Diamond Home Services, Inc. Acquires Telemarketing Company.

WOODSTOCK, Ill.--(BUSINESS WIRE)--Oct. 16, 1998--Diamond Home Services, Inc. (Nasdaq: DHMS) announced today that a Special Committee of the Board of Directors has approved and authorized the Company to sign a purchase agreement to acquire certain net assets and the business of KanTel, the telephone operations and telemarketing division of HI Inc., for approximately $2.7 million.

KanTel, based in Lawrence, KS, conducts a telemarketing business and employs approximately 125 associates, including 100 full- and part-time telephone operators. KanTel has been Diamond's sole third-party lead-taking vendor since Diamond decided to centralize and outsource its lead-taking activities in late 1996. HI Inc. is a closely-held company in which C. Stephen Clegg, Chairman and CEO of Diamond, has a controlling interest.

The acquisition contemplates a purchase price of $1.5 million in cash and $1.2 million in 5% convertible subordinated notes. The notes are convertible only if KanTel's operations meet a predetermined cost-per-lead level during years 2000, 2001 and 2002. The number of shares issuable upon conversion ranges from 75,000 to 300,000, based on the year in which the cost-per-lead level is attained. Management anticipates the acquisition to close by the end of the October, 1998.

Diamond Home Services, Inc. is a leading national marketer and contractor of installed home improvement products, including roofing systems, gutters, doors, and fencing. The Company markets its installed home improvement products and services directly to consumers, primarily under the "SEARS" name. Through its finance subsidiary, Marquise Financial Services, Inc., the Company also offers financing to its customers. The Company has 70 sales offices located in major cities across the U.S., providing the Company with a presence in markets covering approximately 80% of the owner-occupied households in the U.S. In addition, the Company, through its subsidiary, Reeves Southeastern Corporation, is one of the largest manufacturers and distributors of fencing and perimeter security products to the industrial and residential markets in the U.S. Reeves Southeastern operates 31 distribution centers primarily in the eastern half of the U.S.

Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives estimates or expectations of the Company or future results or events constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known or unknown risks, including, but not limited to, general economic and business conditions, matters related to the licensing agreement between Diamond Exteriors, Inc. and Sears, Roebuck and Co., warranty exposure, the Company's reliance on sales associates and on the availability of qualified independent installers, lead activity and costs related thereto, and conditions in the installed home improvement industry. There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur. Users of forward-looking statements are encouraged to review Item 7 of the Company's 1997 annual report on Form 10-K, its filings on Form 10-Q, management's discussion and analysis in the Company's 1997 annual report to stockholders, the Company's filings on Form 8-K, and other federal securities law filings for a description of other important factors that may affect the Company's business, results of operations and financial condition.