Employee Solutions to Acquire Simplified, Making Second Largest PEO

Employee Solutions, Inc. (ESI), a professional employer organization (PEO), has signed a letter of intent to acquire Simplified Employment Services Corporation (SES). With approximately 22,000 worksite employees and 1997 revenues of approximately $470 million, SES is one of the nation's largest privately held PEOs. The transaction creates the country's second largest PEO, with pro forma 1997 revenues of approximately $1.4 billion and approximately 68,000 worksite employees.

ESI chairman and CEO Marvin D. Brody says the announcement, "marks a continuation of ESI's role as a leading consolidator in the PEO industry. It is our firm belief that building bulk remains fundamental to long-term success in the PEO industry. The combination of ESI and SES will result in significant opportunities to improve operating efficiencies and bargaining power in core product areas such as employee benefits and workers' compensation. In addition to improved opportunities in our core PEO products and services, our increased worksite employee base and broadened national presence will improve our ability to benefit clients and worksite employees directly through the distribution of a broader menu of ancillary products and services at more competitive prices."

Brody continues, "SES has built a premier PEO through innovative products and superior customer service. SES has grown primarily through its 50-employee internal sales force, which has established a proven track record of internally generated revenue growth. Together, ESI and SES will continue to build an organization that will offer our clients increased products and services, new market alliances, and a new level of excitement and enthusiasm."

ESI and SES plan to move forward in a manner that allows for an orderly closing of the merger and post merger integration of operations. While both companies will maintain a "business as usual" approach with clients and employees, a cross-functional team is developing a transition plan intended to ensure that the best practices from each company are retained the newly merged company. ESI's recently installed state of the art technology platform from J.D. Edwards is expected to facilitate a smooth transition of accounting and financial data.

Dennis Lambka, CEO of SES states, "SES customers will be pleased with the level of products, services and professionalism ESI will bring to the merged entity. Combining these two leading PEOs creates a positive synergy of products, systems and ideas. We perceive a strong cultural fit between the two organizations, with complementary strengths that we expect will significantly benefit the combined entity. We believe the combination will be positive for our clients, employees and the industry." ESI said the letter of intent contemplates the exchange of 5.1 million shares of its common stock and $5 million in cash for 100% of SES' outstanding shares. The letter of intent provides that liabilities of SES that will be assumed as part of the transaction will not exceed $22.5 million. The transaction is expected to close by approximately August 11998, and is subject to execution of a definitive agreement, due diligence and other normal closing conditions.