COMFORT SYSTEMS USA INC, S-1/A, 1997-06-02

COMFORT SYSTEMS USA INC
S-1/A, 1997-06-02
ELECTRICAL WORK

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 1997
REGISTRATION NO. 333-24021
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------

AMENDMENT NO. 1
TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------

COMFORT SYSTEMS USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 1711 76-0526487
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

FRED M. FERREIRA
CHIEF EXECUTIVE OFFICER
4801 WOODWAY DRIVE
SUITE 300E
HOUSTON, TEXAS 77056
(713) 964-2685

(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND AGENT FOR SERVICE)

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

COPIES TO:

WILLIAM D. GUTERMUTH RICHARD C. TILGHMAN, JR.
BRACEWELL & PATTERSON, L.L.P. PIPER & MARBURY, L.L.P.
SOUTH TOWER PENNZOIL PLACE 36 SOUTH CHARLES STREET
711 LOUISIANA STREET, SUITE 2900 BALTIMORE, MARYLAND 21201
HOUSTON, TEXAS 77002-2781

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.

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

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE>
******************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************

SUBJECT TO COMPLETION
JUNE 2, 1997

6,100,000 SHARES

(LOGO)

COMFORT SYSTEMS USA, INC.

COMMON STOCK
------------------

All of the 6,100,000 shares of Common Stock offered hereby are being
offered by Comfort Systems USA, Inc. Prior to this offering, there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price for the Common Stock will be between
$11.00 and $13.00 per share. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price. The
Common Stock has been approved for listing on The New York Stock Exchange under
the symbol "FIX," subject to official notice of issuance.

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

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 8 HEREOF.

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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>
==================================================================================================================
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................ $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total(2)............................. $ $ $
==================================================================================================================
</TABLE>

(1) Before deducting expenses of the offering payable by the Company, estimated
at $4,000,000.

(2) The Company has granted the Underwriters a 30-day option to purchase up to
915,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public as shown above. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.

ALEX. BROWN & SONS
INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
SANDERS MORRIS MUNDY

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>

Comfort Systems has entered into agreements to acquire twelve Founding
Companies simultaneously with the closing of this Offering. In 1996, the
Founding Companies, which have been in business an average of 39 years, had pro
forma combined revenues of $167 million and served customers in 27 states.

The Founding Companies are:

Tri-City Mechanical, Inc., Phoenix, Arizona. Founded in 1962.
Freeway Heating and Air Conditioning, Inc., Bountiful, Utah. Founded in 1947.
C.S.I./Bonneville, Salt Lake City, Utah. Founded in 1969.
Western Building Services, Inc., Denver, Colorado. Founded in 1980.
Accurate Air Systems, Inc., Houston, Texas. Founded in 1980.
Atlas Air Conditioning Co., Houston, Texas. Founded in 1947.
Quality Air Heating and Cooling, Inc., Grand Rapids, Michigan. Founded in 1968.
Eastern Heating and Cooling, Inc. Albany, New York. Founded in 1945.
Tech Heating and Air Conditioning, Inc., Solon, Ohio. Founded in 1979.
Seasonair, Inc., Rockville, Maryland. Founded in 1966.
S.M. Lawrence Co., Inc., Jackson, Tennessee. Founded in 1917.
Standard Heating and Air Conditioning Co., Birmingham, Alabama. Founded in 1939.

THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS AND WITH QUARTERLY REPORTS CONTAINING UNAUDITED SUMMARY FINANCIAL
INFORMATION FOR EACH OF THE FIRST THREE QUARTERS OF EACH FISCAL YEAR.

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

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

[In Gatefold]

Comfort Systems served customers in 27 states (red borders) during 1996.
Broad geographic presence and specialized technical and marketing strengths will
position the Company to provide comprehensive services to large regional and
national customers.

Comfort Systems USA employs specially trained engineers who use CAD/CAM
technology to design cost-effective, energy-efficient HVAC systems.

Comfort Systems USA specializes in "design and build" projects in which
it accepts responsibility for design, engineering, integration, installation and
start up of HVAC systems. Our customers benefit from this single-source
arrangement since costs as well as design and installation times are reduced.

Comfort Systems has full-service facilities for fabrication of ductwork,
sheetmetal and piping, based on its own mechanical drawing specifications,
thereby eliminating the need for subcontracted work.

As HVAC systems have become increasingly sophisticated, technicians are
required to have more advanced training and skills. Many companies now outsource
the maintenance, repair, replacement and renovation of their systems and
controls to Comfort Systems.

Comfort Systems uses PC-based telecommunications to monitor HVAC systems
remotely. This allows increased energy efficiency and faster diagnosis of
problems.
<PAGE>
PROSPECTUS SUMMARY

SIMULTANEOUSLY WITH AND AS A CONDITION TO THE CLOSING OF THE OFFERING MADE
BY THIS PROSPECTUS (THIS "OFFERING"), COMFORT SYSTEMS USA, INC. WILL ACQUIRE,
IN SEPARATE MERGER OR SHARE EXCHANGE TRANSACTIONS (THE "MERGERS") IN EXCHANGE
FOR CASH AND SHARES OF ITS COMMON STOCK, 12 COMPANIES ENGAGED PRINCIPALLY IN THE
HEATING, VENTILATION AND AIR CONDITIONING ("HVAC") BUSINESS (EACH A "FOUNDING
COMPANY" AND, COLLECTIVELY, THE "FOUNDING COMPANIES"). UNLESS OTHERWISE
INDICATED, ALL REFERENCES TO THE "COMPANY" HEREIN INCLUDE THE FOUNDING
COMPANIES, AND REFERENCES HEREIN TO "COMFORT SYSTEMS" MEAN COMFORT SYSTEMS
USA, INC. PRIOR TO THE CONSUMMATION OF THE MERGERS.

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE COMBINED, PRO FORMA
COMBINED AND INDIVIDUAL HISTORICAL FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, (I)
ALL SHARE, PER SHARE AND FINANCIAL INFORMATION SET FORTH HEREIN (A) HAVE BEEN
ADJUSTED TO GIVE EFFECT TO ALL OF THE MERGERS; (B) ASSUME AN INITIAL PUBLIC
OFFERING PRICE OF $12.00 PER SHARE; AND (C) ASSUME NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION; AND (II) ALL REFERENCES HEREIN TO COMMON
STOCK INCLUDE BOTH COMMON STOCK, $0.01 PAR VALUE, AND RESTRICTED VOTING COMMON
STOCK, $0.01 PAR VALUE (THE "RESTRICTED COMMON STOCK"), OF COMFORT SYSTEMS.

THE COMPANY

Comfort Systems was founded in 1996 to become a leading national provider
of comprehensive HVAC installation services and maintenance, repair and
replacement of HVAC systems, focusing primarily on the commercial and industrial
markets. The Company's commercial and industrial applications include office
buildings, retail centers, apartment complexes, hotels, manufacturing plants and
government facilities. The Company also provides specialized HVAC applications
such as process cooling, control systems, electronic monitoring and process
piping. Approximately 90% of the Company's pro forma combined 1996 revenues of
$167.5 million was derived from commercial and industrial customers, with
approximately 53% of combined revenues attributable to installation services and
47% attributable to maintenance, repair and replacement services. Combined
revenues of the Founding Companies, which have been in business an average of 39
years, increased at a compound annual growth rate of approximately 16% from 1994
through 1996.

The Company's commercial and industrial installation business targets
"design and build" projects where the Company is responsible for designing,
engineering and installing a cost-effective, energy-efficient system, customized
to meet the specific needs of the building owner. Management believes that the
"design and build" segment represents a faster growing and more profitable
segment of the HVAC business than traditional "plan and spec" installation,
which is generally awarded based on a bid process. In recent years, the Company
has undertaken a shift from "plan and spec" to "design and build" projects
with "design and build" revenues increasing from approximately 65% of
installation revenues in 1994 to approximately 80% in 1996.

The Company also provides maintenance, repair and replacement of HVAC
systems. Growth in this segment is driven by a number of factors, particularly
(i) the aging of the installed base, (ii) the increasing energy efficiency,
sophistication and complexity of HVAC systems and (iii) the increasing
restrictions on the use of refrigerants commonly used in older HVAC systems. The
energy efficiency and sophistication of new HVAC systems are encouraging
building owners to upgrade and reconfigure their current HVAC systems. Moreover,
the increasing sophistication and complexity of these HVAC systems are leading
many

3
<PAGE>
commercial and industrial building owners and property managers to outsource
maintenance and repair through service agreements with HVAC service providers.
Service agreements lead to better utilization of personnel, link the customer
with the Company should a major repair or replacement be needed and result in
recurring revenues. The Company believes there is also an opportunity to expand
its presence in the highly-fragmented residential maintenance, repair and
replacement market. The replacement segment of the residential HVAC market has
grown significantly in recent years as a result of the aging of the installed
base of residential HVAC systems, the introduction of more energy-efficient
systems and the upgrading of older homes with central air conditioning.

The Company plans to achieve its goal of becoming a leading national
provider of comprehensive HVAC services by improving operations, emphasizing
continued internal growth and expanding through acquisitions.

OPERATING STRATEGY. The Company believes there are significant
opportunities to increase the profitability of the Founding Companies and
subsequently acquired businesses. The key elements of the Company's operating
strategy are:

FOCUS ON COMMERCIAL AND INDUSTRIAL MARKETS. The Company believes that
the commercial and industrial HVAC markets are attractive because of their
growth opportunities, diverse customer base, attractive margins and
potential for long-term relationships with building owners and managers,
general contractors and architects.

OPERATE ON DECENTRALIZED BASIS. The Company believes that, while
maintaining strong operating and financial controls, a decentralized
operating structure will retain the entrepreneurial spirit present in each
of the Founding Companies and will allow the Company to capitalize on the
considerable local and regional market knowledge and customer relationships
possessed by each Founding Company.

ACHIEVE OPERATING EFFICIENCIES. The Company intends to use its
increased purchasing power to gain volume discounts in areas such as HVAC
components, raw materials, service vehicles, advertising, bonding and
insurance. In addition, the Company will identify "best practices" that
can be successfully implemented throughout its operations.

ATTRACT AND RETAIN QUALITY EMPLOYEES. The Company intends to attract
and retain quality employees by providing them (i) an enhanced career path
from working for a larger public company, (ii) additional training,
education and apprenticeships to allow talented employees to advance to
higher-paying positions, (iii) the opportunity to realize a more stable
income and (iv) improved benefits packages.

INTERNAL GROWTH. A key component of the Company's strategy is to continue
the internal growth at the Founding Companies and subsequently acquired
businesses. The key elements of the Company's internal growth strategy are:

CAPITALIZE ON SPECIALIZED TECHNICAL AND MARKETING STRENGTHS. The
Company believes it will be able to expand the services it offers in its
local markets by leveraging the specialized technical and marketing
strengths of individual Founding Companies.

ESTABLISH NATIONAL MARKET COVERAGE. The Company believes that
significant demand exists from large national companies to utilize the
services of a single HVAC service provider and believes existing local and
regional relationships can be expanded as it develops a nationwide network.

ACQUISITIONS. The Company believes that, due to the highly fragmented
nature of the HVAC industry, it has a significant opportunity to achieve its
acquisition strategy. The Company anticipates that acquisition candidates in the
commercial and industrial markets will typically have annual revenues ranging
from $5 million to $35 million. The key elements of the Company's acquisition
strategy are:

ENTER NEW GEOGRAPHIC MARKETS. The Company will pursue acquisitions
that are located in new geographic markets, are financially stable, and
which will have the customer base, technical skills and infrastructure
necessary to be a core business into which other HVAC service operations
can be consolidated.

4
<PAGE>
EXPAND WITHIN EXISTING MARKETS. Once the Company has entered a
market, it will seek to acquire other well-established HVAC businesses
operating within that region and will also pursue "tuck-in" acquisitions
of smaller companies, whose operations can be integrated into an existing
operation to leverage the Company's infrastructure.

ACQUIRE COMPLEMENTARY BUSINESSES. The Company will focus on the HVAC
industry and may also acquire companies providing complementary services to
the same customer base, such as commercial and industrial process piping
and plumbing and electrical companies.

THE OFFERING

Common Stock offered by the 6,100,000 shares
Company............................
Common Stock to be outstanding after 20,060,774 shares(1)(2)
the Offering.........................
Use of proceeds...................... To pay the cash portion of the purchase
price for the Founding Companies, to
repay expenses incurred in connection
with the organization of Comfort Systems
and the Offering and for general
corporate purposes, including future
acquisitions. See "Use of Proceeds."
NYSE symbol.......................... FIX

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

(1) Includes 9,720,927 shares of Common Stock to be issued in connection with
the Mergers, but excludes 1,976,954 shares of Common Stock subject to
options to be granted upon consummation of this Offering at an exercise
price equal to the initial public offering price. See "Management -- 1997
Long-Term Incentive Plan" and " -- 1997 Non-Employee Directors' Stock
Plan."

(2) Includes 4,239,847 shares of Common Stock issued to Notre Capital Ventures
II, L.L.C. ("Notre") and management of and consultants to Comfort Systems
during 1996 and January and February 1997, of which 2,742,912 shares are
Restricted Common Stock held by Notre. Each share of Restricted Common Stock
is entitled to 0.55 of one vote on all matters submitted to stockholders.
Restricted Common Stock is convertible into one share of Common Stock under
certain circumstances. See "Description of Capital Stock -- Common Stock
and Restricted Common Stock."

RECENT DEVELOPMENTS

During late 1996 and early 1997, members of the Company's management team
and certain consultants were assembled to pursue the consolidation of the
Founding Companies. Notre, a consolidator of highly-fragmented industries,
provided the Company with expertise regarding the consolidation process and
advanced the Company the funds needed to pay organizational and Offering
expenses. In connection therewith, during 1996 and January and February 1997,
Comfort Systems sold an aggregate of 1,269,935 shares of Common Stock to
management of and consultants to the Company at a price of $0.01 per share. As a
result, the Company recorded a non-recurring, non-cash compensation charge of
$10.7 million (the "Compensation Charge") in the first quarter of 1997,
representing the difference between the amount paid for the shares and the
estimated fair value of the shares on the date of sale. This Compensation Charge
of $10.7 million is not included in pro forma combined net income.

The aggregate consideration to be paid by Comfort Systems in the Mergers
consists of $41.8 million in cash and 9,720,927 shares of Common Stock, plus
$12.5 million of existing debt of the Founding Companies. The consideration to
be paid by Comfort Systems for each Founding Company was negotiated by the
parties and was based primarily upon the pro forma adjusted net income of each
Founding Company. For a more detailed description of these transactions, see
"Certain Transactions -- Organization of the Company."

Between January 1, 1997 and the date of the Mergers, each Founding Company
which is a C Corporation, except Atlas, will distribute to its stockholders an
amount equal to its net income for the period from January 1, 1997 through the
date of the Mergers (the "Interim Earnings Distributions"). These aggregate
distributions would have been $350,000 as of March 31, 1997 and are expected to
be funded from the Founding Companies' cash and from borrowings from existing
sources available to the Founding Companies.

Comfort Systems USA, Inc. was incorporated in 1996 in Delaware. The
Company's executive offices are located at 4801 Woodway, Suite 300E, Houston,
Texas 77056, and its telephone number is (800) 723-8431.

5
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Comfort Systems will acquire the Founding Companies simultaneously with and
as a condition to consummation of this Offering. For financial statement
presentation purposes, Comfort Systems has been identified as the "accounting
acquirer." The following table presents unaudited pro forma combined financial
data for the Company, adjusted for (i) the effects of the Mergers, (ii) the
effects of certain pro forma adjustments to the historical financial statements
described below and (iii) the consummation of this Offering and the application
of the net proceeds therefrom. See "Selected Financial Data," the Unaudited
Pro Forma Combined Financial Statements and the Notes thereto and the historical
Financial Statements for Comfort Systems and certain of the Founding Companies
and the Notes thereto included elsewhere in this Prospectus.

PRO FORMA COMBINED(1)
------------------------------------
TWELVE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ---------------
INCOME STATEMENT DATA:
Revenues........................ $167,525 $39,505
Gross profit.................... 47,813 10,705
Selling, general and
administrative expenses(2).... 27,814 7,599
Goodwill amortization(3)........ 3,214 803
Income from operations.......... 16,785 2,303
Interest and other income
(expense), net(4)............. (961) (250)
Income before income taxes...... 15,824 2,053
Net income(5)................... 8,209 1,047
Net income per share............ 0.45 0.06
Shares used in computing pro
forma net income per
share(6)...................... 18,205,952 18,205,952

MARCH 31, 1997
----------------------------
PRO FORMA AS
COMBINED ADJUSTED(8)
--------- -----------
BALANCE SHEET DATA:(7)
Working capital(4).............. $ (27,712)(9) $ 36,364
Total assets.................... 177,421 196,813
Long-term debt, net of current
maturities(4).................. 14,292 14,292
Stockholders' equity(4)......... 93,341 157,417

- ------------
(1) The pro forma combined income statement data assume that the Mergers and the
Offering were consummated on January 1, 1996 and are not necessarily
indicative of the results the Company would have obtained had these events
actually then occurred or of the Company's future results.

(2) The pro forma combined income statement data reflect an aggregate of $6.6
million for the twelve months ended December 31, 1996 and $428,000 for the
three months ended March 31, 1997 in pro forma reductions in salaries,
bonuses and benefits to the owners of the Founding Companies to which they
have agreed prospectively (the "Compensation Differential") and does not
include the non-recurring, non-cash Compensation Charge of $10.7 million
recorded in the first quarter of 1997.

(3) Consists of amortization of goodwill to be recorded as a result of the
Mergers over a 40-year period and computed on the basis described in the
Notes to the Unaudited Pro Forma Combined Financial Statements.

(4) Several of the Founding Companies are S Corporations. In connection with the
Mergers, these Founding Companies will make distributions to their
stockholders totalling $16.8 million, representing substantially all of
their previously taxed undistributed earnings (the "S Corporation
Distributions"). In order to fund these distributions, the Founding
Companies will borrow $11.0 million from existing sources. Accordingly, pro
forma interest expense has been increased by $935,000 for the twelve months
ended December 31, 1996 and $207,000 for the three months ended March 31,
1997, pro forma working capital has been reduced by $1.9 million, pro forma
long-term debt has been increased by $11.0 million and pro forma
stockholders' equity has been reduced by $12.9 million. Quality has declared
S Corporation Distributions of $3.9 million which have been recorded as a
dividend payable to shareholder and reduction of stockholders' equity in the
pro forma combined balance sheet data. This $3.9 million is included in the
$16.8 million of S Corporation Distributions.

(5) Assuming a corporate income tax rate of 40% and the non-deductibility of
goodwill.

(6) Includes (i) 2,969,912 shares issued to Notre, (ii) 1,269,935 shares issued
to management of and consultants to Comfort Systems, (iii) 9,720,927 shares
issued to owners of the Founding Companies and (iv) 4,245,178 of the
6,100,000 shares sold in the Offering necessary to pay the cash portion of
the Merger consideration and expenses of this Offering.

(7) The pro forma combined balance sheet data assume that the Mergers were
consummated on March 31, 1997.

(8) Adjusted for the sale of the 6,100,000 shares of Common Stock offered hereby
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."

(9) Includes a $41.8 million note payable to owners of the Founding Companies,
representing the cash portion of the Merger consideration to be paid from a
portion of the net proceeds of this Offering.

6
<PAGE>
SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
(IN THOUSANDS)

The following table presents summary income statement data for the Founding
Companies for each of their three most recent fiscal years. Income from
operations has not been adjusted for the Compensation Differential or to take
into account increased costs associated with the Company's new corporate
management and with being a public company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Introduction."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEARS ENDED(1) MARCH 31,(2)
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
QUALITY:
Revenues........................... $ 24,434 $ 32,594 $ 29,597 $ 6,315 $ 8,766
Income from operations............. 2,154 4,953 4,490 416 1,300
ATLAS:
Revenues........................... 21,848 22,444 30,030 6,207 6,115
Income from operations............. 105 643 2,101 120 496
TRI-CITY:
Revenues........................... 16,883 25,030 24,237 6,482 6,791
Income from operations............. 393 2,539 1,773 374 278
LAWRENCE:
Revenues........................... 12,758 12,568 17,163 3,280 4,565
Income (loss) from operations...... 112 (51) 67 (93) 541
ACCURATE:
Revenues........................... 9,763 12,171 16,806 3,161 2,642
Income (loss) from operations...... (122) 213 499 27 21
EASTERN:
Revenues........................... 7,348 6,067 7,944 1,525 1,284
Income (loss) from operations...... 274 117 431 20 (103)
CSI/BONNEVILLE:
Revenues........................... 6,502 6,361 7,842 1,369 1,562
Income from operations............. 881 448 981 75 59
TECH:
Revenues........................... 6,923 6,960 7,537 1,075 1,656
Income from operations............. 593 948 1,680 46 57
SEASONAIR:
Revenues........................... 5,168 5,942 6,737 1,128 1,831
Income (loss) from operations...... 189 451 134 (62) 22
WESTERN:
Revenues........................... 4,149 4,112 6,494 1,185 1,072
Income (loss) from operations...... 161 (151) 744 96 29
ALL OTHER FOUNDING COMPANIES(3):
Revenues........................... 8,934 12,264 13,138 3,072 3,221
Income (loss) from operations...... 266 321 531 48 (22)
</TABLE>
- ------------
(1) The fiscal years presented are as follows: Quality -- the fiscal years ended
March 31, 1995 and 1996 and the year ended December 31, 1996; Atlas and
Accurate -- the fiscal years ended June 30, 1994 and 1995 and the year ended
December 31, 1996; Lawrence -- the fiscal years ended October 31, 1994, 1995
and 1996; and Tri-City, Eastern, CSI/Bonneville, Tech, Seasonair and
Western -- the years ended December 31.

(2) Lawrence's revenues and income from operations are for the three months
ended January 31, 1996 and 1997.

(3) The other Founding Companies are Standard and Freeway, and data presented
are for the years ended December 31, 1994, 1995 and 1996, in the case of
Standard, and the fiscal years ended March 31, 1995 and 1996 and the year
ended December 31, 1996, in the case of Freeway.

7
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS
INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING AN INVESTMENT IN THE COMMON STOCK. THIS PROSPECTUS CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF ANY NUMBER OF
FACTORS, INCLUDING THE RISK FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS
PROSPECTUS.

ABSENCE OF COMBINED OPERATING HISTORY. Comfort Systems was founded in 1996
but has conducted no operations and generated no revenues to date. Comfort
Systems has entered into definitive agreements to acquire the Founding Companies
simultaneously with and as a condition to the closing of this Offering. The
Founding Companies have been operating as separate independent entities, and
there can be no assurance that the Company will be able to integrate the
operations of these businesses successfully or to institute the necessary
systems and procedures, including accounting and financial reporting systems, to
manage the combined enterprise on a profitable basis. The Company's management
group has been assembled only recently, and there can be no assurance that the
management group will be able to manage the combined entity or to implement
effectively the Company's operating strategy, internal growth strategy and
acquisition program. The pro forma combined historical financial results of the
Founding Companies cover periods when the Founding Companies and Comfort Systems
were not under common control or management and may not be indicative of the
Company's future financial or operating results. The inability of the Company to
integrate the Founding Companies successfully would have a material adverse
effect on the Company's business, financial condition and results of operations
and would make it unlikely that the Company's acquisition program will be
successful. See "Business -- Strategy" and "Management."

RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY. The Company intends
to grow significantly through the acquisition of additional HVAC and
complementary businesses. The Company expects to face competition for
acquisition candidates, which may limit the number of acquisition opportunities
and may lead to higher acquisition prices. There can be no assurance that the
Company will be able to identify, acquire or manage profitably additional
businesses or to integrate successfully any acquired businesses into the Company
without substantial costs, delays or other operational or financial problems.
Further, acquisitions involve a number of special risks, including failure of
the acquired business to achieve expected results, diversion of management's
attention, failure to retain key personnel of the acquired business and risks
associated with unanticipated events or liabilities, some or all of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Customer dissatisfaction or performance problems at a
single acquired company could have an adverse effect on the reputation of the
Company generally and render ineffective the Company's national sales and
marketing initiatives. The Company may consider acquiring complementary
businesses in the electrical, process piping and plumbing industries, and there
can be no assurance that these complementary businesses can be successfully
integrated. In addition, there can be no assurance that the Founding Companies
or other businesses acquired in the future will achieve anticipated revenues and
earnings. See "Business -- Strategy."

RISKS RELATED TO ACQUISITION FINANCING. The timing, size and success of
the Company's acquisition efforts and the associated capital commitments cannot
be readily predicted. The Company currently intends to finance future
acquisitions by using shares of its Common Stock for all or a substantial
portion of the consideration to be paid. If the Common Stock does not maintain a
sufficient market value, or if potential acquisition candidates are otherwise
unwilling to accept Common Stock as part of the consideration for the sale of
their businesses, the Company may be required to utilize more of its cash
resources, if available, in order to initiate and maintain its acquisition
program. Upon completion of this Offering, the Company will have $22.3 million
of net proceeds remaining for future acquisitions and working capital after
payment of Merger and Offering expenses and the cash portion of the purchase
price for the Founding Companies. If the Company does not have sufficient cash
resources, its growth could be limited unless it is able to obtain additional
capital through debt or equity financings. The Company has received a commitment
for a bank line of credit of $75.0 million from Bank One, Texas, NA ("Bank
One") for working capital and

8
<PAGE>
acquisitions. The line of credit is subject to customary closing conditions and
the completion of definitive documentation. In the event the Company does not
close the commitment received from Bank One and does not otherwise obtain an
acceptable line of credit, it is possible that the Company's operations and
strategies could be adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Combined liquidity
and capital resources."

RISKS RELATED TO OPERATING AND INTERNAL GROWTH STRATEGY. Key elements of
the Company's strategy are to improve the profitability of the Founding
Companies and subsequently acquired businesses and to continue to expand the
revenues of the Founding Companies and any subsequently acquired businesses. The
Company intends to seek to improve the profitability of the Founding Companies
and any subsequently acquired businesses by various means, including increased
purchasing efficiencies and a reduction, in some cases, of duplicative operating
costs and overhead. The Company's ability to increase the revenues of the
Founding Companies and any subsequently acquired company will be affected by
various factors, including demand for new or replacement HVAC systems, the level
of new construction, the Company's ability to expand the range of services
offered to customers of individual Founding Companies and other acquired
businesses, the Company's ability to develop national accounts and other
marketing programs in order to attract new customers and the Company's ability
to attract and retain a sufficient number of qualified HVAC technicians and
other necessary personnel. Many of these factors are beyond the control of the
Company, and there can be no assurance that the Company's operating and internal
growth strategies will be successful or that it will be able to generate cash
flow adequate for its operation and to support internal growth. See
"Business -- Strategy."

COMPETITION. The HVAC industry is highly competitive and is served by
small, owner-operated private companies and several large companies. Certain of
these competitors may have lower overhead cost structures and may, therefore, be
able to provide their services at lower rates than the Company. The HVAC
industry is currently undergoing rapid consolidation on both a national and a
regional level by other companies which have acquisition objectives the same as
or similar to the Company's objectives. These companies and other consolidators
may have greater financial resources than the Company to finance acquisition and
internal growth opportunities and might be willing to pay higher prices than the
Company for the same acquisition opportunities. Additionally, HVAC equipment
manufacturers and certain public utilities are beginning to enter the
maintenance, repair and replacement segment of the HVAC industry. These
companies generally are better capitalized, have greater name recognition and
may be able to provide these services at a lower cost. Consequently, the Company
may encounter significant competition in its efforts to achieve both its
acquisition and internal growth objectives as well as its operating strategy to
increase the profitability of the Founding Companies and subsequently acquired
companies. See "Business -- Competition."

AVAILABILITY OF HVAC TECHNICIANS. The timely provision of high-quality
installation service and maintenance, repair and replacement of HVAC systems by
the Company requires an adequate supply of skilled HVAC technicians.
Accordingly, the Company's ability to increase its productivity and
profitability will be limited by its ability to employ, train and retain the
skilled technicians necessary to meet the Company's service requirements. From
time to time, there are shortages of qualified HVAC technicians, and there can
be no assurance that the Company will be able to maintain an adequate skilled
labor force necessary to operate efficiently, that the Company's labor expenses
will not increase as a result of a shortage in the supply of skilled technicians
or that the Company will not have to curtail its planned internal growth as a
result of labor shortages. See "Business -- Employees" and " -- Recruiting,
Training and Safety."

SEASONAL AND CYCLICAL NATURE OF THE HVAC INDUSTRY. The HVAC industry is
subject to seasonal variations. Specifically, the demand for new installations
is generally lower during the winter months due to reduced construction activity
during inclement weather and less use of air conditioning during colder months.
Demand for HVAC maintenance, repair and replacement services is generally higher
in the second and third calendar quarters due to the increased use of air
conditioning during warmer months. Accordingly, the Company expects its revenues
and operating results generally will be lower in the first and fourth

9
<PAGE>
quarters. Historically, the construction industry has been highly cyclical. As a
result, the Company's volume of business may be adversely affected by declines
in new installation projects in various geographic regions of the United States.

REGULATION. HVAC systems are subject to various environmental statutes and
regulations, including the Clean Air Act and those regulating the production,
servicing and disposal of certain ozone depleting refrigerants used in HVAC
systems. There can be no assurance that the regulatory environment in which the
Company operates will not change significantly in the future. Various local,
state and federal laws and regulations impose licensing standards on technicians
who install and service HVAC systems. The Company's failure to comply with these
laws and regulations could subject it to substantial fines and the loss of its
licenses. See "Business -- Governmental Regulation and Environmental Matters."

RELIANCE ON KEY PERSONNEL. The Company will be highly dependent on the
continuing efforts of its executive officers and the senior management of the
Founding Companies, and the Company likely will depend on the senior management
of any significant business it acquires in the future. The business or prospects
of the Company could be affected adversely if any of these persons does not
continue in his management role until the Company is able to attract and retain
qualified replacements. See "Management."

CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS. Following the completion
of the Mergers and this Offering, the Company's executive officers and
directors, former stockholders of the Founding Companies and entities affiliated
with them will beneficially own approximately 69.6% of the outstanding shares of
Common Stock (66.6% if the Underwriters' over-allotment option is exercised in
full). These persons, if acting in concert, will be able to exercise control
over the Company's affairs, to elect the entire Board of Directors and to
control the outcome of any matter submitted to a vote of stockholders. See
"Principal Stockholders."

SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATES OF FOUNDING
COMPANIES. Of the net proceeds of this Offering, $41.8 million, or
approximately 65%, will be paid as the cash portion of the purchase price for
the Founding Companies. Some of the recipients of these funds will become
directors of the Company or holders of more than 5% of the Common Stock.
Additionally, as of May 29, 1997, Notre has advanced to Comfort Systems funds to
pay organization expenses and Offering costs and will be reimbursed
approximately $1,127,000 from the proceeds of this Offering. See "Use of
Proceeds" and "Certain Transactions."

BENEFITS TO NOTRE AND MANAGEMENT.__Notre, management and certain
consultants to the Company own in the aggregate 4,239,847 shares of Common
Stock. These stockholders acquired their Common Stock at a price of $0.01 per
share. These parties will own, in the aggregate, approximately 21% of the
outstanding Common Stock following the consummation of this Offering, which will
have a value of approximately $50.9 million. Of these shares of Common Stock,
2,742,912 shares are Restricted Common Stock, which are entitled to elect one
member of the Company's Board of Directors and to 0.55 of one vote for each
share held on all other matters on which they are entitled to vote. Holders of
Restricted Common Stock are not entitled to vote on the election of any other
directors and will control in the aggregate 10.2% of the votes of all shares of
Common Stock. See "Principal Stockholders."

NO PRIOR PUBLIC MARKET AND DETERMINATION OF OFFERING PRICE. Prior to this
Offering, there has been no public market for the Common Stock. Therefore, the
initial public offering price for the Common Stock will be determined by
negotiation between the Company and the Representatives of the Underwriters and
may bear no relationship to the price at which the Common Stock will trade after
the Offering. See "Underwriting" for the factors to be considered in
determining the initial public offering price. The Common Stock has been
approved for listing on The New York Stock Exchange, subject to official notice
of issuance. However, there can be no assurance that an active trading market
will develop subsequent to this Offering or, if developed, that it will be
sustained. After this Offering, the market price of the Common Stock may be
subject to significant fluctuations in response to numerous factors, including
the timing of any acquisitions by the Company, variations in the Company's
annual or quarterly financial results or those of its competitors, changes by
financial research analysts in their estimates of the future earnings of the
Company, conditions in the economy in general or in the Company's industry in
particular, unfavorable

10
<PAGE>
publicity or changes in applicable laws and regulations (or judicial or
administrative interpretations thereof) affecting the Company or the HVAC,
process piping and plumbing and electrical services industries. From time to
time, the stock market experiences significant price and volume volatility,
which may affect the market price of the Common Stock for reasons unrelated to
the Company's performance.

POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON
STOCK. Upon consummation of the Mergers and this Offering, 20,060,774 shares of
Common Stock will be outstanding. The 6,100,000 shares sold in this Offering
(other than shares that may be purchased by affiliates of the Company) will be
freely tradable. The remaining outstanding shares may be resold publicly only
following their registration under the Securities Act of 1933, as amended (the
"Securities Act"), or pursuant to an available exemption from registration
(such as provided by Rule 144 following a one year holding period for previously
unregistered shares). The holders of these remaining shares have certain rights
to have their shares registered in the future under the Securities Act, but may
not exercise such registration rights, and have agreed with the Company that
they will not sell, transfer or otherwise dispose of any of their shares for one
year following the closing of this Offering. See "Shares Eligible for Future
Sale." On completion of this Offering, the Company also will have outstanding
options to purchase up to a total of 1,976,954 shares of Common Stock. The
Company intends to register all the shares subject to these options under the
Securities Act for public resale. The Company intends to register 8,000,000
additional shares of Common Stock under the Securities Act within 90 days after
completion of its offering for issuance in connection with future acquisitions.
These shares generally will be freely tradable after their issuance by persons
not affiliated with the Company unless the Company contractually restricts their
resale.

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS. Comfort
Systems' Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation"), authorizes the Board of Directors to issue, without
stockholder approval, one or more series of preferred stock having such
preferences, powers and relative, participating, optional and other rights
(including preferences over the Common Stock respecting dividends and
distributions and voting rights) as the Board of Directors may determine. The
issuance of this "blank-check" preferred stock could render more difficult or
discourage an attempt to obtain control of the Company by means of a tender
offer, merger, proxy contest or otherwise. In addition, the Certificate of
Incorporation provides for a classified Board of Directors, which may also have
the effect of inhibiting or delaying a change in control of the Company. Certain
provisions of the Delaware General Corporation Law may also discourage takeover
attempts that have not been approved by the Board of Directors. See
"Description of Capital Stock."

IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of Common Stock in this
Offering will experience immediate, substantial dilution in the net tangible
book value of their stock of $10.56 per share and may experience further
dilution in that value from issuances of Common Stock in connection with future
acquisitions. See "Dilution."

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<PAGE>
THE COMPANY

Comfort Systems was founded in 1996 to become a leading national provider
of comprehensive HVAC installation services and maintenance, repair and
replacement of HVAC systems, focusing primarily on the commercial and industrial
markets. Comfort Systems has entered into agreements to acquire the Founding
Companies simultaneously with and as a condition to the consummation of this
Offering. In 1996, the Founding Companies, which have been in business an
average of 39 years, had pro forma combined revenues of $167.5 million and
served customers in 27 states. For a description of the transactions pursuant to
which these businesses will be acquired, see "Certain
Transactions -- Organization of the Company." The following is a description of
the Founding Companies:

QUALITY AIR HEATING AND COOLING, INC. -- Quality Air Heating and Cooling,
Inc. ("Quality"), headquartered in Grand Rapids, Michigan, was founded in 1968
and operates primarily in western Michigan. Quality focuses on providing
"design and build" installation services and maintenance, repair and
replacement of HVAC systems, primarily for medium and large commercial
facilities. Quality operates a sheet metal and ductwork fabrication facility for
its installation services. Quality had 1996 revenues of $29.6 million and
currently has 216 employees. Robert J. Powers, the President of Quality, has
been employed by Quality for 16 years, will sign a five-year employment
agreement with Quality to continue his present position following consummation
of this Offering and will become a director of the Company.

ATLAS AIR CONDITIONING CO. -- Atlas Comfort Services USA, Inc., which does
business as Atlas Air Conditioning Co. ("Atlas"), and is headquartered in
Houston, Texas, was founded in 1947 and operates primarily in the southwest,
northeast and mid-Atlantic regions of the United States. Atlas is a leading
provider of HVAC installation services for apartment complexes, condominiums,
hotels and elder care facilities in the United States and also provides
maintenance, repair and replacement of HVAC systems. Atlas had 1996 revenues of
$30.0 million and currently has 254 employees. Brian S. Atlas and Michael Atlas,
the Chief Executive Officer and Chief Operating Officer of Atlas, respectively,
have been employed by Atlas for 22 and 20 years, respectively. They will sign
five-year employment agreements with Atlas to continue their present positions
following consummation of this Offering. Brian S. Atlas will become a director
of the Company.

TRI-CITY MECHANICAL, INC. -- Tri-City Mechanical, Inc. ("Tri-City"),
headquartered in Tempe, Arizona, was founded in 1962 and operates in Arizona,
California and Nevada. Tri-City focuses on providing "design and build"
installation services and maintenance, repair and replacement of HVAC systems
primarily for large commercial and industrial facilities, as well as process
piping for industrial facilities. Tri-City operates a sheet metal and ductwork
fabrication facility for its installation services. Tri-City had 1996 revenues
of $24.2 million and currently has 238 employees. Michael Nothum, Jr., the
President of Tri-City, has been employed by Tri-City for 18 years, will sign a
five-year employment agreement with Tri-City to continue his present position
following consummation of this Offering and will become a director of the
Company.

S. M. LAWRENCE CO., INC. -- S. M. Lawrence Co., Inc. and Lawrence Service,
Inc. (together "Lawrence"), headquartered in Jackson, Tennessee, were founded
in 1917 and operate primarily in Tennessee and the surrounding states. Lawrence
focuses on providing "design and build" installation services and process
piping primarily for industrial facilities and maintenance, repair and
replacement of commercial and industrial HVAC systems. Lawrence operates a sheet
metal and ductwork fabrication facility for its installation services. Lawrence
had 1996 revenues of $17.2 million and currently has 168 employees. Samuel M.
Lawrence III and Frank F. Lawrence, the Chief Executive Officer and President of
Lawrence, respectively, have been employed by Lawrence for 20 and 17 years,
respectively, and will sign five-year employment agreements with Lawrence to
continue their present positions following consummation of this Offering. Samuel
M. Lawrence III will become a director of the Company.

ACCURATE AIR SYSTEMS, INC. -- Accurate Air Systems, Inc. ("Accurate"),
headquartered in Houston, Texas, was founded in 1980 and operates primarily in
Texas, Oklahoma and New Mexico. Accurate focuses on providing "design and
build" installation services and maintenance, repair and replacement of HVAC
systems for commercial facilities. Accurate operates a sheet metal and ductwork
fabrication facility for its

12
<PAGE>

installation services. Accurate had 1996 revenues of $16.8 million and currently
has 123 employees. Thomas J. Beaty, President and founder of Accurate, has been
employed by Accurate for 16 years, will sign a five-year employment agreement
with Accurate to continue his present position following consummation of this
Offering and will become a director of the Company.

FREEWAY HEATING AND AIR CONDITIONING, INC. -- Freeway Heating and Air
Conditioning, Inc. ("Freeway"), headquartered in Bountiful, Utah, was founded
in 1947 and operates primarily in the Salt Lake City area. Freeway provides
installation services and maintenance, repair and replacement of HVAC systems
for commercial and residential facilities. Freeway had 1996 revenues of $9.4
million and currently has 113 employees. Robert Arbuckle, President of Freeway,
has been employed by Freeway for 22 years and will sign a five-year employment
agreement with Freeway to continue his present position following consummation
of this Offering.

EASTERN HEATING AND COOLING INC. -- Eastern Heating and Cooling Inc.
("Eastern"), headquartered in Albany, New York, was founded in 1945 and
operates primarily within a 75-mile radius of Albany, New York. Eastern focuses
on providing "design and build" installation and maintenance, repair and
replacement of HVAC systems for commercial and industrial facilities. Eastern
also offers continuous monitoring and control services for commercial
facilities. Eastern had 1996 revenues of $7.9 million and currently has 58
employees. Alfred J. Giardenelli, Jr., President of Eastern, has been employed
by Eastern for 26 years, will sign a five-year employment agreement with Eastern
to continue his present position following consummation of this Offering and
will become a director of the Company.

CSI/BONNEVILLE -- Contract Service Inc., which does business as C. S. I.
Heating and Air Conditioning and Bonneville Heating and Cooling
("CSI/Bonneville"), and is headquartered in Salt Lake City, Utah, was founded
in 1969 and operates primarily in Utah. CSI/Bonneville focuses on providing
maintenance, repair and replacement of HVAC systems for commercial and
residential facilities. CSI/Bonneville had 1996 revenues of $7.8 million and
currently has 81 employees. John C. Phillips, President and co-founder of
CSI/Bonneville, has been employed by CSI/Bonneville for 28 years, will sign a
five-year employment agreement with CSI/Bonneville to continue his present
position following consummation of this Offering and will become a director of
the Company.

TECH HEATING AND AIR CONDITIONING, INC. -- Tech Heating and Air
Conditioning, Inc. and Tech Mechanical, Inc. (together "Tech"), headquartered
in Solon, Ohio, were founded in 1979 and operate primarily in the greater
Cleveland, Ohio area. Tech focuses on providing "design and build"
installation services and maintenance, repair and replacement of HVAC systems
for commercial and industrial facilities. Tech also offers continuous monitoring
and control services for commercial facilities. Tech had 1996 revenues of $7.5
million and currently has 56 employees. Robert R. Cook, President and founder of
Tech, has been employed by Tech for 18 years, will sign a five-year employment
agreement with Tech to continue his present position following consummation of
this Offering and will become a director of the Company.

SEASONAIR, INC. -- Seasonair, Inc. ("Seasonair"), headquartered in
Rockville, Maryland, was founded in 1966 and operates primarily in Maryland, the
District of Columbia and Virginia. Seasonair focuses on providing installation
services and maintenance, repair and replacement of HVAC systems for light
commercial facilities. Seasonair had 1996 revenues of $6.7 million and currently
has 65 employees. James C. Hardin, Sr., who will become Chief Executive Officer
of Seasonair upon consummation of this Offering, has been employed by Seasonair
for 11 years and will sign a five-year employment agreement with Seasonair
following consummation of this Offering.

WESTERN BUILDING SERVICES, INC. -- Western Building Services, Inc.
("Western"), headquartered in Denver, Colorado, was founded in 1980 and
operates primarily in Colorado. Western focuses on providing "design and
build" installation services and maintenance, repair and replacement of HVAC
systems for commercial facilities. Western also offers continuous monitoring and
control services for commercial facilities. Western had 1996 revenues of $6.5
million and currently has 52 employees. Charles W. Klapperich, President and
founder of Western, has been employed by Western for 17 years, will sign a five-

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<PAGE>
year employment agreement with Western to continue his present position
following consummation of this Offering and will become a director of the
Company.

STANDARD HEATING AND AIR CONDITIONING CO. -- Standard Heating and Air
Conditioning Co. ("Standard"), headquartered in Birmingham, Alabama, was
founded in 1939 and operates primarily in Alabama. Standard focuses on providing
comprehensive maintenance, repair and replacement of HVAC systems for
residential and light commercial facilities. Standard had 1996 revenues of $3.7
million and currently has 37 employees. Thomas B. Kime, President of Standard,
has been employed by Standard for over 20 years and will sign a five-year
employment agreement with Standard to continue his present position with
Standard following consummation of this Offering.

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<PAGE>
USE OF PROCEEDS

The net proceeds from the sale of the 6,100,000 shares of Common Stock
offered hereby, after deducting underwriting discounts and commissions and
estimated Offering and Merger expenses, are estimated to be $64.1 million ($74.3
million if the Underwriters' over-allotment option is exercised in full).

Of the net proceeds, $41.8 million will be used to pay the cash portion of
the purchase price for the Founding Companies, some of which will be paid to
stockholders who will become directors or holders of more than 5% of the Common
Stock.

The remaining net proceeds of $22.3 million will be used for working
capital and other general corporate purposes, which are expected to include
future acquisitions. The Company currently has no binding agreements to effect
any future acquisitions. Pending such uses, the net proceeds will be invested in
short-term, interest-bearing, investment grade securities.

The Company has received a commitment for a bank line of credit from Bank
One for $75.0 million for working capital and acquisitions, which is subject to
customary closing conditions and the completion of definitive documentation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Combined Results of Operations."

DIVIDEND POLICY

The Company intends to retain all of its future earnings, if any, to
finance the expansion of its business and for general corporate purposes,
including future acquisitions, and does not anticipate paying any cash dividends
on its Common Stock for the foreseeable future. In addition, if the Company is
successful in obtaining a credit facility, it is likely that such facility will
include restrictions on the ability of the Company to pay dividends without the
consent of the lender.

In connection with the consummation of the Mergers, certain of the Founding
Companies intend to make S Corporation Distributions to their former
stockholders. As of March 31, 1997, the S Corporation Distributions to be made
totalled $16.8 million. In addition, the Founding Companies which are C
Corporations, except Atlas, will make Interim Earnings Distributions prior to
the Mergers. As of March 31, 1997, the Interim Earnings Distributions to be made
totalled $350,000.

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<PAGE>
CAPITALIZATION

The following table sets forth the current maturities of long-term
obligations and capitalization at March 31, 1997 (i) of the Founding Companies
combined; (ii) of Comfort Systems on a pro forma combined basis to give effect
to the issuance of 1,269,935 shares of Common Stock to management of and
consultants to Comfort Systems, the Mergers and the S Corporation Distributions;
and (iii) of Comfort Systems, pro forma combined, as adjusted to give effect to
the Mergers, the S Corporation Distributions, this Offering and the application
of a portion of the estimated net proceeds therefrom. This table should be read
in conjunction with the Unaudited Pro Forma Combined Financial Statements of the
Company and the Notes thereto included elsewhere in this Prospectus.

MARCH 31, 1997
----------------------------------------
PRO FORMA
COMBINED COMBINED AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
Current maturities of long-term debt
obligations(1)..................... $ 9,230 $ 47,173(2) $ 5,355
======== ========= ===========
Long-term obligations, less current
maturities(1)...................... $ 3,267 $ 14,292(3) $ 14,292
Stockholders' equity:
Preferred Stock: $0.01 par
value, 5,000,000 shares
authorized; none issued or
outstanding................... -- -- --
Common Stock: $0.01 par value,
52,969,912 shares authorized;
13,960,774 shares issued and
outstanding pro forma
combined; and 20,060,774
shares issued and outstanding,
as adjusted(4)................ 433 140 201
Additional paid-in capital...... 11,248 93,201 157,216
Retained earnings............... 9,061 -- --
Treasury stock.................. (1,201) -- --
-------- --------- -----------
Total stockholders'
equity.................. 19,541 93,341 157,417
-------- --------- -----------
Total
capitalization..... $22,808 $ 107,633 $ 171,709
======== ========= ===========

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

(1) For a description of the Company's debt, see the Notes to Unaudited Pro
Forma Combined Financial Statements and Notes to the Founding Companies'
Financial Statements.

(2) Includes a $41.8 million note payable to owners of the Founding Companies,
representing the cash portion of the Merger consideration to be paid from a
portion of the net proceeds of this Offering.

(3) Includes $11.0 million in long-term obligations to reflect that portion of
the S Corporation Distributions that will be funded through borrowings.

(4) Excludes 1,976,953 shares of Common Stock subject to options to be granted
upon consummation of this Offering at an exercise price equal to the initial
public offering price. See "Management -- 1997 Long-Term Incentive Plan"
and "-- 1997 Non-Employee Directors' Stock Plan."

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<PAGE>
DILUTION

The deficit in pro forma combined net tangible book value of the Company at
March 31, 1997 was $35.2 million or $2.52 per share of Common Stock. The deficit
in pro forma combined net tangible book value per share represents the amount by
which the Company's pro forma combined total liabilities exceeds the Company's
pro forma combined net tangible assets, divided by the number of shares of
Common Stock to be outstanding after giving effect to the Mergers. After giving
effect to the sale of the 6,100,000 shares of Common Stock in this Offering and
after deduction of the underwriting discounts and commissions and estimated
Offering and Merger expenses, the pro forma combined net tangible book value of
the Company at March 31, 1997 would have been approximately $28.9 million or
$1.44 per share. This represents an immediate increase in pro forma combined net
tangible book value of $3.96 per share to existing stockholders and an immediate
dilution of $10.56 per share to purchasers of Common Stock in this Offering. The
following table illustrates this pro forma dilution:

Assumed initial public offering price
per share............................. $ 12.00
Pro forma combined deficit in net
tangible book value per share
before this Offering.............. $ (2.52)
Increase in pro forma combined net
tangible book value per share
attributable to new investors..... 3.96
---------
Pro forma combined net tangible book
value per share after this Offering... 1.44
---------
Dilution per share to new investors..... $ 10.56
=========

The following table sets forth, on a pro forma combined basis to give
effect to the Mergers at March 31, 1997, the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid by existing stockholders and the new investors purchasing shares
of Common Stock from the Company in this Offering, before deducting underwriting
discounts and commissions and estimated Offering and Merger expenses:

<TABLE>
<CAPTION>
SHARES PURCHASED AVERAGE
-------------------- TOTAL PRICE
NUMBER PERCENT CONSIDERATION PER SHARE
--------- ------- ------------- ---------
<S> <C> <C> <C> <C>
Existing stockholders................... 13,961 69.6% $ (35,182)(1) $ (2.52)
New investors........................... 6,100 30.4 73,200 12.00
--------- ------- -------------
Total.............................. 20,061 100.0% $ 38,018
========= ======= =============
</TABLE>

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

(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity of the Founding Companies before this Offering,
adjusted to reflect: (i) the cash portion of the consideration payable to
the stockholders of the Founding Companies in connection with the Mergers
and (ii) the S Corporation Distributions.

17
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Comfort Systems will acquire the Founding Companies simultaneously with and
as a condition to the consummation of this Offering. For financial statement
presentation purposes, Comfort Systems has been identified as the "accounting
acquirer." The following selected financial data for Comfort Systems as of
December 31, 1996 has been derived from audited financial statements of Comfort
Systems. The selected historical financial data as of March 31, 1997 and the
three months ended March 31, 1997 have been derived from unaudited financial
statements of Comfort Systems, which have been prepared on the same basis as the
audited financial statements and, in the opinion of Comfort Systems, reflect all
adjustments consisting of normal recurring adjustments, necessary for a fair
presentation of such data. The selected unaudited pro forma combined financial
data present data for the Company, adjusted for (i) the effects of the Mergers,
(ii) the effects of certain pro forma adjustments to the historical financial
statements described below and (iii) the consummation of this Offering and the
application of the net proceeds therefrom. See the Unaudited Pro Forma Combined
Financial Statements and the Notes thereto and the historical Financial
Statements of Comfort Systems and certain of the Founding Companies and the
Notes thereto included elsewhere in this Prospectus.

TWELVE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------- ------------
INCOME STATEMENT DATA:
COMFORT SYSTEMS
Revenues......................... $ -- $ --
Gross profit..................... -- --
Selling, general and
administrative
expenses(1).................... -- 10,655
------------- ------------
Loss from operations............. -- (10,655)
Interest and other income
(expense), net.................. -- --
------------- ------------
Net loss......................... $ -- $ (10,655)
============= ============
PRO FORMA COMBINED(2)
Revenues......................... $ 167,525 $ 39,505
Gross profit..................... 47,813 10,705
Selling, general and
administrative expenses(3)...... 27,814 7,599
Goodwill amortization(4)......... 3,214 803
Income from operations........... 16,785 2,303
Interest and other income
(expense), net(5)............... (961) (250)
Income before income taxes....... 15,824 2,053
Net income(6).................... 8,209 1,047
Net income per share............. 0.45 0.06
Shares used in computing pro
forma net income per share(7)... 18,205,952 18,205,952

<TABLE>
<CAPTION>
COMBINED COMPANIES
COMFORT SYSTEMS ------------------------------
------------------------- MARCH 31, 1997
DECEMBER 31, MARCH 31, ------------------------------
------------ --------- PRO FORMA
1996 1997 COMBINED(8) AS ADJUSTED(9)
------------ --------- ----------- ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(5)............... $ 1 $ 42 $ (27,712)(10) $ 36,364
Total assets..................... 178 2,908 177,421 196,813
Long-term debt, net of current
maturities(5).................. -- -- 14,292 14,292
Stockholders' equity(5).......... 1 42 93,341 157,417
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

18
<PAGE>
- ------------
(1) Represents the non-recurring, non-cash Compensation Charge of $10.7
million.

(2) The pro forma combined income statement data assume that the Mergers and
the Offering were consummated on January 1, 1996 and are not necessarily
indicative of the results the Company would have obtained had these events
actually then occurred or of the Company's future results.

(3) The pro forma combined income statement data reflect the Compensation
Differential of $6.6 million for the twelve months ended December 31, 1996
and $428,000 for the three months ended March 31, 1997 and does not include
the Compensation Charge of $10.7 million recorded in the first quarter of
1997.

(4) Consists of amortization of goodwill to be recorded as a result of the
Mergers over a 40-year period and computed on the basis described in the
Notes to the Unaudited Pro Forma Combined Financial Statements.

(5) Several of the Founding Companies are S Corporations. In connection with
the Mergers, these Founding Companies will make the S Corporation
Distributions totalling $16.8 million. In order to fund these
distributions, the Founding Companies will borrow $11.0 million from
existing sources. Accordingly, pro forma interest expense has been
increased by $935,000 for the twelve months ended December 31, 1996 and
$207,000 for the three months ended March 31, 1997, pro forma working
capital has been reduced by $1.9 million, pro forma long-term debt has been
increased by $11.0 million and pro forma stockholders' equity has been
reduced by $12.9 million. Quality has declared S Corporation Distributions
of $3.9 million which have been recorded as a dividend payable to an
affiliate and a reduction of stockholders' equity in the pro forma combined
balance sheet data. This $3.9 million is included in the $16.8 million of S
Corporation Distributions.

(6) Assuming a corporate income tax rate of 40% and the non-deductibility of
goodwill.

(7) Includes (i) 2,969,912 shares issued to Notre, (ii) 1,269,935 shares issued
to management of and consultants to Comfort Systems, (iii) 9,720,927 shares
issued to owners of the Founding Companies and (iv) 4,245,178 of the
6,100,000 shares sold in the Offering necessary to pay the cash portion of
the Merger consideration and expenses of this Offering.

(8) The pro forma combined balance sheet data assume that the Mergers were
consummated on March 31, 1997.

(9) Adjusted for the sale of the 6,100,000 shares of Common Stock offered
hereby and the application of the estimated net proceeds therefrom.

(10) Includes a $41.8 million note payable to owners of the Founding Companies,
representing the cash portion of the Merger consideration to be paid from a
portion of the net proceeds of this Offering.

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with "Selected
Financial Data" and the Founding Companies' Financial Statements and related
Notes thereto appearing elsewhere in this Prospectus.

INTRODUCTION

The Company's revenues are derived from providing comprehensive HVAC
installation services and maintenance, repair and replacement of HVAC systems
primarily for commercial and industrial customers. The Company's commercial and
industrial applications include office buildings, retail centers, apartment
complexes, hotels, manufacturing plants and government facilities. The Company
also provides specialized HVAC applications such as process cooling, control
systems, electronic monitoring and process piping. Approximately 90% of the
Company's pro forma combined 1996 revenues of $167.5 million was derived from
commercial and industrial customers, with approximately 53% of total revenues
attributable to installation services and 47% attributable to maintenance,
repair and replacement services.

Revenues related to commercial and industrial installation are of two
types: "design and build" and "plan and spec." Approximately 80% of the
commercial and industrial installation revenues for 1996 were generated from
"design and build" projects, which generally yield higher margins than "plan
and spec" projects because the Company is responsible for designing,
engineering and installing a cost-effective, energy-efficient system that is
customized to the specific needs of the building owner. This enables the Company
to control the customer's cost and reduce overall design and installation time.
Additionally, the costs and other terms of "design and build" projects are
normally established through relationship-based negotiation with the building
owner or its representative rather than through a competitive bid process.
"Plan and spec" installation projects typically yield lower margins than
"design and build" projects because the building's architect or consulting
engineer designs the HVAC system and the installation project is put out for
bid.

Most installation and reconfiguration projects are completed within one
year. Generally, these contracts are accounted for under the
percentage-of-completion method of accounting. Revenues are recorded based on
the percentage of costs incurred during a particular period, in proportion to
total estimated costs for each contract. Maintenance, repair and replacement
service revenues are recorded as services are performed. Costs of services
consist primarily of HVAC components, parts and materials related to new
installation, equipment maintenance and rental, salaries and benefits payable to
service and repair technicians, as well as supervisory and subcontract labor.
Selling, general and administrative expenses consist primarily of compensation
and benefits to owners as well as to sales and administrative employees, fees
for professional services, depreciation of equipment and other general office
expenses. Selling, general and administrative expenses also include incentive
and discretionary bonuses paid to owners, significant portions of which were
paid in lieu of S Corporation distributions to enable stockholders to meet their
income tax obligations.

The Founding Companies have operated throughout the periods presented as
independent, privately-owned entities, and their results of operations reflect
varying tax structures (S Corporations or C Corporations) which have influenced
the historical level of owners' compensation. Gross profit margins and selling,
general and administrative expenses as a percentage of revenues may not be
comparable among the individual Founding Companies. The owners of the Founding
Companies have agreed to certain reductions in their compensation and benefits
in connection with the organization of the Company. The Compensation
Differential for 1996 of $6.6 million has been reflected as a pro forma
adjustment in the Unaudited Pro Forma Combined Statements of Operations.

The Company anticipates that following the Mergers it will realize savings
from (i) greater volume discounts from suppliers of HVAC components, parts and
raw materials; (ii) consolidation of insurance and bonding programs; (iii) other
general and administrative areas such as training and advertising; and (iv) the
Company's ability to borrow at lower interest rates than most of the Founding
Companies. It is anticipated that these savings will be offset by costs related
to the Company's new corporate management and by the

20
<PAGE>

costs associated with being a public company. The Company believes that neither
these savings nor the costs associated therewith can be quantified because the
Mergers have not occurred, and there have been no combined operating results
upon which to base any assumptions. As a result, they have not been included in
the pro forma financial information included herein.

During January and February 1997, Comfort Systems sold an aggregate of
1,269,935 shares of Common Stock to management and consultants. As a result, the
Company recorded a non-recurring, non-cash Compensation Charge of $10.7 million
in the first quarter of 1997, representing the difference between the amount
paid for the shares and the estimated fair value of the shares on the date of
sale. This Compensation Charge of $10.7 million is not included in pro forma
financial information or Combined Results of Operations.

In July 1996, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 97 ("SAB 97") relating to business combinations
immediately prior to an initial public offering. SAB 97 requires that these
combinations be accounted for using the purchase method of acquisition
accounting. Under the purchase method, one of the companies must be designated
as the accounting acquirer. For the remaining companies, $128.6 million,
representing the excess of the fair value of the Merger consideration received
over the fair value of the net assets to be acquired, will be recorded as
"goodwill" on the Company's balance sheet. Goodwill will be amortized as a
non-cash charge to the income statement over a 40-year period. The pro forma
impact of this amortization expense, which is non-deductible for tax purposes,
is $3.2 million per year on an after-tax basis. Prior to the issuance of SAB 97,
goodwill and related amortization expense were not required to be recorded for
most business combinations similar to the Mergers. The amount of goodwill to be
recorded and the related amortization expense will depend in part on the actual
Offering price. See "Certain Transactions -- Organization of the Company."

COMBINED RESULTS OF OPERATIONS

The combined results of operations of the Founding Companies for the
periods presented do not represent combined results of operations presented in
accordance with generally accepted accounting principles, but are only a
summation of the revenues, cost of services and selling, general and
administrative expenses of the individual Founding Companies on a historical
basis. The combined results also exclude the effect of pro forma adjustments and
may not be comparable to, and may not be indicative of, the Company's
post-combination results of operations because (i) the Founding Companies were
not under common control or management during the periods presented; (ii) the
Founding Companies used different tax structures (S Corporations or C
Corporations) during the periods presented; (iii) the Company will incur
incremental costs related to its new corporate management and the costs of being
a public company; (iv) the Company will use the purchase method to record the
Mergers, resulting in the recording of goodwill which will be amortized over 40
years; and (v) the combined data do not reflect the Compensation Differential
and potential benefits and cost savings the Company expects to realize when
operating as a combined entity.

The following table sets forth the combined results of operations of the
Founding Companies on a historical basis and such results as a percentage of
revenues.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEARS ENDED(1) MARCH 31,(3)
---------------------------------------------------------------- --------------------
1994 1995(2) 1996(2) 1996
-------------------- -------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 124,710 100.0% $ 146,512 100.0% $ 167,525 100.0% $ 34,799 100.0%
Cost of services..................... 92,318 74.0 105,043 71.7 119,712 71.5 25,759 74.0
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 32,392 26.0 41,469 28.3 47,813 28.5 9,040 26.0
Selling, general and
administrative expenses............ 27,386 22.0 31,038 21.2 34,382 20.5 7,973 22.9
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations............... 5,006 4.0 10,431 7.1 13,431 8.0 1,067 3.1
</TABLE>

THREE MONTHS ENDED
MARCH 31,(3)
--------------------
1997
--------------------
Revenues............................. $ 39,505 100.0%
Cost of services..................... 28,800 72.9
--------- ---------
Gross profit......................... 10,705 27.1
Selling, general and
administrative expenses............ 8,027 20.3
--------- ---------
Income from operations............... 2,678 6.8

- ------------
(1) The fiscal years presented are as follows: Quality -- the fiscal years ended
March 31, 1995 and 1996 and the year ended December 31, 1996; Atlas and
Accurate -- the fiscal years ended June 30, 1994 and 1995 and the year ended
December 31, 1996; Lawrence -- the fiscal years ended October 31, 1994, 1995
and 1996; and Tri-City, Eastern, CSI/Bonneville, Tech, Seasonair and
Western -- the years ended December 31 for all periods presented.

(2) The financial data for 1995 and 1996 both include Quality's results for the
three months ended March 31, 1996 which were as follows: revenues of $6.3
million, cost of services of $4.3 million, and selling, general and
administrative expenses of $1.6 million.

(3) Lawrence's results of operations are presented for the three months ended
January 31, 1996 and 1997.

21
<PAGE>
COMBINED RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1996

REVENUES. Combined revenues increased approximately $4.7 million, or
13.5%, from $34.8 million for the three months ended March 31, 1996 to $39.5
million for the three months ended March 31, 1997. The increase in revenues
occurred primarily at Quality, Lawrence and Tech. Revenues at Quality increased
$2.5 million due to a $1.5 million increase in installation revenues and a $1.0
million increase in maintenance, repair and replacement revenues. Revenues
increased $1.3 million at Lawrence due primarily to a "design and build"
installation project for a manufacturing facility in North Carolina. Revenues at
Tech increased $0.6 million due to an increase in commercial installation
services because there were fewer days of inclement weather in the first three
months of 1997 as compared to the prior comparable period. Four of the other
Founding Companies reported an increase in revenues from the first quarter of
1996 compared to the first quarter of 1997, partially offset by a decline in
revenues at Accurate and Eastern.

GROSS PROFIT. Combined gross profit increased $1.7 million, or 18.4%, from
$9.0 million for the three months ended March 31, 1996 to $10.7 million for the
three months ended March 31, 1997, due primarily to increases of $1.4 million at
Quality, $0.5 million at Atlas and $0.3 million at Lawrence. As a percentage of
revenues, combined gross profit increased from 26.0% in the three months ended
March 31, 1996 to 27.1% in the three months ended March 31, 1997. Gross profit
as a percentage of revenues at Quality increased from 32.1% in the three months
ended March 31, 1996 to 38.7% in the three months ended March 31, 1997 as a
result of Quality's ability to be more selective in accepting projects. Gross
profit as a percentage of revenues at Atlas increased from 12.1% for the three
months ended March 31, 1996 to 20.4% for the three months ended March 31, 1997.
This improvement resulted from Atlas's ability to be more selective in accepting
projects.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general
and administrative expenses increased $0.1 million, or 0.7%, from $7.9 million
for the three months ended March 31, 1996 to $8.0 million for the three months
ended March 31, 1997 due primarily to an increase in infrastructure needed to
support increased volume, partially offset by a decrease in compensation to
owners and incentive compensation to key employees totalling $1.2 million. As a
percentage of revenues, selling, general and administrative expenses decreased
from 22.9% in the three months ended March 31, 1996 to 20.3% in the three months
ended March 31, 1997.

COMBINED RESULTS FOR 1996 COMPARED TO 1995

REVENUES. Combined revenues increased approximately $21.0 million, or
14.3%, from $146.5 million in 1995 to $167.5 million in 1996. The increase in
combined revenues occurred primarily at Atlas, Accurate and Lawrence. This
increase in combined revenues was primarily attributable to an increase in
commercial and industrial "design and build" revenues of approximately 15% and
an increase in maintenance, repair and replacement revenues of approximately
30%. Revenues for Atlas increased $7.6 million from 1995 to 1996 due to
increasing demand by several large national customers for HVAC "design and
build" installation services provided by Atlas for multi-unit facilities.
Revenues for Accurate increased $4.6 million from 1995 to 1996 reflecting the
success of an increased marketing effort along with the addition of sales
personnel and project managers. Revenues at Lawrence increased by $4.6 million
from 1995 to 1996 due to a management decision in 1995 to expand the number of
general contractors for which Lawrence provides industrial installation services
and due to a large "design and build" installation contract obtained in 1996
for a food processing facility. Seven of the other Founding Companies reported
an increase in revenues from 1995 and 1996, partially offset by a decline in
revenues at Quality and Tri-City.

GROSS PROFIT. Combined gross profit increased $6.3 million, or 15.3%, from
$41.5 million in 1995 to $47.8 million in 1996, due principally to increases in
gross profit of $2.2 million at Atlas, $1.5 million at Lawrence and $1.1 million
at Western. As a percentage of revenues, combined gross profit increased from
28.3% in 1995 to 28.5% in 1996. Gross profit as a percentage of revenues at
Atlas increased from 12.5% of revenues in 1995 to 16.5% of revenues in 1996 as
increasing demand for Atlas' specialized installation services enabled Atlas to
earn higher margins. Gross profit as a percentage of revenues at Accurate
decreased from 26.1% of revenues in 1995 to 21.0% of revenues in 1996 as a
result of an increase in

22
<PAGE>

overtime and subcontract labor necessary to support the increased number of
"design and build" projects. Gross profit as a percentage of revenues at
Western increased from 17.1% to 28.2% from 1995 to 1996, which resulted in part
from Western's participation in an incentive program sponsored by the Public
Service Company of Colorado.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general
and administrative expenses increased $3.4 million, or 10.8%, from $31.0 million
in 1995 to $34.4 million in 1996. Selling, general and administrative expenses
increased $1.4 million at Lawrence, approximately one-half of which was related
to increases in salary and incentive compensation paid to the owners, and the
other half of which was related to increases in incentive compensation and
discretionary profit sharing contributions for employees. Selling, general and
administrative expenses increased $0.7 million at Tri-City as a result of a $1.1
million increase in compensation to the owners in lieu of S Corporation
distributions, offset by $0.4 million of reductions in other overhead expenses.
As a percentage of combined revenues, selling, general and administrative
expenses decreased from 21.2% in 1995 to 20.5% in 1996.

COMBINED RESULTS FOR 1995 COMPARED TO 1994

REVENUES. Combined revenues increased approximately $21.8 million, or
17.5%, from $124.7 million in 1994 to $146.5 million in 1995, primarily due to
an increase in commercial and industrial "design and build" revenues of
approximately 40% and an increase of approximately 10% in maintenance, repair
and replacement revenues. Revenues at Quality increased $8.2 million from 1994
to 1995 as a result of management's focus on obtaining more "design and build"
projects and related service work. Revenues at Tri-City increased $8.1 million
from 1994 to 1995 as a result of a strategy implemented in late 1994 to focus on
larger "design and build" projects and the related service relationships. To
accomplish its strategy, Tri-City increased the size of its sales and project
management staff.

GROSS PROFIT. Combined gross profit increased $9.1 million, or 28.0%, from
$32.4 million in 1994 to $41.5 million in 1995. Gross profit increased $3.1
million at Tri-City and $2.9 million at Quality. As a percentage of revenues,
combined gross profit increased from 26.0% in 1994 to 28.3% in 1995. Gross
profit as a percentage of revenues at Tri-City increased from 15.5% in 1994 to
22.9% in 1995 as a result of an increase in the number of higher-margin "design
and build" installation projects. Gross profit as a percentage of revenues at
Lawrence increased from 23.2% in fiscal 1994 to 27.3% in fiscal 1995 as
management emphasized higher-margin "design and build" projects and
successfully implemented an incentive program for project managers to control
project costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general
and administrative expenses increased $3.6 million, or 13.3%, from $27.4 million
in 1994 to $31.0 million in 1995. Selling, general and administrative expenses
increased $1.0 million at Tri-City from 1994 to 1995 primarily due to a $0.8
million increase in compensation to its owners. Selling, general and
administrative expenses at Lawrence increased $0.6 million primarily due to an
increase in salary and incentive compensation to its owners. As a percentage of
combined revenues, combined selling, general and administrative expenses
decreased from 22.0% in 1994 to 21.2% in 1995.

COMBINED LIQUIDITY AND CAPITAL RESOURCES

On a combined basis, the Founding Companies generated $2.1 million of net
cash from operating activities for the three months ended March 31, 1997,
primarily at Quality, Tri-City and Seasonair. Net cash used in investing
activities was $0.8 million, primarily for equipment purchases. Net cash used in
financing activities was $0.4 million and consisted of increases in long-term
debt of $1.9 million offset by distributions to stockholders of $2.3 million. At
March 31, 1997, the combined Founding Companies had working capital of $16.0
million and total debt of $12.5 million, including $5.1 million of debt to
stockholders.

In connection with and prior to the Mergers, certain Founding Companies
will make S Corporation Distributions to their owners of substantially all of
their previously-taxed undistributed earnings. The pro forma combined financial
statements as of March 31, 1997 and for the three months then ended, included
elsewhere in this Prospectus, reflect pro forma adjustments for the estimated
amount of these S Corporation

23
<PAGE>
Distributions and additional debt needed to fund these distributions had they
occurred in their entirety as of March 31, 1997. These pro forma adjustments
reflect $16.8 million of S Corporation Distributions and $11.0 million of
additional debt. The Founding Companies expect to borrow this $11.0 million from
their existing credit sources and use cash on hand to pay the remaining $5.8
million.

On a combined basis, the Founding Companies generated $9.0 million of net
cash from operating activities during fiscal 1996, primarily at Quality,
Tri-City and CSI/Bonneville. Net cash used in investing activities was $3.0
million on a combined basis, primarily for equipment purchases. Net cash used in
financing activities was $7.3 million on a combined basis, consisting of net
reductions in long-term debt of $1.6 million and distributions to stockholders
of $5.7 million. At December 31, 1996, the combined Founding Companies had
working capital of $18.9 million and total debt of $8.6 million, including debt
to stockholders.

The Company intends to pursue acquisition opportunities. The Company
expects to fund future acquisitions through the issuance of additional Common
Stock, borrowings, including use of amounts available under the proposed credit
facility and cash flow from operations. The Company anticipates that its cash
flow from operations will provide cash in excess of the Company's normal working
capital needs, debt service requirements and planned capital expenditures for
equipment. On a combined basis, the Founding Companies made capital expenditures
of $2.3 million in fiscal 1996.

The Company has received a commitment for a revolving line of credit of
$75.0 million from Bank One. The facility will be used for acquisitions, capital
expenditures, refinancing of debt not paid out of the proceeds of this Offering
and for general corporate purposes. The Company expects that the credit facility
will require the Company to comply with various loan covenants including (i)
maintenance of certain financial ratios, (ii) restrictions on additional
indebtedness, and (iii) restrictions on liens, guarantees, advances and
dividends. The line of credit is subject to customary closing conditions and the
completion of definitive documentation. In the event the Company does not close
the line of credit and does not otherwise obtain an acceptable line of credit or
additional financing, the Company's liquidity and capital resources could be
adversely affected.

QUALITY RESULTS OF OPERATIONS

Quality, headquartered in Grand Rapids, Michigan, was founded in 1968 and
operates primarily throughout western Michigan. Quality focuses on providing
"design and build" installation services and maintenance, repair and
replacement of HVAC systems, primarily for medium and large commercial
facilities.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
------------------------------------------ -------------------- --------------------
1995 1996(1) 1996(1) 1995
-------------------- -------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 24,434 100.0% $ 32,594 100.0% $ 29,597 100.0% $ 26,279 100.0%
Cost of services..................... 15,634 64.0 20,850 64.0 18,467 62.4 16,559 63.0
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 8,800 36.0 11,744 36.0 11,130 37.6 9,720 37.0
Selling, general and administrative
expenses........................... 6,646 27.2 6,791 20.8 6,640 22.4 5,183 19.7
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations............... 2,154 8.8 4,953 15.2 4,490 15.2 4,537 17.3
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- ------------------------------------------
1996 1996 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 23,282 100.0% $ 6,315 100.0% $ 8,766 100.0%
Cost of services..................... 14,176 60.9 4,291 67.9 5,372 61.3
--------- --------- --------- --------- --------- ---------
Gross profit......................... 9,106 39.1 2,024 32.1 3,394 38.7
Selling, general and administrative
expenses........................... 5,032 21.6 1,608 25.5 2,094 23.9
--------- --------- --------- --------- --------- ---------
Income from operations............... 4,074 17.5 416 6.6 1,300 14.8
</TABLE>

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

(1) The financial data for the year ended December 31, 1996 and the year ended
March 31, 1996 both include results for the three months ended March 31,
1996, which were as follows: revenues of $6.3 million, cost of services of
$4.3 million and selling, general and administrative expenses of $1.6
million.

QUALITY RESULTS FOR THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1996

REVENUES.__Revenues increased $2.5 million, or 38.8%, from $6.3 million for
the three months ended March 31, 1996 to $8.8 million for the three months ended
March 31, 1997 due to a $1.5 million increase in installation revenues and a
$1.0 million increase in maintenance, repair and replacement revenues.

24
<PAGE>
GROSS PROFIT.__Gross profit increased $1.4 million, or 67.7%, from $2.0
million for the three months ended March 31, 1996 to $3.4 million for the three
months ended March 31, 1997. As a percentage of revenues, gross profit increased
from 32.1% to 38.7% as a result of Quality's ability to be more selective in
accepting projects.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.__Selling, general and
administrative expenses increased $0.5 million, or 30.2%, from $1.6 million for
the three months ended March 31, 1996 to $2.1 million for the three months ended
March 31, 1997. The increase in selling, general and administrative expenses was
primarily attributable to an increase in administrative costs associated with
the higher sales volume. As a percentage of revenues, selling, general and
administrative expenses decreased from 25.5% to 23.9% as Quality was able to
increase its sales volume without a commensurate increase in overhead expenses.

QUALITY RESULTS FOR NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO NINE MONTHS
ENDED DECEMBER 31, 1995

REVENUES. Revenues decreased $3.0 million, or 11.4%, from $26.3 million
for the nine months ended December 31, 1995 to $23.3 million for the nine months
ended December 31, 1996 due to a decrease in Quality's volume of commercial
"design and build" installation projects. Quality's decline in revenues from
1995 to 1996 resulted from management's decision to be more selective in
accepting installation projects. Management continues to emphasize project
selectivity and expansion of capacity through the addition of technical staff
and management rather than through subcontract labor and employee overtime.

GROSS PROFIT. Gross profit decreased $0.6 million, or 6.3%, from $9.7
million for the nine months ended December 31, 1995 to $9.1 million for the nine
months ended December 31, 1996. As a percentage of revenues, gross profit
increased from 37.0% to 39.1% due to management's emphasis on project selection
and a decrease in the use of subcontract labor, employee overtime and outside
services.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $0.2 million, or 2.9%, from $5.2 million for
the nine months ended December 31, 1995 to $5.0 million for the nine months
ended December 31, 1996. As a percentage of revenues, these expenses increased
from 19.7% to 21.6% due to the decline in revenues.

QUALITY RESULTS FOR YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED MARCH
31, 1996

REVENUES. Revenues decreased $3.0 million, or 9.2%, from $32.6 million for
the year ended March 31, 1996 to $29.6 million for the year ended December 31,
1996, for the reasons described above.

GROSS PROFIT. Gross profit decreased $0.6 million, or 5.2%, from $11.7
million for the year ended March 31, 1996 to $11.1 million for the year ended
December 31, 1996. As a percentage of revenues, gross profit increased from
36.0% to 37.6% due to management's emphasis on project selection and a decrease
in the use of subcontract labor, employee overtime and outside services.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $0.2 million, or 2.2%, from $6.8 million for
the year ended March 31, 1996 to $6.6 million for the year ended December 31,
1996. As a percentage of revenues, selling, general and administrative expenses
increased from 20.8% to 22.4% due to the decline in revenues.

QUALITY RESULTS FOR YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31,
1995

REVENUES. Revenues increased $8.2 million, or 33.4%, from $24.4 million
for the fiscal year ended March 31, 1995 to $32.6 for the fiscal year ended
March 31, 1996. This increase in revenues was primarily attributable to
management's emphasis on obtaining more "design and build" installation
projects and the related service work.

GROSS PROFIT. Gross profit increased $2.9 million, or 33.5%, from $8.8
million for the fiscal year ended March 31, 1995 to $11.7 million for the fiscal
year ended March 31, 1996. As a percentage of revenues, gross profit remained
unchanged at 36.0% as the benefits associated with higher revenues were offset
by an increase in subcontract labor, employee overtime and outside services.

25
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.2 million, or 2.2%, from $6.6 million for
the fiscal year ended March 31, 1995 to $6.8 million for the fiscal year ended
March 31, 1996. As a percentage of revenues, selling, general and administrative
expenses decreased from 27.2% to 20.8% as the Company successfully leveraged its
infrastructure to support the significant increase in volume.

QUALITY LIQUIDITY AND CAPITAL RESOURCES

Quality generated $1.5 million in net cash from operating activities for
the three months ended March 31, 1997. Net cash used in investing activities was
approximately $0.1 million, principally for equipment purchases. Net cash used
in financing activities was $0.3 million, representing repayment of long-term
debt.

At March 31, 1997, Quality had working capital of $3.5 million and $1.1
million of total debt outstanding.

Quality generated $4.5 million in net cash from operating activities for
the twelve months ended December 31, 1996. Net cash used in investing activities
was approximately $0.4 million, principally for equipment purchases. Net cash
used in financing activities was $4.4 million, of which $3.5 million was
distributed to shareholders and $0.9 million was used to repay long-term debt.

At December 31, 1996, Quality had working capital of $4.9 million and $1.3
million of total debt outstanding.

ATLAS RESULTS OF OPERATIONS

Atlas, headquartered in Houston, Texas, was founded in 1947 and operates
primarily in the southwest, northeast and mid-Atlantic regions of the United
States. Atlas is a leading provider of HVAC installation services for apartment
complexes, condominiums, hotels and elder care facilities in the United States
and also provides maintenance, repair and replacement of HVAC systems.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
---------------------------------------------------------------- --------------------
1994 1995 1996 1995
-------------------- -------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 21,848 100.0% $ 22,444 100.0% $ 29,174 100.0% $ 14,689 100.0%
Cost of services..................... 19,657 90.0 19,635 87.5 25,449 87.2 12,886 87.7
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 2,191 10.0 2,809 12.5 3,725 12.8 1,803 12.3
Selling, general and administrative
expenses........................... 2,086 9.5 2,166 9.6 2,843 9.8 1,417 9.6
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations.. 105 0.5 643 2.9 882 3.0 386 2.7
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- ------------------------------------------
1996 1996 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 15,545 100.0% $ 6,207 100.0% $ 6,115 100.0%
Cost of services..................... 12,508 80.5 5,456 87.9 4,866 79.6
--------- --------- --------- --------- --------- ---------
Gross profit......................... 3,037 19.5 751 12.1 1,249 20.4
Selling, general and administrative
expenses........................... 1,432 9.2 631 10.2 753 12.3
--------- --------- --------- --------- --------- ---------
Income from operations.. 1,605 10.3 120 1.9 496 8.1
</TABLE>

ATLAS RESULTS FOR THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1996

REVENUES. Revenues decreased $0.1 million, or 1.5%, from $6.2 million for
the three months ended March 31, 1996 to $6.1 million for the three months ended
March 31, 1997.

GROSS PROFIT. Gross profit increased $0.4 million, or 66.3%, from $0.8
million for the three months ended March 31, 1996 to $1.2 million for the three
months ended March 31, 1997. As a percentage of revenues, gross profit increased
from 12.1% to 20.4% due to management's ability to be more selective in
accepting projects.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.2 million, or 19.3%, from $0.6 million for
the three months ended March 31, 1996 to $0.8 million for the three months ended
March 31, 1997. As a percentage of revenues, selling, general and administrative
expenses increased from 10.2% to 12.3% due to the addition of administrative
personnel and related costs.

26
<PAGE>
ATLAS RESULTS FOR SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED TO SIX MONTHS
ENDED DECEMBER 31, 1995

REVENUES. Revenues increased $0.8 million, or 5.8%, from $14.7 million for
the six months ended December 31, 1995 to $15.5 million for the six months ended
December 31, 1996. This increase was primarily attributable to an increase in
demand for Atlas' specialized services for multi-unit facilities.

GROSS PROFIT. Gross profit increased $1.2 million, or 68.4%, from $1.8
million for the six months ended December 31, 1995 to $3.0 million for the six
months ended December 31, 1996. As a percentage of revenues, gross profit
increased from 12.3% to 19.5% due to an increase in the proportion of "design
and build" projects and management's ability to be more selective in accepting
projects.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained unchanged at $1.4 million for the six months
ended December 31, 1995 and the six months ended December 31, 1996. As a
percentage of revenues, selling, general and administrative expenses decreased
from 9.6% to 9.2% as Atlas was able to increase revenues without a commensurate
increase in overhead expenses.

ATLAS RESULTS FOR YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995

REVENUES. Revenues increased $6.8 million, or 30.0%, from $22.4 million
for the year ended June 30, 1995 to $29.2 million for the year ended June 30,
1996 due to an increase in demand for Atlas' specialized services for multi-unit
facilities.

GROSS PROFIT. Gross profit increased $0.9 million, or 32.6%, from $2.8
million for the year ended June 30, 1995 to $3.7 million for the year ended June
30, 1996. As a percentage of revenues, gross profit increased from 12.5% to
12.8%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.6 million, or 31.3%, from $2.2 million for
the year ended June 30, 1995 to $2.8 million for the year ended June 30, 1996,
as Atlas increased its infrastructure to support higher volume. As a percentage
of revenues, selling, general and administrative expenses increased from 9.6% to
9.8%.

ATLAS RESULTS FOR JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1994

REVENUES. Revenues increased $0.6 million, or 2.7%, from $21.8 million for
the year ended June 30, 1994 to $22.4 million for the year ended June 30, 1995.

GROSS PROFIT. Gross profit increased $0.6 million, or 28.2%, from $2.2
million for the year ended June 30, 1994 to $2.8 million for the year ended June
30, 1995. As a percentage of revenues, gross profit increased from 10.0% to
12.5%. The increase in the gross profit percentage from 1994 to 1995 was
primarily related to higher demand for Atlas' specialized installation services
for multi-unit facilities and a decrease in lower-margin "plan and spec"
projects.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.1 million, or 3.8%, from $2.1 million for
the twelve months ended June 30, 1994 to $2.2 million for the twelve months
ended June 30, 1995. As a percentage of revenues, selling, general and
administrative expenses increased from 9.5% to 9.6%.

ATLAS LIQUIDITY AND CAPITAL RESOURCES

Atlas generated $0.2 million in net cash from operating activities for the
three months ended March 31, 1997. Net cash used in investing activities was
approximately $0.1 million, primarily for equipment purchases. Net cash provided
by financing activities was $0.2 million, representing borrowings on the line of
credit.

At March 31, 1997, Atlas had working capital of $2.8 million and total debt
of $2.0 million.

Atlas used $0.3 million in net cash from operating activities for the
twelve months ended June 30, 1996 primarily due to an increase in accounts
receivable which were collected in subsequent periods. Net cash used in
investing activities was approximately $0.1 million for equipment purchases. Net
cash provided by financing activities was $0.3 million for the twelve months
ended June 30, 1996, principally as a result of a net increase in long-term debt
and notes payable.

27
<PAGE>

At December 31, 1996, Atlas had working capital of $2.7 million and total
debt of $1.8 million.

TRI-CITY RESULTS OF OPERATIONS

Tri-City, headquartered in Tempe, Arizona, was founded in 1962 and operates
in Arizona, California and Nevada. Tri-City focuses on providing "design and
build" installation services and maintenance, repair and replacement of HVAC
systems primarily for large commercial and industrial facilities, as well as
process piping for industrial facilities.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------------- --------------------
1994 1995 1996 1996
-------------------- -------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 16,883 100.0% $ 25,030 100.0% $ 24,237 100.0% $ 6,482 100.0%
Cost of services..................... 14,271 84.5 19,298 77.1 18,561 76.6 5,082 78.4
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 2,612 15.5 5,732 22.9 5,676 23.4 1,400 21.6
Selling, general and administrative
expenses........................... 2,219 13.2 3,193 12.8 3,903 16.1 1,026 15.8
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations............... 393 2.3 2,539 10.1 1,773 7.3 374 5.8
</TABLE>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997
--------------------
Revenues............................. $ 6,791 100.0%
Cost of services..................... 5,946 87.6
--------- ---------
Gross profit......................... 845 12.4
Selling, general and administrative
expenses........................... 567 8.3
--------- ---------
Income from operations............... 278 4.1

TRI-CITY RESULTS FOR THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1996

REVENUES. Revenues increased $0.3 million, or 4.8%, from $6.5 million for
the three months ended March 31, 1996 to $6.8 million for the three months ended
March 31, 1997 due primarily to an increase in "design and build" installation
activity for a large medical institution. Tri-City pursued this project to
expand its presence in its regional healthcare HVAC market. Tri-City was
selected as the lead mechanical contractor on this project. Installation of the
HVAC and process piping systems on this project began in October 1996 and
accounted for approximately 45% of the revenues in the three months ended March
31, 1997. This particular project is for a nationally-known healthcare
organization, and represents the first major facility on what is expected to be
a medical campus covering more than 100 acres.

GROSS PROFIT. Gross profit decreased $0.6 million, or 39.6%, from $1.4
million for the three months ended March 31, 1996 to $0.8 million for the three
months ended March 31, 1997. As a percentage of revenues, gross profit decreased
from 21.6% to 12.4%. In its role as lead mechanical contractor on this major
healthcare project Tri-City is responsible for arranging a significant amount of
subcontract work as well as for procuring most of the HVAC equipment on this
project. Margins on subcontract work and procured equipment are typically lower
than margins on work performed directly by Tri-City.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $0.4 million, or 44.7%, from $1.0 million for
the three months ended March 31, 1996 to $0.6 million for the three months ended
March 31, 1997 due to a decrease in owners' compensation. As a percentage of
revenues, selling, general and administrative expenses decreased from 15.8% to
8.3% due to the decrease in owners' compensation.

TRI-CITY RESULTS FOR YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED
DECEMBER 31, 1995

REVENUES. Revenues decreased $0.8 million, or 3.2%, from $25.0 million in
1995 to $24.2 million in 1996, primarily due to a decrease in "plan and spec"
revenues from 1995 to 1996 of approximately $2.0 million, partially offset by an
increase of approximately $1.2 million in commercial HVAC maintenance, repair
and replacement service revenues.

GROSS PROFIT. Gross profit remained constant at $5.7 million for 1995 and
1996. As a percentage of revenues, gross profit increased from 22.9% to 23.4%,
due to a decrease in lower margin "plan and spec" projects in 1996.

28
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.7 million, or 22.2%, from $3.2 million in
1995 to $3.9 million in 1996 due to a $1.1 million increase in compensation to
owners in lieu of S Corporation distributions, offset by a $0.4 million
reduction in other overhead expenses. As a percentage of revenues, selling,
general and administrative expenses increased from 12.8% in 1995 to 16.1% in
1996, primarily as a result of the increase in owners' compensation.

TRI-CITY RESULTS FOR YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED
DECEMBER 31, 1994

REVENUES. Revenues increased $8.1 million, or 48.2%, from $16.9 million in
1994 to $25.0 million in 1995 as a result of a strategy implemented in 1994 to
emphasize "design and build" projects. To implement its strategy, Tri-City
increased its sales and project management staff.

GROSS PROFIT. Gross profit increased $3.1 million, or 119.4%, from $2.6
million in 1994 to $5.7 million in 1995. As a percentage of revenues, gross
profit increased from 15.5% in 1994 to 22.9% in 1995 as a result of an increase
in the proportion of "design and build" installation projects.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.0 million, or 43.9%, from $2.2 million in
1994 to $3.2 million in 1995. The increase in selling, general and
administrative expenses in 1995 was primarily attributable to a $0.8 million
increase in compensation to owners in lieu of S Corporation distributions and an
increase in the number of the sales personnel and project managers. As a
percentage of revenues, selling, general and administrative expenses decreased
from 13.2% in 1994 to 12.8% in 1995 as Tri-City was able to substantially
increase its volume without a commensurate increase in overhead expenses.

TRI-CITY LIQUIDITY AND CAPITAL RESOURCES

Tri-City generated $0.7 million in net cash from operating activities for
the three months ended March 31, 1997. Investing and financing activities were
immaterial during this period.

At March 31, 1997, working capital was $5.8 million and there was no debt
outstanding.

Tri-City generated $1.4 million in net cash from operating activities in
1996. Net cash used in investing activities was approximately $0.7 million, of
which $0.5 million was used for investments in U.S. Treasury obligations and
$0.2 million for equipment purchases. Net cash used in financing activities was
$1.2 million, primarily for distributions to shareholders.

At December 31, 1996, working capital was $5.5 million and there was no
debt outstanding.

LAWRENCE RESULTS OF OPERATIONS

Lawrence, headquartered in Jackson, Tennessee, was founded in 1917 and
operates primarily in Tennessee and the surrounding states. Lawrence focuses on
providing "design and build" installation services and process piping
primarily for industrial facilities and maintenance, repair and replacement of
commercial and industrial HVAC systems.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
---------------------------------------------------------------- --------------------
1994 1995 1996 1996
-------------------- -------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 12,758 100.0% $ 12,568 100.0% $ 17,163 100.0% $ 3,280 100.0%
Cost of services..................... 9,797 76.8 9,142 72.7 12,211 71.1 2,377 72.4
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 2,961 23.2 3,426 27.3 4,952 28.9 903 27.6
Selling, general and administrative
expenses........................... 2,849 22.3 3,477 27.7 4,885 28.5 996 30.4
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations........ 112 0.9 (51) (0.4) 67 0.4 (93) (2.8)
</TABLE>
THREE MONTHS ENDED
JANUARY 31,
--------------------
1997
--------------------
Revenues............................. $ 4,565 100.0%
Cost of services..................... 3,326 72.9
--------- ---------
Gross profit......................... 1,239 27.1
Selling, general and administrative
expenses........................... 698 15.3
--------- ---------
Income (loss) from operations........ 541 11.8

29
<PAGE>
LAWRENCE RESULTS FOR THREE MONTHS ENDED JANUARY 31, 1997 COMPARED TO THREE
MONTHS ENDED JANUARY 31, 1996

REVENUES. Revenues increased $1.3 million, or 39.2%, from $3.3 million for
the three months ended January 31, 1996 to $4.6 million for the three months
ended January 31, 1997 due to an increase in "design and build" installation
revenues of $1.0 million related to a manufacturing facility in North Carolina
and a $0.3 million increase in maintenance, repair and replacement revenues.

GROSS PROFIT. Gross profit increased $0.3 million, or 37.2%, from $0.9
million for the three months ended January 31, 1996 to $1.2 million for the
three months ended January 31, 1997. As a percentage of revenues, gross profit
decreased from 27.6% to 27.1%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $0.3 million, or 29.9%, from $1.0 million for
the three months ended January 31, 1996 to $0.7 million for the three months
ended January 31, 1997 primarily due to a decrease in compensation to the owners
of $0.4 million. As a percentage of revenues, selling, general and
administrative expenses decreased from 30.4% to 15.3% due to the increase in
revenues and the decrease in owners' compensation.

LAWRENCE RESULTS FOR YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER
31, 1995

REVENUES. Revenues increased $4.6 million, or 36.6%, from $12.6 million for
the year ended October 31, 1995 to $17.2 million for the fiscal year ended
October 31, 1996 due to a management decision in 1995 to expand the number of
general contractors for which Lawrence provides industrial installation services
and due to a large "design and build" installation contract obtained in 1996 for
a food processing facility in Tennessee.

GROSS PROFIT. Gross profit increased $1.5 million, or 44.5%, from $3.5
million for the fiscal year ended October 31, 1995 to $5.0 million for the
fiscal year ended October 31, 1996. As a percentage of revenues, gross profit
increased from 27.3% to 28.9%, primarily as a result of an increase in the
volume of "design and build" installation projects.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.4 million, or 40.5%, from $3.5 million for
the fiscal year ended October 31, 1995 to $4.9 million for the fiscal year ended
October 31, 1996. The increase in selling, general and administrative expenses
in fiscal 1996 was primarily attributable to a $0.6 million increase in salary
and incentive compensation paid to the owners and a $0.7 million increase in
incentive compensation to employees and discretionary profit sharing
contributions. As a percentage of revenues, selling, general and administrative
expenses increased from 27.7% in fiscal 1995 to 28.5% in fiscal 1996.

LAWRENCE RESULTS FOR FISCAL YEAR ENDED OCTOBER 31, 1995 COMPARED TO FISCAL YEAR
ENDED OCTOBER 31, 1994

REVENUES. Revenues decreased $0.2 million, or 1.5%, from $12.8 million the
fiscal year ended October 31, 1994 to $12.6 million for the fiscal year ended
October 31, 1995.

GROSS PROFIT. Gross profit increased $0.4 million, or 15.7%, from $3.0
million for the fiscal year ended October 31, 1994 to $3.4 million for the
fiscal year ended October 31, 1995. As a percentage of revenues, gross profit
increased from 23.2% to 27.3% as management emphasized higher-margin "design
and build" projects and successfully implemented an incentive program for
project managers designed to control project costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.7 million, or 22.0%, from $2.8 million in
fiscal 1994 to $3.5 million in fiscal 1995 primarily due to an increase in
salary and incentive compensation paid to the owners. As a percentage of
revenues, selling, general and administrative expenses increased from 22.3% in
fiscal 1994 to 27.7% in fiscal 1995 and, as a result, Lawrence incurred an
operating loss in fiscal 1995.

LAWRENCE LIQUIDITY AND CAPITAL RESOURCES

Lawrence used $0.5 million in net cash from operating activities for the
three months ended January 31, 1997 primarily due to a decrease in accounts
payable and accrued expenses. Net cash used in investing

30
<PAGE>
activities was approximately $0.2 million, principally for equipment purchases.
Net cash provided by financing activities of $0.5 million consisted primarily of
$0.4 million of borrowings on the line of credit.

Working capital as of January 31, 1997 was $1.5 million and there was $0.5
million of debt outstanding as of that date.

Lawrence generated $0.1 million in net cash from operating activities for
the fiscal year ended October 31, 1996. Net cash used in investing activities
was approximately $0.4 million, principally for equipment purchases and
leasehold improvements.

Working capital as of October 31, 1996 was $1.4 million and there was no
debt outstanding as of that date.

ACCURATE RESULTS OF OPERATIONS

Accurate, headquartered in Houston, Texas, was founded in 1980 and operates
primarily in Texas and Oklahoma. Accurate focuses on providing "design and
build" installation services and maintenance, repair and replacement of HVAC
systems for commercial facilities.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, YEAR ENDED MARCH 31,
------------------------------------------ DECEMBER 31, --------------------
1994 1995 1996 1996
-------------------- -------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 9,763 100.0% $ 12,171 100.0% $ 16,806 100.0% $ 3,161 100.0%
Cost of services..................... 7,204 73.8 8,998 73.9 13,270 79.0 2,450 77.5
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 2,559 26.2 3,173 26.1 3,536 21.0 711 22.5
Selling, general and administrative
expenses........................... 2,681 27.5 2,960 24.3 3,037 18.0 684 21.6
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations........ (122) (1.3) 213 1.8 499 3.0 27 0.9
</TABLE>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997
--------------------

Revenues............................. $ 2,642 100.0%
Cost of services..................... 2,095 79.3
--------- ---------
Gross profit......................... 547 20.7
Selling, general and administrative
expenses........................... 526 19.9
--------- ---------
Income (loss) from operations........ 21 0.8

ACCURATE RESULTS FOR THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1996

REVENUES. Revenues decreased $0.6 million, or 16.4%, from $3.2 million for
the three months ended March 31, 1996 to $2.6 million for the three months ended
March 31, 1997 due to a decrease in commercial installation services. This
decrease resulted from a decrease in commercial installation services due to the
greater number of days of inclement weather in Texas during the first three
months of 1997 compared to the same period of the prior year.

GROSS PROFIT. Gross profit decreased $0.2 million, or 23.1%, from $0.7
million for the three months ended March 31, 1996 to $0.5 million for the three
months ended March 31, 1997. As a percentage of revenues, gross profit decreased
from 22.5% to 20.7% due to the decrease in revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $0.2, or 23.1% from $0.7 million for the three
months ended March 31, 1996 to $0.5 million for the three months ended March 31,
1997 primarily due to a decrease in owners' compensation. As a percentage of
revenues, selling, general and administrative expenses decreased from 21.6% to
19.9%.

ACCURATE RESULTS FOR YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED JUNE
30, 1995

REVENUES. Revenues increased $4.6 million, or 38.1%, from $12.2 million
for the year ended June 30, 1995 to $16.8 million for the year ended December
31, 1996, reflecting the success of an increased marketing effort along with the
addition of project management personnel who also have sales responsibility.
These efforts resulted in an increase in commercial "design and build"
installation revenues and an increase in replacement services.

GROSS PROFIT. Gross profit increased $0.3 million, or 11.4%, from $3.2
million for the year ended June 30, 1995 to $3.5 million for the year ended
December 31, 1996. As a percentage of revenues, gross

31
<PAGE>
profit decreased from 26.1% to 21.0%, primarily as a result of an increase in
subcontract labor and employee overtime necessary to support the increased
number of "design and build" projects.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained constant at $3.0 million for the fiscal year
ended June 30, 1995 and the year ended December 31, 1996. As a percentage of
revenues, selling, general and administrative expenses decreased from 24.3% to
18.0% as Accurate was able to increase revenues without a commensurate increase
in overhead expenses.

ACCURATE RESULTS FOR YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30,
1994

REVENUES. Revenues increased $2.4 million, or 24.7%, from $9.8 million for
the year ended June 30, 1994 to $12.2 million for the fiscal year ended June 30,
1995. This increase was primarily attributable to a new project for an existing
customer to design and build an HVAC system for a correctional facility and an
increase in maintenance and replacement services.

GROSS PROFIT. Gross profit increased $0.6 million, or 24.0%, from $2.6
million for the fiscal year ended June 30, 1994 to $3.2 million for the fiscal
year ended June 30, 1995. As a percentage of revenues, gross profit remained
stable over these periods.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.3 million, or 10.4%, from $2.7 million in
fiscal 1994 to $3.0 million in fiscal 1995. As a percentage of revenues,
selling, general and administrative expenses decreased from 27.5% to 24.3% as
Accurate was able to increase revenues without a commensurate increase in
overhead expenses.

ACCURATE LIQUIDITY AND CAPITAL RESOURCES

Accurate used $0.1 million of net cash for operating activities for the
three months ended March 31, 1997. Net cash provided by financing activities of
$0.2 million resulted from an increase in long-term debt used to fund working
capital needs.

Working capital at March 31, 1997 was $0.2 million and total debt
outstanding was $1.5 million, of which $0.6 million was owed to a shareholder.

Accurate generated $0.2 million in net cash from operating activities for
the year ended December 31, 1996. Net cash used in investing activities was
approximately $0.1 million for equipment purchases.

Working capital at December 31, 1996 was $0.2 million and total debt
outstanding was $1.3 million, of which $0.6 million was owed to a shareholder.

CSI/BONNEVILLE RESULTS OF OPERATIONS

CSI/Bonneville, headquartered in Salt Lake City, Utah, was founded in 1969
and operates primarily in Utah. CSI/Bonneville focuses on providing maintenance,
repair and replacement of HVAC systems for commercial and residential
facilities.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

THREE MONTHS ENDED
MARCH 31,
--------------------
1997
--------------------
Revenues............................. $ 1,562 100.0%
Cost of services..................... 1,045 66.9
--------- ---------
Gross profit......................... 517 33.1
Selling, general and administrative
expenses........................... 458 29.3
--------- ---------
Income from operations............... 59 3.8

32
<PAGE>
CSI/BONNEVILLE RESULTS FOR THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1996

REVENUES. Revenues increased $0.2 million, or 14.1%, from $1.4 million for
the three months ended March 31, 1996 to $1.6 million for the three months ended
March 31, 1997 primarily due to an increase in commercial and residential
maintenance, repair and replacement services.

GROSS PROFIT. Gross profit increased $0.1 million, or 16.7%, from $0.4
million for the three months ended March 31, 1996 to $0.5 million for the three
months ended March 31, 1997. As a percentage of revenues, gross profit increased
from 32.4% to 33.1%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.1 million, or 24.5%, from $0.4 million for
the three months ended March 31, 1996 to $0.5 million for the three months ended
March 31, 1997 as a result of an increase in administrative personnel. As a
percentage of revenues, selling, general and administrative expenses increased
from 26.9% to 29.3%.

CSI/BONNEVILLE RESULTS FOR YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED
DECEMBER 31, 1995

REVENUES. Revenues increased $1.4 million, or 23.3%, from $6.4 million in
1995 to $7.8 million in 1996, primarily as a result of an increase in both
commercial and residential maintenance, repair and replacement services due to
an increase in the number of sales and marketing personnel in 1995 and 1996.
Revenues declined in 1995 due to the deployment of operating personnel to a move
to a new facility in that year.

GROSS PROFIT. Gross profit increased $0.7 million, or 35.6%, from $1.9
million for 1995 to $2.6 million in 1996. As a percentage of revenues, gross
profit increased from 30.6% in 1995 to 33.7% in 1996. The lower gross profit in
1995 was due to the deployment of operating personnel to a move to a new
facility.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.2 million, or 10.7%, from $1.5 million in
1995 to $1.7 million in 1996. As a percentage of revenues, selling, general and
administrative expenses decreased from 23.6% in 1995 to 21.2% in 1996.

CSI/BONNEVILLE RESULTS FOR YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED
DECEMBER 31, 1994

REVENUES. Revenues decreased from $6.5 million in 1994 to $6.4 million in
1995 as a result of CSI/Bonneville's move into a new facility during 1995.

GROSS PROFIT. Gross profit decreased $0.2 million, or 7.6%, from $2.1
million in 1994 to $1.9 million in 1995. As a percentage of revenues, gross
profit declined from 32.4% in 1994 to 30.6% in 1995 as a result of
CSI/Bonneville's move into a new facility during 1995.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.3 million, or 22.1%, from $1.2 million in
1994 to $1.5 million in 1995. As a percentage of revenues, selling, general and
administrative expenses increased from 18.9% in 1994 to 23.6% in 1995. This
percentage increase was primarily attributable to rent, depreciation and related
costs associated with the new facility occupied in 1995.

CSI/BONNEVILLE LIQUIDITY AND CAPITAL RESOURCES

CSI/Bonneville's operating activities were breakeven on a cash-flow basis
for the three months ended March 31, 1997. Net cash used in investing activities
was $0.1 million, principally for equipment purchases.

Working capital at March 31, 1997 was $0.5 million and total debt
outstanding was $0.5 million, all of which was owed to shareholders.

CSI/Bonneville generated $1.1 million in net cash from operating activities
in 1996. Net cash used in investing activities was $0.2 million, principally for
equipment purchases. Net cash used in financing activities was $0.8 million,
primarily for distributions to shareholders.

Working capital at December 31, 1996 was $0.5 million and total debt
outstanding was $0.5 million, all of which was owed to shareholders.

33
<PAGE>
TECH RESULTS OF OPERATIONS

Tech, headquartered in Solon, Ohio, was founded in 1979 and operates
primarily in the greater Cleveland, Ohio area. Tech focuses on providing
"design and build" installation services and maintenance, repair and
replacement of HVAC systems for commercial and industrial facilities.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ------------------------------------------
1995 1996 1996 1997
-------------------- -------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 6,960 100.0% $ 7,537 100.0% $ 1,075 100.0% $ 1,656 100.0%
Cost of services..................... 4,212 60.5 3,996 53.0 639 59.4 1,034 62.4
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 2,748 39.5 3,541 47.0 436 40.6 622 37.6
Selling, general and administrative
expenses........................... 1,800 25.9 1,861 24.7 390 36.3 565 34.1
--------- --------- --------- --------- --------- --------- --------- ---------
Income from operations............... 948 13.6 1,680 22.3 46 4.3 57 3.5
</TABLE>

TECH RESULTS FOR THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1996

REVENUES. Revenues increased $0.6 million, or 54.0%, from $1.1 million for
the three months ended March 31, 1996 to $1.7 million for the three months ended
March 31, 1997 due primarily to an increase in commercial installation services
because there were fewer days of inclement weather in the first three months of
1997 as compared to the prior comparable period.

GROSS PROFIT. Gross profit increased $0.2 million, or 42.7%, from $0.4
million for the three months ended March 31, 1996 to $0.6 million for the three
months ended March 31, 1997. As a percentage of revenues, gross profit decreased
from 40.6% to 37.6% due to a decrease in the proportion of maintenance, repair
and replacement revenues, which typically have higher margins than installation.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.2 million, or 44.9%, from $0.4 million for
the three months ended March 31, 1996 to $0.6 million for the three months ended
March 31, 1997 due to an increased marketing effort, including an increase in
marketing personnel. As a percentage of revenues, selling, general and
administrative expenses declined from 36.3% to 34.1% as Tech was able to
substantially increase its volume without a commensurate increase in overhead
expenses.

TECH RESULTS FOR YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER
31, 1995

REVENUES. Revenues increased $0.5 million, or 8.3%, from $7.0 million in
1995 to $7.5 million in 1996. This increase was primarily attributable to an
increase in commercial "design and build" installation projects and related
service work.

GROSS PROFIT. Gross profit increased $0.8 million, or 28.9%, from $2.7
million in 1995 to $3.5 million in 1996. As a percentage of revenues, gross
profit increased from 39.5% to 47.0%, primarily due to an increase in "design
and build" versus "plan and spec" installation projects.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained relatively unchanged from 1995 to 1996. As a
percentage of revenues, selling, general and administrative expenses decreased
from 25.9% in 1995 to 24.7% in 1996 as Tech successfully leveraged its
infrastructure to achieve revenue growth.

TECH LIQUIDITY AND CAPITAL RESOURCES

Tech generated $0.6 million in net cash from operating activities for the
three months ended March 31, 1997. Net cash used in financing activities was
$0.9 million, principally for distributions to shareholders of $1.6 million
offset by borrowings of long-term debt of $0.7 million.

34
<PAGE>
Total debt outstanding at March 31, 1997 was $1.0 million.

Tech generated $0.9 million in net cash from operating activities in 1996.
Net cash used in investing activities was $0.3 million for equipment purchases.
Net cash used in financing activities was $0.4 million, principally for
distributions to shareholders.

Working capital at December 31, 1996 was $1.6 million and total debt
outstanding was $0.3 million.

WESTERN RESULTS OF OPERATIONS

Western, headquartered in Denver, Colorado, was founded in 1980 and
operates primarily in Colorado. Western focuses on providing "design and
build" installation services and maintenance, repair and replacement of HVAC
systems for commercial facilities.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ ------------------------------------------
1995 1996 1996 1997
-------------------- -------------------- -------------------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $ 4,112 100.0% $ 6,494 100.0% $ 1,185 100.0% $ 1,072 100.0%
Cost of services..................... 3,408 82.9 4,662 71.8 857 72.3 812 75.7
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 704 17.1 1,832 28.2 328 27.7 260 24.3
Selling, general and administrative
expenses........................... 855 20.8 1,088 16.7 232 19.6 231 21.6
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations........ (151) (3.7) 744 11.5 96 8.1 29 2.7
</TABLE>

WESTERN RESULTS FOR THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1996

REVENUES. Revenues decreased $0.1 million, or 9.5%, from $1.2 million for
the three months ended March 31, 1996 to $1.1 million for the three months ended
March 31, 1997.

GROSS PROFIT. Gross profit was $0.3 million for the three months ended
March 31, 1996 and the three months ended March 31, 1997. As a percentage of
revenues, gross profit decreased from 27.7% to 24.3% due primarily to the
decline in revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses remained constant at $0.2 million for the three months
ended March 31, 1996 and the three months ended March 31, 1997. As a percentage
of revenues, selling, general and administrative expenses increased from 19.6%
to 21.6% due to the decline in revenues.

WESTERN RESULTS FOR YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER
31, 1995

REVENUES. Revenues increased $2.4 million, or 57.9%, from $4.1 million in
1995 to $6.5 million in 1996. This increase was primarily attributable to an
increase in commercial replacement revenues of $1.5 million related to the
Demand Side Management ("DSM") incentive program developed by the Public
Service Company of Colorado ("PSC"). This program provided incentives for
commercial PSC customers to replace existing HVAC systems with more
energy-efficient systems and ended in November 1996. Management believes that a
significant portion of the revenues generated under the DSM program can be
replaced by redeploying Western's sales force to emphasize installation of
commercial control systems and commercial maintenance, repair and replacement
services. Western also intends to bid for participation in another PSC incentive
program commencing in the second half of 1997.

GROSS PROFIT. Gross profit increased $1.1 million, or 160.2%, from $0.7
million in 1995 to $1.8 million in 1996. As a percentage of revenues, gross
profit increased from 17.1% in 1995 to 28.2% in 1996, primarily due to an
increase in maintenance, repair and replacement revenues, including revenues
generated under the DSM program.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.2 million in 1995, or 27.3%, from $0.9
million in 1995 to $1.1 million in 1996. As a percentage of

35
<PAGE>
revenues, selling, general and administrative expenses decreased from 20.8% to
16.7% as a result of the substantial revenue increase without a commensurate
increase in overhead expenses.

WESTERN LIQUIDITY AND CAPITAL RESOURCES

Western used $0.1 million in net cash from operating activities in the
three months ended March 31, 1997 primarily due to a decrease in accounts
payable and accrued expenses.

Working capital at March 31, 1997 was $0.3 million and total long-term debt
outstanding was $0.2 million.

Western generated $0.6 million in net cash from operating activities in
1996. Net cash used in investing activities was approximately $0.1 million,
principally for equipment purchases. Net cash used in financing activities was
$0.4 million, as a result of distributions to shareholders and net repayments of
long-term debt.

Working capital at December 31, 1996 was $0.4 million and total long-term
debt outstanding was $0.3 million.

SEASONAIR RESULTS OF OPERATIONS

Seasonair, headquartered in Rockville, Maryland, was founded in 1966 and
operates primarily in Maryland, the District of Columbia and Virgina. Seasonair
focuses on providing installation services and maintenance, repair and
replacement of HVAC systems for light commercial facilities.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ------------------------------------------
1996 1996 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................ $ 6,737 100.0% $ 1,128 100.0% $ 1,831 100.0%
Cost of services........................ 4,006 59.5 586 52.0 1,165 63.6
--------- --------- --------- --------- --------- ---------
Gross profit............................ 2,731 40.5 542 48.0 666 36.4
Selling, general and administrative
expenses.............................. 2,597 38.5 604 53.5 644 35.2
--------- --------- --------- --------- --------- ---------
Income (loss) from operations........... 134 2.0 (62) (5.5) 22 1.2
</TABLE>

SEASONAIR RESULTS FOR THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1996

REVENUES. Revenues increased $0.7 million, or 62.3%, from $1.1 million for
the three months ended March 31, 1996 to $1.8 million for the three months ended
March 31, 1997 due to an increase in maintenance, repair and replacement
services resulting from management's decision to expand the business more
rapidly.

GROSS PROFIT. Gross profit increased $0.2 million, or 22.9%, from $0.5
million for the three months ended March 31, 1996 to $0.7 million from the three
months ended March 31, 1997. As a percentage of revenues, gross profit decreased
from 48.0% to 36.4%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $0.6 million for the three months ended March 31,
1996 and the three months ended March 31, 1997. As a percentage of revenues,
selling, general and administrative expenses decreased from 53.5% to 35.2% due
to management's ability to increase revenues without a commensurate increase in
overhead expenses.

SEASONAIR LIQUIDITY AND CAPITAL RESOURCES

Seasonair generated $0.1 million in net cash from operating activities for
the three months ended March 31, 1997 due to a decrease in prepaid expenses and
other current assets and an increase in accounts payable and accrued expenses.
Net cash provided by financing activities was $0.1 million from borrowings on
the line of credit.

Working capital at March 31, 1997 was $0.5 million and total debt
outstanding was $0.2 million.

36
<PAGE>
Seasonair used $0.2 million in net cash from operating activities in 1996
primarily due to an increase in prepaid expenses and other current assets. Net
cash provided by investing activities was $0.1 million from proceeds on sale of
equipment. Net cash used in financing activities was $0.1 million to repay long-
term debt.

Working capital at December 31, 1996 was $0.5 million and total debt
outstanding was $0.1 million.

EASTERN RESULTS OF OPERATIONS

Eastern, headquartered in Albany, New York, was founded in 1945 and
operates primarily within a 75 mile radius of Albany, New York. Eastern focuses
on providing "design and build" installation and maintenance, repair and
replacement of HVAC systems for commercial and industrial facilities. Eastern
also offers continuous monitoring and control services for commercial
facilities.

The following table sets forth selected statement of operations data and
such data as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ------------------------------------------
1996 1996 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................ $ 7,944 100.0% $ 1,525 100.0% $ 1,284 100.0%
Cost of services........................ 5,276 66.4 973 63.8 805 62.7
--------- --------- --------- --------- --------- ---------
Gross profit............................ 2,668 33.6 552 36.2 479 37.3
Selling, general and administrative
expenses.............................. 2,237 28.2 532 34.9 582 45.3
--------- --------- --------- --------- --------- ---------
Income (loss) from operations........... 431 5.4 20 1.3 (103) (8.0)
</TABLE>

EASTERN RESULTS FOR THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1996

REVENUES. Revenues decreased $0.2 million, or 15.8% from $1.5 million for
the three months ended March 31, 1996 to $1.3 million for the three months ended
March 31, 1997 due primarily to a decrease in maintenance, repair and
replacement services. As a result of a mild winter season in the first three
months of 1997 in the Albany, New York area, the need for service work on
heating equipment decreased.

GROSS PROFIT. Gross profit decreased $0.1 million, or 13.2%, from $0.6
million for the three months ended March 31, 1996 to $0.5 million for the three
months ended March 31, 1997. As a percentage of revenues, gross profit increased
from 36.2% to 37.3%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.1 million, or 9.4%, from $0.5 million for
the three months ended March 31, 1996 to $0.6 million for the three months ended
March 31, 1997. As a percentage of revenues, selling, general and administrative
expenses increased from 34.9% to 45.3% due to the higher expenses and the
decrease in revenues.

EASTERN LIQUIDITY AND CAPITAL RESOURCES

Eastern generated $0.1 million in net cash from operating activities
primarily from a net decrease in accounts receivables of $0.3 million. Cash
flows used for financing activities were $0.1 million for distributions to
shareholders and $0.1 million for repayment of long-term debt. Cash flows used
in financing activities was $0.2 million of borrowings on the line of credit.

As of March 31, 1997, Eastern had a working capital deficit of $0.2 million
and total debt outstanding of $1.0 million. Eastern has historically funded its
operations with cash flow from operations and debt from lenders and
shareholders. The Company believes that Eastern has adequate financing
alternatives to fund its operations.

Eastern generated $0.5 million in net cash from operating activities in
1996 primarily due to $0.4 million in net income. Net cash used in investing
activities was $0.2 million for the purchase of property and equipment. Net cash
used in financing activities in 1996 was $0.3 million for distributions to
shareholders.

37
<PAGE>
Working capital at December 31, 1996 was $0.1 million and total debt
outstanding was $0.9 million of which $0.3 million is payable to the former
owner.

SEASONAL AND CYCLICAL NATURE OF THE HVAC INDUSTRY

The HVAC industry is subject to seasonal variations. Specifically, the
demand for new installations is generally lower during the winter months due to
reduced construction activities during inclement weather and less use of air
conditioning during the colder months. Demand for HVAC services is generally
higher in the second and third quarters due to the increased use of air
conditioning during the warmer months. Accordingly, the Company expects its
revenues and operating results generally will be lower in the first and fourth
quarters. Historically, the construction industry has been highly cyclical. As a
result, the Company's volume of business may be adversely affected by declines
in new installation projects in various geographic regions of the United States.

INFLATION

Inflation did not have a significant effect on the results of operations of
the combined Founding Companies for 1994, 1995 or 1996 or the three months ended
March 31, 1997.

38
<PAGE>
BUSINESS

INDUSTRY OVERVIEW

Based on available industry data, the Company believes that the HVAC
industry is highly fragmented with over 40,000 companies, most of which are
small, owner-operated businesses with limited access to capital for
modernization and expansion. The overall HVAC industry, including the
commercial, industrial and residential markets, is estimated to generate annual
revenues in excess of $75 billion, over $35 billion of which is in the
commercial and industrial markets. HVAC systems have become a necessity in
virtually all commercial and industrial buildings as well as homes. Because most
commercial buildings are sealed, HVAC systems provide the primary method of
addressing air quality concerns and injecting fresh air. Older industrial
facilities often have poor air quality as well as inadequate air conditioning,
factors which are causing industrial facility owners to consider replacement
options. Operation of older HVAC systems represents a significant cost due to
their energy inefficiency. In many instances, the replacement of an aging system
with a modern, energy-efficient system will significantly reduce a building's
operating costs while also improving the effectiveness of the HVAC system and
air quality.

Growth in the HVAC industry is being positively affected by a number of
factors, particularly (i) the aging of the installed base, (ii) the increasing
efficiency, sophistication and complexity of HVAC systems and (iii) the
increasing restrictions on the use of refrigerants commonly used in older HVAC
systems. These factors are expected to increase demand for the reconfiguration
or replacement of existing HVAC systems. These factors also mitigate the effect
on the HVAC industry of the cyclicality inherent in the traditional construction
industry.

The HVAC industry can be broadly divided into the installation segment and
the maintenance, repair and replacement segment.

INSTALLATION SEGMENT. The installation segment consists of "design and
build" and "plan and spec" projects. In "design and build" projects, the
commercial HVAC firm is responsible for designing, engineering and installing a
cost-effective, energy-efficient system customized to meet the specific needs of
the building owner. Costs and other project terms are normally negotiated
between the building owner or its representative and the HVAC firm. Firms which
specialize in "design and build" projects generally have specially-trained
HVAC engineers, CAD/CAM design systems, in-house sheet metal and prefabrication
capabilities. These firms utilize a consultative approach with customers and
tend to develop long-term relationships with building owners and developers,
general contractors, architects and property managers. "Plan and spec"
installation refers to projects where an architect or a consulting engineer
designs the HVAC system and the installation project is put out for bid. The
Company believes that "plan and spec" projects usually take longer to complete
than "design and build" projects because the preparation of the system design
and the bid process often take months to complete. Furthermore, in "plan and
spec" projects, the HVAC firm is not responsible for project design and changes
must be approved by several parties, thereby increasing overall project time and
cost.

MAINTENANCE, REPAIR AND REPLACEMENT SEGMENT. This segment includes the
maintenance, repair, replacement, reconfiguration and monitoring of previously
installed HVAC systems and controls. Growth in

39
<PAGE>
this segment has been fueled by the aging of the installed base of HVAC systems
and the increasing demand for more efficient, sophisticated and complex systems
and controls. The increasing sophistication and complexity of these HVAC systems
is leading many commercial and industrial building owners and property managers
to outsource maintenance and repair, often through service agreements with HVAC
service providers. In addition, increasing restrictions are being placed on the
use of certain types of refrigerants used in HVAC systems, which, along with air
quality concerns, are expected to increase demand for the reconfiguration and
replacement of existing HVAC systems. State-of-the-art control and monitoring
systems feature electronic sensors and microprocessors and require specialized
training to install, maintain and repair, which the typical building engineer
does not have. Increasingly, HVAC systems in commercial and industrial buildings
are being remotely monitored through PC-based communications systems to improve
energy efficiency and expedite problem diagnosis and correction.

The Company believes that the majority of business owners in the HVAC
industry have limited access to capital for expansion of their businesses and
that few have attractive liquidity options. In addition, the increasing
complexity of HVAC systems has led to a need for better trained technicians to
install, monitor and service these systems. The cost of recruiting, training and
retaining a sufficient number of qualified technicians makes it more difficult
for smaller HVAC companies to expand their businesses. The Company believes that
significant opportunities exist for a well-capitalized, national company
operating in the commercial, industrial and residential markets of the HVAC
industry and that the highly fragmented nature of this industry should allow it
to consolidate existing HVAC businesses.

STRATEGY

The Company plans to achieve its goal of becoming a leading national
provider of comprehensive HVAC services by implementing its operating strategy,
emphasizing continued internal growth and expanding through acquisitions.

FOCUS ON COMMERCIAL AND INDUSTRIAL MARKETS. The Company intends to
focus principally on the commercial and industrial markets with particular
emphasis on the "design and build" installation and the maintenance,
repair and replacement segments. The Company believes that the commercial
and industrial HVAC markets are attractive because of their growth
opportunities, diverse customer base, attractive margins and potential for
long-term relationships with building owners and managers, general
contractors and architects.

OPERATE ON DECENTRALIZED BASIS. The Company intends to manage the
Founding Companies on a decentralized basis, with local management assuming
responsibility for the day-to-day operations, profitability and growth of
the business. The Company believes that, while maintaining strong operating
and financial controls, a decentralized operating structure will retain the
entrepreneurial spirit present in each of the Founding Companies and will
allow the Company to capitalize on the considerable local and regional
market knowledge and customer relationships possessed by each Founding
Company.

ACHIEVE OPERATING EFFICIENCIES. The Company believes there are
significant opportunities to achieve operating efficiencies and cost
savings through purchasing economies and the adoption of "best practices"
operating programs. The Company intends to use its increased purchasing
power to gain volume discounts in areas such as HVAC components, raw
materials, service vehicles, advertising, bonding and insurance. Moreover,
the Company will review its operations and training programs at the local
and regional operating levels in order to identify those "best practices"
that can be successfully implemented throughout its operations.

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higher-paying positions, (iii) the opportunity to realize a more stable
income and (iv) improved benefits packages.

CAPITALIZE ON SPECIALIZED TECHNICAL AND MARKETING STRENGTHS. The
Company believes it will be able to expand the services it offers in its
markets by leveraging the specialized technical and marketing strengths of
individual Founding Companies. For example, one of the Founding Companies
has developed significant industry recognition for its technical expertise
within apartment complexes, condominiums, hotels and elder care facilities
which may be transferable to other Founding Companies. A number of Founding
Companies currently focus primarily on installation and, therefore, have
only limited maintenance, repair and replacement operations. The Company
believes there are significant opportunities for these Founding Companies
to provide maintenance, repair and replacement services, particularly by
offering those services to its "design and build" customers. Several of
the Founding Companies have specific expertise in HVAC control and
monitoring systems, process cooling, replacement and other service
strengths, many of which can be shared with other Founding Companies and
subsequently acquired businesses.

ESTABLISH NATIONAL MARKET COVERAGE. The Company believes that
significant demand exists from large national companies to utilize the
services of a single HVAC service company capable of providing
comprehensive commercial and industrial services on a regional or national
basis. Many of the Founding Companies already provide local or regional
coverage to companies with nationwide locations, such as commercial real
estate developers and managers, retailers and manufacturers. The Company
believes these existing relationships can be expanded as it develops a
nationwide network since these customers often desire a single source for
all of their HVAC needs to promote consistency, improve control and reduce
cost.

ACQUISITIONS. The Company believes the HVAC industry is highly fragmented
with over 40,000 companies, most of which are small, owner-operated businesses
with limited access to adequate capital for modernization and expansion. The
Company anticipates that acquisition candidates in the commercial and industrial
markets will typically have annual revenues ranging from $5 million to $35
million. The key elements of the Company's acquisition strategy are:

ENTER NEW GEOGRAPHIC MARKETS. In new markets, the Company intends to
target one or more leading local or regional companies providing HVAC or
complementary services. The acquisition target will have the customer base,
technical skills and infrastructure necessary to be a core business into
which other HVAC service operations can be consolidated. The Company will
choose businesses that are located in attractive markets, are financially
stable, are experienced in the industry and have management willing to
participate in the future growth of the Company.

EXPAND WITHIN EXISTING MARKETS. Once the Company has entered a
market, it will seek to acquire other well-established HVAC businesses to
expand its market penetration and range of services offered. The Company
also will pursue "tuck-in" acquisitions of smaller companies, whose
operations can be integrated into an existing Company operation to leverage
the existing infrastructure.

ACQUIRE COMPLEMENTARY BUSINESSES. The Company will focus on its
traditional markets in the HVAC industry and may acquire companies
providing complementary services to the same customer base, such as
commercial and industrial process piping and plumbing as well as electrical
companies. This will enable the Company to offer, on a comprehensive basis
and from a single provider, HVAC, mechanical and electrical services in
certain markets.

ACQUISITION PROGRAM

The Company believes it will be regarded by acquisition candidates as an
attractive acquirer because of: (i) the Company's strategy for creating a
national, comprehensive and professionally managed HVAC

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service provider that capitalizes on cross-marketing and business development
opportunities; (ii) the Company's decentralized operating strategy; (iii) the
Company's increased visibility and access to financial resources as a public
company; (iv) the potential for increased profitability due to certain
centralized administrative functions, enhanced systems capabilities and access
to increased marketing resources; and (v) the potential for the owners of the
businesses being acquired to participate in the Company's planned internal
growth and growth through acquisitions, while realizing liquidity.

The Company believes the management teams of the Founding Companies will be
instrumental in identifying and completing future acquisitions. The Company's
visibility within the HVAC industry will increase the awareness and interest of
acquisition candidates in the Company and its acquisition program. Within the
past several months, the Company has contacted the owners of a number of
acquisition candidates, several of whom have expressed interest in having their
business acquired by the Company. The Company currently has no binding
agreements to effect any acquisition other than the Founding Companies.

As consideration for future acquisitions, the Company intends to use
various combinations of its Common Stock, cash and notes. The consideration for
each future acquisition will vary on a case-by-case basis. The major factors in
establishing the purchase price for each acquisition will be historical
operating results, future prospects of the acquiree and the ability of that
business to complement the services offered by the Company. Management believes
that companies providing commercial and industrial HVAC services are larger than
those providing residential services, with commercial and industrial companies
generating annual revenues ranging from $5 million to $35 million, compared to
companies providing residential HVAC services which generally have annual
revenues ranging from $500,000 to $3 million. The Company intends to register
8,000,000 additional shares of Common Stock under the Securities Act for its use
in connection with future acquisitions.

OPERATIONS AND SERVICES PROVIDED

The Company provides a wide range of installation, maintenance, repair and
replacement services for HVAC systems in commercial, industrial and residential
properties. Daily operations are managed on a local basis by the management team
at each Founding Company. In addition to senior management, the Founding
Companies' personnel generally include design engineers, sales personnel,
customer service personnel, installation service technicians, sheet metal and
prefabrication technicians, estimators and administrative personnel. Upon
consummation of the Mergers, the Company will manage the Founding Companies on a
decentralized basis, with local management being responsible for day-to-day
operating decisions. The Company intends to centralize certain administrative
functions to enable the management of each Founding Company to focus on pursuing
new business opportunities and to improve operating efficiencies. Administrative
functions which the Company expects to centralize include Company-wide training
and safety programs, accounting programs, risk management programs, purchasing
programs and employee benefits.

INSTALLATION SEGMENT. The Company's installation business comprised
approximately 53% of the Company's 1996 revenues. This segment consists of the
design, engineering, integration, installation and start-up of HVAC systems. The
commercial and industrial installation services performed by the Company consist
primarily of "design and build" systems for office buildings, retail centers,
apartment complexes, hotels, manufacturing plants and government facilities. In
a "design and build" project, the customer typically has an overall design for
the facility prepared by an architect or a consulting engineer who then enlists
the Company's sales and engineering personnel to prepare a specific design for
the HVAC system. The Company determines the needed capacity, energy efficiency
and type of controls that best suit the proposed facility. The Company's
engineer then estimates the amount of time, labor, materials and equipment
needed to build the specified system. Materials and equipment for a typical
commercial or industrial project include ductwork, compressors, blowers,
chillers, cooling towers, air handling equipment and the associated pumps and
piping necessary to complete the system. The Company utilizes CAD/CAM systems in
the design and engineering phases of the project to calculate the material and
labor costs of the project based on previously established Company standards and
to generate mechanical drawings for each project. The drawings are prepared in a
format appropriate for submission to local building inspectors. The

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final design, terms, price and timing of the project are then negotiated with
the customer or its representatives, after which any necessary modifications are
made to the system.

Once an agreement has been reached, the Company orders the necessary
materials and equipment for delivery to meet the project schedule. In most
instances, the Company fabricates in its own facilities the ductwork and piping
and assembles certain components for the system based on the mechanical drawing
specifications, thereby eliminating the need to subcontract ductwork or piping
fabrication. The Company's CAD/CAM systems are capable of automatically cutting
ductboard, sheet metal and piping, thereby reducing the amount of labor
necessary to produce the ductwork and piping for the system. Project specific
components are then fabricated at the Company's facilities in sections small
enough to be transported to the job site. This enables the Company to limit the
amount of field work required for installation, reduce the labor associated with
the actual installation process and meet the shorter time requirements
increasingly demanded by commercial and industrial customers. The Company
installs the system at the project site, working closely with the general
contractor. Most commercial and industrial installation projects last from two
weeks to one year and generate revenues from $25,000 to $2,000,000 per project.
These projects are generally billed periodically as costs are incurred
throughout the project, with a 10% retainage until completion and successful
start-up of the HVAC system.

Atlas, one of the Founding Companies, specializes in the design and
installation of HVAC systems for apartment complexes, condominiums, hotels and
elder care facilities. Because the room layouts in these types of buildings are
typically very similar, Atlas is able to design a single HVAC system, or a few
systems, suitable for installation in all units within the project. This permits
Atlas to prepare a "kit" containing all parts for an individual unit and ship
all of the kits for a particular project to the job site, thereby significantly
decreasing installation time.

The Company also performs selected "plan and spec" installation services
when a bidder prequalification process has been used by the customer to limit
the number of potential bidders for an attractive project. The Company may use
these projects when "design and build" projects are in lower demand and to
provide additional on-the-job training to apprentice or less-experienced
technicians.

The Company also installs process cooling systems, control and monitoring
systems and industrial process piping. Process cooling systems are utilized
primarily in industrial facilities to provide heating and/or cooling to precise
temperature and climate standards for products being manufactured and for the
manufacturing equipment. Control systems are used in HVAC and process cooling
systems in order to maintain pre-established temperature or climate standards
for commercial or industrial facilities. These systems use direct digital
technology integrated with computer terminals. HVAC control systems are capable
not only of controlling a facility's entire HVAC system, often on a room-by-room
basis, but can be programmed to integrate energy management, security, fire,
card key access, lighting and overall facility monitoring. Monitoring can be
performed on-site or remotely through a PC-based communications system. The
monitoring system will sound an alarm when the HVAC system is operating outside
pre-established parameters. Diagnosis of potential problems can be performed
from the computer terminal which often can remotely adjust the control system.
Industrial process piping is utilized in manufacturing facilities to convey
required raw materials, support utilities and finished products.

The Company's residential services consist of installing complete central
HVAC systems in new and existing homes, often through agreements with housing
developers. In 1996, residential installation comprised approximately 2% of the
Company's revenues.

The Founding Companies generally warrant their labor for the first year
after installation on new HVAC systems and for 30 days after servicing of
existing HVAC systems. A reserve for warranty costs is recorded based on a
percentage of material costs.

MAINTENANCE, REPAIR AND REPLACEMENT SEGMENT. The Company's maintenance,
repair and replacement segment comprised approximately 47% of the Company's 1996
combined revenues and includes the maintenance, repair, replacement,
reconfiguration and monitoring of HVAC systems and industrial process piping.
Over one-half of the Company's maintenance, repair and replacement segment
revenues were

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derived from reconfiguring existing HVAC systems for commercial and industrial
customers. Reconfiguration often utilizes consultative expertise similar to that
provided in the "design and build" installation market. The Company believes
that the reconfiguration of an existing system results in a more cost-effective,
energy-efficient system that better meets the specific needs of the building
owner. The reconfiguration also enables the Company to utilize its design and
engineering personnel as well as its sheet metal and pre-fabrication facilities.

Maintenance and repair services are provided either in response to service
calls or pursuant to a service agreement. Service calls are coordinated by
customer service representatives or dispatchers that use computer and
communications technology to process orders, arrange service calls, communicate
with customers, dispatch technicians and invoice customers. Service technicians
work out of service vans equipped with commonly used parts, supplies and tools
to complete a variety of jobs.

Commercial and industrial service agreements usually have terms of one to
three years, with automatic annual renewals, and typically provide fees from
$3,000 to $20,000 per year. The Company also provides remote monitoring of
temperature, pressure, humidity and air flow for HVAC systems for commercial and
industrial customers. If the system is not operating within the specifications
set forth by the customer and cannot be remotely adjusted, a service crew is
dispatched to analyze and repair the system, as appropriate. Residential service
agreements generally have one year terms, automatic renewal provisions and
provide annual fees between $100 and $200 per system.

SOURCES OF SUPPLY

The raw materials and components used by the Company include HVAC system
components, ductwork, steel, sheet metal and copper tubing and piping. These raw
materials and components are generally available from a variety of domestic or
foreign suppliers at competitive prices. Delivery times are typically short for
most raw materials and standard components, but during periods of peak demand
may take a month or more to obtain. Chillers for large units typically have the
longest delivery time and generally have lead times of up to six months. The
major components of HVAC systems are compressors and chillers that are
manufactured primarily by York Heating and Air Conditioning Corporation
("York"), Carrier Corporation and Trane Air Conditioning Company. The major
suppliers of control systems are Honeywell Inc., Johnson Controls Inc., York and
Andover Control Corporation. The Company believes that it will be able to reduce
costs on raw materials and components through volume purchases. The Company does
not currently have any significant contracts for the supply of raw materials or
components.

SALES AND MARKETING

The Company has a diverse customer base, with no single customer accounting
for more than 4% of the Company's pro forma combined 1996 revenues. Management
and a dedicated sales force at the Founding Companies have been responsible for
developing and maintaining successful long-term relationships with key
customers. Customers of the Founding Companies generally include building owners
and developers and property managers, as well as general contractors, architects
and consulting engineers. The Company intends to continue its emphasis on
developing and maintaining long-term relationships with its customers by
providing superior, high-quality service in a professional manner. Moreover, the
dedicated sales force will receive additional technical and sales training to
enhance the comprehensive selling skills necessary to serve the HVAC needs of
its customers.

The Company also intends to capitalize on cross-marketing and business
development opportunities that management believes will be available to the
Company as a national provider of comprehensive commercial, industrial and
residential HVAC services. Management believes that it will be able to leverage
the diverse technical and marketing strengths of individual Founding Companies
to expand the services offered in other local markets. Eventually, the Company
intends to offer comprehensive services from many of its regional locations.

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EMPLOYEES

As of March 31, 1997, the Company had 1,436 employees, including 70
management personnel, 1,144 engineers and service and installation technicians,
70 sales personnel and 152 administrative personnel. The Company does not
anticipate any reductions in staff as a result of the consolidation of the
Founding Companies. Rather, as it implements its internal growth and acquisition
strategies, the Company expects that the number of employees will increase.
Three of the Founding Companies have collective bargaining agreements which
cover, in the aggregate, fewer than 50 employees. Under these agreements, these
Founding Companies make payments to multi-employer pension plans. The Company
has not experienced any strikes or work stoppages and believes its relationship
with its employees and union representatives is satisfactory.

RECRUITING, TRAINING AND SAFETY

The Company's future success will depend, in part, on its ability to
continue to attract, retain and motivate qualified service technicians, field
supervisors and project managers. The Company believes that its success in
retaining qualified employees will be based on the quality of its recruiting,
training, compensation, employee benefits programs and opportunities for
advancement. The Company recruits at local technical schools and community
colleges where students focus on learning basic HVAC and related skills, and
provides on-the-job training, apprenticeship programs, improved benefit
packages, steady employment and opportunities for advancement.

The Company intends to establish "best practices" throughout its
operations to ensure that all technicians comply with safety standards
established by the Company, its insurance carriers and federal, state and local
laws and regulations. The Company's employment screening process seeks to
determine that prospective employees have the requisite skills, sufficient
background references and acceptable driving records, if applicable. The Company
believes that these employment criteria effectively identify potential employees
committed to safety and quality. Additionally, the Company intends to implement
a "best practices" safety program throughout its operations, which will
provide employees with incentives to improve safety performance and decrease
workplace accidents. The Company intends to implement job site safety meetings
and instruct personnel in proper lifting techniques and eye safety in an effort
to reduce the number of preventable accidents.

FACILITIES AND VEHICLES

All of the Company's facilities will be leased. Prior to the Mergers,
Accurate owned the building it uses for its offices and operations. As part of
the agreement pursuant to which Accurate is being acquired, it will transfer
ownership of that building to its stockholder who will enter into a long-term
lease of the building to the Company. See "Certain Transactions -- Leases of
Real Property by Founding Companies."

The Founding Companies collectively lease approximately 250,000 square feet
of commercial property, which they utilize for office, warehouse, fabrication
and storage space. Leased premises range in size from 50,200 square feet, in the
case of Quality, to 7,000 square feet and 6,500 square feet in the case of
Eastern and Seasonair, respectively. In addition, Atlas currently leases 14
one-bedroom apartments for technicians and installation crews working on
projects around the country. After consummation of the Mergers, the Company
believes that the opportunities for some of the Founding Companies to use
fabrication and storage facilities of other Founding Companies for sheet metal
cutting, equipment fabrication and inventory storage will increase operating
efficiencies for the Company as a whole. The Company believes that its
facilities are sufficient for its current needs.

The Company operates a fleet of approximately 600 owned or leased service
trucks, vans and support vehicles. It believes these vehicles generally are
well-maintained and adequate for the Company's current operations. The Company
expects it will be able to purchase vehicles at lower prices due to its
increased purchasing volume.

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After the consummation of this Offering, the Company will lease its
principal executive and administrative offices in Houston, Texas and is
currently in the process of obtaining office space for this purpose.

RISK MANAGEMENT, INSURANCE AND LITIGATION

The primary risks in the Company's operations are bodily injury, property
damage and injured workers' compensation. Upon completion of the Offering, the
Company intends to obtain and maintain liability insurance for bodily injury and
third party property damage which it considers sufficient to insure against
these risks, subject to self-insured amounts. The workers' compensation
insurance policies held by the Founding Companies generally provide for first
dollar coverage.

The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involves claims for personal injury
and property damage incurred in connection with its operations. The Company is
not currently involved in any litigation, nor is the Company aware of any
threatened litigation, that the Company believes is likely to have a material
adverse effect on its financial condition or results of operations.

The Company generally offers one year warranties on labor it performs and
passes to the customer warranties on equipment purchased from manufacturers. The
Company does not expect warranty claims to have a material effect on its results
of operations or financial condition.

COMPETITION

The HVAC industry is highly competitive. The Company believes that
purchasing decisions in the commercial and industrial markets are based on (i)
long-term customer relationships, (ii) quality, timeliness and reliability of
services provided, (iii) competitive price, (iv) range of services provided, and
(v) scale of operation. The Company believes its strategy of becoming a leading
national provider of comprehensive HVAC installation services as well as
maintenance, repair and replacement of HVAC systems directly addresses these
factors. Specifically, the Company's strategy to focus on the highly
consultative "design and build" installation segment and the maintenance,
repair and replacement segment, as well as its strategy to operate on a
decentralized basis, should promote the development and strengthening of
long-term customer relationships. In addition, the Company's focus on
attracting, training and retaining quality employees by utilizing professionally
managed recruiting, training and benefits programs should allow it to offer high
quality, comprehensive HVAC services at a competitive price.

Most of the Company's competitors are small, owner-operated companies that
typically operate in a limited geographic area. There are a few public companies
focused on providing HVAC services in some of the same services lines provided
by the Company. In addition, there are a number of private companies attempting
to consolidate HVAC companies on a regional or national basis. In the future,
competition may be encountered from new entrants, such as public utilities and
HVAC manufacturers. Certain of the Company's competitors and potential
competitors may have greater financial resources than the Company to finance
acquisition and development opportunities, to pay higher prices for the same
opportunities or to develop and support their own operations.

GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS

The Company's operations are subject to various federal, state and local
laws and regulations, including, (i) licensing requirements applicable to
service technicians, (ii) building and HVAC codes and zoning ordinances, (iii)
regulations relating to consumer protection, including those governing
residential service agreements and (iv) regulations relating to worker safety
and protection of the environment. The Company believes it has all required
licenses to conduct its operations and is in substantial compliance with
applicable regulatory requirements. Failure of the Company to comply with
applicable regulations could result in substantial fines or revocation of the
Company's operating licenses.

Many state and local regulations governing the HVAC services trades require
permits and licenses to be held by individuals. In some cases, a required permit
or license held by a single individual may be

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sufficient to authorize specified activities for all the Company's service
technicians who work in the state or county that issued the permit or license.
The Company intends to implement a policy to ensure that, where possible, any
such permits or licenses that may be material to the Company's operations in a
particular geographic region are held by at least two Company employees within
that region.

The Company's operations are subject to the federal Clean Air Act, as
amended (the "Clean Air Act"), which governs air emissions and imposes
specific requirements on the use and handling of chlorofluorocarbons ("CFCs")
and certain other refrigerants. Clean Air Act regulations require the
certification of service technicians involved in the service or repair of
equipment containing these refrigerants and also regulate the containment and
recycling of these refrigerants. These requirements have increased the Company's
training expenses and expenditures for containment and recycling equipment. The
Clean Air Act is intended ultimately to eliminate the use of CFCs in the United
States and to require alternative refrigerants to be used in replacement HVAC
systems. As a result, the number of conversions of existing HVAC systems which
use CFCs to systems using alternative refrigerants is expected to increase.

Prior to entering into the agreements relating to the Mergers, the Company
evaluated the properties owned or leased by the Founding Companies and engaged
an independent environmental consulting firm to conduct or review assessments of
environmental conditions at these properties. No material environmental problems
were discovered in these reviews, and the Company is not aware of any material
environmental liabilities associated with these properties.

<PAGE>
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth information concerning the Company's
directors, executive officers and key employees upon completion of this
Offering.

NAME AGE POSITION
- ------------------------------- --- ----------------------------------------
Fred M. Ferreira............... 54 Chairman of the Board, Chief Executive
Officer and President
Michael Nothum, Jr............. 42 Chief Operating Officer (acting),
President of Tri-City, Director
J. Gordon Beittenmiller........ 38 Senior Vice President, Chief Financial
Officer and Director
Reagan S. Busbee............... 33 Senior Vice President
William George, III............ 31 Vice President, General Counsel and
Secretary
Milburn E. Honeycutt........... 33 Vice President and Controller
S. Craig Lemmon................ 45 Vice President -- Acquisitions
Brian J. Vensel................ 36 Vice President -- Acquisitions
Brian S. Atlas................. 45 Chief Executive Officer of Atlas,
Director
Thomas J. Beaty................ 43 President of Accurate, Director
Robert R. Cook................. 42 President of Tech, Director
Alfred J. Giardenelli, Jr...... 49 President of Eastern, Director
Charles W. Klapperich.......... 50 President of Western, Director
Samuel M. Lawrence III......... 45 Chief Executive Officer of Lawrence,
Director
John C. Phillips............... 55 President of CSI/Bonneville, Director
Robert J. Powers............... 57 President of Quality, Director
Steven S. Harter............... 34 Director
Larry Martin................... 55 Director
John Mercadante, Jr............ 52 Director
Robert Arbuckle................ 47 President of Freeway
James C. Hardin, Sr............ 35 Chief Executive Officer of Seasonair
Thomas B. Kime................. 50 President of Standard

Fred M. Ferreira has served as Chairman of the Board, Chief Executive
Officer and President of Comfort Systems since January 1997. Mr. Ferreira was
responsible for introducing the consolidation opportunity in the commercial and
industrial HVAC industry to Notre and has been primarily responsible for the
organization of Comfort Systems, the acquisition of the Founding Companies and
this Offering. From 1995 through 1996, Mr. Ferreira was a private investor. He
served as Chief Operating Officer and a director of Allwaste, Inc., a
publicly-traded environmental services company ("Allwaste"), from 1994 to
1995, and was President of Allwaste Environmental Services, Inc., the largest
division of Allwaste, from 1991 to 1994. From 1989 to 1990, Mr. Ferreira served
as President of Allied Waste Industries, Inc., an environmental services
company. Prior to that time, Mr. Ferreira served as Vice President -- Southern
District and in various other positions with Waste Management, Inc., an
environmental services company.

Michael Nothum, Jr. will become a director of the Company and will also
become its Chief Operating Officer (acting) upon consummation of this Offering.
He has been employed by Tri-City since 1979, serving as President since 1992,
and will continue in that capacity after consummation of this Offering. Mr.
Nothum currently serves on the Education and Training Committee of Associated
Builders and Contractors and on the Legislative Committee of the Air
Conditioning Contractors Association. It is anticipated that Mr. Nothum will
return full-time to his duties at Tri-City when a permanent Chief Operating
Officer joins the Company.

J. Gordon Beittenmiller has served as Senior Vice President, Chief
Financial Officer and a director of Comfort Systems since February 1997. From
1994 to February 1997, Mr. Beittenmiller was Corporate

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Controller of Keystone International, Inc. ("Keystone"), a publicly-traded
manufacturer of industrial valves and actuators, and served Keystone in other
financial positions from 1991 to 1994. From 1987 to 1991, he was Vice
President -- Finance of Critical Industries, Inc., a publicly-traded
manufacturer and distributor of specialized safety equipment. From 1982 to 1987,
he held various positions with Arthur Andersen LLP. Mr. Beittenmiller is a
Certified Public Accountant.

Reagan S. Busbee has served as Senior Vice President of Comfort Systems
since January 1997. From 1992 through 1996, Mr. Busbee served as Vice President
of Chas. P. Young Co., a financial printer and a wholly-owned subsidiary of
Consolidated Graphics Inc., a publicly-traded company. From August 1986 to May
1992, he was a certified public accountant with Arthur Andersen LLP.

William George, III has served as Vice President, General Counsel and
Secretary of Comfort Systems since March 1997. From October 1995 to March 1997,
Mr. George was Vice President and General Counsel of American Medical Response,
Inc., a publicly-traded consolidator of the healthcare transportation industry.
From September 1992 to September 1995, Mr. George practiced corporate and
antitrust law at Ropes & Gray, a law firm.

Milburn E. Honeycutt has served as Vice President and Controller of Comfort
Systems since February 1997. From 1994 to January 1997, Mr. Honeycutt was
Financial Accounting Manager -- Corporate Controllers Group for Browning-Ferris
Industries, Inc., a publicly-traded waste services company. From 1986 to 1994,
he held various positions with Arthur Andersen LLP. Mr. Honeycutt is a Certified
Public Accountant.

S. Craig Lemmon will become Vice President -- Acquisitions upon the closing
of this Offering. Mr. Lemmon has been a consultant to Comfort Systems since its
inception in December 1996. From 1993 to 1996, he served as Manager of Mergers
and Acquisitions of Allwaste Environmental Services, Inc. From 1992 to 1993, he
served as Vice President -- Acquisitions and Vice President -- Southern Region
of United Waste Systems, Inc., an environmental services company. Prior thereto,
Mr. Lemmon held various positions in the transportation and solid waste
industries.

Brian J. Vensel has served as Vice President -- Acquisitions of the Company
since February 1997. From September 1996 through January 1997, Mr. Vensel served
as Projects Director of the Liquids Business Unit of NGC Corporation, a
publicly-traded gas marketer and processor. From April 1996 through August 1996,
Mr. Vensel served as Corporate Controller and an officer of Phoenix Energy
Products, Inc., a privately-owned, oilfield service company. From 1982 through
March 1996, Mr. Vensel held various positions, primarily with Price Waterhouse
LLP and Arthur Andersen LLP. Mr. Vensel is a Certified Public Accountant.

Brian S. Atlas will become a director of the Company upon consummation of
this Offering. He has been employed by Atlas since 1974, serving as its Chief
Executive Officer since 1983, and will continue in that capacity after
consummation of this Offering.

Thomas J. Beaty will become a director of the Company upon consummation of
this Offering. He founded and has served as President of Accurate since 1980 and
will continue in that capacity after consummation of this Offering.

Robert R. Cook will become a director of the Company upon consummation of
this Offering. He founded and has served as President of Tech since 1979 and
will continue in that capacity after consummation of this Offering.

Alfred J. Giardenelli, Jr. will become a director of the Company on
consummation of this Offering. He has been the President of Eastern since 1982
and will continue in that capacity after consummation of this Offering.

Charles W. Klapperich will become a director of the Company upon
consummation of this Offering. He founded and has served as President of Western
since 1980 and will continue in that capacity after consummation of this
Offering.

49
<PAGE>

Samuel M. Lawrence III will become a director of the Company upon
consummation of this Offering. He has been employed by Lawrence since 1977,
serving as its Chairman and Chief Executive Officer since 1991 and will continue
in that capacity after consummation of this Offering.

John C. Phillips will become a director of the Company upon consummation of
this Offering. He co-founded CSI/Bonneville in 1969, serving as President and
General Manager since 1969, and will continue in that capacity after
consummation of this Offering. Mr. Phillips was President of the Utah Heating
and Air Conditioning Contractors Association from 1981 to 1982 and is currently
a director of that association.

Robert J. Powers will become a director of the Company upon consummation of
this Offering. He has been employed by Quality since 1977, serving as President
since 1988 and will continue in that capacity after consummation of this
Offering.

Steven S. Harter has been a director of the Company since December 1996 and
is the director elected by the holders of the Restricted Common Stock. Mr.
Harter is President of Notre, a consolidator of highly-fragmented industries.
Prior to becoming the President of Notre, Mr. Harter was Senior Vice President
of Notre Capital Ventures, Ltd. ("Notre I") from June 1993 through July 1995
and was the Notre I principal primarily responsible for the initial public
offerings of US Delivery Systems, Inc., a consolidator of the local delivery
industry, and Physicians Resource Group, Inc., a consolidator of eye care
physician management companies. From April 1989 to June 1993, Mr. Harter was
Director of Mergers and Acquisitions for Allwaste. From May 1984 to April 1989,
Mr. Harter was a certified public accountant with Arthur Andersen LLP. Mr.
Harter also serves as a director of Coach USA, Inc. ("Coach").

Larry Martin will become a director upon consummation of this Offering. Mr.
Martin, a co-founder of Sanifill, Inc., an environmental services provider
("Sanifill"), served as its Vice Chairman from March 1992 through August 1996.
From July 1991 to February 1992, he was President of Sanifill, and from October
1989 to July 1991, he served as its President and Co-Chief Executive Officer.
Prior to that time, Mr. Martin served in various positions in the environmental
services and contracting industries. Mr. Martin currently serves on the Board of
Directors of USA Waste Services, Inc., an environmental services company.

John Mercadante, Jr. will become a director of the Company upon
consummation of this Offering. Mr. Mercadante co-founded Leisure Time Tours,
Inc. in 1970 and was President of Cape Transit Corp. both of which are motor
coach companies that were acquired by Coach at the time of Coach's initial
public offering in May 1996. Mr. Mercadante has served as President, Chief
Operating Officer and a director of Coach since its initial public offering.

Robert Arbuckle has been employed by Freeway since 1975, serving as its
President since 1987 and will continue in that capacity after consummation of
this Offering.

James C. Hardin, Sr. has been employed by Seasonair since 1986, serving
initially as a service technician, as field supervisor from 1988 to 1990, as
service manager from 1990 to 1993 and as Vice President of Operations from 1993
to March 1997. Mr. Hardin currently serves as Chief Executive Officer of
Seasonair and will continue in that capacity after consummation of this
Offering.

Thomas B. Kime has been employed by Standard since 1977, serving as its
President since 1996 and will continue in that capacity after consummation of
this Offering.

Effective upon consummation of this Offering, the Board of Directors will
be divided into three classes of four, five and five directors, respectively,
with directors serving staggered three-year terms, expiring at the annual
meeting of stockholders in 1998, 1999 and 2000, respectively. At each annual
meeting of stockholders, one class of directors will be elected for a full term
of three years to succeed that class of directors whose terms are expiring. All
officers serve at the discretion of the Board of Directors.

The Board of Directors has established an Audit Committee, a Compensation
Committee and an Executive Committee. Effective as of the consummation of this
Offering, the members of the Audit Committee and the Compensation Committee will
be Messrs. Harter, Mercadante and Martin. The members

50
<PAGE>
of the Executive Committee will be selected following the consummation of this
Offering and will include at least one outside director.

DIRECTORS' COMPENSATION

Directors who are also employees of the Company or one of its subsidiaries
will not receive additional compensation for serving as directors. Each director
who is not an employee of the Company or one of its subsidiaries will receive a
fee of $2,000 for attendance at each Board of Directors' meeting and $1,000 for
each committee meeting (unless held on the same day as a Board of Directors'
meeting). In addition, under the Company's 1997 Non-Employee Directors' Stock
Plan, each non-employee director will automatically be granted an option to
acquire 10,000 shares of Common Stock upon such person's initial election as a
director, and an annual option to acquire 5,000 shares at each annual meeting of
the Company's stockholders thereafter at which such director is re-elected or
remains a director, unless such annual meeting is held within three months of
such person's initial election as a director. Each non-employee director also
may elect to receive shares of Common Stock or credits representing "deferred
shares" in lieu of cash directors' fees. See " -- 1997 Non-Employee Directors'
Stock Plan." Directors are also reimbursed for out-of-pocket expenses incurred
in attending meetings of the Board of Directors or committees thereof.

EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS; COVENANTS-NOT-TO-COMPETE

The Company was incorporated in December 1996, has conducted limited
operations and generated no revenue to date and did not pay any of its executive
officers compensation during 1996. The Company anticipates that during 1997 its
five most highly compensated executive officers will be Messrs. Ferreira,
Beittenmiller, George, Nothum and Powers.

Each of Messrs. Ferreira, Beittenmiller and George will enter into an
employment agreement upon consummation of this Offering with the Company
providing for an annual base salary of $150,000. Each employment agreement will
be for a term of three years, and unless terminated or not renewed by the
Company or not renewed by the employee, the term will continue thereafter on a
year-to-year basis on the same terms and conditions existing at the time of
renewal. Each of these agreements will provide that, in the event of a
termination of employment by the Company without cause, the employee will be
entitled to receive from the Company an amount equal to one year's salary,
payable in one lump sum on the effective date of termination. In the event of a
change in control of the Company (as defined in the agreement) during the
initial three-year term, if the employee is not given at least five days' notice
of such change in control, the employee may elect to terminate his employment
and receive in one lump sum three times the amount he would receive pursuant to
a termination without cause during such initial term. The non-competition
provisions of the employment agreement do not apply to a termination without
such notice. In the event the employee is given at least five days' notice of
such change in control, the employee may elect to terminate his employment and
receive in one lump sum three times the amount he would receive pursuant to a
termination without cause during such initial term. In such event, the
non-competition provisions of the employment agreement would apply for two years
from the effective date of termination. Each employment agreement contains a
covenant not to compete with the Company for a period of two years immediately
following termination of employment or, in the case of a termination by the
Company without cause in the absence of a change in control, for a period of one
year following termination of employment.

Each of Messrs. Nothum and Powers will enter into an employment agreement
with their respective Founding Company providing for an annual base salary of
$150,000. Each employment agreement will be for a term of five years, and unless
terminated or not renewed by the Founding Company or not renewed by the
employee, the term will continue thereafter on a year-to-year basis on the same
terms and conditions existing at the time of renewal. Each of these agreements
will provide that, in the event of a termination of employment by the Founding
Company without cause during the first three years of the employment term (the
"Initial Term"), the employee will be entitled to receive from the Founding
Company an amount equal to his then current salary for the remainder of the
Initial Term or for one year, whichever is greater. In the event of a
termination of employment with cause during the final two years of the initial
five year term of the employment agreement, the employee will be entitled to
receive an amount equal to his then current

51
<PAGE>
salary for one year. In either case, payment is due in one lump sum on the
effective date of termination. In the event of a change in control of the
Company (as defined in the agreement) during the Initial Term, if the employee
is not given at least five days' notice of such change in control, the employee
may elect to terminate his employment and receive in one lump sum three times
the amount he would receive pursuant to a termination without cause during the
Initial Term. The non-competition provisions of the employment agreement do not
apply to a termination without such notice. In the event the employee is given
at least five days' notice of such change in control, the employee may elect to
terminate his employment agreement and receive in one lump sum two times the
amount he would receive pursuant to a termination without cause during the
Initial Term. In such event, the non-competition provisions of the employment
agreement would apply for two years from the effective date of termination. Each
employment agreement contains a covenant not to compete with the Company for a
period of two years immediately following termination of employment or, in the
case of a termination by the Company without cause in the absence of a change in
control, for a period of one year following termination of employment.

At least one principal executive officer of each of the other Founding
Companies will enter into an employment agreement, containing substantially the
same provisions, including a covenant not to compete, as Messrs. Nothum's and
Power's employment agreements.

1997 LONG-TERM INCENTIVE PLAN

No stock options were granted to, or exercised by or held by any executive
officer in 1996. In March 1997, the Board of Directors and the Company's
stockholders approved the Company's 1997 Long-Term Incentive Plan (the
"Plan"). The purpose of the Plan is to provide directors, officers, key
employees, consultants and other service providers with additional incentives by
increasing their ownership interests in the Company. Individual awards under the
Plan may take the form of one or more of: (i) either incentive stock options
("ISOs") or non-qualified stock options ("NQSOs"), (ii) stock appreciation
rights ("SARs"), (iii) restricted or deferred stock, (iv) dividend equivalents
and (v) other awards not otherwise provided for, the value of which is based in
whole or in part upon the value of the Common Stock.

The Compensation Committee will administer the Plan and select the
individuals who will receive awards and establish the terms and conditions of
those awards. The maximum number of shares of Common Stock that may be subject
to outstanding awards, determined immediately after the grant of any award, may
not exceed the greater of 2,500,000 shares or 13% of the aggregate number of
shares of Common Stock outstanding. Shares of Common Stock which are
attributable to awards which have expired, terminated or been canceled or
forfeited are available for issuance or use in connection with future awards.

The Plan will remain in effect until terminated by the Board of Directors.
The Plan may be amended by the Board of Directors without the consent of the
stockholders of the Company, except that any amendment, although effective when
made, will be subject to stockholder approval if required by any Federal or
state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted.

At the closing of this Offering, NQSOs to purchase a total of 675,000
shares of Common Stock will be granted as follows: 200,000 shares to Mr.
Ferreira, 100,000 shares to Mr. Beittenmiller, 100,000 shares to Mr. Busbee,
100,000 shares to Mr. Lemmon, 75,000 shares to Mr. George, 50,000 shares to Mr.
Honeycutt and 50,000 shares to Mr. Vensel. In addition, at the closing of this
Offering, options to purchase 1,271,953 shares will be granted to certain
employees of the Founding Companies. Each of the foregoing options will have an
exercise price equal to the initial public offering price per share. These
options will vest at the rate of 20% per year, commencing on the first
anniversary of this Offering and will expire at the earlier of seven years from
the date of grant or three months following termination of employment.

1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN

The Company's 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which was adopted by the Board of Directors and approved by the
Company's stockholders in March 1997, provides for (i) the automatic grant to
each non-employee director serving at the commencement of this Offering of

52
<PAGE>
an option to purchase 10,000 shares, (ii) the automatic grant to each
non-employee director of an option to purchase 10,000 shares upon such person's
initial election as a director and (iii) an automatic annual grant to each
non-employee director of an option to purchase 5,000 shares at each annual
meeting of stockholders thereafter at which such director is re-elected or
remains a director, unless such annual meeting is held within three months of
such person's initial election as a director. All options will have an exercise
price per share equal to the fair market value of the Common Stock on the date
of grant and are immediately vested and expire on the earlier of ten years from
the date of grant or one year after termination of service as a director. The
Directors' Plan also permits non-employee directors to elect to receive, in lieu
of cash directors' fees, shares or credits representing "deferred shares" at
future settlement dates, as selected by the director. The number of shares or
deferred shares received will equal the number of shares of Common Stock which,
at the date the fees would otherwise be payable, will have an aggregate fair
market value equal to the amount of such fees.

CERTAIN TRANSACTIONS

ORGANIZATION OF THE COMPANY

In connection with the formation of Comfort Systems, Comfort Systems issued
to Notre a total of 2,969,912 shares of Common Stock for an aggregate cash
consideration of $29,699. Mr. Harter is the President of Notre and a director of
the Company. In March 1997, Notre exchanged 2,742,912 shares of Common Stock for
an equal number of shares of Restricted Common Stock. Notre has agreed to
advance whatever funds are necessary to effect the Mergers and this Offering. As
of May 29, 1997, Notre had outstanding advances to the Company in the aggregate
amount of approximately $1,127,000 all of which are non-interest-bearing. All of
Notre's advances will be repaid from the net proceeds of this Offering.

In January and February 1997, the Company issued a total of 902,435 shares
of Common Stock at $.01 per share to various members of management, as follows:
Mr. Ferreira -- 479,435 shares, Mr. Beittenmiller -- 116,000 shares, Mr.
Busbee -- 116,000 shares, Mr. George -- 75,000 shares, Mr. Honeycutt -- 58,000
shares and Mr. Vensel -- 58,000 shares. The Company also issued 116,000 shares
to Mr. Lemmon and 251,500 shares of Common Stock to other consultants to the
Company at $0.01 per share. The Company also granted options to purchase 10,000
shares of Common Stock under the Directors' Plan, effective upon the
consummation of this Offering, to Mr. Harter, a Director of the Company, and to
Messrs. Mercadante and Martin, who will become directors of the Company upon the
closing of this Offering.

Simultaneously with the consummation of this Offering, Comfort Systems will
acquire by merger or share exchange all of the issued and outstanding stock of
the Founding Companies, at which time each Founding Company will become a
wholly-owned subsidiary of the Company. The aggregate consideration to be paid
by Comfort Systems in the Mergers consists of $41.8 million in cash and
9,720,927 shares of Common Stock. In addition, immediately prior to the Mergers
certain of the Founding Companies will make the S Corporation Distributions of
$16.8 million and the Interim Earnings Distributions. Also, prior to the
Mergers, Accurate will distribute to Thomas J. Beaty real property having a net
book value of approximately $370,000.

The consummation of each Merger is subject to customary conditions. These
conditions include, among others, the continuing accuracy on the closing date of
the Mergers of the representations and warranties of the Founding Companies and
the principal stockholders thereof and of Comfort Systems, the performance by
each of them of all covenants included in the agreements relating to the Mergers
and the nonexistence of a material adverse change in the results of operations,
financial condition or business of each Founding Company.

There can be no assurance that the conditions to closing of the Mergers
will be satisfied or waived or that the acquisition agreements will not be
terminated prior to consummation. If any of the Mergers is terminated for any
reason, the Company does not intend to consummate this Offering on the terms
described herein.

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<PAGE>

The following table sets forth the consideration to be paid and total debt
to be assumed by Comfort Systems as of March 31, 1997 for each of the Founding
Companies:

<TABLE>
<CAPTION>
SHARES OF
COMMON S CORPORATION
CASH STOCK DISTRIBUTIONS TOTAL DEBT
--------- ----------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Quality.............................. $ 9,306 2,207,158 $ 8,708 $ 4,932
Tri-City............................. 8,012 1,557,962 6,331 --
Atlas................................ 6,336 1,432,000 -- 2,049
Lawrence............................. 4,154 1,197,796 -- 450
Tech................................. 3,690 717,408 482 1,001
Accurate............................. 2,903 564,537 -- 1,495
CSI/Bonneville....................... 1,674 493,672 735 535
Western.............................. 1,867 362,939 371 338
Freeway.............................. 959 319,698 -- 126
Seasonair............................ 1,399 272,084 -- 168
Standard............................. 874 291,457 -- 443
Eastern.............................. 644 304,216 158 960
--------- ----------- -------------- -----------
Total...................... $ 41,818 9,720,927 $ 16,785 $12,497
========= =========== ============== ===========
</TABLE>

Additionally, prior to the Mergers, the Founding Companies which are C
Corporations, except Atlas, will make Interim Earnings Distributions to their
stockholders. As of March 31, 1997 the distributions to be made totalled
$350,000.

In connection with the Mergers, and as consideration for their interests in
the Founding Companies, certain officers, directors, key employees and holders
of more than 5% of the outstanding shares of the Company, together with their
spouses and trusts for which they act as trustees, will receive cash and shares
of Common Stock of the Company as follows:

SHARES OF
COMMON
NAME CASH STOCK
- ------------------------------------- --------- -----------
(DOLLARS IN THOUSANDS)
Robert J. Powers..................... $ 7,516 1,461,915
Michael Nothum, Jr................... 4,006 760,287
Robert R. Cook....................... 3,690 717,408
Brian S. Atlas....................... 3,168 716,000
Thomas J. Beaty...................... 2,903 564,537
John C. Phillips..................... 1,209 403,305
Samuel M. Lawrence III............... 952 317,307
Alfred J. Giardenelli, Jr............ 644 304,216
Charles W. Klapperich................ 1,314 255,401

Pursuant to the agreements to be entered into in connection with the
Mergers, the stockholders of the Founding Companies have agreed not to compete
with the Company for five years, commencing on the date of consummation of this
Offering.

Certain of the Founding Companies have incurred indebtedness which has been
personally guaranteed by their stockholders or by entities controlled by their
stockholders. At March 31, 1997, the aggregate amount of indebtedness of these
Founding Companies that was subject to personal guarantees was approximately
$4.9 million. The Company intends to use its best efforts to have the personal
guarantees of

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<PAGE>
this indebtedness released within 60 days after the closing of this Offering
and, in the event that any guarantee cannot be released, to repay such
indebtedness. See "Use of Proceeds."

LEASES OF REAL PROPERTY BY FOUNDING COMPANIES

Following the Mergers, Atlas will continue to lease its office space in
Houston, Texas, as well as mobile homes located in Austin, Texas; Phoenix,
Arizona; and Antioch, Tennessee. These properties are owned by M & B Interests,
Inc. ("M & B"), a corporation wholly-owned by Mr. Brian S. Atlas, who will
become a director of the Company upon consummation of this Offering, and Mr.
Michael Atlas. The lease for the real property in Houston expires on September
30, 1997 and provides for an annual rental of $90,000. The three single family
residences are leased on a month-to-month basis, at an annual aggregate rental
of $36,780. In March 1997, Atlas entered into an agreement with M & B to lease a
newly constructed office and warehouse facility to be constructed by M & B in
Houston for an annual rental of $204,000. When construction is completed, this
new office and warehouse facility will replace Atlas' existing facility. The
Company believes that the rent for these properties does not exceed fair market
value.

Following the Mergers, Tri-City will continue to lease its office space in
Tempe, Arizona from Mr. Nothum, Jr. and his father. Mr. Nothum, Jr. is a
trustee of a family trust that is a stockholder of Tri-City and will become a
director of the Company upon consummation of this Offering. The lease expires on
June 30, 1998 and provides for an annual rental of $120,000. Additionally,
Tri-City provides liability insurance on the property and is responsible for any
increases in real property taxes due to its improvement of the leased property.
Tri-City has a verbal commitment with a limited liability corporation owned by
Mr. Nothum, Jr. and his father to construct new office, operations and warehouse
facilities. The Company believes that the rent for these properties does not and
will not exceed fair market value.

Following the Mergers, Lawrence will continue to lease its office space and
fabrication facility in Jackson, Tennessee from the father of Mr. Samuel M.
Lawrence III, who is Lawrence's Chief Executive Officer and who will become a
director of the Company upon consummation of this Offering. The lease expires on
October 31, 1997 and provides for an annual rental of $110,400. Additionally,
Lawrence provides liability insurance on the property and pays its proportionate
share of ad valorem taxes, utilities and maintenance costs. The Company believes
that the rent for this property does not exceed fair market value.

Following the Mergers, Accurate will lease two parcels of real property in
Houston, Texas owned by Mr. Beaty, who will become a director of the Company
upon consummation of this Offering. One of the leased premises is used by
Accurate for office and warehouse space. The lease on one of these premises
expires on May 31, 2002 and provides for an annual rental of $38,000. The other
leased premise is used by Accurate as a sheet metal shop under a lease,
effective upon the consummation of this Offering, that will expire on May 31,
2002 and will provide for an annual rental of $46,700. The rental rate on these
premises in subsequent years of the lease term will be adjusted in accordance
with the Consumer Price Index. Additionally, Accurate will pay all utility,
taxes and insurance costs on both leased premises. Accurate has options to renew
each lease for two additional five-year terms. The Company believes that the
rent for both properties does not and will not exceed fair market value.
Accurate previously owned the property it uses for its sheet metal shop. Prior
to the Mergers, Accurate will distribute this property having a net book value
of approximately $370,000 to Mr. Beaty.

Following the Mergers, Eastern will continue to lease its office and
warehouse space in Albany, New York, owned by 60 Loudonville Road Associates
("Loudonville"), a partnership of Mr. Alfred J. Giardenelli, Jr., who will
become a director of the Company upon consummation of this Offering, and his
brother. The lease provides for annual rental of $55,000 and payment by Eastern
of taxes, maintenance, repairs, utilities and insurance costs on the leased
premises. The Company believes that the rent for this property does not exceed
the fair market value. The lease expires on December 31, 1999. Prior to
expiration, however, Eastern intends to enter into a 10-year lease with
Loudonville for a new building and to terminate the existing lease. Eastern has
agreed to install the HVAC systems in the new building at a

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<PAGE>
price which the Company believes to be at a fair market value. The Company's
annual rental in the new building will be at fair market value, as determined by
an appraisal.

Following the Mergers, CSI/Bonneville will continue to lease its office and
warehouse space in Salt Lake Valley, Utah from J & J Investments, a joint
venture partly owned by Mr. Phillips, who will become a director of the Company
upon consummation of this Offering. This lease expires on February 28, 2002 and
provides for an annual rental in 1997 of $120,720, increasing annually by 5%.
CSI/Bonneville is responsible for ad valorem taxes, maintenance, insurance and
third-party management costs related thereto. CSI/Bonneville has options to
renew the lease for two additional five-year terms at a fair market value, as
determined by an appraisal. The Company believes that the rent for this property
does not exceed fair market value.

Following the Mergers, Tech will continue to lease its office and warehouse
space in Solon, Ohio from Mr. Cook, who will become a director of the Company
upon consummation of this Offering. The lease expires on April 2, 2000, and
provides for an annual rental of $84,000. Tech is responsible for its utility
costs, 15% of common utility costs and 50% of the landlord's cost of servicing
and maintaining the premises and providing comprehensive liability insurance for
the leased premises. The Company believes that the rent for such property does
not exceed fair market value.

Following the Mergers, Quality will continue to lease its warehouse
facility in Grand Rapids, Michigan from Mr. Powers, who will become a director
of the Company upon consummation of this Offering. Construction of the warehouse
facility was financed with the proceeds of a public bond issue. The lease
expires on April 30, 2005, and provides for an annual rental of the greater of
$216,000 or Mr. Powers' costs for the leased warehouse, including bond debt
service or mortgage payments, utilities, insurance, ad valorem taxes,
maintenance and repairs. Quality has an option to renew the lease for one
additional three-year term on the same terms. The Company believes that the rent
for such property does not exceed fair market value. Quality has guaranteed the
payment of two series of public bonds issued in 1985 and 1990, respectively, by
the Michigan Strategic Fund on behalf of two real property development entities
owned by Mr. Powers, the proceeds of which were used to fund the construction of
Quality's leased warehouse facility and a second adjacent warehouse. As of March
1997, approximately $1.6 million of the bond debt remained outstanding.

The Company has adopted a policy that, whenever possible, it will not own
any real estate. Accordingly, in connection with future acquisitions, the
Company may require the distribution of real property owned by acquired
companies to its stockholders and the leaseback of such property at fair market
value.

OTHER TRANSACTIONS

Atlas owes $78,000 to Sid Atlas, the father of Brian and Michael Atlas,
payable in monthly installments of $5,500, including interest at the rate of
10%, through March 1998. Atlas is also the obligor on two promissory notes
payable to Brian S. Atlas and Michael Atlas in the outstanding principal amount
of $63,537 to each, providing for aggregate monthly installments of $4,812,
including interest at the rate of 10%, through June 1999.

On October 31, 1996, Lawrence loaned $75,000 to Charles Lawrence at an
interest rate of 8%. This note is due on demand or October 31, 2001, whichever
occurs first. Charles Lawrence is a brother of Samuel M. Lawrence III, who will
become a director of the Company on consummation of this Offering.

On December 27, 1996, Accurate borrowed $630,000 from Mr. Beaty. Interest
is payable monthly at the rate of 9% on the outstanding balance. The note
matures on June 30, 1997.

CSI/Bonneville owed Messrs. Phillips and another stockholder of
CSI/Bonneville $424,000 and $105,000, respectively. Two of the promissory notes,
payable to Mr. Phillips and the other stockholder, are in the principal amount
of $80,000 and $20,000, respectively, and are payable on demand. The remaining
eight promissory notes are each payable ten years from the date of the note, and
mature at various times from 2002 to 2006. All of the notes bear interest at
10%, with interest payable monthly and principal

56
<PAGE>
payable at maturity. In 1996, CSI/Bonneville made interest payments to Mr.
Phillips and the other stockholder in the amount of $35,000 and $6,000,
respectively.

During 1996, Mr. Klapperich, who will become a director of the Company upon
consummation of this Offering, received advances from Western aggregating
$173,500. On December 31, 1996, Western credited against this amount a portion
of a dividend payable in the amount of $210,315, discharging the indebtedness of
Mr. Klapperich to Western.

On January 2, 1996, Standard loaned Mr. Kime $480,000 under a promissory
note at an interest rate of 7.67%. Payments of $18,427 are due quarterly over a
five-year term. Mr. Kime anticipates paying off the balance of this note shortly
after consummation of the Mergers. The note was formerly secured by a pledge of
his shares of stock in Standard; however, Standard released its security
interest in such stock on March 6, 1997 in anticipation of consummation of the
Mergers.

The Company has agreed to pay up to an aggregate of $150,000 of the legal
fees of the owners of the Founding Companies.

COMPANY POLICY

Any future transactions with directors, officers, employees or affiliates
of the Company or its subsidiaries are anticipated to be minimal and will be
approved in advance by a majority of disinterested members of the Board of
Directors.

57
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of the Common Stock, after giving effect to the Mergers and this
Offering, by (i) each person known to own beneficially more than 5% of the
outstanding shares of Common Stock; (ii) each Company director and person who
has consented to be named as a director ("named directors"); (iii) each named
executive officer; and (iv) all executive officers, directors and named
directors as a group. All persons listed have an address c/o the Company's
principal executive offices and have sole voting and investment power with
respect to their shares unless otherwise indicated.

SHARES BENEFICIALLY
OWNED AFTER
OFFERING(1)
----------------------
NAME NUMBER PERCENT
- ------------------------------------- ---------- --------
Notre Capital Ventures II, L.L.C..... 2,969,912 14.8%
Steven S. Harter(2).................. 2,979,912 14.8
Robert J. Powers..................... 1,461,915 7.3
Michael Nothum, Jr.(3)............... 778,981 3.9
Robert R. Cook....................... 717,408 3.6
Brian S. Atlas....................... 716,000 3.6
Thomas J. Beaty...................... 564,537 2.8
Fred M. Ferreira..................... 479,435 2.4
John C. Phillips..................... 403,305 2.0
Samuel M. Lawrence III............... 317,307 1.6
Alfred J. Giardenelli, Jr............ 304,216 1.5
Charles W. Klapperich................ 255,401 1.3
J. Gordon Beittenmiller.............. 116,000 *
Reagan S. Busbee..................... 116,000 *
William George, III.................. 75,000 *
Larry Martin(4)(5)................... 27,692 *
John Mercadante, Jr.(4).............. 20,000 *
All executive officers, directors and
named directors
as a group (16 persons)............ 9,333,109 46.5

- ------------
* Less than 1%.

(1) Shares shown do not include shares that could be acquired upon exercise of
options outstanding immediately after the Offering and which do not vest
within 60 days.

(2) Includes 10,000 shares of Common Stock issuable upon exercise of options
granted under the Directors' Plan and 2,969,912 shares of Common Stock
issued to Notre. Mr. Harter is the President of Notre.

(3) Includes an aggregate of 18,694 shares which are held in irrevocable trusts
for Mr. Nothum's minor children and of which he is trustee.

(4) Includes 10,000 shares of Common Stock issuable upon exercise of options
granted under the Directors' Plan.

(5) Includes 7,692 shares of Common Stock issuable on conversion of a
convertible note issued by Notre which is convertible into Common Stock of
the Company owned by Notre.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of 57,969,912 shares
of capital stock, consisting of 50,000,000 shares of Common Stock, 2,742,912
shares of Restricted Common Stock and 5,000,000 shares of Preferred Stock. Upon
completion of the Mergers and this Offering, the Company will have outstanding
20,060,774 shares of Common Stock, which includes 2,742,912 shares of Restricted
Common Stock and no shares of Preferred Stock. The following discussion is
qualified in its entirety by reference to the Restated Certificate of
Incorporation of Comfort Systems, which is included as an exhibit to the
Registration Statement of which this Prospectus is a part.

COMMON STOCK AND RESTRICTED COMMON STOCK

The holders of Common Stock are each entitled to one vote for each share
held on all matters to which they are entitled to vote, including the election
of directors. The holders of Restricted Common Stock, voting together as a
single class, are entitled to elect one member of the Company's Board of
Directors and to 0.55 of one vote for each share held on all other matters on
which they are entitled to vote. Holders of Restricted Common Stock are not
entitled to vote on the election of any other directors. Upon consummation of
this Offering, the Board of Directors will be classified into three classes as
nearly equal in number as possible, with the term of each class expiring on a
staggered basis. The classification of the Board of Directors may make it more
difficult to change the composition of the Board of Directors and thereby may
discourage or make more difficult an attempt by a person or group to obtain
control of the Company. Cumulative voting for the election of directors is not
permitted. Any director, or the entire Board of Directors, may be removed at any
time, with cause, by of a majority of the aggregate number of votes which may be
cast by the holders of all of the outstanding shares of Common Stock and
Restricted Common Stock entitled to vote for the election of directors, except
that only the holder of the Restricted Common Stock may remove the director such
holder is entitled to elect.

Subject to the rights of any then outstanding shares of Preferred Stock,
holders of Common Stock and Restricted Common Stock are together entitled to
participate pro rata in such dividends as may be declared in the discretion of
the Board of Directors out of funds legally available therefor. Holders of
Common Stock and Restricted Common Stock together are entitled to share ratably
in the net assets of the Company upon liquidation after payment or provision for
all liabilities and any preferential liquidation rights of any Preferred Stock
then outstanding. Holders of Common Stock and holders of Restricted Common Stock
have no preemptive rights to purchase shares of stock of the Company. Shares of
Common Stock are not subject to any redemption provisions and are not
convertible into any other securities of the Company. Shares of Restricted
Common Stock are not subject to any redemption provisions and are convertible
into Common Stock as described below. All outstanding shares of Common Stock and
Restricted Common Stock are, and the shares of Common Stock to be issued
pursuant to this Offering and the Mergers will be, upon payment therefor, fully
paid and non-assessable.

Each share of Restricted Common Stock will automatically convert to Common
Stock on a share-for-share basis (i) in the event of a disposition of such share
of Restricted Common Stock by the holder thereof (other than a distribution by a
holder to its partners or beneficial owners, or a transfer to a related party of
such holders (as defined in Sections 267, 707, 318 and/or 4946 of the Internal
Revenue Code of 1986, as amended)), (ii) in the event any person acquires
beneficial ownership of 15% or more of the total number of outstanding shares of
Common Stock, or (iii) in the event any person offers to acquire 15% or more of
the total number of outstanding shares of Common Stock. After July 1, 1998, the
Board of Directors may elect to convert any remaining shares of Restricted
Common Stock into shares of Common Stock in the event 80% or more of the
originally outstanding shares of Restricted Common Stock have been previously
converted into shares of Common Stock.

The Common Stock has been approved for listing on The New York Stock
Exchange under the symbol "FIX," subject to official notice of issuance. The
Restricted Common Stock will not be listed on any exchange.

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PREFERRED STOCK

The Preferred Stock may be issued from time to time by the Board of
Directors in one or more series. Subject to the provisions of the Company's
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to change the number of shares constituting any
series and to provide for or change the voting powers, designations, preferences
and relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any series of the Preferred
Stock, in each case without any further action or vote by the stockholders. The
Company has no current plans to issue any shares of Preferred Stock.

One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock and Restricted Common Stock as to dividend
rights, liquidation preference or both, may have full or limited voting rights
and may be convertible into shares of Common Stock. Accordingly, the issuance of
shares of Preferred Stock may discourage bids for the Common Stock or may
otherwise adversely affect the market price of the Common Stock.

STATUTORY BUSINESS COMBINATION PROVISION

The Company is subject to Section 203 of the DGCL which, with certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any "interested stockholder" for a period
of three years following the date that such stockholder became an interested
stockholder, unless: (i) prior to such date, the Board of Directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and officers and
(b) by employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or after such date, the
business combination is approved by the Board of Directors and authorized at an
annual or special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. An "interested stockholder" is defined as any person that is (a)
the owner of 15% or more of the outstanding voting stock of the corporation or
(b) an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.

CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS

Pursuant to the Company's Certificate of Incorporation and as permitted by
Delaware law, directors of the Company are not liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty, except for
liability in connection with a breach of duty of loyalty, for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, for dividend payments or stock repurchases illegal under Delaware law or
any transaction in which a director has derived an improper personal benefit.

Additionally, the Certificate of Incorporation of the Company provides that
directors and officers of the Company shall be, and at the discretion of the
Board of Directors non-officer employees and agents may be, indemnified by the
Company to the fullest extent authorized by Delaware law, as it now exists or
may in

60
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the future be amended, against all expenses and liabilities actually and
reasonably incurred in connection with service for or on behalf of the Company,
and further permits the advancing of expenses incurred in defense of claims.

The Certificate of Incorporation also provides that any action required or
permitted to be taken by the stockholders of the Company at an annual or special
meeting of stockholders must be effected at a duly called meeting and may not be
taken or effected by a written consent of stockholders in lieu thereof. The
Company's Bylaws provide that a special meeting of stockholders may be called
only by the Chief Executive Officer, by a majority of the Board of Directors, or
by a majority of the Executive Committee of the Board of Directors. The Bylaws
provide that only those matters set forth in the notice of the special meeting
may be considered or acted upon at that special meeting. To amend or repeal the
Company's Bylaws, an amendment or repeal thereof must first be approved by the
Board of Directors or by affirmative vote of the holders of at least 66 2/3% of
the total votes eligible to be cast by holders of voting stock with respect to
such amendment or repeal.

The Company's Bylaws establish an advance notice procedure with regard to
the nomination, other than by or at the direction of the Board of Directors or a
committee thereof, of candidates for election as directors (the "Nomination
Procedure") and with regard to other matters to be brought by stockholders
before an annual meeting of stockholders of the Company (the "Business
Procedure"). The Nomination Procedure requires that a stockholder give prior
written notice, in proper form, of a planned nomination for the Board of
Directors to the Secretary of the Company. The requirements as to the form and
timing of that notice are specified in the Company's Bylaws. If the Chairman of
the Board of Directors determines that a person was not nominated in accordance
with the Nomination Procedure, such person will not be eligible for election as
a director. Under the Business Procedure, a stockholder seeking to have any
business conducted at an annual meeting must give prior written notice, in
proper form, to the Secretary of the Company. The requirements as to the form
and timing of that notice are specified in the Company's Bylaws. If the Chairman
of the Board of Directors determines that the other business was not properly
brought before such meeting in accordance with the Business Procedure, such
business will not be conducted at such meeting.

Although the Company's Bylaws do not give the Board of Directors any power
to approve or disapprove stockholder nominations for the election of directors
or of any other business desired by stockholders to be conducted at an annual or
any other meeting, the Company's Bylaws (i) may have the effect of precluding a
nomination for the election of directors or precluding the conduct of business
at a particular meeting if the proper procedures are not followed or (ii) may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors or otherwise attempting to obtain control of
the Company, even if the conduct of such solicitation or such attempt might be
beneficial to the Company and its stockholders.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York, 10005.

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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Mergers and completion of this Offering, the
Company will have outstanding 20,060,774 shares of Common Stock. The 6,100,000
shares sold in this Offering (plus any additional shares sold upon exercise of
the Underwriters' over-allotment option) will be freely tradeable without
restriction unless acquired by affiliates of the Company. None of the remaining
outstanding shares of Common Stock or Restricted Common Stock have been
registered under the Securities Act, which means that they may be resold
publicly only upon registration under the Securities Act or in compliance with
an exemption from the registration requirements of the Securities Act, including
the exemption provided by Rule 144 thereunder.

In general, under Rule 144, if a period of at least one year has elapsed
between the later of the date on which restricted securities were acquired from
the Company or the date on which they were acquired from an affiliate, the
holder of such restricted securities (including an affiliate) is entitled to
sell a number of shares within any three-month period that does not exceed the
greater of (i) one percent of the then outstanding shares of the Common Stock
(approximately 200,608 shares upon completion of this Offering) or (ii) the
average weekly reported volume of trading of the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain requirements pertaining to the manner of such sales, notices of such
sales and the availability of current public information concerning the Company.
Affiliates may sell shares not constituting restricted securities in accordance
with the foregoing volume limitations and other requirements but without regard
to the one year holding period. Under Rule 144(k), if a period of at least two
years has elapsed between the later of the date on which restricted securities
were acquired from the Company and the date on which they were acquired from an
affiliate, a holder of such restricted securities who is not an affiliate at the
time of the sale and has not been an affiliate for a least three months prior to
the sale is entitled to sell the shares immediately without regard to the volume
limitations and other conditions described above.

The Company and its officers, directors and certain stockholders, who
beneficially own 4,239,847 shares in the aggregate, have agreed not to sell or
otherwise dispose of any shares of Common Stock or Restricted Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of Alex. Brown & Sons Incorporated, except that the Company may issue
Common Stock in connection with acquisitions, in connection with its 1997
Long-Term Incentive Plan and its 1997 Non-Employee Directors' Stock Plan (the
"Plans") or upon conversion of shares of the Restricted Common Stock. See
"Underwriting." In addition, all of the stockholders of the Founding
Companies, the Company's officers and directors and certain stockholders,
holding in the aggregate 13,960,774 shares of Common Stock, have agreed with the
Company that they will not sell any of their shares for a period of one year
after the closing of this Offering. These stockholders, however, have the right,
in the event the Company proposes to register under the Securities Act any
Common Stock for its own account or for the account of others, subject to
certain exceptions, to require the Company to include their shares in the
registration, subject to the right of the Company to exclude some or all of the
shares in the offering upon the advice of the managing underwriter. In addition,
certain of such stockholders have certain limited demand registration rights to
require the Company to register shares held by them following the first
anniversary of the closing of this Offering.

Within 90 days after the closing of this Offering, the Company intends to
register 8,000,000 shares of its Common Stock under the Securities Act for use
by the Company in connection with future acquisitions. Upon such registration,
these shares will generally be freely tradeable after their issuance. In some
instances, however, the Company may contractually restrict the sale of shares
issued in connection with future acquisitions. The piggyback registration rights
described above do not apply to the registration statement relating to these
8,000,000 shares.

Prior to this Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price for
the Common Stock prevailing from time to time. Nevertheless, sales, or the
availability for sale of, substantial amounts of the Common Stock in the public
market could adversely affect prevailing market prices and the future ability of
the Company to raise equity capital and complete any additional acquisitions for
Common Stock.

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<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), through their representatives,
Alex. Brown & Sons Incorporated, Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation and Sanders Morris Mundy Inc. (together, the
"Representatives"), have severally agreed to purchase from the Company the
following respective number of shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus:

NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------- ---------
Alex. Brown & Sons Incorporated.........
Bear, Stearns & Co. Inc.................
Donaldson, Lufkin & Jenrette Securities
Corporation...........................
Sanders Morris Mundy Inc................

---------
Total.............................. 6,100,000
=========

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of Common Stock offered hereby if
any of such shares are purchased.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may re-allow, a concession not in
excess of $ per share to certain other dealers. After commencement of the
initial public offering, the offering price and other selling terms may be
changed by the Representatives.

The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 915,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it in the above table bears to 6,100,000, and the Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 6,100,000 shares are being offered.

The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters and the Company regarding certain liabilities,
including liabilities under the Securities Act.

To facilitate the Offering of the Common Stock, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock. Specifically, the Underwriters

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<PAGE>
may over-allot shares of the Common Stock in connection with this Offering,
thereby creating a short position in the Underwriters' syndicate account.
Additionally, to cover such over-allotments or to stabilize the market price of
the Common Stock, the Underwriters may bid for, and purchase, shares of the
Common Stock in the open market. Any of these activities may maintain the market
price of the Common Stock at a level above that which might otherwise prevail in
the open market. The Underwriters are not required to engage in these
activities, and, if commenced, any such activities may be discontinued at any
time. The Representatives, on behalf of the Underwriters, also may reclaim
selling concessions allowed to an Underwriter or dealer, if the syndicate
repurchases shares distributed by that Underwriter or dealer.

The Company has agreed that it will not sell or offer any shares of Common
Stock or options, rights or warrants to acquire any Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent of
Alex. Brown & Sons Incorporated, except for shares issued (i) in connection with
acquisitions, (ii) pursuant to the exercise of options granted under the Plans,
and (iii) upon conversion of shares of Restricted Common Stock. Further, the
Company's directors, officers and certain stockholders, who beneficially own
4,239,847 shares in the aggregate, have agreed not to directly or indirectly
sell or offer for sale or otherwise dispose of any Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent of
Alex. Brown & Sons Incorporated.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.

Certain employees of Donaldson, Lufkin & Jenrette Securities Corporation,
one of the Representatives, are investors in Notre, and as a result beneficially
own an aggregate of less than 1% of the Common Stock to be outstanding after
this Offering. A principal of Sanders Morris Mundy Inc., one of the
Representatives, is also an investor in Notre. In February 1997, that principal
and an investment fund affiliated with Sanders Morris Mundy Inc. each purchased
notes from Notre which are convertible into shares of Common Stock upon
consummation of this Offering. That principal has agreed that he will not sell
or offer any shares of Common Stock received upon conversion of the note for a
period of one year after the date of conversion. The shares of Common Stock
beneficially owned by that principal and that investment fund also represent
less than 1% of the Common Stock to be outstanding after this Offering.

Prior to this Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock has
been determined by negotiations between the Company and the Representatives.
Among the factors considered in such negotiations were prevailing market
conditions, the results of operations of the Founding Companies in recent
periods, the market capitalization and stages of development of other companies
which the Company and the Representatives believed to be comparable to the
Company, estimates of the business potential of the Company, the present state
of the Company's development and other factors deemed relevant by the Company
and the Representatives.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed on for the
Company by Bracewell & Patterson, L.L.P., Houston, Texas. Certain legal matters
related to this Offering will be passed on for the Underwriters by Piper &
Marbury, L.L.P., Baltimore, Maryland.

EXPERTS

The audited financial statements included in this Prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the SEC a Registration Statement (which term
shall encompass any and all amendments thereto) on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Common Stock offered hereby. This Prospectus, which
is part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain items of which are omitted in accordance with the rules and regulations
of the SEC. Statements made in this Prospectus as to the contents of any
contract,

64
<PAGE>
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is hereby made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. For further information
with respect to the Company, reference is hereby made to the Registration
Statement and such exhibits and schedules filed as a part thereof, which may be
inspected, without charge, at the Public Reference Section of the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the SEC located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. The SEC maintains a web site that contains
reports, proxy and information statements regarding registrants that file
electronically with the SEC. The address of this web site is
(http://www.sec.gov). Copies of all or any portion of the Registration Statement
may be obtained from the Public Reference Section of the SEC, upon payment of
the prescribed fees.

65
<PAGE>
INDEX TO FINANCIAL STATEMENTS

PAGE
-----
COMFORT SYSTEMS USA, INC. (UNAUDITED)
PRO FORMA COMBINED FINANCIAL
STATEMENTS
Introduction to Unaudited Pro
Forma Combined Financial
Statements..................... F-3
Unaudited Pro Forma Combined
Balance Sheet.................. F-4
Unaudited Pro Forma Combined
Statements of Operations....... F-5
Notes to Unaudited Pro Forma
Combined Financial
Statements..................... F-7
COMFORT SYSTEMS USA, INC.
Report of Independent Public
Accountants.................... F-11
Balance Sheets.................. F-12
Statement of Operations......... F-13
Statement of Stockholders'
Equity......................... F-14
Statement of Cash Flows......... F-15
Notes to Financial Statements... F-16
FOUNDING COMPANIES
QUALITY AIR HEATING & COOLING, INC.
Report of Independent Public
Accountants.................... F-19
Balance Sheets.................. F-20
Statements of Operations........ F-21
Statements of Shareholders'
Equity......................... F-22
Statements of Cash Flows........ F-23
Notes to Financial Statements... F-24
ATLAS COMFORT SERVICES USA, INC.
AND SUBSIDIARY
Report of Independent Public
Accountants.................... F-29
Consolidated Balance Sheets..... F-30
Consolidated Statements of
Operations..................... F-31
Consolidated Statements of
Shareholders' Equity........... F-32
Consolidated Statements of Cash
Flows.......................... F-33
Notes to Consolidated Financial
Statements..................... F-34
TRI-CITY MECHANICAL, INC.
Report of Independent Public
Accountants.................... F-42
Balance Sheets.................. F-43
Statements of Operations........ F-44
Statements of Shareholders'
Equity......................... F-45
Statements of Cash Flows........ F-46
Notes to Financial Statements... F-47
S.M. LAWRENCE INC. AND RELATED
COMPANY
Report of Independent Public
Accountants.................... F-52
Combined Balance Sheets......... F-53
Combined Statements of
Operations..................... F-54
Combined Statements of
Shareholders' Equity........... F-55
Combined Statements of Cash
Flows.......................... F-56
Notes to Combined Financial
Statements..................... F-57

F-1
<PAGE>

PAGE
-----
ACCURATE AIR SYSTEMS, INC.
Report of Independent Public
Accountants.................... F-63
Balance Sheets.................. F-64
Statements of Operations........ F-65
Statements of Shareholder's
Equity......................... F-66
Statements of Cash Flows........ F-67
Notes to Financial Statements... F-68
EASTERN HEATING AND COOLING, INC.
Report of Independent Public
Accountants.................... F-75
Balance Sheets.................. F-76
Statements of Operations........ F-77
Statements of Shareholder's
Equity......................... F-78
Statements of Cash Flows........ F-79
Notes to Financial Statements... F-80
CONTRACT SERVICE, INC.
Report of Independent Public
Accountants.................... F-85
Balance Sheets.................. F-86
Statements of Operations........ F-87
Statements of Shareholders'
Equity......................... F-88
Statements of Cash Flows........ F-89
Notes to Financial Statements... F-90
TECH HEATING AND AIR CONDITIONING,
INC. AND RELATED COMPANY
Report of Independent Public
Accountants.................... F-95
Combined Balance Sheets......... F-96
Combined Statements of
Operations..................... F-97
Combined Statements of
Shareholders' Equity........... F-98
Combined Statements of Cash
Flows.......................... F-99
Notes to Combined Financial
Statements..................... F-100
SEASONAIR, INC.
Report of Independent Public
Accountants.................... F-105
Balance Sheets.................. F-106
Statements of Operations........ F-107
Statements of Shareholders'
Equity......................... F-108
Statements of Cash Flows........ F-109
Notes to Financial Statements... F-110
WESTERN BUILDING SERVICES, INC.
Report of Independent Public
Accountants.................... F-115
Balance Sheets.................. F-116
Statements of Operations........ F-117
Statements of Shareholders'
Equity......................... F-118
Statements of Cash Flows........ F-119
Notes to Financial Statements... F-120

F-2
<PAGE>
COMFORT SYSTEMS USA, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION

The following unaudited pro forma combined financial statements give effect
to the acquisitions by Comfort Systems USA, Inc. ("Comfort Systems") of the
outstanding capital stock of Quality, Atlas, Tri-City, Lawrence, Accurate,
Eastern, CSI/Bonneville, Seasonair, Tech, Western, Freeway and Standard
(together, the "Founding Companies"). These acquisitions (the "Mergers")
will occur simultaneously with the closing of Comfort Systems' initial public
offering (the "Offering") and will be accounted for using the purchase method of
accounting. Comfort Systems has been identified as the accounting acquirer for
financial statement presentation purposes.

The unaudited pro forma combined balance sheet gives effect to the Mergers
and the Offering as if they had occurred on March 31, 1997. The unaudited pro
forma combined statements of operations give effect to these transactions as if
they had occurred on January 1, 1996.

Comfort Systems has preliminarily analyzed the savings that it expects to
be realized from reductions in salaries and certain benefits to the owners. To
the extent the owners of the Founding Companies have agreed prospectively to
reductions in salary, bonuses and benefits, these reductions have been reflected
in the pro forma combined statements of operations. With respect to other
potential cost savings, Comfort Systems has not and cannot quantify these
savings until completion of the combination of the Founding Companies. It is
anticipated that these savings will be offset by costs related to Comfort
Systems' new corporate management and by the costs associated with being a
public company. However, because these costs cannot be accurately quantified at
this time, they have not been included in the pro forma financial information of
Comfort Systems.

The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what Comfort
Systems' financial position or results of operations would actually have been if
such transactions in fact had occurred on those dates and are not necessarily
representative of the Comfort Systems' financial position or results of
operations for any future period. Since the Founding Companies were not under
common control or management, historical combined results may not be comparable
to, or indicative of, future performance. The unaudited pro forma combined
financial statements should be read in conjunction with the other financial
statements and notes thereto included elsewhere in this Prospectus. See "Risk
Factors" included elsewhere herein.

F-3
<PAGE>

COMFORT SYSTEMS USA, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1997
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
QUALITY ATLAS TRI-CITY LAWRENCE ACCURATE EASTERN CSI/BONNEVILLE TECH
------- ------ -------- -------- -------- ------- --------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............ $ 3,778 $ 356 $2,665 $-- $ 104 $ 131 $ 103 $ 249
Restricted cash and investments...... -- -- 828 -- -- -- -- --
Accounts receivable.................. 6,512 4,764 4,532 3,706 2,330 921 743 1,261
Less allowance...................... 80 100 30 -- 28 25 21 45
------- ------ -------- -------- -------- ------- --------------- ------
Accounts receivable, net............. 6,432 4,664 4,502 3,706 2,302 896 722 1,216
Other receivables.................... 6 -- 66 76 85 27 -- 20
Inventories.......................... 601 1,676 218 255 141 97 491 193
Prepaid expenses and other........... 50 56 2 31 -- -- 4 20
Costs in excess of billings.......... 595 314 380 262 228 48 129
Other................................ 692 145 -- -- -- -- -- --
------- ------ -------- -------- -------- ------- --------------- ------
Total current assets.............. 12,154 7,211 8,661 4,330 2,860 1,199 1,449 1,698
Property and equipment, net.......... 774 598 643 716 932 607 690 484
Goodwill, net........................ -- 22 -- -- -- -- -- --
Other noncurrent assets.............. -- 88 -- 237 -- 174 15 --
------- ------ -------- -------- -------- ------- --------------- ------
Total assets......................... $12,928 $7,919 $9,304 $5,283 $3,792 $1,980 $ 2,154 $2,182
======= ====== ======== ======== ======== ======= =============== ======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term
debt................................ $ 695 $ 800 $-- $ 450 $ 716 $ 607 $ 101 $ 969
Accounts payable and accrued
expenses............................ 2,654 3,037 2,408 1,241 1,197 759 657 701
Payable to shareholder/affiliate..... 3,875 -- -- -- 630 -- -- --
Billings in excess of costs and
earnings............................ 988 570 435 890 97 53 218
Deferred income taxes................ -- -- -- 217 -- -- -- --
Other................................ 391 -- -- -- -- -- -- --
------- ------ -------- -------- -------- ------- --------------- ------
Total current liabilities......... 8,603 4,407 2,843 2,798 2,640 1,419 976 1,670
Deferred income taxes................ -- -- -- -- -- -- -- --
Long-term debt, net of current
maturities.......................... 362 1,174 -- -- 149 353 4 32
Payable to shareholder/affiliate..... -- 75 -- -- -- -- 430 --
------- ------ -------- -------- -------- ------- --------------- ------
Total liabilities................. 8,965 5,656 2,843 2,798 2,789 1,772 1,410 1,702
Commitments and contingencies........ -- -- -- -- -- -- -- --

Stockholders' equity:
Common stock........................ 22 1 25 161 1 50 9 1
Additional paid-in-capital.......... 6 -- 105 -- -- -- -- --
Retained earnings................... 4,833 2,262 6,331 2,339 1,002 158 735 482
Treasury stock...................... (898) -- -- (15) -- -- -- (3)
------- ------ -------- -------- -------- ------- --------------- ------
Total stockholders' equity...... 3,963 2,263 6,461 2,485 1,003 208 744 480
------- ------ -------- -------- -------- ------- --------------- ------
Total liabilities and stockholders'
equity.............................. $12,928 $7,919 $9,304 $5,283 $3,792 $1,980 $ 2,154 $2,182
======= ====== ======== ======== ======== ======= =============== ======
</TABLE>
<TABLE>
<CAPTION>
OTHER PRO POST
FOUNDING COMFORT PRO FORMA FORMA MERGER AS
SEASONAIR WESTERN COMPANIES SYSTEMS ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
--------- ------- --------- -------- ----------- --------- ----------- --------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents............ $ 221 $ 34 $ 227 $ 42 $ (5,760) $ 2,150 $ 22,258 $24,408
Restricted cash and investments...... -- -- -- -- -- 828 -- 828
Accounts receivable.................. 922 641 1,677 -- -- 28,009 -- 28,009
Less allowance...................... 9 -- 69 -- -- 407 -- 407
--------- ------- --------- -------- ----------- --------- ----------- --------
Accounts receivable, net............. 913 641 1,608 -- -- 27,602 -- 27,602
Other receivables.................... 40 6 443 -- -- 769 -- 769
Inventories.......................... 187 86 519 -- -- 4,464 -- 4,464
Prepaid expenses and other........... 49 9 82 -- -- 303 -- 303
Costs in excess of billings.......... 89 91 -- -- -- 2,136 -- 2,136
Other................................ 104 -- -- 2,866 -- 3,807 (2,866) 941
--------- ------- --------- -------- ----------- --------- ----------- --------
Total current assets.............. 1,603 867 2,879 2,908 (5,760) 42,059 19,392 61,451
Property and equipment, net.......... 61 189 288 -- -- 5,982 -- 5,982
Goodwill, net........................ -- -- -- -- 128,528 128,550 -- 128,550
Other noncurrent assets.............. 110 174 32 -- -- 830 -- 830
--------- ------- --------- -------- ----------- --------- ----------- --------
Total assets......................... $ 1,774 $1,230 $ 3,199 $2,908 $ 122,768 $177,421 $ 19,392 $196,813
========= ======= ========= ======== =========== ========= =========== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term
debt................................ $ 91 $ 97 $ 199 $-- $ -- $ 4,725 $ -- $ 4,725
Accounts payable and accrued
expenses............................ 866 437 1,548 2,866 -- 18,371 (2,866) 15,505
Payable to shareholder/affiliate..... -- -- -- -- 37,943 42,448 (41,818) 630
Billings in excess of costs and
earnings............................ 134 21 44 -- -- 3,450 -- 3,450
Deferred income taxes................ -- -- 49 -- -- 266 -- 266
Other................................ -- -- 120 -- -- 511 -- 511
--------- ------- --------- -------- ----------- --------- ----------- --------
Total current liabilities......... 1,091 555 1,960 2,866 37,943 69,771 (44,684) 25,087
Deferred income taxes................ 17 -- -- -- -- 17 -- 17
Long-term debt, net of current
maturities.......................... 9 241 370 -- 11,025 13,719 -- 13,719
Payable to shareholder/affiliate..... 68 -- -- -- -- 573 -- 573
--------- ------- --------- -------- ----------- --------- ----------- --------
Total liabilities................. 1,185 796 2,330 2,866 48,968 84,080 (44,684) 39,396
Commitments and contingencies........ -- -- -- -- -- -- -- --
Stockholders' equity:
Common stock........................ 78 1 42 42 (293) 140 61 201
Additional paid-in-capital.......... 1 62 419 10,655 81,953 93,201 64,015 157,216
Retained earnings................... 745 371 458 (10,655) (9,061) -- -- --
Treasury stock...................... (235) -- (50) -- 1,201 -- -- --
--------- ------- --------- -------- ----------- --------- ----------- --------
Total stockholders' equity...... 589 434 869 42 73,800 93,341 64,076 157,417
--------- ------- --------- -------- ----------- --------- ----------- --------
Total liabilities and stockholders'
equity.............................. $ 1,774 $1,230 $ 3,199 $2,908 $ 122,768 $177,421 $ 19,392 $196,813
========= ======= ========= ======== =========== ========= =========== ========
</TABLE>

F-4
<PAGE>

COMFORT SYSTEMS USA, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
QUALITY ATLAS TRI-CITY LAWRENCE ACCURATE EASTERN CSI/BONNEVILLE
-------- --------- --------- --------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES............................. $29,597 $ 30,030 $24,237 $17,163 $16,806 $7,944 $ 7,842
COST OF SERVICES..................... 18,467 25,071 18,561 12,211 13,270 5,276 5,201
-------- --------- --------- --------- --------- ------- ---------------
Gross profit........................ 11,130 4,959 5,676 4,952 3,536 2,668 2,641
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ 6,640 2,858 3,903 4,885 3,037 2,237 1,660
GOODWILL AMORTIZATION................ -- -- -- -- -- -- --
-------- --------- --------- --------- --------- ------- ---------------
INCOME FROM OPERATIONS............... 4,490 2,101 1,773 67 499 431 981
OTHER INCOME (EXPENSE):
Interest income..................... -- -- 152 47 -- -- --
Interest expense.................... (154 ) (292) -- -- (80) (87 ) (29)
Other............................... 97 65 89 8 14 40 51
-------- --------- --------- --------- --------- ------- ---------------
INCOME BEFORE INCOME TAXES........... 4,433 1,874 2,014 122 433 384 1,003
PROVISION FOR INCOME TAXES........... -- 750 -- 60 -- -- --
-------- --------- --------- --------- --------- ------- ---------------
NET INCOME........................... $ 4,433 $ 1,124 $ 2,014 $ 62 $ 433 $ 384 $ 1,003
======== ========= ========= ========= ========= ======= ===============
NET INCOME PER SHARE.................
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE(1).............
</TABLE>
<TABLE>
<CAPTION>
OTHER
FOUNDING COMFORT PRO FORMA PRO FORMA
TECH SEASONAIR WESTERN COMPANIES SYSTEMS ADJUSTMENTS COMBINED
--------- ---------- -------- ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 7,537 $6,737 $6,494 $ 13,138 $-- $ -- $ 167,525
COST OF SERVICES..................... 3,996 4,006 4,662 8,991 -- -- 119,712
--------- ---------- -------- ---------- -------- ------------ ----------
Gross profit........................ 3,541 2,731 1,832 4,147 -- -- 47,813
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ 1,861 2,597 1,088 3,616 -- (6,568) 27,814
GOODWILL AMORTIZATION................ -- -- -- -- -- 3,214 3,214
--------- ---------- -------- ---------- -------- ------------ ----------
INCOME FROM OPERATIONS............... 1,680 134 744 531 -- 3,354 16,785
OTHER INCOME (EXPENSE):
Interest income..................... -- -- -- 17 -- -- 216
Interest expense.................... (18) (21) (51) -- -- (935) (1,667 )
Other............................... 31 82 (21) 34 -- -- 490
--------- ---------- -------- ---------- -------- ------------ ----------
INCOME BEFORE INCOME TAXES........... 1,693 195 672 582 -- 2,419 15,824
PROVISION FOR INCOME TAXES........... -- 69 -- 49 -- 6,687 7,615
--------- ---------- -------- ---------- -------- ------------ ----------
NET INCOME........................... $ 1,693 $ 126 $ 672 $ 533 $-- $ (4,268) $ 8,209
========= ========== ======== ========== ======== ============ ==========
NET INCOME PER SHARE................. $ 0.45
==========
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE(1)............. 18,205,952
==========
</TABLE>

(1) Includes (i) 2,969,912 shares issued to Notre, (ii) 1,269,935 shares
issued to management of and consultants to Comfort Systems, (iii)
9,720,927 shares issued to owners of the Founding Companies and (iv)
4,245,178 of the 6,100,000 shares sold in the Offering necessary to
pay the cash portion of the Merger consideration and expenses of this
Offering. The 1,854,822 shares excluded reflects the net cash proceeds
to Comfort Systems.

F-5
<PAGE>

COMFORT SYSTEMS USA, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
QUALITY ATLAS TRI-CITY LAWRENCE ACCURATE EASTERN CSI/BONNEVILLE
-------- --------- --------- --------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 8,766 $ 6,115 $ 6,791 $ 4,565 $ 2,642 $1,284 $ 1,562
COST OF SERVICES..................... 5,372 4,866 5,946 3,326 2,095 805 1,045
-------- --------- --------- --------- --------- ------- ---------------
Gross profit........................ 3,394 1,249 845 1,239 547 479 517
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ 2,094 753 567 698 526 582 458
GOODWILL AMORTIZATION................ -- -- -- -- -- -- --
-------- --------- --------- --------- --------- ------- ---------------
INCOME (LOSS) FROM OPERATIONS........ 1,300 496 278 541 21 (103 ) 59
OTHER INCOME (EXPENSE):
Interest income..................... 38 -- 25 -- 1 -- 2
Interest expense.................... (29 ) (54) -- -- (33) (20 ) (17)
Other............................... (34 ) 17 9 2 7 -- 9
-------- --------- --------- --------- --------- ------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES.... 1,275 459 312 543 (4) (123 ) 53
PROVISION FOR INCOME TAXES........... -- 188 -- 217 -- -- --
-------- --------- --------- --------- --------- ------- ---------------
NET INCOME (LOSS).................... $ 1,275 $ 271 $ 312 $ 326 $ (4) $ (123 ) $ 53
======== ========= ========= ========= ========= ======= ===============
NET INCOME PER SHARE.................
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE(1).............
</TABLE>
<TABLE>
<CAPTION>
OTHER
FOUNDING COMFORT PRO FORMA PRO FORMA
TECH SEASONAIR WESTERN COMPANIES SYSTEMS ADJUSTMENTS COMBINED
--------- ---------- -------- ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 1,656 $1,831 $1,072 $ 3,221 $ -- $ -- $ 39,505
COST OF SERVICES..................... 1,034 1,165 812 2,334 -- -- 28,800
--------- ---------- -------- ---------- -------- ------------ ----------
Gross profit........................ 622 666 260 887 -- -- 10,705
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ 565 644 231 909 10,655 (11,083) 7,599
GOODWILL AMORTIZATION................ -- -- -- -- -- 803 803
--------- ---------- -------- ---------- -------- ------------ ----------
INCOME (LOSS) FROM OPERATIONS........ 57 22 29 (22) (10,655) 10,280 2,303
OTHER INCOME (EXPENSE):
Interest income..................... -- -- -- 6 -- -- 72
Interest expense.................... (10) (3) (11) -- -- (207) (384)
Other............................... 11 28 (2) 15 -- -- 62
--------- ---------- -------- ---------- -------- ------------ ----------
INCOME (LOSS) BEFORE INCOME TAXES.... 58 47 16 (1) (10,655) 10,073 2,053
PROVISION FOR INCOME TAXES........... -- 23 -- -- -- 578 1,006
--------- ---------- -------- ---------- -------- ------------ ----------
NET INCOME (LOSS).................... $ 58 $ 24 $ 16 $ (1) $(10,655) $ 9,495 $ 1,047
========= ========== ======== ========== ======== ============ ==========
NET INCOME PER SHARE................. $ 0.06
==========
SHARES USED IN COMPUTING PRO FORMA
NET INCOME PER SHARE(1)............. 18,205,952
==========
</TABLE>

F-6
<PAGE>
COMFORT SYSTEMS USA, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

1. GENERAL:

Comfort Systems USA, Inc. ("Comfort Systems") was founded to become a
leading national provider of comprehensive heating, ventilation and air
conditioning ("HVAC") installation services as well as maintenance, repair and
replacement of HVAC systems, focusing primarily on commercial and industrial
markets. Comfort Systems has conducted no operations to date and will acquire
the Founding Companies concurrently and as a condition with the closing of this
Offering.

The historical financial statements reflect the financial position and
results of operations of the Founding Companies and were derived from the
respective Founding Companies' financial statements where indicated. The periods
included in these financial statements for the individual Founding Companies are
as of and for the three months ended March 31, 1997 and for the year ended
December 31, 1996, with the exception of Lawrence for which the period is as of
and for the three months ended January 31, 1997 and for the fiscal year ended
October 31, 1996. The audited historical financial statements included elsewhere
herein have been included in accordance with Securities and Exchange Commission
("SEC") Staff Accounting Bulletin No. 80.

2. ACQUISITION OF FOUNDING COMPANIES:

Concurrently with and as a condition to the closing of this Offering,
Comfort Systems will acquire all of the outstanding capital stock of the
Founding Companies. The acquisitions will be accounted for using the purchase
method of accounting with Comfort Systems being treated as the accounting
acquirer.

The following table sets forth the consideration to be paid (a) in cash and
(b) in shares of Common Stock to the common stockholders of each of the Founding
Companies. For purposes of computing the estimated purchase price for accounting
purposes, the value of the shares is determined using an estimated fair value of
$9.60 per share (or $93.3 million), which represents a discount of twenty
percent from the assumed initial public offering price of $12 due to
restrictions on the sale and transferability of the shares issued. The total
estimated purchase price of $135.1 million for the acquisitions is based upon
preliminary estimates and is subject to certain purchase price adjustments at
and following closing. The table does not reflect the distributions totaling
$16.8 million constituting substantially all of the Founding Companies
undistributed earnings previously taxed to their stockholders ("S Corporation
Distributions").

SHARES
CASH OF COMMON STOCK
--------- ---------------
(DOLLARS IN THOUSANDS)
Quality ............................. $ 9,306 2,207,158
Atlas................................ 6,336 1,432,000
Tri-City............................. 8,012 1,557,962
Lawrence............................. 4,154 1,197,796
Accurate............................. 2,903 564,537
Eastern.............................. 644 304,216
CSI/Bonneville....................... 1,674 493,672
Tech................................. 3,690 717,408
Seasonair............................ 1,399 272,084
Western.............................. 1,867 362,939
Freeway.............................. 959 319,698
Standard............................. 874 291,457
--------- ---------------
Total........................... $ 41,818 9,720,927
========= ===============

F-7
<PAGE>
COMFORT SYSTEMS USA, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:

(a) Records the S Corporation Distributions of $16.8 million
(including $3.9 million recorded as a payable to affiliate at
Quality) of which $5.8 million is expected to be paid using cash
on hand and $11.0 million is expected to be funded using debt (See
(b) below).

(b) Records the debt obtained to fund the S Corporation
Distributions.

(c) Records the liability for the cash portion of the consideration to
be paid to the stockholders of the Founding Companies in
connection with the Mergers.

(d) Records the purchase of the Founding Companies by Comfort Systems
consisting of $41.8 million in cash and 9,720,927 shares of
Common Stock valued at $9.60 per share (or $93.3 million) for a
total estimated purchase price of $135.1 million resulting in
excess purchase price of $128.5 million over the net assets
acquired of $6.6 million. See Note 2.

(e) Records the cash proceeds of $73.2 million from the issuance of
shares of Comfort Systems Common Stock net of estimated offering
costs of $9.1 million (based on an assumed initial public offering
price of $12 per share and includes the payment of deferred
offering costs of $2.9 million incurred through March 31, 1997).
Offering costs primarily consist of underwriting discounts and
commissions, accounting fees, legal fees and printing expenses.

(f) Records the cash portion of the consideration to be paid to the
stockholders of the Founding Companies in connection with the
Mergers.

The following table summarizes unaudited pro forma combined balance sheet
adjustments (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENT
------------------------------------------ PRO FORMA
(A) (B) (C) (D) ADJUSTMENTS
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............... $ (16,785) $ 11,025 $ -- $ -- $ (5,760)
--------- --------- --------- --------- -----------
Total current assets................ (16,785) 11,025 -- -- (5,760)
Goodwill, net........................... -- -- -- 128,528 128,528
--------- --------- --------- --------- -----------
Total assets............................ $ (16,785) $ 11,025 $ -- $ 128,528 $ 122,768
========= ========= ========= ========= ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Payable to shareholder/affiliate........ $ (3,875) $ -- $ 41,818 $ -- $ 37,943
--------- --------- --------- --------- -----------
Total current liabilities........... (3,875) -- 41,818 -- 37,943
--------- --------- --------- --------- -----------
Long-term debt, net of current
maturities............................ -- 11,025 -- -- 11,025
--------- --------- --------- --------- -----------
Total liabilities................... (3,875) 11,025 41,818 -- 48,968
Stockholders' equity:
Common stock........................ -- -- -- (293) (293)
Additional paid-in capital.......... (12,910) -- (41,818) 136,681 81,953
Retained earnings................... -- -- -- (9,061) (9,061)
Treasury stock...................... -- -- -- 1,201 1,201
--------- --------- --------- --------- -----------
Total stockholders' equity..... (12,910) -- (41,818) 128,528 73,800
--------- --------- --------- --------- -----------
Total liabilities and stockholders'
equity................................ $ (16,785) $ 11,025 $ -- $ 128,528 $ 122,768
========= ========= ========= ========= ===========
</TABLE>
POST MERGER
(E) (F) ADJUSTMENTS
--------- --------- -----------
ASSETS
Cash and cash equivalents............... $ 64,076 $ (41,818) $ 22,258
--------- --------- -----------
Other............................... (2,866) -- (2,866)
Total current assets................ 61,210 (41,818) 19,392
--------- --------- -----------
Total assets............................ $ 61,210 $ (41,818) $ 19,392
========= ========= ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses... $ (2,866) $ -- $ (2,866)
Payable to shareholder/affiliate........ -- (41,818) (41,818)
--------- --------- -----------
Total current liabilities........... (2,866) (41,818) (44,684)
--------- --------- -----------
Total liabilities................... (2,866) (41,818) (44,684)
Stockholders' equity:
Common stock........................ 61 -- 61
Additional paid-in capital.......... 64,015 -- 64,015
Retained earnings................... -- -- --
Treasury stock...................... -- -- --
--------- --------- -----------
Total stockholders' equity..... 64,076 -- 64,076
--------- --------- -----------
Total liabilities and stockholders'
equity................................ $ 61,210 $ (41,818) $ 19,392
========= ========= ===========

F-8
<PAGE>
COMFORT SYSTEMS USA, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS:

YEAR ENDED DECEMBER 31, 1996

(a) Reflects the reduction in salaries, bonuses and benefits from an
aggregate total of $9.0 million to $2.4 million to the owners of
the Founding Companies to which they have agreed prospectively.

(b) Reflects the amortization of goodwill to be recorded as a result
of these Mergers over a 40-year estimated life.

(d) Reflects the incremental provision for federal and state income
taxes relating to the other statements of operations adjustments
and for income taxes on S Corporation income.

The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENT
------------------------------------------ PRO FORMA
(A) (B) (C) (D) ADJUSTMENTS
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... $ (6,568) $ -- $ -- $ -- $(6,568)
GOODWILL AMORTIZATION................ -- 3,214 -- -- 3,214
--------- --------- --------- --------- -----------
INCOME (LOSS) FROM OPERATIONS........ 6,568 (3,214) -- -- 3,354
OTHER INCOME (EXPENSE):
Interest expense................ -- -- (935) -- (935)
--------- --------- --------- --------- -----------
INCOME (LOSS) BEFORE INCOME TAXES.... 6,568 (3,214) (935) -- 2,419
PROVISION FOR INCOME TAXES........... -- -- -- 6,687 6,687
--------- --------- --------- --------- -----------
NET INCOME (LOSS).................... $ 6,568 $ (3,214) $ (935) $ (6,687) $(4,268)
========= ========= ========= ========= ===========
</TABLE>

F-9
<PAGE>
COMFORT SYSTEMS USA, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

THREE MONTHS ENDED MARCH 31, 1997

(a) Reflects the reduction in salaries, bonuses and benefits from an
aggregate total of $1.0 million to $0.6 million to the owners of
the Founding Companies to which they have agreed prospectively.

(b) Reflects the amortization of goodwill to be recorded as a result
of these Mergers over a 40-year estimated life.

(d) Reflects the incremental provision for federal and state income
taxes relating to the other statements of operations adjustments
and for income taxes on S Corporation income.

(e) Reflects the reduction in compensation expense related to the
non-recurring, non-cash compensation charge of $10.7 million
recorded by Comfort in the first quarter of 1997 related to Common
Stock issued to management of and consultants to the Company.

The following table summarizes unaudited pro forma combined statements of
operations adjustments (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENT
----------------------------------------------------- PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... $ (428) $ -- $ -- $ -- (10,655) $(11,083)
GOODWILL AMORTIZATION................ -- 803 -- -- -- 803
--------- --------- --------- --------- --------- -----------
INCOME (LOSS0 FROM OPERATIONS........ 428 (803) -- -- 10,655 10,280
OTHER INCOME (EXPENSE):
Interest expense................ -- -- (207) -- -- (207)
--------- --------- --------- --------- --------- -----------
INCOME (LOSS) BEFORE INCOME TAXES.... 428 (803) (207) -- 10,655 10,073
PROVISION FOR INCOME
TAXES.............................. -- -- -- 578 -- 578
--------- --------- --------- --------- --------- -----------
NET INCOME (LOSS).................... $ 428 $ (803) $ (207) $ (578) $ 10,655 $ 9,495
========= ========= ========= ========= ========= ===========
</TABLE>

F-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Comfort Systems USA, Inc.:

We have audited the accompanying balance sheet of Comfort Systems USA, Inc.
as of December 31, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement 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 statement is 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 statement referred to above presents fairly,
in all material respects, the financial position of Comfort Systems USA, Inc. as
of December 31, 1996, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 25, 1997

F-11
<PAGE>

COMFORT SYSTEMS USA, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
ASSETS

CASH AND CASH EQUIVALENTS............... $ 1 $ 42
DEFERRED OFFERING COSTS................. 177 2,866
------------ -----------
Total assets.................. $ 178 $ 2,908
============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY

ACCRUED LIABILITIES AND AMOUNTS DUE TO
STOCKHOLDER........................... $ 177 $ 2,866
STOCKHOLDER'S EQUITY:
Preferred stock, $.01 par,
5,000,000 authorized, none issued
and outstanding.................. -- --
Common stock, $.01 par, 52,969,912
shares authorized, 121,139 and
4,239,847 shares issued and
outstanding, respectively........ 1 42
Additional paid in capital......... -- 10,655
Retained deficit................... -- (10,655)
------------ -----------
Total stockholder's equity.... 1 42
------------ -----------
Total liabilities and
stockholder's equity....... $ 178 $ 2,908
============ ===========

Reflects a 121.1387-for-one stock split effective on March 19, 1997.
The accompanying notes are an integral part of these financial statements.

F-12
<PAGE>

COMFORT SYSTEMS USA, INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
(IN THOUSANDS)

REVENUES............................. $ --
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................. 10,655
---------
LOSS BEFORE INCOME TAXES............. (10,655)
INCOME TAX BENEFIT................... --
---------
NET LOSS............................. $ (10,655)
=========

The accompanying notes are an integral part of these financial statements.

F-13
<PAGE>
COMFORT SYSTEMS USA, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (DECEMBER 12, 1996)
THROUGH MARCH 31, 1997
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
----------- ------ ---------- -------- --------------
<S> <C> <C> <C> <C> <C>
Initial Capitalization............... 121,139 $ 1 $ -- $ -- $ 1
----------- ------ ---------- -------- --------------
BALANCE, December 31, 1996........... 121,139 1 -- -- 1
Issuance of Management Shares
(unaudited)..................... 4,118,708 41 10,655 -- 10,696
Net loss (unaudited)............ -- -- -- (10,655) (10,655)
----------- ------ ---------- -------- --------------
BALANCE, March 31, 1997
(unaudited)........................ 4,239,847 $ 42 $10,655 $(10,655) $ 42
=========== ====== ========== ======== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-14
<PAGE>
COMFORT SYSTEMS USA, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss............................. $ (10,655)
Adjustments to reconcile net loss
to net cash provided by (used
in) operating activities--
Compensation expense related to
issuance of management shares... 10,655
Changes in assets and liabilities--
Increase in deferred offering
costs........................ (2,689)
Increase in accrued
liabilities and amounts due
to stockholder............... 2,689
---------
Net cash provided by
operating activities...... --
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock.................. 41
---------
Net cash provided by
financing activities...... 41
---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 41
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 1
---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 42
=========

The accompanying notes are an integral part of these financial statements.

F-15
<PAGE>
COMFORT SYSTEMS USA, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Comfort Systems USA, Inc., a Delaware corporation, ("Comfort Systems" or
the "Company") was founded in December 1996 to become a national provider of
comprehensive HVAC installation services and maintenance, repair and replacement
of HVAC systems, focusing primarily on the commercial and industrial markets.
Comfort intends to acquire 12 U.S. businesses (the "Mergers"), complete an
initial public offering (the "Offering") of its common stock and, subsequent
to the Offering, continue to acquire through merger or purchase, similar
companies to expand its national operations.

Comfort Systems has not conducted any operations, and all activities to
date have related to the Offering and the Mergers. The Company's cash balances
were generated from the initial capitalization of the Company (see Note 3). All
other expenditures to date have been funded by the primary stockholder, Notre
Capital Ventures II, L.L.C. ("Notre"), on behalf of the Company. Since there
were no revenues, expenses or cash flows from Inception (December 12, 1996)
through December 31, 1996, statements of operations and cash flows have been
omitted for this period. Notre has committed to fund the organization expenses
and offering costs. As of December 31, 1996 and March 31, 1997, costs of
approximately $177,000 and $2,866,000 (unaudited), respectively have been
incurred by Notre in connection with the Offering. Comfort Systems has treated
these costs as deferred offering costs. Comfort Systems is dependent upon the
Offering to execute the pending Mergers. There is no assurance that the pending
Mergers discussed below will be completed or that Comfort Systems will be able
to generate future operating revenues.

2. INTERIM FINANCIAL INFORMATION:

The interim financial statements as of March 31, 1997, and for the three
months then ended are unaudited, and certain information and footnote
disclosures, normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been omitted. In the opinion
of management, all adjustments, consisting only of normal recurring adjustments,
necessary to fairly present the financial position, results of operations and
cash flows with respect to the interim financial statements, have been included.
The results of operations for the interim period is not necessarily indicative
of the results for the entire fiscal year.

3. STOCKHOLDER'S EQUITY:

COMMON STOCK AND PREFERRED STOCK

Comfort Systems effected a 121.1387-for-one stock split on March 19, 1997
for each share of common stock of the Company ("Common Stock") then
outstanding. In addition, the Company increased the number of authorized shares
of Common Stock to 52,969,912 and authorized 5,000,000 shares of $.01 par value
preferred stock. The effects of the Common Stock split and the increase in the
shares of authorized Common Stock have been retroactively reflected on the
balance sheet and in the accompanying notes.

In connection with the organization and initial capitalization of Comfort
Systems, the Company issued 121,139 shares of common stock at $.01 per share to
Notre. In January 1997, the Company issued 2,848,773 additional shares to Notre
for $.01 per share.

In January and February 1997, the Company issued a total of 1,269,935
shares of Common Stock to management and consultants to the Company at a price
of $.01 per share. As a result, the Company recorded a non-recurring, non-cash
compensation charge of $10.7 million (unaudited) in the first quarter of 1997,
representing the difference between the amount paid for the shares and an
estimated fair value of the shares on the date of sale.

F-16
<PAGE>
COMFORT SYSTEMS USA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

RESTRICTED COMMON STOCK

In March 1997, the primary stockholder exchanged its 2,742,912 shares of
Common Stock for an equal number of shares of restricted voting common stock
("Restricted Common Stock"). The holder of Restricted Common Stock is entitled
to elect one member of the Company's Board of Directors and to 0.55 of one vote
for each share on all other matters on which they are entitled to vote. Holders
of Restricted Common Stock are not entitled to vote on the election of any other
directors.

Each share of Restricted Common Stock will automatically convert to Common
Stock on a share-for-share basis (i) in the event of a disposition of such share
of Restricted Common Stock by the holder thereof (other than a distribution
which is a distribution by a holder to its partners or beneficial owners, or a
transfer to a related party of such holders (as defined in Sections 267, 707,
318 and/or 4946 of the Internal Revenue of 1986, as amended), (ii) in the event
any person acquires beneficial ownership of 15% or more of the total number of
outstanding shares of Common Stock of the Company, or (iii) in the event any
person offers to acquire 15% or more of the total number of outstanding shares
of Common Stock of the Company. After July 1, 1998, the Board of Directors may
elect to convert any remaining shares of Restricted Common Stock into shares of
Common Stock in the event 80% or more of the originally outstanding shares of
Restricted Common Stock have been previously converted into shares of Common
Stock.

LONG-TERM INCENTIVE PLAN

In March 1997, the Company's stockholders approved the Company's 1997
Long-Term Incentive Plan (the "Plan"), which provides for the granting or
awarding of incentive or non-qualified stock options, stock appreciation rights,
restricted or deferred stock, dividend equivalents and other incentive awards to
directors, officers, key employees and consultants to the Company. The number of
shares authorized and reserved for issuance under the Plan is the greater of
2,500,000 shares or 13% of the aggregate number of shares of Common Stock
outstanding. The terms of the option awards will be established by the
Compensation Committee of the Company's Board of Directors. The Company intends
to file a registration statement on Form S-8 under the Securities Act
registering the issuance of shares upon exercise of options granted under this
Plan. The Company expects to grant non-qualified stock options to purchase a
total of 675,000 shares of Common Stock to key employees of the Company at the
initial public offering price upon consummation of the Offering. In addition,
the Company expects to grant options to purchase a total of 1,271,953 shares of
Common Stock to certain employees of the Founding Companies at the initial
public offering price per share. These options will vest at the rate of 20% per
year, commencing on the first anniversary of the Offering and will expire seven
years from the date of grant or three months following termination of
employment.

NON-EMPLOYEE DIRECTORS STOCK PLAN

In March 1997, the Company's stockholders approved the 1997 Non-Employee
Directors' Stock Plan (the "Directors' Plan"), which provides for the granting
or awarding of stock options and stock appreciation rights to nonemployees. The
number of shares authorized and reserved for issuance under the Stock Plan is
250,000 shares. The Directors' Plan provides for the automatic grant of options
to purchase 10,000 shares to each non-employee director serving at the
commencement of the Offering.

Each non-employee director will be granted options to purchase an
additional 10,000 shares at the time of the initial election. In addition, each
director will be automatically granted options to purchase 5,000 shares at each
annual meeting of the stockholders occurring more than two months after the date
of the

F-17
<PAGE>
COMFORT SYSTEMS USA, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

director's initial election. All options will be exercised at the fair market
value at the date of grant and are immediately vested upon grant.

Options will be granted to each of two future and one current member of the
board of directors to purchase 10,000 shares of Common Stock at the initial
Offering price per share effective upon the consummation of this Offering. These
options will expire the earlier of 10 years from the date of grant or one year
after termination of service as a director.

The Directors' Plan allows non-employee directors to receive shares
("deferred shares") at future settlement dates in lieu of cash. The number of
deferred shares will have an aggregate fair market value equal to the fees
payable to the directors.

4. STOCK BASED COMPENSATION:

Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," allows entities to choose between a
new fair value based method of accounting for employee stock options or similar
equity instruments and the current intrinsic, value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25").
Entities electing to remain with the accounting in APB Opinion No. 25 must make
pro forma disclosures of net income and earnings per share as if the fair value
method of accounting had been applied. The Company will provide pro forma
disclosure of net income and earnings per share, as applicable, in the notes to
future consolidated financial statements.

5. EVENTS SUBSEQUENT TO THE DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

Wholly-owned subsidiaries of Comfort Systems have signed definitive
agreements to acquire by merger or share exchange 12 companies ("Founding
Companies") to be effective contemporaneously with the Offering. The companies
to be acquired are Accurate Air Systems, Inc., Atlas Comfort Services USA, Inc.
and Subsidiary, Contract Service, Inc., Eastern Heating and Cooling, Inc.,
Freeway Heating and Air Conditioning, Inc., Quality Air Heating & Cooling, Inc.,
Seasonair, Inc., S.M. Lawrence Inc. and Related Company, Standard Heating and
Air Conditioning Company, Tech Heating and Air Conditioning, Inc. and Related
Company, Tri-City Mechanical, Inc. and Western Building Services, Inc. The
aggregate consideration that will be paid by Comfort Systems to acquire the
Founding Companies is approximately $41.8 million in cash and 9,720,927 shares
of Common Stock.

On March 26, 1997, Comfort Systems filed a registration statement on Form
S-1 for the sale of its common stock. See "Risk Factors" included elsewhere
herein.

The Company has received a commitment for a revolving line of credit of
$75.0 million. The facility is intended to be used for acquisitions, capital
expenditures, refinancing of debt not paid out of the proceeds of this Offering
and for general corporate purposes. The credit facility will require the Company
to comply with various loan covenants including (i) maintenance of certain
financial ratios, (ii) restrictions on additional indebtedness, and (iii)
restrictions on liens, guarantees, advances and dividends. The line of credit is
subject to customary closing conditions and the completion of definitive
documentation.

F-18

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Quality Air Heating & Cooling, Inc.:

We have audited the accompanying balance sheets of Quality Air Heating &
Cooling, Inc., as of March 31, 1995 and 1996, and December 31, 1996, and the
related statements of operations, shareholders' equity and cash flows for the
years ended March 31, 1995 and 1996, the nine months ended December 31, 1996,
and the year ended December 31, 1996. 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 financial position of Quality Air Heating &
Cooling, Inc., as of March 31, 1995 and 1996, and December 31, 1996, and the
results of their operations and their cash flows for the years ended March 31,
1995 and 1996, the nine months ended December 31, 1996 and the year ended
December 31, 1996, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-19
<PAGE>
QUALITY AIR HEATING & COOLING, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
MARCH 31,
-------------------- DECEMBER 31, MARCH 31,
1995 1996 1996 1997
--------- --------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 1,669 $ 4,191 $ 2,651 $ 3,778
Accounts receivable --
Trade, net of allowance of
$87, $80, $80 and $80,
respectively............ 4,510 4,188 5,260 5,896
Retainage.................. 457 464 453 536
Other receivables.......... 14 12 5 6
Inventories..................... 445 480 541 601
Costs and estimated earnings in
excess of billings on
uncompleted contracts......... 1,192 964 1,312 595
Prepaid expenses and other
current assets................ 92 63 17 50
Federal income tax deposit...... 506 654 691 692
--------- --------- ------------ ------------
Total current
assets............. 8,885 11,016 10,930 12,154
PROPERTY AND EQUIPMENT, net.......... 771 708 758 774
--------- --------- ------------ ------------
Total assets.......... $ 9,656 $ 11,724 $ 11,688 $ 12,928
========= ========= ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
debt.......................... $ 470 $ 613 $ 675 $ 695
Accounts payable and accrued
expenses...................... 2,786 2,734 2,178 2,654
Dividends payable to
shareholder................... 1,538 3,314 1,519 3,875
Billings in excess of costs and
estimated earnings on
uncompleted contracts......... 897 604 1,254 988
Unearned revenue................ 335 362 372 391
--------- --------- ------------ ------------
Total current
liabilities........ 6,026 7,627 5,998 8,603
LONG-TERM DEBT, net of current
maturities......................... 2,444 1,392 646 362
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value;
250,000 shares authorized and
issued, 183,993 shares
outstanding................... 22 22 22 22
Additional paid-in capital...... 6 6 6 6
Retained earnings............... 2,056 3,575 5,914 4,833
Treasury stock, 66,007 shares,
at cost....................... (898) (898) (898) (898)
--------- --------- ------------ ------------
Total shareholders'
equity............. 1,186 2,705 5,044 3,963
--------- --------- ------------ ------------
Total liabilities and
shareholders'
equity............. $ 9,656 $ 11,724 $ 11,688 $ 12,928
========= ========= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-20
<PAGE>
QUALITY AIR HEATING & COOLING, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS YEAR THREE MONTHS ENDED
MARCH 31, ENDED ENDED MARCH 31,
-------------------- DECEMBER 31, DECEMBER 31, --------------------
1995 1996 1996 1996 1996 1997
--------- --------- ------------ ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 24,434 $ 32,594 $ 23,282 $ 29,597 $ 6,315 $ 8,766
COST OF SERVICES..................... 15,634 20,850 14,176 18,467 4,291 5,372
--------- --------- ------------ ------------ --------- ---------

Gross profit.................... 8,800 11,744 9,106 11,130 2,024 3,394
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 6,646 6,791 5,032 6,640 1,608 2,094
--------- --------- ------------ ------------ --------- ---------

Income from operations.......... 2,154 4,953 4,074 4,490 416 1,300
OTHER INCOME (EXPENSE):

Interest expense................ (36) (218) (101) (154) (53) (29)
Other........................... 53 98 60 97 37 4
--------- --------- ------------ ------------ --------- ---------

NET INCOME........................... $ 2,171 $ 4,833 $ 4,033 $ 4,433 $ 400 $ 1,275
========= ========= ============ ============ ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-21
<PAGE>
QUALITY AIR HEATING & COOLING, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------- PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------- ------ ---------- --------- -------- --------------

<S> <C> <C> <C> <C> <C> <C>
BALANCE, March 31, 1994................. 250,000 $ 22 $ 6 $ 3,636 $-- $ 3,664

Purchase of treasury stock......... -- -- -- -- (898) (898)

Distributions to shareholders...... -- -- -- (3,751) -- (3,751)

Net income......................... -- -- -- 2,171 -- 2,171
------- ------ ------- --------- -------- --------------

BALANCE, March 31, 1995................. 250,000 22 6 2,056 (898) 1,186

Distributions to shareholders...... -- -- -- (3,314) -- (3,314)

Net income......................... -- -- -- 4,833 -- 4,833
------- ------ ------- --------- -------- --------------
BALANCE, March 31, 1996................. 250,000 22 6 3,575 (898) 2,705

Distributions to shareholders...... -- -- -- (1,694) -- (1,694)

Net income......................... -- -- -- 4,033 -- 4,033
------- ------ ------- --------- -------- --------------
BALANCE, December 31, 1996.............. 250,000 22 6 5,914 (898) 5,044

Distribution to shareholders
(unaudited)...................... -- -- -- (2,356) -- (2,356)
Net income (unaudited)............. -- -- -- 1,275 -- 1,275
------- ------ ------- --------- -------- --------------
BALANCE, March 31, 1997 (unaudited)..... 250,000 $ 22 $ 6 $ 4,833 $ (898) $ 3,963
======= ====== ======= ========= ======== ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-22
<PAGE>
QUALITY AIR HEATING & COOLING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED NINE MONTHS YEAR ENDED
MARCH 31 ENDED ENDED MARCH 31,
-------------------- DECEMBER 31, DECEMBER 31, --------------------
1995 1996 1996 1996 1996 1997
--------- --------- ------------ ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 2,171 $ 4,833 $ 4,033 $ 4,433 $ 400 $ 1,275
Adjustments to reconcile net income
to net cash provided by (used
in) operating activities --.....
Depreciation and amortization... 359 371 242 370 121 127
Loss (gain) on sale of property
and equipment................. 7 -- 25 25 3 (1)
Changes in operating assets and
liabilities --................
(Increase) decrease in --.....
Accounts receivable........ (1,334) 317 (1,054) 335 1,389 (720)
Inventories................ (6) (35) (61) (76) (15) (60)
Costs and estimated
earnings in excess of
billings on uncompleted
contracts............... (804) 228 (348) (253) 95 717
Prepaid expenses and other
current assets.......... (15) 29 46 (3) (49) (33)
Federal income tax
deposit................. 50 (148) (37) (185) (148) (1)
Increase (decrease) in --.....
Accounts payable and
accrued expenses........ 470 (52) (556) (481) 74 476
Billings in excess of costs
and estimated earnings
on uncompleted
contracts............... 477 (293) 650 269 (381) (266)
Unearned revenue........... (15) 27 10 26 17 19
--------- --------- ------------ ------------ --------- ---------
Net cash provided by
operating
activities......... 1,360 5,277 2,950 4,460 1,506 1,533
--------- --------- ------------ ------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment....................... 21 -- 14 14 4 3
Additions of property and
equipment....................... (467) (308) (331) (455) (123) (145)
--------- --------- ------------ ------------ --------- ---------
Net cash used in
investing
activities......... (446) (308) (317) (441) (119) (142)
--------- --------- ------------ ------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt....... 3,000 -- -- -- -- --
Payments of long-term debt......... (226) (909) (684) (903) (219) (264)
Distributions to shareholders...... (3,088) (1,538) (3,489) (3,488) -- --
Purchase of treasury stock......... (898) -- -- -- -- --
--------- --------- ------------ ------------ --------- ---------
Net cash used in
financing
activities......... (1,212) (2,447) (4,173) (4,391) (219) (264)
--------- --------- ------------ ------------ --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... (298) 2,522 (1,540) (372) 1,168 1,127
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 1,967 1,669 4,191 3,023 3,023 2,651
--------- --------- ------------ ------------ --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 1,669 $ 4,191 $ 2,651 $ 2,651 $ 4,191 $ 3,778
========= ========= ============ ============ ========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for --
Interest........................ $ 44 $ 201 $ 107 $ 152 $ 45 $ 25
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-23
<PAGE>
QUALITY AIR HEATING & COOLING, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Quality Air Heating & Cooling, Inc., a Michigan corporation, (the
"Company") focuses on providing "design and build" installation services and
maintenance, repair and replacement of HVAC systems primarily for mid-sized to
large commercial facilities. Quality primarily operates throughout western
Michigan.

The Company and its shareholders intend to enter into a definitive
agreement with Comfort Systems USA, Inc. ("Comfort Systems"), pursuant to
which all outstanding shares of the Company's common stock will be exchanged for
cash and shares of Comfort Systems common stock concurrently with the
consummation of the initial public offering (the "Offering") of the common
stock of Comfort Systems.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL INFORMATION

The interim financial statements as of March 31, 1997, and for the three
months ended March 31, 1996 and 1997, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES

Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the asset.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.

REVENUE RECOGNITION

The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-completion method measured by the
percentage of costs incurred to total estimated costs for each contract.
Provisions for the total estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job performance, job
conditions, estimated profitability and final contract settlements may result in
revisions to costs and income and their effects are recognized in the period in
which the revisions are determined.

F-24
<PAGE>
QUALITY AIR HEATING & COOLING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The balances billed but not paid by customers pursuant to retainage
provisions in construction contracts will be due upon completion of the
contracts and acceptance by the customer. Based on the Company's experience with
similar contracts in recent years, the retention balance will be billed and
collected in the upcoming fiscal year.

WARRANTY COSTS

The Company warrants labor for the first year after installation on new air
conditioning and heating systems. The Company generally warrants labor for 30
days after servicing of existing air conditioning and heating systems. A reserve
for warranty costs is recorded upon completion of installation or service.

INCOME TAXES

The Company has elected S Corporation status as defined by the Internal
Revenue Code, whereby the Company is not subject to taxation for federal
purposes. Under S Corporation status, the shareholders report their share of the
Company's taxable earnings or losses in their personal tax returns. The Company
will terminate its S Corporation status concurrently with the effective date of
this Offering. Included in current assets are deposits to prepay certain of the
shareholders' federal income taxes.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NEW ACCOUNTING PRONOUNCEMENT

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Accordingly, in
the event that facts and circumstances indicate that property and equipment or
other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, 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 is necessary. Adoption of this
standard did not have a material effect on the financial position or results of
operations of the Company.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
ESTIMATED MARCH 31,
USEFUL LIVES -------------------- DECEMBER 31,
IN YEARS 1995 1996 1996
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Transportation equipment............. 5 $ 1,449 $ 1,554 $1,725
Machinery and equipment.............. 7 480 453 465
Computer and telephone equipment..... 5-7 80 87 90
Leasehold improvements............... 5 838 834 859
Furniture and fixtures............... 7 435 414 459
--------- --------- ------------
Less -- Accumulated depreciation and
amortization....................... (2,511) (2,634) (2,840)
--------- --------- ------------
Property and equipment, net..... $ 771 $ 708 $ 758
========= ========= ============
</TABLE>
F-25
<PAGE>
QUALITY AIR HEATING & COOLING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS (IN THOUSANDS):

Activity in the Company's allowance for doubtful accounts consists of the
following:

MARCH 31,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
Balance at beginning of year......... $ 70 $ 87 $ 80
Additions to costs and expenses...... 142 35 2
Deductions for uncollectible
receivables written off and
recoveries......................... (125) (42) (2)
--------- --------- ------------
$ 87 $ 80 $ 80
========= ========= ============

Accounts payable and accrued expenses consist of the following:

MARCH 31,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
Accounts payable, trade.............. $ 1,353 $ 1,145 $ 921
Accrued compensation and benefits.... 540 693 426
Other accrued expenses............... 893 896 831
--------- --------- ------------
$ 2,786 $ 2,734 $2,178
========= ========= ============

Installation contracts in progress are as follows:

MARCH 31,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
Costs incurred on contracts in
progress........................... $ 5,240 $ 7,697 $ 7,231
Estimated earnings, net of losses.... 1,556 2,588 2,433
--------- --------- ------------
6,796 10,285 9,664
Less -- Billings to date............. 6,501 9,925 9,606
--------- --------- ------------
$ 295 $ 360 $ 58
========= ========= ============
Costs and estimated earnings in
excess of billings on uncompleted
contracts.......................... $ 1,192 $ 964 $ 1,312
Billings in excess of costs and
estimated earnings on uncompleted
contracts.......................... (897) (604) (1,254)
--------- --------- ------------
$ 295 $ 360 $ 58
========= ========= ============

5. LONG-TERM DEBT:

Long-term debt consists of a note payable to a bank. The debt is secured by
certain equipment, accounts receivable, inventory, a $1,000,000 life insurance
policy on the president and the personal guaranty of the president limited to 50
percent of the outstanding balance of the loan. The note is payable in monthly
installments of $63,000 including interest at the prime lending rate less .25
percent (8 percent at December 31, 1996). The Company has restrictive and
various financial covenants with which the Company was in compliance at December
31, 1996.

F-26
<PAGE>
QUALITY AIR HEATING & COOLING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The maturities of long-term debt as of December 31, 1996, are as follows
(in thousands):

Year ending December 31,
1997............................ $ 675
1998............................ 646
---------
$ 1,321
=========

The Company has a $2,000,000 line of credit with a bank. The line of credit
expires August 1, 1997, and bears interest at one-half percent below the prime
lending rate. The line of credit is secured by accounts receivable, inventory, a
$1,000,000 life insurance policy, and machinery and equipment. There was no
balance outstanding under this line of credit at March 31, 1995 and 1996, and
December 31, 1996.

6. LEASES:

The Company leases a facility from a company which is owned by one of the
Company's shareholders. The lease expires on April 30, 2005. Quality has an
option to renew the lease for one additional three-year term on the same terms.
The rent paid under this related-party lease was approximately $221,000 for each
of the years ended March 31, 1995 and 1996, and December 31, 1996. The Company
also leases a facility from a third party, which expires on June 30, 1998. The
rent paid under this lease was approximately $20,000 for each of the years ended
March 31, 1995 and 1996, and December 31, 1996. The Company has guaranteed the
payment of two series of public bonds issued in 1985 and 1990, respectively, by
the Michigan Strategic Fund on behalf of two real property development entities
owned by a shareholder, the proceeds of which were used to fund the construction
of the Company's leased warehouse facility and a second adjacent warehouse. As
of March 1997, approximately $1.6 million of the bond debt remained outstanding.

Future minimum lease payments under these non-cancellable operating leases
are as follows (in thousands):

Year ending December 31,
1997............................ $ 241
1998............................ 231
1999............................ 221
2000............................ 221
2001............................ 221
Thereafter...................... 718
---------
$ 1,853
=========

7. RELATED-PARTY TRANSACTIONS:

The Company paid management fees to an entity owned by its majority
shareholder through December 31, 1995. Total management fees paid amounted to
$260,000 and $190,000 for the years ended March 31, 1995 and 1996, respectively.

8. EMPLOYEE BENEFIT PLAN:

The Company has a defined contribution profit sharing plan. The plan
provides for the Company to match one-half of the first 4 percent contributed by
each employee. Total contributions by the Company under the plan were
approximately $104,000, $110,000 and $125,000 for the years ending March 31,
1995 and 1996, and December 31, 1996, respectively. The Company may also make
discretionary contributions. The Company made discretionary contributions of
$200,000 and $300,000 for the years ended March 31,

F-27
<PAGE>
QUALITY AIR HEATING & COOLING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1995 and 1996, and had accrued approximately $169,000 at December 31, 1996, for
contributions to be funded in 1997.

9. FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash and cash equivalents, a
line of credit, notes payable and debt. The Company believes that the carrying
value of these instruments on the accompanying balance sheet approximates their
fair value.

10. COMMITMENTS AND CONTINGENCIES:

LITIGATION

The Company is involved in legal actions arising in the ordinary course of
business. Management does not believe the outcome of such legal actions will
have a material adverse effect on the Company's financial position or results of
operations.

INSURANCE

The Company carries a broad range of insurance coverage, including business
auto liability, general liability and an umbrella policy. The Company has not
incurred significant claims or losses on any of these insurance policies.

The Company is self-insured for medical claims up to $30,000 per year per
covered individual. Additionally, the Company is part of the state's workers'
compensation plan and is responsible for claims up to $275,000 per accident with
a maximum aggregate exposure for twenty-four months of $648,000. Claims in
excess of these amounts are covered by a stop-loss policy. Under the state's
policy, the Company has a $300,000 letter of credit which expires December 31,
1997. The Company has recorded reserves for its portion of self-insured claims
based on estimated claims incurred through March 31, 1995 and 1996 and December
31, 1996.

ROYALTY AGREEMENT

The Company is obligated to pay royalties ranging from 1 percent to 4.5
percent based on the level of service revenues through December 1, 2001, for
management systems support. Royalties paid under this agreement were
approximately $157,000, $159,000 and $165,000 for the years ended March 31, 1995
and 1996 and December 31, 1996.

11. SHAREHOLDERS' EQUITY:

On February 15, 1995, the Company acquired 66,007 shares of common stock
from its majority shareholder for approximately $898,000.

12. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

In March 1997, the Company and its shareholders entered into a definitive
agreement with a wholly-owned subsidiary of Comfort Systems, providing for the
merger of the Company with the subsidiary of Comfort Systems.

As of March 31, 1997, the Company declared and accrued distributions of
$2,356,000 to its shareholders. In connection with the merger, the Company will
make additional cash distributions of approximately $4,833,000 prior to the
merger which represents the Company's estimated S Corporation accumulated
adjustment account. Had these transactions been recorded at March 31, 1997, the
effect on the accompanying unaudited balance sheet would be a decrease in assets
of $3,478,000, an increase in liabilities of $1,355,000 and a decrease in
shareholders' equity of $4,833,000.

F-28

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Atlas Comfort Services USA, Inc.:

We have audited the accompanying consolidated balance sheets of Atlas
Comfort Services USA, Inc. (a Texas corporation) and its subsidiary (the
Company) as of June 30, 1995 and 1996 and December 31, 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended June 30, 1994, 1995 and 1996 and the six months ended December
31, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Atlas Comfort Services USA, Inc., and its subsidiary as of June 30, 1995 and
1996, and December 31, 1996, and the consolidated results of their operations
and their cash flows for the three years ended June 30, 1994, 1995 and 1996 and
for the six months ended December 31, 1996, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-29
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
JUNE 30,
-------------------- DECEMBER 31, MARCH 31,
1995 1996 1996 1997
--------- --------- ------------ ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 427 $ 391 $ 101 $ 356
Accounts receivable --
Trade, net of allowance of
$60, $60, $100 and $100,
respectively............ 2,920 3,953 2,604 3,226
Retainage.................. 904 1,327 1,208 1,280
Officers, employees and
other receivables....... 114 172 159 158
Inventories..................... 1,685 2,000 1,770 1,676
Costs and estimated earnings in
excess of billings on
uncompleted contracts......... 1,050 681 676 314
Current deferred income taxes... 155 164 145 145
Prepaid expenses and other
current assets................ 40 27 82 56
--------- --------- ------------ ---------
Total current
assets............. 7,295 8,715 6,745 7,211
PROPERTY AND EQUIPMENT, net.......... 231 484 499 598
OTHER ASSETS:
Goodwill, net................... 24 23 22 22
Deferred income tax............. 167 105 88 88
--------- --------- ------------ ---------
Total assets.......... $ 7,717 $ 9,327 $7,354 $ 7,919
========= ========= ============ =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit.................. $ 500 $ 600 $-- $ 200
Current maturities of notes
payable to affiliates......... 200 102 107 107
Current obligations under
capital leases................ 32 92 101 140
Current maturities of long-term
debt.......................... 9 348 356 353
Accounts payable and accrued
expenses...................... 3,522 3,295 2,246 2,101
Income tax payable.............. 363 390 752 936
Billings in excess of costs and
estimated earnings on
uncompleted contracts......... 1,115 1,947 523 570
--------- --------- ------------ ---------
Total current
liabilities........ 5,741 6,774 4,085 4,407
NOTES PAYABLE TO AFFILIATES, net of
current portion.................... 1,271 149 98 75
OBLIGATIONS UNDER CAPITAL LEASES, net
of current portion................. 44 133 121 209
LONG-TERM DEBT, net of current
portion............................ 21 1,225 1,058 965
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value;
5,000 shares authorized,
1,000 issued and
outstanding................... 1 1 1 1
Retained earnings............... 639 1,045 1,991 2,262
--------- --------- ------------ ---------
Total shareholders'
equity............. 640 1,046 1,992 2,263
--------- --------- ------------ ---------
Total liabilities and
shareholders'
equity............. $ 7,717 $ 9,327 $7,354 $ 7,919
========= ========= ============ =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-30
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
SIX MONTHS ENDED
YEAR ENDED JUNE 30, ENDED MARCH 31,
------------------------------- DECEMBER 31, --------------------
1994 1995 1996 1996 1996 1997
--------- --------- --------- ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 21,848 $ 22,444 $ 29,174 $ 15,545 $ 6,207 $ 6,115
COST OF SERVICES..................... 19,657 19,635 25,449 12,508 5,456 4,866
--------- --------- --------- ------------ --------- ---------

Gross profit..................... 2,191 2,809 3,725 3,037 751 1,249
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,086 2,166 2,843 1,432 631 753
--------- --------- --------- ------------ --------- ---------

Income from operations........... 105 643 882 1,605 120 496
OTHER INCOME (EXPENSE):

Interest expense................. (156) (168) (185) (107) (51) (54)
Other............................ 2 28 (11) 78 -- 17
--------- --------- --------- ------------ --------- ---------

Income (loss) before income taxes,
extraordinary item, and cumulative
effect of a change in accounting
principle.......................... (49) 503 686 1,576 69 459
Provision for income taxes
(benefit).......................... (2) 199 280 630 28 188
--------- --------- --------- ------------ --------- ---------

Income (loss) before extraordinary
item and cumulative effect of a
change in accounting principle..... (47) 304 406 946 41 271
Extraordinary item -- gain on
extinguishment of debt, net of
deferred taxes of $167,000 (Note
5)................................. 273 -- -- -- -- --
--------- --------- --------- ------------ --------- ---------

Income before cumulative effect of a
change in accounting principle..... 226 304 406 946 41 271
Cumulative effect on prior years of a
change in accounting for income
taxes (Note 7)..................... 141 -- -- -- -- --
--------- --------- --------- ------------ --------- ---------

NET INCOME........................... $ 367 $ 304 $ 406 $ 946 $ 41 $ 271
========= ========= ========= ============ ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-31
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------ RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------- ------- --------- -------------

<S> <C> <C> <C> <C>
BALANCE, December 31, 1993........... 1,000 $ 1 $ (32) $ (31)

Net income...................... -- -- 367 367
------- ------- --------- -------------

BALANCE, June 30, 1994............... 1,000 1 335 336

Net income...................... -- -- 304 304
------- ------- --------- -------------

BALANCE, June 30, 1995............... 1,000 1 639 640

Net income...................... -- -- 406 406
------- ------- --------- -------------

BALANCE, June 30, 1996............... 1,000 1 1,045 1,046

Net income...................... -- -- 946 946
------- ------- --------- -------------

BALANCE, December 31, 1996........... 1,000 1 1,991 1,992
Net income (unaudited).......... -- -- 271 271
------- ------- --------- -------------

BALANCE, March 31, 1997
(unaudited)........................ 1,000 $ 1 $ 2,262 $ 2,263
======= ======= ========= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-32
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
SIX MONTHS ENDED
YEAR ENDED JUNE 30, ENDED MARCH 31,
------------------------------- DECEMBER 31, --------------------
1994 1995 1996 1996 1996 1997
--------- --------- --------- ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................... $ 367 $ 304 $ 406 $ 946 $ 41 $ 271
Adjustments to reconcile net
income to net cash
provided by (used in) operating
activities --
Depreciation and
amortization.............. 104 124 92 84 27 33
Cumulative effect of a
change in accounting
principle................. (141) -- -- -- -- --
Extraordinary gain on
extinguishment of debt.... (440) -- -- -- -- --
Deferred income tax
provision................. 167 (196) 54 36 -- --
Changes in operating assets
and liabilities --
(Increase) decrease in --
Accounts receivable......... (1,672) 148 (1,514) 1,481 816 (693)
Inventories................. (264) (554) (315) 230 (460) 94
Costs and estimated earnings
in excess of billings on
uncompleted contracts..... (145) (266) 369 5 317 362
Prepaid expenses and other
current assets............ 121 (14) 13 (55) 124 26
Increase (decrease) in --
Accounts payable and accrued
expenses.................. 1,320 (417) (227) (1,049) (135) (146)
Income tax payable.......... -- 363 27 362 (259) 184
Billings in excess of costs
and estimated earnings on
uncompleted contracts..... 585 437 834 (1,424) (445) 47
--------- --------- --------- ------------ --------- ---------
Net cash provided by (used
in) operating
activities................ 2 (71) (261) 616 26 178
--------- --------- --------- ------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment...................... (139) (67) (121) (50) (96) (131)
--------- --------- --------- ------------ --------- ---------
Net cash used in investing
activities................ (139) (67) (121) (50) (96) (131)
--------- --------- --------- ------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of
credit......................... 400 100 100 (600) 240 200
Principal payments on notes
payable to affiliates.......... (38) (261) (1,219) (50) (23) (23)
Borrowings on notes payable to
affiliates..................... 1,202 100 -- 3 -- --
Principal payments on long-term
debt........................... (1,067) (14) (150) (176) (29) (95)
Borrowings on long-term debt..... 41 -- 1,689 15 315 19
Additions to (principal payments
on) capital lease
obligations.................... (29) (37) (74) (48) (9) 107
--------- --------- --------- ------------ --------- ---------
Net cash provided by (used
in) financing
activities................ 509 (112) 346 (856) 494 208
--------- --------- --------- ------------ --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 372 (250) (36) (290) 424 255
--------- --------- --------- ------------ --------- ---------
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 305 677 427 391 -- 101
--------- --------- --------- ------------ --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 677 $ 427 $ 391 $ 101 $ 424 $ 356
========= ========= ========= ============ ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Income Taxes..................... $ -- $ 30 $ 200 $ 224 $ 200 $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-33
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Atlas Comfort Services USA, Inc., a Texas corporation, and its subsidiary
(the "Company") is a leading provider of HVAC installation services for
apartment complexes, condominiums and hotels in the United States and also
provides maintenance, repair and replacement of HVAC systems. Atlas primarily
operates in the southwest, northeast, and the mid-Atlantic regions of the United
States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The consolidated financial statements include the accounts and results of
operations of the Company and its subsidiary which are under common control and
management of two individuals. All significant intercompany transactions and
balances have been eliminated in combination.

INTERIM FINANCIAL INFORMATION

The interim consolidated financial statements as of March 31, 1997, and for
the three months ended March 31, 1996 and 1997, are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the consolidated
interim financial statements, have been included. The results of operations for
the interim periods are not necessarily indicative of the results for the entire
fiscal year.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES

Inventories consist of duct materials, air conditioning equipment,
refrigeration supplies and accessories held for use in the ordinary course of
business and are stated at the lower of cost or market using the first-in,
first-out (FIFO) method.

PROPERTY AND EQUIPMENT

F-34
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-completion method measured by the
percentage of costs incurred to total estimated costs for each contract.
Provisions for the total estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job performance, job
conditions, estimated profitability and final contract settlements may result in
revisions to costs and income and are recognized in the period in which the
revisions are determined.

WARRANTY COSTS

The Company warrants labor for the first year after installation on new air
conditioning and heating units. The Company generally warrants labor for 30 days
after servicing of existing air conditioning and heating units. A reserve for
warranty costs is recorded upon completion of installation or service.

INCOME TAXES

The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109.
Under this method, deferred income taxes are recorded based upon the differences
between the 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
underlying assets or liabilities are recovered or settled.

USE OF ESTIMATES

GOODWILL

Goodwill, in the amount of $33,000, represents the excess of cost over the
fair value of net assets acquired and is amortized using the straight-line
method over 40 years. The Company assesses the recoverability of its goodwill
whenever adverse events occur and believes that no material impairment exists.

NEW ACCOUNTING PRONOUNCEMENTS

Effective July 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Accordingly, in the event that facts and circumstances indicate that
property and equipment, and intangible or other assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
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 is necessary. Adoption of this standard did not have a material effect on
the financial position or results of operations of the Company.

F-35
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
ESTIMATED JUNE 30,
USEFUL LIVES -------------------- DECEMBER 31,
IN YEARS 1995 1996 1996
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Transportation equipment............. 5 $ 741 $ 987 $1,043
Machinery and equipment.............. 5 116 140 137
Leasehold improvements............... 3 28 28 28
Furniture and fixtures............... 5 266 286 212
--------- --------- ------------
Less -- Accumulated depreciation and
amortization....................... (920) (957) (921)
--------- --------- ------------
Property and equipment,
net..................... $ 231 $ 484 $ 499
========= ========= ============
</TABLE>
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS (IN THOUSANDS):

Activity in the Company's allowance for doubtful accounts consists of the
following:

JUNE 30,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
Balance at beginning of year......... $ 60 $ 60 $ 60
Additions to costs and expenses...... 75 77 42
Deductions for uncollectible
receivables written off and
recoveries......................... (75) (77) (2)
--------- --------- ------------
$ 60 $ 60 $ 100
========= ========= ============

Accounts payable and accrued expenses consist of the following:

JUNE 30,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
Accounts payable, trade.............. $ 2,935 $ 2,409 $1,582
Accrued compensation and benefits.... 197 231 163
Accrued warranty expense............. 250 300 310
Other accrued expenses............... 140 355 191
--------- --------- ------------
$ 3,522 $ 3,295 $2,246
========= ========= ============

F-36
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Installation contracts in progress are as follows:

JUNE 30,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
Costs incurred on contracts in
progress........................... $ 11,884 $ 12,526 $ 12,643
Estimated earnings, net of losses.... 2,666 2,589 2,582
--------- --------- ------------
14,550 15,115 15,225
Less -- Billings to date............. 14,615 16,381 15,072
--------- --------- ------------
$ (65) $ (1,266) $ 153
========= ========= ============
Costs and estimated earnings in
excess of billings on uncompleted
contracts.......................... 1,050 681 676
Billings in excess of costs and
estimated earnings on uncompleted
contracts.......................... (1,115) (1,947) (523)
--------- --------- ------------
$ (65) $ (1,266) $ 153
========= ========= ============

5. DEBT:

LINE OF CREDIT

The Company has a $700,000 revolving line-of-credit facility with a bank at
the prime lending rate plus 1 percent with interest payable monthly. This credit
facility is secured by the Company's cash, accounts receivable, inventory, and
unpledged property and equipment. The credit facility is guaranteed by two of
the Company's officers and is also secured by investment accounts of certain
affiliates. The credit facility had an outstanding balance of $500,000,
$600,000, and $0 at June 30, 1995 and 1996 and December 31, 1996, respectively,
and matures in January 1998. The Company paid approximately $8,000, $33,000 and
$35,000 of interest relating to the revolving credit line for the years ended
June 30, 1994, 1995 and 1996 and $18,500 for the six months ended December 31,
1996.

NOTES PAYABLE TO FINANCIAL INSTITUTIONS

Long-term debt is summarized as follows:

JUNE 30,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
(IN THOUSANDS)
Note payable to a financial
institution with interest at prime
plus 1%, payable in monthly
installments of $26,667 plus
interest through January 1999, when
the entire balance of unpaid
principal and accrued interest
shall be due and payable........... $ -- $ 1,467 $1,306
Vehicle notes with interest at rates
ranging from 7.9% to 9.4%, payable
in monthly installments through
March 2001......................... 30 106 108
--------- --------- ------------
30 1,573 1,414
Less -- Current maturities........... 9 348 356
--------- --------- ------------
$ 21 $ 1,225 $1,058
========= ========= ============

The note payable to a financial institution is secured by cash, accounts
receivable, inventory, property and equipment, and the personal guarantee of the
two shareholders. In addition, investment accounts of the shareholders and of
certain affiliates of the shareholders are pledged as collateral for the note.
The Company paid interest of $3,000, $3,000 and $73,500 for the years ended June
30, 1994, 1995 and 1996, respectively, and $73,000 for the six months ended
December 31, 1996.

F-37
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In September 1993, the Company and a bank reached a settlement agreement in
which the bank released the Company from its total obligation of approximately
$1,500,000 related to a revolving line of credit, installment notes, equipment
notes and related accrued interest, for a lump sum payment of $1,100,000. The
payment was funded by the proceeds from the notes payable to affiliates
mentioned below. This early extinguishment of debt generated a gain aggregating
$440,000. The Company paid approximately $77,000 in interest during the year
ended June 30, 1994 related to these extinguished notes.

NOTES PAYABLE TO AFFILIATES

Notes payable to affiliates are summarized as follows:

JUNE 30,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
(IN THOUSANDS)
Note payable to a related party in
monthly installments of $5,500
including interest at 10% through
March 1998, collateralized by stock
of the Company..................... $ 159 $ 105 $ 78
Unsecured note payable to an
affiliate in monthly installments
of $2,500 including interest at 6%
through September 1996............. 326 -- --
Notes payable to Company officers in
monthly installments of $4,812
including interest at 10% through
June 1999.......................... 186 146 127
Notes payable to Company officers
with interest due monthly at the
prime rate through September 1996,
secured by accounts receivable,
certain property and equipment, and
intangible assets.................. 700 -- --
Unsecured note payable to Company
officers with interest and any
unpaid principal balance due August
8, 1995, at the rate of 9%......... 100 -- --
--------- --------- ------------
1,471 251 205
Less -- Current maturities........... 200 102 107
--------- --------- ------------
$ 1,271 $ 149 $ 98
========= ========= ============

The Company paid interest of $116,400, $112,600 and $68,000 related to
notes payable to affiliates for the years ended June 30, 1994, 1995 and 1996,
respectively, and $12,600 for the six months ended December 31, 1996.

The aggregate maturities of notes payable to financial institutions and
affiliates are as follows (in thousands):

Year ending December 31,
1997............................ $ 463
1998............................ 424
1999............................ 718
2000............................ 13
2001 and thereafter............. 1
---------
$ 1,619
=========

F-38
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LEASES:

The Company leases vehicles and warehouse facilities under capital and
operating leases expiring through October, 2000. Total rent expense related to
operating leases amounted to $95,000, $143,000 and $180,000 for the years ended
June 30, 1994, 1995 and 1996, respectively, and $60,000 for the six months ended
December 31, 1996.

Future minimum lease payments for capital and noncancelable operating
leases are as follows (in thousands):

NONCANCELABLE
CAPITAL OPERATING
LEASES LEASES
------- -------------
Year ended December 31,
1997............................ $ 117 $ 142
1998............................ 98 23
1999............................ 44 --
2000............................ 6 --
------- -------------
Total minimum lease payments.... 265 165
Amounts representing interest... 43
-------
Present value of net minimum
lease payments................ 222
Less -- Current portion......... 101
-------
Long-term obligation............ $ 121
=======

7. INCOME TAXES (IN THOUSANDS):

Federal and state income taxes are as follows:

SIX MONTHS
YEAR ENDED JUNE 30, ENDED
------------------------------- DECEMBER 31,
1994 1995 1996 1996
--------- --------- --------- ------------
Federal --
Current................... $ (2) $ 331 $ 193 $ 504
Deferred.................. 141 (164) 43 28
State --
Current................... -- 64 34 90
Deferred.................. 26 (32) 10 8
--------- --------- --------- ------------
$ 165 $ 199 $ 280 $ 630
========= ========= ========= ============

F-39
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 34 percent to income
(loss) before income taxes as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
------------------------------- DECEMBER 31,
1994 1995 1996 1996
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Provision at the statutory rate...... $ (16) $ 171 $ 233 $ 536
Increase resulting from --
Permanent differences, mainly
meals and entertainment....... 164 7 19 29
State income tax, net of benefit
for federal deduction......... 17 21 28 65
--------- --------- --------- ------------
$ 165 $ 199 $ 280 $ 630
========= ========= ========= ============
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences, representing deferred
tax assets and liabilities, result principally from the following:

JUNE 30,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
Accounting for long-term contracts... $ 159 $ 74 $ (11)
Warranty reserves.................... 100 123 127
Inventory............................ 32 38 40
Allowance for doubtful accounts...... 36 30 51
Other accrued expenses not deducted
for tax purposes................... 25 62 90
Bases differences on property and
equipment and capital lease
accounting......................... (30) (58) (64)
--------- --------- ------------
Net deferred tax assets.............. $ 322 $ 269 $ 233
========= ========= ============

The net deferred tax assets and liabilities are comprised of the following:

JUNE 30,
-------------------- DECEMBER 31,
1995 1996 1996
--------- --------- ------------
Deferred tax assets --
Current......................... $ 209 $ 240 $ 293
Long-term....................... 221 171 149
--------- --------- ------------
Total...................... 430 411 442
--------- --------- ------------
Deferred tax liabilities --
Current......................... (54) (76) (148)
Long-term....................... (54) (66) (61)
--------- --------- ------------
Total...................... (108) (142) (209)
--------- --------- ------------
Net deferred income tax
assets.................. $ 322 $ 269 $ 233
========= ========= ============

The Company adopted the provisions of SFAS No. 109 in fiscal year 1994
resulting in a cumulative effect of a change in accounting principle of
$141,000.

8. RELATED-PARTY TRANSACTIONS:

Two shareholders lease to the Company the main office facility. Total
payments made under this lease agreement amounted to $90,000 for each of the
years ended June 30, 1994, 1995 and 1996, respectively, and $45,000 for the six
months ended December 31, 1996. The Company is in the process of entering into

F-40
<PAGE>
ATLAS COMFORT SERVICES USA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
an agreement with these shareholders to lease land on which a new facility will
be built. This lease agreement is anticipated to have a twenty year term.

9. COMMITMENTS AND CONTINGENCIES:

LITIGATION

The Company is involved in legal actions arising in the ordinary course of
business. Management does not believe the outcome of such legal action will have
a material adverse effect on the Company's financial position or consolidated
results of operations.

INSURANCE

The Company carries a broad range of insurance coverage, including general
and business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies.

10. EMPLOYEE BENEFIT PLAN

The Company sponsors a Profit Sharing and Savings Plan (the "Plan") which
covers substantially all employees. The employees who participate in the Plan
may contribute 1 percent to 20 percent of their base compensation, and the
Company may make discretionary matching contributions. The Company did not make
any contributions for the years ended December 31, 1994 and 1995. The Company
made $18,248 in contributions for the year ended June 30, 1996 and $12,667 for
the six months ended December 31, 1996.

11. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
notes receivable, notes payable, a line of credit and long-term debt. The
Company believes that the carrying value of these instruments on the
accompanying balance sheet approximates their fair value.

12. SIGNIFICANT CUSTOMERS AND VENDORS:

Significant customers are those that account for greater than ten percent
of the Company's revenues. For the year ended June 30, 1996 and the six months
ended December 31, 1996, one customer, a publicly traded Real Estate Investment
Trust, accounted for 14% and 20% of the Company's revenues, respectively.
Receivables outstanding from this customer represented 13% and 12% of the
Company's trade and retainage receivables as of June 30, 1996 and December 31,
1996, respectively. In addition, one of the Company's shareholders has less than
1% ownership in this customer.

During the years ended June 30, 1994, 1995 and 1996 and the six months
ended December 31, 1996, two vendors accounted for 12% and 11%; 29% and 17%; 20%
and 17%; and 15% and 12% of the Company's purchases, respectively.

13. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

In March 1997, the Company and its shareholders entered into a definitive
agreement with a wholly-owned subsidiary of Comfort Systems providing for the
merger of the Company with the subsidiary of Comfort Systems.

Concurrently with the merger, the Company will enter into agreements with
the shareholders to lease land and buildings used in the Company's operations
for negotiated amounts and terms.

F-41

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Tri-City Mechanical, Inc.:

We have audited the accompanying balance sheets of Tri-City Mechanical,
Inc. as of December 31, 1995 and 1996, and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. 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 Tri-City Mechanical, Inc. as
of December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-42
<PAGE>
TRI-CITY MECHANICAL, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 2,551 $1,958 $2,665
Restricted cash................. 383 325 328
Investments..................... -- 493 500
Accounts Receivable --
Trade, net of allowance of
$130, $30 and $30,
respectively............ 4,495 3,734 3,774
Retainage.................. 831 756 728
Other receivables.......... 2 11 66
Inventories..................... 1,183 762 218
Costs and estimated earnings in
excess of billings on
uncompleted contracts......... 306 288 380
Prepaid expenses and other
current assets................ 1 12 2
------------ ------------ ------------
Total current assets....... 9,752 8,339 8,661
PROPERTY AND EQUIPMENT, net.......... 508 656 643
------------ ------------ ------------
Total assets............... $ 10,260 $8,995 $9,304
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
expenses...................... $ 2,683 $2,179 $2,408
Billings in excess of costs and
estimated earnings on
uncompleted contracts......... 2,207 667 435
------------ ------------ ------------
Total current
liabilities............. 4,890 2,846 2,843
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $10 par 2,500
shares authorized, 2,500
issued and outstanding........ 25 25 25
Additional paid-in capital...... 105 105 105
Retained earnings............... 5,240 6,019 6,331
------------ ------------ ------------
Total shareholders'
equity.................. 5,370 6,149 6,461
------------ ------------ ------------
Total liabilities and
shareholders' equity.... $ 10,260 $8,995 $9,304
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-43
<PAGE>
TRI-CITY MECHANICAL, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------- --------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 16,883 $ 25,030 $ 24,237 $ 6,482 $ 6,791
COST OF SERVICES..................... 14,271 19,298 18,561 5,082 5,946
------------ ------------ ------------ --------- ---------

Gross profit.................... 2,612 5,732 5,676 1,400 845
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,219 3,193 3,903 1,026 567
------------ ------------ ------------ --------- ---------

Income from operations.......... 393 2,539 1,773 374 278
OTHER INCOME (EXPENSE):

Interest expense................ (2) (1) -- -- --
Interest income................. 50 132 152 43 25
Other........................... 24 81 89 18 9
------------ ------------ ------------ --------- ---------

NET INCOME........................... $ 465 $ 2,751 $ 2,014 $ 435 $ 312
============ ============ ============ ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-44
<PAGE>
TRI-CITY MECHANICAL, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993........... 2,500 $ 25 $ 105 $ 2,577 $ 2,707
Distributions to shareholders... -- -- -- (338) (338)
Net income...................... -- -- -- 465 465
------ ------ ---------- -------- --------------
BALANCE, December 31, 1994........... 2,500 25 105 2,704 2,834
Distributions to shareholders... -- -- -- (215) (215)
Net income...................... -- -- -- 2,751 2,751
------ ------ ---------- -------- --------------
BALANCE, December 31, 1995........... 2,500 25 105 5,240 5,370
Distributions to shareholders... -- -- -- (1,235) (1,235)
Net income...................... -- -- -- 2,014 2,014
------ ------ ---------- -------- --------------
BALANCE, December 31, 1996........... 2,500 25 105 6,019 6,149
Net income (unaudited).......... -- -- -- 312 312
------ ------ ---------- -------- --------------
BALANCE, March 31, 1997
(unaudited)........................ 2,500 $ 25 $ 105 $ 6,331 $ 6,461
====== ====== ========== ======== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-45
<PAGE>
<TABLE>
<CAPTION>
TRI-CITY MECHANICAL, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 465 $ 2,751 $ 2,014 $ 435 $ 312
Adjustments to reconcile net income
to net cash provided by (used
in) operating activities --
Depreciation.................... 131 134 102 36 26
Deferred income taxes........... (218) -- -- -- --
Gain on sale of property and
equipment..................... -- 1 (10) -- --
Changes in operating assets and
liabilities --
(Increase) decrease in --
Restricted cash............ (73) (75) 58 (22) (3)
Accounts receivable........ (231) (1,306) 827 1,048 (67)
Inventories................ (329) (801) 421 1,037 544
Costs in excess of billings
and estimated earnings
on uncompleted
contracts............... 17 (90) 18 (146) (92)
Prepaid expenses and other
current assets.......... (14) 28 (11) (10) 10
Increase (decrease) in --
Accounts payable and
accrued expenses........ 864 519 (504) (393) 229
Billings in excess of costs
and estimated earnings
on uncompleted
contracts............... 1,360 508 (1,540) (1,234) (232)
--------- --------- --------- --------- ---------
Net cash provided by
operating
activities......... 1,972 1,669 1,375 751 727
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment....................... -- 18 22 -- --
Additions of property and
equipment....................... (311) (157) (262) (6) (13)
Purchase of investment............. -- -- (493) -- (7)
--------- --------- --------- --------- ---------
Net cash used in
investing
activities......... (311) (139) (733) (6) (20)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in payable to
shareholders.................... (210) -- -- -- --
Borrowings on line of credit....... 19 1 -- -- --
Payments on line of credit......... (17) (15) -- -- --
Distributions to shareholders...... (338) (215) (1,235) -- --
--------- --------- --------- --------- ---------
Net cash used in
financing
activities......... (546) (229) (1,235) -- --
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 1,115 1,301 (593) 745 707
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 135 1,250 2,551 2,551 1,958
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 1,250 $ 2,551 $ 1,958 $ 3,296 $ 2,665
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest........................ $ 2 $ 1 $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-46
<PAGE>
TRI-CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Tri-City Mechanical, Inc., an Arizona corporation, (the "Company")
focuses on providing "design and build" installation services and maintenance,
repair and replacement of HVAC systems primarily for large commercial and
industrial facilities, as well as process piping for industrial facilities.
Tri-City primarily operates in Arizona, California and Nevada.

The Company and its shareholders intend to enter into a definitive
agreement with Comfort Systems USA, Inc. ("Comfort Systems") pursuant to which
all outstanding shares of the Company's common stock will be exchanged for cash
and shares of Comfort Systems common stock concurrently with the consummation of
the initial public offering (the "Offering") of the common stock of Comfort
Systems.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL INFORMATION

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

RESTRICTED CASH

The Company also maintains restricted cash which consists of certificates
of deposit. These certificates of deposit are held in a joint checking account
between the contractors and Tri-City for the retainage balance due from
contractors at the completion of the job.

INVENTORIES

INVESTMENTS

The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
which requires that investments in debt securities and marketable equity
securities be designated as trading, held-to-maturity or available-for-sale. At
December 31, 1996, investments have been categorized as held-to-maturity, are
stated at cost, and are classified in the balance sheet as current assets.
Investments at December 31, 1996 consist of U.S. Treasury Bills.

PROPERTY AND EQUIPMENT

F-47
<PAGE>
TRI-CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

WARRANTY COSTS

INCOME TAXES

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENT

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Accordingly, in
the event that facts and circumstances indicate that property and equipment may
be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the asset is compared to the asset's carrying amount to determine if a
write-down to market value is necessary. Adoption of this standard did not have
a material effect on the financial position or results of operations of the
Company.

F-48
<PAGE>
TRI-CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):

ESTIMATED DECEMBER 31,
USEFUL LIVES --------------------
IN YEARS 1995 1996
------------ --------- ---------
Transportation equipment............. 5 $ 521 $ 623
Machinery and equipment.............. 10 639 680
Computer and telephone equipment..... 5 121 157
Leasehold improvements............... 5 48 48
Furniture and fixtures............... 6 54 54
--------- ---------
1,383 1,562
Less -- Accumulated depreciation..... (875) (906)
--------- ---------
Property and equipment, net..... $ 508 $ 656
========= =========

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts consists of the
following (in thousands):

DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
Balance at beginning of year......... $ 100 $ 130 $ 130
Additions to costs and expenses...... 184 1 48
Deductions for uncollectible
receivables written off and
recoveries......................... (154) (1) (148)
--------- --------- ---------
$ 130 $ 130 $ 30
========= ========= =========

Accounts payable and accrued expenses consist of the following (in
thousands):

DECEMBER 31,
--------------------
1995 1996
--------- ---------
Accounts payable, trade................. $ 2,178 $ 1,749
Accrued compensation and benefits....... 181 97
Warranty reserve........................ 301 278
Other accrued expenses.................. 23 55
--------- ---------
$ 2,683 $ 2,179
========= =========

F-49
<PAGE>
TRI-CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Installation contracts in progress are as follows (in thousands):

DECEMBER 31,
--------------------
1995 1996
--------- ---------
Costs incurred on contracts in
progress........................... $ 14,659 $ 8,615
Estimated earnings, net of losses.... 3,865 2,471
--------- ---------
18,524 11,086
Less -- Billings to date............. 20,425 11,465
--------- ---------
$ (1,901) $ (379)
========= =========
Costs and estimated earnings in
excess of billings on
uncompleted contracts.............. $ 306 $ 288
Billings in excess of costs and
estimated earnings on
uncompleted contracts.............. (2,207) (667)
--------- ---------
$ (1,901) $ (379)
========= =========

5. LONG-TERM DEBT:

The Company has a $1.0 million line of credit with a financial services
company. The line of credit expires October 31, 1997, and bears interest at 9
percent per annum. The line of credit is secured by a lien on accounts
receivable. There was no balance outstanding under this line of credit at
December 31, 1995 or 1996.

6. LEASES:

The Company leases facilities from a company which is wholly owned by one
of the shareholders. The lease expires June 30, 1998. The rent paid under this
related-party lease was approximately $109,000 for the year ended 1996. The
lease requires the Company to pay taxes, maintenance, insurance and certain
other operating costs of the leased property. The lease contains renewal and
termination provisions.

The Company leases vehicles for certain key members of management. The
leases expire October 1, 1999. The lease payments under these vehicle leases
were approximately $6,000, $15,000 and $16,000 for the years ended December 31,
1994, 1995 and 1996, respectively.

Future minimum lease payments for operating leases are as follows (in
thousands):

Year ending December 31 --
1997............................ $ 142
1998............................ 65
1999............................ 3
---------
$ 210
=========

7. EMPLOYEE BENEFIT PLANS:

The Company has adopted a 401(k) plan. The plan provides for the Company to
match 20 percent of the first 6 percent contributed by each employee. Total
contributions by the Company under this plan were approximately $13,000, $22,000
and $24,000 during 1994, 1995 and 1996, respectively. Amounts due to this plan
were approximately $ --, $ -- and $4,000 for the years ended December 31, 1994,
1995 and 1996, respectively.

F-50
<PAGE>
TRI-CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. RELATED-PARTY TRANSACTIONS:

The Company provides accounting services and building maintenance at no
cost to Nothum Properties & SMAC companies which are wholly owned by the
shareholders. The estimated value of the services provided during the years
ended December 31, 1994, 1995 and 1996 was $25,000, $28,000 and $30,000,
respectively.

9. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

10. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
investments, and a line of credit. The Company believes that the carrying value
of these instruments on the accompanying balance sheet approximates their fair
value.

11. SALES TO SIGNIFICANT CUSTOMER:

For the years ended December 31, 1994, 1995 and 1996, a customer accounted
for approximately 17, 11 and 11 percent, respectively, of the Company's sales.

12. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

In connection with the merger the Company will make a cash distribution of
approximately $6,331,000 prior to the merger which represents the Company's
estimated S Corporation accumulated adjustment account. Had these transactions
been recorded at March 31, 1997, the effect on the accompanying unaudited
balance sheet would be a decrease in assets of $2,365,000, an increase in
liabilities of $3,966,000 and a decrease in shareholders' equity of $6,331,000.

Concurrently with the merger, the Company will enter into agreements with
the shareholders to lease land and buildings used in the Company's operations
for a negotiated amount and term.

Tri-City has a verbal commitment with a limited liability corporation owned
by Mr. Nothum, Jr. and his father to construct new office, operations and
warehouse facilities. The Company believes that the rent for its current and
future property does not and will not exceed fair market value.

F-51

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To S. M. Lawrence Inc.:

We have audited the accompanying combined balance sheets of S. M. Lawrence
Inc. and related company as of October 31, 1995 and 1996, and the related
combined statements of operations, shareholders' equity and cash flows for the
three years ended October 31, 1996. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of S. M. Lawrence Inc.
and related company as of October 31, 1995 and 1996, and the results of their
operations and their cash flows for the three years ended October 31, 1996 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-52
<PAGE>
S. M. LAWRENCE INC. AND RELATED COMPANY
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

OCTOBER 31,
-------------------- JANUARY 31,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 680 $ 327 $--
Accounts receivable --
Trade......................... 1,457 2,493 2,604
Retainage..................... 454 896 1,102
Other receivables............. 1 1 --
Note receivable from shareholder... 50 75 76
Inventories........................ 215 253 255
Costs and estimated earnings in
excess of billings on
uncompleted contracts............ 66 358 262
Prepaid expenses and other current
assets........................... 39 61 31
--------- --------- -----------
Total current assets..... 2,962 4,464 4,330
PROPERTY AND EQUIPMENT, net............. 459 644 716
OTHER NONCURRENT ASSETS................. 138 132 237
--------- --------- -----------
Total assets............. $ 3,559 $ 5,240 $ 5,283
========= ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Line of credit..................... $ 10 $ -- $ 350
Note payable to affiliate.......... -- -- 100
Accounts payable and accrued
expenses......................... 1,153 2,737 1,241
Income tax payable................. -- -- 217
Billings in excess of costs and
estimated earnings on
uncompleted contracts............ 299 344 890
--------- --------- -----------
Total current
liabilities........... 1,462 3,081 2,798
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 3,000
shares authorized, 1,480 shares
issued and outstanding........... 161 161 161
Treasury stock, at cost............ (15) (15) (15)
Retained earnings.................. 1,951 2,013 2,339
--------- --------- -----------
Total shareholders'
equity................ 2,097 2,159 2,485
--------- --------- -----------
Total liabilities and
shareholders'
equity................ $ 3,559 $ 5,240 $ 5,283
========= ========= ===========

The accompanying notes are an integral part of these combined financial
statements.

F-53
<PAGE>
S.M. LAWRENCE INC. AND RELATED COMPANY
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ 12,758 $ 12,568 $ 17,163 $ 3,280 $ 4,565
COST OF SERVICES........................ 9,797 9,142 12,211 2,377 3,326
--------- --------- --------- --------- ---------
Gross profit....................... 2,961 3,426 4,952 903 1,239
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 2,849 3,477 4,885 996 698
--------- --------- --------- --------- ---------
Income (loss) from operations......... 112 (51) 67 (93) 541
OTHER INCOME (EXPENSE):
Interest income, net.................. 32 55 47 -- --
Other................................. (41) 34 8 10 2
--------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES.............. 103 38 122 (83) 543
PROVISION FOR INCOME TAXES.............. 50 30 60 138 217
--------- --------- --------- --------- ---------
NET INCOME.............................. $ 53 $ 8 $ 62 $ (221) $ 326
========= ========= ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-54
<PAGE>
S.M. LAWRENCE INC. AND RELATED COMPANY
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------ RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT EARNINGS STOCK EQUITY
--------- ------ --------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, October 31, 1993............ 1,480 $ 161 $ 1,890 $ (15) $ 2,036

Net income...................... -- -- 53 -- 53
--------- ------ --------- --------- -------------

BALANCE, October 31, 1994............ 1,480 161 1,943 (15) 2,089

Net income...................... -- -- 8 -- 8
--------- ------ --------- --------- -------------

BALANCE, October 31, 1995............ 1,480 161 1,951 (15) 2,097

Net income...................... -- -- 62 -- 62
--------- ------ --------- --------- -------------

BALANCE, October 31, 1996............ 1,480 161 2,013 (15) 2,159

Net income (unaudited).......... -- -- 326 -- 326
--------- ------ --------- --------- -------------

BALANCE, January 31, 1997
(unaudited)........................ 1,480 $ 161 $ 2,339 $ (15) $ 2,485
========= ====== ========= ========= =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-55
<PAGE>
S.M. LAWRENCE INC. AND RELATED COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>

THREE MONTHS
ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 53 $ 8 $ 62 $ (221) $ 326
Adjustments to reconcile net income
to net cash provided by (used
in) operating activities --
Depreciation and amortization... 263 121 200 45 61
Loss on sale of property and
equipment..................... -- -- -- (2) --
Changes in operating assets and
liabilities
(Increase) decrease in --
Accounts receivable........ 262 203 (1,502) (309) (317)
Inventories................ (18) (26) (38) (7) (2)
Costs and estimated
earnings in excess of
billings on uncompleted
contracts............... 42 26 (292) (151) 96
Prepaid expenses and other
assets.................. 46 (13) 3 (106) 30
Increase (decrease) in --.....
Accounts payable and
accrued expenses........ (156) 143 1,584 159 (1,279)
Billings in excess of costs
on uncompleted
contracts............... 33 (171) 45 15 546
--------- --------- --------- --------- ---------
Net cash provided by
(used in) operating
activities......... 525 291 62 (577) (539)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to cash surrender value
of insurance.................... (38) (45) (19) 19 (5)
Purchases to property and
equipment, net.................. (74) (380) (386) (71) (133)
Investments........................ -- -- -- -- (100)
--------- --------- --------- --------- ---------
Net cash used in
investing
activities......... (112) (425) (405) (52) (238)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit....... -- -- -- -- 350
Proceeds received on note from
affiliate....................... -- -- -- -- 100
Payments on note receivable from
shareholder..................... -- (2) (10) -- --
Proceeds received on note from
shareholder..................... -- 12 -- -- --
Payments on note payable to
shareholder..................... (181) -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by
(used in)
financing
activities......... (181) 10 (10) -- 450
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 232 (124) (353) (629) (327)
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 572 804 680 680 327
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end
of period.......................... $ 804 $ 680 $ 327 $ 51 $ --
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest........................ $ 14 $ -- $ 5 $ -- $ 4
Income taxes.................... -- 16 14 -- 3
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-56
<PAGE>
S.M. LAWRENCE INC. AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

S.M. Lawrence Inc., a Tennessee corporation (the "Company") focuses on
providing "design and build" installation services and process piping
primarily for industrial facilities and maintenance, repair and replacement of
commercial and industrial HVAC systems. S.M. Lawrence primarily operates in
Tennessee and the immediately surrounding states.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The financial statements include the accounts and results of operations of
S.M. Lawrence Inc. and Lawrence Services, Inc. which are under common control
and management of two individuals. All significant intercompany transactions and
balances have been eliminated in combination.

INTERIM FINANCIAL INFORMATION

The interim combined financial statements as of January 31, 1997, and for
the three months ended January 31, 1996 and 1997, are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the combined
interim financial statements, have been included. The results of operations for
the interim periods are not necessarily indicative of the results for the entire
fiscal year.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and depreciation is computed
using an accelerated method of depreciation. Leasehold improvements are
capitalized and amortized over the lesser of the life of the lease or the
estimated useful life of the asset.

REVENUE RECOGNITION

The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-

F-57
<PAGE>
S.M. LAWRENCE INC. AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
completion method measured by the percentage of costs incurred to total
estimated costs for each contract. Provisions for the total estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, estimated profitability
and final contract settlements may result in revisions to costs and income and
their effects are recognized in the period in which the revisions are
determined.

WARRANTY COSTS

The Company warrants labor and parts for one year after installation of new
air conditioning and heating systems. A reserve for warranty costs is recorded
upon completion of installation or service.

INCOME TAXES

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENT

Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Accordingly, in the event that facts and circumstances indicate that
property and equipment, and intangible or other assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
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 is necessary. Adoption of this standard did not have a material effect on
the financial position or results of operations of the Company.

F-58
<PAGE>
S.M. LAWRENCE INC. AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):

ESTIMATED OCTOBER 31,
USEFUL LIVES --------------------
IN YEARS 1995 1996
------------ --------- ---------
Transportation equipment............. 5 $ 774 $ 907
Machinery and equipment.............. 7 648 677
Furniture and fixtures............... 5 145 210
Leasehold improvements............... 32 122 231
Construction in process.............. 81 --
--------- ---------
1,770 2,025
Less -- Accumulated depreciation and
amortization....................... (1,311) (1,381)
--------- ---------
Property and equipment,
net..................... $ 459 $ 644
========= =========

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Accounts payable and accrued expenses consist of the following (in
thousands):

OCTOBER 31,
--------------------
1995 1996
--------- ---------
Accounts payable, trade.............. $ 620 $ 1,560
Accrued compensation and benefits.... 466 1,091
Other accrued expenses............... 67 86
--------- ---------
$ 1,153 $ 2,737
========= =========

Installation contracts in progress are as follows (in thousands):

OCTOBER 31,
--------------------
1995 1996
--------- ---------
Costs incurred on contracts in
progress........................... $ 13,475 $ 15,503
Estimated earnings, net of losses.... 4,193 5,641
--------- ---------
17,668 21,144
Less -- Billings to date............. 17,901 21,130
--------- ---------
$ (233) $ 14
========= =========
Costs and estimated earnings in
excess of billings on
uncompleted contracts.............. $ 66 $ 358
Billings in excess of costs and
estimated earnings on
uncompleted contracts.............. (299) (344)
--------- ---------
$ (233) $ 14
========= =========

5. LINE OF CREDIT:

The Company had an unsecured bank line of credit at October 31, 1995 and
1996, with an outstanding balance of $0 for all years. The available balance was
$800,000 for 1995 and $850,000 for 1996. The line of credit is secured by
guarantees and is payable upon demand. Interest is payable on the line of credit
at prime plus 1 percent.

F-59
<PAGE>
S.M. LAWRENCE INC. AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. LEASES:

The Company leases facilities from a company which is owned by one of the
shareholders. The lease is for a one-year period and is renewed annually. For
each year ended October 31, 1994, 1995 and 1996, the rent expense under this
related-party lease was $110,400.

7. INCOME TAXES:

Federal and state income taxes are as follows (in thousands):

OCTOBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
Federal --
Current............................ $ 25 $ 24 $ 54
Deferred........................... 17 1 (3)
State --
Current............................ 5 4 10
Deferred........................... 3 1 (1)
--- --- ---
$ 50 $ 30 $ 60
=== === ===

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 34 percent to income
before income taxes for 1994 and 1995 and 35 percent for 1996 as follows (in
thousands):

OCTOBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
Provision at the statutory rate......... $ 35 $ 13 $ 39
Increase resulting from --
State income tax, net of benefits
for federal deduction............ 5 3 6
Other.............................. 10 14 15
--- --- ---
$ 50 $ 30 $ 60
=== === ===

Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences representing deferred
tax assets and liabilities result principally from the following (in thousands):

OCTOBER 31,
------------------------
1995 1996
----------- -----------
Accruals and reserves not deductible
until paid............................ $ (1) $ 2
--- ---
Net deferred income tax assets
(liabilities)......................... $ (1) $ 2
=== ===

F-60
<PAGE>
S.M. LAWRENCE INC. AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The net deferred tax assets and liabilities are comprised of the following
(in thousands):

OCTOBER 31,
------------------------
1995 1996
----------- -----------
Deferred tax assets --
Current............................ $ -- $ 2
--- ---
Total......................... -- 2
--- ---
Deferred tax liabilities --
Current............................ (1) --
--- ---
Total......................... (1) --
--- ---
Net deferred income tax assets
(liabilities).............. $ (1) $ 2
=== ===

8. RELATED-PARTY TRANSACTIONS:

The Company loans one of the shareholders money annually. In 1994, the
shareholder signed a promissory note for $44,695 to be paid on demand, accruing
interest at eight percent. The entire balance remained outstanding at year-end
1994. The entire note was repaid during fiscal year 1995. In fiscal year 1995,
the shareholder signed a promissory note for $50,435 to be paid on demand,
accruing interest at eight percent. The entire amount remained outstanding at
year-end 1995. The entire note was repaid during fiscal year 1996. In 1996, the
shareholder signed a promissory note for $75,435 to be paid on demand, accruing
interest at eight percent. The entire balance remained outstanding at year-end
1996.

The Company entered into a non-compete agreement with a former major
shareholder on November 1, 1991 for $542,562. Under this agreement, the former
shareholder agreed not to compete with the Company for a period of 36 months
beginning with November 1, 1991. The principal to be paid was recorded as an
asset and was fully amortized over 36 months. The last payment of $180,854 was
made during fiscal 1994.

In September 1995, the Company entered into an agreement to purchase
equipment from a related party. The terms of the agreement included a $2,776
cash down payment and a note payable due in one year for $11,852. Payments on
the note were $1,975 and $9,877 during 1995 and 1996, respectively.

9. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

The Company has adopted a partially self-funded medical plan. Under this
plan, the Company pays up to $20,000 per year per employee. The Company's
insurance copay pays the remaining amount. For the years ended December 31,
1994, 1995, and 1996 the Company contributed $102,647, $82,866 and $143,788,
respectively. For claims incurred but not yet reported the Company accrued
$25,000 for the years ended December 31, 1995 and 1996.

F-61
<PAGE>
S.M. LAWRENCE INC. AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

10. EMPLOYEE BENEFIT PLANS:

The Company has adopted a 401(k) retirement plan which provides for 100
percent matching contribution by the Company, up to a maximum liability of 5
percent of each participating employee's annual compensation. The Company has
the right to make additional discretionary contributions. Total contributions by
the Company under this plan to provide contributions and pay expenses were
$57,434, $141,105 and $368,377 during 1994, 1995, and 1996, respectively.
Amounts due to this plan were approximately $117,508 and $397,000 for the years
ended December 31, 1995 and 1996, respectively.

11. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
notes receivable, investments, notes payable and a line of credit. The Company
believes that the carrying value of these instruments on the accompanying
balance sheet approximates their fair value.

12. SALES TO SIGNIFICANT CUSTOMER:

During 1996, one customer accounted for approximately 19 percent of the
Company's sales.

13. SUBSEQUENT EVENT:

In December 1996, the Company entered into an agreement to purchase a
one-third interest in an investment. The investment is a partnership and will
own an aircraft, available for use by any of the partners. The Company's cost
for this investment was $100,000. In connection with the agreement, the Company
signed a note payable to the partnership on December 31, 1996 for $100,000 with
interest of 7 percent. This note was fully paid in 1997.

14. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

Concurrently with the merger, the Company will enter into agreements with
the shareholders to lease land and buildings used in the Company's operations
for a negotiated amount and term.

F-62

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Accurate Air Systems, Inc.:

We have audited the accompanying balance sheets of Accurate Air Systems,
Inc. as of June 30, 1995, December 31, 1995 and 1996, and the related statements
of operations, shareholder's equity and cash flows for each of the years ended
June 30, 1994 and 1995, for the six months ended December 31, 1995, and for the
year ended December 31, 1996. 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 Accurate Air Systems, Inc.,
as of June 30, 1995, December 31, 1995 and 1996, and the results of their
operations and their cash flows for the years ended June 30, 1994 and 1995, for
the six months ended December 31, 1995, and for the year ended December 31, 1996
in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-63
<PAGE>
ACCURATE AIR SYSTEMS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31, MARCH 31,
1995 1995 1996 1997
-------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $ 50 $ 33 $ 79 $ 104
Accounts receivable --
Trade, net of allowance of $70,
$70, $33 and $28,
respectively.................. 1,385 1,671 1,778 2,035
Retainage........................ 550 321 725 267
Other receivables................ 8 16 18 85
Inventories........................... 122 129 104 141
Costs and estimated earnings in excess
of billings on uncompleted
contracts.......................... 275 212 231 228
Prepaid expenses and other current
assets............................. 181 81 -- --
-------- ------------ ------------ ------------
Total current assets............. 2,571 2,463 2,935 2,860
PROPERTY AND EQUIPMENT, net............. 804 1,014 925 932
DEFERRED TAX ASSET...................... 14 -- -- --
-------- ------------ ------------ ------------
Total assets..................... $3,389 $3,477 $3,860 $3,792
======== ============ ============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
debt............................... $ 88 $ 109 $ 42 $ 16
Accounts payable and accrued
expenses........................... 1,707 1,355 1,236 1,197
Line of credit........................ 374 600 500 700
Note payable -- shareholder........... -- -- 630 630
Billings in excess of costs and
estimated earnings on uncompleted
contracts.......................... 229 206 312 97
-------- ------------ ------------ ------------
Total current liabilities........ 2,398 2,270 2,720 2,640
LONG-TERM DEBT, net of current
maturities............................ 56 175 133 149
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock $1 par, 250,000 shares
authorized, 1,000 shares issued and
outstanding........................ 1 1 1 1
Retained earnings..................... 934 1,031 1,006 1,002
-------- ------------ ------------ ------------
Total shareholder's equity....... 935 1,032 1,007 1,003
-------- ------------ ------------ ------------
Total liabilities and
shareholder's equity.......... $3,389 $3,477 $3,860 $3,792
======== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-64
<PAGE>
ACCURATE AIR SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED JUNE 30, SIX MONTHS ENDED
ENDED YEAR ENDED MARCH 31,
-------------------- DECEMBER 31, DECEMBER 31, --------------------
1994 1995 1995 1996 1996 1997
-------- -------- ------------ ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $9,763 $ 12,171 $5,585 $ 16,806 $ 3,161 $ 2,642
COSTS OF SERVICES.................... 7,204 8,998 4,312 13,270 2,450 2,095
-------- -------- ------------ ------------ --------- ---------

Gross profit.................... 2,559 3,173 1,273 3,536 711 547
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................. 2,681 2,960 1,131 3,037 684 526
-------- -------- ------------ ------------ --------- ---------

Income (Loss) from
operations.................... (122) 213 142 499 27 21
OTHER INCOME/(EXPENSE):

Interest expense................ (21) (48) (41) (80) (20) (32)
Other........................... (9) (9) (4) 14 23 7
-------- -------- ------------ ------------ --------- ---------

INCOME (LOSS) BEFORE INCOME TAXES.... (152) 156 97 433 30 (4)
-------- -------- ------------ ------------ --------- ---------

PROVISION (BENEFIT) FOR INCOME
TAXES................................ (54) 60 -- -- -- --
-------- -------- ------------ ------------ --------- ---------

NET INCOME (LOSS).................... $ (98) $ 96 $ 97 $ 433 $ 30 $ (4)
======== ======== ============ ============ ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-65
<PAGE>
ACCURATE AIR SYSTEMS, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- RETAINED SHAREHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE, June 30, 1993............... 1,000 $ 1 $ 941 $ 942

Net loss........................ -- -- (98) (98)
------ ------ -------- -------------

BALANCE, June 30, 1994............... 1,000 1 843 844

Distribution to shareholder..... -- -- (5) (5)

Net income...................... -- -- 96 96
------ ------ -------- -------------

BALANCE, June 30, 1995............... 1,000 1 934 935

Net income...................... -- -- 97 97
------ ------ -------- -------------

BALANCE, December 31, 1995........... 1,000 1 1,031 1,032

Distributions to shareholder.... -- -- (458) (458)

Net income...................... -- -- 433 433
------ ------ -------- -------------

BALANCE, December 31, 1996........... 1,000 $ 1 $1,006 $ 1,007
Net loss (unaudited)............ -- -- (4) (4)
------ ------ -------- -------------

BALANCE, March 31, 1997
(unaudited)........................ 1,000 $ 1 $1,002 $ 1,003
====== ====== ======== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-66
<PAGE>

ACCURATE AIR SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED JUNE 30, SIX MONTHS ENDED
ENDED YEAR ENDED MARCH 31,
-------------------- DECEMBER 31, DECEMBER 31, --------------------
1994 1995 1995 1996 1996 1997
--------- --------- ------------ ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................. $ (98) $ 96 $ 97 $ 433 $ 30 $ (4)
Adjustments to reconcile net income
(loss) to net cash
provided by (used in) operating
activities --
Depreciation and amortization... 128 124 85 186 31 36
Deferred income tax provision... (150) (70) 81 -- -- --
Changes in operating assets and
liabilities --
(Increase) decrease in --
Accounts receivable........ 127 (395) (66) (513) (458) 134
Costs and estimated
earnings in excess of
billings on uncompleted
contracts................. (90) (58) 63 (19) (60) 3
Prepaid expenses and other
current assets............ (1) (44) 31 81 78 --
Inventories................ (22) (16) (7) 25 (9) (37)
Increase (decrease) in --
Accounts payable and
accrued expenses.......... 365 419 (350) (119) 176 (39)
Billings in excess of costs
and estimated earnings
on uncompleted
contracts............... 64 119 (22) 106 71 (215)
--------- --------- ------------ ------------ --------- ---------
Net cash provided by (used in)
operating activities........ 323 175 (88) 180 (141) (122)
--------- --------- ------------ ------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales (purchase) of property and
equipment......................... (100) (347) (295) (97) 16 (43)
--------- --------- ------------ ------------ --------- ---------
Net cash provided by (used in)
investing activities........ (100) (347) (295) (97) 16 (43)
--------- --------- ------------ ------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt....... -- 183 192 -- -- --
Payments of long-term debt......... (186) (39) (52) (109) (29) (10)
Borrowings of short-term debt...... -- -- -- 630 -- --
Borrowings on line of credit....... 50 -- 226 -- 160 200
Payments on line of credit......... -- (76) -- (100) -- --
Distributions to shareholder....... -- (5) -- (458) -- --
--------- --------- ------------ ------------ --------- ---------
Net cash provided by (used in)
financing activities........ (136) 63 366 (37) 131 190
--------- --------- ------------ ------------ --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 87 (109) (17) 46 6 25
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 72 159 50 33 33 79
--------- --------- ------------ ------------ --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 159 $ 50 $ 33 $ 79 $ 39 $ 104
========= ========= ============ ============ ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest........................ $ 21 $ 48 $ 41 $ 79 $ 8 $ 33
Income taxes.................... 53 34 -- -- -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-67
<PAGE>
ACCURATE AIR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Accurate Air Systems, Inc., a Texas corporation, (the "Company") focuses
on providing "design and build" installation services and maintenance, repair
and replacement of HVAC systems for commercial facilities. Accurate primarily
operates in Texas and Oklahoma.

The Company and its shareholder intend to enter into a definitive agreement
with Comfort Systems USA, Inc. ("Comfort Systems") pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash and
shares of Comfort Systems common stock concurrently with the consummation of the
initial public offering (the "Offering") of the common stock of Comfort
Systems.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CHANGE IN FISCAL YEAR END

Effective July 1, 1995, the Company changed its fiscal year end from June
30 to December 31. The statements of operations, shareholder's equity and cash
flows for the six months ended December 31, 1995 are presented in the
accompanying financial statements. The results of operations for the six month
period are not necessarily indicative of the results for a full year period.

INTERIM FINANCIAL INFORMATION

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES

PROPERTY AND EQUIPMENT

REVENUE RECOGNITION

The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-

F-68
<PAGE>
ACCURATE AIR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
completion method measured by the percentage of costs incurred to total
estimated costs for each contract. Provisions for the total estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, estimated profitability
and final contract settlements may result in revisions to costs and income and
their effects are recognized in the period in which the revisions are
determined.

WARRANTY COSTS

The Company warrants labor for the first year after installation on new air
conditioning and heating systems. The Company generally warrants labor for 90
days after the servicing of existing air conditioning and heating systems. A
reserve for warranty costs is recorded upon completion of installation or
service.

INCOME TAXES

Effective July 1, 1995, the Company elected S Corporation status as defined
by the Internal Revenue Code whereby the Company is not subject to taxation for
federal purposes. Under S Corporation status, each shareholder reports his share
of the Company's taxable earnings or losses in his personal federal and state
tax returns. The balance in the deferred tax liability account at July 1, 1995
was credited to income during the six month period ended December 31, 1995.

Prior to July 1, 1995, the Company followed the liability method of
accounting for income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109. Under this method, deferred income taxes were recorded
based upon differences between the financial reporting and tax bases of assets
and liabilities and were measured using the enacted tax rates and laws that
would have been in effect when the underlying assets or liabilities were
recovered or settled.

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENT

F-69
<PAGE>
ACCURATE AIR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES JUNE 30, --------------------
IN YEARS 1995 1995 1996
------------ -------- --------- ---------
<S> <C> <C> <C> <C>
Land................................. -- $ 200 $ 200 $ 200
Buildings............................ 31.5 205 213 213
Transportation equipment............. 5 414 336 241
Machinery and equipment.............. 5 - 7 262 477 510
Leasehold improvements............... 15 - 18 57 60 61
Furniture and fixtures............... 5 - 7 74 122 133
-------- --------- ---------
Less -- Accumulated depreciation and
amortization....................... (408) (394) (433)
-------- --------- ---------
Property and equipment, net..... $ 804 $ 1,014 $ 925
======== ========= =========
</TABLE>
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS (IN THOUSANDS):

Activity in the Company's allowance for doubtful accounts consist of the
following:

DECEMBER 31,
JUNE 30, --------------------
1995 1995 1996
-------- --- ---------
Balance at beginning of year......... $ 57 $ 70 $ 70
Additions to costs and expenses...... 19 -- --
Deductions for uncollectible
receivables written off and
recoveries......................... (6) -- (37)
--- --- ---------
$ 70 $ 70 $ 33
=== === =========

Accounts payable and accrued expenses consist of the following:

DECEMBER 31,
JUNE 30, --------------------
1995 1995 1996
-------- --------- ---------
Accounts payable, trade.............. $ 537 $ 871 $ 685
Accrued compensation and benefits.... 509 179 288
Other accrued expenses............... 575 243 190
Warranty reserve..................... 86 62 73
-------- --------- ---------
$1,707 $ 1,355 $ 1,236
======== ========= =========

Installation contracts in progress are as follows:

DECEMBER 31,
JUNE 30, --------------------
1995 1995 1996
-------- --------- ---------
Costs incurred on contracts in
progress............................. $4,113 $ 2,468 $ 5,514
Estimated earnings, net of losses.... 1,428 726 1,760
Less -- Billings to date............. 5,495 3,188 7,355
-------- --------- ---------
$ 46 $ 6 $ (81)
======== ========= =========
Costs and estimated earnings in
excess of billings on uncompleted
contracts.......................... $ 275 $ 212 $ 231
Billings in excess of costs and
estimated earnings on uncompleted
contracts.......................... (229) (206) (312)
-------- --------- ---------
$ 46 $ 6 $ (81)
======== ========= =========

F-70
<PAGE>
ACCURATE AIR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. SHORT-TERM DEBT:

On October 15, 1996, the Company executed a renewal and extension of its
revolving line of credit with its bank. The new agreement provides for maximum
borrowings of up to $900,000 with interest payable monthly on the amount
outstanding at the rate of prime plus one percent, not to exceed 18 percent. The
agreement provides that the Company may borrow up to 70 percent of its accounts
receivable that are less than sixty days past due. The revolving line of credit
is secured by accounts receivable and the personal guaranty of the sole
shareholder, and requires the Company to maintain certain minimum tangible net
worth and cash flow ratios. Balances outstanding relating to the line are
approximately $374,000, $600,000, and $500,000 as of June 30, 1995, and December
31, 1995 and 1996, respectively. The Company was in compliance with all
covenants at each applicable year end.

On December 27, 1996, the Company borrowed $630,000 from the Company's
shareholder. Interest is payable monthly at a rate of 9 percent on the
outstanding balance. The note matures on June 30, 1997. The entire balance was
outstanding as of December 31, 1996.

6. LONG-TERM DEBT:

DECEMBER 31,
JUNE 30, --------------------
1995 1995 1996
-------- --------- ---------
(IN THOUSANDS)
Note payable, secured by real estate,
payable in twenty-four installments
of $2,540 including interest at
9.50% per annum with the final
payment due January 28, 1997....... $ 44 $ 31 $ --
Notes payable, secured by
transportation and operating
equipment, monthly installments of
various amounts, including interest
at rates ranging from 9.00% to
9.75% per annum until 1997......... 100 69 21
Note payable, secured by operating
equipment, payable in thirty-five
installments of $3,177 including
interest at a rate of prime plus
one percent. A final payment of
$128,696 due on August 1, 1998..... -- 184 154
-------- --------- ---------
144 284 175
Less -- Current maturities........... 88 109 42
-------- --------- ---------
$ 56 $ 175 $ 133
======== ========= =========

The aggregate maturities of long-term debt as of December 31, 1996, are as
follows (in thousands):

1997................................. $ 42
1998................................. 133
---------
$ 175
=========

7. LEASES:

The Company leases facilities from a company which is partially owned by
the shareholder. The lease expires in April 1999. The rent paid under this
related-party lease was approximately $15,000, $60,000, $30,000 and $60,000 for
the years ended June 30, 1994 and 1995, the six months ended December 31, 1995
and the year ended December 31, 1996 respectively. The Company also leased a
facility from a third party, which expired on December 31, 1996. The rent paid
under this lease was approximately $12,000, $12,000, $6,000 and $13,200 for the
years ended June 30, 1994 and 1995, the six months ended December 31, 1995, and
the year ended December 31, 1996, respectively. The leases require the Company
to pay taxes, maintenance, insurance and certain other operating costs of the
leased properties.

F-71
<PAGE>
ACCURATE AIR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company also leases vehicles for operations which expire in 1998. The
payments under these vehicle leases were approximately $--, $1,400, $26,000 and
$94,000 for the years ended June 30, 1994 and 1995, the six months ended
December 31, 1995 and the year ended December 31, 1996, respectively.

Future minimum lease payments for operating leases are as follows (in
thousands):

DECEMBER 31,
1996
------------
Year Ended
1997............................... $ 197
1998............................... 60
1999............................... 15
------------
$ 272
============

8. INCOME TAXES (IN THOUSANDS):

Federal and state income taxes are as follows:

YEAR ENDED JUNE 30,
--------------------
1994 1995
--------- ---------
Federal --
Current............................ $ (37) $ 111
Deferred........................... (9) (60)
State --
Current............................ (7) 20
Deferred........................... (1) (11)
--------- ---------
$ (54) $ 60
========= =========

Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate tax rate of 34 percent to income
before income taxes as follows:

YEAR ENDED JUNE 30,
--------------------
1994 1995
--------- ---------
Provision at the statutory rate......... $ (52) $ 53
Increase (decrease) resulting from --
State income tax, net of benefit
for federal deduction............. (2) 6
Other.............................. -- 1
--------- ---------
$ (54) $ 60
========= =========

F-72
<PAGE>
ACCURATE AIR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

JUNE 30,
1995
--------
Depreciation and amortization........ $ 14
Accruals and reserves not deductible
until paid......................... 121
State taxes.......................... (4)
Cash to accrual adjustments.......... (50)
--------
Net deferred income tax assets....... $ 81
========

The net deferred tax assets and liabilities are comprised of the following:

JUNE 30,
1995
--------
Deferred tax assets --
Current......................... $ 114
Long-term....................... 14
--------
Total...................... 128
--------
Deferred tax liabilities --
Current......................... 47
Long-term....................... --
--------
Total...................... 47
--------
Net deferred income tax
assets................. $ 81
========

9. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

Effective January 1, 1995, the Company became self-insured for medical
claims up to $30,000 per year per covered individual per event. Claims in excess
of these amounts are covered by a stop-loss policy. The Company has recorded
reserves for self-insured claims based on estimated claims incurred through June
30, 1995, six months ended December 31, 1995 and the year ended December 31,
1996.

10. EMPLOYEE BENEFIT PLANS:

The Company has adopted a 401(k) plan which provides for 10 percent
matching contributions by the Company, up to a maximum of 6 percent of each
participating employee's annual compensation. The Company has the right to make
additional discretionary contributions. Employees become 100 percent vested in
the employer's contribution after 7 years of service. Total contributions by the
Company under

F-73
<PAGE>
ACCURATE AIR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
this plan to provide contributions and pay expenses were approximately $118,000,
$131,000, $12,000 and $199,000 during the years ended June 30, 1994 and 1995,
the six months ended December 31, 1995 and the year ended December 31, 1996,
respectively. Amounts due to this plan were approximately $109,000, $--and
$173,000 for the year ended June 30, 1995, the six months ended December 31,
1995 and the year ended December 31, 1996, respectively.

The Company also adopted a discretionary profit-sharing plan under which
the Company may contribute up to 25 percent of a participant's compensation, up
to a maximum contribution of $30,000. Employees become 100 percent vested in the
employer's contributions after 7 years of service. The Company's contributions
and administrative expenses were approximately $5,000, $8,000, $-- and $--, for
the years ended June 30, 1994 and 1995, and six months ended December 31, 1995
and the year ended December 31, 1996, respectively.

11. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
notes payable, a line of credit, and debt. The Company believes that the
carrying value of these instruments on the accompanying balance sheet
approximates their fair value.

12. CAPITAL STOCK:

In addition to the 250,000 authorized shares of $1 par value voting common
stock, the Company has the following classes of authorized capital stock. None
of these three classes have been issued.

SHARES PAR
AUTHORIZED VALUE
----------- ------
Nonvoting Common..................... 250,000 $ 1
Voting Preferred..................... 250,000 $ 1
Nonvoting Preferred.................. 250,000 $ 1

13. SALES TO SIGNIFICANT CUSTOMERS:

For the years ended June 30, 1994 and 1995, the six months ended December
31, 1995, and year ended December 31, 1996 one customer accounted for
approximately 12, 25, 13, and 0 percent, respectively, of the Company's revenue.

14. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

In March 1997, the Company and its shareholder entered into a definitive
agreement with a wholly-owned subsidiary of Comfort Systems, providing for the
merger of the Company with the subsidiary of Comfort Systems.

In connection with the merger, the Company will dividend certain assets to
the shareholder, consisting of land, buildings, and automobiles, with a total
carrying value of approximately $370,000 as of March 31, 1997. Had this
adjustment been recorded at March 31, 1997, the effect on the accompanying
unaudited balance sheet would be a decrease in shareholder's equity of $370,000.

Concurrently with the merger, the Company will enter into new agreements
with a company partially owned by the shareholder to lease land and buildings
owned by such party used in the Company's operations for a negotiated amount and
term.

F-74

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Eastern Heating and Cooling, Inc.:

We have audited the accompanying balance sheet of Eastern Heating and
Cooling, Inc., as of December 31, 1996, and the related statements of
operations, shareholder's equity 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 Eastern Heating and Cooling,
Inc., as of December 31, 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-75
<PAGE>

EASTERN HEATING AND COOLING, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 83 $ 131
Accounts receivable --
Trade, net of allowance of
$25 and $25,
respectively............ 1,214 813
Retainage.................. 43 83
Other receivables.......... 13 27
Inventories..................... 100 97
Costs and estimated earnings in
excess of billings on
uncompleted contracts......... 66 48
------------ ------------
Total current
assets............. 1,519 1,199
PROPERTY AND EQUIPMENT, net.......... 604 607
OTHER NONCURRENT ASSETS.............. 144 174
------------ ------------
Total assets.......... $2,267 $1,980
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
debt........................... $ 302 $ 302
Accounts payable and accrued
expenses....................... 826 759
Line of credit.................. 140 305
Billings in excess of costs and
estimated earnings on
uncompleted contracts.......... 102 53
------------ ------------
Total current
liabilities........ 1,370 1,419
LONG-TERM DEBT, net of current
maturities......................... 431 353
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock, no par value, 200
shares authorized, 100 shares
issued and outstanding......... 50 50
Retained earnings............... 416 158
------------ ------------
Total shareholder's
equity............. 466 208
------------ ------------
Total liabilities and
shareholder's
equity............. $2,267 $1,980
============ ============

The accompanying notes are an integral part of these financial statements.

F-76
<PAGE>

EASTERN HEATING AND COOLING, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------
1996 1996 1997
------------ --------- ---------
(UNAUDITED)
REVENUES............................. $ 7,944 $ 1,525 $ 1,284
COST OF SERVICES..................... 5,276 973 805
------------ --------- ---------

Gross profit.................... 2,668 552 479
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,237 532 582
------------ --------- ---------

Income (loss) from operations... 431 20 (103)
OTHER INCOME (EXPENSE):

Interest expense................ (87) (19) (20)
Other........................... 40 -- --
------------ --------- ---------

NET INCOME (LOSS).................... $ 384 $ 1 $ (123)
============ ========= =========

The accompanying notes are an integral part of these financial statements.

F-77
<PAGE>

EASTERN HEATING AND COOLING, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED SHAREHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------

<S> <C> <C> <C> <C>
BALANCE, December 31, 1995........... 100 $ 50 $ 356 $ 406

Distributions to shareholder.... -- -- (324) (324)

Net income...................... -- -- 384 384
------ ------ -------- -------------

BALANCE, December 31, 1996........... 100 $ 50 $ 416 $ 466
Distributions to shareholder
(unaudited)................... -- -- (135) (135)
Net loss (unaudited)............ -- -- (123) (123)
------ ------ -------- -------------

BALANCE, March 31, 1997
(unaudited)........................ 100 $ 50 $ 158 $ 208
====== ====== ======== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-78
<PAGE>

EASTERN HEATING AND COOLING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------
1996 1996 1997
------------ --------- ---------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................. $ 384 $ 1 $ (123)
Adjustments to reconcile net income
to net cash provided by operating
activities --
Depreciation and amortization.... 144 31 40
Gain on sale of property and
equipment...................... (31) -- --
Changes in operating assets and
liabilities --
(Increase) decrease in --
Accounts receivable......... (434) (119) 347
Inventories................. 4 (1) 2
Costs and estimated earnings
in excess of billings on
uncompleted contracts..... 123 (60) 19
Other noncurrent assets..... 80 3 (32)
Increase (decrease) in --
Accounts payable and accrued
expenses.................. 246 114 (67)
Billings in excess of costs
and estimated earnings on
uncompleted contracts..... 10 36 (48)
------------ --------- ---------
Net cash provided by
operating
activities............ 526 5 138
------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment........................ 38 -- --
Additions of property and
equipment........................ (262) (3) (42)
------------ --------- ---------
Net cash used in
investing
activities............ (224) (3) (42)
------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt....... 208 -- --
Payments of long-term debt......... (280) (69) (78)
Borrowings on line of credit....... 140 181 165
Distributions to shareholder....... (325) (80) (135)
------------ --------- ---------
Net cash provided by
(used in) financing
activities............ (257) 32 (48)
------------ --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 45 34 48
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 38 38 83
------------ --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 83 $ 72 $ 131
============ ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest......................... $ 52 $ 19 $ 20

The accompanying notes are an integral part of these financial statements.

F-79
<PAGE>
EASTERN HEATING AND COOLING, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Eastern Heating and Cooling, Inc., a New York corporation, (the
"Company") focuses on providing "design and build" installation and
maintenance, repair and replacement of HVAC systems for commercial and
industrial facilities. Eastern also offers continuous monitoring and control
systems for commercial facilities. Eastern primarily operates in the area within
a 75 mile radius of Albany, New York.

The Company and its shareholder intends to enter into a definitive
agreement with Comfort Systems USA, Inc. ("Comfort Systems") pursuant to which
all outstanding shares of the Company's common stock will be exchanged for cash
and shares of Comfort Systems common stock concurrently with the consummation of
the initial public offering (the "Offering") of the common stock of Comfort
Systems.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL INFORMATION

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES

Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.

PROPERTY AND EQUIPMENT

REVENUE RECOGNITION

F-80
<PAGE>
EASTERN HEATING AND COOLING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The balances billed but not paid by customers pursuant to retainage
provision in construction contracts will be due upon completion of the contracts
and acceptance by the customer. Based on the Company's experience with similar
contracts in recent years, the retention balance will be billed and collected in
the upcoming fiscal year.

WARRANTY COSTS

INCOME TAXES

The Company has elected S Corporation status as defined by the Internal
Revenue Code, whereby the Company is not subject to taxation for federal
purposes. Under S Corporation status, the shareholder reports his share of the
Company's taxable earnings or losses in his personal tax returns. The Company
will terminate its S Corporation status concurrently with the effective date of
this Offering.

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENT

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Accordingly, in
the event that facts and circumstances indicate that property and equipment, and
intangible or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, 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 is necessary.
Adoption of this standard did not have a material effect on the financial
position or results of operations of the Company.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):

ESTIMATED
USEFUL LIVES DECEMBER 31,
IN YEARS 1996
------------ ------------
Transportation equipment............. 7 $ 957
Machinery and equipment.............. 10 54
Computer and telephone equipment..... 3-5 6
Leasehold improvements............... 20 36
Furniture and fixtures............... 7-10 126
------------
1,179
Less -- Accumulated depreciation and
amortization....................... (575)
------------
Property and equipment, net..... $ 604
============

F-81
<PAGE>
EASTERN HEATING AND COOLING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts consists of the
following (in thousands):

DECEMBER 31,
1996
------------
Balance at beginning of year......... $ 16
Additions to costs and expenses...... 25
Deductions for uncollectible
receivables written off and
recoveries......................... (16)
------------
$ 25
============

Accounts payable and accrued expenses consist of the following (in
thousands):

DECEMBER 31,
1996
------------
Accounts payable, trade.............. $ 611
Accrued compensation and benefits.... 120
Other accrued expenses............... 95
------------
$ 826
============

Installation contracts in progress are as follows (in thousands):

DECEMBER 31,
1996
------------
Costs incurred on contracts in
progress........................... $ 749
Estimated earnings, net of losses.... 235
------------
984
Less -- Billings to date............. 1,020
------------
$ (36)
============

Costs and estimated earnings in
excess of billings on uncompleted
contracts.......................... $ 66
Billings in excess of costs and
estimated earnings on uncompleted
contracts.......................... (102)
------------
$ (36)
============

5. LONG-TERM DEBT:

Long-term debt consists of the following:

The Company has a term note payable to a financial institution with an
outstanding balance of approximately $133,000 at December 31, 1996. The term
note matures in April 1999, and bears interest at prime plus 2 percent (10.25
percent at December 31, 1996) which is payable along with principal of $4,583
monthly. The note is secured by substantially all assets of the Company and is
guaranteed by the Company's shareholder.

The Company has various installment notes with several financial
institutions which are secured by transportation equipment. The terms of the
notes range from 48 months to 60 months with monthly payments of principal and
interest of approximately $12,300. The notes bear interest at rates ranging from
6.5 percent to 10.5 percent and mature from 1997 to 2001.

The Company has a note payable to its former owner with an outstanding
balance of $288,444 at December 31, 1996. The note payable was calculated using
an implied interest rate of 9 percent. The note

F-82
<PAGE>
EASTERN HEATING AND COOLING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
payable is due in installments of $159,385 on January 1, 1997 and $168,948 on
January 1, 1998, including interest.

The aggregate maturities of long-term debt as of December 31, 1996, are as
follows (in thousands):

Year ending December 31 --
1997............................ $ 302
1998............................ 296
1999............................ 85
2000............................ 42
2001............................ 8
---------
$ 733
=========

6. LINE OF CREDIT:

The Company has a $500,000 line of credit with a financial services
company. The line of credit is due on demand and bears interest at prime plus 1
percent per annum (9.25 percent at December 31, 1996). The line of credit is
secured by substantially all assets of the Company. The balance outstanding
under this line of credit at December 31, 1996 was $140,000.

7. LEASES:

The Company leases a facility from a company which is 50 percent owned by
the Company's shareholder. The lease expires in December 1999. The rent paid
under this related-party lease was approximately $50,000 for the year ended
December 31, 1996.

Additionally, the Company rents other facilities from non-related parties.
Future minimum lease payments under non-cancellable operating leases are as
follows (in thousands):

Year Ended December 31 --
1997............................... $ 55
1998............................... 55
1999............................... 50
------------
$ 160
============
8. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

F-83
<PAGE>
EASTERN HEATING AND COOLING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
investments, notes payable, a line of credit, and debt. The Company believes
that the carrying value of these instruments on the accompanying balance sheet
approximates their fair value.

10. SALES TO SIGNIFICANT CUSTOMER:

During 1996, one customer accounted for approximately 12 percent of the
Company's sales.

11. SUBSEQUENT EVENT:

Effective January 2, 1997, an affiliate of the Company acquired the
business and certain operating assets of RECC, Inc., a New York corporation.
This affiliate agreed to pay $10,000 over a period of one year.

12. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

As of March 31, 1997, the Company distributed $135,000 from the accumulated
adjustment account. In connection with the merger, the Company will make
additional cash distributions of approximately $158,000 prior to the merger
which represents the Company's estimated S Corporation accumulated adjustment
account. Had these transactions been recorded at March 31, 1997, the effect on
the accompanying unaudited balance sheet would be an increase in liabilities of
$158,000 and a decrease in shareholder's equity of $158,000.

Concurrently with the merger, the Company will enter into agreements with
the shareholders to lease land and buildings used in the Company's operations
for a negotiated amount and term.

Eastern intends to enter into a 10-year lease with 60 Loudonville Road
Associates for a new building and terminate the existing lease. Eastern has
agreed to install the HVAC systems in the new building at a price which the
Company believes to be at a fair market value. The Company's annual rental in
the new building will be at fair market value, as determined by appraisal.

F-84

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Contract Service, Inc.:

We have audited the accompanying balance sheets of Contract Service, Inc.,
as of December 31, 1995 and 1996, and the related statements of operations,
shareholders' equity and cash flows for the three years ended December 31, 1996.
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 audits 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 financial position of Contract Service, Inc., as
of December 31, 1995 and 1996, and the results of their operations and their
cash flows for the three years ended December 31, 1996 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-85
<PAGE>
CONTRACT SERVICE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

DECEMBER 31,
-------------------- MARCH 31,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 116 $ 207 $ 103
Accounts receivable --
Trade, net of allowance of
$11, $22 and $21,
respectively............... 651 680 681
Retainage..................... 10 26 41
Inventories........................ 306 362 491
Costs and estimated earnings in
excess of billings on uncompleted
contracts........................ 104 110 129
Prepaid expenses and other current
assets........................... 11 4 4
--------- --------- -----------
Total current assets.......... 1,198 1,389 1,449
PROPERTY AND EQUIPMENT, net............. 549 642 690
OTHER NONCURRENT ASSETS................. 14 16 15
--------- --------- -----------
Total assets.................. $ 1,761 $ 2,047 $ 2,154
========= ========= ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of long-term
debt............................. $ 100 $ 100 $ 101
Accounts payable and accrued
expenses......................... 576 691 657
Billings in excess of costs and
estimated earnings on uncompleted
contracts........................ 149 136 218
--------- --------- -----------
Total current liabilities..... 825 927 976
LONG-TERM DEBT, net of current
maturities............................ 263 429 434
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 20,000
shares authorized, 8,946 shares
issued and outstanding........... 9 9 9
Retained earnings.................. 664 682 735
--------- --------- -----------
Total shareholders' equity.... 673 691 744
--------- --------- -----------
Total liabilities and
shareholders' equity....... $ 1,761 $ 2,047 $ 2,154
========= ========= ===========

The accompanying notes are an integral part of these financial statements.

F-86
<PAGE>
CONTRACT SERVICE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ 6,502 $ 6,361 $ 7,842 $ 1,369 $ 1,562
COST OF SERVICES........................ 4,393 4,413 5,201 926 1,045
--------- --------- --------- --------- ---------

Gross profit............. 2,109 1,948 2,641 443 517
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 1,228 1,500 1,660 368 458
--------- --------- --------- --------- ---------

Income from operations... 881 448 981 75 59
OTHER INCOME (EXPENSE):

Interest expense................... (5) (9) (29) (9) (15)
Other.............................. 29 38 51 13 9
--------- --------- --------- --------- ---------

NET INCOME.............................. $ 905 $ 477 $ 1,003 $ 79 $ 53
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-87
<PAGE>
CONTRACT SERVICE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>

COMMON STOCK TOTAL
------------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
--------- ------ -------- --------------

<S> <C> <C> <C> <C>
BALANCE, December 31, 1993........... 8,946 $ 9 $ 660 $ 669

Distributions to shareholders... -- -- (911) (911)

Net income...................... -- -- 905 905
--------- ------ -------- --------------

BALANCE, December 31, 1994........... 8,946 9 654 663

Distributions to shareholders... -- -- (467) (467)

Net income...................... -- -- 477 477
--------- ------ -------- --------------

BALANCE, December 31, 1995........... 8,946 9 664 673

Distributions to shareholders... -- -- (985) (985)

Net income...................... -- -- 1,003 1,003
--------- ------ -------- --------------

BALANCE, December 31, 1996........... 8,946 9 682 691
Net income (unaudited).......... -- -- 53 53
--------- ------ -------- --------------

BALANCE, March 31, 1997
(unaudited)........................ 8,946 $ 9 $ 735 $ 744
========= ====== ======== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-88
<PAGE>
CONTRACT SERVICE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 905 $ 477 $ 1,003 $ 79 $ 53
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities --
Depreciation..................... 97 120 138 28 33
Gain (loss) on sale of property
and equipment................... 8 (5) -- -- --
Changes in operating assets and
liabilities --
(Increase) decrease in --
Accounts receivable......... (219) (96) (45) 177 (16)
Inventories................. 20 (49) (57) (54) (129)
Costs and estimated earnings
in excess of billings on
uncompleted contracts...... (44) 35 (6) 8 (19)
Prepaid expenses and other
current assets............. (9) (2) 7 2 --
Other noncurrent assets..... (8) 5 (2) (11) 1
Increase (decrease) in --
Accounts payable and accrued
expenses................... (27) (3) 115 (32) (34)
Billings in excess of costs
and estimated earnings on
uncompleted contracts..... 12 17 (13) (28) 82
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities.......... 735 499 1,140 169 (29)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment......................... -- 6 -- 1 --
Additions of property and
equipment......................... (138) (199) (230) (107) (81)
--------- --------- --------- --------- ---------
Net cash used in investing
activities.................... (138) (193) (230) (106) (81)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt....... 102 201 166 -- 6
Distributions to shareholders...... (911) (467) (985) -- --
Collections of advances to officers
and shareholders.................. 86 -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities.......... (723) (266) (819) -- 6
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... (126) 40 91 63 (104)
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 202 76 116 116 207
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 76 $ 116 $ 207 $ 179 $ 103
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest......................... $ 6 $ 30 $ 41 $ 9 $ 15
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-89
<PAGE>
CONTRACT SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Contract Service, Inc., a Utah corporation, (the "Company") focuses on
providing comprehensive maintenance, repair and replacement of HVAC systems for
commercial and residential facilities primarily in Utah.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL INFORMATION

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.

REVENUE RECOGNITION

The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-completion method measured by the
percentage of costs incurred to total estimated costs for each contract.
Provisions for the total estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job performance, job
conditions, estimated profitability and final contract settlements may result in
revisions to costs and income and are recognized in the period in which the
revisions are determined.

F-90
<PAGE>
CONTRACT SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

WARRANTY COSTS

The Company warrants labor for the first year after installation of new air
conditioning and heating units. The Company generally warrants labor for 30 days
after the servicing of existing air conditioning and heating units. A reserve
for warranty costs is recorded upon completion of installation or service.

INCOME TAXES

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENT

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Accordingly, in
the event that facts and circumstances indicate that property and equipment, and
intangible or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, 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 is necessary.
Adoption of this standard did not have a material effect on the financial
position or results of operations of the Company.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES DECEMBER 31, DECEMBER 31,
IN YEARS 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Transportation equipment............. 5-10 $ 690 $ 907
Machinery and equipment.............. 5-30 126 127
Furniture and fixtures............... 5-20 178 189
------------ ------------
Less -- Accumulated depreciation..... (445) (581)
------------ ------------
Property and equipment, net..... $ 549 $ 642
============ ============
</TABLE>
F-91
<PAGE>
CONTRACT SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts consists of the
following (in thousands):

DECEMBER 31,
--------------------
1995 1996
--------- ---------
Balance at beginning of year......... $ 11 $ 11
Additions to costs and expenses...... 18 26
Deductions for uncollectible
receivables written off and
recoveries......................... (18) (15)
--------- ---------
$ 11 $ 22
========= =========

Accounts payable and accrued expenses consist of the following (in
thousands):

DECEMBER 31,
--------------------
1995 1996
--------- ---------
Accounts payable, trade.............. $ 242 $ 256
Accrued compensation................. 219 312
Other accrued expenses............... 115 123
--------- ---------
$ 576 $ 691
========= =========

Installation contracts in progress are as follows (in thousands):

DECEMBER 31,
--------------------
1995 1996
--------- ---------
Costs incurred on contracts in
progress............................. $ 1,998 $ 2,534
Estimated earnings, net of losses.... 741 978
--------- ---------
2,739 3,512
Less -- Billings to date............. 2,784 3,538
--------- ---------
$ (45) $ (26)
========= =========

Costs and estimated earnings in
excess
of billings on uncompleted
contracts.......................... $ 104 $ 110
Billings in excess of costs and
estimated
earnings on uncompleted
contracts.......................... (149) (136)
--------- ---------
$ (45) $ (26)
========= =========

5. LONG-TERM DEBT:

Long-term debt consists of ten unsecured promissory notes to the Company's
shareholders of which two are demand notes. All notes, except the demand notes,
are due 10 years from the date of the note. The notes bear an interest rate of
10 percent. Monthly interest payments are made to the shareholders with the
principal due at the date of maturity.

F-92
<PAGE>
CONTRACT SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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

Year ending December 31,

1997................................. $ 100
1998................................. --
1999................................. --
2000................................. --
2001................................. --
Thereafter........................... 429
---------
$ 529
=========

6. LEASES:

The Company leases its facilities from a company owned by its two
shareholders. The lease is currently on a month-to-month basis. The rent paid
under this related-party lease was approximately $66,000, $106,000 and $120,000
for the years ended December 31, 1994, 1995 and 1996, respectively.

Future minimum lease payments for operating leases are as follows (in
thousands):

Year ending December 31,
1997............................ $ 120
1998............................ 120
1999............................ 120
2000............................ 120
2001............................ 120
---------
$ 600
=========

7. RELATED-PARTY TRANSACTIONS:

At December 31, 1994, 1995 and 1996, the Company held notes payable to the
shareholders in the amount of $162,000, $363,000 and $529,000, respectively.
(See Note 5.) The notes bear interest at 10 percent. Interest paid during the
years ended December 31, 1994, 1995 and 1996 related to these loans was $6,000,
$29,000 and $41,000, respectively.

8. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

F-93
<PAGE>
CONTRACT SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. EMPLOYEE BENEFIT PLAN:

Beginning January 1, 1994, the Company adopted a 401(k) plan. The plan
allows employees to contribute a portion of their gross wages into the plan as a
salary deferral and requires the Company to match 25 percent of the employee
contribution up to 5 percent of employee's gross wages. The Company's matching
contributions for the years ended December 31, 1995 and 1996 were $17,000 and
$19,000 respectively.

The Company has also adopted a cafeteria plan pursuant to Section 125 of
the Internal Revenue Code that covers all employees from 90 days after the
commencement of employment. Under this plan, the employees may reduce their
compensation to fund medical, dental and dependent care/day care benefits. The
funds withheld are used to pay actual claims or medical insurance, based on the
employees' elections.

10. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
and debt. The Company believes that the carrying value of these instruments on
the accompanying balance sheet approximates their fair value.

11. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

In connection with the merger, the Company will make a cash distribution of
approximately $735,000 prior to the merger which represents the Company's
estimated S Corporation accumulated adjustment account. Had these transactions
been recorded at March 31, 1997, the effect on the accompanying unaudited
balance sheet would be a decrease in assets of $97,000 and an increase in
liabilities of $832,000 and a decrease in shareholders' equity of $735,000.

F-94

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Tech Heating and Air Conditioning, Inc.:

We have audited the accompanying combined balance sheets of Tech Heating
and Air Conditioning, Inc., and related company as of December 31, 1995 and
1996, and the related combined statements of operations, shareholders' equity
and cash flows for the years then ended. These combined financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Tech
Heating and Air Conditioning, Inc., and related company as of December 31, 1995
and 1996, and the combined results of their operations and their cash flows for
the years then ended in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-95
<PAGE>
TECH HEATING AND AIR CONDITIONING, INC.,
AND RELATED COMPANY
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

DECEMBER 31,
-------------------- MARCH 31,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 313 $ 611 $ 249
Accounts receivable --
Trade, net of allowance of
$45, $40 and $45,
respectively............... 1,244 1,723 1,216
Retainage..................... 92 48 --
Other receivables............. -- 7 20
Inventories........................ 67 208 193
Prepaid expenses and other current
assets........................... 7 33 20
--------- --------- -----------
Total current assets..... 1,723 2,630 1,698
PROPERTY AND EQUIPMENT, net............. 368 500 484
--------- --------- -----------
Total assets............. $ 2,091 $ 3,130 $ 2,182
========= ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
debt............................... $ -- $ 62 $ 69
Accounts payable and accrued
expenses........................... 1,048 757 701
Line of credit..................... 88 190 900
--------- --------- -----------
Total current
liabilities.............. 1,136 1,009 1,670
LONG-TERM DEBT, net of current
maturities.............................. 48 60 32
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 1,000
shares authorized, 500 shares
issued........................... 1 1 1
Treasury stock..................... (3) (3) (3)
Retained earnings.................. 909 2,063 482
--------- --------- -----------
Total shareholders'
equity................... 907 2,061 480
--------- --------- -----------
Total liabilities and
shareholders' equity..... $ 2,091 $ 3,130 $ 2,182
========= ========= ===========

The accompanying notes are an integral part of these combined financial
statements.

F-96
<PAGE>
TECH HEATING AND AIR CONDITIONING, INC.,
AND RELATED COMPANY
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER ENDED
31, MARCH 31,
-------------------- --------------------
1995 1996 1996 1997
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES................................ $ 6,960 $ 7,537 $ 1,075 $ 1,656
COST OF SERVICES........................ 4,212 3,996 639 1,034
--------- --------- --------- ---------
Gross profit....................... 2,748 3,541 436 622
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 1,800 1,861 390 565
--------- --------- --------- ---------
Income from operations............. 948 1,680 46 57
OTHER INCOME (EXPENSE):
Interest expense................... (12) (18) (3) (10)
Other.............................. 20 31 6 11
--------- --------- --------- ---------
NET INCOME.............................. $ 956 $ 1,693 $ 49 $ 58
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-97
<PAGE>
TECH HEATING AND AIR CONDITIONING, INC.,
AND RELATED COMPANY
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- TREASURY RETAINED SHAREHOLDERS'
SHARES AMOUNT STOCK EARNINGS EQUITY
------ ------ -------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994.............. 500 $ 1 $ (3) $ 575 $ 573
Distributions to shareholders...... -- -- -- (622) (622)
Net income......................... -- -- -- 956 956
------ ------ --- -------- -------------
BALANCE, December 31, 1995.............. 500 1 (3) 909 907
Distributions to shareholders...... -- -- -- (539) (539)
Net income......................... -- -- -- 1,693 1,693
------ ------ --- -------- -------------
BALANCE, December 31, 1996.............. 500 1 (3) 2,063 2,061
Distributions to shareholders
(unaudited)...................... -- -- -- (1,639) (1,639)
Net income (unaudited)............. -- -- -- 58 58
------ ------ --- -------- -------------
BALANCE, March 31, 1997 (unaudited)..... 500 $ 1 $ (3) $ 482 $ 480
====== ====== === ======== =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-98
<PAGE>
TECH HEATING AND AIR CONDITIONING, INC.,
AND RELATED COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------- --------------------
1995 1996 1996 1997
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 956 $ 1,693 $ 49 $ 58
Adjustments to reconcile net income
to net cash provided by (used
in) operating activities --
Depreciation.................... 89 142 31 38
Changes in operating assets and
liabilities --
(Increase) decrease in --
Accounts receivable........ 581 (442) (48) 542
Inventories................ (42) (141) 1 15
Prepaid expenses and other
current assets.......... 7 (26) (6) 13
Increase (decrease) in --
Accounts payable and
accrued expenses........ (513) (291) (312) (56)
--------- --------- --------- ---------
Net cash provided by
(used in) operating
activities......... 1,078 935 (285) 610
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and
equipment....................... (127) (274) (59) (22)
--------- --------- --------- ---------
Net cash used in
investing
activities......... (127) (274) (59) (22)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit....... 76 102 18 710
Borrowings on long-term debt....... -- 205 203 --
Payments on long-term debt......... (100) (131) -- (21)
Distributions to shareholders...... (622) (539) (15) (1,639)
--------- --------- --------- ---------
Net cash provided by
(used in) financing
activities......... (646) (363) 206 (950)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 305 298 (138) (362)
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 8 313 313 611
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 313 $ 611 $ 175 $ 249
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest........................ $ 12 $ 18 $ 3 $ 8
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-99
<PAGE>
TECH HEATING AND AIR CONDITIONING, INC.
AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Tech Heating and Air Conditioning, Inc., an Ohio corporation, and related
company (collectively, the "Company") focuses on providing "design and
build" installation and services, maintenance, repair and replacement of HVAC
systems for commercial and industrial facilities. Tech also offers continuous
monitoring and control services for commercial facilities. The Company's
customers are primarily in the greater Cleveland, Ohio area.

The Company and its shareholders intend to enter into a definitive
agreement with Comfort Systems, USA, Inc. ("Comfort Systems") pursuant to
which all outstanding shares of the Company's common stock will be exchanged for
cash and shares of Comfort Systems common stock concurrently with the
consummation of the initial public offering (the "Offering") of the common
stock of Comfort Systems.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The combined financial statements include the accounts and results of
operations of Tech Heating and Air Conditioning, Inc., and its related company,
Tech Mechanical which are under common control and management of two
individuals. All significant intercompany transactions and balances have been
eliminated in combination.

INTERIM FINANCIAL INFORMATION

The interim combined financial statements as of March 31, 1997, and for the
three months ended March 31, 1996 and 1997, are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the combined
interim financial statements, have been included. The results of operations for
the interim periods are not necessarily indicative of the results for the entire
fiscal year.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.

F-100
<PAGE>
TECH HEATING AND AIR CONDITIONING, INC.
AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

WARRANTY COSTS

The Company warrants labor for the first year after installation of new air
conditioning and heating systems. The Company generally warrants labor for 30
days after the servicing of existing air conditioning and heating systems. A
reserve for warranty costs is recorded upon completion of installation or
service.

INCOME TAXES

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENT

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Accordingly, in
the event that facts and circumstances indicate that property and equipment may
be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, 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 is necessary. Adoption of this standard did not have
a material effect on the financial position or combined results of operations of
the Company.

F-101
<PAGE>
TECH HEATING AND AIR CONDITIONING, INC.
AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):

ESTIMATED DECEMBER 31,
USEFUL LIVES --------------------
IN YEARS 1995 1996
------------ --------- ---------
Transportation equipment................ 5 $ 462 $ 553
Machinery and equipment................. 7 61 159
Computer and telephone equipment........ 5 107 190
Furniture and fixtures.................. 5-7 145 128
--------- ---------
Less -- Accumulated depreciation........ (407) (530)
--------- ---------
Property and equipment, net........ $ 368 $ 500
========= =========

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts consists of the
following (in thousands):

DECEMBER 31,
--------------------
1995 1996
--- ---
Balance at beginning of year............ $ 25 $ 45
Additions to costs and expenses......... 20 --
Deductions for uncollectible receivables
written off and recoveries............ -- (5)
--- ---
$ 45 $ 40
=== ===

Accounts payable and accrued expenses consist of the following (in
thousands):

DECEMBER 31,
--------------------
1995 1996
--------- ---------
Accounts payable, trade................. $ 428 $ 388
Accrued compensation and benefits....... 337 226
Other accrued expenses.................. 283 143
--------- ---------
$ 1,048 $ 757
========= =========

At December 31, 1995 and 1996 billings to customers generally equalled work
performed which resulted in no costs and estimated earnings in excess of
billings or billings in excess of costs and estimated earnings on uncompleted
contracts.

F-102
<PAGE>
TECH HEATING AND AIR CONDITIONING, INC.
AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT AND NOTES PAYABLE:

Long-term debt consists of installment notes payable for transportation
equipment. The debt is secured by the related transportation equipment. The
terms of the notes range from 24 months to 36 months with monthly payments of
principal and interest of approximately $8,000. The notes bear interest at rates
ranging from 7.5 percent to 9.95 percent.

The aggregate maturities of long-term debt as of December 31, 1996, are as
follows (in thousands):

Year ending December 31 --
1997............................... $ 252
1998............................... 55
1999............................... 5
---------
$ 312
=========

The Company has a $1,500,000 line of credit with a financial services
company. The line of credit expires in July 1997 and bears interest at prime
plus .25 percent per annum (8.5 percent at December 31, 1996). The line of
credit is secured by a lien on accounts receivable and inventory and is
guaranteed by the shareholders. There was $190,000 outstanding under this line
of credit at December 31, 1996.

6. LEASES:

The Company leases facilities from a company which is partially owned by
one of the shareholders. The lease expires in April of 2000. The rent paid under
this related-party lease was approximately $84,000 for the year ended December
31, 1996. The lease requires the Company to pay taxes, maintenance, insurance
and certain other operating costs of the leased property. The lease contains
renewal provisions.

The Company leases a vehicle for a key member of management. The lease
payments under this vehicle lease totaled approximately $6,700 for the year
ended December 31, 1996.

Future minimum lease payments for operating leases are as follows (in
thousands):

Year ending December 31
1997............................ $ 100
1998............................ 91
1999............................ 86
2000............................ 28
---------
$ 305
=========

7. EMPLOYEE BENEFIT PLANS:

The Company has adopted a retirement plan which qualifies under Section
401(k) of the Internal Revenue Code. The Company has the right to make
discretionary contributions. Total contributions by the Company under this plan
were approximately $18,000 and $12,000 for 1995 and 1996, respectively.

8. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents
and debt. The Company believes that the carrying value of these instruments on
the accompanying balance sheet approximates their fair value.

F-103
<PAGE>
TECH HEATING AND AIR CONDITIONING, INC.
AND RELATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

10. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

As of March 31, 1997, the Company distributed $1,639,000 from the
accumulated adjustment account and increased borrowings on the line of credit of
$900,000 with the remainder paid from cash on hand. In connection with the
merger, the Company will make additional cash distributions of approximately
$482,000 prior to the merger which represents the Company's estimated S
Corporation accumulated adjustment account. Had these transactions been recorded
at March 31, 1997, the effect on the accompanying unaudited balance sheet would
have been a decrease in assets of $149,000, an increase in liabilities of
$333,000 and a decrease in shareholders' equity of $482,000.

Concurrently with the merger, the Company will enter into agreements with
the shareholders to lease land and buildings used in the Company's operations
for a negotiated amount and term.

F-104

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Seasonair, Inc.:

We have audited the accompanying balance sheet of Seasonair, Inc. as of
December 31, 1996, and the related statements of operations, shareholders'
equity 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 Seasonair, Inc., as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-105
<PAGE>

SEASONAIR, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 69 $ 221
Accounts receivable --
Trade, net of allowance of $
-- and $9, respectively.... 961 869
Retainage..................... 17 44
Other receivables............. -- 40
Inventories........................ 190 187
Costs on uncompleted contracts in
excess of billings................ 75 89
Deferred tax asset................. 104 104
Prepaid expenses and other current
assets............................ 96 49
------------ ------------
Total current assets..... 1,512 1,603
PROPERTY AND EQUIPMENT, net............. 63 61
OTHER NONCURRENT ASSETS................. 83 110
------------ ------------
Total assets............. $1,658 $1,774
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit..................... $-- $ 65
Current maturities of long-term
debt.............................. 34 26
Accounts payable and accrued
expenses.......................... 810 866
Billings in excess of costs and
estimated earnings on uncompleted
contracts......................... 156 134
------------ ------------
Total current
liabilities.......... 1,000 1,091
LONG-TERM DEBT, net of current
maturities............................ 76 77
DEFERRED TAX LIABILITY.................. 17 17
COMMITMENTS AND CONTINGENCIES...........
SHAREHOLDERS' EQUITY:
Common stock, no par value,
2,000,000 shares authorized,
1,244,000 shares issued and
outstanding....................... 78 78
Additional paid-in capital......... 1 1
Retained earnings.................. 721 745
Treasury stock..................... (235) (235)
------------ ------------
Total shareholders'
equity............... 565 589
------------ ------------
Total liabilities and
shareholders'
equity............... $1,658 $1,774
============ ============

The accompanying notes are an integral part of these financial statements.

F-106
<PAGE>

SEASONAIR, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------
1996 1996 1997
------------ --------- ---------
(UNAUDITED)
REVENUES................................ $ 6,737 $ 1,128 $ 1,831
COST OF SERVICES........................ 4,006 586 1,165
------------ --------- ---------
Gross profit.................. 2,731 542 666
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 2,597 604 644
------------ --------- ---------
Income (loss) from
operations................. 134 (62) 22
OTHER INCOME (EXPENSE):
Interest expense................... (21) (5) (3)
Other.............................. 82 6 28
------------ --------- ---------
INCOME BEFORE INCOME TAXES.............. 195 (61) 47
PROVISION FOR INCOME TAXES.............. 69 -- 23
------------ --------- ---------
NET INCOME (LOSS)....................... $ 126 $ (61) $ 24
============ ========= =========

The accompanying notes are an integral part of these financial statements.

F-107
<PAGE>
SEASONAIR, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------- PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------------ ------ ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995........... 1,214,724 $ 78 $ 1 $ 632 $ (269) $ 442

Sales of treasury stock......... 29,503 -- -- -- 34 34

Distributions to shareholders... -- -- -- (37) -- (37)

Net income...................... -- -- -- 126 -- 126
------------ ------ ---------- --------- --------- -------------
BALANCE, December 31, 1996........... 1,244,227 78 1 721 (235) 565

Purchase of treasury stock...... (266) -- -- -- -- --
Net income (unaudited).......... -- -- -- 24 -- 24
------------ ------ ---------- --------- --------- -------------
BALANCE, March 31, 1997
(unaudited)..................... 1,243,961 $ 78 $ 1 $ 745 $ (235) $ 589
============ ====== == ========= ========= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-108
<PAGE>

SEASONAIR, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------
1996 1996 1997
------------ --------- ---------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................. $ 126 $ (61) $ 24
Adjustments to reconcile net income
(loss) to net cash provided by
(used in)
operating activities
Depreciation.................... (54) 5 5
Gain on sale of property and
equipment..................... (4) -- --
Changes in operating assets and
liabilities --
(Increase) decrease in --
Accounts receivable........ 49 282 25
Inventories................ (35) (6) 3
Prepaid expenses and other
current assets.......... (171) (37) 47
Costs of uncompleted
contracts in excess of
billings................ 58 (65) (14)
Other noncurrent assets.... (71) -- (27)
Increase (decrease) in --
Accounts payable and
accrued expenses........ (74) (76) 56
Billings in excess of costs
on uncompleted
contracts............... (23) 12 (22)
Deferred tax liability..... 30 -- --
------------ --------- ---------
Net cash provided by
(used in) operating
activities......... (169) 54 97
------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property
and equipment................. 71 (8) (3)
------------ --------- ---------
Net cash provided by
(used in) investing
activities......... 71 (8) (3)
------------ --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit.... -- -- 65
Payments of long-term debt...... (105) (82) (7)
Distributions to shareholders... (37) -- --
Cash received for sale of
treasury shares............... 34 (1) --
------------ --------- ---------
Net cash provided by
(used in) financing
activities......... (108) (83) 58
------------ --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... (206) (37) 152
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 275 275 69
------------ --------- ---------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 69 $ 238 $ 221
============ ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest................... $ 22 $ 3 $ 5
Income taxes............... 163 30 40

The accompanying notes are an integral part of these financial statements.

F-109
<PAGE>
SEASONAIR, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Seasonair, Inc., a Maryland corporation, (the "Company") focuses on
providing installation services and maintenance, repair and replacement of HVAC
systems for light commercial facilities. Seasonair primarily operates in
Maryland, the District of Columbia and Virginia.

INTERIM FINANCIAL INFORMATION

The interim financial statements as of March 31, 1997, and for the three
months ended March 31, 1996 and 1997, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting princples, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and depreciation is computed
using an accelerated method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the asset.

REVENUE RECOGNITION

The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenue from construction
contracts is recognized on the completed-contract method. This method is used
because the typical contract is completed within a twelve-month period, and the
Company's current financial position and results of operations do not vary
significantly from those which would result from use of the
percentage-of-completion method. A contract is considered complete when all
costs except insignificant items have been incurred, and the installation is
operating according to specifications or has been accepted by the customer.

F-110
<PAGE>
SEASONAIR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Contract costs include all direct equipment, material, labor, and
subcontract costs. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined.

WARRANTY COSTS

INCOME TAXES

The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes". Under this method, deferred income taxes are
recorded based upon differences between the 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 underlying assets or liabilities are recovered
or settled.

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENT

Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Accordingly, in the event that facts and circumstances indicate that
property and equipment and intangible or other assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
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 is necessary. Adoption of this standard did not have a material effect on
the financial position or results of operations of the Company.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):

ESTIMATED
USEFUL LIVES DECEMBER 31,
IN YEARS 1996
------------ ------------
Transportation equipment............. 5 $ 17
Machinery and equipment.............. 5 208
Leasehold improvements............... 39 15
Furniture and fixtures............... 7 16
------------
256
Less -- Accumulated depreciation and
amortization....................... (193)
------------
Property and equipment, net..... $ 63
============

F-111
<PAGE>
SEASONAIR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts consist of the
following (in thousands):

DECEMBER 31,
1996
------------
Balance at beginning of year............ $ --
Additions to costs and expenses......... 5
Deductions for uncollectible receivables
written off and recoveries............ (5)
---
$ --
===

Accounts payable and accrued expenses consist of the following (in
thousands):

DECEMBER 31,
1996
------------
Accounts payable, trade.............. $ 353
Accrued compensation and benefits.... 321
Warranty reserve..................... 37
Other................................ 99
------------
$ 810
============

5. LONG-TERM DEBT:

Long-term debt consists of two notes payable to officers and an installment
note payable for transportation equipment, which is secured by the related
transportation equipment. The terms of the notes range from 51 months to 80
months with monthly payments of principal and interest of approximately $3,598.
The notes bear interest at rates ranging from 10 percent to 12.7 percent.

The aggregate maturities of long-term debt as of December 31, 1996, are as
follows (in thousands):

Year ending December 31 --
1997............................... $ 34
1998............................... 37
1999............................... 38
2000............................... 1
---------
$ 110
=========

The Company has a $150,000 line of credit with a financial services
company. The line of credit expires August 5, 1997, and bears interest at prime
plus one percent per annum. There was no balance outstanding under this line of
credit at December 31, 1996.

6. LEASES:

The Company leases facilities from a partnership which is partially owned
by one of the shareholders. The lease expires in October, 2006. The rent paid
under this lease was approximately $62,640 for the year ended December 31, 1996.
The lease requires the Company to pay taxes, maintenance, insurance and certain
other operating costs of the leased property.

The Company leases vehicles for operations. The payments under these
vehicle leases were approximately $189,000 for the year ended December 31, 1996.

F-112
<PAGE>
SEASONAIR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments for operating leases are as follows (in
thousands):

Year ending December 31 --
1997............................... $ 241
1998............................... 202
1999............................... 158
2000............................... 105
2001............................... 65
---------
$ 771
=========

7. INCOME TAXES:

Federal and state income taxes for the year ended December 31, 1996, are as
follows (in thousands):

Federal --
Current............................ $ 50
Deferred........................... 7
State --
Current............................ 11
Deferred........................... 1
---
$ 69
===

Actual income tax expense for the year ended December 31, 1996, differs
from income tax expense computed by applying the U.S. federal statutory
corporate tax rate of 35% to income before income taxes as follows (in
thousands):

Provision at the statutory rate......... $ 68
Increase (decrease) resulting from --
State income tax, net of benefits
for federal deduction............. 8
Other.............................. (7)
---
$ 69
===

Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences representing deferred
tax assets and liabilities as of December 31, 1996, result principally from the
following (in thousands):

Depreciation and amortization........... $ (18)
Accruals and reserves not deductible
until paid............................ 110
State taxes............................. (5)
---------
Net deferred income tax asset........... $ 87
=========

F-113
<PAGE>
SEASONAIR, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The net deferred tax assets and liabilities at December 31, 1996, are comprised
of the following (in thousands):

Deferred tax assets --
Current............................ $ 104
Long-term.......................... --
---------
Total......................... 104
---------
Deferred tax liabilities --
Current............................ --
Long-term.......................... 17
---------
Total......................... 17
---------
Net deferred income tax
asset...................... $ 87
=========

8. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

9. EMPLOYEE BENEFIT PLAN:

The Company has a 401(k) profit-sharing plan which provides for the Company
to match employee contributions up to a maximum of $260 per person per year as
well as an employee stock ownership plan. Total contributions for both plans by
the Company under the plan were approximately $80,000 for purchase of treasury
stock for the employee stock ownership plan, and $5,000 for the 401(k) plan for
the year ended December 31, 1996.

10. FINANCIAL INSTRUMENTS:

The Company's financial instruments consist of cash and cash equivalents,
notes receivable, investments, notes payable, and debt. The Company believes
that the carrying value of these instruments on the accompanying balance sheet
approximates their fair value.

11. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

In March 1997, the Company and its shareholders entered into a definitive
agreement with a wholly-owned subsidiary of Comfort Systems, providing for the
exchange of shares by the Company with the subsidiary of Comfort Systems. A
total of 70,197 shares will be exchanged for cash and distributed to the
employee stock ownership plan.

F-114

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Western Building Services, Inc.:

We have audited the accompanying balance sheets of Western Building
Services, Inc. as of December 31, 1995 and 1996, and the related statements of
operations, shareholders' 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 Western Building Services,
Inc. as of December 31, 1995 and 1996, and the results of their operations and
cash flows for the years then ended in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
March 7, 1997

F-115
<PAGE>
WESTERN BUILDING SERVICES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

DECEMBER 31,
-------------------- MARCH 31,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ -- $ 177 $ 34
Accounts receivable --
Trade......................... 726 661 513
Retainage on uncompleted
contracts.................. 78 183 128
Other receivables............. 133 3 6
Inventories........................ 71 86 86
Costs and estimated earnings in
excess of billings on
uncompleted contracts............ 65 26 91
Prepaid expenses and other current
assets........................... 31 30 9
--------- --------- -----------
Total current assets..... 1,104 1,166 867
PROPERTY AND EQUIPMENT, net............. 150 191 189
OTHER NONCURRENT ASSETS................. 22 129 174
--------- --------- -----------
Total assets............. $ 1,276 $ 1,486 $ 1,230
========= ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Line of credit..................... $ 231 $ -- $ --
Notes payable...................... -- 6 --
Current maturities of long-term
debt............................. 86 73 78
Current portion of capital
leases........................... 17 21 19
Accounts payable and accrued
expenses......................... 732 556 437
Billings in excess of costs and
estimated earnings on
uncompleted contracts............ 76 151 21
--------- --------- -----------
Total current
liabilities........... 1,142 807 555
LONG-TERM DEBT, net of current
maturities............................ 179 261 241
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock, $.10 par value,
4,000,000 shares authorized,
2,600 and 2,700 shares issued and
outstanding...................... 1 1 1
Additional paid-in capital......... 61 62 62
Retained earnings (deficit)........ (107) 355 371
--------- --------- -----------
Total shareholders'
equity (deficit)...... (45) 418 434
--------- --------- -----------
Total liabilities and
shareholders'
equity................ $ 1,276 $ 1,486 $ 1,230
========= ========= ===========

The accompanying notes are an integral part of these financial statements.

F-116
<PAGE>
WESTERN BUILDING SERVICES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- --------------------
1995 1996 1996 1997
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES............................. $ 4,112 $ 6,494 $ 1,185 $ 1,072
COST OF SERVICES..................... 3,408 4,662 857 812
--------- --------- --------- ---------
Gross profit.................... 704 1,832 328 260
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 855 1,088 232 231
--------- --------- --------- ---------
Income (loss) from operations... (151) 744 96 29
OTHER INCOME (EXPENSE):

Interest expense................ (35) (51) (11) (11)
Other........................... 6 (21) (1) (2)
--------- --------- --------- ---------
NET INCOME (LOSS).................... $ (180) $ 672 $ 84 $ 16
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-117
<PAGE>
WESTERN BUILDING SERVICES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>

TOTAL
COMMON STOCK ADDITIONAL RETAINED SHAREHOLDERS'
---------------- PAID-IN EARNINGS EQUITY
SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
------ ------ ---------- --------- -------------

<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994........... 2,600 $ 1 $ 61 $ 73 $ 135

Net loss........................ -- -- -- (180) (180)
------ ------ --- --------- -------------

BALANCE, December 31, 1995........... 2,600 1 61 (107) (45)

Distributions to shareholders... -- -- -- (210) (210)
Net income...................... -- -- -- 672 672

Common stock issuance........... 100 -- 1 -- 1
------ ------ --- --------- -------------

BALANCE, December 31, 1996........... 2,700 1 62 355 418
Net income (unaudited).......... -- -- -- 16 16
------ ------ --- --------- -------------

BALANCE, March 31, 1997
(unaudited)........................ 2,700 $ 1 $ 62 $ 371 $ 434
====== ====== === ========= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-118
<PAGE>
WESTERN BUILDING SERVICES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
---------------- ---------------
1995 1996 1996 1997
----- ----- ---- -----

(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................. $(180) $ 672 $ 84 $ 16
Adjustments to reconcile net income
to net cash provided by (used
in) operating activities --.....
Depreciation and amortization... 51 51 9 25
Changes in operating assets and
liabilities --................
(Increase) decrease in --.....
Accounts receivable........ (179) 91 23 200
Inventories................ (35) (15) -- --
Costs and estimated
earnings in excess of
billings on uncompleted
contracts............... (5) 39 65 (65)
Prepaid expenses and other
current assets.......... 5 1 (19) 21
Other noncurrent assets.... (15) (106) (90) (56)
Increase (decrease) in --.....
Accounts payable and
accrued expenses........ 186 (177) (22) (119)
Billings in excess of costs
and estimated earnings
on uncompleted
contracts............... 17 74 (50) (130)
----- ----- ---- -----
Net cash provided by
(used in) operating
activities......... (155) 630 -- (108)
----- ----- ---- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment....................... -- 20 -- --
Additions of property and
equipment....................... (40) (113) (20) (12)
----- ----- ---- -----
Net cash used in
investing
activities......... (40) (93) (20) (12)
----- ----- ---- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common
stock........................... -- 1 -- --
Borrowings of long-term debt....... 206 175 20 --
Payments of long-term debt......... (259) (96) -- (23)
Net borrowings in line of credit... 230 (230) -- --
Distributions to shareholders...... -- (210) -- --
----- ----- ---- -----
Net cash provided by
(used in) financing
activities......... 177 (360) 20 (23)
----- ----- ---- -----
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... (18) 177 -- (143)
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 18 -- -- 177
----- ----- ---- -----
CASH AND CASH EQUIVALENTS, end of
period............................. $ -- $ 177 $-- $ 34
===== ===== ==== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest........................ $ 35 $ 51 $ 11 $ 11

The accompanying notes are an integral part of these financial statements.

F-119
<PAGE>
WESTERN BUILDING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Western Building Services, Inc., a Colorado corporation, (the "Company")
focuses on providing "design and build" installation services and maintenance,
repair and replacement of HVAC systems for commercial facilities. Western also
offers continuous monitoring and control services for commercial facilities. The
Company primarily operates in Colorado.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL INFORMATION

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt investments purchased with an
original maturity of three months or less to be cash equivalents.

INVENTORIES

PROPERTY AND EQUIPMENT

REVENUE RECOGNITION

F-120
<PAGE>
WESTERN BUILDING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
settlements may result in revisions to costs and income and are recognized in
the period in which the revisions are determined.

Revenues of approximately $783,000 and $2,291,000 with gross profits of
$339,000 and $874,000 were recognized by the Company in 1995 and 1996,
respectively, for energy conversions and new installations related to an
incentive program developed by the Public Service Company of Colorado (PSC). The
Demand Side Management program provided incentives for PSC customers to convert
from electric heat to gas/steam heat in order to reduce peak demand for
electricity. This program ended November 1996.

WARRANTY COSTS

INCOME TAXES

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENT

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Accordingly, in
the event that facts and circumstances indicate that property and equipment, and
intangible or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, 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 is necessary.
Adoption of this standard did not have a material effect on the financial
position or results of operations of the Company.

F-121
<PAGE>
WESTERN BUILDING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following (dollars in thousands):

ESTIMATED DECEMBER 31,
USEFUL LIVES --------------------
IN YEARS 1995 1996
------------ --------- ---------
Transportation equipment............. 5 $ 47 $ 47
Machinery and equipment.............. 6-7 133 68
Computer and telephone equipment..... 5 120 145
Leasehold improvements............... 3 21 71
Furniture and fixtures............... 7 28 20
--------- ---------
349 351
Less -- Accumulated depreciation and
amortization....................... (199) (160)
--------- ---------
Property and equipment, net..... $ 150 $ 191
========= =========

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Other noncurrent assets consist of the following (in thousands):

DECEMBER 31,
--------------------
1995 1996
--------- ---------
Covenant not to compete.............. $ -- $ 75
Life insurance surrender value....... 14 27
Other noncurrent assets.............. 8 27
--------- ---------
$ 22 $ 129
========= =========

At December 31, 1996, the Company acquired the contract rights of a
competitor for $75,000 through a covenant not to compete agreement. This
agreement will be amortized over its three year term which expires at
December 31, 1999.

Accounts payable and accrued expenses consist of the following (in
thousands):

DECEMBER 31,
--------------------
1995 1996
--------- ---------
Accounts payable, trade.............. $ 403 $ 249
Accrued compensation and benefits.... 108 86
Accrued warranty expense............. 82 82
Other accrued expenses............... 139 139
--------- ---------
$ 732 $ 556
========= =========

F-122
<PAGE>
WESTERN BUILDING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Installation contracts in progress are as follows (in thousands):

DECEMBER 31,
--------------------
1995 1996
--------- ---------
Costs incurred on contracts in
progress........................... $ 335 $ 530
Estimated earnings, net of losses.... 206 160
--------- ---------
541 690
Less -- Billings to date............. 552 815
--------- ---------
$ (11) $ (125)
========= =========
Costs and estimated earnings in
excess of billings on uncompleted
contracts.......................... $ 65 $ 26
Billings in excess of costs and
estimated earnings on uncompleted
contracts.......................... (76) (151)
--------- ---------
$ (11) $ (125)
========= =========

5. LONG-TERM DEBT:

Long-term debt consists of installment notes payable for transportation
equipment. The debt is secured by the related transportation equipment. The
terms of the notes range from 36 months to 48 months with monthly payments of
principal and interest of approximately $8,600. The notes bear interest at rates
ranging from 9 percent to 13 percent.

Long-term debt also consists of term loans and capital leases. The term
loans were issued in the amounts of $175,000 and $200,000 in 1996 and 1995,
respectively. The $175,000 term loan is secured by equipment, inventory,
accounts receivable and all contract rights. The $200,000 term loan is secured
by all inventory and equipment and bears interest at prime plus 2 percent per
annum. These term loans are also guaranteed by the Company president.

The capital leases relate to computer equipment and printers. The terms of
the leases range from 12 to 36 months. The interest rates on these leases range
from 10 to 12 percent.

The aggregate maturities of long-term debt as of December 31, 1996, are as
follows (in thousands):

Year ending December 31
1997............................ $ 85
1998............................ 89
1999............................ 98
2000............................ 89
---------
$ 361
=========

The Company has a $300,000 line of credit with a financial institution. The
line of credit expires September 28, 1997, and bears interest at prime plus 2
percent per annum. The line of credit is secured by accounts receivable and
inventory and is guaranteed by the Company president. There was no balance
outstanding under this line of credit at December 31, 1996.

6. LEASES:

The Company leases its facility from a third party, which expires in 1999.
The rent paid under this lease was approximately $43,000 and $66,500 for the
years ended December 31, 1995 and 1996. The lease requires the Company to pay
taxes, maintenance, insurance and certain other operating costs of the leased
property. The lease contains renewal provisions.

F-123
<PAGE>
WESTERN BUILDING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company leases vehicles for operating purposes. The lease payments
under these vehicle leases totaled approximately $47,000 and $71,000 for the
years ended December 31, 1995 and 1996, respectively.

Future minimum lease payments for operating leases are as follows (in
thousands):

Year ending December 31
1997............................ $ 144
1998............................ 132
1999............................ 19
---------
$ 295
=========

7. EMPLOYEE BENEFIT PLANS:

The Company has adopted a 401(k) plan which allows the Company to make
discretionary contributions and discretionary profit sharing contributions. No
contributions were made by the Company under this plan in 1995 and 1996.
However, expenses of $2,733 and $3,903 were incurred by the Company during 1995
and 1996, respectively.

8. FINANCIAL INSTRUMENTS:

9. RELATED-PARTY TRANSACTIONS:

At December 31, 1995, the Company had a receivable of $109,500 due from the
president and vice president. At December 31, 1996, this balance was $173,500.
The Company offset this balance with the dividends payable of $210,315 at
December 31, 1996, resulting in a remaining dividend payable of $36,875 to two
shareholders and one director.

10. COMMITMENTS AND CONTINGENCIES:

LITIGATION

INSURANCE

11. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

In connection with the merger, the Company will make a cash distribution of
approximately $371,000 prior to the merger which represents the Company's
estimated S Corporation accumulated adjustment account. Had these transactions
been recorded at March 31, 1997, the effect on the accompanying unaudited
balance sheet would be a decrease in assets of $41,000 and an increase in
liabilities of $333,000 and a decrease in shareholders' equity of $371,000.

F-124
<PAGE>
COMFORT SYSTEMS USA

Comfort Systems was founded in 1996 to become a leading
national provider of comprehensive HVAC installation, maintenance
repair and replacement services.

[GRAPHIC]

Services Provided:

"Design and Build" Installation o Maintenance

Repair o Replacement

Reconfiguration o Controls

Monitoring o Process Piping

Fabrication o Sheetmetal

Ductwork o Plumbing
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

PAGE
----
Prospectus Summary ................................................. 3
Risk Factors ....................................................... 8
The Company ........................................................ 12
Use of Proceeds .................................................... 15
Dividend Policy .................................................... 15
Capitalization ..................................................... 16
Dilution ........................................................... 17
Selected Financial Data ............................................ 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 20
Business ........................................................... 39
Management ......................................................... 48
Certain Transactions ............................................... 53
Principal Stockholders ............................................. 58
Description of Capital Stock ....................................... 59
Shares Eligible for Future Sale .................................... 62
Underwriting ....................................................... 63
Legal Matters ...................................................... 64
Experts ............................................................ 64
Additional Information ............................................. 64
Index to Financial Statements ...................................... F-1

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

UNTIL , 1997 (25 DAYS AFTER THE DATE HEREOF), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

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

6,100,000 SHARES

(LOGO)

COMFORT SYSTEMS USA, INC.
COMMON STOCK

-------------------
PROSPECTUS
-------------------

ALEX. BROWN & SONS
INCORPORATED

BEAR, STEARNS & CO. INC.

DONALDSON, LUFKIN & JENRETTE
Securities Corporation

SANDERS MORRIS MUNDY

, 1997

================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the securities being registered. All amounts are estimates
except for the fees payable to the SEC.

AMOUNT TO BE
PAID
-------------
SEC registration fee.................... $ 29,761
Printing expenses....................... $ 325,000
Legal fees and expenses................. $ 875,000
Accounting fees and expenses............ $ 2,450,000
Blue Sky fees and expenses.............. $ 10,000
Transfer Agent's and Registrar's fees... $ 4,000
Miscellaneous........................... $ 306,239
-------------
TOTAL......................... $ 4,000,000
=============

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

The Company's Certificate of Incorporation, as amended, and Bylaws
incorporate substantially the provisions of the Delaware General Corporation Law
("DGCL") providing for indemnification of directors and officers of the
Company against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding arising by
reason of the fact that such person is or was an officer or director of the
Company or is or was serving at the request of the Company as a director,
officer or employee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.

As permitted by Section 102 of the DGCL, the Company's Certificate of
Incorporation, as amended, contains provisions eliminating a director's personal
liability for monetary damages to the Company and its stockholders arising from
a breach of a director's fiduciary duty except for liability (a) for any breach
of the director's duty of loyalty to the Company or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any
transaction from which the director derived an improper personal benefit.

Section 145 of the DGCL provides generally that a person sued as a
director, officer, employee or agent of a corporation may be indemnified by the
corporation for reasonable expenses, including attorneys' fees, if in the case
of other than derivative suits such person has acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation (and, in the case of a criminal proceeding, had no
reasonable cause to believe that such person's conduct was unlawful). In the
case of a derivative suit, an officer, employee or agent of the corporation
which is not protected by the Certificate of Incorporation may be indemnified by
the corporation for reasonable expenses, including attorneys' fees, if such
person has acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in the case of a derivative suit in respect of any
claim as to which an officer, employee or agent has been adjudged to be liable
to the corporation unless that person is fairly and reasonably entitled to
indemnity for proper expenses. Indemnification is mandatory in the case of a
director, officer, employee, or agent who is successful on the merits in defense
of a suit against such person.

The Company intends to enter into Indemnity Agreements with its directors
and certain key officers pursuant to which the Company generally is obligated to
indemnify its directors and such officers to the full extent permitted by the
DGCL as described above.

II-1
<PAGE>
The Company intends to purchase liability insurance policies covering
directors and officers in certain circumstances.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On December 12, 1996, Comfort Systems issued and sold 1,000 shares of
Common Stock to Notre for a consideration of $1,000. This sale was exempt from
registration under Section 4(2) of the Securities Act, no public offering being
involved.

On January 6, 1997, Comfort Systems issued and sold shares of Common Stock
to the following parties in the amounts and for the consideration indicated.
These sales were exempt from registration under Section 4(2) of the Securities
Act: Notre -- 23,516.623 shares for a consideration of $28,699.12; Fred M.
Ferreira -- 3957.7359 shares for a consideration of $4,794.35; J. Gordon
Beittenmiller -- 825.5 shares for a consideration of $1,000.00; Reagan S. Busbee
- -- 825.5 shares for a consideration of $1,000.00; S. Craig Lemmon -- 825.5
shares for a consideration of $1,000.00; Milburn E. Honeycutt -- 412.75 shares
for a consideration of $500.00; Brian J. Vensel -- 412.75 shares for a
consideration of $500.00; Emmett E. Moore -- 412.75 shares for a consideration
of $500.00; John W. Bouloubasis -- 412.75 shares for a consideration of $500.00;
Stephen R. Baur -- 330.2 shares for a consideration of $400.00; Shellie LePori
- -- 206.375 shares for a consideration of $250.00; Constance Drew -- 288.925
shares for a consideration of $350.00; John Mercandante, Jr. -- 82.55 shares for
a consideration of $100.00; Larry Martin -- 82.55 shares for a consideration of
$100.00; Norton Family Trust -- 61.9125 shares for a consideration of $75.00;
Larry E. Jacobs -- 61.9125 shares for a consideration of $75.00; Richard T.
Howell -- 41.275 shares for a consideration of $50.00; Rod Crosby -- 41.275
shares for a consideration of $50.00; Jennifer Summerford -- 24.765 shares for a
consideration of $30.00; Infoscope Partners, Inc. -- 8.255 shares for a
consideration of $10.00; Melinda Malik -- 4.1275 shares for a consideration of
$5.00; and Steven T. Zellers -- 16.51 shares for a consideration of $20.00.

On February 25, 1997, Comfort Systems issued and sold shares of Common
Stock to the following parties in the amounts and for the consideration
indicated. These sales were exempt from registration under Section 4(2) of the
Securities Act, no public offering being involved: William George, III --
619.125 shares for a consideration of $750.00; J. Gordon Beittenmiller -- 132.08
shares for a consideration of $160.00; Reagan S. Busbee -- 132.08 shares for a
consideration of $160.00; S. Craig Lemmon -- 132.08 shares for a consideration
of $160.00; Milburn E. Honeycutt -- 66.04 shares for a consideration of $80.00;
and Brian J. Vensel -- 66.04 shares for a consideration of $80.00.

Effective March 20, 1997, Comfort Systems effected a 121.1387 to 1 stock
split on outstanding shares of Common Stock as of March 19, 1997.

Effective March 20, 1997, Comfort Systems issued and sold 2,742,912 shares
of Restricted Voting Common Stock to Notre in exchange for 2,742,912 shares of
Common Stock. This sale was exempt from registration under Section 4(2) of the
Securities Act, no public offering being involved.

Simultaneously with the consummation of this Offering, the Company will
issue 9,720,927 shares of its Common Stock in connection with the Mergers of the
Founding Companies. Each of these transactions was completed without
registration under the Securities Act in reliance upon the exemption provided by
Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------------------------ ------------------------------------------------------
1.1+ -- Form of Underwriting Agreement
2.1* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Accurate Acquisition Corp., Accurate Air Systems,
Inc. and the Stockholder named therein

II-2
<PAGE>
2.2* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Atlas Air Acquisition I Corp., Atlas Comfort Services
USA, Inc. and the Stockholders named therein
2.3* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Contract Acquisition Corp., Contract Service, Inc.
and the Stockholders named therein
2.4* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Eastern Acquisition Corp., Eastern II Acquisition
Corp., Eastern Heating & Cooling, Inc., Eastern
Refrigeration Co., Inc. and the Stockholder named
therein
2.5* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Freeway Acquisition Corp., Freeway Heating & Air
Conditioning, Inc. and the Stockholders named therein
2.6* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Quality Acquisition Corp., Quality Air Heating &
Cooling, Inc. and the Stockholders named therein
2.7* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc., S.
M. Lawrence Acquisition Corp., S. M. Lawrence II
Acquisition Corp., S. M. Lawrence Company, Inc.,
Lawrence Service, Inc. and the Stockholders named
therein
2.8* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Seasonair, Inc. and the Stockholders named therein
2.9* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Standard Acquisition Corp., Standard Heating & Air
Conditioning Company and the Stockholders named
therein
2.10* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Tech I Acquisition Corp., Tech II Acquisition Corp.,
Tech Heating and Air Conditioning, Inc., Tech
Mechanical, Inc. and the Stockholder named therein
2.11* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Tri-City Acquisition Corp., Tri-City Mechanical, Inc.
and the Stockholders named therein
2.12* -- Agreement and Plan of Organization, dated as of March
18, 1997, by and among Comfort Systems USA, Inc.,
Western Building Acquisition Corp., Western Building
Services, Inc. and the Stockholders named therein
3.1+ -- Second Amended and Restated Certificate of
Incorporation of Comfort Systems USA, Inc.
3.2* -- Bylaws of Comfort Systems USA, Inc., as amended
4.1+ -- Form of certificate evidencing ownership of Common
Stock of Comfort Systems USA, Inc.
5.1+ -- Opinion of Bracewell & Patterson, L.L.P.
10.1+ -- Comfort Systems USA, Inc. 1997 Long-Term Incentive
Plan
10.2* -- Comfort Systems USA, Inc. 1997 Non-Employee
Directors' Stock Plan
10.3+ -- Form of Employment Agreement between Comfort Systems
USA, Inc. and Fred M. Ferreira.
10.4+ -- Form of Employment Agreement between Comfort Systems
USA, Inc. and J. Gordon Beittenmiller.
10.5+ -- Form of Employment Agreement between Comfort Systems
USA, Inc. and William George, III.
10.6+ -- Form of Employment Agreement between Comfort Systems
USA, Inc. and Reagan S. Busbee.

II-3
<PAGE>
10.7+ -- Form of Employment Agreement between Comfort Systems
USA, Inc., Accurate Air Systems, Inc. and Thomas J.
Beaty.
10.8+ -- Form of Employment Agreement between Comfort Systems
USA, Inc., Atlas Comfort Services USA, Inc. and Brian
S. Atlas.
10.9+ -- Form of Employment Agreement between Comfort Systems
USA, Inc., Contract Service, Inc. and John C.
Phillips.
10.10+ -- Form of Employment Agreement between Comfort Systems
USA, Inc., Eastern Heating & Cooling, Inc. and Alfred
J. Giardenelli, Jr.
10.11+ -- Form of Employment Agreement between Comfort Systems
USA, Inc., Quality Air Heating & Cooling, Inc. and
Robert J. Powers.
10.12+ -- Form of Employment Agreement between Comfort Systems
USA, Inc., S. M. Lawrence Company, Inc. and Samuel M.
Lawrence III.
10.13+ -- Form of Employment Agreement between Comfort Systems
USA, Inc., Tech Heating and Air Conditioning, Inc.
and Robert R. Cook.
10.14+ -- Form of Employment Agreement between Comfort Systems
USA, Inc., Tri-City Mechanical, Inc. and Michael
Nothum, Jr.
10.15+ -- Form of Employment Agreement between Comfort Systems
USA, Inc., Western Building Services, Inc. and
Charles W. Klapperich.
10.16+ -- Form of Agreement among certain stockholders
21.1* -- List of subsidiaries of Comfort Systems USA, Inc.
23.1+ -- Consent of Arthur Andersen LLP
23.2+ -- Consent of Bracewell & Patterson, L.L.P. (contained
in Exhibit 5.1).
23.3* -- Consent of Fred M. Ferreira to be named as a
director.
23.4* -- Consent of J. Gordon Beittenmiller to be named as a
director.
23.5* -- Consent of Brian S. Atlas to be named as a director.
23.6* -- Consent of Thomas J. Beaty to be named as a director.
23.7* -- Consent of Robert R. Cook to be named as a director.
23.8* -- Consent of Alfred J. Giardenelli, Jr. to be named as
a director.
23.9* -- Consent of Charles W. Klapperich to be named as a
director.
23.10* -- Consent of Samuel M. Lawrence III to be named as a
director.
23.11* -- Consent of Michael Nothum, Jr. to be named as a
director.
23.12* -- Consent of John C. Phillips to be named as a
director.
23.13* -- Consent of Robert J. Powers to be named as a
director.
23.14* -- Consent of Steven S. Harter to be named as a
director.
23.15* -- Consent of Larry Martin to be named as a director.
23.16* -- Consent of John Mercadante, Jr. to be named as a
director.
24.1* -- Power of Attorney (included herein on Signature Page)
27.1+ -- Financial Data Schedule

- ------------
* Previously filed.

+ Filed herewith.

(b) FINANCIAL STATEMENT SCHEDULES

All schedules for which provision is made in the applicable accounting
regulation of the SEC are not required under the related instructions, are
inapplicable, or the information is included in the consolidated financial
statements, and therefore have been omitted.

II-4
<PAGE>
ITEM 17. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the provisions described in Item 14, or otherwise,
the Company has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

(b) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.

(c) The undersigned registrant hereby undertakes that: (i) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective; (ii) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

II-5
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, COMFORT SYSTEMS
USA, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF HOUSTON, STATE OF TEXAS, ON MAY 19, 1997.

COMFORT SYSTEMS USA, INC.
By /s/FRED M. FERREIRA
FRED M. FERREIRA
CHIEF EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE INDICATED CAPACITIES ON MAY 19, 1997.

SIGNATURE TITLE
--------- -----
/s/FRED M. FERREIRA Chairman of the Board, Chief Executive
FRED M. FERREIRA Officer and President
/s/J. GORDON BEITTENMILLER* Senior Vice President, Chief Financial
J. GORDON BEITTENMILLER Officer and Director
(PRINCIPAL ACCOUNTING OFFICER)

/s/STEVEN S. HARTER* Director
STEVEN S. HARTER

*By/s/FRED M. FERREIRA
FRED M. FERREIRA
ATTORNEY-IN-FACT

II-6

6,100,000 SHARES

COMFORT SYSTEMS USA, INC.

Common Stock

UNDERWRITING AGREEMENT

_________________, 1997

ALEX. BROWN & SONS INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SANDERS MORRIS MUNDY INC.
c/o Alex. Brown & Sons Incorporated
One South Street
Baltimore, Maryland 21202

Gentlemen:

Comfort Systems USA, Inc., a Delaware corporation (the "Company"),
proposes to sell to you (the "Underwriters") an aggregate of 6,100,000 shares of
the Company's Common Stock, par value $.01 per share (the "Firm Shares"). The
respective amounts of the Firm Shares to be so purchased by each of the
Underwriters are set forth opposite their names in Schedule I hereto. The
Company also proposes to sell at the Underwriters' option an aggregate of up to
915,000 additional shares of the Company's Common Stock (the "Option Shares") as
set forth below.

You have advised the Company that you are authorized to enter into this
Agreement, and (b) that you are willing, acting severally and not jointly, to
purchase the numbers of Firm Shares set forth opposite your respective names in
Schedule I, plus your pro rata portion of the Option Shares if you elect to
exercise the over-allotment option in whole or in part for the accounts of the
Underwriters. The Firm Shares and the Option Shares (to the extent the
aforementioned option is exercised) are herein collectively called the "Shares."

Simultaneously with closing on the Firm Shares by the Underwriters, the
Company will cause each of the Founding Companies (as hereinafter defined) to be
merged with a subsidiary of the Company (collectively, the "Founding Company
Mergers"), the consideration for which will

- 1 -
<PAGE>
be a combination of cash and shares of the Company's Common Stock as described
in the Registration Statement (as hereinafter defined).

In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:

1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Underwriters as
follows:

(a) A registration statement on Form S-1 (Reg. No. 333-24021) with
respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") thereunder
and has been filed with the Commission. Copies of such registration
statement, including any amendments thereto, the preliminary prospectuses
(meeting the requirements of the Rules and Regulations) contained therein
and the exhibits, financial statements and schedules, as finally amended
and revised, have heretofore been delivered by the Company to you. Such
registration statement, together with any registration statement filed by
the Company pursuant to Rule 462(b) under the Act, herein referred to as
the "Registration Statement," which shall be deemed to include all
information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and
no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "Prospectus" means (a) the form of
prospectus first filed with the Commission pursuant to Rule 424(b), or (b)
the last preliminary prospectus included in the Registration Statement
filed prior to the time it becomes effective or filed pursuant to Rule
424(a) under the Act that is delivered by the Company to the Underwriters
for delivery to purchasers of the Shares, together with the term sheet or
abbreviated term sheet filed with the Commission pursuant to Rule
424(b)(7) under the Act. Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus."

(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement. Each of Quality
Air Heating and Cooling, Inc, Atlas Air Conditioning Co., Tri-City
Mechanical, Inc., S.M. Lawrence Co., Inc., Accurate Air Systems, Inc.,
Freeway Heating and Air Conditioning, Inc., Eastern Heating and Cooling
Inc., Contract Services Inc., Tech Heating and Air Conditioning, Inc.,
Seasonair, Inc., Western Building Services, Inc. and Standard Heating and
Air Conditioning Co. (collectively the "Founding Companies") has been duly
organized and is validly existing as

- 2 -
<PAGE>
a corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement. As of the date hereof, the Company has no subsidiaries except
those listed in Item 16 to the Registration Statement. The Company and
each of the Founding Companies are duly qualified to transact business in
all jurisdictions in which the conduct of their respective businesses
requires such qualification, except where the failure to so qualify would
not have a materially adverse effect on the business and operations of the
Company and the Founding Companies taken as a whole. The outstanding
shares of capital stock of each of the Founding Companies have been duly
authorized and validly issued, are fully paid and non-assessable. As of
the Closing Date (as hereinafter defined), after giving effect to the
Founding Company Mergers, all of the outstanding shares of capital stock
of each of the Founding Companies will be owned by the Company free and
clear of all liens, encumbrances and equities and claims; and no options,
warrants or other rights to purchase, agreements or other obligations to
issue or other rights to convert any obligations into shares of capital
stock or ownership interests in any of the Founding Companies will be
outstanding.

(c) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable;
the Shares to be issued and sold by the Company have been duly authorized
and when issued and paid for as contemplated herein will be validly
issued, fully paid and non-assessable; and no preemptive rights of
stockholders exist with respect to any of the Shares or the issue and
sale thereof. Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives
rise to any rights, other than those which have been waived or satisfied,
for or relating to the registration of any shares of Common Stock. Upon
completion of the Founding Company Mergers in the manner described in the
Registration Statement, the shares of Common Stock of the Company to be
issued in such mergers will be duly authorized, validly issued and fully
paid and non-assessable.

(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the
description thereof contained in the Registration Statement. The form of
certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.

(e) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares
nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto
will contain, all statements which are required to be stated therein by,
and will conform to the requirements of the Act and the Rules and
Regulations. The Registration Statement and any amendment thereto do not
contain, and will not contain, any untrue statement of a material fact and
do not omit, and will not omit, to state any material fact required to be
stated therein or necessary to make

- 3 -
<PAGE>
the statements therein not misleading. The Prospectus and any supplements
thereto do not contain, and will not contain, any untrue statement of a
material fact and do not omit, and will not omit, to state any material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on
behalf of any Underwriter, specifically for use in the preparation
thereof.

(f) All of the financial statements of the Company and the separate
financial statements of the Founding Companies, in each case together with
related notes and schedules, as set forth in the Registration Statement,
present fairly in all material respects the financial position and the
results of operations and cash flows of the Company, of each of the
Founding Companies and of the Company, respectively, at the indicated
dates and for the indicated periods. Such financial statements and related
schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods
involved, except as disclosed therein, and all adjustments necessary for a
fair presentation of results for such periods have been made. The summary
historical and pro forma financial and statistical data included in the
Registration Statement present fairly the information shown therein and
such data have been compiled on a basis consistent with the financial
statements presented therein and the books and records of the Company and
the Founding Companies, as applicable. The pro forma combined financial
statements of the Company and the Founding Companies (including the
supplemental pro forma information shown therein), together with the
related notes, as set forth in the Registration Statement, present fairly
the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the pro forma bases
described therein, and in the opinon of the Company, the assumptions used
in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions or circumstances
referred to therein.

(g) Arthur Andersen LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and
the Rules and Regulations.

(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Founding Companies before any court or administrative agency or otherwise,
which if determined adversely to the Company or such Founding Company is
reasonably likely to result in any material adverse change in the
earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and the

- 4 -
<PAGE>
Founding Companies, taken as a whole, or to prevent the consummation of
the transactions contemplated hereby except as set forth in the
Registration Statement.

(i) Each of the Company and the Founding Companies has good and
marketable title to all of its properties and assets reflected in its
financial statements (or as described in the Registration Statement)
hereinabove described, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those reflected in such financial
statements (or as described in the Registration Statement) or which are
not material in amount. Each of the Company and the Founding Companies
occupies its leased properties under valid and binding leases conforming
in all material respects to the description thereof set forth in the
Registration Statement.

(j) Each of the Company and the Founding Companies has filed all
Federal, state, local and foreign income tax returns which have been
required to be filed and have paid all taxes indicated by said returns and
all assessments received by it or any of them to the extent that such
taxes have become due and are not being contested in good faith. All tax
liabilities have been adequately provided for in the financial statements
of the Company and the Founding Companies, as applicable.

(k) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise), or prospects of the Company and the Founding
Companies, taken as a whole, whether or not occurring in the ordinary
course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being entered
into by the Company or the Founding Companies, other than transactions in
the ordinary course of business and changes and transactions described in
the Registration Statement, as it may be amended or supplemented. Neither
the Company nor any of the Founding Companies has any material contingent
obligations which are not disclosed in the Company's or such Founding
Company's financial statements, as applicable, included in the
Registration Statement.

(l) Neither the Company nor any of the Founding Companies is, or
with the giving of notice or lapse of time or both, will be, in violation
of or in default under its Charter or By-Laws or under any agreement,
lease, contract, indenture or other instrument or obligation to which it
is a party or by which it, or any of its properties, is bound and which
default is of material significance in respect of the condition (financial
or otherwise) of the Company and the Founding Companies, taken as a whole,
or the business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and the
Founding Companies, taken as a whole. The execution and delivery of this
Agreement and the consummation of the transactions

- 5 -
<PAGE>
herein contemplated and the fulfillment of the terms hereof will not
conflict with or result in a material breach of any of the terms or
provisions of, or constitute a material default under, any indenture,
mortgage, deed of trust or other agreement or instrument to which the
Company or any of the Founding Companies is a party, or of the Charter or
By-Laws of the Company or any of the Founding Companies or any order, rule
or regulation applicable to the Company or any of the Founding Companies
of any court or, assuming compliance with all applicable state securities
or blue sky laws, of any regulatory body or administrative agency or other
governmental body having jurisdiction.

(m) Each material approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body necessary in connection with the
execution and delivery by the Company of this Agreement and the
consummation of the transactions herein contemplated (except such
additional steps as may be required by the Commission, the National
Association of Securities Dealers, Inc. (the "NASD") or such additional
steps as may be necessary to qualify the Shares for public offering by the
Underwriters under state securities or Blue Sky laws) has been obtained or
made and is in full force and effect.

(n) The Company and each of the Founding Companies hold all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses; and neither the Company nor
any of the Founding Companies has infringed any patents, patent rights,
trade names, trademarks or copyrights, which infringement is material to
the business of the Company or such Founding Company. The Company knows of
no material infringement by others of patents, patent rights, trade names,
trademarks or copyrights owned by or licensed to the Company or any of the
Founding Companies.

(o) Neither the Company, nor to the Company's best knowledge, any of
its affiliates or any of the Founding Companies or any of their
affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale
of the Shares.

(p) Neither the Company nor any of the Founding Companies is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940 and the rules and regulations of the Commission
thereunder.

(q) The Company and each of the Founding Companies maintain a system
of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial

- 6 -
<PAGE>
statements in conformity with generally accepted accounting principles and
to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.

(r) The Company and each of the Founding Companies carry, or are
covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the value of
their respective properties and as is customary for companies engaged in
similar industries.

(s) The Company and each of the Founding Companies are in compliance
in all material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company or any of the
Founding Companies would have any liability; neither the Company nor any
of the Founding Companies has incurred nor expects to incur liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal
from, any "pension plan," or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which
the Company or any of the Founding Companies would have any liability that
is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such
qualification.

2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.

(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the
Company agrees to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $_______ per share,
the number of Firm Shares set forth opposite the name of each Underwriter
in Schedule I hereof, subject to adjustments in accordance with Section 9
hereof.

(b) Payment for the Firm Shares to be sold hereunder is to be made
in New York Clearing House funds by certified or bank cashier's checks
drawn to the order of the Company against delivery of certificates
therefor to the Underwriters for the several accounts of the Underwriters.
Such payment and delivery are to be made at the offices of Alex. Brown &
Sons Incorporated, One South Street, Baltimore, Maryland, at 10:00 A.M.,
Baltimore time, on the third business day after the date of this Agreement
or at such

- 7 -
<PAGE>
other time and date not later than third business days thereafter as you
and the Company shall agree upon, such time and date being herein referred
to as the "Closing Date." (As used herein, "business day" means a day on
which the New York Stock Exchange is open for trading and on which banks
in New York are open for business and are not permitted by law or
executive order to be closed.) The certificates for the Firm Shares will
be delivered in such denominations and in such registrations as the
Underwriters request in writing not later than the third full business day
prior to the Closing Date, and will be made available for inspection by
the Underwriters at least one business day prior to the Closing Date.

(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth,
the Company hereby grants an option to the several Underwriters to
purchase the Option Shares at the price per share as set forth in the
first paragraph of this Section 2. The option granted hereby may be
exercised in whole or in part but only once and at any time upon written
notice given within 30 days after the date of this Agreement, by you, as
Underwriters, to the Company setting forth the number of Option Shares as
to which the several Underwriters are exercising the option, the names and
denominations in which the Option Shares are to be registered and the time
and date at which such certificates are to be delivered. The time and date
at which certificates for Option Shares are to be delivered shall be
determined by the Underwriters but shall not be earlier than three nor
later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein
referred to as the "Option Closing Date"). If the date of exercise of the
option is three or more days before the Closing Date, the notice of
exercise shall set the Closing Date as the Option Closing Date. The number
of Option Shares to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Shares being purchased as the
number of Firm Shares being purchased by such Underwriter bears to
6,100,000, adjusted by you in such manner as to avoid fractional shares.
The option with respect to the Option Shares granted hereunder may be
exercised only to cover over-allotments in the sale of the Firm Shares by
the Underwriters. You may cancel such option at any time prior to its
expiration by giving written notice of such cancellation to the Company.
To the extent, if any, that the option is exercised, payment for the
Option Shares shall be made on the Option Closing Date in New York
Clearing House funds by certified or bank cashier's check drawn to the
order of the Company against delivery of certificates therefor at the
offices of Alex. Brown & Sons Incorporated, One South Street, Baltimore,
Maryland.

3. OFFERING BY THE UNDERWRITERS.

It is understood that the Underwriters are to make a public offering of
the Firm Shares as soon as they deem it advisable to do so following execution
of this Agreement. The Firm Shares are to be initially offered to the public at
the public offering price set forth on the cover of the
- 8 -
<PAGE>
Prospectus. The Underwriters may from time to time thereafter change the public
offering price and other selling terms. To the extent, if at all, that any
Option Shares are purchased pursuant to Section 2 hereof, the Underwriters will
offer them to the public on the foregoing terms.

It is further understood that you will act in accordance with a Master
Agreement Among Underwriters.

4. COVENANTS OF THE COMPANY.

The Company covenants and agrees with the Underwriters that:

(a) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a
Prospectus in a form approved by the Underwriters containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A of the Rules and Regulations, and (B)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Underwriters shall not previously have been
advised and furnished with a copy or to which the Underwriters shall have
reasonably objected in writing or which is not in compliance with the
Rules and Regulations.

(b) The Company will advise the Underwriters promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, and (D) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of
the Prospectus or of the institution of any proceedings for that purpose.
The Company will use its best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus and to
obtain as soon as possible the lifting thereof, if issued.

(c) The Company will cooperate with the Underwriters in endeavoring
to qualify the Shares for sale under the securities laws of such
jurisdictions as the Underwriters may reasonably have designated in
writing and will make such applications, file such documents, and furnish
such information as may be reasonably required for that purpose, provided
the Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction where
it is not now so qualified or required to file such a consent. The Company
will, from time to time, prepare and file such statements, reports, and
other documents, as are or may be required to

- 9 -
<PAGE>
continue such qualifications in effect for so long a period as the
Underwriters may reasonably request for distribution of the Shares.

(d) The Company will deliver to, or upon the order of, the
Underwriters, from time to time, as many copies of any Preliminary
Prospectus as the Underwriters may reasonably request. The Company will
deliver to, or upon the order of, the Underwriters during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Underwriters may reasonably request. The Company will deliver to the
Underwriters at or before the Closing Date, three signed, xeroxed copies
of the Registration Statement and all amendments thereto including all
exhibits filed therewith, and will deliver to the Underwriters such number
of copies of the Registration Statement (including such number of copies
of the exhibits filed therewith that may reasonably be requested),
including any documents incorporated by reference therein, and of all
amendments thereto, as the Underwriters may reasonably request.

(e) The Company will comply with the Act and the Rules and
Regulations and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission
thereunder, so as to permit the completion of the distribution of the
Shares as contemplated in this Agreement and the Prospectus. If during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Underwriters,
it becomes necessary to amend or supplement the Prospectus in order to
make the statements therein, in the light of the circumstances existing at
the time the Prospectus is delivered to a purchaser, not misleading, or,
if it is necessary at any time to amend or supplement the Prospectus to
comply with any law, the Company promptly will prepare and file with the
Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the
law.

(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later
than 15 months after the effective date of the Registration Statement, an
earnings statement (which need not be audited) in reasonable detail,
covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement, which earnings statement
shall satisfy the requirements of Section 11(a) of the Act and Rule 158 of
the Rules and Regulations and will advise you in writing when such
statement has been so made available.

(g) The Company will, for a period of five years from the Closing
Date, deliver to the Underwriters copies of annual reports and copies of
all other documents, reports and information furnished by the Company to
its stockholders or filed with any securities

- 10 -
<PAGE>
exchange pursuant to the requirements of such exchange or with the
Commission pursuant to the Act or the Exchange Act. The Company will
deliver to the Underwriters similar reports with respect to significant
subsidiaries, as that term is defined in the Rules and Regulations, which
are not consolidated in the Company's financial statements.

(h) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of
Common Stock (or agreement for such) will be made for a period of 180 days
after the date of the Prospectus, directly or indirectly, by the Company
otherwise than hereunder or with the prior written consent of Alex. Brown
& Sons Incorporated, except that the Company may, without such consent,
issue shares (i) upon exercise of options granted under its stock option
plans, (ii) upon exercise of warrants outstanding on the date of this
Agreement, (iii) in connection with acquisitions of businesses, (iv) in
connection with conversion of shares of Restricted Common Stock to Common
Stock or (v) pursuant to employee benefit or compensation plans existing
on the date hereof.

(i) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on the New York Stock Exchange.

(j) The Company has caused each executive officer and director of
the Company to furnish to you, on or prior to the date of this Agreement,
a letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person has agreed not to offer,
sell, sell short or otherwise dispose of any shares of Common Stock of the
Company owned by such person (or as to which such person has the right to
direct the disposition of) or request the registration for the offer or
sale of any of the foregoing for a period of 180 days after the date of
the Prospectus, directly or indirectly, except with the prior written
consent of Alex. Brown & Sons Incorporated ("Lockup Agreements").

(k) The Company will: (i) use its best efforts to satisfy all
conditions to the consummation of the Founding Company Mergers as set
forth in the agreements with respect thereto, (ii) use its best efforts to
cause each other party to such agreements to satisfy all conditions to the
consummation of the Founding Company Mergers, and (iii)
promptly notify the Underwriters of the occurence of any event which may
result in the non-consummation of any of the Founding Company Mergers on
the Closing Date.

(l) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of
the proceeds therefrom as may be required in accordance with Rule 463
under the Act.

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<PAGE>
(m) The Company shall not invest, or otherwise use, the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Founding Companies to register as
an investment company under the Investment Company Act of 1940, as amended
(the "1940 Act").

(n) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for
the Common Stock.

(o) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of
the price of any securities of the Company.

5. COSTS AND EXPENSES.

The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement and in
connection with the Founding Company Mergers, including, without limiting the
generality of the foregoing, the following: accounting fees of the Company; the
fees and disbursements of counsel for the Company; the cost of printing and
delivering to, or as requested by, the Underwriters copies of the Registration
Statement, Preliminary Prospectuses, the Prospectus, this Agreement; the filing
fees of the Commission; the filing fees and expenses (including disbursements
but excluding legal fees of counsel to the Underwriters) incident to securing
any required review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Shares; the Listing Fee of The New York
Stock Exchange; and the expenses, including the fees and disbursements of
counsel for the Underwriters, incurred in connection with the qualification of
the Shares under State securities or Blue Sky laws. The Company shall not,
however, be required to pay for any of the Underwriters' expenses (other than
those related to qualification under NASD regulations and State securities or
Blue Sky laws) except that, if this Agreement shall not be consummated because
the conditions in Section 6 hereof are not satisfied, or because this Agreement
is terminated by the Underwriters pursuant to Section 11 hereof, or by reason of
any failure, refusal or inability on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on its part to be performed, unless such failure to satisfy
said condition or to comply with said terms be due to the default or omission of
any Underwriter, then the Company shall reimburse the Underwriters for
reasonable out-of-pocket expenses, including fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and proposing to
market the Shares or in contemplation of performing their obligations hereunder;
but the Company shall not in any event be liable to any of the Underwriters for
damages on account of loss of anticipated profits from the sale by them of the
Shares.

6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.

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<PAGE>
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company contained
herein, and to the performance by the Company of their covenants and obligations
hereunder and to the following additional conditions:

(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Underwriters and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date or
the Option Closing Date, as the case may be, which would prevent the issuance of
the Shares.

(b) The Underwriters shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Bracewell & Patterson
L.L.P., counsel for the Company, dated the Closing Date or the Option Closing
Date, as the case may be, addressed to the Underwriters (and stating that it may
be relied upon by counsel to the Underwriters) to the effect that:

(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own or
lease its properties and conduct its business as described in the
Registration Statement; each of the Founding Companies has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with
corporate power and authority to own or lease its properties and
conduct its business; the Company and each of the Founding Companies
are duly qualified to transact business in each of the jurisdictions
set forth on a schedule to such opinion; and, upon consummation of
the Founding Company Mergers, the outstanding shares of capital
stock of each of the Founding Companies will have been duly
authorized and validly issued and will be fully paid and
non-assessable and will be owned by the Company; and, to the best of
such counsel's knowledge, the outstanding shares of capital stock of
each of the Founding Companies will be owned by the Company, free
and clear of all liens, encumbrances and equities and claims, and no
options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into
any shares of capital stock of

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<PAGE>
or other ownership interests in any of the Founding Companies will
be outstanding.

(ii) The Company has authorized capital stock as set forth
under the caption "Capitalization" in the Prospectus; the authorized
shares of the Company's Preferred Stock and Common Stock have been
duly authorized; the outstanding shares of the Company's Common
Stock have been duly authorized and validly issued and are fully
paid and non-assessable; all of the Shares conform to the
description thereof contained in the Prospectus; the certificates
for the Shares, assuming they are in the form filed with the
Commission, are in due and proper form; the Firm Shares and Option
Shares, if any, to be sold by the Company pursuant to this Agreement
and the shares of Common Stock of the Company to be issued in
connection with the Founding Company Mergers have been duly
authorized and will be validly issued, fully paid and non-assessable
when issued and paid for as contemplated by this Agreement; and no
preemptive rights of stockholders exist under statute or under
agreements known to such counsel with respect to any of the Shares
or the shares to be issued in the Founding Company Mergers or the
issue or sale thereof.

(iii) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel, there are no
outstanding securities of the Company convertible or exchangeable
into or evidencing the right to purchase or subscribe for any shares
of capital stock of the Company and there are no outstanding or
authorized options, warrants or rights of any character obligating
the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right
to purchase or subscribe for any shares of such stock; and except as
described in the Prospectus, to the knowledge of such counsel, no
holder of any securities of the Company or any other person has the
right, contractual or otherwise, which has not been satisfied or
effectively waived, to cause the Company to sell or otherwise issue
to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any shares of Common Stock or other
securities of the Company included in the Registration Statement or
the right, as a result of the filing of the Registration Statement,
to require registration under the Act of any shares of Common Stock
or other securities of the Company.

(iv) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending
or threatened under the Act.

(v) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material
respects with the

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<PAGE>
requirements of the Act and the applicable rules and regulations
thereunder (except that such counsel need express no opinion as to
the financial statements, notes thereto and related schedules and
other financial and statistical information included therein or any
information furnished by the Underwriters for use therein).

(vi) The statements under the captions "Business-Regulation,"
"Business-Legal Proceedings," "Management- Executive Compensation;
Employment Agreements; Covenants-not-to-Compete," "Management-Long-
Term Incentive Compensation Plan," "Certain Transactions,"
"Description of Capital Stock" and "Shares Eligible for Future Sale"
in the Prospectus, insofar as such statements constitute a summary
of documents referred to therein or matters of law, are accurate
summaries and fairly present in all material respects the
information called for with respect to such documents and matters.

(vii) Each of the Agreements and Plan or Reorganization with
respect to the Founding Company Mergers (which have been filed with
the Commission as exhibits to the Registration Statement) have been
duly authorized, executed and delivered by the Company and
constitutes the valid binding obligation of the Company; the
Certificates or Articles of Merger referred to in such Agreements
and Plans of Reorganization, assuming the due filing thereof with
the appropriate regulatory authorities, will cause the statutory
merger of each of the Founding Companies with the respective
subsidiaries of the Company that are parties thereto.

(viii) Such counsel does not know of any contracts or
documents required to be filed as exhibits to the Registration
Statement or described in the Registration Statement or the
Prospectus which are not so filed or described as required, and the
descriptions of such contracts and documents required to be
described in the Registration Statement or the Prospectus are
correct in all material respects.

(ix) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the
Founding Companies except as set forth in the Prospectus.

(x) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will
not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, the Charter or By-Laws
of the Company, or, in any respect material to the Company and the
Founding
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<PAGE>
Companies, taken as a whole, any agreement or instrument known to
such counsel to which the Company or any of the Founding Companies
is a party or by which the Company or any of the Founding Companies
may be bound.

(xi) This Agreement has been duly authorized, executed and
delivered by the Company.

(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated (other than as may be required by
the NASD or as required by State securities and Blue Sky laws as to
which such counsel need express no opinion), except such as have
been obtained or made, specifying the same.

(xiii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement,
and application of the net proceeds therefrom as described in the
Prospectus, required to register as an investment company under the
1940 Act.

In rendering such opinion, Bracewell & Patterson L.L.P. may provide
that its opinion is limited to matters governed by the laws of Texas and
the General Corporation law of the State of Delaware, and the Federal
securities laws of the United States and may rely on counsel to one or
more of the Founding Companies with respect to matters related to the
Founding Companies, provided that, in lieu of such reliance, Bracewell &
Patterson L.L.P. may provide separate opinions of such counsel so long as
such opinions are addressed to the Underwriters, and further provided,
that, in each case, Bracewell & Patterson L.L.P. shall state that they
believe that they and the Underwriters are justified in relying on such
other counsel. In addition to the matters set forth above, the opinion of
Bracewell & Patterson L.L.P. shall also include a statement of belief to
the effect that nothing has come to the attention of such counsel which
leads them to believe that (i) the Registration Statement, at the time it
became effective under the Act (but after giving effect to any
modifications incorporated therein pursuant to Rule 430A under the Act)
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements, in the
light of the circumstances under which they are made, not misleading
(except that such counsel need express no view as to financial statements,
schedules or other financial and statistical information therein). With
respect to such statement of belief, Bracewell & Patterson L.L.P. may
state that their

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<PAGE>
belief is based upon the procedures set forth therein, but is without
independent check and verification.

(c) The Underwriters shall have received from Piper & Marbury
L.L.P., counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ii), (iii), (iv), and (xi) of Paragraph (b) of
this Section 6, and that the Company is a duly organized and validly
existing corporation under the laws of the State of Delaware. In rendering
such opinion, Piper & Marbury L.L.P. may rely as to the matters relating
to the laws of the States other than Maryland and Delaware on the opinions
of counsel referred to in Paragraph (b) of this Section 6. In addition to
the matters set forth above, such opinion shall also include a statement
to the effect that nothing has come to the attention of such counsel which
leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to
Rule 430A under the Act) contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant
to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact, necessary in order to
make the statements, in the light of the circumstances under which they
are made, not misleading (except that such counsel need express no view as
to financial statements, schedules and statistical information therein).
With respect to such statement, Piper & Marbury L.L.P. may state that
their belief is based upon the procedures set forth therein, but is
without independent check and verification.

(d) The Underwriters shall have received at or prior to the Closing
Date from Piper & Marbury L.L.P. a memorandum or summary, in form and
substance satisfactory to the Underwriters, with respect to the
qualification for offering and sale by the Underwriters of the Shares
under the State securities or Blue Sky laws of such jurisdictions as the
Underwriters may reasonably have designated to the Company.

(e) The Underwriters shall have received, on the date hereof, the
Closing Date and the Option Closing Date, as the case may be, letters
dated the date hereof, the Closing Date or the Option Closing Date, as the
case may be, in form and substance satisfactory to the Underwriterss, of
Arthur Andersen LLP confirming that they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating that, in their opinion, the
financial statements and schedules of the Company and the Founding
Companies examined by them and included in the Registration Statement
comply in form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and Regulations;
and containing such other statements and information as is ordinarily
included in accountants'

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<PAGE>
"comfort letters" to Underwriters with respect to such financial
statements and certain financial and statistical information contained in
the Registration Statement and Prospectus.

(f) The Underwriters shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of
the Company and signed by the Chief Executive Officer and the Chief
Financial Officer of the Company to the effect that, as of the Closing
Date or the Option Closing Date, as the case may be:

(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such
purpose have been taken or are, to his knowledge, contemplated by
the Commission;

(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct in all material
respects as of the Closing Date or the Option Closing Date, as the
case may be;

(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;

(iv) As of the effective date of the Registration Statement,
the statements contained in the Registration Statement were true and
correct in all material respects, and such Registration Statement
and Prospectus did not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading, and since the effective date of the Registration
Statement, no event has occurred which should have been set forth in
a supplement to or an amendment of the Prospectus which has not been
so set forth in such supplement or amendment; and

(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not
been any material adverse change or any development involving a
prospective material adverse change in or affecting the condition,
financial or otherwise, of the Company or any of the Subsidiaries or
the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the
Company or any of the Subsidiaries, whether or not arising in the
ordinary course of business, except as set forth in, or contemplated
by, the Prospectus or as described in such certificate.

(g) The Company shall have furnished to the Underwriters such
further certificates and documents confirming the representations and
warranties, covenants and
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<PAGE>
conditions contained herein and related matters as the Underwriters may
reasonably have requested.

(h) The Firm Shares and Option Shares, if any, shall have been
approved for designation upon notice of issuance on the New York Stock
Exchange.

(i) The Lockup Agreements described in Section 4(j) shall be in full
force and effect.

(j) Each of the Founding Company Mergers shall have been completed
upon the terms set forth in the Prospectus simultaneously with the closing
of the purchase of the Firm Shares by the Underwriters.

The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Underwriters and to Piper & Marbury L.L.P., counsel
for the Underwriters, in their reasonable judgment.

If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Underwriters by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.

In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).

7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.

The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that: (a) at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened, and (b) each of the Founding Company Mergers
shall have been completed upon the terms set forth in the Prospectus
simultaneously with the closing of the purchase of the Firm Shares by the
Underwriters.

8. INDEMNIFICATION.

(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act, against any losses, claims, damages or liabilities
to which such Underwriter or any such

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<PAGE>
controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will
reimburse each Underwriter and each such controlling person upon demand
for any legal or other expenses reasonably incurred by such Underwriter or
such controlling person in connection with investigating or defending any
such loss, claim, damage or liability, action or proceeding or in
responding to a subpoena or governmental inquiry related to the offering
of the Shares, whether or not such Underwriter or controlling person is a
party to any action or proceeding; provided, however, that the Company
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission
made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through
the Underwriters specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Company
may otherwise have.

(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who
has signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of the Act against any losses,
claims, damages or liabilities to which the Company or any such director,
officer, or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or (ii) the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in the light of the circumstances under which they were made; and will
reimburse any legal or other expenses reasonably incurred by the Company
or any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that each Underwriter will be liable in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission has
been made in the Registration Statement, any Preliminary Prospectus, the
Prospectus or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through
the Underwriters specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.

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<PAGE>
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to
any party who shall fail to give notice as provided in this Section 8(c)
if the party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was materially prejudiced by the
failure to give such notice, but the failure to give such notice shall not
relieve the indemnifying party or parties from any liability which it or
they may have to the indemnified party for contribution or otherwise than
on account of the provisions of Section 8(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party and shall pay as incurred the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred (or within 30 days of
presentation) the fees and expenses of the counsel retained by the
indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them
or (iii) the indemnifying party shall have failed to assume the defense
and employ counsel acceptable to the indemnified party within a reasonable
period of time after notice of commencement of the action. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm for all
such indemnified parties. Such firm shall be designated in writing by you
in the case of parties indemnified pursuant to Section 8(a) and by the
Company in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment. In
addition, the indemnifying party will not, without the prior written
consent of the indemnified party, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action or
proceeding of which indemnification may be sought hereunder (whether or
not any indemnified party is an actual or potential party to such claim,
action or proceeding) unless such settlement, compromise or consent
includes an

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<PAGE>
unconditional release of each indemnified party from all liability arising
out of such claim, action or proceeding.

(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above (other than by reason of the exceptions provided
in such paragraphs) in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other
from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law then
each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on
the one hand and the Underwriters on the other in connection with the
statements, omissions or breaches of representations and warranties which
resulted in such losses, claims, damages or liabilities, (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bears to the total underwriting
discounts and commissions received by the Underwriters, in each case as
set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to above in this Section 8(d)
shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
subsection (d), (i) no Underwriter shall be required to contribute any
amount in excess of the underwriting discounts and commissions applicable
to the Shares purchased by such Underwriter and (ii) no person guilty of
fraudulent misrepresentation (within the meaning

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<PAGE>
of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 8(d) to contribute are several
in proportion to their respective underwriting obligations and not joint.

(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process
issuing from such court may be served upon him or it by any other
contributing party and consents to the service of such process and agrees
that any other contributing party may join him or it as an additional
defendant in any such proceeding in which such other contributing party is
a party.

(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are
incurred. The indemnity and contribution agreements contained in this
Section 8 and the representations and warranties of the Company set forth
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, the Company, its
directors or officers or any persons controlling the Company , (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter, or to the
Company, its directors or officers, or any person controlling the Company,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.

9. DEFAULT BY UNDERWRITERS.

If on the Closing Date or the Option Closing Date, as the case may be,
either Underwriter shall fail to purchase and pay for any portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), the
non-defaulting Underwriters, shall use their reasonable efforts to procure
within 36 hours thereafter one or more other underwriters to purchase from the
Company such amounts as may be agreed upon and upon the terms set forth herein,
the Firm Shares or Option Shares, as the case may be, which the defaulting
Underwriter failed to purchase. If during such 36 hours the non-defaulting
Underwriter shall not have procured such other underwriters, or any others, to
purchase the Firm Shares or Option Shares, as the case may be, agreed to be
purchased by the defaulting Underwriter, then (a) if the aggregate number of
shares with respect to which such default shall occur does not exceed 10% of the
Firm Shares or Option Shares, as the case may be, covered hereby, the
non-defaulting Underwriter shall be obligated, severally, in proportion to the

- 23 -
<PAGE>
respective numbers of Firm Shares or Option Shares, as the case may be, which
they are obligated to purchase hereunder, to purchase the Firm Shares or Option
Shares, as the case may be, which such defaulting Underwriter failed to
purchase, or (b) if the aggregate number of shares of Firm Shares or Option
Shares, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the Company or the non-defaulting Underwriter will have the right, by
written notice given within the next 36-hour period to the parties to this
Agreement, to terminate this Agreement without liability on the part of the
non-defaulting Underwriter or of the Company except to the extent provided in
Section 8 hereof. In the event of a default by any Underwriter, as set forth in
this Section 9, the Closing Date or Option Closing Date, as the case may be, may
be postponed for such period, not exceeding seven days, as the non-defaulting
Underwriter may determine in order that the required changes in the Registration
Statement or in the Prospectus or in any other documents or arrangements may be
effected. The term "Underwriter" includes any person substituted for a
defaulting Underwriter. Any action taken under this Section 9 shall not relieve
any defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.

10. NOTICES.

All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, One Street, Baltimore, Maryland 21202, Attention: Jay S. Eastman,
Principal, with a copy to Alex. Brown & Sons Incorporated, One South Street,
Baltimore, Maryland 21202 Attention: General Counsel; and if to the Company; to
Comfort Sytems USA, Inc., 4801 Woodway Drive, Suite 300E, Houston, Texas 77056,
Attention: Fred M Ferreira, Chief Executive Officer, with copies to Bracewell &
Patterson L.L.P., South Tower Pennzoil Place, 711 Louisiana Street, Suite 2900,
Houston, Texas 77002- 2718, Attention: William D. Gutermuth, Esq. and William
George III, Esq., General Counsel, Comfort Systems USA, Inc., 4801 Woodway
Drive, Suite 300E, Houston, Texas 77056.

- 24 -
<PAGE>
11. TERMINATION.

This Agreement may be terminated by you by notice to the Company as
follows:

(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the date of this Agreement;

(b) at any time prior to the Closing Date if any of the following
has occurred: (i) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the
Company and the Founding Companies taken as a whole or the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and the Founding
Companies taken as a whole, whether or not arising in the ordinary course
of business, (ii) any outbreak or escalation of hostilities or declaration
of war or national emergency or other national or international calamity
or crisis or change in economic or political conditions if the effect of
such outbreak, escalation, declaration, emergency, calamity, crisis or
change on the financial markets of the United States would, in your
reasonable judgment, make it impracticable to market the Shares or to
enforce contracts for the sale of the Shares, (iii) suspension of trading
in securities generally on the New York Stock Exchange or the American
Stock Exchange or limitation on prices (other than limitations on hours or
numbers of days of trading) for securities on either such Exchange, (iv)
the enactment, publication, decree or other promulgation of any statute,
regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects or may materially
and adversely affect the business or operations of the Company, (v)
declaration of a banking moratorium by United States or New York State
authorities, (vi) the suspension of trading of the Company's Common Stock
by the Commission on the New York Stock Exchange, or (vii) the taking of
any action by any governmental body or agency in respect of its monetary
or fiscal affairs which in your reasonable opinion has a material adverse
effect on the securities markets in the United States; or

12. SUCCESSORS.

This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any

- 25 -
<PAGE>
right or obligation hereunder. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign merely because of such
purchase.

13. INFORMATION PROVIDED BY UNDERWRITERS.

The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.

14. MISCELLANEOUS.

The reimbursement, indemnity and contribution agreements contained in this
Agreement and the representations and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement.

This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware.

- 26 -
<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the
Underwriters in accordance with its terms.

Very truly yours,

COMFORT SYSTEMS USA, INC.

By: __________________________________
Fred M. Ferreira,
Chief Executive Officer

The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.

ALEX. BROWN & SONS INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SANDERS MORRIS MUNDY INC.

By: Alex. Brown & Sons Incorporated

By _____________________________
Authorized Officer

- 27 -
<PAGE>
SCHEDULE I

SCHEDULE OF UNDERWRITERS

NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED

Alex. Brown & Sons Incorporated
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Sanders Morris Mundy Inc.

Total...........................................

- 28 -

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COMFORT SYSTEMS USA, INC.

The undersigned, Fred M. Ferreira, President, and Reagan Busbee, Assistant
Secretary of Comfort Systems USA, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), do hereby certify
as follows:

FIRST: The name of the Corporation is

Comfort Systems USA, Inc.

SECOND: The Certificate of Incorporation of the Corporation was filed in
the Office of the Secretary of State of the State of Delaware on December 12,
1996.

THIRD: The Amended and Restated Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of the State of
Delaware on March 20, 1997.

FOURTH: A Certificate of Amendment of the Amended and Restated Certificate
of Incorporation of the Corporation was filed in the Office of the Secretary of
State of the State of Delaware on May 19, 1997.

FIFTH: This Second Amended and Restated Certificate of Incorporation of
the Corporation (the "Second Restatement") was duly adopted in accordance with
the provisions of Section 242 of the Delaware General Corporation Law, the Board
of Directors having duly adopted resolutions setting forth and declaring
advisable this Second Restatement, and in lieu of a meeting of the stockholders,
written consent to this Second Restatement having been given by the holders of a
majority of the outstanding stock of the Corporation in accordance with Section
228 of the General Corporation Law of the state of Delaware.

SIXTH: The Amended and Restated Certificate of Incorporation of the
Corporation, as amended, is hereby replaced by the Second Restatement, which
reads in its entirety as follows:

ARTICLE ONE

The name of the corporation is:

Comfort Systems USA, Inc.

<PAGE>
ARTICLE TWO

The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.

ARTICLE THREE

The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.

ARTICLE FOUR

The total number of shares of all classes of stock which the Corporation
shall have authority to issue is Fifty Seven Million, Nine Hundred Sixty Nine
Thousand, Nine Hundred Twelve (57,969,912) shares, of which Five Million
(5,000,000) shares, designated as Preferred Stock, shall have a par value of One
Cent ($.01) per share (the "Preferred Stock"), Fifty Million (50,000,000)
shares, designated as Common Stock, shall have a par value of One Cent ($.01)
per share (the "Common Stock"), and Two Million, Nine Hundred Sixty Nine
Thousand, Nine Hundred Twelve (2,969,912) shares, designated as Restricted
Voting Common Stock, shall have a par value of One Cent ($.01) per share (the
"Restricted Voting Common Stock").

A statement of the powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, in respect of each class of stock of the
Corporation is as follows:

PREFERRED STOCK

The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of this Certificate of Incorporation and the limitations prescribed by law, the
Board of Directors is expressly authorized by adopting resolutions to issue the
shares, fix the number of shares and change the number of shares constituting
any series, and to provide for or change the voting powers, designations,
preferences and relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof, including dividend rights
(and whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), a redemption price or prices, conversion
rights and liquidation preferences of the shares constituting any class or
series of the Preferred Stock, without any further action or vote by the
stockholders.

-2-
<PAGE>
COMMON STOCK

1. DIVIDENDS.

Subject to the preferred rights of the holders of shares of any class or
series of Preferred Stock as provided by the Board of Directors with respect to
any such class or series of Preferred Stock, the holders of the Common Stock
shall be entitled to receive, as and when declared by the Board of Directors out
of the funds of the Corporation legally available therefor, such dividends
(payable in cash, stock or otherwise) as the Board of Directors may from time to
time determine, payable to stockholders of record on such dates, not exceeding
60 days preceding the dividend payment dates, as shall be fixed for such purpose
by the Board of Directors in advance of payment of each particular dividend. All
dividends on Common Stock shall be paid PARI PASSU with dividends on Restricted
Voting Common Stock.

2. LIQUIDATION.

In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the distribution or payment
to the holders of shares of any class or series of Preferred Stock as provided
by the Board of Directors with respect to any such class or series of Preferred
Stock, the remaining assets of the Corporation available for distribution to
stockholders shall be distributed among and paid to the holders of Common Stock
and Restricted Voting Common Stock ratably in proportion to the number of shares
of Common Stock and Restricted Voting Common Stock held by them respectively.

3. VOTING RIGHTS.

Except as otherwise required by law, each holder of shares of Common Stock
shall be entitled to one vote for each share of Common Stock standing in such
holder's name of the books of the Corporation.

RESTRICTED VOTING COMMON STOCK

1. DIVIDENDS.

-3-
<PAGE>
determine, payable to stockholders of record on such dates, not exceeding 60
days preceding the dividend payment dates, as shall be fixed for such purpose by
the Board of Directors in advance of payment of each particular dividend. All
dividends on Restricted Voting Common Stock shall be paid PARI PASSU with
dividends on Common Stock.

2 LIQUIDATION.

In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the distribution or payment
to the holders of shares of any class or series of Preferred Stock as provided
by the Board of Directors with respect to any such class or series of Preferred
Stock, the remaining assets of the Corporation available for distribution to
stockholders shall be distributed among and paid to the holders of Restricted
Voting Common Stock and Common Stock ratably in proportion to the number of
shares of Restricted Voting Common Stock and Common Stock held by them
respectively.

3. VOTING RIGHTS.

Holders of Restricted Voting Common Stock voting as a class shall be
entitled to elect one member of the Board of Directors, but shall not otherwise
be entitled to vote in the election of directors of the Corporation. Subject to
the foregoing, and except as otherwise required by law, each holder of shares of
Restricted Voting Common Stock shall be entitled to fifty five one-hundredths
(0.55) of one vote for each share of Restricted Voting Common Stock standing in
such holder's name of the books of the Corporation.

4. CONVERSION OF THE RESTRICTED VOTING COMMON STOCK.

Each share of Restricted Voting Common Stock will automatically convert
into Common Stock on a share-for-share basis (a) in the event of a disposition
of such share of Restricted Voting Common Stock by the holder thereof (other
than a disposition which is a distribution by a holder to its partners or
beneficial owners or a transfer to a related party of such holder (as defined in
Sections 267, 707, 318 and/or 4946 of the Internal Revenue Code of 1986, as
amended)), (b) in the event any person acquires beneficial ownership of 15% or
more of the outstanding shares of Common Stock of the Corporation, or (c) in the
event any person offers to acquire 15% or more of the outstanding shares of
Common Stock of the Corporation.

After July 1, 1998, the Corporation may elect to convert any outstanding
shares of Restricted Voting Common Stock into shares of Common Stock in the
event 80% or more of the outstanding shares of Restricted Voting Common Stock
have been converted into shares of Common Stock.

-4-
<PAGE>
ARTICLE FIVE

1. BOARD OF DIRECTORS.

The Directors shall be classified with respect to the time for which they
shall severally hold office into three classes as nearly equal in number as
possible. The Class I directors shall be elected to hold office for an initial
term expiring at the 1998 annual meeting of stockholders, the Class II Directors
shall be elected to hold office for an initial term expiring at the 1999 annual
meeting of stockholders and the Class III Directors shall be elected to hold
office for an initial term expiring at the 2000 annual meeting of stockholders,
with the members of each class of directors to hold office until their
successors have been duly elected and qualified. At each annual meeting of
stockholders, the successors to the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election and until their successors have been duly elected and qualified. At
each annual meeting of stockholders at which a quorum is present, the persons
receiving a plurality of the votes cast shall be directors. No director or class
of directors may be removed from office by a vote of the stockholders at any
time except for cause. Election of directors need not be by written ballot
unless the Bylaws of the Corporation so provide.

Notwithstanding the foregoing, the holders of Restricted Voting Common
Stock voting as a class shall be entitled to elect one member of the Board of
Directors, and only the holders of the Restricted Voting Common Stock shall be
entitled to remove such member from the Board of Directors.

2. VACANCIES.

Any vacancy on the Board of Directors resulting from death, retirement,
resignation, disqualification or removal from office or other cause, as well as
any vacancy resulting from an increase in the number of directors which occurs
between annual meetings of the stockholders at which directors are elected,
shall be filled only by a majority vote of the remaining directors then in
office, though less than a quorum, except that those vacancies resulting from
removal from office by a vote of the stockholders may be filled by a vote of the
stockholders at the same meeting at which such removal occurs. The directors
chosen to fill vacancies shall hold office for a term expiring at the end of the
next annual meeting of stockholders at which the term of the class to which they
have been elected expires. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director. If the
vacancy on the Board of Directors results from the death, retirement,
resignation, disqualification or removal from office of the director elected by
the holders of the Restricted Voting Common Stock, only the holders of the
Restricted Voting Common Stock shall be entitled to fill such vacancy.

-5-
<PAGE>
Notwithstanding the foregoing, whenever the holders of one or more classes
or series of Preferred Stock shall have the right, voting separately, as a class
or series, to elect directors, the election, term of office, filling of
vacancies, removal and other features of such directorships shall be governed by
the terms of the resolution or resolutions adopted by the Board of Directors
pursuant to ARTICLE FOUR applicable thereto, and each director so elected shall
not be subject to the provisions of this ARTICLE FIVE unless otherwise provided
therein.

3. POWER TO MAKE, ALTER AND REPEAL BYLAWS.

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter and repeal the
Bylaws of the Corporation.

4. AMENDMENT AND REPEAL OF ARTICLE FIVE.

Notwithstanding any provision of this Certificate of Incorporation and of
the Bylaws, and notwithstanding the fact that a lesser percentage may be
specified by Delaware law, unless such action has been approved by a majority
vote of the full Board of Directors, the affirmative vote of 66 2/3 percent of
the votes which all stockholders of the then outstanding shares of capital stock
of the Corporation would be entitled to cast thereon, voting together as a
single class, shall be required to amend or repeal any provisions of this
ARTICLE FIVE or to adopt any provision inconsistent with this ARTICLE FIVE. In
the event such action has been previously approved by a majority vote of the
full Board of Directors, the affirmative vote of a majority of the outstanding
stock entitled to vote thereon shall be sufficient to amend or repeal any
provision of this ARTICLE FIVE or adopt any provision inconsistent with this
ARTICLE FIVE.

ARTICLE SIX

The Corporation reserves the right to amend, alter, change or repeal any
provision in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute.

ARTICLE SEVEN

No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit.

-6-
<PAGE>
ARTICLE EIGHT

The Corporation shall, to the fullest extent permitted by Section 145 of
the Delaware General Corporation Law, as the same may be amended and
supplemented, indemnify each director and officer of the Corporation from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section and the indemnification provided for herein shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders, vote of disinterested
directors or otherwise, and shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such persons and the Corporation may purchase and maintain
insurance on behalf of any director or officer to the extent permitted by
Section 145 of the Delaware General Corporation Law.

IN WITNESS WHEREOF, the undersigned have executed this Second Amended and
Restated Certificate of Incorporation on behalf of the Corporation and have
attested such execution and do verify and affirm, under penalty of perjury, that
this Second Amended and Restated Certificate of Incorporation is the act and
deed of the Corporation and that the facts stated herein are true as of this
2nd day of June, 1997.

COMFORT SYSTEMS USA, INC.

By:/s/FRED M. FERREIRA
Fred M. Ferreira
President

Attest:

/s/REAGAN BUSBEE
Reagan Busbee
Assistant Secretary

-7-

[vignette]

COMMON STOCK COMMON STOCK
NUMBER NUMBER

THIS CERTIFICATE TRANSFERABLE INCORPORATED UNDER THE LAWS OF
IN NEW YORK, NEW YORK THE STATE OF DELAWARE

CUSIP 199908 10 4
SEE REVERSE FOR CERTAIN DEFINITIONS

COMFORT SYSTEMS USA, INC.

This Certifies that

is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE
PAR VALUE OF $.01 EACH OF
[CERTIFICATE OF STOCK]
COMFORT SYSTEMS USA, INC. transferable only on the books of the Corporation by
the holder hereof or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.

[SEAL]

Dated

/s/ WILLIAM GEORGE /s/ FRED M. FERREIRA
SECRETARY PRESIDENT

Countersigned and Registered:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, New York) Transfer Agent and Registrar

By
Authorized Signature
<PAGE>
COMFORT SYSTEMS USA, INC.

The Corporation will furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.

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

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM- as tenants in common UNIF TRANS MIN ACT- Custodian
TEN ENT- as tenants by the entireties (Cust) (Minor)
JT TEN- as joint tenants with right under Uniform Transfers to Minors
of survivorship and not as Act
tenants in common (State)

Additional abbreviations may also be used though not in the above list.

For Value received,_______________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE

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

- ------------------------------------------------------------------------- Shares
of the Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
----------------------------------------------------------

- -------------------------------------------------------------- Attorney to
transfer the said shares on the books of the within named Corporation with full
power of substitution.

Dated,

X_______________________________

NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.

SIGNATURE(S) GUARANTEED:_______________________________

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION,
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.

KEEP THIS CERTIFICATE IN A SAFE PLACE, IF IT IS LOST, STOLEN, OR DESTROYED, THE
CORPORATION MAY REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.

_____________, 1997

Comfort Systems USA, Inc.
4801 Woodway Drive, Suite 300E
Houston, Texas 77056

Gentlemen:

We have acted as counsel to Comfort Systems USA, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of its Registration
Statement on Form S-1 (Registration No. 333-24021) (the "Registration
Statement"), filed by the Company under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the offering and sale by the Company of
up to 7,015,000 shares of its common stock, par value $.01 per share (the
"Common Stock").

We have examined originals or copies of (i) the Second Amended and Restated
Certificate of Incorporation of the Company; (ii) the Bylaws of the Company, as
amended; (iii) certain resolutions of the Board of Directors of the Company; and
(iv) such other documents and records as we have deemed necessary and relevant
for purposes hereof. We have relied upon certificates of public officials and of
officers of the Company as to certain matters of fact relating to this opinion
and have made such investigations of law as we have deemed necessary and
relevant as a basis hereof. We have not independently verified any factual
matter relating to this opinion.

We have assumed the genuineness of all signatures, the authenticity of all
documents, certificates and records submitted to us as copies, and the
conformity to original documents, certificates and records of all documents,
certificates and records submitted to us as copies.

Based upon the foregoing, and subject to the limitations and assumptions set
forth herein, and having due regard for such legal considerations as we deem
relevant, we are of the opinion that:

1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
<PAGE>
Comfort Systems USA, Inc.
____________, 1997
Page 2

2. The issuance of the Common Stock has been duly authorized, and when
issued and delivered by the Company against payment therefor as described in the
Registration Statement, such shares will be validly issued, fully paid and
nonassessable.

The foregoing opinion is based on and is limited to the laws of the State of
Delaware and the relevant law of the United States of America, and we render no
opinion with respect to the law of any other jurisdiction.

We hereby consent to the filing of this opinion with the Securities and Exchange
Commission as Exhibit 5.1 to the Registration Statement and to the reference to
this firm as having passed on the validity of the issuance of the Common Stock
under the caption "Legal Matters" in the prospectus contained in the
Registration Statement. By giving such consent, we do not admit that we are
included within the category of persons whose consent is required under Section
7 of the Securities Act or the rules and regulations issued thereunder.

Very truly yours,

Bracewell & Patterson, L.L.P.

EXHIBIT 10.1

COMFORT SYSTEMS USA, INC.

1997 LONG-TERM INCENTIVE PLAN

1. PURPOSE. The purpose of this 1997 Long-Term Incentive Plan (the"Plan")
of Comfort Systems USA, Inc., a Delaware corporation (the "Company"), is to
advance the interests of the Company and its stockholders by providing a means
to attract, retain and reward executive officers and other key employees and
consultants of and service providers to the Company and its subsidiaries
(including consultants and others providing services of substantial value) and
to enable such persons to acquire or increase a proprietary interest in the
Company, thereby promoting a closer identity of interests between such persons
and the Company's stockholders.

2. DEFINITIONS. The definitions of awards under the Plan, including
Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock, Stock
granted as a bonus or in lieu of other awards, Dividend Equivalents and Other
Stock-Based Awards are set forth in Section 6 of the Plan. Such awards, together
with any other right or interest granted to a Participant under the Plan, are
termed "Awards." For purposes of the Plan, the following additional terms shall
be defined as set forth below:

(a) "Award Agreement" means any written agreement, contract, notice or
other instrument or document evidencing an Award.

(b) "Beneficiary" shall mean the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

(d) A "Change in Control" shall be deemed to have occurred if:

(i) any person, other than the Company or an employee benefit plan
of the Company, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Exchange Act) of any voting security of the
Company and immediately after such acquisition such Person is, directly or
indirectly, the Beneficial Owner of voting securities representing 50 percent or
more of the total voting power of all of the then-outstanding voting securities
of the Company;
<PAGE>
(ii) the following individuals no longer constitute a majority of
the members of the Board: (A) the individuals who, as of the closing date of the
Initial Public Offering, constitute the Board (the "Original Directors"); (B)
the individuals who thereafter are elected to the Board and whose election, or
nomination for election, to the Board was approved by a vote of at least
two-thirds (2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their election);
and (C) the individuals who are elected to the Board and whose election, or
nomination for election, to the Board was approved by a vote of at least
two-thirds (2/3) of the Original Directors and Additional Original Directors
then still in office (such directors also becoming "Additional Original
Directors" immediately following their election);

(iii) the stockholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the Company, or a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than any such
transaction which would result in at least 75 percent of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by at least 75
percent of the holders of outstanding voting securities of the Company
immediately prior to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders not substantially
altered in the transaction; or

(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or a substantial portion of the Company's assets (i.e., 50
percent or more of the total assets of the Company).

(e) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include
regulations thereunder and successor provisions and regulations thereto.

(f) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan.

(g) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act shall be
deemed to include rules thereunder and successor provisions and rules thereto.

(h) "Fair Market Value" means, with respect to Stock, Awards, or other
property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee, PROVIDED, HOWEVER, that (i) if the

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Stock is listed on a national securities exchange or quoted in an interdealer
quotation system, the Fair Market Value of such Stock on a given date shall be
based upon the last sales price or, if unavailable, the average of the closing
bid and asked prices per share of the Stock on such date (or, if there was no
trading or quotation in the Stock on such date, on the next preceding date on
which there was trading or quotation) as reported in the WALL STREET JOURNAL (or
other reporting service approved by the Committee), (ii) the "Fair Market Value"
of Stock subject to Options granted effective upon commencement of the Initial
Public Offering shall be the Initial Public Offering price of the shares so
issued and sold in the Initial Public Offering, as set forth in the first final
prospectus used in such offering (the provisions of clause (i) notwithstanding)
and (iii) the "Fair Market Value" of Stock prior to the date of the Initial
Public Offering shall be as determined by the Board of Directors.

(i) "Initial Public Offering" shall mean an initial public offering of
shares of Stock in a firm commitment underwriting registered with the Securities
and Exchange Commission in compliance with the provisions of the Securities Act
of 1933, as amended.

(j) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.

(k) "Participant" means a person who, at a time when eligible under
Section 5 hereof, has been granted an Award under the Plan.

(l) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.

(m) "Stock" means the Common Stock, $.01 par value, of the Company and
such other securities as may be substituted for Stock or such other securities
pursuant to Section 4.

3. ADMINISTRATION.

(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:

(i) to select persons to whom Awards may be granted;

(ii) to determine the type or types of Awards to be granted to each
such person;

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(iii) to determine the number of Awards to be granted, the number of
shares of Stock to which an Award will relate, the terms and conditions of any
Award granted under the Plan (including, but not limited to, any exercise price,
grant price or purchase price, any restriction or condition, any schedule for
lapse of restrictions or conditions relating to transferability or forfeiture,
exercisability or settlement of an Award, and waivers or accelerations thereof,
performance conditions relating to an Award (including performance conditions
relating to Awards not intended to be governed by Section 7(f) and waivers and
modifications thereof), based in each case on such considerations as the
Committee shall determine), and all other matters to be determined in connection
with an Award;

(iv) to determine whether, to what extent and under what
circumstances an Award may be settled, or the exercise price of an Award may be
paid, in cash, Stock, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;

(v) to determine whether, to what extent and under what
circumstances cash, Stock, other Awards or other property payable with respect
to an Award will be deferred either automatically, at the election of the
Committee or at the election of the Participant;

(vi) to prescribe the form of each Award Agreement, which need not
be identical for each Participant;

(vii) to adopt, amend, suspend, waive and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;

(viii) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any Award,
rules and regulations, Award Agreement or other instrument hereunder; and

(ix) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem necessary or
advisable for the administration of the Plan.

(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. Unless authority is
specifically reserved to the Board under the terms of the Plan, the Company's
Certificate of Incorporation or Bylaws, or applicable law, the Committee shall
have sole discretion in exercising authority under the Plan. Any action of the
Committee with respect to the Plan shall be final, conclusive and binding on all
persons, including the Company, subsidiaries of the Company, Participants, any
person claiming any rights under the Plan from or through any Participant and
stockholders, except to the extent the Committee may subsequently modify, or
take further action

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<PAGE>
not consistent with, its prior action. If not specified in the Plan, the time at
which the Committee must or may make any determination shall be determined by
the Committee, and any such determination may thereafter by modified by the
Committee (subject to Section 8(e)). The express grant of any specific power to
the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The Committee may
delegate to officers or managers of the Company or any subsidiary of the Company
the authority, subject to such terms as the Committee shall determine, to
perform administrative functions and, with respect to Participants not subject
to Section 16 of the Exchange Act, to perform such other functions as the
Committee may determine, to the extent permitted under Rule 16b-3, if
applicable, and other applicable law.

(c) LIMITATION OF LIABILITY. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company's independent certified public accountants or any
executive compensation consultant, legal counsel or other professional retained
by the Company to assist in the administration of the Plan. No member of the
Committee, nor any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and any officer or employee of the Company acting on
its behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination or
interpretation.

4. STOCK SUBJECT TO PLAN.

(a) AMOUNT OF STOCK RESERVED. The total amount of Stock that may be
subject to outstanding awards, determined immediately after the grant of any
Award, shall not exceed the greater of 2,500,000 shares of Stock or 13% of the
total number of shares of Stock outstanding at the time of such grant.
Notwithstanding the foregoing, the number of shares that may be delivered upon
the exercise of ISOs shall not exceed 500,000, subject in each case to
adjustment as provided in Section 4(c), and the number of shares that may be
delivered as Restricted Stock and Deferred Stock (other than pursuant to an
Award granted under Section 7(f)) shall not in the aggregate exceed 500,000,
provided, however, that shares subject to ISOs, Restricted Stock or Deferred
Stock Awards shall not be deemed delivered if such Awards are forfeited, expire
or otherwise terminate without delivery of shares to the Participant. To the
extent that an Award is only to be paid in cash or is paid in cash, any shares
of Stock subject to such Award shall again be available for the grant of an
Award. Any shares of Stock delivered pursuant to an Award may consist, in whole
or in part, of authorized and unissued shares, treasury shares or shares
acquired in the market for a Participant's Account.

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<PAGE>
(b) ANNUAL PER-PARTICIPANT LIMITATIONS. During any calendar year, no
Participant may be granted Awards that may be settled by delivery of more than
250,000 shares of Stock, subject to adjustment as provided in Section 4(c). In
addition, with respect to Awards that may be settled in cash (in whole or in
part), no Participant may be paid during any calendar year cash amounts relating
to such Awards that exceed the greater of the Fair Market Value of the number of
shares of Stock set forth in the preceding sentence at the date of grant or the
date of settlement of Award. This provision sets forth two separate limitations,
so that Awards that may be settled solely by delivery of Stock will not operate
to reduce the amount of cash-only Awards, and vice versa; nevertheless, Awards
that may be settled in Stock or cash must not exceed either limitation.

(c) ADJUSTMENTS. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Stock or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase or exchange of Stock or other
securities, liquidation, dissolution, or other similar corporate transaction or
event, affects the Stock such that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of Participants under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and kind of shares of Stock reserved and available for
Awards under Section 4(a), including shares reserved for the ISOs and Restricted
and Deferred Stock, (ii) the number and kind of shares of Stock specified in the
Annual Per-Participant Limitations under Section 4(b), (iii) the number and kind
of shares of outstanding Restricted Stock or other outstanding Award in
connection with which shares have been issued, (iv) the number and kind of
shares that may be issued in respect of other outstanding Awards and (v) the
exercise price, grant price or purchase price relating to any Award (or, if
deemed appropriate, the Committee may make provision for a cash payment with
respect to any outstanding Award). In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence) affecting the Company or
any subsidiary or the financial statements of the Company or any subsidiary, or
in response to changes in applicable laws, regulations, or accounting
principles. The foregoing notwithstanding, no adjustments shall be authorized
under this Section 4(c) with respect to ISOs or SARs in tandem therewith to the
extent that such authority would cause the Plan to fail to comply with Section
422(b)(1) of the Code, and no such adjustment shall be authorized with respect
to Options, SARs or other Awards subject to Section 7(f) to the extent that such
authority would cause such Awards to fail to qualify as "qualified
performance-based compensation" under Section 162(m)(4)(C) of the Code.

5. ELIGIBILITY. Executive officers and other key employees of the Company
and its subsidiaries, including any director or officer who is also such an
employee, and persons who provide consulting or other services to the Company
deemed by the Committee to be of substantial value to the Company, are eligible
to be granted Awards under the Plan. In addition, a person who

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has been offered employment by the Company or its subsidiaries is eligible to be
granted an Award under the Plan, provided that such Award shall be cancelled if
such person fails to commence such employment, and no payment of value may be
made in connection with such Award until such person has commenced such
employment. The foregoing notwithstanding, no member of the Committee shall be
eligible to be granted Awards under the Plan.

6. SPECIFIC TERMS OF AWARDS.

(a) GENERAL. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment or
service of the Participant. Except as provided in Section 6(f), 6(h), or 7(a),
or to the extent required to comply with requirements of the Delaware General
Corporation Law that lawful consideration be paid for Stock, only services may
be required as consideration for the grant (but not the exercise) of any Award.

(b) OPTIONS. The Committee is authorized to grant Options (including
"reload" options automatically granted to offset specified exercises of Options)
on the following terms and conditions ("Options"):

(i) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee; PROVIDED,
HOWEVER, that, except as provided in Section 7(a), such exercise price shall be
not less than the Fair Market Value of a share on the date of grant of such
Option.

(ii) TIME AND METHOD OF EXERCISE. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part, the
methods by which such exercise price may be paid or deemed to be paid, the form
of such payment, including, without limitation, cash, Stock, other Awards or
awards granted under other Company plans or other property (including notes or
other contractual obligations of Participants to make payment on a deferred
basis, such as through "cashless exercise" arrangements, to the extent permitted
by applicable law), and the methods by which Stock will be delivered or deemed
to be delivered to Participants.

(iii) ISOS. The terms of any ISO granted under the Plan shall comply
in all respects with the provisions of Section 422 of the Code, including but
not limited to the requirement that no ISO shall be granted more than ten years
after the effective date of the Plan. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to ISOs shall be interpreted,

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<PAGE>
amended, or altered, nor shall any discretion or authority granted under the
Plan be exercised, so as to disqualify either the Plan or any ISO under Section
422 of the Code, unless requested by the affected Participant.

(iv) TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
Committee, upon termination of a Participant's employment with the Company and
its subsidiaries, such Participant may exercise any Options during the
three-month period following such termination of employment, but only to the
extent such Option was exercisable immediately prior to such termination of
employment. Notwithstanding the foregoing, if the Committee determines that such
termination is for cause, all Options held by the Participant shall terminate as
of the termination of employment.

(i) RIGHT TO PAYMENT. An SAR shall confer on the Participant to whom
it is granted a right to receive, upon exercise thereof, the excess of (A) the
Fair Market Value of one share of Stock on the date of exercise (or, if the
Committee shall so determine in the case of any such right other than one
related to an ISO, the Fair Market Value of one share at any time during a
specified period before or after the date of exercise), over (B) the grant price
of the SAR as determined by the Committee as of the date of grant of the SAR,
which, except as provided in Section 7(a), shall be not less than the Fair
Market Value of one share of Stock on the date of grant.

(ii) OTHER TERMS. The Committee shall determine the time or times at
which an SAR may be exercised in whole or in part, the method of exercise,
method of settlement, form of consideration payable in settlement, method by
which Stock will be delivered or deemed to be delivered to Participants, whether
or not an SAR shall be in tandem with any other Award, and any other terms and
conditions of any SAR. Limited SARs that may only be exercised upon the
occurrence of a Change in Control may be granted on such terms, not inconsistent
with this Section 6(c), as the Committee may determine. Limited SARs may be
either freestanding or in tandem with other Awards.

(d) RESTRICTED STOCK. The Committee is authorized to grant Restricted
Stock on the following terms and conditions ("Restricted Stock"):

(i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or in combination
at such times, under such circumstances, in such

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<PAGE>
installments, or otherwise, as the Committee may determine. Except to the extent
restricted under the terms of the Plan and any Award Agreement relating to the
Restricted Stock, a Participant granted Restricted Stock shall have all of the
rights of a stockholder including, without limitation, the right to vote
Restricted Stock or the right to receive dividends thereon.

(ii) FORFEITURE. Except as otherwise determined by the Committee,
upon termination of employment or service (as determined under criteria
established by the Committee) during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be forfeited
and reacquired by the Company; PROVIDED, HOWEVER, that the Committee may
provide, by rule or regulation or in any Award Agreement, or may determine in
any individual case, that restrictions or forfeiture conditions relating to
Restricted Stock will be waived in whole or in part in the event of termination
resulting from specified causes.

(iii) CERTIFICATES FOR STOCK. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of the
Participant, such certificates may bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock, the
Company may retain physical possession of the certificate, and the Participant
shall have delivered a stock power to the Company, endorsed in blank, relating
to the Restricted Stock.

(iv) DIVIDENDS. Dividends paid on Restricted Stock shall be either
paid at the dividend payment date in cash or in shares of unrestricted Stock
having a Fair Market Value equal to the amount of such dividends, or the payment
of such dividends shall be deferred and/or the amount or value thereof
automatically reinvested in additional Restricted Stock, other Awards, or other
investment vehicles, as the Committee shall determine or permit the Participant
to elect. Stock distributed in connection with a Stock split or Stock dividend,
and other property distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted Stock with respect
to which such Stock or other property has been distributed, unless otherwise
determined by the Committee.

(e) DEFERRED STOCK. The Committee is authorized to grant Deferred Stock
subject to the following terms and conditions ("Deferred Stock"):

(i) AWARD AND RESTRICTIONS. Delivery of Stock will occur upon
expiration of the deferral period specified for an Award of Deferred Stock by
the Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be subject to such restrictions
as the Committee may impose, if any, which restrictions may lapse at the
expiration of the deferral period or at earlier specified times, separately or
in combination, in installments or otherwise, as the Committee may determine.

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(ii) FORFEITURE. Except as otherwise determined by the Committee,
upon termination of employment or service (as determined under criteria
established by the Committee) during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in the Award Agreement
evidencing the Deferred Stock), all Deferred Stock that is at that time subject
to such forfeiture conditions shall be forfeited; PROVIDED, HOWEVER, that the
Committee may provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture conditions
relating to Deferred Stock will be waived in whole or in part in the event of
termination resulting from specified causes.

(f) BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The
Committee is authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of Company obligations to pay cash under other plans or
compensatory arrangements. Stock or Awards granted hereunder shall be subject to
such other terms as shall be determined by the Committee.

(g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend
Equivalents entitling the Participant to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock ("Dividend Equivalents"). Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Stock,
Awards or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify.

(h) OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to
limitations under applicable law, to grant such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Stock and factors that may influence the
value of Stock, as deemed by the Committee to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries ("Other Stock Based Awards"). The
Committee shall determine the terms and conditions of such Awards. Stock issued
pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards, or other property, as the Committee shall determine. Cash awards,
as an element of or supplement to any other Award under the Plan, may be granted
pursuant to this Section 6(h).

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<PAGE>
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.

(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with or in substitution for
any other Award granted under the Plan or any award granted under any other plan
of the Company, any subsidiary or any business entity to be acquired by the
Company or a subsidiary, or any other right of a Participant to receive payment
from the Company or any subsidiary. Awards granted in addition to or in tandem
with other Awards or awards may be granted either as of the same time as or a
different time from the grant of such other Awards or awards.

(b) TERM OF AWARDS. The term of each Award shall be for such period as may
be determined by the Committee; PROVIDED, HOWEVER, that in no event shall the
term of any ISO or an SAR granted in tandem therewith exceed a period of ten
years from the date of its grant (or such shorter period as may be applicable
under Section 422 of the Code).

(c) FORM OF PAYMENT UNDER AWARDS. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a subsidiary
upon the grant, exercise or settlement of an Award may be made in such forms as
the Committee shall determine, including, without limitation, cash, Stock, other
Awards or other property, and may be made in a single payment or transfer, in
installments or on a deferred basis. Such payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents in respect of installment or deferred payments denominated in Stock.

(d) LOAN PROVISIONS. With the consent of the Committee, and subject at all
times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee or arrange for a loan
or loans to a Participant with respect to the exercise of any Option or other
payment in connection with any Award, including the payment by a Participant of
any or all federal, state or local income or other taxes due in connection with
any Award. Subject to such limitations, the Committee shall have full authority
to decide whether to make a loan or loans hereunder and to determine the amount,
terms and provisions of any such loan or loans, including the interest rate to
be charged in respect of any such loan or loans, whether the loan or loans are
to be with or without recourse against the borrower, the terms on which the loan
is to be repaid and conditions, if any, under which the loan or loans may be
forgiven.

(e) PERFORMANCE-BASED AWARDS. The Committee may, in its discretion,
designate any Award the exercisability or settlement of which is subject to the
achievement of

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performance conditions as a performance-based Award subject to this Section
7(f), in order to qualify such Award as "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. The performance objectives for an Award subject to this Section 7(f)
shall consist of one or more business criteria and a targeted level or levels of
performance with respect to such criteria, as specified by the Committee but
subject to this Section 7(f). Performance objectives shall be objective and
shall otherwise meet the requirements of Section 162(m)(4)(C) of the Code.
Business criteria used by the Committee in establishing performance objectives
for Awards subject to this Section 7(f) shall be selected exclusively from among
the following:

(1) Annual return on capital;

(2) Annual earnings per share;

(3) Annual cash flow provided by operations;

(4) Changes in annual revenues; and/or

(5) Strategic business criteria, consisting of one or more
objectives based on meeting specified revenue, market penetration, geographic
business expansion goals, cost targets, and goals relating to acquisitions or
divestitures.

The levels of performance required with respect to such business criteria
may be expressed in absolute or relative levels. Achievement of performance
objectives with respect to such Awards shall be measured over a period of not
less than one year nor more than five years, as the Committee may specify.
Performance objectives may differ for such Awards to different Participants. The
Committee shall specify the weighting to be given to each performance objective
for purposes of determining the final amount payable with respect to any such
Award. The Committee may, in its discretion, reduce the amount of a payout
otherwise to be made in connection with an Award subject to this Section 7(f),
but may not exercise discretion to increase such amount, and the Committee may
consider other performance criteria in exercising such discretion. All
determinations by the Committee as to the achievement of performance objectives
shall be in writing. The Committee may not delegate any responsibility with
respect to an Award subject to this Section 7(f).

(f) ACCELERATION UPON A CHANGE OF CONTROL. Notwithstanding anything
contained herein to the contrary, unless otherwise provided by the Committee in
an Award Agreement, all conditions and restrictions relating to an Award,
including limitations on exercisability, risks of forfeiture and conditions and
restrictions requiring the continued performance

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of services or the achievement of performance objectives with respect to the
exercisability or settlement of such Award, shall immediately lapse upon a
Change in Control.

8. GENERAL PROVISIONS.

(a) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company shall not be
obligated to issue or deliver Stock in connection with any Award or take any
other action under the Plan in a transaction subject to the registration
requirements of the Securities Act of 1933, as amended, or any other federal or
state securities law, any requirement under any listing agreement between the
Company and any national securities exchange or automated quotation system or
any other law, regulation or contractual obligation of the Company until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing shares of
Stock issued under the Plan will be subject to such stop-transfer orders and
other restrictions as may be applicable under such laws, regulations and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon.

(b) LIMITATIONS ON TRANSFERABILITY. Awards and other rights under the Plan
will not be transferable by a Participant except by will or the laws of descent
and distribution or to a Beneficiary in the event of the Participant's death,
and, if exercisable, shall be exercisable during the lifetime of a Participant
only by such Participant or his guardian or legal representative; PROVIDED,
HOWEVER, that such Awards and other rights (other than ISOs and SARs in tandem
therewith) may be transferred to one or more transferees during the lifetime of
the Participant, and may be exercised by such transferees in accordance with the
terms of such Award consistent with the registration of the offer and sale of
Stock on Form S-8 or Form S-3 or a successor registration form of the Securities
and Exchange Commission, and permitted by the Committee. Awards and other rights
under the Plan may not be pledged, mortgaged, hypothecated or otherwise
encumbered, and shall not be subject to the claims of creditors.

(c) NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. Neither the Plan
nor any action taken hereunder shall be construed as giving any employee or
other person the right to be retained in the employ or service of the Company or
any of its subsidiaries, nor shall it interfere in any way with the right of the
Company or any of its subsidiaries to terminate any employee's employment or
other person's service at any time.

(d) TAXES. The Company and any subsidiary is authorized to withhold from
any Award granted or to be settled, any delivery of Stock in connection with an
Award, any other payment relating to an Award or any payroll or other payment to
a Participant amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and

-13-
<PAGE>
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.

(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter, suspend,
discontinue or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of stockholders or Participants, except that
any such action shall be subject to the approval of the Company's stockholders
at or before the next annual meeting of stockholders for which the record date
is after such Board action if such stockholder approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such
changes to the Plan to stockholders for approval; PROVIDED, HOWEVER, that,
without the consent of an affected Participant, no such action may materially
impair the rights of such Participant under any Award theretofore granted to
him. The Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue, or terminate, any Award theretofore granted and any Award
Agreement relating thereto; PROVIDED, HOWEVER, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under such Award.

(f) NO RIGHTS TO AWARDS; NO STOCKHOLDER RIGHTS. No Participant or
employee shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity of treatment of Participants and employees. No
Award shall confer on any Participant any of the rights of a stockholder of the
Company unless and until Stock is duly issued or transferred and delivered to
the Participant in accordance with the terms of the Award or, in the case of an
Option, the Option is duly exercised.

(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general creditor of
the Company; PROVIDED, HOWEVER, that the Committee may authorize the creation of
trusts or make other arrangements to meet the Company's obligations under the
Plan to deliver cash, Stock, other Awards, or other property pursuant to any
Award, which trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant.

(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating

-14-
<PAGE>
any limitations on the power of the Board to adopt such other compensatory
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.

(i) NO FRACTIONAL SHARES. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

(j) COMPLIANCE WITH CODE SECTION 162(M). It is the intent of the Company
that employee Options, SARs and other Awards designated as Awards subject to
Section 7(f) shall constitute "qualified performance-based compensation" within
the meaning of Code Section 162(m). Accordingly, if any provision of the Plan or
any Award Agreement relating to such an Award does not comply or is inconsistent
with the requirements of Code Section 162(m), such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements, and
no provision shall be deemed to confer upon the Committee or any other person
discretion to increase the amount of compensation otherwise payable in
connection with any such Award upon attainment of the performance objectives.

(k) GOVERNING LAW. The validity, construction and effect of the Plan, any
rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.

(l) EFFECTIVE DATE; PLAN TERMINATION. The Plan shall become effective as
of the date of its adoption by the Board, subject to stockholder approval prior
to the commencement of the Initial Public Offering, and shall continue in effect
until terminated by the Board.

-15-

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and among Comfort Systems USA,
Inc., a Delaware corporation ("Company"), and Fred M. Ferreira ("Employee") is
hereby entered into and effective as of the _____ day of ___________________,
1997, the date of the consummation of the initial public offering of the common
stock of the Company. This Agreement hereby supersedes any other employment
agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

As of the date of this Agreement, the Company is engaged primarily in the
business of providing commercial and residential heating, ventilation and air
conditioning ("HVAC"), plumbing and electrical services.

Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by the Company and future plans with
respect thereto, all of which has been and will be established and maintained at
great expense to the Company, this information is a trade secret and constitutes
the valuable good will of the Company.

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

(a) The Company hereby employs Employee as Chief Executive Officer and
President of the Company. As such, Employee shall have responsibilities, duties
and authority reasonably accorded to and expected of a Chief Executive Officer
and President of the Company and will report directly to the Board of Directors
of the Company. Employee hereby accepts this employment upon the terms and
conditions herein contained and, subject to paragraph 1(c), agrees to devote his
time, attention and efforts to promote and further the business of the Company.
<PAGE>
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.

(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.

2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:

(a) BASE SALARY. Effective ____________, 1997, the base salary payable to
Employee shall be $150,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly. On at
least an annual basis, the Board will review Employee's performance and may make
increases to such base salary if, in its discretion, any such increase is
warranted. Such recommended increase would, in all likelihood, require approval
by the Board or a duly constituted committee thereof.

(b) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:

(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company may have in effect
from time to time, benefits provided to Employee under this clause (i) to
be at least equal to such benefits provided to other Company executives.

(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.

(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide employee benefits as
are available from time to time.

2
<PAGE>
3. NON-COMPETITION AGREEMENT.

(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC, plumbing or electrical services business in
direct competition with the Company within 100 miles of where the Company
or any of its subsidiaries conducts business, including any territory
serviced by the Company or any of such subsidiaries (the "Territory");

(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company (including the respective
subsidiaries thereof) in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the
Company (including the respective subsidiaries thereof);

(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company (including the respective subsidiaries thereof) within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company within the Territory;

(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company (including the respective subsidiaries thereof) or for which the
Company made an acquisition analysis, for the purpose of acquiring such
entity.

Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.

(b) Because of the difficulty of measuring economic losses to the Company
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to the Company for which they would
have no other adequate remedy, Employee agrees that the foregoing covenant may
be enforced by the Company in the event of breach by him, by injunctions and
restraining orders.

3
<PAGE>
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company (including the Company's subsidiaries) on the date
of the execution of this Agreement and the current plans of the Company
(including the Company's subsidiaries); but it is also the intent of the Company
and Employee that such covenants be construed and enforced in accordance with
the changing activities, business and locations of the Company (including the
Company's subsidiaries) throughout the term of this covenant, whether before or
after the date of termination of the employment of Employee. For example, if,
during the term of this Agreement, the Company (including the Company's
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
covenant.

It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company (including the
Company's subsidiaries), or similar activities or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company (including the Company's subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.

(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.

(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period of two (2) years following termination of employment
stated at the beginning of this paragraph 3, during which the agreements and
covenants of Employee made in this paragraph 3 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this paragraph 3.

4
<PAGE>
4. PLACE OF PERFORMANCE.

(a) Employee understands that he may be requested by the Board to relocate
from his present residence to another geographic location in order to more
efficiently carry out his duties and responsibilities under this Agreement or as
part of a promotion or other increase in duties and responsibilities. In such
event, if Employee agrees to relocate, the Company will pay all relocation costs
to move Employee, his immediate family and their personal property and effects.
Such costs may include, by way of example, but are not limited to, pre-move
visits to search for a new residence, investigate schools or for other purposes;
temporary lodging and living costs prior to moving into a new permanent
residence; duplicate home carrying costs; all closing costs on the sale of
Employee's present residence and on the purchase of a comparable residence in
the new location; and added income taxes that Employee may incur if any
relocation costs are not deductible for tax purposes. The general intent of the
foregoing is that Employee shall not personally bear any out-of-pocket cost as a
result of the relocation, with an understanding that Employee will use his best
efforts to incur only those costs which are reasonable and necessary to effect a
smooth, efficient and orderly relocation with minimal disruption to the business
affairs of the Company and the personal life of Employee and his family.

(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).

5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal . This Agreement and Employee's employment may be
terminated in any one of the followings ways:

(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.

(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request

5
<PAGE>
made within thirty (30) days of the date of such written statement, Employee
shall submit to an examination by a doctor selected by the Company who is
reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Initial Term of this Agreement or
for one (1) year, whichever amount is greater.

(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company which materially and adversely affects the operations or reputation of
the Company; (4) Employee's conviction of a felony crime; or (5) confirmed
positive drug and/or alcohol test result. In the event of a termination for good
cause, as enumerated above, Employee shall have no right to any severance
compensation.

(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board. Should Employee be terminated by the Company without cause
during the first three (3) years of the Term (the "Initial Term"), Employee
shall receive from the Company, in a lump-sum payment due on the effective date
of termination, the base salary at the rate then in effect for whatever time
period is remaining under the Initial Term of this Agreement or for one (1)
year, whichever amount is greater. Should Employee be terminated by the Company
without cause during the final two (2) year period of the Term, Employee shall
receive from the Company, in a lump-sum payment due on the effective date of
termination, the base salary rate then in effect equivalent to one (1) year of
salary. Further, any termination without cause by the Company shall operate to
shorten the period set forth in paragraph 3(a) and during which the terms of
paragraph 3 apply to one (1) year from the date of termination of employment. If
Employee resigns or otherwise terminates his employment without cause, rather
than the Company terminating his employment pursuant to this paragraph 5(d),
Employee shall receive no severance compensation.

(e) CHANGE IN CONTROL OF THE COMPANY. In the event of a "Change in Control
of the Company" (as defined below) during the Initial Term, refer to paragraph
12 below.

6
<PAGE>
to Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of the Company and Employee under
this Agreement shall cease as of the effective date of termination, except that
the Company's obligations under paragraph 9 herein and Employee's obligations
under paragraphs 3, 6, 7, 8 and 10 herein shall survive such termination in
accordance with their terms.

If termination of Employee's employment arises out of the Company's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement is terminated as a result of a breach by
the Company.

6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company or its
representatives, vendors or customers which pertain to the business of the
Company shall be and remain the property of the Company and be subject at all
times to its discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials and other similar data pertaining to the
business, activities or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.

7. INVENTIONS. Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company and which Employee conceives as a result of his
employment by the Company. Employee hereby assigns and agrees to assign all his
interests therein to the Company or its nominee. Whenever requested to do so by
the Company, Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.

8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's relationships or agreements with their respective significant vendors
or customers or any other significant and material trade secret of the Company,
whether in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever.

7
<PAGE>
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Employee in connection
therewith. In the event that both Employee and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful and wanton negligence
and misconduct or performed criminal and fraudulent acts which materially damage
the business of the Company.

10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.

11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.

12. CHANGE IN CONTROL.

(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Initial Term, then the provisions of this paragraph 12 shall be
applicable.

8
<PAGE>
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Initial Term and the
applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.

(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Initial Term; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be double the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase the Company's Common Stock, including any options with
accelerated vesting under the provisions of the Comfort's 1997 Long-Term
Incentive Plan, such that he may convert the options to shares of the Company's
Common Stock at or prior to the closing of the transaction giving rise to the
Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

(i) any person, other than the Company or an employee benefit plan
of the Company acquires directly or indirectly the Beneficial Ownership
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;

9
<PAGE>
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of the Company: (A) the individuals
who, as of the closing date of the Company's initial public offering,
constitute the Board of Directors of the Company (the "Original
Directors"); (B) the individuals who thereafter are elected to the Board
of Directors of the Company and whose election, or nomination for
election, to the Board of Directors of the Company was approved by a vote
of at least two-thirds (2/3) of the Original Directors then still in
office (such directors becoming "Additional Original Directors"
immediately following their election); and (C) the individuals who are
elected to the Board of Directors of the Company and whose election, or
nomination for election, to the Board of Directors of the Company was
approved by a vote of at least two-thirds (2/3) of the Original Directors
and Additional Original Directors then still in office (such directors
also becoming "Additional Original Directors" immediately following their
election).

(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially Owned by
at least 75% of the holders of outstanding voting securities of the
Company immediately prior to the transaction, with the voting power of
each such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or

(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the Company).

(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.

10
<PAGE>
between the Company and Employee and of all the terms of this Agreement, and it
cannot be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Company and Employee, and no term of this Agreement may be waived except
by writing signed by the party waiving the benefit of such term.

14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: Comfort Systems USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056

To Employee: --------------------

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

Notice shall be deemed given and effective on the earlier of three (3) days
after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified, return receipt requested, or when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this paragraph 14.

15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.

16. ARBITRATION. With the exception of paragraphs 3 and 8, any unresolved
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a panel of three (3)
arbitrators in Houston, Texas, in accordance with the rules of the American
Arbitration Association then in effect. The arbitrators shall not have the
authority to add to, detract from, or modify any provision hereof nor to award
punitive damages to any injured party. The arbitrators shall have the authority
to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Employee was terminated without disability or good
cause, as defined in paragraphs 5(b) and 5(c), respectively, or that the Company
has otherwise materially

11
<PAGE>
breached this Agreement. A decision by a majority of the arbitration panel shall
be final and binding. Judgment may be entered on the arbitrators' award in any
court having jurisdiction. The direct expense of any arbitration proceeding
shall be borne by the Company.

17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.

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

COMFORT SYSTEMS USA, INC.

By:
Name:
Title:

EMPLOYEE:

- --------------------
Fred M. Ferreira

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and among Comfort Systems USA,
Inc., a Delaware corporation ("Company"), and J. Gordon Beittenmiller
("Employee") is hereby entered into and effective as of the _____ day of
___________________, 1997, the date of the consummation of the initial public
offering of the common stock of the Company. This Agreement hereby supersedes
any other employment agreements or understandings, written or oral, between the
Company and Employee.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

(a) The Company hereby employs Employee as Senior Vice President and Chief
Financial Officer of the Company. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of a Senior Vice
President and Chief Financial Officer of the Company and will report directly to
the Board of Directors of the Company. Employee hereby accepts this employment
upon the terms and conditions herein contained and, subject to
<PAGE>
paragraph 1(c), agrees to devote his time, attention and efforts to promote and
further the business of the Company.

(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.

2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:

2
<PAGE>
3. NON-COMPETITION AGREEMENT.

4. PLACE OF PERFORMANCE.

4
<PAGE>
(a) Employee understands that he may be requested by the Board to relocate
from his present residence to another geographic location in order to more
efficiently carry out his duties and responsibilities under this Agreement or as
part of a promotion or other increase in duties and responsibilities. In such
event, if Employee agrees to relocate, the Company will pay all relocation costs
to move Employee, his immediate family and their personal property and effects.
Such costs may include, by way of example, but are not limited to, pre-move
visits to search for a new residence, investigate schools or for other purposes;
temporary lodging and living costs prior to moving into a new permanent
residence; duplicate home carrying costs; all closing costs on the sale of
Employee's present residence and on the purchase of a comparable residence in
the new location; and added income taxes that Employee may incur if any
relocation costs are not deductible for tax purposes. The general intent of the
foregoing is that Employee shall not personally bear any out-of-pocket cost as a
result of the relocation, with an understanding that Employee will use his best
efforts to incur only those costs which are reasonable and necessary to effect a
smooth, efficient and orderly relocation with minimal disruption to the business
affairs of the Company and the personal life of Employee and his family.

(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.

5
<PAGE>
the event this Agreement is terminated as a result of Employee's disability,
Employee shall receive from the Company, in a lump-sum payment due within ten
(10) days of the effective date of termination, the base salary at the rate then
in effect for whatever time period is remaining under the Initial Term of this
Agreement or for one (1) year, whichever amount is greater.

(e) CHANGE IN CONTROL OF THE COMPANY. In the event of a "Change in Control
of the Company" (as defined below) during the Initial Term, refer to paragraph
12 below.

Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of the Company and Employee under
this Agreement shall cease as of the effective date of termination, except that
the Company's obligations under paragraph 9 herein and

6
<PAGE>
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive
such termination in accordance with their terms.

9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses

7
<PAGE>
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company agrees to engage
competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful and wanton negligence
and misconduct or performed criminal and fraudulent acts which materially damage
the business of the Company.

12. CHANGE IN CONTROL.

(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner

8
<PAGE>
and to the same extent that the Company is hereby required to perform, then such
Change in Control shall be deemed to be a termination of this Agreement by the
Company without cause during the Initial Term and the applicable portions of
paragraph 5(d) will apply; however, under such circumstances, the amount of the
lump-sum severance payment due to Employee shall be triple the amount calculated
under the terms of paragraph 5(d) and the non-competition provisions of
paragraph 3 shall not apply whatsoever.

(e) A "Change in Control" shall be deemed to have occurred if:

(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of the Company: (A) the individuals
who, as of the closing date of the Company's initial public offering,
constitute the Board of Directors of the Company (the "Original
Directors"); (B) the individuals who thereafter are elected to the Board
of Directors of the Company and whose election, or nomination for
election, to the Board of Directors of the Company was approved by a vote
of at least two-thirds (2/3) of the Original Directors then still in
office (such directors becoming "Additional Original Directors"
immediately

9
<PAGE>
following their election); and (C) the individuals who are elected to the
Board of Directors of the Company and whose election, or nomination for
election, to the Board of Directors of the Company was approved by a vote
of at least two-thirds (2/3) of the Original Directors and Additional
Original Directors then still in office (such directors also becoming
"Additional Original Directors" immediately following their election).

(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the Company).

(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.

14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

10
<PAGE>
To the Company: Comfort Systems USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056

To Employee: --------------------

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

17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

11
<PAGE>
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.

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

COMFORT SYSTEMS USA, INC.

By:
Name:
Title:

EMPLOYEE:

- -----------------------
J. Gordon Beittenmiller

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and among Comfort Systems USA,
Inc., a Delaware corporation ("Company"), and William George, III ("Employee")
is hereby entered into and effective as of the _____ day of ___________________,
1997, the date of the consummation of the initial public offering of the common
stock of the Company. This Agreement hereby supersedes any other employment
agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

(a) The Company hereby employs Employee as Vice President, General Counsel
and Secretary of the Company. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of a Vice President,
General Counsel and Secretary of the Company and will report directly to the
Board of Directors of the Company. Employee hereby accepts this employment upon
the terms and conditions herein contained and, subject to paragraph 1(c), agrees
to devote his time, attention and efforts to promote and further the business of
the Company.

1
<PAGE>
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.

2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:

2
<PAGE>
3. NON-COMPETITION AGREEMENT.

4. PLACE OF PERFORMANCE.

(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.

(e) CHANGE IN CONTROL OF THE COMPANY. In the event of a "Change in Control
of the Company" (as defined below) during the Initial Term, refer to paragraph
12 below.

6
<PAGE>
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive
such termination in accordance with their terms.

12. CHANGE IN CONTROL.

(e) A "Change in Control" shall be deemed to have occurred if:

(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the Company).

(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

10
<PAGE>
To the Company: Comfort Systems USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056

To Employee: --------------------

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

17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

COMFORT SYSTEMS USA, INC.

By:
Name:
Title:

EMPLOYEE:

- --------------------
William George, III

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and among Comfort Systems USA,
Inc., a Delaware corporation ("Company"), and Reagan S. Busbee ("Employee") is
hereby entered into and effective as of the _____ day of ___________________,
1997, the date of the consummation of the initial public offering of the common
stock of the Company. This Agreement hereby supersedes any other employment
agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

(a) The Company hereby employs Employee as Senior Vice President of the
Company. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a Senior Vice President of the Company
and will report directly to the Board of Directors of the Company. Employee
hereby accepts this employment upon the terms and conditions herein contained
and, subject to paragraph 1(c), agrees to devote his time, attention and efforts
to promote and further the business of the Company.

1
<PAGE>
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.

2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:

(a) BASE SALARY. Effective ____________, 1997, the base salary payable to
Employee shall be $125,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly. On at
least an annual basis, the Board will review Employee's performance and may make
increases to such base salary if, in its discretion, any such increase is
warranted. Such recommended increase would, in all likelihood, require approval
by the Board or a duly constituted committee thereof.

2
<PAGE>
3. NON-COMPETITION AGREEMENT.

4. PLACE OF PERFORMANCE.

(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.

(e) CHANGE IN CONTROL OF THE COMPANY. In the event of a "Change in Control
of the Company" (as defined below) during the Initial Term, refer to paragraph
12 below.

6
<PAGE>
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive
such termination in accordance with their terms.

12. CHANGE IN CONTROL.

(e) A "Change in Control" shall be deemed to have occurred if:

(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the Company).

(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

10
<PAGE>
To the Company: Comfort Systems USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056

To Employee: --------------------

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

17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

COMFORT SYSTEMS USA, INC.

By:
Name:
Title:

EMPLOYEE:

- --------------------
Reagan S. Busbee

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and between Accurate Air
Systems, Inc. (the "Company"), a Texas corporation and a wholly-owned subsidiary
of Comfort Systems USA, Inc., a Delaware corporation ("Comfort"), and Thomas J.
Beaty ("Executive") is hereby entered into and effective as of the _____ day of
___________________, 1997, the date of the consummation of the initial public
offering of the common stock of Comfort. This Agreement hereby supersedes any
other employment agreements or understandings, written or oral, between the
Company and Executive.

R E C I T A L S

The following statements are true and correct:

Executive is employed hereunder by the Company in a confidential
relationship wherein Executive, in the course of his employment with the
Company, has and will continue to become familiar with and aware of information
as to the Company's and Comfort's customers, specific manner of doing business,
including the processes, techniques and trade secrets utilized by the Company
and Comfort, and future plans with respect thereto, all of which has been and
will be established and maintained at great expense to the Company and Comfort;
this information is a trade secret and constitutes the valuable goodwill of the
Company and Comfort.

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

(a) The Company hereby employs Executive as President and Chief Executive
Officer of the Company. As such, Executive shall have responsibilities, duties
and authority reasonably accorded to, expected of, and consistent with
Executive's position as, President and Chief Executive Officer of the Company
and will report directly to the Board of Directors of the Company (the "Board").
Executive hereby accepts this employment upon the terms and conditions herein
contained

1
<PAGE>
and, subject to paragraph 1(c), agrees to devote substantially all of his
business time, attention and efforts to promote and further the business of the
Company.

(b) Executive shall faithfully adhere to, execute and fulfill all lawful
policies established by the Company.

(c) Executive shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes in any material respect with
Executive's duties and responsibilities hereunder. The foregoing limitations
shall not be construed as prohibiting Executive from making personal investments
in such form or manner as will neither require his services in the operation or
affairs of the companies or enterprises in which such investments are made nor
violate the terms of paragraph 3 hereof.

(d) Executive shall not be required by the Company or the performance of
his duties to relocate from Houston, Texas.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

(a) BASE SALARY. Effective ____________, 1997, the base salary payable to
Executive shall be $100,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly. On at
least an annual basis, the Board will review Executive's performance and may
make increases to such base salary if, in its discretion, any such increase is
warranted. Such recommended increase would, in all likelihood, require approval
by the Board or a duly constituted committee thereof. In no event shall
Executive's base salary be reduced to a level below the greater of $100,000, or
90% of Executive's base salary during the prior contract year.

(b) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Executive
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:

(i) Payment of all premiums for coverage for Executive and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company may have in effect
from time to time, benefits provided to Executive under this clause (i) to
be at least equal to such benefits provided to Comfort executives.

(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Executive in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Executive upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.

2
<PAGE>
(iii) The Company shall provide Executive with other executive
perquisites as may be available to or deemed appropriate for Executive by
the Board and participation in all other Company-wide employee benefits as
are available from time to time.

3. NON-COMPETITION AGREEMENT.

(a) Executive will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, other than a
termination by the Company without cause or by Executive for Good Reason,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, company, partnership, corporation or business of whatever nature:

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC Business in direct competition with the
Company or Comfort, within 100 miles of where the Company or any of
Comfort's subsidiaries conducts business, including any territory serviced
by the Company or Comfort or any of such subsidiaries (the "Territory");

(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or Comfort (including the respective
subsidiaries thereof) in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the
Company or Comfort (including the respective subsidiaries thereof);

(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company or Comfort (including the respective subsidiaries thereof) within
the Territory for the purpose of soliciting or selling products or
services in direct competition with the Company or Comfort within the
Territory;

(iv) call upon any prospective acquisition candidate, on Executive's
own behalf or on behalf of any competitor, which candidate was, to
Executive's actual knowledge after due inquiry, either called upon by the
Company or Comfort (including the respective subsidiaries thereof) or for
which the Company or Comfort made an acquisition analysis, for the purpose
of acquiring such entity.

Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Executive from acquiring as an investment not more than three percent
(3%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or on an over-the-counter or similar market.

(b) Because of the difficulty of measuring economic losses to the Company
and Comfort as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable

3
<PAGE>
damage that could be caused to the Company and Comfort for which they would have
no other adequate remedy, Executive agrees that the foregoing covenant may be
enforced by Comfort or the Company in the event of breach by him, by injunctions
and restraining orders.

(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Executive in light of the
activities and business of the Company or Comfort, as the case may be (including
Comfort's other subsidiaries) on the date of the execution of this Agreement and
the current plans of Comfort (including Comfort's other subsidiaries); but it is
also the intent of the Company and Executive that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of the Company and Comfort, as the case may be (including Comfort's other
subsidiaries) throughout the term of this covenant, whether before or after the
date of termination of the employment of Executive. For example, if, during the
term of this Agreement, the Company or Comfort, as the case may be (including
Comfort's other subsidiaries) engages in new and different activities, enters a
new business or establishes new locations for its current activities or business
in addition to or other than the activities or business enumerated under the
Recitals above or the locations currently established therefor, then Executive
will be precluded from soliciting the customers or employees of such new
activities or business or from such new location and from directly competing
with such new business within 100 miles of its then-established operating
location(s) through the term of this covenant.

It is further agreed by the parties hereto that, in the event that
Executive shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or Comfort
(including Comfort's other subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (i) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Executive's
obligations under this paragraph 3, if any, Executive shall not be chargeable
with a violation of this paragraph 3 if the Company or Comfort (including
Comfort's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.

(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Comfort, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Comfort or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants

4
<PAGE>
of Executive made in this paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Executive is in violation
of any provision of this paragraph 3.

4. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for five (5) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal. This Agreement and Executive's employment may be
terminated in any one of the followings ways:

(a) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.

(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Executive shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Executive's employment
hereunder provided Executive is unable to resume his full-time duties at the
conclusion of such notice period. Also, Executive may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Executive shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Executive shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Executive or
Executive's doctor and such doctor shall have concurred in the conclusion of
Executive's doctor. In the event this Agreement is terminated as a result of
Executive's disability, Executive shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater.

(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Executive for good cause, which shall be: (1)
Executive's willful, material and irreparable breach of this Agreement; (2)
Executive's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Executive's material duties and responsibilities hereunder; (3)
Executive's willful dishonesty, fraud or misconduct with respect to the business
or affairs of the Company or Comfort which materially and adversely affects the
operations or reputation of the Company or Comfort; (4) Executive's conviction
of a felony crime; or (5) confirmed positive illegal drug test result. In the
event of a termination for good cause, as enumerated above, Executive shall have
no right to any severance compensation.

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<PAGE>
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Executive may, without cause, and without Good Reason (as hereinafter defined)
terminate this Agreement and Executive's employment, effective thirty (30) days
after written notice is provided to the Company. Executive may only be
terminated without cause by the Company during the Term hereof if such
termination is approved by at least eighty percent (80%) of the members of the
Board of Directors of Comfort. Should Executive be terminated by the Company
without cause or should Executive terminate with Good Reason during the first
three (3) years of the Term (the "Initial Term"), Executive shall receive from
the Company, in a lump-sum payment due on the effective date of termination, the
base salary at the rate then in effect for whatever time period is remaining
under the Initial Term of this Agreement or for one (1) year, whichever amount
is greater. Should Executive be terminated by the Company without cause or
should Executive terminate with Good Reason during the final two (2) year period
of the Term, Executive shall receive from the Company, in a lump-sum payment due
on the effective date of termination, the base salary rate then in effect
equivalent to one (1) year of salary. Further, any termination without cause by
the Company shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Executive resigns or otherwise terminates his
employment without cause, rather than the Company terminating his employment
pursuant to this paragraph 5(d), Executive shall receive no severance
compensation.

Executive shall have "Good Reason" to terminate this Agreement and his
employment hereunder upon the occurrence of any of the following events: (a)
Executive is demoted by means of a reduction in authority, responsibilities or
duties to a position of less stature or importance within the Company than the
position described in Section 1 hereof; or (b) Executive's annual base salary as
determined pursuant to Section 2 hereof is reduced to a level that is less than
90% of the base salary paid to Executive during any prior contract year under
this Agreement, unless Executive has agreed in writing to that demotion or
reduction.

(e) CHANGE IN CONTROL OF COMFORT. In the event of a "Change in Control of
Comfort" (as defined below) during the Initial Term, refer to paragraph 11
below.

Upon termination of this Agreement for any reason provided above,
Executive shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Executive only to the extent and in the manner expressly provided above or in
paragraph 11. All other rights and obligations of the Company and Executive
under this Agreement shall cease as of the effective date of termination, except
that the Company's obligations under paragraph 8 herein and Executive's
obligations under paragraphs 3, 5, 6, 7 and 9 herein shall survive such
termination in accordance with their terms.

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<PAGE>
jurisdiction or pursuant to the provisions of paragraph 15 below, the Company
shall pay all amounts and damages to which Executive may be entitled as a result
of such breach, including interest thereon and all reasonable legal fees and
expenses and other costs incurred by Executive to enforce his rights hereunder.
Further, none of the provisions of paragraph 3 shall apply in the event this
Agreement is terminated as a result of a breach by the Company.

If Executive is terminated without cause or terminates his employment
hereunder with Good Reason, (a) the Company shall make the insurance premium
payments contemplated by COBRA for a period of 18 months after such termination,
(b) the Executive shall be entitled to receive a pro rated portion of any annual
bonus to which the Executive would have been entitled for the year during which
the termination occured had the Executive not been terminated and (c) all
options to purchase CSI stock shall vest thereupon.

5. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Executive by or on behalf of the Company, Comfort or
their representatives, vendors or customers which pertain to the business of the
Company or Comfort shall be and remain the property of the Company or Comfort,
as the case may be, and be subject at all times to their discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans of
the Company or Comfort which is collected by Executive shall be delivered
promptly to the Company without request by it upon termination of Executive's
employment.

6. INVENTIONS. Executive shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by
Executive, solely or jointly with another, during the period of employment or
within one (1) year thereafter, and which are directly related to the business
or activities of the Company and which Executive conceives as a result of his
employment by the Company. Executive hereby assigns and agrees to assign all his
interests therein to the Company or its nominee. Whenever requested to do so by
the Company, Executive shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.

7. TRADE SECRETS. Executive agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or Comfort's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or Comfort, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.

8. INDEMNIFICATION. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other

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<PAGE>
than an action by the Company or Comfort against Executive), by reason of the
fact that he is or was performing services under this Agreement, then the
Company shall indemnify Executive against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, as actually and
reasonably incurred by Executive in connection therewith to the maximum extent
permitted by applicable law. The advancement of expenses shall be mandatory. In
the event that both Executive and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company agrees to engage
competent legal representation, and Executive agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Executive,
Executive may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Executive is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Executive cannot be held liable to the Company or Comfort for errors or
omissions made in good faith where Executive has not exhibited gross, willful
and wanton negligence and misconduct or performed criminal and fraudulent acts
which materially damage the business of the Company or Comfort.

9. NO PRIOR AGREEMENTS. Executive hereby represents and warrants to the
Company that the execution of this Agreement by Executive and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Executive agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Executive and such third party
which was in existence as of the date of this Agreement.

10. ASSIGNMENT; BINDING EFFECT. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.

11. CHANGE IN CONTROL.

(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Executive understands and acknowledges that Comfort and/or the Company may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of Comfort and/or the
Company hereunder or that the Company may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Initial Term, then the provisions of this
paragraph 11 shall be applicable.

8
<PAGE>
(b) In the event of a pending Change in Control wherein Comfort and/or the
Company and Executive have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of Comfort's and/or the Company's business and/or assets that such successor is
willing as of the closing to assume and agree to perform Comfort's and/or the
Company's obligations under this Agreement in the same manner and to the same
extent that Comfort and/or the Company is hereby required to perform, then such
Change in Control shall be deemed to be a termination of this Agreement by
Comfort and/or the Company without cause during the Initial Term and the
applicable portions of paragraph 4(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Executive
shall be triple the amount calculated under the terms of paragraph 4(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.

(c) In any Change in Control situation, Executive may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 4(d) will apply as though the Company had terminated the
Agreement without cause during the Initial Term; however, under such
circumstances, the amount of the lump-sum severance payment due to Executive
shall be double the amount calculated under the terms of paragraph 4(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Executive must be paid in full by the
Company at or prior to such closing. Further, Executive will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Comfort Common Stock, such that he may convert the options
to shares of Comfort Common Stock at or prior to the closing of the transaction
giving rise to the Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

(i) any person, other than Comfort or an employee benefit plan of
Comfort, acquires directly or indirectly the beneficial ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;

(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Comfort: (A) the individuals who,
as of the closing date of

9
<PAGE>
Comfort's initial public offering, constitute the Board of Directors of
Comfort (the "Original Directors"); (B) the individuals who thereafter are
elected to the Board of Directors of Comfort and whose election, or
nomination for election, to the Board of Directors of Comfort was approved
by a vote of at least two-thirds (2/3) of the Original Directors then
still in office (such directors becoming "Additional Original Directors"
immediately following their election); and (C) the individuals who are
elected to the Board of Directors of Comfort and whose election, or
nomination for election, to the Board of Directors of Comfort was approved
by a vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election).

(iii) the stockholders of Comfort shall approve a merger,
consolidation, recapitalization, or reorganization of Comfort, a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by at least
75% of the holders of outstanding voting securities of Comfort immediately
prior to the transaction, with the voting power of each such continuing
holder relative to other such continuing holders not substantially altered
in the transaction; or

(iv) the stockholders of Comfort shall approve a plan of complete
liquidation of Comfort or an agreement for the sale or disposition by
Comfort of all or a substantial portion of Comfort's assets (i.e., 50% or
more of the total assets of Comfort).

(f) Executive must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

(g) Executive shall be reimbursed by the Company or its successor for any
excise taxes that Executive incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Executive
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Executive.

12. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Executive has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Executive and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed

10
<PAGE>
by a duly authorized officer of the Company and Executive, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.

13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: Accurate Air Systems, Inc.
8505 Rannie Road
Houston, TX 77080

To Executive --------------------

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

14. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.

15. ARBITRATION. With the exception of paragraphs 3 and 7, any unresolved
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a panel of three (3)
arbitrators in Houston, Texas, in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
("AAA") then in effect provided that the parties may agree to use arbitrators
other than those provided by the AAA. The arbitrators shall not have the
authority to add to, detract from, or modify any provision hereof nor to award
punitive damages to any injured party. The arbitrators shall have the authority
to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Executive was terminated without disability or good
cause, as defined in paragraphs 4(b) and 4(c), respectively, or that the Company
has otherwise materially breached this Agreement. A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award

11
<PAGE>
in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.

16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

17. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.

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

ACCURATE AIR SYSTEMS, INC.

By:
Name:
Title:

EXECUTIVE:

Thomas J. Beaty

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and between Atlas Comfort
Services USA, Inc. (the "Company"), a Texas corporation and a wholly-owned
subsidiary of Comfort Systems USA, Inc., a Delaware corporation ("Comfort"), and
Brian S. Atlas ("Executive") is hereby entered into and effective as of the
_____ day of ___________________, 1997, the date of the consummation of the
initial public offering of the common stock of Comfort. This Agreement hereby
supersedes any other employment agreements or understandings, written or oral,
between the Company and Executive.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

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<PAGE>
and, subject to paragraph 1(c), agrees to devote substantially all of his
business time, attention and efforts to promote and further the business of the
Company.

(b) Executive shall faithfully adhere to, execute and fulfill all lawful
policies established by the Company.

(d) Executive shall not be required by the Company or the performance of
his duties to relocate from Houston, Texas.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

3. NON-COMPETITION AGREEMENT.

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC Business in direct competition with the
Company or Comfort, within 100 miles of where the Company or any of
Comfort's subsidiaries conducts business, including any territory serviced
by the Company or Comfort or any of such subsidiaries (the "Territory");

(b) Because of the difficulty of measuring economic losses to the Company
and Comfort as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable

(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Comfort, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Comfort or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants

(a) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.

(e) CHANGE IN CONTROL OF COMFORT. In the event of a "Change in Control of
Comfort" (as defined below) during the Initial Term, refer to paragraph 11
below.

8. INDEMNIFICATION. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other

11. CHANGE IN CONTROL.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Executive must be paid in full by the
Company at or prior to such closing. Further, Executive will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Comfort Common Stock, such that he may convert the options
to shares of Comfort Common Stock at or prior to the closing of the transaction
giving rise to the Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Comfort: (A) the individuals who,
as of the closing date of

(f) Executive must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

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<PAGE>
by a duly authorized officer of the Company and Executive, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.

13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: Atlas Comfort Services USA, Inc.
4125 Southerland
Houston, TX 77092-4416

To Executive --------------------

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

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<PAGE>
in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.

16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

ATLAS COMFORT SERVICES USA, INC.

By:
Name:
Title:

EXECUTIVE:

Brian S. Atlas

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and between Contract
Service, Inc. (the "Company"), a Utah corporation and a wholly-owned subsidiary
of Comfort Systems USA, Inc., a Delaware corporation ("Comfort"), and John C.
Phillips ("Executive") is hereby entered into and effective as of the _____ day
of ___________________, 1997, the date of the consummation of the initial public
offering of the common stock of Comfort. This Agreement hereby supersedes any
other employment agreements or understandings, written or oral, between the
Company and Executive.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

(b) Executive shall faithfully adhere to, execute and fulfill all lawful
policies established by the Company.

(d) Executive shall not be required by the Company or the performance of
his duties to relocate from Salt Lake City, Utah.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

(a) BASE SALARY. Effective ____________, 1997, the base salary payable to
Executive shall be $105,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly. On at
least an annual basis, the Board will review Executive's performance and may
make increases to such base salary if, in its discretion, any such increase is
warranted. Such recommended increase would, in all likelihood, require approval
by the Board or a duly constituted committee thereof. In no event shall
Executive's base salary be reduced to a level below the greater of $105,000, or
90% of Executive's base salary during the prior contract year.

2
<PAGE>
detail by Executive upon submission of any request for reimbursement, and
in a format and manner consistent with the Company's expense reporting
policy.

(iii) The Company shall provide Executive with other executive
perquisites as may be available to or deemed appropriate for Executive by
the Board and participation in all other Company-wide employee benefits as
are available from time to time.

3. NON-COMPETITION AGREEMENT.

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC Business in direct competition with the
Company or Comfort, within 100 miles of where the Company or any of
Comfort's subsidiaries conducts business, including any territory serviced
by the Company or Comfort or any of such subsidiaries (the "Territory");

Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Executive from acquiring as an investment not more than three percent
(3%) of the capital stock of a competing

3
<PAGE>
business, whose stock is traded on a national securities exchange or on an
over-the-counter or similar market.

(b) Because of the difficulty of measuring economic losses to the Company
and Comfort as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company and
Comfort for which they would have no other adequate remedy, Executive agrees
that the foregoing covenant may be enforced by Comfort or the Company in the
event of breach by him, by injunctions and restraining orders.

<PAGE>
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Comfort, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Comfort or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Executive made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Executive is in violation of any provision of this paragraph 3.

(a) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.

5
<PAGE>
fraud or misconduct with respect to the business or affairs of the Company or
Comfort which materially and adversely affects the operations or reputation of
the Company or Comfort; (4) Executive's conviction of a felony crime; or (5)
confirmed positive illegal drug test result. In the event of a termination for
good cause, as enumerated above, Executive shall have no right to any severance
compensation.

(d) WITHOUT CAUSE. At any time after the commencement of employment,
Executive may, without cause, and without Good Reason (as hereinafter defined)
terminate this Agreement and Executive's employment, effective thirty (30) days
after written notice is provided to the Company. Executive may only be
terminated without cause by the Company during the Term hereof if such
termination is approved by at least eighty percent (80%) of the members of the
Board of Directors of Comfort. Should Executive be terminated by the Company
without cause or should Executive terminate with Good Reason during the first
three (3) years of the Term (the "Initial Term"), Executive shall receive from
the Company, in a lump-sum payment due on the effective date of termination, the
base salary at the rate then in effect for whatever time period is remaining
under the Initial Term of this Agreement or for one (1) year, whichever amount
is greater. Should Executive be terminated by the Company without cause or
should Executive terminate with Good Reason during the final two (2) year period
of the Term, Executive shall receive from the Company, in a lump-sum payment due
on the effective date of termination, the base salary rate then in effect
equivalent to one (1) year of salary. Further, any termination without cause by
the Company shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Executive resigns or otherwise terminates his
employment without cause, rather than the Company terminating his employment
pursuant to this paragraph 5(d), Executive shall receive no severance
compensation.

(e) CHANGE IN CONTROL OF COMFORT. In the event of a "Change in Control of
Comfort" (as defined below) during the Initial Term, refer to paragraph 11
below.

Upon termination of this Agreement for any reason provided above,
Executive shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Executive only to the extent and in the manner expressly provided above or in
paragraph 11. All other rights and obligations of the Company and Executive
under this Agreement
6
<PAGE>
shall cease as of the effective date of termination, except that the Company's
obligations under paragraph 8 herein and Executive's obligations under
paragraphs 3, 5, 6, 7 and 9 herein shall survive such termination in accordance
with their terms.

If termination of Executive's employment arises out of the Company's
failure to pay Executive on a timely basis the amounts to which he is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 15 below, the Company shall pay all amounts and damages
to which Executive may be entitled as a result of such breach, including
interest thereon and all reasonable legal fees and expenses and other costs
incurred by Executive to enforce his rights hereunder. Further, none of the
provisions of paragraph 3 shall apply in the event this Agreement is terminated
as a result of a breach by the Company.

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<PAGE>
7. TRADE SECRETS. Executive agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or Comfort's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or Comfort, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.

8. INDEMNIFICATION. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
or Comfort against Executive), by reason of the fact that he is or was
performing services under this Agreement, then the Company shall indemnify
Executive against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Executive in
connection therewith to the maximum extent permitted by applicable law. The
advancement of expenses shall be mandatory. In the event that both Executive and
the Company are made a party to the same third-party action, complaint, suit or
proceeding, the Company agrees to engage competent legal representation, and
Executive agrees to use the same representation, provided that if counsel
selected by the Company shall have a conflict of interest that prevents such
counsel from representing Executive, Executive may engage separate counsel and
the Company shall pay all attorneys' fees of such separate counsel. Further,
while Executive is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Executive cannot be held liable to
the Company or Comfort for errors or omissions made in good faith where
Executive has not exhibited gross, willful and wanton negligence and misconduct
or performed criminal and fraudulent acts which materially damage the business
of the Company or Comfort.

8
<PAGE>
11. CHANGE IN CONTROL.

(b) In the event of a pending Change in Control wherein Comfort and/or the
Company and Executive have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of Comfort's and/or the Company's business and/or assets that such successor is
willing as of the closing to assume and agree to perform Comfort's and/or the
Company's obligations under this Agreement in the same manner and to the same
extent that Comfort and/or the Company is hereby required to perform, then such
Change in Control shall be deemed to be a termination of this Agreement by
Comfort and/or the Company without cause during the Initial Term and the
applicable portions of paragraph 4(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Executive
shall be triple the amount calculated under the terms of paragraph 4(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Executive must be paid in full by the
Company at or prior to such closing. Further, Executive will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Comfort Common Stock, such that he may convert the options
to shares of Comfort Common Stock at or prior to the closing of the transaction
giving rise to the Change in Control, if he so desires.

9
<PAGE>
(e) A "Change in Control" shall be deemed to have occurred if:

(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Comfort: (A) the individuals who,
as of the closing date of Comfort's initial public offering, constitute
the Board of Directors of Comfort (the "Original Directors"); (B) the
individuals who thereafter are elected to the Board of Directors of
Comfort and whose election, or nomination for election, to the Board of
Directors of Comfort was approved by a vote of at least two-thirds (2/3)
of the Original Directors then still in office (such directors becoming
"Additional Original Directors" immediately following their election); and
(C) the individuals who are elected to the Board of Directors of Comfort
and whose election, or nomination for election, to the Board of Directors
of Comfort was approved by a vote of at least two-thirds (2/3) of the
Original Directors and Additional Original Directors then still in office
(such directors also becoming "Additional Original Directors" immediately
following their election).

(f) Executive must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

(g) Executive shall be reimbursed by the Company or its successor for any
excise taxes that Executive incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any

10
<PAGE>
Change in Control. Such amount will be due and payable by the Company or its
successor within ten (10) days after Executive delivers a written request for
reimbursement accompanied by a copy of his tax return(s) showing the excise tax
actually incurred by Executive.

13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: Contract Service, Inc.
3222 S. Washington Street
Salt Lake City, Utah 84165

To Executive: John C. Phillips
2030 Maple Hollow Way
Bountiful, UT 84010

11
<PAGE>
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association ("AAA") then in effect provided that the parties may
agree to use arbitrators other than those provided by the AAA. The arbitrators
shall not have the authority to add to, detract from, or modify any provision
hereof nor to award punitive damages to any injured party. The arbitrators shall
have the authority to order back-pay, severance compensation, vesting of options
(or cash compensation in lieu of vesting of options), reimbursement of costs,
including those incurred to enforce this Agreement, and interest thereon in the
event the arbitrators determine that Executive was terminated without disability
or good cause, as defined in paragraphs 4(b) and 4(c), respectively, or that the
Company has otherwise materially breached this Agreement. A decision by a
majority of the arbitration panel shall be final and binding. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. The direct
expense of any arbitration proceeding shall be borne by the Company.

16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

CONTRACT SERVICE, INC.

By:
Name:
Title:

EXECUTIVE:

John C. Phillips

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and between Eastern Heating
& Cooling, Inc. (the "Company"), a New York corporation and a wholly-owned
subsidiary of Comfort Systems USA, Inc., a Delaware corporation ("Comfort"), and
Alfred J. Giardenelli, Jr. ("Executive") is hereby entered into and effective as
of the _____ day of ___________________, 1997, the date of the consummation of
the initial public offering of the common stock of Comfort. This Agreement
hereby supersedes any other employment agreements or understandings, written or
oral, between the Company and Executive.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

1
<PAGE>
and, subject to paragraph 1(c), agrees to devote substantially all of his
business time, attention and efforts to promote and further the business of the
Company.

(b) Executive shall faithfully adhere to, execute and fulfill all lawful
policies established by the Company.

(d) Executive shall not be required by the Company or the performance of
his duties to relocate from Albany, New York.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

3. NON-COMPETITION AGREEMENT.

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC Business in direct competition with the
Company or Comfort, within 100 miles of where the Company or any of
Comfort's subsidiaries conducts business, including any territory serviced
by the Company or Comfort or any of such subsidiaries (the "Territory");

(b) Because of the difficulty of measuring economic losses to the Company
and Comfort as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable

(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Comfort, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Comfort or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants

(a) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.

(e) CHANGE IN CONTROL OF COMFORT. In the event of a "Change in Control of
Comfort" (as defined below) during the Initial Term, refer to paragraph 11
below.

8. INDEMNIFICATION. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other

11. CHANGE IN CONTROL.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Executive must be paid in full by the
Company at or prior to such closing. Further, Executive will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Comfort Common Stock, such that he may convert the options
to shares of Comfort Common Stock at or prior to the closing of the transaction
giving rise to the Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

(i) any person, other than Comfort or an employee benefit plan of Comfort,
acquires directly or indirectly the beneficial ownership (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended) of any voting security
of the Company and immediately after such acquisition such Person is, directly
or indirectly, the Beneficial Owner of voting securities representing 50% or
more of the total voting power of all of the then-outstanding voting securities
of the Company;

(ii) the following individuals no longer constitute a majority of the
members of the Board of Directors of Comfort: (A) the individuals who, as of the
closing date of

9
<PAGE>
Comfort's initial public offering, constitute the Board of Directors of Comfort
(the "Original Directors"); (B) the individuals who thereafter are elected to
the Board of Directors of Comfort and whose election, or nomination for
election, to the Board of Directors of Comfort was approved by a vote of at
least two-thirds (2/3) of the Original Directors then still in office (such
directors becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of Directors of
Comfort and whose election, or nomination for election, to the Board of
Directors of Comfort was approved by a vote of at least two-thirds (2/3) of the
Original Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately following
their election).

(iii) the stockholders of Comfort shall approve a merger, consolidation,
recapitalization, or reorganization of Comfort, a reverse stock split of
outstanding voting securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such transaction which
would result in at least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of Comfort immediately prior to the transaction,
with the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or

(iv) the stockholders of Comfort shall approve a plan of complete
liquidation of Comfort or an agreement for the sale or disposition by Comfort of
all or a substantial portion of Comfort's assets (i.e., 50% or more of the total
assets of Comfort).

(f) Executive must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

10
<PAGE>
by a duly authorized officer of the Company and Executive, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.

13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: Eastern Heating & Cooling, Inc.
60 Loudonville Road
Albany, NY 12204

To Executive: Alfred J. Giardenelli, Jr.
1240 Milton Keynes Dr.
Niskayuna, NY 12309

11
<PAGE>
in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.

16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

EASTERN HEATING & COOLING, INC.

By:
Name:
Title:

EXECUTIVE:

Alfred J. Giardenelli, Jr.

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and between Quality Air
Heating & Cooling, Inc. (the "Company"), a Michigan corporation and a
wholly-owned subsidiary of Comfort Systems USA, Inc., a Delaware corporation
("Comfort"), and Robert J. Powers ("Executive") is hereby entered into and
effective as of the _____ day of ___________________, 1997, the date of the
consummation of the initial public offering of the common stock of Comfort. This
Agreement hereby supersedes any other employment agreements or understandings,
written or oral, between the Company and Executive.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

1
<PAGE>
and, subject to paragraph 1(c), agrees to devote substantially all of his
business time, attention and efforts to promote and further the business of the
Company.

(b) Executive shall faithfully adhere to, execute and fulfill all lawful
policies established by the Company.

(d) Executive shall not be required by the Company or the performance of
his duties to relocate from Grand Rapids, Michigan.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

(a) BASE SALARY. Effective ____________, 1997, the base salary payable to
Executive shall be $150,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly. On at
least an annual basis, the Board will review Executive's performance and may
make increases to such base salary if, in its discretion, any such increase is
warranted. Such recommended increase would, in all likelihood, require approval
by the Board or a duly constituted committee thereof. In no event shall
Executive's base salary be reduced to a level below the greater of $150,000, or
90% of Executive's base salary during the prior contract year.

3. NON-COMPETITION AGREEMENT.

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC Business in direct competition with the
Company or Comfort, within 100 miles of where the Company or any of
Comfort's subsidiaries conducts business, including any territory serviced
by the Company or Comfort or any of such subsidiaries (the "Territory");

(b) Because of the difficulty of measuring economic losses to the Company
and Comfort as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable

(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Comfort, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Comfort or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants

(a) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.

(e) CHANGE IN CONTROL OF COMFORT. In the event of a "Change in Control of
Comfort" (as defined below) during the Initial Term, refer to paragraph 11
below.

8. INDEMNIFICATION. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other

11. CHANGE IN CONTROL.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Executive must be paid in full by the
Company at or prior to such closing. Further, Executive will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Comfort Common Stock, such that he may convert the options
to shares of Comfort Common Stock at or prior to the closing of the transaction
giving rise to the Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Comfort: (A) the individuals who,
as of the closing date of

(f) Executive must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

10
<PAGE>
by a duly authorized officer of the Company and Executive, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.

13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: Quality Air Heating & Cooling, Inc.
3395 Kraft Ave., SE
Grand Rapids, MI 49512

To Executive: ____________________

11
<PAGE>
in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.

16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

QUALITY AIR HEATING & COOLING, INC.

By:
Name:
Title:

EXECUTIVE:

Robert J. Powers

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and between S. M. Lawrence
Company, Inc. (the "Company"), a Tennessee corporation and a wholly-owned
subsidiary of Comfort Systems USA, Inc., a Delaware corporation ("Comfort"), and
Samuel M. Lawrence III ("Executive") is hereby entered into and effective as of
the _____ day of ___________________, 1997, the date of the consummation of the
initial public offering of the common stock of Comfort. This Agreement hereby
supersedes any other employment agreements or understandings, written or oral,
between the Company and Executive.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

(a) The Company hereby employs Executive as Chief Executive Officer of the
Company. As such, Executive shall have responsibilities, duties and authority
reasonably accorded to, expected of, and consistent with Executive's position
as, Chief Executive Officer of the Company and will report directly to the Board
of Directors of the Company (the "Board"). Executive hereby accepts this
employment upon the terms and conditions herein contained

1
<PAGE>
and, subject to paragraph 1(c), agrees to devote substantially all of his
business time, attention and efforts to promote and further the business of the
Company.

(b) Executive shall faithfully adhere to, execute and fulfill all lawful
policies established by the Company.

(d) Executive shall not be required by the Company or the performance of
his duties to relocate from Jackson, Tennessee.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

(a) BASE SALARY. Effective ____________, 1997, the base salary payable to
Executive shall be $125,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly. On at
least an annual basis, the Board will review Executive's performance and may
make increases to such base salary if, in its discretion, any such increase is
warranted. Such recommended increase would, in all likelihood, require approval
by the Board or a duly constituted committee thereof. In no event shall
Executive's base salary be reduced to a level below the greater of $125,000, or
90% of Executive's base salary during the prior contract year.

3. NON-COMPETITION AGREEMENT.

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC Business in direct competition with the
Company or Comfort, within 100 miles of where the Company or any of
Comfort's subsidiaries conducts business, including any territory serviced
by the Company or Comfort or any of such subsidiaries (the "Territory");

(b) Because of the difficulty of measuring economic losses to the Company
and Comfort as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable

(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Comfort, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Comfort or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants

(a) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.

(e) CHANGE IN CONTROL OF COMFORT. In the event of a "Change in Control of
Comfort" (as defined below) during the Initial Term, refer to paragraph 11
below.

8. INDEMNIFICATION. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other

11. CHANGE IN CONTROL.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Executive must be paid in full by the
Company at or prior to such closing. Further, Executive will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Comfort Common Stock, such that he may convert the options
to shares of Comfort Common Stock at or prior to the closing of the transaction
giving rise to the Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Comfort: (A) the individuals who,
as of the closing date of

(f) Executive must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

10
<PAGE>
by a duly authorized officer of the Company and Executive, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.

13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: S. M. Lawrence Company, Inc.
245 Preston Street
Jackson, Tennessee 38302-0638

To Executive: Samuel M. Lawrence III
4525 Bells Hwy
Jackson TN 38305

11
<PAGE>
in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.

16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

S. M. LAWRENCE COMPANY, INC.

By:
Name:
Title:

EXECUTIVE:

Samuel M. Lawrence III

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and between Tech Heating
and Air Conditioning, Inc. (the "Company"), an Ohio corporation and a
wholly-owned subsidiary of Comfort Systems USA, Inc., a Delaware corporation
("Comfort"), and Robert R. Cook ("Executive") is hereby entered into and
effective as of the _____ day of ___________________, 1997, the date of the
consummation of the initial public offering of the common stock of Comfort. This
Agreement hereby supersedes any other employment agreements or understandings,
written or oral, between the Company and Executive.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

1
<PAGE>
and, subject to paragraph 1(c), agrees to devote substantially all of his
business time, attention and efforts to promote and further the business of the
Company.

(b) Executive shall faithfully adhere to, execute and fulfill all lawful
policies established by the Company.

(d) Executive shall not be required by the Company or the performance of
his duties to relocate from Solon, Ohio.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

3. NON-COMPETITION AGREEMENT.

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC Business in direct competition with the
Company or Comfort, within 100 miles of where the Company or any of
Comfort's subsidiaries conducts business, including any territory serviced
by the Company or Comfort or any of such subsidiaries (the "Territory");

(b) Because of the difficulty of measuring economic losses to the Company
and Comfort as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable

(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Comfort, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Comfort or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants

(a) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.

(e) CHANGE IN CONTROL OF COMFORT. In the event of a "Change in Control of
Comfort" (as defined below) during the Initial Term, refer to paragraph 11
below.

8. INDEMNIFICATION. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other

11. CHANGE IN CONTROL.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Executive must be paid in full by the
Company at or prior to such closing. Further, Executive will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Comfort Common Stock, such that he may convert the options
to shares of Comfort Common Stock at or prior to the closing of the transaction
giving rise to the Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Comfort: (A) the individuals who,
as of the closing date of

(f) Executive must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

10
<PAGE>
by a duly authorized officer of the Company and Executive, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.

13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: Tech Heating and Air Conditioning, Inc.
30300 Bruce Industrial Parkway
Solon, Ohio 44139

To Executive: ____________________
====================

11
<PAGE>
in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.

16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

TECH HEATING AND AIR CONDITIONING, INC.

By:
Name:
Title:

EXECUTIVE:

Robert R. Cook

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and between Tri-City
Mechanical, Inc., (the "Company") an Arizona corporation and a wholly-owned
subsidiary of Comfort Systems USA, Inc., a Delaware corporation ("Comfort"), and
Michael Nothum, Jr. ("Executive") is hereby entered into and effective as of the
_____ day of ___________________, 1997, the date of the consummation of the
initial public offering of the common stock of Comfort. This Agreement hereby
supersedes any other employment agreements or understandings, written or oral,
between the Company and Executive.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

1
<PAGE>
and, subject to paragraph 1(c), agrees to devote substantially all of his
business time, attention and efforts to promote and further the business of the
Company.

(b) Executive shall faithfully adhere to, execute and fulfill all lawful
policies established by the Company.

(d) Executive shall only be required to perform his duties in ___________
unless otherwise agreed by Executive. Executive shall not be required by the
Company or the performance of his duties to relocate from ______________ unless
otherwise agreed by Executive.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

(a) BASE SALARY. Effective ____________, 1997, the base salary payable to
Executive shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Executive's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof. In no event shall Executive's base salary be reduced to a level below
the greater of $150,000, or 90% of Executive's base salary during the prior
contract year.

2
<PAGE>
detail by Executive upon submission of any request for reimbursement, and
in a format and manner consistent with the Company's expense reporting
policy.

3. NON-COMPETITION AGREEMENT.

(a) Subject to, and so long as the Company is not in violation of its
obligations under this Agreement, Executive will not, during the period of his
employment by or with the Company, and for a period of two (2) years immediately
following the termination of his employment under this Agreement, for any reason
whatsoever, other than a termination by the Company without cause or by
Executive for Good Reason, directly or indirectly, for himself or on behalf of
or in conjunction with any other person, company, partnership, corporation or
business of whatever nature:

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC Business in direct competition with the
Company or Comfort, within 100 miles of where the Company or any of
Comfort's subsidiaries conducts business, including any territory serviced
by the Company or Comfort or any of such subsidiaries (the "Territory");

Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Executive from acquiring as an investment not more than three percent
(3%) of the capital stock of a competing

3
<PAGE>
business, whose stock is traded on a national securities exchange or on an
over-the-counter or similar market.

4
<PAGE>
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Comfort, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Comfort or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Executive made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Executive is in violation of any provision of this paragraph 3.

(a) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.

5
<PAGE>
materially and adversely affects the operations or reputation of the Company or
Comfort; (4) Executive's conviction of a felony crime; or (5) confirmed positive
illegal drug test result. In the event of a termination for good cause, as
enumerated above, Executive shall have no right to any severance compensation.

Executive shall have "Good Reason" to terminate this Agreement and his
employment hereunder upon the occurrence of any of the following events: (a)
Executive is demoted by means of a reduction in authority, responsibilities or
duties to a position of less stature or importance within the Company than the
position described in Section 1 hereof; (b) Executive's annual base salary as
determined pursuant to Section 2 hereof is reduced to a level that is less than
90% of the base salary paid to Executive during the prior contract year under
this Agreement, unless Executive has agreed in writing to that demotion or
reduction; or (c) Executive is required to relocate from __________ without his
prior approval.

(e) CHANGE IN CONTROL OF COMFORT. In the event of a "Change in Control of
Comfort" (as defined below) during the Initial Term, refer to paragraph 11
below.

6
<PAGE>
paragraph 8 herein and Executive's obligations under paragraphs 3, 5, 6, 7 and 9
herein shall survive such termination in accordance with their terms.

If Executive is terminated without cause or terminates his employment
hereunder with Good Reason, (a) the Company shall make the insurance premium
payments contemplated by COBRA for a period of 18 months after such termination,
(b) the Executive shall be entitled to receive a pro rated portion of any annual
bonus to which the Executive would have been entitled for the year during which
the termination occured had the Executive not been terminated and (c) all of
Executive's options to purchase CSI stock shall vest thereupon.

7. TRADE SECRETS. Executive agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or Comfort's

7
<PAGE>
relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
Comfort, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.

11. CHANGE IN CONTROL.

8
<PAGE>
obligations of Comfort and/or the Company hereunder or that the Company may
undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Initial Term, then the provisions of this paragraph 11 shall be applicable.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Executive must be paid in full by the
Company at or prior to such closing. Further, Executive will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Comfort Common Stock, such that he may convert the options
to shares of Comfort Common Stock at or prior to the closing of the transaction
giving rise to the Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

9
<PAGE>
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;

(f) Executive must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

10
<PAGE>
written Agreement is the final, complete and exclusive statement and expression
of the agreement between the Company and Executive and of all the terms of this
Agreement, and it cannot be varied, contradicted or supplemented by evidence of
any prior or contemporaneous oral or written agreements. This written Agreement
may not be later modified except by a further writing signed by a duly
authorized officer of the Company and Executive, and no term of this Agreement
may be waived except by writing signed by the party waiving the benefit of such
term.

13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: Tri-City Mechanical, Inc.
1741 S. Holbrook Lane
Tempe, AZ 85281

To Executive --------------------

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

11
<PAGE>
terminated without disability or good cause, as defined in paragraphs 4(b) and
4(c), respectively, or that the Company has otherwise materially breached this
Agreement. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be borne by
the Company.

16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

TRI-CITY MECHANICAL, INC.

By:
Name:
Title:

EXECUTIVE:

Michael Nothum, Jr.

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") by and between Western
Building Services, Inc. (the "Company"), a Colorado corporation and a
wholly-owned subsidiary of Comfort Systems USA, Inc., a Delaware corporation
("Comfort"), and Charles W. Klapperich ("Executive") is hereby entered into and
effective as of the _____ day of ___________________, 1997, the date of the
consummation of the initial public offering of the common stock of Comfort. This
Agreement hereby supersedes any other employment agreements or understandings,
written or oral, between the Company and Executive.

R E C I T A L S

The following statements are true and correct:

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

A G R E E M E N T S

1. EMPLOYMENT AND DUTIES.

1
<PAGE>
and, subject to paragraph 1(c), agrees to devote substantially all of his
business time, attention and efforts to promote and further the business of the
Company.

(b) Executive shall faithfully adhere to, execute and fulfill all lawful
policies established by the Company.

(d) Executive shall not be required by the Company or the performance of
his duties to relocate from Denver, Colorado.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

(a) BASE SALARY. Effective ____________, 1997, the base salary payable to
Executive shall be $107,082 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly. On at
least an annual basis, the Board will review Executive's performance and may
make increases to such base salary if, in its discretion, any such increase is
warranted. Such recommended increase would, in all likelihood, require approval
by the Board or a duly constituted committee thereof. In no event shall
Executive's base salary be reduced to a level below the greater of $107,082, or
90% of Executive's base salary during the prior contract year.

3. NON-COMPETITION AGREEMENT.

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any HVAC Business in direct competition with the
Company or Comfort, within 100 miles of where the Company or any of
Comfort's subsidiaries conducts business, including any territory serviced
by the Company or Comfort or any of such subsidiaries (the "Territory");

(b) Because of the difficulty of measuring economic losses to the Company
and Comfort as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable

(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Comfort, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Comfort or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants

(a) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.

(e) CHANGE IN CONTROL OF COMFORT. In the event of a "Change in Control of
Comfort" (as defined below) during the Initial Term, refer to paragraph 11
below.

8. INDEMNIFICATION. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other

11. CHANGE IN CONTROL.

(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Executive must be paid in full by the
Company at or prior to such closing. Further, Executive will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Comfort Common Stock, such that he may convert the options
to shares of Comfort Common Stock at or prior to the closing of the transaction
giving rise to the Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Comfort: (A) the individuals who,
as of the closing date of

(f) Executive must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.

10
<PAGE>
by a duly authorized officer of the Company and Executive, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.

13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

To the Company: Western Building Services, Inc.
6820 N. Broadway, #G
Denver, CO 80221-2850

To Executive: Charles W. Klapperich
9650 W. 92nd Pl.
Arvada, CO 80005

11
<PAGE>
in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.

16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.

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

WESTERN BUILDING SERVICES, INC.

By:
Name:
Title:

EXECUTIVE:

Charles W. Klapperich

Comfort Systems USA, Inc.
4801 Woodway -Suite 300E
Houston, Texas 77056

May 8, 1997

To the Stockholders of the Companies

Reference is made to those certain Agreements and Plans of Organization (the
"Agreements"), each dated as of March 18, 1997, by and among the parties as
reflected on Exhibit A attached hereto. Each of the undersigned hereby agrees,
and Comfort Systems USA, Inc., a Delaware corporation ("Comfort"), hereby agrees
with respect to Section 5, as follows:

1. NONCOMPETITION. Each of the undersigned hereby agrees to adhere to and
be bound by the terms, covenants, restrictions, prohibitions and limitations of
Section 13 of the Agreements as if each of the undersigned was a STOCKHOLDER as
defined therein.

2. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Each of the undersigned
hereby agrees to adhere to and be bound by the terms, covenants, restrictions,
prohibitions and limitations of Section 14.1, 14.3 and 14.4 of the Agreements as
if each of the undersigned was a STOCKHOLDER as defined therein, and agrees to
adhere to and be bound by the terms, covenants, restrictions, prohibitions and
limitations of Sections 14.2, 14.3 and 14.4 of the Agreements as if each was
COMFORT and NEWCO as defined therein.

3. TRANSFER RESTRICTIONS. Each of the undersigned hereby agrees to adhere
to and be bound by the terms, covenants, restrictions, prohibitions and
limitations of Section 15 of the Agreements with respect to all of the shares of
Comfort Common Stock owned of record by each of the undersigned as of the
Funding and Consummation Date (as defined in the Agreements) as if each of the
undesigned was a STOCKHOLDER as defined therein. Each of the undersigned
expressly acknowledges and agrees that the stock certificates evidencing
<PAGE>
Stockholders of the Companies
May 8, 1997
Page 2

all of such shares shall bear the restrictive legend contained in Section 15.1
of the Agreements.

4. FEDERAL SECURITIES ACT REPRESENTATIONS. Each of the undersigned hereby
agrees to adhere to and be bound by the terms, covenants, restrictions,
prohibitions and limitations of Section 16 of the Agreements with respect to all
of the shares of Comfort Common Stock owned of record by the undersigned as of
the Funding and Consummation Date as if each of the undesigned was a STOCKHOLDER
as defined therein. Further, each of the undersigned expressly acknowledges and
agrees that the stock certificates evidencing all of such shares shall bear the
restrictive legend contained in Section 16.1 of the Agreements.

5. REGISTRATION RIGHTS. Comfort hereby grants each of the undersigned the
same piggyback registration rights set forth in Section 17.1 of the agreements
granted to the STOCKHOLDERS (as defined in the Agreements), subject to the
terms, covenants, restrictions, prohibitions and limitations of Sections 17.3,
17.4 and 17.5 of the Agreements, which the undersigned agree to adhere to and to
be bound by.

6. COUNTERPARTS. This letter may be executed simultaneously in two (2) or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have set their hands as of the day
and year first above written.

--------------------------------------
Fred M. Ferreira

--------------------------------------
J. Gordon Beittenmiller
<PAGE>
Stockholders of the Companies
May 8, 1997
Page 3

-------------------------------------
Reagan S. Busbee

Notre Capital Ventures, II L.L.C.

By:__________________________________
Name: Steven S. Harter
Title: President

-------------------------------------
S. Craig Lemmon

-------------------------------------
Milburn E. Honeycutt

--------------------------------------
William George, III

------------------------------------
Brian Vensel

--------------------------------------
Emmett E. Moore

<PAGE>
Stockholders of the Companies
May 8, 1997
Page 4

--------------------------------------
John W. Boulabasis

-------------------------------------
Stephen R. Baur

--------------------------------------
Shellie LePori

-------------------------------------
Constance Drew

--------------------------------------
John Mercandante, Jr.

-------------------------------------
Lawrence Martin

-------------------------------------
Norton Family Trust, Carl L. Norton, Trustee

<PAGE>
Stockholders of the Companies
May 8, 1997
Page 5

-------------------------------------
Larry E. Jacobs

-------------------------------------
Richard T. Howell

-------------------------------------
Rod Crosby

-------------------------------------
Jennifer Summerford

--------------------------------------
Infoscope Partners, Inc.

--------------------------------------
Melinda Malik

-------------------------------------
Steven T. Zellers

<PAGE>
Stockholders of the Companies
May 8, 1997
Page 6

ACCEPTED AND AGREED, as of the day and year first above written as to Section 5.

COMFORT SYSTEMS USA, INC.

By:___________________________________

<PAGE>
Stockholders of the Companies
May 8, 1997
Page 7

EXHIBIT A

Quality Air Heating and Cooling, Inc.

Tri-City Mechanical, Inc.

Atlas Air Conditioning Co.

S.M. Lawrence Co., Inc.

Accurate Air Systems, Inc.

Contract Service Inc.

Tech Heating and Air Conditioning, Inc.

Western Building Services, Inc.

Eastern Heating and Cooling, Inc.

Seasonair, Inc.

Standard Heating and Air Conditioning Co.

Freeway Heating and Air Conditioning, Inc.

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.

ARTHUR ANDERSEN LLP

Houston, Texas
May 27, 1997

<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF COMFORT SYSTEMS USA, INC. AS OF DECEMBER 31,
1996 AND THE TWELVE MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 178
<CURRENT-LIABILITIES> 177
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 178
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>