CORESTAFF INC, 424B4, 1996-05-24

CORESTAFF INC
424B4, 1996-05-24
HELP SUPPLY SERVICES

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<PAGE> 1
FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-03238

5,300,000 SHARES

CORESTAFF, INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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

Of the 5,300,000 shares of Common Stock offered, 4,240,000 shares are being
offered hereby in the United States and 1,060,000 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both Offerings. See "Underwriting".

Of the 5,300,000 shares of Common Stock offered, 3,300,000 shares are being
sold by the Company and 2,000,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of shares by the Selling Stockholders.

The last reported sale price of the Common Stock, which is listed under the
symbol "CSTF", on the Nasdaq National Market on May 23, 1996 was $44.50 per
share. See "Price Range of Common Stock and Dividend Policy".

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Per Share...... $43.75 $1.85 $41.90 $41.90
Total(3)....... $231,875,000 $9,805,000 $138,270,000 $83,800,000
</TABLE>

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

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

(2) Before deducting estimated expenses of $800,000 payable by the Company.

(3) Certain Selling Stockholders have granted the U.S. Underwriters an option
for 30 days to purchase up to an additional 636,000 shares at the initial
public offering price per share, less the underwriting discount, solely to
cover over-allotments. Additionally, such Selling Stockholders have granted
the International Underwriters a similar option to purchase up to an
additional 159,000 shares, as part of the concurrent International Offering.
If such options are exercised in full, the total initial public offering
price, underwriting discount, proceeds to the Company and proceeds to the
Selling Stockholders will be $266,656,250, $11,275,750, $138,270,000 and
$117,110,500, respectively. See "Underwriting".

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

The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York, on
or about May 30, 1996, against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.
MONTGOMERY SECURITIES
THE ROBINSON-HUMPHREY COMPANY, INC.
---------------------
The date of this Prospectus is May 23, 1996.
<PAGE> 2

[MAP]

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. IN CONNECTION WITH THE OFFERINGS, CERTAIN UNDERWRITERS
AND SELLING GROUP MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
SEE "UNDERWRITING".
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements, including the notes
thereto, appearing elsewhere in this Prospectus. The pro forma consolidated
financial data presented herein give effect to all businesses acquired by the
Company through April 30, 1996, as if such acquisitions were consummated as of
the beginning of the periods presented, but do not give effect to the offerings
made hereby. Information contained in this Prospectus reflects a three-for-two
stock split effected on March 26, 1996 and assumes no exercise of the
over-allotment options. As used herein, unless the context indicates otherwise,
the terms "COREStaff" and the "Company" mean COREStaff, Inc. and its
predecessors, subsidiaries, and divisions. In this Prospectus, references to
"dollars" and "$" are to United States dollars.

THE COMPANY

COREStaff is a leading provider of temporary and contract personnel to
businesses, professional and service organizations, manufacturers, institutions,
and government agencies. The Company provides a broad range of services to
national, regional, and local clients. Since its inception in July 1993, the
Company has grown primarily through the acquisition of businesses in the
staffing services industry. As of April 30, 1996, the Company had acquired 17
staffing companies and had 113 branch offices in 20 states, the District of
Columbia and the United Kingdom. The Company believes that it is one of the
largest staffing services firms in the United States, and that it is a leading
provider of information technology staffing services. The Company's pro forma
revenues totaled approximately $485.1 million for 1995.

The Company's business is organized into two primary operating groups: the
Support Services Group and the Information Technology Services Group. The
Support Services Group, which provides office/clerical, light industrial, and
electronic/technical assembly personnel, generated 61.4% of the Company's pro
forma revenues for 1995. The Information Technology Services Group, which
provides highly-skilled computer professionals to staff programming, systems
analysis, information technology consulting, and other computer-related jobs,
generated 36.3% of the Company's pro forma revenues for 1995. Information
technology services, one of the fastest growing sectors of the temporary
staffing industry, provide the Company with the opportunity to achieve greater
profitability due to the higher gross margins in this sector. In 1995, the
Support Services and Information Technology Services Groups achieved 21.5% and
28.8% pro forma gross margins, respectively.

STRATEGY

INCREASE REVENUES THROUGH INTERNAL GROWTH. The Company believes it can
increase revenues through internal growth, particularly in the information
technology services sector, due to its well-developed presence in key geographic
and sector-specific markets. The Company's existing branch office network has
the infrastructure and support systems in place to enable it to expand and
enhance services with limited incremental expense. The Company believes that it
can achieve significant economies of scale by opening and clustering branch
offices in new and existing markets and allocating operating expenses over a
larger revenue base. The Company is also focused on increasing penetration of
national accounts through the cross-selling of services.

CONTINUE TO PURSUE STRATEGIC ACQUISITIONS. The Company's growth strategy
includes the continued acquisition of established, profitable regional staffing
companies ("platform companies") in markets with attractive growth
opportunities. These platform companies are intended to serve as

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<PAGE> 4

a basis for future growth and, therefore, must have the management
infrastructure and other operating characteristics necessary to significantly
expand the Company's presence within a specific sector and geographic area. In
addition, the Company is focused on acquiring smaller companies ("tuck-under
companies") which can be integrated into its existing platform companies to
increase market share with modest incremental expense. The Company's senior
management team has extensive experience in identifying attractive acquisition
targets and integrating acquired businesses into the Company's existing
operations.

ENHANCE LEADERSHIP POSITION IN INFORMATION TECHNOLOGY SERVICES SECTOR. The
Company believes that it is a leading provider of information technology
staffing services, with pro forma revenues from this group of $176.1 million in
1995. The Company has targeted the high growth, high margin information
technology services sector as its primary growth area and intends to
aggressively enhance its existing leadership position in this sector. The
Company believes that it is well-positioned to capitalize on the anticipated
continued growth in the information technology sector due to its size,
geographic breadth, industry experience, and expertise in providing a wide range
of information technology staffing services. The Company intends to grow
significantly in this area through selective acquisitions, the opening of
offices in new and existing markets, aggressive recruiting of industry
specialists, and the active cross-selling of its information technology staffing
services to its existing support services customers.

DEVELOP ADDITIONAL SPECIALIZED NICHE DEVELOPMENT SERVICES. The Company
believes revenues, profitability, and client relationships can be enhanced by
providing specialized niche services in select sectors of the staffing services
industry. The Company has developed specialty operations in the physical therapy
and technical communications outsourcing areas through the implementation of
focused marketing and operating strategies, which areas generally offer higher
operating margins than traditional general support services. The Company intends
to further develop these and other niche services through acquisitions, internal
development, and the establishment of separate product line identities when
opportunities for higher operating margins and national expansion can be
identified.

EXPAND GEOGRAPHIC AND SECTOR DIVERSITY. The Company seeks to increase
revenues and enhance earnings stability by continuing to expand its geographic
and sector diversity. The Company believes that this diversity helps protect it
from adverse regional economic and business cycles and provides the Company with
an advantage when pursuing contracts with national accounts, which generally
have numerous locations and a wide variety of staffing needs.

CONTINUE DEVELOPMENT OF VENDOR-IN-PARTNERSHIP PROGRAM. The Company believes
that its vendor-in-partnership ("VIP") program provides an attractive
opportunity to grow its operating revenues while generating higher-than-average
operating margins. The Company currently operates 21 VIP programs, which
generated combined pro forma revenues in 1995 of $66.1 million. The VIP program
provides the Company with an opportunity to establish long-term relationships
with clients and a more stable source of revenue while providing clients with a
dedicated, on-site account manager who can more effectively meet the client's
changing staffing needs with high quality and consistent service. The Company
intends to utilize its experience with the VIP program in the general support
services sector to establish itself as a leading VIP staffing provider in the
information technology services sector.

PROVIDE ENTREPRENEURIAL ENVIRONMENT. The Company believes its
entrepreneurial business environment rewards performance and allows it to
attract and retain highly talented managers who have demonstrated the ability to
operate independently and succeed within a decentralized management structure.
In addition, the Company has a profit-based compensation program at the
national, regional, and local levels and a broadly distributed stock option
program to further incentivize employees through ownership in the Company.

4
<PAGE> 5

THE TEMPORARY STAFFING INDUSTRY

According to Staffing Industry Report, a staffing services industry
publication, the temporary staffing industry was estimated to have 1995 revenues
of approximately $40 billion and a compound annual growth rate of approximately
18% over the past four years. The information technology services sector, one of
the fastest growing sectors of the temporary staffing industry, was estimated to
have 1995 revenues of approximately $9 billion, which represents a 25% increase
per year for the past two years. The Company believes that the demand for
traditional support services and information technology support services will
continue to increase due to changes in workforce lifestyles, advances in
technology and the increasing desire of many companies to shift employee costs
from a fixed to a variable expense and to outsource the support functions of
their non-core businesses.

RECENT DEVELOPMENTS

Since the Company's initial public offering in November 1995 (the "Initial
Public Offering"), the Company has acquired five additional staffing services
companies. Taylor Temporary Services, Inc. ("Taylor"), which provides support
services, was acquired in January 1996; Datronics Management, Inc. and its
United Kingdom affiliate, Datronics UK Limited (together, "Datronics"), which
provide information technology services, were acquired in January 1996; Richard
Keith Enterprises, Inc. and its affiliate, Provincial Staffing Services, Inc.
(together, "Richard Keith Enterprises"), which provide support services, were
acquired in February 1996; Regal Data Systems, Inc. ("Regal"), which provides
information technology services was acquired in April 1996; and Leafstone, Inc.
("Leafstone"), which provides support services, was acquired in April 1996. The
combined revenues related to these acquisitions were approximately $105.5
million for 1995.

5
<PAGE> 6

THE OFFERINGS

<TABLE>
<S> <C>
Common Stock offered by the Company:
U.S. Offering...................................................... 2,640,000 shares
International Offering............................................. 660,000 shares
Total...................................................... 3,300,000 shares
Common Stock offered by the Selling Stockholders(1):
U.S. Offering...................................................... 1,600,000 shares
International Offering............................................. 400,000 shares
Total...................................................... 2,000,000 shares
Common Stock to be outstanding after the Offerings(2)................ 21,246,167 shares
Nasdaq National Market Symbol........................................ CSTF
Use of Proceeds by the Company....................................... For the repayment of
existing indebtedness.
</TABLE>

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

(1) Assumes the over-allotment options are not exercised. The Company will not
receive any of the proceeds from the sale of shares sold by the Selling
Stockholders. See "Principal and Selling Stockholders."

(2) Based on shares outstanding as of April 30, 1996, and includes 913,703
shares of the Company's Class B Non-Voting Common Stock, $.01 par value per
share (the "Non-Voting Common Stock"), which shares are convertible at any
time at the option of the holder, subject to certain limitations, into
shares of the Company's Common Stock, $.01 par value per share (the "Common
Stock"), on a one-for-one basis. Immediately prior to the closing of the
Offerings, 206,020 shares of Non-Voting Common Stock will be converted into
the same number of shares of Common Stock. Further, such information
excludes 1,800,000 shares of Common Stock reserved for issuance pursuant to
the Company's 1995 Long Term Incentive Plan (the "1995 Plan") and 300,000
shares of Common Stock reserved for issuance pursuant to the Company's
Employee Stock Purchase Plan (the "Stock Purchase Plan"). On March 26,
1996, the Company effected a three-for-two stock split by means of a stock
dividend of one share of Common Stock and Non-Voting Common Stock for every
two shares of Common Stock and Non-Voting Common Stock, respectively, held
of record on March 14, 1996 (the "Stock Split").

The offering of 4,240,000 shares of Common Stock initially being offered in
the United States (the "U.S. Offering") and the concurrent offering of 1,060,000
shares of Common Stock initially being offered outside the United States (the
"International Offering") are collectively referred to as the "Offerings." The
closing of the International Offering is conditioned upon the closing of the
U.S. Offering, and vice versa.

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<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------- PRO FORMA(1)
INCEPTION ----------------------------------
(JULY 21, 1993) YEAR ENDED THREE MONTHS ENDED THREE MONTHS ENDED
THROUGH DECEMBER 31, MARCH 31, YEAR ENDED MARCH 31,
DECEMBER 31, ------------------- ------------------ DECEMBER 31, -------------------
1993 1994 1995 1995 1996 1995 1995 1996
--------------- -------- -------- ------- -------- ------------ -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from services.. $ 3,093 $163,351 $344,548 $69,471 $103,386 $485,126 $114,337 $124,720
Gross profit............ 748 33,808 82,456 15,312 25,702 117,593 26,538 30,198
Operating income
(loss)................ (388) 4,876 17,807 2,397 5,826 27,673 5,115 6,825
Income (loss) before
income taxes.......... (395) 2,711 10,947 1,165 4,602 13,272 1,513 4,711
Net income (loss)....... $ (253) $ 1,549 $ 6,357 $ 685 $ 2,669 $ 7,587 $ 865 $ 2,733
Earnings (loss) per
common share(2)....... $ (0.02) $ 0.10 $ 0.43 $ 0.04 $ 0.15 $ 0.53 $ 0.06 $ 0.15
Number of shares used to
compute earnings per
common share.......... 11,015 11,724 13,143 12,274 18,226 13,143 12,274 18,226
Revenues by business segment:
Support services................................................................. $297,755 $ 71,577 $ 72,949
Information technology services.................................................. 176,143 40,367 48,989
Niche development services....................................................... 11,228 2,393 2,782
Average revenue per office (annualized)............................................ $ 4,077 $ 3,844 $ 4,415
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
AS
ACTUAL ADJUSTED(3)
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................................................... $ 49,406 $ 84,379
Total assets............................................................................. 188,163 252,508
Long-term debt, net of current maturities................................................ 76,883 4
Stockholders' equity..................................................................... 78,068 215,538
</TABLE>

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

(1) Gives effect to all businesses acquired by the Company through April 30,
1996, as if such acquisitions were consummated as of the beginning of the
periods presented and should be read in conjunction with the pro forma
condensed consolidated financial statements included elsewhere in this
Prospectus. The pro forma results of operations are not necessarily
indicative of the results that would have occurred had the acquisitions been
consummated as of the beginning of the periods presented.

(2) Gives effect to the Stock Split and the conversion of preferred stock into
Common Stock (the "Conversions"). Supplemental earnings per common share,
which give effect to the Stock Split, the Conversions, the Initial Public
Offering and the Offerings as if they had occurred on January 1, 1995, were
$0.52 for the year ended December 31, 1995 and $0.16 for the three months
ended March 31, 1996. See Notes 1 and 5 to Consolidated Financial
Statements.

(3) Gives effect to the acquisition of Regal and Leafstone as if such
acquisitions were consummated as of March 31, 1996, and the Offerings and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."

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<PAGE> 8

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors relating to the Company and the Offerings should be considered in
evaluating an investment in the shares of Common Stock offered hereby.

FORWARD-LOOKING INFORMATION

This Prospectus contains various forward-looking statements and information
that are based on management's belief as well as assumptions made by and
information currently available to management. When used in this document, the
words "anticipate," "estimate," "project," "expect," and similar expressions are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected. Among the
key factors that may have a direct bearing on the Company's operating results
are fluctuations in the economy, the degree and nature of competition, demand
for the Company's services, and the Company's ability to integrate the
operations of acquired businesses, to recruit and place temporary professionals,
to expand into new markets, and to maintain gross margins in the face of pricing
pressures.

LIMITED OPERATING HISTORY

The Company was founded in July 1993 and has subsequently grown primarily
through the acquisition of staffing companies. Although certain of these
acquired businesses have been in operation for some time, the Company has only a
limited operating history upon which prospective investors may judge the
Company's performance. Future operating results will depend upon many factors,
including fluctuations in the economy, the degree and nature of competition,
demand for the Company's services, and the Company's ability to integrate the
operations of acquired businesses, to recruit and place temporary professionals,
to expand into new markets, and to maintain margins in the face of pricing
pressures.

ABILITY TO CONTINUE COMPANY GROWTH

The Company has experienced significant growth in the past, principally
through acquisitions. There can be no assurance that the Company will continue
to be able to expand its market presence in its current locations or to
successfully enter other markets or integrate acquired businesses into its
operations. The ability of the Company to continue its growth will depend on a
number of factors, including existing and emerging competition and the
availability of attractive acquisition opportunities and working capital to
support such growth. The Company must also manage costs in changing regulatory
environments, adapt its infrastructure and systems to accommodate growth, and
recruit and train additional qualified personnel.

LIABILITIES FOR CLIENT AND EMPLOYEE ACTIONS

Temporary service providers are in the business of employing people and
placing them in the workplace of other businesses. An attendant risk of such
activity includes possible claims of discrimination and harassment, employment
of illegal aliens, and other similar claims. The Company has policies and
guidelines in place to reduce its exposure to these risks. However, a failure to
follow these policies and guidelines may result in negative publicity and the
payment by the Company of money damages or fines. Although the Company
historically has not had any significant problems in this area, there can be no
assurance that the Company will not experience such problems in the future.

The Company is also exposed to liability with respect to actions taken by
its employees while on assignment, such as damages caused by employee errors,
misuse of client proprietary information, or theft of client property. To reduce
such exposures, the Company maintains insurance policies covering general
liability, workers' compensation claims, errors and omissions, and employee
theft.

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<PAGE> 9

Due to the nature of the Company's assignments, in particular, access to client
information systems and confidential information, and the potential liability
with respect thereto, there can be no assurance that insurance coverage will
continue to be available or that it will be adequate to cover any such
liability.

RELIANCE ON KEY PERSONNEL

The Company is highly dependent on its management. The Company believes
that its continued success will depend to a significant extent upon the efforts
and abilities of its Chairman, President and Chief Executive Officer, Michael T.
Willis, and certain other key executives. The loss of the services of Mr. Willis
or the other key executives could have a material adverse effect upon the
Company.

INCREASES IN UNEMPLOYMENT INSURANCE PREMIUMS AND WORKERS' COMPENSATION RATES

The Company is required to pay unemployment insurance premiums and workers'
compensation benefits for its temporary employees. Unemployment insurance
premiums are set annually by the states in which employees perform services and
could increase. Workers' compensation costs have increased as various states in
which the Company conducts operations have raised benefit levels and liberalized
allowable claims. The Company maintains workers' compensation insurance for its
employees under a self-insurance program with the State of California and an
insured program in its remaining areas of operation. These programs have a
$250,000 per claim deductible and an aggregate $5 million limit of liability
provision. See "Business -- Workers' Compensation Program; Safety Program." The
Company bases its workers' compensation costs on estimates of the costs of
future claims. Consulting actuaries are used by the Company in the determination
of its liability, which is calculated using a claims-incurred method. Using this
method, the present value (using a 5% discount factor) of the estimated
liability for claims incurred but unpaid as of December 31, 1995 was
approximately $5.5 million ($6.1 million undiscounted). There can be no
assurance that the Company's actual workers' compensation obligations will not
exceed the amount of its reserve. The Company may incur costs related to
workers' compensation claims at a higher rate due to higher than anticipated
losses from known claims or an increase in the number or the severity of new
claims. There can be no assurance that the Company will be able to increase the
fees charged to its clients in a sufficient amount to cover increased costs
related to workers' compensation and unemployment insurance. Further, there can
be no assurance that the Company will be able to obtain or renew workers'
compensation insurance coverage in amounts and types desired at reasonable
premium rates.

HIGHLY COMPETITIVE MARKET

The temporary services industry is highly competitive with limited barriers
to entry. The Company competes in national, regional, and local markets with
full service agencies and with specialized temporary services agencies. Several
competitors have greater marketing and financial resources than does the
Company. The Company expects that the level of competition will remain high in
the future. See "Business -- Competition."

FLUCTUATIONS IN THE GENERAL ECONOMY AFFECT DEMAND FOR TEMPORARY STAFFING
SERVICES

Demand for temporary staffing services is significantly affected by the
general level of economic activity. When economic activity increases, temporary
employees are often added before full-time employees are hired. Similarly, as
economic activity slows, many companies reduce their usage of temporary
employees before undertaking layoffs of full-time employees. Further, in an
economic downturn, the Company may face pricing pressure from its customers and
increased competition from other staffing companies which could have a material
adverse effect on the Company's business.

CONTROL OF THE COMPANY

Immediately after the Offerings, the Company's executive officers,
directors, and affiliates will control approximately 45% of the outstanding
shares of Common Stock. As a result, such persons

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<PAGE> 10

would have the ability to influence the election of all of the Company's
directors and the outcome of substantially all issues submitted to the Company's
stockholders. Such concentration of ownership could limit the price that certain
investors might be willing to pay in the future for shares of Common Stock, and
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, control of the
Company. See "Principal and Selling Stockholders."

STOCK PRICE VOLATILITY

The Company's Common Stock has been quoted on the Nasdaq National Market
since the Initial Public Offering, and the market price of the Common Stock has
risen substantially since such time. In the future, the market price of the
Common Stock could fluctuate substantially due to a variety of factors,
including quarterly operating results of the Company or other companies in the
same or similar industry, changes in general conditions in the economy, the
financial markets or the staffing services industry, natural disasters or other
developments affecting the Company or its competitors.

ANTI-TAKEOVER CONSIDERATIONS

Certain provisions of the Company's First Amended and Restated Certificate
of Incorporation (the "Certificate of Incorporation") and Amended and Restated
Bylaws (the "Bylaws") may have the effect of discouraging, delaying or making
more difficult a change in control of the Company or preventing the removal of
incumbent directors even if some, or a majority, of the Company's stockholders
were to deem such an attempt to be in the best interest of the Company. Among
other things, the Certificate of Incorporation provides for a classified Board
of Directors and allows the Board of Directors to issue up to five million
shares of Preferred Stock and fix the rights, privileges and preferences of
those shares without any further vote or action by the stockholders. The rights
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. While the Company has no present intention to issue shares of Preferred
Stock, any such issuance could have the effect of making it more difficult for a
third-party to acquire a majority of the outstanding voting stock of the
Company. In addition, the Company is subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law (the "DGCL"), which could
have the effect of delaying or preventing a change of control of the Company.
See "Description of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Sales of substantial amounts of Common Stock in the public market following
the Offerings could adversely affect the market price of the Common Stock. Of
the 21,246,167 shares of Common Stock and Non-Voting Common Stock that will be
outstanding following the Offerings, 9,309,972 shares of Common Stock and
913,703 shares of Non-Voting Common Stock are considered "restricted securities"
for the purpose of Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The sale of these restricted securities is limited by lock-up
agreements under which the holders of the restricted securities have agreed that
they will not, without the prior written consent of Goldman, Sachs & Co., offer,
sell, contract to sell, or otherwise dispose of their shares for a period of 90
days from the date of this Prospectus. After expiration of such lock-up
agreements, most of the restricted securities will be eligible for sale under
Rule 144 or Rule 701 of the Securities Act. Further, pursuant to a registration
rights agreement between the Company and the holders of the restricted stock,
such stockholders are entitled to certain registration rights. See "Shares
Eligible for Future Sale -- Registration Rights." In addition, the Company has
filed Registration Statements on Form S-8 under the Securities Act registering
1,800,000 shares of Common Stock issuable under the 1995 Plan and 300,000 shares
of Common Stock issuable under the Stock Purchase Plan. See "Management -- 1995
Long Term Incentive Plan" and "-- Employee Stock Purchase Plan."

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<PAGE> 11

THE COMPANY

COREStaff was formed in July 1993 by its Chairman, President, and Chief
Executive Officer, Michael T. Willis, and an affiliate of the Chicago-based
private equity firm, Golder, Thoma, Cressey, Rauner, Inc. ("GTCR Inc."). The
Company is a leading provider of temporary and contract personnel to businesses,
professional and service organizations, manufacturers, institutions, and
government agencies. The Company was incorporated in Delaware in 1993. Its
principal executive offices are located at 4400 Post Oak Parkway, Suite 1130,
Houston, Texas 77027-3413, and its telephone number is (713) 961-3633.

USE OF PROCEEDS

The net proceeds from the sale of the shares of Common Stock to be sold by
the Company in the Offerings are estimated to be $137.5 million per share, after
deducting estimated underwriting discounts and commissions and estimated
expenses payable by the Company. The Company intends to use such net proceeds
for the repayment of principal and interest under the Company's Second Amended
and Restated Credit Agreement dated November 7, 1995, by and among the Company,
the lenders named therein and First Union National Bank of North Carolina
("First Union Bank"), as Agent (as amended and supplemented, the "Credit
Agreement"). Any remaining proceeds to the Company will be used for general
corporate purposes, including possible future acquisitions. Borrowings under the
Credit Agreement bear interest, at the Company's option, at LIBOR or the bank's
base rate, plus the applicable margin, and mature on September 30, 2000. As of
May 22, 1996, the Company had outstanding borrowings under the Credit Agreement
of approximately $113.9 million and remaining availability of approximately $9.4
million. The weighted average interest rate on the Company's outstanding
borrowings under the Credit Agreement was 6.8% at March 31, 1996. Borrowings
under the Credit Agreement have primarily been used to fund acquisitions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Acquisitions."

The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Stockholders.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Prior to the quotation of the Common Stock on the Nasdaq National Market
beginning on November 8, 1995, there was no established market for the Common
Stock. Since that date, the Common Stock has been quoted on the Nasdaq National
Market under the symbol "CSTF." The following table sets forth the range of high
and low sales prices of the Common Stock as reported on the Nasdaq National
Market for the periods indicated and as adjusted for the Stock Split.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995
Fourth Quarter (November 8 through December 31)................ $25.83 $15.33
1996
First Quarter.................................................. $33.67 $22.50
Second Quarter (through May 23)................................ $48.50 $28.50
</TABLE>

The last reported sale price of the Common Stock on the Nasdaq National
Market on May 23, 1996 was $44.50. There were 40 holders of record of Common
Stock as of May 22, 1996. The Company believes that it has a significantly
larger number of beneficial owners of its Common Stock.

The Company has not paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends on its Common Stock for the foreseeable
future. The Company currently intends to retain any earnings to fund the
expansion and development of its business. Any future determination as to the
payment of dividends will be made at the discretion of the Board of Directors of
the Company and will depend upon the Company's operating results, financial
condition, capital requirements, and such other factors as the Board of
Directors deems relevant. In addition, the Credit Agreement prohibits the
payment of dividends; however, the lenders under the Credit Agreement waived
such restriction in connection with the Stock Split.

11
<PAGE> 12

CAPITALIZATION

The following table sets forth as of March 31, 1996, the actual, pro forma,
and adjusted capitalization of the Company. The table should be read in
conjunction with the Company's Consolidated Financial Statements and Pro Forma
Condensed Consolidated Financial Statements included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
PRO FORMA
FOR THE AS
ACTUAL ACQUISITIONS(1) ADJUSTED(1)(2)
-------- --------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term debt............... $ 1,902 $ 1,902 $ 1,902
======== ========= =========
Long-term debt, net of current maturities:
Credit Agreement................................. $ 76,879 $ 110,497 $ --
Other............................................ 4 4 4
-------- --------- ---------
Total long-term debt..................... 76,883 110,501 4
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares
authorized; no shares issued.................. -- -- --
Common Stock, $.01 par value; 40,000,000 shares
authorized; 17,510,444 shares issued and
16,826,444 shares outstanding; 21,016,464
shares issued and 20,332,464 shares
outstanding as adjusted for the
Offerings(3).................................. 175 175 210
Class B Non-Voting Common Stock, $.01 par value;
3,000,000 shares authorized; 1,119,723 shares
issued and outstanding; 913,703 shares issued
and outstanding as adjusted for the
Offerings(4).................................. 11 11 9
Additional paid-in capital....................... 70,748 70,748 208,185
Retained earnings................................ 8,149 8,149 8,149
Less -- Notes receivable from stockholders.... (827) (827) (827)
Less -- 684,000 shares of Common Stock held in
treasury, at cost........................... (188) (188) (188)
-------- --------- ---------
Total stockholders' equity............... 78,068 78,068 215,538
-------- --------- ---------
Total capitalization..................... $154,951 $ 188,569 $ 215,542
======== ========= =========
</TABLE>

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

(1) Gives effect to indebtedness incurred in connection with the acquisition of
Regal and Leafstone in April 1996.

(2) Gives effect to the Offerings and the application of the net proceeds
therefrom. See "Use of Proceeds."

(3) Excludes 785,924 shares of Common Stock subject to outstanding options
under the 1995 Plan as of March 31, 1996.

(4) Assumes the conversion by a Selling Stockholder of 206,020 shares of
Non-Voting Common Stock into Common Stock.

12
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA

The selected historical consolidated financial data for the period from
inception (July 21, 1993) to December 31, 1993 and the years ended December 31,
1994 and 1995 have been derived from the Company's Consolidated Financial
Statements, which have been audited by Ernst & Young LLP, independent auditors.
The selected historical consolidated financial data for the three months ended
March 31, 1995 and 1996 have been derived from the unaudited consolidated
financial statements of the Company, which in the opinion of management include
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the periods presented. The results of operations for the
three months ended March 31, 1996 are not necessarily indicative of the results
of operations to be expected for the year. The selected historical consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.

The pro forma consolidated financial data give effect to all businesses
acquired by the Company through April 30, 1996 as if such acquisitions were
consummated as of the beginning of the periods presented. The pro forma
consolidated financial data should be read in conjunction with the Pro Forma
Condensed Consolidated Financial Statements included elsewhere in this
Prospectus. The pro forma results of operations are not necessarily indicative
of the results that would have occurred had the acquisitions been consummated as
of the beginning of the periods presented or that might be attained in the
future.

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------- PRO FORMA
INCEPTION ----------------------------------
(JULY 23, THREE MONTHS THREE MONTHS
1993) YEAR ENDED ENDED ENDED
THROUGH DECEMBER 31, MARCH 31, YEAR ENDED MARCH 31,
DECEMBER 31, ------------------- ------------------ DECEMBER 31, -------------------
1993 1994 1995 1995 1996 1995 1995 1996
------------ -------- -------- ------- -------- ------------ -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from services............. $ 3,093 $163,351 $344,548 $69,471 $103,386 $485,126 $114,337 $124,720
Cost of services................... 2,345 129,543 262,092 54,159 77,684 367,533 87,799 94,522
------- -------- -------- ------- -------- -------- -------- --------
Gross profit....................... 748 33,808 82,456 15,312 25,702 117,593 26,538 30,198
Operating costs and expenses....... 1,136 28,932 64,649 12,915 19,876 89,920 21,423 23,373
------- -------- -------- ------- -------- -------- -------- --------
Operating income (loss)............ (388) 4,876 17,807 2,397 5,826 27,673 5,115 6,825
Other income (expense)............. (7) (2,165) (6,860) (1,232) (1,224) (14,401) (3,602) (2,114)
------- -------- -------- ------- -------- -------- -------- --------
Income (loss) before income taxes.. (395) 2,711 10,947 1,165 4,602 13,272 1,513 4,711
Provision (benefit) for income
taxes............................ (142) 1,162 4,590 480 1,933 5,685 648 1,978
------- -------- -------- ------- -------- -------- -------- --------
Net income (loss).................. $ (253) $ 1,549 $ 6,357 $ 685 $ 2,669 $ 7,587 $ 865 $ 2,733
======= ======== ======== ======= ======== ======== ======== ========
Earnings (loss) per common
share(1)......................... $ (0.02) $ 0.10 $ 0.43 $ 0.04 $ 0.15 $ 0.53 $ 0.06 $ 0.15
======= ======== ======== ======= ======== ======== ======== ========
Number of shares used to compute
earnings per common share........ 11,015 11,724 13,143 12,274 18,226 13,143 12,274 18,226
======= ======== ======== ======= ======== ======== ======== ========
Revenues by business segment:
Support services........................................................................ $297,755 $ 71,577 $ 72,949
Information technology services......................................................... 176,143 40,367 48,989
Niche development services.............................................................. 11,228 2,393 2,782
Average revenue per office (annualized)................................................... $ 4,077 $ 3,844 $ 4,415
</TABLE>

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------
PRO FORMA
DECEMBER 31, ---------
----------------------------- MARCH 31, MARCH 31,
1993 1994 1995 1996 1996
------ ------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................... $ 659 $24,318 $ 33,665 $ 49,406 $ 57,406
Total assets.......................................................... 4,777 92,153 152,370 188,163 225,535
Long-term debt, net of current maturities............................. 369 50,028 43,315 76,883 110,501
Stockholders' equity.................................................. 3,604 19,485 75,165 78,068 78,068
</TABLE>

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

(1) Gives effect to the Stock Split and the Conversions. Supplemental earnings
per common share, which give effect to the Stock Split, the Conversions, the
Initial Public Offering, and the Offerings as if they had occurred on
January 1, 1995, were $0.52 for the year ended December 31, 1995 and $0.16
for the three months ended March 31, 1996. See Notes 1 and 5 to Consolidated
Financial Statements.

13
<PAGE> 14

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

The following discussion should be read in conjunction with the "Selected
Consolidated Financial Data" and the Company's Pro Forma Condensed Consolidated
Financial Statements and Consolidated Financial Statements included elsewhere in
this Prospectus.

INTRODUCTION

The Company's growth since its inception in July 1993 has been primarily
through the acquisition of businesses in the staffing services industry and
subsequent internal growth. The Company provides its services through two
primary operating groups: the Support Services Group and the Information
Technology Services Group. In addition to its two primary operating groups, the
Company operates the Niche Development Services Group, which provides
specialized services such as physical therapy and technical communications
outsourcing. Through April 30, 1996, the Company had completed 17 acquisitions
of companies in the staffing services industry, consisting of ten support
services businesses, four information technology businesses, and three physical
therapy businesses. See "Business -- Strategy -- Acquisitions." These
acquisitions were primarily of businesses having long-standing operating
histories and well-established infrastructures.

The Support Services Group currently represents the Company's largest
operating group and accounted for 61.4% of the Company's pro forma consolidated
revenues for the year ended December 31, 1995. The Information Technology
Services Group accounted for 36.3% of the Company's pro forma consolidated
revenues for the same period. Management believes that the information
technology services sector generally offers higher growth opportunities as well
as higher bill rates and gross margins in comparison to traditional support
services. The Company believes that the revenues and gross profit contributed by
its Information Technology Services Group will continue to increase as a percent
of total revenues due to the higher growth opportunities in this sector and the
Company's focused expansion strategy. The Niche Development Services Group
represented 2.3% of the Company's pro forma consolidated revenues for the year
ended December 31, 1995.

All acquisitions completed by the Company have been accounted for using the
purchase method of accounting and, accordingly, the historical Consolidated
Financial Statements of the Company include the operating results of the
acquired businesses from the date of acquisition. The Company's historical
consolidated operating results have been significantly affected by the number,
timing, and size of the acquisitions. Accordingly, pro forma financial data are
provided herein for a more meaningful period-to-period comparison of the
Company's operating results.

The pro forma financial data have been prepared and included herein to give
effect to the following acquisitions as if they occurred at the beginning of the
periods presented: (i) United Staffing Services, Incorporated and United
Personnel Systems (together, "United") acquired in April 1994; (ii) Superior
Temporaries, Inc. and Superior Temporaries of Atlanta, Inc.(together,
"Superior") acquired in April 1994; (iii) TSTP Corp. ("TSTP") acquired in August
1994; (iv) COMSYS Technical Services, Inc. ("COMSYS") acquired in September
1994; (v) Friends & Company of Phoenix ("Friends & Company") acquired in January
1995; (vi) Regency Staffing, Inc. ("Regency") acquired in January 1995; (vii)
CTS Personnel Services ("CTS") acquired in March 1995; (viii) Tri-Starr
Services, Inc. and Tri-Starr Personnel, Inc. (together, "Tri-Starr") acquired in
April 1995; (ix) Cutler-Williams Incorporated ("Cutler-Williams") acquired in
June 1995; (x) Occupational Therapy Contract Services, Inc. ("OTCS") acquired in
August 1995; (xi) Taylor acquired in January 1996; (xii) Datronics acquired in
January 1996; (xiii) Richard Keith Enterprises acquired in February 1996; (xiv)
Regal acquired in April 1996; and (xv) Leafstone acquired in April 1996 (all
such acquisitions are collectively referred to as the "Acquisitions"). The pro
forma financial data are not necessarily indicative of results of operations
that would have occurred had

14
<PAGE> 15

the Acquisitions been consummated as of the beginning of the periods presented
or that might be attained in the future.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THE THREE MONTHS ENDED MARCH
31, 1995

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------- -------------------------------------
THREE MONTHS ENDED MARCH 31, THREE MONTHS ENDED MARCH 31,
------------------------------------- -------------------------------------
1995 1996 1995 1996
---------------- ---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from Services:
Support Services..................... $ 51,622 74.3% $ 60,786 58.8% $ 71,577 62.6% $ 72,949 58.5%
Information Technology Services...... 15,456 22.3 39,818 38.5 40,367 35.3 48,989 39.3
Niche Development Services........... 2,393 3.4 2,782 2.7 2,393 2.1 2,782 2.2
-------- ----- -------- ----- -------- ----- -------- -----
Total.......................... $ 69,471 100.0% $103,386 100.0% $114,337 100.0% $124,720 100.0%
Gross Profit:
Support Services..................... $ 10,879 71.1% $ 13,324 51.8% $ 14,586 55.0% $ 15,465 51.2%
Information Technology Services...... 3,881 25.3 11,656 45.4 11,400 43.0 14,011 46.4
Niche Development Services........... 552 3.6 722 2.8 552 2.0 722 2.4
-------- ----- -------- ----- -------- ----- -------- -----
Total.......................... $ 15,312 100.0% $ 25,702 100.0% $ 26,538 100.0% $ 30,198 100.0%
Gross Margin:
Support Services..................... 21.1% 21.9% 20.4% 21.2%
Information Technology Services...... 25.1 29.3 28.2 28.6
Niche Development Services........... 23.1 26.0 23.1 26.0
Consolidated......................... 22.0 24.9 23.2 24.2
Operating Income....................... $ 2,397 $ 5,826 $ 5,115 $ 6,825
Net Income............................. $ 685 $ 2,669 $ 865 $ 2,733
</TABLE>

COMPARISON OF HISTORICAL OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH
31, 1996 WITH THE THREE MONTHS ENDED MARCH 31, 1995

SUMMARY. Revenues, gross profit, and net income of the Company for the 1996
period increased by $33.9 million (48.8%), $10.4 million (67.9%), and $2.0
million (289.6%), respectively, compared with 1995. This improvement was
primarily due to the Acquisitions discussed above.

SUPPORT SERVICES GROUP. Revenues and gross profit for the first quarter of
1996 increased by $9.2 million (17.8%) and $2.4 million (22.5%), respectively,
compared with 1995. This improvement was primarily due to the inclusion of the
operating results for 1996 from Tri-Starr, Taylor, and Richard Keith, which were
acquired after March 31, 1995. Revenues and gross profit attributable to these
three companies of $9.6 million and $1.9 million, respectively, were included in
the Company's consolidated results of operations for 1996. Operating results for
1996 also benefited from a higher gross margin of 21.9% compared with 21.1% for
1995. This improvement related to improvements in overall cost performance due
to the implementation of additional risk management initiatives and the
termination of certain low margin accounts.

INFORMATION TECHNOLOGY SERVICES GROUP. Revenues and gross profit for the
1996 period increased by $24.4 million (157.6%) and $7.8 million (200.3%)
respectively, compared with 1995. This improvement was primarily due to the
inclusion of the operating results for 1996 from Cutler-Williams and Datronics
which were acquired after March 31, 1995. Revenues and gross profit attributable
to these two companies of $19.7 million and $6.4 million, respectively, were
included in the Company's consolidated results of operations for 1996. The gross
margin of this group increased to 29.3% for 1996 compared with 25.1% for 1995
primarily due to the higher gross margins of Cutler-Williams and Datronics.

OPERATING COSTS AND EXPENSES. Selling, general, and administrative ("SG&A")
expenses for the 1996 period totaled $18.5 million (17.9% of revenues), compared
with $12.0 million (17.3% of revenues) for 1995. The increase in SG&A expenses
primarily related to (i) the Acquisitions, (ii) internal growth of the operating
companies, and (iii) higher expenses at the corporate level.

15
<PAGE> 16

The operating subsidiaries incurred 92.8% of SG&A expenses for 1996. This
reflects the current decentralized nature of the Company's operations in which
virtually all front-office activities (e.g. recruiting, marketing, account
management, placement) and most of the accounting and administrative activities
of the operating companies are performed at the subsidiary level. SG&A expenses
at the corporate level totaled $1.3 million for the first quarter of 1996 and
primarily related to salaries and benefits of personnel responsible for
corporate activities, including its acquisition program and certain marketing,
administrative and reporting responsibilities.

Management believes that, in the future, SG&A expenses as a percentage of
revenues could increase as a result of the higher marketing, recruiting, and
employee benefit costs of the Information Technology Services Group, which is
growing at a faster rate than the two other operating groups. The Information
Technology Services Group also produces higher operating margins than the
Company's other operating groups. Consequently, as the Information Technology
Services Group becomes a larger portion of the Company's consolidated revenues,
management believes that this will result in higher consolidated operating
margins. In addition, the centralization and standardization of certain front-
and back-office functions should result in a reduction in SG&A.

Depreciation and amortization totaled $1.4 million and $0.9 million for
1996 and 1995, respectively. Depreciation of $0.6 and $0.4 million for the 1996
and 1995 periods, respectively, related primarily to the fixed assets of the
acquired companies. Amortization of $0.8 million and $0.5 million for 1996 and
1995, respectively, related to amortization of goodwill and non-compete
agreements of the acquired companies. The increase in both categories is a
result of the Acquisitions.

NON-OPERATING COSTS AND EXPENSES. Interest expense for 1996 totaled $1.3
million compared with $1.2 million for 1995. The $0.1 million increase was
primarily due to higher average outstanding borrowings during 1996.

The provision for income taxes for 1996 was $1.9 million (an effective tax
rate of 42.0%), as compared with $0.5 million (an effective tax rate of 41.2%)
for 1995. The higher effective rate reflects the amortization of goodwill
related to the acquisition of Cutler-Williams, which is not deductible for
federal income tax purposes and a higher corporate federal income tax rate. The
Company's effective tax rate includes the effects of state income taxes and the
portion of goodwill amortization that is not deductible for federal income tax
purposes.

NET INCOME. Due to the factors described above, net income for 1996 was
$2.7 million compared with $0.7 million for 1995. Net income as a percentage of
revenues increased to 2.6% for the 1996 period, from 1.0% for 1995.

COMPARISON OF PRO FORMA OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31,
1996 WITH THE THREE MONTHS ENDED MARCH 31, 1995.

Pro forma financial data are provided herein for a more meaningful basis of
comparison of operating results between periods due to the significance of the
Acquisitions to the Company's financial results. The pro forma financial data
give effect to the Acquisitions as if they were completed as of the beginning of
the periods presented. This financial data should be read in conjunction with
the Company's Consolidated Financial Statements and its Pro Forma Condensed
Consolidated Financial Statements included elsewhere in this Prospectus.

SUMMARY. Pro forma revenues, gross profit, and net income of the Company
for the 1996 period increased $10.4 million (9.1%), $3.7 million (13.8%), and
$1.9 million (215.8%), respectively, compared with 1995. The increase in
profitability primarily related to the $0.9 million and $2.6 million increases
in the gross profit of the Support Services Group and the Information Technology
Services Group, respectively.

SUPPORT SERVICES GROUP. Pro forma revenues for the 1996 period were $72.9
million compared with $71.6 million for 1995. The improvement in pro forma
revenues for 1996 was achieved despite (i) lower sales to certain large
manufacturing customers, (ii) work days lost as a result of the

16
<PAGE> 17

severe weather in the Northeast during January 1996, and (iii) the termination
of the business relationships with two major light-industrial customers in early
1995. The decrease in sales to certain large manufacturing customers was due to
their high inventory levels caused by sluggish sales in the fourth quarter of
1995. Management believes that sales to those customers will increase as these
excess inventory levels are reduced. The severe weather in January 1996 caused
the Company to lose approximately five working days in the Northeast. These
operations were also affected by the shut-down of the Federal government in
January. Revenues and gross profit from the two light-industrial customers
totaled $2.0 million and $0.3 million, respectively, for 1995. The Company
terminated its business relationship with the larger of the two customers due to
low operating margins and prospects for increased workers' compensation
exposure.

The gross margin for the group increased from 20.4% to 21.2% due to a
change in customer mix toward higher margin services (e.g. technical and
clerical) and improvements in overall cost performance due to the implementation
of additional risk management initiatives and the termination of certain lower
margin accounts.

INFORMATION TECHNOLOGY SERVICES GROUP. Pro forma revenues for the 1996
period were $49.0 million, which was 21.4% higher than pro forma revenues for
1995. This increase reflected the strong demand for technical services as
customers continued to depend heavily on technology to improve productivity and
support growth. Revenues for COMSYS and Cutler-Williams, which comprised the
Company's Information Technology Services Group at December 31, 1995, increased
25.3% from 1995 to 1996; whereas, the combined increase in revenues from 1995 to
1996 for Regal and Datronics, which were both acquired in 1996, was 11.3%. Gross
margin increased to 28.6% for 1996 from 28.2% for 1995 primarily due to billing
rate increases in excess of the related increase in personnel costs.

OPERATING COSTS AND EXPENSES. Pro forma SG&A expenses for the 1996 period
totaled $21.7 million (17.4% of revenues) compared with $19.9 million (17.4% of
revenues) for 1995. The increase in pro forma SG&A expenses primarily related to
internal growth of the operating companies and increased expenses at the
corporate level. The operating subsidiaries incurred 93.8% of the pro forma SG&A
expenses for 1996. This reflects the current decentralized nature of the
Company's operations in which virtually all front-office activities (e.g.
recruiting, marketing, account management, placement, etc.) and most of the
accounting and administrative activities of the operating companies are
performed at the subsidiary level. Pro forma SG&A expenses at the corporate
level for 1996 totaled $1.3 million (compared with $0.6 million for 1995) and
related primarily to salaries and benefits of personnel responsible for
corporate activities, including its acquisition program and certain marketing,
administrative and reporting responsibilities. The pro forma results for 1995
and 1996 reflect historical SG&A expenses at the corporate level and therefore
do not include the pro forma effects of personnel additions made subsequent to
the beginning of each period to accommodate the growth of the Company.

Management believes that, in the future, SG&A expenses as a percentage of
revenues could be affected by the higher marketing, recruiting and employee
benefit costs of the Information Technology Services Group, which is growing at
a faster rate than the two other operating groups. The Information Technology
Services Group also produces higher operating margins than the Company's other
operating groups. Consequently, as the Information Technology Services Group
becomes a larger portion of the Company's consolidated revenues, management
believes that this will result in higher consolidated operating margins. In
addition, the centralization and standardization of certain front- and
back-office functions should result in a reduction in SG&A.

Depreciation and amortization totaled $1.7 million and $1.5 million for
1996 and 1995, respectively. Depreciation of $0.6 and $0.5 million for 1996 and
1995, respectively, related primarily to the fixed assets of the acquired
companies. Amortization of $1.1 million and $1.0 million for 1996 and 1995,
respectively, related to amortization of goodwill and non-compete agreements of
the acquired companies.

17
<PAGE> 18

NON-OPERATING COSTS AND EXPENSES. Pro forma interest expense for 1996
totaled $2.2 million compared with $3.6 million for 1995. The decrease primarily
related to the repayment of indebtedness in November 1995 with proceeds from the
Initial Public Offering.

The pro forma provision for income taxes for 1996 was $2.0 million (an
effective tax rate of 42.0%), compared with $0.6 million (an effective tax rate
of 42.8%) for 1995. The lower effective rate was due to an increase in income
before income taxes that substantially exceeded the increase in permanent
non-deductible expenses. The Company's effective tax rate includes the effects
of state income taxes and the portion of goodwill amortization not deductible
for federal income tax purposes.

NET INCOME. Due to the factors described above, pro forma net income for
1996 was $2.7 million compared with $0.9 million for 1995. Pro forma net income
as a percentage of pro forma revenues was 2.2% for 1996 compared with 0.8% for
1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------- -------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------- -------------------------------------
1994 1995 1994 1995
---------------- ---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from Services:
Support Services.................... $135,551 83.0% $233,823 67.9% $280,182 66.6% $297,755 61.4%
Information Technology Services..... 19,159 11.7 99,497 28.9 131,731 31.3 176,143 36.3
Niche Development Services.......... 8,641 5.3 11,228 3.2 8,641 2.1 11,228 2.3
-------- ----- -------- ----- -------- ----- -------- -----
Total.......................... $163,351 100.0% $344,548 100.0% $420,554 100.0% $485,126 100.0%
Gross Profit:
Support Services.................... $ 26,669 78.9% $ 52,076 63.2% $ 55,034 58.2% $ 64,118 54.5%
Information Technology Services..... 5,021 14.9 27,555 33.4 37,447 39.6 50,650 43.1
Niche Development Services.......... 2,118 6.2 2,825 3.4 2,118 2.2 2,825 2.4
-------- ----- -------- ----- -------- ----- -------- -----
Total.......................... $ 33,808 100.0% $ 82,456 100.0% $ 94,599 100.0% $117,593 100.0%
Gross Margin:
Support Services.................... 19.7% 22.3% 19.6% 21.5%
Information Technology Services..... 26.2 27.7 28.4 28.8
Niche Development Services.......... 24.5 25.2 24.5 25.2
Consolidated........................ 20.7 23.9 22.5 24.2
Operating Income....................... $ 4,876 $ 17,807 $ 19,048 $ 27,673
Net Income............................. $ 1,549 $ 6,357 $ 3,853 $ 7,587
</TABLE>

COMPARISON OF HISTORICAL OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31,
1995 WITH THE YEAR ENDED DECEMBER 31, 1994

SUMMARY. Revenues, gross profit, and net income of the Company for 1995
increased $181.2 million (110.9%), $48.6 million (143.9%), and $4.8 million
(310.4%), respectively, compared with 1994. This improvement was primarily due
to the Acquisitions discussed above.

SUPPORT SERVICES GROUP. Revenues and gross profit for 1995 increased by
$98.3 million (72.5%) and $25.4 million (95.3%), respectively, compared with
1994. This improvement was primarily due to the inclusion of (i) a full year of
operating results for 1995 from United, Superior, and TSTP compared with only a
partial year for 1994, and (ii) the operating results of Regency and Tri-Starr.
Revenues for United, Superior, and TSTP were $135.6 million from their
respective acquisition dates to December 31, 1994, compared with $204.1 million
for the year ended December 31, 1995. Revenues for Regency and Tri-Starr were
$29.7 million from their respective acquisition dates to December 31, 1995.
Operating results for 1995 also benefited from a higher gross margin of 22.3%
compared with 19.7% for 1994. This improvement related to (i) the inclusion of a
full year of operating results for TSTP and a partial year for Regency and
Tri-Starr in 1995, all three of which had higher gross margins than the average
for the Support Services Group for 1994,

18
<PAGE> 19

and (ii) improvements in overall cost performance due to the implementation of
additional risk management initiatives and the termination of certain low margin
accounts.

INFORMATION TECHNOLOGY SERVICES GROUP. Results of operations for the
Information Technology Services Group consisted of operations from the Company's
two information technology companies, COMSYS and Cutler-Williams. Revenues and
gross profit for 1995 were $99.5 million and $27.6 million, respectively,
compared with $19.2 million and $5.0 million, respectively, for 1994. This
improvement was primarily due to the inclusion of (i) a full year of operating
results for 1995 from COMSYS and (ii) six months of operating results for 1995
from Cutler-Williams. The gross margin of this group increased to 27.7% for 1995
compared with 26.2% for 1994 primarily due to the higher gross margin of
Cutler-Williams as compared with COMSYS.

OPERATING COSTS AND EXPENSES. SG&A expenses for 1995 totaled $60.4 million
(17.5% of revenues), compared with $27.0 million (16.5% of revenues) for 1994.
The increase in SG&A expenses primarily related to (i) the Acquisitions, (ii)
internal growth of the operating companies post-acquisition, (iii) higher
expenses at the corporate level, and (iv) a $0.7 million non-recurring charge
for payments incurred in connection with the departure in August 1995 of two
officers of an acquired company. The operating subsidiaries incurred 93.5% of
SG&A expenses for 1995. This reflects the current decentralized nature of the
Company's operations in which virtually all front-office activities (e.g.
recruiting, marketing, account management, placement, etc.) and most of the
accounting and administrative activities of the operating companies are
performed at the subsidiary level. SG&A expenses at the corporate level totaled
$3.9 million for 1995 and related primarily to salaries and benefits of
personnel responsible for corporate activities, including its acquisition
program and certain marketing, administrative and reporting responsibilities.

Depreciation and amortization totaled $4.2 million and $1.9 million for
1995 and 1994, respectively. Depreciation of $1.8 and $0.8 million for 1995 and
1994, respectively, related primarily to the fixed assets of the acquired
companies. Amortization of $2.4 million and $1.1 million for 1995 and 1994,
respectively, related to amortization of goodwill and non-compete agreements of
the acquired companies. The increase in both categories reflected the
Acquisitions.

NON-OPERATING COSTS AND EXPENSES. Interest expense for 1995 totaled $7.0
million compared with $2.3 million for 1994. The $4.7 million increase was
primarily a result of increased borrowings related to the Acquisitions.

The provision for income taxes for 1995 was $4.6 million (an effective tax
rate of 41.9%), as compared with $1.2 million (an effective tax rate of 42.9%)
for 1994. The lower effective rate was due to an increase in income before
income taxes that substantially exceeded the increase in permanent
non-deductible expenses. The Company's effective tax rate includes the effects
of state income taxes and the portion of goodwill amortization that is not
deductible for federal income tax purposes.

NET INCOME. Due to the factors described above, net income for 1995 was
$6.4 million compared with $1.5 million for 1994. Net income as a percentage of
revenues increased to 1.8% for 1995, from 0.9% for 1994.

19
<PAGE> 20

COMPARISON OF PRO FORMA OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995
WITH THE YEAR ENDED DECEMBER 31, 1994

Pro forma financial data are provided herein for a more meaningful basis of
comparison of operating results between periods. The pro forma financial data
give effect to the Acquisitions as if they were completed as of January 1, 1994.
This financial data should be read in conjunction with the Company's
Consolidated Financial Statements and its Pro Forma Condensed Consolidated
Financial Statements, and notes thereto, included elsewhere in this Prospectus.

SUMMARY. Pro forma revenues, gross profit, and net income of the Company
for 1995 increased $64.6 million (15.4%), $23.0 million (24.3%), and $3.7
million (97.0%), respectively, compared with 1994. The increase in revenue
related primarily to internal growth. The increase in profitability primarily
related to the $9.1 million and $13.2 million increases in the gross profit of
the Support Services Group and the Information Technology Services Group,
respectively.

SUPPORT SERVICES GROUP. Pro forma revenues increased 6.3% to $297.8 million
for 1995 compared with 1994, primarily due to increased revenues from services
provided to certain large light-industrial customers under the Company's VIP
program. The gross margin for the group increased to 21.5% in 1995 from 19.6% in
1994 due to a change in customer mix toward higher margin services (e.g.
technical and clerical) and improvements in overall cost performance due to the
implementation of additional risk management initiatives and the termination of
certain lower margin accounts. The improved results were partially offset by the
termination of two major light-industrial customers and diminished economic
conditions in southern California. Revenues and gross profit from these
customers totaled $2.0 million and $0.3 million, respectively, for 1995 compared
with $17.8 million and $2.7 million, respectively, for 1994. The Company chose
to terminate its business relationship with the larger of the two major
light-industrial customers due to low operating margins and prospects for
increased workers' compensation exposure. Excluding the revenues contributed by
these two customers, revenues for 1995 increased by 12.7% over 1994.

INFORMATION TECHNOLOGY SERVICES GROUP. Pro forma revenues for 1995 were
$176.1 million, which represented a 33.7% increase over pro forma revenues for
1994. This increase reflected the strong demand for technical services as
customers continued to depend heavily on technology to improve productivity and
support growth. Gross margin increased to 28.8% from 28.4% primarily due to
billing rate increases in excess of the related increase in personnel costs.

OPERATING COSTS AND EXPENSES. Pro forma SG&A expenses for 1995 totaled
$83.6 million (17.2% of revenues) compared with $69.7 million (16.6% of
revenues) for 1994. The increase in pro forma SG&A expenses primarily related to
(i) internal growth of the operating companies, (ii) increased expenses at the
corporate level, and (iii) a non-recurring $0.7 million charge for payments
incurred in connection with the departure in August 1995 of two officers of an
acquired company. The operating subsidiaries incurred 95.3% of the pro forma
SG&A expenses for 1995. This reflects the current decentralized nature of the
Company's operations in which virtually all front-office activities (e.g.
recruiting, marketing, account management, placement, etc.) and most of the
accounting and administrative activities of the operating companies are
performed at the subsidiary level. Pro forma SG&A expenses at the corporate
level for 1995 totaled $3.9 million (compared with $2.1 million for 1994) and
related primarily to salaries and benefits of personnel responsible for
corporate activities, including its acquisition program, and certain marketing,
and administrative and reporting responsibilities. The pro forma results for
1994 and 1995 reflect historical SG&A expenses at the corporate level and
therefore do not include a full year of the costs of personnel additions made
since the beginning of each period to accommodate the significant growth of the
Company.

20
<PAGE> 21

pany's other operating groups. Consequently, as the Information Technology
Services Group becomes a larger portion of the Company's consolidated revenues,
management believes that this will result in higher consolidated operating
margins. In addition, the centralization and standardization of certain front-
and back-office functions should result in a reduction in SG&A.

Depreciation and amortization totaled $6.3 million and $5.8 million for
1995 and 1994, respectively. Depreciation of $2.2 and $1.8 million for 1995 and
1994, respectively, related primarily to the fixed assets of the acquired
companies. Amortization of $4.1 million and $4.0 million for 1995 and 1994,
respectively, related to amortization of goodwill and non-compete agreements of
the acquired companies.

NON-OPERATING COSTS AND EXPENSES. Pro forma interest expense for 1995
totaled $14.3 million compared with $12.2 million for 1994. The increase
primarily related to an increase in interest rates.

The pro forma provision for income taxes for 1995 was $5.7 million (an
effective tax rate of 42.8%), compared with $3.3 million (an effective tax rate
of 45.9%) for 1994. The lower effective rate was due to an increase in income
before income taxes that substantially exceeded the increase in permanent
non-deductible expenses. The Company's effective tax rate includes the effects
of state income taxes and the portion of goodwill amortization not deductible
for federal income tax purposes.

NET INCOME. Due to the factors described above, pro forma net income for
1995 was $7.6 million compared with $3.9 million for 1994. Pro forma net income
as a percentage of pro forma revenues was 1.6% for 1995 compared with 0.9% for
1994.

YEAR ENDED DECEMBER 31, 1994 COMPARED WITH PERIOD FROM INCEPTION (JULY 21,
1993) TO DECEMBER 31, 1993

<TABLE>
<CAPTION>
INCEPTION
(JULY 21, 1993)
THROUGH
DECEMBER 31, 1993 YEAR ENDED
DECEMBER 31, 1994
--------------------- -----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues from Services:
Support Services.............................................. $ -- --% $ 135,551 83.0%
Information Technology Services............................... -- -- 19,159 11.7
Niche Development Services.................................... 3,093 100.0 8,641 5.3
------ ----- -------- -----
Total................................................... $ 3,093 100.0% $ 163,351 100.0%
Gross Profit:
Support Services.............................................. $ -- --% $ 26,669 78.9%
Information Technology Services............................... -- -- 5,021 14.9
Niche Development Services.................................... 748 100.0 2,118 6.2
------ ----- -------- -----
Total................................................... $ 748 100.0% $ 33,808 100.0%
Gross Margin:
Support Services.............................................. --% 19.7%
Information Technology Services............................... -- 26.2
Niche Development Services.................................... 24.2 24.5
Consolidated.................................................. 24.2 20.7
Operating Income (loss)......................................... $ (388) $ 4,876
Net Income (loss)............................................... $ (253) $ 1,549
</TABLE>

SUMMARY. The significant increase in operating results was related to the
acquisition of three support services businesses and one information technology
services business in 1994. The niche development businesses acquired in 1993
accounted for 5.3% of consolidated revenues for the year ended December 31,
1994.

SUPPORT SERVICES GROUP. United, acquired in April 1994, accounted for 71.8%
of the group's historical revenues and 69.8% of gross profit for 1994. Superior,
acquired in April 1994, accounted

21
<PAGE> 22

for 19.1% of the group's historical revenues and 16.0% of gross profit for 1994.
TSTP, acquired in August 1994, accounted for 9.1% of the group's historical
revenues and 14.2% of gross profit for 1994, respectively.

INFORMATION TECHNOLOGY SERVICES GROUP. In September 1994, the Company
acquired COMSYS which represented the Company's only acquisition in this segment
during 1994. COMSYS accounted for 11.7% of the Company's historical consolidated
revenues and 14.9% of gross profit for 1994.

NICHE DEVELOPMENT SERVICES GROUP. This group comprised 5.3% of historical
revenues and 6.2% of gross profit for 1994 and accounted for all of the
Company's operating results for the period from inception to December 31, 1993.
Revenues and gross profit from this group increased for 1994 primarily due to
the inclusion of a full year of operating results.

OPERATING COSTS AND EXPENSES. SG&A expenses for 1994 totaled $27.0 million
(16.5% of revenues) compared with $1.0 million (33.4% of revenues) for the
period from inception to December 31, 1993. The improvement as a percentage of
revenues relates to the economies of scale associated with acquisitions. The
increase in SG&A expenses was directly related to the acquisitions. SG&A
expenses primarily related to salaries and benefits of personnel at the
operating companies. Corporate SG&A expenses for 1994 totaled $2.1 million and
related primarily to salaries and benefits of corporate personnel.

Depreciation and amortization for 1994 totaled $1.9 million, consisting of
depreciation of $0.8 million and amortization of intangible assets of $1.1
million. The majority of depreciation expense related to the fixed assets of the
acquired companies. The amortization of intangible assets related to the
amortization of goodwill and non-compete agreements in connection with the
acquisitions. Depreciation and amortization for 1993 totaled $0.1 million and
related to depreciation and amortization associated with the acquisition of the
two physical therapy businesses in 1993.

NON-OPERATING COSTS AND EXPENSES. Interest expense for 1994 totaled $2.3
million and primarily related to interest on borrowings under the Company's
credit facilities used to fund a portion of the purchase price of certain of the
Acquisitions.

The provision for income taxes for 1994 was $1.2 million (an effective tax
rate of 42.9%). The Company's effective tax rate includes state income taxes and
the portion of goodwill amortization not deductible for federal income tax
purposes. For 1993, the Company reflected a benefit for income taxes of 36.0% of
the loss before income taxes.

NET INCOME. Due to the factors described above, net income for 1994 was
$1.5 million compared with a net loss of $0.3 million for 1993. Net income as a
percentage of revenues increased to 0.9% for 1994, from (8.2)% for 1993.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has funded its capital requirements with
borrowings from banks, issuances of securities, and internally generated funds.
In November 1995, the Company completed the Initial Public Offering and received
net proceeds of $58.9 million. Such net proceeds were used to (i) repay $37.4
million of outstanding principal and accrued interest under the Credit
Agreement, (ii) repay $10.1 million of outstanding principal and accrued
interest under its senior subordinated note, (iii) redeem outstanding Preferred
Stock for $9.2 million, and (iv) pay $2.2 million of dividends in arrears on the
Preferred Stock.

Under the terms of the Credit Agreement which was amended April 2, 1996,
the Company may borrow, under a revolving credit facility, up to the lesser of
$130 million or 3.5 times Pro Forma Adjusted EBITDA (earnings before interest,
income taxes, depreciation and amortization of all acquired companies for the
preceding twelve months). Borrowings under the Credit Agreement bear interest,
at the Company's option, at LIBOR or the bank's base rate, plus the applicable

22
<PAGE> 23

margin. A commitment fee of .25% (.375% if the leverage ratio, as defined, is
greater than 2 to 1) is payable on the unused portion of the commitment. The
Credit Agreement contains certain covenants which, among other things, restrict
the payment of dividends and require the maintenance of certain financial
ratios. As of April 30, 1996, the Company had outstanding borrowings under the
Credit Agreement of $110.0 million and remaining availability of $13.3 million.
The Company intends to repay outstanding borrowings under the Credit Agreement
with the net proceeds from the Offerings.

The Company's primary capital requirements relate to the acquisition of
staffing businesses. During 1995 and 1994, the Company made cash payments for
acquisitions of $39.8 million and $55.8 million, respectively. The Company has
made cash payments for acquisitions of approximately $60.0 million since
December 31, 1995. The Company's acquisition program will require significant
additional capital. The Company intends to seek additional capital as necessary
to fund such acquisitions through one or more funding sources that may include
borrowings under the Credit Agreement or offerings of debt and/or equity
securities of the Company. Cash flow from operations, to the extent available,
may also be used to fund a portion of these expenditures. Although management
believes that the Company will be able to obtain sufficient capital to fund
acquisitions, there can be no assurance that such capital will be available to
the Company at the time it is required or on terms acceptable to the Company.

Capital expenditures totaled $3.0 million and $1.9 million for the years
ended December 31, 1995 and 1994, respectively. These expenditures related
primarily to the establishment of new offices, training equipment and materials,
information systems (including front-office systems), and computer equipment.
The Company currently expects capital expenditures for 1996 to be approximately
$8.0 million of which $1.8 million was incurred during the three months ended
March 31, 1996. The majority of these expenditures will relate to the
installation of an integrated front- and back-office information system, which
is expected to be operational in late 1996 or early 1997.

The Company had working capital of $33.7 million and $24.3 million at
December 31, 1995 and 1994, respectively. The Company had cash and cash
equivalents of $4.1 million and $4.6 million at December 31, 1995 and 1994,
respectively. Cash flows provided by (used in) operating activities were $6.1
million and $(0.5) million for the years ended December 31, 1995 and 1994,
respectively. The improvement in operating cash flows for 1995 reflected higher
cash earnings and improved accounts receivable turnover. The Company's operating
cash flows and working capital requirements are significantly affected by the
timing of payment of payroll and the receipt of payment from the customer.
Generally, the Company pays the temporary employees of its Support Services
Group weekly and the employees of its Information Technology Services Group and
Niche Development Services Group every two weeks. Payments from customers are
received on average 30 to 65 days from the date of invoice. Cash flows used in
investing activities were $42.9 million and $56.6 million for the years ended
December 31, 1995 and 1994, respectively. Cash used in investing activities
consisted primarily of payments for acquisitions. Proceeds from the issuance of
long-term debt ($84.7 million and $68.3 million for 1995 and 1994, respectively)
and from the sale of common and preferred stock ($61.1 million and $14.5 million
for 1995 and 1994, respectively) were used to fund the Company's investing
activities.

Cash flows provided by operating activities were $8,000 and $1.7 million
for the three months ended March 31, 1996 and 1995, respectively. The decrease
in operating cash flows for 1996 reflected an increase in net accounts
receivable between the periods. Cash flows used in investing activities were
$31.6 million and $2.4 million for the three months ended March 31, 1996 and
1995, respectively. Cash used in investing activities consisted primarily of
payments for acquisitions. Proceeds from the issuance of long-term debt ($33.8
million for 1996) and from the sale of preferred stock ($1.3 million for 1995)
were used to fund the Company's investing activities.

On January 26, 1995, the Company purchased for $0.3 million a three-year
interest rate cap to reduce a portion of its interest rate exposure on
borrowings under the Credit Agreement. The

23
<PAGE> 24

agreement initially covers $30.0 million of notional principal with quarterly
notional principal reductions. Under the interest rate cap, the Company will
receive an amount equal to the excess of LIBOR (reset quarterly in arrears) over
8.75%, times the notional principal. The cost of this cap is being amortized
evenly over its three-year term with the amortization included in interest
expense. Any amounts received under the agreement will reduce interest expense.

SEASONALITY

The Company's quarterly operating results are affected primarily by the
number of billing days in the quarter and the seasonality of its customers'
businesses. Demand for services in the Support Services Group has historically
been lower during the year-end holidays through February of the following year,
showing gradual improvement over the remainder of the year. Although less
pronounced than in the Support Services Group, the demand for services of the
Information Technology Services Group is typically lower during the first
quarter until customers' operating budgets are finalized. The Company believes
that the effects of seasonality will be less severe in the future as revenues
contributed by the Information Technology Services Group continue to increase as
a percentage of the Company's consolidated revenues.

INFLATION

The effects of inflation on the Company's operations were not significant
during the periods presented in the financial statements.

24
<PAGE> 25

BUSINESS

GENERAL

COREStaff is a leading provider of temporary and contract personnel to
businesses, professional and service organizations, manufacturers, institutions,
and government agencies. The Company provides a broad range of services to
national, regional, and local clients. Since its inception in July 1993, the
Company has grown primarily through the acquisition of businesses in the
staffing services industry. As of April 30, 1996, the Company had acquired 17
staffing companies and had 113 branch offices in 20 states, the District of
Columbia and the United Kingdom. The Company believes that it is currently one
of the largest staffing services firms in the United States, and that it is a
leading provider of information technology staffing services.

The Company's business is organized into two primary operating groups: the
Support Services Group and the Information Technology Services Group. The
Support Services Group, which provides office/clerical, light industrial, and
electronic/technical assembly personnel, generated 61.4% and 66.6% of the
Company's pro forma revenues for the years ended December 31, 1995 and 1994,
respectively. The Information Technology Services Group, which provides
highly-skilled computer professionals to staff programming, systems analysis,
information technology consulting, and other computer-related jobs, generated
36.3% and 31.3% of the Company's pro forma revenues for the years ended December
31, 1995 and 1994, respectively. Information technology services, one of the
fastest-growing sectors of the temporary staffing industry according to Staffing
Industry Analysts, a trade publication, provides the Company the opportunity to
achieve greater profitability than operating exclusively in the support services
sector. In addition to its two primary operating groups, the Company operates
the Niche Development Services Group which focuses on providing specialized
services such as physical therapy and technical communications outsourcing.

STRATEGY

The Company seeks to become the leading provider of a broad range of
high-quality staffing services to a diverse, national client base. The Company's
strategy is focused on internal growth, strategic acquisitions, and the
continued development of additional complementary staffing services. The Company
believes that its business strategy will provide it with a competitive advantage
in pursuing and maintaining major national and regional accounts as well as in
serving local markets. The key elements of the Company's strategy are presented
below.

INCREASE REVENUES THROUGH INTERNAL GROWTH

Since its inception in July 1993, the Company has focused on the
establishment of a national network of staffing services operations. The Company
believes it can increase revenues through internal growth, particularly in the
information technology services sector, due to its well-developed presence in
key geographic and sector-specific markets. The Company's existing branch office
network has the infrastructure and support systems in place to enable it to
expand and enhance services with limited incremental expense. In addition, the
Company intends to open recruiting offices near its current branch locations as
a low-cost means of hiring temporary employees. Further, the Company believes
that it can achieve significant economies of scale by opening and clustering
branch offices in new and existing markets and allocating management,
advertising, recruiting, and training costs over a larger revenue base. The
Company believes that the average cost of opening a new branch office ranges
from an estimated $75,000 to $200,000, primarily based on the size of the office
and whether the Company has any existing operations in the area. The Company is
also focused on increasing penetration of national accounts through the
cross-selling of services.

25
<PAGE> 26

CONTINUE TO PURSUE STRATEGIC ACQUISITIONS

The Company's growth strategy includes the continued acquisition of
established, profitable regional staffing companies ("platform companies") in
markets with attractive growth opportunities. These platform companies are
intended to serve as a basis for future growth and, therefore, must have the
management infrastructure and other operating characteristics necessary to
significantly expand the Company's presence within a specific sector and
geographic area. In addition, the Company is focused on acquiring smaller
companies ("tuck-under companies") which can be integrated into its existing
platform companies to increase market share with minimal incremental expense.
The Company believes that its favorable reputation and management style
facilitate its efforts to make tuck-under acquisitions of businesses that are
seeking alliances with larger staffing companies to more effectively compete for
national contracts. The Company's senior management team has extensive
experience in identifying attractive acquisition targets and integrating
acquired businesses into the Company's existing operations. During 1995, the
Company acquired six companies with combined 1995 revenues of $96.2 million.
During the first four months of 1996, the Company acquired five companies with
combined 1995 revenues of $105.5 million.

The following table summarizes the 17 acquisitions made by the Company
through April 30, 1996. For more information regarding such acquisitions, see
"-- Acquisitions."

<TABLE>
<CAPTION>
DATE OF YEAR TYPE OF HEADQUARTERS
ACQUIRED COMPANY ACQUISITION FOUNDED ACQUISITION LOCATION STAFFING SERVICES
- - -------------------------- --------------- ------- ----------- -------------- -----------------------
<S> <C> <C> <C> <C> <C>
PHP July 1993 1985 Platform California Physical Therapy
CTOC September 1993 1992 Tuck-Under Colorado Physical Therapy
United April 1994 1980 Platform California Support Services
Superior April 1994 1986 Platform Texas/Georgia Support Services
TSTP August 1994 1948 Platform Maryland Support Services
COMSYS September 1994 1979 Platform Maryland Information Technology
Services
Friends & Company January 1995 1989 Tuck-Under Arizona Support Services
Regency January 1995 1991 Platform Florida Support Services
CTS March 1995 1993 Tuck-Under Texas Support Services
Tri-Starr April 1995 1984 Platform Texas Support Services
Cutler-Williams June 1995 1969 Platform Texas Information Technology
Services
OTCS August 1995 1985 Tuck-Under Colorado Physical Therapy
Taylor January 1996 1984 Tuck-Under North Carolina Support Services
Datronics January 1996 1976 Platform New York Information Technology
Services
Richard Keith Enterprises February 1996 1990 Platform Colorado Support Services
Regal April 1996 1982 Platform New Jersey Information Technology
Services
Leafstone April 1996 1985 Platform New York Support Services
</TABLE>

ENHANCE LEADERSHIP POSITION IN THE INFORMATION TECHNOLOGY SERVICES SECTOR

Recently there has been a dramatic increase in demand for technical project
support, software development, and other computer-related services resulting
from the increased use of technology. This high level of demand, coupled with
the higher value-added nature of such services, generally results in higher
profit margins than those earned by providing general support services.

The Company established its Information Technology Services Group with the
acquisition of a major platform company in September 1994 and acquired three
additional platform companies in June 1995, January 1996, and April 1996. The
Company believes that it is a leading provider of information technology
staffing services, with 1995 pro forma revenues for the year ended December 31,
1995 of $176.1 million. The Company has targeted the high growth, high margin
information technology services sector as its primary growth area and intends to
aggressively enhance its existing leadership position in this sector. Pro forma
revenues from the Information

26
<PAGE> 27

Technology Services Group increased 33.7% from the year ended December 31, 1994
to the year ended December 31, 1995, while the pro forma gross margin increased
from 28.4% to 28.8%. This group has also grown as a percentage of the Company's
consolidated pro forma revenues from 31.3% for the year ended December 31, 1994
to 36.3% for the year ended December 31, 1995. The Company expects that revenues
contributed by its Information Technology Services Group will continue to
increase as a percentage of its total revenues. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

The Company believes that it is well positioned to capitalize on the
anticipated continued growth in the information technology sector due to its
size, geographic breadth, industry experience, and expertise in providing a wide
range of information technology staffing services. The Company intends to grow
significantly in this area through (i) selective acquisitions, (ii) the opening
of offices in new and existing markets, (iii) aggressive recruiting, training,
and marketing of industry specialists with a wide range of technical expertise,
and (iv) active cross-selling of its information technology staffing services to
its existing support services customers.

DEVELOP ADDITIONAL SPECIALIZED NICHE DEVELOPMENT SERVICES

In addition to its two core business areas, the Company believes revenues,
profitability, and client relationships can be enhanced by providing specialized
niche services in select sectors of the staffing services industry. For example,
the Company has developed specialty operations in the physical therapy and
technical communications outsourcing areas through the implementation of focused
marketing and operating management strategies. These niche services generally
offer higher operating margins than traditional general support services. The
Company intends to further develop these and other niche services through
acquisitions, internal development, and the establishment of separate product
line identities when opportunities for higher operating margins and national
expansion can be identified.

EXPAND GEOGRAPHIC AND SECTOR DIVERSITY

The Company seeks to increase revenues and enhance earnings stability by
continuing to expand its geographic and sector diversity. The Company currently
provides a wide variety of general support, information technology, and niche
development services in the Western, Southwestern, Southeastern and Eastern
states. The Company believes that this geographic and sector diversity helps
protect it from adverse regional economic and business cycles. In addition, this
diversity provides the Company with an advantage when pursuing contracts with
national accounts, which generally have numerous locations and a wide variety of
staffing needs. The Company intends to package and market its services with the
goal of becoming the primary staffing provider to Fortune 1000 companies and
other national accounts.

CONTINUE DEVELOPMENT OF VENDOR-IN-PARTNERSHIP PROGRAM

The Company believes that its VIP program provides an attractive
opportunity to grow its operating revenues while generating higher-than-average
operating margins. While these VIP programs tend to have lower gross margins
than traditional temporary staffing services, higher volumes and proportionately
lower operating costs result in attractive operating profits for the Company.
The Company currently operates 21 VIP programs, which generated combined pro
forma revenues of $66.1 million for the year ended December 31, 1995. Under
these programs, the Company assumes administrative responsibility for
coordinating all temporary personnel services throughout a client's organization
or location. The VIP program provides the Company with an opportunity to
establish long-term relationships with clients and a more stable source of
revenue, while providing clients with a dedicated, on-site account manager who
can more effectively meet the client's changing staffing needs with high quality
and consistent service. The Company is utilizing the VIP program in the general
support services sector to establish itself as a leading VIP staffing provider
in the information technology services sector.

27
<PAGE> 28

PROVIDE ENTREPRENEURIAL ENVIRONMENT

The Company believes that its entrepreneurial business environment rewards
performance. Each branch office is operated as a separate profit center with
local management having profit and loss responsibilities. The Company believes
that this management philosophy allows it to attract and retain highly talented
managers who have demonstrated the ability to operate independently and succeed
within a decentralized management structure. The Company has established
guidelines that offer its managers and field personnel latitude in operational
areas such as hiring, pricing, training, sales, and marketing. In addition, the
Company has a profit-based compensation program at the national, regional, and
local levels and a broadly distributed stock option program to further
incentivize employees through ownership in the Company. See "Management -- 1995
Long-Term Incentive Plan."

THE TEMPORARY STAFFING INDUSTRY

The temporary staffing industry was once used predominately as a short-term
fix for peak production periods and to temporarily replace workers absent due to
illness, vacation, or abrupt termination. Since the mid-1980s, the temporary
services sector has evolved into a permanent and significant component of the
staffing plans of many corporations. Corporate restructuring, downsizing,
government regulations, advances in technology, and the desire by many companies
to shift employee costs from a fixed to a variable expense have resulted in the
use of a wide range of staffing alternatives by businesses. In addition, the
reluctance of corporations to risk exposure to wrongful discharge has led to an
increase in companies using temporary staffing as a means of evaluating the
qualifications of personnel before hiring them on a full-time basis.
Furthermore, many companies are adopting strategies which focus on their core
businesses and, as a result, are outsourcing the support functions of their
non-core businesses. The National Association of Temporary and Staffing Services
estimates that more than 90% of all United States businesses utilize staffing
services.

Information technology staffing services has become one of the fastest
growing sectors of the temporary staffing industry. Over the last decade, the
increased use of technology has led to a dramatic rise in demand for technical
project support, software development, and other computer-related services.
Corporations have outsourced many of these departments and/or have utilized the
employees of staffing firms in an attempt to meet the increased demand for
computer-skilled personnel.

The Company believes that the temporary staffing industry is highly
fragmented and is currently experiencing a trend toward consolidation primarily
due to the increasing demand by large companies for centralized staffing
services and the difficulties faced by many smaller staffing companies in
today's staffing services market. The growth of national and regional accounts
resulting from the centralization of staffing decisions by national and larger
regional companies has increased the importance of staffing companies being able
to offer a wide range of services over a broad geographic area. In addition,
many smaller staffing companies are experiencing increased

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<PAGE> 29

difficulties due to factors such as significant working capital requirements,
limited management resources, and an increasingly competitive environment.

ACQUISITIONS

1996 ACQUISITIONS

TAYLOR TEMPORARY SERVICES, INC. In January 1996, the Company acquired the
assets of Taylor for $3.5 million in cash plus an earnout payment based on its
earnings for 1996, not to exceed $600,000. Through this transaction, the Company
acquired three branch offices in North Carolina, which provide support staffing
services.

DATRONICS MANAGEMENT, INC. AND DATRONICS U.K. LIMITED. In January 1996, the
Company acquired all of the outstanding stock of Datronics for $17.5 million in
cash. Through this transaction, the Company acquired seven branch offices
located in New York, New York; Dallas, Texas; Atlanta, Georgia; Phoenix,
Arizona; Iselin, New Jersey; and The Research Triangle Park, North Carolina.
Additionally, Datronics has a branch office located in the United Kingdom in
Brighton, England. Datronics provides information technology staffing services.

RICHARD KEITH ENTERPRISES, INC. AND PROVINCIAL STAFFING SERVICES, INC. In
February 1996, the Company acquired the assets of Richard Keith Enterprises for
$5.9 million in cash plus an earnout based on its earnings for 1996, not to
exceed $3.2 million. Richard Keith Enterprises provides general support staffing
services through eight branch offices in Colorado, one in Cheyenne, Wyoming and
one in the Chicago, Illinois area.

REGAL DATA SYSTEMS, INC. In April 1996, the Company acquired all of the
outstanding stock of Regal for approximately $21.7 million in cash plus an
earnout based on its earnings for 1996, not to exceed $1.0 million. Regal
provides information technology services through one office in Somerset, New
Jersey.

LEAFSTONE, INC. In April 1996, the Company acquired the assets of Leafstone
for $11.3 million in cash plus an earnout based on its earnings for 1996, not to
exceed $4.0 million. Leafstone provides support and staffing services through
eight branch offices in New York, New Jersey, Connecticut, Pennsylvania,
Virginia, and Georgia.

ACQUISITIONS THROUGH 1995

PROFESSIONAL HEALTHCARE PROVIDERS, INC. ("PHP"). In July 1993, the Company
acquired all of the outstanding stock of PHP, which provides physical therapy
staffing services. The acquisition included the payment by the Company of $0.5
million in cash, and the issuance of 385,320 shares of Common Stock and
11,120.485 shares of Class B Junior Preferred Stock, par value $.01 per share,
of the Company in exchange for all of the outstanding capital stock of PHP.
Through this acquisition, the Company acquired one branch office located in
California.

COLORADO THERAPISTS ON CALL, INC. ("CTOC"). In September 1993, the Company
acquired all of the assets of CTOC for $1.3 million in cash and $0.5 million in
an interest bearing note. Through this acquisition the Company acquired one
branch office located in Colorado. CTOC provides physical therapy staffing
services.

UNITED STAFFING SERVICES, INCORPORATED AND UNITED PERSONNEL SYSTEMS. In
April 1994, the Company acquired all of the outstanding stock of United for
$19.9 million in cash. Through this acquisition, the Company acquired 18
company-operated branch offices and three franchise branch offices located
throughout the Los Angeles and San Francisco/Oakland, California areas. United
is based in Brea, California and provides traditional support staffing services.

29
<PAGE> 30

SUPERIOR TEMPORARIES, INC. AND SUPERIOR TEMPORARIES OF ATLANTA, INC. In
April 1994, the Company acquired certain assets of Superior for $4.7 million in
cash. Through this acquisition, the Company acquired two offices in Georgia and
three in Texas where Superior is headquartered. Superior provides traditional
support staffing services.

TSTP CORP. In August 1994, the Company acquired all of the outstanding
stock of TSTP, which provides traditional support staffing services through its
12 branch offices located in Washington, D.C., northern Virginia, suburban
Maryland and Philadelphia, Pennsylvania. The Company acquired all of the
outstanding capital stock of TSTP for $17.3 million in cash.

COMSYS TECHNICAL SERVICES, INC. In September 1994, the Company acquired all
of the outstanding stock of COMSYS for $20.9 million in cash. COMSYS is
headquartered in Rockville, Maryland and through this acquisition the Company
acquired 15 branch offices located in Arizona, Colorado, Georgia, North
Carolina, Texas, and Washington. COMSYS provides information technology staffing
services.

FRIENDS & COMPANY OF PHOENIX. In January 1995, the Company acquired all of
the assets of Friends & Company (formerly known as Goodfriend of Phoenix, Inc.)
for $0.4 million in cash. The assets acquired included one branch office located
in Arizona.

REGENCY STAFFING, INC. In January 1995, the Company acquired all of the
outstanding stock of Regency for $4.9 million in cash. In addition, the Company
is obligated to make an earnout payment based upon the increase in the earnings
before interest and taxes of Regency for the 12 month period ended February 28,
1997. Through this transaction, the Company acquired two branch offices located
in Florida.

CTS PERSONNEL SERVICES, INC. In March 1995, the Company acquired all of the
assets of CTS for $0.1 million in cash. The assets acquired include one branch
office located in Dallas, Texas.

TRI-STARR SERVICES, INC. AND TRI-STARR PERSONNEL, INC. In April 1995, the
Company acquired all of the outstanding stock of Tri-Starr, a Texas-based
support services company. The purchase price totaled $12.0 million, consisting
of cash of $6.0 million paid to the sellers at closing and the remainder paid in
February 1996. Through this transaction, the Company acquired three branch
offices located in San Antonio, Texas and one branch office located in Austin
and Houston, Texas, respectively.

CUTLER-WILLIAMS INCORPORATED. In June 1995, the Company acquired all of the
outstanding stock of Cutler-Williams for $26.3 million in cash and $2.0 million
in interest-bearing notes. Through this transaction, the Company acquired a
total of 14 branch offices located in Atlanta, Georgia; Austin and Dallas,
Texas; Chicago and Springfield, Illinois; Cleveland, Ohio; Raleigh, North
Carolina; St. Louis, Missouri; and Tallahassee, Florida. Cutler-Williams
provides information technology staffing services.

OCCUPATIONAL THERAPY CONTRACT SERVICES, INC. In August 1995, the Company
acquired the assets of OTCS for $75,000 in cash. In this transaction, the
Company acquired one office located in Colorado.

POTENTIAL ACQUISITIONS

The Company is continually seeking acquisition opportunities and believes
that there exists a substantial number of potentially attractive acquisition
opportunities in the temporary staffing services industry. The Company from time
to time enters into discussions and non-binding letters of intent which may lead
to potential acquisitions but no assurances can be given that future
acquisitions will be consummated.

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<PAGE> 31

OPERATIONS

The Company's business is conducted through its Support Services Group,
Information Technology Services Group, and its Niche Development Services Group.

SUPPORT SERVICES GROUP

The Company's Support Services Group provides office/clerical, light
industrial, and electronic/technical services through 78 branch offices,
including 3 franchise offices (as of April 30, 1996), located in Arizona,
California, Colorado, Connecticut, the District of Columbia, Florida, Georgia,
Illinois, Maryland, Nevada, New Jersey, New York, North Carolina, Pennsylvania,
Texas, Virginia, and Wyoming. The Support Services Group accounted for 61.4% and
66.6% of the Company's pro forma revenues for 1995 and 1994, respectively.
Office/clerical staffing services include providing secretaries, word
processors, receptionists, general office support, telemarketers, data entry
personnel, bookkeepers, and collectors. Also included in the office/clerical
category are staffing services in the accounting, financial and library services
areas, all of which require specialized training. Light industrial staffing
includes the provision of unskilled and semi-skilled personnel in light
manufacturing and assembly, picking and packing, warehouse services, equipment
handling, inventory, and shipping and receiving. Electronic/technical staffing
includes the training and provision of skilled personnel in electronic
manufacturing.

The Support Services Group provides a wide range of staffing options to its
clients, including, but not limited to, supplemental and project staffing and
VIP programs. The appropriate staffing option depends on the nature and length
of the assignment and the degree of day-to-day management responsibility
delegated to the provider of the services.

SUPPLEMENTAL STAFFING. Often considered traditional or tactical temporary
help, supplemental staffing assignments generally range in duration from one day
to several months. Supplemental staffing provides clients with maximum
flexibility in meeting staffing requirements as clients may commence and
terminate assignments at any time and with short notice. In addition, because
clients generally only pay for the time actually worked by a supplemental
staffing employee, they can use supplemental staffing employees at any time and
on any day without paying a premium for shift, holiday, or weekend labor.

VENDOR-IN-PARTNERSHIP PROGRAMS. In response to increased client demand, the
Company provides, through its VIP program, coordination of temporary personnel
services by providing a dedicated on-site account manager to assist in the
procurement and management of the client's temporary workforce. Customized to
the needs of each client, the Company designs and implements programs that
include services such as specialized testing, drug screening, selection and
monitoring of back-up vendors, enforcement of the client's quality standards,
and orientation of each temporary employee to the client's work site, culture,
and job requirements. The Company currently operates 21 VIP programs.

PROJECT STAFFING. The Company provides contract employees to clients who
require personnel to staff specific projects for a defined period of time.
Generally, project staffing involves a commitment of a team of employees who
remain at the site until completion of the project.

INFORMATION TECHNOLOGY SERVICES GROUP

The Company's Information Technology Services Group provides personnel to
meet the growing need for employees with advanced computer-related skills. As of
April 30, 1996, the Information Technology Services Group operated 27 branch
offices located in Arizona, Colorado, Florida, Georgia, Illinois, Maryland,
Missouri, New Jersey, New York, North Carolina, Ohio, Texas, and Washington, and
the United Kingdom. This group accounted for 36.3% and 31.3% of the Company's
pro forma revenues for the years ended December 31, 1995 and 1994, respectively.
The

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<PAGE> 32

Company believes that it is a leading provider of information technology
staffing services among multi-sector staffing services firms in terms of
revenues.

The Company offers a full spectrum of computer-related services ranging
from traditional systems analysis to high value-added information technology
consulting and project management. Depending upon the needs of the client, four
primary types of staffing services are offered: information and systems
development services, management services, advanced technology services, and
government services.

INFORMATION AND SYSTEMS DEVELOPMENT SERVICES. The Company provides
highly-skilled information systems personnel ("software engineers") to meet
clients' specific needs in the following areas:

<TABLE>
<S> <C>
Technical Services -- design, programming and evaluation of operating
systems, databases, networks, and communications
systems
Contract Programming -- programming of existing applications and development
and implementation of new applications
Conversion Services -- data, platform, language, and application conversions
Documentation Services -- creation, maintenance, or re-engineering of various
forms of documentation
</TABLE>

MANAGEMENT SERVICES. As clients' technology needs have become more complex,
demand has increased for comprehensive information technology solutions that
involve not only the provision of temporary workers, but also the management of
the underlying project. In a management services assignment, the Company assumes
greater responsibility for a project's success than it would in a traditional
information services assignment. These services are provided on the following
bases:

<TABLE>
<S> <C>
Consulting Services -- development of solutions, usually delivered in a report
or recommendation, to a client's specific information
technology needs
Project Management -- staffing and management of a specific information
technology project within written performance criteria
and objectives
</TABLE>

ADVANCED TECHNOLOGY SERVICES. The Company provides leading-edge information
technology services to staff positions that require knowledge of emerging
technologies. Such advanced technology services include information engineering
methodology, computer-aided software engineering, application re-engineering,
and client/server and object oriented services.

GOVERNMENT SERVICES. The Company provides software engineers and technical
consultants to 43 government agencies in 16 states (as of April 30, 1996) and
believes that it is a major provider of information technology services to state
government agencies. In the government services segment, the Company's personnel
have technical expertise and application knowledge primarily in health and human
services, transportation and highways, and environmental services.

MILLENNIUM SERVICES. The "millennium issue" arises from the widespread use
of computer programs that rely on two-digit date codes to perform computations
and decision-making functions. Many of these computer programs may fail due to
an inability to properly interpret date codes. Such programs may misinterpret
"00" as the year 1900 rather than 2000. These "date-dependent" programs are
found in computer hardware, software and embedded systems used in many
businesses. The Gartner Group, a market research firm, has estimated that it
will cost the public and private sectors between $300 and $600 billion worldwide
to solve the millennium issue. The cost to the Federal government is estimated
to be over $30 billion.

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<PAGE> 33

The Company, through its recently formed Millennium Services team, formed a
strategic alliance in January 1996 with Viasoft, Inc., a provider of software
tools and processes specifically designed to provide solutions to this issue.
The Company currently has two contracts that provide for computer staffing
services for periods of up to two years and has over 25 proposals in progress.
While future results cannot be assured, management believes that it is well
positioned to take advantage of this opportunity.

NICHE DEVELOPMENT SERVICES GROUP

The Company believes that revenues, profitability, and client relationships
can be enhanced by providing specialized niche services in selected staffing
sectors. Therefore, the Company has developed the following specialty niche
businesses through the implementation of focused marketing, servicing, and
management strategies.

PHYSICAL THERAPY. The Company's physical therapy business provides
physical, occupational, and respiratory therapists, and speech and hearing
pathologists to acute care and home health programs, hospitals, skilled nursing
centers, orthopedic and outpatient clinics, and rehabilitation facilities. The
physical therapy group has branch offices in Emeryville and Ontario, California;
Denver, Colorado; and Phoenix, Arizona; and also operates a therapist division
providing therapists who are willing to travel to locations throughout the
country.

TECHNICAL COMMUNICATIONS OUTSOURCING. The Company maintains a full-time
staff of writers, editors, graphic artists, and consultants to fulfill the
technical communication outsourcing needs of its clients. In an effort to
further develop this niche business, the Company has established alliances with
companies that have ongoing technical communication needs, including company
magazines, ISO 9000 documentation, maintenance manuals, newsletters, on-line
documentation, technical articles, books, brochures, papers, reports, and
product specification sheets.

BRANCH OFFICES AND CENTRALIZED BUSINESS OPERATIONS

The Company provides temporary, contracting, and outsourcing services
through 110 company-operated branch offices and three franchise-operated branch
offices (as of April 30, 1996) located primarily in the Western, Southwestern,
Southeastern and Eastern states. While the Company's Support Services and
Information Technology Services Groups currently maintain separate facilities,
it is the Company's intention to reduce costs as well as enhance cross-selling
of services by opening multi-sector service centers where appropriate. All of
the Company's staffing services locations are leased. The average lease term is
three to five years.

The following table shows the Company's staffing services offices as of
December 31, 1994 and 1995 and April 30, 1996.

<TABLE>
<CAPTION>
DECEMBER 31,
------------- APRIL 30,
1994 1995 1996
---- ---- ---------
<S> <C> <C> <C>
Support Services............................................ 42 58 78
Information Technology Services............................. 9 22 27
Niche Development Services.................................. 6 9 8
-- --
---
Total Branch Offices........................................ 57 89 113
== == ===
</TABLE>

SALES AND MARKETING

The Company has developed a sales and marketing strategy which focuses on
both national and local accounts and is implemented through its branch
locations. Local accounts are targeted by account managers at the branch offices
permitting the Company to capitalize on the local expertise and established
relationships of its branch office employees. Such accounts are solicited
through personal sales presentations, telephone marketing, direct mail
solicitation, referrals from clients, and advertising in a variety of local and
national media. These advertisements appear in the Yellow

33
<PAGE> 34

Pages, newspapers, and trade publications. The Company also conducts public
relations activities designed to enhance public recognition of the Company and
its services. Local employees are encouraged to be active in civic organizations
and industry trade groups to facilitate the development of new customer
relationships.

The Company's national sales and marketing effort is coordinated by
management at the corporate level, which enables the Company to develop a
consistent, focused strategy to pursue national account opportunities. This
strategy allows the Company to capitalize on the desire of national clients to
work with a limited number of preferred vendors for their staffing requirements.

RECRUITING OF TEMPORARY EMPLOYEES

The Company recruits its temporary and contract employees through a
recruiting program that primarily utilizes local and national advertisements and
job fairs. In addition, the Company has succeeded in recruiting qualified
employees through referrals from its existing labor force. As a result, the
Company has initiated a policy whereby it pays referral fees to employees
responsible for attracting new recruits. The Company believes this balanced
recruiting strategy will continue to provide it with high quality temporary
employees to meet its staffing demands.

In the information technology services sector, the demand for software
engineers and technology consultants significantly exceeds supply. In an effort
to attract a wide spectrum of employees, the Company offers diverse employment
options and training programs. The two primary approaches the Company utilizes
are full-time employee status with an annual salary irrespective of assignment,
and hourly contingent worker status for which compensation is tied to the
duration of the assignment. In addition, the Information Technology Services
Group operates and maintains 10 regional learning centers to provide its
employees with access to and training in new software applications as well as a
diversity of mainframe, client/server, and personal computer technologies. The
Company believes that these learning centers have improved employee retention,
increased the technical skills of the Company's personnel, and resulted in
better service for the Company's clients.

ASSESSMENT AND TRAINING

To better meet the needs and requirements of its clients and to enhance the
marketability and job satisfaction of its employees, the Company utilizes a
comprehensive system to assess and train its employees. The Company conducts
extensive background, drug, and skills screening of potential temporary
employees and contract consultants and provides these employees with written and
video workplace orientation courses that are tailored to the practices and
policies of specific clients. Computerized tutorials are available in the
Support Services Group branch offices for temporary employees wishing to upgrade
their typing, data entry, spreadsheet, office automation, desktop publishing, or
word processing skills. In addition, the Company's Information Technology
Services Group maintains 10 regional learning centers covering a broad spectrum
of courses concerning mainframe applications development and maintenance,
client/server technology, and desktop-user support. These learning centers are
located in Austin and Dallas, Texas; Cleveland, Ohio; Raleigh, North Carolina;
St. Louis, Missouri; Chicago and Springfield, Illinois; Tallahassee, Florida;
Atlanta, Georgia; and Rockville, Maryland.

COMPETITION

The temporary services industry is fragmented and highly competitive, with
limited barriers to entry. Within local markets, smaller firms actively compete
with the Company for business, and in most of these markets, no single company
has a dominant share of the market. The Company also competes with larger
full-service and specialized competitors in national, regional, and local
markets, which have significantly greater marketing, financial and other
resources than the Company. The Company believes that the primary competitive
factors in obtaining and retaining clients are the ability to provide a wide
range of staffing services and service an expansive geographic area, an
understanding of the client's specific job requirements, the ability to provide
temporary

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<PAGE> 35

personnel with the appropriate skills in a timely manner, the monitoring of
quality of job performance, and the pricing of services. The primary competitive
factors in obtaining qualified candidates for temporary employment assignments
are wages, responsiveness to work schedules, and the number of hours of work
available. Management believes that the Company is highly competitive in these
areas.

INTEGRATION OF ACQUIRED COMPANIES

Management begins integrating newly acquired companies as soon as
practicable. This process involves formalizing and standardizing each acquired
company's marketing and sales programs and field operations procedures.
Standardized personnel manuals are distributed, and the acquired company is
brought under the Company's uniform risk management program. In some cases, the
Company closes certain of the acquired company's offices and merges its
operations and personnel, including field employees, into the Company's existing
business.

This process has been formalized and accelerated during 1996 through the
initiation of an effort called "Project '96." Within the framework of Project
'96, all front- and back-office information systems will be consolidated and
integrated in order to more efficiently serve the Company's customers, operating
groups and corporate management. The Company's various front-office systems will
be consolidated into two systems: (i) a proprietary management, administrative,
recruiting and sales software system, "MARS," designed specifically for the
Company's Information Technology Services Group and (ii) "Delta 21," a staffing
services front-office software system. The Company's various back-office
activities will be integrated using "PeopleSoft," a software system specializing
in payroll, human resources, administration and financial reporting. MARS and
Delta 21 will be interfaced with the PeopleSoft system in order to maximize the
timeliness and efficiency of data gathering and retrieval.

WORKERS' COMPENSATION PROGRAM; SAFETY PROGRAM

The Company maintains workers' compensation insurance for its employees
under a self-insurance program with the State of California and an insured
program in its remaining areas of operation. These programs have a $250,000 per
claim deductible and an aggregate $5 million limit of liability provision. Under
both programs, field personnel work in conjunction with a designated risk
manager and a third-party administrator to manage claims and establish
appropriate reserves for the deductible portion of claims. An independent
actuary provides advice on overall workers' compensation costs as well as an
actuarial valuation regarding the adequacy of the reserves for payments relating
to the uninsured portion of workers' compensation claims. The reserve balances
determined by the third-party administrator and Company management are adjusted
to the amounts recommended by the actuary. As of December 31, 1995, the
Company's established reserve for workers' compensation claims was $5.5 million.

In addition, the Company has a safety program in its branch offices to
provide appropriate safety training to employees prior to job assignment. The
risk manager and field personnel also perform safety inspections at customer
locations to help determine potential risks for employee injury and to assist
customers in making the workplace safer. Company policies prohibit staffing of
high-risk work such as roofing, the handling of hazardous materials, or
operating heavy equipment.

EMPLOYEES

The Company employed approximately 885 full-time staff employees at March
31, 1996, and, during the first quarter of 1996, had an average of approximately
15,600 employees (including approximately 1,700 information technology
consultants) on assignment per week. The Company is not a party to any
collective bargaining agreements and considers its relationships with its
employees to be satisfactory.

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<PAGE> 36

The Company is responsible for and pays the employer's share of Social
Security taxes (FICA), federal and state unemployment taxes, workers'
compensation insurance, and other costs relating to its temporary employees. The
Company does not, in general, provide health insurance benefits to its temporary
employees. Currently, temporary employees with more than 1,000 hours of service
per year are eligible to participate in 401(k) savings plans offered by certain
of the Company's operating subsidiaries.

LEGAL PROCEEDINGS

The Company is, from time to time, a party to ordinary, routine litigation
incidental to the Company's business, including discrimination, wrongful
termination, harassment and other similar claims.

The principal risks that the Company insures against are workers'
compensation, personal injury, property damage, professional malpractice, errors
and omissions, and fidelity losses. The Company maintains insurance in such
amounts and with such coverages and deductibles as management believes are
reasonable and prudent. In the opinion of management, the ultimate resolution of
all pending legal proceedings will not have a material adverse effect on the
Company's financial condition.

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<PAGE> 37

MANAGEMENT

The executive officers and directors of the Company, and their ages as of
March 31, 1996, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
----------------------------------------- --- ---------------------------------------
<S> <C> <C>
Michael T. Willis........................ 51 Chairman of the Board, Chief Executive
Officer, and President
Daniel L. Shimer......................... 51 Executive Vice President
George W. Fink........................... 48 Executive Vice President
William L. Caudell....................... 43 Senior Vice President
Joseph V. Amella......................... 40 Executive Vice President -- Eastern
Operations
Peter T. Dameris......................... 36 Vice President, General Counsel, and
Secretary
Edward L. Pierce......................... 39 Vice President, Chief Financial
Officer, and Assistant Secretary
Rocco N. Aceto........................... 39 President of United Staffing Services,
Inc.
Nuala Beck............................... 44 Director
Charles H. Cotros........................ 58 Director
Donald J. Edwards........................ 30 Director
Bruce V. Rauner.......................... 40 Director
Charles R. Schneider..................... 55 Director
John T. Turner........................... 52 Director
</TABLE>

Michael T. Willis has served as Chairman of the Board, Chief Executive
Officer and President of the Company since its formation and has been in the
personnel and temporary services industry for over 20 years. Mr. Willis founded
The Talent Tree Corporation ("Talent Tree") in 1976 and built it into one of the
largest temporary services companies in the United States. Mr. Willis sold
Talent Tree to Hestair plc in 1987 and then continued as President and Chief
Executive Officer until April 1, 1993. Mr. Willis is also a director of
Servtech, Inc., a publicly traded oil field service company, and Southwest Bank
of Texas N.A. Mr. Willis was a majority stockholder of Furniture Investments,
Inc., which was one of four partners in a small office furniture supply company,
IPM Joint Venture d/b/a LaMesa Systems Furniture ("IPM"). In April 1994, IPM
filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern
District. An Order of Dismissal was filed December 17, 1994.

Daniel L. Shimer has served as an Executive Vice President of the Company
since April 1994 and is primarily responsible, with other key executives, for
the Company's mergers and acquisitions program. From April 1994 to April 1996,
Mr. Shimer also served as the Chief Financial Officer of the Company. Prior to
joining the Company, Mr. Shimer served as the Executive Vice President, Chief
Financial Officer, and President of National Accounts for Brice Foods, Inc./I
Can't Believe It's Yogurt, Inc. from March 1991 to January 1994; the General
Manager and Chief Financial Officer of Computerland Corporation in Sydney,
Australia from March 1989 to March 1991; Vice President, Treasurer and Chief
Financial Officer of Coast America Corporation from May 1986 to March 1989; and
Vice President and Treasurer of FoxMeyer Corporation from February 1983 to May
1986. Mr. Shimer, a certified public accountant, began his career at KPMG Peat
Marwick LLP and has over 25 years of financial management experience. Mr. Shimer
serves on the Board of Directors of Wireless One, Inc., a publicly traded
wireless cable television company.

George W. Fink has served as an Executive Vice President of the Company and
Chief Operating Officer of the Company's Information Technology Services Group
since September 1995. Prior to joining the Company, Mr. Fink was self-employed,
managing a variety of personal investments. From June 1986 until July 1993 and
from August 1993 until March 1994, Mr. Fink served as

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<PAGE> 38

President and Chief Executive Officer of Remco America, Inc. and Rent-A-Center,
respectively. Prior to joining Remco, Mr. Fink was a Partner with Ernst & Young
LLP and the Director of the Houston Office Entrepreneurial Services Group.

William L. Caudell has served as the Senior Vice President of the Company
since April 1994. Prior to joining the Company, Mr. Caudell was employed by
Talent Tree from 1985 to 1993 and served as its Senior Vice President from
October 1990 to April 1993. While at Talent Tree, Mr. Caudell was responsible
for coordinating support for sales, marketing, and operations for each of the
company's subsidiaries. From July 1978 until February 1985, Mr. Caudell served
as a Vice President for Snelling and Snelling, Inc. where he directed the
training and development of its employment counselors and for its base and
franchise branch network.

Joseph V. Amella has served as the Executive Vice President -- Eastern
Operations since August 1994 and has over 14 years of experience in the staffing
industry. Prior to joining the Company, Mr. Amella served in various capacities
with Talent Tree and its subsidiaries including Vice President and General
Manager, and Senior Vice President -- Mid-Atlantic Division from March 1984 to
April 1993.

Peter T. Dameris has served as Vice President, General Counsel, and
Secretary of the Company since January 1995. Prior to joining the Company, Mr.
Dameris served as outside counsel to the Company since its inception as a
partner with the law firm of Cochran, Rooke and Craft, LLP. Mr. Dameris was
associated with Cochran, Rooke and Craft, LLP from June 1989 to January 1995.

Edward L. Pierce has served as Vice President, Chief Financial Officer, and
Assistant Secretary of the Company since April 1996. Mr. Pierce previously
served as Vice President-Finance, and prior thereto as Vice President and
Controller, of the Company. Prior to joining the Company in November 1994, Mr.
Pierce served in various capacities with American Oil and Gas Corporation,
including Director of Accounting, Taxation, and Reporting, Assistant Controller,
and Corporate Controller, from January 1990 to November 1994 and as an Audit
Manager for Arthur Andersen & Co. prior thereto.

Rocco N. Aceto has served as the President of United Staffing Services,
Incorporated, a subsidiary of the Company, since August 1994, where he is
responsible for the day-to-day management of the Company's West Coast
operations. Prior to joining the Company, Mr. Aceto was a corporate Vice
President and General Manager of Pagenet of Orange County, California from March
1992 to August 1994. From July 1980 until joining Pagenet, Mr. Aceto worked with
Pitney Bowes where he served as a division Vice President.

Nuala Beck has served as a director of the Company since April 1996. Ms.
Beck, an international economist, serves as the President and is the founder of
Nuala Beck & Associates Inc., a management consulting firm. Ms. Beck also serves
as a director of Ontario Hydro.

Charles H. Cotros has served as a director of the Company since November
1995. Mr. Cotros has served as Executive Vice President and Chief Operating
Officer of Sysco Corporation ("Sysco") since January 1995 and has held various
positions for Sysco for more than the past five years. Mr. Cotros has also
served as a director of Sysco since 1984 and is a member of the Executive
Committee of the Board of Directors of Sysco.

Donald J. Edwards has served as a director of the Company since August
1995. In addition, Mr. Edwards served as a Vice President of the Company from
May 1995 to August 1995. Mr. Edwards joined Golder, Thoma, Cressey, Rauner, Inc.
in August 1994 and became a Principal in April 1996. From September 1992 to June
1994, Mr. Edwards attended Harvard Business School and received his MBA. Prior
to that time, Mr. Edwards served as an analyst with Lazard Freres & Co. from
August 1988 to January 1990 and as an associate from January 1990 to April 1992.

38
<PAGE> 39

Bruce V. Rauner has served as a director of the Company since July 1993.
Mr. Rauner joined Golder, Thoma, Cressey, Rauner, Inc. in 1981 and became a
Principal in 1984. Mr. Rauner also serves as a director of ERO Industries.

Charles R. Schneider has served as a director of the Company since October
1994. Mr. Schneider founded U.S. Security Associates, Inc. and has served as its
President and Chief Executive Officer and a director since November 1993. From
October 1986 to November 1993, Mr. Schneider served as President of Baker
Industries, Inc. ("Baker") and as a Vice President of Borg-Warner Security
Corp., a subsidiary of Baker, from August 1987 to September 1993.

John T. Turner has served as a director of the Company since October 1994.
Mr. Turner currently is self-employed, managing a variety of personal
investments. From November 1990 to March 1993, Mr. Turner served as the Senior
Vice President and a director of the Loewen Group, Inc. Mr. Turner was also a
founder of Paragon Family Services, Inc. and served as its President from
November 1986 to November 1990.

TERM OF OFFICE

The Board of Directors is classified into three classes. The first class,
comprised of Messrs. Willis and Rauner, will serve until the annual meeting of
stockholders to be held in 1996, the second class, comprised of Messrs. Turner
and Schneider, will serve until the annual meeting of stockholders to be held in
1997, and the third class, comprised of Messrs. Cotros and Edwards, will serve
until the annual meeting of stockholders to be held in 1998. All officers serve
at the discretion of the Board of Directors. There are no family relationships
among any of the directors or officers of the Company.

COMPENSATION OF DIRECTORS

All directors of the Company are entitled to reimbursement for certain
expenses in connection with their travel to and attendance at meetings of the
Board of Directors or committees thereof. Directors who are not officers or
employees of the Company will receive a $3,500 fee for each meeting of the Board
of Directors attended by such director. In addition, each director who is not an
officer or employee of the Company or associated with GTC III will receive an
annual grant of options to purchase 1,500 shares of Common Stock (at an exercise
price equal to the fair market value of the Common Stock on the date the option
is granted) under the 1995 Plan for each year he or she serves as a director.
Such options vest one-third per year over a three-year period. Other than
reimbursement of their expenses, directors who are employees or officers of the
Company will not receive any compensation for services as a director.

BOARD COMMITTEES

The Company has an Audit Committee, a Compensation Committee, a 1995 Long
Term Incentive Plan Committee, and a Stock Purchase Plan Committee. The Audit
Committee, comprised of Messrs. Turner, Schneider, and Edwards, examines and
considers matters relating to the financial affairs of the Company, including
reviewing the Company's annual financial statements, the scope of the
independent annual audit and internal audits and the independent accountant's
letter to management concerning the effectiveness of the Company's internal
financial and accounting controls. The Compensation Committee, comprised of
Messrs. Willis, Rauner, and Schneider, considers and makes recommendations to
the Company's Board of Directors with respect to programs for human resource
development and management organization and succession, approves changes in
senior executive compensation, and makes recommendations to the Company's Board
of Directors with respect to compensation matters and policies. The 1995 Long
Term Incentive Plan Committee, comprised of Messrs. Rauner and Schneider,
administers the Company's 1995 Plan and grants of options under such plan. The
Stock Purchase Plan Committee, comprised of Messrs. Rauner and Schneider,
administers the Company's Stock Purchase Plan.

39
<PAGE> 40

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee is comprised of Messrs. Willis, Rauner and
Schneider. Mr. Willis serves as the Chairman of the Board, Chief Executive
Officer, and President of the Company. Neither Mr. Rauner nor Mr. Schneider have
been an employee or officer of the Company or any of its subsidiaries. Mr.
Rauner is a general partner of GTCR Partnership which serves as the sole general
partner of GTC III. GTC III owns approximately 43.9% of the outstanding Common
Stock of the Company.

EXECUTIVE COMPENSATION

The following table sets forth for the fiscal year ended December 31, 1995
the annual, long-term and other compensation paid to the Company's Chief
Executive Officer and to each of its four most highly compensated executive
officers whose total salary and bonus for 1995 exceeded $100,000 (the "Named
Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
NAME AND ----------------------------
PRINCIPAL POSITION YEAR SALARY BONUS
- - -------------------------------------------------------------- ---- -------- --------
<S> <C> <C> <C>
Michael T. Willis............................................. 1995 $308,140 $150,000
Chairman of the Board, Chief Executive Officer, and
President 1994 246,304 84,375
Rocco N. Aceto................................................ 1995 212,614 460,948
President of United Staffing Services, Inc. 1994 84,375 25,000
Joseph V. Amella.............................................. 1995 182,500 172,000
Executive Vice President -- Eastern Operations
William L. Caudell............................................ 1995 136,267 93,840
Senior Vice President 1994 82,300 117,000
Daniel L. Shimer.............................................. 1995 187,600 162,800
Executive Vice President 1994 135,650 --
</TABLE>

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

(1) Annual Compensation excludes the aggregate value of perquisites as such
value is less than the lesser of $50,000 or 10% of total annual Salary and
Bonus for each Named Officer.

EMPLOYMENT AGREEMENTS

MICHAEL T. WILLIS

In November 1995, the Company entered into a new employment agreement with
Michael T. Willis which remains in effect until November 15, 1998, and
thereafter automatically renews for three year terms until November 15, 2001,
unless either party notifies the other at least 90 days prior to the expiration
of any such three year term. Mr. Willis' employment contract provides for an
annual base salary of $350,000, subject to annual review for adjustments by the
Board of Directors and the Compensation Committee, and an annual bonus at the
discretion of the Board. In addition, Mr. Willis will be eligible to participate
in all benefit plans of the Company. Mr. Willis' contract will provide for two
years of severance in the event of termination of his employment with the
Company or in the event Mr. Willis resigns with good reason following a change
of control of the Company. Mr. Willis' severance payment will be determined
based on Mr. Willis' annual salary prior to termination and the highest bonus
paid to Mr. Willis in the two years prior to termination. However, in the event
of termination, Mr. Willis will be subject to a two year non-compete covenant
following the termination of his employment. In addition, the Company has the
option to extend the term of Mr. Willis' non-compete covenant for one year upon
the payment of an additional year of severance benefits.

40
<PAGE> 41

OTHER EMPLOYMENT AGREEMENTS

The Company has also entered into employment agreements with each of
Messrs. Aceto, Amella, Caudell, Dameris, and Shimer. The annual base salaries
being paid to Messrs. Aceto, Amella, Caudell, Dameris, and Shimer are $240,000,
$200,000, $160,000, $150,000, and $199,800, respectively, as of December 31,
1995, and such agreements provide for periodic salary increases and bonuses in
the discretion of the Company and, in some cases, the Company's achievement of
certain performance objectives. In the cases of Messrs. Amella, Caudell, and
Shimer, the agreements renew for annual terms until terminated. The agreements
with Messrs. Aceto and Dameris continue until August 8, 1997 and January 15,
1998, respectively, and annually thereafter until terminated. In addition, the
agreements provide for severance benefits in the event of termination of
employment.

1995 LONG TERM INCENTIVE PLAN

The 1995 Plan provides for the grant of any or all of the following types
of awards: (i) stock options, including incentive stock options and nonqualified
stock options; (ii) stock appreciation rights ("SARs") in tandem with stock
options or freestanding; (iii) restricted stock; (iv) performance share awards;
(v) stock value equivalent awards; and (vi) cash awards. Any stock option
granted in the form of an incentive stock option must satisfy the applicable
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). Awards may be made to the same person on more than one occasion
and may be granted singly, in combination, or in tandem as determined by the
1995 Long Term Incentive Plan Committee which is currently comprised of Messrs.
Rauner and Schneider. There are 1,800,000 shares of Common Stock reserved for
issuance under the 1995 Plan.

As of March 31, 1996, the Company had non-qualified stock options to
purchase an aggregate of 785,924 shares of Common Stock outstanding under the
1995 Plan.

EMPLOYEE STOCK PURCHASE PLAN

The Company's Stock Purchase Plan provides for the issuance of up to
300,000 shares of Common Stock which will be newly issued shares. Under the
Stock Purchase Plan, employees and officers of the Company are eligible to
participate in the plan after a one-year period of employment with the Company.
Each plan offering will be made annually utilizing payroll deductions to
purchase shares of Common Stock. The purchase price of such shares will be equal
to at least 85% of the fair market value of the Common Stock on the day the
offering commences as determined by the Company's Board of Directors. The Stock
Purchase Plan is administered by the Stock Purchase Plan Committee, which is
currently comprised of Messrs. Rauner and Schneider. The Committee has approved
the commencement of the first offering period under the Stock Purchase Plan
effective April 1, 1996.

41
<PAGE> 42

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

EQUITY DOCUMENTS

The Company was founded in July 1993 by GTC III, an affiliate of GTCR Inc.,
and Mr. Willis. In connection with the formation of the Company, Mr. Willis and
certain other executives of the Company entered into various agreements relating
to the management and ownership of the Company. These agreements include an
Equity Purchase Agreement, Senior Management Agreements, a Professional Services
Agreement, a Stockholders Agreement and a Registration Agreement (collectively
and as amended to date, the "Equity Documents"). All of the Equity Documents,
with the exception of the Registration Agreement, terminated upon completion of
the Initial Public Offering.

In July 1993, pursuant to the Equity Purchase Agreement between the Company
and GTC III (as amended, the "GTC III Equity Agreement"), GTC III purchased
7,798,740 shares of Common Stock at approximately $0.18 per share. In addition,
the GTC III Equity Agreement allowed GTC III at its sole election, to purchase
up to an additional 204,703.7837 shares of Class A Preferred Stock at $100.00
per share. In connection with the Initial Public Offering, GTC III acquired an
additional 618,681 shares of Common Stock upon conversion of the 70,116.6798
shares of Class A Preferred Stock held by GTC III at such time and the Company
redeemed the remaining 70,116.6798 shares of Class A Preferred Stock held by GTC
III with proceeds from the Initial Public Offering.

In addition, in July 1993, the Company entered into a Professional Services
Agreement (the "Services Agreement") which provided for the provision of
consulting and financial services by Golder, Thoma, Cressey, Rauner Limited
Partnership, an Illinois limited partnership ("GTCR Partnership"), to the
Company for quarterly fees equal to one-quarter of 1% of the aggregate purchase
price of the Common Stock and Preferred Stock owned by GTC III, not to exceed
$150,000 in any calendar year. Pursuant to such agreement, the Company paid GTCR
Partnership consulting fees of $37,000, $85,000, and $127,000 for the years
ended December 31, 1993, 1994 and 1995, respectively. The Services Agreement
also provided for the payment of investment fees equal to 1% of the purchase
price paid to the Company in connection with any purchase of securities by GTC
III under the GTC III Equity Agreement. For the years ended December 31, 1993,
1994 and 1995, the Company paid GTC III investment fees of approximately $8,400,
$114,000, and $16,000, respectively.

In July 1993, the Company also entered into a Senior Management Agreement
with Mr. Michael T. Willis (the "Willis Management Agreement"). Pursuant to the
Willis Management Agreement, Mr. Willis purchased 1,368,000 shares of Common
Stock at $0.17 per share and 935,940 shares of Common Stock at approximately
$0.14 per share. In addition, the Willis Management Agreement obligated Mr.
Willis to purchase shares of Class A Preferred Stock in connection with shares
purchased by GTC III and First Union under the GTC III Equity Agreement and the
First Union Equity Agreement (defined herein), respectively. The Willis
Management Agreement also provided for the payment of an investment fee equal to
1% of the purchase price of any securities purchased by Mr. Willis under the
Willis Management Agreement. For the years ended December 31, 1994 and 1995, the
Company paid Mr. Willis investment fees of approximately $10,300 and $2,200,
respectively. In connection with the Initial Public Offering, Mr. Willis
acquired an additional 55,371 shares of Common Stock upon conversion of the
6,275.4783 shares of Class A Preferred Stock held by Mr. Willis at such time and
the Company redeemed the remaining 6,275.4782 shares of Class A Preferred Stock
held by Mr. Willis with proceeds from the Initial Public Offering.

In addition, the Equity Documents, among other things: (i) restricted the
Company's ability to take certain actions without the consent of GTC III; (ii)
granted GTC III, First Union, The Leslie J. Cohen Amended Revocable Trust Dated
May 28, 1993 (the "Leslie J. Cohen Trust"), and Messrs. Willis, Shimer, Caudell,
Amella, Dameris, Aceto, Turner, and Schneider certain preemptive rights to
acquire additional securities issued by the Company; (iii) restricted the
transfer of shares of the Company held by such stockholders; (iv) provided for
the vesting (and acceleration of

42
<PAGE> 43

vesting upon the filing of the registration statement relating to the Initial
Public Offering) of shares of Common Stock granted to Messrs. Willis, Shimer,
Caudell, Amella, Dameris, Aceto, Turner, and Schneider; and (v) provided for
certain rights of first refusal in connection with proposed transfers of the
Company's securities by the parties to the Equity Documents. The Equity
Documents also established certain voting arrangements with respect to the
shares of Common Stock owned by GTC III and Mr. Willis pursuant to which GTC III
and Mr. Willis were each allowed to appoint one director of the Company's Board
of Directors and were jointly allowed to appoint three directors of the
Company's Board of Directors. It was pursuant to this arrangement that Messrs.
Willis, Rauner, Turner, Edwards, and Schneider were elected to the Company's
Board of Directors.

Pursuant to the terms of the Registration Agreement, the parties to the
Equity Documents will continue to be entitled to certain registration rights
with respect to shares of Common Stock held by them. See "Shares Eligible for
Future Sale."

FIRST UNION EQUITY AGREEMENT

In connection with the establishment of the original Credit Agreement in
April of 1994, the Company entered into an Equity Purchase Agreement (the "First
Union Equity Agreement") pursuant to which First Union, an affiliate of First
Union Bank, acquired 1,026,000 shares of Non-Voting Common Stock of the Company
at approximately $0.18 per share and 10,592.3 shares of Class A Preferred Stock
at $100.00 per share. Further, the First Union Equity Agreement obligated First
Union, under certain circumstances related to the consummation by the Company of
qualified acquisitions or investments, to acquire up to an additional
173,825.1854 shares of Class A Preferred Stock at $100.00 per share. In the
event First Union failed to fulfill such obligation, the First Union Equity
Agreement granted each of the Company and GTC III a one-year option to purchase
a percentage of the shares of Non-Voting Common Stock held by First Union equal
to the percentage of shares of Class A Preferred Stock First Union failed to
purchase, at First Union's original purchase price. At the time of purchase by
First Union of shares of Non-Voting Common Stock or Preferred Stock pursuant to
the First Union Equity Agreement, the Company was obligated to pay First Union
an investment fee equal to 1% of the purchase price paid to the Company in
connection with such purchase. For the fiscal years ended December 31, 1994 and
1995, the Company paid First Union fees of approximately $18,800 and $2,400,
respectively. In connection with the Initial Public Offering, First Union
acquired 93,723 shares of Non-Voting Common Stock upon conversion of the
10,621.9509 shares of Class A Preferred Stock held by First Union at such time
and the Company redeemed the remaining 10,621.9509 shares of Class A Preferred
Stock held by First Union with proceeds from the Initial Public Offering.

In addition, in April 1994, in connection with the establishment of the
Credit Agreement, the Stockholders Agreement and the Registration Agreement were
amended to include First Union as a party thereto. The Stockholders Agreement
and the First Union Equity Agreement terminated upon completion of the Initial
Public Offering.

SENIOR SUBORDINATED LOAN

In June 1995, the Company entered into a $10 million senior subordinated
note facility (the "Senior Subordinated Loan") pursuant to which First Union
loaned the Company $10.0 million in connection with the acquisition of
Cutler-Williams. In connection with the Senior Subordinated Loan, the Company
executed a warrant purchase agreement for the benefit of First Union (the
"Warrant Agreement") pursuant to which First Union had the right to purchase 5%
of the outstanding Common Stock of the Company on a fully diluted basis if the
Company had not paid the amounts due under the Senior Subordinated Loan by June
30, 1996. The Company used a portion of the net proceeds from the Initial Public
Offering to repay all indebtedness outstanding under the Senior Subordinated
Loan thereby terminating the Warrant Agreement. In addition, First Union Bank, a
subsidiary of First Union, serves as the agent bank for the Credit Agreement as
well as providing the Company with certain cash management services under terms
of a separate agreement. See

43
<PAGE> 44

"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

STOCKHOLDER LOANS

Messrs. Aceto, Amella, Caudell, Dameris, Schneider, Shimer, and Turner are
indebted to the Company in the amounts shown below. These debts were incurred in
connection with the acquisition by each of them of shares of Common Stock
pursuant to their respective Senior Management Agreements on the dates and in
the amounts shown below. The notes relating to these loans are recourse, payable
on demand, bear interest at 8% per annum, with interest due only upon payment of
principal, and are secured by a pledge of such shares of Common Stock.

<TABLE>
<CAPTION>
ORIGINAL DATE OUTSTANDING NUMBER OF PRICE
PRINCIPAL OF AMOUNT SHARES PER
NAME AMOUNT ISSUANCE OF NOTE(1) PURCHASED SHARE
- - ------------------------------- -------- ------------- ----------- --------- -----
<S> <C> <C> <C> <C> <C>
Rocco N. Aceto................. $355,000 April 1995 $374,452.05 114,000 $3.11
Joseph V. Amella............... 355,000 April 1995 374,452.05 114,000 3.11
William L. Caudell............. 40,000 April 1994 45,505.75 228,000 0.17
Peter T. Dameris............... 75,000 January 1995 80,852.05 114,000 0.66
Charles R. Schneider........... 2,250 January 1995 2,425.56 3,420 0.66
Daniel L. Shimer............... 60,000 April 1994 68,258.63(2) 342,000 0.17
John T. Turner................. 2,250 January 1995 2,425.56(2) 3,420 0.66
</TABLE>

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

(1) Includes accrued interest through December 31, 1995.

(2) These notes were paid in full during the first quarter of 1996.

OTHER TRANSACTIONS

Pursuant to the Preferred Stock Redemption, the Company paid Mr. Willis,
GTC III, and First Union the total amount of approximately $947,984, $7,011,718,
and $1,062,195 ($100.00 per share of Preferred Stock redeemed from each, which
is equal to their original purchase price of $100.00 per share), respectively.
In addition, Mr. Willis, GTC III and First Union received payment of accrued but
unpaid dividends on the Preferred Stock through the closing of the Initial
Public Offering of $251,215, $1,594,644, and $235,626, respectively.

Mr. Willis is a 17% limited partner of a consulting and investment banking
company. For the years ended December 31, 1993, 1994 and 1995, the Company paid
such company fees of approximately $4,000, $550,000, and $31,000, respectively,
for investment banking and consulting services furnished in connection with the
Company's acquisition of two staffing services companies. Such fees were
calculated based on rates stipulated in an agreement which, in the opinion of
management, are equivalent to rates charged by unrelated investment banking
firms.

From January 1990 until January 1995, Mr. Dameris was a partner with the
law firm of Cochran, Rooke and Craft, LLP which from time to time provided legal
services to the Company and its subsidiaries. For the years ended December 31,
1993, 1994 and 1995, the Company paid this firm fees of approximately $128,800,
$344,600, and $30,800, respectively, for the provision of such legal services.

Mr. Willis was a former stockholder of PHP, an entity acquired by the
Company in July 1993. As consideration for the acquisition of Mr. Willis' shares
of capital stock of PHP, the Company issued 228,000 shares of Common Stock and
6,408.72 shares of Class B Preferred Stock to Mr. Willis. In connection with the
Initial Public Offering, Mr. Willis acquired 28,273 shares of Common Stock upon
conversion of 3,204.36 shares of Class B Preferred Stock held by Mr. Willis and
the Company redeemed the remaining 3,204.36 shares of Class B Preferred Stock
held by Mr. Willis with proceeds from the Initial Public Offering.

44
<PAGE> 45

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of the Company's equity securities as of April 30, 1996:
(i) by each person known to the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) by each director of the Company, (iii)
by each of the Named Officers, (iv) by all directors and officers of the Company
as a group, and (v) each Selling Stockholder. Each stockholder has (i) sole
voting and investment power with respect to such stockholder's shares of stock
except to the extent that authority is shared by his or her spouse under
applicable law and (ii) record and beneficial ownership with respect to such
stockholders' shares of stock. The Company will pay all expenses incurred by the
Selling Stockholders with respect to the Offerings other than legal fees and
expenses and underwriting discounts and commissions applicable to the sale of
shares by Selling Stockholders.

<TABLE>
<CAPTION>
SHARES OWNED SHARES TO BE OWNED
BENEFICIALLY BENEFICIALLY
PRIOR TO THE SHARES AFTER THE
OFFERINGS(1) TO BE SOLD OFFERINGS(1)
----------------------- IN THE ---------------------
NAME NUMBER PERCENT OFFERINGS NUMBER PERCENT
- - ----------------------------------------- ---------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
SHARES OF COMMON STOCK:
Golder Thoma & Cressey Fund III Limited
Partnership(2)....................... 7,391,421 43.9% 1,359,957(7) 6,031,464 29.7%
Michael T. Willis(3)................... 2,593,527 15.4% 259,353 2,334,174 11.5%
Daniel L. Shimer....................... 342,000 2.0% 68,400 273,600 1.3%
William L. Caudell..................... 228,000 1.4% 22,800 205,200 1.0%
Joseph V. Amella....................... 114,000 * 11,400 102,600 *
Peter T. Dameris....................... 129,000 * 27,900 101,100 *
Rocco N. Aceto......................... 114,000 * 11,400 102,600 *
Donald J. Edwards(4)................... 1,500 * -0- 1,500 *
Bruce V. Rauner........................ 7,391,421(5) 43.9% -0- 6,031,464 29.7%
Charles R. Schneider................... 13,170(6) * -0- 13,170 *
John T. Turner......................... 4,920(6) * -0- 4,920 *
Charles H. Cotros...................... 16,500(6) * -0- 16,500 *
Nuala Beck............................. 1,500(6) * -0- 1,500 *
The Leslie J. Cohen Amended Revocable
Trust................................ 178,107 1.1% 32,770(7) 145,337 *
All officers and directors as a group (14
persons)............................... 11,030,788 65.3% 9,269,578 45.4%
SHARES OF NON-VOTING COMMON STOCK:
First Union Corporation(8)............. 1,119,723 100.0% 206,020(7) 913,703 100.0%
</TABLE>

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

* Less than 1%

(1) Shares of common stock that are not outstanding but that may be acquired by
a person upon exercise of options within 60 days of the date of this
Prospectus are deemed outstanding for the purpose of computing the
percentage of outstanding shares beneficially owned by such person. However,
such shares are not deemed to be outstanding for the purpose of computing
the percentage of outstanding shares beneficially owned by any other person.

(2) GTC III's sole general partner is GTCR Partnership. The address for GTC III
is 6100 Sears Tower, Chicago, Illinois 60606.

(3) The address for Mr. Willis is 4400 Post Oak Parkway, Suite 1130, Houston,
Texas 77027.

(4) Mr. Edwards is a Principal with GTCR Inc., an affiliate of GTC III.

(5) Includes all of the shares of Common Stock owned by GTC III. Mr. Rauner is a
general partner of GTCR Partnership, which serves as the sole general
partner of GTC III and over which he may be deemed to have voting and
investment power. The address for Mr. Rauner is 6100 Sears Tower, Chicago,
Illinois 60606.

(6) Includes 1,500 shares that may be acquired upon exercise of outstanding
options.

45
<PAGE> 46

(7) In addition, GTC III, the Leslie J. Cohen Trust, and First Union have agreed
to sell up to an additional 676,258, 16,296, and 102,446 shares of Common
Stock, respectively, to cover over-allotments, if any. If the over-allotment
options are exercised in full, GTC III and the Leslie J. Cohen Trust would
beneficially own 26.2% and 0.6%, respectively, of the Common Stock after the
Offerings and First Union would beneficially own 100.0% of the Non-Voting
Common Stock.

(8) The address for First Union is One First Union Center, 18th Floor,
Charlotte, North Carolina 28288-0732.

DESCRIPTION OF CAPITAL STOCK

Pursuant to the Certificate of Incorporation, the Company's authorized
capital stock consists of 40,000,000 shares of Common Stock; 3,000,000 shares of
Non-Voting Common Stock; and 5,000,000 shares of Preferred Stock. On March 26,
1996, the Company effected a three-for-two stock split by means of a stock
dividend of one share of Common Stock for each two shares of Common Stock held
of record on March 14, 1996. As a result of the Stock Split, the Company had
17,510,444 shares of Common Stock issued and 16,826,444 shares outstanding;
1,119,723 shares of Non-Voting Common Stock issued and outstanding; and no
shares of Preferred Stock issued or outstanding as of March 31, 1996.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters submitted to a vote of stockholders and do
not have cumulative voting rights. Subject to preferences that may be applicable
to any outstanding Preferred Stock, the holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to receive, after payment of the
Company's debts and liabilities, the remaining assets of the Company on a
ratable basis. This right, however, is subject to (i) any prior liquidation
rights of Preferred Stock then outstanding (to the extent such rights are
designated by the Board of Directors) and (ii) any rights of holders of
Preferred Stock to share ratably with holders of Common Stock in all assets
remaining after payment of liabilities and liquidation preferences (to the
extent such rights are designated by the Board of Directors). The Common Stock
has no preemptive or conversion rights or other subscription rights. There are
no redemption or sinking fund provisions applicable to the Common Stock. All
shares of Common Stock currently outstanding are fully paid and non-assessable.

NON-VOTING COMMON STOCK

Except as required by applicable law, the holders of Non-Voting Common
Stock are not entitled to vote in the election of directors or on any other
matters submitted to a vote of stockholders. In addition, Non-Voting Common
Stock (i) may only be issued to and held by a "Regulated Stockholder" which is
defined in the Certificate of Incorporation to be an entity subject to the
Federal Reserve Board's rules and regulations, (ii) may be converted into Common
Stock at any time at the option of the holder thereof on a one-for-one basis;
provided, however, any such conversion may only be made if in the opinion of the
holder of the Non-Voting Common Stock the regulations of the Federal Reserve
Board in effect at such time would not prohibit a national bank holding company
from holding such shares of Common Stock, and (iii) is subject to the same
dividend and liquidation preferences and benefits as the Common Stock. Except
for the restrictions on ownership, voting, and conversion, the Non-Voting Common
Stock is substantially similar to the Common Stock.

46
<PAGE> 47

PREFERRED STOCK

The Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions granted to or imposed upon any unissued shares of
Preferred Stock and to fix the number of shares constituting any series and the
designations of such series, without any further vote or action by the
stockholders. Although it currently has no intention to do so, the Board of
Directors, without stockholder approval, can issue Preferred Stock with voting
and conversion rights which could adversely affect the voting power of the
holders of Common Stock. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company.

PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECTS

The Certificate of Incorporation and the Bylaws of the Company contain
provisions that could have an anti-takeover effect. These provisions are
intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors of the Company and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions which may involve an actual or threatened change of control of the
Company. The provisions are designed to reduce the vulnerability of the Company
to an unsolicited proposal for a takeover of the Company that does not
contemplate the acquisition of all of its outstanding shares or an unsolicited
proposal for the restructuring or sale of all or part of the Company. The
provisions are also intended to discourage certain tactics that may be used in
proxy contests. Set forth below is a description of such provisions in the
Certificate of Incorporation and the Bylaws. The Board of Directors has no
current plans to formulate or effect additional measures that could have an
anti-takeover effect.

Pursuant to the Certificate of Incorporation, directors, other than those,
if any, elected by the holders of Preferred Stock, can be removed from office by
the affirmative vote of the holders of 66 2/3% of the voting power of the then
outstanding shares of capital stock entitled to vote thereon ("Voting Stock").
Vacancies on the Board of Directors may be filled by the remaining directors and
does not require stockholder approval.

The Certificate of Incorporation of the Company provides for the Board of
Directors to be divided into three classes, with staggered three-year terms. As
a result, only one class of directors will be elected at each annual meeting of
stockholders of the Company, with the other classes continuing for the remainder
of their respective three-year term. The classification of the Board of
Directors makes it more difficult to replace the Board of Directors as well as
for another party to obtain control of the Company by replacing the Board of
Directors. Since the Board of Directors has the power to retain and discharge
officers of the Company, these provisions could also make it more difficult for
existing stockholders or another party to effect a change in management.

The Company is subject to the provisions of Section 203 of the DGCL. In
general, Section 203 prohibits a publicly-held Delaware corporation from
engaging in a "business transaction" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. A "business combination" generally includes, without
limitation, a merger, assets or stock sale, or a transaction resulting in a
financial benefit to the interested stockholder. An "interested stockholder"
generally is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's outstanding
voting stock.

In addition, the Company's Certificate of Incorporation provides that in
addition to any other vote required by law, the following actions involving the
Company or its subsidiaries and an interested stockholder (an "interested
stockholder" is defined in the Certificate of Incorporation to generally include
any person, entity or group which beneficially owns 10% or more of the
outstanding Voting Stock of the Company) shall require the affirmative vote of
both the holders of shares constituting 66 2/3% of the Voting Stock of the
Company and the holders of the majority of the

47
<PAGE> 48

shares of Common Stock at the time outstanding, given in person or by proxy at a
meeting called for such purpose at which the holders of Common Stock shall vote
separately as a class (a) for any merger, consolidation or reorganization, (b)
for any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of (1) the Company's or its subsidiaries' assets to an interested stockholder or
(2) an interested stockholder's assets to the Company or its subsidiaries, (c)
for any issuance, sale, exchange, disposition or other transfer or any
reclassification or recapitalization of any securities of the Company or its
subsidiaries with a value of $1.0 million or more, and (d) for certain other
material corporate transactions with an interested stockholder; provided,
however, in the event either (y) more than 66 2/3% of the Company's directors
shall have expressly approved the transaction or (z) the stockholders receive a
fair price for their holdings and other requirements are fulfilled as set forth
in the Certificate of Incorporation, such special vote of the stockholders shall
not be required. A "fair price" shall be deemed to be an amount equal to the
highest amount of consideration paid by the interested stockholder for a share
of Common Stock or Non-Voting Common Stock (collectively, "Common Equity") at
any time within a two year period immediately prior to the date such interested
stockholder became an interested stockholder and during any time while such
interested stockholder was an interested stockholder.

The Certificate of Incorporation provides that except as otherwise provided
for with respect to the rights of holders of Preferred Stock, no action that is
required or permitted to be taken by the stockholders of the Company at any
annual or special meeting of the stockholders may be effected by written consent
of the stockholders in lieu of a meeting of stockholders, unless the actions to
be effected by written consent of the stockholders and the taking of such action
by such written consent has been expressly approved in advance by the Board of
Directors of the Company. This provision makes it difficult for stockholders to
initiate or effect an action by written consent, and thereby effect an action
opposed by the Board of Directors. The Certificate of Incorporation and Bylaws
also provide that special meetings of stockholders may be called only by the
Chairman of the Board, the Vice Chairman of the Board, the Chief Executive
Officer, or the President of the Company, the Board of Directors of the Company,
or the holders of at least 25% of the outstanding Voting Stock. In addition, the
Bylaws set forth an advance notice procedure with regard to business to be
brought before an annual meeting of stockholders of the Company.

The Certificate of Incorporation further provides that the Board of
Directors, by a majority vote, may adopt, alter, amend or repeal provisions of
the Bylaws. However, stockholders may only adopt, alter, amend or repeal
provisions of the Bylaws by a vote of 66 2/3% or more of the combined voting
power of the then outstanding Voting Stock. In addition, the Certificate of
Incorporation provides that whenever any vote of Voting Stock is required by law
to amend, alter, repeal or rescind ("Change") any provision thereof, then, in
addition to any affirmative vote required by law (i) the affirmative vote of
66 2/3% or more of the combined voting power of the then outstanding shares of
Voting Stock is required to Change certain provisions of the Certificate of
Incorporation, including the provisions referred to above relating to interested
stockholder transactions, the filling of vacancies on the Board of Directors,
the removal of directors, the limitations on stockholder action by written
consent, the calling of special meetings by stockholders and the approval of
amendments to the Company's Bylaws and (ii) if at such time there exists one or
more interested stockholders, such Change must also be approved by the
affirmative vote of the holders of at least a majority of the combined voting
power of the outstanding shares of Voting Stock beneficially owned by persons
other than the interested stockholder or any affiliate or associate thereof.

LIMITATION ON DIRECTORS' AND OFFICERS' LIABILITY; INDEMNIFICATION

The Certificate of Incorporation of the Company limits the liability of the
directors of the Company to the Company or its stockholders (in their capacity
as directors but not in their capacity as officers) to the fullest extent
permitted by the DGCL. Accordingly, pursuant to the terms of the DGCL as
presently in effect, directors of the Company will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director, except
for liability (i) for any breach

48
<PAGE> 49

of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. In addition, such provisions do not limit the rights of the Company or
its stockholders, in appropriate circumstances, to seek equitable remedies such
as injunctive or other forms of non-monetary relief. Such remedies may not be
effective in all cases. The Certificate of Incorporation also provides that if
the DGCL is amended after the approval of the Certificate of Incorporation to
authorize corporate action further eliminating or limiting the personal
liability of the directors, then the liability of a director of the Company will
be eliminated or limited to the full extent permitted by the DGCL, as so
amended. In addition, the Certificate of Incorporation provides that the Company
may purchase and maintain insurance on behalf of the any director, officer,
employee or agent of the Company or is or was serving, at the request of the
Corporation, as a director, officer, employer, or agent for another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in such capacity or arising out of his
status as such, whether or not the Company would have the power to indemnify
such person for such liability under the DGCL.

In addition, the Bylaws, in substance, require the Company to indemnify
each person who is or was, a director, officer, employee or agent of the Company
to the full extent permitted by the laws of the State of Delaware in the event
he/she is involved in legal proceedings by reason of the fact that he/she is or
was a director, officer, employee or agent of the Company, or is or was serving
at the Company's request as a director, officer, employee or agent of another
corporation, partnership or other enterprise. The Company is also required to
advance to such persons payments incurred in defending a proceeding to which
indemnification might apply, provided the recipient provides an undertaking
agreeing to repay all such advanced amounts if it is ultimately determined that
he is not entitled to be indemnified. In addition, the Bylaws specifically
provide that the indemnification rights granted thereunder are non-exclusive.

INDEMNIFICATION AGREEMENTS

Each director of the Company has also entered into an indemnification
agreement with the Company (the "Indemnification Agreements"). The
Indemnification Agreements are intended to permit indemnification which may be
broader than specifically provided by law. It is possible that the applicable
law could change the degree to which indemnification is expressly permitted.

The Indemnification Agreements cover most monetary liabilities paid in
settlement or defense of claims if the indemnified party acted in good faith and
in the manner he or she believed to be in or not opposed to the best interests
of the Company or, with respect to a criminal proceeding, had no reason to
believe his or her conduct was unlawful. The determination as to whether such
standard of conduct has been met is determined by a majority of disinterested
directors or if there are no such directors, by independent legal counsel or the
stockholders. The Indemnification Agreements cover claims relating to the fact
that the indemnified party is or was a director, officer, employee, or agent of
the Company or its subsidiary, or is or was serving at the request of the
Company as a director, officer, employee, or agent for another entity. The
Indemnification Agreements also obligate the Company to promptly advance all
expenses incurred in connection with any claim. The indemnitee is, in turn,
obligated to reimburse the Company for all amounts so advanced if it is later
determined that the indemnitee is not entitled to indemnification. The
indemnification provided under the Indemnification Agreements is not exclusive
of any other indemnity rights.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.

49
<PAGE> 50

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offerings, the Company will have outstanding
21,246,167 shares of Common Stock and Non-Voting Common Stock (assuming no
exercise of outstanding options). Of such shares, 9,309,972 shares of Common
Stock and 913,703 shares of Non-Voting Common Stock are considered "restricted
securities" for the purpose of Rule 144 under the Securities Act and may only be
sold if they are registered under the Securities Act or if an exemption from
registration is available, including an exemption afforded by Rule 144 under the
Securities Act. Upon the expiration of certain lockup agreements, most of the
restricted securities will be eligible for sale in the public market under Rule
144 or Rule 701 of the Securities Act as described below.

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned his or her restricted securities for at least two years but
less than three years, is entitled to sell within any three-month period a
number of such shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock or (ii) the average weekly trading volume in
the Common Stock during the four calendar weeks preceding the date on which
notice of such sale is filed with the Securities and Exchange Commission (the
"Commission"). Sales pursuant to Rule 144 are subject to certain requirements
relating to manner of sale, notice, and availability of current public
information about the Company. A person who is not deemed to have been an
affiliate of the Company at any time during the three months preceding a sale,
and who owns shares that have not been held by the Company or an affiliate of
the Company for at least three years, would be entitled to sell the shares under
Rule 144(k) without compliance with the limitations described above. Restricted
securities properly sold in reliance on Rule 144 are thereafter freely tradeable
without restrictions or registration under the Securities Act unless thereafter
held by an affiliate of the Company.

In general, under Rule 701 under the Securities Act, any employee, officer,
or director of or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701. Such provisions permit nonaffiliates to sell
their Rule 701 shares without having to comply with the public information,
holding period, volume limitation, or notice provisions of Rules 144 and permit
affiliates to sell their Rule 701 shares without having to comply with the Rule
144 holding period restrictions.

The Company has reserved an aggregate of 1,800,000 shares of Common Stock
for issuance pursuant to the 1995 Plan. Initial grants under the 1995 Plan
included options to purchase an aggregate of 810,224 shares of Common Stock. The
Company has filed a registration statement under the Securities Act with respect
to the shares reserved for issuance under the 1995 Plan. The Company has
reserved an aggregate of 300,000 shares of Common Stock for issuance pursuant to
the Stock Purchase Plan. The Company has filed a registration statement under
the Securities Act with respect to the shares reserved for issuance under the
Stock Purchase Plan.

Sales of substantial amounts of Common Stock in the public market could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through the sale of its equity
securities.

REGISTRATION RIGHTS

GTC III, First Union, Michael T. Willis, the Leslie J. Cohen Trust, William
L. Caudell, Daniel L. Shimer, Peter T. Dameris, Rocco N. Aceto, Joseph V.
Amella, John T. Turner and Charles R. Schneider are parties to a Registration
Agreement with the Company (the "Registration Agreement") under which each has
certain rights with respect to the registration under the Securities Act, for
resale to the public, of an aggregate of 10,223,675 shares of Common Stock and
Non-Voting Common Stock (the "Registrable Shares") after giving effect to the
completion of the Offerings (9,428,675 shares if the Underwriters'
over-allotment options are exercised in full). The Registration Agreement
provides that in the event the Company proposes to register any of its
securities under the Securities Act and the registration form to be used to
register such securities may also be

50
<PAGE> 51

used for the registration of the Registrable Shares, such stockholders will be
entitled to include Registrable Shares in such registration, subject to certain
conditions and limitations, including the right of the managing underwriter of
any such offering to exclude for marketing reasons all or some of the
Registrable Shares from such registration. See "Principal and Selling
Stockholders." In addition, GTC III and First Union each have the right, subject
to certain conditions and limitations, to require the Company to register such
Registrable Shares on a Form S-1 on no more than three occasions or on a Form
S-2 or S-3 or any other similar short-form registration, if available, on an
unlimited number of occasions. The Company will be obligated to pay all expenses
associated with the exercise of such registration rights other than underwriting
discounts or commissions incurred in connection with such registration.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Akin, Gump, Strauss, Hauer & Feld, L.L.P. Certain legal
matters will be passed upon for the Underwriters by Andrews & Kurth L.L.P.

EXPERTS

The consolidated financial statements of the Company as of December 31,
1994 and 1995, and the period from inception to December 31, 1993 and the years
ended December 31, 1994 and 1995; the combined financial statements of Tri-Starr
and affiliate as of December 31, 1993 and 1994, and the years then ended; the
financial statements of Regal as of December 31, 1994 and 1995 and the years
then ended; and the financial statements of Leafstone as of December 31, 1995
and the year then ended, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.

The financial statements of Cutler-Williams as of December 31, 1993 and
1994 and for each of the three years in the period ended December 31, 1994
included in this Prospectus have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

The financial statements of Datronics as of December 31, 1994 and 1995 and
for the years then ended included in this Prospectus have been so included in
reliance upon the report of Konigsberg, Wolf & Co., P.C., given on the authority
of said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended, and in accordance therewith
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information concerning the Company may be
inspected and copied without charge at the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the
Commission's Regional Offices located at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such materials may also be obtained upon written request
from the Public Reference Section of the Commission upon payment of prescribed
fees.

51
<PAGE> 52

and regulations of the Commission. For further information with respect to the
Company and the shares of Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and, where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit,
to which reference is hereby made.

52
<PAGE> 53

CORESTAFF, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CORESTAFF, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996............. F-3
Pro Forma Condensed Consolidated Statements of Operations:
Year Ended December 31, 1995.................................................. F-4
Three Months Ended March 31, 1995............................................. F-5
Three Months Ended March 31, 1996............................................. F-6
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements........ F-7
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Auditors.................................................. F-10
Consolidated Balance Sheets as of December 31, 1994 and 1995.................... F-11
Consolidated Statements of Operations for the Period from Inception (July 21,
1993) to December 31, 1993 and the Years Ended December 31, 1994 and 1995...... F-12
Consolidated Statements of Stockholders' Equity for the Period from Inception
(July 21, 1993) to December 31, 1993 and the Years Ended December 31, 1994 and
1995........................................................................... F-13
Consolidated Statements of Cash Flows for the Period from Inception (July 21,
1993) to December 31, 1993 and the Years Ended December 31, 1994 and 1995...... F-14
Notes to Consolidated Financial Statements...................................... F-15
Consolidated Balance Sheet as of March 31, 1996 (Unaudited)..................... F-25
Consolidated Statements of Operations for the Three Months Ended March 31, 1995
and 1996 (Unaudited)........................................................... F-26
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1995
and 1996 (Unaudited)........................................................... F-27
Notes to Unaudited Consolidated Financial Statements............................ F-28
TRI-STARR SERVICES, INC. AND AFFILIATE
Report of Independent Auditors..................................................... F-32
Combined Balance Sheets as of December 31, 1993 and 1994........................... F-33
Combined Statements of Operations for the Years Ended December 31, 1993
and 1994 and the Period from January 1, 1995 to April 9, 1995 (Unaudited)....... F-34
Combined Statements of Stockholders' Equity for the Years Ended December 31, 1993
and 1994 and the Period from January 1, 1995 to April 9, 1995 (Unaudited)....... F-35
Combined Statements of Cash Flows for the Years Ended December 31, 1993
and 1994 and the Period from January 1, 1995 to April 9, 1995 (Unaudited)....... F-36
Notes to Combined Financial Statements............................................. F-37
CUTLER-WILLIAMS INCORPORATED
Report of Independent Accountants.................................................. F-40
Balance Sheets as of December 31, 1993 and 1994.................................... F-41
Statements of Operations for the Years Ended December 31, 1992, 1993 and 1994 and
the Period from January 1, 1995 to June 30, 1995 (Unaudited).................... F-42
Statements of Stockholders' Equity for the Years Ended December 31, 1992,
1993 and 1994 and the Period from January 1, 1995 to June 30, 1995
(Unaudited)..................................................................... F-43
Statements of Cash Flows for the Years Ended December 31, 1992, 1993 and 1994 and
the Period from January 1, 1995 to June 30, 1995 (Unaudited).................... F-44
Notes to Financial Statements...................................................... F-45
</TABLE>

F-1
<PAGE> 54

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
DATRONICS MANAGEMENT, INC.
Report of Independent Auditors..................................................... F-50
Balance Sheets as of December 31, 1994 and 1995.................................... F-51
Statements of Income and Retained Earnings for the Years Ended December 31, 1994
and 1995........................................................................ F-52
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995............ F-53
Notes to Financial Statements...................................................... F-54

REGAL DATA SYSTEMS, INC.
Report of Independent Auditors..................................................... F-58
Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996 (Unaudited)..... F-59
Statements of Operations for the Years Ended December 31, 1994 and 1995 and for the
Three Months Ended March 31, 1995 and 1996 (Unaudited).......................... F-60
Statements of Stockholders' Equity for the Years Ended December 31, 1994 and
1995............................................................................ F-61
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995 and for the
Three Months Ended March 31, 1995 and 1996 (Unaudited).......................... F-62
Notes to Financial Statements...................................................... F-63

LEAFSTONE, INC.
Report of Independent Auditors..................................................... F-66
Balance Sheet as of December 31, 1995 and March 31, 1996 (Unaudited)............... F-67
Statements of Operations and Retained Earnings for the Year Ended
December 31, 1995 and for Three Months Ended March 31, 1995 and 1996
(Unaudited)..................................................................... F-68
Statements of Cash Flows for the Year Ended December 31, 1995 and for Three Months
Ended March 31, 1995 and 1996 (Unaudited)....................................... F-69
Notes to Financial Statements...................................................... F-70
</TABLE>

F-2
<PAGE> 55

CORESTAFF, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1996
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------
REGAL
DATA
CORESTAFF, SYSTEMS, LEAFSTONE,
INC. INC. INC. ADJUSTMENTS PRO FORMA
---------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents...................... 6$,091.... $ 520 $ (382) $ $ 6,229
Accounts receivable, net....................... 65,221 5,159 4,611 (135)(b) 74,856
Prepaid expenses and other..................... 4,165 73 397 1,511(b) 6,146
Deferred income taxes.......................... 1,933 -- -- 1,933
-------- ------ ------ ------- --------
Total current assets................... 77,410 5,752 4,626 1,376 89,164
Fixed Assets, net................................ 7,638 88 723 (244)(b) 8,205
Intangible Assets, net........................... 100,745 -- -- 24,968(b) 125,713
Other Assets..................................... 2,370 23 95 (35)(b) 2,453
-------- ------ ------ ------- --------
Total Assets..................................... $188,163 $5,863 $ 5,444 $26,065 $ 225,535
======== ====== ====== ======= ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Current maturities of long-term debt........... $ 1,902 $ -- $ 1,891 $(1,891)(b) $ 1,902
Accounts payable............................... 12,218 539 251 (61)(b) 12,947
Payroll and related taxes...................... 11,389 1,270 1,752 (12)(b) 14,399
Self-insurance reserve......................... 1,004 -- -- 1,004
Payable to sellers of acquired companies....... 999 -- -- 999
Deferred income taxes.......................... -- 348 38 (386)(b) --
Other current liabilities...................... 492 -- 15 507
-------- ------ ------ ------- --------
Total current liabilities.............. 28,004 2,157 3,947 (2,350) 31,758
Non-current Self-insurance Reserve............... 4,183 -- -- 4,183
Long-term Debt, net of current maturities........ 76,883 -- -- 33,618(a) 110,501
Deferred Income Taxes and Other.................. 1,025 -- -- 1,025
Stockholders' Equity:
Common Stock................................... 175 853 14 (867)(a) 175
Non-voting Common Stock........................ 11 -- 14 (14)(a) 11
Additional paid-in capital..................... 70,748 -- -- 70,748
Retained earnings.............................. 8,149 2,853 1,469 (4,322)(a) 8,149
-------- ------ ------ ------- --------
79,083 3,706 1,497 (5,203) 79,083
Less-common stock held in treasury, at cost.... (188) -- -- (188)
Less-notes receivable from stockholders........ (827) -- -- (827)
-------- ------ ------ ------- --------
Total stockholders' equity............. 78,068 3,706 1,497 (5,203) 78,068
-------- ------ ------ ------- --------
Total Liabilities and Stockholders' Equity....... $188,163 $5,863 $ 5,444 $26,065 $ 225,535
======== ====== ====== ======= ========
</TABLE>

See notes to pro forma condensed consolidated financial statements.

F-3
<PAGE> 56

CORESTAFF, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------------------
TRI-STARR REGAL
SERVICES, CUTLER- DATRONICS DATA
CORESTAFF, INC. AND WILLIAMS MANAGEMENT, SYSTEMS, LEAFSTONE, PRO
INC. AFFILIATE INCORPORATED INC. INC. INC. OTHER ADJUSTMENTS FORMA
---------- --------- ------------ ----------- -------- --------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from Services... $344,548 $ 6,726 $ 28,765 $20,072 $27,809 $34,883 $22,942 $ (619)(c) $485,126
Cost of Services......... 262,092 5,404 19,280 12,210 21,641 28,125 18,365 (4)(c) 367,533
420(d)
-------- ------- -------- ------- ------- ------- ------- ------- --------
Gross Profit............. 82,456 1,322 9,485 7,862 6,168 6,758 4,577 (1,035) 117,593
Operating Costs and
Expenses:
Selling, general and
administrative....... 60,434 832 6,384 6,693 5,020 6,713 3,360 (1,519)(c) 83,616
(4,021)(e)
230(f)
(420)(d)
(90)(g)
Depreciation and
amortization......... 4,215 12 372 50 38 130 108 (36)(c) 6,304
1,217(h)
198(i)
-------- ------- -------- ------- ------- ------- ------- ------- --------
64,649 844 6,756 6,743 5,058 6,843 3,468 (4,441) 89,920
-------- ------- -------- ------- ------- ------- ------- ------- --------
Operating Income......... 17,807 478 2,729 1,119 1,110 (85) 1,109 3,406 27,673
Other Income (Expense):
Interest expense....... (6,978) (23) (28) (28) (89) (156) (58) (6,912)(j) (14,272)
Other, net............. 118 (11) 10 208 12 -- (234) (232)(k) (129)
-------- ------- -------- ------- ------- ------- ------- ------- --------
(6,860) (34) (18) 180 (77) (156) (292) (7,144) (14,401)
Income (loss) before
Income Taxes........... 10,947 444 2,711 1,299 1,033 (241) 817 (3,738) 13,272
Provision (benefit) for
Income Taxes........... 4,590 -- 1,077 86 98 (66) -- (100)(l) 5,685
-------- ------- -------- ------- ------- ------- ------- ------- --------
Net Income (loss)........ $ 6,357 $ 444 $ 1,634 $ 1,213 $ 935 $ (175) $ 817 $(3,638) $ 7,587
======== ======= ======== ======= ======= ======= ======= ======= ========
Earnings per Common
Share.................. $ .43 $ 0.53
======== ========
Number of Shares Used to
Compute Earnings per
Share.................. 13,143 13,143
======== ========
</TABLE>

See notes to pro forma condensed consolidated financial statements.

F-4
<PAGE> 57

CORESTAFF, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------------------------
TRI-STARR REGAL
SERVICES, CUTLER- DATRONICS DATA
CORESTAFF, INC. AND WILLIAMS MANAGEMENT, SYSTEMS, LEAFSTONE,
INC. AFFILIATE INCORPORATED INC. INC. INC. OTHER ADJUSTMENTS PRO FORMA
---------- --------- ------------ ---------- -------- --------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from Services.... $ 69,471 $ 6,726 $ 13,570 $4,990 $6,351 $ 7,912 $5,439 $ (122)(c) $114,337
Cost of Services.......... 54,159 5,404 9,233 3,035 5,032 6,530 4,318 (4)(c) 87,799
92(d)
------- ------ ------- ------ ------ ------ ------ ------- --------
Gross Profit.............. 15,312 1,322 4,337 1,955 1,319 1,382 1,121 (210) 26,538
Operating Costs and
Expenses:
Selling, general and
administrative........ 12,038 832 3,107 1,839 1,621 1,397 687 (216)(c) 19,918
(1,370)(e)
57(f)
(92)(d)
18(g)
Depreciation and
amortization.......... 877 12 184 10 8 23 16 (3)(c) 1,505
328(h)
50(i)
------- ------ ------- ------ ------ ------ ------ ------- --------
12,915 844 3,291 1,849 1,629 1,420 703 (1,228) 21,423
------- ------ ------- ------ ------ ------ ------ ------- --------
Operating Income (Loss)... 2,397 478 1,046 106 (310) (38) 418 1,018 5,115
Other Income (Expense):
Interest expense........ (1,244) (23) (13) (10) (27) (36) (15) (2,244)(j) (3,612)
Other, net.............. 12 (11) 6 23 -- -- 3 (23)(k) 10
------- ------ ------- ------ ------ ------ ------ ------- --------
(1,232) (34) (7) 13 (27) (36) (12) (2,267) (3,602)
------- ------ ------- ------ ------ ------ ------ ------- --------
Income (Loss) before
Income Taxes............ 1,165 444 1,039 119 (337) (74) 406 (1,249) 1,513
Provision (Benefit) for
Income Taxes............ 480 -- -- -- (54) (20) -- 242(l) 648
------- ------ ------- ------ ------ ------ ------ ------- --------
Net Income (Loss)......... $ 685 $ 444 $ 1,039 $ 119 $ (283) $ (54) $ 406 $(1,491) $ 865
======= ====== ======= ====== ====== ====== ====== ======= ========
Earnings per Common
Share................... $ 0.04 $ 0.06
======= ========
Number of Shares Used to
Compute Earnings per
Common Share............ 12,274 12,274
======= ========
</TABLE>

See notes to pro forma condensed consolidated financial statements.

F-5
<PAGE> 58

CORESTAFF, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------
REGAL
DATRONICS DATA
CORESTAFF, MANAGEMENT, SYSTEMS, LEAFSTONE, PRO
INC. INC. INC. INC. OTHER ADJUSTMENTS FORMA
---------- ----------- -------- ---------- ------ ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Services.... $103,386 $ 1,682 $7,489 $ 10,561 $1,815 $ (213)(c) $124,720
Cost of Services.......... 77,684 947 5,869 8,585 1,437 94,522
------- ------ ------ ------- ------ ------- --------
Gross Profit.............. 25,702 735 1,620 1,976 378 (213) 30,198
Operating Costs and
Expenses:
Selling, general and
administrative....... 18,494 664 981 1,750 348 (406)(c) 21,701
(130)(d)
Depreciation and
amortization......... 1,382 5 8 46 10 (14)(c) 1,672
204(h)
31(i)
------- ------ ------ ------- ------ ------- --------
19,876 669 989 1,796 358 (315) 23,373
Operating Income.......... 5,826 66 631 180 20 102 6,825
Other Income (Expense):
Interest expense........ (1,285) -- (3) (44) (13) (838)(j) (2,183)
Other, net.............. 61 946 6 -- -- (944)(k) 69
------- ------ ------ ------- ------ ------- --------
(1,224) 946 3 (44) (13) (1,782) (2,114)
Income (Loss) before
Income Taxes............ 4,602 1,012 634 136 7 (1,680) 4,711
Provision for Income
Taxes................... 1,933 -- 28 50 -- (33)(l) 1,978
------- ------ ------ ------- ------ ------- --------
Net Income................ $ 2,669 $ 1,012 $ 606 $ 86 $ 7 $(1,647) $ 2,733
======= ====== ====== ======= ====== ======= ========
Earnings per Common
Share................... $ 0.15 $ 0.15
======= ========
Number of Shares Used to
Compute Earnings per
Common Share............ 18,226 18,226
======= ========
</TABLE>

See notes to pro forma condensed consolidated financial statements.

F-6
<PAGE> 59

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

The accompanying unaudited pro forma condensed consolidated financial
statements (the "Pro Forma Financial Statements") are based on adjustments to
the historical consolidated financial statements of COREStaff, Inc. ("COREStaff"
or the "Company") to give effect to the acquisitions described in Note 3 (the
"Acquired Companies"). The pro forma condensed consolidated balance sheet
assumes the acquisitions made after March 31,1996 were consummated on that date.
The pro forma condensed consolidated statements of operations assume all
acquisitions described in Note 3 were consummated as of the beginning of the
periods presented. The pro forma condensed consolidated statements of operations
are not necessarily indicative of results that would have occurred had the
acquisitions been consummated as of the beginning of the periods presented or
that might be attained in the future. Certain information normally included in
financial statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The Pro Forma Financial Statements
should be read in conjunction with the historical consolidated financial
statements of COREStaff, the historical financial statements of the acquired
companies and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.

(2) EARNINGS PER SHARE

Pro forma earnings per share were computed by dividing net income
applicable to common stock by the weighted average number of shares of common
stock (after giving retroactive effect to the conversion of one-half of the
preferred stock into common stock) and common stock equivalents outstanding
during the period and the dilutive effect of common stock issued within one year
prior to the initial public offering. The number of shares of common stock and
common stock equivalents has been retroactively adjusted for the three-for-two
stock split. Common stock equivalents consisted of the number of shares issuable
on exercise of the outstanding stock options less the number of shares that
could have been purchased with the proceeds from the exercise of the options
based on the average price of the common stock during the period. The dilutive
effect of common stock issued within one year prior to the initial public
offering for the periods prior to issuance was determined in the same manner
except that the initial public offering price of $17 per share ($11.33 per share
after giving effect to the three-for-two stock split on March 26, 1996) was used
for the repurchase price.

(3) ACQUISITIONS

The acquisitions by the Company of businesses in the temporary staffing
industry have been accounted for as purchases and, accordingly, the results of
operations of the acquired companies have been included in the consolidated
results of operations of COREStaff from the date of acquisition.

On January 9, 1995, the Company acquired Regency Staffing, Inc., a
Florida-based support services company. The purchase price totaled $4.9 million,
consisting of cash of $4.7 million paid to sellers and direct acquisition costs
of $0.2 million. The sellers may also receive contingent payments of up to $1.8
million based on the increase in earnings through February 28, 1997. Payments of
contingent consideration will increase the amount of goodwill related to the
acquisition.

On April 9, 1995, the Company acquired Tri-Starr Services, Inc. and an
affiliate, both of which are Texas-based support services companies. The
purchase price totaled $12.0 million, consisting of cash of $6.0 million paid to
sellers at closing and the remainder paid in February 1996.

F-7
<PAGE> 60

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

On June 30, 1995, the Company acquired Cutler-Williams Incorporated, a
Texas-based information technology services company. The purchase price totaled
$28.3 million, consisting of (i) cash of $25.6 million paid to sellers, (ii)
interest-bearing notes of $2.0 million, and (iii) direct acquisition costs of
$0.7 million.

During 1995, the Company also acquired two small support services companies
(Friends & Company of Phoenix and CTS Personnel Services) and one small physical
therapy company (Occupational Therapy Contract Services, Inc.). The purchase
price for these companies totaled $0.6 million.

On January 4, 1996, the Company acquired substantially all of the assets of
Taylor Temporary Services, Inc. ("Taylor"), a North Carolina-based support
services company, for $3.5 million in cash. The seller may also receive
contingent consideration of up to $0.6 million based on the increase in 1996
earnings before interest and taxes over the amount for 1995. Payment of
contingent consideration will increase the amount of goodwill related to the
acquisition.

On January 31, 1996, the Company acquired Datronics Management, Inc. and
Datronics, U.K. Limited (together, "Datronics"), a New York-based information
technology services company, for approximately $17.5 million in cash.

On February 12, 1996, the Company acquired the assets of Richard Keith
Enterprises, Inc. and Provencial Staffing Services, Inc. (together, "Richard
Keith Enterprises"), Colorado-based support services companies, for $5.9 million
in cash. The seller is also entitled to contingent consideration of up to $3.2
million based on the increase in 1996 earnings before interest and taxes over
the amount for 1995. Payment of contingent consideration will increase the
amount of goodwill related to the acquisition.

On April 2, 1996, the Company acquired Regal Data Systems, Inc. ("Regal"),
a New Jersey-based information technology services company, for $21.7 million in
cash. The sellers are also entitled to contingent consideration of up to $1.0
million based on the increase in 1996 earnings before interest and taxes over
the amount for 1995. Payment of contingent consideration will increase the
amount of goodwill related to the acquisition.

On April 23, 1996, the Company acquired Leafstone, Inc. ("Leafstone"), a
New York-based support services company, for $11.3 million in cash. The sellers
are also entitled to contingent consideration of up to $4.0 million based on the
increase in 1996 earnings before interest and taxes over the amount for 1995.
Payment of contingent consideration will increase the amount of goodwill related
to the acquisition.

(4) ADJUSTMENTS TO HISTORICAL FINANCIAL STATEMENTS

The following pro forma adjustments have been made to the historical
condensed consolidated balance sheet of COREStaff to give effect to the
acquisition of Regal and Leafstone described in Note 3 as if they had occurred
as of March 31, 1996 and to the historical statements of operations as if all
the acquisitions described in Note 3 were consummated as of the beginning of the
periods presented:

(a) To reflect the acquisition of Regal and Leafstone and the
borrowings under the Company's senior credit agreement to fund those
acquisitions.

(b) To reflect, in connection with the acquisition of Regal and
Leafstone, the (i) purchase price allocated to goodwill and (ii) the
elimination of assets not acquired or liabilities not assumed by COREStaff.

F-8
<PAGE> 61

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

(d) To reclass certain expenses to conform with the presentation used
by COREStaff.

(e) To reduce expenses for the difference between compensation of
certain sellers prior to consummation of the acquisitions and their
compensation following the acquisitions as stipulated in the respective
employment agreements with COREStaff.

(f) To eliminate the adjustment made by an acquired company to
write-off its estimated excess self-insurance reserve. Most of the excess
reserve related to prior years.

(g) To reduce expenses for other non-recurring costs.

(h) To reflect amortization of goodwill related to the purchase of the
Acquired Companies, which is being amortized on a straight-line basis over
40 years.

(i) To reflect amortization of other intangible assets (principally
non-compete agreements) related to the purchase of the Acquired Companies.
The cost of the non-compete agreements are amortized over the term of the
agreements.

(j) To reflect the amortization of the costs related to the borrowings
and the interest expense on the borrowings to fund the purchase of the
Acquired Companies.

(k) To eliminate income on investments that were liquidated
immediately following the acquisition of Datronics.

(l) To reflect (i) the change in income taxes related to pro forma
adjustments, and (ii) income taxes on the Acquired Companies that were S
corporations as if they were C corporations for federal income tax
purposes.

F-9
<PAGE> 62

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
COREStaff, Inc.

We have audited the accompanying consolidated balance sheets of COREStaff,
Inc. and subsidiaries (the Company) as of December 31, 1994 and 1995 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the period from inception (July 21, 1993) to December 31, 1993 and the
years ended December 31, 1994 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of COREStaff, Inc.
and subsidiaries at December 31, 1994 and 1995 and the consolidated results of
their operations and their cash flows for the period from inception (July 21,
1993) to December 31, 1993 and the years ended December 31, 1994 and 1995 in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Houston, Texas
February 2, 1996
except for Notes 3 and 5
as to which the date is March 26, 1996

F-10
<PAGE> 63

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................................... $ 4,637 $ 4,091
Accounts receivable, net of allowance of $649 and $891.............. 36,150 54,453
Prepaid expenses and other.......................................... 1,090 2,583
Deferred income taxes............................................... -- 1,740
------- --------
Total current assets........................................ 41,877 62,867
Fixed Assets, net..................................................... 3,731 6,005
Intangible Assets, net of accumulated amortization of $1,185 and
$2,906.............................................................. 45,201 81,277
Other Assets.......................................................... 1,344 2,221
------- --------
Total Assets.......................................................... $92,153 $152,370
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt................................ $ 3,181 $ 2,063
Accounts payable.................................................... 3,914 8,682
Payroll and related taxes........................................... 7,785 9,955
Self-insurance reserve.............................................. 1,168 2,026
Deferred income taxes............................................... 547 --
Amounts due sellers of acquired companies........................... -- 5,972
Other current liabilities........................................... 964 504
------- --------
Total current liabilities................................... 17,559 29,202
Non-current Self-insurance Reserve.................................... 4,674 3,461
Long-term Debt, net of current maturities............................. 50,028 43,315
Deferred Income Taxes and Other....................................... 407 1,227
Stockholders' Equity:
Preferred stock, par value $.01
Class A Senior -- 300,000 shares authorized, 153,348.5153 and
none shares issued.............................................. 2 --
Class B Junior -- 300,000 shares authorized, 11,120.485 and none
shares issued................................................... -- --
Common stock, par value $.01
Common Stock -- 40,000,000 shares authorized, 11,286,000 and
17,495,444 shares issued........................................ 75 175
Class B (non-voting) -- 3,000,000 shares authorized, 1,026,000
and 1,119,723 shares issued..................................... 7 11
Additional paid-in capital.......................................... 18,433 70,637
Retained earnings................................................... 1,296 5,420
------- --------
19,813 76,243
------- --------
Less -- 684,000 shares of common stock held in treasury, at cost.... (188) (188)
Less -- notes receivable from stockholders.......................... (140) (890)
------- --------
Total stockholders' equity.................................. 19,485 75,165
------- --------
Total Liabilities and Stockholders' Equity............................ $92,153 $152,370
======= ========
</TABLE>

See notes to consolidated financial statements.

F-11
<PAGE> 64

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD FROM INCEPTION (JULY 21, 1993) TO DECEMBER 31, 1993 AND
YEARS ENDED DECEMBER 31, 1994 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
Revenues from Services...................................... $ 3,093 $163,351 $344,548
Cost of Services............................................ 2,345 129,543 262,092
------- -------- --------
Gross Profit................................................ 748 33,808 82,456
Operating Costs and Expenses:
Selling, general and administrative....................... 1,033 26,999 60,434
Depreciation and amortization............................. 103 1,933 4,215
------- -------- --------
1,136 28,932 64,649
------- -------- --------
Operating Income (Loss)..................................... (388) 4,876 17,807
Other Income (Expense):
Interest expense.......................................... (16) (2,276) (6,978)
Other, net................................................ 9 111 118
------- -------- --------
(7) (2,165) (6,860)
------- -------- --------
Income (Loss) before Income Taxes........................... (395) 2,711 10,947
Provision (Benefit) for Income Taxes........................ (142) 1,162 4,590
------- -------- --------
Net Income (Loss)........................................... $ (253) $ 1,549 $ 6,357
======= ======== ========
Pro Forma Earnings (Loss) per Common Share.................. $ (0.02) $ 0.10 $ 0.43
======= ======== ========
Number of Shares Used to Compute Pro Forma Earnings per
Common Share.............................................. 11,015 11,724 13,143
======= ======== ========
</TABLE>

See notes to consolidated financial statements.

F-12
<PAGE> 65

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (JULY 21, 1993) TO DECEMBER 31, 1993 AND
YEARS ENDED DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PREFERRED STOCK NOTES
----------------- COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
CLASS CLASS ---------------- PAID-IN RETAINED TREASURY FROM STOCKHOLDERS'
A B COMMON CLASS B CAPITAL EARNINGS STOCK STOCKHOLDERS EQUITY
------- ------- ------ ------- ---------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at inception
(July 21, 1993)........ $ -- $ -- $ -- $-- $ -- $ -- $ -- $ -- $ --
Sale of 6,887,120 shares
of Common Stock........ 69 1,769 (40) 1,798
Issuance of 256,880
shares of Common Stock
and 11,120.485 shares
of Class B preferred
stock.................. 2 1,222 1,224
Sale of 8,348.5136 shares
of Class A preferred
stock.................. 835 835
Net loss................. (253) (253)
------ ------ ---- --- ------- ------- ----- ----- -------
Balance at December 31,
1993................... -- -- 71 -- 3,826 (253) -- (40) 3,604
Repurchase of 684,000
shares of Common
Stock.................. (188) (188)
Sale of 684,000 shares of
Class B common stock
(non-voting)........... 7 181 188
Sale of 380,000 shares of
Common Stock, net...... 4 96 (100)
Sale of 145,000 shares of
Class A preferred
stock, net............. 2 14,330 14,332
Net income............... 1,549 1,549
------ ------ ---- --- ------- ------- ----- ----- -------
Balance at December 31,
1994................... 2 -- 75 7 18,433 1,296 (188) (140) 19,485
Sale of 20,679.794 shares
of Class A preferred
stock, net............. 2,047 2,047
Repurchase of 152,000
shares of Common
Stock.................. (371) 40 (331)
Sale of 4,037,560 shares
of Common Stock........ 40 59,417 371 (790) 59,038
Conversion of 87,014.6089
shares of Class A
preferred stock into
482,075 shares of
Common Stock........... (1 ) 4 (3)
Conversion of 5,560.2425
shares of Class B
preferred stock into
62,482 shares of Class
B common stock
(non-voting)
Redemption of 87,013.6089
shares of Class A
preferred stock and
5,560.2425 shares of
Class B preferred
stock.................. (1 ) (9,257) (9,258)
Preferred stock
dividends.............. (2,173) (2,173)
Net income............... 6,357 6,357
Three-for-two stock split
(issuance of 5,603,809
and 373,241 shares of
common stock and Class
B common stock
(non-voting),
respectively).......... 56 4 (60)
------ ------ ---- --- ------- ------- ----- ----- -------
Balance at December 31,
1995................... $ -- $ -- $175 $11 $ 70,637 $ 5,420 $ (188) $ (890) $75,165
====== ====== ==== === ======= ======= ===== ===== =======
</TABLE>

See notes to consolidated financial statements.

F-13
<PAGE> 66

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD FROM INCEPTION (JULY 21, 1993) TO DECEMBER 31, 1993 AND
YEARS ENDED DECEMBER 31, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)......................................... $ (253) $ 1,549 $ 6,357
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................... 103 1,933 4,215
Amortization of deferred loan costs.................... -- 102 546
Deferred income tax benefit............................ (147) (1,800) (1,108)
Self-insurance reserve................................. -- 2,502 (776)
Provision for doubtful accounts........................ (7) 308 476
Loss on disposal of assets............................. -- 8 69
Changes in assets and liabilities net of effects of
acquisitions:
Accounts receivable.................................. (47) (8,099) (5,619)
Prepaid expenses and other........................... (24) 208 (607)
Accounts payable..................................... 72 1,736 1,433
Accrued liabilities.................................. 22 1,059 1,071
------- -------- --------
Net cash provided by (used in) operating
activities...................................... (281) (494) 6,057
------- -------- --------
Cash Flows from Investing Activities:
Cash paid for acquisitions, net of cash acquired.......... (1,712) (55,836) (39,733)
Capital expenditures...................................... (8) (1,941) (3,005)
Proceeds from sale of investments......................... -- 841 --
Other..................................................... (126) 362 (207)
------- -------- --------
Net cash used in investing activities............. (1,846) (56,574) (42,945)
------- -------- --------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt.................. -- 68,255 84,684
Payments on long-term debt................................ (6) (21,207) (97,664)
Repayments of notes payable............................... (18) (181) --
Net proceeds from sale of preferred stock................. 835 14,356 2,047
Net proceeds from sale of common stock.................... 1,798 188 59,038
Repurchase of common stock................................ -- (188) (331)
Redemption of preferred stock............................. -- -- (9,258)
Payment of dividends on preferred stock................... -- -- (2,174)
------- -------- --------
Net cash provided by financing activities......... 2,609 61,223 36,342
------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 482 4,155 (546)
Cash and cash equivalents at beginning of period............ -- 482 4,637
------- -------- --------
Cash and cash equivalents at end of period.................. $ 482 $ 4,637 $ 4,091
======= ======== ========
Cash paid during the period for:
Interest.................................................. $ -- $ 1,625 $ 6,518
Income taxes.............................................. $ -- $ 2,391 $ 5,717
</TABLE>

See notes to consolidated financial statements.

F-14
<PAGE> 67

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
COREStaff, Inc. (the "Company"), and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

CASH AND CASH EQUIVALENTS

All short-term investments with an original maturity of 90 days or less are
considered cash equivalents.

FIXED ASSETS

Fixed assets are recorded at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets. Amortization
of leasehold improvements is computed on a straight-line basis over the useful
life of the asset or lease term, whichever is shorter. Accumulated depreciation
and amortization was approximately $0.9 million and $2.6 million at December 31,
1994 and 1995, respectively.

INTANGIBLE ASSETS

Intangible assets primarily consist of goodwill associated with the
acquired businesses. Goodwill is amortized on a straight-line basis over 40
years. Other intangible assets consist of non-compete agreements, which are
amortized over the term of the agreement. In the event that facts and
circumstances indicate intangible or other long-lived assets may be impaired,
the Company evaluates the recoverability of such assets. The estimated future
undiscounted cash flows associated with the asset are compared to the asset's
carrying amount to determine if a write-down to market value or discounted cash
flow value is necessary. The Company believes all such assets are fully
realizable as of December 31, 1995.

REVENUE RECOGNITION

Revenue is recognized at the time the services are provided.

INCOME TAXES

The Company follows the liability method of accounting for income taxes.
Under this method, deferred income tax assets and liabilities are determined
based on differences between the financial statement and income tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.

SELF-INSURANCE

The Company self-insures most of its workers' compensation exposure.
Consulting actuaries are used by the Company to assist in the determination of
its liability, which is calculated using a claims-incurred method. The
determination of self-insurance liabilities involves certain assumptions and
estimates used in the actuarially determined liability.

EARNINGS PER COMMON SHARE

Earnings per common share were computed by dividing net income applicable
to common stock (net income less preferred stock dividends in arrears applicable
to the period) by the weighted

F-15
<PAGE> 68

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

average number of shares of common stock and common stock equivalents
outstanding during the period and the dilutive effect of common stock issued
within one year prior to the public offering. Common stock equivalents consisted
of the number of shares issuable on exercise of the outstanding stock options
less the number of shares that could have been purchased with the proceeds from
the exercise of the options based on the average price of the common stock
during the period. The dilutive effect of common stock issued within one year
prior to the public offering for the periods prior to issuance was determined in
the same manner except that the initial public offering price of $17 per share
($11.33 per share after giving effect to the three-for-two stock split discussed
in Note 5) was used for the repurchase price. Historical earnings (loss) per
common share were $(.03) for the period from inception (July 21, 1993) to
December 31, 1993 and $.07 and $.41 for the years ended December 31, 1994 and
1995, respectively. Net income (loss) applicable to common stock was $(310,000)
for the period from inception (July 21, 1993) to December 31, 1993 and $748,000
and $5,041,000 for the years ended December 31, 1994 and 1995, respectively.

Pro forma earnings per common share were determined in the same manner as
described above, except that the conversion of one-half of the preferred stock
into common stock (See Note 5) was assumed to have occurred as of the beginning
of the periods. Net income applicable to common stock was increased by the
dividends in arrears applicable to the preferred stock converted. See Note 5 for
discussion of supplemental earnings per common share.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

STOCK OPTIONS

The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations (APB 25) in
accounting for its employee stock options. In October 1995, SFAS No. 123,
"Accounting for Stock-Based Compensation," was issued, which established a
fair-value based method of accounting for stock-based compensation plans. In
accordance with the provisions of this new accounting standard, the Company has
elected to continue following the provisions of APB 25 and will include in
future filings the pro forma disclosures required by SFAS No. 123.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior years' consolidated
financial statements to conform with the current year presentation.

2. ACQUISITIONS

On April 13, 1994, the Company acquired United Temporary Services,
Incorporated and United Personnel Systems, two California-based support services
companies. The purchase price totaled $19.9 million, consisting of cash of $19.5
million paid to the sellers and direct acquisition costs of $0.4 million.

On April 15, 1994, the Company acquired certain assets of Superior
Temporaries, Inc., a Houston-based support services company and Superior
Temporaries of Atlanta, Inc. The purchase

F-16
<PAGE> 69

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

price totaled $4.7 million, consisting of cash of $4.6 million paid to the
sellers and direct acquisition costs of $0.1 million.

On August 5, 1994, the Company acquired TSTP Corp., a Maryland-based
support services company. The purchase price totaled $17.3 million, consisting
of cash of $17.2 million paid to the sellers and direct acquisition costs of
$0.1 million.

On September 1, 1994, the Company acquired COMSYS Technical Services, Inc.
("COMSYS"), a Maryland-based information technology services company. The
purchase price totaled $20.9 million, consisting of cash of $20.5 million paid
to the sellers and direct acquisition costs of $0.4 million.

On January 9, 1995, the Company acquired Regency Staffing, Inc., a
Florida-based support services company. The purchase price totaled $4.9 million,
consisting of cash of $4.7 million paid to the sellers and direct acquisitions
costs of $0.2 million. The sellers may also receive contingent payments of up to
$1.8 million based on the increase in earnings through February 28, 1997.
Payments of contingent consideration will increase the amount of goodwill
related to the acquisition.

On April 9, 1995, the Company acquired Tri-Starr Services, Inc. and an
affiliate, both of which are Texas-based support services companies. The
purchase price totaled $12.0 million, consisting of cash of $6.0 million paid to
the sellers at closing and the remainder paid to the sellers in February 1996.

On June 30, 1995, the Company acquired Cutler-Williams Incorporated
("Cutler-Williams"), a Texas-based information technology services company. The
purchase price totaled $28.3 million, consisting of (i) cash of $25.6 million
paid to the sellers, (ii) interest-bearing notes of $2.0 million, and (iii)
direct acquisition costs of $0.7 million.

All the acquisitions made by the Company have been accounted for using the
purchase method of accounting. Accordingly, the results of operations of the
acquired companies are included in the Company's consolidated results of
operations from the date of acquisition.

The following unaudited results of operations have been prepared assuming
the acquisitions and the conversion of one-half of the preferred stock into
common stock (see Note 5) had occurred as of the beginning of the periods
presented. These results are not necessarily indicative of results of future
operations nor of results that would have occurred had the acquisitions been
consummated as of the beginning of the periods presented.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenues from services................................. $330,803 $380,205
Net income............................................. $ 3,411 $ 7,136
Earnings per common share.............................. $ 0.22 $ 0.49
</TABLE>

F-17
<PAGE> 70

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. LONG-TERM DEBT

As of December 31, 1994 and 1995, long-term debt consisted of the
following:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Borrowings under senior credit agreement:
Revolving credit facility, interest at bank's base rate or
London Interbank Offered Rate ("LIBOR") plus 1.25%
(weighted rate of 7.36% at December 31, 1995), due
September 30, 2000......................................... $ -- $ 43,122
Term loan facility, interest at bank's base rate or LIBOR plus
1.25% (weighted rate of 8.83% at December 31, 1994), repaid
in November 1995........................................... 34,000 --
$25 million revolving credit facility, interest at bank's base
rate plus 1.5% or LIBOR plus 2.75% (weighted rate of 8.71%
at December 31, 1994), repaid in November 1995............. 16,844 --
Other........................................................... 2,365 2,256
------- -------
53,209 45,378
Less current maturities......................................... 3,181 2,063
------- -------
$ 50,028 $ 43,315
======= =======
</TABLE>

Scheduled maturities of long-term debt are as follows (in thousands):

The Company's senior credit agreement (the "Credit Agreement") was amended
and restated in November 1995. Under the terms of the Credit Agreement, the
Company may borrow, under a revolving credit facility, up to the lesser of $102
million or 3.5 times Pro Forma Adjusted EBITDA (earnings before interest, income
taxes, depreciation and amortization of all acquired companies for the preceding
twelve months). A commitment fee of 0.25% (0.375% if the leverage ratio, as
defined, is greater than 2 to 1) is payable on the unused portion of the
commitment. The Credit Agreement contains certain covenants which, among other
things, restrict the payment of dividends and require the maintenance of certain
financial ratios. As of December 31, 1995, the Company had outstanding
borrowings of $43.1 million and remaining availability (after deducting
outstanding letters of credit of $5.7 million) of $41.3 million under the Credit
Agreement. On March 22, 1996 the banks consented, subject to execution of final
documentation, to increase the borrowing commitment under the Credit Agreement
from $102 million to $130 million, subject to defined borrowing base
limitations. The Company had outstanding borrowings under the Credit Agreement
of $78.2 million as of March 22, 1996 and remaining availability of $17.0
million.

During 1995, a financial institution, which owns all the Company's Class B
(non-voting) common stock, provided the Company with a $10 million senior
subordinated note. Borrowings under this note accrued interest at LIBOR, plus
4.5 percent. The Company paid an up-front fee of $0.3 million to the institution
for arranging the financing. This note, plus accrued interest, was repaid out of
the proceeds of the initial public offering.

F-18
<PAGE> 71

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On January 26, 1995, the Company purchased for $0.3 million a three-year
interest rate cap to reduce a portion of its interest rate exposure on
borrowings under the Credit Agreement. The agreement initially covers $30
million of notional principal with quarterly notional principal reductions.
Under this agreement, the Company will receive an amount equal to the excess of
LIBOR, which is reset quarterly in arrears, over 8.75%, times the notional
principal. The cost of this cap is being amortized evenly over its three-year
term and the amortization is included in interest expense. Any amounts received
under the agreement from the counterparty will be used to reduce interest
expense.

4. INCOME TAXES

The provision (benefit) for income taxes for the period from inception
(July 21, 1993) to December 31, 1993, and the years ended December 31, 1994 and
1995, consisted of the following:

<TABLE>
<CAPTION>
1993 1994 1995
----- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................. $ -- $ 2,582 $ 5,098
State............................................... 5 380 600
----- ------- -------
5 2,962 5,698
----- ------- -------
Deferred:
Federal............................................. (114) (1,530) (967)
State............................................... (33) (270) (141)
----- ------- -------
(147) (1,800) (1,108)
----- ------- -------
$(142) $ 1,162 $ 4,590
===== ======= =======
</TABLE>

The differences between income taxes computed at the federal statutory
income tax rate and the provision (benefit) for income taxes for the period from
inception (July 21, 1993) to December 31, 1993 and the years ended December 31,
1994 and 1995 are as follows:

<TABLE>
<CAPTION>
1993 1994 1995
----- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes computed at federal statutory income tax
rate.................................................. $(134) $ 922 $3,731
State income taxes, net of federal benefit.............. (28) 103 498
Amortization of nondeductible goodwill.................. 15 70 177
Nondeductible portion of business meals and
entertainment and other............................... 5 67 184
----- ------ ------
Provision (benefit) for income taxes.................... $(142) $1,162 $4,590
===== ====== ======
</TABLE>

The net current and noncurrent components of deferred income taxes
reflected in the consolidated balance sheets as of December 31, 1994 and 1995
are as follows:

<TABLE>
<CAPTION>
1994 1995
----- ------
(IN THOUSANDS)
<S> <C> <C>
Net current assets................................................ $ -- $1,740
Net current liabilities........................................... 547 --
Net noncurrent liabilities........................................ 407 755
------- -------
Net asset (liability)............................................. $(954) $ 985
======= =======
</TABLE>

F-19
<PAGE> 72

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred tax assets and liabilities as of December 31, 1994 and 1995 were
comprised of the following:

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Self-insurance reserve....................................... $ 2,337 $ 2,439
Non-compete agreements....................................... 185 453
Bad debt allowances.......................................... 205 297
Vacation pay................................................. 85 144
Other........................................................ -- 46
------- -------
Total deferred tax assets............................ 2,812 3,379
------- -------
Deferred tax liabilities:
Goodwill..................................................... (254) (880)
Excess financial over tax basis of acquisitions.............. (3,376) (1,443)
Other........................................................ (136) (71)
------- -------
Total deferred tax liabilities....................... (3,766) (2,394)
------- -------
Net deferred tax asset (liability)............................. $ (954) $ 985
======= =======
</TABLE>

5. STOCKHOLDERS' EQUITY

PREFERRED STOCK. The Company's preferred stock had a liquidation value of
$100 per share and entitled the holders to receive cumulative dividends at 8%
per annum of the sum of the liquidation value plus all accumulated and unpaid
dividends. Dividends of $0.9 million were in arrears at December 31, 1994. In
November 1995, one-half of the outstanding shares of preferred stock was
converted into common stock at the initial public offering price of $17 per
share ($11.33 per share after giving effect to the three-for-two stock split
discussed below) and the remaining one-half of the shares was redeemed out of
the proceeds from the initial public offering. Dividends in arrears of $2.2
million were also paid out of the proceeds from the offering.

COMMON STOCK. Under terms of an agreement, 1,520,000 shares (2,280,000
after giving effect to the three-for-two stock split discussed below) of the
Company's common stock were issued to key executives and management. In
connection with certain of these issuances, the Company received notes from
executives as consideration. These notes, which total $0.9 million and are
secured by the common stock, bear interest at 8% per year and are due on demand.
These shares became fully vested in connection with the public offering of the
Company's common stock.

In October 1995, the Board of Directors approved a 76-for-1 stock split of
the Company's common stock. All references to common share amounts in the
financial statements and notes thereto have been restated to reflect the split.

In November 1995, the Company completed a public offering (the "Offering")
of 3,795,000 shares of its common stock at $17 per share (5,692,500 shares at
$11.33 per share after giving effect to the three-for-two stock split discussed
below). Net proceeds from the Offering were approximately $59 million. The
proceeds were used to (i) redeem the outstanding preferred stock, plus accrued
dividends, (ii) repay the $10 million senior subordinated note, plus accrued
interest and (iii) pay down borrowings under the Credit Agreement by
approximately $38 million. Supplemental earnings per common share reflect
adjustments to the pro forma earnings per common share (see Note 1) to give
effect to the use of proceeds described above as if this had occurred at

F-20
<PAGE> 73

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the beginning of 1995. Supplemental earnings per common share for the year ended
December 31, 1995 were $0.52.

On March 4, 1996, the Board of Directors authorized a three-for-two stock
split, effected in the form of a stock dividend, payable to shareholders of
record on March 14, 1996. All references in the financial statements to number
of shares outstanding and related prices, per share amounts and stock option
plan data have been restated to reflect the split. The stock split resulted in
the issuance of approximately 6.0 million new shares of common stock and a
reclassification of approximately $0.1 million from retained earnings to common
stock representing the par value of the shares issued.

6. LONG TERM INCENTIVE PLAN

In August 1995, the Company adopted a long term incentive plan (the "Plan")
which provides for the issuance of stock options, stock appreciation rights,
restricted stock, performance share awards, and stock value equivalent awards
and cash awards. All full time employees and directors of the Company or its
affiliates are eligible to participate. An aggregate of 1.8 million shares of
common stock has been reserved for issuance under the Plan. The Plan is
administered by the 1995 Long Term Incentive Plan Committee. Stock options
issued under the Plan can be either incentive stock options or non-qualified
stock options. The exercise price of an incentive stock option will not be less
than the fair market value of the common stock on the date the option is
granted.

During 1995, the Company had issued only non-qualified stock options under
the Plan, which had exercise prices equal to the fair market value of the common
stock at the date of grant. Activity during 1995 with respect to the stock
options follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
SHARES
UNDER OPTION PRICE
OPTION PER SHARE
------ ---------------
<S> <C> <C>
Outstanding at December 31, 1994.......................... -- --
Granted................................................. 810 $7.47 to $11.33
Exercised............................................... (15) $7.47
Canceled or expired..................................... (2) $7.47
---
Outstanding at December 31, 1995.......................... 793
===
Shares available for grant at end of year................. 992
Options exercisable at end of year........................ 63
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

The Company leases various office space and equipment under noncancelable
operating leases expiring through 1999. Rent expense was $43,410, $1,631,897 and
$3,335,158 for 1993, 1994 and 1995, respectively. The related future minimum
lease payments as of December 31, 1995 are as follows (in thousands):

<TABLE>
<S> <C>
1996.............................................. $ 3,391
1997.............................................. 3,023
1998.............................................. 2,568
1999.............................................. 1,814
2000.............................................. 917
Thereafter........................................ 285
-------
$11,998
=======
</TABLE>

F-21
<PAGE> 74

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company self-insures most of its workers' compensation exposure.
Consulting actuaries are used by the Company in the determination of its
liability, which is calculated using a claims-incurred method. Using this
method, the present value (using a 5% discount factor) of the estimated
liability for claims incurred but unpaid as of December 31, 1995 was
approximately $5.5 million ($6.1 million undiscounted), of which approximately
$2.0 million was classified as a current liability. As of December 31, 1995, the
Company had an irrevocable stand-by letter of credit of approximately $4.1
million, as required by the State of California.

Certain of the Company's executives are covered by employment agreements
covering, among other things, base compensation, incentive-bonus determinations
and payments in the event of termination or change in control of the Company.

Under terms of certain acquisitions, the Company is required to make
additional payments to sellers generally to the extent future earnings, as
defined, exceed certain stipulated levels. The provisions of these contingent
payments are described in Note 2.

The Company is a defendant in various lawsuits and claims arising in the
normal course of business. Management believes it has valid defenses in these
cases and is defending them vigorously. While the results of litigation cannot
be predicted with certainty, management believes the final outcome of such
litigation will not have a material effect on the Company.

8. RELATED PARTY TRANSACTIONS

Under terms of a professional services agreement, which terminated in
November 1995 following the Company's initial public offering, the general
partner of the Company's largest stockholder provided certain financial and
management consulting services to the Company. Fees paid under this agreement
totaled $37,000, $85,000 and $127,000, during 1993, 1994 and 1995, respectively.

Under terms of an agreement, the Company paid an investment fee of 1% of
the purchase price to the equity investors who purchased the Company's preferred
stock.

The CEO of the Company owns an interest in a firm that provided investment
banking services on certain acquisitions or acquisition targets. Fees for
services rendered were based on rates stipulated in an agreement, which in the
opinion of management, are equivalent to rates charged by unrelated investment
banking firms. Fees paid to this firm during 1993, 1994 and 1995 were
approximately $4,000, $550,000 and $31,000, respectively.

A bank, which is an affiliate of the financial institution that owns all
the Company's Class B (non-voting) common stock, serves as the agent bank for
the Company's Credit Agreement. This bank also provided the Company with cash
management services under terms of a separate agreement.

F-22
<PAGE> 75

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. SUPPLEMENTAL CASH FLOW INFORMATION

In addition to cash paid for the acquired businesses, the Company issued
notes payable to the sellers of COMSYS (repaid in 1995) and Cutler-Williams (see
Note 2). The liabilities assumed in connection with the acquisitions for the
period from inception (July 21, 1993) to December 31, 1993 and the years ended
December 31, 1994 and 1995 follow:

<TABLE>
<CAPTION>
1993 1994 1995
-------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Fair value of assets acquired (including
goodwill)......................................... $ 3,656 $ 80,037 $ 55,397
Less: cash paid..................................... (1,736) (58,102) (40,304)
------- -------- --------
Liabilities assumed................................. $ 1,920 $ 21,935 $ 15,093
======= ======== ========
</TABLE>

10. CREDIT RISK

The Company provides temporary staffing services to customers in numerous
states. A substantial portion of these sales are in California. This
concentration could impact the Company's overall exposure to credit risk
inasmuch as these customers could be affected by similar economic or other
conditions. The Company believes its portfolio of accounts receivable is well
diversified and as a result its credit risks are minimal. The Company
continually evaluates the creditworthiness of its customers and monitors
accounts on a periodic basis, but typically does not require collateral.

11. SUBSEQUENT EVENTS (UNAUDITED)

On January 4, 1996, the Company acquired substantially all of the assets of
Taylor Temporaries, Inc., a North Carolina-based support services company, for
$3.5 million in cash. The seller is also entitled to contingent consideration of
up to $0.6 million based on the increase in 1996 earnings before interest and
taxes over the amount for 1995. On January 31, 1996, the Company acquired
Datronics Management, Inc. and Datronics U. K. Limited, a New York-based
information technology services company, for $17.5 million in cash. On February
12, 1996, the Company acquired the assets of Richard Keith Enterprises, Inc. and
Provincial Staffing Services, Inc., Colorado-based support services companies,
for $5.9 million in cash. The seller is also entitled to contingent
consideration of up to $3.2 million based on the increase in 1996 earnings
before interest and taxes over the amount for 1995. Payments of contingent
consideration will increase the amount of goodwill related to the acquisitions.

F-23
<PAGE> 76

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. QUARTERLY FINANCIAL DATA (UNAUDITED)

Unaudited summarized financial data by quarter for 1994 and 1995 follow (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
1994
Revenues................................ $ 2,195 $34,446 $ 55,313 $ 71,397
Operating income (loss)................. (170) 751 2,167 2,128
Net income (loss)....................... (108) 226 787 644
Earnings (loss) per common share(1)..... (0.01) 0.01 0.06 0.04
1995
Revenues................................ $ 69,471 $76,775 $ 97,644 $ 100,658
Operating income........................ 2,397 3,590 5,215 6,605
Net income.............................. 685 1,190 1,705 2,777
Earnings per common share(1)............ 0.04 0.08 0.12 0.17
</TABLE>

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

(1) Adjusted to give effect to the conversion of preferred stock into common
stock (See Note 5).

F-24
<PAGE> 77

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1996
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents...................................................... $ 6,091
Accounts receivable, net of allowance of $934.................................. 65,221
Prepaid expenses and other..................................................... 4,165
Deferred income taxes.......................................................... 1,933
--------
Total current assets................................................... 77,410
Fixed Assets, net................................................................ 7,638
Intangible Assets, net of accumulated amortization of $4,408..................... 100,745
Other Assets..................................................................... 2,370
--------
Total Assets..................................................................... $188,163
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt........................................... $ 1,902
Accounts payable............................................................... 12,218
Payroll and related taxes...................................................... 11,389
Self-insurance reserve......................................................... 1,004
Amounts due sellers of acquired companies...................................... 999
Other current liabilities...................................................... 492
--------
Total current liabilities.............................................. 28,004
Non-current Self-insurance Reserve............................................... 4,183
Long-term Debt, net of current maturities........................................ 76,883
Deferred Income Taxes and Other.................................................. 1,025
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, par value $.01, none issued...................................
Common stock, par value $.01...................................................
Common Stock -- 40,000,000 shares authorized, 17,510,444 shares issued...... 175
Class B (non-voting) -- 3,000,000 shares authorized 1,119,723 shares
issued..................................................................... 11
Additional paid-in capital..................................................... 70,748
Retained earnings.............................................................. 8,149
--------
79,083
--------
Less -- 684,000 shares of common stock in treasury, at cost.................... (188)
Less -- notes receivable from stockholders..................................... (827)
--------
Total stockholders' equity............................................. 78,068
--------
Total Liabilities and Stockholders' Equity....................................... $188,163
========
</TABLE>

See notes to unaudited consolidated financial statements.

F-25
<PAGE> 78

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Revenues from Services................................................ $69,471 $103,386
Cost of Services...................................................... 54,159 77,684
------- --------
Gross Profit.......................................................... 15,312 25,702
Operating Costs and Expenses:
Selling, general and administrative................................. 12,038 18,494
Depreciation and amortization....................................... 877 1,382
------- --------
12,915 19,876
------- --------
Operating Income...................................................... 2,397 5,826
------- --------
Operating Income (Expense):
Interest expense.................................................... (1,244) (1,285)
Other, net.......................................................... 12 61
------- --------
(1,232) (1,224)
------- --------
Income before Income Taxes............................................ 1,165 4,602
Provision for Income Taxes............................................ 480 1,933
------- --------
Net Income............................................................ $ 685 $ 2,669
======= ========
Pro Forma Earnings per Common Share................................... $ 0.04 $ 0.15
======= ========
Number of Shares Used to Compute Pro Forma Earnings per Common
Share............................................................... 12,274 18,226
======= ========
</TABLE>

See notes to unaudited consolidated financial statements.

F-26
<PAGE> 79

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income........................................................... $ 685 $ 2,669
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 877 1,382
Amortization of deferred loan costs............................... 48 82
Provision for doubtful accounts................................... 104 180
Deferred income tax benefit....................................... (494) (77)
Self-insurance reserve............................................ 326 (146)
Changes in assets and liabilities net of effects of acquisitions:
Accounts receivable............................................. 2,221 (5,178)
Prepaid expenses and other...................................... (355) (1,324)
Accounts payable................................................ 98 2,815
Accrued liabilities............................................. (1,818) (395)
------- -------
Net cash provided by operating activities......................... 1,692 8
------- -------
Cash Flows from Investing Activities:
Cash paid for acquisitions, net of cash acquired..................... (1,823) (29,817)
Capital expenditures................................................. (408) (1,829)
Payments received on shareholder notes............................... -- 63
Other................................................................ (183) (3)
------- -------
Net cash used in investing activities............................. (2,414) (31,586)
------- -------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt, net of costs............... -- 33,757
Payments on long-term debt........................................... (835) (350)
Net proceeds from sale of preferred stock............................ 1,293 --
Net proceeds from sale of common stock............................... -- 171
------- -------
Net cash provided by financing activities......................... 458 33,578
------- -------
Net increase (decrease) in cash and cash equivalents................... (264) 2,000
Cash and cash equivalents at beginning of year......................... 4,637 4,091
------- -------
Cash and cash equivalents at end of period............................. $ 4,373 $ 6,091
======= =======
Cash paid during the period for:
Interest............................................................. $ 1,513 $ 1,047
Income taxes......................................................... $ 703 $ 719
</TABLE>

See notes to unaudited consolidated financial statements.

F-27
<PAGE> 80

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

The consolidated financial statements of COREStaff, Inc. and its
wholly-owned subsidiaries (the "Company") included herein have been prepared
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. The Company
believes that the presentations and disclosures herein are adequate to make the
information not misleading. The consolidated financial statements reflect all
elimination entries and adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the interim periods.

The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the full year. These
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes included elsewhere
in this Prospectus.

2. INCOME TAXES

3. EARNINGS PER COMMON SHARE

Earnings per common share were computed by dividing net income applicable
to common stock (net income less preferred stock dividends in arrears applicable
to the period) by the weighted average number of shares of common stock and
common stock equivalents outstanding during the period and the dilutive effect
of common stock issued within one year prior to the initial public offering.
Common stock equivalents consisted of the number of shares issuable on exercise
of the outstanding stock options less the number of shares that could have been
purchased with the proceeds from the exercise of the options based on the
average price of the common stock during the period. The dilutive effect of
common stock issued within one year prior to the initial public offering for the
periods prior to issuance was determined in the same manner except that the
initial public offering price of $17 per share ($11.33 per share after giving
effect to the three-for-two stock split) was used for the repurchase price.
Historical earnings per common share were $0.03 and $0.15 for the three months
ended March 31, 1995 and 1996, respectively. Net income applicable to common
stock was $0.5 million and $2.7 million for the three months ended March 31,
1995 and 1996, respectively.

Pro forma earnings per common share were determined in the same manner as
described above, except that the conversion of one-half of the preferred stock
into common stock was assumed to have occurred as of the beginning of the
periods. Net income applicable to common stock was increased by the dividends in
arrears applicable to the preferred stock converted. Supplemental earnings per
common share reflect adjustments to the pro forma earnings per share to give
effect to the use of proceeds from the offering described in Note 6 as if the
offering had occurred as of January 1, 1996. Supplemental earnings per common
share for the three months ended March 31, 1996 were $0.16.

F-28
<PAGE> 81

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ACQUISITIONS

On January 9, 1995, the Company acquired Regency Staffing, Inc., a
Florida-based support services company. The purchase price totaled $4.9 million,
consisting of cash of $4.7 million paid to the sellers and direct acquisition
costs of $0.2 million. The sellers may also receive contingent payments of up to
$1.8 million based on the increase in earnings through February 28, 1997.
Payment of contingent consideration will increase the amount of goodwill related
to the acquisition.

On April 9, 1995, the Company acquired Tri-Starr Services, Inc. and an
affiliate, both of which are Texas-based support services companies. The
purchase price totaled $12.0 million, consisting of cash of $6.0 million paid to
the sellers at closing and the remainder paid in February 1996.

On June 30, 1995, the Company acquired Cutler-Williams Incorporated, a
Texas-based information technology services company. The purchase price totaled
$28.3 million, consisting of (i) cash of $25.6 million paid to the sellers, (ii)
interest-bearing notes of $2.0 million, and (iii) direct acquisition costs of
$0.7 million.

On January 4, 1996, the Company acquired substantially all of the assets of
Taylor Temporary Services, Inc., a North Carolina-based support services
company, for $3.5 million in cash. The seller is also entitled to contingent
consideration of up to $0.6 million based on the increase in 1996 earnings
before interest and taxes over the amount for 1995. Payment of contingent
consideration will increase the amount of goodwill related to the acquisition.

On January 31, 1996, the Company acquired Datronics Management, Inc., a New
York-based information technology services company, and Datronics U.K. Limited
for $17.5 million in cash.

On February 12, 1996, the Company acquired the assets of Richard Keith
Enterprises, Inc. and Provincial Staffing Services, Inc., Colorado-based support
services companies, for $5.9 million in cash. The seller is also entitled to
contingent consideration of up to $3.2 million based on the increase in 1996
earnings before interest and taxes over the amount for 1995. Payment of
contingent consideration will increase the amount of goodwill related to the
acquisition.

All of the acquisitions made by the Company have been accounted for using
the purchase method of accounting. Accordingly, the results of operations of the
acquired companies are included in the Company's consolidated results of
operations from the date of acquisition.

F-29
<PAGE> 82

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following unaudited pro forma results of operations have been prepared
assuming the acquisitions described above and the conversion of one-half of the
preferred stock into common stock had occurred as of the beginning of the
periods presented. The unaudited pro forma operating results are not necessarily
indicative of future operating results nor of operating results that would have
occurred had these acquisitions been consummated as of the beginning of the
periods presented.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1996
-------- --------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Revenues..................................................... $100,196 $106,883
Net income................................................... $ 1,109 $ 2,675
Earnings per common share.................................... $ 0.08 $ 0.15
</TABLE>

5. LONG-TERM DEBT

At March 31, 1996, the Company had outstanding borrowings of $76.9 million
under its senior credit agreement (the "Credit Agreement"). Borrowings under
this agreement bear interest, at the Company's option, at LIBOR or the bank's
base rate, plus the applicable margin. The weighted average interest rate at
March 31, 1996 was 6.8%. A commitment fee of 0.25% (0.375% if the leverage
ratio, as defined, is greater than 2 to 1) is payable on the unused portion of
the commitment. On April 2, 1996, the Credit Agreement was amended to increase
the borrowing commitment from $102 million to $130 million, subject to defined
borrowing base limitations. As of April 3, 1996, the Company had outstanding
borrowings of $97.0 million and remaining availability of $18.2 million.

6. STOCKHOLDERS' EQUITY

On March 4, 1996, the Board of Directors authorized a three-for-two stock
split, effected in the form of a stock dividend, payable to stockholders of
record on March 14, 1996. All references in the financial statements to number
of shares outstanding, related prices and per share amounts have been restated
to reflect the split. The stock split resulted in the issuance of approximately
6.0 million new shares of common stock and a reclassification of $0.1 million
from retained earnings to common stock representing the par value of the shares
issued.

On April 5, 1996, the Company filed a registration statement on Form S-1
(the "Form S-1") with the SEC covering the sale of 5.0 million shares of its
common stock (3.0 million shares being offered by the Company and 2.0 million
shares by certain selling stockholders). On May 1, 1996, the Company filed an
amendment to the Form S-1 increasing the shares being offered by the Company by
300,000 shares. Certain selling stockholders, which exclude the Company, have
granted the underwriters an option to acquire up to an additional 795,000 shares
to cover the over-allotment options. The Company intends to use its net proceeds
to repay outstanding borrowings under its Credit Agreement.

F-30
<PAGE> 83

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. SUPPLEMENTAL CASH FLOW INFORMATION

The liabilities assumed in connection with the acquisitions for the three
months ended March 31, 1995 and 1996 follow:

<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
(IN THOUSANDS)
Fair value of assets acquired (including goodwill).......... $ 5,256 $ 35,793
Less: cash paid............................................. (1,880) (32,728)
-------- ---------
Liabilities assumed......................................... $ 3,376 $ 3,065
======== =========
</TABLE>

8. SUBSEQUENT EVENTS

On April 2, 1996, the Company acquired Regal Data Systems, Inc., a New
Jersey-based information technology services company, for $21.7 million in cash.
The sellers are also entitled to contingent consideration of up to $1.0 million
based on the increase in 1996 earnings before interest and taxes over the amount
for 1995. On April 23, 1996, the Company acquired Leafstone, Inc. ("Leafstone"),
a New York-based support services company, for $11.3 million in cash. The
sellers are also entitled to contingent consideration of up to $4.0 million
based on the increase in 1996 earnings before interest and taxes over the amount
for 1995. Payments of contingent consideration will increase the amount of
goodwill related to the acquisitions.

F-31
<PAGE> 84

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Tri-Starr Services, Inc. and Affiliate

We have audited the accompanying combined balance sheets of Tri-Starr
Services, Inc. and Affiliate (the Company) as of December 31, 1993 and 1994 and
the related combined statements of operations, stockholders' equity, and cash
flows for the years ended December 31, 1993 and 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Tri-Starr Services,
Inc. and Affiliate at December 31, 1993 and 1994 and the combined results of
their operations and their cash flows for the years ended December 31, 1993 and
1994, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Houston, Texas
June 15, 1995

F-32
<PAGE> 85

TRI-STARR SERVICES, INC. AND AFFILIATE

COMBINED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1994
---------- ----------
<S> <C> <C>
Current Assets:
Accounts receivable............................................. $2,373,604 $2,468,266
Other receivables............................................... 10,279 33,030
Prepaid expenses and other...................................... 135,031 96,477
---------- ----------
Total current assets.................................... 2,518,914 2,597,773
Fixed Assets:
Furniture and equipment......................................... 351,104 461,799
Vehicles........................................................ 26,512 26,512
---------- ----------
377,616 488,311
Less accumulated depreciation and amortization.................. (294,945) (357,313)
---------- ----------
82,671 130,998
Other Assets...................................................... 42,953 79,575
---------- ----------
Total Assets...................................................... $2,644,538 $2,808,346
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt............................ $ 700,000 $ 5
Notes payable -- shareholders................................... 283,218 1,000,000
Accounts payable................................................ 35,665 70,019
Cash overdraft.................................................. 357,561 125,068
Payroll and related taxes....................................... 383,041 734,279
Self-insurance reserve.......................................... -- 237,533
Federal income taxes payable.................................... 164,520 --
Other........................................................... -- 46,479
---------- ----------
Total current liabilities............................... 1,924,005 2,213,383
Commitments and contingencies
Stockholders' Equity:
Common Stock:
Class A -- $1 par value, 100,000 shares authorized, 21,000
shares issued and outstanding............................... 21,000 21,000
Class A -- $1 par value, 1,000 shares authorized, 100 shares
issued and 80 shares outstanding............................ 100 100
Class B (non-voting) -- $0.20 par value, 4,600 shares
authorized, 118 shares issued and 68 shares outstanding..... 24 24
Additional paid-in capital...................................... 219,586 219,586
Retained earnings............................................... 630,872 505,302
Less: 20 shares of Class A and 50 shares of Class B common stock
in treasury, at cost......................................... (151,049) (151,049)
---------- ----------
Total stockholders' equity.............................. 720,533 594,963
---------- ----------
Total Liabilities and Stockholders' Equity........................ $2,644,538 $2,808,346
========== ==========
</TABLE>

See notes to combined financial statements.

F-33
<PAGE> 86

TRI-STARR SERVICES, INC. AND AFFILIATE

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD
FROM
JANUARY 1,
1995
YEAR ENDED DECEMBER 31, TO APRIL
--------------------------- 9,
1993 1994 1995
----------- ----------- ----------
<S> <C> <C> <C>
(UNAUDITED)
Revenues from services........................... $26,103,328 $27,541,448 $6,725,618
Operating costs and expenses:
Cost of services............................... 22,081,148 22,846,310 5,403,943
General and administrative..................... 3,900,176 4,680,811 831,020
Depreciation and amortization.................. 64,565 62,368 12,494
----------- ----------- ----------
26,045,889 27,589,489 6,247,457
----------- ----------- ----------
Operating income (loss).......................... 57,439 (48,041) 478,161
Other income (expense):
Interest expense............................... (56,062) (78,717) (23,364)
Other, net..................................... 7,840 1,188 (11,097)
----------- ----------- ----------
(48,222) (77,529) (34,461)
----------- ----------- ----------
Income (loss).................................... $ 9,217 $ (125,570) $ 443,700
=========== =========== ==========
</TABLE>

See notes to combined financial statements.

F-34
<PAGE> 87

TRI-STARR SERVICES, INC. AND AFFILIATE

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY TOTAL
--------------------------- PAID-IN RETAINED STOCK (AT STOCKHOLDERS'
CLASS A CLASS A CLASS B CAPITAL EARNINGS COST) EQUITY
------- ------- ------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 (unaudited)..... $21,000 $ 100 $24 $ 219,586 $621,655 $(151,049) $ 711,316
Income............................ -- -- -- -- 9,217 -- 9,217
------- ------ ----- ---------- -------- --------- ------------
Balance at
December 31, 1993................. 21,000 100 24 219,586 630,872 (151,049) 720,533
Loss.............................. -- -- -- -- (125,570) -- (125,570)
------- ------ ----- ---------- -------- --------- ------------
Balance at
December 31, 1994................. 21,000 100 24 219,586 505,302 (151,049) 594,963
Net income (unaudited)............ -- -- -- -- 443,700 -- 443,700
------- ------ ----- ---------- -------- --------- ------------
Balance at
April 9, 1995 (unaudited)......... $21,000 $ 100 $24 $ 219,586 $949,002 $(151,049) $ 1,038,663
======= ====== ===== ========== ======== ========= ===========
</TABLE>

See notes to combined financial statements.

F-35
<PAGE> 88

TRI-STARR SERVICES, INC. AND AFFILIATE

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD
FROM
JANUARY
1,
YEAR ENDED DECEMBER 31, 1995 TO
--------------------------- APRIL 9,
1993 1994 1995
----------- ----------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Cash Flows from Operating Activities
Income (loss)................................... $ 9,217 $ (125,570) $ 443,700
Adjustments to reconcile income (loss) to net
cash used in operating activities:
Depreciation and amortization................ 64,565 62,368 12,494
Provision for doubtful accounts.............. -- 12,079 --
Loss on asset disposal....................... -- -- 13,093
Changes in assets and liabilities:
Accounts receivable........................ (764,359) (129,493) 82,642
Due from affiliate......................... -- -- (200,587)
Prepaid expenses and other................. (53,802) 38,554 (211,873)
Other assets............................... (8,424) (45,253) 1
Accounts payable........................... (349,423) 34,354 206,021
Accrued liabilities........................ (120,871) 635,250 (177,484)
Federal income taxes payable............... 125,048 (164,520) --
----------- ----------- ---------
Net cash provided by (used in) operating
activities................................... (1,098,049) 317,769 168,007
Cash Flows from Investing Activities
Cash overdraft.................................. 357,561 (232,493) (125,068)
Capital expenditures............................ (29,336) (102,063) (7,335)
Sale of marketable securities................... 409,124 -- --
----------- ----------- ---------
Net cash provided by (used in) investing
activities................................... 737,349 (334,556) (132,403)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt........ 959,000 940,651 250,000
Repayments of long-term debt.................... (359,000) (1,640,646) (250,005)
Issuance (repayment) of notes payable --
shareholders................................. (330,452) 716,782 --
----------- ----------- ---------
Net cash provided by (used in) financing
activities................................... 269,548 16,787 (5)
----------- ----------- ---------
Net increase (decrease) in cash................... (91,152) -- 35,599
Cash at beginning of period....................... 91,152 -- --
----------- ----------- ---------
Cash at end of period............................. $ -- $ -- $ 35,599
=========== =========== =========
Cash paid during the period for:
Interest........................................ $ 56,062 $ 44,437 $ 1,487
=========== =========== =========
</TABLE>

See notes to combined financial statements.

F-36
<PAGE> 89

TRI-STARR SERVICES, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO APRIL 9, 1995 IS UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Tri-Starr Services, Inc., is a Texas corporation which provides management
services to its affiliate, Tri-Starr Personnel, Inc. Tri-Starr Personnel, Inc.
provides temporary personnel services. Tri-Starr Services, Inc. and Tri-Starr
Personnel, Inc. (together, the "Company") were acquired by COREStaff, Inc.
effective April 9, 1995.

PRINCIPLES OF COMBINATION

The accompanying combined financial statements include the accounts of
Tri-Starr Services, Inc. and its affiliate, Tri-Starr Personnel Services, Inc.
and are combined because of the common ownership and control of the two
companies. All significant intercompany accounts and transactions have been
eliminated.

FIXED ASSETS

INCOME TAXES

The Company is an S Corporation for tax purposes, and, accordingly, all
income and expenses flow through to the shareholders.

SELF-INSURANCE

The Company self-insures most of its workers' compensation exposure. The
Company estimates its liability using a claims-incurred method and applying
historical skill-specific risk modifiers to salaries paid.

REVENUE RECOGNITION

The Company records revenue for services rendered when the associated
payroll costs are incurred for the temporary personnel.

INTERIM FINANCIAL INFORMATION

The financial statements for the period from January 1, 1995 to April 9,
1995 are unaudited; however, in the opinion of management, such statements
include all adjustments, consisting solely of normal recurring adjustments,
necessary for a fair presentation of the results for the periods presented.

The interim financial statements should be read in conjunction with the
financial statements for the year ended December 31, 1994 and notes thereto
included in the Company's audited consolidated financial statements included
herein.

The results of operations for the interim periods are not necessarily
indicative of the results that might be expected for the future interim periods
or for the full year ended December 31, 1995.

F-37
<PAGE> 90

TRI-STARR SERVICES, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO APRIL 9, 1995 IS UNAUDITED)

2. LONG-TERM DEBT

Under terms of a credit agreement with a major bank, the Company has
available a $750,000 revolving credit facility. Interest on this facility is
computed at the prime rate plus 1.0% per annum. The credit agreement is secured
by the Company's accounts receivable and guarantees of the shareholders and the
Company.

Under terms of the revolving credit facility, the Company can borrow up to
the lesser of $750,000 or 75% of the Company's eligible accounts receivable, as
defined. An annual commitment fee of $2,400 is payable on the unused portion of
the facility. At December 31, 1993 and 1994, the Company had outstanding
borrowings of $700,000 and $5, respectively.

3. RELATED PARTY TRANSACTIONS

During 1993, 1994 and 1995, the S Corporation distributions of the
Company's earnings were made to the shareholders in the form of noninterest
bearing notes payable to the shareholders. (See Note 5). At December 31, 1993
and 1994, notes payable to shareholders were $283,218 and $1,000,000,
respectively. Interest expense was imputed at prime plus 1% per annum and
amounted to $10,324, $28,400, and $21,698 for the year ended December 31, 1993
and 1994 and the period from January 1 to April 9, 1995, respectively. The
interest expense is accrued at December 31, 1993 and 1994.

Selling, general and administrative expenses included compensation paid to
certain officers of the Company who are also the principal stockholders of the
Company. Compensation expense to these officers totaled approximately $1.6
million, $1.7 million and $0.2 million for the years ended December 31, 1993 and
1994, and the period from January 1, 1995 to April 9, 1995, respectively.

The Company has a receivable due from an uncombined affiliate of $200,587
at April 9, 1995 for transactions performed in the normal course of business.
The receivable was fully collected subsequent to April 9, 1995.

4. COMMITMENTS AND CONTINGENCIES

The Company leases various office space and equipment under noncancelable
operating leases expiring through 1999. Rent expense was $239,987, $248,886 and
$57,177 for the year ended December 31, 1993 and 1994, and the period from
January 1 to April 9, 1995, respectively. The related future minimum lease
payments at December 31, 1994 are as follows:

Effective September 1994, the Company self-insures most of its workers'
compensation exposure. Previously, a fully-insured policy was held. The Company
estimates its liability using a claims-incurred method and applying historical
skill-specific risk modifiers to salaries paid. Using this method, the estimated
liability for claims incurred but unpaid as of December 31, 1994 was
approximately $237,533.

F-38
<PAGE> 91

TRI-STARR SERVICES, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO APRIL 9, 1995 IS UNAUDITED)

5. STOCKHOLDERS' EQUITY

Prior to 1993, certain officers of Tri-Starr Services, Inc. purchased a
total of 100 shares of its class A common stock and 118 shares of its class B
common stock in exchange for $181,278. Of these shares, 20 shares of class A
common stock and 50 shares of class B common stock were repurchased prior to
1994 and are held as treasury stock at the cost of $151,049.

Prior to 1993, an officer of Tri-Starr Personnel, Inc. purchased 21,000
shares of its class A common stock in exchange for $61,328.

6. BENEFIT PLAN

Prior to 1993, the Company established an employee savings plan, pursuant
to Section 401(k) of the Internal Revenue Code, enabling employees to contribute
a portion of their salaries to the plan on a before-tax basis, with the Company
matching 75% of such contributions up to 4.5% of the employees' salaries. The
plan is available to all employees with one or more years of service.
Contributions by the Company to the plan were approximately $15,000, $34,000 and
$8,788 for the years ended December 31, 1993 and 1994, and the period from
January 1 to April 9, 1995, respectively.

7. INCOME TAXES

During 1991, Tri-Starr Services, Inc. reorganized its affiliated companies
and created Tri-Starr Personnel, Inc. for tax purposes. The Internal Revenue
Service treated the reorganization as a sale resulting in income taxes deferred
through 1993. At December 31, 1993, the Company had a federal income tax payable
of $164,520, which was paid in 1994.

F-39
<PAGE> 92

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Stockholders
Cutler-Williams Incorporated

In our opinion, the accompanying balance sheets and the related statements
of income, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Cutler-Williams Incorporated at
December 31, 1993 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Dallas, Texas
March 3, 1995

F-40
<PAGE> 93

CUTLER-WILLIAMS INCORPORATED

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1994
---------- ----------
<S> <C> <C>
Cash and cash equivalents......................................... $1,661,154 $1,052,634
Notes and accounts receivable, net................................ 3,771,763 6,435,491
Deferred tax asset................................................ 32,342 118,336
Other current assets.............................................. 66,511 132,798
---------- ----------
Total current assets.................................... 5,531,770 7,739,259
---------- ----------
Furniture and equipment........................................... 1,080,517 1,305,811
Less -- accumulated depreciation.................................. (566,810) (710,100)
---------- ----------
Furniture and equipment, net...................................... 513,707 595,711
---------- ----------
Intangible assets................................................. 373,588 2,040,588
Less -- accumulated amortization.................................. (194,000) (513,903)
---------- ----------
Intangible assets, net............................................ 179,588 1,526,685
Other assets...................................................... 105,304 113,125
---------- ----------
Total Assets............................................ $6,330,369 $9,974,780
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................................................. $ 390,614 $ 390,208
Accrued salaries and bonuses...................................... 359,709 883,962
Accrued group insurance........................................... 263,203 451,881
Other accrued liabilities......................................... 165,797 123,647
Current portion of note payable (Note 3).......................... -- 135,417
Income taxes payable.............................................. 1,635 118,277
---------- ----------
Total current liabilities............................... 1,180,958 2,103,392
---------- ----------
Notes payable and other long-term debt (Notes 2 and 5)............ -- 1,100,000
Deferred rent..................................................... 60,254 83,809
---------- ----------
Total liabilities....................................... 1,241,212 3,287,201
---------- ----------
Commitments (Note 9)
Stockholders' Equity:
Common Stock, $.01 par value per share -- authorized
5,000,000 shares, 2,265,500 and 2,196,000 shares issued
and outstanding.............................................. 21,960 22,655
Treasury stock, at cost, 90,000 and 100,000 shares.............. (131,210) (169,710)
Additional paid-in capital...................................... 1,289,926 1,461,937
Notes receivable from stockholders.............................. (123,296) (199,520)
Retained earnings............................................... 4,031,777 5,572,217
---------- ----------
Total stockholders' equity.............................. 5,089,157 6,687,579
---------- ----------
Total Liabilities and Stockholders' Equity.............. $6,330,369 $9,974,780
========== ==========
</TABLE>

See notes to financial statements.

F-41
<PAGE> 94

CUTLER-WILLIAMS INCORPORATED

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEAR ENDED DECEMBER 31, 1995 TO
----------------------------------------- JUNE 30,
1992 1993 1994 1995
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues............................ $27,659,413 $29,571,835 $40,923,589 $28,763,397
Cost of services.................... 19,648,354 21,274,783 27,858,557 19,282,846
----------- ----------- ----------- -----------
Gross profit........................ 8,011,059 8,297,052 13,065,032 9,480,551
Operating Expenses:
Sales, general and
administrative................. 6,474,317 7,116,783 9,983,229 6,378,509
Depreciation and amortization..... 178,498 269,721 515,388 373,330
----------- ----------- ----------- -----------
Total operating expenses............ 6,652,815 7,386,504 10,498,617 6,751,839
----------- ----------- ----------- -----------
Income from operations.............. 1,358,244 910,548 2,566,415 2,728,712
Interest and other income........... 38,955 26,663 27,448 9,725
Interest expense and other
expenses.......................... 2,646 1,302 43,123 28,039
----------- ----------- ----------- -----------
Income before income taxes.......... 1,394,553 935,909 2,550,740 2,710,398
Income tax provision................ 524,000 359,100 1,010,300 1,077,200
----------- ----------- ----------- -----------
Net income................ $ 870,553 $ 576,809 $ 1,540,440 $ 1,633,198
=========== =========== =========== ===========
</TABLE>

See notes to financial statements.

F-42
<PAGE> 95

CUTLER-WILLIAMS INCORPORATED

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
-------------------- --------------------- ADDITIONAL
NUMBER OF NUMBER OF PAID-IN- RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991........... 2,107,000 $21,070 138,000 $161,330 $1,122,706 $2,792,665
Exercise of stock options........... 69,000 690 (51,000) (48,430) 97,980
Stock option tax benefit............ 17,681
Purchase of treasury shares......... 20,000 32,550 (102,950)
Net income.......................... 870,553
--------- ------- ------- -------- ---------- ----------
Balance December 31, 1992........... 2,176,000 21,760 107,000 145,450 1,238,367 3,560,268
Exercise of stock options........... 20,000 200 (17,000) (14,240) 51,559
Dividends declared.................. (105,300)
Net income.......................... 576,809
--------- ------- ------- -------- ---------- ----------
Balance December 31, 1993........... 2,196,000 21,960 90,000 131,210 1,289,926 4,031,777
Exercise of stock options........... 69,500 695 (10,000) (11,200) 172,011
Purchase of treasury shares......... 20,000 49,700
Net income.......................... 1,540,440
--------- ------- ------- -------- ---------- ----------
Balance December 31, 1994........... 2,265,500 22,655 100,000 169,710 1,461,937 5,572,217
Exercise of stock options
(unaudited)....................... 30,000 300 (10,000) (8,400) 90,649
Stock option tax benefit............ 750
Purchase of treasury shares
(unaudited)....................... 90,000 300,600
Net income (unaudited).............. 1,633,198
--------- ------- ------- -------- ---------- ----------
Balance June 30, 1995 (unaudited)... 2,295,500 $22,955 180,000 $461,910 $1,553,336 $7,205,415
========= ======= ======= ======== ========== ==========
</TABLE>

See notes to financial statements.

F-43
<PAGE> 96

CUTLER-WILLIAMS INCORPORATED

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEAR ENDED DECEMBER 31, 1995 TO
------------------------------------------ JUNE 30,
1992 1993 1994 1995
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash Flows from Operating Activities:
Net income........................................ $ 870,553 $ 576,809 $ 1,540,440 $ 1,633,198
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................... 178,498 269,719 515,388 373,330
Deferred rent................................... 17,194 40,415 23,555 20,205
Loss on asset retirement........................ -- 3,065 4,740 16,037
Changes in operating assets and liabilities:
Deferred tax and other current assets........ 4,803 21,774 (152,281) (129,754)
Notes and accounts receivable................ (1,607,764) 386,990 (2,663,728) (3,007,217)
Refundable income taxes...................... (22,838) 40,519 -- --
Other assets................................. (12,222) (2,794) 179 (353,109)
Income taxes payable......................... -- 1,635 116,642 10,115
Accounts payable............................. 11,772 31,563 (406) (62,023)
Accrued group insurance...................... 80,792 21,418 188,678 393,537
Other accrued liabilities.................... (355,628) 9,784 (42,150) 43,670
Accrued salaries and bonuses................. 55,163 (109,639) 524,253 60,931
----------- ---------- ----------- -----------
Net cash (used in) provided by operating
activities............................... (779,677) 1,291,258 55,310 (1,001,080)
----------- ---------- ----------- -----------
Cash Flows from Investing Activities:
Proceeds from (funding of) notes to stockholders,
net............................................. 53,118 42,517 (76,224) 199,315
Proceeds from notes to officers and employees..... 25,000 -- -- --
Capital expenditures.............................. (345,399) (255,886) (282,228) (296,031)
Purchase of intangible and other assets........... (269,463) -- (1,250,000)
----------- ---------- ----------- -----------
Net cash used in investing activities...... (536,744) (213,369) (1,608,452) (96,716)
----------- ---------- ----------- -----------
Cash Flows from Financing Activities:
Proceeds from notes payable and other long-term
debt............................................ -- -- 1,000,000 800,000
Payments on notes payable......................... -- -- (189,583) (75,917)
Proceeds from sale of common stock................ 59,300 200 172,705 91,400
Purchase of treasury shares....................... (32,550) -- (49,700) (300,600)
Proceeds from sale of treasury shares............. 13,400 170 11,200 8,400
Payment of dividends.............................. (102,950) -- -- --
----------- ---------- ----------- -----------
Net cash (used in) provided by financing
activities............................... (62,800) 370 944,622 523,283
----------- ---------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents....................................... (1,379,221) 1,078,259 (608,520) (574,513)
Cash and cash equivalents at beginning of period.... 1,962,116 582,895 1,661,154 1,052,634
----------- ---------- ----------- -----------
Cash and cash equivalents at end of period.......... $ 582,895 $1,661,154 $ 1,052,634 $ 478,121
=========== ========== =========== ===========
Supplemental information:
The Company acquired certain assets from a third
party on May 31, 1994, as follows:
Intangibles and other assets.................... $ 1,675,000
Notes issued.................................... (425,000)
-----------
Cash payment.................................... $ 1,250,000
===========
</TABLE>

See notes to financial statements.

F-44
<PAGE> 97

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

1. ACQUISITION BY CORESTAFF, INC.

Effective June 30, 1995, Cutler-Williams Incorporated (the Company) was
acquired by COREStaff, Inc. in a stock transaction. The accompanying financial
statements do not reflect any adjustments which may be required as a result of
this transaction.

2. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

The Company is a professional data processing services company founded in
1969. The Company provides project management and assistance for a wide range of
industry and government users with data processing systems and programming
needs.

REVENUE

The Company recognizes revenue as services are performed. A single customer
accounted for ten percent of the Company's revenues for 1994 and eight percent
for the period from January 1, 1995 to June 30, 1995. No customer individually
comprised 10% or more of 1992 or 1993 revenues.

CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

FURNITURE AND EQUIPMENT

Furniture and equipment are valued at cost. Maintenance and repair costs
are expenses.

Depreciation is calculated using the straight-line method for financial
accounting purposes and using accelerated methods for tax accounting purposes,
based on estimated useful lives ranging from four to ten years.

INTANGIBLE ASSETS

Intangible assets consist of customer contract agreements acquired by the
Company from third parties. These assets are amortized over estimated individual
contract lives over periods not to exceed four years. Amortization expense
totalled $84,000, $110,000 and $319,903 in 1992, 1993 and 1994, respectively,
and $247,000 for the period from January 1, 1995 to June 30, 1995.

INCOME TAXES

Income taxes are calculated and recorded in accordance with SFAS No. 109,
"Accounting for Income Taxes." Deferred income taxes are reported for temporary
differences between the cost basis of assets and liabilities reported in the
financial statements and those reported for income tax purposes.

RECLASSIFICATIONS

Certain 1992 and 1993 amounts have been reclassified to conform with the
presentation for 1994 and the period from January 1, 1995 to June 30, 1995.

F-45
<PAGE> 98

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

INTERIM FINANCIAL INFORMATION

The financial statements for the six-month period ended June 30, 1995 are
unaudited; however, in the opinion of management, such statements include all
adjustments, consisting solely of normal recurring adjustments, necessary for a
fair presentation of the results for the periods presented.

The results of operations for the interim periods are not necessarily
indicative of the results that might be expected for the future interim periods
or for the full year ended December 31, 1995.

3. ASSET PURCHASE

Effective May 31, 1994, the Company entered into an agreement to acquire
certain assets from a third party (the "Agreement"). The purchase price was
comprised of (i) a $1,250,000 cash payment, and (ii) a $425,000 note, without
interest, payable in twelve monthly installments of $27,083 beginning on July 1,
1994 and $100,000 payable on May 31, 1996.

Substantially all of the purchase price of $1,675,000 was allocated to
individual customer contract agreements. Customer contracts acquired are
included in intangible assets and are amortized on a contract-by-contract basis
over periods not to exceed four years.

The transaction includes certain representations and warranties made by the
seller which could result in a future adjustment to the purchase price.
Additionally, the agreement includes a provision for additional consideration if
revenues from the contracts acquired exceed a specified level through December
31, 1995. Any adjustments resulting from these contingencies within the
Agreement will be made, if necessary, as such underlying events occur.

In addition to the asset purchase, the Company paid $100,000 to the selling
shareholder for consulting services. This payment was made on May 31, 1994 and
was recognized as expense by the Company in 1994.

4. NOTES AND ACCOUNTS RECEIVABLE

Notes and accounts receivable are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1994
---------- ----------
<S> <C> <C>
Trade accounts receivable................................. $3,909,309 $6,550,378
Other accounts receivable................................. 12,454 35,113
---------- ----------
3,921,763 6,585,491
Less -- allowance for doubtful receivables.............. (150,000) (150,000)
---------- ----------
Total........................................... $3,771,763 $6,435,491
========== ==========
</TABLE>

5. LONG-TERM DEBT

Long-term debt includes $1,000,000 of borrowings under a $4,500,000
revolving line of credit with a commercial bank. The line of credit arrangement
expires May 15, 1997 and provides for borrowings up to 85% of eligible accounts
receivable as defined by the financing and security agreement. These borrowings
are at the lending bank's prime rate, payable quarterly and are

F-46
<PAGE> 99

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

secured by accounts receivable and equipment. The debt agreement contains
certain negative covenants, including a requirement that the Company maintain a
specified, minimum amount of net worth.

The applicable interest rate on these borrowings at December 31, 1994 was
8.5%. At December 31, 1994, the Company had approximately $3,075,000 available
under the revolving line of credit. Borrowings available under the revolving
line of credit have been reduced by $425,000 for letters of credit issued in
connection with the Agreement (Note 3). Interest payments of $36,488 were made
on the line of credit in 1994.

6. RETIREMENT AND PROFIT SHARING PLAN

The Company maintains a retirement and profit sharing plan in which all
employees at least 21 years of age are eligible to participate. Employees may
contribute up to 15% of their compensation. For those employees who have at
least one year of service, the Company matches employee contributions up to a
maximum of 25% of the first 3% of the participant's salary. Additional Company
contributions may be made at the discretion of the board of directors. Employees
vest in Company contributions at the rate of 10% per year for the first four
years and 20% per year in years five to seven; employees are 100% vested after
year seven. Company contributions made and recorded as compensation expense were
$55,148 in 1992, $64,848 in 1993 and $76,798 in 1994, and $46,477 for the period
from January 1, 1995 to June 30, 1995.

7. CAPITAL STOCK

In June 1993, the stockholders approved and adopted the 1993 Employee
Incentive Stock Option Plan. Under the plan, 200,000 shares were reserved for
grants to officers and key employees of the Company. Under four other incentive
stock option plans approved and adopted prior to 1990, 938,000 shares were
reserved for grants to officers and key employees. Options under all five plans
are granted at estimated fair value on the date of grant and are exercisable for
a period of three years. The options must be exercised in cash or by promissory
note. At December 31, 1993 and 1994, 424,000 shares and 245,000 shares,
respectively, were available for future grant under the five plans.

In June 1993, the stockholders approved and adopted the 1993 Stock Option
Plan for Directors. Under the plan, 60,000 shares were reserved for grants to
directors of the Company. The nonqualified plan provides for an automatic grant
of 5,000 options to purchase Company stock to each director on July 1 of each
year, beginning July 1, 1993, provided the director had served for at least six
continuous months prior to the option grant. Under the one other nonqualified
plan approved and adopted prior to 1988, 100,000 shares were reserved for grants
to directors of the Company. Options under both plans are granted at estimated
fair value on the date of grant and are exercisable for a period of five years
under the 1993 plan, and for a period of ten years under the other nonqualified
plan. The options must be paid for in cash upon exercise. At December 31, 1994,
20,000 shares were available for future grant under both plans.

F-47
<PAGE> 100

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

Stock options granted under all of the Company's stock option plans vest
immediately upon issuance. A summary of stock option activity for all plans is
as follows:

<TABLE>
<CAPTION>
NUMBER OF PRICE PER
SHARES SHARE
--------- ------------
<S> <C> <C>
Outstanding and exercisable at December 31, 1991.......... 177,000 $ .47 - 1.88
Granted................................................. 92,000 1.94 - 2.32
Exercised............................................... (120,000) .47 - 1.94
Cancelled............................................... (22,000) 1.35 - 2.19
--------
Outstanding and exercisable at December 31, 1992.......... 127,000 1.35 - 2.32
========
Granted................................................. 45,000 2.30 - 2.64
Exercised............................................... (37,000) 1.35 - 2.19
Cancelled............................................... (25,000) 1.50 - 2.19
--------
Outstanding and exercisable at December 31, 1993.......... 110,000 1.70 - 2.64
========
Granted................................................. 194,000 2.53 - 3.19
Exercised............................................... (79,500) 1.70 - 3.19
Cancelled............................................... --
--------
Outstanding and exercisable at December 31, 1994.......... 224,500 1.94 - 3.19
========
</TABLE>

The Company has the first right and option to purchase all shares issued
pursuant to these plans.

The Company received notes totalling $65,630 in 1993 and $131,010 in 1994
from officers and employees to fund exercise of stock options for purchase of
Company stock. These notes are for varying terms of up to a maximum of five
years. Interest rates on the notes issued during the year range from 5.3% to
7.1%. All notes are secured by Company stock and are reflected in the Company's
balance sheet as a reduction of stockholders' equity.

8. INCOME TAXES

The income tax provision consists of the following components at December
31:

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1995
TO JUNE 30,
1992 1993 1994 1995
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Current provision:
Federal....................... $ 460,000 $ 315,194 $ 964,295 $ 1,009,200
State......................... 53,000 34,000 132,000 135,000
Deferred provision (benefit) --
federal....................... 11,000 9,906 (85,995) (67,000)
-------- -------- ---------- ----------
$ 524,000 $ 359,100 $ 1,010,300 $ 1,077,200
======== ======== ========== ==========
</TABLE>

F-48
<PAGE> 101

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

A reconciliation of the statutory federal income tax rate to the effective
rate is as follows:

<TABLE>
<CAPTION>
PERIOD
FROM
JANUARY
1,
1995
TO
JUNE
30,
1992 1993 1994 1995
--- --- --- ---
<S> <C> <C> <C> <C>
(UNAUDITED)
Provision at statutory rate............................... 34% 34% 34% 34%
State taxes (net of federal benefits)..................... 3 3 3 4
Other..................................................... 1 1 1 1
-- -- -- --
38% 38% 38% 39%
== == == ==
</TABLE>

The tax effects of temporary differences at December 31 results in a net
deferred tax asset, as follows:

<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Bad debt reserve........................................... $ 55,500 $ 55,500
Intangibles................................................ -- 65,898
Rent liability............................................. 14,954 31,009
-------- --------
Total deferred tax asset........................... 70,454 152,407
Deferred tax liability:
Furniture and equipment.................................... (10,780) (34,071)
Other...................................................... (27,432) --
-------- --------
Net deferred tax asset............................. $ 32,242 $118,336
======== ========
</TABLE>

Federal and state income tax payments approximated $542,000 in 1992,
$317,000 in 1993 and $951,000 in 1994 and $1,167,000 for the period from January
1, 1995 to June 30, 1995.

9. COMMITMENTS

The Company leases office space under several different lease arrangements.
Certain of these leases have deferred or escalating rent terms. The Company
accounts for these leases on a straight-line basis over the term of each
respective lease. Accordingly, deferred rent liabilities are recognized as a
result of these lease arrangements. The Company is committed at December 31,
1994 under noncancelable leases with terms in excess of one year as follows:

<TABLE>
<CAPTION>
LEASE RENTAL
YEAR PAYABLE
------------------------------------------------------------------------ ------------
<S> <C>
1995.................................................................... $515,790
1996.................................................................... 511,854
1997.................................................................... 441,733
1998.................................................................... 378,895
1999.................................................................... 318,854
Thereafter.............................................................. 602,880
</TABLE>

Rent expense was $301,135 in 1992, $397,758 in 1993 and $504,657 in 1994
and $299,786 for the period from January 1, 1995 to June 30, 1995.

F-49
<PAGE> 102

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Datronics Management, Inc.

We have audited the balance sheets of Datronics Management, Inc. as of
December 31, 1994 and 1995, and the related statements of income and retained
earnings and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Datronics Management, Inc.
as of December 31, 1994 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

KONIGSBERG, WOLF & CO., P.C.

New York, New York
March 8, 1996

F-50
<PAGE> 103

DATRONICS MANAGEMENT, INC.

BALANCE SHEETS
DECEMBER 31, 1994 AND 1995

ASSETS

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents....................................... $ 132,990 $ 49,496
Marketable securities (Notes 2 and 4)........................... 2,003,289 2,099,302
Accounts receivable, net of allowance for doubtful accounts of
$9,000, respectively (Note 8)................................ 3,572,662 3,334,329
Prepaid income taxes............................................ 31,535 19,612
Prepaid expenses................................................ 154,638 205,453
Other current assets............................................ 4,979 49,611
---------- ----------
Total current assets.................................... 5,900,093 5,757,803
Property and equipment, net (Note 3).............................. 55,334 37,550
Other Assets...................................................... 73,021 88,690
---------- ----------
Total Assets............................................ $6,028,448 $5,884,043
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable -- officers -- partially subordinated (Note 7).... $1,113,191 $ --
Payroll and payroll taxes payable............................... 328,007 298,073
Accounts payable and accrued expenses........................... 1,149,495 357,445
Loan payable (Note 10).......................................... -- 195,048
Deferred income taxes (Note 9).................................. 125,000 160,000
---------- ----------
Total current liabilities............................... 2,715,693 1,010,566
Commitments and contingencies (Note 8)
Shareholders' Equity:
Common Stock, $.01 par value, 500,000 shares authorized, 323,220
shares issued and 306,345 shares outstanding................. 3,237 3,252
Additional paid-in capital...................................... 112,528 128,193
Retained earnings............................................... 2,949,609 3,930,639
Net unrealized gain on marketable securities (Notes 2 and 4).... 410,082 984,164
Treasury stock, 17,875 shares in 1994 and 18,875 shares in
1995......................................................... (162,701) (172,771)
---------- ----------
Total Shareholders' Equity.............................. 3,312,755 4,873,477
---------- ----------
Total Liabilities and Shareholders' Equity.............. $6,028,448 $5,884,043
========== ==========
</TABLE>

See notes to financial statements.

F-51
<PAGE> 104

DATRONICS MANAGEMENT, INC.

STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Revenues from Services......................................... $19,553,342 $20,072,316
Cost of Services............................................... 12,208,960 12,209,853
---------- ----------
Gross Profit................................................... 7,344,382 7,862,463
Operating Costs and Expenses:
Selling, general and administrative expenses................. 7,106,503 6,692,844
Depreciation and amortization................................ 28,506 49,958
---------- ----------
7,135,009 6,742,802
---------- ----------
Operating Income............................................... 209,373 1,119,661
Other income (expense):
Interest expense (Note 7).................................... (54,138) (27,511)
Investment expenses.......................................... (21,044) (20,301)
Interest and dividend income................................. 97,244 110,642
Gain on sale of marketable securities........................ 47,784 120,658
Other........................................................ -- (3,686)
---------- ----------
69,846 179,802
---------- ----------
Income Before Income Taxes..................................... 279,219 1,299,463
Provision for Income Taxes (Note 9)............................ 27,421 85,613
---------- ----------
Net Income..................................................... 251,798 1,213,850
Retained Earnings, beginning of year........................... 3,112,556 2,949,609
Less -- Distributions to Shareholders.......................... (414,745) (232,820)
---------- ----------
Retained Earnings, end of year................................. $ 2,949,609 $ 3,930,639
========== ==========
</TABLE>

See notes to financial statements.

F-52
<PAGE> 105

DATRONICS MANAGEMENT, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
--------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income..................................................... $ 251,798 $ 1,213,850
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization............................... 28,506 49,958
Gain on sale of marketable securities....................... (47,784) (120,658)
Deferred income taxes....................................... 5,000 35,000
Changes in operating assets and liabilities:
Accounts receivable....................................... (821,919) 238,333
Prepaid income taxes...................................... (31,535) 11,923
Prepaid expenses.......................................... (69,978) (50,815)
Other..................................................... 15,437 (44,632)
Cash surrender value -- officers' life insurance.......... 14,772 (4,891)
Payroll and payroll taxes payable......................... (90,743) (29,934)
Accounts payable and accrued expenses..................... 600,696 (792,050)
Income taxes payable...................................... (9,136) --
--------- -----------
Total adjustments...................................... (406,684) (707,766)
--------- -----------
Net cash provided by (used in) operating activities....... (154,886) 506,084
--------- -----------
Cash Flows from Investing Activities:
Proceeds from sale of marketable securities.................... 292,997 1,017,438
Purchase of marketable securities.............................. (112,751) (418,711)
Acquisition of property and equipment.......................... (32,520) (32,174)
Notes receivable............................................... 11,229 (9,936)
Other.......................................................... (666) (842)
--------- -----------
Net cash provided by investing activities................. 158,289 555,775
--------- -----------
Cash Flows from Financing Activities:
Notes payable -- officers -- partially subordinated............ -- (1,113,191)
Loan payable -- broker......................................... -- 195,048
Distributions to shareholders.................................. (414,745) (232,820)
Purchase of common stock....................................... 2,587 15,680
Purchase of treasury stock..................................... -- (10,070)
--------- -----------
Net cash used in financing activities..................... (412,158) (1,145,353)
--------- -----------
Decrease in cash and cash equivalents............................ (408,755) (83,494)
Cash and cash equivalents -- beginning of year................... 541,745 132,990
--------- -----------
Cash and cash equivalents -- end of year......................... $ 132,990 $ 49,496
========= ===========
Cash paid during the year for:
Interest....................................................... $ 55,668 $ 29,652
Income taxes................................................... 63,092 38,690
</TABLE>

See notes to financial statements.

F-53
<PAGE> 106

DATRONICS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

Datronics Management, Inc. (the "Company") was incorporated under the laws
of the State of New York in 1976. The Company is primarily engaged in providing
programmers, system analysts and consultants to clients as supplemental staff on
a time billing basis.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS:

For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.

MARKETABLE SECURITIES:

At December 31, 1994 and 1995, marketable securities are stated at fair
market value in accordance with statement of financial accounting standards No.
115 "Accounting for Certain Investments in Debt and Equity Securities."
Accordingly, the marketable securities are classified as available-for-sale and
are carried at fair value, with the unrealized gains and losses, reported in a
separate component of Shareholders' equity. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sales
securities are included in investment income. The cost of marketable securities
sold is determined on the specific identification method.

DEPRECIATION:

Depreciation is provided on straight-line and accelerated methods over the
estimated useful lives of the respective assets. Additions and betterments are
capitalized, whereas costs of maintenance and repairs are charged to expense as
incurred.

INCOME TAXES:

Effective October 1, 1987, the Company and its shareholders elected to be
treated as a Small Business Corporation under Section 1361 of the Internal
Revenue Code and certain applicable state income tax laws. The shareholders have
consented to include the Company's income or loss on their individual tax
returns.

Certain states and municipalities in which the Company operates do not
recognize the Company's election to be treated as a Small Business Corporation.
In these states and municipalities, the Company follows the liability method of
accounting for income taxes. Under this method, deferred income tax assets and
liabilities are determined based on differences between the financial statement
and income tax bases of assets and liabilities using enacted tax rules in effect
for the year in which the differences are expected to reverse. These differences
result primarily from the use of the cash basis of accounting for income tax
purposes.

USE OF ESTIMATES:

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

F-54
<PAGE> 107

DATRONICS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

STOCK OPTIONS:

The Company follows Accounting Principles Board No. 25, "Accounting for
Stock Issued to Employees" and related interpretations in accounting for its
employee stock options.

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
--------- ---------
<S> <C> <C>
Office equipment........................................... $ 150,260 $ 179,713
Furniture and fixtures..................................... 52,889 53,456
Leasehold improvements..................................... 67,791 68,862
--------- ---------
270,940 302,031
Less: Accumulated depreciation and amortization............ (215,606) (264,481)
--------- ---------
$ 55,334 $ 37,550
========= =========
</TABLE>

4. MARKETABLE SECURITIES

The following is a summary of available-for-sale securities:

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1994
U.S. Treasury Notes............... $ 676,334 $ -- $ 34,070 $ 642,264
Other debt securities............. -- -- -- --
---------- -------- ------- ----------
Total debt securities..... 676,334 -- 34,070 642,264
Equity Securities................. 916,873 460,373 16,221 1,361,025
---------- -------- ------- ----------
$1,593,207 $ 460,373 $ 50,291 $2,003,289
========== ======== ======= ==========
December 31, 1995
Equity Securities................. $1,115,138 $ 984,164 $ -- $2,099,302
========== ======== ======= ==========
</TABLE>

5. EMPLOYEE STOCK OPTION PLAN

Stock options are available to certain key employees of the Company at
$10.35 per share. The options are exercisable in four equal annual installments
commencing one year after the date of the grant. Changes in shares available to
be purchased under the plan are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------ ------
<S> <C> <C>
Number of shares, beginning of year.............................. 12,000 5,750
Granted.......................................................... 500 3,000
Exercised........................................................ (250) (1,515)
Expired or canceled.............................................. (6,500) --
------ ------
Number of shares, end of year.................................... 5,750 7,235
====== ======
</TABLE>

F-55
<PAGE> 108

DATRONICS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. RETIREMENT PLANS

PROFIT SHARING:

The Company has a non-contributory profit sharing plan covering all
eligible employees. Contributions to the plan are at the sole discretion of the
Board of Directors and shall not exceed the maximum amount allowable under
applicable provisions of the Internal Revenue Code. Amounts contributed to the
plan were $43,000 and $60,000 for the years ended December 31, 1994 and 1995,
respectively.

7. NOTES PAYABLE -- OFFICERS -- PARTIALLY SUBORDINATED

The notes payable to officers are payable on demand and bear interest at a
floating rate based upon the Company's realized investment income. At December
31, 1994, $250,000 of the $1,113,191 in notes payable to officers were
subordinated to the bank for an irrevocable letter of credit (Note 8). The
Company's interest expense in connection with the officers' notes aggregated
$54,138 and $27,511 for the years ended December 31, 1994 and 1995,
respectively.

8. COMMITMENTS AND CONTINGENCIES

The Company is obligated under certain operating leases for occupancy of
its current premises and for the use of transportation and office equipment.
Approximate minimum annual rentals under these leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- - ------------------------
<S> <C> <C>
1996......................................... $451,000
1997......................................... 402,000
1998......................................... 56,000
1999......................................... 13,000
--------
$922,000
========
</TABLE>

Rental expense charged to operations amounted to approximately $456,000 and
$475,000 for the years ended December 31, 1994 and 1995, respectively.

LINE OF CREDIT:

The Company has a $1,000,000 line of credit with a bank collateralized by
the Company's accounts receivable. The Company at December 31, 1994 had an
irrevocable letter of credit for $250,000, under the line of credit, to
guarantee the performance in meeting certain staffing levels on a long-term
contact with a customer.

9. PROVISION FOR INCOME TAXES

Provision for income taxes (all state and local) consisted of the
following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Current........................................................ $22,421 $50,613
Deferred....................................................... 5,000 35,000
------- -------
$27,421 $85,613
======= =======
</TABLE>

F-56
<PAGE> 109

DATRONICS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Certain state and local tax jurisdictions impose taxes based on items other
than income, such as stockholders' equity or employee compensation. The above
amounts include provisions for these taxes.

10. LOAN PAYABLE -- BROKER

The loan payable -- broker of $195,048 is secured by the marketable
securities. The interest rate is approximately 9%. The Company repaid the loan
in January 1996 through the sale of the marketable securities.

11. SUBSEQUENT EVENTS

ACQUISITION OF DATRONICS MANAGEMENT, INC.'S STOCK:

On January 31, 1996, 100% of the Company's stock was acquired by COREStaff,
Inc. ("COREStaff") a publicly-traded corporation, for $17.5 million, subject to
a net worth adjustment. As a result of the acquisition, there are one or more
disqualified shareholders. Accordingly, effective January 31, 1996, the
Company's status as an "S" corporation is terminated and will be taxed
prospectively as a "C" corporation.

The acquisition was consummated under Internal Revenue Code Section
338(h)(10). Accordingly, all existing temporary differences, which would
ordinarily create federal and New York State deferred income taxes on a "C"
corporation, cease to exist, since such taxes will be borne by the individual
shareholders.

As part of the acquisition, COREStaff's bank perfected a security interest
in the Company's accounts receivable, documents, instruments and general
intangibles. In addition, COREStaff's bank has an indemnification agreement with
the Company's bank on the $1,000,000 irrevocable, standby letter of credit.

The nature of the Company's operations is not expected to materially change
as a result of the acquisition by COREStaff.

LETTER OF CREDIT:

Subsequent to December 31, 1995 the Company's bank issued a $1,000,000
irrevocable, standby letter of credit to a customer, to guaranty performance in
meeting certain staffing levels on a long-term contract.

F-57
<PAGE> 110

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Regal Data Systems, Inc.

We have audited the accompanying balance sheets of Regal Data Systems, Inc.
(the Company) as of December 31, 1994 and 1995 and the related statements of
operations, stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Regal Data Systems, Inc. at
December 31, 1994 and 1995 and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Houston, Texas
March 29, 1996

F-58
<PAGE> 111

REGAL DATA SYSTEMS, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1994 1995 1996
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents........................ $ 107,738 $ 54,909 $ 520,254
Accounts receivable.............................. 3,578,968 5,454,456 5,158,775
Prepaid expenses and other....................... 96,365 144,256 72,975
---------- ---------- ----------
Total current assets..................... 3,783,071 5,653,621 5,752,004
Fixed Assets:
Furniture and equipment.......................... 435,874 484,038 321,849
Leasehold improvements........................... 6,831 7,716 7,716
---------- ---------- ----------
442,705 491,754 329,565
Less accumulated depreciation and amortization... (360,870) (399,201) (241,509)
---------- ---------- ----------
81,835 92,553 88,056
Deferred tax assets................................ 28,790 22,834 22,834
---------- ---------- ----------
Total Assets....................................... $3,893,696 $5,769,008 $5,862,894
========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Note payable..................................... $ 600,000 $ 725,000 $ --
Accounts payable and accrued expenses............ 375,195 428,974 539,195
Payroll and related taxes........................ 887,410 1,166,918 1,269,676
Deferred tax liability........................... 205,000 348,000 348,000
---------- ---------- ----------
Total current liabilities................ 2,067,605 2,668,892 2,156,871
Commitments and contingencies
Stockholders' Equity:
Common stock, no par value, 2,500 shares
Authorized, 100 shares issued and
outstanding................................... 151,935 853,086 853,086
Retained earnings................................ 1,674,156 2,247,030 2,852,937
---------- ---------- ----------
Total stockholders' equity............... 1,826,091 3,100,116 3,706,023
---------- ---------- ----------
Total Liabilities and Stockholders' Equity......... $3,893,696 $5,769,008 $5,862,894
========== ========== ==========
</TABLE>

See notes to financial statements.

F-59
<PAGE> 112

REGAL DATA SYSTEMS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
---------------------------- MARCH 31,
1994 1995 -----------------------------
------------ ------------ 1995 1996
------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues from Services............ $ 18,515,696 $27,808,969 $ 6,351,268 $7,488,985
Cost of Services.................. 14,992,495 21,641,196 5,031,862 5,868,783
------------ ------------ ------------ -----------
Gross Profit...................... 3,523,201 6,167,773 1,319,406 1,620,202
Operating Costs and Expenses:
General and administrative...... 3,028,625 5,019,643 1,621,075 981,398
Depreciation and amortization... 35,791 38,331 8,262 7,756
------------ ------------ ------------ -----------
3,064,416 5,057,974 1,629,337 989,154
------------ ------------ ------------ -----------
Operating Income (Loss)........... 458,785 1,109,799 (309,931) 631,048
Other Income (Expense):
Interest expense................ (66,827) (89,122) (27,179) (3,178)
Other, net...................... 13,862 12,353 -- 5,946
------------ ------------ ------------ -----------
(52,965) (76,769) (27,179) 2,768
------------ ------------ ------------ -----------
Income (loss) before provision for
income taxes.................... 405,820 1,033,030 (337,110) 633,816
Provision (benefit) for income
taxes........................... 34,357 97,656 (54,360) 27,909
------------ ------------ ------------ -----------
Net Income (Loss)....... $ 371,463 $ 935,374 $ (282,750) $ 605,907
============ ============ ============= ===========
</TABLE>

See notes to financial statements.

F-60
<PAGE> 113

REGAL DATA SYSTEMS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
-------- ---------- -------------
<S> <C> <C> <C>
Balance at December 31, 1993 (unaudited)............. $119,787 $1,302,693 $ 1,422,480
Compensation expense for stock options............. 32,148 -- 32,148
Net Income......................................... -- 371,463 371,463
-------- ---------- -------------
Balance at December 31, 1994......................... 151,935 1,674,156 1,826,091
Compensation expense for stock options............. 97,151 -- 97,151
Stock Grant........................................ 604,000 -- 604,000
Distribution to stockholders....................... -- (362,500) (362,500)
Net income......................................... -- 935,374 935,374
-------- ---------- -------------
Balance at December 31, 1995......................... $853,086 $2,247,030 $ 3,100,116
========= ========== ===========
</TABLE>

See notes to financial statements.

F-61
<PAGE> 114

REGAL DATA SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- -----------------------
1994 1995 1995 1996
----------- ------------ --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows from Operating
Activities
Net income (loss)................ $ 371,463 $ 935,374 $(282,750) $ 605,907
Adjustments to reconcile net
income to net cash (used in)
provided by operating
activities:
Compensation expense for stock
options..................... 32,148 97,151 97,151 --
Compensation expense for stock
grant....................... -- 604,000 604,000 --
Depreciation and
amortization................ 35,791 38,331 8,262 7,756
Provision for doubtful
accounts.................... -- (5,000) -- --
Deferred tax expense.......... 34,307 148,956 (8,744) --
Changes in assets and
liabilities:
Accounts receivable......... (959,694) (1,870,488) (936,242) 295,681
Accounts payable and accrued
expenses................. 408,665 221,043 (278,779) 110,221
Payroll and related taxes... 30,073 112,244 506,660 102,758
Other....................... 19,938 (47,891) (16,309) 71,281
----------- ------------ --------- ---------
Net cash (used in)
provided by operating
activities............. (27,309) 233,720 (306,751) 1,193,604
Cash Flows from Investing
Activities
Capital expenditures............. (40,080) (49,049) (7,333) (3,259)
----------- ------------ --------- ---------
Net cash used in
investing activities... (40,080) (49,049) (7,333) (3,259)
Cash Flows from Financing
Activities
Proceeds from line of credit..... 7,670,000 12,790,000 800,000 --
Repayments of line of credit..... (7,895,000) (12,665,000) -- (725,000)
Payment of dividends............. -- (362,500) (362,500) --
----------- ------------ --------- ---------
Net cash provided by
(used in) financing
activities............. (225,000) (237,500) 437,500 (725,000)
----------- ------------ --------- ---------
Net increase (decrease) in cash and
cash equivalents................. (292,389) (52,829) 123,416 465,345
Cash and cash equivalents at
beginning of period.............. 400,127 107,738 107,738 54,909
----------- ------------ --------- ---------
Cash and cash equivalents at end of
period........................... $ 107,738 $ 54,909 $ 231,154 $ 520,254
============ ============= ========== ==========
Cash paid during the period for:
Interest......................... $ 65,430 $ 92,882 $ 23,125 $ 8,768
============ ============= ========== ==========
Income taxes..................... $ 50 $ -- $ -- $ --
============ ============= ========== ==========
</TABLE>

See notes to financial statements.

F-62
<PAGE> 115

REGAL DATA SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Regal Data Systems, Inc. (the "Company") is a New Jersey corporation, which
provides computer systems consulting services.

PRESENTATION

The financial data for the three months ended March 31, 1995 and 1996 are
unaudited; however, in the opinion of the Company, these interim data include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair statement of the results for such interim periods.

CASH EQUIVALENTS

All short-term investments with an original maturity of 90 days or less are
considered cash equivalents.

FIXED ASSETS

Fixed assets are recorded at cost. Depreciation is computed on the
declining balance and straight-line bases over the estimated useful lives of the
assets. Amortization of leasehold improvements is computed on a straight-line
basis over the useful life of the asset or lease term, whichever is shorter.

INCOME TAXES

The Company is an S Corporation for federal income tax purposes, and,
accordingly, all income and expenses flow through to the shareholders. The State
of New Jersey does not recognize S Corporation status and thus the profit and
losses of the Company remain taxable at the state level.

The Company follows the liability method of accounting for income taxes.
The liability method measures deferred income taxes by applying enacted
statutory rates in effect at the balance sheet date to the differences between
the tax bases of assets and liabilities and their reported amounts in the
financial statements.

REVENUE RECOGNITION

Revenue is recognized at the time the services are provided.

STOCK OPTIONS

F-63
<PAGE> 116

REGAL DATA SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

USE OF ESTIMATES

2. LONG-TERM DEBT

Under terms of a credit agreement with a major bank, the Company has
available a $3,000,000 revolving credit facility due September 30, 1996.
Interest on this facility is computed at the bank's prime rate per annum for
borrowings up to $1,000,000 and the bank's prime rate plus .75% per annum for
borrowings in excess of $1,000,000 (9.25% blended rate at December 31, 1995).
The credit agreement is secured by the Company's accounts receivable, property
and equipment and personal guarantees of the officers of the Company.
Additionally, the credit agreement requires the Company to maintain certain
financial covenants.

At December 31, 1994 and 1995, the Company had outstanding borrowings of
$600,000 and $725,000, respectively.

3. COMMITMENTS AND CONTINGENCIES

The Company leases various office space and equipment under noncancelable
operating leases expiring through 1999. Rent expense was $96,247 and $104,953
for the year ended December 31, 1994 and 1995, respectively. The related future
minimum lease payments at December 31, 1995 are as follows:

<TABLE>
<S> <C>
1996............................................................. $ 110,338
1997............................................................. 113,014
1998............................................................. 111,050
1999............................................................. 85,811
---------
Total.................................................. $ 420,213
=========
</TABLE>

4. STOCKHOLDERS' EQUITY

In 1987, the Company granted a stock option to a key employee which
permitted him to acquire 6.75% of the Company. The exercise price of the option
is equal to 5% of 200% of the book value of the Company.

In January 1995, the two principal stockholders agreed to a re-allocation
of the ownership interest in the Company. As a result, the minority stockholder
was granted an additional nine percent ownership interest in the Company. The
Company recorded compensation expense for the fair market value of this
additional interest.

5. BENEFIT PLAN

The Company maintains a profit sharing plan (the "Plan"), pursuant to
Section 401(k) of the Internal Revenue Code, enabling employees to contribute a
portion of their salaries to the Plan on a before-tax basis. The Plan is
available to all employees with one or more years of service. Contributions by
the Company to the Plan are discretionary and were approximately $731,469 and
$933,372 for the years ended December 31, 1994 and 1995.

F-64
<PAGE> 117

REGAL DATA SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

6. INCOME TAXES

The provision for state income taxes consists of the following for the
years ended December 31:

<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Current....................................................... $ 50 $(51,300)
Deferred...................................................... 34,307 148,956
------- --------
Total............................................... $34,357 $ 97,656
======= ========
</TABLE>

Deferred income taxes result primarily from differences between the accrual
method of accounting for financial reporting purposes and the cash method of
accounting for tax purposes. The components of the deferred tax assets and
liabilities are as follows at December 31:

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Deferred tax liabilities..................................... $322,500 $491,000
Deferred tax assets.......................................... 146,290 165,834
-------- --------
Net deferred tax liability................................... $176,210 $325,166
======== ========
</TABLE>

7. CONCENTRATION OF CREDIT RISK

The Company provides temporary information technology staffing services to
customers located primarily in the states of New York and New Jersey. This
concentration would impact the Company's overall exposure to credit risk in as
much as these customers would be affected by similar economic or other
conditions. The Company had two customers which each comprised 42% of sales in
1994 and three customers which comprised 42%, 30%, and 13% in 1995. The two
customers in 1994 each comprised 42% of total accounts receivable outstanding at
December 31, 1994 and the three customers in 1995 comprised 40%, 23%, and 21% of
total accounts receivable outstanding at December 31, 1995. The Company
continually evaluates the credit worthiness of its customers and monitors
accounts on a periodic basis, but does not typically require collateral.

F-65
<PAGE> 118

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Leafstone, Inc.

We have audited the accompanying balance sheet of Leafstone, Inc. (the
Company) as of December 31, 1995 and the related statements of operations and
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Leafstone, Inc. at December
31, 1995, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Melville, New York
March 20, 1996

F-66
<PAGE> 119

LEAFSTONE, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
MARCH 31,
1996
DECEMBER 31, -----------
1995
------------ (UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................................... $ 226,615 $ 133,042
Accounts receivable, less allowance for doubtful accounts of
$42,463..................................................... 4,098,377 4,611,471
Prepaid expenses and other current assets...................... 332,052 317,177
Recoverable federal income taxes............................... 72,669 79,421
---------- ----------
Total current assets................................... 4,729,713 5,141,111
Property and equipment, at cost:
Furniture and fixtures......................................... 384,334 440,510
Computer equipment, including $23,353 under capital lease...... 624,276 624,276
Leasehold improvements......................................... 13,376 13,376
---------- ----------
1,021,986 1,078,162
Less accumulated depreciation and amortization, including $15,312
and $16,480 relating to computer equipment under capital
lease.......................................................... 322,205 355,047
---------- ----------
Net property and equipment....................................... 699,781 723,115
Other............................................................ 86,153 95,273
---------- ----------
Total Assets........................................... $5,515,647 $ 5,959,499
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................... $ 492,166 $ 251,097
Accrued expenses and other liabilities......................... 1,497,161 2,267,500
Loan payable -- bank........................................... 2,066,000 1,891,000
Deferred income taxes.......................................... 28,748 37,868
Obligation under capital lease................................. 20,882 15,133
---------- ----------
Total current liabilities.............................. 4,104,957 4,462,598
Commitments
Stockholders' Equity:
Class A common stock, no par value, 90,000 shares authorized,
issued and outstanding...................................... 13,750 13,750
Class B nonvoting common stock, no par value; 10,000 shares
authorized, issued and outstanding.......................... 13,750 13,750
Retained earnings.............................................. 1,383,190 1,469,401
---------- ----------
Total stockholders' equity............................. 1,410,690 1,496,901
---------- ----------
Total Liabilities and Stockholders' Equity....................... $5,515,647 $ 5,959,499
========== ==========
</TABLE>

See notes to financial statements.

F-67
<PAGE> 120

LEAFSTONE, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------------
1995 1995 1996
------------ ----------- ------------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Revenues:
Temporary services fees........................ $ 33,951,950 $ 7,796,395 $ 10,269,461
Software fees.................................. 759,428 89,507 217,919
Permanent placement fees....................... 130,786 26,017 73,699
Other income................................... 40,514 -- --
----------- ---------- -----------
Total revenues......................... 34,882,678 7,911,919 10,561,079
Direct wages and related costs................... 28,124,951 6,530,366 8,584,595
----------- ---------- -----------
Gross profit..................................... 6,757,727 1,381,553 1,976,484
Other expenses:
General and administrative..................... 5,075,584 1,337,305 1,293,109
Advertising and promotional.................... 146,610 59,668 50,239
Software related expenses...................... 1,504,424 -- 420,343
Other operating................................ 115,694 22,709 32,842
----------- ---------- -----------
6,842,312 1,419,682 1,796,533
----------- ---------- -----------
Income (loss) from operations.................... (84,585) (38,129) 179,951
Interest expense................................. (156,144) (36,295) (43,740)
----------- ---------- -----------
Income (loss) before income taxes................ (240,729) (74,424) 136,211
Provision (benefit) for income taxes............. (65,758) (20,330) 50,000
----------- ---------- -----------
Net income (loss)................................ (174,971) (54,094) 86,211
Retained earnings, beginning of period........... 1,558,161 1,558,161 1,383,190
----------- ---------- -----------
Retained earnings, end of period................. $ 1,383,190 $ 1,504,067 $ 1,469,401
=========== ========== ===========
</TABLE>

See notes to financial statements.

F-68
<PAGE> 121

LEAFSTONE, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER MARCH 31,
31, -------------------------
1995 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Cash Flows from Operating Activities
Net income (loss).................................. $ (174,971) $ (54,094) $ 86,211
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization................... 130,265 22,709 32,842
Provision for bad debts......................... 35,933 -- --
Deferred income taxes........................... (4,297) (8,953) 9,120
Changes in operating assets and liabilities:
Accounts receivable........................... (46,821) 24,365 (513,094)
Prepaid expenses and other current assets..... (160,535) (101,649) 14,875
Recoverable federal income taxes.............. (72,669) (15,213) (6,752)
Other assets.................................. (54,864) (20,263) (9,120)
Accounts payable.............................. 330,616 81,488 (241,069)
Accrued expenses and other liabilities........ 461,519 (177,858) 770,339
Income taxes payable.......................... (196,865) (252,143) --
--------- -------- ---------
Net cash provided by (used in) operating expenses.... 247,311 (501,611) 143,352
Cash Flows from Investing Activities
Purchases of property and equipment................ (387,764) (48,396) (56,176)
--------- -------- ---------
Net cash used in investing activities.............. (387,764) (48,396) (56,176)
Cash Flows from Financing Activities
Net proceeds from loan payable -- bank............. 541,000 -- --
Net payments of loan payable -- bank............... -- (125,000) (175,000)
Principal payments of long-term debt............... (217,500) (22,500) --
Principal payments of obligations under capital
lease........................................... (27,993) (1,511) (5,749)
--------- -------- ---------
Net cash provided by (used in) financing
activities......................................... 295,507 (149,011) (180,749)
Net increase (decrease) in cash and cash
equivalents........................................ 155,054 (699,018) (93,573)
Cash and cash equivalents at beginning of period..... 71,561 71,561 226,615
--------- -------- ---------
Cash and cash equivalents at end of period........... $ 226,615 $ (627,457) $ 133,042
========= ======== =========
Supplemental disclosure of cash flow information
Cash paid for interest............................. $ 155,727 $ 39,761 $ 46,261
========= ======== =========
Cash paid for income taxes......................... $ 279,927 $ 231,813 $ --
========= ======== =========
</TABLE>

See notes to financial statements.

F-69
<PAGE> 122

LEAFSTONE, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Leafstone, Inc. (the "Company") was incorporated in the State of New York
on June 28, 1991. The Company provides businesses with administrative and
technical personnel on a long term or as-needed basis. In addition, they provide
companies with human resources management and the related software systems.

2. SIGNIFICANT ACCOUNTING POLICIES

PRESENTATION

The financial data for the three months ended March 31, 1995 and 1996 are
unaudited and in the opinion of the Company include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results for such interim periods.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid financial instruments with an
original maturity of three months or less to be cash equivalents. At December
31, 1995, the Company maintained cash and cash equivalents with various
financial institutions throughout the eastern United States. The Company's
policy is designated to limit exposure with any one financial institution.

DEPRECIATION AND RELATED POLICIES

The Company provides for depreciation of furniture and fixtures and
computer equipment using the straight-line method over the estimated useful
lives of the assets, which range from five to seven years. Leasehold
improvements are amortized using the straight-line method over the remaining
terms of the related leases or the useful life of the assets, whichever is
shorter.

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Statement No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company will adopt Statement No. 121 during the
year ended December 31, 1996 and, based on current circumstances, does not
believe that the adoption of Statement No. 121 will have an effect on the
financial statements.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the financial statements and accompanying notes. Actual
results could differ from these estimates.

RESEARCH AND DEVELOPMENT

Research and development costs related to development of software that has
not reached technological feasibility are expensed as incurred. Capitalization
of software development costs begins upon the establishment of technological
feasibility and continues until such software is available for general release
to customers. Amortization of capitalized software costs is provided on

F-70
<PAGE> 123

LEAFSTONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

a product-by-product basis based on the ratio of current gross revenues to the
total of current and anticipated future gross revenues or the straight-line
method over the estimated economic life of the product beginning at the point
the product is ready for general release. Costs incurred to improve and support
products after they become available for general release are charged to expense
as incurred. The establishment of technological feasibility, the point at which
the product is ready for general release, and the ongoing assessment of
recoverability of capitalized software development costs require the exercise of
judgment by management.

INCOME TAXES

The Company accounts for income taxes in accordance with Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under Statement No. 109, the liability method is
used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.

3. LOAN PAYABLE -- BANK

Effective June 1, 1995, the Company entered into a $2,800,000 revolving
credit agreement with a bank which replaced a similar $2,000,000 agreement that
expired on that date. Borrowings outstanding on December 31, 1995 and March 31,
1996 were $2,066,000 and $1,891,000, respectively, and the agreement expires on
June 1, 1997. Interest is payable at the bank's prime rate, as defined, plus
3/4% (9.25% at December 31, 1995). Borrowings are limited to amounts computed
under a formula for eligible accounts receivable and are guaranteed by the
Company's shareholder.

The revolving credit agreement contains, among other matters, restrictive
covenants limiting the acquisition of fixed assets and the maintaining of
minimum levels of net worth and working capital, all as defined.

4. STOCK OPTION PLAN

During 1992, the Board of Directors of the Company formed the Leafstone
Employees Stock Option Plan (the "Plan"). Each eligible employee, as defined,
has the option to purchase one share of Class B nonvoting common stock
("Restricted Stock") for each month of service from the effective date of the
Plan at a price per share of one dollar. Pursuant to the Plan, the Company may
not issue more than 5,000 shares of Restricted Stock. An eligible employee may
exercise a minimum of 24 options at any time. After conversion of the option to
Restricted Stock, the holder can sell the shares to the Company at a price based
on a formula as defined in the Plan. In addition, upon an eligible employee's
termination, as defined, the Company has the right to repurchase the Restricted
Stock based upon the same formula. On January 25, 1996, an employee exercised 48
options and the Company repurchased Restricted Stock valued at approximately
$1,700. As of January 26, 1996, the Company has 411 options outstanding pursuant
to the Plan with an estimated Restricted Stock value of $9,000.

F-71
<PAGE> 124

LEAFSTONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

5. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

Significant components of the Company's deferred tax assets and liability
as of December 31, 1995 are as follows:

<TABLE>
<S> <C>
Deferred tax liability:
Tax over book description.............................................. $ 55,940
--------
Total deferred tax liability............................................. 55,940
--------
Deferred tax assets:
Accounts receivable reserves........................................... 18,438
Accrued expenses....................................................... 8,754
--------
Total deferred tax assets................................................ 27,192
--------
Net deferred tax liability............................................... $ 28,748
========
</TABLE>

During the year ended December 31, 1995, the Company incurred a loss for
both income tax and financial reporting purposes. Significant components of the
benefit for income taxes for the year ended December 31, 1995 is as follows:

<TABLE>
<S> <C>
Current:
Federal................................................................ $(72,669)
State and local........................................................ 11,208
--------
(61,461)
--------
Deferred:
Federal................................................................ (7,130)
State and local........................................................ 2,833
--------
(4,297)
--------
Benefit for income taxes................................................. $(65,758)
=========
</TABLE>

6. COMMITMENTS

As of December 31, 1995, the Company is the lessee for premises under
operating leases which expire at various dates through 2000. The approximate
minimum rentals applicable to the aforementioned leases for the years ended
December 31 are as follows:

<TABLE>
<S> <C>
1996............................................................. $306,000
1997............................................................. 263,000
1998............................................................. 196,000
1999............................................................. 135,000
2000............................................................. 13,000
--------
Total............................................................ $913,000
========
</TABLE>

The foregoing reflect minimum rentals only and does not include additional
rents that may be due as a result of various escalation clauses in the lease for
real estate taxes, energy costs or operating costs. Rent expense charged to
operations was approximately $375,000 for the year ended December 31, 1995.

F-72
<PAGE> 125

LEAFSTONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

7. CONCENTRATIONS OF CREDIT RISK

During the year ended December 31, 1995, sales from one customer
approximated 35% of total revenues. Concentrations of credit risk with respect
to the Company's remaining trade accounts receivable are limited due to the
large number of entities comprising the Company's customer base and their
dispersion across the eastern United States. Credit is extended based on an
evaluation of the customer's financial condition, and generally collateral is
not required. Credit losses are provided for in the accompanying financial
statements and consistently have been within management's expectations.

8. SUBSEQUENT EVENT (UNAUDITED)

On April 15, 1996, the Company sold its information technology division to
its majority stockholder for approximately $276,000. The Company also sold
certain fixed assets and leasehold improvements to Leafstone Information
Technology, Inc., which is owned 100% by the stockholder, for approximately
$181,000.

F-73
<PAGE> 126

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below (the "U.S. Underwriters"), and each of the U.S.
Underwriters, for whom Goldman, Sachs & Co., Montgomery Securities and The
Robinson-Humphrey Company, Inc. are acting as representatives, has severally
agreed to purchase from the Company and the Selling Stockholders, the respective
number of shares of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
---------------------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co. ................................................. 902,668
Montgomery Securities................................................. 902,666
The Robinson-Humphrey Company, Inc. .................................. 902,666
Advest, Inc. ......................................................... 85,000
Robert W. Baird & Co. Incorporated.................................... 85,000
George K. Baum & Company.............................................. 85,000
William Blair & Company............................................... 85,000
J.C. Bradford & Co. .................................................. 85,000
Alex. Brown & Sons Incorporated....................................... 128,000
Cleary Gull Reiland & McDevitt Inc. .................................. 85,000
Donaldson, Lufkin & Jenrette Securities Corporation................... 128,000
EVEREN Securities, Inc. .............................................. 128,000
Janney Montgomery Scott Inc. ......................................... 85,000
Principal Financial Securities, Inc. ................................. 85,000
Rauscher Pierce Refsnes, Inc. ........................................ 85,000
Sanders Morris Mundy Inc. ............................................ 85,000
Stephens Inc. ........................................................ 85,000
Unterberg Harris...................................................... 85,000
Wasserstein Perella Securities, Inc. ................................. 128,000
---------
Total....................................................... 4,240,000
=========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $1.05 per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $0.10 per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.

The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the International Offering (the "International Underwriters") providing for the
concurrent offer and sale of 1,060,000 shares of Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the Offerings are
identical. The closing of the U.S. Offering made hereby is a condition to the
closing of the International Offering, and vice versa. The representatives for
the International Underwriters are Goldman Sachs International, Montgomery
Securities and The Robinson-Humphrey Company, Inc.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the U.S.
Underwriters named herein has agreed that, as part of the distribution of the
shares offered hereby and subject to certain

U-1
<PAGE> 127

exceptions, it will offer, sell or deliver the shares of Common Stock, directly
or indirectly, only in the United States of America (including the States and
the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States") and to U.S. persons, which
term shall mean, for purposes of this paragraph: (a) any individual who is a
resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States. Each of the International Underwriters has agreed
pursuant to the Agreement Between that, as part of the distribution of the
shares offered as a part of the International Offering, and subject to certain
exceptions, it will (i) not, directly or indirectly, offer, sell or deliver
shares of Common Stock (a) in the United States or to any U.S. persons or (b) to
any person whom it believes intends to reoffer, resell or deliver the shares in
the United States or to any U.S. persons, and (ii) cause any dealer to whom it
may sell such shares at any concession to agree to observe a similar
restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold will be
the initial public offering price, less an amount not greater than the selling
concession.

Certain of the Selling Stockholders have granted the U.S. Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase up
to an aggregate of 636,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 4,240,000 shares of Common Stock offered hereby. Such
Selling Stockholders have granted the International Underwriters a similar
option to purchase up to an aggregate of 159,000 additional shares of Common
Stock.

The Company and the Selling Stockholders have agreed that, during the
period beginning from the date of this Prospectus and continuing to and
including the date 90 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing, or on the
conversion or exchange of convertible or exchangeable securities outstanding, on
the date of this Prospectus) which are substantially similar to the shares of
the Common Stock or which are convertible or exchangeable into securities which
are substantially similar to the shares of the Common Stock without the prior
written consent of Goldman, Sachs & Co., except for the shares of Common Stock
offered in connection with the Offerings.

In connection with the U.S. Offering, certain Underwriters and selling
group members who are qualifying registered market makers on the Nasdaq National
Market may engage in passive market making transactions in the Common Stock on
the Nasdaq National Market in accordance with Rule 10b-6A under the Securities
Exchange Act of 1934, during the two business day period before commencement of
offers or sales of the Common Stock offered hereby. Passive market making
transactions must comply with certain volume and price limitations and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security, and if all
independent bids are lowered below the passive market maker's bid, then such bid
must be lowered when certain purchase limits are exceeded.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act. The Underwriters have agreed to reimburse the Company for
certain expenses.

U-2
<PAGE> 128

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 8
The Company.............................. 11
Use of Proceeds.......................... 11
Price Range of Common Stock and Dividend
Policy................................. 11
Capitalization........................... 12
Selected Consolidated Financial Data..... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 14
Business................................. 25
Management............................... 37
Certain Relationships and Related Party
Transactions........................... 42
Principal and Selling Stockholders....... 45
Description of Capital Stock............. 46
Shares Eligible for Future Sale.......... 50
Legal Matters............................ 51
Experts.................................. 51
Available Information.................... 51
Index to Financial Statements............ F-1
Underwriting............................. U-1
</TABLE>

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

5,300,000 SHARES

CORESTAFF, INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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

PROSPECTUS

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

GOLDMAN, SACHS & CO.

MONTGOMERY SECURITIES

THE ROBINSON-HUMPHREY
COMPANY, INC.

REPRESENTATIVES OF THE UNDERWRITERS

================================================================================
<PAGE> 129
FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-03238

5,300,000 SHARES

CORESTAFF, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 5,300,000 shares of Common Stock offered, 1,060,000 shares are being
offered hereby in an international offering outside the United States and
4,240,000 shares are being offered in a concurrent United States offering. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting".

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

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

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

(2) Before deducting estimated expenses of $800,000 payable by the Company.

(3) Certain Selling Stockholders have granted the International Underwriters an
option for 30 days to purchase up to an additional 159,000 shares at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, certain of the Selling
Stockholders have granted the U.S. Underwriters a similar option to purchase
up to an additional 636,000 shares, as part of the concurrent U.S. Offering.
If such options are exercised in full, the total initial public offering
price, underwriting discount, proceeds to the Company and proceeds to the
Selling Stockholders will be $266,656,250, $11,275,750, $138,270,000 and
$117,110,500, respectively. See "Underwriting".

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

The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery in New York, New
York, on or about May 30, 1996, against payment therefor in immediately
available funds.
GOLDMAN SACHS INTERNATIONAL
MONTGOMERY SECURITIES
THE ROBINSON-HUMPHREY COMPANY, INC.
ABN AMRO HOARE GOVETT DRESDNER BANK - KLEINWORT BENSON
---------------------
The date of this Prospectus is May 23, 1996.
<PAGE> 130

[MAP]

This Prospectus does not constitute an offer to sell or the solicitation of an
offer to buy the Shares in any jurisdiction in which such offer or solicitation
is unlawful. There are restrictions on the offer and sale of the Shares in the
United Kingdom. All applicable provisions of the Financial Services Act 1986 and
the Public Offers of Securities Regulations 1995 with respect to anything done
by any person in relation to the Shares, in, from or otherwise involving the
United Kingdom must be complied with. See "Underwriting".

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

PROSPECTUS SUMMARY

THE COMPANY

STRATEGY

3
<PAGE> 132

4
<PAGE> 133

THE TEMPORARY STAFFING INDUSTRY

RECENT DEVELOPMENTS

5
<PAGE> 134

THE OFFERINGS

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

6
<PAGE> 135

SUMMARY CONSOLIDATED FINANCIAL DATA

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

7
<PAGE> 136

RISK FACTORS

FORWARD-LOOKING INFORMATION

LIMITED OPERATING HISTORY

ABILITY TO CONTINUE COMPANY GROWTH

LIABILITIES FOR CLIENT AND EMPLOYEE ACTIONS

8
<PAGE> 137

RELIANCE ON KEY PERSONNEL

INCREASES IN UNEMPLOYMENT INSURANCE PREMIUMS AND WORKERS' COMPENSATION RATES

HIGHLY COMPETITIVE MARKET

FLUCTUATIONS IN THE GENERAL ECONOMY AFFECT DEMAND FOR TEMPORARY STAFFING
SERVICES

CONTROL OF THE COMPANY

Immediately after the Offerings, the Company's executive officers,
directors, and affiliates will control approximately 45% of the outstanding
shares of Common Stock. As a result, such persons

9
<PAGE> 138

STOCK PRICE VOLATILITY

ANTI-TAKEOVER CONSIDERATIONS

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

10
<PAGE> 139

THE COMPANY

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Stockholders.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

11
<PAGE> 140

CAPITALIZATION

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

(1) Gives effect to indebtedness incurred in connection with the acquisition of
Regal and Leafstone in April 1996.

(2) Gives effect to the Offerings and the application of the net proceeds
therefrom. See "Use of Proceeds."

(3) Excludes 785,924 shares of Common Stock subject to outstanding options
under the 1995 Plan as of March 31, 1996.

(4) Assumes the conversion by a Selling Stockholder of 206,020 shares of
Non-Voting Common Stock into Common Stock.

12
<PAGE> 141

SELECTED CONSOLIDATED FINANCIAL DATA

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

13
<PAGE> 142

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

INTRODUCTION

14
<PAGE> 143

the Acquisitions been consummated as of the beginning of the periods presented
or that might be attained in the future.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THE THREE MONTHS ENDED MARCH
31, 1995

COMPARISON OF HISTORICAL OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH
31, 1996 WITH THE THREE MONTHS ENDED MARCH 31, 1995

15
<PAGE> 144

COMPARISON OF PRO FORMA OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31,
1996 WITH THE THREE MONTHS ENDED MARCH 31, 1995.

16
<PAGE> 145

17
<PAGE> 146

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994

COMPARISON OF HISTORICAL OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31,
1995 WITH THE YEAR ENDED DECEMBER 31, 1994

18
<PAGE> 147

and (ii) improvements in overall cost performance due to the implementation of
additional risk management initiatives and the termination of certain low margin
accounts.

19
<PAGE> 148

COMPARISON OF PRO FORMA OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995
WITH THE YEAR ENDED DECEMBER 31, 1994

20
<PAGE> 149

NON-OPERATING COSTS AND EXPENSES. Pro forma interest expense for 1995
totaled $14.3 million compared with $12.2 million for 1994. The increase
primarily related to an increase in interest rates.

YEAR ENDED DECEMBER 31, 1994 COMPARED WITH PERIOD FROM INCEPTION (JULY 21,
1993) TO DECEMBER 31, 1993

SUPPORT SERVICES GROUP. United, acquired in April 1994, accounted for 71.8%
of the group's historical revenues and 69.8% of gross profit for 1994. Superior,
acquired in April 1994, accounted

21
<PAGE> 150

LIQUIDITY AND CAPITAL RESOURCES

22
<PAGE> 151

On January 26, 1995, the Company purchased for $0.3 million a three-year
interest rate cap to reduce a portion of its interest rate exposure on
borrowings under the Credit Agreement. The

23
<PAGE> 152

SEASONALITY

INFLATION

The effects of inflation on the Company's operations were not significant
during the periods presented in the financial statements.

24
<PAGE> 153

BUSINESS

GENERAL

COREStaff is a leading provider of temporary and contract personnel to
businesses, professional and service organizations, manufacturers, institutions,
and government agencies. The Company provides a broad range of services to
national, regional, and local clients. Since its inception in July 1993, the
Company has grown primarily through the acquisition of businesses in the
staffing services industry. As of April 30, 1996, the Company had acquired 17
staffing companies and had 113 branch offices in 20 states, the District of
Columbia and the United Kingdom. The Company believes that it is currently one
of the largest staffing services firms in the United States, and that it is a
leading provider of information technology staffing services.

The Company's business is organized into two primary operating groups: the
Support Services Group and the Information Technology Services Group. The
Support Services Group, which provides office/clerical, light industrial, and
electronic/technical assembly personnel, generated 61.4% and 66.6% of the
Company's pro forma revenues for the years ended December 31, 1995 and 1994,
respectively. The Information Technology Services Group, which provides
highly-skilled computer professionals to staff programming, systems analysis,
information technology consulting, and other computer-related jobs, generated
36.3% and 31.3% of the Company's pro forma revenues for the years ended December
31, 1995 and 1994, respectively. Information technology services, one of the
fastest-growing sectors of the temporary staffing industry according to Staffing
Industry Analysts, a trade publication, provides the Company the opportunity to
achieve greater profitability than operating exclusively in the support services
sector. In addition to its two primary operating groups, the Company operates
the Niche Development Services Group which focuses on providing specialized
services such as physical therapy and technical communications outsourcing.

STRATEGY

INCREASE REVENUES THROUGH INTERNAL GROWTH

25
<PAGE> 154

CONTINUE TO PURSUE STRATEGIC ACQUISITIONS

The following table summarizes the 17 acquisitions made by the Company
through April 30, 1996. For more information regarding such acquisitions, see
"-- Acquisitions."

ENHANCE LEADERSHIP POSITION IN THE INFORMATION TECHNOLOGY SERVICES SECTOR

26
<PAGE> 155

DEVELOP ADDITIONAL SPECIALIZED NICHE DEVELOPMENT SERVICES

EXPAND GEOGRAPHIC AND SECTOR DIVERSITY

CONTINUE DEVELOPMENT OF VENDOR-IN-PARTNERSHIP PROGRAM

27
<PAGE> 156

PROVIDE ENTREPRENEURIAL ENVIRONMENT

THE TEMPORARY STAFFING INDUSTRY

28
<PAGE> 157

difficulties due to factors such as significant working capital requirements,
limited management resources, and an increasingly competitive environment.

ACQUISITIONS

1996 ACQUISITIONS

ACQUISITIONS THROUGH 1995

29
<PAGE> 158

CTS PERSONNEL SERVICES, INC. In March 1995, the Company acquired all of the
assets of CTS for $0.1 million in cash. The assets acquired include one branch
office located in Dallas, Texas.

OCCUPATIONAL THERAPY CONTRACT SERVICES, INC. In August 1995, the Company
acquired the assets of OTCS for $75,000 in cash. In this transaction, the
Company acquired one office located in Colorado.

POTENTIAL ACQUISITIONS

30
<PAGE> 159

OPERATIONS

The Company's business is conducted through its Support Services Group,
Information Technology Services Group, and its Niche Development Services Group.

SUPPORT SERVICES GROUP

INFORMATION TECHNOLOGY SERVICES GROUP

31
<PAGE> 160

Company believes that it is a leading provider of information technology
staffing services among multi-sector staffing services firms in terms of
revenues.

INFORMATION AND SYSTEMS DEVELOPMENT SERVICES. The Company provides
highly-skilled information systems personnel ("software engineers") to meet
clients' specific needs in the following areas:

32
<PAGE> 161

NICHE DEVELOPMENT SERVICES GROUP

BRANCH OFFICES AND CENTRALIZED BUSINESS OPERATIONS

The following table shows the Company's staffing services offices as of
December 31, 1994 and 1995 and April 30, 1996.

SALES AND MARKETING

33
<PAGE> 162

RECRUITING OF TEMPORARY EMPLOYEES

ASSESSMENT AND TRAINING

COMPETITION

34
<PAGE> 163

INTEGRATION OF ACQUIRED COMPANIES

WORKERS' COMPENSATION PROGRAM; SAFETY PROGRAM

EMPLOYEES

35
<PAGE> 164

LEGAL PROCEEDINGS

The Company is, from time to time, a party to ordinary, routine litigation
incidental to the Company's business, including discrimination, wrongful
termination, harassment and other similar claims.

36
<PAGE> 165

MANAGEMENT

The executive officers and directors of the Company, and their ages as of
March 31, 1996, are as follows:

37
<PAGE> 166

38
<PAGE> 167

TERM OF OFFICE

COMPENSATION OF DIRECTORS

BOARD COMMITTEES

39
<PAGE> 168

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

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

(1) Annual Compensation excludes the aggregate value of perquisites as such
value is less than the lesser of $50,000 or 10% of total annual Salary and
Bonus for each Named Officer.

EMPLOYMENT AGREEMENTS

MICHAEL T. WILLIS

40
<PAGE> 169

OTHER EMPLOYMENT AGREEMENTS

1995 LONG TERM INCENTIVE PLAN

As of March 31, 1996, the Company had non-qualified stock options to
purchase an aggregate of 785,924 shares of Common Stock outstanding under the
1995 Plan.

EMPLOYEE STOCK PURCHASE PLAN

41
<PAGE> 170

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

EQUITY DOCUMENTS

42
<PAGE> 171

FIRST UNION EQUITY AGREEMENT

SENIOR SUBORDINATED LOAN

43
<PAGE> 172

"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

STOCKHOLDER LOANS

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

(1) Includes accrued interest through December 31, 1995.

(2) These notes were paid in full during the first quarter of 1996.

OTHER TRANSACTIONS

44
<PAGE> 173

PRINCIPAL AND SELLING STOCKHOLDERS

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

* Less than 1%

(2) GTC III's sole general partner is GTCR Partnership. The address for GTC III
is 6100 Sears Tower, Chicago, Illinois 60606.

(3) The address for Mr. Willis is 4400 Post Oak Parkway, Suite 1130, Houston,
Texas 77027.

(4) Mr. Edwards is a Principal with GTCR Inc., an affiliate of GTC III.

(6) Includes 1,500 shares that may be acquired upon exercise of outstanding
options.

45
<PAGE> 174

(8) The address for First Union is One First Union Center, 18th Floor,
Charlotte, North Carolina 28288-0732.

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

NON-VOTING COMMON STOCK

46
<PAGE> 175

PREFERRED STOCK

PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECTS

47
<PAGE> 176

LIMITATION ON DIRECTORS' AND OFFICERS' LIABILITY; INDEMNIFICATION

48
<PAGE> 177

INDEMNIFICATION AGREEMENTS

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.

49
<PAGE> 178

SHARES ELIGIBLE FOR FUTURE SALE

REGISTRATION RIGHTS

50
<PAGE> 179

CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of shares of
Common Stock by a Non-U.S. Holder. The term "Non-U.S. Holder" means (a) a
foreign corporation, (b) a foreign partnership, (c) a nonresident alien
individual or (d) a foreign estate or trust (that is, a trust or estate not
subject to United States federal income tax on income from sources without the
United States that is not effectively connected with the conduct of a trade or
business within the United States). An individual may, subject to certain
exceptions, be deemed to be a resident alien (as opposed to a nonresident alien)
with respect to a calendar year by virtue of being present in the United States
on at least 31 days in that calendar year and for an aggregate of at least 183
days during a three-year period ending in that calendar year (counting for such
purposes all of the days present in that year, one-third of the days present in
the immediately preceding year, and one-sixth of the days present in the second
preceding year). Resident aliens are subject to United States federal tax as if
they were United States persons.

This discussion does not describe all aspects of United States federal
income and estate taxation that may be relevant to a Non-U.S. Holder's
particular circumstances and does not address non-U.S., state and local tax
consequences. Furthermore, this discussion is based on current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
regulations promulgated thereunder and administrative and judicial
interpretations as of the date of this Prospectus, all of which are subject to
change. Any revisions of these authorities could be made retroactive with
respect to transactions consummated prior to the time such changes are announced
or enacted.

FOREIGN INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE
SPECIFIC UNITED STATES AND OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF SHARES OF COMMON STOCK.

DIVIDENDS

A dividend paid to a Non-U.S. Holder of Common Stock will be subject to
United States withholding tax at a rate of 30% of the gross amount of the
dividend (or at such lesser rate as may be provided by an applicable treaty),
unless the dividend is effectively connected with the conduct of a trade or
business in the United States by the Non-U.S. Holder (or, if a tax treaty
applies, is attributable to or effectively connected with a U.S. permanent
establishment of the Non-U.S. Holder). If a dividend is effectively connected
with a United States trade or business (or, in the case of an applicable tax
treaty, attributable to a U.S. permanent establishment) of a Non-U.S. Holder who
has properly filed a Form 4224 (or similar statement) with the withholding agent
with respect to the taxable year in which the dividend is paid, no withholding
will be required. However, that dividend will be subject to the regular United
States federal income tax, which is not collected by withholding. Under certain
circumstances, corporate Non-U.S. Holders may be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an

51
<PAGE> 180

applicable income tax treaty on its earnings (including dividends) effectively
connected with a United States trade or business to the extent such earnings are
considered to be repatriated away from the United States trade or business.

Although currently proposed regulations could alter this position if they
become effective, currently the Internal Revenue Service's position is that a
dividend paid to an address in a foreign country is generally presumed to be
paid to a resident of the foreign country for purposes of determining the
applicability of the United States withholding tax discussed above (either at
the statutory rate of 30% or at any lower rate established by treaty) unless the
payor has knowledge to the contrary. Under the proposed regulations, however, a
Non-U.S. Holder of Common Stock who wishes to claim the benefit of an applicable
treaty rate would be required to file Form 1001 (Ownership, Exemption of Reduced
Rate Certificate) and, subject to a de minimis exception, Form 8306 (Certificate
of Residence) (a form not yet printed by the Internal Revenue Service) with the
withholding agent. Such forms would be required to contain the name and address
of the Non-U.S. Holder and other pertinent information, to be certified by the
Non-U.S. Holder under penalties of perjury, and, in the case of Form 8306, to
include an official statement by the "competent authority" in the foreign
country attesting to the holder's status as a resident of such country.

A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund as
to any excess amounts withheld by filing an appropriate claim for refund with
the Internal Revenue Service.

GAIN ON DISPOSITION

In general, a Non-U.S. Holder will not be subject to the United States
federal income tax (or withholding tax) on any gain recognized on a sale (or
other disposition) of shares of Common Stock, unless (i) the gain is not
effectively connected with the conduct of a trade or business of the Non-U.S.
Holder in the United States (and, if any of certain tax treaties applies, is
attributable to or effectively connected with a United States permanent
establishment of the Non-U.S. Holder within the meaning of the treaty), (ii) in
the case of a Non-U.S. Holder who is an individual, such individual is present
in the United States for 183 or more days in the taxable year of the disposition
(as calculated under certain provisions of the Code), the Common Stock is a
capital asset, and either (a) such individual's "tax home" for federal income
tax purposes is in the United States or (b) the gain is attributable to an
office or fixed place of business maintained in the United States by such
individual, or (iii) at the time of disposition the Company is or has been a
"United States real property holding corporation" for federal income tax
purposes or, if the Company is or was a "United States real property holding
corporation" whose Common Stock is or was during the calendar year of
disposition regularly traded on an established securities market, the Non-U.S.
Holder has not held, directly or indirectly, at any time during the shorter of
the holder's holding period and the five-year period ending on the date of
disposition, more than 5% of the shares of Common Stock. The Company believes
that it is not and has not been nor does the Company currently expect to become
a "United States real property holding corporation."

A partner in a partnership or a beneficiary of a trust or estate may be
subject to United States federal income tax on gain realized on the disposition
of shares of Common Stock by the partnership, trust or estate (even though that
entity may not be subject to tax) if (i) the partner or beneficiary is subject
to United States federal income tax because of its own status, such as a United
States resident or a foreign person engaged in a trade or business in the United
States whose gain is effectively connected with that trade or business, or (ii)
the partner is a nonresident alien individual or foreign corporation and the
gain of the partnership, estate or trust disposing of the shares of Common Stock
is effectively connected with its conduct of a trade or business within the
United States.

52
<PAGE> 181

FEDERAL ESTATE TAXES

Shares of Common Stock owned, or treated as owned, by an individual
Non-U.S. Holder at the time of death will be subject to United States federal
estate taxes, unless an applicable estate tax treaty provides otherwise.

UNITED STATES INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

The Company must report annually to the Internal Revenue Service the amount
of dividends paid to, and the tax withheld with respect to, a Non-U.S. Holder.
These information reporting requirements apply regardless of whether withholding
was reduced by an applicable tax treaty. Copies of these information returns may
also be made available under the provisions of a specific treaty or agreement to
the tax authorities in the country in which the Non-U.S. Holder resides. United
States backup withholding tax (which generally is a withholding tax imposed at a
rate of 31% on certain payments to persons that fail to furnish the information
required under the United States information reporting requirements) will
generally not apply to dividends paid on shares of Common Stock to a Non-U.S.
Holder at an address outside the United States unless the payor has knowledge
that the payee is a United States person.

The payment of proceeds of the disposition of shares of Common Stock by a
broker to or through a U.S. office is subject to both possible backup
withholding and information reporting requirements unless the holder certifies
his non-U.S. status under penalties of perjury or otherwise establishes an
applicable exception. The payment of the proceeds of the disposition of shares
of Common Stock to or through a non-U.S. office of a broker will not generally
be subject to information reporting or backup withholding. Information reporting
requirements will apply but backup withholding will not apply to payments to or
through an office of a broker that (i) is a United States person, (ii) a United
States "controlled foreign corporation" or (iii) a foreign person 50% or more of
whose gross income (over a three-year period) is effectively connected with the
conduct of a United States trade or business, unless such broker has documentary
evidence in its records of the owner's non-U.S. status and has no actual
knowledge to the contrary or unless the owner otherwise establishes an
exemption.

Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded or credited against the Non-U.S. Holder's
United States federal income tax liability, if any, provided that a proper claim
for refund is made or the required information is furnished to the Internal
Revenue Service.

POSSIBLE FUTURE LEGISLATIVE AND ADMINISTRATIVE DEVELOPMENTS

In 1982, 1989, 1990, 1992 and 1995 legislation was introduced that, if
enacted, would, under certain circumstances, impose U.S. taxes on dispositions
of stock of U.S. corporations held by 10% Non-U.S. Holders. Whether this or
similar legislation will be enacted cannot reasonably be determined at this
time. Moreover, the backup withholding and information reporting rules are
currently under review by the Treasury Department and their application to the
shares of Common Stock is subject to change.

LEGAL MATTERS

53
<PAGE> 182

EXPERTS

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock being
offered by this Prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which have been omitted as permitted by the
rules and regulations of the Commission. For further information with respect to
the Company and the shares of Common Stock offered hereby, reference is made to
the Registration Statement, including the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete and, where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit,
to which reference is hereby made.

54
<PAGE> 183

CORESTAFF, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

F-1
<PAGE> 184

F-2
<PAGE> 185

CORESTAFF, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1996
(IN THOUSANDS)

ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

See notes to pro forma condensed consolidated financial statements.

F-3
<PAGE> 186

CORESTAFF, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See notes to pro forma condensed consolidated financial statements.

F-4
<PAGE> 187

CORESTAFF, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See notes to pro forma condensed consolidated financial statements.

F-5
<PAGE> 188

CORESTAFF, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See notes to pro forma condensed consolidated financial statements.

F-6
<PAGE> 189

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

(2) EARNINGS PER SHARE

(3) ACQUISITIONS

F-7
<PAGE> 190

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

(4) ADJUSTMENTS TO HISTORICAL FINANCIAL STATEMENTS

(a) To reflect the acquisition of Regal and Leafstone and the
borrowings under the Company's senior credit agreement to fund those
acquisitions.

F-8
<PAGE> 191

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

(d) To reclass certain expenses to conform with the presentation used
by COREStaff.

(f) To eliminate the adjustment made by an acquired company to
write-off its estimated excess self-insurance reserve. Most of the excess
reserve related to prior years.

(g) To reduce expenses for other non-recurring costs.

(h) To reflect amortization of goodwill related to the purchase of the
Acquired Companies, which is being amortized on a straight-line basis over
40 years.

(j) To reflect the amortization of the costs related to the borrowings
and the interest expense on the borrowings to fund the purchase of the
Acquired Companies.

(k) To eliminate income on investments that were liquidated
immediately following the acquisition of Datronics.

F-9
<PAGE> 192

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
COREStaff, Inc.

ERNST & YOUNG LLP

Houston, Texas
February 2, 1996
except for Notes 3 and 5
as to which the date is March 26, 1996

F-10
<PAGE> 193

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)

ASSETS

See notes to consolidated financial statements.

F-11
<PAGE> 194

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD FROM INCEPTION (JULY 21, 1993) TO DECEMBER 31, 1993 AND
YEARS ENDED DECEMBER 31, 1994 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See notes to consolidated financial statements.

F-12
<PAGE> 195

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (JULY 21, 1993) TO DECEMBER 31, 1993 AND
YEARS ENDED DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)

See notes to consolidated financial statements.

F-13
<PAGE> 196

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD FROM INCEPTION (JULY 21, 1993) TO DECEMBER 31, 1993 AND
YEARS ENDED DECEMBER 31, 1994 AND 1995
(IN THOUSANDS)

See notes to consolidated financial statements.

F-14
<PAGE> 197

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

CASH AND CASH EQUIVALENTS

All short-term investments with an original maturity of 90 days or less are
considered cash equivalents.

FIXED ASSETS

INTANGIBLE ASSETS

REVENUE RECOGNITION

Revenue is recognized at the time the services are provided.

INCOME TAXES

SELF-INSURANCE

EARNINGS PER COMMON SHARE

Earnings per common share were computed by dividing net income applicable
to common stock (net income less preferred stock dividends in arrears applicable
to the period) by the weighted

F-15
<PAGE> 198

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

USE OF ESTIMATES

STOCK OPTIONS

RECLASSIFICATIONS

Certain reclassifications have been made to the prior years' consolidated
financial statements to conform with the current year presentation.

2. ACQUISITIONS

On April 15, 1994, the Company acquired certain assets of Superior
Temporaries, Inc., a Houston-based support services company and Superior
Temporaries of Atlanta, Inc. The purchase

F-16
<PAGE> 199

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

price totaled $4.7 million, consisting of cash of $4.6 million paid to the
sellers and direct acquisition costs of $0.1 million.

On January 9, 1995, the Company acquired Regency Staffing, Inc., a
Florida-based support services company. The purchase price totaled $4.9 million,
consisting of cash of $4.7 million paid to the sellers and direct acquisitions
costs of $0.2 million. The sellers may also receive contingent payments of up to
$1.8 million based on the increase in earnings through February 28, 1997.
Payments of contingent consideration will increase the amount of goodwill
related to the acquisition.

On April 9, 1995, the Company acquired Tri-Starr Services, Inc. and an
affiliate, both of which are Texas-based support services companies. The
purchase price totaled $12.0 million, consisting of cash of $6.0 million paid to
the sellers at closing and the remainder paid to the sellers in February 1996.

F-17
<PAGE> 200

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. LONG-TERM DEBT

As of December 31, 1994 and 1995, long-term debt consisted of the
following:

Scheduled maturities of long-term debt are as follows (in thousands):

F-18
<PAGE> 201

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INCOME TAXES

The provision (benefit) for income taxes for the period from inception
(July 21, 1993) to December 31, 1993, and the years ended December 31, 1994 and
1995, consisted of the following:

The net current and noncurrent components of deferred income taxes
reflected in the consolidated balance sheets as of December 31, 1994 and 1995
are as follows:

F-19
<PAGE> 202

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred tax assets and liabilities as of December 31, 1994 and 1995 were
comprised of the following:

5. STOCKHOLDERS' EQUITY

F-20
<PAGE> 203

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the beginning of 1995. Supplemental earnings per common share for the year ended
December 31, 1995 were $0.52.

6. LONG TERM INCENTIVE PLAN

7. COMMITMENTS AND CONTINGENCIES

F-21
<PAGE> 204

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. RELATED PARTY TRANSACTIONS

Under terms of an agreement, the Company paid an investment fee of 1% of
the purchase price to the equity investors who purchased the Company's preferred
stock.

F-22
<PAGE> 205

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. SUPPLEMENTAL CASH FLOW INFORMATION

10. CREDIT RISK

11. SUBSEQUENT EVENTS (UNAUDITED)

F-23
<PAGE> 206

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. QUARTERLY FINANCIAL DATA (UNAUDITED)

Unaudited summarized financial data by quarter for 1994 and 1995 follow (in
thousands, except per share amounts):

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

(1) Adjusted to give effect to the conversion of preferred stock into common
stock (See Note 5).

F-24
<PAGE> 207

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1996
(DOLLARS IN THOUSANDS)

ASSETS

See notes to unaudited consolidated financial statements.

F-25
<PAGE> 208

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See notes to unaudited consolidated financial statements.

F-26
<PAGE> 209

CORESTAFF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS)

See notes to unaudited consolidated financial statements.

F-27
<PAGE> 210

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

2. INCOME TAXES

3. EARNINGS PER COMMON SHARE

F-28
<PAGE> 211

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ACQUISITIONS

On January 9, 1995, the Company acquired Regency Staffing, Inc., a
Florida-based support services company. The purchase price totaled $4.9 million,
consisting of cash of $4.7 million paid to the sellers and direct acquisition
costs of $0.2 million. The sellers may also receive contingent payments of up to
$1.8 million based on the increase in earnings through February 28, 1997.
Payment of contingent consideration will increase the amount of goodwill related
to the acquisition.

On April 9, 1995, the Company acquired Tri-Starr Services, Inc. and an
affiliate, both of which are Texas-based support services companies. The
purchase price totaled $12.0 million, consisting of cash of $6.0 million paid to
the sellers at closing and the remainder paid in February 1996.

On June 30, 1995, the Company acquired Cutler-Williams Incorporated, a
Texas-based information technology services company. The purchase price totaled
$28.3 million, consisting of (i) cash of $25.6 million paid to the sellers, (ii)
interest-bearing notes of $2.0 million, and (iii) direct acquisition costs of
$0.7 million.

On January 31, 1996, the Company acquired Datronics Management, Inc., a New
York-based information technology services company, and Datronics U.K. Limited
for $17.5 million in cash.

F-29
<PAGE> 212

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT

6. STOCKHOLDERS' EQUITY

F-30
<PAGE> 213

CORESTAFF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. SUPPLEMENTAL CASH FLOW INFORMATION

The liabilities assumed in connection with the acquisitions for the three
months ended March 31, 1995 and 1996 follow:

8. SUBSEQUENT EVENTS

F-31
<PAGE> 214

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Tri-Starr Services, Inc. and Affiliate

ERNST & YOUNG LLP

Houston, Texas
June 15, 1995

F-32
<PAGE> 215

TRI-STARR SERVICES, INC. AND AFFILIATE

COMBINED BALANCE SHEETS

ASSETS

See notes to combined financial statements.

F-33
<PAGE> 216

TRI-STARR SERVICES, INC. AND AFFILIATE

COMBINED STATEMENTS OF OPERATIONS

See notes to combined financial statements.

F-34
<PAGE> 217

TRI-STARR SERVICES, INC. AND AFFILIATE

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

See notes to combined financial statements.

F-35
<PAGE> 218

TRI-STARR SERVICES, INC. AND AFFILIATE

COMBINED STATEMENTS OF CASH FLOWS

See notes to combined financial statements.

F-36
<PAGE> 219

TRI-STARR SERVICES, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO APRIL 9, 1995 IS UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

PRINCIPLES OF COMBINATION

FIXED ASSETS

INCOME TAXES

The Company is an S Corporation for tax purposes, and, accordingly, all
income and expenses flow through to the shareholders.

SELF-INSURANCE

REVENUE RECOGNITION

The Company records revenue for services rendered when the associated
payroll costs are incurred for the temporary personnel.

INTERIM FINANCIAL INFORMATION

The results of operations for the interim periods are not necessarily
indicative of the results that might be expected for the future interim periods
or for the full year ended December 31, 1995.

F-37
<PAGE> 220

TRI-STARR SERVICES, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO APRIL 9, 1995 IS UNAUDITED)

2. LONG-TERM DEBT

3. RELATED PARTY TRANSACTIONS

4. COMMITMENTS AND CONTINGENCIES

F-38
<PAGE> 221

TRI-STARR SERVICES, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO APRIL 9, 1995 IS UNAUDITED)

5. STOCKHOLDERS' EQUITY

Prior to 1993, an officer of Tri-Starr Personnel, Inc. purchased 21,000
shares of its class A common stock in exchange for $61,328.

6. BENEFIT PLAN

7. INCOME TAXES

F-39
<PAGE> 222

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Stockholders
Cutler-Williams Incorporated

PRICE WATERHOUSE LLP

Dallas, Texas
March 3, 1995

F-40
<PAGE> 223

CUTLER-WILLIAMS INCORPORATED

BALANCE SHEETS

ASSETS

See notes to financial statements.

F-41
<PAGE> 224

CUTLER-WILLIAMS INCORPORATED

STATEMENTS OF OPERATIONS

See notes to financial statements.

F-42
<PAGE> 225

CUTLER-WILLIAMS INCORPORATED

STATEMENTS OF STOCKHOLDERS' EQUITY

See notes to financial statements.

F-43
<PAGE> 226

CUTLER-WILLIAMS INCORPORATED

STATEMENTS OF CASH FLOWS

See notes to financial statements.

F-44
<PAGE> 227

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

1. ACQUISITION BY CORESTAFF, INC.

2. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

REVENUE

CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

FURNITURE AND EQUIPMENT

Furniture and equipment are valued at cost. Maintenance and repair costs
are expenses.

INTANGIBLE ASSETS

INCOME TAXES

RECLASSIFICATIONS

Certain 1992 and 1993 amounts have been reclassified to conform with the
presentation for 1994 and the period from January 1, 1995 to June 30, 1995.

F-45
<PAGE> 228

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

INTERIM FINANCIAL INFORMATION

The results of operations for the interim periods are not necessarily
indicative of the results that might be expected for the future interim periods
or for the full year ended December 31, 1995.

3. ASSET PURCHASE

4. NOTES AND ACCOUNTS RECEIVABLE

Notes and accounts receivable are comprised of the following:

5. LONG-TERM DEBT

F-46
<PAGE> 229

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

secured by accounts receivable and equipment. The debt agreement contains
certain negative covenants, including a requirement that the Company maintain a
specified, minimum amount of net worth.

6. RETIREMENT AND PROFIT SHARING PLAN

7. CAPITAL STOCK

F-47
<PAGE> 230

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

Stock options granted under all of the Company's stock option plans vest
immediately upon issuance. A summary of stock option activity for all plans is
as follows:

The Company has the first right and option to purchase all shares issued
pursuant to these plans.

8. INCOME TAXES

The income tax provision consists of the following components at December
31:

F-48
<PAGE> 231

CUTLER-WILLIAMS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE PERIOD FROM JANUARY 1, 1995 TO JUNE 30, 1995 IS UNAUDITED)

A reconciliation of the statutory federal income tax rate to the effective
rate is as follows:

The tax effects of temporary differences at December 31 results in a net
deferred tax asset, as follows:

Federal and state income tax payments approximated $542,000 in 1992,
$317,000 in 1993 and $951,000 in 1994 and $1,167,000 for the period from January
1, 1995 to June 30, 1995.

9. COMMITMENTS

Rent expense was $301,135 in 1992, $397,758 in 1993 and $504,657 in 1994
and $299,786 for the period from January 1, 1995 to June 30, 1995.

F-49
<PAGE> 232

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Datronics Management, Inc.

KONIGSBERG, WOLF & CO., P.C.

New York, New York
March 8, 1996

F-50
<PAGE> 233

DATRONICS MANAGEMENT, INC.

BALANCE SHEETS
DECEMBER 31, 1994 AND 1995

ASSETS

See notes to financial statements.

F-51
<PAGE> 234

DATRONICS MANAGEMENT, INC.

STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1994 AND 1995

See notes to financial statements.

F-52
<PAGE> 235

DATRONICS MANAGEMENT, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1995

See notes to financial statements.

F-53
<PAGE> 236

DATRONICS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS:

For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.

MARKETABLE SECURITIES:

DEPRECIATION:

INCOME TAXES:

USE OF ESTIMATES:

F-54
<PAGE> 237

DATRONICS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

STOCK OPTIONS:

The Company follows Accounting Principles Board No. 25, "Accounting for
Stock Issued to Employees" and related interpretations in accounting for its
employee stock options.

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

4. MARKETABLE SECURITIES

The following is a summary of available-for-sale securities:

5. EMPLOYEE STOCK OPTION PLAN

F-55
<PAGE> 238

DATRONICS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. RETIREMENT PLANS

PROFIT SHARING:

7. NOTES PAYABLE -- OFFICERS -- PARTIALLY SUBORDINATED

8. COMMITMENTS AND CONTINGENCIES

Rental expense charged to operations amounted to approximately $456,000 and
$475,000 for the years ended December 31, 1994 and 1995, respectively.

LINE OF CREDIT:

9. PROVISION FOR INCOME TAXES

Provision for income taxes (all state and local) consisted of the
following:

F-56
<PAGE> 239

DATRONICS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Certain state and local tax jurisdictions impose taxes based on items other
than income, such as stockholders' equity or employee compensation. The above
amounts include provisions for these taxes.

10. LOAN PAYABLE -- BROKER

11. SUBSEQUENT EVENTS

ACQUISITION OF DATRONICS MANAGEMENT, INC.'S STOCK:

The nature of the Company's operations is not expected to materially change
as a result of the acquisition by COREStaff.

LETTER OF CREDIT:

F-57
<PAGE> 240

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Regal Data Systems, Inc.

ERNST & YOUNG LLP

Houston, Texas
March 29, 1996

F-58
<PAGE> 241

REGAL DATA SYSTEMS, INC.

BALANCE SHEETS

ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

See notes to financial statements.

F-59
<PAGE> 242

REGAL DATA SYSTEMS, INC.

STATEMENTS OF OPERATIONS

See notes to financial statements.

F-60
<PAGE> 243

REGAL DATA SYSTEMS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

See notes to financial statements.

F-61
<PAGE> 244

REGAL DATA SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

See notes to financial statements.

F-62
<PAGE> 245

REGAL DATA SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Regal Data Systems, Inc. (the "Company") is a New Jersey corporation, which
provides computer systems consulting services.

PRESENTATION

CASH EQUIVALENTS

All short-term investments with an original maturity of 90 days or less are
considered cash equivalents.

FIXED ASSETS

INCOME TAXES

REVENUE RECOGNITION

Revenue is recognized at the time the services are provided.

STOCK OPTIONS

F-63
<PAGE> 246

REGAL DATA SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

USE OF ESTIMATES

2. LONG-TERM DEBT

At December 31, 1994 and 1995, the Company had outstanding borrowings of
$600,000 and $725,000, respectively.

3. COMMITMENTS AND CONTINGENCIES

4. STOCKHOLDERS' EQUITY

5. BENEFIT PLAN

F-64
<PAGE> 247

REGAL DATA SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

6. INCOME TAXES

The provision for state income taxes consists of the following for the
years ended December 31:

7. CONCENTRATION OF CREDIT RISK

F-65
<PAGE> 248

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Leafstone, Inc.

ERNST & YOUNG LLP

Melville, New York
March 20, 1996

F-66
<PAGE> 249

LEAFSTONE, INC.

BALANCE SHEETS

ASSETS

See notes to financial statements.

F-67
<PAGE> 250

LEAFSTONE, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

See notes to financial statements.

F-68
<PAGE> 251

LEAFSTONE, INC.

STATEMENTS OF CASH FLOWS

See notes to financial statements.

F-69
<PAGE> 252

LEAFSTONE, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

2. SIGNIFICANT ACCOUNTING POLICIES

PRESENTATION

CASH AND CASH EQUIVALENTS

DEPRECIATION AND RELATED POLICIES

ACCOUNTING ESTIMATES

RESEARCH AND DEVELOPMENT

F-70
<PAGE> 253

LEAFSTONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

INCOME TAXES

3. LOAN PAYABLE -- BANK

4. STOCK OPTION PLAN

F-71
<PAGE> 254

LEAFSTONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

5. INCOME TAXES

Significant components of the Company's deferred tax assets and liability
as of December 31, 1995 are as follows:

6. COMMITMENTS

F-72
<PAGE> 255

LEAFSTONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE INTERIM PERIODS IS UNAUDITED)

7. CONCENTRATIONS OF CREDIT RISK

8. SUBSEQUENT EVENT (UNAUDITED)

F-73
<PAGE> 256

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
International Underwriters named below (the "International Underwriters"), and
each of the International Underwriters, for whom Goldman Sachs International,
Montgomery Securities and The Robinson-Humphrey Company, Inc. are acting as
representatives, has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set forth
opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
---------------------------------------------------------------------- ------------
<S> <C>
Goldman Sachs International........................................... 308,000
Montgomery Securities................................................. 306,000
The Robinson-Humphrey Company, Inc.................................... 306,000
ABN AMRO Bank N.V. ................................................... 70,000
Kleinwort Benson Limited.............................................. 70,000
---------
Total....................................................... 1,060,000
=========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.

The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $1.05 per share. The International Underwriters
may allow, and such dealers may reallow, a concession not in excess of $0.10 per
share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.

The Company and the Selling Stockholders have entered into an underwriting
agreement (the "U.S. Underwriting Agreement") with the underwriters of the U.S.
Offering (the "U.S. Underwriters") providing for the concurrent offer and sale
of 4,240,000 shares of Common Stock in the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two Offerings
are identical. The closing of the International Offering made hereby is a
condition to the closing of the U.S. Offering, and vice versa. The
representatives for the U.S. Underwriters are Goldman, Sachs & Co., Montgomery
Securities and The Robinson-Humphrey Company, Inc.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two Offerings, each of the
U.S. Underwriters named herein has agreed that, as part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
part of the distribution of the shares offered as a part of the International
Offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person whom it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.

U-1
<PAGE> 257

Certain of the Selling Stockholders have granted the International
Underwriters an option exercisable for 30 days after the date of this Prospectus
to purchase up to an aggregate of 159,000 additional shares of Common Stock
solely to cover over-allotments, if any. If the International Underwriters
exercise their over-allotment option, the International Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 1,060,000 shares of Common
Stock offered hereby. Certain of the Selling Stockholders have granted the U.S.
Underwriters a similar option to purchase up to an aggregate of 636,000
additional shares of Common Stock.

Each International Underwriter has also agreed that (a) it has not offered
or sold and prior to the date six months after the date of issue of the shares
of Common Stock will not offer or sell any shares of Common Stock to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply with, all applicable provisions of the Financial
Services Act 1986 of Great Britain with respect to anything done by it in
relation to the shares of Common Stock in, from or otherwise involving the
United Kingdom, and (c) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with the
issuance of the shares of Common Stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.

Buyers of shares of Common Stock offered hereby may be required to pay
stamp taxes and other charges in accordance with the laws and practice of the
country of purchase in addition to the initial public offering price.

U-2
<PAGE> 258

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 8
The Company.............................. 11
Use of Proceeds.......................... 11
Price Range of Common Stock and Dividend
Policy................................. 11
Capitalization........................... 12
Selected Consolidated Financial Data..... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 14
Business................................. 25
Management............................... 37
Certain Relationships and Related Party
Transactions........................... 42
Principal and Selling Stockholders....... 45
Description of Capital Stock............. 46
Shares Eligible for Future Sale.......... 50
Certain United States Tax Consequences to
Non-U.S. Holders....................... 51
Legal Matters............................ 53
Experts.................................. 54
Available Information.................... 54
Index to Financial Statements............ F-1
Underwriting............................. U-1
</TABLE>

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

- - ---------------------------------------------------------
- - ---------------------------------------------------------
5,300,000 SHARES

CORESTAFF, INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------

PROSPECTUS

------------------
GOLDMAN SACHS INTERNATIONAL

MONTGOMERY SECURITIES

THE ROBINSON-HUMPHREY
COMPANY, INC.

REPRESENTATIVES OF THE UNDERWRITERS
- - ---------------------------------------------------------
- - ---------------------------------------------------------