (pound)1,500 per person, details of
               which have been supplied to the Purchaser before the date of this
               agreement;

        (b)    each Group Company is released from any guarantee, indemnity,
               bond, letter of comfort or Encumbrance or other similar
               obligation given or incurred by it which relates in whole or in
               part to debts or other liabilities or obligations, whether actual
               or contingent, of any person other than a Group Company save
               for:-

               (i)   any obligations of Production Response Limited to Collett
                     Dickenson Pearce and/or William Holmes in relation to the
                     Reacta Lease (as defined in Disclosure 4.2(c) of the
                     Disclosure Letter);

               (ii)  the indemnity given by Production Response Limited to Real
                     Time Studios Limited at clause 7.1 of the agreement dated 4
                     February 1997 between (1) Real Time Studios Limited and (2)
                     Production Response Limited and any obligations owed to
                     Messrs Owen and Ryan in relation to the same property the
                     subject of the said indemnity (being the Store Street
                     premises) (as previously disclosed and annexed to the
                     Disclosure Letter);

and prior to such repayment or release the Vendors undertake to the
        Purchaser (on behalf of themselves and as trustee on behalf of each
        Group Company) to keep each Group Company fully indemnified against any
        failure to make any such repayment or any 



                                      Page 21 of 92

                                      
<PAGE>

        liability arising under any such guarantee, indemnity, bond, letter of 
        comfort or Encumbrance.

3.5     Upon compliance by the Vendors with the provisions of clauses 3.2, 3.3
        and 3.4 the Purchaser shall:-

        (a)    provide for the transfer by CHAPS of (pound)13,586,800 to the
               Vendors' Solicitors at Barclays Bank plc, of 8-9 Hanover Square,
               London W1A 4ZW Sort Code 20-05-75, Account No. 70330205 and
               receipt by such bank of such sum shall be good discharge to the
               Purchaser;

        (b)    deliver to the Vendors' Solicitors counterparts of the Tax Deeds
               duly executed by the Purchaser; and

        (c)    use reasonable endeavours to procure that each Vendor is released
               from the guarantees given or incurred by him relating to a debt
               or liability of any Group Company as listed under the Personal
               Deed of Guarantee given by the Troypeak Vendors (excluding
               NatWest and C. Budd) to National Westminster Bank Ltd
               guaranteeing the liabilities of Production Response Ltd to a
               maximum of (pound)398,290;

and the Purchaser hereby undertakes to keep such Vendors indemnified in
        relation to any liability that they may suffer under such guarantee with
        effect from Completion.

4.      VENDORS' WARRANTIES AND INDEMNITIES

4.1     (a)    The Troypeak Vendors, except NatWest, warrant with and represent
               to the Purchaser in the terms of the Warranties so that for the
               purpose of schedule 5 "COMPANY" means Troypeak and includes the
               Troypeak Subsidiaries, all of them and each of them as the
               context admits and "GROUP" and "GROUP COMPANY" shall be construed
               accordingly;

        (b)    The Pismo Vendors, except BBH and WPP, warrant with and represent
               to the Purchaser in the terms of the Warranties and each of BBH
               and WPP severally warrant with and represent to the Purchaser in
               the terms of the Warranties in each case, so that for the purpose
               of schedule 5 "COMPANY" means Pismo includes the Pismo
               Subsidiaries, all of them and each of them as the context admits
               and "GROUP" and "GROUP COMPANY" shall be construed accordingly.

4.2     Any information supplied by or on behalf of any Group Company to or on
        behalf of the Vendors in connection with the Warranties, the Disclosure
        Letter or otherwise in relation to the business and affairs of any Group
        Company shall not constitute a representation or warranty or guarantee
        as to the accuracy thereof by any Group Company and each of the Vendors
        agrees with the Purchaser (on behalf of itself and as trustee for each
        Group Company and their respective directors, employees, agents 



                                      Page 22 of 92

                                      
<PAGE>

        and advisers) that he hereby irrevocably waives all claims which he
        might otherwise have against any Group Company or any of their
        respective directors and employees in respect thereof and any and all
        other claims in respect of any cause, matter or thing whatsoever and
        hereby releases each Group Company and each such person from any
        liability or obligation to him whatsoever.

4.3     (a)    Without restricting the rights of the Purchaser or the ability of
               the Purchaser to claim damages on any basis available to it if
               any of the Vendors are in breach of any of the Warranties the
               Troypeak Vendors (except NatWest) shall pay to the Purchaser on
               demand the amount necessary to put Troypeak and the Troypeak
               Subsidiaries into the position which would have existed if the
               said Warranties had not been breached.

        (b)    Without restricting the rights of the Purchaser or the ability of
               the Purchaser to claim damages on any basis available to it if
               any of the Vendors are in breach of any of the Warranties the
               Pismo Vendors shall pay to the Purchaser on demand the amount
               necessary to put Pismo and the Pismo Subsidiaries into the
               position which would have existed if the said Warranties had not
               been breached.

4.4     Any payments made by the Warrantors to the Purchaser in respect of
        claims under the Warranties or the Tax Deed shall be treated by the
        parties as a reduction in the consideration for the Shares.

4.5     Each of the Warranties shall be construed as a separate warranty and
        representation, and (unless expressly provided to the contrary) shall
        not be limited by the terms of any of the other Warranties or by any
        other term of this agreement.

4.6     The liability of the Warrantors under the Warranties shall only be
        limited if and to the extent that the limitations referred to in
        schedule 6 apply.

4.7     No information relating to the Group of which the Purchaser has
        knowledge (actual or constructive) other than that contained in or
        referred to in this agreement and/or included in the Disclosure Letter
        and no investigation by or on behalf of the Purchaser shall prejudice
        any claim by the Purchaser under the Warranties or reduce any amount
        recoverable thereunder.

4.8     The Vendors shall use all reasonable endeavours to give to the Purchaser
        all such information and documentation relating to the Group as the
        Purchaser shall reasonably require to enable it to satisfy itself as to
        whether there has been any breach of the Warranties.

4.9     The Troypeak Vendors (except NatWest) hereby undertake with the
        Purchaser to pay from time to time to the Purchaser such sums as would
        if paid to any member of the Purchaser's Group, Troypeak or to a
        Troypeak Subsidiary indemnify and keep indemnified such member, Troypeak
        and the Troypeak Subsidiaries against all losses, claims, costs,
        charges, reasonable expenses, liabilities, actions, demands, 



                                      Page 23 of 92

                                      
<PAGE>

        proceedings and judgements whatsoever which such member, Troypeak or any
        Troypeak Subsidiary may at any time suffer or incur or which may be
        brought or threatened against or incurred by any of them which arise
        directly or indirectly out of or in connection with or which results
        from or is attributable to any activities of Studio Response Limited
        whether before or after Completion PROVIDED always that the indemnity in
        this clause 4.9 shall not apply to the loss, in respect of periods after
        Completion, of fees from Studio Response Limited to Production Response
        Ltd in the sum of (pound)2,000 per month and any tax payable thereon.

4.10    (a)    In the event that the notifications referred to in (i) below are
               made within 12 months of Completion, and if during the period of
               12 months from the later of (i) the end of the month in which
               Euro RSCG is notified by Production Response Ltd that the
               activities of Studio Response Ltd are to terminate (and of the
               ceasing of any involvement, direct or indirect, by Troypeak,
               Pismo (or any subsidiary undertaking or any director or employee
               of any of them or any connected person of any of the foregoing)
               in Studio Response Ltd or any company or undertaking carrying on
               similar activities for Euro RSCG or any connected person) and
               (ii) the end of the month of the actual date of termination so
               notified, turnover of Production Response Ltd attributable to
               Euro RSCG falls below(pound)400,000, then the consideration for
               the Shares in Troypeak attributable to the Troypeak Vendors
               (other than NatWest) shall be reduced by an aggregate amount
               equal to 120% of the shortfall below(pound)400,000 (such
               reduction to be pro rata to their respective shareholdings in
               Troypeak).

        (b)    In the event that the notifications referred to in (i) above are
               not made within 12 months of Completion, and if during the period
               of 24 months beginning with the end of the month in which
               Completion takes place, turnover of Production Response Limited
               attributable to Euro RSCG falls below(pound)800,000, then the
               consideration for the Shares in Troypeak attributable to the
               Troypeak Vendors (other than NatWest) shall be reduced by an
               aggregate amount equal to 120 per cent of the shortfall below
               (pound)800,000 (such reduction to be pro rata to their respective
               shareholdings in Troypeak).

        (c)    For the purposes of this clause 4.10, turnover means turnover
               according to UK GAAP but excluding all invoices which are unpaid
               as at 90 days after the end of the last month referred to in (d)
               below and all sums relating to value added tax and other relevant
               taxes, duties or imposts and all disbursements or expenses paid
               or payable by Production Response Ltd and recharged to the
               relevant client and after deduction of all commissions,
               overriders, discounts and other similar payments or credits).

        (d)    Any reduction required by this clause 4.10 shall be paid by the
               Troypeak Vendors (except NatWest) to the Purchaser, immediately
               upon the expiry of the period of 90 days from the end of the last
               month of the relevant 12 (in the case of a reduction arising
               under paragraph (a) above) or 24 (in the case of a reduction
               arising under paragraph (b) above) month period, together with




                                      Page 24 of 92

                                      
<PAGE>

               interest at the Agreed Rate (as defined in clause 2.5) in respect
               of the period from the end of the last month of the relevant 12
               or 24 month period as aforesaid down to the date of actual
               payment.

        (e)    In the event of any dispute as to the amount of Turnover in the
               relevant period, a report of the Auditors (as defined in clause
               2.5), acting as expert and not as arbitrator, shall (in the
               absence of manifest error) be final and binding on the parties.

4.11    The Troypeak Vendors (except NatWest) hereby undertake with the
        Purchaser to pay to the Purchaser) such sums as would, if paid to any
        member of Purchasers Group, Troypeak or to a Troypeak Subsidiary,
        indemnify and keep indemnified such member, Troypeak and the Troypeak
        Subsidiaries against all claims, costs, charges, expenses, liabilities,
        actions, demands, proceedings and judgements whatsoever which either:-

        (a)    constitute or derive from a liability or obligation (actual or
               contingent) of Troypeak or a Troypeak Subsidiary as at Completion
               (or a payment made prior to Completion (excluding the purchase
               price of(pound)100,000 and professional fees of(pound)33,000 plus
               VAT)) which Troypeak or any Troypeak Subsidiary may at any time
               suffer or incur or which may be brought or threatened against or
               incurred by any of them which arise directly or indirectly out of
               or in connection with or which results from or is attributable to
               the acquisition pursuant to the agreement by Production Response
               Ltd made with inter alios Reacta Graphics Ltd on 16 January 1998;
               or

        (b)    comprise payments made voluntarily in order to protect the
               goodwill of the business acquired or any of the other assets
               acquired pursuant to such agreement of 16 January 1998 or
               prospects of such business, or goodwill, assets or prospects of
               any business carried on at the date of the said acquisition and
               which would not have been made had the said acquisition not taken
               place.

This indemnity shall not apply to unfair dismissal claims and related legal
        advisors expenses not exceeding (pound)70,000 in aggregate.

Any payment required by this clause 4.11 shall be made by the Troypeak
        Vendors (except NatWest) to the Purchaser immediately upon production of
        audited accounts for the year ending 31 December 2000 (when the
        aggregate amount of the bonuses payable (or deemed payable) has been
        determined as described in schedule 6, paragraph 10).

The Troypeak Vendors (except NatWest) will be under no further liability
        under this clause 4.11 after any payment due has been made (or, if no
        payment is due, after such date of production of audited accounts).



                                      Page 25 of 92

                                      
<PAGE>

4.12    Clause 2.5 of the Tax Deeds shall apply to any payment made under
        clauses 4.9, 4.10 and 4.11 of this agreement, as if that clause 2.5 was
        expressly incorporated into this agreement.

5.      PURCHASER'S WARRANTIES

        The Purchaser represents and warrants to each of the Vendors that each
        of the following representations and warranties are true and accurate in
        all material respects at the date of this Agreement:-

5.1     The Purchaser has the corporate power and authority to enter into and to
        perform its obligations under this Agreement and the execution, delivery
        and performance by the Purchaser of this Agreement have been duly
        authorised by all necessary action on the part of the Purchaser. This
        Agreement constitutes a legal, valid and binding obligation on the
        Purchaser, enforceable against it in accordance with its terms.

5.2     Neither the execution, delivery and performance of this Agreement nor
        the consummation of the transactions contemplated hereby, nor compliance
        by the Purchaser with any of the provisions hereof, will

        (a)    violate, conflict or constitute a default (or an event which,
               with notice or lapse of time or both, would constitute a default)
               under, or result in the termination of, or result in a right of
               termination, under any of the terms, conditions, or provisions of
               any of their respective articles of incorporation or bylaws or
               any material agreement or other material instrument or material
               obligation to which the Purchaser or any of its subsidiaries is a
               party; or

        (b)    subject to compliance with the statutes and regulations referred
               to in the next paragraph, to the knowledge of the Purchaser,
               violate any material judgment, ruling, order, decree, statute,
               rule or regulation applicable to the Purchaser or any of its
               subsidiaries or any of their respective properties or assets.

6.      PROTECTION OF GOODWILL

6.1     JWT and the Vendors, except NatWest and WPP, (which parties shall, for
        the purposes of this clause 6 be referred to as the "COVENANTORS")
        hereby severally undertake to procure that (except as otherwise agreed
        in writing with the Purchaser) they will not either solely or jointly
        with any other person (either on its own account or as the agent of any
        other person):-

        (a)    for a period of 3 years from Completion carry on or be engaged or
               concerned or (except as the holder of shares in a listed company
               which confer not more than five per cent. of the votes which can
               generally be cast at a general meeting of the company) interested
               directly or indirectly in a business which competes with the type
               of business carried on by any member of the Group at 




                                      Page 26 of 92
                                      
<PAGE>

               Completion in the area or areas constituting the market in Great
               Britain, Northern Ireland or the Republic of Ireland of any
               member of the Group;

        (b)    for a period of 3 years from Completion solicit or accept the
               custom of any person in respect of goods or services competitive
               with those manufactured or supplied by any member of the Group
               during the period of 12 months prior to Completion, such person
               having been a customer of any member of the Group in respect of
               such goods or services during such period;

        (c)    for a period of 3 years from Completion induce, solicit or
               endeavour to entice to leave the service or employment of any
               member of the Group, any person who during the period of 12
               months prior to Completion was an employee of any member of the
               Group occupying a senior or managerial position likely (in the
               reasonable opinion of the Purchaser) to be:-

               (i)   in possession of confidential information relating to; or

               (ii)  able to influence the customer relationships or 
                     connections of any member of the Group;

        (d)    use any trade name (including the expressions Lifeboat Matey or
               Production Response) used by any member of the Group at any time
               during the 3 years immediately preceding the date of this
               agreement or any other name similar thereto or capable of being
               confused with any such trade name;

PROVIDED THAT the restrictions contained in this clause 6.1 shall not apply to
        J. Walter Thompson Company (Manchester) Limited or JWT to the extent
        that JWT acts as the principal of that company.

6.2     The Covenantors agree that the undertakings contained in this clause 6
        are reasonable and are entered into for the purpose of protecting the
        goodwill of the business of each member of the Group and that
        accordingly the benefit of the undertakings may be assigned by the
        Purchaser and its successors in title without the consent of any of the
        Covenantors.

6.3     Each undertaking contained in this clause 6 is and shall be construed as
        separate and severable and if one or more of the undertakings is held to
        be against the public interest or unlawful or in any way an unreasonable
        restraint of trade or unenforceable in whole or in part for any reason
        the remaining undertakings or parts thereof, as appropriate, shall
        continue to bind the Covenantors.

6.4     If any undertaking contained in this clause 6 shall be held to be void
        but would be valid if deleted in part or reduced in application, such
        undertaking shall apply with such deletion or modification as may be
        necessary to make it valid and enforceable. Without prejudice to the
        generality of the foregoing, such period (as the same may 


                                      
                                      Page 27 of 92

<PAGE>

        previously have been reduced by virtue of this clause 6.4) shall take
        effect as if reduced by six months until the resulting period shall be
        valid and enforceable.

6.5     No provision of this agreement, by virtue of which this agreement is
        subject to registration (if such be the case) under the Restrictive
        Trade Practices Act 1976 (unless this agreement is a non-notifiable
        agreement pursuant to section 27A of that Act), shall take effect until
        the day after particulars of this agreement have been furnished to the
        Director-General of Fair Trading pursuant to section 24 of that Act. For
        this purpose the expression "this agreement" includes any agreement or
        arrangement of which this agreement forms part and which is registrable
        or by virtue of which this agreement is registrable.

6.6     The expression "any member of the Group" shall be construed as referring
        to Troypeak or any of the Troypeak Subsidiaries, insofar as undertakings
        are given by any Troypeak Vendor, and as referring to Pismo or any of
        the Pismo Subsidiaries insofar as undertakings are given by any Pismo
        Vendor or by JWT.

7.      CONFIDENTIAL INFORMATION

7.1     The Vendors on a several basis shall:-

        (a)    not and shall procure that none of their connected persons or any
               director, officer or employee or adviser or agent of their
               Related Persons shall use or disclose to any person Confidential
               Information; and

        (b)    use all reasonable endeavours to prevent the use or disclosure of
               Confidential Information by any person other than by members of
               the Purchaser's Group.

7.2     Clause 7.1 does not apply to:-

        (a)    disclosure of Confidential Information to or at the written
               request of the Purchaser (which shall include disclosure made in
               the discharge of a Vendor's duties under a Service Agreement);

        (b)    use or disclosure of Confidential Information required to be
               disclosed by law, regulation, any revenue authority, the London
               Stock Exchange or any other recognised stock exchange on which
               any party's or their Related Person's shares are listed;

        (c)    disclosure of Confidential Information to professional advisers
               for the purpose of advising the Vendors; or

        (d)    Confidential Information which is in the public domain other than
               by a breach by any of the Vendors of clause 7.1.


                                      
                                      Page 28 of 92

<PAGE>

8.      ANNOUNCEMENTS

 8.1    No party shall disclose the making of this agreement nor its terms nor
        (except those matters set out in the press release in the agreed terms)
        and each of the parties shall procure that each of its Related Persons
        and its professional advisers shall not make any such disclosure without
        the prior consent of the other party unless disclosure is:-

        (a)    to its professional advisers; or

        (b)    required by law or the rules of any stock exchange, any revenue
               authority, or other regulatory body and disclosure shall then
               only be made by that party:-

               (i)   after it has taken all such steps as may be reasonable in
                     the circumstances to agree the contents of such
                     announcement with the other parties before making such
                     announcement and provided that any such announcement shall
                     be made only after notice to the other parties; and

               (ii)  to the person or persons and in the manner required by law,
                     the London Stock Exchange or any other recognised stock
                     exchange on which any party or its Related Person's shares
                     are listed or as otherwise agreed between the parties

provided that this clause 8.1 does not apply to announcements, communications or
        circulars made or sent by the Purchaser after Completion to customers,
        clients or suppliers of any Group Company to the extent that it informs
        them of the Purchaser's acquisition of the Shares or to any
        announcements containing only information which has become generally
        available.

8.2     The restrictions contained in clause 8.1 shall apply without limit of
        time and whether or not this agreement is terminated.

9.      COSTS

        Unless expressly otherwise provided in this agreement each of the
        parties shall bear its own legal, accountancy and other costs, charges
        and expenses connected with the sale and purchase of the Shares.

10.     EFFECT OF COMPLETION

10.1    The terms of this agreement (insofar as not performed at Completion and
        subject as specifically otherwise provided in this agreement) shall
        continue in force after and notwithstanding Completion.

10.2    The remedies of the Purchaser in respect of any breach of any of the
        Warranties shall continue to subsist notwithstanding Completion.


                                      
                                      Page 29 of 92

<PAGE>

11.     FURTHER ASSURANCES

Following Completion the Vendors on a several basis shall from time to time
        forthwith upon request from the Purchaser and at the Purchaser's
        expense, do or procure the doing of all acts and/or execute or procure
        the execution of all such documents in a form reasonably satisfactory to
        the Purchaser for the purpose of assisting the Purchaser, the Companies
        and Subsidiaries with any enquiries from a regulatory agency or
        recognised stock exchange and vesting in the:-

        (a)  Purchaser the full legal and beneficial title to the:

             (i)   Shares and otherwise giving the Purchaser the full benefit of
                   this agreement; and

             (ii)  Intellectual Property used by the Company except where such
                   Intellectual Property is the subject of licences to the
                   Company as at the date hereof; and

        (b)    Company title to the Properties in accordance with paragraph 18.3
               of schedule 5 or insofar as any consent or licence may be
               required by reason of the transactions set out in this agreement
               or otherwise to enable any of the Properties to continue to be
               vested with title as aforesaid in the Company when under the
               ownership or control of the Purchaser or other person being
               entitled for the time being to the benefit of the Warranties.

12.     ENTIRE AGREEMENT

Each party on behalf of itself and as agent for each of its Related Persons
        acknowledges and agrees with the other parties (each such party acting
        on behalf of itself and as agent for each of its Related Persons if any)
        that:-

        (a)    this agreement together with any other documents referred to in
               this agreement (together the "TRANSACTION DOCUMENTS") constitute
               the entire and only agreement between the parties and their
               respective Related Persons, if any, relating to the subject
               matter of the Transaction Documents;

        (b)    neither it nor any of its Related Persons, if any, have been
               induced to enter into any Transaction Document in reliance upon,
               nor have they been given, any warranty, representation,
               statement, assurance, covenant, agreement, undertaking, indemnity
               or commitment of any nature whatsoever other than as are
               expressly set out in the Transaction Documents and, to the extent
               that any of them have been, it (acting on behalf of itself and as
               agent on behalf of each of its Related Persons, if any)
               unconditionally and irrevocably waives any claims, rights or
               remedies which any of them might otherwise have had in relation
               thereto;


                                      
                                      Page 30 of 92

<PAGE>

PROVIDED THAT the provisions of this clause 12 shall not exclude any liability
        which any of the parties or, where appropriate, their Related Persons
        would otherwise have to any other party or, where appropriate, to any
        other party's Related Persons or any right which any of them may have in
        respect of any statements made fraudulently by any of them prior to the
        execution of this agreement or any rights which any of them may have in
        respect of fraudulent concealment by any of them.

13.     VARIATIONS

        This agreement may be varied only by a document signed by each of the
        Vendors and the Purchaser.

14.     WAIVER

14.1    A waiver of any term, provision or condition of, or consent granted
        under, this agreement shall be effective only if given in writing and
        signed by the waiving or consenting party and then only in the instance
        and for the purpose for which it is given.

14.2    No failure or delay on the part of any party in exercising any right,
        power or privilege under this agreement shall operate as a waiver
        thereof, nor shall any single or partial exercise of any such right,
        power or privilege preclude any other or further exercise thereof or the
        exercise of any other right, power or privilege.

14.3    No breach of any provision of this agreement shall be waived or
        discharged except with the express written consent of the Vendors and
        the Purchaser.

14.4    The rights and remedies herein provided are cumulative with and not
        exclusive of any rights or remedies provided by law.

15.     INVALIDITY

If any provision of this agreement is or becomes invalid, illegal or
        unenforceable in any respect under the law of any jurisdiction:-

        (a)    the validity, legality and enforceability under the law of that
               jurisdiction of any other provision; and

        (b)    the validity, legality and enforceability under the law of any
               other jurisdiction of that or any other provision,

shall not be affected or impaired in any way.

16.     NOTICES

16.1 Any notice, demand or other communication given or made under or in
        connection with the matters contemplated by this agreement shall be in
        writing and shall be


                                      
                                      Page 31 of 92

<PAGE>

        delivered personally or sent by fax or prepaid first class post (air
        mail if posted to or from a place outside the United Kingdom):-

          IN THE CASE OF THE PURCHASER TO:-

          Address                         Big Flower Digital Services Limited
                                          c/o 3 East 54th Street
                                          New York City 10022
                                          USA

          Fax:                            00 1 212 521 1640
          Attention:                      Mark Angelson

          IN THE CASE OF TROYPEAK TO:-

          any two of Messrs. C.G. Budd, A.W. Edwards and P.J. Hughes at their
          respective addresses set out in schedule 1 or to any other addresses
          for such persons which have been notified to the Purchaser in
          accordance with clause 16.2.

          IN THE CASE OF PISMO TO:-

          Mr A. Tout, BBH and WPP at their respective addresses set out in
          schedule 1 or to any other addresses for such persons which have been
          notified to the Purchaser in accordance with clause 16.2.

and shall be deemed to have been duly given or made as follows:-

        (a)    if personally delivered, upon delivery at the address of the
               relevant party;

        (b)    if sent by first class post, two Business Days after the date of
               posting; and

        (c)    if sent by air mail, five Business Days after the date of
               posting;

provided that if, in accordance with the above provisions, any such notice,
        demand or other communication would otherwise be deemed to be given or
        made outside 9.00 a.m. - 5.00 p.m. on a Business Day such notice, demand
        or other communication shall be deemed to be given or made at 9.00 a.m.
        on the next Business Day.

16.2    A party may notify the other party to this agreement of a change to its
        name, relevant addressee or address for the purposes of clause 16.1
        provided that such notification shall only be effective on:-

        (a)    the date specified in the notification as the date on which the
               change is to take place; or

        (b)    if no date is specified or the date specified is less than five
               Business Days after the date on which notice is given, the date
               falling five Business Days after notice of any such change has
               been given.


                                      
                                      Page 32 of 92

<PAGE>

16.3    Any notice or other authority or instruction to be given by the Troypeak
        Vendors under this agreement may be given and shall be properly given if
        signed by any three of the Troypeak Vendors (excluding NatWest).

17.     COUNTERPARTS

        This agreement may be executed in any number of counterparts which
        together shall constitute one agreement. Any party may enter into this
        agreement by executing a counterpart and this agreement shall not take
        effect until it has been executed by all parties.

18.     GOVERNING LAW AND JURISDICTION

18.1    This agreement (and any dispute, controversy, proceedings or claim of
        whatever nature arising out of or in any way relating to this agreement
        or its formation) shall be governed by and construed in accordance with
        English law.

18.2    Each of the parties to this agreement irrevocably agrees that the courts
        of England shall have exclusive jurisdiction to hear and decide any
        suit, action or proceedings, and/or to settle any disputes, which may
        arise out of or in connection with this agreement (respectively,
        "PROCEEDINGS" and "DISPUTES") and, for these purposes, each party
        irrevocably submits to the jurisdiction of the courts of England.

18.3    Each party irrevocably waives any objection which it might at any time
        have to the courts of England being nominated as the forum to hear and
        decide any Proceedings and to settle any Disputes and agrees not to
        claim that the courts of England are not a convenient or appropriate
        forum for any such Proceedings or Disputes and further irrevocably
        agrees that a judgment in any Proceedings or Disputes brought in any
        court referred to in this clause 18 shall be conclusive and binding upon
        the parties and may be enforced in the courts of any other jurisdiction.

19.     ASSIGNMENT

It      is hereby agreed and declared that the benefit of this agreement may be
        assigned by the Purchaser to any member of the Purchaser's Group
        provided that any such assignee shall be bound by the provisions of this
        clause 19 mutatis mutandis.

IN WITNESS whereof this agreement has been executed on the date first above
written.

                                      
                                      Page 33 of 92

<PAGE>

                                   SCHEDULE 1
                                   THE VENDORS
                                     PART I
                                TROYPEAK LIMITED

<TABLE>
<CAPTION>

============================================================================================
            1                         2                   3                  4
                                                          Cash               Percentage
 Column     Names & Addresses of      Number of           Consideration      %
            the Vendors               Shares held         (pound)
============================================================================================
<S>         <C>                       <C>                   <C>             <C>
 1.         NatWest Ventures          33,000                2,250,000        NIL
            Investments Limited       (consisting of
            135 Bishopsgate           Pref. C Ord.
            London  EC2M 3UR          21,429 &
                                      C Ord. 11,571)
- - --------------------------------------------------------------------------------------------
 2.         Christopher George        11,000 (A Ord)          594,250        8.44
            Budd
            Bolivia Mount
            The Dhoor
            Lazayre
            Isle of Man  IM7 4ED
- - --------------------------------------------------------------------------------------------
 3.         Philip John Hughes        11,000 (A Ord)          594,250        8.44
            The Bungalow
            241A Lower Way
            Thatcham
            Newbury
            Berkshire   RG13 4TP
- - --------------------------------------------------------------------------------------------
 4.         Anthony William           286,000 (B Ord)         655,000        6.60
            Edwards
            97 Wensleydale Avenue
            Clayhall
            Ilford
            Essex   IG5 0ND
- - --------------------------------------------------------------------------------------------
 5.         Anthony James Brady       11,000 (A Ord)          594,250        8.44
            80 Malmains Way
            Park Langley
            Beckenham
            Kent   BR3 2SF
- - --------------------------------------------------------------------------------------------
 6.         Paul Christopher          286,000 (B Ord)         655,000        6.60
            Blowes
            26A Regents Park 
            Road
            London  NW1 7TX
- - --------------------------------------------------------------------------------------------
</TABLE>


                                      
                                      Page 34 of 92

<PAGE>


<TABLE>
<CAPTION>

============================================================================================
            1                         2                   3                  4
                                                          Cash               Percentage
 Column     Names & Addresses of      Number of           Consideration      %
            the Vendors               Shares held         (pound)
============================================================================================
<S>        <C>                        <C>                    <C>             <C>
 7.         Ronald Charles Penfold    286,000 (B Ord)         655,000        6.60
            78 Gayfere Road
            Stoneleigh
            Epsom
            Surrey   KT17 2JU
- - --------------------------------------------------------------------------------------------
 8.         Richard Mark Potts        286,000 (B Ord)         655,000        6.60
            126 Wagon Road
            Barnet
            Hertfordshire   EN4
            0PN
- - --------------------------------------------------------------------------------------------

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

                                      1,210,000            (pound)6,652,750
============================================================================================
</TABLE>



                                      
                                      Page 35 of 92

<PAGE>


                                     PART II
                                  PISMO LIMITED

<TABLE>
<CAPTION>

==============================================================================================
                 1                          2                  3               4

                                            Number of
                 Names & Addresses of       Shares held
 Column          the Vendors                (Ordinary          Cash             Percentage
                                            Shares of          Consideration    %
                                            (pound)1 each)     (pound)
==============================================================================================
<S>        <C>                        <C>                    <C>             <C>
 1.              Mark Brian Kennedy         753 (A Ord)        198,787          2.79
                 The Old Nursery
                 44 Leicester Road
                 Narborough
                 Leicester  LE9 5DF
- - ----------------------------------------------------------------------------------------------
 2.              Rowland Leach              3765 (A Ord)       993,938          13.93
                 Chaffinches Farm
                 Main Road
                 Birdham
                 Chichester
                 West Sussex
                 PO18 8TD
- - ----------------------------------------------------------------------------------------------
 3.              Alan Tout                  7781 (A Ord)       2,054,138        28.77
                 Flat 2
                 45 Bramham Gardens
                 London  SW3 0HQ
- - ----------------------------------------------------------------------------------------------
 4.              David Paul Whittall        753 (A Ord)        198,787          2.79
                 7 Valley View Close
                 Highwoods
                 Colchester
                 Essex  CO4 4UN
- - ----------------------------------------------------------------------------------------------
 5.              WPP Group plc*             24 (B Ord)         1,744,200        NIL
                 Industrial Estate
                 Hythe
                 Kent  CT21 6PE
- - ----------------------------------------------------------------------------------------------
 6.              BBH Communications         24 (B Ord)         1,744,200        NIL
                 Limited+
                 60 Kingly Street
                 London  W1 6AD
- - ----------------------------------------------------------------------------------------------

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

                                            13,100       (pound)6,934,050
                                            ==========   ================
==============================================================================================
</TABLE>

- - --------
* registered holder is Carteret Holdings Ltd
+ registered holder is Montrane Ltd


                                      
                                      Page 36 of 92

<PAGE>

                                   SCHEDULE 2
                       PARTICULARS RELATING THE COMPANIES
                                TROYPEAK LIMITED

Authorised share capital:        (pound)3,000,000 in shares of(pound)1 each:
                                            100,000 CRPB Shares
                                            33,000 A Ordinary Shares
                                            2,772,571 B Ordinary Shares
                                             21,429 Preferred Ordinary Shares 
                                             (now Preferred C Ordinary Shares)
                                             11,571 A Preferred Ordinary Shares 
                                             (now C Ordinary Shares)
                                            61,429 CRPA Shares

Issued share  capital:           (pound)1,210,000 in shares of(pound)1 each:
                                            33,000 A Ordinary Shares
                                            1,144,000 B Ordinary Shares
                                             21,429 Preferred Ordinary Shares 
                                             (now Preferred C Ordinary Shares)
                                             11,571 A Preferred Ordinary Shares 
                                             (now C Ordinary Shares)

Directors:                        P J Hughes
                                  The Bungalow, 241A Lower Way, Thatcham,
                                  Newbury, Berkshire  RG13 4TP

                                  P Blowes
                                  26A Regents Park Road, London  NW1 7TX

                                  A J Brady
                                  80 Malmains Way, Park Langley, Beckenham,
                                  Kent   BR3 2SF

                                  R C Penfold
                                  78 Gayfere Road, Stoneleigh, Epsom,

                                  Surrey KT17 2JU


                                  C G Budd
                                  Bolivia Mount, The Dhoor, Lazayre,
                                  Isle of Man   IM7 4ED

                                  A W Edwards
                                  97 Wensleydale Avenue, Clayhall, Ilford,
                                  Essex   IG5 0ND

                                  R M Potts
                                  126 Wagon Road,
                                  120 Hadley Road
                                  Barnet,
                                  Hertfordshire EN5 4QP


                                      
                                      Page 37 of 92

<PAGE>

Secretary:                        P J Hughes

Auditors:                         Solomon Hare

                                  Oakfield House, Oakfield Grove, Clifton,
                                  Bristol   BS8 2BN

Accounting reference date:        30 September

Registered Office:                P O Box 18, Marsh House, 11 Marsh Street,
                                  Bristol BS99 7BB



                                      
                                      Page 38 of 92

<PAGE>

                                  PISMO LIMITED

Authorised share capital:        (pound)100,000 in shares of(pound)1 each:
                                             52,000 A Ordinary Shares
                                             48,000 B Ordinary Shares

Issued share capital:            (pound)13,100 in shares of(pound)1 each:
                                             13,052 A Ordinary Shares
                                                 48 B Ordinary Shares

Directors:                        M B Kennedy
                                  The Old Nursery, 44 Leicester Road,
                                  Narborough, Leicester  LE9 5DF

                                  R Leach
                                  Chaffinches Farm, Main Road, Birdham,
                                  Chichester, West Sussex  PO18 8TD

                                  A Tout
                                  Flat 2, 45 Bramham Gardens, London  SW3 0HQ

                                  D P Whittall
                                  7 Valley View Close, Highwoods, Colchester,

                                  Essex CO4 4UN


Secretary:                        A Tout

Auditors:                         Kingston Smith
                                  Quadrant House
                                  Air Street Entrance
                                  80-82 Regent Street
                                  London W1R 5PA

Accounting reference date:        31 March

Registered Office:                50/54 Beak Street
                                  London W1R 3DH



                                      
                                      Page 39 of 92

<PAGE>



                                   SCHEDULE 3
                                     PART I
                PARTICULARS RELATING TO THE TROYPEAK SUBSIDIARIES

                           PRODUCTION RESPONSE LIMITED

Authorised share capital:        (pound)50,000: 50,000 Shares of(pound)1 each

Issued share capital:            (pound)50,000: 50,000 Shares of(pound)1 each

Directors:                       C G Budd
                                 P J Hughes
                                 E Arnold
                                 A W Edwards
                                 A J Brady
                                 P Blowes
                                 R Penfold
                                 R Potts
                                 D Lumm

Secretary:                       P J Hughes


Auditors:                        Solomon Hare
                                 Oakfield House, Oakfield Grove, Clifton,
                                 Bristol   BS8 2BN


Accounting reference date:       30 September


Registered Office:               Cartwrights
                                 P O Box 18, Marsh House, 11 Marsh Street,
                                 Bristol, Avon   BS99 7BB



                                      
                                      Page 40 of 92

<PAGE>

                               ERIC STUDIO LIMITED

Authorised share capital:      (pound)100: 100 Ordinary Shares of(pound)1 each


Issued share capital:          (pound)2: 2 Ordinary Shares of(pound)1 each


Directors:                     C G Budd

                               A W Edwards
                               P J Hughes

Secretary:                     P J Hughes

Auditors:                      Solomon Hare
                               Oakfield House, Oakfield Grove, Clifton,
                               Bristol   BS8 2BN


Accounting reference date:     30 September


Registered Office:             Cartwrights
                               P O Box 18, Marsh House, 11 Marsh Street,
                               Bristol, Avon   BS99 7BB



                                      
                                      Page 41 of 92

<PAGE>

                                     PART II
                 PARTICULARS RELATING TO THE PISMO SUBSIDIARIES

                  MATELOT PRODUCTIONS LIMITED AS AT COMPLETION

Authorised share capital:        (pound)100 divided into 100 Ordinary Shares of
                                 (pound)1 each.

Issued share capital:            (pound)2 divided into 2 Ordinary Shares of
                                 (pound)1 each.

Directors:                       Rutland Directors Limited


Secretary:                       Rutland Secretaries Limited


Auditors:                        None appointed


Accounting reference date:       31 March.


Registered Office:               18 Southampton Place
                                 London WC1A 2AJ



                                      
                                      Page 42 of 92

<PAGE>

                  MATELOT PRODUCTIONS LIMITED AFTER COMPLETION

Authorised share capital:        (pound)100 divided into 100 Ordinary Shares of
                                 (pound)1 each.

Issued share capital:            (pound)90 divided into 90 Ordinary Shares of
                                 (pound)1 each.

Directors:                       Alan Tout             Julie Davis
                                 Flat 2                276 Maidstone Road
                                 45 Bramham Gardens    Chatham
                                 London  SW5 0NQ       Kent  M64 6JL

                                 Jonathan Hills
                                 Stable Cottage
                                 Smart Hill
                                 Penshurst
                                 Kent TN11 866

Secretary:                       Julie Davis
                                 276 Maidstone Road
                                 Chatham

                                 Kent M64 6JL

Auditors:                        Willott Kingston Smith
                                 Quadrant House
                                 Air Street entrance
                                 80-82 Regent Street
                                 London W1R 5PA

Accounting reference date:       31 March.

Registered Office:               50-54 Beak Street
                                 London W1R 3DH



                                      
                                      Page 43 of 92

<PAGE>



      FLITCLAIM LIMITED (TO BE RENAMED WATERSHED LIMITED) AS AT COMPLETION

Authorised share capital:        (pound)1,000 divided into 1,000 Ordinary Shares
                                 of(pound)1 each


Issued share capital:            (pound)2 divided into 2 Ordinary Shares of
                                 (pound)1 each

Directors:                       Alan Tout
                                 Flat 2
                                 45 Bramham Gardens
                                 London SW5 0NQ

Secretary:                       Julie Davis
                                 276 Maidstone Road
                                 Chatham
                                 Kent M64 6JL

Auditors:                        None appointed

Accounting reference date:       [             ]

Registered Office:               50/54 Beak Street
                                 London
                                 W1R 3DH



                                      
                                      Page 44 of 92

<PAGE>



      FLITCLAIM LIMITED (TO BE RENAMED WATERSHED LIMITED) AFTER COMPLETION

Authorised share capital:        (pound)1,000 divided into 1,000 Ordinary Shares
                                 of(pound)1 each


Issued share capital:            (pound)1,000 divided into 1,000 Ordinary Shares
                                 of(pound)1 each

Directors:                       Alan Tout
                                 Flat 2
                                 45 Bramham Gardens
                                 London SW5 0NQ

Secretary:                       Julie Davis
                                 276 Maidstone Road
                                 Chatham
                                 Kent M64 6JL

Auditors:                        Willott Kingston Smith
                                 10 Bruton Street
                                 London W1X 7AG

Accounting reference date:       31 December

Registered Office:               50/54 Beak Street
                                 London
                                 W1R 3DH



                                      
                                      Page 45 of 92

<PAGE>

                                   SCHEDULE 4
                                    [DELETED]









                                      
                                      Page 46 of 92

<PAGE>

                                   SCHEDULE 5
                                 THE WARRANTIES

Any Warranty expressed to be given "to the best of the Warrantors' knowledge and
belief" or "so far as the Warrantors are aware" or otherwise qualified by
reference to the knowledge of the Warrantors shall not, save where expressed to
the contrary, be qualified in the manner stated unless the Warrantors establish
that they have made such reasonable enquiries to establish the truth and
accuracy of that Warranty as are appropriate in the context of the relevant
Warranty.

In this schedule 5 and schedule 6 the following words have the following
meanings, unless the context otherwise requires:

"ACCOUNTS" means the audited financial statements of each Company, comprising
the balance sheet, profit and loss account and cash flow statements of each
Company, together in each case with the notes thereon, directors' report and
auditors' certificate, as at and for the financial period ended on the Accounts
Date;

"ACTIVITIES" means any activity, operation or process carried out by the Company
at any property whether or not currently owned, occupied or used by the Company;

"CAA" means the Capital Allowances Act 1990;

"CLAIM FOR TAX" means any of the following:-

        (a)    any liability to make a payment of Tax and any claim, assessment,
               demand, notice or other document issued or action taken by or on
               behalf of any person, authority or body whatsoever and of
               whatever country, including any Tax Authority, which claims
               payment of Tax;

        (b)    any non-availability or loss of or reduction of any relief
               (including in particular a right to repayment);

"COMPETENT AUTHORITY" means any person or legal entity (including any government
or government agency) having regulatory authority under Environmental Laws
and/or any court of law or tribunal;

"DISTRIBUTION" means a distribution as defined by sections 209 to 211
(inclusive) of the TA and section 418 of the TA;

"ENVIRONMENT" means any and all organisms (including without limitation man),
ecosystems, property and the following media: air, (including without
limitation, the air within buildings and the air within other natural or
man-made structures whether above or below ground); water (including without
limitation, water under or within land or in drains or sewers and coastal and
inland waters); and land (including without limitation, land under water);

"ENVIRONMENTAL LAWS" means all international, EU, national, federal, state or
local statutes, (which for the avoidance of doubt shall include the Producer
Responsibility Obligations (Packaging Waste) Regulations 1997, section 57 and
schedule 22 of the Environment Act 


                                      
                                      Page 47 of 92

<PAGE>

1995 and the guidance and regulations adopted under those provisions,) by-laws,
orders, regulations or other law or subordinate legislation or common law, all
orders, ordinances, decrees or regulatory codes of practice, circulars, guidance
notes and equivalent controls concerning the protection of human health or which
have as a purpose or effect the protection or prevention of harm to the
Environment or health and safety;

"ENVIRONMENTAL LIABILITY" means liability (including, without limitation,
liability in respect of Remedial Action) on the part of the Company and for any
of its directors, officers or shareholders under Environmental Laws;

"ENVIRONMENTAL PERMIT" means any and all licences, consents, permits,
authorisations or similar, made or issued pursuant to or under, or required by,
Environmental Laws in relation to the carrying on by the Company of its
business;

"ERA" means the Employment Rights Act 1996;

"FORMER PROPERTY" means any and all land or property, other than the Properties,
owned, occupied or used at any time by the Company;

"HARM" OR "DAMAGE" in relation to the Environment mean harm or damage to health
of living organisms (which in the case of man includes offence caused to any of
his senses or harm to his property) or other interference with ecological
systems of which they form part;

"HAZARDOUS MATTER" means any natural or artificial substance (whether solid,
liquid, gas, noise, ion, vapour, electromagnetic or radiation, including
electricity, heat and vibration, and whether alone or in combination with any
other substance) which is capable of causing harm to or have a deleterious
effect on the Environment, being a nuisance, or which restricts or makes more
costly the use, development, ownership or occupation of any Properties;

"ITA" means the Inheritance Tax Act 1984;

"L&T COVENANTS ACT" means the Landlord and Tenant (Covenants) Act 1995;

"LEASES" means the leases specified in the Disclosure Letter;

"REMEDIAL ACTION" means (i) preventing, limiting, removing, remedying, cleaning
up, abating, containing or ameliorating the presence or effect of any Hazardous
Matter in the Environment (including without limitation the Environment at the
Properties) or (ii) carrying out investigative work and obtaining legal and
other professional advice as is reasonably required in relation to (i);

"SUBSTANTIAL CUSTOMER" means a customer accounting for more than five per cent.
of the Group's sales in the financial year ended on the Accounts Date;

"SUBSTANTIAL SUPPLIER" means a supplier accounting for more than five per cent.
of the Group's purchases in the financial year ended on the Accounts Date;

"TAX" OR "TAX" means any tax, and any duty, contribution, impost, withholding,
levy or charge in the nature of tax, whether domestic or foreign, and any fine,
penalty, surcharge or interest connected therewith and includes corporation tax,
advance corporation tax, income 


                                      
                                      Page 48 of 92

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tax (including income tax required to be deducted or withheld from or accounted
for in respect of any payment), national insurance and social security
contributions, capital gains tax, inheritance tax, value added tax, customs
excise and import duties, stamp duty, stamp duty reserve tax, insurance premium
tax, air passenger duty, land fill tax, petroleum revenue tax, advance petroleum
revenue tax, gas levy and any other payment whatsoever which any person is or
may be or become bound to make to any person and which is or purports to be in
the nature of taxation;

"TAXATION AUTHORITY" means any local, municipal, governmental, state, federal or
fiscal, revenue, customs or excise authority, body, agency or official anywhere
in the world having or purporting to have power or authority in relation to Tax
including the Inland Revenue and HM Customs and Excise;

"TAXATION STATUTES" means all statutes, statutory instruments, orders
enactments, laws, by-laws, directives and regulations, whether domestic or
foreign decrees, providing for or imposing any Tax;

"TCGA" means the Taxation of Chargeable Gains Act 1992;

"TMA" means the Taxes Management Act 1970;

"TRANSFER REGULATIONS" means the Transfer of Undertakings (Protection of
Employment) Regulations 1981;

"TULR(C)A" means the Trade Union and Labour Relations (Consolidation) Act 1992;

"VATA" means the Value Added Tax Act 1994 and "VAT LEGISLATION" means VATA and
all regulations and orders made thereunder;

"YEAR 2000 CONFORMITY" shall have the meaning set out in the document published
with reference number DISC PD2000-1 by the part of the British Standards
Institution called DISC entitled "A Definition of Year 2000 Conformity
Requirements". In construing the meaning of this definition, regard shall be had
to the Amplification of the Definition and Rules set out in the same document.

1.      VENDORS' CAPACITY

1.1     AUTHORISATIONS

The Vendors have obtained all corporate authorisations and all other
        applicable governmental, statutory, regulatory or other consents,
        licences, waivers or exemptions required to empower them to enter into
        and to perform its obligations under this agreement and each document to
        be executed by them at or before Completion.


                                      
                                      Page 49 of 92

<PAGE>

1.2     PROPER EXECUTION

The Vendors' obligations under this agreement and each document to be
        executed at or before Completion are or when the relevant document is
        executed, will be enforceable in accordance with their terms.

2.      THE COMPANY, THE SHARES AND THE SUBSIDIARIES

2.1     INCORPORATION AND EXISTENCE

The Company, Montrane Limited and each of the Subsidiaries are limited
        companies incorporated under English law and Carteret Holdings Limited
        is incorporated under Jersey Law and each have been in continuous
        existence since their incorporation.

2.2     THE SHARES

        (a)    The Vendors are the only legal and beneficial owners of the
               Shares.

        (b)    The Company has not allotted any shares other than the Shares and
               the Shares are fully paid or credited as fully paid.

        (c)    There is no Encumbrance in relation to any of the Shares or
               unissued shares in the capital of the Company. No person has
               claimed to be entitled to an Encumbrance in relation to any of
               the Shares and no Group Company is under any obligation (whether
               actual or contingent) to sell, charge or otherwise dispose of any
               of the Shares or any interest therein to any person.

        (d)    Other than this agreement, there is no agreement, arrangement or
               obligation requiring the creation, allotment, issue, sale,
               transfer, redemption or repayment of, or the grant to a person of
               the right (conditional or not) to require the allotment, issue,
               sale, transfer, redemption or repayment of, a share in the
               capital of the Company (including an option or right of
               pre-emption or conversion).

2.3     THE SUBSIDIARIES

        (a)    The Company does not have any subsidiary undertakings other than
               the Subsidiaries. Each of the Subsidiaries is a wholly-owned
               subsidiary of the Company (unless otherwise indicated in schedule
               3) and each of the shares of each such company has been properly
               allotted and issued and is fully paid or credited as fully paid.

        (b)    There is no Encumbrance in relation to any of the shares or
               unissued shares in the capital of any of the Subsidiaries. No
               person has claimed to be entitled to an Encumbrance in relation
               to any of the shares of any of the Subsidiaries and no Group
               Company is under any obligation (whether actual or contingent) 


                                      
                                      Page 50 of 92

<PAGE>

               to sell, charge or otherwise dispose of any shares in any of the
               Subsidiaries or any interest therein to any person.

        (c)    Other than this agreement, there is no agreement, arrangement or
               obligation requiring the creation, allotment, issue, sale,
               transfer, redemption or repayment of, or the grant to a person of
               the right (conditional or not) to require the allotment, issue,
               sale, transfer, redemption or repayment of, a share in the
               capital of any of the Subsidiaries (including an option or right
               of pre-emption or conversion).

        (d)    The Company does not own any shares or stock in the capital of
               nor does it have any beneficial or other interest in any company
               or business organisation other than the Subsidiaries nor does the
               Company control or take part in the management of any other
               company or business organisation.

3.      ACCOUNTS

3.1     GENERAL

        (a)  The Accounts show a true and fair view of the:-

             (i)   assets, liabilities, financial position and state of affairs
                   at the Accounts Date; and

            (ii)   the profits and losses for the financial year ended on the
                   Accounts Date of the Company.

        (b)    The Accounts have been prepared and audited in accordance with
               the standards, principles and practices specified on the face of
               the Accounts applied on a consistent basis and subject thereto in
               accordance with the law and applicable standards, principles and
               practices generally accepted in the United Kingdom consistently
               applied.

        (c)    The Accounts have been prepared on a basis consistent with the
               basis upon which all audited accounts of the Company have been
               prepared in respect of the three years before the Accounts Date.

3.2      LIABILITIES

The Accounts make full provision or reserve for or disclose all liabilities
        (including all contingent or deferred liability to Tax) of the Company
        whether actual, contingent or otherwise which would fall to be disclosed
        in accordance with UK generally accepted accounting principles.


                                      
                                      Page 51 of 92

<PAGE>

3.3    EXTRAORDINARY AND EXCEPTIONAL ITEMS

The results shown by the audited profit and loss account of the Company for
        each of the three financial years of the Company ended on the Accounts
        Date have not (except as disclosed in those accounts) been affected by
        an extraordinary, exceptional or non recurring item or by any other
        matter making the profits or losses for a period covered by any of those
        accounts unusually high or low and do not include any profit any profit
        or loss or any transaction between any Vendor or any Related Person or
        connected person of any Vendor on the one hand and the Company on the
        other.

3.4     VALUATION OF STOCK

In the Accounts:-

        (a)    stock was valued in the same way as in the two preceding
               financial years and on the basis of the lower of cost and net
               realisable value; and

        (b)    all redundant and obsolete stock was written off and full
               provision was made for all slow-moving and damaged stock.

3.5     DEPRECIATION

The rates of depreciation and amortisation used in the audited accounts of
        the Company for the three financial years of the Company ended on the
        Accounts Date were sufficient to ensure that each fixed asset of the
        Company will be written down to nil by the end of its useful life.

3.6     FIXED ASSETS

The value of all of the fixed assets of the Company as shown in the Accounts
        is at cost thereof less depreciation deducted from time to time in a
        consistent manner and there has been no revaluation of such fixed assets
        since their acquisition.

3.7     OFF BALANCE SHEET FINANCING

No member of the Group is engaged in any financing (including the incurring
        of any borrowing or any indebtedness in the nature of acceptances or
        acceptance credits) of a type which would not be required to be shown or
        reflected in the Accounts.

3.8     ACCOUNTING AND OTHER RECORDS

        (a)    The books of account and all other records of the Company
               (including any which it may be obliged to produce under any
               contract now in force) are up-to-date, in its possession and are
               true and complete in accordance with the law and applicable
               standards, principles and practices generally accepted in the
               United Kingdom.


                                      
                                      Page 52 of 92

<PAGE>

        (b)    All deeds and documents (properly stamped where stamping is
               necessary for enforcement thereof) belonging to the Company or
               which ought to be in the possession of the Company are in the
               possession of the Company.

3.9     ACCOUNTING REFERENCE DATE

The accounting reference date (under section 224 of the Companies Act 1985)
        is and has always been 30 September for Troypeak and the Troypeak
        Subsidiaries and 31 March for Pismo.

3.10    MANAGEMENT ACCOUNTS

The management accounts of the Company for the period from the Accounts Date
        to 31 January 1998 (a copy of which are annexed to the Disclosure
        Letter) have been prepared on a basis consistent with the Accounts and
        subject to (a) to (f) below are accurate in all material respects and:-

        (a)    make proper provision or reserve for depreciation, bad or
               doubtful debts and other known actual liabilities;

        (b)    make fair disclosure in notes of all known contingent
               liabilities;

        (c)    do not overvalue assets;

        (d)    have not (save as disclosed in such Management Accounts) been
               affected by any extraordinary, exceptional or non-recurring item
               or by any other fact rendering the profits or losses for the
               relevant period unusually high or low;

        (e)    do not include any profit or loss on any transaction between any
               of the Vendors or any person connected or associated with them
               and the Company, save for such as previously disclosed to the
               Purchaser; and

        (f)    fully accrue all sums which are owed to advertising agencies,
               including in particular all commissions, discounts, over-riders
               and other similar payments or credits.

Provided that this Warranty 3.10 shall not apply to corporation tax and, in
        particular, deferred taxation save that the Management Accounts take
        into account UK tax at the rates of 33pc and in relation to Troypeak
        only, in addition known capital allowances, addbacks for depreciation
        and entertainment expenditure and known disallowable items and general
        provisions.

4.      CHANGES SINCE THE ACCOUNTS DATE

4.1     GENERAL

Since the Accounts Date:-


                                      
                                      Page 53 of 92

<PAGE>

        (a)    the Company has carried on its business prudently and in the
               ordinary and usual course and so as to maintain the business as a
               going concern;

        (b)    there has been no material adverse change in the financial or
               trading position or prospects of the Company; and

        (c)    there has been no material reduction in the value of those fixed
               assets specified in the Accounts, to the extent still owned by
               the Company.

4.2     SPECIFIC

Since the Accounts Date:-

        (a)    the Company has not, other than in the ordinary course of
               trading:-

               (i)   disposed of, or agreed to dispose of, an asset; or

               (ii)  assumed or incurred or paid, or agreed to assume or incur
                     or pay, a material liability, obligation or expense (actual
                     or contingent);

        and in the case of a disposal or agreement to dispose of an asset for an
        amount which is lower than book value or an open market arm's length
        value, whichever is the higher;

        (b)    the Company has not acquired or agreed to acquire an asset for an
               amount which is higher than open market arm's length value;

        (c)    the Companies, together, have not made, or agreed to make,
               capital expenditure exceeding in total (pound)60,000 or incurred,
               or agreed to incur, a commitment or connected commitments
               involving capital expenditure exceeding in total (pound)60,000;

        (d)    no Substantial Supplier or Substantial Customer has ceased or
               substantially reduced its trade with the Company or has altered
               the terms of trade to the Company's disadvantage;

        (e)    the Company has not declared, paid or made a dividend or other
               distribution (including a distribution within the meaning of the
               TA) except to the extent provided in the Accounts;

        (f)    no resolution of the shareholders of the Company has been passed
               (except for those representing the ordinary business of an annual
               general meeting);

        (g)    the Company has not repaid or redeemed share or loan capital, or
               made (whether or not subject to conditions) an agreement or
               arrangement or undertaken an obligation to do any of those
               things;


                                      
                                      Page 54 of 92

<PAGE>

        (h)    the Company has not repaid any sum in the nature of borrowings in
               advance of any due date or made any loan or incurred any
               indebtedness (including in each case inter group);

        (i)    the Company has not paid nor is under an obligation to pay any
               service, management or similar charges or any interest or amount
               in the nature of interest to any other person or incurred any
               liability to make such a payment or made any payment to any of
               the Vendors or any of their connected persons whatsoever; and

        (j)    the Company has not incurred or paid any liability for any
               financial, legal, accountancy, surveyors, valuers, environmental,
               actuaries or other professional advisers fees.

5.      ASSETS

5.1     TITLE AND CONDITION

        (a)    There are no Encumbrances (other than liens arising in the
               ordinary course of business), nor has the Company agreed to
               create any Encumbrances, over any part of its undertaking or
               assets and each asset used by the Company (tangible or
               intangible) is:-

               (i)   legally and beneficially owned by the Company; and

               (ii)  where capable of possession, in the possession of the 
                     Company.

        (b)    The Company owns each asset (tangible or intangible) necessary
               for the operation of its business as currently conducted and
               without limitation no rights (other than rights as shareholders
               in the Company) relating to the business of the Company are owned
               or otherwise enjoyed by or on behalf of any of the Vendors of any
               of their connected persons.

        (c)    All plant, machinery, vehicles and equipment owned or used by the
               Company are in good condition and working order and have been
               regularly and properly maintained. None is dangerous,
               inefficient, out-of-date or in need of renewal or replacement or
               surplus to the Company's requirements.

5.2     HIRE PURCHASE AND LEASED ASSETS

Copies of any bill of sale or any hiring or leasing agreement, hire purchase
        agreement, credit or conditional sale agreement, agreement for payment
        on deferred terms or any other similar agreement to which the Company is
        a party are annexed to the Disclosure Letter.


                                      
                                      Page 55 of 92

<PAGE>

5.3     STOCK

        (a)    The Company's stock is of satisfactory quality and saleable in
               the usual course of its business in accordance with its current
               price list.

        (b)    The Company has not supplied, or agreed to supply, goods which
               have been defective or which fail, or will fail, to comply with
               their terms of sale.

        (c)    No goods in a state ready for supply by the Company are defective
               or will fail to comply with terms of sale similar to terms of
               sale on which similar goods have previously been sold by the
               Company.

        (d)    The Company's level of stock is reasonable having regard to
               current and anticipated demand.

        (e)    The Company has not acquired nor agreed to acquire any material
               part of its stock on terms that the property therein does not
               pass until full payment is made.

5.4     DEBTS

Except to the extent to which specific provision or reserve has been made in
        the Accounts, all indebtedness owed to the Company and whether included
        in the Accounts or arising since the Accounts Date will be duly paid in
        full not later than 6 months from Completion and none of such
        indebtedness has been factored, sold or agreed to be sold by the
        Company.

6.      INTELLECTUAL PROPERTY

6.1     GENERAL

        (a)    Save for Intellectual Property licensed to the Company, the
               Company is the sole and absolute legal and beneficial owner of
               all Intellectual Property used in connection with its business
               and where appropriate such Intellectual Property is registered in
               or applied for in the name of the Company.

        (b)    The Intellectual Property used by the Company in connection with
               its business is free from Encumbrances and, in the case of
               confidential information, any disclosure obligation and is
               subsisting, valid, exercisable and enforceable.

6.2    RENEWALS/MAINTENANCE

All registration and renewal fees have been paid in relation to the
        Intellectual Property which is registered or applied for in the name of
        the Company. All steps have been taken diligently for the prosecution
        and maintenance of such Intellectual Property and all steps have been
        taken diligently for the maintenance and protection of unregistered
        Intellectual Property owned by the Company.


                                      
                                      Page 56 of 92

<PAGE>

6.3     LICENCES

        (a)    The terms of all licences or rights which have been granted by
               the Company or which the Company or the Vendors or any of their
               Related Persons, if applicable, intends to enter into for the
               purposes of the business of the Company or which are being
               currently negotiated or other agreement or consents or
               undertakings entered into by the Company or the Vendors or any of
               their Related Persons, if applicable, relating to the
               Intellectual Property owned by or licensed to the Company are set
               out in the Disclosure Letter and unless disclosed neither the
               Company nor the Vendors nor any of their Related Persons, if
               applicable, is obliged to enter into any such agreement relating
               to the business of the Company. There has been or is no breach by
               the Company so far as the Warrantors are aware nor is there any
               fact or matter which would or may create a breach of such
               licences or undertakings.

        (b)    The terms of all licences or rights granted to the Company or
               which the Company or the Vendors or any of their Related Persons,
               if applicable, intends to enter into for the purposes of the
               business of the Company or which are being currently negotiated
               or other agreement or consents or undertakings entered into by
               the Company or the Vendors or any of their Related Persons, if
               applicable, relating to the Intellectual Property used in the
               business of the Company are set out in the Disclosure Letter and
               neither the Company nor the Vendors nor any of their Related
               Persons, if applicable, is obliged to enter into any such
               agreement relating to the business of the Company. There has been
               or is no breach by the Company nor, so far as the Warrantors are
               aware, is there any fact or matter which would or may create a
               breach of such licences or undertakings.

6.4     INFRINGEMENT

        (a)    The use by the Company of any Intellectual Property used in the
               business of the Company does not and is not likely to infringe
               and the processes or methods employed, services provided, the
               business conducted and the products used manufactured and dealt
               in or supplied by the Company do not nor did they at the time
               used manufactured dealt in or supplied infringe the Intellectual
               Property of any other person.

        (b)    No proceedings claims or complaints have been brought or
               threatened by any third party or competent authority in relation
               to the Intellectual Property owned by or licensed to the Company
               including any concerning title subsistence validity or
               enforceability or grant of any right or interest in such
               Intellectual Property.


                                      
                                      Page 57 of 92

<PAGE>

        (c)    So far as the Warrantors are aware no third party is infringing
               or misusing or threatening to infringe or misuse the Intellectual
               Property owned by or licensed to the Company.

        (d)    The Company is not subject to any injunction, undertaking or
               court order or order of any other authority of competent
               jurisdiction not to use or restricting the use of any
               Intellectual Property.

6.5     CONFIDENTIAL AGREEMENTS

Save as disclosed, the Company has not and none of the Vendors nor any of
        their Related Persons, if applicable, has entered into any
        confidentiality or other agreement or is subject to any duty which
        restricts the free use or disclosure of any information used in the
        business of the Company and there is no breach of any such agreement or
        duty.

7.      EFFECT OF SALE

7.1     Neither the execution nor performance of this agreement or any document
        to be executed at or before Completion will:-

        (a)    result in the Company losing the benefit of a Permit or an asset,
               licence, grant, subsidy, right or privilege which it enjoys at
               the date of this agreement in any jurisdiction; or

        (b)    conflict with, or result in a breach of, or give rise to an event
               of default under, or require the consent of a person under, or
               enable a person to terminate, or relieve a person from an
               obligation under, an agreement, arrangement or obligation to
               which the Company is a party or a legal or administrative
               requirement in any jurisdiction; or

        (c)    result in any Substantial Customer being entitled to cease
               dealing or, so far as the Warrantors are aware having made no
               enquiry of any Substantial Customers, ceasing to deal with the
               Company or substantially to reduce its existing level of business
               or to change the terms upon which it deals with the Company; or

        (d)    result in any Substantial Supplier being entitled to cease
               supplying or, so far as the Warrantors are aware having made no
               enquiry of any Substantial Supplier, ceasing to supply the
               Company or substantially to reduce its supplies to or to change
               the terms upon which it supplies the Company;

        (e)    so far as the Warrantors are aware result in any officer or
               senior employee leaving the Company; or

        (f)    make the Company liable to offer for sale, transfer or otherwise
               dispose of or purchase or otherwise acquire any assets, including
               shares held by it in other 


                                      
                                      Page 58 of 92

<PAGE>

               bodies corporate under their articles of association or any
               agreement or arrangement.

8.      CONSTITUTION

8.1     INTRA VIRES

The Company has the power to carry on its business as now conducted and the
        business of the Company has at all times been carried on intra vires.

8.2     MEMORANDUM AND ARTICLES

The memorandum and articles of association of the Company in the form
        annexed to the Disclosure Letter are true and complete and have embodied
        therein or annexed thereto copies of all resolutions and agreements as
        are referred to in section 380 of the Companies Act 1985, and all
        amendments thereto (if any) were duly and properly made.

8.3     REGISTER OF MEMBERS

The register of members of the Company has been properly kept and contains
        true and complete records of the members from time to time of the
        Company and the Company has not received any notice or allegation that
        any of them is incorrect or incomplete or should be rectified.

8.4     POWERS OF ATTORNEY

The Company has not executed any power of attorney or conferred on any
        person other than its directors, officers and employees any authority to
        enter into any transaction on behalf of or to bind the Company in any
        way and which power of attorney remains in force or was granted or
        conferred within three years of the Completion Date.

8.5     STATUTORY BOOKS AND FILINGS

        (a)    The statutory books of the Company are up to date, in its
               possession and are true and complete in accordance with the law.

        (b)    All resolutions, annual returns and other documents required to
               be delivered to the Registrar of Companies (or other relevant
               company registry or other corporate authority in any
               jurisdiction) have been properly prepared and filed and are true
               and complete and the common seal of the Company is in its
               possession.

9.      INSURANCE

9.1     POLICIES


                                      
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<PAGE>

The Disclosure Letter contains a list of each current insurance and
        indemnity policy in respect of which the Company has an interest
        (together the "POLICIES"). Each of the Policies is valid and enforceable
        and is not void or voidable. So far as the Warrantors are aware, there
        are no circumstances which might make any of the Policies void or
        voidable or lead to any claim under the Policies to be avoided by the
        insurers.

9.2     INSURANCE OF ASSETS

Each insurable asset of the Company has at all material times been and is at
        the date of this agreement insured to its full replacement value against
        each risk normally insured against by a prudent person operating the
        types of business operated by the Company.

9.3     CLAIMS

No claim is outstanding under any of the Policies and so far as the
        Warrantors are aware, no matter exists which might give rise to a claim
        under any of the Policies.

9.4     PREMIUMS

The Company has not done or omitted to do anything which might result in an
        increase in the premium payable under any of the Policies.

10.     CONTRACTUAL MATTERS

10.1    VALIDITY OF AGREEMENTS

        (a)    Neither the Company nor the Warrantors have any knowledge
               (without having made enquiry of any third party) of the
               invalidity of, or a ground for termination, avoidance or
               repudiation of, an agreement, arrangement or obligation to which
               the Company is a party. No party with whom the Company has
               entered into an agreement, arrangement or obligation has given
               notice of its intention to terminate, or has sought to repudiate
               or disclaim, the agreement, arrangement or obligation.

        (b)    So far as the Warrantors are aware, no party with whom the
               Company has entered into an agreement or arrangement is in
               material breach of the agreement or arrangement and so far as the
               Warrantors are aware, no matter exists which might give rise to
               such breach.

        (c)    The Company is not in breach of any agreement or arrangement so
               far as the Warrantors are aware, no matter exists which might
               give rise to such breach.


                                      
                                      Page 60 of 92

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10.2    STANDARD TERMS AND CONDITIONS

A copy of the standard terms and conditions of business of the Company are
        annexed to the Disclosure Letter and the Company has not entered into an
        agreement or arrangement with a customer or supplier different from
        these.

10.3    SUPPLY CONTRACTS

Full and accurate details of all agreements or arrangements for the supply of
        stock, raw materials, products or goods to or by the Company which
        involve or are likely to involve the supply of goods the aggregate sale
        value of which will represent in excess of five per cent. of the
        turnover for the financial year of the Company ended on the Accounts
        Date are contained in the Disclosure Letter and copies annexed to it.

10.4    MATERIAL AGREEMENTS

        (a)  The Company is not a party to and is not liable under any
             contract, transaction, arrangement or liability which involves,
             or is likely to involve obligations or liabilities which, by
             reason of their nature or magnitude, ought reasonably to be made
             known to an intending purchaser of the Shares because it:-

             (i)  is of an unusual or abnormal nature, or outside the ordinary
                  and proper course of business;

            (ii)  is of a long-term nature (that is, unlikely to have been
                  fully performed, in accordance with its terms, more than six
                  months after the date on which it was entered into or
                  undertaken);

           (iii)  is incapable of termination in accordance with its terms, by
                  the Company, on 60 days' notice or less;

            (iv)  cannot readily be fulfilled or performed by the Company on
                  time without undue or unusual expenditure of money, effort or
                  personnel;

             (v)  involves payment by the Company by reference to fluctuations
                  in the index of retail prices, or any other index or in the
                  rate of exchange for any currency;

            (vi)  involves an aggregate outstanding expenditure or other
                  liability by the Company of more than (pound)60,000, or

           (vii)  restricts its freedom to engage in any activity or business or
                  confines its activity or business to a particular place;

        (b)  The Company is not a party to and is not liable under:-


                                      
                                      Page 61 of 92

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           (i)    an agreement, arrangement or obligation by which the Company
                  is a member of a joint venture, consortium, partnership or
                  association (other than a bona fide trade association); or

           (ii)   a distributorship, agency, marketing, licensing or management
                  agreement or arrangement.

10.5    CONTRACTS WITH CONNECTED PERSONS

There is, and during the three years ending on the date of this agreement
        there has been, no agreement or arrangement (legally enforceable or not)
        to which the Company is or was a party and in which any of the Vendors,
        a director or former director of any member of the Group or of any of
        the Vendors' Related Persons or a person connected with any of them is
        or was interested in any way. The Company does not owe any obligation or
        sum to nor does it and neither will it immediately after Completion have
        any contractual or other arrangements of any sort with the Vendors or
        any of their connected persons and since the Accounts Date no payment or
        accrual (including, in particular, interest) has been made between or
        for the benefit of any of the Vendors or any of the Vendors' Related
        Persons or a person connected with any of them on the one hand and the
        Company on the other hand.

10.6    CONDITIONS AND WARRANTIES IN RESPECT OF GOODS OR SERVICES

Except for a condition or warranty implied by law or contained in its standard
        terms of business or otherwise given in the usual course of trading, the
        Company has not given a condition or warranty, or made a representation,
        in respect of goods or services supplied or agreed to be supplied by it,
        or accepted an obligation that could give rise to a liability after the
        goods or services have been supplied by it.

10.7    Neither BBH nor JWT nor any other advertising agency nor any person
        connected with an advertising agency has (or has in the previous 24
        months had) any interest, proposed interest or intention to acquire an
        interest in the profits of any Group Company or business, or part of the
        business, of any Group Company, save as 48 pc shareholders in Pismo and
        save in relation to Eric Studio Limited and Studio Response Ltd; and no
        such agency or connected person receives from any Group Company
        discounts commissions or rebates or any other fee calculated otherwise
        than by reference to turnover supplied by such person.

10.8    No employee or director of Pismo or Troypeak or any Subsidiary or
        connected person of any of them has any interest, direct or indirect, in
        Studio Response Ltd or any company or undertaking carrying on similar
        activities for Euro RSCG or any connected person.


                                      
                                      Page 62 of 92

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11.     INFORMATION TECHNOLOGY

11.1    INFORMATION TECHNOLOGY

In the twelve months prior to the date hereof the Company has not suffered
        and, so far as the Warrantors are aware without having made enquiry of
        any third party, no other person has suffered any failures or bugs in or
        breakdowns of any computer hardware or software used in connection with
        the business of the Company which have caused any substantial disruption
        or interruption in or to its use and the Warrantors do not know, without
        having made enquiry of any third party, nor are they aware, of any fact
        or matter which may so disrupt or interrupt or affect the use of such
        equipment following the acquisition by the Purchaser of the Shares
        pursuant to this agreement on the same basis as it is presently used.

11.2    So far as the Warrantors are aware, all computer systems used and
        planned to be used in the business of the Company comply with Year 2000
        Conformity.

11.3    All computer systems, excluding software, used in the business of the
        Company are owned and operated by and are under the control of the
        Company and are not wholly or partly dependent on any facilities which
        are not under the ownership, operation or control of the Company. No
        action will be necessary to enable such systems to continue to be used
        in the business of the Company to the same extent and in the same manner
        as they have been used prior to the date hereof.

11.4    The Company is validly licensed to use the software used in its business
        and no action will be necessary to enable it to continue to use such
        software to the same extent and in the same manner as they have been
        used prior to the date hereof.

12.     LIABILITIES

12.1    BORROWINGS

The total amount borrowed by the Company from its bankers does not exceed
        the limits of the applicable facilities and the total amount borrowed by
        the Company from whatsoever source does not exceed any limitation on its
        borrowing contained in its articles of association, or in any debenture
        or loan stock deed or other instrument.

12.2    CONTINUANCE OF FACILITIES

Full and accurate details of all overdrafts, loans or other financial
        facilities outstanding or available to the Company as at Completion are
        set out in the Disclosure Letter and whether or not of a type which
        would be required to be shown in or reflected in the Accounts (including
        any indebtedness for moneys borrowed or raised under any acceptance
        credit, bond, note, bill of exchange or commercial paper, finance lease,
        hire purchase agreement, trade bills (other than those on terms normally
        obtained) forward sale or purchase agreement or conditional sale
        agreement or other transaction 


                                      
                                      Page 63 of 92

<PAGE>

        having the commercial effect of a borrowing) and copies of all documents
        relating to such matters are annexed to the Disclosure Letter. None of
        the Vendors' nor any of their Related Persons nor any member of the
        Group has done anything whereby the continuance of any such facilities
        in full force and effect might be affected or prejudiced.

12.3    BANK ACCOUNTS

A statement of all the bank accounts of the Company and of the credit or
        debit balances on such accounts as at a date not more than seven days
        before the date of this agreement has been supplied to the Purchaser.
        The Company does not have any other bank or deposit accounts (whether in
        credit or overdrawn) not included in such statement. Since such
        statement there have been no payments out of any such accounts except
        for routine payments and the balances on current account are not now
        substantially different from the balances shown on such statements.

12.4    WORKING CAPITAL

Having  regard to existing bank and other facilities, the Company has sufficient
        working capital for the purposes of continuing to carry on its business
        in its present form and at its present level of turnover for a period of
        12 months from Completion and for the purposes of executing, carrying
        out and fulfilling in accordance with their terms all orders, projects
        and contractual obligations which have been placed with, or undertaken
        by, the Company.

12.5    GUARANTEES AND INDEMNITIES

        (a)    The Company is not a party to and is not liable (including
               contingently) under a guarantee, indemnity or other agreement to
               secure or incur a financial or other obligation with respect to
               another person's obligation.

        (b)    No part of the loan capital, borrowing or indebtedness in the
               nature of borrowing of the Company is dependent on the guarantee
               or indemnity of, or security provided by, another person other
               than a Group Company.

12.6    EVENTS OF DEFAULT

No event has occurred or is subsisting or been alleged or so far as the
        Warrantors are aware is likely to arise which:-

        (a)    constitutes an event of default, or otherwise gives rise to an
               obligation to repay, or to give security under an agreement
               relating to borrowing or indebtedness in the nature of borrowing
               (or will do so with the giving of notice or lapse of time or
               both);

        (b)    will lead to an Encumbrance constituted or created in connection
               with borrowing or indebtedness in the nature of borrowing, a
               guarantee, an 


                                      
                                      Page 64 of 92

<PAGE>

               indemnity or other obligation of the Company becoming enforceable
               (or will do so with the giving of notice or lapse of time or
               both); or

        (c)    with the giving of notice and/or lapse of time constitute or
               result in a default or the acceleration of any obligation under
               any agreement or arrangement to which the Company is a party or
               by which it or any of its properties, revenues or assets is
               bound.

12.7    GRANTS

The Company is not liable to repay an investment or other grant or subsidy
        made to it by any person (including the Department of Trade and Industry
        or its predecessor). No matter (including the execution and performance
        of this agreement) exists which might entitle a body to require
        repayment of, or refuse an application by the Company for, the whole or
        part of a grant or subsidy.

13.     PERMITS

13.1    COMPLIANCE WITH PERMITS

The Company has obtained and complied with the terms and conditions of each
        Permit (full and accurate details of which are contained in the
        Disclosure Letter).

13.2    STATUS OF PERMITS

There are no pending or threatened proceedings which might in any way affect
        the Permits and the Warrantors are not aware, without having made
        enquiry of any third party of any other reason why any of them should be
        suspended, threatened or revoked or be invalid.

14.     INSOLVENCY

14.1    WINDING UP

No order has been made, petition presented or resolution passed for the
        winding up of the Company or for the appointment of a provisional
        liquidator to the Company.

14.2    ADMINISTRATION

No administration order has been made and no petition for an administration
        order has been presented in respect of the Company.

14.3    RECEIVERSHIP

No receiver, receiver and manager or administrative receiver has been
        appointed of the whole or part of the Company's business or assets.


                                      
                                      Page 65 of 92

<PAGE>

14.4    COMPROMISES WITH CREDITORS

        (a)    No voluntary arrangement under section 1 of the Insolvency Act
               1986 has been proposed or approved in respect of the Company.

        (b)    No compromise or arrangement under section 425 of the Companies
               Act 1985 has been proposed, agreed to or sanctioned in respect of
               the Company.

        (c)    The Company has not entered into any compromise or arrangement
               with its creditors or any class of its creditors generally.

14.5    INSOLVENCY

The Company is not unable to pay its debts within the meaning of section 123
        of the Insolvency Act 1986 (but for this purpose ignoring the reference
        to "if it is proved to the satisfaction of the court that" in section
        123(1)(e) and 123(2)).

14.6    PAYMENT OF DEBTS

The Company has not stopped paying its debts as they fall due.

14.7    DISTRESS ETC.

No distress, execution or other process has been levied on an asset of the
Company.

14.8    UNSATISFIED JUDGMENTS

There is no unsatisfied judgment or court order outstanding against the Company.

14.9    STRIKING OUT

No action is being taken by the Registrar of Companies to strike the
        Company off the register under section 652 of the Companies Act 1985.

15.     LITIGATION AND COMPLIANCE WITH LAW

15.1    LITIGATION

        (a)    Neither the Company nor a person for whose acts or defaults the
               Company may be vicariously liable is involved, or has during the
               three years ending on the date of this agreement been involved,
               in a material civil, criminal, arbitration, administrative or
               other proceeding in any jurisdiction, excluding debt collection
               disputes for amounts totalling in aggregate less
               than(pound)50,000. No civil, criminal, arbitration,
               administrative or other proceeding in any jurisdiction is pending
               or threatened by or against the Company or so far as the
               Warrantors are aware, a person for whose acts or defaults the
               Company may be vicariously liable.

                                      
                                      Page 66 of 92

<PAGE>

        (b)    So far as the Warrantors are aware, no matter exists which might
               give rise to a civil, criminal, arbitration, administrative or
               other proceeding in any jurisdiction involving the Company or a
               person for whose acts or defaults the Company may be vicariously
               liable.

        (c)    There is no outstanding judgment, order, decree, arbitral award
               or decision of a court, tribunal, arbitrator or governmental
               agency in any jurisdiction against the Company or, so far as the
               Warrantors are aware, against a person for whose acts or defaults
               the Company may be vicariously liable.

15.2    COMPLIANCE WITH LAW

The     Company has conducted its business and dealt with its assets in all
        material respects in accordance with all applicable legal and
        administrative requirements in any jurisdiction.

15.3    INVESTIGATIONS

The Company is not and has not so far as the Warrantors are aware, been
        subject to any investigation, enquiry or disciplinary proceeding
        (whether judicial, quasi-judicial or otherwise) in any jurisdiction and
        none is pending or threatened, and neither has it received any request
        for information from, any court or governmental authority (including any
        national competition authority and the Commission of the European
        Communities and the EFTA Surveillance Authority) under any anti-trust or
        similar legislation in any jurisdiction. So far as the Warrantors are
        aware no matter exists which might give rise to such an investigation,
        enquiry, proceeding or request for information.

15.4    COMPETITION LAW

        (a)  The Company is not nor has been a party to or concerned in any
             agreement or arrangement, or conducted itself (whether by
             omission or otherwise) in a manner, which:-

            (i)    could give rise to an investigation by the Office of Fair
                   Trading or the Monopolies and Mergers Commission under the
                   Fair Trading Act 1973;

            (ii)   has been or is required to be furnished to the Director
                   General of Fair Trading pursuant to the Restrictive Trade
                   Practices Acts 1976 and 1977;

            (iii)  contravenes the provisions of the Resale Prices Act 1976;

            (iv)   contravenes the provisions of the Trade Descriptions Acts
                   1968 and 1972;


                                      
                                      Page 67 of 92

<PAGE>

            (v)    constitutes an anti-competitive practice within the meaning
                   of the Competition Act 1980;

            (vi)   constitutes a breach of any relevant undertaking, order,
                   assurance or other measure made under the Fair Trading Act
                   1973, the Restrictive Trade Practices Acts 1976 and 1977, the
                   Resale Prices Act 1976, the Trade Descriptions Acts 1968 and
                   1972, or the Competition Act 1980;

            (vii)  infringes Articles 85 and/or 86 of the Treaty of Rome or
                   their equivalent provisions under the European Economic Area
                   Agreement or any other anti-trust or similar legislation in
                   any jurisdiction; or

            (viii) is registrable, unenforceable or void (whether in whole or in
                   part) or renders it liable to civil, criminal or
                   administrative proceedings by virtue of any anti-trust,
                   anti-monopoly, anti-cartel, consumer law or any other similar
                   legislation in any jurisdiction.

        (b)    The Company has not given an undertaking or written assurance
               (whether legally binding or not) to any court or governmental
               authority (including any national competition authority and the
               Commission of the European Communities and the EFTA Surveillance
               Authority) under any anti-trust or similar legislation in any
               jurisdiction.

        (c)    The Company is not subject to an order, regulation or decision
               made by any court or governmental authority (including any
               national competition authority and the Commission of the European
               Communities and the EFTA Surveillance Authority) under any
               anti-trust or similar legislation in any jurisdiction.

        (d)    The Company is not and has not been a party to or concerned in
               any agreement, arrangement or concerted practice in respect of
               which an application for negative clearance and/or an exemption
               has been made to the Commission of the European Communities or
               the EFTA Surveillance Authority.

15.5    UNLAWFUL PAYMENTS

Neither the Company nor, so far as the Warrantors are aware, any person for
        whose acts or defaults the Company may be vicariously liable has:-

        (a)    induced a person to enter into an agreement or arrangement with
               the Company by means of an unlawful or immoral payment,
               contribution, gift or other inducement;

        (b)    offered or made an unlawful or immoral payment, contribution,
               gift or other inducement to a government official or employee; or


                                      
                                      Page 68 of 92

<PAGE>

        (c)    directly or indirectly made an unlawful contribution to a
               political activity.

All references to the Company in this paragraph 15 should be deemed to
        include the Company's officers, agents and employees.

16.     BROKERAGE OR COMMISSIONS

        No person is entitled to receive from the Company or any Vendor or
        Related Person or a connected person of any of them, a finder's fee,
        brokerage or commission or other benefit in connection with this
        agreement or anything in it and in particular the Company is not liable
        to pay or give to any of its directors, officers, employees, agents and
        advisers any sum or benefit whatsoever in connection with the sale of
        the Shares and no such person has any interest in such sale.

17.     DIRECTORS AND EMPLOYEES

17.1    PARTICULARS OF OFFICERS

The particulars of all employees annexed to the Disclosure Letter show the
        names, job title, date of commencement of employment, date of birth and
        period of continuous employment (calculated in accordance with Chapter 1
        of part XIV of the ERA) of every employee of the Company and contain
        details of negotiations which have taken place in the preceding two
        years concerning pay for all employees of Pismo and the Pismo
        Subsidiaries.

17.2    REMUNERATION AND BENEFITS

The particulars of all employees annexed to the Disclosure Letter show all
        remuneration and other benefits:-

        (a)    actually provided; and

        (b)    which the Company is currently or conditionally bound to provide
               (whether now or in the future)

to each officer and employee of the Company and are true and complete and
        include particulars of and details of participation in all profit
        sharing, incentive, bonus, commission, share option, medical, permanent
        health insurance, directors' and officers' insurance, travel, car,
        redundancy and other benefit schemes, arrangements and understandings
        (the "SCHEMES") operated for all or any employees or former employees of
        the Company or their dependants whether legally binding on the Company
        or not.


                                      
                                      Page 69 of 92

<PAGE>

17.3    TERMS AND CONDITIONS

        (a)    The Disclosure Letter contains copies of all the standard terms
               and conditions, staff handbooks and policies which apply to
               employees of the Company and identifies which terms and
               conditions apply to which employees.

        (b)    There are no terms and conditions in any contract with any
               director, officer or employee of the Company pursuant to which
               such person will be entitled to receive any payment or benefit or
               such person's rights will change as a direct consequence of the
               transaction contemplated by this agreement.

        (c)    There are no service agreements or contracts of employment
               between the Company and any of its directors, officers or
               employees containing any provision in addition to the matters
               required to be contained therein under section 1 of the ERA.

        (d)    All employees of the Company have received a written statement of
               particulars of their employment as required by section 1 of the
               ERA.

        (e)    No employee of Troypeak or the Troypeak Subsidiaries have any
               contractual rights whatsoever to an annual increase in salary
               and/or any contractual benefits.

17.4    OPERATION OF THE SCHEMES

        (a)    The Schemes have at all times been operated in accordance with
               their governing rules or terms and all applicable laws and all
               documents which are required to be filed with any regulatory
               authority have been so filed and all tax clearances and approvals
               necessary to obtain favourable tax treatment for the Company
               and/or the participants in the Schemes have been obtained and not
               withdrawn and no act or omission has occurred which has or could
               prejudice any such tax clearance and/or approval.

        (b)    No past or present director, officer, employee or any dependant
               thereof or any other participant in any Scheme has made any claim
               against the Company in respect of any Scheme and no event has
               occurred which could or might give rise to any such claim.

17.5    NOTICE PERIODS

The terms of employment or engagement of all employees, agents, consultants
        and professional advisers of the Company are such that their employment
        or engagement may be terminated by not more than four weeks' notice
        given at any time without liability for any payment including by way of
        compensation or damages (except for unfair dismissal or a statutory
        redundancy payment).


                                      
                                      Page 70 of 92

<PAGE>

17.6    CHANGES SINCE THE ACCOUNTS DATE

Since the Accounts Date the Company has not made, announced or proposed any
        changes to the emoluments or benefits of or any bonus to any of its
        directors, officers or employees and the Company is under no obligation
        to make any such changes with or without retrospective operation.

17.7    LOANS

There are no amounts owing or agreed to be loaned or advanced by the Company
        to any directors, officers and employees of the Company (other than
        amounts representing remuneration accrued due for the current pay
        period, accrued holiday pay for the current holiday year or for
        reimbursement of expenses).

17.8    NOTICE OF TERMINATION AND LEAVE OF ABSENCE

        (a)    No director, officer or employee of the Company has given or
               received notice to terminate his employment.

        (b)    There are no directors, officers or employees of the Company who
               are on secondment, maternity leave or absent on grounds of
               disability or other leave of absence (other than normal holidays
               or absence of no more than one week due to illness).

17.9    PAYMENT UP TO COMPLETION

All salaries and wages and other benefits of all employees of the Company
        have, to the extent due, been paid or discharged in full.

17.10   INDUSTRIAL RELATIONS

        (a)    No directors, officers or employees of the Company are members of
               a trade union, staff association or any other body representing
               workers and no such union, association or body is recognised by
               the Company for the purposes of collective bargaining.

        (b)    There are no rights and liabilities relating or pursuant to any
               collective agreements (whether with a trade union, staff
               association or any other body representing workers and whether
               legally binding or not) concerning the Company.

        (c)    Within the three years preceding the date hereof the Company has
               not been engaged or involved in any trade dispute (as defined in
               section 218 of the TULR(C)A) with any employee, trade union,
               staff association or any other body representing workers and no
               event has occurred which could or might give rise to any such
               dispute and no industrial action involving employees of the
               Company, official or unofficial, is now occurring or threatened
               nor has 


                                      
                                      Page 71 of 92

<PAGE>

               any industrial relations or employment matter been referred
               either by the Company or its employees or by any trade union
               staff association or any other body representing workers to ACAS
               for advice, conciliation or arbitration.

17.11   CLAIMS BY EMPLOYEES

Nopast or present director, officer or employee of the Company or any
        predecessor in business has brought any claim or has any right of action
        against the Company including any claim:-

        (a)    in respect of any accident or injury which is not fully covered
               by insurance; or

        (b)    for breach of any contract of services or for services; or

        (c)    for loss of office or arising out of or connected with the
               termination of his office or employment

and so far as the Warrantors are aware, no event or inaction has occurred
        which could or might give rise to any such claim.

17.12   ENQUIRIES AND DISCRIMINATION

        (a)    There are no enquiries or investigations existing, pending or, so
               far as the Warrantors are aware, threatened affecting the Company
               in relation to any directors, officers or employees by the Equal
               Opportunities Commission, the Commission for Racial Equality or
               the Health and Safety Executive or any other bodies with similar
               functions or powers in relation to workers.

        (b)    There are no terms or conditions under which any director,
               officer or employee of the Company is employed, nor has anything
               occurred or not occurred prior to Completion that may give rise
               to any claim for sex discrimination, race discrimination,
               disability discrimination or equal pay either under domestic
               United Kingdom or European Law whether by such director, officer
               or employee or a prospective director, officer or employee or
               otherwise.

17.13   COMPLIANCE WITH LAWS

        (a)    The Company has complied in all material respects with all
               relevant provisions of the Treaty of Rome, EC Directives,
               statutes, regulations, codes of conduct, collective agreements,
               terms and conditions of employment, orders, declarations and
               awards relevant to the Company's directors, officers and
               employees or the relations between the Company and any trade
               union, staff association or any other body representing workers.

        (b)    There are no training schemes, arrangements or proposals, whether
               past or present, in respect of which a levy may henceforth become
               payable by the 


                                      
                                      Page 72 of 92

<PAGE>

               Company under the Industrial Training Act 1982 and pending
               Completion no such schemes, arrangements or proposals will be
               established or undertaken.

17.14   TRANSFER REGULATIONS

The Company has not entered into any agreement and no event has occurred
        which may involve the Company in the future acquiring any undertaking or
        part of one such that the Transfer Regulations may apply thereto.

17.15   DUTY TO INFORM AND CONSULT

The Vendors and the Company have complied with their obligations to inform
        and consult with trade unions and other representatives of workers and
        to send notices to the Secretary of State pursuant to sections 188 to
        194 of the TULR(C)A and regulations 10 and 11 of the Transfer
        Regulations.

17.16   RECORDS

The Company has maintained adequate and suitable records regarding the
        service of its directors, officers and employees and such records comply
        with the requirements of the Data Protection Act 1984.

17.17   BUSINESS IS CONDUCTED BY EMPLOYEES

The Company has not entered into any agreement or arrangement for the
        management or operation of its business or any part thereof other than
        with its employees.

18.     PROPERTIES

18.1    ALL PROPERTY

The Properties comprise all the land and property owned, used or occupied by
        and all the rights vested in the Company and all agreements whereby the
        Company has any entitlement to income relating to any such land and
        property at the date hereof.

18.2    NO OTHER LIABILITIES

The Company has no actual or contingent obligations or liabilities (in any
        capacity including as principal contracting party or guarantor) in
        relation to any lease, licence or other interest in, or agreement
        relating to, land apart from the Properties.

18.3    LEGAL AND BENEFICIAL ENTITLEMENT

The Company is solely legally and beneficially entitled to the Properties
        for the term of years granted or periods allowed by the leases and other
        agreements brief details of which are set out in Schedule 8


                                      Page 73 of 92
<PAGE>

18.4    TITLE DEEDS AND DOCUMENTS

The Company has under its control all title deeds and documents necessary to
        prove its title to the Properties and the same are original documents or
        properly examined abstracts.

18.5    NO ENCUMBRANCES

Unless disclosed in schedule 8 the Properties and the title deeds thereto are
        not and will not at Completion be subject to any Encumbrance or any
        lease or agreement for lease.

18.6    NO DEFAULT

The Company has in all material respects and to the best of its knowledge
        and belief (without having made any specific search enquiry or
        investigation of any third party having the benefit of such matters or
        entitled to enforce them) duly performed, observed and complied with any
        covenants, restrictions, exceptions, reservations, conditions,
        agreements, statutory and common law requirements, by-laws, orders,
        building regulations and other stipulations and regulations affecting
        the Properties and the uses of the Properties including the terms of any
        lease, underlease, tenancy agreement or agreement to occupy under which
        any part of any of the Properties is held and the terms of any agreement
        for lease and (without prejudice to the generality of the foregoing) all
        outgoings have been paid to date and (in the case of leasehold property)
        all rents and (to the extent demanded) service charges have been paid to
        date and no notice of any alleged breach of any of the terms of any such
        lease or tenancy agreement as aforesaid has been served on the Company.

18.7    REPLIES TO ENQUIRIES

All disclosures and replies to enquiries relating to the Properties made or
        given by or on behalf of the Vendors or the Company to the Purchaser or
        its solicitors are now believed by the Vendor and the Company to the
        best of their knowledge and belief (without having made any specific
        search or enquiry of any third party) to be complete and correct in all
        material respects.

18.8    FULL DISCLOSURE

Full details of all leases or other agreements relating to occupation of the
        Properties have been disclosed in writing to the Purchaser or its
        solicitors prior to the date hereof.

18.9    NO LITIGATION

The Company is not engaged in any litigation or arbitration proceedings in
        connection with any of the Properties and has not received notice of any
        alleged offences and has not to the best of its knowledge and belief
        (without having made any specific search or enquiry of any third party)
        committed any offences in connection with the Properties. So far as the
        Vendor is aware (without having made any specific search or enquiry of
        any third party) there is no cause of action which has arisen or accrued
        or law suit or 


                                      
                                      Page 74 of 92

<PAGE>

        arbitration threatened or pending against the Company in connection with
        the Properties and no circumstances exist which are likely to give rise
        to any.

18.10   NO VITIATION OF INSURANCE

The Company has not to the best of its knowledge and belief (without having
        made any specific search or enquiry of the insurers) done or omitted to
        do anything whereby any policy of insurance has or may become void or
        voidable and all requisite insurances are in force and all current
        premiums which has been demanded by the relevant Landlords of the
        Company are fully paid.

18.11   FIRE PRECAUTIONS ACT 1971

The Company has to the best of its knowledge and belief (without having made
        any specific search or enquiry of the Fire Officer) complied with its
        obligations under the Fire Precautions Act 1971 and (where requisite)
        has applied for and/or obtained fire certificates thereunder in respect
        of all premises owned or occupied by the Company to the extent required
        by such Act.

18.12   CLOSURE OF GREAT MARLBOROUGH STREET

All costs, charges, expenses, liabilities and (so far as the Vendors are
        aware) losses (being only those losses suffered prior to the date
        hereof) in respect of the closure of Pismo's premises at Great
        Marlborough Street, London, W1, the relocation of staff and related
        redundancies, restructuring and reorganisation do not exceed
        (pound)300,000.

19.     PENSIONS

PISMO

"BENEFICIARY" means each present or former director, officers or employee who
        has at any time, agreed to provide services to Pismo.

"DEATH IN SERVICE PLAN" means the Lifeboat Matey Death in Service Plan
        established by a Declaration of Trust made by Pismo on 23 October 1996.

"EPP"  means the Scottish Widows Executive Pension Plans relating to LJ
        Keswick, DP Whittall, SA Calder, R Leach, A Tout, MB Kennedy and V
        Kaufmann.

"GROUP PLAN" means the Sun Alliance Group Personal Pension Plan ("GPPP10871").

"SUPPLEMENTARY DEATH IN SERVICE PLAN" means the Lifeboat Matey Top Up Benefit
        Scheme established by a Declaration of Trust made by Pismo on 23 October
        1996.


                                      
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<PAGE>

19.1    PENSION ARRANGEMENTS DISCLOSED

Save in respect of the Death in Service Plan, the EPP, the Group Plan and the
        Supplementary Death in Service Plan (the "DISCLOSED PLANS") Pismo is
        under no legal obligation or commitment, to pay, provide or contribute
        towards any "RELEVANT BENEFITS" within the meaning of section 612 of the
        TA or sickness or disability benefits to or in respect of any
        Beneficiary and has not at any time participated in or contributed
        towards any scheme or arrangement which has as its purpose or one of its
        purposes the provision of any such benefits (other than schemes which
        have been fully wound up).

19.2    EX GRATIA PENSIONS ETC.

As far as the Warrantors are aware Pismo has not made or proposed any
        voluntary payments to any person in respect of any relevant benefit (as
        defined in paragraph 19.1 of this schedule).

19.3    UNDERTAKINGS AND ASSURANCES

No legally binding undertaking or assurance has been given by Pismo to any
        person as to the continuance, introduction, increase or improvement of
        any such benefit or scheme or arrangement as is referred to in paragraph
        19.1 of this schedule (including, for the avoidance of doubt, the
        Disclosed Plans).

19.4    DISCLOSURE OF DOCUMENTS

Current material details of the EPP as listed below, the Death in Service Plan
        and the Supplementary Death in Service Plan have been given to the
        Purchaser which are as follows:-

        (a)    The consent policy documents and letters of the Inland Revenue
               approval for the EPP.

        (b)    The policy document relating to the Death in Service Plan and the
               Supplementary Death in Service Plan.

        (c)    Names of all current members of the Disclosed Plans.

        (d)    Details of all contributions and premiums currently payable or
               being paid by in respect of the members of the Disclosed Plans.

        (e)    Copies of written confirmation from the Pensions Scheme's Office
               of the Inland Revenue of the EPP's and Death in Service Plan's
               status as exempt approved schemes within the meaning of section
               592 TA.

        (f)    Names of all companies or other bodies participating in the EPP
               or in the Death in Service Plan or the Supplementary Death in
               Service Plan.


                                      
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<PAGE>

        (g)    A copy of the Declaration of Trust relating to the Death in
               Service Plan.

19.5    PAYMENT OF CONTRIBUTIONS

There are no contributions or premiums in relation to the Disclosed Plans
        which have fallen due but remain unpaid.

19.6    EXEMPT APPROVAL

As far as the Warrantors are aware the EPP and the Death in Service Plan
        are exempt approved schemes within the meaning of section 592(1) of the
        TA and there is no reason why such approval might be withdrawn or cease
        to apply.

19.7    CONTRACTING OUT

No employee of Pismo is in contracted-out employment as defined in the
        Pension Schemes Act 1993.

19.8    INSURANCE OF DEATH BENEFITS

All benefits which may be payable under the EPP or Death in Service Plan
        (other than a refund of members' contributions with interest where
        appropriate) are fully insured with an insurance company. There is no
        ground as far as the Warrantors are aware on which the insurance company
        concerned might avoid liability under any such policy or contract. Each
        Beneficiary as far as the Warrantors are aware has been covered for such
        insurance by such insurance company at its normal rates applicable for
        their age.

19.9    LEGAL COMPLIANCE

As far as the Warrantors are aware, having made due enquiry of Scottish
        Widows, the Disclosed Plans have been administered in accordance with
        the trusts powers and provisions of their governing documentation and
        have been administered in accordance with and comply with all applicable
        legislation and the general requirements of trust law and (without
        limitation to the foregoing) the provisions of Article 119 Treaty of
        Rome.

19.10   NO CLAIMS OR LITIGATION

As far as the Warrantors are aware no claim has been made or threatened
        against the trustees of any of the EPP, the Death in Service Plan or the
        Supplementary Death in Service Plan or Pismo (including any complaint to
        the Pensions Ombudsman) in respect of any act, event, omission or other
        matter arising out of or in connection with the EPP, the Death in
        Service Plan or the Supplementary Death in Service Plan (other than
        routine claims for benefits) and so far as the Warrantors are aware
        there are no circumstances which may give rise to any such claim.


                                      
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<PAGE>

19.11   ACCESS TO MEMBERSHIP

Every Beneficiary who is entitled to membership of the EPP, Death in Service
        Plan or Supplementary Death in Service Plan has been invited to join as
        of the date on which he became so entitled.

19.12   MONEY PURCHASE BENEFITS ONLY

         In addition to lump sum death in service benefits the Disclosed Plans
         provide only money purchase benefits (as defined in section 181 of the
         Pension Schemes Act 1993).

19.13   TROYPEAK

        (a)    Save as disclosed in the Disclosure Letter, Troypeak or the
               Troypeak Group is under no legal obligation or commitment, to
               pay, provide or contribute towards any relevant benefit (as
               defined in paragraph 19.1 of this Schedule) or sickness or
               disability benefits to or in respect of any Beneficiary and has
               not at any time participated in or contributed towards any scheme
               or arrangement which has as its purpose or one of its purposes
               the provision of any such benefits (other than schemes which have
               been fully wound up).

        (b)    All pension contributions due in respect of any pension scheme,
               under any contract of employment in respect of any of the
               individuals listed in the Disclosure Letter have been paid up to
               date and there are none outstanding.

        (c)    As far as the Warrantors are aware, neither Troypeak nor the
               Troypeak Group have made or have proposed to make any voluntary
               payments to any person in respect of any relevant benefit (as
               defined in paragraph 19.1 of this schedule).

        (d)    No legally binding undertaking or assurance has been given by
               Troypeak or the Troypeak Group to any person as to the
               continuance, introduction, increase or improvement of any such
               benefit or scheme or arrangement as is referred to in paragraph
               19.13(a) of this schedule.

20.     TAXATION

                             INFORMATION AND RETURNS

20.1    RETURNS

The Company has made all returns and supplied all information and given all
        notices to the Inland Revenue or other Taxation Authority as reasonably
        requested or required by law within any requisite period and all such
        returns and information and notices are correct and accurate in all
        respects and are not the subject of any dispute and there 


                                      
                                      Page 78 of 92

<PAGE>

        
        are no facts or circumstances likely to give rise to or be the subject
        of any such dispute.

20.2    DISCLOSURES

All statements and disclosures made to any Taxation Authority in connection
        with any provision of the Taxation Statutes whatsoever were when made
        and remain complete and accurate in all material respects.

20.3    CLEARANCES

No action has been taken by the Company in respect of which any consent or
        clearance from the Inland Revenue or other Taxation Authority was
        required except in circumstances where such consent or clearance was
        validly obtained and where any conditions attaching thereto were met and
        will, immediately following Completion, continue to be met.

20.4    TAX DEED

No event has occurred which would or might give rise to a claim under the
        Tax Deed upon or after the execution thereof.

                        PROVISION FOR AND PAYMENT OF TAX

20.5    GENERAL

The Accounts make full provision or reserve in respect of any period ended
        on or before the Accounts Date for all Tax assessed or liable to be
        assessed on the Company or for which it is accountable at the Accounts
        Date whether or not the Company has or may have any right of
        reimbursement against any other person including Tax in respect of
        property (of whatever nature) income, profits or gains held, earned,
        accrued or received by or to any person on or before the Accounts Date
        or by reference to any event occurring, act done or circumstances
        existing on or before that date including distributions made down to
        such date or provided for in the Accounts and proper provision has been
        made and shown in the Accounts for deferred Tax in accordance with
        generally accepted accounting principles.

20.6    PAYMENT OF TAX

        (a)    The Company has duly and punctually paid all Tax to the extent
               that the same ought to have been paid and is not liable nor has
               it within three years prior to the date hereof been liable to pay
               any penalty or interest in connection therewith.

        (b)    The Company has duly deducted Tax from all payments made where
               required by applicable legislation and accounted to the relevant
               Tax Authority for tax so deducted.


                                      
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<PAGE>

20.7    PAY AS YOU EARN

The Company has properly operated the PAYE system deducting Tax as required
        by law from all payments to or treated as made to or benefits provided
        for employees, ex-employees or independent contractors of the Company
        (including any such payments within section 134 of the TA) and duly
        accounted to the Inland Revenue for Tax so deducted and has complied
        with all its reporting obligations to the Inland Revenue in connection
        with any such payments made or benefits provided, and no PAYE audit or
        DSS visit in respect of the Company has been made by the Inland Revenue
        nor has the Company been notified that any such audit will be made.

20.8    SECONDARY LIABILITY

No transaction or event has occurred in consequence of which the Company is
        or may be held liable for any Tax or deprived of relief or allowances
        otherwise available to it in consequence of any Tax or may otherwise be
        held liable for or to indemnify any person in respect of any Tax, where
        some other company or person is or may become primarily liable for the
        Tax in question (whether by reason of any such other company being or
        having been a member of the same group of companies or otherwise).

                                 CORPORATION TAX

20.9    CHANGES IN TRADE ETC.

        (a)    Within the period of three years ending with the date hereof
               there has been:-

               (i)   no major change in the nature or conduct of any trade or
                     business carried on by the Company within the meaning of
                     section 245 or 768 of the TA;

               (ii)  no major change in the nature or conduct of any trade or
                     business of a company which has surrendered advance
                     corporation tax to the Company under the provisions of
                     section 240 of the TA.

        (b)    Within the period of three years ending with the date hereof
               there has been no cessation or discontinuance of any trade or
               business carried on by the Company nor has the scale of
               activities in any trade or business carried on by the Company
               within three years hereof become small or negligible.

        (c)    Prior to the execution of this agreement no change of ownership
               of the Company has taken place such that either or both of
               section 245 or 768 of the TA has or may be applied to deny relief
               in respect of a loss or losses of the Company or any set off of
               advance corporation tax.]


                                      
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<PAGE>

20.10   DEDUCTIONS

The Company has not made any payment or incurred any liability to make any
        payment in either case of a revenue nature which could be disallowed as
        a deduction in computing the taxable profits of the Company or as a
        charge on the Company's income including any payment which could be
        disallowed under sections 74 (general rules as to deductions not
        allowable), 125 (annual payments for non-taxable consideration), 338-340
        (allowance of charges on income), 779-785 (leased assets) or 787
        (restriction of relief for payments of interest) of the TA.

20.11   SALES AT UNDERVALUE/OVERVALUE

All transactions entered into by the Company with any person connected with
        it have been entered into on an arm's length basis and the consideration
        (if any) charged or received or paid by the Company on all transactions
        entered into by it has been equal to the consideration which might have
        been expected to be charged, received or paid (as appropriate) between
        independent persons dealing at arm's length and no notice or enquiry
        pursuant to section 770 of the TA or the transfer pricing provisions of
        any arrangements made under section 788 of the TA (relief by agreement
        with other countries) has been made in connection with any of such
        transactions.

20.12   EXCHANGE GAINS AND LOSSES

The Company is not and has not since the Accounts Date been:-

        (a)    the holder of a qualifying asset;

        (b)    subject to a qualifying liability;  or

        (c)    party to a currency contract

for the purposes of chapter II of the FA 1993.

20.13   LOAN RELATIONSHIPS

The Company is not party to any loan relationship as defined in Chapter II
        of the Finance Act, 1996 which may give rise to any debits or credits
        (other than in relation to interest on an accruals basis).

                                 CAPITAL ASSETS

20.14   CAPITAL ALLOWANCES

        (a)    No balancing charge in respect of any capital allowances claimed
               or given would arise if all the assets of the Company were to be
               realised for a consideration equal to the amount of the book
               value thereof as shown or included in the Accounts.


                                      
                                      Page 81 of 92

<PAGE>

        (b)    All necessary conditions for all capital allowances (as defined
               in section 832(1) of the TA) claimed by the Company were at all
               material times satisfied and remain satisfied and the Company has
               not since the Accounts Date become liable for any balancing
               charge.

        (c)    The capital allowances computations for the period ending on the
               Accounts Date are complete, correct and annexed to the Disclosure
               Letter.

20.15   FINANCE LEASES

         The Company is not and has not been the lessee under any leases of
         plant or machinery except for the Leases.

                                  DISTRIBUTIONS

20.16   REPAYMENTS OF SHARE CAPITAL

        (a)    The Company has not at any time after 6 April 1965 repaid or
               agreed to repay or redeemed or agreed to redeem or purchased or
               agreed to purchase (or made any contingent purchase contract
               within the meaning of section 165 of the Companies Act 1985) in
               respect of any of its issued share capital or any class thereof.
               Further the Company has not after 6 April 1965 capitalised or
               agreed to capitalise in the form of shares, debentures or other
               securities or in paying up amounts unpaid on any shares,
               debentures or other securities any profits or reserves of any
               class or description or passed or agreed to be passed any
               resolution to do so.

        (b)    The Company has not made (and will not be deemed to have made)
               any distribution within the meaning of sections 209 and 210
               (bonus issue following repayment of capital) of the TA since 5
               April 1965 except dividends properly authorised and shown in its
               Accounts nor is the Company bound to make any such distribution.

        (c)    The Company has not been party to any transaction involving an
               exempt distribution within section 213 of the TA within the
               period commencing five years prior to the Accounts Date.

                                CHARGEABLE GAINS

20.17   SALES AT BOOK VALUE

No chargeable gain or profit (disregarding the effects of any indexation
        relief available) would arise if any asset of the Company (other than
        trading stock) were to be realised for a consideration equal to the
        amount of the book value thereof as shown or included in the Accounts.


                                      
                                      Page 82 of 92

<PAGE>

                            ANTI-AVOIDANCE PROVISIONS

20.18   TAX SCHEMES

The Company has not entered into nor been a party to nor otherwise involved
        in any scheme or arrangement designed wholly or partly for the purpose
        of avoiding, reducing or deferring Tax.

                                 FOREIGN ELEMENT

20.19   RESIDENCE

The Company is not and never has been liable for tax in any jurisdiction
        other than the United Kingdom.

                                 CLOSE COMPANIES

20.20   CLOSE COMPANIES - TRANSFERS OF VALUE

The Company has made no transfer of value such as is specified in section
        94(1) (or section 99(2)) of the ITA.

20.21   CLOSE COMPANIES - LOANS TO PARTICIPATORS

The Company has not made any loan advance or payment or given any
        consideration falling within sections 419-420 or 422 of the TA.

20.22   CLOSE COMPANIES - DISTRIBUTIONS

The Company has made no payments and conferred no benefits falling to be
        treated as distributions under section 418 of the TA.

20.23   CLOSE COMPANIES - SHORTFALL ETC.

The Company is not and never has been a close investment-holding company as
        defined at section 13A of the TA.

20.24   CLOSE COMPANIES - TRANSFERS AT UNDERVALUE

The Company has not made a transfer at an undervalue so that section 125 of
        the TCGA could apply.


                                      
                                      Page 83 of 92

<PAGE>

                               GROUPS OF COMPANIES

20.25   GROUP COMPANIES

The Company is not, nor has it ever been, a member of a group of companies
        as defined by section 170 of the TCGA which contains or contained any
        companies other than the Companies.

                                 INHERITANCE TAX

20.26   INHERITANCE TAX

        (a)    The Company is not, and will not become, liable to be assessed to
               inheritance tax as donor or donee of any gift or transferor or
               transferee of value (actual or deemed) nor as a result of any
               disposition, chargeable transfer or transfer of value (actual or
               deemed) made by or deemed to be made by any other person.

        (b)    There is no unsatisfied liability to inheritance tax attached or
               attributable to the Shares or any asset of the Company and in
               consequence no person has the power to raise the amount of such
               tax by sale or mortgage of or by a terminable charge on any of
               the Shares or assets of the Company as mentioned in section 212
               of the ITA and none of the Shares or assets of the Company are
               subject to an Inland Revenue charge within section 237 of the
               ITA.

                                 VALUE ADDED TAX

20.27   VALUE ADDED TAX

        (a)    The Company is a registered taxable person for the purpose of the
               VAT legislation and has not at any time been treated as a member
               of a group of companies for such purpose and has not made any
               application to be so treated and no circumstances exist whereby
               the Company would or might become liable for value added tax as
               an agent or otherwise by virtue of section 47 of the VATA.

        (b)    The Company has complied in all respects with the requirements
               and provisions of the VAT legislation and has made and maintained
               and will pending Completion make and maintain accurate and up to
               date records invoices accounts and other documents required by or
               necessary for the purposes of the VAT legislation and the Company
               has at all times punctually paid and made all payments and
               returns required thereunder.

        (c)    The Company has not made any exempt supplies in consequence of
               which it is or will be unable to obtain credit for all input tax
               paid by it during any VAT quarter ending after the Accounts Date.


                                      
                                      Page 84 of 92

<PAGE>

20.28   CAPITAL GOODS SCHEME

There are set out in the Disclosure Letter with express reference to this
        Warranty full details of each of the assets of the Company of a kind
        described in part XV of the Value Added Tax Regulations 1995 (SI No
        2518) (adjustments to the deduction of input tax on capital items) in
        relation to which that part could operate to adjust the amount of input
        tax deducted, including in particular:-

        (a)    a description (including, in the case of land, or a building or
               part of a building the nature of the tenure and the time that the
               tenure has to run), the date of acquisition (or, in the case of a
               lease, the date of grant) and the price paid and VAT upon the
               purchase or acquisition of the capital item in question;

        (b)    the proportion of the VAT on the purchase price for which credit
               has been claimed, including any adjustments made under Part XV,
               Value Added Tax Regulations 1995.

                                   STAMP DUTY

20.29   STAMP DUTY

All documents in the enforcement of which the Company is or may be
        interested have been duly stamped and since the Accounts Date the
        Company has not been a party to any transaction whereby the Company was
        or is or could become liable to stamp duty reserve tax.

21.     ENVIRONMENT

These Warranties are made on the basis that and the Warrantors acknowledge
        that the Purchaser has not searched any public register or made
        enquiries of any public body or Competent Authority, its successors in
        title and assigns:-

21.1    The Company has conducted its business at all times in compliance with
        Environmental Laws.

21.2    So far as the Warrantors are aware, no circumstance exists which may
        result, to the detriment of the Company, in breach, modification,
        suspension, or revocation of any Environmental Permit or may result in
        any such Environmental Permit not being extended, renewed, granted or
        (where necessary) transferred.

21.3    So far as the Warrantors are aware, but having taken no positive
        measures to confirm the same, no work or expenditure, including work and
        expenditure in respect of upgrading plant or processes or the removal or
        clean-up of Hazardous Matter, is or may in the foreseeable future be
        required under the conditions of any Environmental Permits or under any
        Environmental Laws (whether or not actually enforced) in order for the
        Company to carry on lawfully its business as carried on at the date
        hereof.


                                      
                                      Page 85 of 92

<PAGE>

21.4    No storage tanks of any kind, including related underground pipework,
        are or have been located so far as the Warrantors are aware, at any time
        whatsoever at, on, or under the Properties and/or the Former Property.

21.5    At no time has the Company or any member of the Group had knowledge of
        and/or received any written notice, claim, complaint or other
        communication alleging, any actual or potential Environmental Liability.

22.     INFORMATION

22.1    THE AGREEMENT

The information set out in schedules 1, 2, 3 and 8 of this agreement is
        true, complete, accurate and not misleading.




                                      
                                      Page 86 of 92

<PAGE>

                                   SCHEDULE 6

                      LIMITATIONS ON WARRANTORS' LIABILITY

1.      TIME LIMIT FOR CLAIMS

1.1     Save in the case of any liability based upon fraud and including without
        limitation fraudulent concealment by any of the Warrantors, the
        Warrantors shall not be liable in respect of a claim under the
        Warranties unless written notice of such claim setting out reasonable
        details of the relevant claim is served upon the Warrantors' Solicitors
        on behalf of the Warrantors:-

        (a)    in the case of a claim under the Warranties (other than the
               Warranties relating to Tax and Year 2000 Conformity), by not
               later than 5.00 p.m. on the second anniversary of Completion;

        (b)    in the case of a claim under the Warranties relating to Year 2000
               Conformity by not later than 5.00 p.m. on 1 July 2001; and

        (c)    in the case of a claim under Warranties relating to Tax by not
               later than (in the case of a claim against Troypeak Vendors
               except NatWest) 31 October 2004 and (in the case of a claim
               against Pismo Vendors) 30 April 2004.

2.      MONETARY LIMIT ON CLAIMS

Save in the case of any liability based upon fraud and including, without
        limitation, fraudulent concealment by any of the Warrantors:

               (a) the Troypeak Vendors (except NatWest) shall not be liable in
               respect of a claim under the Warranties or under the Troypeak Tax
               Deed, save for claims made pursuant to clause 2.1(a)(iv) or (v)
               of the Troypeak Tax Deed, unless and until the aggregate amount
               of all such substantiated claims against them
               exceeds (pound)50,000 in which event their liability shall be for
               the total amount of such substantiated claims and shall not be
               limited to the excess provided that (save in the case of fraud or
               fraudulent concealment by any of the Troypeak Vendors (except
               NatWest)) the aggregate liability of the Troypeak Vendors (except
               NatWest) in respect of all claims under the Warranties and the
               Troypeak Tax Deed shall not in any circumstances exceed the
               aggregate of (i) 82.35% of(pound)6,652,750 ("Basic Amount") and
               (ii) 82.35% of such part of the Adjustment Payment as is actually
               due (disregarding clause 2.6(f)-(j)) ("the Due Payment") to the
               Troypeak Vendors (except NatWest)



                                      Page 87 of 92

<PAGE>

               Provided that, before the Due Payment is due, nothing in this
               para. (a) shall restrict the bringing and pursuing of any such
               claims and proceedings in respect thereof to judgment to
               establish liability and (insofar as the principal amount of
               claims do not exceed the Basic Amount) to establish quantum and,
               insofar as the principal amount of claims exceed the Basic
               Amount, the parties will procure that proceedings are stayed by
               agreement pending determination of the Due Payment.

        (b)    the Pismo Vendors shall not be liable in respect of a claim under
               the Warranties or the Pismo Tax Deed unless and until the
               aggregate amount of all such substantiated claims against them
               exceeds(pound)50,000 in which event their liability shall be for
               the total amount of such substantiated claims and shall not be
               limited to the excess provided that (save in the case of fraud or
               fraudulent concealment by any of the Pismo Vendors) the aggregate
               liability of the Pismo Vendors in respect of all claims under the
               Warranties and the Pismo Tax Deed shall not in any circumstances
               exceed the aggregate of (i)(pound)6,934,050 ("the Basic Amount)
               and (ii) such part of the Adjustment Payment (disregarding clause
               2.6(f)-(j)) as is actually due ("the Due Payment")to the Pismo
               Vendors

        Provided that, before the Due Payment is due, nothing in this para. (b)
        shall restrict the bringing and pursuing of any such claims and
        proceedings in respect thereof to judgment to establish liability and
        (insofar as the principal amount of claims do not exceed the Basic
        Amount) to establish quantum and, insofar as the principal amount of
        claims exceed the Basic Amount, the parties will procure that
        proceedings are stayed by agreement pending determination of the Due
        Payment.

In this paragraph 2 "substantiated" means a claim for which any of the
        Warrantors are liable (whether individually, as a contributory or
        otherwise), and which is admitted, settled without admission of
        liability, or proved or determined in a court of competent jurisdiction.

3.      DISCLOSURE

        The Vendors, shall not be liable in respect of a claim under the
        Warranties to the extent that the same or circumstances giving rise
        thereto are fairly disclosed in the Disclosure Letters or are expressly
        provided for or noted in the Accounts. No letter, document or other
        communication shall be deemed to be disclosed except and to the extent
        that the same is referred to in, and a copy attached to, the Disclosure
        Letters.


                                       
                                      Page 88 of 92

<PAGE>


45.     No liability (whether in contract, tort or otherwise) shall attach to
        the Vendors in respect of any claim under the Warranties to the extent
        that:-

        (a)    the claim or the events giving rise to the claim would not have
               arisen but for any voluntary act, omission or transaction of the
               Purchaser's Group after Completion which could reasonably have
               been avoided otherwise than in the ordinary course of the
               business of the Company as at present carried on and which the
               Purchaser knew, or ought reasonably to have known, could give
               rise to a claim, or which would not have arisen but for any
               claim, election or surrender or disclaimer made or omitted to be
               made or notice or consent given or omitted to be given by the
               Purchaser's Group under the provisions of any statutes relating
               to Tax the making or giving of which was taken into account in
               computing the provision for taxation in the Accounts and notified
               to the Purchaser in writing at least 14 days prior to the date on
               which any such thing should have been due under the provisions of
               the relevant legislation;

        (b)    provision or reserve in respect of the matter giving rise to the
               claim shall have been made in the Accounts;

        (c)    the claim occurs wholly or partly out of or the amount thereof is
               increased as a result of:-

               (i)   any change in the accounting principles or practices of the
                     Purchaser's Group introduced or having effect after the
                     date of this agreement, unless the same is introduced to
                     bring the accounting principles and practices into line
                     with generally accepted accounting principles and practices
                     in relation to a business of the type carried on by the
                     Companies; or

               (ii)  any increase in the rates of taxation made after the date 
                     hereof; or

               (iii) any change in law made after the date hereof;


                                       
                                      Page 89 of 92


<PAGE>


                                                                    Exhibit 99.1

             BIG FLOWER ACQUIRES UK-BASED DIGITAL SERVICES COMPANIES

                 LASER TECH COLOR ADDS STRONG ADVERTISING AGENCY
                      CUSTOMER BASE, INTERNATIONAL PLATFORM

New York City (March 17, 1998) - Big Flower Holdings, Inc. (NYSE: BGF) announced
today that Laser Tech Color, Big Flower's digital premedia and image content
management business, has acquired Production Response Systems and Lifeboat
Matey, both headquartered in London, England. The acquired companies, which have
combined annual revenues of approximately $25 million, will do business as The
Fusion Group. Terms of the acquisition were not disclosed.

Production Response is a leading London-based provider of full service digital
premedia services including digital photography, graphic assembly and digital
distribution to advertising agencies and publishers. Lifeboat Matey is a leading
London-based provider of design and electronic post-production services to
advertising agencies.

Commenting on the acquisitions, Edward T. Reilly, President and Chief Executive
Officer of Big Flower said, "Production Response and Lifeboat Matey provide a
strong building block for our strategy of globalizing the creation, management
and distribution of image content for print, broadcast and electronic media
output."

As a result of the acquisitions, Laser Tech is one of only two premedia service
providers with an international presence to provide worldwide premedia and image
technology solutions for its multinational customers. In addition to enhancing
Big Flower's international platform, Production Response and Lifeboat Matey
provide important relationships with some of the largest advertising agencies in
the United Kingdom.

"I am delighted to join forces with Production Response and Lifeboat Matey,"
said Brian Mason, Chief Executive Officer of Laser Tech Color. "Leading
advertisers and packaged goods manufacturers will now be able to create
advertising and packaging imaging materials on one continent and distribute them
simultaneously on another using Laser Tech's VixNet, a virtual private network
designed to facilitate high bandwidth communication of image content."

Production Response and Lifeboat Matey are the fifth and sixth acquisitions
completed for the Laser Tech Color Group in the past 15 months. Laser Tech,
acquired by Big Flower in November 1995, operates a digitally-linked network of
23 premedia facilities and facilities management sites providing outsourced
digital premedia, image content management and 



                                      Page 90 of 92
                          
<PAGE>

new media services to advertising agencies, consumer product and packaging
companies and retail advertisers.

Big Flower Holdings, Inc. is a leading advertising and marketing services
company with three principal lines of business: targeted advertising inserts and
circulation-building newspaper products, customized direct mail and direct
marketing, and digital services, including outsourced digital premedia and
computer-based management systems for the broadcast industry. For the twelve
months ended December 31, 1997, the Company's pro forma revenues were
approximately $1.6 billion, including the recently completed acquisitions.

                                      # # #

For more information, contact:      Nancy S. Murray
                                    Big Flower Holdings, Inc.
                                    212.521.1606
                                    [email protected]



           

                                      Page 91 of 92

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